Hi, The Investor’s Podcast Network Community!

Mark Zuckerberg just threw a knockout punch with his “Twitter killer” Threads app before even stepping into the ring with Elon Musk 🥊

Whether the punch lands is something we’ll be keenly watching in the coming weeks — let the battle of the billionaires commence.

More on that below.

— Weronika, Shawn & Matthew

Here’s the rundown:

Today, we’ll discuss the three biggest stories in markets:

• How Mark Zuckerberg’s new app poses a threat to Twitter
• The Russian ruble’s rocky year
• Homebuilder stocks soar after rough 2022

All this, and more, in just 5 minutes to read.

IN THE NEWS

📱 Meta Presents Threads App, a Threat to Musk’s Twitter(Reuters)

Instagram, owned by Meta, has introduced Threads, a new app aimed at competing with Twitter. This launch poses the most significant challenge to Elon Musk’s struggling social media platform to date, gathering over 10 million sign-ups in the first seven hours and over 30 million after the first day.

• With Facebook and Instagram each boasting billions of active users, Threads is hitting the ground running with ample credibility and support.
• You need an Instagram account to use it, and to fully delete your Threads account requires deleting your Instagram account — features that may make it stickier and boost users across platforms for Meta.

How it works: Threads, although introduced as a separate app, offers users the convenience of logging in with their Instagram credentials and following the same accounts. This seamless integration augments the existing habits of Instagram’s massive user base, exceeding 2 billion monthly active users, brands, celebrities, and creators.

• “There should be a public conversations app with 1 billion-plus people on it,” said Meta’s CEO Mark Zuckerberg. “Twitter has had the opportunity to do this but hasn’t nailed it. Hopefully, we will.”
• A few notable features on Twitter are missing or yet to be added to Threads, including an edit button, character count (showing how close you are to a post’s word limit), keyword/hashtag searching, direct messaging, audio rooms (known as Spaces on Twitter), and ads.

This isn’t Meta’s first time emulating successful products from emerging rivals. For instance, Instagram’s Reelsfeature mirrors TikTok’s popular video app, and its Stories feature imitates Snapchat’sdisappearing posts.

• With the introduction of Threads, Meta is directly contesting Twitter, and pretty brazenly so, given the new app’s name, seemingly derived from Twitter’s defining text-based “threads” feature.

Why it matters:

Since Musk acquired Twitter for $44 billion in October, the platform has undergone significant changes, including thousands of layoffs, relaxed content moderation policies, and no shortage of technical issues for users and advertisers.

Pinching pennies: Financially, things have been tough. Saddled with debt and burdensome interest expenses, Twitter’s ad revenue has also hit a cliff, falling 50% in March.

• To address these issues, Musk recently appointed Linda Yaccarino, a former NBC Universal executive, as CEO to enhance relationships with brands.
• For Meta shareholders, “Investors can’t help but be a little excited about the prospect that Meta really has a ‘Twitter-Killer,” shared one financial analyst.

Despite the launch of Threads, Twitter continues to impose limitations on the number of tweets users can view per day, a temporary measure implemented to combat data scrapers and bots, according to Musk.

Still, it’s not the type of move you’d expect from a business reliant on overall platform engagement.

• Users haven’t been shy about voicing their dissatisfaction, to which Musk wrote, “The reason I set a ‘View Limit’ is because we are all Twitter addicts and need to go outside. I’m doing a good deed for the world here.”

⤵ Downswing in Russian Ruble Continues (Bloomberg)

Starting land wars in Europe, followed shortly thereafter by harsh sanctions from Western governments, doesn’t exactly inspire confidence in a currency’s value. Add a dramatic mutiny (failed coup?), and the picture is even bleaker.

• The Russian ruble has provided a fascinatingcase study over the past year, illustrating what happens to a major economy’s currency when its nation is expelled from the conventional financial system.

After a collapse following Russia’s invasion of Ukraine, the ruble rallied sharply as the country forced others to pay for its oil & gas supplies with rubles instead of dollars or euros. It also raised interest rates aggressively from 9.5% to 20%.

• Since then, the ruble has steadily ground lower, falling 19% against the dollar this year, with only Turkey’s lira and the Argentine peso performing worse.

Declining exports, namely from lower oil & gas prices, have weighed on the ruble in recent months as less money flows into Russia’s economy. Year-over-year, revenues from Russia’s main exports (fossil fuels) fell by 25%.

• As a result, Russia’s government has tapped its $45 billion stockpile of Chinese yuan to finance budget deficits. Writes Mikhail Svetlov of Markets Insider, “Russia is increasing sales of its foreign exchange reserves to plug a hole in its budget as energy revenues crash.”

Why it matters:

Kremlin officials acknowledged that the currency had fallen below a key “comfort zone” against the U.S. dollar, blaming “speculative games.”

Ultimately, a weaker ruble only adds to the country’s economic fragility and fuels inflation as imports become more expensive while government spending (to support war efforts) surges and labor shortages mount — every person sent to the frontline is one less available worker domestically.

At the same time, wealthy Russians have been keen to move money abroad, with 15 regions in Russia reporting a 70-80% increase in demand for other currencies since a military rebellion almost two weeks ago.

• One economist added that the “political crisis prompted cash outflows from rouble to dollar and to foreign banks” worth around $1 billion. In total, since the war began, over $40 billion worth of deposits have been moved abroad.

🏠 The Homebuilder Stock Boom(WSJ)

Homebuilder stocksare booming as homeowners stay put.

Higher mortgage rates have kept many homeowners in place, thus driving the demand for new homes. Consequently, homebuilder stocks have soared upward of 30%, compared with the S&P 500’s 16% rise in 2023.

• The Federal Reserve’s rate hikes have drastically slowed the housing market, yet many homebuilders have benefited. As higher rates drive many homeowners to stay put — they don’t want to leave a sub-4% mortgage for a much-higher rate – the demand for brand-new homes is hot.
• While most U.S. homes are existing homes, new-home sales are playing a larger role, rising as a percentage of home sales from 15% in early 2018 to 19% this year, per Citigroup.

Large homebuilders such as D.R. Horton, Lennar, and PulteGroup have seen their share of new-home sales rise from 22% to 31% over the past five years. The demand is particularly strong in lower-cost states across the American South, where people moved during the pandemic once they realized they could work from home.

• “Generally the largest home-building markets are in South Florida and Texas,” a senior equity analyst at Bank of America noted. “Those markets are benefiting from migration trends as well as corporate relocation and a robust job market.”

Why it matters:

New-home sales were up 12% in May over the previous month and up 20% from a year ago, according to the U.S. Census Bureau. But existing-home sales in May were up 0.2% over the previous month and down 20% from the previous year.

• Added one asset manager: “I think home builders are underinvested in (by many portfolio managers) because of this mantra, over and over again, that higher rates are not good for home builders…The 55-and-older community…they can’t build houses fast enough for this demographic.”

To be clear, it was a rough 2022 for homebuilder stocks, which fell about 20%. Supply-chain problems plagued builders, and investors questioned how well they’d do with higher interest rates. But a National Association of Home Builders survey showed that home-builder sentiment fell sharply in 2022 before rebounding this year.

• “It’s a perfect example of the market where just when you think there’s nothing that can go right for a group, that’s when things start to go right,” another investor noted.

See you next time!

That’s it for today on We Study Markets!

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