This newsletter is 1,890 words, a 9 min read
I am currently reading a book called "Same As Ever", it has a great story about Martin Luther King Jr. The speech MLK gave and we remember as the "I Have a Dream Speech" was not the one he was supposed to give. After a few minutes into his speech, someone shouted, "Tell them about the dream, Martin!" After that Martin went into full story mode and that speech has become one of the most memorable speeches of all time.
One thing I want to do more of this year is tell stories. Stories are the most powerful way to influence people or share information. So look forward to more stories in all my writings, videos, podcasts, etc.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economy vs Emotion - The Economy is doing well but why do I feel it is not?
Inflation is acting Weird
Crypto Bros Rejoice
Earnings
Banks
Stats of the Week
10 Hottest Housing Markets in 2024
93% of Stocks owned by 10% of families in the US
20% office vacancies in U.S.
93 of the top 100 broadcasts in 2023 were NFL games
Looking Ahead
Government Shutdown
Sports I Love
HALA MADRID!!
Man U still SUCK! Do not be deceived
The University of Michigan are Champions
Living Legends Retire
NFL Playoffs Began
Markets
Stocks are losing all the momentum from the end of 2023. The first two weeks of 2024 have not been kind to our retirement accounts. The start of the year has been the worst in over 21 years. The market was acting like a child that had too much sugar crashed hard.
Tale of the Tape
Economy
One of my favorite books ever is "The Psychology of Money" by Morgan Housel. The book is centered around how our psychology and emotions about money play a bigger role than the numbers or facts that are in our faces.
We are seeing this play out perfectly in the economy
🔎Details: From all factors about the economy, things are good.
Inflation has declined over the last year from 10% to 3%
Gas prices are super low, average price is $3/gallon
Rent prices are stabilizing
Egg prices have fallen back to normal prices
However; NO ONE CARES! We all feel very differently because although prices are stabilizing, it is still much higher than we had to pay in the past. According to a survey by Pew Research:
67% of people believe food and gas prices will keep getting more expensive
Opposite of what is happening
37% of Americans describe their financial situation as poor and believe it will worsen this year
😕Weird: The most interesting thing from the survey is what people are choosing to do in response to how they feel. You would think people would react by cutting back on expenses and saving more money. But again, we are humans, not robots. We are not RATIONAL.
💬In Their Words: Johns Gerzema, CEO of Harris Poll, put it best, "Americans are consuming in denial. They're looking to deflect some of the blame. There's a sense of entitlement, that Americans feel like, 'We're worth it, so I might change my vote but I'm not going to change my lifestyle.'"
😊Takeaway: Be aware of your emotions, they drive you much more than you know. We are not nearly as rational as we believe ourselves to be. So make your decisions with that almost in mind.
How people feel is very warranted cause these inflation numbers are playing all kinds of games with our minds. After months of inflation declining to 3%, inflation unexpectedly picked back up in December to 3.4%.
🔎Details: Driven mostly by shelter costs (rents & mortgages) inflation increased by 0.3% when compared to November. However; core inflation which removes volatility of food and energy prices, fell below 4% for the first time since May of 2021.
👎🏾👍🏾Good or Bad?: Not sure. It is kinda middle of the road. It's like back in college sometimes, you need to survive some classes and get that C to move on with your life. Inflation is kinda like that right now, it ain't bad but it ain't great either.
💬In Their Words: Seema Shah, chief global strategist at Principal Asset Management, said to CNBC, “These are not bad numbers, but they do show that disinflation progress is still slow and unlikely to be a straight line down to 2%,. Certainly, as long as shelter inflation remains stubbornly elevated, the Fed will keep pushing back at the idea of imminent rate cuts.”
⏸Takeaway: The Fed will remain cautious on how they proceed with interest rates. Expect no huge changes in interest rates for a while.
On Wednesday the 10th, the Securities and Exchange Commission (SEC) approved a spot bitcoin ETF for the first time.
‼Important?: It makes it far easier for most people, who don't want the responsibilities of holding crypto keys and remembering 30-digit passwords, to finally get access to Bitcoin.
Investors (mainly advisors) will finally get exposure to a trillion-dollar asset class without having to buy Bitcoin.
This makes Bitcoin mainstream as traditional financial companies begin offering the spot ETFs: BlackRock and Fidelity are amongst the first to get approved by the SEC.
🤔What Now?: Crypto is known to have crazy high fees when compared to the rest of the investing industry. Expect those costs to completely diminish as more options for investing in crypto are made available
Takeaway: Supposedly, this is a watershed moment for crypto and will cause billions in institutional funds that will cause bitcoin to go up. Will that happen? Maybe, probably. But should you care? Not really.
Earnings
Banks (We Are Not The Same)
It was kind of a mixed bag for banks. Although they reported good profits for the quarter, each bank expects the months ahead to not be great.
Why Do We Care?: Banks give us a good insight into consumer health especially the Bank of America and JP Morgan because a large share of consumer spending is done through these banks. This can give us a good idea of what direction the economy is going in
In Their Words: Bank of America CEO, Brian Moynihan said, "Consumer balance sheets are generally in good shape and while impacted by higher rates.” said Bank of America CEO Brian Moynihan
Jamie Dimon, JPMorgan Chase CEO, said, "The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing. The economy is being fueled by large amounts of government deficit spending & past stimulus. There is also an ongoing need for increased spending. This may lead inflation to be stickier and rates to be higher than markets expect."
Interesting Notes: New Interest Income brought in over $250 Billion for the four largest banks, an increase of over $80 Billion from two years ago.
Stock Move After Earnings: Wall Street did not like the forecasts banks gave. Each bank sold off on Friday.
What to Watch: With the Federal Reserve reducing rates, how will banks find new ways to make money? One of the reasons, I absolutely hate big banks is unlike banks like SoFi or Ally, they do not pass on higher rates to their customers. Right now the average rate for these banks on savings accounts is 0.1% vs 4.5+% at Ally or SoFi.
Stats of the Week
10 Hottest Housing Markets in 2024
What I see reading this list is "10 Housing Markets to Avoid in 2024." Why would I shop when the demand for the thing is high? It means their prices gonna get bid up. I like a sale so we avoiding this thing like the plague$. Unless I have to buy it.
The top 10% of families in the US own a record 93% of all stocks. Although there has been a surge in Stock ownership in the US, grown over the last four years to over 58%. The total amount owned by most Americans is tiny.
🤔Think: For every $10 invested in the Stock Market, $9.30 is owned by the richest families in the United States. All I know is that my family is about to be in that 10%.
20%
Record level of office vacancies in the US, according to Moody's Analytics. As more businesses switch to a hybrid work environment, less space is needed to house workers. All trends indicate that the number only to go higher. Five of the 10 cities with the highest vacancy rates in 2023 were in the South — including Houston, Dallas, Austin, Tampa, and Jacksonville.
93 of the top 100
According to Sportico, the NFL accounted for 93 of the top 100 US broadcasts in 2023. This is an increase from 82 in 2022. It is safe to assume that everyone watched the NFL Playoffs over the weekend.
Looking Ahead
If you thought the government had finally gotten its act together to pass a spending bill and avert a government shutdown. You would be incorrect. Congress needs to pass a new spending bill by January 20 or we will once again be doing the "will they won’t they" dance. We did for most of 2023.
What to Watch For: New House Speaker Mike Johnson seems to be doing a decent job of finding a middle lane for Democrats and Republicans to pass something.
Earnings
More big bank earnings (Morgan Stanley & Goldman Sachs) but these banks are investment banking. Therefore, I do not care. Other earnings:
Sports I Love
HALA MADRID!
Real Madrid completely demolished Barcelona to win the Spanish Super Cup.
Man U
Do not be deceived by Man U drawing against Spurs. Man U does this every single time. I will no longer be swindled by this draw as a positive sign of things to come. Plus it is the way they drew, this team has no Modello in them. They have no spirit, they went up and seemingly would have control but pissed it away.
The University of Michigan are Champions
As I predicted Michigan won the National Championship, 34-13. It is the University of Michigan's first title since 1997. They completely dominated the game with a power-running game and great defense. Washington could not get its offense going at all. Michael Penix Jr. (Washington's QB) spent most of the night running for his life or on his back. He got hit on almost every single passing play.
For the 2024-25 season, the College Football Playoffs will be increased from 4 teams to 12. So it will be a lot more dramatic moving into the future.
In a decision that shocked the entire College Football World, Nick Saban on Wednesday announced he is retiring from the University of Alabama. Walking away as a Legend in the game with 6 national titles. He has sent more players to the NFL than most schools have people.
Pete Carroll also stepped down as the head coach of the Seattle Seahawks on Wednesday.
On Thursday, Bill Belichick announced his retirement after 24 years with the Patriots.
It is an end to an era!
NFL Playoffs Begin
One era ends and another begins.
I cannot believe people were in attendance for the Chiefs-Dolphins game on Saturday. It was -24 degrees when you included wind chill. I believe every stadium should be indoor, we need to see these athletes at their best not get a nerfed version of them. Just Saying. Anyway here are the results:
Extras
Amazon, Google, Disney, Citigroup, BlackRock, Duolingo, and Xerox are amongst the companies that have announced more rounds of layoffs this year. It will seem more will be on the way later this year, as more businesses flesh out the full effects of the interest rate increases over the last two years.
*I am a tiny shareholder in this company.