10 Monday AM Reads

My back-to-work morning train WFH reads:

• The impact of the AI capex boom on S&P 500 return on equity: Record profitability has been one of the factors supporting high S&P 500 valuations. S&P 500 ROE has surged by 150 bp during the past four quarters, driven by a boost from the mega-cap technology stocks to index profit margins. The AI capex boom has lifted semiconductor profitability but will be an increasing headwind to mega-cap tech ROE going forward. AI also creates a key long-term upside case for ROE, both for the mega-cap tech stocks and for the broad equity market. Goldman’s strategy team on the record return-on-equity sitting underneath this index. Useful data behind the “valuations are stretched” headlines. (Goldman Sachs)

• Donald Trump, Champion of Renewable Energy:  California — which would be the world’s 4th largest economy if it were a country — gets more than half of its electricity from renewables. It is rapidly becoming a state largely powered by the sun during daylight hours and powered by batteries during the night. Krugman on the irony that Trump-era policies are inadvertently boosting renewable buildout. Markets find a way; politics, less so. (Paul Krugman)

• Real-Estate Agents Are Quitting the Slow Housing Market: WSJ on the agent exodus — NAR membership dropping, the bottom-quartile producers gone first. The post-NAR-settlement shakeout that everyone predicted, finally arriving. In fourth year of struggling market, even real-estate professionals who made it this far are reaching breaking point (Wall Street Journal)

• Million-Dollar Watches Are Absolutely Booming. Here’s Why: Sales of seven-figure watches at auction are on pace to double from last year. And it’s not the brands you might think. GQ on the seven-figure-watch market and the new generation of buyers driving it. The status economy keeps finding new asset classes. (GQ)

• Half of America’s Cities Are Depopulating. We Could Be Headed for a Ghost Town Era. *Tumbleweed*. No city in the Northeast or Midwest is safe from a trend toward depopulation. And just because states such as Texas and Utah experience growth now, doesn’t mean it will last. At least, not according to research. Major depopulation is coming for the United States—and it’s coming fast. Popular Mechanics on the demographic split between the handful of booming metros and everywhere else. The infrastructure implications are larger than the headline. (Popular Mechanics)

• These Are the Country’s Top CEOs. They’ve Maximized the Moment, Whether in Pizza, Sports, or Tech. From Delta’s Bastian to Exxon Mobil’s Woods, these 25 leaders have positioned their companies for long-term success. Good managers matter. We gather these names to study which tactics work, in the hope of informing future investment decisions. (Barron’s)

• The Mars Delusion: Noema makes the unsentimental case against the Mars-colonization fantasy on physical, biological, and economic grounds. The dream survives mostly because it’s marketed by people who don’t have to live the math. Establishing a human colony on Mars is fraught with risk. Why are so many people obsessed with achieving it? (NOEMA)

• Trump’s Iran “Deal” Is a Giant Bag of Dog Sht:  It’s not a deal. It’s a memo of understanding in advance of a surrender of the American-led world order. The Bulwark on the gap between the Iran-deal press release and what the actual terms commit to (or don’t). The branding is moving faster than the substance. (The Bulwark) see also Trump Is Tired of Arming Allies. This Country Is Stepping Up. The U.S. retreat from the global stage is an opportunity for South Korea. (Politico)

• The Classic Movie That Was Nearly Destroyed by a Single Line of Code: A beloved film was accidentally deleted—and miraculously saved. The real story behind the ‘Toy Story’ franchise is even better than the movies. WSJ on the legendary near-deletion of Toy Story 2 and how the lessons quietly saved Toy Story 5. A backup story made interesting. The real story behind the ‘Toy Story’ franchise is even better than the movies. (Wall Street Journal)

• Jalen Brunson Is the ‘King of New York’ The undersized superstar delivers a historic title for the Knicks. The undersized superstar delivers a historic title for the Knicks. His most important contribution? Choosing to play there. (Wall Street Journal)

Video of the day: ‘Toy Story 5’ Director on Pixar’s Secret to Making Adults Cry.

Be sure to check out our Master’s in Business with Seth Klarman, CEO and portfolio manager of The Baupost Group. Founded in 1982 with $27 million in seed capital, over the past four decades, Baupost has grown to $22 billion, with annual net returns of over 20%. The legendary investor is known for his patient, risk-averse, and contrarian approach to finding deeply discounted securities across equities, distressed debt, and real estate.  He is the author of Margin of Safety (1991) and the editor of the 7th edition of Security Analysis (2023).

Summer is as much as 38 days longer than it was 30 years ago

Source: Washington Post

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