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Markets

Compare them to Frank Zappa because the stocks are setting records non-stop. Both the S&P 500 and Nasdaq reached new record highs yesterday, extending June's impressive performance. Nvidia led the charge yet again, surpassing Microsoft in market capitalization to claim the top spot for the first time ever. Just a reminder: The market is closed today in honor of Juneteenth.

New York experienced a heat wave that extended to Wall Street, where stocks surged yesterday as the S&P 500 achieved another record close—its 30th this year. Technology stocks, including Apple, Meta, and Microsoft, played a significant role, while Broadcom continued to build on substantial gains from last week following the announcement of a stock split.

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Business

Boeing CEO Answers to Congress

On Capitol Hill yesterday, Boeing CEO Dave Calhoun faced intense scrutiny from a Senate subcommittee in a bipartisan grilling likened to a session at the Capital Grill. This marked Calhoun's first appearance before lawmakers since an Alaska Airlines 737 Max 9 made an emergency landing in January with a significant fuselage hole.

Prior to Calhoun's testimony, the subcommittee received another whistleblower complaint, further damaging Boeing's reputation. Quality assurance investigator Sam Mohawk alleged that Boeing was mishandling faulty parts, potentially leading to their incorporation into aircraft. He claimed he was instructed to conceal these issues from the FAA and faced retaliation for speaking out.

The subcommittee noted additional reports from Boeing employees painting a troubling picture of prioritizing manufacturing speed and cost-cutting over aircraft safety. The hearing occurred amid heightened regulatory scrutiny, with federal investigators identifying manufacturing process flaws and the Justice Department considering criminal charges.

During the hearing, Calhoun, who took the helm in 2020 following fatal Boeing accidents, began by apologizing to the families of crash victims present. He fielded tough questions about Boeing's safety improvements, the effectiveness of management changes, and the appropriateness of his substantial annual compensation of $32.8 million. Calhoun acknowledged Boeing's shortcomings in safety culture, admitted to retaliating against whistleblowers, and cited challenges in attracting skilled workers, while pledging the company's commitment to rectifying these issues.

Looking forward, Calhoun is set to step down by year's end, but Boeing faces challenges in finding his successor, with reports of several candidates declining the role.

Health

Social Media Needs Mental Health Warnings

The leading health official in the US is urging Congress to approve legislation that would affix social media apps with a surgeon general's warning. This label would explicitly state that "social media is associated with significant mental health risks for adolescents," as stated in an op-ed published yesterday in the New York Times.

Increasing the urgency, Surgeon General Dr. Vivek Murthy's call for a warning label comes after years of raising alarms, marking his most forceful appeal to lawmakers to date.

In his statement, Murthy referenced a 2019 study that found a doubling of depression risks among teens who spend more than three hours daily on social media, and a 2023 Gallup poll indicating US teens spend an average of 4.8 hours daily on these platforms.

"Why have we not responded to the harms of social media, which are as urgent and widespread as those posed by unsafe cars, planes, or food?" Murthy wrote, referencing recent events like revoked driverless car permits, Boeing groundings, and listeria-related dairy recalls this year.

According to a recent Brookings study, adding a warning label is likely to make some parents reconsider unsupervised scrolling habits. However, Murthy acknowledged that this alone would not suffice to make social media safer for children. Therefore, he also urged Congress to pass legislation that would:

• Protect minors from online abuse and exposure to inappropriate content.

• Prohibit social media platforms from collecting sensitive data from child users.

• Impose restrictions on features such as push notifications, autoplay, and infinite scrolling.

Murthy additionally called for mandatory transparency from social media companies regarding the mental health impacts of their platforms and advocated for independent safety audits.

Some states have already taken action. Laws passed in Florida and Utah since March 2023 have raised the minimum age for social media account ownership. A New York bill recently passed, pending the governor's signature, seeks to ban companies from sharing children's data and using algorithms in their feeds. Moreover, over 40 states have filed lawsuits against Meta, alleging it deliberately encourages addiction among young users.

Politics

Biden plans new protections for undocumented spouses of US citizens

President Biden is set to unveil a new immigration initiative today aimed at shielding individuals unlawfully residing in the US and married to citizens from deportation. The program would grant them work permits and offer a pathway to obtaining legal permanent residency. This announcement follows Biden's recent decision to suspend asylum claims during periods of increased illegal border crossings, reflecting his attempt to navigate a challenging issue that remains a priority for many voters.

Tax

R.I.P. Corporate Tax Loophole

If your familiarity with gaming extends beyond Mario Kart circuits, you might find the latest Treasury Department move intriguing. Recently announced, it aims to target a prevalent tax loophole associated with basis shifting — the practice of transferring assets between different partnerships (often shell companies) solely to evade taxes, rather than for any legitimate economic purpose. This crackdown is part of broader efforts to curb high-end tax abuse and address the tax gap, potentially recouping an estimated $50 billion in tax revenue over the next decade, according to Deputy Treasury Secretary Wally Adeyemo. This initiative also seeks to narrow the $160 billion tax gap attributed to the top 1%.

To bolster these efforts, the IRS plans to enhance tax audits and regulatory measures. The agency's increased focus follows a significant funding boost of $80 billion allocated in 2022 to enhance customer service and enforcement capabilities. However, recent budget revisions have reduced this amount by $20 billion. This financial injection has empowered the IRS to probe instances of basis shifting more effectively.

Looking ahead, the IRS's ability to continue investigating questionable tax maneuvers hinges on future funding decisions, particularly influenced by the upcoming November events. President Biden advocates for an additional $104 billion to support IRS operations, while opposing viewpoints seek to curtail funding for the agency.

Technology

Nvidia is now the most valuable company in the world

Jensen Huang and Nvidia continue their impressive ascent. Yesterday, the chipmaker surpassed Microsoft to become the world's most valuable publicly traded company, reaching a market capitalization exceeding $3.3 trillion. Earlier this month, Nvidia crossed the $3 trillion milestone for the first time, surpassing Apple to claim the second position.

Nvidia's dominance in the AI sector, where it holds approximately 80% of the data center chip market, has been instrumental in its meteoric rise. This success has significantly enriched investors and boosted CEO Jensen Huang's net worth by nearly $100 billion in less than two years, elevating him to the rank of the 13th richest person globally as of June.