Be Fearful when others are greedy
-Warren Buffet
Markets are ripping. The economy is flowing in a positive direction. Consumer sentiment (more below) is finally positive. Things are great!
And I am getting more worried (more below). It's easy to say the Buffett quote but much harder to live it out. You have to remember there are other influences that make it much harder to actually be fearful when others are greedy. We do not live in a vacuum. It's much harder to not go with the flow. Which is why we need reminders. Let this be a reminder for you not to rush into the market and buy your favorite stocks or stocks that have had unbelievable runs i.e. Nvidia. Stick to your plans.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Markets Weekly Performance
This newsletter is 1,488 words a 7 min read
Tale of the Tape
Economy
According to JPMorgan Chase's analysis of 9 million Chase customers' checking and savings accounts, Americans have 10-15% more money in their banks than they did in 2019 before the pandemic hit. Seems my bank did not get that memo to have more money in it 😔.
But those excess savings are quickly dwindling as everyone has been spending heavily over the last year. Median Account balances have declined 41% from their peak in April 2021, according to Chase.
However, just because savings may be declining does not mean spending is slowing down. Consumer Sentiment is at its highest point in over two years. The American Superpower saved us from a recession.
The Dark Side: The party might be coming to an end. In the next few months, a number of safety net programs from the pandemic will be coming to an end:
Student Loan moratorium will end in October
Child Care funding will expire
Work requirements for food stamps will be reimplemented
Medicaid will remove people who were enrolled during the pandemic that are no longer eligible
Takeaway: The sun does not always shine. I will repeat what I have been saying since January. Make sure you have a rainy day fund because the storm clouds are getting stronger by the day.
Earnings
Newsletter Update: moving forward I will be doing less full breakdown of company earnings. Rather, I will give my takeaway from each earnings results. Let me know your thoughts on the new style.
Tesla
Margins are compressing fast (from 25-30% to 18%) for the most popular Electric Vehicle manufacturer but revenues grew over 40% in the quarter. This is part of the strategy for Tesla to gain more market share as competition heats up in the EV market. While other manufacturers are trying to find ways to become profitable with EVs. Tesla wants to drive a distance between itself and the competition. Tesla is also beginning to advertise and is participating in car expos as it tries to drive higher demand for its vehicles.
Stock Move After Earnings: Fell 10% which I do not think was warranted.
What to Watch: GM & Ford report earnings this week. It'll be interesting to see how their EV sales are doing. Also to hear more about how using Tesla charging stations won't be negative for their revenues in the future.
Netflix
This company has been the ultimate example of what people say is not what they do. Password crackdown has continued to drive massive subscriber growth. They added 5 million subs in the last quarter.
Netflix announced it is dropping its cheapest ad-free subscription option. Replacing it with its ad options.
Stock Move After Earnings: Fell 8%, again I do not think it was a warranted selloff.
Stats of the Week
The number of combined workers that plan or are already striking this summer. We all know about the Writers and Actors strike in Hollywood. Well 340,000 UPS workers are planning to go on strike as well. An agreement between UPS and its Workers’ Union was not reached and the deadline is quickly approaching at the end of July. 150,000 of Detroit's Big Three automakers (Ford, GM, and Stellantis (Chrysler)) employees are also planning to strike by next month. With the pressure of a possible recession and companies announcing a push for "efficiency". Unions are using their contract timing to push back.
Those were your chances of winning the Powerball lottery last week. One lucky Californian was the sole winner of the $1.08 Billion, the sixth largest U.S. lottery prize ever. The winner will be taking home a cool $558 million (Uncle Sam gotta get his). Good choice by the winner to take the lump sum. Always take the lump sum and always remain anonymous. It is the only way to fully enjoy your winnings.
This is the third-largest Powerball and the third time the jackpot has hit $1 billion dollars. They made the lottery harder a few years ago which is why we've been seeing more of these large payouts. It took 38 straight drawings without a grand-prize winner. This is part of the strategy of the lottery.
Only people, who never dream of winning the lottery, make these kinds of purchases. An original iPhone just sold for 380 times its original price of $499. Apparently, it was the rarest version of the original iPhone with only 4GB of memory. Doesn’t have to make sense to me, I guess
The number of consecutive days that Arizona has had temperatures above 110 degrees Fahrenheit. This broke a 49-year-old record. Even when the sun goes down temperatures only drop to 90-94 degrees.
To our brothers and sisters across the pond, temperatures are just as bad. According to meteorologists, peak temperatures in Europe could break the Continent's record of 119.8 degrees.
Remember when people didn't believe in Climate Change? Don't think we need to have those discussions anymore.
You have permission to stay inside for the rest of the summer.
Ford cut the price of the F-150 Lightning by $10,000. The entry model now starts at $49,995. Ford says they reduced the price of the truck because material prices came down and production capabilities increased. But that is total BULL S#!+
Companies never give back profit margins. Once they know they can sell a product for more, they sell it for more. The only reason a company reduces its price is competition. Tesla earlier this year reduced its price which in turn is forcing Ford to do the same.
The automotive market is known to have very tight margins. EVs initially turned that on its head with Tesla having margins similar to that of Apple. But reality is setting in, a car is still a car. It does not matter how fancy it may look.
Looking Ahead
Busy Busy Busy
Jerome and His Fed Buddies take center stage on Wednesday. They will announce if interest rates will be held at current levels or increased again. Expectations are for the Fed to increase rates by 0.25%. This would bring rates to 5.5%, the highest we have seen in 22 years.
Get ready for the scorching hot takes from every Finnerd on Twitter, as all your favorite companies report earnings.
Microsoft*, my favorite Big Tech company, is reporting earnings on Tuesday. There is not much of a question about if Microsoft will do well or not. The company continues to print money from all its various subscription services. Plus, they recently announced a $30 increase to its Office Software Suite for all those who would like to integrate its CoPilot AI.
What to watch: Details on finalizing deal with Activision Blizzard.
Google* & Meta announce earnings on Tuesday as well. Both face similar but different challenges. Meta has been on a tear all year long recovering from its massive sell-off last year. More than doubling this year. After getting outdone by ChatGPT, Google seems to have slowly stolen the spotlight as it integrated Bard into Google.
What to watch: What are Google's plans to continue to position Bard as a default in front of users without affecting its Search revenue? How is Google Cloud growing or shrinking?
What exactly is Meta's plan with Threads? Are they really trying to compete with Twitter? Recent reports show that engagement on the platform has fallen over 70% after the initial rush to 100 million users. While twitter's engagement is back at 200 million daily users.
Other Earnings
Sports I Love
He Truly is The 🐐
Messi did the most Messi thing ever. In his debut for Inter Miami, he scored the game-winning goal in the 94' min from a FREE KICK!!
This guy is truly a LEGEND!!
$6.05 Billion for Washington
The Washington Commanders, the NFL team in DC, was sold for $6 Billion to a guy named Josh Harris. This is a record for an NFL franchise sale.
*I am a tiny shareholder in this company.