September 28, 2023

US FTC Revives Microsoft-Activision Deal Challenge

📰 News Organizations

  • US FTC Revives Microsoft-Activision Deal Challenge. The agency will move forward with its in-house trial against the acquisition after pausing it over the summer, according to an order the agency issued Wednesday.

  • OpenAI Seeks New Valuation of Up to $90 Billion in Sale of Existing Shares. The deal is expected to allow employees to sell their existing shares as opposed to the company issuing new ones to raise additional capital.

  • Snap to Shutter Business-Focused AR Unit That Just Launched This Year. Snap Inc. is closing a division focused on making augmented reality services for businesses, pulling the plug on its latest failed attempt to diversify the ad-dependent company.

  • Costco Tops Quarterly Earnings Expectations. CFO Richard Galanti said shoppers made more trips to the retailer’s stores, even as they spent less. He said sales of pricier items in the U.S., outside of food, were weaker and falling gas prices also weighed on revenue.

  • Target To Close 9 Stores Across 4 States, Citing Theft. Target has been outspoken about organized retail crime at its stores and said theft has driven higher levels of shrink. Target is closing locations in New York City, Seattle, San Francisco, and Portland.

  • Meta Announces New Quest 3 VR Headset. The release of Meta’s latest VR headset comes as an impending battle looms with Apple in virtual reality, which many in the technology industry believe could be a shift that expands the total market and creates new winners.

  • U.S. Crude Oil Hits Highs of the Year. U.S. crude oil futures extended their three-month-long rally, bringing them to their highest level of the year. The move seems driven by an American Petroleum Institute survey revealing a 14-month low in crude oil inventories in Oklahoma.

🐦 Twitter

  • The 30-year, fixed-rate mortgage is now 7.9%. Not only will the rate break 8%, but 9% is likely before year end. That will effectively triple mortgage rates, causing the Fed's balance sheet to explode, as insolvent banks dump their highly underwater MBS on the Fed at par. Source.

  • Nearly $270 billion of leveraged loans carry weak credit profiles and are potentially at risk of default: Fitch data. Excluding a 2020 spike, the default rate for the past 12 months is the highest since 2014. Source.

  • Major central banks around the world (except the Bank of Japan and People’s Bank of China), have been tightening their reins in a big way. Central-bank balance sheets have been reduced from 31% of global GDP to 25%. Source.

  • Inflation forces gaining momentum or stabilizing? Prices paid component within September Dallas Fed⁩ Manufacturing Index climbed to +25 (highest since February). Significant move from just +1.4 in June. Source.

  • US housing affordability is worse today than the peak of the last housing bubble. The median American household would need to spend 43.8% of their income to afford the median priced home, a record high. Source.

  • Ford's decision to hit the brakes on a planned $3.5B battery plant in Michigan highlights a challenge for Tesla's growing crowd of rivals in the U.S. market: Tesla is pushing most of them into unprofitable, low-volume niches. Source.

If you bought long term treasury bonds 12 years ago, and re-invested all dividends, today you'd have as many dollars as you initially spent. You may as well have put dollars under the mattress. The idea of government bonds is to beat inflation without risk. That idea is dead.

Saifedean Ammous

📓 Online Publications

  • Home-Buying Demand Falls as Mortgage Rates Reach Multi-Decade Highs. Amid rising interest rates, both home purchase and refinancing demand dwindled, with the purchase index dropping 1.5% and the refinance index declining by 0.9%.

  • Inflation Adjusted House Prices 3.4% Below Peak. Inflation-adjusted house prices are 3.4% below their peak in real terms, which means that they have lost value when adjusted for inflation. A significant decline, given that house prices have been rising steadily.

  • Apple Delays M3 Rollout. Apple has seemingly delayed utilizing some of TSM's most advanced chipmaking abilities in some of its products. The door might be open for Intel to land some secondary orders from big customers like Apple.

  • Mattel Gets Overweight Rating. Shares of the toymaker rose more than 4% after Morgan Stanley initiated coverage of Mattel with an overweight rating. Mattel is expected to see its sales and margins expand in Q3 and Q4, helped by the success of the Barbie movie.

🎧 Podcasts

  • JPMorgan Settles Jeffrey Epstein Lawsuits with US Virgin Islands. The bank said it will pay $75mn to the US Virgin Islands, where Epstein had a home. The money will go to anti-trafficking charities, legal fees and mental healthcare for Epstein’s victims. Source(3:14)

  • Lawmakers Warn that US is Heading for Shutdown as Budget Talks Stall. Lawmakers have until midnight on Saturday to pass a budget deal. If a deal doesn’t get done in time, everything except essential government operations will grind to a halt. Source(4:12)

  • TLT ETF Attracts $18 Billion Amid Bond Market Activity. TLT has witnessed substantial inflow, ranking second among ETFs this year, with approximately $16 to $18 billion in assets. This influx involves short-sellers and fast-money participants contributing to the flow. Source(13:24)

  • Victoria’s Secret Struggles to Stay Relevant. Victoria's Secret had a $1.8 billion sales decline since 2018 and a 6.5% drop in last year's revenue. Their shares reached all-time lows in September, down 78% from 2021 and 49% for the year. Source(17:55)

  • We are Approaching a Critical Phase in Global Markets. The transition to fiscal dominance in global markets, driven by various challenges, could lead to significant market changes, with a bearish outlook on fixed income and rising interest rates for the next two decades. Source(5:58)