August 15, 2023

📰 News Organizations

• Berkshire Bets Big On Homebuilder Stocks. Warren Buffett’s Berkshire Hathaway unveiled new positions in D.R. Horton, NVR, and Lennar, together worth more than $800 million at the end of June, according to the latest filing disclosed Monday. Homebuilders have seen a boom since mortgage rates shot up last year.
  

• SoftBank in Talks to Buy Vision Fund’s Stake in Arm. SoftBank is in discussions to purchase the 25% stake in Arm Ltd. it doesn’t directly own from Vision Fund 1. If the negotiations lead to a deal, investors in the fund would be positioned for an immediate windfall.

• U.S. Steel Rejects Offer From Cleveland-Cliffs. According to Cleveland-Cliffs, U.S. Steel’s board rejected the offer. U.S. Steel said that it was reviewing strategic alternatives. Combining the two would have reduced the major steelmakers in the U.S. to three from four.

• Tesla Stock Falls After China Price Cuts. The car company dropped prices by up to 4.5% for two versions of its top-end Model Y car. Tesla's latest price cuts threaten to prolong a price war that has already hurt profitability at some Chinese electric car makers.

• Mastercard to Buy Stake in MTN’s $5.2 Billion Fintech Unit. MTN said Monday that the deal values the entire fintech unit at $5.2 billion. As part of the agreement, MTN’s business will use Mastercard’s technology infrastructure to expand its payments and remittance services in Africa.
  

• UBS To Pay $1.4 Billion Over Fraud In Mortgage-Backed Securities. The settlement concludes the final case brought by the Justice Department over misleading statements made to the purchasers of those mortgage-backed securities.

🐦 Twitter

• Total worth of U.S. homes hit record $46.8 trillion in June, above prior all-time high of $46.6 trillion a year ago. The number of homes for sale in the U.S. dropped by 15% year/year to an all-time low in June (the biggest annual decline in nearly 2 years) per Redfin. Source.
  

• Industrial US companies are seeing their businesses in China slow down considerably. DuPont, Dow, and Caterpillar have cut their sales outlook for the country into this year. Tesla cut prices in China again. Source.
  

• Fresh data from our 2Q23 Fix-and-Flip Survey tells us that flippers are getting more optimistic. Low inventory is supporting sales and prices for flips, but acquisition remains challenging due to financing costs and competition from consumers willing to overbid. Source.
  

• Mortgage rates just surged above 7.5% for the first time in 23 years. The economy is currently experiencing a significant tightening of financial conditions, largely driven by the persisting fragility in the Treasury market. Source.
  

• The median sales price of a home in the US is now 560% of the median household income. In 2008, it was 360% of the median household income. This is the least affordable housing market in history. Source.

📓 Online Publications

• Intuit’s Alex Chriss Named New PayPal CEO. Chriss will take over for PayPal’s long-time CEO Dan Schulman beginning Sept. 27th. The board members said they were impressed by Chriss’ leadership at Intuit and the $12 billion acquisition of Mailchimp.
  

• Lumber Prices Down 29% YoY. LBR is currently at $496.00 per 1000 board feet, down 29% from $694.50 a year ago. We didn't see a significant runup in prices this Spring due to the housing slowdown. Lumber prices usually peak in April or May.
  

• Nikola Issues Recall on Commercial Trucks. The EV player recalled most of the electrified commercial trucks it's sent into the wild, due to a battery defect that could cause fires. The recall of 209 battery-powered commercial trucks is roughly 60% of what it produced last year.
  

• China's Housing Market Slumps Again as Buyers Play the Waiting Game. In addition to the housing crisis, China's slow pandemic recovery has also led to deflation, high unemployment among young adults, and lackluster exports. Some compare it to Japan's Lost Decades.
  

• Unless Something Changes In August, Expect A Rate Pause. Looking at the cumulative change instead of the published number, it takes a full year or more for rate hikes to have an impact on the economy. The recent CPI figure of 3.2% indicates a pause.

🎧 Podcasts

• Ruble Hits 16-Month Low As Military Spending Rises And Exports Fall. Russia’s currency has lost a quarter of its value this year. That’s thanks to a surge in military spending, a drop in exports, and of course, western sanctions. Plus, the country’s central bank has been aggressively cutting interest rates. Source(1:21)

• US Airlines Ally With Farmers To Seek Subsidies For Corn As Jet Fuel. They want corn-based ethanol to power airplanes instead of jet fuel. So the groups are lobbying the federal government to make ethanol qualify for green tax breaks under the Inflation Reduction Act. Source(1:54)

• The New Commodity Superpowers. Experts say that materials like copper, lithium, and nickel are going to be vital for a green economy. That demand is good news for countries like Indonesia, Chile, and the Democratic Republic of Congo which have large deposits of minerals used in electric batteries and solar panels. Source(5:42)
  

• Big Retailers Are in the Spotlight This Week. Wal-Mart, Home Depot, Target, and TJX are going to report earnings to give us a peek into consumer spending, which drives two-thirds of the US economy and is the reason we haven't tipped into a recession yet. Source(22:58)
  

• Inflation Adjusted House Prices 3.6% Below Peak. There have been 13 years where construction is below the half-century average. The shortage of entry-level homes, combined with the lack of distressed sellers and the equity that homeowners hold, makes a crash less probable. Source(16:14)