July 12. 2023
Major US Banks to Report Biggest Jump in Loan Losses
📰 News Organizations
Buffett Takes Control of US LNG Plant With $3.3 Billion Deal. Berkshire Hathaway Energy has entered into a $3.3 billion agreement to purchase Dominion Energy Inc.'s stake in a Maryland liquefied natural gas export project, increasing their ownership of the terminal to 75%, while Brookfield Infrastructure Partners will retain a 25% stake.
Major US Banks to Report Biggest Jump in Loan Losses. America’s top lenders are expected to release their second quarterly earnings reports this week, with JPMorgan, Wells Fargo, Citigroup, and BlackRock releasing theirs on July 14. Bank of America and Morgan Stanley will release theirs on July 18 and Goldman Sachs on July 19.
Microsoft Wins US Court Nod to Buy Activision. The deal would combine Microsoft’s Xbox videogaming business with the publisher of popular franchises such as Call of Duty, World of Warcraft and Candy Crush. The ruling means there is no current U.S. obstacle to the two companies merging; the companies are still seeking U.K. approval.
Apple Launches Online Store on WeChat. Apple on Tuesday launched an online store on Tencent’s WeChat, China’s biggest messaging platform with over 1.2 billion users. This opens another retail channel for Apple. Users can purchase the full line of Apple products, including the latest iPhone 14 range, through the Mini Program, Tencent said in a statement.
Sam Altman-Backed Nuclear Startup Is Going Public Through Altman’s SPAC. Oklo, a nuclear-fission startup backed by Sam Altman, plans to go public through a merger with his SPAC. The deal would add to recent SPAC mergers involving nuclear companies and test investor appetite for clean-energy startups. Companies such as Oklo are trying to build a new generation of smaller nuclear power projects.
Deep Sea Mining Threatens $5.5 Billion Tuna Industry. Researchers analyzed climate models to predict that the biomass of bigeye, skipjack and yellowfin tuna species will increase by an average of 21% by mid-century in the Clarion-Clipperton Zone, a vast region of the Pacific Ocean between Hawaii and Mexico that is targeted for the mining of valuable metals.
Shutterstock Expands Partnership with OpenAI. Shares of Shutterstock popped Tuesday after the company announced an expanded, six-year partnership with ChatGPT-maker OpenAI. Shutterstock said it will provide OpenAI with “high-quality” training data by granting access to its video, image and music libraries. The companies will also work to bring generative AI to mobile users via Shutterstock’s GIPHY platform.
OpenAI Rival Anthropic Debuts New A.I. Chatbot. Anthropic, which was founded two years ago by former OpenAI research executives, debuted its new AI chatbot called Claude 2, and invited the public to use it. The company says Claude 2 has the ability to summarize up to about 75,000 words, which could be the length of a book. Users can input large data sets, and ask for summaries in the form of a memo, letter or story.
Turkey Agrees to Allow Sweden to Join NATO. In the lead-up to a NATO summit in Vilnius, Turkey and Sweden have reached an agreement that could potentially expand NATO's reach over a thousand miles, altering the power dynamics in Northern Europe and establishing a strategic bottleneck for Russian warships and aircraft in the region.
The share of US small businesses raising prices last month fell to the lowest level in more than two years. A net 29% reported higher selling prices in June compared to three months earlier, the smallest share since March 2021: NFIB. Source.
Headline from our home builder survey this month: “Strong YTD Sales Boost Builder Starts.” June builder results finally ushering in some YOY growth on single-family housing starts. Source.
Despite the fact that the combined market capitalization of the top 10 companies in the S&P 500 constitutes an unprecedented 31.7% of the index, their earnings contribution has been drastically declining and now stands at only 21.5%. The dominance of megacaps in leadership is overwhelmingly unsustainable and cannot be justified by their current fundamentals. Source.
Another big week for interest in risk assets … large-cap and broad equity ETFs collectively took in >$18 billion last week; fixed income ETFs had smaller inflows … for month of July, large- and mid-cap equity ETFs held largest share of inflows at nearly 55%. Source.
Housing Market Resiliency. At the end of 2022, all signs were pointing to a sharp decline in home prices with rates spiking & affordability collapsing. But that big decline has yet to materialize - US home prices are <2% below their high. Source.
📓 Online Publications
Toyota Announced a New Breakthrough With Solid-State Batteries. Toyota said it had greatly simplified the process of making solid-state batteries for electric vehicles. If viable, the solid-state batteries could bring major improvement to Toyota's electric vehicles by improving driving ranges, charging times, and costs.
CoreLogic: US Annual Home Price Growth Drops to the Lowest Rate in 11 Years. Annual U.S. single-family home price growth slowed for the 12th straight month in May, falling to 1.4% increase year over year. Following recent trends, a significant number of Western states saw prices decline in May from the same time in 2022, reflecting out-migration from less-urban locations where people moved during the height of the pandemic.
Threads vs. Twitter: The Battle for Social Media's Future Unfolds. Threads represents an experiment that will determine Twitter's long-term prospects. It tests the hypothesis whether users abandoned Twitter due to a lack of interest in text-based social networking or the platform's difficulty in getting started. If the engaged user base of Threads continues to grow, it would confirm the former and validate criticisms against Twitter's execution.
Rising Rates and Borrowing Fuel Concerns of Hard Landing. With ongoing borrowing despite rising interest rates, a hard-landing scenario appears unavoidable. Seasonal trends may temporarily support the housing market, but the Federal Reserve could face increased panic if even a slight year-on-year decline in housing occurs, potentially leading to rate hikes and impacting the Fed's inflation goals.
Hedge Funds Shift Focus to Europe Amid US Stock Market Rally. Despite the strong performance of the US stock market, hedge funds have reduced their investments in the rising market, with Wall Street's exposure to US equities reaching its lowest level since 2013. Concerns over potential interest rate hikes by the Federal Reserve and the risk of an economic downturn are driving this shift. Source(0:46)
US Bank Watchdog Proposes Stricter Rules for Large Lenders. The Federal Reserve's Vice Chair for Supervision, Michael Barr, has outlined potential regulatory changes, including a requirement for banks with $100 billion or more in assets to maintain larger capital reserves to prepare for emergencies, signaling stricter rules ahead for major US banks. Source(1:18)
The Fed Announces New Instant Payment Program. The Federal Reserve is launching Fed Now, a new service that enables banks to offer real-time access to customer funds, bringing the U.S. closer to countries that have already implemented similar systems. While this move benefits customers, particularly those with lower incomes, by providing faster access to paychecks, it also introduces the risk of real-time bank runs. Source(2:31)
Europe's Rate Decreases Unlikely, UK Banks Face Challenges. In Europe, it is highly unlikely to see a significant decrease in interest rates as the market expects. The presence of excess demand and the lack of adjustment in coverage ratios suggest a longer timeframe for interest rate flow. The UK, in particular, is viewed as a unique and challenging situation, with more work needed compared to Europe and the US, making UK banks a potential value trap. Source(13:58)
Home Price Growth Hit Record Highs in Most Markets. Even if prices go down a bit, the high-interest rates keep the renters out of the market. All of the would-be homebuyers aren't going to buy a house because they either can't afford it or they can afford to buy but are concerned about prices declining soon. That further increases the size of the renter pool and pushes upward prices on rents. Source(8:58)
Fossil Fuels Are Here to Stay. Scott Galloway says that at the end of the day, the best business in the world over the last 100 years hasn't been microprocessors or the internet, it's been fossil fuels. One could argue that you can follow the flow of power globally for the last century, if you follow the flow of energy. Most of the existing industries now wouldn't exist without fossil fuels. Source(10:50)