July 28, 2023

📰 News Organizations

• U.S. Economic Growth Accelerates, Defying Slowdown Expectations. GDP grew at a seasonally- and inflation-adjusted 2.4% annual rate in the second quarter, the Commerce Department said Thursday. That was faster than economists expected and above the 2% growth in the first three months of the year. Consumer spending cooled but rose enough to drive overall growth alongside much stronger business investment in the second quarter.
  

• Shell Posts Sharp Drop in Second-Quarter Profit on Weaker Commodity Prices. Shell posted adjusted earnings of $5.1 billion for the three-month period through to the end of June, missing analyst expectations of $6 billion, according to estimates collated by Refinitiv. The impact of lower commodity prices is likely mirrored across the energy industry.

• Samsung Reports 95% Drop In Profit. The plunge came as weak demand for memory chips continued. But Samsung expects global demand to recover in the second half of the year which should lead to an improvement in earnings driven by the component business. However, continued macroeconomic risks could make the recovery challenging, said the firm.
  

• Netflix Reworks Microsoft Pact, Lowers Ad Prices in Bid for Growth. Netflix is restructuring its advertising partnership with Microsoft a year into their deal and lowering ad prices in a bid to jump-start that fledgling corner of its business. Netflix is reworking its pact with Microsoft to reduce the revenue guarantee. Those terms are still being settled.
  

• Southwest Airlines Faces Challenges with Unit Revenues and Rising Costs in Q2. Southwest Airlines reported an 8.3% drop in unit revenue for the second quarter, attributing it to challenging comparisons from the travel demand surge in 2022 and higher-than-seasonal growth. The airline also experienced increased costs during the same period.

• McDonald's Beats Earnings Estimates with Strong Sales in U.S. and China. McDonald's quarterly earnings and revenue surpassed analysts' expectations, driven by a rebound in China sales and mascot Grimace drives U.S. visits. It reported robust second-quarter net income of $2.31 billion, or $3.15 per share, compared to $1.19 billion, or $1.60 per share, in the same period last year.

• Microsoft Faces European Antitrust Investigation Over Teams Software Bundling. The European Commission has launched an antitrust investigation against Microsoft, expressing concerns that the company may be granting an unfair advantage to Teams by not providing customers with the option to choose access to the product separately.

🐦 Twitter

• Wholesale used car prices continue to decline in July and are now 17% lower than their peak in January 2022. This should translate into lower retail prices in the coming months. Source.
  

• Annual US interest expense at a modest positive real rate on 7.5% nominal growth is 8% x $32T in debt = $2.5T in interest payments = 9% of GDP. The Fed is about to learn why they needed to inflate debt/GDP back down to 70-80% before they began hiking. Source.
  

• The inflation data is still lagging/incorporating pandemic bullwhip stuff, but for the first time the economic growth data is what a "real expansion" looks like and isn't just noise we'll have to adjust for later. Source.
  

• Housing’s drag on GDP has faded. Residential investment dragged -0.16% from GDP in 2Q23, which was same as drag in 1Q23 and a major improvement from 4Q22’s -1.2%. Source.
  

• Gasoline prices are surging in the past few days. Higher energy costs may push up consumer prices and lead to renewed goods inflation — a sector where price increases have slowed. Source.
  

📓 Online Publications

• US Stablecoin Legislation Stalls Temporarily Amidst Political Factors. Bipartisan talks to establish a comprehensive US framework for payment stablecoins have been interrupted by midterm elections, changes in majority control in the House of Representatives, and the FTX collapse's impact on the digital asset industry.

• Hong Kong and Saudi Arabia Collaborate on Financial Initiatives. The central banks of Hong Kong and Saudi Arabia, HKMA and SAMA, have discussed various financial initiatives and signed an MoU to jointly explore financial innovation by targeting tokenization and payments infrastructure agreements.
  

• Bank of Italy Partners with Polygon for Institutional DeFi Pilot. Polygon Labs will work with Italy's central bank's innovation center, Milano Hub, to launch an "Institutional DeFi for Security Token" ecosystem, aimed at creating a regulated environment for security token trading and exploring different designs for such tokens.

• Bitcoin Price Reacts to Strong US Dollar and GDP Data. After the Federal Reserve hiked interest rates, Bitcoin's price erased its FOMC gains due to a surge in the US dollar. The day’s U.S. GDP advanced print for Q2 came in better than forecast at 2.4% annualized, pointing to inflationary pressures continuing to ebb in what could prove a catalyst for risk asset performance.

• Avalanche Introduces $50M Fund to Boost Asset Tokenization. Avalanche launches "Avalanche Vista," an incentive scheme to promote asset tokenization on the network. The fund will be targeting various asset classes, including equity, credit, real estate, commodities, and blockchain-native assets.

🎧 Podcasts

• Gap Wants A Slice Of This Summer’s Barbie Mania. The clothing company has poached Mattel’s chief operating officer Richard Dickson to be its new CEO. Gap has been struggling with excess inventory and dwindling consumer demand. The retailer said that Dickson was the lead architect in turning around Mattel’s brand. And they’re hoping that some of that Barbie magic will rub off on them, too. Source(8:18)
  

• Federal Reserve Signals An Uncertain Outlook. Andreas Steno Larsen says the Federal Reserve altered its growth outlook wording from "modest growth pace" to "moderate growth pace," suggesting a slightly more optimistic stance. However, the lack of substantial details in the press release leaves uncertainty that this was the last rate hike. Source(3:04)
  

• Inflation to Bottom Out And Become Persistent Again in Q2 2024. Darius Dale thinks that it is highly possible that inflation will bottom out and become persistent again by the second quarter of the following year, as observed disinflation in the economy may lead to a structurally higher level of inflation. While it's not currently a concern for the market, it may become an issue in the fourth or first quarter of the next year, necessitating a careful observation of the situation. Source(12:29)
  

• Housing Starts Still Insufficient to Address Shortage. Jason Hartman says the number of housing starts does not even come close to solving the housing shortage. The average price of a new home is $475,000 which is already above what most people consider as entry level. The level of homebuilding we have now is nothing compared to where it used to be before the great financial crisis. Couple that with demographics and that's double the pressure in the housing market than ever in the past. Source(5:41)
  

• Automakers Unite for EV Charging Network. Seven major automakers form a multibillion-dollar joint venture to build 30,000 electric vehicle plugs in the US and Canada, challenging Tesla's dominance in the charging infrastructure. Previously, it seemed like the car industry would let Tesla remain the top player in charging, making this development a surprising twist. Source(11:00)