November 16, 2022

Today's Topics

Hello! So, it’s official: Donald Trump announced his 2024 run for president to make America great again (again). First stop? Mars, apparently. Today we’re exploring:

  • Maxing out. Credit card debts are rising in the US.
  • Oatly. The alt milk makers are struggling to meet their lofty expectations.
  • Buffett's buying. Berkshire Hathaway is investing again.
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American household debt has hit a new high, with the collective tab rising $351bn in the latest quarter, taking the total owed by households to more than $16.5 trillion. There’s not many comparisons to give that number context, but its roughly 5x the size of the UK economy, or just shy of 7x what Apple is worth.

Credit or debit?

Though mortgages are still by far the biggest source of debt, the collective credit card balance was the category that grew fastest on a relative basis. All told, household credit card debt grew 15% year-on-year, the largest annual jump for more than 20 years. A group of Federal Reserve researchers, hardly known for their salacious exaggeration, said that the increase “towers over the last 18 years of data”.

With over 500 million accounts open in the US, credit cards are a staple of consumer spending — more than 190 million Americans have at least one account, and 13% reported having five or more cards.

The concern for the economy is that consumers will find themselves owing more, at a higher interest rate, and may struggle to make payments. The good news is that, per The New York Fed, delinquency rates so far have only risen very modestly — and in a historical context remain low — suggesting that people are making payments on time.

The oat bloat

Alt milk company Oatly saw its share price sink some 17% this week after the plant-based beverage maker reported a disappointing third quarter.

There was a lot to digest from Oatly, much of which left a sour aftertaste. Losses were wider than expected, sales weren’t up to scratch, and the company announced that they’d be becoming a leaner organization, with layoffs likely to come in the future. At its peak, Oatly was worth $17bn, today the company's market cap. is closer to $1bn.

Plant-based growth

Oatly’s woes come even as their key ingredient stays strong in the battle for top spot in the alt milk game. Currently, interest in almond is still top for Google searchers across the world, though oat has quickly become buzzy, leaving soy and rice behind back in 2020.

Indeed, the wider alt milk industry around Oatly is in pretty good health. Last year, the Good Food Institute reported that plant-based milk sales hit $2.6bn in the US, up 33% in comparison to 2018.

Research shows that the dairy industry takes up to 10x as much land and 2-20x as much water as plant alternatives. With the world growing more climate-conscious, many are turning to nuts and oats to top up their coffees and splash in their cereal.

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Berkshire buyin'

On Monday, iconic investor Warren Buffett announced that his firm Berkshire Hathaway had purchased a $4.1bn stake in Taiwanese chipmaker TSMC during the last few months. Known to have missed the early wave of investments in tech, passing early on Google and Amazon, Buffett and co. are now — selectively — embracing the industry. A 2016 investment in Apple has worked out spectacularly well, with the iPhone maker now Berkshire’s largest holding, equivalent to a 5.5% stake in the company.

Although notable, the TSMC investment still barely makes a dent in the holding company’s 12-figure outstanding cash pile. Berkshire’s $108bn is an amount that, at current market prices, could theoretically buy Lululemon ($45bn), Snap ($18bn), Dominos Pizza ($18bn), Spotify ($14bn), Peloton ($5bn), Lyft ($4bn) and soccer team Manchester United ($4bn). Or, if Buffett wanted to put all of his eggs in one basket, he could go for PayPal ($102bn), Target ($87bn)... or two-and-a-bit Twitters (which seemingly go for $44bn a piece).

Slow and steady wins the race

After years in which high-growth, expensive, companies have been in vogue, Buffett’s unflashy value investing strategy might begin to identify bargains again, as stock markets have slumped so far this year.

Indeed, after 40+ years of outperforming, Berkshire Hathaway is still winning. Over the last 12-months, shares in BRK are up 10%, whilst the S&P 500 is down 14% over the same time period.

More Data

40 states are fining Google a total of $391m. That's the largest-ever US consumer privacy settlement, but is only equivalent to about ~13 hours of revenue for the tech giant.

• Interesting Guardian exploration of the worrying numbers behind the Qatar World Cup.

• The results are in — Olivia and Liam are still the most popular baby names for 2022.

Hi-Viz

• Another sign of slowing Chinese economy as Alibaba's Singles Day sales slow.

• You are 1-in-8-billion — cool interactive visualization putting the global population in context.

Quick cut: Jeff Bezos has pledged to give away the majority of his fortune during his lifetime, but who tops the list of most-generous American billionaires?

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