Weekend Reading

9 March 2019 | by Ensemble Capital

A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.

Next Money ‘Crop’ For Farmers? Solar Panels (Genevieve Bookwalter, @GenevieveBook, The Washington Post)

Illinois has passed a state law requiring that renewable resources provide 25% of the state’s power by the year 2025 and hundreds of farmers there have been applying for the opportunity to host solar panels on their land.  There is uncertainty in the economics of the farming business and factors such as weather as well as supply and demand are catalysts for price movements.  Because of this, some farmers are finding themselves drawn to the consistency of the option of solar panels.  However, this doesn’t come without controversy as taking some of the most fertile soil in the world out of production could have serious consequences when it comes to supplying food for a growing population.

Thousands of New Millionaires are About to Eat San Francisco Alive (Nellie Bowles, @NellieBowles, The New York Times)

The thought of Silicon Valley and big paydays often go hand in hand given how many successful IPO’s that have been seen over the years and there’s more to come.  This year alone Uber, Lyft, Slack, Postmates, Pintrest, and Airbnb are all slated to go public; and they’re all in the bay area.  Following a successful launch they will mint another class of multi millionaires that has financial planners, real estate agents, and even the tech buses that move them scrambling to prepare.  One thought that comes to mind is what impact will this have on the already expensive real estate market throughout the bay area.

Sportswear-Maker Puma to Open New York Flagship on Fifth Avenue (Keiko Morris @KeikoMorris, The Wall Street Journal)

Sportswear maker Puma is looking to expand their presence with a new storefront on one of the most prestigious streets in the world.  They’ve leased a 24,000 square foot space on Fifth Avenue in New York City.  The brand will be joining others along the corridor including Nike Inc., Under Armour Inc. and Adidas AG who have all experienced the impact of online retail growth.  Senior Analyst, Todd Wenning, CFA with Ensemble wrote about his thoughts on brands in the article Delivering on What Customers Really Need. 

Ray Dalio, Manager of the World’s Biggest Hedge Fund, Lowers His Odds of a Recession (John Melloy, @johnmelloy, CNBC)

The Fed hasn’t always been known for being fully transparent on the direction in which rates will move and we saw plenty of volatility in the markets throughout the fourth quarter of 2018.  During that volatility, many investors were worried that the US was on the brink of a recession and since then the markets have continued to rally.  Given the upward trend in the stock market paired with comments from the Fed about taking a “patient” approach to rates this year has the world’s largest hedge fund manager Ray Dalio lowering his odds for a recession.  Ensemble President and Chief Investment Officer Sean Stannard-Stockton, CFA wrote about this topic and Why We Might Not Have a Recession for a Long Time.  Sean also wrote another relevant article titled Strong Evidence of Rare Events: False Positives in a Sea of Noise.

China Lowers Growth Target and Cuts Taxes as Economy Slows (Bloomberg)

With a slowing Chinese economy struggling to keep up with GDP targets, China has now lowered their goal for economic growth and is implementing major tax cuts in hopes to reach the newly revised goals.  “The lower bound of the GDP target would be the slowest pace of economic growth in almost three decades, a consequence of China’s long deceleration as policy makers prioritize reining in debt risks, cleaning up the environment and alleviating poverty.”

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