Salesforce (CRM) kicks off its annual Dreamforce Conference tomorrow. Honing in on the buzzword of the year, AI innovation will be front and center with CEO March Benioff’s keynote scheduled to focus on the company’s usage of AI in its customer relationship management (CRM) platform.  Leading up to the conference, Salesforce has been one of the top performing Tech stocks in the S&P 500, rallying 69% year to date.  Historically, CRM has often risen in the six months ahead of the conference and has also risen more often than not in the short-term leading up to the start of the event. Once the Dreamforce Conference begins, CRM has historically averaged a 1.24% gain over the three-to-four-day span with positive returns a little over half the time. From there, CRM usually gives up some of its gains one week later, but the following months are once again positive, although it’s worth pointing out that the stock has traded lower in the three months after Dreamforce in each of the last three years.

Compared to the Tech sector, using the S&P 500 Tech ETF (XLK) as a proxy, performance in the lead up to the conference over the past twenty years has usually been positive. In fact, returns in the six months leading up to the conference have been positive 80% of the time. Unlike CRM, when the conference is underway, the Tech sector has fallen more than half the time with an average drop of 0.15%. The weakness has also been prevalent one week after the conference with an average drop of 0.65%. However, that weakness tended to be short-lived with gains on an average basis one, three, and six months after the conclusion of the conference.

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:
This is Jeopardy!  On September 10th, 1984, legendary host Alex Trebek made his debut on the TV game show Jeopardy! He hosted the show for an astounding 36 years. With his distinctive voice, poise, and humor, he became an iconic presence for viewers worldwide, making the show a cultural phenomenon. Beyond hosting the show, his battle with cancer inspired many.  After 36 years with just one host, the show has had two ‘permanent’ hosts (plus many guest hosts) in just the last two years.

National Security and Global Relations

Chinese Gate-Crashers at U.S. Bases Spark Espionage Concerns (WSJ)
“Gate-crashers” is the new name for Chinese nationals, often posing as tourists, who access US military bases and sites without proper authorization. The number of these considered espionage attempts has risen significantly in recent years as gate-crashers have accessed missile ranges, rocket-launch sites, Trump’s Mar-a-Lago estate, and multiple military bases. Concerns have grown amid rising tensions between the U.S. and China, and Congress is considering legislation to address the issue. [Link]

A short history of ‘India’ versus ‘Bharat’ (The India Fix)
The Indian government has communicated, through a dinner invitation, that it wants to change the name of the country to “Bharat.” “India” is said to be an English word, while “Bharat” in Hindi. The idea has sparked a debate over linguistic and national identity, an on and off phenomenon in the country through its history. Various groups have supported different names such as “Bharat” and “Hindustan” that are often linked to political and cultural ideologies. “India,” though, has gained international recognition after 200 years of use, making any official renaming a complex issue. [Link]

Technology and Innovation

Scientists grow whole model of human embryo, without sperm or egg (BBC News)
Scientists at the Weizmann Institute have developed an entity that closely resembles an early human embryo using stem cells, without the use of sperm, eggs, or a womb. This “embryo model” mimics a 14-day-old embryo and could provide an ethical way to study the earliest moments of human development and help our understanding of development, organ formation, genetic diseases, and more. [Link]

How valuable is the UK’s AI industry? Here’s one way to not find out (Financial Times)
Global AI Ecosystem, an open-source AI knowledge platform identified over 8,900 UK companies involved in AI-related activities. It highlighted the expansive scope of AI in various industries, including unexpected ones like postal services, loudspeaker makers, and political data consultants, which are counted as part of the UK’s AI ecosystem. The article questions the methodology used in the report, especially the broad definition of AI’s role in different businesses. [Link]

Money Is Pouring Into AI. Skeptics Say It’s a ‘Grift Shift.’ (Institutional Investor)
Applied Digital, a company that recently rebranded itself and shifted focus from crypto to AI services, saw its stock soar after announcing cloud hosting deals worth hundreds of millions of dollars with unnamed AI customers. Some short-sellers are raising concerns about the legitimacy and sustainability of such companies, noting unclear AI claims and overvaluation. While AI is a hot topic in the market, there are questions about whether it can deliver on its promises and whether some companies might be exploiting the AI hype for financial gains. [Link]

If Earth were an exoplanet, JWST would know there’s an intelligent civilization here (Phys.org)
The James Webb Space Telescope (JWST) could potentially detect signs of life or advanced civilizations on exoplanets by analyzing their atmospheres. The study used real observations of Earth’s atmosphere to simulate that of an Earth-like exoplanet (a planet outside the solar system), taking into account the noise and lower resolutions expected in JWST observations many lightyears away. The results indicate that JWST could identify various molecules suggestive of life on exoplanets within 50 light-years of Earth. The question remains: are there other intelligent civilizations out there? [Link]

Pandemic Impact

New report shows young people’s mental health improved during lockdown (NIHR School for Public Health Research)
Contrary to the majority of already published research, a report from the southwest of England shows that COVID lockdowns led to a more positive perception of school, with improved teacher-student relationships. Many reported enjoying school more than they did before the pandemic, perhaps having taken it for granted before the lockdown. Anxiety levels decreased during lockdown, particularly for those who felt less connected to school previously and those at a higher risk of anxiety before the pandemic.  Our take?  Maybe it’s just that they liked school more because they didn’t have to go! [Link]

Sports

A record 73 million Americans plan to bet on the NFL this season, survey says (CNBC)
73 million projected bettors this season is up big from last season’s 46 million. The survey indicates that 19% of American adults plan on placing bets on NFL games which represents a 56% increase from last season. The growth in sports gambling and the ability to bet on mobile devices have contributed to this trend after the Supreme Court allowed states to legalize sports betting in 2018. The Kansas City Chiefs are once again the favorites to win the Super Bowl, but bettors were likely disappointed after their Week 1 loss to the Lions on Thursday to open the season. Hopefully none of them are as confidence as this guy, who got a tattoo saying they would go undefeated. [Link]

The Orioles Are a Different Type of World Series Contender (Sports Illustrated)
The Baltimore Orioles, known for their style of play emphasizing good hitting with runners in scoring position and taking the extra base, are challenging conventional baseball wisdom. They are succeeding with a different approach, scoring runs despite being 17th in home runs. The team has embraced a more traditional style of play that focuses on situational hitting, base running, and playing faster, which is enabled by MLB’s new rules aimed at speeding up the game. Statistics suggest the Orioles could be serious World Series contenders. [Link]

Economic and Financial Trends

Banking industry faces ‘significant downside risks’: FDIC chair (Yahoo Finance)
FDIC Chair Martin Gruenberg has warned that the US banking industry faces significant downside risks from inflation and high interest rates, which could weaken profitability and credit quality. Overall, deposits declined for the fifth quarter in a row, putting pressure on banks to raise their funding costs to retain account holders. Gruenberg also expressed concerns about a weakening market for commercial real estate, as banks are major lenders to commercial property owners across the US. [Link]

Bankruptcies spiked in August — the post-COVID rebound ‘is becoming a reality’ (MarketWatch)
Consumer bankruptcies in the US have increased in August, indicating growing financial distress for many individuals. An 18% increase in August compared to the previous year marks the 13th consecutive month of rising bankruptcies. Factors contributing to this trend include rising interest rates, inflation, high credit card debt levels, and an  increase in car loan delinquencies. The resumption of federal student loan payments in October is expected to further impact consumer finances. [Link]

Walmart Cuts Starting Pay for Some New Hires (WSJ)
Walmart has adjusted its wage structure for new hourly workers, resulting in most new hires earning lower starting wages than in previous months. This move suggests that the tight labor market, which led to wage increases and added benefits, is easing. Walmart claims the change allows employees to move between work groups without pay impacts and enables them to learn new skills to advance in the company. This adjustment is part of a broader trend as retailers seek to reduce costs ahead of potential consumer weakness later in the year. [Link]

How Large Are Inflation Revisions? The Difficulty of Monitoring Prices in Real Time – Liberty Street Economics (Liberty Street Economics)
Inflation estimates can change significantly over time. The Personal Consumption Expenditures (PCE) price index highlights examples like the global financial crisis where inflation estimates change dramatically over subsequent data releases. The analysis underscores the significant uncertainty in measuring inflation in real time, which poses challenges for policymakers, analysts, and investors when assessing inflation trends and their implications. [Link]

The Problem With Economic Data Is Getting Worse (WSJ)
Economic data has always been subject to revisions, but in the post-pandemic period, the process of compiling information that goes into these reports has become even more difficult, making them subject to potentially larger revisions down the road. The monthly Job Openings and Labor Turnover Survey was one indicator cited in the article where the response rate to the survey sent out by the BLS is now just 32% compared to a 65%+ response rate prior to the pandemic. [Link]

Is economics changing its mind about administrative burdens? (Don Moynihan)
This article discusses “ordeals” or “ordeal mechanisms” as a means of targeting limited resources in public policy. Ordeals are the deadweight costs individuals face when trying to qualify for a transfer or benefit, and they are assumed to deter those who don’t truly need the services. However, some research challenges this assumption, suggesting that, n some cases, ordeals can exclude people who genuinely need help, particularly those with poor health or lower education who struggle more with administrative burdens. [Link]

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