January 12, 2025
Good afternoon. Larry David would be furious if I started out this newsletter with a Happy New Year more than 2 weeks into 2025, so here is a hope the year is off to a strong start. We at mogul are very excited for the year to come, and have some exciting announcements coming in the next few weeks. So stay tuned and happy investing!
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- Alex Blackwood
âDripped out Zuck swerves right - Donning a $900k watch in a video posted to instagram, Mark Zuckerberg, CEO of Meta, announced Meta would be ending professional fact-checking on Facebook and Instagram. Besides the $1mm pledged by Zuck to the Trump inaugural fund, Zuck cozied up to President-Elect Trump by adding Trumpâs longtime friend and CEO of UFC, Dana White to Metaâs board.
đ¤ From Jensen Huang to emotional support robots - The Consumer Electronics Show just wrapped up in Vegas. Jensen Huang opened up with the keynote, and all major consumer tech companies got a chance to showcase their helpful and not so helpful inventions to tech enthusiasts. Check out some of the major gadgets, gizmos and news here.
đ Dance videos or WMD - The Supreme Court of the United States will rule on whether or not Tik Tok will have to shut down or find new owners within the US by January 19th. The Justice Department has stated the parent company to Tik Tok, Bytedance, is effectively an arm of Chinaâs Communist government, which poses a security threat. Pretty crazy that 2 of the 3 major highlights this week came from social media platformsâŚcrazy or scary, whoâs to say.
I want to start out this section by stating, our thoughts and prayers go out to those affected by the fires in Los Angeles. None of what we are going over in any way is meant to downplay the outrageous personal and economic toll the fires have taken. In this section, we are merely looking to provide information around what happened, what is the impact from a macro perspective, and what this means going forward.
A brush fire on Tuesday went on to start one of the most destructive fires in history. The fire started in the Pacific Palisades of Los Angeles. Within 2 hours, the fire went from brush fire to spanning more than 200 acres. Through a mix of massive gusts of wind up to 100mph and dry conditions, the fire spread to several regions and has destroyed more than 12,000 structures.
While still too early to tell, one JPMorgan analyst has estimated total economic losses at close to $50 billion.
Everyone tells you that insurance is to blame, but nobody understands why. Well, here is a brief overview on the problem with insurance in this circumstance:
Private Insurance providers like State Farm and All State dropped coverage in California because of an issue with California regulation around insurance pricing.
Insurance companies make money by charging people premiums. The premiums are meant to protect individuals when things go south. In the meantime, Insurance companies take those premiums and invest them into assets and purchase Reinsurance. The Reinsurance companies effectively do the same thing, but their customers are the Insurance companies.
In most states, Insurance companies are able to charge more on the premiums to cover the cost of reinsurance. In California, Insurance companies are not able to pass along the Reinsurance premium costs and cannot utilize catastrophe modeling to predict a propertyâs future risk. Instead, Insurance companies can only use historical losses on a property.
As a result, in California, Insurance companies could only collect $1 in premiums for what would be a $1.09 expense. The loss would be massive, and Private Insurance companies left the state.
The state of California has an insurer called the FAIR Plan or Fair Access to Insurance Requirements Plan. It is a state-mandated insurance program, but it is severely undercapitalized. The FAIR plan has $5.9 billion in Palisades exposure with only $700 million in cash on hand to pay claims.
If the FAIR plan fails, which is looking to be the case, other insurance companies in California will have to step in to shoulder the burden. This will lead to ramp up in insurance costs to cover the losses from the wildfires.
This is all based on the current situation, but government intervention may occur at the Federal level. With a change of office and the wildfires far from contained, we wonât know the full answer for quite some time.
On Friday, the Labor Department announced that the U.S. economy added 256,000 jobs in December, well above the 155,000 jobs analysts had predictedâŚcrap.
The Fed will lower interest rates in the event of 1 of 2 things. 1) Inflation must return to the 2% healthy level. 2) The labor market must soften.
The Fed uses the interest rates as its primary levels to stimulate or slow down the economy. The economy is doing very well it seems, with unemployment at 4.1%. The only problem is: interest rates are pretty high right now.
With interest rates high, cost of borrowing goes up and cash becomes more expensive. This means growth slows down.
Because the economy remains so healthy, the jobs report all but eliminates the chance of an interest rate cut at the next Fed meeting and significantly lowers the chance of one at the following meeting.
All this is to say, the economy is doing great, but damn, could it slow down a tad?
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To be honest, I had no idea this was a book until I read the previously reviewed Foundation Series by Sci-Fi great Isaac Asimov. Craving more by the legendary author, I turned to his book that sparked the Will Smith classic movie by the same name. The book takes similar premises from the Foundation series and blends them into the origin story of Robots on earth (of course, this is fictional). Told through flashbacks, the book explores the push and pull society has with robots that become more powerful.
With the AI revolution currently upon us, the novel weaves a story that makes you think about when robots surpass humans and how to instill rules to prevent complete domination. We as humans are flawed, and if we allow robots to surpass usâŚWell, just read the book and write to me your thoughts.
â 4.81 / 5.0 in my book (no pun intended)
Potbelly started in 1977 as a small antique store on Lincoln Avenue in Chicago. To boost sales, the original owner began offering toasty warm sandwiches to customers. Soon, people who had no interest in antiques were stopping by to enjoy the delicious sandwiches, homemade desserts and live music featured in the shop.
Written by Alex Blackwood & Thomas Horcel
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