We’ve all seen the headlines about how extreme weather events are becoming more frequent and more disastrous, but one group is surprisingly optimistic that the worst catastrophes won’t happen: hedge funds.

A record $16.4 billion of catastrophe bonds were issued in 2023, and top hedge funds snapped up many of them, which helped them reach historic profits, according to Bloomberg.

What are they? Catastrophe bonds, or cat bonds, are insurance-linked securities that pay outsized returns if a natural disaster doesn’t happen. The investor puts up collateral to be used if the disaster occurs, but gets it back if it doesn’t—and earns interest along the way.

• They entail precise, contractually predefined terms of what qualifies as a catastrophe (like how high the water got in a flood), and if the disaster does not meet those specific criteria, then the bondholder doesn’t have to shell out money.
• As the risk of catastrophe increases with climate change, so does the risk premium (i.e., profit).

It’s a win-win: Cat bonds also benefit insurers because they shift some of the burden of paying out when disasters strike to hedge funds and other buyers like pension plans and very rich individuals. FEMA issued $275 million in cat bonds earlier this year to bolster the National Flood Insurance Program. The World Bank issued $350 million in cat bonds last year to help insure Chile against earthquake and tsunami damage.

And it probably won’t be the last time. Experts predict the cat bond market will expand with more bonds covering wildfires, one of the biggest threats from climate change, and cyberattacks, which first came on the market last year.

It’s not just the cat bonds

Last year, hedge funds performed like they were Radiohead in 1997.

• The top 20 firms—including TCI, Viking, Citadel, and, for the first time since 2015, Bill Ackman’s Pershing Square Capital Management—made a record $67 billion in profits.
• There was one clear winner: Citadel, the Ken Griffin-led fund, made $16 billion—the largest annual gain in history by a hedge fund, according to LCH Investments.

So, how’d they do it? Big risks pay big prizes. LCH credited Citadel’s performance to aggressive bets in the stock market that paid off when share prices ballooned.—CC

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New Hampshire votes today. All eyes will be on the nation’s 41st-most-populous state tonight when the results roll in from New Hampshire’s presidential primary. Because New Hampshire holds the earliest primary (sorry, Iowa, you’ll always be just a caucus), it’s considered an indicator of what’s to come. On the Republican side, with Ron DeSantis’s recent decision to bow out, the votes will show whether Nikki Haley has any shot at taking on the front-runner, former President Donald Trump. Meanwhile, the Democrats have drama over…scheduling. President Biden supported the party’s efforts to strip New Hampshire of its first primary status, leading the state to leave him off the ballot in its unsanctioned primary, though supporters are expected to write him in.

The FAA wants to check the door plugs on another Boeing model. Because you can never be too careful after a hole appears midair on a plane full of people, the Federal Aviation Administration has recommended that airlines inspect the door plugs on all Boeing 737-900ERs “as soon as possible.” The model is distinct from the Boeing 737 Max 9 involved in the recent Alaska Airlines incident where a plane was forced to make an emergency landing after the door plugs blew off, but it has the same door plug design, according to the agency. Airlines including Alaska, Delta, and United said they’ve begun checking planes and don’t expect any disruptions.

SCOTUS will let Texas’s border razor wire be cut. By a 5–4 vote reported with a one-page order, the Supreme Court decided that border agencies may remove the sharp wire that Texas installed to deter migrants from crossing the border into the state from Mexico as a legal battle over the state’s actions continues. It’s the latest development in a high-stakes showdown between the Biden administration and Texas Gov. Greg Abbott, a Republican, over border security and how much power the state has to enforce it, overturning a lower court’s injunction barring agents from getting rid of the barrier.

Screaming infants in Cameroon became the first humans in history to get a routine malaria shot yesterday in a major accomplishment that caps off decades of work to rid Africa of the deadly illness.

The new vaccine, Mosquirix—developed by GlaxoSmithKline and endorsed by the World Health Organization—is now being given for free to children aged six months or younger at health facilities in Cameroon, where malaria was responsible for 12% of childhood deaths in 2021, according to UNICEF.

At stake: The mosquito-borne disease causes more than 600,000 deaths each year, and 95% of them occur in Africa. The vaccine is projected to save tens of thousands of lives, but…

It’s not a perfect fix. The four-dose immunization is only suggested for kids up to 17 months old. It’s ~30% effective, starts to wear off in months, and doesn’t stop transmission, so immunized people should also use traditional prevention methods like bed nets, health experts say. Communicating these details will be critical to staving off vaccine hesitancy and achieving widespread immunization, the Africa Centres for Disease Control and Prevention said.

Looking ahead…Cameroon hopes to vaccinate ~250,000 kids by the end of next year, according to Time. Nineteen other African countries are planning to start immunization programs this year, which would create too much demand for Mosquirix to handle, but a second malaria vax that only just received WHO approval is expected to roll out this year and ease supply concerns.—ML

If you’re looking for an automation-proof career, there are still options besides becoming a nurse or a rodeo clown. Even for jobs that could theoretically be done by AI, replacing human workers often doesn’t make economic sense, according to research published yesterday by MIT that was funded by the MIT-IBM Watson AI Lab. The findings suggest that AI adoption will likely go slower than many tech bulls believe. 

Money vs. machines

The research focused on jobs involving tasks that can be handled by a visual recognition AI system (like a baker doing quality checks). AI isn’t (yet) coming for those jobs for the same reason you didn’t see Taylor in concert last summer: It’s too darn expensive. The research shows:

• Due to the tech’s high upfront costs, using AI is pricier than simply paying a human to do the work in most cases.
• Of all the wages that workers receive in vision-centric jobs, only 23% are for tasks that can be automated in a financially feasible way.

While it might not entirely apply to word-slinging tools like ChatGPT, the analysis should comfort workers who regularly have the bejeebers scared out of them by stats about how much of the job market is susceptible to automation. The International Monetary Fund, for instance, recently estimated that almost 40% of jobs worldwide have the potential to be at least partially automated.

Things could still speed up…if AI becomes cheaper and more accessible to smaller companies, the MIT researchers warn.—SK

Stat: Think no one wants to work anymore? That’ll definitely get an eye roll from teenagers. Teen employment in the US is at its highest since 2009, with 37% of 16- to 19-year-olds holding a job (or searching for one) in 2023, Labor Department data shows. The uptick in teens working reverses forty years of decline, according to the Washington Post. It helps that the tight labor market means high-schoolers can get jobs that actually pay: Workers aged 16–24 got a 9.8% pay bump last year, which is nearly twice the jump for working people overall, per the Atlanta Fed.

Quote: “MY FIRST X VIDEO MADE OVER $250,000! ”

MrBeast is killing it on yet another platform: The YouTube star may have been skeptical of Elon Musk’s invitation to post content on X, but his first video shared directly on the app brought in serious cash. Still, the YouTuber warns that your results may vary: His post announcing the sum acknowledged it might be “a bit of a facade,” saying advertisers appeared to have bought ads on the video, upping its revenue. And some users suspect the platform is boosting it, too, by inserting it into their feeds as an unlabeled ad. Whatever the reason for the video’s success, MrBeast is using it as an excuse to do what he does best: give away money.

Read: High School Musical changed everything: An oral history of the Disney Channel Original Movie. (Morning Brew)

Jaiden, we hardly knew ye: The baby names at risk of disappearing this year.

Train of thought: How the NYC subway can help you convert Celsius temps to Fahrenheit.

Visualize your next trip: Get inspired by the winners of the Travel Photographer of the Year awards.

He’s talented: Watch the trailer for Netflix’s new Ripley series, starring the suddenly everywhere Andrew Scott.

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