July 18, 2023

Wheat Prices Surge as Russia Ends Black Sea Grain Deal

📰 News Organizations

  • Wheat Prices Surge as Russia Ends Grain Deal. Wheat, corn, and soybean prices experienced a surge after Russia announced it would not renew the U.N.-brokered Black Sea Grain Initiative, reigniting concerns about global food security. Analysts describe the initiative's demise as both an expected setback and a blow to the markets.

  • Microsoft and Sony Strike Deal to Keep Call of Duty on PlayStation. Sony has signed a 10-year binding deal with Microsoft to ensure the popular Call of Duty series remains available on PlayStation, alleviating concerns about Microsoft's dominance in the gaming market after its acquisition of Activision Blizzard.

  • Ford Slashes Price of EV F-150 Lightning Truck by Up to 17%. Ford has reduced the price of its F-150 Lightning Pro electric truck by nearly $10,000 to $49,995. The move comes after Tesla which had 60% U.S. market share in electric vehicles this year through June, reported a surge in second-quarter deliveries that was helped by sharp price cuts.

  • US Dollar Weakens as Inflation Cools. The US currency teeters at its lowest level in over a year as signs of cooling inflation lead to speculation that the Federal Reserve will halt interest rate hikes. This potential long-term slide in the dollar would benefit developing nations by reducing import prices and will strengthen other currencies.

  • UK Joins Indo-Pacific Trade Bloc CPTPP. The United Kingdom becomes the first new member and the first European nation to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), comprising 11 countries. The UK government views this membership as a significant boost for British businesses.

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  • Spreads on high-yield bonds have fallen to the lowest since April 2022. If credit is a forward looking indicator, it's suggesting we're not going to see any kind of default cycle of note. Source.

  • Three years of inflation compounding at ~5.7% has gotten public Debt/GDP from 134% to 119%. The only way you're going to lower debt as a percentage of GDP is with persistent negative real yields. And now, interest expense is about to be +$1 Trillion due to higher yields. Source.

  • The stock market has regained nearly three-fourths of the ground it lost last year. Bear-market rallies don’t retrace much more than half their preceding decline. When they do, they are usually new bull markets. With our current 73% retracement, history seems to be on the side of the bulls here. We could still be in a long trading range (like the 1940s), but the market has now spent a year and a half—a long time—bucking the long-term uptrend. Source.

  • Market's expectations for Fed rate cuts this year have been priced out, which is a major change from mid-March, when 5% fed funds rate was unthinkable. Source.

  • The second-month VIX futures contract (August) is implying a market as "normal" as we had in 2018-19. I'm not sure that kind of complacency is warranted until (if?) there's a path to non-recessionary rate cuts, which we can't have until at least Q4. Source.

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📓 Online Publications

  • Nasdaq-100 Is Undergoing a Special Rebalance. Just the top five companies currently account for more than 43% of the index: Microsoft, Apple, Nvidia, Amazon, and Meta Platforms. According to the Nasdaq-100's methodology, this concentration warrants a rebalance, and this will actually be the index's third special rebalance, mimicking similar moves made in 1998 and 2011.

  • Mixed Signals in the Economy. Inflation recedes while unemployment remains stable, hinting at the potential for a favorable soft landing. However, the concern lies in the possibility that the economy may be impacted by higher interest rates with a delay in side effects, posing a downside risk if the Fed's aggressive approach proves to have unintended consequences.

  • Connected TV Is Dominating Global Advertising. A more recent study confirms the growing importance of this trend in the advertising market. CTV continued to dominate advertising last year, generating 51% of advertising video impressions, up from 40% the year before. The Motley Fool says the ongoing shift of advertising dollars from traditional to streaming television bodes well for both Roku and The Trade Desk.

  • Video Industry Now Face Similar Challenges as Print and Music Industries. The internet offers boundless capacity and free distribution, but these advantages pose challenges to industries built on scarcity. To survive, the video industry must focus on producing unique content. Both talent and studios are jointly threatened by the internet's impact, and long-term sustainability depends on managing costs effectively.

🎧 Podcasts

  • Tesla Unveils First Cybertruck. Over the weekend, Tesla completed the production of its Cybertruck at its Austin, Texas facility. Initially projected to be priced at $39,000, the entry-level model now carries an anticipated cost of $50,000 while boasting a range exceeding 300 miles. The highest-priced variant, starting at approximately $70,000, will feature three electric motors and a range of 500 miles. Source(14:08)

  • US Banks Second-Quarter Earnings Reports Continue. This week will see reports from Morgan Stanley, Bank of America, Goldman Sachs, and several mid-sized regional banks. Bank of America is optimistic about its ability to increase loan rates. However, analysts anticipate lower profits for Goldman Sachs and are cautious about Morgan Stanley's wealth management business. Source(1:05)

  • EU Urges Faster Emissions Reductions from Polluting Nations. EU senior officials have expressed their desire for China, India, and the United States to take more significant actions in reducing emissions. Internal disagreements have emerged within the bloc regarding Brussels's next round of climate targets, particularly the proposed 2040 emissions reduction target. Source(4:21)

  • Typical Gen X Household Has Only $40,000 For Retirement. Gen X represents roughly 20% of the total US population. A large share of the Gen X population virtually has nothing saved for retirement and most who are saving are not close to the savings target that will enable them to retire with their current standard of living. Source(8:42)

  • Auto Insurers Hit By Worst Crisis In 30 Years, Sends Premium Skyrocketing. Auto insurance rates have skyrocketed during and after the pandemic, driven by higher repair costs, larger bills, and rising litigation fees. All states have seen auto insurance rates rise by 40%. This means that potential home buyers and renters are being squeezed from all sides as inflation eats away at their salaries. Source(25:27)