This week I note that, as Blake Millard illustrates in his newsletter, a massive shift in resources will result from record numbers of retirees. Blake cites several reasons for a 2.7 million uptick but stops short of speculating the impact. Personally, I agree with the notion that an increase in retirees will lead to more conservative investment strategies that could take some wind out of the stock market’s sales. Then again, everyone Gen X and younger continue to plow money into the stock market via 401(k)s, so who knows?

Gavekal, via Mauldin Econ’s “Over My Shoulder” provides confirmation that CRE is a real risk for regional banking, but not for the broader economy. We don’t really know how big the problem is because of lack of price transparency. Either way the CRE crisis could be bad for borrowers who rely on loans from regional banks.

Nvidia reported earnings this week, but it couldn’t stop the obsession or comparisons between the stock and Cisco during the dot com bubble. The trend line is eerily similar, but the chip maker is different than the network hardware manufacturer. For starters Nvidia’s GPU chips are dominant in the market, though they could eventually be challenged in the next few years. There is truly no equivalent to Nvidia, and it would require a massive collapse in the AI industry to trigger the same sort of quick downfall.

Regarding globalization, China has two problems: rising labor costs and a shrinking workforce. But as Mauldin Econ notes productivity can bridge the gap, at least for a while. Compound this with financial troubles in the real estate sector and I think China will lose a lot of ground to other Asian nations, but still retain the lead. Long term the success of home-grown solutions will dictate China’s position in the global supply chain.

Finally, Walmart is at it again. After a failed attempt at creating its own streaming service, the retailer is trying to buy Vizio. If you recall Walmart abandoned its service in 2019 to focus on Vudu (purchased in 2010), only to sell it in 2020. So why does Walmart want to buy a TV company? Advertising, or at least that is the bet. I think this initiative is outside of Walmart’s core competencies.

TOPICS

• Labor Market
• Commercial Real Estate
• Stock Market
• Globalization
• Digital Media

When it comes to the labor market it’s tough out there. It hasn’t stopped unionization efforts and reshoring and worker shortages have tipped the negotiation scales in the favor of labor. 

The broader global trend of domestic onshoring continues as Sony and Toyota work to bring a second TSMC factory to Japan. Having learned from the pandemic supply chain issues and looming stand-off with China, industry is rightly trying to reduce the risk of future chip supply interruptions. 

The stock market continues to befuddle, and it recently drew the comparison of the Magnificent 7 to the Tech Bubble 5. While conditions aren’t the same, questions arise about the future performance of these household names held by every 401k and mutual fund. The answer always lies in: watch what people do, not what they say. It may, indeed, be the economy stupid. 

Finally, another doomer prediction from former fed DiMartino Booth who recently took to YouTube to talk about why spending, debt and interest rates are a problem. I don’t disagree with the sentiment, but phrases like “wall of maturity” and predictions of “big layoffs ahead” are intended to get clicks and views. 

If you follow folks like DiMartino Booth and Peter Zeihan you are familiar with the somewhat hyperbolic delivery. It sells books and newsletters, but it is showmanship at best. Most of the predictions and conclusions are directionally accurate, and if someone weren’t shouting you probably would never pay attention.

TOPICS

• Labor Market
• Domestic Semiconductor
• Corporate Debt
• Stock Market

Where is the stock market going? If the yield curve and consumer spending is an indicator we could be headed for a recession. On the other hand, Black Friday card data says that spending may not be as weak as expected and the VIX indicates a new kind of bullishness not seen in a while. On thing is clear, sectors that performed well outperformed the S&P 500 by a significant amount. 

Rent or buy? No not talking about a home, but rather machine learning cycles. Companies like Snowflake continue to grow amid high demand for Nvidia chips. Sometimes it makes sense to rent a server rather than rack your own hardware. 

A couple of bright spots. First battery prices are expected to fall and newer technology will improve performance. Likewise, life extending technology like CRISPR gene editing is opening new possibilities in treatment. Finally, even though modular nuclear technology is a non-starter at the moment, the broader application of “hot rocks making steam” is still a benefit to reducing carbon output.

TOPICS

• Consumer Credit
• Fed Rate
• Recession
• Battery Technology
• Cybersecurity
• Stock Market
• Life Extending Technology
• AI and ML
• Nuclear Power

Wages are still going up for some and inflation continues to cool effects are sticky. Companies continue to cut costs and shut down money losing projects 

Commercial real estate delinquencies are up but residential still looks OK. 

Moody’s cuts United States credit outlook and precious metal are being pitched as a remedy to a calamity that may never materialize. 

In the stock market retailers are seeing major drops in market value while shorts pile up on highflyers like TSLA and XOM. Meanwhile private equity that didn’t flee China is now stuck.  

Finally, OpenAI is asking Microsoft for more money, Sam Altman stating “Training expenses are just huge.” Simultaneous Disney’s content well is running dry with consumers as “The Marvels” lowest opening for a Disney film in the MCU.'

TOPICS

• Labor Market
• National Debt
• Inflation
• Real Estate
• Currency Risk
• Stock Market
• Globalization
• Digital Media
• AI and ML

Commercial real estate seems to be stabilizing, while the housing market has gone cold. Meanwhile in China, Country Garden issues a dire warning and has missed loan payments. This could unlock a fresh hell of financial worries.

The speculative bubble in use cars continues to unwind and is shaking out weak companies like Shift Technologies who filed for Chapter 11 this week. Meanwhile Tesla continues to lower prices to both chase higher volumes and to also compete with BYD.

As soon as the Fed stopped raising rates everyone began speculating when rate cuts would begin. Some think higher for longer and others believe that history indicates cuts sooner. Either way a rate cut will be a temporary boost for borrowing. Long term, near-zero rates are gone, and the economy needs to adjust its risk-reward equation.

Profitability and debt reduction among companies is a high priority. Rising rates will ensure that weak and heavily indebted companies meet an end. Likewise high valued scaleups like Airtable need to mind the bottom line and show significant revenue to justify their valuations. All in all, the number of shutdown startups is rising as companies begin running out of money and are unable to raise.

TOPICS

• Real Estate
• Automotive
• Bankruptcy
• Fed Rate
• Profitability
• Corporate Debt
• Stock Market

Labor market continues to be tight, in places. Recent wage reports paint a picture of an oversupply of people with college degrees and undersupply of people without.

Inflation remains sticky with everything from drought driving water transport prices to gas prices at $4. It’s also obvious, to everyone except the conference board, that we are IN a recession.

The federal deficit balloons and the solar industry feels the slump of not being proped up by government spending.

Tech IPOs returned with Arm, Instacart and Klaviyo; while the cable industry reaches new lows as CNN has worst ratings weekend on record.

TOPICS

• Recession
• Fed Rate
• Inflation
• Labor Market
• National Debt
• Energy
• Stock Market
• Digital Media

More bad news for residential real estate; profitability in focus; national debt balloons; weird energy ideas in UK and sticky gas prices; platform consolidation; econ cycle nears end, what’s next;

The residential real estate market continues to suffer from perceived higher interest rates. Historically not above average, but relatively higher given the long low/no interest rates of recent memory. Housing supply continues to prop up prices which means home sales will certainly slow.

As fundraising and investment has become harder to find companies are now focused on improving profitability. AI companies are not alone, and the once hot tech sector is in the same boat raising prices and cutting costs. This will put pressure on SaaS contracts and employment and belt tightening continues.

The US debt continues to climb and will become prohibitive at some point due to higher interest rates. Meanwhile the UK mulls the idea of natural gas-powered heat pumps which is a weird idea given the Russian embargo and supply shortages. Oil supply tightening will continue to keep fuel prices high

Finally, streaming platforms continue to consolidate as Comcast looks for an exit on Hulu. It is worth noting that Comcast and Disney are still fighting over broadcasting contracts. And is the cycle nearly done? Whether you believe the economy was in recession the historical indicators say we’re nearing the end.

TOPICS

• Real Estate
• Profitability
• Debt
• Energy
• M and A
• Stock Market

Inflation eases, predictions of recession fade and bankruptcies accelerate.

TOPICS

• Real Estate
• Inflation
• Bankruptcy
• Stock Market

On top of mind this week is the real risk posed by commercial real estate. While single-family delinquencies declined, multi-family increased. Single-family inventory is at the lowest level on record (going back to 2012) based on Redfin. On the commercial side some estimates have only top ~10% of office buildings in NYC are not distressed.

The labor market continues to be strong, and workers confident despite manufacturing layoffs picking up. The wave of tech layoffs has slowed but higher than last year. On the flip side, the US has 2.4 million excess retirees and it’s likely causing labor shortages. No shortage of Hel Wanted signs around my town.

Finally, the stock market continues to prove bears wrong, but something isn’t right. Top winners in the S&P 500 are the largest, most institutionally owned names. Only 27% of companies in the index are beating the benchmark. Meanwhile BRICS countries have a growing share of the world economy but they’re not going to rival the G7 anytime soon.

TOPICS

• Real Estate
• Labor Market
• Population
• Stock Market
• Globalization

An interesting trend in household mobility due to an interest rate driven and still stalled real estate market. Contraditions abound between an inverted yield curve and a surging S&P 500. But the greatest contradiction is in the acceleration of fossil fuels as emerging economies ramp up energy needs.

TOPICS

• Real Estate
• Energy
• Recession
• Stock Market

Concerns abound and uncertainty is high, but one thing is certain we will not return to 2018 levels of any time soon. Banks are getting the double-whammy because of commercial real estate and continued deposit outflows. Spin it how you’d like, but this will bring more banking sector pain.

On the recession front, consumer credit continues to deteriorate, trucking is struggling and and consumer “revenge spending” is expected to peter out by fall. On the other hand the economy is way better than doomsters like to admit and the markets are placing bets on a quick recovery.

Either way fear, uncertainty and doubt abound. Sounds like a great time to shop for names that don’t show up on CNBC or Twitter. 😉

TOPICS

• Real Estate
• Energy
• Credit Crunch
• Recession
• Stock Market
• Semiconductor
• Globalization

Apple ski goggles.. you know you want them, or do you?

A lot of hot takes about everything from recession to remote work. Thinking these wlll become political wedge issues.

TOPICS

• Labor Market
• Real Estate
• Energy
• Stock Market
• Precious Metals

Another weird week with sources debating a current recession vs other sources predicting the next recession. Not much to say aside from the next few years will be tumultous for the stock market.

TOPICS

• Real Estate
• Recession
• Energy
• Automotive
• Stock Market
• Precious Metals

A couple of surprises this week. Primarily the better-than-expected corporate earnings reports which seem to point toward a realistic soft landing. What that looks like remains to be seen, but positive news is balanced against an all too expected bankruptcy by Bed Bath & Beyond and overall long-term anemia of the automotive industry.

TOPICS

• Real Estate
• Automotive
• Stock Market
• Corporate Debt

TOPICS

• Special Edition
• Financial
• Energy
• Inflation

TOPICS

• Debt
• Labor Market
• Energy
• Stock Market

TOPICS

• Energy
• Real Estate
• Stock Market

TOPICS

• Ad Revenue
• Stock Market
• Recession

TOPICS

• Labor Market
• Energy
• Inflation
• Stock Market

Recession fears, the fed funds rate and resetting energy expectations

TOPICS

• Labor Market
• Energy
• Inflation
• Recession
• Stock Market

THIS WEEK

• Inflation
• Stock Market
• Energy
• Resources
• Famine