The late novelist Kurt Vonnegut informed his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history.
Heller responded – “Yes, but I have something he will never have . . . enough.”
Welcome back to the Rambling Mind Newsletter. This is your Market Update
This newsletter is 1417 words and a 7 min read
Markets
Another 🥱 week in the markets.
Tale of the Tape
Economy
We might be returning back to regular times when inflation data does not mean the Stock Market gets overly enthusiastic or overly depressed.
By The Numbers: CPI came in pretty much as expected on an annual basis:
Year Over Year inflation was 6.4%
Core inflation which removes food and gas prices was 5.6%
But not all that shines is gold. Unfortunately, month-over-month inflation was not as positive.
It increased by 0.5% from December
Core inflation increased by 0.4% from December
What's Driving The Increase?: Housing, Food, and Services costs are the culprits for higher inflation.
Housing Costs increased 0.7% on the month and 7.9% over the last year (I can feel rent price increase from conversations with friends in Atlanta)
Energy increased by 2% on the month and 8.7% over the last year
Food increased by 0.5% on the month and 10% over the last year.
Eggs are the biggest factor here as they increased nearly 8% last month and nearly 70% over the last year.
Takeaway: Monthly inflation numbers set our collective inflation expectations. We do not remember the price we paid for food a year ago but we do remember the prices we paid last month. If consumers (you and I) continue to expect things to keep getting more expensive, we will pull back on spending and focus on saving. Which could lead to a recession.
Moving forward, I will focus on the monthly numbers. as this will give us more useful insights.
My Takeaway: The Fed is gonna keep raising rates. Investors got too excited about the possibility of the Fed cutting rates but that is definitely not happening after this report. The stagnancy of the stock market this week is a result of investors beginning to grapple with the reality of higher rates for an extended period of time.
I hate most trends that start on TikTok but this one I absolutely LOVE. Since the beginning of January, the #deinfluencing has acquired 155 million views on TikTok. The Deinfluencing movement is counter to the influencer marketing that pushes us to spend all our money on nothing.
By The Numbers: Influencer Marketing is a MASSIVE industry and plays a key role in how we seem to always be broke:
According to McKinsey, total ad spend on influencer marketing hit $16.4 billion
According to GWI, a consumer data analytics company, American consumers’ dependence on social networks to make purchasing decisions has increased by 42% since 2015.
Gen Z is 23% more likely to make an impulse purchase after seeing influencers post about something. And 27% less likely to find the best deal.
Why The Change?: I can pinpoint three things:
Fears of a Recession.
Big Tech Layoffs
Probably the biggest factor, Gen Z is now realizing everything is fake. No influencer is absolutely genuine. Just because a video is made in a person’s bedroom or living room does not make it any less of a commercial.
Takeaway: The number of Gen Zers interested in influencers has dropped 12% since 2020, and the number who take note of what influencers wear has fallen 16% since then, per GWI data. Per Axios:
As a result, influencers — and others — are making viral videos listing trendy makeup products or shoes that aren’t worth the money, or what to cut when planning trips or weddings.
My Takeaway: As much as I am excited to see pushback on our overconsumption culture. I doubt this #deinfluencing wave will last. We have had this pushback in the past with anti-haul and anti-unboxing videos during the height of YouTube. However, today we still have haul and unboxing videos. Plus over-consumerism is still very much alive.
Recession fears will recede and people will go back to their non-saving, easily influenced over-consuming ways. Until people learn to make decisions not because it is cool to post on social or to be part of a trend. Nothing will change. Alas, this is just another blip in time.
Earnings
AirBnB totally crushed earnings in the 4th Quarter of 2022. For the first time since going public, Airbnb reported an ANNUAL PROFIT!
Backstory: Prior to the pandemic, Airbnb was a fully profitable business. However, COVID showed up and for more than a year Airbnb couldn't run its business because well you know why. But this was a lesson for the company and actually made it stronger.
The company focused on its core business and removed a ton of excess. Those moves have been showing major dividends.
By The Numbers: Here's why the stock has been flying since the report:
Generated $8.4 billion in 2022 revenue growing 40% YoY
Generated $1.9 billion in 2022 GAAP net income vs. ($352M) in 2021. It grew FCF YoY by 49% in 2022.
Takeaway: Don't lump Airbnb in with any of the other high-flying unprofitable tech companies. This business has legs and has learned how to operate a business that makes money.
Stats of the Week
US Consumer Credit Card debt grew by $61 Billion in the 4th Quarter of 2022
The previous record was $927 Billion
This is a new record high for credit card debt. It is likely to break $1 trillion by the end of this quarter.
Delinquencies and Late payments are on the rise
Delinquencies for the quarter rose to 4%
Late payments increased to 5.9%
Two things causing the increases are higher interest rates and inflation
The amount of money that was bet on the Super Bowl
In 2022, "only" $7 Billion was bet.
Next year the Super Bowl will be in Las Vegas so that number is definitely going up
The percentage of Teenage Girls that say they have felt persistently sad or hopeless in 2021. This is according to a study by the CDC
30% of teen girls have considered attempting suicide
18% of teen girls say they have experienced some form of sexual violence in the past year
CDC's chief medical officer said at a briefing on Monday, "America's teen girls are engulfed in a growing wave of sadness, violence, and trauma."
If you know anyone struggling please share this lifeline so they can get the support they need: 988lifeline.org. En Español.
This is the tariff placed on imported women's underwear. It is only 11.5% for men's underwear. The most blatant example of a pink tax (where female products are more expensive than male products for no apparent reason).
It adds an extra $1.10 for women's underwear and $0.75 for men's underwear
However, the higher tax is unintentional.
According to Morning Brew, "The tariff gap originates from industry lobbying in the 1930s and ’40s. At the time, domestic producers were concerned about foreign competition for goods that required more labor-intensive production (women’s undies tend to have more intricate designs) and those targeting price-sensitive consumers."
Looking Ahead
Two things to take note of in this upcoming week:
Personal Consumption Expenditure (PCE) is the Fed’s preferred gauge for inflation. It is expected to have accelerated by 0.3% month over month. Another sign that inflation may not be slowing down as quickly as expected.
This is preferred by the Fed because it closely tracks U.S. consumer spending. The basket of goods for the PCE is updated frequently, whereas CPI’s basket of goods is fixed.
Walmart and Home Depot report earnings. These are two of the largest retailers in the U.S. They provide a lot of insight into how consumers are doing.
Especially Walmart, the largest retailer in the U.S. by annual revenue.
Sports I Love
Man United keeps it going!!!!
They have been playing exceptionally well in the last few months. I am loving what Ten Hagen has done with the team. I was shocked at how well they played against Barcelona. Honestly, I thought they would lose the game but they pulled it off. I hope we continue this for the rest of the year and build on this success.
Super Bowl LVII
Called it!! Don’t bet against Pat Mahomes!
NBA All-Star Game
Biggest Takeaway: NAIJA, WE NO DEY CARRY LAST!!
*I am a shareholder of this company