Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
👨🏾🏭👩🏾🏭199,000 Jobs were added in November, the soft landing is here
🎓🏈College Athletes finally get PAID by the colleges
📺Old is New, Streaming Looking like Cable TV Bundles
🤑Return of Crypto feels different this time
Stats of the Week:
$16 Billion amount being spent on political ads in 2024 😭
👶🏾44% of Nonparents (ages 18-49) say they do not want kids. Why? MONEY
🎅🏾$975 is the average amount being spent on Christmas
Looking Ahead
Final inflation report of 2023.
Federal Reserve holds the last FOMC meeting to decide on rate hikes
Man U still SUCKS
Markets
December is not being as friendly to us as November was. The stock market kicked off the month by telling us it needed a breather after a great November. But it closed out the week quite nicely, rallying on Thursday and Friday to end the week in the green. After the release of the November job report Friday morning (more below). Let's hope it has worked off all the Thanksgiving meal weight.
This newsletter is 2,095 words a 10-min read
Tale of the Tape
Economy
👨🏾🏭👩🏾🏭Jobs Growth Strong but Weakening
Things are going exactly the way Jerome Powell and the Federal Reserve would love to see it go. After big job numbers in October and September, the labor market has cooled off rather quickly.
🔍Details: On Tuesday, the Labor Department reported 8.73 million job openings for November. This is the lowest amount we have seen since March 2021, a decline of 6.6%.
This means that the ratio of job openings to available workers is down to 1.3 to 1. In 2021, the ratio stayed in the range of 2 to 1.
This means the labor market is no longer tight and the power has swung back to employers, who do not have to increase wages as much.
Restaurant owners are already seeing the benefits of this as wage increases have slowed down dramatically in the last two months. From an average of over 10%. Wage increases are in the range of 4% now.
Quits rates have dropped from a historic 3% down to a normal 2.3% as workers no longer have a sense of assurance that they can get a better-paying job.
🔬More Detail: On Wednesday, ADP released private payroll data. It showed the slowest job growth in more than 2 years.
Companies added just 103,000 workers in November, below expectations of 130,000 jobs.
Pay increases also reduced to the lowest level since September 2021 at 5.6% versus close to 7% in 2021.
🔎🔬Even More Detail: On Friday, the Labor Department released the nonfarm payroll for November. This is the big report that is cited for the unemployment rate and job growth rate. It told the same story as the JOLTS report and the ADP Private Payroll.
The economy added 199,000 jobs last month, which is phenomenal. However; it is less than the 250,000 monthly average job growth we have had all year
Also, October and September jobs numbers were revised and reduced by 35,000 jobs
Also, 30,000 of the jobs added were from the Auto Workers’ Strike in October meaning it was a net zero addition.
The best part of the report was the unemployment rate unexpectedly dropping from 3.9% last month to 3.7%.
This extends the strongest labor market in the US since 1968, where unemployment has remained under 4% for this long
The drop is because more people are entering the labor market.
Takeaway: The labor market is no longer too tight as employers tighten their belts in the face of higher interest rates. People are running out of savings and are returning to the workforce. This is exactly the situation the Fed wants. This is the soft landing that Jerome Powell has mentioned multiple times in press conferences. In a situation inflation dies down and the economy does not go into a recession. It seems to have been achieved thus far. What 2024 holds, no one knows.
🎓🏈College Athletes Getting PAID
Typically, sports stories are at the bottom of the newsletter but this one was too big to not talk about early. The NCAA has proposed a plan to allow college Division 1 athletes to get paid through their Name, Image, and Likeness (NIL).
🔎Details: About 2 years ago, the NCAA finally allowed players to earn money through their name, image, and likeness. Technically they did not allow them, they got sued to oblivion and the NCAA was forced to allow athletes to earn money in college. This new proposal takes that decision a step further and allows colleges to pay athletes directly. However, there are some requirements for colleges to be able to pay their players:
Colleges would have to invest at least $30,000 per year into a trust fund for athletes
Students would have to enter into a NIL agreement directly with the school
This already happens in a roundabout way. Schools use their relationships with brands like Nike or Adidas or local businesses to get players paid
The NCAA would also create a new tier of Division to separate the "highest-resourced colleges and universities" (think Alabama, Georgia, Michigan aka Power-5 conference schools) from everyone else who would not be able to compete from a monetary standpoint.
Backdrop: This has been a long overdue change that has been championed by so many former college athletes. The NCAA has resisted this change for over 117 years.
🤔My Takeaway: This still does not fully address the core issues of athletes not getting a full share of the revenue they generate for the universities and NCAA. The amount of time athletes have to dedicate to their sport is at the level of professional athletes. It gives them no time for anything else. Very few of those athletes go pro, and most end up taking trash courses in college just to play on the team. They come out empty-handed at the end of their tenure. So this still is not enough in my opinion but it is a good step in the right direction.
We all thought we were doing away with cable and streaming was changing everything. Well, we were wrong. Television just transformed from a cable box and channels to a smart TV and streaming apps.
🔎Details: Apple is rumored to be in talks with Paramount to offer Apple+ and Paramount+ as a bundle for a discounted price.
Verizon just announced a bundling of Netflix and HBO Max for an extra $10 on its mobile plans
Disney and Charter have a bundle to give its cable customers access to Disney+ and ESPN+.
Instacart is offering a free Peacock membership to compete against Amazon and Walmart (which gives access to Paramount+ with a Walmart+ subscription)
Takeaway: This was the only outcome possible. All these companies have realized there is no profit in streaming as it is currently set up. Charging $10-15 without advertising to subsidize the platform is not a good business plan. Netflix has been the only company to benefit from all this and it is because they were early enough to capture the market.
Also, there are just too many services to subscribe to. Consumers do not have the bandwidth to manage 10 subscriptions. I predicted this back in 2022 and it is coming to pass.
What is old is now new again.
Crypto is back
On Tuesday, Bitcoin hit $42,000. Recovering all the losses from the last two years after the collapse of various "stablecoins".
🔎Details: Crypto is moving away from being an unregulated Wild West to being just another basic investment option. Due to a lawsuit by the United States government against the largest cryptocurrency exchange, Binance.
In November, Binance pleaded guilty to money laundering and fraud charges. It agreed to pay $4 billion in fines—the largest fine in US Treasury history.
Binance laundered money for multiple terrorist organizations including Hamas
You might be asking how is Binance able to continue operating after committing such a crime.
Well like a spy that has been caught, the US is turning Binance into a double agent.
Under the settlement with the US, Binance is required to create an effective anti-money laundering system that will be under the watchful eye of the Fed
This one agreement finally gives credibility to crypto as a regulated investment
Takeaway: Crypto may be back but it is no longer the Wild West that it once was. This ruling is making it easier for larger institutions to begin investing directly in cryptocurrencies. This is part of the reason we have seen a massive rally in crypto as the year ends.
My Takeaway: The most annoying type of rich person is rich again, Crypto-bros. I loved seeing them lose a bunch of money during the last downturn. Sadly, the recovery means all these folks will rise from their bunkers and begin prophesizing once again about how fiat is trash and this is the future 😑😓😤
Stats of the Week
This is the median income of DINKS, Dual Income No Kids. Compared to $251,000 for couples with kids, according to findings from the Federal Reserve.
Another finding from the Fed shows that DINKs earn an average of $138,000/year which is $9,000 more than coupled with kids.
In a Pew survey from October 2021, 44% of nonparents between 18-49 said they don't want to have kids. This is an increase from 2018 when 37% said they would not. Why? Because it has become more expensive to raise kids in the US.
Takeaway: The US is currently in a baby slump, which means we do not have enough births to replace deaths. Not great for the economy. To turn things around, the government needs to adopt more policies to make childbearing and family growing advantageous to families. Otherwise, we will begin looking like Japan where the largest age group of the population is over 45.
The amount consumers say they'll be spending on vacation this year, according to a Gallup Survey. It's an increase of $52 from last year. Despite everyone saying things are terrible, we are all still willing to swipe that card with no regard. The AMERICAN SUPERPOWER HAS NO WEAKNESS.
The projected amount that will be spent on US political advertising next year. This is a 31% increase from the amount that was spent in 2020 which was already a record-breaking year. To help put into context just how insane this amount of money is to spend on political ads. The entire ad market in Australia is $17 Billion.
For those of us who live in purple (swing) states, the Lord Help US! Cause it will SUCK for a solid 10 months starting in January. 😢
Looking Ahead
Inflation
The final Consumer Price Index (inflation) report will be released tomorrow. The Fed will have this in hand to make its final decision on Interest Rates at its monthly FOMC Meeting. This might be the first week in over 2 years that we might have CPI under 3%.
All Eyes on Jerome Clause or Gringe Powell
On Tuesday and Wednesday, the Federal Reserve will have its monthly Federal Open Market Committee meeting. This will be the last one for the year, it is expected that the Fed will make no changes to interest rates to close out the year.
What do you think? Will the Fed cut rates, hike rates, or keep them steady? Share your thoughts below
Sports I Love
THIS TEAM?!
Man U is the most Jeckly and Hyde team EVER!! How do we go from beating Chelsea midweek to getting not just beaten but abused by Bournemouth on Saturday?!
How is it that the same week, Ten Hag gets the award for being the Premier League's Manager of the Month; it is the same week the team looks like they have no idea how to play football? Just How?!
Can ANYONE EXPLAIN IT TO ME?!!