For those of you who would prefer to listen:
The Stock Market rally took a breather. The streak of 6-weekly gains came to an end. Momentum slowed with election uncertainty, deficit concerns and added pressure on interest rates. Leadership narrowed back to Tech ahead of a massive run of earnings next week. It was rising yields that caused the speedbumps.
There’s been a rapid repricing in rates.Bond yields spiked. The 10-Year Treasury yield jumped from 3.6% to 4.25% in just a month. That might not seem like much, but it’s a huge move in Bond-land. Interest rates have actually increased significantly after the Fed cut in September. Treasury yields haven’t risen this much post-Fed rate cuts since the Covid crash in 2020 and the only real soft-landing achieved in 1995. The fact of the matter is the price of money just got more expensive. The Dollar is back on the rise.
30-year mortgages are pushing 7% again, averaging 6.75% nationwide. That’s up from 6.32% just a week ago. Higher rates have dented the Housing Market. Sales of existing homes in America are on track for the worst year since 1995. High prices for houses and mortgages are the reason. Low inventories and expensive insurance hurt too. It’s keeping buyers on the sidelines.
The Fed is still expected to continue its rate cuts. But the size and pace are likely to be curbed. The Market is now pricing in a 95% probability of a 1/4-point cut in November. It was 42% a month ago with a 58% probability of another 1/2-point cut. The Market is assigning zero chance of that now. The meeting takes place the day after the election.
Despite the increase in rates and yields, there’s not a lot of stress in the financial system. At least not yet. The Bond Market has been reacting a bit to the ballooning Federal debt, sitting near $36 Trillion and counting. But it’s comforting that credit spreads have remained fairly well-behaved. That suggests these higher rates are not yet pressuring corporate credit costs. That’s the financial plumbing of America. It’s still flowing fine.
It hasn’t just been the Stock Market that has been hitting all-time highs. Gold has also reached levels never before seen. The precious metal cleared $2700 for the first time as inflation is perking up again. Seeing Gold and stocks rallying to record levels together is not a common occurrence. The S&P 500 is up 20% this year, while Gold is up over 30%. Any guesses as to the number of times both Gold and the S&P were up 25% in the same year? The answer is Zero. There’s just over 2 months left on the calendar in 2024 to see if it happens for the first time.
The Coca-Cola Company reported another strong quarter, with a double-beat on earnings and revenue. Coke’s unit case volume fell, while the average price of products sold increased 10%. The company has significant pricing power. But for the first time in years, Coca-Cola saw a decline in the number of beverages sold. Demand finally gave into higher prices. The stronger Dollar also played a role, creating a 10% currency headwind. Demand was weaker overseas. Coke finally experienced what other consumer companies have been saying for months; High prices have finally caused a breaking point for demand.
You know what else is expensive but showing no signs of slowing down? Satellite launches. Starlink, owned and operated by Elon Musk’s SpaceX, launched 23 more satellites into orbit on Wednesday. It now has over 7,000 in space. It began launching them in 2018. These devices orbit nearly 350 miles above the earth’s surface, providing phone and network connections across the globe. The average lifespan for these satellites is roughly 5 years. The SpaceX goal is to ultimately have over 42K in orbit. That’s quite a goal. Price is apparently no object. Each satellite costs roughly $800K. The cost to launch the Falcon 9 rocket is estimated to be around $60 Million. The larger rockets cost upwards of $90 Million. The space race continues.
Alan Shepard hit a golf ball on the moon. The year was 1971. It was reported that he swung a makeshift 6-iron. It didn’t go very far. You know, that bulky space suit and air density posed a challenge. There’s never been a baseball hit in outer space. But there will be plenty of baseballs hit at Chavez Ravine this weekend followed by the Bronx next week.
For the 12th time in history, there’s a Yankees-Dodgers World Series. It’s the first time these storied franchises have met in the Fall Classic since 1981. The first Yankees-Dodgers World Series took place when the Joe DiMaggio led Yankees beat “Dem Bums” Brooklyn Dodgers in 1941. The Yankees won that Series in 5 games. In fact, the Yankees won 8 of the previous 11 Series, though the Dodgers won the most recent matchup 4 decades ago. The Dodgers began in Brooklyn in 1884. They had the guts and the vision to break the color barrier in 1947 debuting Jackie Robinson. The Yankees emerged first as the New York Highlanders in 1903 before changing their name a decade later. In 1920, they acquired a young talent named Ruth. He’s better known as the Babe. They built Yankee Stadium. It was called the “House that Ruth built”. The rest is history.
For the first time in a while the World Series is a matchup of the teams with the best records in their respective leagues, with the Dodgers owning the best overall record in Major League Baseball. That earned the right to host Game 1 and 4 of the potential 7 games at Dodger Stadium; Home field advantage. The Dodgers won the 2020 World Series, but that was during Covid, so it doesn’t really count, right? Asking for a friend with in-laws that for some reason bleed Dodger Blue…
This 2024 World Series matchup is Major League Baseball’s dream, matching teams from the two largest markets, being New York and Los Angeles. It features the two biggest stars in the sport, in Aaron Judge and Shohei Ohtani. It’s East versus West. Hollywood versus the Big Apple. Ticket prices reflect the drama. This week, the average ticket price on the secondary market for a game in New York was nearly $5K and over $3K in LA. The previous record was just under $7K in 2016 when the Chicago Cubs ended their 108-year championship drought in a thrilling 7-game Series against Cleveland. They’ve come down a bit as the game got closer.
The cheapest ticket to Game 1 last year in Texas with the Diamondbacks versus the Rangers cost $305. Tonight, the cheapest ticket at Dodger Stadium is expected to be more than triple that, over $1K. Then you throw in a $6 Coke and $8 dog and a $16 beer, the budget gets completely blown up. The cheapest ticket at Yankee Stadium is standing-room-only for $1400. A 30-second commercial on Fox is selling for $500K. Prices are high.
If there’s even a question of whether people will pay the high prices, question not. As the late, great James Earl Jones famously said: “People will come… They’ll pass over the money without even thinking about it: for it is money they have and peace they lack”.
Let’s hope we can all take a timeout and watch the games as innocent as children, longing for the past when we cheered our heroes. As James Earl reminisced, we’ll watch the games and it’ll be as if we’ve dipped ourselves in magic waters. The memories will be so thick we’ll have to brush them away from our faces.
For generations, baseball has been our nation’s pastime. But the 21st century has made it clear that football has taken over that role. Football is a faster paced game with much more action. The intensity better reflects today’s society. Baseball, on the other hand is a slower game, steeped in tradition and more nostalgic for the past. The home run record reflects it as both Hank Aaron and Barry Bonds were immersed in controversy as they cleared what once was the pinnacle achievement in sports held by the Babe. The Washington Post declared: “Baseball is what America was; football is what it’s become.” It’s hard to disagree.
Field of Dreams was iconic in its messaging. Mr. Jones reminded us, “The one constant through all the years, Ray, has been baseball. America has rolled by like an army of steamrollers. It has been erased like a blackboard, rebuilt and erased again. But baseball has marked the time. This field, this game: it’s a part of our past, Ray. It reminds of us of all that once was good and it could be again”.
I love this message, and always will. Memories of the good, with visions of much more of it ahead. We all could use a whole lot of this these days. Let’s all collectively embrace the good. You simply cannot put a price on that. The most important good is indeed priceless.
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike