Apr 14, 2024
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:
Two Tragedies: April 14th has been a particularly eventful day in history. In 1865, President Abraham Lincoln was assassinated by John Wilkes Booth, a well-known actor and Confederate sympathizer, at Ford’s Theater in Washington, DC. During a performance of the play “Our American Cousin,” Booth entered the presidential box and fatally shot Lincoln in the back of the head just days after the surrender of Confederate General Robert E. Lee. This was the first of what have now been four assassinations of a US president.
Forty-seven years later, in 1912, at 11:40 PM on April 14th, the Titanic struck an iceberg that infamously sank the ship. Before the departure of its maiden voyage, the Titanic was deemed unsinkable due to its advanced safety features. In the frigid North Atlantic Ocean, the collision resulted in the deaths of over 1,500 passengers and crew with most succumbing to hypothermia rather than drowning.
What a coincidence that two such monumental and history-altering events can be traced to a single night less than 50 years apart.
New Questions on How a Key Agency Shared Inflation Data (NYT)
The Bureau of Labor Statistics (BLS) is facing scrutiny after revelations that more detailed inflation data was shared with Wall Street “super users” than was previously admitted. An economist at the BLS, in regular contact with finance industry analysts, shared insights about inflation figures, particularly changes in methodology that could affect market-sensitive predictions. This sharing included emails to analysts of major investment banks and hedge funds, detailing technical aspects of inflation data construction. While no early data release was involved, the sharing of methodological insights not yet made public could have provided these analysts with a competitive edge in forecasting. [Link]
The US Postal Service wants to hike stamp prices again in July. Here’s how much you’ll pay (CNN Business)
The US Postal Service is planning another price increase for First-Class “Forever” stamps, proposing to raise the cost from $0.68 to $0.73. The plan seeks to modernize and make USPS more competitive despite its ongoing financial struggles, with projected losses of $6.3 billion in 2024. Since 2019, the price of stamps has increased 36%. Additional changes would see domestic postcard rates rise from $0.53 to $0.56 and international postcard rates increase from $1.55 to $1.65. [Link]
AI & Technology
How Tech Giants Cut Corners to Harvest Data for A.I. (NYT)
In late 2021, OpenAI faced a data shortage from training its AI models and devised a solution by creating a speech recognition tool, Whisper, to transcribe YouTube videos to textual data. Although potentially breaching YouTube’s rules, this fueled the development of GPT-4, one of the world’s most advanced AI models. To keep pace with AI growth and the fierce competition among the world’s largest companies, it’s interesting to note their willingness to explore new methods of data collection, even if they infringe on copyrights. [Link]
The Worst Part of a Wall Street Career May Be Coming to an End (NYT)
For Wall Street, Generative AI could potentially reduce the need for human analysts in investment banking. AI programs which are being integrated into major banks such as Goldman Sachs, Morgan Stanley, and JPMorgan Chase can perform tasks like quickly and efficiently assembling PowerPoint presentations and analyzing financial data. By automating routine tasks traditionally performed by analysts, banks are discussing the possibility of reducing junior analyst hires by up to two-thirds. Investment banking is traditionally reliant on the labor-intensive work of young analysts, but AI could redefine career paths in finance, shifting the focus from grueling entry-level work to more strategic and creative roles. [Link]
AI & Technology
India’s electric rickshaws are leaving EVs in the dust (Rest of World)
In Sonipat, India, a factory is transforming the EV landscape by producing 5,000 three-wheeler EVs, or e-rickshaws, each month for YC Electric, the country’s second-largest manufacturer. These e-rickshaws are part of an EV revolution in India, with sales soaring as the country embraces cleaner transportation alternatives. Despite the lack of major brand recognition compared to four-wheeler and two-wheeler EVs, these e-rickshaws are making significant inroads, driven by local manufacturing and government incentives. The Sonipat plant is a joint venture with Chinese partners providing technology and training. [Link]
E&E News: Geoengineering test launched with salt flecks and secrecy (Politico Pro)
The first outdoor experiment in the US to combat global warming by attempting to increase cloud cover was launched discreetly from a decommissioned aircraft carrier in San Francisco Bay. The test tried to reflect sunlight away from Earth by dispersing microscopic salt particles into the air as part of solar radiation modification research. The experiment does raise questions about the development of climate intervention technologies due to its potential unforeseen impacts on ecosystems and communities. [Link]
Environmental
‘Shortcuts Everywhere’: How Boeing Favored Speed Over Quality (DNyuz)
Recent incidents with Boeing’s 737 Max planes, including malfunctions and a panel blowout, have raised concerns about the aircraft’s production quality. Despite efforts to improve after the fatal crashes in 2018 and 2019, reports and interviews suggest ongoing issues with Boeing’s quality control, including pressure on employees to meet production deadlines, a decline in workforce experience, and a weakened inspection process. The FAA’s ongoing audit and Boeing’s steps toward addressing quality-control issues indicate a critical period for the company as it seeks to regain its reputation and ensure the safety of its aircraft. [Link]
America’s Best Idea, Now Accessible by EV (Heatmap News)
The expansion of EV charging infrastructure is transforming travel to remote national parks across the United States. Previously, accessing these parks with an EV involved navigating sparse and sometimes unreliable charging options, which could turn such trips into logistical challenges. Now, efforts by companies like Tesla to install fast-charging stations near these parks are making it increasingly feasible to explore America’s natural wonders without the carbon footprint associated with traditional vehicles. Not only will this support demand for EV use but it also aligns with conservation goals in the country’s national parks. [Link]
Why Is It So Hard to Build an Airport? (Construction Physics)
The transformation of air travel, particularly with the advent of jet airliners, necessitated the expansion and modernization of airports, a task complicated primarily by the large environmental impact, including noise pollution that affects nearby residents, and the large land requirements that can encroach on valuable ecological areas or necessitate the relocation of existing communities. The historical resistance to airport construction and expansion also reflects broader societal concerns about the pace of technological progress. The solutions for this issue are broad, including quieter turbofan engines, improvements in air traffic control, and more efficient use of existing airport capacities. [Link]
Environmental
Invaders from underground are coming in cicada-geddon. It’s the biggest bug emergence in centuries (AP News)
Trillions of periodical cicadas, unique for their 13 or 17-year emergence cycle, are set to swarm parts of the United States in an event dubbed “cicada-geddon.” This rare occurrence, not seen in such numbers since the early 1800s, will see the insects emerging from the ground to mate and lay eggs before dying. Collectively, their “song” can reach up to 110 decibels, comparable to jet engines. This year’s double emergence of two broods, last seen together in 1803, promises an unparalleled display across multiple states. [Link]
In Texas, ex-oil and gas workers champion geothermal energy as a replacement for fossil-fueled power plants (The Texas Tribune)
In 2021, Sage Geosystems, a startup led by former Shell employees, targeted a deserted well in Texas for a geothermal energy project, aiming to generate power from the Earth’s heat. The technique used mirrors fracking, involving deep drilling and water injection to crack rocks and release pressurized water, spinning turbines to produce electricity. Geothermal energy, unlike solar and wind, offers a continuous power source, independent of weather conditions. These projects embody the transition of oil and gas expertise to renewable energy sources, aiming to expand geothermal capacity with the support of Inflation Reduction Act tax credits and potentially transform energy production on a global scale. [Link]
Sports
Bill Murray’s Son Designed UConn’s Offense. It’s No Joke. (WSJ)
UConn dominated March Madness thanks to the team’s dynamic offense, which is largely credited to assistant coach Luke Murray, son of comedy legend Bill Murray. Perhaps one of the most shocking stats was the team’s 30-0 scoring run against Illinois in the Elite Eight. The closest game UConn played in the tournament leading up to its championship matchup against Purdue, which the Huskies still won by 15, was still a 14-point margin against Alabama in the Final Four with an average margin of 23 points throughout the tournament. The team’s total point differential of +140 is the greatest in tournament history and they join UCLA from the 1960s as the only teams to win back-to-back championships by 15+ points. To make a long story short, that’s a lot of scoring. The key to Murray’s success lies in observation, taking ideas from basketball worldwide. It has proven to be effective enough to make UConn the most efficient offense in the nation after being ranked 27th in the category before Murray’s hiring in 2020. [Link]
TV Ratings: Men’s NCAA Final Falls Short of Women’s Title Game for First Time (The Hollywood Reporter)
While UConn might’ve dominated on the men’s side of March Madness, attracting a slight increase in viewership from last year, it was the women who shined this year. In fact, the men’s final attracted fewer viewers than the women’s championship for the first time, with the women’s final between South Carolina and Iowa garnering a record 18.87 million viewers. Of course, all eyes were on Iowa’s Caitlin Clark against Dawn Staley’s undefeated South Carolina team who ultimately thanked Clark’s contributions to the women’s game after defeating Iowa. Notably, that championship game also attracted more eyes than any basketball game, including NBA games, in the last five years! [Link]
Steve Cohen says a 4-day work week is coming in part because of AI (CNBC)
Steve Cohen, billionaire hedge fund manager and owner of the New York Mets, says that the four-day workweek will eventually become a reality as AI becomes more prevalent and productivity levels on Fridays are already low. Assuming the shortened week is coming as Cohen expects, that means people will have more leisure time and lead to more golf rounds and higher levels of interest in the sport. The sport already saw a surge in interest during the pandemic, so it is obvious that interest is there. The prospect of a four-day workweek was enough evidence for Cohen to invest in the golf startup league TGL as well as a possible future investment in the PGA Tour. [Link]
Investments
Costco selling as much as $200 million in gold bars monthly, Wells Fargo estimates (CNBC)
Gold sales at Costco started in late summer of 2023 and have quickly gained momentum, evidenced by rapid online sell-outs and an increasing volume of related Reddit discussions. The retailer sells one-ounce, nearly pure 24-karat gold bars, roughly 2% above the spot price, making them an attractive investment amid rising inflation and uncertainty over the economy. Since the beginning of the year, gold is up more than 13%. [Link]
Fidelity to Charge $100 Servicing Fee on Some ETFs (The Wealth Advisor)
Starting on June 3rd, Fidelity is set to impose a new service charge on ETFs from a select group of asset managers, including Simplify Asset Management, AXS Investments, and others. The fee targets ETFs from firms not engaged in a specific maintenance agreement with Fidelity to support the technology and services necessary for a secure investor experience (pay to play anyone?). Meanwhile, the broader ETF market continues to grow, with US-listed ETFs holding $8.9 trillion in assets as of the end of March. Notably, ETFs from State Street, Vanguard, and BlackRock saw significant inflows last month, driven by rising interest in domestic equity as the S&P 500 index climbed. [Link]
Sotheby’s Rare Bond to Be Backed by Rembrandt, Warhol Art (BNN Bloomberg)
Sotheby’s Financial Services is preparing to issue a unique $500 million bond backed by art from renowned artists like Rembrandt van Rijn, Andy Warhol, Pablo Picasso, Jean-Michel Basquiat, and Frida Kahlo. The bond involves 89 personal loans secured against artworks and collectibles valued at approximately $2.85 billion. This securitization includes a mix of contemporary art and Old Master paintings, with contemporary pieces accounting for 43% of the total estimated value. Sotheby’s is leveraging its extensive experience in art lending amid a broader market trend of embracing niche asset-backed securities. [Link]
Taxes
Bad tax advice is multiplying on TikTok (Washington Post)
TikTok has become a hotbed for aggressive tax advice, with influencers suggesting questionable strategies to lower tax liabilities. CPA Krystal Todd, with a significant following on TikTok and Instagram, stresses her videos are educational, not advice. Yet, the IRS warns many online tax tips, such as hiring children as employees or deducting personal vacations as business expenses, could lead to fines. Of course, TikTok is a very influential platform, so there is a concern about the impact of such advice on taxpayers’ decisions and potential legal implications. [Link]
Doing Your Taxes Sucks. The IRS Is Fixing That. (The New Republic)
With the April 15th deadline tomorrow, the IRS has been piloting its new Direct File option this year in 12 states for individuals with W2 income, Social Security benefits, unemployment insurance, and interest income below $1,500. Direct File is part of the IRS’s initiative under the Inflation Reduction Act that aims to simplify and economize tax filing. It allows eligible taxpayers to file directly with the IRS, saving them time and money, taking about 30 minutes to complete. So far, results have been positive and could be the start of the IRS expanding options like this in the future. [Link]
College Admissions
Why US Colleges Are Reviving Standardized Tests (Bloomberg)
The pandemic disrupted standardized testing across the US, leading many colleges, including Ivy League schools, to adopt test-optional policies. Recently, however, institutions like Yale, Dartmouth, Brown, and MIT have reinstated mandatory testing requirements. This reversal is partly in response to the Supreme Court’s decision against race-based admissions, pushing colleges to seek new metrics for evaluating applicants. Critics argue that these tests favor wealthier students who can afford extensive preparation. In contrast, some colleges continue to explore alternative admissions criteria to promote equity. [Link]
Baltimore Bridge Collapse
A CIA mission, Howard Hughes and espionage: The history of Baltimore bridge’s crane (Axios)
The enormous crane involved in clearing the collapsed Baltimore bridge, known as Chesapeake 1000 or “Chessy,” has a dramatic history tied to a covert Cold War CIA operation. Originally used to assist in constructing a massive ship for a US spy mission in 1968, Chessy was part of Project AZORIAN to recover a sunken Soviet submarine and its secrets from the Pacific Ocean. Despite the ambitious nature of the mission and partial recovery of the submarine, the operation was exposed in 1975 due to leaked documents. Decades later, Chessy is still operational, now aiding in the cleanup efforts of the recent bridge collapse. [Link]
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Apr 7, 2024
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:
Cold War Dominoes: On April 7th, 1954, President Dwight D. Eisenhower gave his “domino theory” speech during a press conference. The theory suggested that a communist victory in one nation would lead to a chain reaction of communist takeovers in neighboring states. Specifically, Eisenhower’s remarks addressed the situation in Indochina, warning that if Vietnam fell to communism, then other countries in Southeast Asia would follow, like dominoes. This speech would foreshadow the remainder of the Cold War era and the United States’ anxiety towards the potential global spread of communism. It also served as a rationale for US intervention in foreign conflicts like the Korean War and later in Vietnam.
Denver man restricted from sports betting sites after winning too much money (9News)
After winning $50,000 within six weeks, sportsbooks decided they had enough of Cody Sudmeier. Sudmeier, a Denver resident, noticed he was limited to significantly smaller bets, as low as $15.60 in some cases, a practice which he found unfair. The Colorado Department of Revenue confirmed that sportsbooks, tied to brick-and-mortar casinos, have the legal right to adjust betting limits or ask gamblers to leave at any time. Despite the legality, Sudmeier argues that it contradicts the premise of gambling where there’s an assumed possibility of winning and plans to seek legislative investigation into the matter. As a slap in the face to bettors, Colorado sportsbooks just reported a record profit earlier in the year. [Link]
Tiger Woods’ Putter Choice Has Created an Asset Class (Bloomberg)
As the saying goes, drive for show, putt for dough. It’s no surprise that Tiger Woods, one of the greatest golfers of all time, is also regarded as one of the greatest putters ever. Putters hold a unique place in golf blending personal attachment with performance, and if you’ve ever seen Tiger’s Scotty Cameron putter, it’s easy to tell that both of those are true. Scotty Cameron putters aren’t just any old putter though, as the highly coveted Circle T models have turned into both a collector’s dream and a speculative market, with prices ranging from $2,000 to $8,000 and resale values soaring. Tiger’s use of Cameron putters, even while contracted with other brands, has significantly boosted the brand’s profile, turning these clubs into sought-after items that could even qualify as art. [Link]
‘Like riding a bike’: Inside The Rock’s return at WrestleMania 40 (ESPN)
Dwayne “The Rock” Johnson, known for his charismatic persona both in WWE and Hollywood, has returned to WWE with a darker, more menacing character. He’s teaming up with Roman Reigns against Cody Rhodes and Seth Rollins in WrestleMania 40’s main event. This marks Johnson’s first full-length match in 11 years. Since that last match, Johnson has become a member of the board of directors of TKO Group, the parent company of WWE and the UFC, and now owns the full rights to “The Rock” character. His training for the event has been extensive, and his transformation into a formidable villain has revitalized his connection with WWE. [Link]
Little League Scandal Roils Washington, D.C., Elite (WSJ)
Northwest Washington Little League, drawing families from affluent neighborhoods of Washington DC, was dominated by one team. The players weren’t cheating, but parents began to question the coaches when games began ending early, regularly, due to such lopsided scores. Coaches were accused of manipulating the draft process, by way of falsified paperwork to bring in ineligible players and paying coaches unfairly from league funds, all to accumulate top talent on a single team. As the community divided, a prominent law firm got involved and a settlement was eventually reached. Youth sports, indeed, are all but fun and games. [Link]
NFL owners approve massive revamp to kickoff (ESPN)
NFL owners approved an overhaul of the kickoff rules, adopting a format similar to the XFL’s to enhance safety and potentially make it a more entertaining phase of the game as football fans have been watching strong-legged kickers consistently put the ball through the back of the endzone for many years now. The change is designed to reduce high-speed collisions and concussions while increasing the rate of returns and involves altering the positioning of players during the kickoff. The new rules, effective for the 2024 season, include kickers kicking from the 35-yard line but with the rest of the kickoff team lining up at the receiving team’s 40-yard line. Yes, this means no more surprise onside kicks. Other rule changes, like banning the hip-drop tackle, have sparked protests from players and fans on social media. [Link]
Two billionaire mortgage giants have brought their beef to the NBA (ESPN)
In February 2023, Mat Ishbia became the new majority owner of the Phoenix Suns. Ishbia, CEO of United Wholesale Mortgage, immediately made headlines by ending a sponsorship deal with Rocket Mortgage, signaling his ongoing rivalry with Dan Gilbert, owner of Rocket Mortgage and the Cleveland Cavaliers. This rivalry, stemming from their competition in the mortgage industry and shared Michigan roots, spilled into the NBA when Ishbia took ownership of the Suns. Ishbia’s first full season with the Suns has been challenging due to player injuries, but his and Gilbert’s competition remains a notable subplot in the NBA landscape. [Link]
Health & Wellness
They Got a ‘Sleep Divorce’—and Their Marriage Has Never Been Better (WSJ)
The concept of a “sleep divorce,” where couples choose to sleep in separate rooms, is gaining popularity, with a survey indicating that 35% of Americans sleep apart occasionally or consistently. This trend, often enabled by “snore rooms” or dual primary bedrooms, has historical precedents and does not necessarily indicate relationship problems. Some couples pour tens of thousands of dollars into renovating million-dollar homes rather than fighting over “chainsaw” snoring and other sleep irregularities to keep their relationships stable and even stronger. [Link]
How scientists traced a mysterious covid case back to six toilets (MIT Technology Review)
Researchers tracking a unique COVID variant in Wisconsin pinpointed its source to a single company through extensive wastewater analysis, highlighting both the potential of sewer surveillance in virus tracking and the ethical dilemmas around privacy and stigmatization it raises. The investigation eventually narrowed down to six toilets at a company. Faced with the challenge of wanting to find and help the individual likely shedding the virus without breaching privacy or causing alarm, the team opted for voluntary testing among the company’s employees, though this did not identify the carrier. [Link]
AI & Technology
Scientists create AI models that can talk to each other and pass on skills with limited human input (Live Science)
Researchers have developed a groundbreaking AI network that learns tasks from written instructions and communicates its knowledge to another AI using natural language processing (NLP). This method allows the “sister” AI to perform tasks without prior training. Utilizing the S-Bert NLP model, the researchers connected it to a sensorimotor-recurrent neural network (RNN), which understood and executed tasks based on language instructions. Inspired by human cognitive abilities to learn from verbal or written guidance, this opens possibilities for more complex AI networks and their application in robotics and automated industries. [Link]
Internet speeds just got 4.5 million times faster (Interesting Engineering)
Researchers at Aston University have set a new world record for internet data transmission speed, achieving a rate that is 4.5 million times faster than the average home broadband. They managed to transmit data at 301 terabits per second using a standard optical fiber. This breakthrough was made possible by tapping into new wavelength bands not previously utilized in fiber optic systems. This development could significantly enhance future internet infrastructure, offering vastly improved connections for users by increasing the capacity of existing fiber networks in a cost-effective and environmentally friendly way. [Link]
Taco Bell and Pizza Hut Are Going ‘AI-First,’ Yum’s New Tech Chief Says (WSJ)
Yum Brands, the parent company of Taco Bell, Pizza Hut, KFC, and Habit Burger Grill, is adopting an “AI-first mentality” as 45% of its sales are now digital, roughly doubling 2019’s level. The company says that AI will work in kitchen management, customer service, and drive-through orders. This includes experimenting with voice AI and image recognition for enhancing drive-through experiences. The company’s SuperApp, currently used in over 8,700 locations, offers a digital assistant to franchisees for operational management. Yum also discussed the importance of human employees, aiming to use technology to improve their work experiences rather than replace them. [Link]
Walmart, 7-11, and Chick-fil-A launch new project to speed up every shopping trip – you won’t even need to go to a store (The US Sun)
Walmart, Chick-fil-A, and 7-Eleven are introducing a novel drone delivery service in collaboration with the Virginia startup DroneUp, featuring an innovative autonomous drone ecosystem. This system incorporates climate-controlled lockers, or DBXs, for drone package pickups, making it feasible for even smaller retailers to adopt drone technology. These lockers could transform delivery on college campuses and urban areas by ensuring secure, swift deliveries while preventing theft and facilitating returns. The drones, capable of reaching 60 mph over a 30-mile range, are designed for efficiency, navigating autonomously to avoid aircraft and delivering orders within minutes. The service could drastically reduce delivery costs, along with the improved speed. [Link]
Transportation
‘Shortcuts Everywhere’: How Boeing Favored Speed Over Quality (DNyuz)
Recent incidents with Boeing’s 737 Max planes, including malfunctions and a panel blowout, have raised concerns about the aircraft’s production quality. Despite efforts to improve after the fatal crashes in 2018 and 2019, reports and interviews suggest ongoing issues with Boeing’s quality control, including pressure on employees to meet production deadlines, a decline in workforce experience, and a weakened inspection process. The FAA’s ongoing audit and Boeing’s steps toward addressing quality-control issues indicate a critical period for the company as it seeks to regain its reputation and ensure the safety of its aircraft. [Link]
America’s Best Idea, Now Accessible by EV (Heatmap News)
The expansion of EV charging infrastructure is transforming travel to remote national parks across the United States. Previously, accessing these parks with an EV involved navigating sparse and sometimes unreliable charging options, which could turn such trips into logistical challenges. Now, efforts by companies like Tesla to install fast-charging stations near these parks are making it increasingly feasible to explore America’s natural wonders without the carbon footprint associated with traditional vehicles. Not only will this support demand for EV use but it also aligns with conservation goals in the country’s national parks. [Link]
Why Is It So Hard to Build an Airport? (Construction Physics)
The transformation of air travel, particularly with the advent of jet airliners, necessitated the expansion and modernization of airports, a task complicated primarily by the large environmental impact, including noise pollution that affects nearby residents, and the large land requirements that can encroach on valuable ecological areas or necessitate the relocation of existing communities. The historical resistance to airport construction and expansion also reflects broader societal concerns about the pace of technological progress. The solutions for this issue are broad, including quieter turbofan engines, improvements in air traffic control, and more efficient use of existing airport capacities. [Link]
Environmental
Invaders from underground are coming in cicada-geddon. It’s the biggest bug emergence in centuries (AP News)
Trillions of periodical cicadas, unique for their 13 or 17-year emergence cycle, are set to swarm parts of the United States in an event dubbed “cicada-geddon.” This rare occurrence, not seen in such numbers since the early 1800s, will see the insects emerging from the ground to mate and lay eggs before dying. Collectively, their “song” can reach up to 110 decibels, comparable to jet engines. This year’s double emergence of two broods, last seen together in 1803, promises an unparalleled display across multiple states. [Link]
In Texas, ex-oil and gas workers champion geothermal energy as a replacement for fossil-fueled power plants (The Texas Tribune)
In 2021, Sage Geosystems, a startup led by former Shell employees, targeted a deserted well in Texas for a geothermal energy project, aiming to generate power from the Earth’s heat. The technique used mirrors fracking, involving deep drilling and water injection to crack rocks and release pressurized water, spinning turbines to produce electricity. Geothermal energy, unlike solar and wind, offers a continuous power source, independent of weather conditions. These projects embody the transition of oil and gas expertise to renewable energy sources, aiming to expand geothermal capacity with the support of Inflation Reduction Act tax credits and potentially transform energy production on a global scale. [Link]
Economic Trends
Lula-Milei Clash Embodies the World’s Competing Economic Views (Yahoo News)
In a striking contrast of economic ideologies, Argentina’s President Javier Milei and Brazil’s President Luiz Inacio Lula da Silva are adopting vastly different strategies for their nations’ economies. Milei is pushing for drastic cuts in public spending, privatization, and deregulation, while Lula emphasizes increased government spending, bolstering state companies, and strengthening worker and environmental protections. Despite their nations’ longstanding relationship as major trade partners and competitors, their opposing views have sparked tensions, with Milei branding Lula a “communist” and Lula dismissing Milei as a “primitive” nationalist. The economic outcomes of their policies could influence regional political trends and investment flows, amidst challenges such as Argentina’s soaring inflation and Brazil’s political instability. [Link]
Pawn shops know something about the US economy that Biden doesn’t: Times are still tough (USA Today)
President Biden has been promoting a positive view of the US economy as he has cited lower inflation, job growth, and a booming stock market. However, many Americans, particularly working families affected by two years of steep inflation, feel disconnected from this optimistic outlook. The economic disparity is vivid in downtown El Paso, where a block’s difference illustrates the stark contrast between luxury and affordability. Pawnshops have become a critical financial lifeline for nearly 6 million US households without bank accounts, with pawn balances rising nationwide due to increased living costs and lack of credit access. [Link]
California Restaurants Cut Jobs as Fast-Food Wages Set to Rise (WSJ)
California’s new state law increased fast-food workers’ wages to $20 an hour in April, prompting some restaurants to lay off staff and cut workers’ hours to manage costs. Pizza Hut and Round Table Pizza franchisees are among those reducing their number of delivery drivers, opting instead for app-based delivery services. This wage increase, which represents a 25% rise from the state’s current $16 minimum wage, is aimed at improving the lives of hundreds of thousands of workers, with support from organized labor groups. However, restaurant operators are raising prices and considering automation to offset increased labor costs. The move has sparked debates on the impact of minimum wage increases on employment. [Link]
The wealth of the 1% just hit a record $44 trillion (NBC Los Angeles)
The wealth of the top 1% in the US reached a new high at the end of last year fueled by the stock market’s ongoing rally. This group, owning assets over $11 million, saw their wealth rise by $2 trillion. The spike in wealth underscores the persisting disparity in stock ownership as the top 10% of Americans own 87% of all stocks. Despite these gains, the overall impact on consumer spending among the wealthy may be limited due to their lower propensity to spend extra income. The wealth gap, slightly narrowed in recent years due to wage increases and rising housing prices for middle-class and lower-income Americans, has started to widen again, with the top 1% now holding 30% of the nation’s wealth. [Link]
Housing & Real Estate
Reckoning Arrives for South Florida Multifamily Loans (The Real Deal)
Pressure is mounting on multifamily real estate investors in South Florida due to the Fed’s interest rate hikes, which have led to increased costs and decreased cash flow. Despite high occupancy rates and initial expectations of profit from the region’s booming demand and record rent hikes, increased expenses for property maintenance, insurance, and payroll are taking a toll. The situation is further complicated by inflation and rent delinquencies, leading some investors to sell their properties at a loss. [Link]
Dividends outstrip cash flows at Blackstone’s flagship property fund (Financial Times)
The $60 billion Blackstone Real Estate Income Trust generated $2.7bn in cash flows in 2023, mostly from rents, but paid out more than $2.8bn in distributions, marking its first annual shortfall from operations to cover shareholder payouts. Payout ratios exceeding 100% could lead to unsustainable funding practices, potentially forcing funds to incur more debt, issue new shares, or sell assets to fund dividends. Breit’s cash flows from operating activities covered just 95% of its payout in 2023, indicating a strain amid property sales and investments in data centers not yet generating rent. [Link]
Missing Money
South Carolina mulls mystery $1.8bn in account: ‘We don’t know why it’s there’ (The Guardian)
South Carolina is grappling with an unusual problem: an unexplained $1.8 billion in a state bank account. The discovery raises questions about the funds’ origin, intended use, and whether it really exists. This issue comes after a comptroller’s resignation last year due to a $3.5 billion accounting error. During a public hearing, it was unclear whether the $1.8 billion is real cash, leading to discussions on how to allocate it if proven to exist. Governor Henry McMaster urged caution in spending the potentially phantom funds, emphasizing the need for confidence restoration in the state’s financial management. [Link]
Burglars steal $30 million in cash from a Los Angeles money storage facility – one of the city’s largest cash heists (CNN)
The FBI and Los Angeles Police Department are investigating a heist at a money storage facility in Sylmar, a part of the San Fernando Valley, where up to $30 million was stolen on Easter Sunday night. The facility, operated by GardaWorld, was burglarized by what is believed to be a sophisticated group that managed to evade detection and did not trigger alarms. This incident, possibly involving insiders, is among the largest cash thefts in Los Angeles history, surpassing a $18.9 million heist in 1997. [Link]
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