The US Dollar index is now up 7.4% since its 2018 closing low hit on February 15th.  This morning we just wanted to provide a heads up that the Dollar is breaking above another key resistance level at 95.  The index had couldn’t break through 95 last October/November, and it failed once again at 95 at the end of May.  The break above resistance at 95 this morning clears out additional supply and provides room to run towards 97 in the near term.

Remember, dollar strength benefits companies that generate most or all of their revenues domestically, while it hurts large-cap companies that generate large portions of their sales outside of the US.  This is a key reason why the small-cap space has been outperforming over the last few months — small-caps are much more “domestic” in nature versus large-cap, global behemoths.

After spiking to levels not seen in a couple of years back in March and April, US equity market volatility has really settled back down.  The chart below does a great job telling the story.

The chart shows the S&P 500’s average absolute daily percentage change on a rolling 50-trading day basis.  Over the last 50 trading days, the S&P has averaged a daily move of +/-0.56%.  That’s 14 bps below the bull market average daily move of +/-0.70%, and it’s half the daily move we were seeing at peak levels of vol earlier this year.

Note, however, that while volatility has indeed settled down, we’re going to need to see a continued slowdown in action throughout the summer months to get back to the historically low vol that investors got used to in 2017.  Remember, back in November 2017, there was a 50-trading day period where the S&P experienced an average daily change of just +/-0.22%!

The spring selling season is beginning to wind down for the residential housing market, and homebuilder sentiment has started to soften.  For the month of June, homebuilder sentiment dropped two points, falling to 68 from May’s reading and the consensus expectation of 70.  The overall trend for sentiment is still higher, but since peaking at 74 back in December, homebuilders have been in a little bit of a funk as mortgage yields have trended higher.

Weakness in this month’s report was pretty broad-based in terms of sales and traffic with every component pulling back.  On a regional basis, however, the picture was more mixed. Sentiment in both the Midwest and South pulled back as it has been doing for some time now, while sentiment in both the West and Northeast ticked higher.  The improved sentiment in the Northeast was most notable in that this month’s level of 61 is tied for the highest monthly reading in well over a decade.

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.

Europe

City of spies: how the battle for Catalonia divided Barcelona by Michael Stothard (FT)

An incredible piece of investigative reporting that dives into the secret police operations conducted by both sides of the Catalonian independence debates. [Link; paywall]

Two big UK banks shift some euro clearing from London to Frankfurt by Philip Stafford (FT)

In a move that signals the impact of Brexit on the City of London’s mammoth financial industry, two major banks are shifting some clearing of euro-based derivatives to Frankfurt-based Deutsche Börse. [Link; paywall]

Money

The Psychology of Money by Morgan Housel (Collaborative Fund)

A list of 20 different behavioral mistakes investors (and people more generally) make when dealing with money. Extremely helpful as a way to evaluate your own approach to financial health. [Link]

Research

Birth Rates Dropped Most in Counties Where Home Values Grew Most by Jeff Tucker (Zillow Research)

Zillow finds that while effects are inconsistent, fertility rates fell by about 1.5% for 25-29 year old women per 10% increase in home prices. [Link]

Time To Not Freak Out About Debt Again by Urban Carmel (The Fat Pitch)

An excellent demolition of the market meme that debt (federal, corporate, household, or whatever seems scariest at the time) is going to destroy the economy or the country as a whole. [Link]

Subscription

Plume is turning home Wi-Fi into a subscription service by Jacob Kastrenakes (The Verge)

Businesses are obsessing about turning one-time sales into subscription models, with everything from clothes and groceries to dog toys and…wifi routers? [Link]

The product economy is over. Here’s how to survive in the subscription economy. by Tien Tzuo and Gabe Weisert (LinkedIn)

A more positive view of the concept of subscriptions (and their recurring revenue) which are starting to proliferate to the point of ubiquity. [Link]

Sports

Boris Becker claims CAR diplomatic immunity in bankruptcy case (BBC)

The three time Wimbledon champ declared bankruptcy, but is now claiming he’s got diplomatic immunity to avoid claims by creditors, because he has been made a sport and culture attaché to the EU on the nation’s behalf. [Link]

‘What a dream come true:’ NHL ref and cancer survivor makes his U.S. Open debut (AP/Golf.com)

A real heartwarmer: Garrett Rank is an NHL referee, a testicular cancer survivor, and is playing in the US open after working his way to qualifying. [Link]

Justify a deserving Triple Crown winner – but the in-race shenanigans were real by Pat Forde (Yahoo!)

When a trainer has multiple horses in a high-stakes race, significant shenanigans sometimes result, and that appears to have been what happened in the Belmont Stakes race that earned Justify a Triple Crown. [Link; auto-playing video]

Trade Wars

O Canada by Brad W. Setser (Council on Foreign Relations)

Even if you take as a given that the US should be introducing tariffs to reduce its trade deficits versus other countries, Canada makes an odd choice to target. [Link]

NAFTA la vista, baby by Jamie Powell (FTAV)

Drawing heavily on an analysis from ETM Analytics analyst Horacio Coutinho [note: keep an eye out for our Bespokecast conversation with Horacio due out next week], the clock looks to be running out when it comes to NAFTA re-negotiations. [Link; registration required]

Code

DeepMind’s AI can ‘imagine’ a world based on a single picture by Chelsea Whyte (New Scientist)

Using a single two-dimensional picture, a new application of neural networks renders an entire three-dimensional construction of the space pictured. [Link]

Citi Wants Analysts to Add Python to List of Languages on Resume by Jennifer Surane (Bloomberg)

In order to become an investment banking analyst at Citi, you’ll now need to be familiar with Python. Don’t worry, though: incoming analysts will get an overview via summer training classes. [Link; soft paywall]

Uber applies for patent to spot drunk passengers (BBC)

In order to prevent clashes between inebriated passengers and their drivers, Uber wants to use machine learning to keep its patrons from hailing when they’ve had too much to drink. [Link]

Delusions of Grandeur

Instagram’s Wannabe-Stars Are Driving Luxury Hotels Crazy by Taylor Lorenz (The Atlantic)

In a bid to earn free hotel stays at some of the swankiest resorts in the world, Instagram “influencers” are offering promotions. Sometimes, the difference between working with a hotel and getting ignored is how professional the pitch being made to add value is. [Link]

The Balloonfest That Went Horribly Wrong by Nathan Truesdell (The Atlantic)

A brilliant cut-up of local news clips which document a stunt involving the release of millions of balloons, with some unfortunate consequences. [Link]

Crypto

Tether Used to Manipulate Price of Bitcoin During 2017 Peak: New Study by Matt Robinson and Matthew Leisig (Bloomberg)

University of Texas finance professor John Griffin has identified a series of extremely suspicious transactions between Bitcoin and Tether which suggest a pattern of price manipulation. [Link; soft paywall, auto-playing video]

History

AP World History gets a makeover, and high school teachers rebel by Benjamin Wermund (Politico)

The Advanced Placement standard has decided to move to a much shorter time-frame and much narrower scope when it comes to the history of the world. [Link]

Media

How Reuters reported the AT&T-Time Warner ruling first (Reuters)

Some inside baseball on how Thomson-Reuters managed to get the scoop (by all of 10 seconds) on the biggest story in M&A. [Link]

Netflix and Alphabet will need to become ISPs, fast by Danny Crichton (TechCrunch)

The combination of the AT&T/Time Warner merger with the repeal of net neutrality rules suggests that companies that rely on content (or services like search) will soon be at a disadvantage if they can’t use their own pipes to deliver it. [Link]

US podcast ad revenues hit record $314 million in 2017 by Sarah Perez (TechCrunch)

The nascent podcast industry is starting to pull in real money as well as real attention from listeners, with revenues almost doubling from 2016 to 2017. [Link]

Geology

Rocks Under I-95 Present Odd, and Scary, Threat to Power Grid by Brian K Sullivan (Bloomberg)

A specific blend of 300 million-year-old rock that lies beneath the surface of the eastern seaboard doesn’t allow solar radiation to pass through it, meaning major sun storm could lead to big problems for the electrical grid. [Link; soft paywall]

Document Recovery

Meet the guys who tape Trump’s papers back together by Annie Karni (Politico)

Because the President has an odd habit of tearing up paper he is finished with and a legal requirement to archive documents used in his office, a government employee is responsible for putting back together the bits with Scotch tape before archiving them. [Link]

Music

The strange appeal of Toto’s Africa – and why it’s cover-proof by Michael Hann (FT)

Why is it that “Africa” (what should a forgettable bit of the 1980s) is so enduring? An investigation. Bonus content: this dog dancing to Africa is going to make you smile. [Link; paywall]

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Have a great Sunday!