October 18, 2023

Goldman Profit Drops 33% Amid Real Estate Loss

📰 News Organizations

  • Goldman Profit Drops 33% Amid Real Estate Write-downs. Goldman Sachs posted a second straight quarter of real estate write-downs and a continued dealmaking slump. Property investments drove a $212 million loss.

  • Ericsson Drops to Lowest Since 2017 After Disappointing Guidance. Ericsson said market weakness will persist into the fourth quarter and beyond, as the company struggles with reduced investment in 5th-generation mobile infrastructure.

  • Starboard Takes 5%-Plus Stake in Contract-Research Firm Fortrea. Starboard believes Fortrea is well-positioned as a large and diversified global contract research organization, providing medical companies with research-management services.

  • CVC Capital Said to Kickoff of Mega Private Equity IPO. CVC Capital Partners is preparing to kick off its initial public offering, undaunted by the recent equity market jitters. The European private equity firm intends to float in Amsterdam as soon as the coming days.

  • Long-End Treasuries Hit by Wildest Swings Since 2020 Pandemic. The US 30-year yield shifted by almost 13 basis points a day over the last five trading days, the highest in more than three years and more than three times as much as the daily average.

  • United Air Forecasts Profit Miss on High Fuel Costs. Adjusted profit will be $1.80 a share if Tel Aviv flights are grounded through Oct. 31, and $1.50 if the ban lasts through the end of 2023, United said in a statement.

🐦 Twitter

  • "There's been a capitulation" of bond bulls, said HSBC's Steve Major. There are many "who are actually long of bonds who have had to cut the position." He sees the selloff as being self-limiting, with long-term bonds still a buy. Source.

  • October Empire Manufacturing Index back in contraction at -4.6 vs. -6 est. & +1.9 prior. New orders fell into contraction (outlook also fell sharply); delivery times slipped into contraction; shipments fell sharply but still expanding. Source.

  • The combination of deglobalization trends, wage pressure, and the rising cost of debt are likely to exert pressure on companies' profit margins, and corporate fundamentals are yet to reflect these issues. Source.

  • Investors are notably stepping back from high-cost markets where the price-to-rent ratios have veered significantly away from historical norms. Essentially, a big chunk of homes for sale in San Francisco and Austin fail to yield positive cash flow. Source.

  • What’s next for stocks? If 3-4% inflation is the new 2%, and the term premium reverts to 100 bps or so, the valuation tailwind of the past 14 years could quickly turn into a headwind. If fiscal policy remains loose, monetary policy could be tighter as a result. Source.

  • Based on the Sept CPI and PPI, forecasters expect the core PCE index rose 0.28% in Sept, with an even firmer print (+0.4%) for core services ex-housing. Source.

In the olden days, your ability to raise capital grew as you demonstrated skill & judgment & word spread from your investors to their friends. The use of social media allows you to accelerate that process. For better & worse.

Moses Kagan

📓 Online Publications

  • Lululemon to Replace Activision Blizzard in S&P 500. The athleisure company was tapped to join the S&P 500, replacing Activision Blizzard after Microsoft's takeover of the video game publisher was approved.

  • Housing Prices Peaked For 6th Straight Month In September. Home prices increased 0.7% between the months of August and September of 2023, and were up 6.7% annually, according to a new report.

  • Consumers Showed Surprising Strength in September. It boosted retail sales well above expectations despite high-interest rates and worries over a weakening economy. Retail sales rose 0.7% on the month, well above the 0.3% Dow Jones estimate.

  • NAR to Shed 1M members If Shared Commission Banned. A report released by the investment banking firm Keefe, Bruyette & Woods forecasts commissions to decline by at least 30% as a result of ongoing threats to the real estate industry.

  • NAHB: Builder Confidence Decreased in October. It fell four points to 40. Builders have reported lower levels of buyer traffic, as some buyers, particularly younger ones, are priced out of the market because of higher interest rates.

🎧 Podcasts

  • Microsoft Will Now Face Heightened Scrutiny. Its recent Activision deal, signals increased attention from regulators in the future and hints at potential challenges in its future endeavors as Microsoft becomes bigger. Source(9:20)

  • Gold Surges Amid Geopolitical Uncertainty. Gold's recent rise signals anticipation amid geopolitical uncertainties, offering a hedge in a climate where traditional options like bonds falter. The liquidity cycle, similar to crypto, adds to the bullish sentiment for gold. Source(10:06)

  • Weaker Dollar Signals Risk-On Sentiment. The dollar is undergoing a corrective pattern, relieving pressure on assets, and despite the potential further downside, a weaker dollar is seen as a sign of a risk-on sentiment, supporting equities with a target of around 109. Source(3:44)

  • Home Sales Haven't Been This Low in a Long Time. High mortgage rates bring home sales to the lowest level. It’s down to 4.1 million, the smallest since 2008. Meanwhile, the monthly rent is $81 cheaper than the monthly 30-year mortgage. Source(2:00)

  • World of Renters and Landlords. Joseph Brown says the true real estate crisis is that someday, people who never bought will no longer be afford to buy and there will be a class of renters and landlords. Source(25:02)