Clear-Eyed Review - Market Update Feb. 17-21, 2025
Do Not Be Distracted
This newsletter is 2,232 words, 11-min read
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Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economic News
👁️Clear-eyed review of the Trump Administration
Company News
👎🏾Bad News from Wally World
Stats of the Week
⚖️70 Lawsuits
🔪6000 IRS Layoffs
🔚1,700 Laid Off
Looking Ahead
PCE Inflation Reading
Nvidia Reports
Salesforce Reports
Sports I Love
😭Man U
Markets
Returns
Tale of the Tape
Economy
👁️Cleared-eye review of The Trump Administration
Background: The last month of the new presidential administration has been to say chaotic, would be an understatement. It's been like experiencing mental whiplash over and over again. Asking ourselves, "What the hell is going on?" At moments we've all felt disbelief, at other moments we feel anger, and at other moments we feel despair. Then we finally land on apathy, the worst and most dangerous place to be.
I might be projecting my emotions on y'all. Regardless, I promised that I wouldn't allow this newsletter to get caught in the outrage machine. That promise has taken two parts for me:
Refuse to overreact and share every crazy new thing the administration tries to do
Provide clear information about the truly important items.
The only way I can do this as a non-journalist is by depending on trustworthy news resources. The largest of which is Axios. Last week Axios released the 6 biggest things to focus on with this chaotic administration. It has provided me with a clear-eyed take on what is noise and what matters.
The Biggest Trump Actions
Claiming Powers that have been granted to Congress. Although it seems nitpicky, these slight distinctions are extremely important.
Dismantling USAID and trying to shut down the Consumer Financial Protection Bureau are not things under the authority of the executive branch but the legislative branch.
Freezing trillions in federal grants and loans is not the power of the executive branch. The executive can only choose how to spend the money but cannot choose to not spend the money.
Trying to control independent agencies such as the Federal Trade Commission, the Federal Reserve, the National Labor Relations Board, and the Consumer Product Safety Commission, is not allowed in the Constitution.
Rewriting an actual Constitutional amendment
Trying to remove the 14th Amendment which gives birthright citizenship to those born in the US.
Again, this is something that can only be changed through Congress.
Firing watchdogs
Firing a variety of inspector generals who are put in a position to ensure the executive branch does not overreach without due process is illegal.
Empowering Elon
An unelected person has almost unlimited access to every single aspect of the American government with the power to do whatever he chooses.
This has never been seen before
Profiting from the presidency
I prefer to call this BRIBERY
I also call this scamming
DOJ dictates
Ordering the DOJ to drop the corruption case against New York Mayor Eric Adams.
My Take: The next two years will be even more chaotic. But in 2026 we all get a chance to decide AGAIN on what we value. Until then, brace yourself for a president who wants to be a dictatorial CEO. Meaning he wants to make the country carry out his vision rather than be a president beholden to the people who put him in power.
For anyone who says they did not see this coming, stop lying. You may not have seen it happening this fast but we all knew this was going to happen. During his campaign, Trump was very clear about what he was going to do once he was back in office. I mean he gave us the playbook with Project 2025.
Companies
Takeaway: Great Quarter but bad future forecast equals investors’ disappointment.
📉Stock Move After Earnings: Stock got discounted by 7%.
🔢By The Numbers: Revenues increased 5% to $182.6 Billion in Q4 2024. It is now official, Amazon ($187 Billion in Q4) has taken the crown of the largest revenue-producing company from Walmart.
Profits increased 10% to $5 Billion.
Always interesting going from tech companies with 50% or greater gross margins to a retailer like Walmart that has a ton more expenses.
Same-store sales continued a strong path of growth, increasing 4.6% in the quarter.
Although, Walmart may have lost its revenue crown to Amazon. It isn't taking it without a fight.
Walmart continues its focus on growing its e-commerce sales. It grew online sales by 20% in the quarter.
Membership to Walmart+ grew 16% as it copies Amazon Prime.
Walmart advertising grew 29%
💬In Their Words: Chief Financial Officer John David Rainey, “We have to acknowledge that we are in an uncertain time and we don’t want to get out over our skis here. There’s a lot of the year to play out. Again, we feel good about our ability to navigate the environment, whether it’s tariffs or other macro [economic] uncertainty.”
👀What to Watch: Walmart is seen as a bell weather for the entire economy. Meaning you can get insight into the entire economy based on what is happening to their business. It explains why the entire stock market dropped after Walmart's earnings call.
S&P 500 and Nasdaq fell 0.5%
The Dow Fell 1%
Walmart adds to a growing list of companies talking about the burden tariffs will place on consumers if fully implemented.
For the company itself, the main focus is the growth of Walmart.com, Walmart+, and Walmart Advertising. Can Walmart continue growing it by 20%+?
I know that over the last few years, I have been shopping more and more on Walmart.com for a lot of house staples over Amazon because it is so much cheaper.
Walmart acquired Vizio as a way to copy Amazon's FireTV advertising.
Walmart partnered with Paramount+ to increase the benefits of Walmart+.
My Take: The stock market is a forward discounting machine. The present doesn't matter as much as the future for investors. Walmart met and exceeded expectations and has been rewarded for it over the last year rising over 60% in the last year. Now investors want to know how it will keep the massive pace of growth.
Stats of the Week
The Court appears to be the final guardrail against the Trump administration's blitz to reimagine the US democratic system and increase presidential powers. Congress with a Republican majority has chosen to bend its knee to Trump and in some situations essentially give up constitutional powers to Trump. There have been 70 lawsuits against the various executive orders from the Trump Administration. Remember the administration has only been for 40ish days.
My Take: The courts are slow-moving and rulings can be nuanced. These are two things that work in the favor of the administration's chaos. They can break things much faster than the courts can order them to reverse or stop. It also works against the American public which is more interested in flash than substance.
Most of the things the administration does will be rescinded the problem is what fires and destruction will be created before the firefighters can show up. And like a humpty dumpty, some things just cannot be put back together.
The Trump Administration laid off 6000 workers at the IRS, just as tax season shifts into high gear. Most of the layoffs are new hires who are still in their probationary period and do not have full union protections.
💬In Their Words: Trump Administration Commerce Secretary Howard Lutnick said, "Think about it, Donald Trump announces the External Revenue Service, and his goal is very simple ... his goal is to abolish the Internal Revenue Service and let all the outsiders pay."
Reality Check: For every $1 spent on IRS enforcement (better tech, hiring people to do audits, etc.), the US government collects $12 in extra tax revenues.
My Take: I get it. Most of us do not like taxes or find the government inefficient. My only question is do you want your taxes processed faster or slower? Does this help the vast majority of people get their tax refund faster or slower? Cause as much as rich people complain about the IRS, most of us get refunds back from the government.
The only people who benefit from a weaker IRS are not the folks reading this newsletter (unless you are worth more than 8 figures in which case Bless my pockets with a little somethin’). It is the wealthy and high earners who have all kinds of ways to reshape their earnings and pay less or almost nothing in taxes. I have been able to do some of this reshaping just from the fact that I make a bit of money from content creation. Where I go from owing taxes to getting a refund because, in the US, we value (and protect) the money made from capital much more than money made from the sweat of our brow (it's called capitalism for a reason).
The only thing that keeps most people from not exaggerating too much when reporting taxes is simply the fear of being audited. Remove that fear and you can guarantee that people will massage numbers to remove all tax liabilities.
My Big Picture Take: This is part of the reason our nation's debt will continue to rise.
Disney and Marvel are back! Last weekend Captain America: Brave New World was released. It brought in over $190 Million in its first week of release. Continuing the box office success of recent Marvel movies.
Honestly, I forgot the movie came out last week. For some reason, I thought it was coming out next weekend. I'll have to find a way to watch it. It looked pretty good but maybe that's wrong. According to Cinematic Universe, the movie had the lowest grade ever for a Marvel movie. I find that kinda extreme cause we had movies like Thor, Ironman 3, and Thor 2.
Southwest announced it would be laying off 15% of its corporate workforce, about 1,700 jobs. It said it was to cut costs and be more competitive after several bad financial years.
Layoffs are normal practice in the corporate world. However, this is the first time in the 53-year history of Southwest that they have ever had layoffs. During the 2008 financial crisis, Southwest was able to avoid layoffs by adjusting the pay of everyone and the executives taking large pay cuts. This time that wasn't enough, unfortunately.
My Take: It sucks when the reality of the business world changes the things we love about businesses. The pressures of Wall Street finally came for Southwest. Since the pandemic, Southwest's share price is down 51%. Which would be okay because the pandemic destroyed travel.
However, compared with its peers, something more is happening with Southwest. Delta (up 165%), American Airlines (up 71%), United Airlines (up 306%). The terrible performance of the business opened the door for Wall Street sharks to try to force changes Wall Street has wanted for years. Elliot Management, an activist firm, took the chance to buy a large stake in Southwest so it could force its way onto the board and make changes to the company. The seating changes and now layoffs are part of the changes that are coming out of those changes.
The annoying part is Elliot Management does not care about the long-term viability of Southwest's business. They come in for a short period cut costs to drive up profits and increase share price. Sell all their shares and leave whatever long-term damage for the business to figure out on their own.
Looking Ahead
Economy
On Friday we get the Fed’s favorite inflation gauge, the Personal Consumption Expenditures (PCE) price index.
Side Note: The key difference between the PCE and CPI is that the PCE measures a broader set of goods and services in the economy. It can provide a better view of how people are doing in the economy. This is why the Fed prefers it.
Takeaway: Generally, PCE and CPI move in the same direction but PCE gives more information on how consumers spend right now.
Company/Earnings
Nvidia
It’s Nvidia’s world and we all live in it. As Nvidia goes so goes the market.
👀 What to Watch: When people think about AI, they think about Nvidia and their chips. Investors have been focused on the massive capital spending from tech companies and reacting negatively to news of increased capex. Nvidia benefits from those capex spending, if Nvidia announces a slowdown in revenue or forecasts a slowdown in revenue growth. Expect a massive reaction from investors in a negative way
Salesforce*
Reports on Wednesday. Salesforce was a beneficiary of the DeepSeek news that tanked a ton of tech company stocks. The assumption is that Salesforce is not just another LLM but its AI “agentforce” is a useful tool for companies today.
What to Watch: How are revenues growing from this new aspect of their business?
Others
Sports I Love
Man U
Because Words are no longer enough to express my disappointment and pain.
*I am a tiny shareholder in this company.
Very informative write up! Looking forward to these every week ! 👍🏿👍🏿