Eclipse Day - Market Update April 1-5 2024
This newsletter is 1,998 words a 10 min read
Reply to this email with your thoughts about any of the topics discussed. I love hearing back from readers and will include those in a new section of the newsletter.
Hope you get a chance to catch a glimpse of the eclipse today. Just remember to wear the proper protective eyewear and not stare at it directly. You can create one of these paper eclipse glasses recommended by NASA.
Unfortunately, I live in Atlanta and I am not one of the millions of people who spent an insane amount of money to travel to witness the eclipse in person. It is estimated people have spent over $3 Billion to witness the eclipse. But if you live in any of the areas, enjoy it on my behalf.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economic News
Labor Market remains STRONG
Company News
Tesla Can’t Sell Cars
Iger Defends The Kingdom of Disney
Stats of the Week
16% increase in students enrolling in vocational training
265 New Billionaires (Unfortunately, I did not make the cut)
$1.45 Million is needed for retirement according to you
1.6 million hens killed
23 Named Storms Expected This Year
Looking Ahead
Inflation Data for March
Earnings Season Begins
Sports I Love
Do I even have to say it?! Man U is Man U
Iowa v LSU was one for the books
Women’s NCAA Tournament was so much better than the men’s
Markets
Not a great week in the markets. A few Fed governors spoke at various events during the week, they all reiterated the point that interest rates being cut early is unlikely. Two weeks ago, investors ignored the same message from Papa Powell. But this time, the message hit home for the investors.
Tale of the Tape
Economy
Surprisingly the US Labor Market added more than 300,000 jobs in March.
🔎Details: On Friday, the Bureau of Labor Statistics (BLS) released the nonfarm payrolls for March. This was an anticipated nonfarm payroll because the labor market had seemingly peaked last year with fewer jobs being added monthly. But it seems we spoke too soon cause this labor market is looking like the energizer bunny.
🔢By The Numbers: 303,000 jobs added, 200,000 was expected. This was the most added in about 10 months, according to Axios.
Unemployment also dropped from 3.9% in February to 3.8% in March even as more people entered the workforce. This is excellent news.
Labor force participation increased by 0.2% or 469,000 people.
Average earnings also rose 0.3%, another great news for workers.
Takeaway: This is becoming the best possible situation we could have hoped for the economy. Wages are growing but not at a crazy pace and more people are getting jobs. This is exactly what the Fed wants to see. This is the Goldilocks and Soft-landing scenario Papa Powell spoke so much about last year. However, this may not be the most preferred news for investors because it means the Fed has no reason to cut rates soon. If the economy is doing well with GDP also growing, leaving rates higher for longer might be the best way to keep things going steadily.
Companies
Tesla reported sales for Q1 2024 and it was pretty bad.
🔢By The Numbers: It was expected that Tesla would sell around 440,000 cars in Q1. But Tesla only sold 386,810 cars. This is a 9% decline in sales from a year ago.
This is the first time since 2020 (during the pandemic) that Tesla has missed vehicle sales numbers.
This is also during a period in which Tesla reduced car prices to win more market share in the EV market.
💬What They Said: Elon Musk said the sales drop was "partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin."
Wedbush Securities analyst Dan Ives (big-time Tesla bull and analyst) said, "Let's call this as it is: While we were anticipating a bad 1Q, this was an unmitigated disaster 1Q that is hard to explain away."
Laymans speak: WE DO NOT BUY IT ELON!
📉Stock Move: The Stock fell almost 5% on the news and continues its terrible start to the year. Tesla is currently the worst-performing stock in the S&P 500, down 33% (more than Boeing). While the S&P 500 is currently up 10% this year.
👀What to Watch: This is not an issue only for Tesla but for the entire Electric Vehicle market. Last year, many automakers reported declining sales and a ramp-down in production. Consumers have not taken to EVs as quickly as I expected. Consumers are choosing to buy hybrids. Toyota has been a massive winner as most of its cars have hybrid versions.
Tesla will be reporting Q1 earnings on April 23, this should provide more details on what they expect to happen soon with sales.
Disney* CEO Bob Iger was able to ward off activist investor Nelson Peltz's attempt to grab a few board seats and change the company’s direction.
🔎Details: Disney's stock and company did not perform well from 2021 to 2023. Peltz believed he had the solution to the problem with Disney, but he needed a seat on the board to implement those changes. The main issue is Disney's terrible succession planning with Bob Chapek's appointment in 2020 and soon firing in 2022 with Iger returning.
For about 2 years, he accumulated almost 2% of Disney shares worth about $3.6 Billion.
🔢By The Numbers: The board battle was the most expensive in history. With both parties spending over $200 million to woo shareholders to their side. Unfortunately for Peltz, the results went in favor of the mouse:
31% of Shareholders voted for Peltz.
Peltz had support from a ton of institutional investors including California Public Employees' Retirement System, Former Marvel Chairman Ike Perlmutter, and ISS (Shareholder Proxy Advisory Firm)
Everyone else voted for Iger, with 75% of individual investors voting for Iger. Unlike most companies, Disney has a large share of individual investors, and their voice is loud.
With support from George Lucas, Star Wars creator, and Jamie Dimon, CEO of JPMorgan.
Institutional Shareholders Vanguard, BlackRock, and T. Rowe Price also had support for Iger. Who are the largest Disney Shareholders.
💬In Their Words: Peltz said at the annual meeting, "Trian will be watching the company's performance. We are proud of the impact we have had in refocusing this Company on value creation and good governance."
Layman’s words: Iger we best not catch you sleeping or slipping ‘cause we gotta be right there to wreck you.
Iger said at the annual meeting, "With the distracting proxy contest now behind us, we're eager to focus 100% of our attention on our most important priorities."
Layman's words: I am still king!
📉Stock Move: Stock fell about 4% after the result of the vote was released. Nelson Peltz likely began selling off his holding in Disney* and caused the stock to fall.
👀What To Watch: This may be the end of this specific battle, but Disney still has issues and Peltz's point still stands. Disney still has a succession planning issue. Disney+ is still not profitable and Disney's slate of content has not been up to par. The good news is the company has performed very well in the last year as it has refocused on its core goal with content and parks. This was the primary reason investors voted for Iger who has been able to slowly turn the ship around and make the business profitable once again.
Stats of the Week
According to the National Student Clearinghouse, there was an increase of 16% in the number of students enrolling in vocational training community colleges. Construction seems to be the most attractive vocational option with an increase of 12% over the last two years.
The young-ins are learning from their uncles, aunties, and older siblings that take a ton of debt just to go to college ain't worth it. Plus AI cannot replace needing a plumber for a leak in your bathroom or a broken foundation which means there is a bit more job security.
Forbes released their annual list of billionaires last week, there were 265 newly minted billionaires. Unfortunately, I was not one of them. According to the list, there are 2,781 Billionaires in the world. They are worth a combined $14.2 Trillion. There are probably many more billionaires but if they are private, we will never know.
According to a study by Northwestern Mutual, Americans especially younger Americans believe they need $1.46 Million to afford retirement. This is a 53% increase from 2020. Considering that the average American only has $88,000 saved for retirement, most of us are a long way away from that number.
How much do you think you need for retirement? Share down in the comments.
Cal-Maine, the largest egg producer in the US, had to kill 1.6 million hens at a Texas Facility last week after detecting the spread of bird flu. We might be returning to the beginning of 2023 when the firm egg-flation entered the lexicon. Cal-Maine accounts for 20% of the egg market in the US. In case you ever wonder why monopolies suck, it is because of situations like these. Although it can breed amazing efficiency, it comes at the cost of having absolutely no resilience against the inevitable disaster life throws our way.
In 2022, a similar bird flu outbreak caused egg prices to set a record of $4.82 for a dozen. We would likely break that level if this outbreak cannot be contained.
The number of names storms meteorologists at Colorado State University say we should expect from the Atlantic this year. Yay for Climate Change. Oceans are warming to incredible levels. Current ocean levels are more typical for July not March and April.
Looking Ahead
Economy
It feels like Dejavu. It is time for the monthly inflation numbers to be released. The inflation data for March will come out on Wednesday. The Fed and investors will be watching with close eyes. Any sign that inflation is not moving in the right direction, will embolden the Fed to hold off on cutting rates even further. With the labor market so strong, the Fed will have no real reason to reduce interest rates. Investors and home buyers will be hoping for the opposite in hopes of the Feds following through on a rate cut in June.
Companies/Earnings
With the first quarter of 2024 officially in the books, it means we are entering into Earnings Seasons. As usual, the Big Banks kick things off. JPMorgan, Wells Fargo, and Citigroup will report on Friday. These banks can give us a glimpse into consumer spending. A recent report by Redfin showed as many as 20% of the population are sacrificing meals to afford house payments
Sports I Love
Man U Does The Man U
Look at the time, the goals were scored. Man U has mastered the art of snatching defeat from the hands of victory. It is INSANE how often United loses games in the final 5 minutes.
The Iowa vs LSU game set an all-time viewership record of 12.3 million viewers, according to the Athletic. Breaking the record set in 2023 in the championship game between the two teams. The game had more viewers than any NBA, MLB, NHL, and MLS game in 2023.
That record was short-lived. On Saturday, the Iowa-Uconn Final Four match-up had 14.2 million viewers. With a peak viewership of 17 million. The Caitlyn Clark effect is being felt. I expect the Iowa-South Carolina game last night was just as massive.
*I am a tiny shareholder in this company.