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- Tuesday's Scoop: Fueled🌤️
Tuesday's Scoop: Fueled🌤️
UnitedHealth shakes off hack disaster & GM expands EVs
Scoops Team
July 16, 2024
Hey friend - welcome back to your daily scoops on the economy and companies impacting your life.
Here’s what you need to know today to inform your work, spending, and investments…
🌎 Big picture
People are still spending despite rising economic challenges.
Homes are less affordable than they have been in 17 years.
Gold is more valuable than ever.
How are you feeling about the economy? |
👜Cost of living trends
Inflation Rate: +3.0% (YoY), -0.1% (MoM)
Policymakers aim for 2% YoY inflation. (June CPI)
Americans keep spending despite rising economic challenges. The Commerce Department reported no change in retail sales last month, following an upwardly revised 0.3% gain in May. When excluding volatile spending categories like automobiles, gasoline, building materials and food services, the so-called core retail sales surged 0.9% in June after climbing 0.4% in May. Economists expected declining spending. E-commerce sales jumped 1.9%, and spending at restaurants and bars increased by 0.3%, indicating that Americans are still willing to dine out. Overall, retail sales were up 2.3% from last year. This unexpected stability is a positive sign for the economy, as consumer spending powers two-thirds of the economy.
🏠Housing trends
30yr Mortgage Rate: 7.0%
That’s up from 6.9% a year ago. (MBA)
Median Home Price: $419,300
That’s up from $397K a year ago. (NAR)
Owning a home in the US has become less affordable than any time in the last 17 years. According to a report from Attom, the costs of a typical home, including mortgage payments, property insurance, and taxes, combined for 35.1% of the average person’s wage last quarter. This is up from 32.1% a year earlier, driven by a record-high median home price of $360,000 and 30-year mortgage rates of around 7%. More than a third of US markets saw ownership costs reach 43% of average local wages, well above the 28% maximum considered affordable. The West and Northeast experienced the most significant affordability declines, with areas like Orange and Alameda counties in California and Brooklyn and Nassau Counties in New York being the hardest hit. Any improvement will require people to get paid more, home prices to stop climbing so quickly, and/or mortgage costs to come down.
📈Investment trends
The Market: ⬆️ +0.6%
S&P 500: 5,667.20
1Mo: +4%| 1Yr: +25%| 5Yr: +90%
The market climbed to another record high on Tuesday as investors rode the momentum of optimism for lower borrowing costs and a Republican administration. Slow growth and low inflation should encourage the Federal Reserve to stop restricting the economy so much and start lowering borrowing costs in September. Investors expect a conservative government to mean lower taxes and regulations for corporations.
Gold is more valuable than ever. The precious metal rose to a record $2,460 per ounce on Tuesday, driven by expectations that the Federal Reserve will soon begin lowering baseline interest rates. Lower interest rates make holding cash in a savings account less valuable and increase the relative appeal of gold, which doesn't yield interest. Gold prices have climbed 18% this year as a preferred safe-haven asset amid rising geopolitical tensions and a protection against inflation.
🤓 Inside Scoop: What are the advantages and disadvantages of investing in physical commodities versus commodity-related financial products?
Commodities are basic materials or products ranging from oil to copper, gold, wheat, or sugar. As such, holding physical commodities can involve a range of challenges, such as transporting, storing, and insuring the materials. So, investors often prefer to deal with financial products designed to track the price of these goods instead of trading the physical commodities. It’s a lot easier to trade an investment fund that tracks the price of oil than to negotiate contracts, purchase, transport, and store barrels of liquid fuel.
Commodity-related financial products, like futures or Exchange-Traded Funds (ETFs), provide easier access but come with their own unique risks. Given the complexities of matching high-frequency financial trading to physical commodities stored somewhere, the prices of these financial products may often diverge from the price movements of the underlying commodity. This complexity demands more active management for investment funds, usually increasing the cost to invest and making performance more dependent on the quality of the portfolio manager.
🏭 Companies worth watching
👍👎 APPROVAL RATINGS
How are these companies doing? Judge their decisions. Investing starts with an opinion. (+2 pts)
 General Motors | EV Expansion General Motors is set to invest $900 million to reshape its Lansing, Michigan plant for electric vehicle production, aided by $500 million in government grants. The Detriot automaker aims to end the sale of gas-powered vehicles by 2035.
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 Marathon Oil | Record Pollution Penalty Marathon Oil will spend $241M in penalties and mandated equipment upgrades to settle for air pollution violations at its North Dakota facilities, the largest penalty ever for such violations. The energy giant's equipment upgrades to meet regulatory standards are expected to cut fossil fuel pollution equivalent to 487,000 cars' annual exhaust.
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 UnitedHealth | Few Consequences Profits at America's largest health insurer climbed in the second quarter despite suffering one of healthcare's most significant cyber attacks that disrupted medical payments for weeks and surrendered medical data for a third of Americans. UnitedHealth's medical payout costs rose in the quarter, but it plans to restart shareholder payouts soon.
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💭Broader perspectives… (+2pts)
Should companies be required to notify all victims of every cyber attack? |
 Macy’s | Buyout Breakdown Macy's has ended buyout discussions with investor group Arkhouse Management and Brigade Capital after deeming their $6.9 billion proposal insufficient. The department store chain will now focus on its turnaround plan, including job cuts, store closures, and expanding its Bloomingdale's and Bluemercury brands.
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 Match Group | More Dating Advice Tinder and Hinge owner Match Group faces mounting pressure from activist investors who are pushing for changes, including a potential sale, if the company doesn't improve operations and financial performance. The dating company has struggled with declining paying customers, growing competition, and shifting user preferences.
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🛠️ Recommended resources (+2pts)
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