October 9, 2023

US Consumer Credit Post Biggest Drop Since Pandemic

📰 News Organizations

  • US Consumer Credit Post Biggest Drop Since Pandemic. It shrank by $15.6 billion in August. It was the biggest decline since May 2020. All of the decline was in so-called non-revolving credit such as auto and student loans.

  • Biggest AI Systems Poised for Stricter Set of EU Rules. European Union negotiators have backed a plan to place additional constraints on the biggest artificial intelligence systems under the upcoming AI Act.

  • G-7 Plans to Ask AI Companies to Agree to Watermarks, Audits. The Group of Seven nations is preparing to ask tech companies to agree to a set of rules to mitigate the risks of AI systems aimed at uniting the divided approaches in Europe and the US.

  • Snap Gets Enforcement Notice From UK Watchdog on AI Chatbot. The notice cited Snap’s potential failure to properly assess privacy risks from its My AI chatbot. If a final notice is issued, Snap might be forced to stop processing data in connection with the chatbot.

  • PGA Tour Merger Faces Delays. The proposed golf entity merger faces potential delays beyond its December 31 deadline. PGA Tour golfers are seeking stakeholder roles, and the Justice Department is reportedly examining the merger for antitrust issues.

🐦 Twitter

  • Until wage growth normalizes inflation will not durably return to the Fed's mandate. So far scanning through the data wage growth still looks too high, particularly for those income segments with a higher propensity to spend. Source.

  • This is a very important reversal in gold and silver, now rallying after the strong jobs report. It's worth noting that Commodity Trading Advisors (CTAs) continue to hold extremely bearish positions on gold. This is the ideal setup for metals to substantially rise from here. Source.

  • Last week ended on a high note with Tech & Comm Serv leading; Utilities had a nice bounce but not enough to erase a terrible dent recently or YTD. Small caps lagged behind large caps today and continue to lack leadership status in both MTD and YTD. Source.

  • If there is good news for stocks, it’s that the S&P 500 (cap-weighted) index has reached its first meaningful support level at 4200, in the form of the 200-day moving average and a 50% retracement of the recent rally. Only 14% of the S&P 500 are above their 50-day moving average. Source.

  • The backdrop for housing looks eerily familiar to the sharp slowdown we saw this same time last year when rates jumped. The move in 2022 was 5% to 7% Aug-Oct, and it slowed everything quickly, including prices. This time around we’re jumping from 6.75% to ~8% in roughly the same time period. Source.

8% mortgage rates are high. But they're not as high as you'd think relative to inflation. With the current "real mortgage rate" in America hovering around 4.0% right now. That's right in line with the long-term average.

Nick Gerli

📓 Online Publications

  • Levi Stock Drops on Lowered Annual Earnings Guidance. Fiscal Q3 revenue is flat year-over-year, falling below the expected 2% growth. High interest rates and inflation drive challenging market conditions for retailers and consumer discretionary firms.

  • ‘Eager Homebuyers’ Are Still Out There. Despite affordability challenges, homes spent 48 days on the market in September, just one day longer than last year, and for the week ending Sept. 30, the number of days matched last year's figures.

  • Early Reporting Markets suggest Sales at New Cycle Low in September. Closed sales in September were mostly for contracts signed in July and August. Since 30-year fixed mortgage rates were in the 6.8% range in July.

  • Verizon Stock Dropped 3.3% on Friday. Verizon faces potential challenges as rising interest rates may impact borrowing costs despite strong jobs data. Investors are closely watching the upcoming results for indications of improved free cash flow to counteract these concerns.

🎧 Podcasts

  • Bonds Spark Recession Concerns. The long bonds closed around 1.5% higher, whereas junk bonds closed only 0.5% higher. If long bonds outperform junk bonds, it could signal a risk-off scenario and potentially indicate a recession. Source(7:07)

  • Concerns of Broader Financial Risks. Concerns in the unregulated non-bank financial sector may lead to broader financial risks if there's a material slowdown in growth and reduced credit activities. Source(7:41)

  • Social Media Traffic to Major News Sites in Dramatic Decline. Major media outlets have seen a dramatic decline in referrals from Facebook and X, formerly Twitter, over the past year after social media platforms made changes to how they deal with news companies. Source(37:19)

  • Anthropic Targets $20B+ Valuation. AI startup Anthropic is now holding talks with investors, including Google LLC, about a new $2 billion funding round. It comes after Amazon.com Inc. last week committed to invest up to $4 billion into the startup. Source(10:29)

  • Repricing Challenge for Businesses. The problem lies in the relative increase in yields over the past 15 years, impacting businesses as loans come due and are repriced at higher interest rates, posing a challenge for those with fixed-rate debt and staggered maturities. Source(9:42)

  • Microsoft's Co-Pilot to Generate $19 Billion. Co-pilot is expected to generate $19 billion in revenue by 2025, aiming to enhance coding efficiency. However, skepticism remains about its transformative impact, with CEOs noting challenges in realizing concrete results. Source(44:15)