Category: Business
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2024 Week 21

Notes, thoughts and observations - Compiled weekly

Global pressure once again calls into question the possibility of a Fed rate cut. Either way the world is seeing the demographic decline play out in Japan and need to take heed of their own issues.

Canceling student debt might have mixed popularity, but it’s hard to ignore the economic impact of freeing prime age consumers from the shackles of debt payments. Will it have an impact, hard to say? Again, either way the real reform needs to focus on the cost of college.

Companies are still trying to figure out how to goose results to please Wall Street. Disney, once again under Bob Iger, is reducing head count and refocusing on major box office releases rather than streaming platform releases. Seems like a solid strategy, short term, but long-term Disney faces a lot of challenges.

Meanwhile DuPont is following in the footsteps of GE and others by planning to break up its business units into multiple stand-alone businesses. While it’s easy to imagine that DuPont wants to divest from slower growing business, the reality is likely that each business will focus on the metrics that Wall Street cares about to maximize stock prices.

TOPICS

Fed Rate

OBSERVATION - Global rate cut pressure mounts

  • (Brief.News)
    • The UK’s annual inflation rate for April 2024 has dropped to 2.3%, down from 3.2% in March, according to the Office for National Statistics (ONS).
    • Despite the decrease, inflation remains above the government’s 2% target
    • Speculation has arisen about a potential rate cut by the Bank of England at their upcoming meeting on June 20.

Global Recession

OBSERVATION - Impact of population decline on economic activity

  • (Brief.News)
    • Japan’s trade deficit in April expanded by 7.6% compared to the previous year, reaching 462.5 billion yen.
    • The increase in imports, especially of energy and raw materials, contributed to the rise in the deficit.
    • Japan’s economy contracted in Q1 2024 due to a decline in consumption and exports.
    • Japan has faced a trade deficit for three consecutive years, losing its position as the world’s third-largest economy to Germany.

Consumer Debt

OPINION - Debt relief is good for personal cash flows and spending

  • (Seeking Alpha)
    • Biden cancels $7.7B more in student debt for SAVE Plan, public service workers
    • $5.2B for 66,900 borrowers through fixes to the Public Service Loan Forgiveness program;
    • $613M for 54,300 borrowers through the SAVE plan and applies to borrowers who had smaller loans for post-secondary studies.
    • $1.9B for 39,200 borrowers through administrative adjustment to IDR payments.

Labor Market

OBSERVATION - Money saving move by Disney, regardless of content problems.

  • (NBC News)
    • Pixar lays off 14% of workforce—175 employees—as Disney reduces content output for streaming and prioritizes theatrical releases
    • Layoffs hit other Disney businesses last year, but Pixar’s cuts were delayed because of production schedules.
    • CEO Bob Iger, who returned to the mantle of CEO in late 2022, has been working to reverse the company’s box office woes, spurred both by the company’s content decisions and pandemic shutdowns.
    • When theaters closed during the pandemic, Disney sought to pad the company’s fledgling streaming service Disney+ with content,
    • Many audiences members started to feel the company’s content had grown overly existential and too concerned with social issues beyond the reach of children.
    • As a result, no Disney animated feature from Pixar or Walt Disney Animation has generated more than $480 million at the global box office since 2019.
    • Pixar will refocus on theatrical releases and move away from short-form series for Disney+.

Mergers and Acquisitions

OBSERVATION - Reverse M&A by breaking off companies continues

  • (Seeking Alpha)
    • DuPont unveiling plans to split into three publicly traded companies
    • Will separate its electronics and water units through tax-free transactions
    • Remaining diversified industrial company will be comprised of existing businesses within the Water & protection segment, Industrial Solutions including Healthcare, and retained businesses reported in Corporate, including Adhesives.
    • New Electronics company, to be comprised of existing Semiconductor Technologies and Interconnect Solutions lines of business

EVs

OBSERVATION - Hybrid the obvious near-term choice

  • (Seeking Alpha)
    • Hybrid vehicle registrations outpace battery-electric vehicles in Europe again
    • Battery-electric car registrations rose by 14.8% during the month to 108,552 units, with their market share holding steady at around 12%.
    • Hybrid-electric cars also saw robust growth, with registrations up 33.1% in April.