Fri, Aug 18, 2023|Whitney Tilson

Treasury yields and mortgage rates hit new highs; U.S. economic growth outpaces peer countries; Trump-Tied SPAC's Rally at Risk as Sponsors Need More Time; Airbnb's 15th anniversary; Susan and I met John Oliver last night; I'm going to Latvia and Estonia next week

1) The 10- and 30-year U.S. Treasurys are at 16- and 12-year highs, respectively: Treasury Yields Hit New Highs. Excerpt:

Treasury yields continued to climb on Thursday after strong labor market data renewed investor concern about rate hikes.

The 10-year Treasury yield rose to 4.307% from 4.258% on Wednesday, settling at its highest closing level since 2007. The 30-year Treasury yield hit a 12-year high, rising to 4.411%.

The strength of the U.S. economy and strong inflation expectations have driven up yields. The latest reading: The Labor Department on Thursday reported 239,000 initial jobless claims last week, just below economists' expectations. Retail giant Walmart said that its sales grew in its latest quarter, with consumers continuing to spend.

In addition, mortgage rates hit the highest level since 2002: Mortgage Rates Hit 7.09%, Highest in More Than 20 Years. Excerpt:

The average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released Thursday by mortgage giant Freddie Mac.

The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.

The housing market is the part of the economy hit most directly by the Federal Reserve's high-rate policies. The resulting slowdown in refinancing and purchase activity has battered some mortgage lenders, leading to tens of thousands of layoffs in the industry and weighing on economic growth.

In light of such a sharp increase in rates, it's astounding how well stocks are doing – thanks mostly to an exceptionally strong economy that has far outperformed its peers, as this chart from the Financial Times shows:

I think the Fed is finished raising rates and that the economy is going to hang in there (though I expect a modest slowdown), which is a perfect "not-too-hot, not-too-cold" environment for stocks, which is why I remain bullish.

And speaking of the Fed...

My colleague Herb Greenberg has just released a brand-new presentation on something else he sees coming from the Fed – what he's calling a potential "money pivot."

According to Herb, this could drastically shift wealth from the middle class and into the pockets of the very rich. In his presentation, he outlines three steps you can take right now to protect yourself – watch it here.

2) While I removed Digital World Acquisition (DWAC) from my "Dirty Dozen" list of stocks to avoid in my April 14 e-mail, I still think the stock – a SPAC that signed a deal to acquire Trump Media and Technology Group, which owns Twitter copycat Truth Social – is, as I've written many times before, "a toxic piece of garbage."

Sure enough, it tumbled 12% yesterday after it announced that it needed shareholders to grant it another extension – it's fifth – to get the deal done. I think they'll probably get approval, but it adds an element of risk... Trump-Tied SPAC's Rally at Risk as Sponsors Need More Time. Excerpt:

The blank-check company seeking to take Donald Trump's media company public sweetened the proposed deal to keep the former president from walking away. Now it needs to make sure rank – and-file investors stick around, too.

Digital World Acquisition, the special-purpose acquisition company that's been waiting to take over Trump Media & Technology Group for nearly two years, will ask investors on Thursday to push out the deadline for closing the deal by another 12 months. The blank check said in a filing Wednesday evening that the meeting will be held on Sept. 5 and not Aug. 17 as originally scheduled.

That would be the fifth such extension and potentially give it the time needed to surmount the remaining legal hurdles to buying Trump's company, whose main asset is Truth Social, the Twitter look-a-like he uses to communicate with followers.

3) This past Friday was the 15th anniversary of the launch of Airbnb (ABNB), an amazing business – and an open recommendation in our Empire Stock Investor newsletter (if you're a subscriber, click here to read our report on it... if not, find out how to gain immediate access to it – and our entire archive and portfolio of open recommendations – by clicking here).

Here are three tweets I had never seen with the company's history:

4) Susan and I saw a great stand-up comedy show last night starting Seth Meyers and John Oliver, who are truly hilarious!

Afterward, we waited for 45 minutes at the stage door, only to see Seth get straight into his car... But John was the opposite, as he came over and chatted with eight of us – answering questions and taking selfies.

I've shared a number of his Last Week Tonight With John Oliver segments with my readers, including:

5) When I was looking into last-minute flights home from Stockholm last month, I was horrified to learn that one-way fares were over $1,000 – but then discovered that if I booked a round-trip, the price dropped by more than 50%... so I booked a return flight this coming week, which I assumed I wouldn't use.

But being the cheapskate value guy that I am, I didn't want to waste a free flight to Europe – and I'm always looking to see new countries! – so I decided to do a quick three-day trip to visit Latvia and Estonia, the 79th and 80th countries I'll have been to.

I'm going to be meeting both a member of Parliament and the former head of the Olympic luge team in Latvia as well as the former President of Estonia, but if you have any additional suggestions for things to do/see or people to meet in either country, please let me know...

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.