The Family Feud of Board Games
For the past two months, the markets have traded in a choppy fashion, going sideways for much of that time. The gains from earlier this year have leveled off as investors take a wait-and-see approach to the pace of economic growth and more importantly, how far inflation will rise and whether it has staying power. The Federal Reserve’s tenacious stance on persistently low interest rates and its embrace of heightened “transitory” inflation has had its desired effect of pushing interest back down. That’s not to say it won’t eventually change its position, but that in the near-term the headwinds have subsided a bit.
On the subject of inflation, the May Consumer Price Index rose to 5% annualized, the largest increase since 2008 and well above consensus estimates. For reference, the 5.4% rise in inflation in 2008 was primarily attributed to the skyrocketing price of oil to a staggering high of $145 per barrel. While this time is different, we have seen oil close above $70 per barrel in recent sessions with some analysts predicting $80 per barrel by the end of this year and options traders heavily buying call options tied to WTI prices reaching $100 per barrel by the end of next year. The Federal Reserve continues to insist the inflation we are experiencing is transitory. Time will tell.
In company news, Amazon turned on a new “feature” in its devices that has generated some controversy. You should be aware that if you own an Echo or Ring device, it has automatically been turned on for use in Amazon’s neighborhood wireless network initiative without your permission. The “neighborhood network” pools local internet connections from millions of Amazon Echo speakers and Ring products to let smart devices have a wider range of operation. While Amazon insists layers of encryption ensure security, plenty of people have reasonable concerns over privacy and the potential for hacking. It is possible to turn off this feature in the Alexa settings and until we know more, I’d suggest you consider turning it off if you own such a device.
Ohio made news this week when it was announced the state plan on suing Google to have it declared a public utility. This would be a first if the State of Ohio were to prevail, and could lead to a sea change in how the search-engine company is regulated. While it is unlikely to win this suit, it demonstrates the pent-up frustration with how technology companies are regulated, what they can do, and more importantly how they may skew the landscape in their own interest. It’s not common that Ohio makes the news twice in one week, but we also learned First Solar plans on building a $680 million solar panel factory in the Toledo area which would be its third Ohio factory. Its three plants combined would produce enough panels to account for a little more than half of all solar panels in the U.S. by 2025. This is good news for Ohio, a return of manufacturing jobs, and a positive development on the way to fulfilling some of the coming green policy initiatives.
In more controversial news, Biogen received FDA approval for the first new Alzheimer’s drug since 2003. I say controversial because the process for its approval was highly unusual. One of its two trials failed, and an FDA advisory committee voted that the data from the other trial was not enough to demonstrate efficacy. Nonetheless, the FDA decided to use the Accelerated Approval pathway, circumventing normal policy to approve this drug. It is also controversial because the annual price tag for this treatment is estimated to be $56,000. Most patients requiring this medication will likely be covered by either Medicare or Medicaid, which suggests taxpayers will likely bear much of the burden. The issue of whether Medicare can negotiate prices with pharmaceutical companies could be revisited as a result. If only 8% of the 6 million people diagnosed with Alzheimer’s begin taking this drug, the cost will exceed $7 billion annually. The clear winner is Biogen, whose stock rose 60% on Monday.
In closing, I came across a recent study which looks at board games, and more specifically, which board games frequently turn family game night into family feud. It turns out Monopoly stands out as the most debated board game. The survey included 2,000 participants with 20% saying their game nights with friends or family were often or always disrupted by competitive or unfriendly behavior. Typical scenarios include someone quitting because they’re losing (46%), someone accusing another player of cheating (44%), and two or more players getting into an argument (44%). But most importantly, three-fourths of respondents said winning wasn’t nearly as important as having fun. Now you know.
Bruce J. Mason, MBA