Stocks for the first time in 4 weeks went negative. Snapping the longest win streak we have had in a while. Something is just special about July (and I am saying that becuase my birthday is in July). Seems someone reminded the market that the Federal Reserve is not done raising interest rates, although inflation receded in the last month.
Tale of the Tape
Economy
Biden Signed IT
On Monday, President Biden signed the biggest climate bill in American history but for some reason the Biden Administration called it the "Inflation Reduction Act" 🤦🏾♂️. It is expected to be extremely transformative in reducing greenhouse gas emissions. An example of this is with incentives to get homeowners to reduce emotions from homes. So home owners PAY ATTENTION (per morning brew):
The bill provides $100 billion for electrification of neighborhoods
The Energy-Efficient Home Improvement credit: Households can claim a tax deduction of up to 30% for upgrades that save energy, such as updating electrical panels, adding insulation or more energy-efficient windows, and installing heat pumps (here’s what those are).
Residential Clean Energy credit: The bill resurrects and beefs up a credit for homeowners installing renewable energy systems like rooftop solar panels. The incentives will cut the cost of a typical $20,000 solar installation by as much as $6,000, per the NYT.
Rebates for high-efficiency appliances: Low- and middle-income families can claim rebates up to $840 for a greener stove or oven and $8,000 for a heat pump for space heating or cooling.
My Take: I might need to get a heat pump installed in my house. I have a gas furnace right now, this might just be a good enough incentive to get that thing replaced. But first I gotta run the numbers, just because something seems like a good idea does not mean it is. For example, the bill is providing increased tax credits for buying Electric Vehicles, but Electric Vehicle prices keep going up. So it doesn’t really make the decision that different.
Speaking of EVs, the Bill has tax breaks and subsidies to incentivize companies to build battery manufacturing plants here in the US. So much so that the Rust Belt aka the South is now being dubbed the Battery Belt. As more companies announce battery manufacturing plants in the South following the passing of the bill.
Negative Kelechi: This was a reduced version of The Build Back Better Act that Biden touted much of last year. Unfortunately that bill got stone walled by Senator Manchin and Senator Sinema. As much as this Inflation Reduction Act is great, it leaves out a few things that I think should be basics for a country as rich and as prosperous as the United States:
Universal Pre-K
Child Tax Credit (during the pandemic this helped reduce Child Poverty and Hunger by a substantial amount)
Although we should celebrate the US government finally being able to get their heads out of their butts (minus every Republican in the Senate who voted against actually making life better). It is still so sad that we would rather protect a tax loophole for hedge funds and private equity managers than to provide food and invest in education for children.
Cooling Housing Market
Last week, we got a boat load of housing data and they showed prices are coming down and buyers are slowly taking back leverage in the market. You no longer have to put an offer that is over the asking price or waive all contingencies or sell your kidney and promise your future grandchildren's name just to buy a house, in that order. Housing sale fell 6% in July when compared to June and is down 20% from last year. According to Axios:
44% of houses had more than one offer. That is way less than the 70% it was earlier in the year. At one point it was closer to 90%
Homes are on the market for an average of 3 days longer.
I can see this for myself, there has been a house next to mine that has been on the market for about 2 months now (not a good sign for the location I bought).
However, home prices are still going up. Median home price now is $413,500
But builders are cutting prices at a higher rate 13% in July now 19%
Stocks
The world's largest retailer reported earnings early Tuesday morning and surprisingly beat earnings expectations but their profit margins were tight. The profit margin tightening was driven mainly from a change in consumer preference away from durable goods (i.e. washers, lawn chairs, etc.) to non durable goods (groceries) and services. Inflation also played a big role in driving the reduced profits as input and labor costs rose massively at the beginning of the year.
CEO of Walmart, Doug McMillion, said on the earnings call he expect things to persist for the rest of the year. “We expect inflation to continue to influence the choices that families make and we’re adjusting to that reality so we can help them more.”
This is causing richer folks (income $100,000+) to shop at Walmart. How Walmart is able to figure out the income of its shoppers? I do not know but it is kinda scary just how much information these companies have on us.
Side note: Walmart is seeking other avenues of growth to offset the pressures of inflation. Recently they announced an agreement with Paramount to offer Paramount+ for free for users of the Walmart+ service. Because as we all know in 2022, you cannot have a subscription service with a + sign and not offer streaming.
Totally missed the mark with their earnings report. Profits fell 90% from a year ago. This was due to a huge markdown in inventory as consumer preferences changed abruptly after the pandemic. The switch hit Target harder than Walmart because unlike Walmart Target is not seen as a value store. It's brand is seen as premium. So when people Trade Down, it is one of the stores people give up to save money.
Hot Take!
Home Depot is WAY BETTER than Lowe's!
Over the weekend I needed a few pieces of wooden boards for my pantry. I went to Lowe's asked if the boards could be cut, I was told NOPE!
Went to Home Depot, not only did they help me cut the board, they made sure the board I was getting would be perfect for my needs.
Therefore, I just invested in Home Depot 😁 (Not financial advice, it was $20). Some of the best investments you make come from living life. Which worked out kinda nicely cause Home Depot reported very good earnings and revenue for the second quarter of the year.
Key Takeaway: Fun is a non-negotiable. CEO Ted Decker told investors that Halloween sales (already?) are set to do really well. He noted that a 12 foot, $300 animatronic witch sold out almost immediately after going on sale. He said, "How quickly people are spending $300 for a clearly discretionary item, but a lot of fun, speaks to the resilience and willingness of customers to spend".
Bed Bath and Beyond shot up over 70% on Monday.
Why?
NO ONE KNOWS
But by Thursday thing had crashed 90%
Stats of the Week
I need a wife FAST!
According to the Federal Reserve Bank of St. Louis, the net worth of married couples aged 25-34 is 9 times larger than their single counterparts in 2019.
Sad news: they estimate that post-pandemic this gap is MUCH BIGGER
That is 4x greater than it was in 2010.
As my Pops always said, "Two heads are better than 1" (use a Nigerian accent when you read this).
Combining incomes allows you to move much faster towards goals
Someone BRING ME MY NIGERIAN QUEEN!! 😥😅
The cost to raise a child from birth through high school. This is according to the Brookings Institute of Research
About $19,000 a year
Maybe I don't wanna be married
Streaming share of TV Consumption in the US. Signaling that streaming is now larger than cable TV
Netflix holds the top spot with 7.7% viewership, YouTube in second at 7.3%
I'm surprised this is just happening. I assumed Streaming was dominating Cable
However; live sports has been the only thing keeping Cable alive. But with more streaming services vying for live sports that will push the change much quicker
See Amazon buying Thursday Night Football
Apple buying rights to MLS and MLB
Looking Ahead
Nothing major is happening this week except for Summer Camp for the Rich and Powerful also known as the Jackson Hole Symposium. From Investopedia:
The Jackson Hole Economic Symposium is an annual symposium, sponsored by the Federal Reserve Bank of Kansas City since 1978, and held in Jackson Hole, Wyo., since 1981. Every year, the symposium focuses on an important economic issue that faces world economies. Participants include prominent central bankers and finance ministers, as well as academic luminaries and leading financial market players from around the world.
The symposium proceedings are closely followed by market participants, as unexpected remarks emanating from the heavyweights at the symposium have the potential to affect global stock and currency markets.
Earnings:
Sports I Care About Update
By the time I put out this post, Man U have not yet played so I can still believe and lie to myself that Man U has a chance against Liverpool. Also in a positive move, Man U just got Casemiro from Real Madrid. Casemiro is one of the best Defensive Midfielders in the world. I hope Man U does not ruin him as they ruined Varane.
BIG Payday
The Big 10 just announced a massive $10 Billion TV deal with Fox, CBS, and NBC for college football games. This is the largest TV deal for a collegic sports programming. But yet they do not want to pay these “student” athletes.
Extras
If you live in ATL, REJOICE!!
For the End of the Dodge Charger and Challenger is near!!
Stellantis, owners of the Dodge brand, announced Wednesday they will stop making gas versions of the Charge and Challenger. Which for all Atl people, you know how ANNOYING those cars are. Then on Wednesday, Dodge showed off an electric Dodge Charger and it looks SWEET!! I AM HERE FOR IT!!