NY State of Mind: Mamdani Edition

With just over a day to go before Zohran Mamdani is inaugurated as NYC's first Muslim mayor, CNN's chief data analyst Harry Enten has some good news for the Mayor-elect. First, new polling shows that his net favorability rating among NYC residents has rocketed from +14 in Sep to +38 now! That's the highest for an incoming mayor ever? 

Further, if Republicans were hoping to use him a boogeyman to bring Democrats down statewide...well it seems Donald is the problem not Zohran; Mamdani's net favorability rating statewide is +15 versus -30 for the President. And lastly, all the talk of NYC's vaunted billionaires leaving the city to escape marginal tax increase...seems to be just talk for now. The Kalshi prediction markets (which is basically truth for the billionaire class) has the odds of the city's richest residents decamping to tax-friendly havens at just 21%! In fact, if you believe the old adage "money talks, bullshit walks" then the opposite is already happening with the city's luxury apartment market surging a month after Mamdani's win, including residences on famed Billionaire's Row.

Of course, every politician has their honeymoon period. And these numbers are likely change over the next three months. For now though, it represents a lot of optimism among New Yorkers for a new era of politics and government--where America's most iconic city and its bastion of free market capitalism is run by an Ugadan-Indian-American Democratic Socialist.    

Yes, Chef: Restaurant Economics of The Bear

Running a restaurant is hard. It can be chaotic, stressful, high-pressure work. We know this from watching the hit FX/Hulu series The Bear. It's also a business with very challenging economics. In fact, a poignant adage about the food business is: “Best way to make a small fortune in restaurants? Start with a big one.”

A few years ago, JPMorgan did an analysis on nearly 600,000 small business it lent to, including almost 25,000 restaurants. The median daily cash inflows for restaurants was $968 while median outflow was $957. Those are thin margins; a bad weather day and you could easily slip into the red, needing to dip into your cash balance to keep this going. But the typical small restaurant had a cash buffer of just 16 days (where cash buffer is the number of days of cash outflows a business could pay out of its cash balance were its inflows to stop).

Things have only gotten harder with inflation, even for the type of high-end restaurant that chef Berzatto dreams of turning The Bear into one day. The WSJ recently published a story on 'Why a $500 Steak Dinner Only Yields a Profit of $25' and breaks down where the costs go (as shown below).   

Source: WSJ. (Click to enlarge)

Food and alcohol make up the largest share of costs at 40%. For steakhouses, in particular, which rely on beef to bring in customers, costs have ballooned. Beef is more expensive than ever, rising 60% since the pandemic. The WSJ article provides an example involving the Gibsons Restaurant Group (based in Chicago, where else?). Gibsons currently pays $25 for a 13-ounce NY strip steak and charges customers $70 for it. In 2016, the same steak cost $16. The Group says that to keep the same margins as then, it would need to charge $89 for it today. WSJ notes that a Chicago steakhouse needs to keep cost of ingredients to around 35% of what customers pay and so has to balance out higher beef costs with lower cost items that are more profitable, such as sides, pastas, and deserts. But still, "beef regularly breaks the 35% target. For prime steaks, it is around 50%...one error in the kitchen, and $50 ends up in the trash." 

Labor takes up another 37% of costs followed by overhead at 23%. Labor has become more expensive since the pandemic (but so has the cost of living for those same employees) and fine-dining restaurants need to pay servers and cooks able to handle $100 dishes. So, why do it for a measly 5% profit margin? Because it's a calling...as Ritchie said "the kitchen is where we find our truth." Here, let Will Hunting explain.  

Where's the Beef?

The stock market has been roaring since OpenAI introduced ChatGPT in November 2022. AI-mania has powered the S&P 500 to gains of more than 20% annually over the past three years. But something decidedly less hi-tech has performed even better: beef. The CME Cattle Feeder Index, which tracks the price of steers sold in the U.S., has gained 21.5% annually over the same period. The outperformance is even bigger over 5 years. Business is good for cattle ranchers and livestock speculators! 

Source: CME and Mantabye. (Click to enlarge)

Such gains may not be a surprise to most Americans, who consume a lot of beef (83 lbs per capita per annum). And many don't like it! Newspapers and television have screamed about runaway beefs prices. According to the St. Louis Fed, ground beef prices touched $6.63/lb in August 2025, up from an average of $4.23/lb pre-pandemic. Yes, while the latest 'bull' market in stocks started in late 2022, the literal bull market took off after the pandemic. Per the WSJ, cattlemen are now making a record profit of "more than $700 per animal, up from $2 five years ago."

And it comes down to basic supply and demand. Ranchers across U.S. had started selling off their herd several years ago as chronic drought, costs, and debt pressured the business. Losses peaked during Covid-19 when many meat processors and restaurants shutdown, backing up livestock inventory and driving down cattle prices. While beef demand is strong, many ranchers have held back from increasing the size of their herds. As a result, U.S. cattle inventory totaled ~87 million as of January 1, 2025, the lowest since 1951. Back then, the U.S. population was 153 million; today it's 343 million. You do the math.

Source: WSJ and Agriculture Department. (Click to enlarge)

As shown above (and below), the U.S. cattle industry began herd liquidation in 2019 when inventory reached 95 million head. According to Beef Magazine, liquidating inventories is one phase of the cattle cycle that typically extends for 10-12 years with "expanding and contracting cattle numbers driven by changes in producer profitability and worsened by drought." While strong prices suggest "there are incentives (for ranchers) to begin rebuilding (their stock)...signals for expansion remain muted at this point." The WSJ article noted many ranchers are looking to pay off longstanding debt and upgrade equipment with their profits rather than growing their herd; they are also wary of inflation that makes livestock feed more expensive.

Source: WSJ and Agriculture Department. *Estimates are for January of each year. (Click to enlarge)

Industry analysts are unsure how long this 'bull' market will last, but it appears the livestock trade still has some ways to go. Tyson Foods and JBS, two of the world's largest meat companies, estimate cattle supplies could edge up in 2027 or 2028. Beef Magazine feels "structural constraints, input costs, and financial considerations will likely delay a rapid recovery in beef cow numbers." Moreover, they estimate that the herd rebuild this cycle "will be slower than the last rebuild that began in 2014...(which) is likely to mean relatively tight supplies and support for cattle prices for the next few years." So, the trade for 2026 is to still be bullish on beef!

Good Job, Will Hunting...

Remember back in 1997 when Will Hunting spectacularly schooled a few obnoxious (typical?) Hahvid grad students? Where is that guy now? Last we saw he was driving to Palo Alto, CA to "go see about a girl."

This clip has resurfaced again recently (originally from 2013), showing an older Will, with his teacher mom, schooling a couple of obnoxious (typical?) reports on the devolution of education policy in the post, post, post-revolutionary period. What Will says seems spot on as a survey by We are Teachers found that in the U.S. a "majority of teachers (75%) entered the profession because they love teaching, and only a quarter of those surveyed say they entered the field because of factors like job stability and benefits." 

Professor Lambeau and the MIT faculty would approve, despite past tensions.   

Tunnel Vision: Steph's 100-Foot Shot (Yes, it was real!)

Stephen Curry returned to the NBA Friday after a 5-game injury. But the biggest action of the night seems to have happened before the game. During the pre-game warm-up Curry sank such an outlandish/ ridiculous/insane long-range trick shot, that it left even Caitlin Clarke wondering if it was AI generated. It wasn't! (Though in the past there have been some confusion). Here's the shot, from different angles:

Oh, in the actual game, Curry went to score an impressive 39-points but it was still not enough to win as the Warriors went down 120-127 to the Timberwolves. But who really cares, right?

After the game reporters inevitably asked Curry about the 100-foot shot. “That’s the second one I made,” he said. “I thought it was going to be a better night.” At least we were entertained.

Did Time Magazine Just Jinx the AI Trade?

Last week (on December 12), Time magazine named the 'Architects of AI' as its Person of the Year ("POY"). It's an annual tradition going back to 1928, when the magazine's editors select the person(s) "who wielded the most influence in the previous 12 months." Of course, Time is not the publication it once was; it currently has a weekly circulation of around 1 million, down from a peak of 4.1 million in 2003. But Time's POY cover still attracts significant attention. This year was no different, with thousands of news outlets covering the announcement (just ask Gemini!).

This year's selection was about the group of people who are responsible for developing and bringing the transformative technology of AI to the world (or so they want you to believe). The cover, shown above, has the CEOs of leading tech companies in the AI landscape sitting on a steal beam high above midtown Manhattan replicating the classic 'Lunch atop a Skyscraper' photograph from the 1930s. Left to right, it features: Mark Zuckerberg (Meta), Lisa Su (AMD), Elon Musk (xAI), Jensen Huang (Nvidia), Sam Altman (OpenAI), Demis Hassabis (DeepMind, owned by Google), Dario Amodei (Anthropic), and Fei-Fei Li (Stanford). The picture has a deeper symbolism that we'll get to later. But one thing is for certain, since OpenAI debuted ChatGPT in November 30, 2022, the stock market has been on a tear. The tech-heavy NASDAQ has rallied 102% over the past three years largely on the promise of AI. So now, investors are fretting Time may have just jinxed this stock market rally with its 2025 pick. Call it the magazine-cover curse, but as Jim Bianco of Bianco Research noted in an X Post: Time's POY choice has a history of being "an excellent contrarian indicator." Yikes!

The premise behind the indicator is that when a magazine finally devotes its cover to a person, company, or theme, said subject or topic is usually past its peak. This idea was invented by Paul Macrae Montgomery and consisted of three primary rules:

1. The magazine must be mainstream--not a business/economics/finance publication that routinely features emerging capital market trends. 

2. The cover subject is a widely talked about or experienced concept/theme.

3. There must have been significant asset-price gains leading up to the cover.

Check, check, and check (Time, AI, and a sustained AI-fueled stock market rally)! So, is it time to sell Big Tech? Maybe, but before we do let's look at how well this indicator actually performs. Brent Donnelly, President of Spectra Markets, a financial media and analytics company, has done empirical work on the magazine cover indicator construct, including that of Time's POY edition. There have been 98 such covers since 1928 and Donnelly identified eight prior occasions when a corporate head, CEO, or industry was honored and where there was identifiable stock performance to track. E.g., in 2010 Mark Zuckerberg was selected Person of the Year, but Facebook (as Meta was then known) was still a private company. Below is Donnelly's list of Time's chosen corporations, CEOs, and specific industries and associated stock performance prior to and after being featured (click to enlarge):

Source: Spectra Markets

What Spectra's analysis shows is that 87% of the time companies lost value in the 12 months after being 'honored' with the POY recognition. And 75% of the time they kept losing value even after 24 months. Andy Grove (and Intel) was the exception back in 1997 (oh but how the company's fortunes have changed today). While the results appear to validate the magazine cover curse, they are based on a very small sample size. Can we say these results are statistically significant?

To find out, we defined our null hypothesis (H0) as: The average return of stocks featured on Time is not statistically different from the average return of the S&P 500 (the market benchmark) and tested it to see if we could reject the H0. The results are detailed in the table below (click to enlarge).

Source: Spectra and Slickcharts.com for stock and S&P 500 returns, respectively; Mantabye for all calculations.

As the calculated t-statistic for the 12-month case is greater than the critical t-value, we can reject the null hypothesis for that period (though that's not the case for the following 24-month case). The result provides statistical evidence that being selected Time's POY has a negative impact on subsequent one-year stock performance. So, we'll try to keep a close eye on the performances of AMD, Alphabet, Meta, Nvidia, Tesla, and Microsoft in 2026! (Yes, MSFT...while Satya Nadella is not in the above picture, Microsoft owns 27% of OpenAI and its stock price has almost doubled in value since ChatGPT was launched.) 

Back to Spectra Market's table and the Time magazine cover. Brent Donnelly provides important context to Chrysler and RCA's POY selections in 1928 and 1929, respectively. In the late 1920s automobiles were a transformative technology that helped propelled markets higher (sound familiar?) and RCA was "at the center of that tech bubble that led to the Crash of 1929." (During the 1920s, RCA stock rose in price 200-fold, one of the largest increases in the history of the stock market--it would go onto lose 98% of its market value by 1932.) 

Oh, and that famous Lunch atop a Skyscraper photo that the Time POY cover recreates...it was taken on September 20, 1932, on a steel beam of...the RCA Building!