August 25, 2023

Zillow Offers 1% Down Payment for Struggling Homebuyers

📰 News Organizations

  • Zillow Offers 1% Down Payment to Lure Struggling Homebuyers. The 1% offering is lower than Freddie Mac’s best of 3%. This comes as mortgage rates in the US hit a 22-year high and house hunters face the most unaffordable market in almost four decades.

  • Big Tech Invests in AI Startup Hugging Face, Sending Valuation to $4.5 Billion. An array of Big Tech companies just contributed to a $235 million round for AI startup Hugging Face. Backers included Google, Amazon, Nvidia, Salesforce, AMD, Intel, IBM and Qualcomm.

  • Subway Sandwich Chain Sells To Roark Capital. Subway and Roark did not announce a transaction price, but the last reported final bid was roughly $9.6 billion. Roark plans to keep Subway as a separate entity within its portfolio.

  • BRICS Asks Saudi, Iran, Other Nations to Join. The major emerging market nations invited top oil exporters Saudi Arabia, Iran, Egypt, Argentina, Ethiopia, and the United Arab Emirates to join their bloc in a push to expand its global influence.

  • Shein Strikes Deal With Forever 21. The two rivals have entered into a partnership that paves the way for the Asian e-commerce powerhouse to sell Forever 21 dresses, jeans, and accessories on its site. Down the line, Shein shops could operate inside Forever 21 stores.

  • Gap Sales Miss Estimates, Underscoring New CEO’s Challenge. Gap Inc. reported second-quarter comparable sales and revenue that missed the average analyst estimate, underscoring ongoing weakness at the retailer’s four brands.

  • Nordstrom tops Wall Street’s quarterly expectations. Despite a sizable beat, the retailer stuck with its previous full-year outlook – signaling caution about the coming months. The company expects revenue to fall 4% to 6%.

🐦 Twitter

  • The average 30-year mortgage rate jumped to 7.23% this week, up from last week's 7.09%, according to Freddie Mac on Thursday. That is the highest rate point since June 2001 when rates were at 7.24%. Source.

  • Simplified way of thinking about it, but boosting housing in short-term (2020-early 2022) has thrown sand in the gears long-term, namely resale. Builders faced a temporary supply chain squeeze, but resale issue is structural and unlikely to go away as quickly. Source.

  • Gas Prices in the US rise to their highest levels of the year @ $3.98/gallon. What was a big tailwind for CPI in May/June (negative YoY commodity prices) was less of a tailwind in July and much less thus far in August. US inflation rate will likely increase again in August. Source.

  • What’s so surprising is you’d expect the rental market to be flourishing as a substitute to home ownership. Not happening. Multifamily occupancy is down 3% points YoY and per Zumper data rent growth is decelerating quickly. The real effect is that new household formation shrunk. Source.

  • Some stabilization seen in prices components within August SPGlobal U.S. PMIs. A notable increase was in manufacturing input prices, but nothing too worrisome for now. Source.

Even if earnings pivot higher, as expected, remember: The S&P 500 already rallied five P/E-points in expectation of exactly that scenario. We must juxtapose this against the ongoing inversion of the yield curve. Sustained rallies in the face of an inverted curve are very rare.

Jurrien Timmer

📓 Online Publications

  • Weekly Initial Unemployment Claims Decrease to 230,000. In the week ending August 19, the advance figure for seasonally adjusted initial claims was 230,000, a decrease of 10,000 from the previous week's revised level.

  • Shopify to Accept USDC Payments with Solana. E-commerce giant Shopify has added Solana Pay to its pool of options for payment, allowing millions of merchants to use the platform to accept crypto transactions, kicking off with USD Coin stablecoin payments.

  • Mastercard And Binance End Crypto Card Partnership In Four Countries. Their crypto card programs are ending in Argentina, Brazil, Colombia, and Bahrain. The cessation, set for Sept. 22, will not affect Mastercard's other crypto card programs.

  • PancakeSwap Version 3 Goes Live on Ethereum Layer 2 Linea Mainnet. PancakeSwap is already available on Ethereum, BNB Chain, Aptos, Polygon zkEVM, zkSync Era, and Arbitrum. Traders can now use the service to trade tokens at lower fees.

  • Coinbase Invests In USDC Issuer Circle. Coinbase and Circle will continue to earn revenue generated by USDC’s reserve assets. Interest earnings will be divided based on the amount of USDC held on each company’s platform, with the firms evenly splitting profits.

  • Yuga Labs To Block OpenSea. The move comes after OpenSea's decision to disable mandatory royalties for existing collections. Yuga Labs' collections comprise nearly $5 billion in all-time traded value on OpenSea, with BAYC alone generating $2 billion.

🎧 Podcasts

  • US Regulators Impose Tougher Disclosure Rules On Private Funds. Gary Gensler and other members of the agency voted to strengthen requirements on how private equity, real estate and hedge funds deal with investors. Source(1:33)

  • Sued Ape Yacht Club. The Board Abe Yacht Club experienced an 18% drop in its floor price after a llawsuit alleges that Sotheby's and celebs like Paris Hilton and Justin Bieber engaged in misleading promotions to artificially inflate the prices of bored apes. Source(21:50)

  • Shift in Fiscal Tools for Rapid Recovery. The pandemic's success with direct financial aid suggests future downturns will prompt quicker fiscal response, diverging from the less effective monetary policy of the past decades. Source(16:04)

  • Yields and Dollar Face Potential Peaks. Brent Donnelly thinks yields and the dollar may be reaching their peak as various challenges impact the US economy. The interplay between nominal and real rates is influencing this perspective, adding complexity to the Federal Reserve's assessment of restrictions. Source(5:30)

  • Downturn Due to Demographic Shifts. Harry Dent emphasizes the potential for a significant market downturn due to demographic shifts, overvalued real estate markets, and high levels of debt. Dent suggests investing in high-quality Treasury bonds as a safe haven during potential market crashes. Source(19:04)