Internal | July 29th, 2024

Here's everything you need to know this week: Kamala Harris’s campaign just raked in a staggering $200 million in fundraising. While critics might argue that money can’t buy charisma, we can’t deny that cash is still king in American politics. This hefty war chest solidifies her standing and sends a clear message: Harris is in it to win it, and she's got the financial firepower to back her up. Investors in the political arena are clearly banking on her potential to shake things up.

1. Tech Earnings Look To Cauterize the Bleeding

Big Tech is bracing for a make-or-break week as some of the sector’s biggest players prepare to report their earnings after last week's tech nosedive, where fears of overvaluations and profit-taking turned into a full-blown selloff. Heavyweights like Apple, Amazon, and Microsoft are up next, and their results will likely dictate whether the market decides to throw a party or a pity party. Analysts are obsessing over these giants' AI investments, hoping they'll translate into some actual revenue growth. With AI being the shiny object everyone’s chasing, any good news could spark a rally, boosting investor sentiment and dragging the broader market up with it.

2. Middle East Tensions Ratchet Up 

Market analysts are on high alert as tensions between Israel and Lebanon hit a boiling point. Israeli airstrikes over the weekend targeted Hezbollah positions in southern Lebanon, following rocket attacks on northern Israel that reportedly hit a playground with deeply tragic results. An escalation into a full-blown regional war could send global oil prices and defense stocks on a wild ride. The energy markets are especially twitchy, given the Middle East's role as the world's oil ATM. A prolonged conflict could skyrocket prices, messing with everything from your Uber fare to your grocery bill.

3. Trump’s Crypto Swing

Donald Trump has announced plans to give SEC Chair Gary Gensler the boot and create a strategic Bitcoin reserve if he lands back in the Oval Office. This bombshell dropped during the Bitcoin 2024 conference, marks a sharp pivot towards a more crypto-friendly stance. The implications for cryptocurrency regulation could be huge, shaking up the SEC's approach and potentially easing the regulatory chokehold. Of course, this move will also likely inject a fresh dose of chaos into the already wild crypto market, ramping up the volatility to new heights.

4. "Deadpool and Wolverine” Tag-Team Box Office,

Ryan Reynolds and Hugh Jackman’s “Deadpool and Wolverine” has smashed the box office, raking in a whopping $205 million in domestic ticket sales. Audiences can't get enough of the wisecracking mercenary and the grumpy adamantium-clawed clawed Canadian, providing a blockbuster success that is also a lifeline for Hollywood, which has been grappling with streaming competition and marks a significant milestone in Marvel's box office recovery after a string of underperforming releases. Studios will be eager to replicate this winning formula, while investors are betting on this dynamic duo to keep the entertainment market buzzing.

Political and Market Sentiment

The Harris campaign moves into its second week (yeah, it’s only been ONE week) with a bulging aforementioned war chest and in search of a VP candidate. While the Trump campaign will look to grab focus without putting it on J.D. Vance (hoping to make the erotic furniture memes stop), Harris and her current boss President Biden will have to balance the election with tamping down the Israel/Hezbollah situation. Markets will watch all of this closely while also acting low-key delirious about last week’s economic data all but guaranteeing a September interest rate cut. 

Global Markets Overview

Europe: The pan-European STOXX Europe 600 Index eked out a 0.55% gain, riding high on Friday's rally fueled by rosier-than-expected quarterly earnings. Germany’s DAX strutted with a 1.35% jump, while the UK’s FTSE 100 Index, ever the overachiever, shot up 1.59%. Meanwhile, core eurozone government bond yields continued their downward slide as the region’s flash PMI readings flopped, stoking hopes for some monetary easing magic. 

Asia: Japan’s stock markets took a nosedive, with the Nikkei 225 plunging 6.0% and the TOPIX down 5.6%, as tech stocks were battered by the ongoing U.S. mega-cap tech sell-off. Over in China, the central bank’s surprise rate cuts did little to boost confidence, leading the Shanghai Composite to drop 3.07% and the CSI 300 to sink 3.67%. Not to be left out, Hong Kong’s Hang Seng Index slid 2.28%, proving that bad news loves company across the Asian markets.

The Week Ahead

It’s going to be a delicate balance of Big Tech hope, geopolitical tension and baking in an autumn rate cut as investors look to revalue the markets after last week’s vicious action. TLDR; It’s going to be a lot for anyone looking to take some time off as August begins.

Let’s dive into more detail below.

GOING SHORT

SEC Crashes Andrew Left’s Short Selling Party

The CEO of Citron Capital is Facing Multiple Charges of Fraud Related to a $20 Million Scheme

BREAKING NEWS
Oh, Andrew Left, you cheeky devil.

It seems the man who loves to call out frauds and overvaluations just got called out himself. Federal prosecutors and the SEC have decided that Left, the activist short seller extraordinaire, might have taken his “tell it like it is” schtick a tad too far.

And by a tad, we mean he allegedly pulled in at least $16 million through a neat little trick called “securities fraud.”

WHAT HAPPENED
Left, who you might recognize from his work as a frequent talking head on CNBC, allegedly used his platform to not just inform the public but also to manipulate the market for his personal gain. The SEC claims that through his hedge fund, Citron Capital, Left engaged in a $20 million scheme that involved making false and misleading statements about stock recommendations. It’s sort of like he was playing a financial game of three-card monte, but with 401Ks and pension funds.

The SEC complaint is dripping with citrus juicy details (see what we did there?). Apparently, Left wasn’t shy about boasting to his colleagues how effective his misleading statements were, likening it to “taking candy from a baby,” which we’ve now learned is a phrase real people still use.

He allegedly played his little trading game with big names like Nvidia, Tesla, and Meta. Basically, if it was a hot stock, Left might have probably had his fingers in the pie.

One particularly delightful example involves Beyond Meat. Back in May 2019, Left had a short position, meaning he was betting the stock would drop. He then tweeted that Beyond Meat was “Beyond Stupid” and recommended a target price significantly lower than its current trading price. But here’s the twist: just ten days prior, the Feds allege that Left told a colleague he expected the price to go up. Within minutes of his tweet, he covered his short positions, profiting from the dip his tweet caused. Then, like a cherry (more fruit) on top, he lied to CNBC on live air about still holding a short position just before they published an article amplifying his negative view.

Left’s defense appears to be that he’s just a publisher of truthful information and that the charges are a bit of a reach. It’s a defense straight out of the “I’m just an entertainer, not a criminal” playbook which we’ve only ever seen work for The Joker.

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HOUSING

Homeownership Today: Navigating High Costs and Economic Realities

Affordable housing remains a top priority among a percentage of Americans, with potential solutions on the horizon to ease the burden on needy buyers

BREAKING NEWS
White picket fences, an apple tree with a swing swaying from one of its branches, and a mailbox with no bills in it…sounds like a dream.

A specific dream. James Truslow Adams, the man who coined the phrase “American Dream” in his 1931 book "Epic of America" defined his vision as a "…dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.”

Yet, this fantasy of owning a house in America today can’t be paid with musings and dreams but of high salaries and even higher mortgages.

WHAT HAPPENED
If you frequent any social media platform, you will likely come across a content creator stating that owning a home in the U.S. is nearly impossible without either help, a ridiculously high-paying job, or going into astronomical debt. For most, this is true, with over 70% of Americans believing buying a home in 2024 is unrealistic, according to a study by IPX1031. 63% say they can’t afford it, and with Fidelity Investments stating that the median annual salary for full-time workers is $59,228 (TimeCamp and SoFi both indicate that the average yearly salary is $63,795 and the U.S. Bureau of Labor Statistics (BLS) reporting $53,490), they aren’t lying.

Our chart with data sourced from Home Sweet Home, as of May 2024, exhibits stark regional disparities in affordability across 30 major cities. With a national median home price of $389,400 requiring an annual salary of $104,339, the landscape varies dramatically across the country and goes directly against the median annual wage.

West Coast cities like San Jose and San Francisco top the list in unaffordability, with San Jose's median home price reaching $1.8 million, likely due to its status as the tech capital of the world. 

In contrast, Midwest and Southern cities offer more accessible housing markets, with Cleveland and Pittsburgh requiring salaries of around $60,000. Surprisingly, some smaller cities, like Portland, demand higher incomes than major metropolitan areas like Chicago.

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1. Big Tech Trade Shudders Just as Stock Pickers Make a Comeback

Wall Street’s lucrative 2024 trade of going all-in on Big Tech has been disrupted, causing stock volatility and impacting momentum-chasing investors. This shift indicates a potential change in investment strategies, highlighting the resurgence of stock pickers.

2. Market Rotation and Interest Rates Impact on Stocks

A St. Louis jury has ordered Abbott Laboratories to pay $495 million in damages after a lawsuit claimed its specialized baby formula caused a severe bowel disease in a premature infant. This verdict significantly impacts the company’s financial outlook.

3. Ackman’s Pershing Square Delays IPO

Pershing Square USA Ltd., managed by Bill Ackman, has postponed its initial public offering, reducing the target size from $25 billion to between $2.5 billion and $4 billion. This decision reflects market uncertainties and potential strategic realignments.

4. Hindenburg Could Be In Trouble As US SEC Squeezes Shortsellers

The SEC’s increasing scrutiny on short-sellers, including Hindenburg Research, mirrors allegations similar to those made by SEBI. This regulatory pressure could significantly impact the operations and strategies of short-selling firms.

5. Apple Reaches First US Labor Deal

Apple and the union representing workers at its Towson, Maryland store have agreed to a historic labor contract. This agreement marks a significant milestone for labor relations in the tech industry, potentially influencing other companies’ labor policies.

6. Trump Vows to Make US ‘Crypto Capital’ at Bitcoin Conference

At the Bitcoin 2024 conference, Donald Trump pledged to establish a national Bitcoin reserve and make the US the “crypto capital of the planet” if elected. This promise could significantly influence the future regulatory landscape of the cryptocurrency market.

7. Investors Concerned AI Isn’t Making Serious Money

Wall Street and Silicon Valley investors are growing increasingly worried that AI investments are not generating the anticipated returns. This concern may lead to a reevaluation of investment strategies and a shift in focus towards more profitable technologies.

8. Earnings Derail Stock Rally Over Doubts on AI, Consumer Strength

Recent earnings reports have raised concerns about the sustainability of the AI boom and consumer spending strength, leading to a decline in stock market optimism. These doubts could impact investment strategies and market performance in the near future.

9. US Home Insurers Suffer Biggest Loss of Century in 2023

Home insurers in the US experienced a net underwriting loss of $15.2 billion in 2023, the largest in over two decades. This financial hit highlights the increasing risks and challenges faced by the insurance industry due to natural disasters and other factors.

10. Fed Is About to Nod at a Rate Cut as Job Growth Moderates

The Federal Reserve is expected to signal an upcoming rate cut due to moderating job growth and cooling inflation. This anticipated move could have significant implications for the economy and financial markets.

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