Thank you to all the men and women who put their lives at risk so I can live the life I live and talk about money and stocks. You are the Shadow MVPs of the Freedoms we have today.
Seems the markets are turning around. We finally saw consecutive green days last week. Something we have not seen for months. The Dow Jones actually saw 5 consecutive days in the green. The S&P and Nasdaq snapped their 7-week losing streak and finished last week in a positive direction.
Does this mean the worst is over and we can finally go back to the World of 2021? Where we were making new highs every other day?
Well, probably not.
There are still a lot of headwinds (a fancy way of saying challenges) facing the US economy and investors are worried (more on this below).
But I will take a relief rally whenever we can get one.
The Beautiful Market Returns Last Week:
Tale of the Tape
Economy
Inflation coming for your eggs.
No, I mean that literally.
According to the US Department of Agriculture (USDA), the price of eggs will be 21% higher by the end of the year. This is a massive increase from the expectation of a 6-7% increase from last month.
How can this be?
Well, it is a combination of factors:
Bird flu outbreak in January that killed 6% of egg-laying chickens in the US
Chicken feed is more expensive because it is made from corn and soybean which have been affected by the trade war with China and Russia's invasion of Ukraine
Cage-free eggs are all the rage right now and that is more expensive to maintain
Plus all the typical issues we have talked about all year
Supply chain constraints
Labor shortages
Putin is the world's worst human being on the planet
In March of this year, a dozen large Grade A eggs were $2.05, expensive but😕. In May, those same dozen large Grade A eggs were $2.52 😨. It was only $1.40 in Spring 2019.
Trying a new segment for the newsletter (let me know what you think)
TRIVIA
Three grocery stores were among the top 10 most reputable companies, can you guess the three stores? Answer at the bottom of the newsletter
Combine that with a recent report from FRED aka the Federal Reserve Economic Data, that showed people are beginning to draw on their excess savings to face inflation. The personal savings rate dropped to its lowest level since the 2008 financial crisis. Jeffrey Roach, LPL Financial's chief economist said, "A falling savings rate tells me that consumers are dipping into savings to offset a subpar wage growth unable to keep up with inflation."
The Fed has doubled down on raising rates and reducing its balance sheet to fight inflation. Last Wednesday, the Fed minutes were leased for their meeting earlier in May. It showed the Fed will increase rates probably for longer than most investors had expected to ensure inflation comes down.
THE GOOD NEWS?
The Congressional Budget Office, a nonpartisan agency that oversees government spending, released a report on Wednesday stating inflation has topped and will decline from here. However, it will still remain above the Fed's annual target of 2%. Also, GDP for the US will grow at 3.1% in 2022 whereas most banking analysts had expected a growth of only 1%. Per CNBC:
Here’s what the CBO sees for the U.S. economy at the end of each year:
Random Interesting/SAD Facts
The number of death per 100,000 children due to Guns
It is now the leading cause of death in Children
NOT Sickness, NOT Disease, NOT car accidents
EFFING GUNS
Number of people who traveled over the Memorial Day weekend according to AAA
This is an increase of 8.3% from 2021
What was that about inflation causing airfare and gas to be more expensive?
For those of us who live in the South (like ya boi), Summer equals STORM SEASON
NOAA (National Oceanic and Atmospheric Administration) is forecasting a 70% chance of 14 to 21 named storms this season.
Of these, six to 10 would become hurricanes, and of these, three to six would intensify into major hurricanes of Category 3 or greater.
Lord PROTECT US!!
Looking Ahead
All eyes on labor
This week the Bureau of Labor Statistics releases its monthly Job Openings and Labor Turnover Survey report. It measures the number of job openings available, the number of new hires, and the number of quits that we have in a month. March showed there were 11 million jobs available. With 5 million people unemployed, it means there were plenty of jobs to go around. It will be interesting to see how the labor market is faring. To see if people are rushing back to work especially as inflation continues to cause people to use up their savings.
However, right now workers still have a lot of power in the job market. But things might be changing
Earnings
As far as stocks are concerned. Everyone's favorite meme stock, Gamestop, reports earnings this week. This should be a reminder to everyone not to get caught up with movements when investing. People’s attentions change and they move on. When investing the most important thing to look at is the CASH a business can generate.
Speaking of Cash generating businesses, there are two that I am very interested in that will be reporting this week: Salesforce and Crowdstrike
Salesforce wants to be like Microsoft for businesses. They provide “customer relationship management software and applications focused on sales, customer service, marketing automation, analytics, and application development.”
In my words: they make it easier for businesses to have a personal touch with customers
The key thing with Salesforce is the fact that they made themselves to be a platform where developers created plugins for the software. Making it very user friendly and personalized for each customer
It is literally the anti-Microsoft (pre-Satya Nadella).
I love boring Business to Business companies because they tend to be able to charge more for their services and they are not caught on the whims of consumer preferences.
Crowdstrike is a cybersecurity company. They provide “cloud workload and endpoint security, threat intelligence, and cyberattack response services.” According to their website
In my words: they use AI to ensure they can prevent attacks before they happen and make it seamless for any business.
Another Business to Business company.
With more and more businesses having employees work from all over the globe, cybersecurity will play a massive role in protecting information from being stolen or systems from being corrupted.
From my research (meaning seeing my company using the service and then listening to podcasts and reading newsletters), Crowdstrike seems to be a leader in the space for enterprises.
Both of these companies have been getting destroyed due to the general hate of tech companies with large multiples right now. So trying to determine if they are a good buy for my portfolio.
The REST
Sports I Care About Update
Since the season is over for Man U (Praise the Lord). This section will become updates on teams I care about. This week is all about Real Madrid winning ANOTHER CHAMPIONS LEAGUE trophy!!
Answer to Trivia: Trader Joe's (my favorite store of late), H-E-B, and Wegmans. Three other grocers were in the top 25 most reputable companies: Kroger (cost-effective), Publix (overhyped but good), and Costco (my second favorite store).
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾