August 14, 2024

The Appetizer

“If you lie down and let someone put a water-soaked bale of hay on your head and try to lift it, that’s the feeling you have when gravity is pulling.”

• U.S. astronaut and test pilot, Joe Engle, who recently passed away at the young age of 91.

Now, on to the numbers. Drum roll, please …

• 0.005 seconds: American sprinter Noah Lyles’s margin of victory in the men’s 100-meter race, winning a gold medal. That time is faster than a blink of an eye.
• $1.14 trillion: The total amount Americans owed on their credit card balances in the second quarter of 2024, a new record.
• 65.70: The intraday rise in the CBOE Volatility Index (VIX) on August 5.
• 12.4%: The decline in Japan’s benchmark Nikkei 225 Index on August 5, its largest one-day fall since October 1987.
• 3.54%: The S&P 500’s decline since July 10, 2024.
• 51.93%: The S&P 500’s rise since the bear market low on October 12, 2022.

Dig In
The “Carry” Trade

The market has been keeping us on our toes recently. The recent jobs report rattled investors, raising concerns that the economy may be cooling down and the Federal Reserve (Fed) isn’t cutting rates fast enough. This volatility got even crazier thanks to something called the “carry trade” unwinding. What’s that all about?

Picture this: You’re on vacation in Japan and spot a brand new Lexus that’s cheaper than in the U.S. You buy it, ship it home, and sell it for a profit – that’s the “carry.”

In finance, it’s similar. An investor borrows money in a currency with a low interest rate (Japanese yen) and invests it in another currency with a higher interest rate (U.S. dollar), hoping to profit from the difference. However, this strategy carries (no pun intended) risks, especially when interest rates change.

Last week, the Fed hinted at cutting rates soon, while the Bank of Japan raised its key interest rate. This squeezed the “carry” and increased selling pressure on equity markets, leading to Japan’s largest one-day drop since 1987. For more on the recent market swings, check out our latest Sight|Lines publication.

Weekly Specials

Most would be thrilled with one Olympic gold medal, but not Cuban Greco-Roman wrestler Mijain López Núñez. This champion wrestler just won his fifth gold medal in his final match, becoming the first to win gold in the same event at five consecutive Games. Afterward, he placed his shoes at the center of the mat, signaling his retirement from the sport.

Pitbull has secured naming rights for Florida International University’s football stadium, now called Pitbull Stadium, home of the FIU Panthers. “This isn’t just an announcement. This is a movement. This is truly history in the making,” said Mr. Worldwide. Will Drake collabing with Drake University be next?

It’s an old tale that Coca-Cola can fight off infections from whatever lurks in the water. Olympic swimmers diving into the Paris Seine this year put that to the test and saw good results. Add that to the long list of things that Coke can be used for.

Thousands of Scottish students took their standardized exams this summer, and expected results last week. Instead, they received blank e-mails, causing widespread distress. At least it’s better than receiving an F, right?

Corporate Lunch

An OpenAI co-founder left to join an AI safety and research company called Anthropic, whose AI chatbot named Claude rivals ChatGPT.

Uber’s second quarter results came in better than expected as employees returned to the office and avoided the subway, which is roughly two billion degrees in the summer.

Disney outperformed expectations as its combined streaming services became profitable. If they just now turned a profit, where has all of my money been going this whole time?

A federal judge ruled that Google has a monopoly over the search engine business. Bing shook their head after that personal attack.

SpaceX wants to launch the world’s largest and most powerful rocket dozens of times every year on the Florida coast. Homeowners and business owners in the area alike don’t seem to be too happy though.

Dolce & Gabbana released a perfume for dogs named after the co-founder’s pooch. I should name one after my cat … Musk by Gus has a nice ring to it.

Charles Barkley is pulling a Tom Brady and has canceled his retirement to stay with TNT Sports for the long term.

Beyonce helped Sony post a 10% increase in profits. What can’t she do?

Boeing and NASA are debating whether the Starliner spacecraft is safe enough to return home. SpaceX offered the stranded astronauts a ride home from the International Space Station in 2025.

Diversification does not ensure a profit or protect against loss.

Indices are unmanaged and are not available for direct investment.

Past performance is not indicative of future results.

VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options.

The Nikkei 225 is a price-weighted index of the 225 top Japanese companies listed in the Tokyo Stock Exchange.

The Standard & Poor’s 500 Index is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market.