Fundamentals, Copper, Rents


After yesterday’s Fed meeting, we’re now roughly 80% of the way through the rate hike cycle. The fed funds rate is now at 4%, up from .25% in March ‘22 and will likely peak around 5% early next year. Most companies’ revenue and earnings continue to climb steadily, but forward guidance is weak. Any company that issues weak guidance is experiencing immediate -20% drops in stock price despite continued growth. Volatility and fear remain high, but many of the fundamentals continue to grow in the face of considerable friction. I don’t think there’s any reason to expect this volatility to end until the Fed is done with their hikes early next year.

One interesting example is Meta(Facebook) with revenue down just -4% from its peak and its stock price down -70% this year. There are obvious challenges with Meta driven by Apple’s IDFA privacy changes and metaverse overspending, but their PE is now in the bottom 10% of all S&P500 stocks. Many of the leading and real time indicators of inflation have already fallen dramatically. The lagging inflation indicators, principally real estate, will continue to roll in slowly. The next hike is on Dec 14th and will likely be .50% and another step closer to getting the rate hikes over with.


Work from home and “quiet quitting” have been blamed for drops in productivity, but I don’t think that explains the whole story. There has been a lot of turnover during the pandemic, especially as it’s been well-documented that changing jobs often leads to pay increases. Transitions in jobs immediately reduce productivity as it takes time to adjust to new roles at new companies. I would say company turnover has hurt productivity far more than working from home.

It will be interesting to see if Elon Musk successfully reduces Twitter headcount by 75%. If he is successful, then you can expect to see significant reductions in the white-collar workforce within tech. Often people and companies only change once they are forced to. With macroeconomic headwinds putting pressure on earnings, companies may look to follow Elon’s example.

Impending copper shortage

Global copper production over the next 5-10 years needs to increase by approximately 40% to match the anticipated demand for electric cars, wind farms, battery storage, solar panels and other green energy products. Slow government permitting and increasingly reluctant investing in mining operations are holding the sector back from expanding at the rate it needs to. This is something to keep an eye on as the risk of spiking copper prices and supply shocks seem to be growing, and the aspirations for green energy are reliant on increasing supplies and low prices.

Metaverse comments

The metaverse term is often overused, especially by the media that focuses on recreations of office spaces used for work. The metaverse started much earlier in the ‘90s with 3d video games on the N64. You could also call the google docs and google sheets programs introduced in the early 2010’s a type of real-time collaborative metaverse. Crypto could even be called a financial metaverse. The real opportunity in metaverse technology comes from both high-definition immersive simulations and any collaborative social interface of any kind. Virtual reality (VR) allows for immersive experiences, and augmented reality (AR) allows for intelligence overlays on the real world.

Gartner has a hype cycle curve that shows how technology tends to moves from inflated expectations to disillusionment and, eventually, real use cases. We are deep in the trough of disillusionment regarding the metaverse technology theme, as most commentary related to the topic seems to be accompanied by eye-rolls.

Apple will eventually release a VR and AR headset which will help us break out of the metaverse cynicism. Apple carries a lot of authority and social proof, whereas Zuckerberg is not exactly universally beloved. Ultra high-definition simulations will be useful for construction, design and enhanced skills training programs for pilots, doctors, dentists, welders, electricians and so many others. Social interaction in the metaverse will continue to evolve through the many expanding video and social platforms as well.

Bloomberg on crypto

Bloomberg Businessweek dedicated this past weekend’s entire issue to crypto. Popular columnist Matt Levine wrote about 40,000 words covering the origin, theory, structure, current uses and musing about our evolving relationship with blockchains. You can read it here if you’re interested. The article can be summed up as, “crypto isn’t going away.” Matt is a great writer, one of my favorites, and he’s able to creatively break down the elements of what attracts people to crypto, from the interesting problems it’s attempting to solve to the sizable economic incentives waiting for the people who eventually get it right.


Shortages are often followed by oversupply. Over 917,000 apartments are currently under construction in the US, representing a 4.9% increase in supply. We’re not close to an oversupply of housing, but I’m glad to see we’re at record construction levels. Meanwhile, Boston has just surpassed San Francisco for the second highest rents in the US, behind NYC. By the time we hit March 2023, we should start to see negative y/y prices decreases on homes, which will help with the inflation conversation. Median home prices are down -8% from the peak in June ‘22. I don’t expect prices to fall much further at all, but that negative y/y price decrease will be helpful in the fight against inflation.

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