Routines are important. It allows you to be creative which is against popular belief. However, every time I fall out of my routine it takes a bit to get my mojo back. All that to say, I apologize for any errors in this post.
Welcome back to the Rambling Mind Newsletter, this is your Market Update
This newsletter is 1,393 words, a 7 min read
Stock Market, much like myself, is just trying to find its pace for 2023.
Tale of the Tape
Economy
😓New Year, More Layoffs
On Wednesday, Amazon announced it was laying off 17,000 corporate employees. Salesforce followed up by announcing a 10% reduction of its staff, about 8,000 employees. This continues the trend of large and small tech companies laying off workers as the economy continues to show signs of weakness.
The main issue is most of these tech companies overhired during the pandemic to meet a sudden surge in demand for their products. CEO of Salesforce, Marc Benioff said, "As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.” Salesforce went from 49,000 employees in 2020 to 80,000 in 2022. This growth was just unsustainable.
Combine that with the Fed doing a 180 by increasing interest rates at the fastest rate in history which drove down stock prices. It became a lot more expensive to fund businesses through debt or equity.
🔢By the Numbers: More than 1,000 Tech companies have laid off more than 150,000 workers in 2022, according to Layoffs.fyi
😞Good-ish News: I said this. when Facebook announced its layoffs, Not all layoffs are created equal. Tech companies provide some of the best severance packages you can ever imagine. Salesforce said they would provide: a minimum of 5 months of pay, health insurance, career resources, and other benefits to help with worker's transition.
My Takeaway: "An inheritance gained too soon, is not a blessing in the end." Proverbs 20:21.
As we see with bodybuilders using steroids, you cannot juice up and expect no downstream consequences (pun intended). None of these companies are bad businesses. They got overly ambitious, believing ULTRAGROWTH would become the new normal for their businesses. Great times are the perfect time to prepare for bad times and to ensure long-term success sometimes it is better to take the long road.
I expect more downstream effects from smaller firms. When large corporations announce layoffs, there are smaller companies that provide services that will also follow suit. So expect many more announcements like these in the near future.
💪🏾Labor Market STRONG
You would think, with tech companies announcing layoffs every other day, that the US labor market is going in the toilet. Well, you would be wrong. The Labor Market continues to remain much stronger than anyone can imagine.
🔢By the Numbers: On Thursday, ADP released its monthly private payrolls report for December 2022.
Payrolls increased by 235,000 jobs vs an estimated 153,000
The increase was led by the addition of jobs in leisure and hospitability, education, and health services.
On Friday, the Labor Department released its Nonfarm Payroll for December 2022. This gives a more in-depth and more accurate look at the Labor Marker. It showed:
223,000 jobs were added vs an estimated 200,000 jobs
Unemployment remains low at 3.5%
However, wage growth slowed to 4.6% year over year lower than the 5% in December. But still very strong growth
Takeaway: Tech is not the economy. All tech jobs combined only makeup 2% of the entire labor market in the US. Although tech grabs all the headlines and makes up a substantial part of the Stock Market, it is not reflective of what is happening in the actual economy.
🚘 Fewer Cars, More Money
If you feel that cars are more expensive than normal. Trust your feelings.
Car manufacturers’ new playbook is to keep inventory lower, and sell fewer cars but for much higher prices.
🔢By the Numbers: In 2022, 14 million new cars were sold in the US. This sounds like a lot but in a typical year, 18 million cars are sold in the US.
Bringing in $32 Billion in profit for manufacturers, the highest in a decade
The average cost for a new vehicle is $48,681, a record high
Takeaway: The pandemic taught car manufacturers "LESS is MORE". Although frustrating for their customers, it is very profitable for their business. I do not see this playing out well over the long term for most car makers.
Stats of the Week
The number of cars Tesla sold in the 4th Quarter of 2022
The stock fell 12% because Tesla missed its own growth expectation of selling 420,760 cars
Tesla stock has had a brutal few months, it is down 65% from the beginning of 2022 and continues to decline
Tesla will remain a dominant EV manufacturer but the reality is beginning to set in that maybe it is just a car company and not a tech company.
This means Tesla cannot be worth the same as every car manufacturer put together
For the 41st Year in a row, the Ford F-series was the best-selling vehicle in the US
Ford sold over 640,000 F-150 series trucks in 2022
One F-series pickup truck was sold every 49 seconds in 2022, according to Ford
I want the lightening but it seems I will not get one cause that thing just keeps going up in prices
This is the amount online retailers made in 2022 during the holiday shopping season
It is much higher than the $209.7 billion estimated by Adobe
Adobe said the heavy discounts drove the boom in sales as retailers looked to get rid of excess inventory.
Looking Ahead
It’s gonna be a busy busy week for econ and finance nerds.
Inflation
On Friday, the Consumer Price Index aka Inflation for the month of December will be released. It is expected for Year over Year inflation to drop from 7.1% in November to 6.5% in December. The slowest rate of inflation in over a year. The hope is inflation showing signs of major deceleration would push the Fed to ease back on increasing interest rates. However, 6% is not 2% which the Fed has been very adamant about pushing for.
Earnings
Big Banks enter stage left as Earnings Season begins. It is expected that with the Fed interest rate hikes, Banks’ profitability should be much higher. Especially these big banks that pay basically 0% in interest rates to savers. If you still have the majority of your savings in any of these banks: Bank of America, Wells Fargo, Citi, or JPMorgan Chase; Please move that thing to a bank like Ally. You are losing so much money. In 2021, US citizens have lost out on over $603 Billion as they left their money in these banks.
Sports I LOVE
🤯 SHOOK
Man U has silently been on a tear since the World Cup. They have not lost in 6 games and prior to the Everton game on Friday, they had not allowed a goal in over 5 games. The Casemiro effect is in full force and I am loving it!! However, Man U needs to get some depth. They have played Ericksen, Fernandes, and Casemiro every single minute of every single game post-World Cup. This is not sustainable for long-term success.
But for now, they have revived my hope in the team. I probably shouldn’t be this hopeful but I cannot help myself.
Extras
ChatGPT + Microsoft = Bing > Google?
Microsoft who is a major investor in OpenAI, the creators of ChatGPT, will be incorporating ChatGPT into results for Bing searches. This is in an effort to steal market share from the default search engine, Google.
If you have no idea what ChatGPT is, here is a quick TL;DR. You are about to lose your job because an AI chatbot can now: write code, write essays, write YouTube videos, create poems, solve complex science problems, do your homework, etc. If none of that makes any sense, check out this video to understand it more.
Regardless this new technology poses a huge threat to Google's large search ad business. Google sees the writing on the wall and issued a "code red" that GPT could destroy their business.
Oh and Bing is already a massive business for Microsoft
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