June 25, 2023

Investors Exit Tech Stocks Amid "Baby Bubble" Concerns

📰 News Organizations

  • Central-Bank Action Signals Cooling Global Economy. The global economy is showing signs of cooling as strong demand for services weakens, indicating that rising borrowing costs are taking effect.* Surveys also reveal a slowdown in inflationary pressures, with businesses reporting reduced costs and prices, which will be welcomed by central banks.

  • Investors Exit Tech Stocks Amid "Baby Bubble" Concerns. The technology sector experienced the largest outflows in 10 weeks, with investors withdrawing $2 billion* in the five trading days through June 21, expressing concerns of a "baby bubble." Despite the Nasdaq 100 Index performing well, investors are cautious and exiting the market.

  • 3M Settles 'Forever Chemicals' Litigation for Up to $12.5 Billion. A tentative national class-action settlement was reached in the environmental fight involving PFAS chemicals in firefighting foam, with 3M agreeing to pay between $10.5 billion and $12.5 billion.* The settlement will cover public water systems across the U.S., marking a significant step towards resolving the landmark litigation.

  • Canada Passes Bill Requiring Google and Meta to Pay for News. Canada's Senate has passed a bill that will make it mandatory for Google and Meta* to compensate media outlets for the news content they share or repurpose on their platforms. The bill's passage reflects the ongoing dispute between the Canadian government and major tech giants over fair compensation for news content.

  • Microsoft-Activision Merger Hearing Begins Amid FTC Lawsuit. A federal judge has commenced hearings in the FTC's lawsuit aimed at blocking Microsoft's proposed acquisition of Activision Blizzard for $75 billion. A ruling in favor of the FTC could temporarily halt the merger* and jeopardize the entire deal.

  • Fortress Investment Group Emerges as Winning Bidder for Vice Media. Vice Media has announced Fortress Investment Group as the winning bidder in its bankruptcy sale, with a final offer of $350 million.* Fortress led a group of lenders that initially bid $225 million, and the successful bid will pave the way for Vice's emergence from bankruptcy.

  • Euro-Area Data Sparks Recession Fear, Bond Surge. Weaker euro-area activity data and concerns of higher interest rates prompted investors to seek safety in bonds, leading to a decline in stock markets. The combination of these factors has intensified fears of recession* and raised doubts about the effectiveness of aggressive central bank policies.

  • Virgin Galactic Raises $300 Million, Plans for Additional Funding. Virgin Galactic has successfully raised $300 million through a stock offering and aims to raise an additional $400 million in the future. The funds will be utilized to develop and expand the company's spacecraft fleet as it continues its mission in the space tourism industry.

🐦 Twitter

  • 3 years ago: 30-yr mortgage rate was 3.13% & median existing home price in the US was $284k. Today: 30-yr mortgage rate is 6.67% & median home price is $396k. Result: $22k increase in down payment (assuming 20% down) and 109% increase in monthly payment (from $973 to $2,037). Source.

  • The Leading Economic Index posted a slight decline in May (-4.3%) - and annually saw a slight decline in its rate of decline. “The US LEI continued to fall in May as a result of deterioration in the gauges of consumer expectations for business conditions, ISM® New. Source.

  • Commodities remain in a bear cycle, despite having enjoyed a 10-day bull run in May ... group has struggled to gain any momentum since June 2022; crude oil's heavy weight in index is helping put downward pressure on performance. Source.

  • The median American household would need to spend over 40% of their income to afford the median priced home for sale today, up from 28% three years ago. Source.

Traders are now fully pricing a Bank of England terminal policy rate of 6.25% in February, according to interest-rate derivatives. The last time the BOE’s key rate was at that level was in 1998. Source.

The rental market downturn right now is about a reversal of pandemic household formation plus a glut of supply coming, but demographically the setup for renting isn’t nearly what it was in the 2010’s

Conor Sen

📓 Online Publications

  • Largest Drop in U.S. Existing Home Prices Since December 2011. Existing home prices in the U.S. experienced the largest decline since December 2011, while sales of existing homes increased by 0.2% in May, surpassing economists' expectations. Despite the rise in sales, the housing market still faces challenges compared to a typical spring season.

  • Modest Boost in Home Sales Signals End of Sluggish Spring. The National Association of Realtors reported 408,000 sales of existing homes in May, a typical improvement for the month compared to the sluggish spring season. Although sales have been relatively steady, the housing market continues to recover slowly* from the impact of the pandemic.

  • U.S. Faces Shortage of 4.3 Million Homes, Urgent Need for Zoning Reform. Zillow estimates that there were 8 million "missing households" in the U.S. in 2021, while only 3.7 million housing units were available for rent or sale. Experts widely agree that loosening restrictive zoning laws* to facilitate more housing construction is crucial in closing the affordability gap.

  • 3 Oil Stocks Poised to Benefit from Rising Oil Prices. As oil prices are expected to increase due to tightening supplies and growing demand, EOG Resources, Devon Energy, and Pioneer Natural Resources plan to distribute significant portions of their oil-driven free cash flow to shareholders, providing investment opportunities for investors seeking exposure to the oil market.

  • Amazon and Snowflake: Cloud Stocks for AI Opportunities. Amazon and Snowflake are potential undervalued investments in the market considering the anticipated demand for AI. As the leading cloud infrastructure provider, Amazon is well-positioned to benefit from the increasing demand for AI-related services, and Snowflake is experiencing notable growth in AI use cases on its data cloud platform.

🎧 Podcasts

  • Bank of England raises interest rates by 0.5 percentage points. The Bank of England raised interest rates by half a percentage point yesterday. They’re now at the highest level since 2008. Homeowners are worried they won’t be able to afford higher mortgages when their fixed-rate contracts run out. Experts expect repossessions to go up as a result of this. Source(0:42)

  • Germany locks in more US natural gas as it shuns Russian supply. Germany took another step away from Russian energy. The company Securing Energy for Europe announced that it’s locked in to buy more than 2mn tonnes of liquefied natural gas from the US, specifically from the American developer Venture Global LNG. The companies did not disclose the gas’s selling price. Source(4:20)

  • Overstock.com Purchases Bed Bath & Beyond’s IP. Overstock.com won the auction and will carry on its name but not its brick-and-mortar locations. Overstock will pay $21.5 million for the company’s name, business data, and online properties, which was the agreed-upon sale price that set the floor for the bankruptcy-run auction, according to court filings. Source(11:19)

  • Is the UK the Sick Man of Europe? Brexit has resulted in a chaotic situation with structural inflation in the UK that remains unresolved. While Europe's inflation is decreasing rapidly, the UK faces challenges in addressing the issue, including concerns about the housing market and the potential for mortgage payment forgiveness as a future stimulus. Source(14:57)

  • Tesla’s Market Value Going Up a Quarter of a Trillion Dollars. Tesla notched a few wins in the last few weeks. With Twitter having a new CEO, Linda Yaccarino, means that Elon Musk can focus his efforts more on Tesla. Tesla also signed new deals that will let GM, Ford, and Rivian use Tesla's supercharger network. Source(10:41)