🍫 📈 Cocoa is More Expensive Than Copper??

Happy Wednesday all,

Every few years, some commodity makes the news for a shortage that causes prices to skyrocket. During the pandemic, avocados and, more famously, eggs were ridiculously expensive. More recently, chocolate has fallen victim to the same effect. It’s interesting, though, because I remember how expensive avocados would get at the grocery store, but now, they’re back to a pretty reasonable price (I just bought them today). Every market has its ups and downs—even chocolate and avocados.

Enjoy this week’s Hump Days!

- Humphrey, Rickie & Tim

👀 Eye-Catching Headlines

Using Your Premium Credit Card May Cost More After Visa-Mastercard Deal (Bloomberg)

Cocoa prices are soaring to record levels. What it means for consumers and why ‘the worst is still yet to come’ (CNBC)

Boeing CEO Dave Calhoun to Step Down in Wake of 737 MAX Struggles (WSJ)

Biden Signs $1.2 Trillion Funding Bill, Ends Shutdown Threat (Bloomberg)

RFK Jr. Names Nicole Shanahan as Running Mate for Presidential Bid (WSJ)

Trump Media stock jumps as much as 50% after DJT ticker debut (CNBC)

Robinhood Unveils Credit Card in Further Push Beyond Trading (Bloomberg)

The Weekly Brief

Chip Stocks Responsible for a Third of the S&P 500’s Rally

• The Philadelphia Semiconductor Index is trading at around eight times sales, the highest in at least two decades. In comparison, the S&P 500 is trading three times sales. This situation increases the risk that market sell-offs could be worse due to the inflated multiples of chip/AI stocks.

• Despite the current boom driven by a rush for AI computing power, the semiconductor industry is historically cyclical and usually experiences volatility in revenues and profitability.

How the Bridge Collapse in Baltimore Affects the Economy

• Baltimore’s Francis Scott Key Bridge collapsed after a container ship hit it early Tuesday. Six workers missing after the collision are presumed to be dead.

• The Port of Baltimore is a critical hub, receiving about $55bn in imports during 2023. Last year, the port handled ~850,000 cars and light trucks, and was the 13th straight year that the port led all U.S. ports in the import of cars and light trucks.

• Imports and exports originally destined for Baltimore will likely be redirected to New York and New Jersey, which would lead to increased costs and delays in shipping and trucking. You can read more about the port disruption here.

Cocoa Is Now More Expensive Than Copper…

• On Tuesday, cocoa futures surged to $10,000 a metric ton. Copper is trading at $8,300 a metric ton. The initial rally in cocoa prices was because of crop failures in West Africa, which produces around 75% of global supply. A combination of aging trees, diseases, and bad weather created the largest shortage in 60 years.

  

• While the initial rally was based on fundamentals, it’s likely that the skyrocketing price is due to margin calls on hedges put on by cocoa traders and producers.

  • Essentially, many traders are being forced to close out their position and buy at whatever the current price may be.

Minor League Baseball Players Caught Insider Trading Del Taco Stock

• The SEC filed a lawsuit against four baseball players, accusing them of insider trading ahead of Jack in the Box’s 2021 acquisition of Del Taco… The players allegedly profited by $200k from buying Del Taco stock.

• The players received information about the acquisition after a social outing in which a former college teammate who was involved in the acquisition gave them information.

• According to the SEC, one of the texts sent between the players said “check out this stock guys Del taco, this chart is looking bullish to me. Might try to gamble on some options or something, I love to eat at del taco”.

  • Just incredible stuff…

Chart of the Week

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