October 1, 2023

UAW Expands Auto Strike Again But Spares Stellantis

📰 News Organizations

  • UAW Expands Auto Strike Again But Spares Stellantis. The United Auto Workers union will expand strikes against General Motors and Ford Motor. Stellantis was spared from additional strikes because of recent progress in negotiations.

  • Fed’s Preferred Inflation Gauge Eases. Core prices edged up 0.1 percent from July to August, down from July’s 0.2 percent. Higher gas prices lifted the Fed's preferred inflation gauge but underlying price pressures remain mild.

  • Justice Department Sues eBay Over Sale of Harmful Products. The complaint claims eBay sold, offered for sale, or caused the sale of more than 343,000 aftermarket devices that try to evade motor vehicle emissions controls.

  • Albemarle to Pay Over $218 Million to Settle Bribery Investigation. Albemarle agents and subsidiaries bribed officials in Vietnam, Indonesia, and India from 2009 to 2017 for chemical catalyst business with state-owned oil refineries, per the Justice Department.

  • Coca-Cola Is Coming for Gatorade’s Top Spot in Sports Drinks. The beverage giant is using the new NCAA rules that allow college athletes to earn money as product endorsers in an effort to unseat the long-dominant player in sports drinks, PepsiCo Inc.’s Gatorade.

  • Lockheed Martin Subsidiary Lands $1.2 billion U.S. Navy Contract. Lockheed landed a $1.2 billion U.S. Navy contract modification for Trident II missile production and deployment systems support which is expected to be completed by Sept. 30, 2028.

🐦 Twitter

  • The Bank of Japan announced an unscheduled bond-purchase operation overnight to dampen the selloff in the nation's debt. It was pretty small - $2 billion of purchases - and didn't dent a selloff that left rates on 30-year notes at the highest in nearly a decade. Source.

  • The average family health insurance premium has increased 249% since 2000. The biggest beneficiaries of this massive increase are health insurance companies. UnitedHealth (largest US insurer) is up 4,120% since 2000 vs. a 340% gain for the S&P 500. Source.

  • If the Fed continues to drain liquidity via QT and the Treasury finishes replenishing its TGA, while money market funds use less of the Fed’s RRP program, overall liquidity could fall to new lows. That could take small caps (and perhaps the broader market) down with it. Source.

  • Given the recent weakness in pending home sales, the year/year trend is starting to hook lower again and is still in double-digit decline territory and bottom end of the long-term range. Source.

  • Mortgage rates hit 7.31%, per Freddie Mac. The last time rates were this high was December 15, 2000. The median sale price for a home was $172K ($416K today). Source.

The fear of finding their next home to buy is a huge concern for sellers. As supply slowly rises, that fear should subside gradually, allowing more sellers to test the waters hopefully.

Rick Palacios Jr.

📓 Online Publications

  • Pending Home Sales Decrease 7.1% in August; Down 18.7% Year-over-year. All four U.S. regions posted monthly losses and year-over-year declines in transactions. Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers.

  • AI in Your Meta Smart Glasses. Incorporating AI in the Smart Glasses makes artificial intelligence more useful simply because it comes in a better form factor as glasses you can wear anywhere that lets you use AI in real-time without relying on your phone.

  • Nike Easily Beat Bottom-Line Estimates. Sales rose in all regions except for North America, but investors had expected stronger growth in China, where revenue was up 12% on a currency-neutral basis.

  • Curve Steepening Suprise. The unexpected steepening of the curve is attributed to long rates, and the reasons for this shift remain uncertain. Despite historical expectations, rising mortgage rates have not led to a significant fall in housing prices, contrary to past trends.

  • Mortgage Rates Hit a High Not Seen Since 2000. For the week ending Sept. 28, rates for a 30-year fixed-rate loan rose to their highest level since 2000, landing at an average of 7.31%—a substantial jump from last week’s 7.19%, according to Freddie Mac.

🎧 Podcasts

  • Rising Headwinds Threaten US Economy’s Resilience. Several challenges have surfaced, including the potential for a government shutdown, energy price spikes due to supply cuts, and an autoworkers' strike. These factors are exerting more downward pressure. Source(6:21)

  • OpenAI Plans 'iPhone of AI’. OpenAI is reportedly in talks with former Apple designer Johnny Ive and SoftBank's CEO Masayoshi Son to create the "iPhone of artificial intelligence," with Son potentially contributing up to $1 billion. Source(7:05)

  • Unlikely Market Crash Amid Government Shutdown Talks. A government shutdown is highly unlikely due to positive demand and shared incentives among political incumbents to avoid a default. Despite potential short-term volatility, the expectation is for a resolution. Source(12:55)

  • LLMS As New Era Computing Interface. LLMs are evolving into a new type of operating system, with enough power for diverse modalities, code interpretation, internet access, and visual or audio rendering, positioning LLMs as a new type of computing interface era. Source(1:15:03)

  • U.S. Leading in Relative Earnings. A secular rotation is anticipated from U.S. large-cap growth to other sectors, but global asset allocation has yet to reflect this shift. So far, the U.S. maintaining leadership in terms of relative earnings outweighing relative valuation. Source(36:30)