October 23, 2023

U.S. Budget Deficit Swells To 1.7 Trillion

📰 News Organizations

  • U.S. Budget Deficit Swells To $1.7 Trillion. The federal budget deficit for fiscal year 2023 was $1.7 trillion, up $320 billion, or 23%. The sharp decrease in revenue was due to lower individual-income tax receipts as capital-gains realizations fell.

  • Office Vacancies at Highest Level Since 2007. Dropbox is giving back over 165,000 square feet of its San Francisco headquarters to the landlord. Meanwhile, Uber is reportedly close to subleasing part of its headquarters to OpenAI.

  • Car Owners Fall Behind on Payments at Highest Rate on Record. With interest rate hikes making newer loans more expensive, millions of car owners are struggling to afford their payments, indicating distress at a time when the economy is sending mixed signals.

  • Tesla Joins GM, Ford in Slowing EV Factory Ramp. Tesla CEO Elon Musk said he was worried that higher borrowing costs would prevent potential customers from affording its vehicles despite substantial price cuts, and that he would pause its planned factory in Mexico.

  • Gold Prices Top $2,000 For the First Time Since July. The war between Hamas and Israel has made haven-asset gold, which is prized for its stability during times of market turmoil, more popular. The yellow metal has rallied about 8% since the conflict began.

  • FaZe Clan Is Merging With Company Backed by Jerry Jones. FaZe Holdings Inc., the struggling video-game-influencer company, is being acquired by GameSquare Holdings Inc. It will buy the pioneering influencer company in an all-stock deal.

🐦 Twitter

  • Every sector down Friday with mix of cyclicals and growth leading to downside; Health Care & Cons Staples were relative winners but continue to look rough YTD. Huge split remains between large and small caps YTD, with Russell 2000 Value lagging most. Source.

  • While speculative positioning on 10-Year Treasury futures has remained firmly bearish, S&P 500 future positioning has been moving towards neutral since June, but is still net bearish. Source.

  • US single stocks saw the largest net selling since July, as single stock shorts increased for a 11th straight week, on par with the longest shorting streak on record. Source.

  • US housing market is so expensive that home prices would have to crash 35% or mortgage rates drop four percentage points to make it considered affordable. Source.

  • The resale housing market has been broken for awhile, but now multi-fam activity is slumping and new home construction is set to slump. That should keep a lid on economic growth. Source.

  • It's been a great year for the 50 largest stocks in the S&P 500, which are still up 24% YTD even after the recent pullback. But the performance of the average stock paints a very different picture with the S&P 500 equal weight down 1% YTD and small caps down 3.5%. Source.

The way to make money in dividend stocks is NOT to buy stocks that pay high dividends. That’s actually one of the best ways to lose money. We want to look for buys in companies with the ability to raise their dividends every year.

J.C. Parets

📓 Online Publications

  • Costco’s Longtime CEO Steps Down. Craig Jelinek will step down at the end of the year. Ron Vachris, Costco’s president and chief operating officer who started at the company 40 years ago driving forklifts, will replace him.

  • Pfizer Just Announced Layoffs. Pfizer is going to be trimming its headcount over the next 12 months. Its best-selling drugs of the last few years are no longer raking in lots of dough. Management's grand plan for the rest of the decade may need to accelerate.

  • Q3 GDP Tracking: Around 4%. The GDPNow model estimate for real GDP growth in the third quarter of 2023 is 5.4 percent on October 18, unchanged from October 17 after rounding. Meanwhile, Goldman left their Q3 GDP tracking estimate unchanged at +4.0%.

  • Stagnant Home Prices Amidst Elevated Mortgage Rates. Realtor.com's Danielle Hale notes the challenge of high mortgage rates combined with unchanging national median home prices at $430,000 from September to mid-October, mirrors last year's pattern.

🎧 Podcasts

  • Three Consecutive Down Years in U.S. Bond Market. This is the first time in US bond market history that we have seen three consecutive down years. This state of stasis is likely to persist, propelling the current trajectory until a significant, cathartic event occurs. Source(3:17)

  • Liquidity Drains as Market Shifts. As the market shifts from a Fed-driven narrative to a market-driven one, liquidity is gradually draining away. The intentional move, with trillions in quantitative tightening and rate hikes, has left banks with minimal liquidity. Source(5:50)

  • US Millennials Poised to Inherit $76 Trillion Over Next 20 Years. This brings a shift in risk preferences compared to baby boomers. This generational wealth transfer is seen as a strong reason to maintain a bullish outlook, supporting equities and shaping consumption patterns. Source(33:03)

  • GLP-1: Next Big Hype Cycle? The GLP-1 Market has mirrored the AI hype cycle, with companies like Lily and Novo Nordisk benefiting from GLP-1s, while others like Dexcom or Dita faced disruption, reflecting trends akin in the AI landscape. Source(1:06:08)

  • Record 58% of US Households Own Stock. The record is driven by a significant 15% to 21% increase in direct stock ownership between 2019 and 2022. This coincided with a historic 37% rise in the median net worth of U.S. families to $192,000, according to the Fed. Source(6:18)