A combine notes because of time off an holidays

Big themes around the direction of the economy, the labor market and the Fed’s next move. As Keith Fitz Gerald notes: “Trying to anticipate the Fed is a fool’s errand.”

Inflation is close to target, but the Eurozone is clearly in the throes of deindustrialization. Regardless of monetary movements in other countries, US data and corporate results continue to surprise to the downside. Is something big coming, or is it simply a bump in the road?

Labor market headlines are often worse than reality. While we’ve reached a high point, since 2021, the rate is still historically low. The expansion is slowing but we aren’t seeing a crash like in 2008. On the flip side, startup layoffs are down 62% since January 2023 per Carta. It’s been steady since early 2022 and may be ending.

The rest of the economy is going through the cycle. Weak companies continue to seek acquisition, or bankruptcy. Financial companies might be in a weakened position but in the near term the 2008 regulations are doing their job.

The biggest headwinds for the economy are the commercial real estate market that has a 20.1% vacancy rate, not seen since the 80s. No indication of how or when this will impact real estate, finance or local governments. Another headwind is the increasing damage from cyberattacks, which impact company bottom lines. However, it’s also an opportunity for companies like Micrsoft to benefit from increased security spending.

TOPICS

• Global Recession
• Domestic Recession
• Fed Rate
• Commercial Real Estate
• Labor Market
• Bankruptcy
• Finance
• Mergers and Acquisitions
• Cybersecurity

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

Growth is slowing around the globe and central banks in Canada, Australia and the Eurozone are signaling rate increases. At some point that will bleed over into the US.

Union pressure ramps up at Amazon as ALU partners with the Teamsters. Hands on labor is still in demand even though office work has been in recession for over a year.

EVs continue to drag down automotive sales and a used car price correction is underway.

The real estate market is still hot, but inventories are starting to recover to pre-pandemic levels. This will create downward pressure on prices but don’t expect a major correction. The real relief will come from more starter homes being built.

A different kind of M&A with Dollar Tree looking to divest some Family Dollar stores. In truth there is likely a lot of footprints overlap between the two and consolidation by shutting down underperforming stores is in order.

Finally, folks are starting to question the massive spend on AI related tech. Chamath Palihapitiya has been very vocal about the value proposition of AI chatbots. He further speculates that eventually shareholders will demand a return on their investment from massive spend.

TOPICS

• Fed Rate
• Global Recession
• Domestic Recession
• Labor Market
• Energy
• Automotive
• Residential Real Estate
• Life Extending Technology
• Mergers and Acquisitions
• AI and ML

The Chevron deal is a move for Guyana in forging its own direction.

Anything short of a lower residential real estate price will help new buyers

Mergers and acquisitions ramp up with both T-Mobile and ConocoPhillips.

Drug prices are starting to pump the brakes on GL2, even as companies like Eli Lilly expand production.

Meanwhile Elon Musk continues to inspire the confidence of investors, even if his business aresosing their luster.

TOPICS

• Energy
• Residential Real Estate
• Mergers and Acquisitions
• Life Extending Technology
• AI and ML

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
• Global Recession
• Consumer Debt
• Labor Market
• Mergers and Acquisitions
• EVs

Long term thinking is the only low stress way to invest in the market, and not worry about what the Fed will do. Don’t worry about meme stonks.

Digital media remains in a state of consolidation. Comcast will partner with Peacock, Netflix, and Apple TV to offer bundles. Meanwhile Disney and Warner Bros announced a joint streaming service combining Disney+, Hulu, and Max. Either way the consolidation is starting to make streaming look more like linear TV.

Red Lobster is rumored to be going bankrupt and Under Armour is on the ropes. Corporate debt is less of a concern as businesses adjust to higher interest rates. Consumers, on the other hand, are taking out more debt. But looking beneath the numbers and debt has less to do with consumer spending. Income and wages are far more important.

The labor market continues to struggle and we’re seeing layoffs outside of tech. We are also seeing an increase in unionization efforts which will make the southern US more expensive for manufacturing. Demand is high and with or without unions wages are likely to go up, and that will drive inflation.

TOPICS

• Fed Rate
• Bankruptcy
• Digital Media
• Stock Market Bubble
• Corporations Debt
• Consumer Debt
• Labor Market

Consolidation deals (M&A) in digital media are accelerating. Disney and Warner Bros are planning to bundle many services, while Sony and Apollo Group are planning to divest parts of Paramount group.

Automotive continues to realign. GM announced its dropping yet another vehicle from the lineup, leaving only the Corvette as the sole ICE car. Meanwhile Chinese car manufacturers continue to flood the EV market. While those vehicles won’t show up in the US, it could seriously impact EV exports.

TOPICS

• Digital Media
• Automotive
• EVs

Justice? Maybe not but at least a judge called B.S. on Adam Neumann’s plan to buy WeWork out of bankruptcy. He was told to pay off the $4b debt first, and ostensibly everyone he owed money to. An article out of the Wall Street Journal (paywall) that confirms population decline. Record low birth rates aren’t new but mainstream acceptance that it will influence economics is. Again, I don’t think it’s a gloom and doom crisis, but it will change things.

A lot of news out of Artificial Intelligence this week. I highly recommend the latest edition of The Pragmatic Engineer newsletter for all the juicy details. Are LLMs hitting the “Napster” moment of licensing? Several lawsuits by IP holders seems to indicate.

Microsoft teased a new web-based version of CoPilot that builds on GitHub Codespaces and provides an intersection between CoPilot web and GitHub CoPilot. In the demo you can see the prompt engineer explain the concept and the LLM expands the idea and ultimately generates code.

This is a different approach than Devin or Magic.dev which aim for the moon shot of taking input and generating code without intervention. I won’t ignore that Microsoft has deep enough pockets to fund this project longer, I also think they are trying to gain market share early by producing tools that make developers more productive, rather than replace them.

TOPICS

• Bankruptcy
• Population
• AI and ML

I think we all learned an important lesson about stories from journalists who seek to sensationalize topics to generate clicks. The predicted Baltimore supply chain issues never materialized after shipping was shut down by the collapse of the Francis Scott Key Bridge.

Young workers have the lowest unemployment rate since the 60s and weekly wages are higher than in the past. Again, this contradicts the prevailing narrative that Gen Z is doing worse than previous generations. Look past the commentary at the data.

Wall Street wasn’t happy with META’s spending on AI. They’d rather the money be returned to the shareholders. We heard a very similar critique with Amazon as Bezos directed online retail profits into building what would become Amazon Web Services. The future of consumer AI will be through service providers, and companies like Meta and Microsoft will play a part.

The idea of natural gas as a bridge fuel is gaining mainstream support with the likes of Jim Cramer admitting as much. I’m still cautious that it will quickly bridge us to nuclear power which is the only reliable base load source that is carbon friendly.

Finally, the economy seems to be roaring ahead despite predictions of current or pending recession. GPD grew steadily but inflation also. Shelter costs and pending trade tariffs will only make inflation stickier. I see daily commentary on how indicators point toward future recession, but I’m mindful that while these indicators have a high correlation the timing is never consistent.

TOPICS

• Inflation
• Bankruptcy
• Energy
• Domestic Recession
• Labor Market
• Population
• Mergers and Acquisitions
• Globalization
• AI and ML

Every one that has eye can see that the Fed isn’t cutting interest rates. Apparently the stock market just realized? Bottom line inflation isn’t over and adding tarrifs to steel imports will only add fuel to the fire. Property and insurance is also piliing on inflation pressure

But it isn’t all gloom and doom. Long term energy production will ensure that the US economy remains top dog in the world. We produced a staggering 12.9 million barrels per day in 2023. There is also a broad consensus that natural gas is the right bridge energy to remove the last of the coal fired plants. All of this will remain a tailwind for the US, especially energy intensive industries.

The labor market is robust but wage growth has cooled. Long term worker pay needs to stabilize with long term inflation. Inflation is squeezing margins but businesses should expect increasing worker demand for raises. Demographics, increased union support and reshoring will all drive wages.

Elon Musk creates a lot of buzz, but if you look at two of his companies his actual impact is pretty visible. SpaceX has spurred an entire industry of providing cheaper commercial access to space. While success if obvious, the associated cost have not fully worked out. A recent impact of space debris on a home in Florida could become more common and the insurance industry is taking notice. Ultimately who is responsible when a Star Link microsatellite deorbits into someone’s property?

Likewise Tesla has long been the leader in electric cars it he US. Musk’s stated goal was to accelerate the EV technology, and he suceeded. With increasing competition from domestic and foreign manufacturers the company has doubled down on self-driving software side of the business. Again the insurance industry is taking notice. In my opinion, the biggest threat to Musk’s vision is not the technology or the consumers but the regulatory and risk mitigation aspects.

TOPICS

• Fed Rate
• Inflation
• Energy
• Labor Market
• Automotive
• EVs
• Commercial Space

Speculation continues on when the next Fed rate move will be, personally I don’t guess. But it’s possible that the source of an interest rate move may come from global forces rather than internal pressure. This hasn’t stopped top CEOs from sharing their opinion. Predict calamity long enough eventually it might become true

Work from home is still to blame for office vacancies, but I’m increasingly thinking that weak business fundamentals are a contributing factor. We are now higher than in 1986 and 1991. Global oil prices are also seeing weakness, though $80 per barrel is priced into the model and seasonal gasoline demand in the US is within historical trends.

It’s either a stock market bubble or a recession depending on which article you read. Someone pointed out the necessary recovery time for the NASDAQ 100 bought at the peak of the dot com bubble. Sure it took 16 years to recover, but if you held it until today, you’d still be up 276%. Also worth noting that the more diversified S&P 500 only took 7 years to recover.

Fear is ruling the day with folks buying gold from Costco and everyone penning articles about whether we are in a bubble and if it will pop. Sure semiconductors and tech may be VERY overpriced, fundamentals in other sectors could indicate we are on the cusp of a huge expansion in other market areas. Point being diversify and plan for the long-term are a better strategy.

Speaking of semiconductors, it looks like we might be on the verge of a second chip war around purpose-built AI processors. To date Nvidia has leveraged GPU designs but recent announcements by Intel, Meta and Alphabet may create a race to reduce training and inference processing costs. One thing is for certain: current AI processing costs are too high to be sustainable.

Another consideration for AI, EVs and chips is the impact of government incentives, tax breaks and spending programs. These act as fuel for expansion but when they expire it can often cause a rash of business failures. Look no further than the solar industry of the 2000s.

NOTE: Week 15 is a two week combination due to some well deserved time off.

TOPICS

• Fed Rate
• Commercial Real Estate
• Energy
• Stock Market Bubble
• Domestic Recession
• Consumer Credit Crunch
• Labor Market
• Automotive
• Domestic Semiconductor
• Deleverage Globalization
• AI and ML
• EV Battery Technology

Bill Gross is predicting that the yield curve needs to flatten, otherwise the long-term outlook for the economy is not positive. Infact everyone is perplexed by the continued inversion of the yield curve. As Howard Marks says “Being too far ahead of your time is indistinguishable from being wrong”

Fisker is on the road to bankruptcy as the company is delisted from the NYSE and its stock price is going to zero. The outlook for EV manufacturers is consolidation and clearly Tesla and BYD are the winners. Speaking of BYD, I can’t imagine a scenario where BYD is allowed to sell vehicles in the US based on security concerns. Given recent revelations of auto manufacturers selling driver data and the political wrangling around TikTok this isn’t going to happen.

TOPICS

• Fed Rate
• Bankruptcy
• Domestic Recession
• Environment

I’m not sure why I note this every week, but the projected Fed rate cuts aren’t coming. By the Feds on definition, we have neither seen a decline in employment nor a decline in inflation. The latest PPI numbers support this. Yet somehow Wall Street is betting on rate cuts. At this point I’m just speculating on what type of tantrum the market will throw when reality is accepted. 

Environmental concerns continue to top business headlines and new Federal emission regulations have everyone banking on a future sales benefit from more strict emission requirements. But sales data shows that consumers don’t want EVs. EV manufacturer Fisker is halting production and could be on the verge of bankruptcy. Meanwhile climate alarmism is once again pointing to ‘chartbusting’ extremes due to a 1.5-degree Celsius temperature increase. Bottom line is that climate alarmism didn’t work, and future efforts need to focus on mitigation strategies. 

The world of semiconductors and machine learning continues to move at a brisk pace. Further investment in domestic semiconductors by the US will probably fuel an expansion and speculation similar to the solar industry under a similar Obama program. The trend around AI mergers and acquisitions continues with Apple acquiring DarwinAI and Microsoft scooping up Inflection AI. The overall trend is that Big Tech will be the big winners of AI.

TOPICS

• Inflation
• Labor Market
• Environment
• Climate Change
• Domestic Semiconductor
• Mergers and Acquisitions
• Cybersecurity
• AI and ML
• EV Battery Technology

The inflation figures weren’t great, but not shocking if you expect a long-term 3-4%.

US gasoline consumption is down but EVs aren’t the reason; Average fuel economy is up 42% since 2003. The US produces more oil than any country, ever. Crude oil production in the United States averaged a staggering 12.9 million barrels per day last year.

The Japanese economy appears on the mend after 25 years. Meanwhile strikes paralyze Germany as workers demand higher wages. While employment numbers for white collar workers are weak, blue collar and service workers are still in demand. I’d expect much more union activity everywhere.

3M is looking to follow GE’s lead and spin its health care business. And geopolitical risks are funneling money into the Indo-Pacific region.

TOPICS

• Inflation
• Energy
• Labor Market
• Life Extending Technology
• Globalization

Job growth in the US continues to be strong, even if it slightly missed expectations. The trades, transportation, construction and utilities all continue to see growth. White collar job losses in professional and business services might make headlines, but otherwise the employment picture is good.

Abroad we are seeing weakness and recession, but the prevailing opinion is that the US will nail a soft landing and avoid outright recession.

Globally energy prices, supply chain disruptions and civil unrest all pull economies in a negative direction. Eygpt is the latest nation to hike interest rates to combat inflation.

Residential real estate continues to be strong, but a recent survey confirmed that rental rates are either flat or declining slightly. This after skyrocketing prices in 2021 and 2022.

One key to the US economic strength is domestic energy production, which stands at an all-time high. In fact, the price is so cheap that production cuts seem likely. Long term this is good as the US will dictate its own energy supply for decades to come.

The stock market tests new highs and that’s not a bad thing. It’s easy to wring your hands about stocks being too expensive but as several articles point out: long term discipline can mitigate the impact of buying at the wrong time.

Finally, the cyber-attack that hit Change Healthcare might have been one of the worst in recent memory. While the victim reportedly paid the ransom, it’s likely that the recovery effort will take a long time. It’s bad, but keep in mind that Change’s parent unit, Optum Insight, only accounts for 12% of parent UnitedHealth’s overall earnings.

TOPICS

• Labor Market
• Global Recession
• Residential Real Estate
• Energy
• Stock Market Bubble
• Mergers and Acquisitions
• Cybersecurity

Rough times for gaming as budgets are slashed and employees let go. Both Sony and Electronic Arts announced major changes. Given the strength of PC and mobile gaming, you must wonder about the future of consoles. 

Apple throws in the towel on self-driving cars. Does this signal capitulation that the technology is nowhere close to road ready? Another interesting point is why Apple is reassigning employees from the car division to AI. Is this a FOMO move or was Apple already working on its own AI for vehicles? 

Regarding a US recession the data doesn’t indicate that. In fact, many believe there is no imminent danger despite some conflicting metrics. What is a risk is further bankruptcies, like for Macy’s who is closing 150 stores nationwide. The move is due to decadelong underperformance and investors looking for ROI. Things look dark for the retailer if the company can’t pull out of the dive. 

The guys on the All-In Podcast had a great discussion about the structure of Nvidia’s business and a breakdown of recent results (worth a watch/listen). A couple of big questions: Are these results based on a sustainable revenue model or are they simply due to a one time build out?  Second who spends $22 billion? Big tech companies with lots of cash and not a lot of investment options. But at some point, investors will look for ROI and that could be bad for everyone involved. 

Real estate and energy continue to hum along. Home sales are slightly down, but prices are not. It should be noted that long-term inflation accounts for most of the rise in home prices. Meanwhile energy prices remain low in the US because of the shale gas revolution. To quote: “We’ve found almost three Saudi Arabia between oil and natural gas.” 

Finally, an interesting tertiary observation about the expansion of AI chips and data centers which generate a lot of heat. Folks are beginning to pay attention to the water usage, for cooling, that these data centers demand. It brings into question the location of data centers in drought-stricken areas, but it also opens the door for alternative cooling technology that Intel and other startups are working on.

TOPICS

• Labor Market
• Path to Profitability
• Domestic Recession
• Bankruptcy
• Domestic Semiconductor
• Residential Real Estate
• Energy
• AI and ML

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

Interesting employment trend as the remote work trend (WFH) creates economic benefits in the labor market as we see a 1% increase in the labor participation of mothers. A couple of reasons why I think this is significant. First it creates a way for parents and caregivers to efficiently work part time as they balance other responsibilities.  

Second, and more critically, it allows full-time workers to provide part-time childcare for school-age children. By eliminating the commute, parents can drop kids off at school, attend events and generally support their children WITHOUT the need to take time off. This is a huge productivity boost and allows parents to stay fully in the workforce. 

Meanwhile inflation remains sticky as the Shelter category continues to drive CPI. Despite interest rates, a shortage of available residential real estate still exists. All of this led me to think that the prospect of a Federal Reserve interest rate cut is wishful thinking. 

Speaking of interest rates, there are a lot of hullabaloo about the so called “wall of maturity”, but if you look at the maturities, you’ll notice more of a ramp from 2025 through 2028. Still a risk, but also not everything at once. I would expect a protracted period of pain. This along with ongoing CRE risks will hang a heavy cloud over debt markets for quite some time. 

Wrapping up with Artificial Intelligence we are seeing two important trends. First a repatriation of high-end chips due to global supply concerns (Taiwan) and technological advances (Extreme ultraviolet lithography) which are expected to leapfrog domestic chip production by Intel. Second Nvidia chip supply issues are causing companies like OpenAI to spend an enormous amount ($7-9B) on GPUs per year. Long term this will influence companies (Apple, Tesla, Samsung) to design their own purpose-built chips.

TOPICS

• Labor Market
• Inflation
• Consumer Credit
• Corporate Debt
• Commercial Real Estate
• Globalization
• AI

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

Fall out from Biogen’s failed Alzheimer’s drug Aduhelm will hurt more than the company. The big loser is the reputation of the FDA.

Strategic thinkers are considering a potential collapse in global maritime shipping. To date shipping has remained operational, but mostly due to ‘ghost fleets’ via China, Russia and India. The great unknown is what happens to insured ships that are inevitably attacked.

Residential housing is not very affordable, but a recent trend in kids moving back in with parents possibly has multiple underlying reasons.

Meanwhile GM dealers are begging the manufacturer for hybrid vehicles instead of full EVs. Dealers claim that buyer are looking for a middle ground between ICE and EVs. Despite the feedback, GM CEO Mary Barra is doubling down on EV.

Evergrande finally goes out of business, or not. The Chinese company was ordered to liquidate by a Hong Kong court. What comes next will be either a bad situation for Chinese savings or for Hong Kong’s authority.

Consumers are running out of steam with nearly 30% of Americans behind on payments. “Buy now pay later” is soaring as wages fail to keep up with inflation for lower wage earners.

Layoffs continue with fresh announcements from Deutsche Bank and Zoom and job losses continue to bleed over from tech into other sectors. Despite a large number of layoffs, unemployment continues to remain at record low as the labor market is still in imbalance.

TOPICS

• Labor Market
• Consumer Credit Crunch
• Bankruptcy
• Automotive
• Residential Real Estate
• Globalization
• Bio Pharma

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

Populist political consequences and bipartisan, systemic big government spending are to blame. 77% of debt since 2000s attributed to legislation that passed with strong bipartisan support. 

Understatement of the year: Commercial real estate is in trouble. Empty office buildings are setting cities in a doom loop. Even CBS 60 minutes has picked up on the trend. 

Global shipping is under pressure.  reducing container transport by over 50%. Shipping rates will impact the supply chain for Europe, which is already weak or in recession. 

EVs don’t make a lot of economic sense right now and car buyers don’t want them. Only 6 Percent in the US want an EV for their Next Vehicle. Adoption rate is likely due to massive government subsidy programs.

TOPICS

• Labor Market
• Inflation
• National Debt
• Real Estate
• Globalization
• Environment

Tech layoffs have taken the front page as three years of layoffs have far exceeded cuts demanded by simply over hiring. AI is often to blame, but the most likely candidate is the end of zero interest rate policy (ZIRP). Easy money will take time to unwind. 

The stock market has already priced in rate cuts, but it is pure fantasy unless the domestic (US) economy takes a dive. Inflation has proven sticky, and analysts warn of a bumpy ride in the short term. However, an economic downturn might be near as coincident indicators point toward recession and consumer credit contracts. Nearly 30% Americans are behind on debt payments. 

Meanwhile declining demand for oil indicate a global recession and slowing demand from China, and Middle East tensions. Likewise global shipping is under pressure and as it grows more difficult and dangerous, it also grows more expensive. Companies are looking to de-risk, and near shore nations like Mexico offer cheap manufacturing labor. 

Less surprising is the headline that America’s corporate offices are emptier than at any point in at least 4 decades. Remote work, accelerated by the pandemic, has led to a staggering 19.6% of office space in major U.S. cities wasn’t leased. Companies are increasingly interested in smaller, more flexible spaces. 

Finally, Gartner recently identified an interesting disruption that you may not have considered. Analysts are predicting a Golden Age of “Silver Workers” due to the talent crunch. The increased experience and productivity of seasoned workers coupled with the democratizes skills via AI could maximize elder workers’ value. The combination of retirement shortfalls and declining worker demographics could make this prediction a reality.

TOPICS

• Labor Market
• Consumer Credit Crunch
• Retirement Shortfalls
• Real Estate
• Energy
• Deleverage Globalization