Abolish Daylight Savings Time - Market Update Feb 26 - Mar 7 2024
Sleep deprived Kelechi at the helm
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Did you know that today, the Monday after daylight savings goes into effect, there is a spike in workplace accidents, strokes, and heart attacks? But for some reason, we keep doing it. This is a typical US thing to do. We ignore obvious and simple changes that would make life better, in pursuit of these expensive and complicated changes that might have a 1% improvement to life if any at all.
😤 If I sound angry, lacking nuance, overly critical, and have no tangible solutions to the issue. In other words, I sound like a politician. TRUST YOUR INSTINCTS. This is what happens when you take a man's sleep away.
Now, Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Healthy Jobs Markets - sort off
She-Conomy is booming - women saving the economy
Crowdstrike - the gift that keeps giving
Stats of the Week
$2 billion fine to Apple by European Commission
$60,000/year wage starting salary for new grads versus $36,000 for non-college grads
27 miles
+1.7 degrees Celsius - record heat
-$43,000 truck
Looking Ahead
Inflation Report for February
Sports I Love
The Dead Clock was Correct
Living Legend Continues Ascent
A Legend is Born
Extras
Eclipse Viewing from 30,000 Feet
Wendy’s Surge Pricing
$100 is the most common bill in circulation
79% of College and Grad Students do not use dating apps
$82 million box office for Dune
YTD Returns
Tale of the Tape
Economy
The Labor Market is returning to a place of normalcy. There was good news but also concerning signs as well. This means the labor market is cooling to pre-pandemic expectations.
🔎Details: Hiring remained strong in February. However, jobless claims began increasing in the same month.
275,000 jobs were added in February.
January's job gains were revised down by 124,000 jobs from 353,000 to "only" 229,000.
Unemployment rate increased from 3.7% to 3.9%, continuing a trend of increasing unemployment.
This is due to more people entering or returning to the workforce, which you can view as a positive or negative thing.
Positive: more people mean more productivity
Negative: people are running out of savings to rely on.
💬In Their Words: Richard de Chazal, a macro analyst at William Blair told Axios, "This report was a bit of a Rorschach test — viewers will see what they want to see."
👀Takeaway: What do you see? I see less labor power to drive higher wages. If the labor market is not tight, employers have no incentive to offer higher salaries to attract or retain workers.
For investors, the takeaway is best summed up by Seema Shah of Principal Asset Management, "If the economy can continue to add jobs but without triggering a resurgence in wage growth, the Fed will achieve its soft landing."
This might be the push the Fed needed to see to begin cutting interest rates. Jerome Powell spoke to Congress on Wednesday and Thursday. He alluded to the likelihood of cutting earlier rather than later this year.
However, inflation is still Enemy #1 on Jerome Powell's hit list.
According to Axios, women are landing higher-paying jobs, opening more businesses, and establishing footholds in industries traditionally dominated by men.
🔎Details: Data from Yelp shows a major increase in the home services companies owned by women, think plumbing and HVAC repairs. Industries typically dominated by men.
From 2022 to 2023, home services listings owned by women grew 38% compared to the national average of 32%
Women-owned Travel agencies, hospitality services, and vacation rentals have increased 44% in the last year vs 28% nationally.
💬In Their Words: Yelp trend expert Tara Lewis told Axios, "In 2023, women invested in themselves and their unique business ideas, helping create a banner year for entrepreneurs nationwide. In 2024, we predict women will continue to make their mark in new industries and lead the cultural conversation."
Takeaway: It is not just Taylor Swift and Beyonce dominating the business landscape. Women are staking their claim, and I AM HERE FOR IT! Women make up 47% of the workforce and 51% of college-educated workforce. Essentially women are the reason the economy did not go into a recession and are currently keeping the economy growing. More power to them!!
Earnings
With more companies being hacked every other day (see the recent hacking of UnitedHealth), cybersecurity is becoming a non-negotiable for companies and governments. CrowdStrike is benefiting hugely from this by being one of the best in the industry. Their Q4 results demonstrated this perfectly.
🔢By The Numbers: Revenues increased by 33% from 2022 to $845 million. Full-year revenue rose to $3 Billion from $2.4 Billion, a 36% increase.
Revenues have grown over the last 3 years by 47% on average.
Subscriptions grew 33% (this means there is a higher demand for its products).
CrowdStrike also made a net profit for the first time. Going from a loss of $48 million in 2022 to a profit of $54 million in 2023.
This can be misleading to make you think that CrowdStrike had not been making money until last year. IT WAS!
CrowdStrike took the Amazon strategy of pumping all the money being made by the company back into the business and spending a little bit more on top to achieve growth.
I typically hate most companies that do this because like we have seen with companies like Snapchat, Peleton, Carvana, Teledoc, Affirm, etc.
CrowdStrike has been a free cash flow monster almost from the beginning. It was just hidden with its high investment costs. Last quarter, it generated another $938 million in free cash flow. Growing its Free Cash Flow by 39%
💬In Their Words: CEO George Kurtz said on the call, “CrowdStrike is cybersecurity’s consolidator of choice, innovator of choice, and platform of choice to stop breaches.”
📈Stock Move After Earnings: Stock surged 21% after announcing earnings on Tuesday night. They gave guidance that was far above analysts' expectations. They increased Free Cash Flow expectations by 30%, with an expectation to have $10 Billion in Annual Recurring Revenue by 2030.
👀What to Watch: When will my luck run out? I have never experienced anything like the run-up I have owning this company. I know that no part of my investment was skillful. I did very basic analysis:
Debt to Cash ratio
Price to Free Cash Flow in a band I like to buy (for CrowdStrike around 30-40 and I broke this rule a ton lol)
Revenues and profits growing (for CrowdStrike higher than 30% because the company is still small and growing)
I got SO LUCKY!! I have done much more analysis on major losses like Intel, Alibaba, Lemonade, Roblox, Tattooed Chef, the list goes on and on. The simple approach to picking a seemingly obvious company has worked so beautifully. Could I repeat this? Highly Unlikely!
This company in my opinion is now much too expensive for my blood. It is currently trading at about 70x FCF. However, with the growth estimates there seems to be room to run. I choose to allow my investment to ride neither buying nor selling just holding.
This investment is not changing my life materially, it is less than 1% of my entire portfolio (went from $2k to $5k).
Stats of the Week
Apple got smacked with a $2 billion fine by the European Commission for anticompetitive practices on the Apple App Store. The fine determined that over the last decade, Apple did not inform users that they could pay a cheaper price outside the App Store for other music streaming services. It resulted in users paying more for Spotify while making Apple Music appear cheaper.
This is the 3rd highest fine levied by the European Commission. It is looking like the 20s shall be the decade of monopoly busting.
Despite all the noise on TikTok and IG from various entrepreneur gurus, there is still a major wage premium for college graduates.
According to the Federal Reserve, college graduates' median annual wages were $60,000 (the highest on record) versus $36,000 for non-college graduates. This is the widest gap in history. According to Axios, the wage premium more than doubles over an individual's lifetime.
Does this mean every major in college is worth the expense? HELL NO! The right major still provides a great starting point in the labor market.
Most of us reading this article are far past the age of deciding about college. But we have people around us who are making that decision right now, aid them in that decision by asking questions about what exactly they want to achieve. Then advise on the cost-benefit of that decision. College debt sucks but if done right it can be the greatest debt of your life.
According to a new study by Stanford economists, the average distance most people live from work is 27 miles. More than double the 10 miles in 2019.
February was the hottest in the history of the Earth. We are on pace to set new records for the hottest year ever. Remember, those records were just set in 2023, the hottest year on record. 2024 is set to completely smash those levels.
According to Reuters, Rivian (my favorite electric truck maker) loses $43,000 for every vehicle sold. So technically, it's financially irresponsible for me not to go buy this truck like right now.
Also, Rivian just announced its R2 & R3 which are supposed to be its version of the Tesla Model Y & 3. Cheaper versions should become the mass market vehicle that will turn the company profitable. Rivian received 68,000 reservations after making the announcement. Deliveries are expected to begin in 2026. The big question is will the company survive until then?
Looking Ahead
Economy
Inflation returns to the spot light this week. February’s inflation number will be released on Tuesday. Investors will be hoping for inflation to continue its decent towards the mythical 2% range.
Earnings
Sports I Love
The Dead Clock was Correct
Living Legend Continues Ascent
LeBron James crossed 40,000 Career Points. He is the first and only player in NBA History to ever achieve such a feat.
She broke the record for the most points in NCAA history
Extras
Eclipse Viewing from 30,000 feet
On April 8th, there will be a total solar eclipse when the moon will completely cover the sun. The last one was in 2017.
Delta Airlines and Southwest are offering flights for an unobstructed view of the eclipse. Unfortunately, it is not being offered in every city.
Delta has multiple one-way flights from Austin to Detroit that will offer the best view of the eclipse.
Southwest is offering various one-way flights from states it operates in including: Arkansas, Indiana, Illinois, Kentucky, Missouri, New York, Ohio, and Texas.
Wendy's is introducing "dynamic pricing". The thing we all hate when we are shopping for a plane ticket or sporting event ticket. Wendy's CEO says the company will be spending the next two years installing digital menu boards to adjust prices on the fly whenever a store is seeing massive demand.
Wendy's is already the most expensive fast-food chain in the market. But after seeing Live Nation withstand the wrath of Swifties and make ungodly amounts of profits. Wendy's believes it can do the same. Only problem is unlike Live Nation, Wendy's is not a monopoly. Movie theaters already tries this and failed epically. It will be interesting to see how Wendy's performs.
Ironically this already happens at all restaurants, it's called happy hour and lunch specials. Also when restaurants went away from printing prices to using QR codes, they began adjusting prices regularly to increase profits.
According to the Federal Reserve, there are more $100 bills in circulation than any other type of paper money. More interesting is the fact that only a third of all transactions last year were completed with cash. We are slowly completing our move to a totally cashless society.
According to a survey by Axios/Generation Lab, 79% of college and graduate schools' students said they do not use dating apps. On the other hand, 41% of those 30+ have paid for dating apps.
This makes sense. College is probably the last place where you can meet people consistently. As our world has become less communal and more individual, there are less reasons for most people to leave the house and less places to have random encounters with strangers.
Dating apps give the Illusion of Choice in two ways:
Fallacy of "There is Someone Better" - Because it takes a swipe to get another "date", we believe if this person I talk to is not "perfect" I can choose someone else. Most people end up never actually seriously dating anyone. Just a bunch of one night meet ups.
For the 1% - Like with any social media platform, the benefit of the platform goes to about 1% of the entire userbase. For most people they end up never actually making a real connection using the app.
Takeaway: Dating apps can be useful but the way they are currently designed are not useful. It is designed for people to use it far more often than needed. It uses the same addictive properties that social media platforms use. Gen-Z is deciding it ain't working for them and going back to the old way of meeting people.
My Takeaway: If you are my age and you do not have the flexibility to meet people as easily as college students. I say use the dating apps but once you meet someone you can have a conversation with, DELETE THE APP! Give that one person a chance not just one date. Focus on this one person. Also be as honest as you can possible be as soon as you can.
This only goes for those who are truly seeking a committed relationship. If you are not, my advice is not for you.
Dune is the first big hit in the box office this year. It brought in $82 million in the US box office and $178 million internationally. Apparently, 45% of the tickets were sold to those between the ages of 18-35. Completely bucking the trend of the younger generations not being movie goers. I fall in the 55%, I'm waiting for it to come to Netflix, where all movies inevitably will be.
*I am a tiny shareholder in this company.