Fact Pack! Pass the S&P

By Hightower Las Vegas and RCG Economics on October 1, 2024

The S&P 500 looks to be heading for a fourth-consecutive quarter of gains — the longest such stretch since 2021:

As of 9/30/24

U.S. government bonds are on track to end September with a first-ever fifth-straight month-over-month gain:

As of 9/30/24

PCE

In last week’s Fact Pack, which followed the Fed’s decision to drop interest rates, co-publisher and Hightower wealth management advisor Mike PeQueen said he’d be watching for Friday’s Personal Consumption Expenditure (PCE) inflation report — noting that it’s the Fed’s preferred measure for their metric. Here’s Mike:

12-month PCE inflation for August was 2.2 percent, just slightly over the Fed’s 2 percent target. The annual rate was 2.7 percent when the price of food and fuel was excluded, and also when excluding components considered outliers (known as the “trimmed mean”). The steady decline in PCE is good news and may well mean another interest cut is on the horizon. See my comments at the end of this newsletter for more, but for the time being consumers have good reason to hold out hope.

Trend since March:

As of August 2024 Source: Dallas Fed

Notably (and speaking of food prices), Nevada recently ranked second in the nation when it comes to weekly grocery costs. According to the Consumer Price Index, the average Nevadan was paying $1,187 more per month to purchase the same basket of goods and services in June 2024 as they were in January 2021.

Only Californians spend more on groceries, according to data collected at Help Advisor:

As of November 2023

Help Advisor data showed U.S. households last November were spending an average of $270.21 per week on groceries.

Helene

Hurricane Helene, which has caused more than 100 deaths across the Southeast, will take a financial toll that may in the end up being one of costliest ever in the U.S. As of Monday morning, AccuWeather estimated damage and economic loss between $145 and $160 billion, putting the storm in the top five:

(Note: Lower estimates do not account for the some of the items AccuWeather includes in its estimates, including lost wages, the cost of canceled flights, and the cost of supply-chain disruptions.)

Most structural and physical losses won’t be covered by insurance. Roughly 4% of Americans have flood insurance, according to the Federal Emergency Management Agency (FEMA). Most of those policies were issued under the federal government’s National Flood Insurance Program — which applies only to homeowners with mortgages in FEMA-designated flood zones. Those zones comprise only one-third of the areas with flood risk posed by extreme rainfall events, according to the Association of State Floodplain Managers.

To get a feel for how many people are affected by east coast hurricanes when they show up, this Census Bureau graphic shows the growth in the most populous Gulf and Atlantic adjacent counties between 2000 and 2019:

Census Bureau data as of 2019

(Note: The Census Bureau’s Business Builder tool allows users to assess potential supply chain disruptions ahead of major storms.)

Helene Slowed Oil Output

Approximately 24 percent of crude oil production and 18 percent of natural gas output in the U.S. Gulf of Mexico was halted in response to the storm, according to the U.S. Bureau of Safety and Environmental Enforcement. Nine oil and gas platforms had been evacuated as of Friday (that’s less than 3 percent of the platforms in the U.S. Gulf of Mexico).

Mention of natural gas and oil platforms in the Gulf of Mexico naturally prompted us to collect some stats (most of which come from Rextag, a data intelligence outfit focused on energy):

The Gulf has more than 230 oil and gas fields.

More than 70 percent of the region’s oil production comes from wells drilled in depths greater than 1,000 feet. The deepest water depth for an oil discovery in the Gulf of Mexico to date is 9,975 feet.

The Gulf is home to 14,773 miles of active offshore gas pipelines — more than 20 percent of which was added in the five years between 2019 and 2023 — with 91 percent in federal waters and the rest in state waters.

Gulf crude oil production trend line since the 1980s:

As of July 2024 Source: U.S. Energy Information Administration

AI Usage

An analysis of steadily increasing AI usage among U.S. businesses shows that 8.3 percent of larger firms (250+ employees) and 6.1 percent of small businesses (1 to 4 employees) report using AI to produce goods or services — and unsurprisingly, small businesses are most likely to use AI to perform human tasks

Graphic:

Source: 2024 Business Trends and Outlook Survey

Notable items from the Census graphic and survey data:

In Nevada, 6.5% of businesses said they use AI—the 3rd largest share among states.

Of those, 24.1% use AI to replace employee tasks.

An additional 8.4% of Nevada businesses said they are planning to adopt AI within the next six months.

Mountain West states tend to have higher rates of AI adoption, along with select Eastern states.

Some of the geographic difference may be driven by regional sector factors — information (20.5%); professional, scientific, and technical (14.9%); and educational services (10.3%) sectors are most likely to use AI, and those industries are common in many states seeing the most AI adoption.

The fields that use AI the least include construction, transportation and warehousing, and accommodation and food services, all of which have less than 2% of firms using AI.

Top 10 states for businesses embracing AI:

Full results of the Tivly analysis include Census Bureau data from all 50 U.S. states. 

Boeing Pension Tension

“We want our defined benefit pension plan back!” may not be as catchy as other loudly shouted strike demands from the 33,000 machinists demanding satisfaction from Boeing, but it’s part of their call for better wages, bonuses, and a restored retirement plan. The workers lost their defined benefit (DB) pension program 10 years ago, and when a restoration or alternate measure was not included in the tentative deal reached last week, 95 percent rejected it.

DB pensions were once a common retirement benefit system but since the 1980s have largely been replaced by 401(k) plans (aka defined contribution plans), especially in the private sector. In a nutshell, a DB pension guarantees the amount an employee will receive upon retirement — and in decades past was often structured as an accrual that resulted in a post-employment annual payout of between 1% and 2% of the final year’s salary for every year of service.

If you worked for a company for 50 years and plan rate was 1%, you would receive 50% of your final annual salary every year for the rest of your life when you stopped working. At the time, it was often considered a good benefit, and helped many workers avoid worrying about funding their retirement.

Traditional DB pensions are still common in the public sector, where around 80 percent of workers have access to them, but more than 88 million Americans participate in a 401(k) with a total of approximately $11 trillion invested in them.

As of 2022

Startup Hubs

San Francisco is still winning:

As of Q2 2024

Happy Belated National EVOO Day

Swerving from AI to agriculture, yes, there is such a thing as National Extra Virgin Olive Oil Day (it was yesterday), thanks to the International Olive Council’s celebration of the culinary mainstay. Originating 6,000 years ago in Egypt, olive oil (and an olive tree branch) was a symbol of peace and prosperity — but modern consumers who buy it regularly have been prospering slightly less.

IMF data show global olive oil prices have tripled just since the start of 2021. Its market price in August was $8,700 per metric ton after hitting an all-time high in January.

Why? Extreme weather events across Europe, including droughts and heatwaves, is affecting supply. Spain, the world’s leading producer (it accounts for about 40 percent of the global market), saw production fall more than 50 percent in 2022-2023 from the prior year.

High prices often prompt the making and selling of fakes — counterfeit couture handbags have been a thing for decades — and olive oil is not immune. Bloomberg reported last week that criminals have been making money on the sale of fake olive oil products packaged with authentic looking labels, and in 2023 “grove robbers” in Greece and other Mediterranean nations cut down and stole heavily loaded olive tree branches and even entire trees to cash in.

Data obtained by the Guardian showed a record number of potential olive oil fraud cases that the EU saw in Q1 2024:

As of Q1 2024

In July, CNN reported that Italian police had seized 42 metric tons of fake extra virgin olive oil worth almost $1 million

Premium EVOO can run as high as $75 per oz – unless it comes from the the oldest olive trees in the world or has gold flakes – but common supermarket brands in the U.S. average around $0.67 per oz. If you like olive oil but don’t want to break the bank, our editor, who enjoys cooking, recommends Carapelli Original EVOO or Bertolli EVOO. (Editor’s note: When selecting olive oil, be sure to check the harvest date on the back of the bottle. The fresher the better — and if it’s older than a year or there is no harvest date, don’t buy it.)

If you pay the big bucks for premium EVOO and want to see how your favorite brand ranks, check out the EVOO World Ranking site (a nonprofit endeavor) for the most-awarded.

Culinary Commodities

News of the jump in olive oil prices naturally prompted us to research price points for the world’s scarcest and thus most expensive foods:

Kobe beef — $25 to $50 per oz. and as much as $75 an oz. if enjoyed at fine restaurants. Just 3,000 to 4,000 head of Kobe cattle come to market each year.

Iberico ham — The cured, aged meat comes by way of Iberian free-roaming pigs with an acorn-heavy diet and costs between $38 and $265 per oz. or between $500 and $4,500 for a 13 to 17 lb. leg.

White truffles — A single oz. generally ranges from $100 to $250.

Matsutake mushrooms — Roundworm problems with the red pine trees near which they grow in Japan, China, Korea and the Pacific Northwest have driven prices as high as $1,000 a pound.

Densuke watermelon — Grown in mineral-rich, volcanic soil on the island of Hokkaido in northern Japan, the distinct black rind and bright red center sets apart the 10,000 melons grown annually and sold for around $250 each.

Beluga caviar — U.S. farm-raised beluga can be had for about $800 an oz., but prices for the real thing range from $200 to $300 per oz.

Saffron — Harvested from flowers, the threadlike red-orange stigmas sell for $10 to $20 per gram. Most of it comes from Iran, Afghanistan, Spain, and India, but there are a few growers in California, Vermont, and Pennsylvania (and no doubt in private gardens across the country).

Hay is for Horses

Nevada doesn’t grow any crops that make anyone rich, but it does sell hay and have a higher per-acre yield (4.20 tons) than the average U.S. hay grower (3.35 tons):

Source: U.S. Department of Agriculture

Beyond Meat, Indeed

Over the past few years, plant-based meat substitutes have been in the public eye, with brands including Beyond Meat succeeding in getting products that simulate chicken, beef, and pork onto grocery store shelves across the country.

The U.S. market has started to decline, though — sales volume for meat substitutes declined by eight percent between 2021 and 2023, and the latest Beyond Meats financials show a struggling company.

According to data from Statista’s Market Insights, plant-based meat substitutes accounted for a mere sliver of the U.S. meat market last year. Not counting lab-grown meat or insect-based meat alternatives (we are going to politely decline to research that term and move on), meat substitute sales amounted to $1.4 billion in 2023, while sales of fresh and processed meat added up to almost $124 billion.

Tiger Nation

We end this week’s Fact Pack with an oddly compelling fact:

An estimated 7,000 tigers live in private facilities across the US, far outnumbering the 5,000 remaining in the wild.

Some are descendants of tigers brought into the country in the early 1900s for zoos and circuses—and for the first time, researchers have collected and compared the DNA of 138 privately owned captive tigers with that of wild tigers to learn more.

Those captive tigers are a genetic mishmash of tiger populations from across Asia, according to a study published last week in the Proceedings of the National Academy of Sciences.

For those of you about to run an internet search for “where to buy a tiger,” we feel it is incumbent upon us to note that The Big Cat Public Safety Act of 2022 made it illegal for people to own, buy, sell, or transport big cats including tigers, lions, jaguars, and cheetahs.

But some tiger owners were grandfathered into the law and can continue to profit off of the animals they have, says Ellie Armstrong, a conservation genomicist at the University of California, Riverside and lead author of the new study.

On the Horizon

Mike PeQueen: Friday’s unemployment report will be important as it is the first since the Federal Reserve Board decided to cut rates — and one of the last two big jobs reports before election day. While there are no dramatic expectations for this report, if it comes in well above or below the norm, it could make news.