Finimize - ☕ A coffee high – literally

What’s going on here?

Robusta coffee bean prices have hit record highs, making for serious lows for those who struggle without their morning brew.

What does this mean?

Your cup of joe is probably made from one of two bean varieties: arabica or robusta. And it looks like your routine is about to cost a little more either way. Robusta beans hit record highs over the past week, while arabica reached levels not seen for over a decade. See, bad weather in Brazil and Vietnam – two of the world’s biggest coffee producers – has ruined crops and pushed down production. At the same time, buyers are clamoring for both beans: arabica because it’s sweeter and makes for better blends, and robusta because it’s used in increasingly popular instant coffee. That’s squeezing prices higher, leaving night owls facing a tough choice between tight budgets and – shudder – cold showers.

Why should I care?

For you: Bitter pill to swallow.

Inflation might be falling, but even cheaper cups of coffee look set to get more expensive. Big brands like Starbucks and McDonald’s – the go-to coffee houses for millions – use 100% arabica beans. And staying home might not help much either: Nespresso uses 90% to 95% arabica, with a little robusta too. Plus, if major names start cutting costs by substituting sweet arabica beans with a cheaper alternative, you might be left with a bitter taste in your mouth – literally.

Zooming out: Not even an espresso martini will take this edge off.

It’s been a rough year for mocha drinkers and tiramisu eaters. Cocoa prices have more than doubled this year, with crops wiped out by extreme weather. Although, while cocoa and coffee might be staples in investors’ pantries, they’re not a typical commodity in their portfolios. For most investors, gold’s the real pick-me-up when it comes to diversifying away from stocks and bonds.

What’s going on here?

The world’s biggest aerospace and defense companies look set to roll in record cash over the next three years.

What does this mean?

The top 15 defense contractors are likely to nearly double their “free cash flow” – the extra cash a company’s left with at the end of the day – to a hefty $52 billion by 2026. That windfall is being driven by pumped-up military budgets, as governments increase spending because of the situations in Ukraine, the Middle East, and Asia. Order books are bursting at the seams and, although it usually takes a few years for these contracts to translate into sales, the cash is already piling up.

Why should I care?

For markets: An endless cycle.

Defense giants have to spend their newfound cash wisely. So far, the industry’s been sticking to its usual playbook of aggressive buybacks, with companies spending billions to scoop up their own shares to make the remaining ones rarer and pricier. But with so much focus on buybacks, lawmakers are starting to question whether enough is being invested into new facilities and production. In fairness, it’s tricky to decide where to flash the cash. There’s the possibility of firing up the factories, but many haven’t been used to maximum capacity for years. And while firms could use their funds to buy up other companies, that decision could be slowed down by regulatory roadblocks.

The bigger picture: A safe pair of hands.

Strong cash flows aside, the defense industry might feel the love for other reasons, especially during an election year that’ll see half of the world head to the polls. Many investors will be looking to protect their portfolios from political fallout, which means finding sectors that tend to stay strong regardless of election outcomes. And around the world, defense is often a top priority for every party, with government funding and long-term contracts making the sector seem like a reliable bet for investors – even in politically turbulent times.