Although it has pulled back as of this writing, at its highs today, Bitcoin reclaimed the $50,000 level.  That was the first time the world’s largest crypto currency has traded above that threshold (on an intraday or closing basis) since December 28, 2021.  As shown below, following the record high set in November 2021, Bitcoin cratered 76.5% over the next year.  Since its bottom in November 2022, the crypto has managed to rally 214%.  A significant portion of those gains have come since last summer with steep increases in the price of Bitcoin from October through December and another sharp push higher in the past few weeks.  In fact, as recently as January 25th, it was trading below $40,000.  But nearly three weeks and $10,000 later, Bitcoin is looking to join the 5.5% of days in which it has formerly traded above $50,000.

Are you ready for the ‘big game’?  Super Bowl LVIII kicks off from Vegas on Sunday evening, so as we do each year, we wanted to provide a quick summary of market returns from the Super Bowl through year-end based on different winners and other scenarios. Starting with winning teams, if the 49ers win on Sunday, they will join the Steelers and the Patriots as the only teams to win six Super Bowls.  Meanwhile, if the Chiefs win, they will be one of seven teams with four championships under their belts.

If you’re a bull, you must be hoping that Brock Purdy and the explosive 49ers offense come out on top. Following their five prior wins, the S&P 500 has risen an average of 20.2% from the Super Bowl through year-end with gains all five times.  For the Chiefs, average returns following their three wins were just a bit more than half the 49ers’ average (10.9%) with gains two out of three times. For the AFC vs NFC rivalry, it used to be that stock market performance was much stronger after NFC wins, and while the NFC still comes out on top, the gap has narrowed considerably.

We also looked at market returns from the Super Bowl through year-end based on several different scoring scenarios, and let’s just say that no matter who wins, let’s hope it’s a high-scoring blowout.  When the winner wins by 21 or more, the total score is 60 or more, the winner scores at least 35 35, or the loser scores more than 28, average returns under each scenario for the remainder of the year are above 10%.  Conversely, when the winner scores 21 or less or the loser scores seven or fewer points, the average returns are either negative or barely positive. See, there’s a reason the NFL likes high-scoring games.  You should too!

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

While you’re here, join Bespoke Premium with a 30-day trial!

On This Day in History:

Freedom’s Triumph: On February 11th, 1990, after spending 27 years in prison for his anti-apartheid activities, Nelson Mandela was freed. His release marked a pivotal moment in South African history, foreshadowing the end of a system of racial discrimination in the country. Mandela’s leadership and commitment to equality led to his election as South Africa’s first black president in 1994, laying the foundation for the country’s democratic transformation.

Sports

An Alabama draft pick has never scored in a Super Bowl. That won’t change this year. (AP News)
Alabama has long reigned king over the college football landscape. Besides all the national championship hardware under the recently retired Coach Nick Saban, Alabama sits atop the list of schools with the most NFL first-round draft choices with 46 since the turn of the century. That’s a lot of NFL potential from one program. We could go on and on about all the flashy stats belonging to the Crimson Tide, but arguably one of the most surprising is a not-so-impressive one. No player that ended his career at Alabama has scored a point in a Super Bowl. The streak will continue tonight too as no player on either team has a former Alabama player. [Link]

The Keys to Successful Celebrity Use in the Super Bowl (iSpot.tv)
Tonight’s big game is also a huge night for ads. Choosing the right celebrities can significantly enhance ad engagement and memorability. The ads cost millions of dollars for just seconds of screen time as it is, and the use of high-profile figures only inflates costs more. Taylor Swift has been all the rage in the NFL lately, and females, in general, have been climbing to the top as the NFL capitalizes on the opportunity to expand its fan base and reach a wider audience. If done right, a good Super Bowl ad can go a long way. [Link]

How Duncan McGuire’s move to Blackburn fell apart twice (The Athletic)
Duncan McGuire, an Orlando City striker, and US Men’s National Team member, was headed for his new home in England, ready to make his connecting flight. According to Murphy’s Law though, “anything that can go wrong will go wrong,” and that is exactly what happened to McGuire, twice. Financial issues and administrative errors sent the striker through the pinball machine and ultimately back to Orlando. On the bright side, there could be worse places to live during the winter. [Link]

AI & Technology

Sam Altman Seeks Trillions of Dollars to Reshape Business of Chips and AI (WSJ)
Sam Altman, CEO of OpenAI, aims to dramatically expand global semiconductor capacity to support AI development, requiring a projected $5 trillion to $7 trillion investment. That’s an absolutely massive figure considering the current value of chips sales. In discussions with investors, including the UAE government, this ambitious initiative seeks to address chip shortages impacting AI advancement, but the US government may push back against Abu Dhabi’s involvement. The project, if successful, could reshape the semiconductor industry and AI’s future. [Link]

What the birth of the spreadsheet can teach us about generative AI (Financial Times)
The digital spreadsheet, introduced in 1979, transformed the way financial calculations were conducted, initially confounding users with its format. VisiCalc, the pioneering software, quickly demonstrated its value by reducing the time required for financial tasks. The evolution of spreadsheets impacted labor markets, increasing the productivity and scope of accountancy work rather than diminishing job opportunities. Perhaps history can provide insights into the potential impacts of generative AI on modern workplaces, suggesting both empowerment and challenges ahead. [Link]

Secrets of ancient Herculaneum scroll deciphered by AI (NBC News)
If there wasn’t already enough that AI has had a hand in lately, add archeology to the list. Archeologists utilized AIto decipher ancient texts from papyrus scrolls buried under ash from Mount Vesuvius’ eruption in 79 AD. Found in a villa in Herculaneum, these scrolls, previously unreadable for nearly the last 2000 years due to carbonization, are revealing secrets with AI’s help. The monumental achievement is a symbol of AI’s revolutionary breakthrough in the field. [Link]

Climate Control

Could a Giant Parasol in Outer Space Help Solve the Climate Crisis? (NYT)
Some scientists want to put a giant screen between Earth and the Sun. As temperatures rise to their highest levels on record, a big sunscreen could block just 2% of solar radiation to cool the Earth by a whole 1.5 degrees Celsius. That would potentially have a huge impact on staying within manageable climate boundaries. Don’t be confused though, to block out that much radiation the shade would have to be roughly the size of Argentina and weigh 2.5 million tons! [Link]

Automobiles

The True Cost of Auto Insurance in 2024 (Bankrate)
The average cost of full coverage car insurance has risen by 26% over the past year, with variations across states and metro areas. Louisiana and Florida experience the highest insurance costs, attributed to frequent extreme weather events and associated catastrophic claims. In contrast, Massachusetts boasts the lowest insurance cost relative to income. The study also highlights the impact of factors such as driving record, vehicle type, and credit history on insurance premiums, alongside the geographical influence of population density and weather patterns on rates. [Link]

Mitchell Reports a Lower Total Loss Rate for Electric Vehicles (PR Newswire)
According to this report on vehicle collisions, many believe that EVs are written off as total losses more often than internal combustion engine (ICE) vehicles, even with minor damage. What was found though was that EVs do not have lower total loss rates compared to ICE vehicles, thereby unsupportive of that thesis. The study also found that labor for EVs constitutes a larger portion of repair costs, and repair costs for EVs are generally higher than for ICE vehicles. Repairable EV volumes have also ticked upwards. [Link]

Back to Normal?

Dartmouth Reinstates SAT Requirement in First for Ivy League (WSJ)
Dartmouth College is the first Ivy to pivot back to SAT/ACT requirements since pressing pause on the tests during the pandemic. While many schools have permanently shifted away from them, Dartmouth has said that standardized test scores predict the best student outcomes better than high-school grades. There’s certainly lots of debate around this topic, but Dartmouth says that being a test-optional college isn’t working, and the other Ivy’s may follow. [Link]

Where are we in the cycle? (TS Lombard)
The global economy has been taken for quite the ride since the pandemic, and through unfamiliar territory in many ways that has made a clear path to a “soft landing” hazy at times. While we’re on track to land softly, which was seemingly unachievable at the beginning of last year, tight monetary policy still is a storm cloud hanging over the economy. Potential policy missteps could disrupt the way forward while a multitude of other factors around the world play out. [Link]

Crime

Inside the Underground Site Where ‘Neural Networks’ Churn Out Fake IDs (404 Media)
OnlyFake, an underground website, utilizes “neural networks” to create highly realistic fake IDs for $15, a huge acceleration for the fake identity market and a bigger headache for cybersecurity. The IDs can pass verification systems and make bank fraud, money laundering, and other criminal activity much quicker and easier. As technology evolves exponentially faster these days, this is just one more area of concern for deciphering the truth. [Link]

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Have a great weekend!

Earlier this week, we updated our Consumer Pulse report, which is a monthly survey we’ve been running on 1,500 US consumers balanced to census since 2014. Among a huge array of questions we survey consumers on, one topic is smartphones. More specifically, since 2014, we have asked smartphone owners which service provider they use. As shown below, in our latest monthly survey, over 30% of respondents reported that they use T-Mobile (TMUS). That is a record high for the company and is essentially a doubling in market share from what was the norm for the company throughout the mid to late 2010s.  T-Mobile appears to be the new leader in the cell service space, eclipsing prior behemoths Verizon and AT&T.

When you look at the performance of the stocks for those same wireless telecommunication companies, it only becomes more evident the degree to which T-Mobile has left its competition in the dust.  In the chart below, we show the performance of TMUS versus Verizon (VZ) and AT&T (T) since T-Mobile’s IPO in April 2007.  As shown, after its IPO, TMUS posted large but temporary gains. In fact, after falling back below the IPO price six months after debuting, the stock wouldn’t recover those levels for another nine years. Meanwhile, Verizon was the clear leader of the pack and more or less meandered sideways. TMUS had caught up to Verizon by 2017, and come 2020 and its merger with Sprint nearing completion, TMUS began to run away as the clear winner. Today, the stock has now risen 253.8% since its IPO compared to a modest 13.7% gain from VZ and a dreary 42.8% loss for T in that same span.

Compared to the S&P 500, once again T-Mobile has been the clear winner.  As shown below, T-Mobile is the only telecommunication services stock that has outperformed (albeit marginally) the S&P 500 since its debut in 2007. Meanwhile, Verizon and AT&T are underperforming by wide margins.

Finally, comparing these stocks’ market caps, T-Mobile didn’t hold a candle to its competitors for much of its history.  The merger with Sprint which completed in 2010 significantly lifted the company’s valuation, bringing it within a much more tangible reach of VZ or T. However, it still didn’t catch up for another couple of years. In that time, TMUS managed to continue to increase its market cap while VZ and T were in the midst of steady downtrends. By the third quarter of 2022, TMUS surpassed both VZ and T.  Today it is not only the largest wireless telecom by market cap, but it is also the only one whose valuation is making new highs.

Last Friday’s Bespoke Report was our quarterly Equity Market Pros and Cons edition. In it, we noted the boom of artificial intelligence both in terms of search interest (measured by Google Trends data) and mentions of the term in the earnings calls of mega caps.  Google Trends data measures how much a given term(s) is being searched for on Google’s search engine.  That interest is indexed with 100 being the peak in searches. Thus a reading of 75 would be when search interest is 75% of said peak, 50 would be 50% of the peak, and so on.  Google Trends also allows for comparisons across multiple terms to evaluate relative search interest.

Given the topic of AI is extremely in vogue, we wanted to compare how search interest stands up to bitcoin, which before AI was the last tech craze among investors and the general public.  Bitcoin, and crypto more broadly, came into the mainstream as the next big thing in tech in late 2017. As shown below, December 2017 would mark the height of Google searches for “Bitcoin”. A few years later in early 2021 when meme stocks were all the rage, search interest for Bitcoin again spiked, but that has been the closest it has come since to returning to 2017 levels of interest. Meanwhile, AI has come to the forefront.

As shown below, searches for “artificial intelligence” or the abbreviation “AI” began to explode higher a little over a year ago with the launch of ChatGPT. Search interest for each of those terms has not ceased rising, and all three just hit record highs last week.  As for the actual index values versus Bitcoin, the Trends score for “artificial intelligence” has climbed to 56 and the index for “AI” has gone even higher to 65.  That means that search volumes for “AI” are currently around two-thirds as high as search volumes for “Bitcoin” were at the peak in late 2017.  That is to say that (as if it wasn’t obvious) AI is the buzzword of the time, but it’s not quite as buzzy (yet) as Bitcoin was several years ago.

While AI-related searches have quickly risen in popularity, the pace hasn’t been as rapid as it was for Bitcoin.  In the chart below we show Google Trends scores for the same terms as above, but for each one, we show the two years before their respective peaks.  While the bulk of the increase to peak searches for Bitcoin in 2017 occurred in just a few months, the more recent growth in AI searches appears to have been much more steady. That offers at least one counterpoint to assuage concerns over AI being a fad.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

While you’re here, join Bespoke Premium with a 30-day trial!

On This Day in History:

Passive Funds Overtake Active Thanks in Part to Advisory Shift (AdvisorHub)
In 2023, passive investment funds in the US, including mutual funds and ETFs, surpassed actively managed funds in total assets, reaching $13.252 trillion versus $13.244 trillion. This landmark shift, a first in 48 years, was propelled by significant annual growth of 22.6% in passive funds against 10.6% for active funds. Clients are moving away from commission-based trading to advisory accounts and advisors are moving from traditional broker-dealers to fee-only RIAs. [Link]

TIPSplaining a lousy inflation hedge (Financial Times)
In the pandemic era, investors poured their money into TIPS, hoping to mitigate the risk of inflation. However, 2022 saw investors facing significant losses in both nominal and real terms, with the TIPS market barely outperforming the nominal US Treasury market. The Fed’s response to inflation by raising rates resulted in increased real yields and led to lower TIPS prices and negative returns. This did not align with investor expectations, leading to around $30 billion being withdrawn from the four largest TIPS ETFs since their peak at the end of 2021. [Link]

Chinese Fervor for Overseas Stocks Is Breaking ETF Trading (BNN Bloomberg)
Chinese investors are increasingly seeking exposure to overseas equities, to the extent of paying premiums of up to 40% over the asset value in some ETFs. This surge in demand has led to trading halts and purchase limits on numerous ETFs tracking foreign stocks. Despite the high premiums, both retail and institutional investors are drawn to these ETFs due to stronger performances in international indices like the S&P 500 and Nikkei 225. The phenomenon underscores a broader shift away from Chinese equities amid frustration with their underwhelming returns. [Link]

This ETF outperforms by stressing corporate culture — but not ESG (MarketWatch)
The Harbor Human Capital ETF invests in companies with strong corporate cultures, as indicated by a proprietary index that assesses factors like employee engagement, management respect, and innovation. Launched in October 2022, the ETF aims to provide investors with the opportunity to invest in large-cap companies that are believed to have better performance potential due to their positive work environments. Since then, it has outperformed the S&P 500. [Link]

AI & Technology

Elon Musk Says Neuralink Has Implanted Brain Chip in Human (WSJ)
The first human has successfully received a Neuralink brain implant, marking a significant step in brain-computer interface technology, potentially aiding individuals with conditions like quadriplegia. The patient is reported to be recovering well, with the implant showing promising initial results in neuron spike detection. The development could be a potential breakthrough for severely disabled individuals, although it is expected to take years before the technology becomes widely available. [Link]

Battle Looming Between AI and Counter-AI, Says Official (US DoD)
The Department of Defense and other defense departments around the world are beginning to integrate AI, which could lead to a future “arms race” between AI and counter-AI. The department aims to leverage AI for threat analysis, vulnerability assessment, and enhancing the security of government and defense systems. AI’s role in processing vast amounts of data for threat detection is seen as crucial to staying ahead of adversaries and maintaining security in an ever-evolving digital environment. [Link]

The Hollywood Jobs Most At-Risk From AI (The Hollywood Reporter)
A study indicates that nearly 240,000 positions in Hollywood, particularly among sound engineers, voice actors, concept artists, and entry-level employees, could be affected by AI within three years. AI is developing abilities to efficiently produce content such as sound design, 3D assets, and realistic dubbing, posing a threat to traditional roles in the industry. The development sparks new reasons for concern regarding AI, this time among the elite in the entertainment business. [Link]

FCC moves to criminalize most AI-generated robocalls (NBC News)
The FCC is set to criminalize unsolicited robocalls that utilize AI-generated voices, following an incident involving a fake AI-generated message mimicking President Joe Biden. This proposal would extend the Telephone Consumer Protection Act (TCPA) of 1991 to include such AI-generated calls, as concern over AI’s role in scams grows. [Link]

Can This A.I.-Powered Search Engine Replace Google? It Has for Me. (NYT)
The AI-powered search engine Perplexity, founded by former OpenAI and Meta researchers, has attracted a lot of attention and investment for offering a new approach to online searches, namely tech insiders and investors like Jeff Bezos. Differing from traditional search engines like Google, Perplexity provides AI-generated summaries of web content rather than a list of links, aiming to make information gathering more efficient. Still, there are concerns about its accuracy and the impact on digital media, essentially making it unnecessary to visit websites anywhere. [Link]

Plane Problems

Kayak reports 15-fold increase in passengers filtering out 737 Max flights (The Independent)
Kayak is a travel search engine that allows users to filter and find the most ideal traveling and hotel plans. Since the recent incident with an Alaska Airlines 737 Max 9’s fuselage blowing out mid-flight, Kayak reported a massive increase in users filtering out flights on 737 Max 9s. The FAA has grounded dozens for inspection after a potentially fatal event and some travelers are taking no chances with the jet. Confidence is surely rattled and therefore, aircraft type is an important part of flying for travelers right now. [Link]

‘I would absolutely not fly a Max airplane’: Ex-Boeing manager raises alarm on jets returning to service (Los Angeles Times)
Some airlines have resumed flights with 737 Max 9 jets that had been grounded after the viral incident with Alaska Airlines. Many, including former Boeing employees, still express deep concerns about the safety of the Max planes, citing persistent issues and a culture prioritizing speed and profit over quality and safety. The decision to resume flights after specific inspections has been met with skepticism, suggesting a need for major change to truly ensure passenger safety. [Link]

EVs

Electric vehicles and hybrids surpass 16% of total 2023 U.S. light-duty vehicle sales (EIA)
In 2023, the United States saw a significant increase in the sales of hybrid vehicles, plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs), which collectively rose to 16.3% of total new light-duty vehicle sales, up from 12.9% in 2022. This growth was driven by an increase in the number of BEV models available, a shift towards offering hybrids in more popular size classes like crossovers, and a reduction in BEV prices, partly due to manufacturer price cuts and incentives from the Inflation Reduction Act. [Link]

Planning & Zoning

Legislature Advances Proposal Allowing Cafes in More Neighborhoods (The Urbanist)
The state of Washington is considering a legislative proposal that could increase the number of small neighborhood cafes within walking distance of homes, aiming to ease strict zoning laws that have long segregated commercial and residential uses. The move is seen as a way to enhance community access to services and strengthen local connections, also expanding the definition of cafes to potentially include venues serving alcohol with food. [Link]

Empty Nest Emptiness

When Junior Heads to College, Helicopter Parents Turn to Empty-Nest Coaches (WSJ)
“Helicopter parents” who become deeply invested in their children’s daily activities and development may experience deep sadness once those kids fly the coop. Enter empty-nest coaching, a niche that offers support and counseling for parents struggling with the emotional and logistical void left by their children’s departure. These coaches have even gone viral on social media platforms like TikTok for helping parents cope with their changing roles. [Link]

“Beware the Viral Graph”

Maybe young men and women aren’t so ideologically different (Good Authority)
This article challenges an article from last week’s installment of Bespoke’s Brunch Reads. Last week’s article showed a graph that went viral for the ideological gap between young men and women in the US. The contrast was eye-catching, but this article argues that these ideological differences are much smaller, averaging about a 5-point difference vs the 30-point difference suggested previously suggesting that the differences are also not necessarily more defined among young people. [Link]

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Have a great weekend!