If you need FINITE answers to INFINITE questions
You're never gonna move
-Madeline L'Engle
The Future has endless possibilities. If you seek certainty in every decision you take, you will remain in the same place forever. You just have to pick a path and move. Then make adjustments or change directions as you learn more.
Welcome back to the Rambling Mind Newsletter. This is your Market Update
This newsletter is words and a min read
Markets
It was all good just a week ago
Tale of the Tape
Economy
Google unveiled its ChatGPT competitor called Bard. It is just like ChatGPT but it is trained on Google's project LaMDA language model. Google has had these models for years but had been hesitant to release it into the wild for fear of scrutiny from the public and governments. But with ChatGPT out in the public, the gloves are off and Google no longer cares too much about safety or total accuracy. Google is integrating Bard with Google Search
On Tuesday, Microsoft unveiled ChatGPT's integration with Bing.
💬In His Words: Satya Nadella, CEO of Microsoft is so hyped for AI. He said, “I have not seen something like this since I would say 2007–2008, when the cloud was just first coming out.”
Microsoft executive Yusuf Mehdi said, "Half of the 10 billion queries are going unanswered today, or at least without very good answers."
TAKEAWAY: The Generative AI arms race is on and both companies want to own the space. Both companies understand that text search is being replaced with recommendations from TikTok and Instagram. People no longer want to go through a list of links to find what they need.
If these AI search-optimized tools become normal in society (which it probably will because we like convenience) expect a lot of your favorite websites to go belly up. Advertising is why the internet is free and if we no longer give our eyeballs and attention to ads, many businesses will be unable to survive even large companies like Google.
MY TAKEAWAY: With every success, we sow the potential seeds of our destruction. As much as I am impressed with ChatGPT and the advancement we made with AI. I worry that we will be too busy being impressed and like with social media, we will be slow to put the necessary safeguards in place. I do not want us to slow down technological advancements because it cannot be stopped. But I do want us to consider what the effects will be long term.
We all feel it every time we have to pay for anything. Living has gotten substantially more expensive. However, technology has been a deflationary (prices coming down) force on the prices of certain things. One of those is entertainment namely Television.
🔎The Details: According to a study by the Ludwig Institute for Shared Economic Prosperity, LISEP, the cost of living well has fallen since 2001. They created an index that measures the cost of bare recreational necessities such as celebrating holidays, giving gifts, etc. To determine if the overall Quality of Life is improving or decreasing
The Index is called the Minimal Quality of Life (MQL) Index
Items included in the Index are: eating out twice a month; basic adult sports equipment like running shoes or a bicycle; the cost of sports at school for children; tickets to a minor league baseball game; a three-day annual vacation; and some money for gifts, decorations, and holiday dinner in December. Plus, one television subscription
Although you may say, you do not need these things to survive. When absent these things cause major emotional, mental, and physical health issues.
🔢By The Numbers: The cost of doing those activities has gone from $2,586 in 2001 to $3,577 in 2021. Which is a much slower pace than the rate of inflation over the period. However, it is still high enough that most families who earn a median income in the US of $70,000 will be unable to afford to do all of these things.
🧮Behind the Number: The key driver that kept costs lower over the last 2 decades has been the declining cost of TV
In 2012, a TV and Cable combination cost $746
In 2021, it cost $277 to get a similar level of entertainment.
TAKEAWAY: Streaming costs pennies compared to cable packages and actual TVs cost next to nothing these days, it has helped open up other activities for families to partake in. Walmart used to be the driving factor in reducing costs but now streaming companies are helping drive those costs even lower.
MY TAKEAWAY: This is why as much as people complain about Netflix or other streaming sites, I tend to not listen. The amount of value that we get from paying $12-$20 a month is outstanding.
However, we have filled that space created in our budgets with other things. Those things have been IG-fied, meaning they are created for the sole purpose of being posted on social media. Which has driven the cost of the most basic things to the sky 😔😒. What's gonna happen when streaming companies start charging their worth
50% of Americans say they are in a worse financial situation this year than last year, according to a survey by Gallup. This is the highest percentage we have seen since 2009.
Inflation and the increased interest rate have taken a major economic toll on our pocketbooks in various ways. Plus, the excess savings we had during the pandemic period is quickly running dry.
Why This Matters?: When we look at the data, there are no signs of a recession. The economy keeps adding more jobs and inflation is finally coming down. However, if you asked most people (self-included) it feels like we are either in a recession or heading for a recession. With a constant barrage of firings from some of the highest profile companies, and politicians not really giving us much hope with the way they are (not) running the country. It puts a massive cloud on all people's heads.
TAKEAWAY: How we feel can determine what happens. If we all feel things are going to be bad and begin pulling back, then things will become worse. One man's spending turns into another man's income.
However, Americans tend to be eternal optimists. Most people also said they feel optimistic about the year ahead. I recently did a podcast called It's NOT Okay on the idea of always being optimistic. TL:DR: It is good to be optimistic but do not ignore your current situation.
Earnings
Bob Iger's first Earnings Call since returning to the company was very positive. Investors reacted very positively to everything he had to say on the call.
🔢By The Numbers: Disney beat on revenue and profit expectations
Revenue for the quarter was $23.51 Billion up 8% from 2022
Earning/Profit was $1.28 Billion increase of about 10% from 2022
But not everything was magical in the report. Disney lost 2.4 million subscribers to Disney+ as they increased prices for the service. However, they still have more subscribers than was expected
161.8 million versus 161.1 million expected
Disney+ lost $1 Billion in the quarter
Disney also announced major cost-cutting strategies to that Bob Iger says will help save the company $5.5 Billion in costs. Start with laying off 7,000 workers. However, Disney is reinstating its dividend
💬In His Words: Bob Iger said during the call, “We believe the work we are doing to reshape our company around creativity while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.”
Takeaway: Bob Iger needed a quick win with investors to show he means business. By cutting costs and trying to reinstate the dividends, he is showing that he is here for the shareholders. Disney is currently going through a proxy war with an activist investor, who has said Disney has not operated its business properly.
My Takeaway: I HATE THIS! I hate when a company cuts costs just to reward shareholders. It’s like going to the gym and then right after gorging your face with pizza, cakes, and ice cream. You take one step forward and 10 back. The thing that was helping Disney up to this point was the fact that they had cut their dividend, which provided additional cash flow to focus on the business. Reinstating the dividend is a bad move in my opinion.
🚖UBER MADE MONEY
I honestly never thought I would see the day when UBER would actually have a profitable quarter. But here we are
🔢By The Numbers: This was a record-breaking year for Uber
Revenues were up 49% year over year to $8.6 billion
More importantly Uber actually had profits in the quarter. It brought in $595 million
Takeaway: Uber is a perfect case study of the state of stocks and businesses over the last decade. It was all about growth at any cost. No one cared about profitability it was all about revenue growth and an increase in users. Everyone wanted the Amazon model without Amazon’s profitability. The idea is if you grow large and fast enough, you can quickly kill your competition. This seems to have worked for Uber.
My Takeaway: Uber killed the taxi business with its super cheap rates. But Uber is now charging the same prices taxis charge as the switch from top-line growth to bottom-line growth aka do what a business is supposed to do. Which is to make money.
Stats of the Week
A 30-second ad for the Super Bowl cost companies $6 million
On the surface that is crazy expensive but it was actually 15% cheaper than it was last year
Crypto companies with their seemingly bottomless budgets bid up prices to crazy levels. However, as we know crypto imploded on itself over 2022 so they are out of the game.
This year it was all about the Booze. 3 out of 4 ads were for alcohol
The big reason for a large number of alcohol ads is that Anheuser-Busch gave up its exclusive advertising rights for the Super Bowl.
Similar to Pepsi and the Halftime show
The number of homes owned by single women versus 8.12 million owned by single men, according to a study by LendingTree
Part of the disparity has to do with women outliving men
But it does point to our times more so of how women seem to be more advanced than men in our society today.
CEO of Zoom took a 98% pay cut as a way to own up to his mistakes running the company over the last two years.
Zoom also announced a 15% reduction in the workforce of about 1,300 people.
Zoom like most tech businesses hired during the pandemic as growth looked unstoppable.
Not this is how you show that you are taking on responsibility.
The number of consecutive games that LeBron James has scored at least 10 points.
He also became the all-time leading scorer in the NBA (more below)
Looking Ahead
Inflation once again takes center stage this week. On Wednesday, we get inflation numbers for January. Inflation is expected to have slowed from 6.5% in December to 6.2%. This would be a very welcome sign for the stock market. Because it signals more reason for the Fed to stop increasing interest rates. However, I think the Fed has been clear that rates will be increased and will remain increased for the foreseeable future.
Sports I Love
HE IS THE KING!!👑👑
Extras
AMC is introducing tiered ticket pricing as you would see when you are trying to buy tickets for a sporting event or concert.
Cheap seats UPFRONT. Your neck will hate you
Regular seats. Nothing special
First Class seats. Right in the middle of the theater. Where everyone wants to be