Fund manager AdvisorShares said that it will shutter its Poseidon Dynamic Cannabis, a leading marijuana-focused ETF, on the New York Stock Exchange. Its closure coincides with a growing disinterest in weed assets among investors. Even though nearly half the country has legalized pot, the federal government hasn’t, creating a legal and bureaucratic headache for stakeholders. Major banks including JPMorgan Chase don’t allow brokerage clients to invest in cannabis stocks, and Mastercard won’t even let people buy marijuana products with its debit card. For NYSE, it’s the last dance with Mary Jane.
Morning Brief
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It’s been a summer-long shopping spree.
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A storm is brewing for ESG.
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TV is still popular, just not television.
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Retail
Americans Just Can’t Stop Shopping
(Photo by Erik Mclean on Unsplash)
There’s nothing a little retail therapy can’t solve, right?
US retail sales rose by 0.7% in July versus the month prior, beating consensus forecasts and following two prior months that saw upward revisions, according to Department of Commerce data released Tuesday. Then again, given the one-two economic punch of a hot job market and rising wages, perhaps the nationwide shopping spree is less therapeutic and more celebratory.
Confessions of the Shopaholics
The key to avoiding a recession may just be good vibes, and this summer has brought them in spades. July marks the fourth straight month of increased consumer spending, as well as the fastest month-over-month increase of the year. And with the 0.7% increase in retail sales outgrowing the 0.2% increase in consumer prices, US spending is outpacing inflation — which means we’re on schedule for a rare economic soft landing that tames inflation without triggering a recession.
“Real GDP growth could accelerate to a 3% increase,” Stephen Stanley, chief US economist at Santander US Capital Markets, told Bloomberg Tuesday. That would top the solid 2.4% increase seen last quarter. What’s more, a breakdown of spending categories shows the Fed’s interest-hiking campaign is applying downward pressure almost exactly where it intended:
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Sales increased in nine of 13 retail categories last month, according to the data. Sectors that saw a sales decrease include auto dealers, electronics, and furniture stores — which tend to be highly sensitive to rising borrowing costs.
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But shoppers beefed up spending everywhere else, including bars and restaurants, back-to-school expenses like clothing and books, as well as groceries and hardware stores. It’s the little things that count in life.
“Despite the additional pressure put on the Fed, Americans’ sustained ability to spend speaks to the strength of the US economy in the face of global economic challenges,” Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office, told CNBC.
Primetime: Underpinning the entire trend: a nearly 2% spike in online shopping. One could thank Amazon for that — its 48-hour Prime Day summer promotion is estimated to have seen upwards of $13 billion in revenue, or more than 10% of July’s total e-commerce sales. But as Amazon soars, as usual, its institutional retail competitors continue to flounder. Home Depot is forecasting its first yearly revenue decline since 2009 (another point scored for Jerome Powell). Meanwhile, Target is expected to report its first quarterly sales decline in four years on Wednesday. Even in a nation of spenders, brick-and-mortar players can’t catch a break.
– Brian Boyle
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Regulation
The SEC is Zeroing In on ESG
ESG greenwashers better clean up their act.
The Financial Timesreported Tuesday that the Securities and Exchange Commission has been in touch with a few fund managers, in some cases via subpoena, to find out more about their environmental, social and governance (ESG) disclosures. It signals the regulatory snare is just starting to tighten on ESG stocks.
Gotta Get That Green
ESG investment appeals to funds for a couple of reasons. First, it’s a good PR look and grants a veneer of ethics. Secondly, and perhaps most importantly, funds can charge higher fees for it. When it comes to standards, ESG has had a wild west quality.
“Until recently, investment houses have been able to determine what qualifies as an ESG fund according to their own terms,” Dr. Ciara Hurley, a fellow at the London School of Economics, told The Daily Upside. She added that while some funds are rigorous in their assessment, others simply “channel capital towards companies that meet certain conditions, which may not be too difficult to meet.” Shifting goalposts isn’t uncommon in the ESG world; even cigarette-maker Philip Morris has tried to position itself as an ESG stock.
According to asset management industry lawyers who spoke to the FT, the SEC appears to be focusing on a couple areas for enforcement:
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Regulators are specifically looking at traditional funds that pivoted to primarily ESG funds, as well as entities which have a presence in both the US and Europe but disclose different amounts of information in each region.
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The US isn’t the only government keeping an eagle eye on ESG. In June, the EU proposed new rules to let it peer over the shoulders of ESG rating agencies, to ensure they’re correctly auditing stocks for their worthiness.
A Less Verdant Amazon: While ESG is regulated on a largely voluntary basis at the moment, there are some entities keeping score of just how environmentally friendly companies are versus what they claim to be. The Science Based Targets initiative, which is UN-backed and parses companies’ claims about hitting net zero, removed Amazon from its nice list this week, a move which casts a dark cloud over Amazon’s status as an ESG stock.
– Isobel Asher Hamilton
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SPONSORED BY PURE GREEN FRANCHISE
This Juice Bar Franchise Is Making (And Printing) Green
If you think green juice is good for your health, just wait until you see how great it can be for your wallet…
This juice bar been named one of Entrepreneur Magazine’s top new and emerging franchises – they already have 100+ stores operating and are on track to open 1,000 total – and they have the finances and connections to back it up:
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The average Pure Green store generates $519,735 in gross profit
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The entire franchise brings in $1M+ monthly
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They work with over 50 pro sports teams from the NFL, MLB, NBA, and more (not to mention Disney and SpaceX)
The best part? They’re showing no signs of slowing down. Shortly after raising $1,070,000 in their previous equity crowdfunding round, Pure Green’s valuation tripled.
Now, they’re back with another fundraising round to help support their growth to 1,000 stores in the U.S., and Daily Upside readers get an exclusive opportunity to get in on the fun right here:
Americans are finally watching less television — only because they’ve switched to streaming.
Nielsen data from July show that traditional TV accounted for less than half of all US viewing time for the first time ever. But the shows most people are watching on services like Netflix and Disney+ are the ones made for traditional TV.
57 (Million) Channels (And Nothin’ On)
In July, cable and broadcast TV represented 29.6% and 20% of total US viewing time, respectively, while streaming services accounted for roughly 40%. The remaining piece of the pie was taken up by DVDs, video-on-demand, and gaming.
And while the number of US households with pay-TV packages has fallen 25% to roughly 75 million in the past decade, Americans still want the content:
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Netflix and Peacock subscribers spent a record 18 billion minutes watching Suits, a courtroom procedural that ran on USA Network, likely a product of America’s obsession with the royal family and Meghan Markle being a cast member.
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In a distant second place, streamers also watched 5 billion minutes of Bluey – a cartoon about an Australian dog that premiered on the Disney Channel.
You won’t hear actors and writers applauding, since they often receive little in residuals from streaming success — one of the reasons they’re on strike. Writer Ethan Drogin said one of his Suits episodes earned him a check worth less than $300.
Not So Different You and I: While streamers create loads of original content, they also spend tens of billions to acquire popular TV shows, films and live sports. And to spark subscriber growth, platforms generally begin with low-cost fees.
That’s changing, though. An analysis from The Wall Street Journalfound that ad-free streaming plans go up in price roughly 25% per year. To avoid the upcharges, viewers can switch to plans with ads, which is great for streamers but strays from their original ad-free selling point. It’s getting to the point where the wall is breaking down so much between TV and streaming that the only clear difference between the two is who you’ll pay in the future.
– Griffin Kelly
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Extra Upside
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Recession premonition: Michael “Big Short” Burry is betting on a Wall Street crash.
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Service fee woes: Travelers claim Ryanair charged then $140 just to print their tickets.
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Not a bullseye: Consumers on a budget means Target likely to post first quarterly revenue drop in six years.
