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AI Hype Takes a Nosedive

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substack.com

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joshbelanger@substack.com

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Wed, Jul 24, 2024 11:35 PM

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Plus: Credit card delinquencies surge, EV demand falters, real estate markets tremble ? ? ? ?

Plus: Credit card delinquencies surge, EV demand falters, real estate markets tremble ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more [AI Hype Takes a Nosedive]( Plus: Credit card delinquencies surge, EV demand falters, real estate markets tremble [Josh Belanger](joshbelanger) Jul 24 joshbelanger   [READ IN APP](   Investors are rattled after today's biggest drop in the S&P 500 since December 2022. The mass exodus from the "Magnificent 7" AI stocks led to a 2.31% fall in the index, while the Nasdaq plunged 3.59%. This snapped the S&P 500's longest streak without a 2% drop since the global financial crisis in 2007. Despite being up 14% year-to-date, today's plunge has done significant structural damage and shaken investor confidence. Buckle up, it's going to be an interesting ride! Credit Card Delinquencies Hit 12-Year High Why it matters: Consumer debt is rising, indicating potential economic stress as more Americans struggle to pay their credit card bills. The Details: The share of credit card balances 60 days past due hit 2.6% in Q1, the highest since 2012, according to [Bloomberg](. This rise follows a low of 1.1% in 2021, bolstered by pandemic-era support. Zoom In: 30-day and 90-day delinquencies also climbed, showing broader issues in consumer finances. Big Picture: Economists are closely watching these trends amid high interest rates and depleted pandemic savings. This could signal trouble for lower-income consumers. Bottom Line: Rising delinquencies could slow economic growth and increase the risk of a recession. EV Demand Wanes: GM and Tesla Feel the Pinch Why it matters: Weakening demand for electric vehicles (EVs) could slow the transition to greener transportation. The Details: General Motors is delaying the rollout of a new Buick EV and pushing back the opening of an EV truck factory due to [lower-than-expected demand](. Similarly, Tesla’s profit dropped 45% as sales cooled and competition intensified ([WSJ](. Zoom In: GM's EV delay follows Ford's shift back to combustion-engine vehicles in Canada. Tesla's earnings missed Wall Street expectations, impacted by a price war among EV makers. Big Picture: The EV market, once booming, is now facing hurdles as consumer enthusiasm wanes and traditional automakers double down on gas-powered vehicles. Bottom Line: Slowing EV demand could hinder efforts to reduce carbon emissions and delay the adoption of sustainable transportation options. Real Estate Rollercoaster: Defaults Rise and Prices Soar Why it matters: The commercial and residential real estate markets are showing signs of strain, impacting investments and affordability. The Details: Blackstone Mortgage Trust cut its dividend by 24% due to [rising defaults and falling property values](. Meanwhile, [U.S. home prices hit a record high]( in June, making housing less affordable. Zoom In: Commercial mortgage REITs like Blackstone are under pressure from higher interest rates and defaults. Home sales are down as high prices and mortgage rates deter buyers. Big Picture: Real estate stress on both commercial and residential fronts indicates broader economic issues. High home prices and reduced dividends point to affordability and investment challenges. Bottom Line: The real estate market's struggles could slow economic recovery and highlight deepening financial pressures on businesses and consumers. Quick Sizzles: - Insurers Brace for IT Outage Claims: Last week's worldwide IT outage, triggered by a CrowdStrike update, could lead to billions in insurance claims as industries from airlines to retailers recover. - UPS Slashes Prices Amid Weak Profits: UPS cuts prices to regain customers after a prolonged slump. Q2 showed the first U.S. package volume growth since 2021. - Google’s Ad-Revenue Growth Slows: Google’s ad sales growth slowed in Q2, affecting Alphabet’s primary revenue source. Increased AI and infrastructure spending contributed to a cautious Q3 outlook. - US Companies Drop Diversity Targets: AMD and Motorola are among companies removing diversity criteria from executive bonuses due to conservative pressure. - China Cuts Rates to Boost Economy: China lowered key lending rates to support the economy amid a property slowdown and weak consumption. - Boeing’s Unfinished Planes: Parts shortages leave Boeing with about 200 unfinished planes, impacting cash flow and production. - Traders Bet Big on Turkish Lira: Hedge funds pour billions into the Turkish lira, attracted by high interest rates, but the economy remains vulnerable to sentiment swings. Option Sizzle: Today's option volume hit 57.1 million contracts, 18% above recent average levels, with calls leading puts 6 to 5. Here are stocks with notable unusual options activity: - Bearish Flow in D R Horton ($DHR): - 11,471 puts traded, or 2x expected. - Focus on 170 strike in 08/2/24 and 08/16/24 expirations. - Bearish Flow in Vale ($VALE): - 34,477 puts traded, or 3x expected. - Most active: 12 strike in 01/17/25 expiration. - Bullish Flow in Sanofi ($SNY): - 4,743 calls traded. - Active strikes: 55 and 52.50 calls in 08/16/24 expiration with opening buyers. You’re currently a free subscriber. Upgrade for the full experience and receive exclusive special reports like "How to Get Rich in The Stock Market" and "Congress' Secret Stock Playbook: The Top 5 Power Picks Revealed”. [Upgrade to paid](   [Like]( [Comment]( [Restack](   © 2024 Josh Belanger 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()

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