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.

Fiscal Matters

Trump’s Biggest Hurdle on Tax Cuts? Congress’s Daunting Calendar by Sahil Kapur (Bloomberg)

Large-scale tax reform (or any tax reform for that matter) is threatened by the cluttered schedule facing Congress, especially the Senate. [Link; auto-playing video]

Macron calls for radical reform to save euro by Ferdinando Giugliano and Sarah Gordon (FT)

Not a new story (dated to 2015) but an illuminating one on how the new President of France views the prospects for European fiscal integration. [Link; paywall]

New Tech

Apple Will Announce Amazon Prime Video Coming To Apple TV At WWDC by John Paczkowski (BuzzFeed)

Banned since 2015, Amazon’s video streaming platform for Prime customers will once against be available for Apple TV users. [Link]

Tesla’s Solar Roof Sets Musk’s Grand Unification Into Motion by Tom Randall (Bloomberg)

Elon Musk’s Tesla is taking deposits for roof tiles that operate as solar panels, moving closer to a full suite of transportation and home products that are entirely off the grid. [Link; auto-playing video]

Bonkers

There Are Now More Indexes Than Stocks (Bloomberg)

Remarkably, there are more indices of US stocks than there are US stocks, with more than 5,000 different indices flooding the market. [Link]

Inside VW’s Campaign of Trickery by Jack Ewing (NYT)

Astounding details on how deep and pervasive the effort to deceive US emissions tests was at Volkswagen, with the key decisions dating back as early as 2006. [Link; soft paywall]

Banking

Watch out Wall Streeters: Your jobs are moving to North Carolina (Reuters/Business Insider)

Swiss investment bank Credit Suisse has announced it will move 1200 jobs to the land of the Tar Heel, supported in part by grants from the NC government. [Link]

JPMorgan Tells Banks to Partner Up as U.S. Deposit Drain Looms by Matthew Monks (Bloomberg)

With the Fed considering an end to reinvestment of the QE bond portfolio, excess reserves are expected to fall and with them deposits. [Link]

Diet

Why Everything We Know About Salt May Be Wrong by Gina Kolata (NYT)

Studies done on Russian cosmonauts indicate that consuming higher volumes of salt actually leads to weight loss rather than weight gain. [Link; soft paywall]

49^th Parallel

We Could Have Been Canada by Adam Gopnik (New Yorker)

What if the American Revolution hadn’t happened? Could we have ended slavery sooner, avoided the Civil War, and ended up more like Australia or Canada? [Link]

Correcting Frameworks

The Robots Have Taken Over (Our Brains) by Matt Busigin (New River Investments)

The current obsession over job-stealing robots isn’t grounded in economic data and completely fails to see the forest for the trees. [Link]

Web Design: First 100 Years by Maciej Cegłowski (Idle Words)

A brilliant talk that illustrates the importance of diminishing marginal returns and functional design while giving an excellent blueprint for the future. [Link]

Sports

A Home Playoff Game Is A Big Advantage — Unless You Play Hockey by Neil Paine (538)

Astoundingly, home playoff hockey teams win at a lower percentage than regular season home teams. [Link]

Have a great Sunday!

Monday, May 8th marked the six-month point since Trump was elected on 11/8/16.  Below is a look at our asset class performance matrix, which highlights the total return of a wide variety of ETFs.  The three time frames used in this edition of the matrix are since the election (11/8/16), year-to-date, and this week.

As shown, equities in the US faded a bit this week, but they’re still up massively since the election.  Performance for foreign markets was scattered this week, with Brazil surging 5.7% and Spain falling 3.6%.  Commodities had a bounce back week, but they’re still down since the election with the exception of UNG.  Treasury ETFs saw a slight week-over-week bounce, and they’re now solidly in the green on the year even though they’re still down since the election.

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We don’t talk about the Utilities sector a whole lot, but in putting together our S&P 500 Chart Book this week, there were a number of interesting looking charts in the sector.  Given their heavily regulated nature, in many cases, charts of stocks in the Utilities sector often look indistinguishable from one another.  Given that, right now we’ll just focus on the chart of the overall sector.  After a big run-up in late 2015 through the first half of 2016 on the heels of falling interest rates, the sector fell on some hard times in the second half of 2016.  The lows following that sell-off, though, came right after the election when interest rates spiked.  You’ll also notice that the decline came to an end right at the previous highs before the late 2015 breakout, and since then it has rebounded nicely.  Beginning in late February, however, the sector has been in a sideways range consolidating those gains right below its prior highs.  With this sideways range forming a nice base for the sector, any rally from here should be enough to power it right past those prior highs.

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Today’s CPI report for the month of April showed a smaller than expected increase resulting in a y/y increase in the headline reading of 2.2%.  That’s down 0.2 percentage points from last month and down a full half point from the multi-year high of 2.7% that we saw in February.  Whenever we look at overall inflation levels, one secondary indicator we like to look at for confirmation of the overall trend is the monthly commodity surveys in the ISM Manufacturing and Non-Manufacturing reports.  In a nutshell, these surveys ask respondents about which commodities they deal with are rising and falling in price, and usually, we have found that trends in these surveys tend to coincide or even lead the overall trend in headline inflation.  This month, though, we have seen some mixed signals.

With regards to the Manufacturing sector, in this month’s survey respondents noted price increases in 20 commodities and no declines.  While twenty is on the high side, it was the lowest monthly reading of the year.  In the Services sector, we saw a similar trend.  Overall, 16 commodities were up in price and four were down, leaving a net of 12.  Adding up the results of both surveys, the net number of commodities rising in price in April was 32, which was down from March’s five-year high of 41.

The chart below compares the three-month moving average of the net number of commodities rising in price compared to the y/y change in CPI.  At this month’s level of 36.0, the three-month moving average is at its highest level since July 2011 and has now ticked higher for the fifth straight month, which is the longest monthly streak of increases since July 2015.  As shown on the rightmost side of the chart, even as CPI has started to decelerate, the trend in commodity prices has remained higher.  This is a trend we wouldn’t expect to continue, and they should both start moving in the same direction.  Based on some of the trends we see in the individual monthly data, we would expect to see the trends in the commodities survey start to follow inflation data lower.

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We’re happy to announce that the newest episode of Bespokecast is now available to the general public both here and via the various podcast platforms.  Be sure to subscribe to Bespokecast on your preferred podcast app to gain access to our full collection of episodes.  We’d also love for you to provide a review as well!

In our newest conversation on Bespokecast, we spoke to Pete Najarian, Co-Founder of Investitute.  Pete is a long-time contributor on CNBC’s Fast Money and Fast Money Halftime Report, and a financial markets veteran with experience across the options world including the CBOE’s pits where he got his start.  Prior to entering the financial industry, Pete played for the Minnesota Golden Gophers in the NCAA and the Tampa Bay Buccaneers and Minnesota Vikings in the NFL.  We loved talking to him about his experience playing football, how athletics helped him in the industry, and what he thinks about the future of the game.  Our conversation also touched on the skills necessary to have success trading options, some detail on strategies he uses to stay ahead of the market, and the impact of volatility products like VIX-linked ETFs or ETNs on the market for single name equity options.  If you’re interested in options, be sure to visit Pete and his brother John’s site — Investitute — where they run their “Unusual Options Activity” service.  We learned a lot chatting with Pete, and we hope you enjoy listening!

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