Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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On This Day in History:

A Microbial Milestone: On March 24, 1882, Dr. Robert Koch, a pioneering German microbiologist, announced a groundbreaking discovery that would change the course of medical history. He identified the bacterium Mycobacterium tuberculosis as the causative agent of tuberculosis (TB), a devastating disease that was a leading cause of death at the time killing one in seven Americans and Europeans. Koch’s meticulous research and the introduction of Koch’s postulates established a new standard for linking specific pathogens to diseases. The discovery not only paved the way for developing treatments and diagnostics for TB, but also significantly advanced the fields of microbiology and infectious disease research. Dr. Koch went on to earn a Novel Prize in 1905 for his work.

Carbone Red Sauce, Duck Breast: Walmart Tries to Lure Wealthy Shoppers (Bloomberg)
Walmart is integrating high-end products and brands, enhancing store aesthetics with wider aisles and better lighting, and featuring items like $50 silk sleep masks and deluxe comforters as it tries to attract wealthier shoppers who are traditionally more drawn to more upscale chains. With initiatives like improved lighting, the addition of mannequins, and the inclusion of luxury and on-trend brands, Walmart aims to shake off its budget-friendly reputation without alienating its core customer base. Early signs suggest the strategy might be working, with sales rising in renovated stores and a broader customer demographic, including households earning over $100,000, increasingly shopping at Walmart. [Link]

Saudi Arabia reportedly in talks with VC firms like Andreessen Horowitz to create mammoth $40 billion AI fund (CNBC)
To diversify away from oil, Saudi Arabia has been investing billions into stake purchases and joint funds with companies like Uber, Bank of America, Citi, SoftBank, and Blackstone. Now, the country is in talks with Andreessen Horowitz to establish a $40 billion fund for AI. Andreessen Horowitz is one of Silicon Valley’s largest venture capital firms and has substantial experience with AI-related investments including major companies like Facebook and close to 100 startups. [Link]

Streamers like Netflix and Disney+ have a Gen-Z problem (Business Insider)
Entertainment giants like Disney and Warner Bros. Discovery have their hands full with Gen Z, who show a strong preference for social video and live streams over traditional TV shows and movies. Deloitte’s research indicates that Gen Z’s viewing habits are driven more by social media creators than streaming service algorithms. With Gen Z also more influenced by social media ads than streaming ads, the future of streaming services may need a shift towards stronger social media engagement and creator-driven content to remain relevant to this key demographic. Sounds like more good news for YouTube! [Link]

Once America’s Hottest Housing Market, Austin Is Running in Reverse (WSJ)
Austin, Texas, which once epitomized the pandemic-driven housing boom fueled by low borrowing costs, an influx of remote workers, and companies like Tesla and Oracle relocating there, is now experiencing the most significant downturn in home prices and apartment rents in the US. Overbuilding and a slowdown in job and population growth have led to a surplus of luxury apartments and unoccupied office space, signaling a reversal from the city’s previous hot market status. Despite a national dip in the housing market, Austin’s situation is unique, with prices dropping over 11% since their peak in 2022, the largest decrease in any metro area. [Link]

AI & Technology

Elon Musk Just Added a Wrinkle to the AI Race (The Atlantic)
Elon Musk has escalated his ongoing feud with OpenAI by launching xAI and releasing Grok, its AI model, for free public use, challenging OpenAI’s GPT-4. Musk criticizes OpenAI for straying from its original open-source ethos in favor of profit. Major tech companies have started to open-source their AI models, contrasting OpenAI’s secretive approach. This movement raises questions about the balance between secrecy and accessibility in AI development, especially regarding the potential risks and ethical concerns. [Link]

Evaluating the Effectiveness of Speed Cameras on Philadelphia’s Roosevelt Boulevard (Sage Journals)
A study conducted around Roosevelt Boulevard, one of Philadelphia’s most dangerous roadways, assessed the impact of speed cameras on reducing traffic crashes, injuries, and fatalities. The study leveraged AI to identify control segments and compared the treated sections of Roosevelt Boulevard with these controls. The research found a significant decrease in crashes, injuries, and fatalities on Roosevelt Boulevard after the installation of speed cameras, with reductions on the higher end of what is typically found in the academic literature on speed cameras. [Link]

Health & Wellness

Viagra Could Be Good for Your Brain (WSJ)
Recent research from the Cleveland Clinic indicates that Viagra, known generically as sildenafil, may have the potential to prevent or reverse Alzheimer’s disease. This discovery was facilitated by AI, which helped identify sildenafil among over 1,600 FDA-approved drugs as having significant interactions with Alzheimer’s pathology. Observational studies and tests on neurons derived from Alzheimer’s patients showed that sildenafil could increase brain cell growth and decrease toxic tau levels. Further analysis of patient databases suggested a reduced risk of Alzheimer’s diagnosis among sildenafil users. [Link]

Privacy & Law

SEC Charges Two Investment Advisers with Making False and Misleading Statements About Their Use of Artificial Intelligence (SEC)
The SEC recently settled charges against Delphia Inc. and Global Predictions Inc. for making false and misleading statements about their AI usage. Both firms were accused of misrepresenting their AI capabilities in various communications, including SEC filings, press releases, websites, and social media. Delphia claimed that it “put collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else” while Global Predictions claimed to be the “first regulated AI financial advisor.” Both claims were false and resulted in a combined total of $400,000 in civil penalties. [Link]

General Motors Quits Sharing Driving Behavior With Data Brokers (NYT)
Following last week’s Brunch Reads article, General Motors has ceased sharing data on driver behavior with data brokers LexisNexis Risk Solutions and Verisk, which had been used to create risk profiles for the insurance industry and therefore negatively impact insurance rates for some drivers. The controversy has sparked a class-action lawsuit against GM, OnStar, and LexisNexis, highlighting concerns over privacy and the use of personal driving data. The decision to cease data sharing will help prioritize customer trust in the reversal of a controversial practice. [Link]

Sports

How one fan picked the greatest March Madness bracket ever built (ESPN)
In March 2019, Gregg Nigl, a neuropsychologist from Ohio, unknowingly set a record with the most accurate NCAA men’s basketball tournament bracket in history, correctly predicting the first 49 games. Planning to enjoy a family trip to Vermont, he filled out brackets focusing on his favorites like Michigan and Gonzaga, and even an underdog, UC-Irvine, without much expectation. Struck by illness right before the trip, he was unaware of his bracket’s success until notified by the NCAA during his vacation. His miraculous streak came to an end after 49 correct picks, but the experience led to a special trip to Anaheim for the Sweet 16 with his son. [Link]

Are you ready for Opening Day? Here’s your guide to the offseason chaos that rocked MLB (ESPN)
The 2024 MLB offseason has been one for the history books, filled with high-profile signings and a flurry of other moves to reshape the competitive landscape. Highlights so far include the Cubs hiring a rival team’s manager for a record contract, the Phillies investing heavily in their pitching duo to keep their championship window open, and the Dodgers making a splash by signing Shohei Ohtani to a groundbreaking contract (the article was written before his latest betting scandal). Other include the Diamondbacks continuing their upward trajectory with key acquisitions, and the Yankees making a bold trade to acquire Juan Soto. As Opening Day approaches, the reshuffled deck promises an intriguing 2024 MLB season. [Link]

Environmental

How a Colombian City Cooled Dramatically in Just Three Years (Reasons to be Cheerful)
In Medellín, Colombia, a pioneering “Green Corridors” project is transforming the urban landscape to combat the heat island effect. Launched in 2016 under Mayor Federico Gutiérrez, this initiative has developed 30 Green Corridors, adding over 2.5 million plants and 880,000 trees to the city. These efforts have not only cooled the city by 2°C but also improved air quality and biodiversity. It hasn’t all been easy though, as pollution, maintenance, and homelessness have all been hindrances. [Link]

Suburbia Is the Real Battleground for Electric Cars (Heatmap News)
The transition to EVs is not uniform across the United States, with urban areas adopting them at a faster rate compared to rural regions due to concerns like charging infrastructure and winter range reduction. However, the urban majority, which constitutes 83% of Americans, lives in conditions well-suited for EV use, making cities the focal point for reducing transportation emissions. In suburban America though, residents typically have higher incomes, which correlates with larger carbon footprints due to increased driving and larger homes. Suburbanites also have the potential means to afford EVs and the necessary home infrastructure for charging. As suburban areas often sit politically and culturally between urban and rural extremes, targeting these regions for EV adoption could be key to achieving broader acceptance and use of electric vehicles. [Link]

Biden to Award $6 Billion to Decarbonize US Heavy Industry (Yahoo News)
The Biden administration plans to distribute up to $6.3 billion in grants to industries that are difficult to decarbonize, such as cement, glass, chemicals, metals, and pulp and paper. Together, these industries contribute to nearly a quarter of US emissions. The grants aim to support the transition to lower-carbon technologies, aligning with the White House’s goals to significantly reduce greenhouse gas emissions by 2030 and achieve net zero by mid-century. The funding, largely from the Inflation Reduction Act, will support projects like hydrogen-based steel production and the construction of a new primary smelter for aluminum. [Link]

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Have a great weekend!

The talk of the day is the debut of Reddit (RDDT) on public markets.  The stock priced at the top of its expected range, and at the intraday highs traded 70% above the IPO price of $34.  While Reddit’s debut places some attention on new companies, overall IPO activity remains muted. In the chart below, we show the average monthly IPO issuance on a rolling 12-month basis in terms of both the number of companies and the $-value of those stocks.  Following record issuance in the first couple of years of the pandemic, IPO activity has cratered to some of the lowest levels since the Financial Crisis. While there has been some recovery in IPO activity and Reddit (RDDT) puts IPOs back into the spotlight, there is still plenty of room to recover to levels observed over the past decade.

While not a perfect measure of recent IPOs, the Renaissance IPO ETF (IPO) seeks to track the space.  Even though IPO activity has been weak, the ETF has been trending higher over the past year.  With the most popular IPO in some time happening today, the IPO ETF has risen to 52-week highs right off extreme overbought levels.

Following Tuesday morning’s widely anticipated decision from the BoJ to end the era of negative interest rates, BoJ Governor Ueda reiterated his view that it was “important to keep conditions accommodative” due to his view that there is “still some distance for price expectations to hit 2%”. While the move out of negative rates was hawkish at the margin, it was also well-telegraphed in advance. Just as important, officials maintained their plans to keep policy easy.  As a result of the actions and comments, the Japanese yen sold off on the news, and even though markets are closed for the Vernal Equinox today, it has continued to sell off in trading today. As shown in the chart below, the yen is once again testing the 152 level, an area where it has run into resistance multiple times in the last couple of years. The chart of the yen is starting to look a lot like a cup and handle formation which, from a technical perspective, is considered a positive pattern.  This would imply that any breakout above the 152 resistance level would be followed by a weaker yen.

Taking a very long-term look at the yen, the roughly 152 resistance level has been in place for decades.  The yen also weakened (rising price in the chart) towards those levels back in the late 1990s and late 1980s before rallying (falling in the chart).  If the yen does manage to take out that 152 resistance level in the weeks/months ahead, there would be very little resistance between here and 200, and that would likely have some pretty major macro ramifications for capital flows in Japan and around the world.