October 2, 2023

Tesla’s Streak of Record Deliveries Hits Roadblock

📰 News Organizations

  • Tesla’s Streak of Record Deliveries Hits Third-Quarter Roadblock. The EV maker shut down facilities over the summer to make upgrades. Additionally, as inflation continues to hit household budgets, consumers are having a harder time making big purchases.

  • EEOC Sues Tesla, Alleging Widespread Racist Harassment. The U.S. Equal Employment Opportunity Commission has sued Tesla for allegedly allowing widespread racist harassment of Black employees and retaliating against those who speak out.

  • EU Begins Early-Stage Probe Into AI Chip Market Abuses. The European Commission has been informally collecting views on potentially abusive practices in the sector for so-called graphics processing units, to see if there’s a need for intervention.

  • Eurozone Inflation Fell to 4.3% in September. That was down from a 5.2% annual reading in August, while month-on-month inflation dipped from 0.5% to 0.3%. The fresh print comes after the European Central Bank decided to hike interest rates in September.

  • CFTC Fines Goldman Over Swaps Reporting. The CFTC ordered Goldman to pay a $30 million penalty for failing to “diligently” supervise its swap dealer activities and for failures relating to swap date reporting and so-called pre-trade mid-market marks.

  • Wells Fargo Sells $2 Billion of Private Equity Investments. The sales are the latest piece of its effort to refocus on its core business. Wells Fargo has also slimmed down its mortgage business and sold off businesses including its asset management arm.

🐦 Twitter

  • Office commercial real estate saw a dramatic rise in its delinquency rate in the second quarter, increasing from 2.7% in Q1 to 4.9% in Q2: Trepp data. Source.

  • GDP growth probably accelerates in Q1 2024 vs. Q4 2023 just from Hollywood ramping back up, UAW employers operating normally, and the federal government not being shut down. Source.

  • From a regional perspective, we're starting to see a glimmer of "normalization" in the Southeast and the Northwest housing markets, and it looks like Florida may be next. Northeast and California markets are still pretty imbalanced. Source.

  • Russell 2000 has stopped falling relative to NASDAQ 100, but will take more convincing stretch of relative gains to see complete reversal in this year's downtrend. Source.

  • Since July 19 10-year yields have risen 80bps, and yet few signs of stress in regional bank equity markets or their balance sheets. Banks passing this duration test with little concern. Suggests yields could press higher without a break. Little equity correlation to bond moves. Source.

Good to see core PCE be so soft, but a reminder that inflation is a lagging indicator, and ultimately growth/real-time activity is what to focus on when thinking about where inflation should be headed in the future.

Conor Sen

📓 Online Publications

  • Asking Rents Down 1.2% Year-over-year. Recent data suggests household formation has slowed sharply and asking rents are declining. With slow household formation, more supply coming, and a rising vacancy rate, rents will be under pressure all year.

  • Single-Family Mortgage Delinquency Rate Declined. There would not be a huge wave of single-family foreclosures this cycle since most homeowners have substantial equity. That means we will not see cascading price declines like following the housing bubble.

  • Nikola Commercially Launched its Hydrogen Fuel Cell Electric Trucks. The hydrogen fuel cell transportation company went into commercial production for its semitrucks after years of delays. Shares closed 25.6% this week but still down 98% from all-time highs.

  • First-Time Homebuyers Face Student Loan Repayments. Of the roughly 43 million adult Americans with a federal student loan, the debt burden falls excessively on young adults. Specifically, one-third of those who carry student loan debt are 25 to 34 years old.

🎧 Podcasts

  • Costco Selling Out of Gold Bars in Hours. Costco's unexpected bestseller: gold bars. Despite a two-bar limit, they sell out quickly, driven by their appeal as a hedge during inflation and market volatility, outpacing the S&P 500 by 57% in the past five years. Source(11:33)

  • European Bond Market Hit by Italy’s Plans for Higher Borrowing. Investors got spooked by Italy’s larger-than-expected budget deficit. They’re also concerned that central banks will keep interest rates higher for longer. The sell-off even spread to UK markets. Source(0:48)

  • Instacart and Arm Shares Lose Steam After IPO Pops. There’s been a lot of uncertainty in the outlook for the economy, whether the US will go into a recession, and what’s happening with interest rates. And that has put a lot of pressure on investment markets. Source(2:21)

  • Enhanced Returns Amid Rising Rates. Rising interest rates drive a shift to bonds, but today's market leverages derivatives and structured yields for enhanced returns, reaching up to 7.5 to 8% with low portfolio leverage. This contrasts with past strategies in inflationary periods. Source(10:56)