2024 Week 24

Sticky inflation numbers have everyone second guessing if multiple rate cuts are in store. A lot of smart folks think we could see one, but nothing more prior to the election. After November all bet’s are off and may depend on who wins the presidency.

The new and used car bubble continues to deflate. Ford ends it’s certified EV dealer program which signals that the novelty of EVs has worn off. Long term EVs are just another propulsion type, like hybrids. GM, on the other hand, is executing stock buy backs to make Wall Street happy. They have outright stated that they plan to capitalize on ICE vehicles.

Rental prices are stalling and some think this is a sign that inflation may stick around. Likewise homes for rent are seeing a similar trend.

Finally the long term impact of GL-1 drugs on non-pharma industries remains to be seen. However BCBS of Michigan plans to discontinue coverage and this along with generic availability may help drive drug costs down.

TOPICS

• Inflation
• Automotive
• Residential Real Estate

Inflation

OPINION - Sticky inflation; Fed’s target needs to rise

• (Seeking Alpha)
  • May’s CPI cools more than expected, with core CPI rising 3.4% Y/Y
  • Consumer Price Index headline number was flat in May
  • Shelter cost inflation remained stubborn, rising 0.4% M/M in May and offsetting a decline in gasoline prices.

Automotive

OPINION - Not the end of EVs, the end of the certified program

• (CNBC)
  • Ford ends EV dealership program that required hefty investment to sell electric models
  • Ending a controversial electric vehicle dealership program that initially asked store owners to invest upward of $1 million to sell EVs.
  • The “EV-certified” program was announced in September 2022 by Ford CEO Jim Farley in response to high demand for the vehicles.
  • Amid slower-than-expected demand, Ford will open EV sales to all of its dealers.

OPINION - Buybacks make Wall Street happy but not sustainable long term. Wasted a huge amount of money on electric cars.

• (Moby)
  • GM Boosts Investor Confidence with $6B Buyback with Strong Financials and Stock Up 30% Past Year
  • CEO Mary Barra and CFO Paul Jacobson, plans to capitalize on stable prices and sustained demand for gasoline-engine vehicles.
  • Buyback plan comes from a solid first quarter. The company reported revenue of $43.0 billion, a 7.6% increase from the same period in 2023, and net income attributable to stockholders of $3.0 billion, with EBIT-adjusted standing at $3.9 billion.
  • Despite challenges like the UAW strike and issues with its Cruise self-driving unit, GM’s strategic financial maneuvers have maintained high investor confidence. This confidence is reflected in GM’s stock, which has seen a 50% increase since the announcement of the initial buyback plan.

Residential Real Estate

OBSERVATION - Homes for rent rates have stabilized as well

• (Moby)
  • Rent prices are stagnating, suggesting high inflation may stick around
  • A report by Realtor.com indicates that the slowdown in rental price decreases in May could contribute to persistent inflation throughout the year.

Life Extending Technology (Bio/Pharma)

OPINION - Expensive drugs but now generics are available? Could cut into pharma’s profits.

• (Seeking Alpha)
  • GLP-1 obesity drug coverage dropped by Blue Cross Michigan: report
  • Blue Cross Blue Shield of Michigan plans to discontinue coverage for fully insured large group commercial plans beginning in January.
    • The insurer cited efficacy, safety, access and cost as reasons behind the change
  • the drugs can cost over $1,000 per month per user.