2024 Week 4

Companies are still cutting the fat, but it begs the question of whether this is all due to pandemic over hiring or does it indicate retail bracing for declining consumer spending?

Bankruptcies continue to occur, but companies are also closing money losing stores. Walmart closed 24 last year and retail pharmacies plan to close hundreds this year.

The national debt continues to grow, but the real concern is the increasing budget deficit which will exacerbate the issue.

Globalization continues to contract over security concerns leading to a short-term spike in shipping rates. Long term this will be a threat to global supply chains and particularly bad for European countries that heavily depend on contested shipping lanes.

TOPICS

• Labor Market
• Bankruptcy
• National Debt
• Globalization

Labor Market

OBSERVATION - Not shocked, tech still cutting fat

• (Brief.News)
  • eBay Inc. to Lay Off 1,000 Employees in Restructuring Move to Boost Growth
    • Accounting for 9% of the workforce, in a restructuring effort to reduce costs and boost long-term growth.

OPINION - Half-truth about pandemic hiring, retail bracing for declining consumer spending as layoffs mount.

• (NBC News)
  • Wayfair to lay off 13% of workforce, affecting 1,650 employees
  • Job cuts are part of Wayfair’s third restructuring since summer 2022 and are expected to save the online goods retailer roughly $280M annually
  • The layoffs come after Hasbro, Etsy and Macy’s all announced cuts to their workforces as retailers contend with slowing demand and an uncertain economy.
  • During the pandemic, Wayfair saw its business explode as stuck-at-home consumers used stimulus dollars and savings to splurge on home goods like furniture and decor, leading Wayfair to significantly increase its headcount.

Bankruptcy

PREDICTION - Will lead to further crypto regulation

• (Seeking Alpha)
  • Terra-Luna crash: Terraform Labs files for Chapter 11 bankruptcy
  • TerraUSD (UST-USD), along with its sister token Luna (LUNA-USD), had collapsed in 2022 after the stablecoin lost its peg to the U.S. dollar, with both cryptos losing around $40B.
  • Terraform also faces fraud charges brought on by the U.S. SEC, which the company sought to dismiss by arguing that TerraUSD (UST-USD) didn’t fall under the regulator’s purview as it is not a security.

OBSERVATION - Article light on detail but directionally correct.

• (Charlotte Observer)
  • Walmart announces major store closures for 2024
  • CVS; Rite Aid, and Walgreens closed hundreds of stores across the country in areas of underperformance and even more were forced to lock up merchandise that were frequent targets of theft.
  • Filings in the U.S. hit the highest level in 13 years in 2023, with 50 stores filing for bankruptcy in December 2023 alone
  • In 2023, Walmart closed 24 stores in total
    • For the most part, Walmart blamed underperformance and theft as a central reason for the closures.

National Debt

OBSERVATION - More concern over deficit than debt, to be clear

• (Over My Shoulder)
  • In 2023 the US federal budget deficit exceeded private and foreign saving for only the eighth time since 1929.
  • Lacy Hunt’s math says the US and its peers will face subpar economic growth until net national saving turns positive.

Globalization

OPINION - Short term shipping impact, longer term economic impact to Europe

• (Seeking Alpha)
  • Red Sea crisis seen as bigger impact event for shipping than early pandemic
  • Disruptions to shipping from the Houthi attacks in the Red Sea already are more damaging to the supply chain than the early COVID-19 pandemic, maritime advisory firm Sea-Intelligence said this week in an analysis of vessel delays.
  • Supply chain data known in the industry as “vessel capacity” shows the second largest drop in recent years, surpassed only when the giant Ever Given cargo ship was stuck in the Suez Canal for six days during March 2021, which halted billions of dollars in trade.
  • Honour Lane Shipping said it is “informally” predicting the crisis will last 6-12 months, and “if so, we expect the soaring freight rates and equipment shortage will continue until the third quarter,”