September 10, 2023

G20 Welcomes The African Union as a Permanent Member

📰 News Organizations

  • The G20 Welcomes The African Union As Permanent Member. The G20 leaders agreed to make the African Union (AU)—a bloc of fifty-five states in Africa—a permanent member. The AU will be the group’s first new member since its inception.

  • The Fall in Home Prices May Already Be Over. After dipping on a year-over-year basis for five consecutive months—the longest run of declines in 11 years—U.S. home prices rose in July. Scarcity is a big reason. High-interest rates have prompted homeowners to stay put.

  • Dollar Set for Longest Weekly Winning Streak Since 2014. The U.S. economic data is still robust and in Europe, it's flattening out. Yuan dives to 2007 low. The dollar usually does well when the U.S. economy outperforms its peers.

  • Kroger Will Pay Up to $1.2 Billion to Settle Opioid Claims. Kroger has agreed to pay $1.2 billion to U.S. states, subdivisions, and Native American tribes to settle the majority claims that it fueled the opioid epidemic through lax oversight of its pill sales.

  • European Gas Prices Jump 10% As Strikes Get Underway At Major Lng Facilities. The negotiations between U.S. energy giant Chevron and the unions representing workers at the liquified natural gas projects failed to resolve a long-running dispute over pay and job security.

  • Ant Unveils AI Language Model for Wealth Management, Insurance. The Jack Ma-backed fintech company will use its financial large language model to power Zhixiaobao, which answers questions for customers, and Zhixiaozhu, an assistant for financial professionals.

🐦 Twitter

  • Spread between 10y and 3m Treasury yields has been negative for 218 consecutive days as of Thursday. Now, officially longer than the streak that ended in 2007, and the longest since the streak that ended in 1980. Source.

  • Credit card delinquencies at small banks are at 7.51% — an all-time high. Small banks almost failed in March, were rescued by the Fed, and hold 71% of CRE loans. 92.3% of which were past-due in July. Regional banks are teetering on the brink & we aren't even in recession yet. Source.

  • There is something deeper going on. As yields have risen, and bond prices declined, fewer high yield bonds are trading. Maybe the ratings agencies are just not handing out junk ratings like they used to. Or maybe junk companies are going elsewhere for capital. Source.

  • In the latest Black Knight data, the average payment for home buyers is now at $3k/mo. Meanwhile, existing homeowners are in such good shape that foreclosure starts fell another 6% in July and are 39% below prepandemic levels. Source.

  • The most active oil-producing basin in the US is now experiencing a contraction in the number of operating rigs. It is the largest 4-month decline since the covid lockdowns. Keep in mind that this basin accounts for nearly 40% of all oil production in the US. Source.

  • Another hint of how much easier it is to hire workers now than six months ago: Walmart essentially lowered the starting wage of some starting salaries. Source.

Hedge fund allocators dream of finding managers that reliably outperform the benchmark. But they can't. The past performance information they typically rely on is no better than random at picking future winners. It's instead a gamble with extreme dispersion.

Bob Elliott

📓 Online Publications

  • Luxury Homes Are Selling Surprisingly Fast in These Cities. California’s Silicon Valley, including San Jose, Sunnyvale, and Santa Clara, has the fastest-selling luxury homes in the U.S. 39 days to be exact, as the deepest-pocketed residents of Silicon Valley are still willing to spend.

  • Zillow Continues To Invest In Its Mortgage Business. While other real estate tech companies are shedding mortgage headcount, cutting expenses, and closing their mortgage operations, Zillow’s investment is a sign of strategic intent to invest for the long term.

  • Purchase Loan Applications Once Again At Lowest Level Since 1995. Both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates.

  • CoreLogic: 1.11 million Homeowners with Negative Equity in Q2 2023. From the first quarter of 2023 to the second quarter of 2023, the total number of mortgaged homes in negative equity decreased by 6%, to 1.11 million homes or 2% of all mortgaged properties.

  • Citibank Wants to Sell its Small Bank Loaning Platform. Demand for commercial and industrial loans (C&I) has fallen steadily since the small and mid-sized regional bank crisis earlier this summer due to high interest rates and an uncertain outlook.

  • American Companies Must Manufacture Advanced Semiconductors. Recent developments in the geopolitical landscape and the strained relationship between the US and China in the advanced semiconductor portend a serious threat to the growth of several US industries.

🎧 Podcasts

  • Risk of Inflation-Driven Growth Deceleration Looms. There is a significant risk of a substantial slowdown in economic growth over the next few quarters, potentially driven by inflation rather than causing it, leading to reduced growth in the long run. Source(19:01)

  • US Economy May Be Poised for Soft Landing. If the ongoing economic trends persist, mirroring the patterns observed in the data over the past four to five quarters, the US economy appears to be heading for a soft landing. Source(19:33)

  • Only Tesla and Toyota will Survive. Tesla's disruptive innovation, strong market valuation, leadership in autonomous driving, adaptability, and perceived longevity are factors that contribute to the belief that only Tesla and Toyota will thrive in the long term. Source(42:01)

  • Fed's Rate Cuts Still Unlikely Amid High Inflation. Currently, with high inflation, it's unlikely that the Fed will take any aggressive action. This is what the euro-dollar curve and other interest rate indicators suggest. Source(16:24)

  • FTC vs. Amazon. The FTC is expected to file an antitrust lawsuit against Amazon as soon as this month. The challenge could ultimately result in a breakup of the more than trillion-dollar business, should the FTC file the lawsuit and win in court. Source(15:21)