"Although inflation has moved down from its peak—a welcome development—it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."
-Federal Chair Jerome Powell at the Jackson Hole Symposium
With those words, Jerome deflated all optimism in the market. Stocks closed the week slightly higher but basically flat after rallying earlier in the week. Jerome has been clear that his inflation target remains 2%. Anything above that is too high. Rates will remain higher for much longer than investors expected unless something breaks in the economy.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Markets
This newsletter is 1,421 words a 7 min read
Tale of the Tape
Economy
New Student Loan Repayment Plan is LIVE
If you have student loans, the new SAVE plan by the Biden Administration is now allowing sign-ups. According to CNBC, this new plan can reduce some borrower's monthly payments by 50% and most borrowers will be able to save $1000/year with the new rules
🔍Details: Go to https://studentaid.gov/idr/ and follow the signup directions. It takes about 10 minutes to complete the process. You will need:
A government-issued ID
Income Information like Tax Return
My Takeaway: If you have student loans, click that link and GET TO WORK!!
So I was completely wrong about this one. I thought the pandemic was the last strike for malls. I assumed that everyone would get so used to shopping online that malls would not be able to compete. I was VERY WRONG!
🔍Details: According to analytics firm Coresight Research:
From 2021 to 2022, retail sales at malls increased 11% to over $800 billion.
Foot traffic at top-tier malls, where the average shopper makes $200,000+ per year, increased 12% in 2022 compared to 2019.
Takeaway: High-end malls that provide an experience to shoppers are thriving. Although businesses like Bed, Bath & Beyond are out of business. Other specialty businesses are filling the gaps.
My Takeaway: In Atlanta, there are three high-end malls: Atlantic Station, Cumberland Mall, and Lenox. When driving around town there is always traffic around these areas. So using my single town location, the research must be spot on. However, other regular malls are definitely dying off.
But with all that being said, retailers are reporting an inability to sell merchandise. More below
Earnings
Nvidia Backs Up The Truck
Nvidia cannot stop and will not stop flying. Nvidia reported earnings last Wednesday and blew away the entire world.
🔍Details: After guiding for insane revenue growth, Nvidia crushed their own estimations and expectations of Wall Street.
Revenues were $13 billion. Doubling from $6 billion last year during the same time period
Net Income was $6 billion. Last year's net income in the same period was $656 million. THAT IS 10X in PROFIT!!!!
Nvidia is predicting revenues to grow another 170% in the 3rd Quarter. (shock face)
💬In His Words: Jensen Huang, Nvidia's leather-clad CEO, said, “The world has something along the lines of about a trillion dollars worth of data centers installed, in the cloud, enterprise and otherwise. That trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI.”
In Regular Speak: WE ABOUT TO MAKE THIS MONEY!!!
Key Takeaway: AI demand and need is HERE to stay. Unlike crypto which is still searching for a use case. AI has proven to be the next generative leap for technology. Nvidia is profiting mightily as the provider of the shovels that enable the proliferation of data diving to create various AI models.
My Warning: The hype is real and there are actual dollars to back it up. Unfortunately, as Morgan Housel has said, "Calm plants the seeds of crazy, growth plants the seeds of decline, success plants the seeds of loss. Everything is cyclical." Where we are in the cycle is impossible to tell.
If you are a Nvidia shareholder, CONGRATULATIONS!! Make this bread!!
Retailers Feeling the Pain
Target sent a warning signal last week. This week other retailers confirmed the damage that was happening to their bottom lines.
Dick's, Nike, Macy's, Foot Locker. Some of the largest retailers in the country reported earnings last week and they all had the same message. Consumers are choosing to either spend on experiences or on necessities.
🔍Details: Dick's reported a profit loss of 23% compared to the same period in 2022. They also expect less profits for the rest of the year, including the most profitable period (Christmas shopping).
Macy's reported an expectation for revenues to decline at least 6% for the rest of the year as consumers get more picky in their spending.
Foot Locker took Nike down with it when Foot Lock reported another quarter of losses and said it expects sales to continue to decline for the rest of the year.
💬In Their Words: “There’s also an increasing amount of caution when it comes to what back half demand looks like when student loan payments resume in October. We’re talking about a consumer that’s already under pressure due to inflation that will go through even more pressure in the fall,” Rick Patel, a retail analyst for Raymond James, told CNBC.
Stats of the Week
This is the average price of a used car, according to Cox Automotive. The average price of a new car in the US is $48,000. Almost 18% of car loans have a monthly payment of $1000. The average monthly car loan payment is $780.
Bruh some people's car payments cost the same as my mortgage. LIKE WHAT?!
According to Cox Automotive, there is only one new car model that costs less than $20,000 in the US. The Mitsubishi Mirage, the thing looks like a smart car. This car is set to be discontinued in 2025.
Compact cars are no longer a thing in the US. As more people choose massive road-dominant vehicles, manufacturers have responded appropriately to the demand and discontinued smaller cars. Choosing to make a variety of large SUVs and Trucks.
Another day and another fine for Wells Fargo. This bank is just terrible
Wells Fargo agreed to pay $35 million to the SEC to settle a lawsuit that claimed Wells Fargo overcharged advisory fees. The SEC said Wells Fargo overcharged over 11,000 investment advisory accounts more than $26.8 million.
In the last decade, Wells Fargo has paid over $10 billion in fines. Does this mean it won’t pay more? Unlikely, the profits that it has made in that time period make the fine look like pennies. In the last 12 months alone, Wells Fargo made $80 billion in profit. So $10 billion over 10 years is nothing but the cost of doing business.
Looking Ahead
Jobs
On Tuesday, we get the JOLTS report which tells us the number of quits, hires, and fires across the country. However, the data is rather delayed. We will be getting the information for the month of July.
On Wednesday, we get private payroll information from ADP. This will tell us if companies are growing or reducing their workforce. This data is more real-time as ADP has an immediate change based on what companies are doing right now.
On Friday, we get the most comprehensive report on the jobs market, the nonfarm payrolls. It is estimated that 268,000 jobs to have been added to the economy in the month of August. The unemployment rate is projected to stay at 3.5%.
Left Overs
We have a few companies within the S&P 500 that will be reporting earnings. None of these companies will provide much of an insight on a macro level. But I will be paying attention to CrowdStrike because it is one of my holdings. Other companies reporting:
Sports I Love
No Hope But STILL
Man U is just a heartbreaking club. Even when you have no hope, they still find a way to destroy your heart.
Yes, they won this week. Well technically, it would be better to say they didn't lose. They played like complete trash. After 5 mins in the game, they were down 2-0. They were saved by a penalty to be able to win teh game. It felt like they had made no progress at all. it is just sad to watch. But at least they won this match. 😒😑
Guess it will be another season of pain