🐂 Fine Line

Markets

On Tuesday, stock markets experienced minimal fluctuations, while bond yields saw a notable increase, reaching their highest level in the past ten days. This surge was triggered by the Commerce Department's release of retail sales data that exceeded expectations. In a separate development, Nvidia's stock price declined significantly as the Biden administration announced plans to impose stricter restrictions on chip manufacturers selling their products to China.

Household Net Worth Surged After the Pandemic Hit

In the years following the onset of the Covid-19 pandemic, the wealth of American families saw a significant upswing, contributing to indications of robust consumer resilience that could assist the U.S. economy in overcoming the challenges posed by higher interest rates.

According to the Federal Reserve's Survey of Consumer Finances, which was published on Wednesday and adjusts for inflation, households' median net worth surged by 37% from 2019 to 2022. This remarkable increase marked the most substantial growth observed since the inception of the survey in 1989.

The notable upturn in net worth was primarily sustained by the steep appreciation of both home and stock prices, which far outpaced the rate of inflation. The wealth augmentation was distributed broadly across various demographic and socioeconomic segments, in part owing to the increased likelihood of middle-income and lower-income households owning stocks and homes in the previous year compared to 2019, as observed by Federal Reserve economists.

International

Biden walks a fine line

President Joe Biden is currently in Tel Aviv meeting with Israeli Prime Minister Benjamin Netanyahu. The purpose of this meeting is to reaffirm U.S. support for Israel and work on a plan to deliver humanitarian aid to civilians in Gaza. This visit follows a major explosion at a hospital in Gaza, which resulted in conflicting accounts of its cause. President Biden had initially planned to meet with leaders from Jordan, Egypt, and the Palestinian Authority, but this summit was canceled due to the hospital blast. The main goals of President Biden's visit are to push for a humanitarian plan for Gaza, including the delivery of essential supplies, and to de-escalate the potential for further regional violence. Additionally, the visit serves as a message to Iran, which has warned of potential attacks on Israel if the conflict in Gaza continues. In the event of an expanded regional conflict, the U.S. is prepared to shift more foreign policy attention to the Middle East. President Biden is also reportedly planning to request a $100 billion funding package from Congress to support various countries, including Ukraine, Israel, and Taiwan, in the coming days.

Politics

Jim Jordan failed to become Speaker on first ballot.

The Republican selection process for the new Speaker of the House will extend for at least another day as Ohio congressman Jim Jordan fell short by 20 votes required for assuming the House leadership. Jordan was nominated by the Republicans following Majority Leader Steve Scalise's withdrawal from the race the previous week. It has now been two weeks since the House has been without a Speaker, a vacancy created by the ousting of Kevin McCarthy due to the actions of a few representatives from the right-wing Freedom Caucus. The delay in choosing a Speaker is hindering Congress from passing legislation, including aid for Israel. The House will reconvene today in the hopes of finally resolving this matter.

Real Estate

DOJ could try and dismantle real estate broker commissions

The stars of "Selling Sunset" will need to address antitrust policy during an upcoming meeting. The U.S. Justice Department is reportedly exploring potential legal action against the profitable commission-sharing system in the American real estate industry, as reported by Bloomberg.

For context, when you sell your house, you typically pay around 5% to 6% of the sale price in broker fees, which are divided between your agent and the buyer's agent. With soaring housing prices, this fee can escalate to approximately $30,000 for a $500,000 house. The National Association of Realtors (NAR), the industry's primary lobbying organization, often mandates this fee when you list your house on nearly any listing service.

NAR, representing over 1.5 million agents, stands as the largest trade group in the country and has even trademarked the term "Realtor," reserving its use for paying members.

NAR contends that criticisms of the current system are largely unwarranted. The organization argues that it benefits buyers by making it more accessible for first-time buyers from minority and lower-income backgrounds to purchase a home.

In recent developments, one of the two class-action lawsuits against NAR and four major brokerages was settled, leading RE/MAX and Anywhere Real Estate to pay a combined sum of $138.5 million. However, only the U.S. Department of Justice (DOJ) can bring about comprehensive changes. Redfin CEO Glenn Kelman pointed out that if the DOJ were to dismantle the existing commission structure, it could potentially lead to significant unemployment among real estate agents, affecting nearly half of them across the country.

Environment

The dubious impact of carbon credit pioneer south pole

For a while, experts have been contending that the $2 billion voluntary carbon credit market, aimed at aiding corporations in combating global warming, is, for the most part, ineffective. A recent feature in The New Yorker, published this week, delves into how the pioneering Swiss climate finance company, South Pole, sold millions of dollars' worth of dubious carbon credits, which is unlikely to improve the reputation of this practice.

South Pole supplied these credits to corporate giants such as JetBlue, Volkswagen, and Nestlé, with a heavy reliance on a forest preservation project situated near Lake Kariba in Zimbabwe. However, it became evident that this project, apart from being highly profitable for South Pole and its founder Renat Heuberger, fell short of delivering the environmental benefits it had pledged.

According to The New Yorker, South Pole transferred the funds to the owner of the Kariba forest, a Zimbabwean tycoon, who used some of the money for local farming initiatives and schools. Nevertheless, he couldn't provide a reliable account of how the funds were allocated, and he admitted to questionable international transfer methods.

In 2022, South Pole determined that it had significantly overestimated the number of trees saved when it utilized a formula provided by the controversial certification agency Verra. This meant that approximately 64% of the carbon credits generated by the project over a decade did not genuinely offset pollution.

Taking a step back, critics who argue that these unclear forest-based carbon credits facilitate corporate greenwashing are concerned that the United Nations is contemplating similar practices to assist countries in meeting their climate objectives.