Welcome back to our weekend reading,
It’s been a week of economic releases, earnings expectations and watching the COVID numbers through the cracks in our fingers. The Biden Administration is surely pulling their hair out when a 6.5% annualised rate of GDP growth is still considered well below expectations, Bitcoin investors are still icing their necks from the Amazon whiplash, and in Sydney, we are preparing for the Mad Max-style apocalypse any day now.
Let’s look back on the week.
Build Back More
If you’re losing track of U.S. infrastructure packages, as I am, the $550 billion USD proposal tentatively agreed to this week in the Senate is one of many milestones in the intended $3.5 trillion USD spending program put forward by the Biden Administration.
The agreement this week, and subsequent advancement through the Senate, furthers the proposals journey through the bureaucratic quagmire – it is now eligible for a full debate process. I have been trying to decipher what that means in simple terms, and now I’ve got a headache.
As a rough breakdown of the projects included in this package:
- $110 billion USD for roads, bridges and major projects
- $73 billion for electric grid upgrades
- $66 billion for rail and Amtrack improvements (congratulations Berkshire, the railway investments continue to serve you well)
- $65 billion for broadband expansion
- $55 billion for clean drinking water
- $39 billion for transit
- $17 billion for ports
- $25 billion for airports
- $7.5 billion for electric vehicle chargers
Chartered Failing Analyst
Not three days ago I was having a discussion with a colleague about how the CFA is not as difficult as its made out, and that Level 1, in particular, is very accessible to most people with any tangential involvement to markets.
How appropriate this story now seems – the pass rate for the CFA Level 1 exam in May has reported the worst pass results ever recorded since starting in 1963.
Only 25% of candidates passed the exam, down from 44% in February – in the last two decades that pass rate has hovered between 35-45% on average.
Albeit I have never asked a CFA holder if the test is purely rote learning or if there’s room for economic intuition, it seems that despite being a “consistent level of difficulty with previous exams”, COVID-19 has certainly had an impact on the pass rate.
Off to Amazon
There must be some interesting workplace culture going on at Boeing Co. that their engineers are leaving for Amazon to work under Jeff “What Bathroom Breaks?” Bezos.
After an exodus of its engineering department to work with Amazon and its Blue Origin space arm, Boeing saw the launch of its Starliner OFT-2 delayed after a mishap with a module in the craft.
This mission is already a re-do of a 2019 mission which almost ended in a disaster – the pressure is doubled since this is Boeing’s answer to SpaceX’s reusable craft launches and successful commercialisation of their space flight operations.
Market commentary has criticised Boeing’s decade long share buyback program, which invested $40 billion USD back into the company equity and made Boeing one of the best performers in the Dow Jones Industrial Average – but have left the company unprepared for “leaner times” and unable to keep up with new threats like SpaceX and Blue Origin.
*All numbers in USD from BofA Securities
- Equities: $23.2bn into equities
- Bonds: $12.7bn into bonds
- Precious Metals: $0.3bn from gold
- Cash: $25.1bn into cash
Flows to Know
- Record weekly flows into TIPS ($3.2bn)
- Inflows in tech trending up
- Inflows into EM stocks inflecting higher (largest inflow $3.8bn in 3 months)
IG corporate bond yields in real terms lowest since 1980
Central bank balance sheet vs big tech market cap ($tn)
Inflows to tech trending back up
First Musk, Now Bezos
After Elon has had so much fun moving the price of Bitcoin in the last year, Jeff decided it was time to come in and have a go.
After Bitcoin rallied from ~$30,000 up to ~$40,000 USD on the back of speculation that Amazon would accept Bitcoin for payments this year, after a job offering for a digital currency executive caused the frenzy.
But later this week an Amazon spokesperson denied that the company would accept Bitcoin, at least this year, knocking the price back down to ~37,500, with the volatility continuing throughout the rest of the week.
Seafood appears to be vanishing off of dinner plates in the U.S., as surging prices for delicacies like crabs and scallops have become prohibitive for consumers and restaurants.
As restaurants struggle to re-open after the COVID lockdown, seafood prices rising by 11% through early July YoY is the last thing they needed to help land on their feet.
And this is a factor which could impact inflationary concerns, given that restaurants were reporting having to raise prices by up to 30% just to continue being profitable on serving certain dishes.
A quick bit of research shows that there are U.S-listed seafood stocks, but alas no fishing ETFs to try and capture this price movement.
Our morning calls continue, please do tune in for a daily dose of market insights and access to some leading experts in the funds management field.
Tune in from 9:30-10:00am AEST, Tuesdays and Thursdays.
Have a safe and enjoyable weekend.
Max and the Mason Stevens team.
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The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.