Thank goodness September is over. In typical fashion, it has been a less-than-stellar month. However, with fall in full swing and cooler temperatures coming our way (we hope), let’s not dwell on what’s already occurred. Looking forward, we anticipate earnings season will be a major catalyst in the near term. Beginning mid-October, we should start getting forward guidance on what companies think the remainder of the year and 2025 have in store. Additionally, we have the government shutdown which appears imminent and will likely begin this weekend. While these headwinds have the potential to slow the markets down further, the fourth quarter is usually one buoyed with hope and optimism for the coming year, not to mention the holidays which everyone looks forward to. We are cautiously optimistic that with September behind us, the remainder of the year could put the markets back on track toward a positive trend by year-end.
While the UAW strike and impending government shutdown are making headline news, it is worth noting that there could be a silver lining to all the trouble. The Fed, which has been battling inflation for much of last year and all this year, may get an assist. Minneapolis Fed President, Neel Kashkari, said this week that, “if these downside scenarios hit the U.S. economy, we might then have to do less with our monetary policy to bring inflation back down to 2% because the government shutdown or the auto strike may slow the economy for us. I’m not hoping for that, but there’s an interaction there.” Like Neel, I do not wish for these issues to become protracted, but it could mean the Fed has less heavy lifting to do going forward and that would be good for the markets.
In other news this week, it appears Johnson Controls was hit with a massive ransomware attack. The company issued a “cybersecurity incident” in a regulatory filing this week noting that the hackers are demanding $51 million in exchange for 27 terabytes worth of stolen data. I didn’t mention this at the time, but last week Clorox announced in a regulatory filing it too had been hacked beginning mid-August. It all points to the need for cybersecurity as hacker groups have become emboldened in finding weak targets to exploit. It is one of the reasons we own the ETFMG Prime Cyber Security ETF (HACK) as these incidents appear to be happening more frequently and are becoming larger in scale. Please pay close attention to your passwords and when in doubt never voluntarily give out personally identifying information. You can never be too safe these days.
On a different topic, I have been grappling with whether artificial intelligence (AI) is in a bubble or is instead at the beginning of a long trajectory higher. It appears valuations, particularly those even peripherally involved in AI, are stretched thin, not unlike during the dot-com bubble of 2000. I hesitate to say this time is different, because it rarely is. However, the future does indeed include a trend toward increased AI in virtually all facets of our lives. From self-driving cars to generative AI, including journalism, TV, and movies, to drug discovery, food preparation, and who knows what else, AI is quickly being embedded in everything from the high-tech to the mundane. Our phones, our cars, and our homes are the breeding ground for these innovations. But outside that we have discoveries in science from fusion energy to drug discovery. Just this week Novo-Nordisk inked a $2.7B deal with Valo Health in a collaboration to use AI in developing new treatments. Maybe it is both? Valuations are sometimes fickle and often wrong, but innovation cannot be denied and the future awaits.
In closing, I turn to what I think you may find ridiculous. Remember when Russian Oligarchs’ yachts were being seized? This would have been around the start of the war with Ukraine. You might be wondering what ever happened to those boats. Well, the good news is they are still being held. The bad news is that the upkeep of these yachts is extraordinarily expensive. One such yacht, the Alfa Nero, a 270-foot $120 million ship with an infinity pool and an original Miro painting is sitting idly in a sleepy harbor in Antigua. Taxpayers of this cash-strapped nation are paying $28,000 a week to maintain the boat, including the salary of an Italian captain and $2,000 a day in diesel to keep its air conditioning running. If turned off, mold could quickly spread through the vessel damaging both the vessel and the Miro painting. It is reported the skeleton crew of six have eaten through the boat’s supply of Champagne, lobster, and caviar. The dock master said, “You can take thousand-dollar bills, tear them up, and just keep going.” Now you know.
