# 676 - 打 Home prices = still not peaking

Good morning. In a world where most of us pay with our cards or phones, the humble coin has fallen on hard times. Americans reportedly throw away $68M in coins each year which is why Reworld, a penny-pinching waste processing company, is sifting through garbage to find loose change. Theyve found a solid chunk of change over the past seven years, netting $10M in coins though only $6M were in usable condition.

Of course, Reworld better hope that the US Mint doesnt discontinue the penny. Many are calling for it, given that each penny costs a highly unprofitable $0.03 to mint.

COMMODITIES

Commodities Are Outpacing Stocks to Start the Year: Heres What To Know

In this weeks global weather forecast, Dubai receives two years worth of rain in just 24 hours, extreme heat waves scorch other parts of the world, and clear skies allow commodity prices to reach new highs. When uranium reached a record high in early January, we had no idea it would be the first of several commodities to breach records and by the looks of it, we might soon be celebrating (or angsting) about higher prices all year long.

Commodity boom: This year, the Dow Jones Commodity Index, a measure of 28 different commodities prices, has risen 6.5%, outpacing the S&P 500. Investors and producers are locking in contracts to hedge against increasing costs amid geopolitical risks, environmental disruptions, and supply uncertainties.

  • Two of the worlds most valuable commodities have led the gains, with gold notching record highs and oil eclipsing $85/barrel due to conflicts in the Middle East.

  • Cocoa and coffee prices have also surged to their highest in nine years due to heat waves and extreme weather.

Inflation watch

The rising commodity prices today are reminiscent of the early pandemic days when raw material prices soared and inflation followed as manufacturers faced higher costs in everything from baking bread to building AI chips. That trickled down to consumers through higher prices, and if this trend doesnt reverse, buyers could be in for more sticker shocks.

  • This week, Fed Chair Jerome Powell emphasized the lack of further progress in lowering inflation to 2%, which could delay interest rate cuts or, worse, lead to more rate hikes.

  • However, analysts underscore growing costs of commodities like copper often signal economic strength.

Worth buying? Commodities may offer a hedge against inflation and continue rallying, but Bloombergs John Stepek warns that while they can work well during the right conditions, the rest of the time, theyre mediocre at best. Just take a look at our digit chart (way below), which shows that commodity returns have been negative over the past decade and was the worst-performing major asset class.

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LARGECAP RECAP

伐 ASMLs first quarter results show chipmakers remaining reserved on expansion

Are semiconductor companies caught in an AI bubble? Thats the trillion-dollar question and this week, were getting some insights, starting with ASMLs ($ASMLF) earnings report. On Wednesday, a major supplier of advanced chip machinery to TSMC ($TSM), Intel ($INTC), and Samsung revealed a 21.6% drop in sales compared to last year, with net income falling by 37.4%.

  • While a sales decrease was expected, the 4% decline in net bookings for ASMLs machinery was more aggressive than anticipated.

  • This slowdown reflects uncertainty among semiconductor firms, which are hesitating to expand production amidst a year-long lull in smartphone and laptop sales.

Reasons to worry? Quilter Cheviots Ben Barringer warned that the first quarters slowdown might be an early warning sign for the semiconductor industry especially considering ASMLs outsized importance in global chip production. However, ASML maintains that its 2024 sales will look similar to 2023 as it navigates a transition year, preparing for a slew of new semiconductor plants in the US and banking on a potential demand rebound, which Samsung said its already seeing.

儭 Amazons good year gets better as Prime memberships rise

The e-commerce giants huge pile of cash is getting bigger, as Amazon Prime memberships hit a new high in March, marking an 8% increase from the year before despite recent changes that may have alienated some customers. This surge means Amazon ($AMZN) will have generated $10.8B in subscription revenue for the first quarter, a 12% uptick.

  • Last year, Amazon upped the free shipping threshold for non-Prime members, possibly nudging some towards subscription.

  • Including live sports on Prime Video has spurred growth, with viewership for Amazons Thursday night NFL games soaring 24% last season compared to the season before.

Global ambitions: Prime doesnt just bring in subscription revenue surveys show Prime members tend to spend more than non-Prime members. But if Amazons going to increase its Prime subscriber base, it still has work to do overseas. Thats why analysts are watching India where a major investment in India-centric content on Prime Video has made it Amazons fastest-growing market outside of the US.

JOES MARKET PULSE

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Markets & Economy

FTC may block fashion mega-merger: Tapestry ($TPR), already owning Coach and Kate Spade, seeks to buy Capri ($CPRI), owner of Michael Kors and Versace but the FTC will discuss if such a massive luxury fashion merger would be anti-competitive. [Read]

Tesla ($TSLA) seeks shareholder approval for Musks hefty pay package: Musk has extensive ties to the board, which is why Delaware courts have blocked the move so far but that hasnt stopped the board from once again pushing for approval of the CEOs multibillion-dollar payout. [Read]

Biden calls to triple China tariffs on steel, aluminum: The Biden admin continues to take issue with Chinas trade practices, which they fear could lead to an oversupply of clean energy products like EVs and solar panels so now they want to significantly raise the current 7.5% tariff rate on steel and aluminum imports. [Read]

Business & Wealth

Superyacht sales hit choppy waters: Wait times of up to four years on orders and reduced demand due to Russian oligarchs exiting the market led to a 17% drop in superyacht sales last year. The largest yachts (over 650 feet long) saw the steepest decline in sales, down 40%. [Read]

Heres how much single people need to live comfortably: If youre a single person living in Massachusetts, youll need a ~$116K/year just to get by even though the median income for individuals in the US is ~$60K. Six-figure salaries are also needed in NY, CA, WA, and HI. [Read]

Gaming giant Take-Two Interactive ($TTWO) announces sweeping job cuts: The company behind major franchises like GTA and NBA 2K will cut 579 jobs and scrap a bunch of in-progress titles as the gaming industry continues to face layoffs. [Read]

*Thanksto oursponsors for keeping the newsletter free.

CHART

DIGIT OF THE DAY

The 2024 Housing Market Heats Up, With Home Prices Climbing An Additional 1.7% This Year

Spring has sprung, and so have home prices. Fannie Maes Home Price Index (FNM-HPI) reveals a 1.7% rise in Q1 mirroring the previous quarter. With affordability already out of reach for many, the dream of homeownership is becoming increasingly elusive.

  • Since this time last year, single-family home prices have surged by 7.4% surpassing rental affordability.

  • Mortgage rates soaring to around 7% has also contributed to housing unaffordability the average American household holds a fixed rate of around 4%.

Homeownership blues: In a recent poll, ~40% of renters worry they'll never afford a home while roughly 14% have no desire to own one. Continuous price hikes, driven by limited housing supply and high demand, suggest little relief soon. Fannie Maes Doug Duncan predicts ongoing affordability struggles for homebuyers due to high home prices and elevated interest rates.

EXTRA JOE

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