☕ Major in decline

Markets

Stocks surged with remarkable momentum today, reminiscent of Jackie Wilson's energy, as they ascended continuously. The Dow achieved its most impressive performance since June, while the S&P 500 and Nasdaq both put an end to their previous losing streaks. Investors remained in anticipation of upcoming inflation data scheduled for later this week. Notably, Berkshire Hathaway experienced a substantial surge to an all-time high. This came after Warren Buffett's weekend announcement that the company had achieved a quarterly profit exceeding $10 billion for the first time.

Berkshire Hathaway Stock Hits Record, Lifts Major Indexes

Monday saw markets driven higher by an increase in the shares of Berkshire Hathaway and other prominent blue-chip companies, providing Wall Street with a rebound from a period of losses.

Berkshire Hathaway, based in Omaha, Nebraska, and with holdings including Geico and BNSF Railway, achieved a new record stock price by turning a profit in the second quarter. The class B shares of the company climbed by 3.6% to reach $362.58, marking their first peak since March 2022—a time coinciding with the Federal Reserve's initiation of interest rate hikes.

This ascent played a crucial role in propelling the S&P 500 to a daily gain of 0.9%, while the Dow Jones Industrial Average increased by 408 points or 1.2%. Early trading indicated potential losses for the Nasdaq Composite, influenced by a decline in Tesla shares of up to 4.4% following the departure of Chief Financial Officer Zachary Kirkhorn. Ultimately, Tesla finished 1% lower, while the tech-focused index managed a 0.6% advancement.

Catherine Seifert, CFRA's Vice President of Equity Research, highlighted a potential broader market rally, stating, "If you assume Berkshire is a microcosm of the broader economy, there’s a bull case for the broadening out of the stock-market rally away from just tech stocks."

The conglomerate experienced a robust quarter due to favorable results in insurance and reinsurance, as well as gains in Warren Buffett's investment portfolio. Despite this, Seifert noted that beneath the surface, Berkshire Hathaway's performance showed a different story, with its railroad, energy, and manufacturing holdings lagging behind. She anticipates that higher interest rates will continue to exert pressure on traditional economy sectors.

Finance

You can now pay your friends in PayPal USD

For those who have long regarded the inconspicuous "Crypto" icon at the bottom of their Venmo interface as irrelevant, recent news brings a revelation. PayPal has introduced its stablecoin, PayPal USD (PYUSD), marking the first issuance of such a cryptocurrency by a global financial platform.

But what exactly is a stablecoin? It's a type of cryptocurrency tied to a stable asset, in this case, the US dollar, aiming to mitigate the volatility inherent in other digital tokens, thus making it a safer option. Although stablecoins have existed for quite some time, they haven't gained substantial traction in consumer payments due to skepticism from regulators regarding their stability claims.

PayPal emphasizes that PYUSD will streamline seamless in-app payments within virtual realms, facilitating faster and more cost-effective cross-border transfers.

PYUSD is designed for person-to-person payments, both in online purchases and value transfers between digital wallets. The currency can be exchanged for US dollars and is convertible to and from other digital currencies supported by PayPal. Furthermore, the ability to transfer tokens between PayPal and Venmo will soon be available, adding an extra layer of convenience for sharing expenses like a dinner with Karl.

The landscape of digital payments

Regulatory challenges have cast a shadow over the realm of cryptocurrencies, including stablecoins, over the past year. PayPal issues PYUSD through Paxos Trust Co., the same entity that previously issued the Binance stablecoin (BUSD). The latter faced regulatory issues earlier this year due to its association with Binance.

However, the entry of PayPal—a prominent fintech company—into this domain suggests that Paxos anticipates a pivotal moment in stablecoin regulation. Meanwhile, Congress is deliberating on two bills, one pertaining to the broader crypto industry and another focused specifically on stablecoins. The outcomes of these bills could substantially influence the future direction of this space.

What motivates PayPal? In addition to maintaining its position at the forefront of payment technology, there's a clear profit potential. Tether, the leading stablecoin issuer, could generate up to $6 billion in revenue this year, underscoring the financial opportunities for companies like PayPal in this evolving landscape.

Energy

Students leave the oil and gas pipeline

It appears that there's an unexpected similarity between classics majors and petroleum-engineering students: both academic programs are experiencing decline. The allure of the oil and gas industry no longer captivates college students as it once did, irrespective of the potential for lucrative post-graduation earnings, according to the Wall Street Journal.

The pursuit of petroleum engineering, which was once a practical and popular major that resonated with the aspirations of Boomer parents, has seen a significant plummet of 75% in enrollment since 2014, as noted by Lloyd Heinze, a professor at Texas Tech.

Historically, enrollment in majors related to oil and gas closely followed market trends. However, even during the period when oil prices experienced a surge between 2016 and 2021, the number of graduates entering this industry continued to decline, as reported by the US Department of Education. The situation was further exacerbated by the pandemic, which underscored the industry's volatility, leading to over 100,000 layoffs in the oil and gas sector between March and August 2020.

This shift isn't solely driven by economic considerations. Despite the potential for petroleum engineers to earn 40% more than their computer science counterparts after graduation, the current generation, Gen Z, is leaning towards environmentally conscious companies and roles. Present students harbor concerns about the fossil fuel industry's contribution to climate change and are increasingly skeptical about the sustainability of these high-paying positions in a future that's transitioning toward clean energy.

Economy

Chinese Exports Fall at Steepest Pace Since February 2020

China experienced a significant decline in its exports to the global market during July, intensifying the challenges confronting the world's second-largest economy. This serves as fresh evidence that the waning demand from Western countries is impeding Beijing's efforts to revive economic growth.

Following a brief resurgence during the spring, China's export of goods resumed a protracted decline that initiated in October of the previous year. This downturn originated as consumers in Western developed nations began redirecting their expenditures from purchasing items like furniture and electronic devices towards services like entertainment and dining out.

Heightening geopolitical tensions between Beijing and the Western coalition led by the United States have additionally prompted certain Western manufacturers to decrease their reliance on China's supply chain. Consequently, this trend is anticipated to erode the trade connections between the two sides.

Other dominant exporters in Asia are also grappling with the deteriorating demand for global trade. In July, South Korea's exports saw a year-over-year drop of 16.5%, a notable escalation from the 6% decrease observed in June. Purchasing managers' indices indicated that the manufacturing sectors of five out of seven Asian countries, including China and Vietnam, were in contraction last month. These indicators underscore a fundamental weakness in demand stemming from Western countries.