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Happy 50th birthday to Atari, founded this day in 1972 by American engineers Ted Dabney and Nolan Bushnell. Though it was merged into a division of Time Warner in 1992, there arguably wouldn't be a modern video game industry without the company's revolutionary games like Pong. Many developers and engineers to this day still follow "Bushnell's Law," which stipulates that "all the best games are easy to learn and difficult to master" — not so different from investing in the stock market. |
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| • | | The US and its allies want to curb China's global influence. | | | • | | Wall Street's fear index is pretty chill when compared to previous bear markets. | | | • | | Amazon's Prime Day may not quite be the sale of the summer anymore. | | | Please do not delete this text. |
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US Will Pitch in $200 Billion for Global Infrastructure to Challenge Chinese Influence |
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If you build it, they will come… under your influence. On Sunday, US President Joe Biden announced a $200 billion pledge to the G-7's Partnership for Global Infrastructure and Investment, a multi-lateral plan among democratic countries to invest in infrastructure projects in developing countries that will challenge China's own, similar efforts. |
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On the Belt and Road Again |
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In 2013, China launched what it calls The Belt and Road Initiative, a global infrastructure strategy designed to increase China's global reach and influence. The initiative has already touched at least 70 countries and international organizations, and some democratic nations are concerned it will leave Xi Jinping's autocratic state with too much influence on developing nations. A report published last year by AidData, a research center at the College of William and Mary, counted $843 billion in Chinese loans for over 13,000 projects primarily between 2000 and 2017, much of through Belt and Road spending. Sunday's announcement was a chance to shift the global balance: |
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• | | The US will headline the project with a five-year, $200 billion contribution that will include direct government aid and private investments — the G-7 as a whole, including private partners, will make $600 billion in investments by 2027. | |
• | | The infrastructure projects will focus on climate, information technology, and health systems — initial projects with investment include a $2 billion solar project in Angola and a $600 million submarine internet cable that will run from Singapore to France. | | |
"This isn't aid or charity," Biden said at a G-7 meeting in Bavaria on Sunday. "It's a chance for us to share our positive vision for the future because when democracies demonstrate what we can do, all that we have to offer, I have no doubt that we will win the competition every time."
Debtor's Remorse: Malaysia, Sri Lanka, the Maldives, and Pakistan have all complained in recent years about the opaque terms of Chinese infrastructure deals. AidData found 42 low- and middle-income countries with debt exposure to China greater than 10% of their GDP and found that 35% of China's infrastructure projects abroad have featured corruption scandals, labor violations, environmental damage, or other significant issues. Does China have an equivalent expression for "read the fine print?" |
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Despite All This Year's Stock Market Woes, Wall St's "Fear Index" is Holding |
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All it takes is a few short moments of reading headlines for cortisol to begin pumping through your veins. But you may be surprised to know that, despite war, surging inflation, interest rates, and energy prices, fear is actually in relatively short supply. The CBOE Volatility Index (VIX) — the famed "fear gauge" that tracks investor sentiment on Wall Street — has remained below the level of bear markets of yore. |
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Despite the S&P 500 being down 18% this year — wiping roughly $12 trillion from investors' portfolios — the index hasn't touched 40 this year, the number most analysts believe signifies pessimism for the market's immediate future. Last week, the VIX hovered in the high 20s, and closed at 27 on Friday. By comparison, during the 2008 financial crisis and at the bleak outset of the pandemic in 2020, the index climbed above 80. So with all the bad news now, why the relative tranquility compared to those bear markets? Believe it or not, the answer is stability: |
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• | | Rather than the sudden, shock-driven crashes that happened after Lehman Brothers collapsed or Covid-19 effectively shut the world down in 2020, the S&P 500 has been on a steady and relatively orderly cruise south this year. While the market falling consistently is hardly pleasant, it hasn't triggered outright panic. | | • | | In fact, investors are betting the VIX will end 2022 under 30, because known causes — mainly inflation and interest rate hikes — underlie the incremental decline and are expected to eventually smooth out (even if it takes months). "The current behavior is playing out similar to the 2000-2002 dot-com bear market, with no big sudden shocks but sustained high realized volatility," Talal Dehbi, a strategist at PrismFP, told Bloomberg. | | | Calm Til December: If VIX ends the year at just under 30 that will be above its five-year average of 20. As for broader markets, there are differing opinions on how sharp this bear market's teeth are. Goldman's chief US equity strategist David J. Kostin sees the S&P 500 finishing 2022 at 4,300, implying 10.3% rally from Friday's close. Bank of America Securities' analysts say "3,600 is the new bull case," which implies a further 7.7% drop in the S&P 500. |
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Amazon Prime Day Loses its Blockbuster Shine |
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(An Amazon Prime delivery truck; Photo by Elvert Barnes) What was once an attempt to bring Black Friday shopping levels to summer is slowly turning into an internet afterthought. After a half-decade of immense success, Amazon is dialing down the discounts offered during its annual Prime Day super sale event (held this year on July 12 and 13). With the competition now circling the same calendar dates, Prime Day is quickly losing its novelty. |
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Since 2015, Amazon's Prime Day has boosted subscriptions and driven sales in the historically quiet summer months. Call it e-commerce Christmas without the mail order hypoallergenic tree. But traditional retailers like Walmart and Target have begun holding competing flash sales and, in 2018 and 2019, Amazon's top competitors saw revenue jump 72% during Prime Day, according to the WSJ. This year, those same players are increasing discounts to clear excess inventory, meaning consumers have more options. The event, previously launched with high-profile kick-off concerts from the likes of Taylor Swift, is now slowly slipping into the background of Amazon's operations. New data shows discounts on non-electronics goods are no steeper than a typical day on the site (both around 30%). And the bulk of promotions are more and more reserved for Amazon's devices like Fire TV and Alexa — products that obviously return higher margins for the mothership. It's almost no wonder sales are now more day-time than prime-time: |
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• | | Amazon will make $7.7 billion in US sales from next month's Prime Day, up 17% from last year, according to forecasts by Insider Intelligence. That's far lower than the typical 65% revenue growth the company has come to expect from the event, The Wall Street Journal notes. | | • | | Last year's average order size, meanwhile, fell to $54.15 from $58.77 the year before, while per-item spending is down to $30.83 from $33.88, according to research firm Numerator. | | | Topping out: Prime Day isn't the only area where Amazon may be hitting a ceiling. In an April earnings report, the company announced its slowest sales in about two decades. Meanwhile, an internal memo leaked to Vox last week revealed the company projects it is on pace to "deplete the available labor supply in the US network by 2024" at its infamously high-turnover logistics and warehouse operations. After a pandemic boom, the company may be too big to keep growing. We'll call that the cost of massive success. |
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Please do not delete this text. | Extra Upside | • | | Are you a student with an Apple Music subscription? Your plan just got pricier. | | | • | | French utilities are asking the public to conserve gas and energy amid fears of more Russian cutbacks. | | | Please do not delete this text. |
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| Written by Sean Craig and Brian Boyle. |
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