This week in charts
Housing
S&P 500
Investor behaviour
Market to be Short Oil From 2025 Onwards, Occidental CEO at Davos
The oil market could be heading for a supply crunch from 2025 onwards as oil exploration fails to keep pace with demand, Occidental Petroleum Chief Executive Vicki Hollub said on Tuesday.
Hollub, who spoke on the sidelines of the World Economic Forum in Davos, said U.S. WTI crude prices could trade in the $80-$85 a barrel range from 2025. Prices averaged about $78 a barrel last year.
“In the near term, the markets are not balanced; supply, demand is not balanced,” Hollub said, adding that: “2025 and beyond is when the world is going to be short of oil”.
Hollub said that from the mid-1950s to the late 1970s, oil companies were finding around five times as much oil as was used, a ratio that has steadily declined to about 25% in 2023.
She said that from 2012, U.S. oil companies moved away from exploration and focused on tapping shale oil reserves, which have a much shorter lifespan than conventionally produced oil.
She added that she expected energy transition scenarios will have to be adjusted to accommodate for more oil exploration.
Baby boomers dominate America's housing market. Members of the "Me" generation own nearly $19 trillion worth of US real estate — more than double the amount held by millennials and about $5 trillion more than Gen Xers. Their massive land grab has continued well into their twilight years as they've used their mountains of savings and accumulated equity to edge out younger buyers.
But as the generation ages, its vast real-estate portfolio poses a question: What happens when boomers die?
By 2040, the population of 80-plus-year-olds will have more than doubled from today, according to projections from the Census Bureau. In the years leading up to that, boomers will begin to leave their residences as they die, move into nursing homes, or shack up in granny flats. Some economists have predicted that a "silver tsunami" of aging Americans will leave millions of homes up for grabs, lowering prices and unlocking opportunities for younger generations used to fighting for table scraps. Others have likened the phenomenon to a glacial shift — slow, predictable, and unlikely to sway home prices as much as 20- and 30-somethings might hope.
Regardless of the degree to which boomers' exit shakes up the market, the changing of the guard will leave one generation in the driver's seat: Gen Z.
Most Gen Zers will be in their prime homebuying years at this crescendo — perfect timing to take advantage of the increase in supply. Since many boomers are downsizing later in life, their leftover inventory could include many of the kinds of starter homes that are perfect for younger households and scarce in today's new housing stock.
Despite the numerous efforts to forecast its moves, the real-estate industry is wildly unpredictable; good luck guessing where mortgage rates will be in 10 years or how many new homes will hit the market. Demographic patterns, on the other hand, follow a more certain path — it's much easier to estimate when generations will start to fade away. Historical data tells us we can expect boomers to begin aging out of their homes after they reach 80, Odeta Kushi, the deputy chief economist for the title company First American, told me. Given that boomers are currently between 60 and 78, Kushi said, we should see a rise in the number of boomers leaving their homes around 2030. Gary Engelhardt, a professor of economics at Syracuse University who has studied the fate of boomers' homes, told me he expects the bulk of the boomer generation to age out of the market between 2030 and 2040.
Millennials, born between 1981 and 1996, have had a pretty rough go in the housing market. They started their careers in the wake of the Great Recession, took on far more student debt than their predecessors did, and were left to contend with a housing crunch caused by a slowdown in homebuilding. They faced competition not just from their peers but from baby boomers, who've been far more active buyers later in life than previous generations were. Left to dream of better days ahead, millennials have hoped that boomers' eventual exit will unleash an onslaught of vacant homes and lower prices enough for them to hop on the ladder. But once again, the timing looks like it won't work out in their favor.
Boomers' passing won't have a simple trickle-down effect. Not all members of subsequent generations will want to live where baby boomers have settled down, and a lot of these homes will require updates to appeal to younger buyers.
S.Korea to scrap capital gains taxes on financial products
In a new year's policy report to President Yoon Suk Yeol, the Financial Services Commission (FSC) said that all capital gains derived from securities and derivative products will be exempt from taxes, pending revisions to the relevant laws.
The government had planned to tax 20-25% of capital gains from stocks amounting to 50 million won ($37,000) or more. The tax was also supposed to apply to investment income of more than 2.5 million won from other financial products such as bonds, funds and derivatives.
Currently, the taxes apply only to top shareholders. The regulation was scheduled to begin in 2023, but was postponed by two years to start in 2025.
The Yoon administration will cut taxes on securities transactions made on the Kospi and Kosdaq markets to 0.18% this year and 0.15% next year, compared to 0.20% in 2023.
The Ministry of Economy and Finance estimated the tax cuts for securities trading will reduce the country’s tax revenue by about 200 billion-300 billion won.
To expand the base of retail stock investors, the government will also boost tax benefits for individual savings accounts (ISAs) and raise the limits on the amount of money they can put in the accounts per year.
To enhance shareholder value, the government is pushing board directors to take more responsibility for the damage they may cause by misappropriating the company’s business opportunities.
It will also introduce electronic voting systems to help minority investors more actively participate in shareholder meetings and amend regulations to ensure that the interests of minority shareholders are properly reflected in the company’s decision-making process.
To prevent top shareholders from securing undue control of a company to be spun off, the government will revise laws to ban the spun-off unit from placing them with new shares.
They will also be subject to stricter public disclosure rules: they must announce shareholding changes and reveal the purpose of their share sales when they occur.
Coinbase Compares Buying Crypto to Collecting Beanie Babies
The biggest US crypto exchange made the comparison Wednesday in a New York federal court hearing. Coinbase was arguing for the dismissal of a Securities and Exchange Commission lawsuit accusing it of selling unregistered securities.
William Savitt, a lawyer for Coinbase, told US District Judge Katherine Polk Failla that tokens trading on the exchange aren’t securities subject to SEC jurisdiction because buyers don’t gain any rights as a part of their purchases, as they do with stocks or bonds.
“It’s the difference between buying Beanie Babies Inc. and buying Beanie Babies,” Savitt said.
The question of whether digital tokens are securities has divided courts. Another Manhattan federal judge ruled in July that exchange sales of Ripple Labs XRP token weren’t subject to SEC jurisdiction, while yet another judge that same month reached the opposite conclusion in the regulator’s case against Terraform Labs Pte.
Coinbase is asking Failla to follow the Ripple decision in dismissing the SEC’s suit. The judge ended the hearing without ruling.
Beanie Babies, which were the subject of a 1990s collecting boom and bust that some have likened to crypto, had come up earlier in the hearing when Failla expressed concern that the SEC’s position might lead to the regulation of collectibles. Lawyers for the government responded that buying an item like a baseball card or a figurine doesn’t mean that someone is buying a stake in the enterprise that makes such items.
But they said that wasn’t the case with tokens sold on Coinbase.
“When they buy this token, they are investing into the network behind it,” SEC lawyer Patrick Costello said. “One cannot be separated from the other.”
The SEC sued Coinbase in June, alleging that the exchange skirted its rules for years by allowing users to trade numerous crypto tokens that were actually unregistered securities. The regulator points to a 1946 Supreme Court decision defining a security as an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
This week’s fun finds
Hot sauce reviews – an Apollo mission with some foreign content
This week the EdgePoint hot sauce reviewers tried a bottle of MonoLoco (Crazy Monkey) that Frank brought us from Costa Rica. The label warned that one drop is sufficient for 9.5 people.
We also tried the second-hottest iteration of Hot Ones Last Dab – Apollo, named after its primary pepper ingredient.
Reviews – Monoloco
- “It just tastes like pepper.”
- “Why are there seeds in it?”
- “Luke, NOOOOOO.”
- (30 minutes later): It’s still burning
Notably, one person just stared into the distance and didn’t say anything for a while after trying it.
Reviews – Last Dab – Apollo
- “It’s not bad as I thought it would be. But maybe because I can only taste the other one still.”
- “I think the other Last Dab was hotter.”
- “Mostly just spice, not a lot of flavour.”
The tyranny of the algorithm: why every coffee shop looks the same
In 2016, I wrote an essay titled Welcome to AirSpace, describing my first impressions of this phenomenon of sameness. “AirSpace” was my coinage for the strangely frictionless geography created by digital platforms, in which you could move between places without straying beyond the boundaries of an app, or leaving the bubble of the generic aesthetic. The word was partly a riff on Airbnb, but it was also inspired by the sense of vaporousness and unreality that these places gave me. They seemed so disconnected from geography that they could float away and land anywhere else. When you were in one, you could be anywhere.
My theory was that all the physical places interconnected by apps had a way of resembling one another. In the case of the cafes, the growth of Instagram gave international cafe owners and baristas a way to follow one another in real time and gradually, via algorithmic recommendations, begin consuming the same kinds of content. One cafe owner’s personal taste would drift toward what the rest of them liked, too, eventually coalescing. On the customer side, Yelp, Foursquare and Google Maps drove people like me – who could also follow the popular coffee aesthetics on Instagram – toward cafes that conformed with what they wanted to see by putting them at the top of searches or highlighting them on a map.
To court the large demographic of customers moulded by the internet, more cafes adopted the aesthetics that already dominated on the platforms. Adapting to the norm wasn’t just following trends but making a business decision, one that the consumers rewarded. When a cafe was visually pleasing enough, customers felt encouraged to post it on their own Instagram in turn as a lifestyle brag, which provided free social media advertising and attracted new customers. Thus the cycle of aesthetic optimisation and homogenisation continued.
As years passed, however, I came to realise that AirSpace was less of a specific style than a condition that we existed in, something beyond a single aesthetic trend. Like all fashions, the visual style of that moment in the mid-2010s decayed. The white subway tiles that were once cool began to look too cliched, and they were replaced by brightly coloured or more textured ceramic tiles. The financial crisis-era, rough-hewn style of high Brooklyn lumberjack, with its repurposed industrial furniture, gave way to careful, Scandinavian-ish mid-century modernism, with spindly-legged chairs and wood joinery. In the late 2010s, the dominant aesthetic grew colder and more minimal, with cement countertops and harsh geometric boxes in place of chairs. Accoutrements such as lights made from rusty plumbing fixtures were left behind in favour of houseplants (succulents especially) and highly textured fibre art, evoking west coast bohemia more than hardscrabble New York City. The association with Brooklyn gradually faded out – after the pandemic, Brooklyn itself was seen as less desirable than downtown Manhattan – and the generic style was less associated with a place than with digital platforms such as Instagram and the insurgent TikTok. In a 2020 essay, the writer Molly Fischer labelled it “the millennial aesthetic”; it was also embraced by startup companies such as the mattress seller Casper and the coworking space chains WeWork and The Wing. Fischer asked: “Will the millennial aesthetic ever end?”
