🐂 The Wig

Markets

The most significant activity observed on Wall Street yesterday occurred within the bond market. The notable surge in Treasury yields conveyed a distinct message about the state of the US economy: it is not only free from a recession but rather exhibiting a robust vitality. As long-term government debt yields reached their highest points since 2011, investors are making predictions that the Federal Reserve will maintain higher interest rates for an extended period. This proactive approach aims to prevent a resurgence of inflation after its recent decline.

Investors Fear China’s ‘Lehman Moment’ Is Looming

Growing concerns are emerging among investors due to indications of financial strain at a prominent asset manager in China. These concerns are fueled by worries about potential contagion effects stemming from the country's struggling real estate sector. This has reignited a debate about the possibility of a "Lehman moment" occurring in the world's second-largest economy.

The focus of this unease is Zhongrong International Trust, a provider of complex financial instruments, which boasted around $108 billion in assets under management by the close of 2022. This asset manager has recently become a source of anxiety in the market. Several trust products managed by Zhongrong have experienced payment setbacks, totaling approximately $14 million, directed towards three publicly listed Chinese firms. These defaults have been disclosed through stock-exchange filings. Zhongrong, headquartered in Beijing, has been involved in extending financial support to various real estate developers and has participated in funding their construction ventures.

This firm, Zhongrong, is part of a larger and expansive financial conglomerate known as Zhongzhi Enterprise Group. This conglomerate possesses various wealth-management enterprises. Should the repayment challenges and defaults escalate, it could place numerous investment products, previously marketed to diverse companies and affluent individuals in China, at risk.

Individual investors have taken to social media to express grievances about not receiving the promised payments from Zhongrong products and certain units within Zhongzhi. Some of these investors have also reported their concerns to local authorities. Despite these allegations, neither Zhongrong nor Zhongzhi have issued public responses or provided comments in relation to these matters, and they have not responded to requests for comment..

Politics

Javier Milei’s plan to save Argentinas economy

The leading contender for the next presidency of Argentina is capturing attention for his unorthodox approach, owning four cloned dogs named after conservative economists, and advocating controversial policies, such as legalizing the sale of human organs.

Following his surprising victory in the presidential primaries, Javier Milei, a far-right libertarian, is outlining his radical economic vision for Argentina in various interviews. Milei, who previously played in a Rolling Stones cover band and participated in second-tier soccer, has drawn comparisons to former President Trump due to his anti-establishment rhetoric, calls to dismantle a corrupt political elite, and distinctively tousled hair, earning him the nickname "The Wig."

While Milei's appeal lies in resonating with Argentines frustrated by the nation's struggling economy, investors are expressing concerns that his proposed changes could destabilize a precarious situation. His victory in the primaries led to a decline in the peso's value and compelled the government to devalue the currency by 18%.

Embracing an "anarcho-capitalist" approach

While a 9% inflation rate in the US is considered substantial, the inflationary crisis in Argentina is far more severe, exceeding 115%. The highest denomination peso banknote is worth less than $3, and within a month, ice cream prices have doubled. With 40% of the population living in poverty, Argentina is on the brink of its sixth recession in a decade. Milei's supporters view his unconventional policy proposals as extreme yet potentially necessary to shake up a deeply flawed system.

Here are some of the radical measures Milei has indicated he would pursue if elected:

1. Dollarization: This involves transitioning the national currency from pesos to the US dollar. Notably, Argentina experimented with a similar approach in the 1990s, which ultimately led to a disaster. However, dollarization has achieved some success in countries like Ecuador and El Salvador.

2. Elimination of Argentina's central bank: Milei strongly believes that the country's central bank is highly detrimental and seeks its eradication.

3. Drastic reduction in government spending: This would entail the closure of public programs, including ministries responsible for health, environment, and education. Citizens would be required to cover costs for the public healthcare system.

Looking ahead, Milei's impressive performance in the primary elections has positioned him ahead of mainstream candidates. However, the presidential race is still ongoing. The main election is scheduled for October 22, and numerous experts anticipate that a runoff election might be necessary on November 19.

Retail

Walmart is cooking

Walmart is experiencing a surge in performance. The largest retailer in the United States has reported a robust quarter in terms of both profit and revenue, underscoring the continued shopping prowess of American consumers. Walmart's current position is advantageous due to the fact that Americans are actively replenishing necessities such as groceries and health-related products. These are areas where the retail giant can outperform its rivals by offering more competitive pricing. Contrastingly, retailers like Target and Home Depot, which focus on desirable non-essential items (in contrast to Walmart's essential offerings), delivered disappointing results in the previous quarter.

Environment

Maui officials say the island is ‘still open to tourists’

Following the devastating Lāhainā wildfires that tragically claimed the lives of at least 111 individuals and wrought destruction upon the homes of numerous others, conflicting messages are shining a spotlight on longstanding tensions surrounding Hawaii's tourism industry.

Given Maui's heavy reliance on tourism, which is estimated to contribute around four out of every five dollars to the local economy by the Maui Economic Development Board, officials including the mayor of Maui County have refrained from discouraging visitors from other places to come. They emphasize that the majority of the island, excluding the fire-ravaged west side, remains open for business. However, this stance contrasts with the sentiments of some Native Hawaiians who are advising tourists to refrain from visiting. Consequently, travelers find themselves uncertain about the best course of action to offer support.

Despite the fact that many residents of west Maui, including those who lost their homes, have resumed employment in other parts of the island, local inhabitants find themselves in a dilemma between the need to earn income and a reluctance to welcome tourists during this time. A July survey of residents from four Hawaiian islands revealed that 67% held a positive view of tourism, yet also concurred that the industry often comes at the expense of local communities.

This paradox is not a novel occurrence: Hawaii's economic dependence on a sector that depletes natural resources, exemplified by instances such as last summer's prioritization of resort landscaping during a drought, has previously triggered anti-tourism demonstrations. Experts advocate for the islands to establish a more diversified economic foundation, and the introduction of a "green fee" paid by tourists could potentially contribute to this goal.

In other developments from Maui, the chief emergency official of Maui County resigned last night due to health reasons. He had faced criticism for his decision not to activate warning sirens as the wildfire rapidly spread.

Lifestyle

Why is everyone getting a tattoo?

This week, a Pew Research Center survey revealed that tattoos are a common choice for Americans, with nearly one-third of the population stating they have at least one tattoo, and 22% indicating they have multiple tattoos.

While the popularity of tattoos cuts across genders, races, and economic backgrounds, there are distinct patterns worth noting:

• A larger proportion of women (38%) have acquired at least one tattoo compared to men (27%).

• Among Americans who identify as lesbian, gay, or bisexual, over half have opted for tattoos (compared to 31% of heterosexual Americans).

• Individuals under the age of 30 are more inclined to have tattoos (41%) compared to those aged 65 and older (13%).

In recent times, prominent corporations have begun revising their tattoo policies as part of their efforts to attract new employees. In the past two years, major companies like Disney, UPS, and Virgin Atlantic have reversed their bans on visible tattoos in the workplace. Even the US Army, which previously prohibited soldiers from having tattoos until 2015, has loosened its restrictions on hand and neck tattoos as of last year.

From a broader perspective, the tattoo industry is expected to flourish, projected to reach $3.9 billion by 2030, as indicated by Fortune Business Insights. Additionally, the tattoo removal sector is also poised for growth, with estimates suggesting it will increase from $478 million in 2019 to $795 million by 2027, as projected by Allied Market Research.