Friday, Feb 25th 2022

The Macro: Oil, Reels, and Armaments


The below content and projections are the opinion of the authors. Any conclusions or takeaways are their own. This should not be considered as investment advice. Investing involves the risk of loss and returns are not guaranteed.

Three Things this week —

1/ Oil prices surge to highest levels since 2014. As Russia’s incursion into Ukraine began Wednesday night, markets were on the move, and oil prices surpassed $100 a barrel for the first time since 2014. Brent crude oil — the international benchmark price — traded as high as $105 a barrel on Thursday. Even with crude giving back some of these gains throughout the day, the price of oil is still up over 50% over the last year. A military conflict involving the world’s third-largest oil producer doesn’t exactly outline an end to these pricing pressures, and portends an economic environment in which consumers stay frustrated about inflation, both at the pump and beyond.

2/ Higher rates hit housing. Here in the NYC metro area, this week’s weather offered a brief spring preview. For the real estate enthusiasts out there, this means the spring buying season is right around the corner. But rising interest rates might make a repeat of last year’s buying frenzy a challenge. The average cost of a 30-year fixed mortgage as of February stood at 3.89% as of February 24, 2022, the highest since May 2019. According to data from, the rise in mortgage rates from December 2020 to February 2022 could add up to $200 on an average monthly payment for a $375,000 home. As we noted earlier this year, the stock of available housing is barren, and this lack of supply could support prices. Rising interest rates resulting from higher inflation could pressure that story. Another reason why many commentators will argue the economic cycle and the housing cycle tend to be one in the same.

3/ Healthy skepticism on mergers. The Department of Justice filed a lawsuit this week to block UnitedHealth’s proposed deal to acquire Change Healthcare. The $13 billion deal would bring more data under the control of UNH, which is the country’s largest health insurer. UNH, for its part, called the government’s challenge “deeply flawed.” But whether this merger goes through in its proposed form, a modified form, or not at all, what catches our eye is the challenge happening at all. So much of the focus on how the government views big business has recently come through the lens of technology — Will the tech giants be broken up? Will their proposed mergers fall through? Will politicians rewrite laws targeted at, say, online marketplaces? And so on. But the WSJ notes the FTC sued to block a hospital merger in Rhode Island last week, while the President has also singled out the healthcare industry in signing executive orders related to competition. And this latest action suggests that at least during the current administration, large businesses buying growth may only be tolerated in a limited fashion, if at all.

Two thoughts on Facebook’s Reels expansion —

Earlier this week, Facebook announced a global expansion of its Reels platform, which had previously been limited to U.S. users. (Titan is also growing fast in this space — make sure to follow!)

And in this announcement, the company said two things we think are worth highlighting.

First, Facebook disclosed that half of the time spent on Facebook and Instagram is spent watching videos. The company added that Reels is its fastest growing content format “by far.” We reflect on our own habits on Insta, and this ratio feels low. But given this is a combined Instagram and Facebook stat, perhaps we’re learning something about just how much total time is spent on Insta between the two properties.

Second, Facebook said as part of this rollout they are trying to make it easier for creators to make money on Reels. Creators will now be eligible for bonuses of up to $35,000 per month based on views. The company is testing overlay ads and Stars, which is basically a program that enables users to tip creators while Meta pays out the rewards.

The company said in its latest quarterly report that Reels monetize at lower rates than content in a user’s Feed or Story. These programs clearly seek to correct this issue.

But Facebook also said it is facing “continued headwinds from…increased competition for people’s time.” On its earnings call, executives mentioned “TikTok” five times. A common criticism we hear of Reels is that they’re just repurposed TikToks; changing that perception is perhaps the real goal of Facebook’s plans.

One thought for the weekend —

Russia’s incursion into Ukraine this week seems likely to dominate the headlines for some time.

As global citizens, our hearts go out to the people of Ukraine. We hope the collateral damage from this unprovoked act of aggression is minimal. As investors, our strategies are defensively positioned, with hedges activated for clients across all three equity strategies and elevated cash holdings in each portfolio, including Titan Crypto.

On Thursday, the Nasdaq fell more than 3% shortly after the market opened. By day’s end, the tech index was up over 3%. Whether geopolitics continue to exert this amount of influence on daily market moves remains to be seen. But in our view, this level of volatility suggests the environment remains an unhealthy one for financial assets.

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