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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Wealth and Investing

Americans Say They Need $2.2 Million to Be Considered Wealthy (Bloomberg)
According to Charles Schwab’s 2023 Modern Wealth Survey, 48% of respondents said they’d feel wealthy with an average net worth of $560,000. Defining this idea of wealth is dependent on several factors discussed in this article including peer lifestyle influence, relationships, generation, the economic environment, region, and more. The results are quite surprising based on intuition. [link]

The Great Convergence (Foreign Affairs)
Global inequality, measured as the income differences across countries fixed for price differences, is at historic low levels as measured by the Gini coefficient. China’s growth in recent decades has contributed most to global equality and economists are looking to African countries to be the next great contributors towards global equality as their countries develop. [link]

ChatGPT Told SoftBank’s Masayoshi Son His Ideas Are Great. Now He’s Investing Big in AI (WSJ)
Softbank’s CEO is ready to shift the bank’s investment stance toward technological advancements in AI. Son has been exchanging back and forth with the chatbot to brainstorm ideas for new inventions and developments amid the new AI frenzy. [link]

FDIC accidentally reveals details about Silicon Valley Bank’s biggest customers (Yahoo)
The FDIC accidentally released an unredacted document to Bloomberg News listing SVB’s largest depositors at the time it went under.  So, Bloomberg published it, and one of the largest depositors – with over $1 billion in the bank – was Sequoia Capital. [link] Geo Politics

Beijing Plans a New Training Facility in Cuba, Raising Prospect of Chinese Troops on America’s Doorstep (WSJ)
Chinese and Cuban officials are discussing the establishment of a new joint military training facility in Northern Cuba. The discussions are not finalized as officials are traveling between the countries negotiating terms. [link]

Urban Decay

US murder rate declines dramatically in 2023 — but you probably haven’t heard about it (Popular Information)
This article highlights a 12% YTD decrease in US murders in 2023 for more than ninety cities, attributed to various factors like the end of the pandemic, increased funding for violence prevention programs, and a decline in gang activity. [link] Science and Technology

Apple Watch Alerts 29-Year-Old Cincinnati Woman to Blood Clot in Lungs While Sleeping (9to5 Mac)The Apple Watch can measure your heart rate and recognize if something isn’t normal. This woman is crediting the feature for saving her life, calling attention to the fact that the technology can do the same for everybody and continue to save lives in the future. It’s an example of how someone literally couldn’t live without their Apple Watch. [link]

AI models feeding on AI data may face death spiral (Tech Xplore)
Researchers studied the learning capabilities of AI and found that AI training could lead to a collapse of the model. AI responses are sometimes flawed, but the models use these answers, misinterpret reality, and reinforce their own beliefs. Could AI collapse just as quick as it rises? [link]

Rampant Groundwater Pumping Has Changed the Tilt of Earth’s Axis (Scientific American)
Groundwater extraction, primarily for agriculture, has led to an uneven distribution of water across the globe, resulting in a redistribution of Earth’s mass and a change in its rotation. This shift underscores the far-reaching and unintended consequences of human activities on the Earth’s dynamics. [link]

USDA Approves First ‘Lab-Grown’ Meat to be Sold to the Public (Fox Business)
The USDA approved cultivated meat, or meat grown in a lab from fertilized eggs. Cultivated meat is environmentally friendly as it does not require extensive land or water like traditional slaughtering practices. This new method is costly, meaning mass market sales are still a ways off. [link]

Economy

American Companies Held Hostage by the Whims of Tik Tok (WSJ)
Tik Tok trends have become so popular that companies are changing production processes to meet the latest Tik Tok trends. Some new or small businesses, like Dave’s Gourmet Pink Sauce, have only emerged and grown as a result of latching on to a Tik Tok trend. Other established brands, like Chipotle, are keeping menu items out of fear of backlash on Tik Tok. [link]

Tesla Has the Top 4 Most American-Made Cars, Only American Automaker in Top 10 (Electrek)
Remember when Tesla was a niche brand just a few years ago?  It now produces the top 4 most American-Made cars thanks to their vertical integration approach. Tesla produces many of the parts for its cars itself and relies on local rather than international supply chains. Other automakers in the Top 10 were Honda, Acura, and Volkswagen. [link]

Brands Wanted to Cut Out Stores. Not Anymore. (WSJ)
New brands are discovering how hard it is to attract customers online with the flood of ads and online data tracking regulations. Brands are returning to retail stores and partnerships to gain brand exposure and spark sales. Some major brands, like Nike, have returned to retail locations such as Macy’s after pulling their products in prior years.  [link]

There Were Fewer Homes for Sale in May Than Any Other Month on Record (Redfin)
Home prices continued to rise in May, but at a slower pace compared to previous months. Inventory levels remained low, leading to increased competition among buyers, and mortgage rates also experienced a slight increase during that period. [link]

First the Choco Taco, And Now This Ice Cream Favorite Has Been Yanked (Mercury News) 
Say goodbye to the popular Good Humor Toasted Almond bar.  The longtime favorite ice cream’s discontinuation has sparked disappointment among those who have enjoyed it since the 1960s. [link]

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Have a great weekend!

The S&P 500 (SPY) has pulled back about 2.2% since its high close for the year on June 15th, but as you can see below, the decline only brings us back to where we were trading early last week.  The market is still trading well above both its 50-day moving average and its 200-day moving average.

Normally you’d expect to see the stocks that gained the most during the rally also pull back the most when we see downside mean reversion, but that hasn’t really been the case over the last week.

Below we’ve broken the large-cap Russell 1,000 into deciles (10 groups of 100 stocks each) based on stock performance on a year-to-date basis through June 15th.  Decile one contains the 100 stocks that were up the most YTD on 6/15, and so on and so forth until you get to decile ten which contains the 100 worst performing stocks YTD through 6/15.

As shown, the decile of stocks that were up the most YTD on 6/15 (last Thursday) are down an average of 2.3% since then.  That’s actually better than the average decline of 2.9% seen across all stocks in the Russell 1,000 since 6/15.

Where the weakness has been since last Thursday has been in the stocks that were already performing the worst in 2023 up to that point.  The stocks in the decile of the worst performers YTD through 6/15 are down an average of 5.6% since then.

Below is a look at the 25 stocks in the Russell 1,000 that were up the most YTD through 6/15 when the market made its recent high.  Some of these names have pulled back 10-20%, but plenty of names have also continued to rally as well, and the average change across all of them is a decline of 2.7%.

On the flip side, just one of the 25 stocks that were down the most YTD through 6/15 is up since then, while the average change for these 25 names since 6/15 is a decline of 7.7%.

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