Few things are as valuable in the modern world as a good bullshit detector
-Morgan Housel
Be careful about who and what you listen to right now. There will be those who will use the recent banking panic (see below for more) as a way to weasel into your pockets. Offering you seemingly better options, if it appears too good to be true. IT IS.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Markets
You would think with all the end-of-world headlines from every news network that the Stock Market would be spiraling out of control. Well, you would be wrong. The Stock Market completely ignored the world and kept on ripping.
This bullish move might not last this week. Let’s get into it
This newsletter is 1,565 words an 8 min read
Tale of the Tape
Economy
Inflation Looking Like A Hydra
It just won’t die.
Once upon a time, I believed what goes up must come down. Inflation is teaching me that is not always true. Inflation continues to increase despite the best efforts of the Federal Reserve. The numbers for the month of February were released last Tuesday. Unfortunately, there was no decline in the pace of price increases.
🔢By the Numbers: Year over Year CPI declined 6% from 6.4% in January
However, month-over-month inflation increased by 0.4%
Food prices are up 9.5% over the last year
Monthly inflation is much more critical for the psyche of consumers. As we compare what we bought last month to what we are able to buy this month.
I see this in myself cause I notice the slight increases in the prices of my stables like fruits, meats, etc.
Core inflation, which removes food and energy, was 5.5% less than 5.6% in January
Month over Month core inflation increased by 0.4%
Shelter costs continue to go higher increasing 0.8% in February compared to 0.7% in January
Side anecdotes
YouTube TV is increasing prices by 12% going from $65 to $73
Disney+ increased prices by 38% and 94% of subscribers stayed subscribed
This points to consumers being willing to take on the increased costs. In other words, we are our own worst enemies in the fight against inflation.
Takeaway: Inflation is not going anywhere. This is putting the Fed in a very tight spot after the implosion of Silicon Valley Bank two weeks ago. If the Fed continues to raise rates as we have expected, there is a huge risk they might break even more things in the economy. However, if they do not continue raising rates, inflation can run rampant and break the economy.
It is the ultimate Catch-22 situation. The Fed meeting this week will be one for the ages, expect a lot of fireworks from the Stock Market. Just not sure if the fireworks will remain in the sky or cause actual fires.
My Takeaway: The Fed will raise rates by 0.25%. Although we had the failure of SVB, I believe that was a good enough warning for other banks to take precautions. Plus the government has proven that it will support depositors regardless of cost. I think that will give the Fed enough strength to continue raising rates. But I might be totally wrong. Get that emergency fund in place, things are getting really weird in these streets.
If there was one company I thought would weather the economic storms and have no issues or minimal issues, it was Apple. However, it seems everything I believed over the last two years is becoming lies.
Details: On Tuesday, it was leaked that Apple will be instituting a hiring freeze. Following the playbook of its Silicon Valley tech peers. But it is also scaling back or canceling promotions and bonuses of some employees. All in an effort to save on costs.
📸🔙Flashback: Towards the end of 2022, it was announced that Tim Cook will take a major pay cut to save Apple some money. It seems that was just a way to show the rest of the company that everyone will be required to make some sacrifices in order to ensure the business remains strong.
Takeaway: Apple has remained the only tech company to not have any layoffs. Rather finding other avenues of money savers to reduce costs. Tim Cook said in a shareholder meeting last week, "We're being very prudent and thoughtful on spending, and we continue to be very deliberate when it comes to hiring."
Stats of the Week
🦸♀️🏧$30 Billion
Large Banks do not want another 2008 to happen. The largest banks in the US have all pledged to provide liquidity to First Republic Bank (another regional bank like SVB) to ensure the implosion of Silicon Valley Bank does not cause even more downstream problems.
By The Numbers: 11 Banks pledged $30 Billion in Deposits to First Republic Bank
Bank of America, Wells Fargo, Citigroup, and JPMorgan put up $5 Billion each
Morgan Stanley and Goldman Sachs put up $2.5 Billion each
Truist, PNC, US Bancorp, State Street, and Bank of New York Mellon put up $1 Billion each
💬In Their Words: “This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” the group said in a statement.
Takeaway: The Federal Reserve and Megabanks understand the dangers of allowing more banks to fail. Banks run on trust and the moment trust begins to erode from the banking system, other things in the economy begin to fail. If there is one system of business that is too important to fail, it is the banking system.
Chick-Fil-A is going worldwide. The restaurant, which did not invent the chicken but invented the chicken sandwich, plans to spend $1 Billion by 2030 to expand into Europe and Asia.
Taking its tried and true: Toasted Buttered Bun, 2 Dill Pickles, Fried Boneless Chicken, Buttered Bun Recipe Worldwide.
Saudi Aramco the largest oil company in the world, made $161.1 Billion in net income in 2022. Not revenue, PROFIT!
💬What they said: CEO Amin Nasser said, "This is probably the highest net income ever recorded in the corporate world." He is probably right
How?: Well Russia invade Ukraine and caused oil prices to go sky-high.
Takeaway: Crazy that just two years earlier, oil prices were negative and we all thought it was the end of oil and gas companies. How quickly things can change.
Meta, aka Facebook, announced another round of layoffs. Meta is laying off 10,000 employees. It is also cutting 5,000 open positions.
💬In Their Words: Zuckerberg said in an announcement, "As part of the Year of Efficiency, we're focusing on returning to a more optimal ratio of engineers to other roles."
"We're working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive."
Takeaway: Gone are the days of "Move Fast and Break Things." We are now in the days of the "Year of Efficiency", "Flatter is Faster", and "Leaner is Better."
Looking Ahead
There is only one thing we are waiting for and one person we can't wait to hear from.
Jerome 'Papa' Powell.
The question we all want to be answered is very simple:
WILL HE OR WON'T HE?
Takeaway: The markets are more emotional than a tween going through puberty and watching Twilight. Expect a lot of chaos in the Stock Market this week.
Sports I Love
Busted Bracket
It took one day for all our brackets to be completely busted. Leading to me caring even less about the tournament.
By The Numbers: 99.88% of Brackets were busted after Day 1 of the Tournament.
There are now 0 Perfect brackets after No.16 Seed Fairleigh Dickinson (the bottom of the bottom) beat No.1 Seed Purdue (the top).
Extras
The Biden Administration informed TikTok on Wednesday that its parent company, ByteDance, has to either sell its stake in the company or face a ban in the US
Back Story: TikTok has grown like a weed in the US with over 100 million users. It has been revealed that TikTok spies on its users and gathers unauthorized data from its users.
China is known for using its commercial products as trojan horses to steal information regularly.
The Federal government banned all government employees from having the app on government-issued devices.
Also, a bipartisan group of senators introduced legislation that was signed by President Biden to give the Commerce Department the power to ban any Chinese technology that was deemed a national security risk
In their words: TikTok in a statement said, "The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing."
Referring to Project Texas, a series of steps TikTok is taking alongside U.S. software giant Oracle to separate its U.S. backend functions and code.
So What's Next: No idea but it is looking more likely that TikTok changes ownership. The pressure continues to mount and China has not exactly been very friendly to US companies (minus Tesla and Apple) either.
Looks so COOL