Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Markets
Year To Date Returns
Well, the massive runup in Stocks we had at the beginning of the year is gone. The Stock Market is down 10% after its third straight month in the red. There are a variety of reasons for this: inflation, interest rates, oil prices, the Russia-Ukraine War, the Israel-Hamas war, bank implosions (SVB, Credit Suisse), and human emotion. When I lay it out that way, it impresses me more that the market is still up.
However, November must have brought Good tidings and Holiday Joy cause the market went on a nice run this week.
This is why regardless of what is happening, we stay invested. No one can predict what will happen next. Do not let the recent downturn freak you out enough to sell your holdings. Stay the course!
This newsletter is 1,846 words a 10 min read
Tale of the Tape
Economy
The US Economy added much fewer jobs than economists expected in October.
🔍Details: According to the Bureau of Labor Statistics, only 150,000 jobs were added and the expectation was for 170,000 jobs to be added. This is almost half the number of jobs that were added in September (297,000). This is the lowest number of job gains we have seen since June of this year.
The BLS also revised down job numbers for August and July by 100,000
The unemployment rate also increased to 3.9%, the highest since January.
The numbers show the pressures from the UAW strike where 40,000 workers left work for a while. However, it also shows the effects of the Federal Reserve's interest rate increases over the last two years.
💬In Their Words: Sal Guatieri, senior economist at BMO Capital Markets said, “The U.S. labor market cooled further in October, just as Dr. Powell prescribes. This is a very Fed-friendly report, with job growth slowing, the jobless rate rising, and wages cooling.”
The stock market rose on the bad jobs number.
On Monday, President Biden issued an executive order to regulate the fast-growing AI industry.
🔍Details: The executive order is designed to require AI developers to work with the government by sharing critical testing information for safety measures to be created. According to Axios, 4 areas are being targeted by the executive order:
National Security and information (think deep fakes)
Equity and Civil Rights (think housing bias based on color)
Privacy (can't just use information without permission)
Innovation and competition
Biden is enlisting almost every government agency to make this happen. Including The National Institute of Standards and Technology, the Department of Homeland Security, the Department of Energy, The Department of Commerce, The Department of Labor, the National Economic Council, and The Department of Justice.
😃Takeaway: The government is learning from past mistakes. After allowing social media companies to run wild through the early 2010s and seeing the adverse results of not regulating the space early. The government does not want to make that mistake again. By enacting new regulations early, the government can ensure they keep tech companies in check while also allowing innovation to thrive.
🤔Negative Takeaway: Executive orders are not the same as passing a law. Only Congress has the power to pass laws. Currently, no laws will be passed because of how divided it is. This means this executive order might as well be written on a piece of toilet paper because it can easily be removed. Also, the language of the order was mainly recommendations and guidance, nothing enforceable. So will this be effective in auctioning us into the new age? Guess we will find out.
The amount a federal jury in Missouri found the National Association of Realtors liable for due to what was believed to be artificially inflating brokerage commissions.
🔍Details: When you buy a house, the seller technically has to pay the fee for the buyer and seller's agent. If you find this to be weird, congratulations so does everyone else who has ever bought a home.
Conflicts of interest are written all over this setup that is mandated by the NAR. Which is the primary issuer of Real Estate licenses. It is believed this setup helped steer buyers into terrible home deals so agents could maximize their commissions.
🔢By The Numbers: Homebuyers in the US spend approximately $100 Billion/year on broker fees.
💬In Their Words: Michael Ketchmark, the lead attorney for the plaintiffs said, "Today was a day of accountability — for the longest time the NAR has used its market power to get a stranglehold grip on home ownership. It costs two to three times as much to sell a house in the United States as it does in other industrialized countries."
HomeServices, one of the real estate companies being sued, said, "Today's decision means that buyers will face even more obstacles in an already challenging real estate market, and sellers will have a harder time realizing the value of their homes. It could also force homebuyers to forgo professional help during what is likely the most complex and consequential financial transaction they'll make in their lifetime. Cooperative compensation helps ensure millions of people realize the American dream of homeownership with the help of real estate professionals."
Kelechi's Interpretation: Do you know how much money you are costing us?!
Takeaway: Realtors are not your friends. THEY ARE SALES PEOPLE!! They are after the dollar and nothing more. They don't care if you buy a dream house or a trash house. As long as you pay the highest price and they get the highest commission possible.
Clippy Gets His Master’s Degree
Microsoft is estimated to bring in an additional $10 Billion by 2026 from the launch of Microsoft Copilot, according to Piper Sandler.
🔍Details: Copilot is a ChatGPT-powered, Microsoft Office assistant that can help you with all your boring white-collar work including:
Turning Word Documents into PowerPoint Presentations
Drafting email responses (Gmail does this)
Summarize video meetings
Help create Excel Spreadsheets
And much more
🔢By The Numbers: Microsoft is charging Enterprise customers $30/license/month and requiring businesses with at least 300 user licenses. This is on top of the regular $36-$57/license/month for Microsoft Office.
This is why $10 Billion in extra revenue over the next two years is coming from.
Some companies that had an early preview to using CoPilot say they have saved an average of 5-10 hours a month using CoPilot.
It is estimated that 6.9 million knowledge workers will be using CoPilot by the end of next year
Takeaway: This might be Microsoft's version of the iPhone. A product so highly demanded that it shapes everything the company does moving forward. Plus with the hype of AI currently, a lot of companies will use this as their version of implementing AI in their business.
Earnings
King Apple does what a King does. Ruled the lands with its bottomless pits of money.
🔍Details: Apple reported earnings on Thursday. Results were perfectly in line with expectations from investors. However, the company is facing major headwinds (fancy investing word for challenges) in the sales of every non-iPhone hardware division. Apple also gave guidance for Q4 revenue to be in line with revenue from Q4 2022.
🔢By The Numbers: Overall revenue increased 9% to $89 billion for the third quarter
iPhone sales continue to be the primary money maker for the company bringing in $43 billion
Mac & iPad sales fell 34% from last year
Service revenue grew 16% to a record $22 Billion.
This is probably the most important part of Apple's future growth.
📉Stock Move After Earnings: The stock fell 3% after the earnings report because of the no growth guidance for Q4. It was expected for Apple to grow revenues in Q4 by 5%. I see this as an overreaction from the market.
👀What to Watch: On Tuesday, Apple released its new M3 chips for its MacBooks. Although not a crazy improvement over the M2, Apple remains far ahead of comparable chips.
Over 1 Billion people use one or more of Apple’s subscription services. Apple has a ton of room for continued revenue growth as they flex their pricing power in the future and use their hardware to drive more service sales.
Stats of the Week
It is estimated that by 2050, 25% of the World's population will be African, and at least one-third of all people ages 15-24 will be African. This is according to the UN, which also estimates that the African population will be 2.5 billion.
By 2100, it is expected that 40% of people on Earth will be African. This is in direct contrast with the declining population of high-income nations such as the US.
I just hope this population boom results in an income and wealth boom on the continent as well.
Looking Ahead
Economy
The New York Federal Reserve will release its quarterly report on US household debt on Tuesday. It is a great way to get an idea of the financial position of the average US household. The last report showed US consumers had a combined $1 Trillion in Credit Card Debt, the highest in history. This drove US household debt to a record $17.06 Trillion.
What to Watch: Are credit delinquencies going up and exceeding historic norms as interest rates climb higher?
Are US income-to-debt ratios hitting abnormal levels?
Are consumers using more debt to survive and pay for everyday items such as groceries or bills?
Earnings Barrage Continues
The not-so-magical kingdom of Disney* reports earnings on Wednesday.
What to Watch: How are they cutting costs to become more profitable?
What are they doing with linear TV assets like ESPN, ABC, and Disney Channels?
What are they doing about the activist investors asking for board sets?
How is the actor’s strike affecting their content release?
Why did they acquire Hulu completely while having major credit issues?
Based on what management says, I might be buying more shares in this company.
Sports I Love
This is the level of Man U now. We get trashed by Newcastle and barely eke out a win against Fulham. This team is terrible!
The first games of the NBA’s version of the FA Cup or Copa del Rey for my soccer fans, started on Friday. It was fun to watch teams go all out so early in the season. I think this tournament-style championship was a great idea by the NBA. Also, the courts have been so beautiful to see. I’m taking the
Extras
The value of the company formerly known as Twitter. When Elon bought Twitter he paid $44 Billion for the fledgling company.
The increase in the number of children being homeschooled since 2017/18.
According to the wedding planning and registry website, the Knot, 55% of couples are listing "Home Funds" on their wedding registry as a gift option. For my wedding registry, I’m just gonna have one gift option: "LIFE FUND"!
*I am a tiny shareholder in this company.