With Labor Day weekend on the horizon, Americans who were on the road this summer experienced a bit of sticker shock as prices surged in late July and into early August.  Through Sunday, the national average price of a gallon of gas, according to AAA, stood at $3.82 which is the second highest price for this time of year since at least 2004.  The only year that the national average price was higher as of 8/27 was last year ($3.85), and the average price for this time of year has historically been $2.91.  Looking at the summer driving season (Memorial Day through Labor Day), the national price has increased by 6.7% this year.  While 6.7% may not sound particularly large, we would note that the median change during the summer driving season since 2004 has been a decline of 3.7%, and prices have only increased 35% of the time. In addition, this year’s increase ranks as the fourth largest trailing only 2017 (+11.8%), 2020 (+13.0%), and the 46.1% surge in 2005 due to the landfall of Hurricane Katrina in the Gulf of Mexico.

While prices this summer increased much more than normal, on a YTD basis, the increase has been right in line with the historical norm. As shown in the chart below, while the average YTD change through 8/27 has been a gain of 17.5% since 2005, this year’s increase of 19.0% is less than two percentage points more than normal. For the last four months of the year, can we expect to see the typical seasonal decline?  Since 2004, the AAA national price’s median change from Labor Day through year end has been a decline of 7.5% with increases just 36% of the time.  Investors looking for inflation to continue to trend lower so that interest rates might come down will certainly be hoping gas prices follow the historical script over the final four months of 2023.

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.

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On This Day in History:
Hurricane Season.  On August 27th, 2011, Hurricane Irene made landfall in the United States. It caused widespread flooding, power outages, and damage along its path from the Caribbean to the northeastern U.S. Irene resulted in the deaths of dozens of people and caused billions of dollars in damage, making it one of the costliest hurricanes in U.S. history.

Technology and Innovation

Elon Musk’s Shadow Rule (The New Yorker)
Elon Musk, despite not holding a government position, does have significant influence around the world. SpaceX had been providing Ukraine with internet access, through its Starlink service. As hard as it would be for Russian forces to dismantle Starlink systems in the country, Musk had the power to do so whenever he wanted. That decision became a potentially realistic one when the Pentagon said it would not foot the steep for it. [Link]

A Draft Of TikTok’s Plan To Avoid A Ban Gives The U.S. Government Unprecedented Oversight Power (Forbes)
ByteDance, the Chinese parent company of TikTok, might have to cede control to the U.S. government in order to avoid a ban. According to report, ByteDance must agree to give the U.S. government access to internal TikTok data and control over key functions in order to keep operating in the US. The agreement would also give U.S. oversight abilities that it does not have over other platforms. [Link]

Multi-day energy storage increases grid capacity by factor of ten (pv magazine USA)
Battery startup Form Energy’s iron-air battery technology, capable of delivering 100 hours of discharge at costs competitive with conventional power plants, is well suited to help New York achieve its clean energy targets and grid reliability goals. Incorporating long-duration and multi-day storage can substantially reduce costs compared to solely relying on short-term lithium-ion batteries, with benefits both economically and environmentally. [Link]

She Didn’t Speak for 18 Years. A Computer Helped Find Her Voice (WSJ)
Significant progress is being made in brain-computer interfaces for communication. One paralyzed woman used a brain implant and algorithm to control a virtual avatar while another with Lou Gehrig’s disease communicated via text using brain signals. Issues like invasiveness and privacy are reasons for concern, but the technological advancements surely give hope to those with speech disabilities. [Link]

AI scores in the top percentile of creative thinking (The Conversation)
AI’s leap into creativity is gaining momentum as AI-generated content’s impact spans industries, exemplified by the Hollywood writers’ strike. An experiment using AI’s responses in the Torrance Tests of Creative Thinking demonstrated AI’s capacity for original thinking, even scoring in the top 1% for idea originality. Although a significant achievement, the creative potential of AI raises questions about fostering human creativity in education. [Link]

Retail and Economics

The US mall is not dying (CNN Business)
Contrary to an article featured in a Bespoke Brunch Reads from August 6^th, some research suggests that malls in the US are not going extinct but rather adapting to new circumstances. The best malls in affluent areas experienced increased foot traffic in 2022, when compared to 2019. Even lower-tier malls saw an increase. Occupancy rates remained promising. The rise of e-commerce hasn’t killed malls, as Gen Z leads a revival of malls for a variety of reasons. [Link]

Car Prices Might Be Unsustainable for Buyers (WSJ)
Cars have become increasingly unaffordable over the last five years. The average American needs 42 weeks of income to pay off a new car, which is up from 33 weeks pre-pandemic. Even used cars have seen a price hike of more than 30% over that time. Higher interest rates have compounded the issue, as average new and used car loan rates sit at 9.5% and 13.7%, respectively. Automakers have capitalized, but the trends might not be sustainable if resistance to higher prices continues. [Link]

U.S. Consumers Are Showing Signs of Stress, Retailers Say (NYT)
U.S. consumers are becoming more cautious about their spending due to eroding savings, inflation, and the resumption of student loan payments. Retailer reports are indicating a shift in consumer behavior with increased credit card delinquencies and a preference for discount retailers. Seasonal shopping events like back-to-school and Halloween will be good measures of further shifts. [Link]

As China’s economy slows, the buck stops with leader Xi Jinping (Washington Post)
As the curtain falls on the era of growth, China’s 2023 economic scene is gloomier. Property markets are stagnating, graduates struggle for jobs, and President Xi’s promises of prosperity have wavered due to debts and market shifts. The economic slowdown challenges the implicit agreement between the Communist Party and citizens: loyalty for an improved future. Foreign companies are being impacted too, becoming cautious about China due to regulatory crackdowns and geopolitical factors. [Link]

Investment and Finance

This Fidelity manager has crushed the S&P 500 since 1989—here’s his advice for investors (CNBC)
Joel Tillinghast’s mutual fund, Fidelity Low-Priced Stock, has delivered an annualized total return of about 13% compared to the 9% return of its benchmark Russell 2000 index. His strategy involves seeking small and mid-cap companies with strong earnings, quality management, and long-term growth potential whose stocks are undervalued. Tillinghast emphasizes patience, a long-term view, and an understanding of price and value. [Link]

Why the Stock Market’s Summer Doldrums Are Not a Problem (NYT)
August has been a tough month for the stock market after July’s rally. As the saying goes, what goes up, must come down. But that’s not necessarily a bad thing, as market history shows that rapid gains are temporary and are usually followed by falls or crashes. So, the current trend can be viewed as a welcomed relief and a signal of a more sustainable upward trend. Despite rising rates and inflation, cautious optimism remains. [Link]

Entertainment

Convicted con man Billy McFarland announces the return of 2017’s disastrous Fyre Festival — with tickets up to $8K (New York Post)
After the viral Netflix documentary recounting the failed music festival due to disastrous execution and misleading marketing promoted by Billy McFarland and rapper Ja Rule, McFarland announced via YouTube that Fyre Festival II is in the works. It is scheduled to take place in the Caribbean at the end of 2024. Can we count on the convicted con artist to deliver this time around? [Link]

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Have a great weekend!