Do you play the NY Times game Connections?

[I’ll be back in two weeks. In the meantime, this week and next, enjoy a survey of recent news items that have caught my interest.]

Group 1

• The Magnificent Seven stocks have now exceeded the profits of the entire Japanese public equity universe. If they were a standalone country, these seven stocks would be the most profitable stock market on earth other than the U.S. and China.
• Since 2021, foreign investors have been buying up Treasury notes and bonds. They’ve slowed these purchases of late but purchases of U.S. corporate bonds have picked up; that buying now stands at an annual rate of $503 billion, the highest level since 2007.
• Over the past 35 years, Treasury yields are down about 400 basis points, but in a distinctive way. Yields are up 200 basis points over that period except in the three trading days around each year’s FOMC meeting, where they are down 600 basis points.
• Yields on German government bonds have long been well below those on Treasuries. Before 2013, however, the yields were quite similar. ISI suggests this divergence may continue for some time because nominal growth in Germany is lower, German inflation is lower than U.S. inflation, their budget outlook is better than that of the U.S., and their r-star is likely lower than that of the U.S.

Group 2

• The Thames Barrier, a flood control system built in 1982 to protect London, may need to be replaced sooner than intended. It was supposed to last until 2070 but recent estimates indicate work on a replacement may need to begin soon.
• A Chinese automotive startup says its self-driving trucks have driven 100 million kilometers with no accidents. U.S. firms are producing driverless semis as well, and one of them is due to take to the interstate between Houston and Dallas later this year.
• The vast majority of Apple iPhones are assembled in China but that is changing to a degree under the pressure of supply-chain concerns and geopolitical risk. Apple has doubled its production of iPhones in India, to 14% of the global total.
• Canada’s Trans Mountain Expansion has cleared lengthy legal, regulatory and other hurdles that caused the project to take more than a decade to complete. The expansion triples the volume of an existing 1953 pipeline that brings oil from Alberta to British Columbia.

Group 3

• April’s federal budget entailed a deficit of nearly $2 trillion. This puts policymakers in a quandary. The Treasury needs the Fed to cut rates due to the sheer size of the debt. The Fed won’t cut unless the economy slows. And a slowdown would make the deficit worse. Strategas estimates that a 1% rise in unemployment would lower income tax revenues by $180 billion.
• The median apartment rental in Manhattan rose to a new high in April of $4,250. Mortgage rates, which make buying more expensive, are one factor in the increase. Nearly half of New York City rentals are rent stabilized.
• Gold has been rising lately. That speaks to rising inflation, right? Maybe, maybe not. In the 1970s, gold and inflation both soared. But in the 2000s, gold surged while inflation stayed low. This time around, the rise in the price of gold—nearly 50% in the past 18 months—comes after inflation peaked.

Group 4

• Anti-obesity medicines Wegovy and Ozempic had their beginnings in research on the painful bite of the gila monster, a lizard native to the southwestern U.S. These drugs do not directly contain reptile venom but a synthetic version of exendin-4, a peptide found in the gila monster’s venom.
• As solar “farms” grow, they sometimes take space from real farms. How to maintain agricultural acreage while also maintaining the solar site? Solar farm operators are experimenting with using sheep to forage there, keeping grass from growing up and harming the panels. In the process, there’s hope that domestic sheep production may grow. Why not goats? They’d eat the wires.
• In a close presidential race, we may not know right away who has won. Recounts are automatic in 23 states—among them, the swing states of Arizona, Michigan and Pennsylvania—if the result is sufficiently close, generally, within 0.5%. Also, a number of other states allow for recounts upon request. It may take a while.   

Common threads: The markets, Travels, Inflation, Creatures—from the swamp and otherwise