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

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

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

Asia is in real trouble.  The YTD basis has the highest zombie prominence of any market which indicates a lot of potential business failures in the future. Meanwhile 67 % of all Chinese bonds are in default which could trigger another Asian debt crisis if the government does not intervene. 

Everything is political, including designating a recession.  Personally, I think we already had a mild recession and numbers will be retroactively revised. The numbers look different this time because of the unprecedented distortion caused by COVID era fiscal policies. 

While the US corporate sector may not be in as bad a shape as Asia, our national budget situation is dire and on the verge of being out of control. This year the budget deficit was approximately the size of total income tax collected which is probably unsustainable. If the fight over house speaker is any indication, this is a very serious situation. 

We wrap with an interesting chart about streaming in the US which seems to have hit a plateau. Companies are looking abroad for growth but it’s more likely that the rate of cord-cutting, and multiple streaming platforms will cool. At this phase I would expect more growth through consolidation of services.

TOPICS

• Bankruptcy
• National Debt
• Recession
• Digital Media

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