October 11, 2023

📰 News Organizations

• Birkenstock Prices IPO at 46 Dollars a Share. At the IPO price, the trendy shoe company commands a market value of about $8.6 billion. The stock is set to start trading on the New York Stock Exchange on Wednesday under the symbol BIRK.

• IMF Warns of Weaker Global Growth and Stubborn Inflation in 2024. The International Monetary Fund lifted its global inflation forecast to 5.8% for next year and called for central banks to keep policy tight until there’s a durable easing in price pressures.

• Global PC Shipments Fall 9% in Quarter Seen as Bottom for Market. Apple Inc. had the steepest drop among the major PC makers, with shipments falling 24% from the same quarter a year earlier. HP Inc.’s units rose 6.4%, the lone vendor to make gains.

• UAW Members Walk Off Job at Mack Trucks as Strike Expands. Members of the UAW at Mack Trucks walked off the job after rejecting a new contract deal, bringing the total number of striking UAW members to more than 30,000 across 22 states.

• PepsiCo Beats Wall Street Estimates, Raises Earnings Outlook. Pepsi reported third-quarter net income attributable to the company of $3.09 billion. For 2023, Pepsi now expects constant currency earnings per share growth of 13%.

• Microsoft Announces AI for Doctors. Microsoft introduced new tools in Microsoft Fabric and Azure AI for health-care organizations. The new products can help eliminate the process of searching through sources one by one, so medical providers can focus on care.

• Adobe Releases New AI Models Aimed at Improved Graphic Design. The new edition of its AI model was trained on about 70% more images, which should improve the system’s ability to create photo-realistic images and bring it closer to the output of competitors.

🐦 Twitter

• US Treasuries are rallying today the most since March, but it would be overly simplistic to simply chalk this up to haven demand due to the Israel-Hamas war. It coincides with a slew of Fed speakers indicating they want to ice further rate hikes for now. Source.
  

• The thing that stands out in this week’s Altos Research update is it’s the worst time in decades to buy a home and yet new weekly pending home sales rose YoY. I think Q3 2023 could turn out to be the forever-low for resale inventory/existing home sales. Source.
  

• If rates remain elevated, but employment, &, therefore, rents remain strong, then real estate has a capitalization problem which will be solved with mezz / pref equity / etc. If rents fall materially, we’re looking at a generational buying opportunity. Source.
  

• For all the cheering of last week’s move higher, the S&P 500 Equal Weighted Index continued to fall relative to cap weighted index. The ratio is now at its lowest since November 2020. Source.
  

• The average interest rate on US credit card balances has moved up to 21.2%. With data going back to 1994, that's the highest rate we've ever seen. Source.

📓 Online Publications

• Homebuyer Pessimism Climbed to a New Record High in September. In the latest survey from Fannie Mae measuring housing sentiment, 84% of respondents in September said now is a bad time to purchase a house, a survey high. Just 16% believed it was a good time to buy.
  

• Mall Vacancy Rate Unchanged in Q3. National vacancy stayed flat at 10.3% since early 2023. Asking/effective rents were up slightly by 0.2%/0.3% as compared to last quarter but remained in the $21/$18-per-sqft range, a level relatively unchanged since 2018.
  

• Warren Buffett Just Sold $619 Million of HP Stock. From Sept. 11 through Oct. 3, Buffett's Berkshire Hathaway sold more than 23 million shares of Hewlett Packard valued at over $619 million. The sales reduce Berkshire's stake in the PC and printer maker by roughly 20%.
  

• Housing Groups Tell Fed to Stop Raising Interest Rates. NAR joined the National Association of Home Builders and the Mortgage Bankers Association to send a letter to Fed Chairman Jerome Powell, saying further rate increases could invite a recession.

• Tiny Homes Are the Hot New Homeowners’ Accessory. ADUs are growing in popularity as states encourage their construction through zoning changes and homeowners seek ways to lower their housing costs by renting out these units.

🎧 Podcasts

• EU Regulators Order Illumina to Sell $8bn Cancer Treatment Group. Illumina bought the company called Grail in 2021, but it didn’t get permission from Brussels. This move is designed to dissuade other companies from defying Brussels. Source(7:11)
  

• Retail Giants Kick Off Early Holiday Deals Trend. Retailers, led by Amazon and Walmart, are launching early holiday deals, departing from the traditional post-Thanksgiving timeline due to e-commerce trends and events like Amazon's October Prime Day. Source(8:02)
  

• Walgreens Walkout. Walgreens stores face closures as pharmacy staff stage a walkout, echoing concerns about working conditions and understaffing. The protest follows a similar action at CVS, highlighting challenges in tasks like vaccine administration. Source(10:39)
  

• Geopolitical Factors Boost Optimism for Oil Rally. The current energy setup holds promise for an oil rally, driven by recent data on gasoline consumption and heightened geopolitical risks. When coupled with geopolitical risks, it creates a compelling combination. Source(12:23)
  

• Link Between Government Debt and Inflation. Richard Vague argues that historical data shows that inflation is often caused by supply constraints, such as during times of war or other disruptions, rather than simply by an increase in government debt. Source(21:26)