🇺🇸🛑 Government Shutdown Avoided?
Happy Wednesday all,
I’ll be in Dallas next week for a YouTube conference, hoping to meet some other YouTubers that I’ve been friends with online for a while. I like how meeting people that we only know of online these days is the norm; back when I was in my 20s - it was definitely a “weird thing” to meet someone from the internet. If you have any food suggestions, let me know!
We have a great video on Warren Buffett that goes out today on the channel, and we hope you tune in - it’ll also be linked down below!
Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
👀 Eye-Catching Headlines
🧠 ChatGPT can now “speak,” listen, and process images (CNBC)
🚴♂️ Peloton and Lululemon are partnering up, PTON 0.00%↑ soars (CNBC)
📦 FTC sues Amazon in landmark antitrust case over marketplace (Bloomberg)
🕵️♂️ CIA builds its own AI tool in rivalry with China (Bloomberg)
🇨🇦 Canada lifts mortgage bond plan by 50% to boost construction (Bloomberg)
📱 SEC collects Wall Street’s private WhatsApp messages as probe escalates (Reuters)
🛢️ Russia dodges G7 price cap sanctions on most oil exports (Reuters)
🔑 World’s richest are betting on U.S. renters to grow their billions (Bloomberg)
The Weekly Brief
1. The Senate Unveiled a Bipartisan Funding Deal to Avert a Government Shutdown (WSJ)
The Senate is advancing legislation that would extend funding through Nov. 17th while providing $6B apiece for Ukraine and disaster relief.
The bill passed in a 77-19 vote late Tuesday.
The bill must now face House Speaker Kevin McCarthy, who wishes to extend government funding but wants to meet two conditions:
Congress must enact stricter border security measures
The bill excludes any new support for Kyiv
Congress has approved over $100B for Ukraine since the Russian invasion.
The Senate bill falls well below the $24B that President Biden had asked for.
McCarthy said he would add a short-term measure later this week centered around keeping the government open while lowering spending and tightening border security.
2. Credit Card Losses Rising at the Fastest Pace Since 2008 (CNBC)
Credit card companies have seen losses rapidly rise since Q1 2022 at the fastest pace since 2008.
Losses currently stand at 3.63%, but Goldman sees them rising another 1.3% to 4.93%.
According to the Federal Reserve, Americans owe more than $1T on credit cards, a record high.
Experts find unusual the fact that losses are accelerating outside of an economic downturn.
Three of the last five credit card loss cycles were characterized by recessions.
The other two occurred in the late 1990s and 2015-2019.
History shows that loss cycles usually peak six to eight quarters after loan growth peaks, meaning that experts do not see losses peaking until late 2024/early 2025.
3. Stocks Flash Recession Warning as Trouble Spreads to Industrials (Bloomberg)
Steep drops in industrial and small-cap stocks typically occur when the economy is in a recession
The S&P 500 Industrials index peaked on August 1st and is down 8% since then.
The small-cap Russell 2000 index has also seen an 11% decline from its July 31st high.
Some investors see the recent drops as little more than a buying opportunity.
Signals such as small-cap stocks may not be the most reliable due to how much the market has risen.
For example, the S&P 500 may be down 6% since July 31st, but it still has a long way to go before giving back the 20% it gained before then.
The last three times the S&P 500 lost 1% in both August and September, it would eventually rebound in October.
+8% in Oct. 2022, +8.3% in Oct. 2015, and +11% in Oct. 2011.
“The market is pricing in the risk of a downturn that we do not see.” - Jeff Cianci, Director of Research at Catherine Avery Investment Management