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

A stark reminder of where the “big three” auto makers rank by market cap. If the future of automotive is electric, Tesla obviously has an early advantage. Toyota takes a slightly different track with hybrids. Maybe you’ve never heard of BYD, but the Chinese manufacturer has already seen success with exporting vehicles.

Everyone on Wall Street and in finance is worried about the fed rate and when cuts will begin. This largely ignores the real impact that high interest rates (i.e., borrowing cost) have on everyday people.  

On one hand the cost for consumers to borrow and maintain their lifestyle amid rising prices is in serious jeopardy. The credit crunch is ongoing and should be a concern to everyone. It has largely propped up buying, as have government transfer payments. Those payments are coming to an end and student loans are coming due. 

The flip side of higher interest rates is the inevitable downward pressure on home prices. It’s a matter of affordability for buyers and we are finally starting to see it. Commercial real estate is in a far worse situation, and I think the prediction of a bottom in mid 2024 is optimistic. It less about a bottom in commercial real estate and more about a long term underperformance.  

Not surprisingly, the deterioration in household finances is fueling a rise in credit delinquency, particularly in automotive. As if that weren’t enough the big three US auto manufacturers are experiencing worker strikes and more alarming a decline in market cap. Most shocking both Ford and GM have less global market cap than Ferrari which produces a fraction of the number of vehicles. 

But notice something else, tucked in between Tesla and BYD is Toyota. Not only does Toyota have the reputation for building reliable internal combustion cars that are a great value, but Toyota has also sold vehicles in the hybrid space for years. The Prius is the bestselling hybrid car of all time first for sale outside of Japan 23 years ago. We should take notice when Toyota recently announced a long-term battery partnership with LG Energy Solution. 

The last point for the week is a great example of how correlation does not imply causation. The spreadsheet did not in fact destroy the bookkeepers job, and it is not an analog of the AI revolution. I know that a lot of finance is done via spreadsheets, but no sizeable business is using Excel to track accounting auditing. There are purpose built systems for that and they are expensive for companies and lucrative for SaaS providers.

TOPICS

• Consumer Debt
• Real Estate
• Automotive
• Fed Rate
• EV Battery
• AI

This week marked yet another rate hike by the Fed and predictable market hang wringing. More troubling is the designation that we might not be headed for a recession after all. Meanwhile the alarm bells are still sounding, but are they early or late?

The entire cargo and ground transportation sector is in contraction with freight rates down significantly. Strikes by the Teamsters didn’t help Yellow trucking which has all but confirmed they will shut down. Likewise, consumer demand for EVS has stalled with dealers reporting a record number still on the lot.

Meanwhile more companies walking away from half-vacant real estate and many market watchers calling a bubble in AI. The most impressive counter view is the value discount for energy stocks particularly oil.

TOPICS

• Real Estate
• Automotive
• Fed Rate
• Cargo Ground Transportation
• Energy
• AI and ML

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