Market Update in Charts
Stocks were broadly lower this week on news that inflation numbers rose by .1% instead of fell by .1% as economists predicted. Investors seemed taken by surprise and knocked stocks back. Expect continued volatility as we move into next week when the Federal Reserve meets. On Wednesday we will learn how much interest rates will increase. Consensus is for a 0.75% increase.
After this week, the three major averages have brought us back to mid-July, erasing gains of the last two months.
Energy has strung together two monthly declines per the BLS. The U.S. oil reserve levels are near a 35-year low after the Biden Administration has been releasing barrels, which has lowered prices. However, OPEC has again cut back on drilling and the winter in Europe without Russia's supply is still ahead.
Per AAA, prices at pump seem to lag the index tracked by the U.S. Bureau of Labor Statistics, which compiles this data. For example prices at pump peaked later in June, not March when prices jumped 18%.
Housing is now driving inflation, not energy. Costs advanced by 0.7% in August after also rising 0.5% in July. Housing has a hefty one-third weighting in the consumer price index (CPI). Housing prices take longer to ease but for personal budgets concerns, only affect those signing a new lease or home purchase. But until these numbers flatten or ease, inflation will rise.
Now for some good news, Oktoberfest is happening in Munich for the first time in three years. Munich is going all out for the festivities. Übertragungswahrscheinlichkeit? Let's not worry about that now.
There will be:
17 tents that can hold 6,000 guests
21 smaller tents for a mere 500 guests
17 days of merriment for 12 hours each day
6 million people attending from all over the world
2.1 million gallons of beer consumed with 1/2 million roasted chickens
Your word for the day, übertragungswahrscheinlichkeit, means the risk of transmission but Covid will probably not be much on the minds of attendees. Germany says that infection rates are low and guests are responsible for showing up healthy. How they feel afterwards is also their responsibility. Prost!
Congress' Insider Trading Problem
Members of Congress have a reputation for outperforming the general stock market. They are privy to plenty of non-public information about publicly-traded companies and have early advantage when it comes to awareness of coming legislation that will affect a company or sector. The STOCK Act passed in 2012 was meant to prevent lawmakers from trading on insider information, just like all other Americans are prohibited from doing. Significantly the bill provided for an online, searchable database for all trades made by or on behalf of the President, the Vice President, Congress, or those running for Congress. Some 28,000 senior government officials are also required to disclose trades but these are not part of the online database. (Previously all such records were kept in paper form or on a database in a government basement not easily searchable.)
In any case, oversight by regulators and the public was thus designed to be much easier for public for scrutiny, transparency and accountability. Here is one such database. It is hard to say whether the problem is just as bad as before but the problem still exists. The most widespread issue is that those subject to the rule either file late or never. The rule requires reporting within 45 days on all securities transactions valued at more than $1,000. The 45-day timing is critical so that insider trading issues may be easily discovered. Just Tuesday The New York Times shared their research finding 97 Congressional members traded on inside knowledge with buys or sells of companies ahead of upcoming legislation or new information that they had non-public knowledge about. Such breaches of the law are dealt with behind closed doors, or so we are told.
A new bipartisan law has been proposed that will restrict Congressional members and their families from trading individual stocks. Public support is also bipartisan and 63% of Americans agree with the proposal. If passed, this will be unfortunate for the pending launch of two Exchange Traded Funds (ETF) that will track and trade like a politician. The Unusual Whales Subversive Democratic Trading ETF and the Unusual Whales Subversive Republican Trading ETF. The funds will scrutinize the filings and invest in a portfolio of 500-600 stocks. They will not invest in other securities like bonds, funds or futures. These ETFs will trade under the symbols NANC and KRUZ. (sigh) They join MAGA, an ETF fund launched several years to track companies that align with what the managers call Republican political beliefs. Currently the fund is overweight in industrials and utilities and has low exposure, relative to their equity-focused peers, to technology and healthcare.
On Personal Finance - Our World's Silver Lining
This week the Bill & Melinda Gates Foundation released an update on its Goalkeepers Report. The report tracks 17 development goals that 193 world leaders agreed to in 2015. The leaders had given themselves 15 years, a deadline of 2030, to achieve massive objectives of eliminating poverty, hunger and treatable illness. Through this lens, the world is no where near on track for any of the goals, which you can see in full here, but progress has been made in nearly every category.
Despite what the report mildly calls “overlapping global crises”, we are living healthier and longer lives. We smoke 20% less, children are 30% less likely to be malnourished, a mother is 40% less likely to die due to childbirth and access to safe plumbing has increased 100%. AIDS-related deaths had been projected to kill as many as 5 million people in 2020; only 500,000 died in 2020 due to this century’s global effort to combat the HIV virus. The measles vaccination has prevented 20 million deaths, mostly of children, since 2000. In the last 120 years, through innovation in food production, we have improved the rate of survival from hunger by 99% even though the world’s population is roughly five times greater.
But the work is never done. Co-chairs Melinda French Gates and Bill Gates write in separate essays about the need for cooperation amongst countries and corporations. “Progress has stalled” says Bill Gates but “turning away would be a mistake.” The foundation wants to teach third world countries to fish for themselves. Citing the war in Ukraine, which has restricted vital shipments to Africa which relies on imports to feed the continent, as an example of how fragile our world dependency has become. Melinda French Gates stresses that we must work to solve problems through “human ingenuity and innovation”. There is no question that the world possesses the tools and brilliance to keep solving these problems but the overlapping crises just keep stymieing the progress