Will AM Radio Survive?

Believe it or not, investors are once again looking for interest rate cuts sooner rather than later.  Hopes for a rate cut were reignited following a softer-than-expected jobs report last week.  This optimism translated into a nice rebound in equities this week as investors resumed a buy-the-dip mentality.

Perhaps the biggest news this week was Apple’s announcement.  I’m not talking about their “amazing” new thinner iPad with an M4 chip nor am I talking about the controversial ad unintentionally suggesting that AI will be the death of creativity which prompted an apology from Apple.  I’m talking about its announcement of a $110B stock buyback plan which is larger than the market cap of 84% of the companies in the S&P 500.  To put this in perspective, Apple could buy one of the following companies with money to spare: Deere, Lockheed Martin, Boeing, Medtronic, TJX, Boston Scientific, Airbnb, Regeneron, Vertex, or Chubb.  Other popular companies that could be purchased include Mondelez, Chipotle Mexican Grill, Starbucks, and Gilead.  Here’s to hoping they do something useful with that pile of cash.

In other news, I came across a thought-provoking comment by a renowned hedge fund billionaire this week.  Stanley Druckenmiller suggested the Federal Reserve should get rid of offering forward guidance and “just do their job.”  This is an interesting thought because on its surface he’s not wrong.  He believes that when the Fed implicitly states what it is going to do ahead of time, it inadvertently traps policy in a changing economic environment.  However, playing devil’s advocate, in the past when the Fed surprised markets with unexpected rate hikes or cuts, the markets usually reacted badly.  It wasn’t uncommon for market volatility to pick up after such an event, with market participants wondering what the Fed knew that everyone else didn’t.  Additionally, it made it difficult for companies to make capital spending decisions, without having an idea where interest rates were headed.  In early 2000, Alan Greenspan offered guidance for the first time just as the Dot-com bubble burst.  It became regular practice beginning in 2003 and continues today.  Should the Fed offer forward guidance?  There are good arguments on both sides.

While we’re talking about Stanley Druckenmiller, he made another bold assertion this week that I wish was more mainstream.  He said, “The private sector does not need government intervention to survive.”  In a CNBC interview this week he said, “Today’s fiscal spending mirrors that of the Great Depression, although the private sector could not be more different today than it was then.”  He went on to say that back then you had a private sector crippled with debt, without new ideas, desperate for interventionist policies which were largely effective.  Today’s companies are much healthier, with strong balance sheets and innovation spreading at a speed perhaps never seen before.  He believes, “All government needs to do is get out of their way and let them innovate.”  Instead, the U.S. Treasury is “acting like we’re in a depression,” he said.  I was glad to hear someone of his caliber saying this.  We don’t hear it enough.

In closing, I mentioned some time ago about the death of AM radio.  Interestingly, electric vehicles (EVs) generate electromagnetic interference from their electric motors which causes reception to be a problem.  Additionally, as AM radio listeners wane with each passing year, automakers wonder if the cost of maintaining it is worth it.  I had assumed it would slowly be phased out over the next decade.  So, I was surprised to read this week that lawmakers have proposed a bill that would require all new cars to be fitted with AM radios.  Senator Edward Markey (D-Mass) revealed that the “AM Radio for Every Vehicle Act” now has the support of 60 U.S. Senators, as well as 246 co-sponsors in the House of Representatives, making its passage an almost sure thing.  According to the National Association of Broadcasters, 82 million people still listen to AM radio.  Perhaps more important, the Federal Emergency Management Agency (FEMA) operates on this frequency and is vital for delivering critical public safety information.  Despite the news, eight automakers told a Senate committee that they were quitting AM: BMW, Ford, Mazda, Polestar, Rivian, Tesla, Volkswagen, and Volvo.  I cannot wait to see how this plays out.  Now you know. 

Bruce J. Mason, MBA