So oil has staged a slow and cautious recovery over the last year powered largely by OPEC’s oil cuts. That said, prices are still ~35% below the $100 per barrel threshold. But guess what, it does not matter. In an absolutely eye-watering piece of data that is a testament to both management and technological innovation, Shell oil company is making as much profit barrel with oil at $60 as it did when oil was $100. Exxon performs even better.
FINSUM: Oil companies have done a truly commendable job rejigging their business models and cutting costs to maintain profitability.
While there has been some speculation that the US housing market may be facing a tough period ahead, new data is showing that prices might continue rising. The big worries are that rates will rise quickly, hurting mortgage demand, while at the same time, the new tax package will reduce home-buying because of the lack of deductibility of mortgage interest above a threshold. However, new data shows that housing inventory continues to sink. There are few homes for sale compared to buyer demand, and the building rate of new homes is weak. This means there is much more demand in the market than there is supply.
FINSUM: We are not very worried about home prices, especially in the lower and middle pars of the spectrum. The largest ever US generation—Millennials—is entering the key home buying period of their lives.
General Motors is ramping up its efforts in the self-driving car space. In what has become somewhat of a new age automotive space race, the company is doing well in its testing of autonomous vehicles. That said, it is still well behind the performance of Waymo, Google’s self-driving car unit. GM’s vehicles are getting very autonomous, with a human driver only needing to intervene 0.797 times for every 1,000 miles driven in 2017, down from 18.51 in 2016. Google’s number is 0.179 per 1,000 miles. Some criticize this “disengagement” metric because it is not well controlled or defined.
FINSUM: There is probably a little bit of “play” in how these stats are recorded, but if they are anything near the truth, the technology sounds like it is performing very well. GM says it wants to debut self-driving cars in 2019.
The Whole Foods acquisition by Amazon has been somewhat of a mystery for markets. While the move sparked a great deal of fear and excitement, it is still not readily clear what Amazon will do with its new asset. That said, prices at Whole Foods are falling, and the company’s in house basic brand, 365, is pushing forward. Whole Foods 365 is the company’s new low price chain of stores. Many thought it would be shuttered under Amazon’s leadership, but it is moving ahead. The first store just opened in Brooklyn and will expand to five more locations this year.
FINSUM: We think a Whole Foods sub brand of lower priced items with the same general theme could work very well in attracting more Millennial shoppers.
Vanguard, one of the preeminent global fund managers, has just gone on the record warning about a big and growing danger for ETFs. Vanguard says that “predators” are increasingly front-running ETFs at the expense of legitimate investors. Because most ETFs disclose their daily holdings, and are benchmarked to an index, they are susceptible to manipulation by those who trade ahead of the reconciliation. Vanguard hopes that regulators will not approve new rules which would demand even greater transparency in the ETF marketplace, as this could worsen the problem. Vanguard currently only discloses its holdings with a one-month lag to mitigate frontrunning, but could be forced to do so on a daily basis.
FINSUM: This is one of the areas of markets where transparency may actual work counter to the interests of the everyday investor.