“There’s always something to worry about. But it’s garbage to worry about these things”
-Peter Lynch
Peter Lynch is one of the greatest investors of all time, he turned an $18 Million Fund into $14 Billion. He had investment returns of almost 30% per year, over 13 years of managing the Magellan Fund for Fidelity. The intro quote is something he said with respect to investors always freaking out about something. I think this advice is excellent not just for investing but also for life. There will always be something that we can worry about jobs, relationships, friends, etc. However, as the Bible says, “Does worrying add an hour to your life?” (Matthew 6:27).
We might as well enjoy the moments of enjoyment that we get. Yes, we plan for the future but do not allow ourselves to stay in a perpetual state of worry and stress.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Markets
Investors got excited for all of a day after inflation numbers were released (more below). But stocks quickly continued their downward trend for reasons that are unknown to me. But I ain’t worried about it.
This newsletter is 1,577 words, an 8 min read
Tale of the Tape
Economy
Inflation for the month of April was released on Wednesday. It was the lowest inflation reading in over 2 years. We are seeing a continuing trend of prices declining as the supply chain normalizes and consumers run out of excess dollars to spend.
🔢By The Numbers: Headline Year-Over-Year inflation was 4.9%
Month-Over-Month inflation increased by 0.4% from March to April
This unfortunately means prices are not falling but rather moderating
My Key Inflation numbers (I pay attention to these categories because these are the items that we buy every week/month and determine how we feel about inflation):
Gas prices rose 3% from March prices
Grocery prices declined 0.2% from March prices
Milk prices fell 2%
Egg prices fell 1.5%
Shelter prices rose 0.4% from March
💬In Their Words: Mood's Analytics Chief Economist said, "Increasingly, we can be confident that inflation is coming back in." Referring to the 2% annual inflation target from the Fed.
Quincy Krosby, chief global strategist at LPL Financial said, "Today’s reports suggests that the Fed’s campaign to quell inflation is working, albeit more slowly than they would like."
Takeaway: This report can be taken as either good or bad. Depending on where you get your news from. As we can see in these two headlines:
But the big picture is we are slowly making progress toward the Fed’s inflation target of 2%. Albeit extremely slow and lethargically but progress is progress.
🤷🏾♂️My Takeaway: No one cares. Inflation search on Google has dropped massively since last year. We can see the Google search trends for the word inflation is returning to historical norms.
We may complain about how things are more expensive but we don’t actually care. We have begun to accept the higher prices as regular costs. This is not good. This is what keeps inflation in place, if companies know people will take on higher prices, companies will charge higher prices.
In conversations I have been a part of recently, I believe this has already happened 😔. People are willing to happily pay exorbitant prices for basics.
Earnings
On Wednesday, Google revealed a plethora of new and exciting products. None bigger than its new and improved Search using AI.
What: After getting dunked on by Microsoft's partnership with OpenAI to create BingAI, Google is finally unveiling its version of an AI-supported search.
Google created a new AI model called PaLM 2 that is trained not on the craziness of social media interactions but on academic papers and 100+ languages.
⚙How It Works: Rather than just clicking through a bunch of links. Google's AI will give you answers to your questions at the top of the page. Similar to the snippets you currently get for simple questions.
Takeaway: If you thought Google was behind in the AI race or had nothing to offer, THINK AGAIN! Google unlike Microsoft has more to lose, which is why they have chosen to move a bit slower in releasing anything to the public.
📱New Hardware: Google announced three new Pixel devices: Pixel Fold ($1800), Pixel Tablet ($500), and Pixel 7A ($500).
🤖Other AI Stuff: Google Bard, the competitor to ChatGPT, is now available to everyone.
If you have a Pixel (all 3 of us), new AI customizable wallpapers are coming. You just type what you want and it will generate a unique image for you.
Google Photos is upping the photo editing game with the ability to enhance pictures move people or objects and remove people from the background.
Although Disney’s revenue and profit were in line with Wall Street’s projections. There were signs of uneasiness all over the business. Causing the stock to fall more than 10%.
🔢By The Numbers: Revenues grew from last year by 13%
Profits returned to historical norms, and Disney made $1.27 billion
Disney+ lost 2 million subscribers in the quarter
But they continue to reduce the losses in this part of the business as they raise prices and remove content
They announced a price increase for the ad-free tier
Hulu will be fully integrated into Disney+ in the near future
The park's business continues to be a cash cow for Disney
Revenue increased 17% to $5.5 billion for the quarter
Driven mainly by the cruise business returning to form as covid fears disappear
Takeaway: The numbers on the surface appear okay but remember investors are not just focused on today but rather on the future. Disney has a lot of tough decisions to make about its business.
Its linear TV business faces challenges from Apple, Google, and Amazon. Each tech company has much deeper pockets than Disney and all want to take the only thing worth watching on live TV, SPORTS.
Streaming has proven to be much more expensive and much harder to fully monetize for profitability.
The park’s business remains a cash cow but is hard to grow because there is a limit on how much people are willing to pay. Plus Universal Studios is joining the fray with Super Mario World.
And then there is Ron DeSantis in Florida trying to ruin Disney.
Disney is in a terrible spot right now. I am very tempted to sell off my minuscule shares and move on but it is just hard to let this business with such great Intellectual Property go. But this is why in investing, it is important to be extremely unemotional.
Stats of the Week
We are on pace in the US to set a new record for mass shootings. In the first four months of this year, we have had 23 mass killings with over 115 people being killed.
According to research from Microsoft, we spend 2 FULL DAYS per week in meetings or on emails.
What They Said: "a lack of focus time, the search for information, and the volume of constant communications have an opportunity cost."
If your tax refund felt a bit lighter this year, you are not alone. According to the IRS, the average tax refund is down from $3,019 last year to $2,777. The Federal stimulus during the pandemic days is over.
Looking Ahead
Next week is all about consumer spending. On Tuesday, the US Census Bureau reports April retail sales (still weird that it’s the census bureau that reports our shopping habits). Throughout the week we get various Big Box retailers reporting their Q2 Earnings Results, including Walmart, Home Depot, and Target.
This will give us great insights into how consumers are doing especially as the fed has continued to raise rates. It feels to be that consumers are finally hitting the stop button on spending. Which is great in order to bring inflation back in line. Not so great for the economy though.
Sports I Love
Survive!
As the season comes to a close, all I care about is if Man U can remain top 4 and make it for Champions League football next year.
The good news is man U won against Wolves on Saturday.
They are tied with Newcastle on points but Liverpool is nipping on their heels. It will be very interesting to see how the season ends.
Extras
The Biden Administration is proposing new rules that would require airlines to provide cash compensation for flyers when airlines are responsible for cancellations or lengthy delays.
State of Play: Currently airlines are required to issue refunds if they cancel a flight. Right now most of the time all you get is a "We apologize for the inconvenience and offer you a complimentary pack of peanuts."
The Change: According to the Department of Transportation, almost 80% of all cancellations are due to mismanagement by the airlines. The Biden administration wants to hold airlines accountable for the extra costs being placed on consumers. With the new rules, Airlines would be required to cover meals, hotels, and extra transportation needs.
When: Do not expect any changes any time soon. It has to go through all the legal and regulatory hurdles before it can become a law.
*I am a tiny shareholder in this company.