August 17, 2023

📰 News Organizations

• Fed Saw ‘Significant’ Inflation Risk That May Merit More Hikes. US central bank issued the minutes of the July 25-26 policy meeting. Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.
  

• Target Jumps as Big Profit Gain Overshadows Cut to Forecast. Adjusted earnings more than quadrupled during the quarter ended in late July, reflecting progress in paring the bloated inventories. Meanwhile, the backlash to Pride Month merchandise hurt sales.

• Intel Scraps Tower Acquisition After China Fails to Approve Deal. The deal required approval from a number of jurisdictions, and China’s State Administration for Market Regulation had yet to sign off by Tuesday’s approval deadline. Intel said it would pay a $353 million termination fee to Tower.
  

• Hedge Funds Dump Intel While Snapping Up Rivals. Steven Cohen’s Point72 Asset Management LP and David Tepper’s Appaloosa Management LP were among those that slashed positions. Firms were big buyers of the shares of rivals Nvidia and AMD.
  

• Tesla Makes Further Price Cuts in China. The cuts reduced models S and X by $7,400 to $8,500. Tesla slashed the price of the existing inventory of its Model S and Model X cars in China, as it looks to boost sales amid rising competition in one of its key markets.
  

• US Mortgage Rate Climbs to 7.16%, Matching Highest Since 2001. The contract rate on a 30-year fixed mortgage rose 7 basis points to 7.16%. Gauges of home buying and refinancing both dropped last week. The lack of homes listed for sale has been pushing prices higher.

• TweetDeck, Renamed X Pro, Now Requires A Subscription. Users who want access to X Pro will have to pay for X Premium, the service introduced by the site’s owner, Elon Musk, as a way to generate additional revenue for the company. The subscription costs users $84 a year.

🐦 Twitter

• Saudi Arabia’s stockpile of US Treasuries has fallen 41% since early 2020, to the lowest level in more than six years. China sold $11.3 billion of the debt in June to bring its holdings of US Treasuries to the lowest level since mid-2009. Source.
  

• The US Housing Market Index fell in August for the first time this year. 7% mortgage rates and record lows in affordability are sharply curbing demand. As a result, homebuilders are increasingly using incentives to bolster sales (55% did so in August, up from 52% in July). Source.
  

• The percentage of credit card debt more than 30 days past due is up for 6 straight quarters. Delinquency rates have nearly doubled since their recent lows and now stand at their highest since 2020. Americans are beginning to borrow money they can’t afford to pay back. Source.
  

• Warren Buffett clearly prefers home builders that limit land exposure via options. $NVR has always been the trendsetter there, but both $LEN and $DHI have moved in that direction in recent years. Source.
  

• Despite weaker headline and internal data for August Empire Manufacturing Index, the outlook for employment improved markedly, climbing to the highest since August 2022. Source.

📓 Online Publications

• Record Number of Multi-Family Housing Units Under Construction. Currently, there are 1,003 thousand multi-family units under construction. This breaks the record set in July 1973 of multi-family units being built. The completion of these units should help with rent pressure.
  

• Cava Swings To A Profit In First Report Since IPO. The Mediterranean restaurant company reported second-quarter net income of $6.5 million. Net sales soared 62% to $172.9 million, fueled by new restaurant openings. Cava said its traffic grew 10.3%, outstripping the broader restaurant industry.
  

• Pre-pandemic Housing Affordability Still Far Away. If U.S. incomes spiked 69%, or U.S. home prices fell 41%, or if mortgage rates fell 4.3 percentage points (from 7.26% to 2.96%), we'd return to pre-pandemic affordability. Simply put, pre-pandemic housing affordability is very far away.
  

• Rating Agencies Issue More Cautions About Banking Industry. Lower ratings for the banking industry as a whole reflects an increasingly uncertain macroeconomic environment and structural challenges to the U.S. banking system should interest rates stay higher for longer.
  

• Potential Unprecedented Run of Losses in the Bond Market. While it’s true that higher yields should lead to higher expected returns in fixed income, there is a psychological toll from these losses. If rates keep rising things are going to get worse for the bond market before they get better.

🎧 Podcasts

• US And European Stocks Hit Five-Week Lows After Strong Retail Sales Data. Investors were also concerned by strong US retail sales data that came out yesterday. That signaled that the economy is resilient, which could mean that the Federal Reserve will keep interest rates higher for longer. Source(1:29)

• Republican Districts Dominate US Clean Technology Investment Boom. Analysts think it's unsurprising because when you think about the industrial areas of the US, places where you can find lots of cheap available land, and cheap labor, it’s often in rural and conservative areas. Source(5:05)
  

• Gas Price Surge Sparks Fed Dilemma. Gas prices have surged by 10% since July 4th, likely affecting the coming August CPI data. The Fed might face a decision on whether to raise rates again or pause due to the strong economy, solid wages, and low unemployment. Source(17:10)
  

• Wall Street Is Ready To Scoop Up Commercial Real Estate On The Cheap. Wall Street is awash with OPM, seeking to invest in distressed commercial real estate. Despite concerns about excess liquidity driven by the constant circulation of money, the appetite for returns remains strong. Source(35:56)
  

• Panama Canal Drought Impacting Shipping. Severe drought at the Panama Canal has forced restrictions on ship passage due to dwindling water levels, causing congestion and supply chain concerns. This critical waterway handles 3% of global trade, impacting East Coast retailers and South American produce shipments. Source(21:00)