We're Digging Into the Portfolio Headlines So You Don't Have To
Here is the latest news that speaks to our investing strategies -- including artificial intelligence, the aging population, defense and cybersecurity.
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The week was dominated by headlines of August inflation data, the 2024 presidential debate, and investor conferences. But if you dug a little deeper, a lot more was in the news. And some of it, spoke to our Portfolio holdings. We scanned journals and newspapers, trade publications and specialty media, for stories about changing demographics, artificial intelligence, Oracle ORCL and AT&T T and more. Here's what we found:
Aging Population
The accelerating growth of seniors as a percentage of the overall population supports the idea that companies will increasingly tailor solutions for this expanding cohort.
“People are living longer and birth rates are down. For instance, the share of the old-age population — those 65 years or older — in the U.S. is expected to grow to 21.5% from 18.1% over the next decade, the bank said. China’s growth is expected to be more rapid, with its older cohort increasing to 21.6% from 14.6% during that time, per the analysis.” Read more from CNBC.
Artificial Intelligence
These two signals show examples of AI in the real world and its adoption.
Dresses are “one of the most-searched apparel categories” on the platform, Google Shopping said in the release. The expansion into the category follows last year’s introduction of virtual try-ons for men’s and women’s tops, plus enhanced algorithms to help shoppers more easily refine their apparel search parameters. Google’s generative AI model manipulates an image of clothing and showcases the item on “a diverse set of real models, ranging in sizes from XXS-XXXL,” per the release. Users can choose a model that best aligns with their body, and click on a retailer’s site to buy the apparel.” Read more from Retaildive.com.
“A novel AI-powered weather model inspired by language-processing systems invented by Google is helping meteorologists at Cape Canaveral Space Force Station avoid disruptions to the busy launch schedule along Florida's Space Coast.” Read more from Space.com.
AI, Cloud Computing, Digital Infrastructure
We always say the only thing better than one tailwind is two, but in this case, we have three intersecting at once, creating a very powerful tailwind for our shares of Nvidia NVDA and Marvell MRVL.
“This AI race is going to go on for a long time. It’s not a matter of just simply getting ahead in AI, but you also have to keep your models current, and that’s going to take larger and larger data centers, and some of the data centers we have that we’re planning are actually even bigger. Some are getting very close to — dare I say it — a gigawatt, which is enough for a pretty good-sized city or for one enormous AI-training cloud data center,” Ellison said. Read more from Accelerationeconomy.com.
“Amazon plans to spend about $10.5 billion over the next five years in cloud and artificial intelligence infrastructure in the U.K., as global tech companies boost their data-center footprints amid a boom in demand for artificial-intelligence computing… Like many top tech companies, Amazon has been ramping up its spending on the data centers, real estate and chips needed to meet the surging demand for computer power that has come with the rise of AI.” Read more at WSJ.
“AT&T’s Chief Data Officer Andy Markus thinks that the advent of generative AI (GenAI) will have as big an impact as smartphones and the emergence of PCs as a household item… An important part of the equation for telecommunications companies, Markus said, will be having enough capacity for the explosion of data transport that generative AI makes likely.” Read more at telecompetitor.com.
Cash-Strapped Consumers
More data shows that a portion of the consumer continues to struggle, which has us keeping the portfolio on the sidelines with companies tied to discretionary spending.
“Connecting the dots between the two separate reports — the Federal Reserve Bank of New York’s reading on inflation expectations from the morning for the short- and long-term horizons, and the Federal Reserve’s Consumer Credit Outstanding report (known as G.19) from the afternoon — paints a portrait of a consumer who’s borrowing what they can, when they can, even as there’s acknowledgment that there’s a higher risk of sliding into delinquency.” Read more at Pymnts.com.
“We missed our sales goal due largely to continued pullback and consumer spending by our core customers, particularly in high-ticket discretionary items,” Thorn said at the time. “The consumer environment softened in the first quarter, and both consumer confidence and sentiment declined due to concerns about inflation, unemployment and interest rates. This year has also seen the northeastern U.S. discount merchant Bob’s Stores announce plans to shut down its entire 21-store chain as part of its bankruptcy proceedings, with 99 Cents Only doing the same thing for its 371 locations on the other side of the country. Likewise, Dollar Tree has said it plans to close almost 1,000 of its Family Dollar stores.” Read more at Pymnts here.
“Over the course of the quarter, our credit challenges have intensified,” Ally Chief Financial Officer Russ Hutchinson said at the Barclays Global Financial Services Conference in New York on Monday. “Our borrower is struggling with high inflation and cost of living, and now, more recently, a weakening employment picture… We’re clearly dealing with a cohort of borrowers … who have been struggling with cost of living and now are struggling with an employment picture that’s worse,” Read more at Marketwatch.com.
Cybersecurity
Another week brings another round of reasons to remain bullish on cybersecurity spending and for the portfolio to remain long First Trust Nasdaq Cybersecurity ETF CIBR shares.
“In recent months, cybercriminals have increasingly targeted Latin America with phishing campaigns designed to deploy banking Trojans. Mekotio, BBTok, and Grandoreiro—Trojans known for their financial fraud capabilities—are at the forefront of these operations. Traditionally, these Trojans focused on regions like Brazil and Argentina, but new intelligence suggests that their reach is expanding beyond the region.” Read more at Securityonline.info.
“Highline Public Schools, a K-12 district in Washington state, has shut down all schools and canceled school activities after its technology systems were compromised in a cyberattack.” Read more at Bleepingcomputer.com.
“Keeping your credit card details safe from hackers just got a whole lot more difficult following a new data breach at a payment gateway provider that affects almost 1.7 million people… Slim CD says that full names, physical addresses, credit card numbers and card expiration dates were all obtained as a result of the breach. However, card verification numbers or CVVs weren't stolen according to the company.” Read more at Tomsguide.com.
Homebuilding & Materials
“Consumers have a well-informed outlook,” Hale said. Realtor.com expects rates to fall through the end of this year to 6.3%, and to continue to drop in 2025, due to the Fed’s expected rate cuts and a falling spread between mortgage rates and rates of other risk-free assets. Fannie Mae said in its August housing forecast that it expects the 30-year mortgage rate to average 5.9% by the fourth quarter of 2025. It also expects home-price growth to decelerate over the next year.” Read more here
“An analysis conducted by USA Today/Homefront using data from Realtor.com found that the median American home is now 128 square feet smaller than five years ago, and yet it costs $125,000 more. Shrinkflation, by definition, is what happens when companies reduce a product's amount or volume per unit without changing its retail price. The concept evokes images of candy bars sneakily getting smaller over the years, or bags of chips and cereal boxes getting emptier, a phenomenon known to outrage consumers.” Read from Newsweek.com.
Safety & Security
We’re building on last week’s Safety & Security signals to show more evidence of ramping defense spending outside the U.S. These are positive data points for the ~25% of Lockheed Martin’s LMT revenue stream that is outside the U.S.
“Japan today announced plans for its biggest defense budget in history, with a planned $57 billion investment in military capabilities. The reason for the increase isn’t hard to find: “The international community is facing the greatest post-war trial yet, and has entered a new era of crisis…” Read more at breakingdefense.com.
“The Netherlands will increase defense spending by more than 10% next year, investing in new tanks, fighter jets, frigates and air defense systems in a push to strengthen its forces in the face of new security threats, the Dutch government said.” Read more from Reuters.
“Poland’s budget proposal for 2025 includes record defense spending of 187 billion zlotys ($48.7 billion)… Poland, which supports Ukraine’s struggle against Russia’s full-scale invasion, is making large purchases of military equipment, including fighter jets, tanks and missile defense systems from the U.S. and South Korea.” Read more from the Associated Press.
The Portfolio is long NVDIA, MRVL, CIBR, LMT.
