Super Bowl LIX - Market Update Feb. 3-7, 2025
Only Thing Talked About in the Office
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Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economic News
💪🏾Job Market Weak Flex
Company News
Google Earnings: Great Earnings Investors not impressed
Amazon Earnings: See above
Disney Earnings: Making Money But Losing Subs
Stats of the Week
🎲$1.39 Billion bet on Superbowl
✂️20,000 Federal Employees Quit
📈50% of People Use 401(k)
🤖$320 Billion Will Be Spent on AI
Looking Ahead
Inflation
More Earnings
Sports I Love
🏈Boring SuperBowl
Markets
I fell for it. After talking about how I would ignore the noise in favor of things that are important and matter, I fell into a panic over tariffs last week. Which turned out to be a non-story for now. However, it does have lasting effects in the minds of all American allies that there is no foundational trust between parties. Warren Buffet once said, "Trust is like the air we breathe. When it's present, nobody notices. But when it's absent, everybody notices." We are about to be gasping for years to come.
Meanwhile, the list of government agencies essentially shut down by the Trump administration continues to grow. USAID has been ordered to put a pause on all foreign aid which is just a lay-up for American adversaries. CFPB has been ordered to stop working and is likely to be completely torn apart, potentially welcoming the age of the greatest fraud ever known to man. All health agencies have been ordered to pause external communications, during a massive bird flu outbreak. The Department of Education might be up next. Also, thousands of government website pages have been taken down.
Most of these things will be changed by lawsuits because these things are beginning to encroach on the powers that Congress has. But in the meantime, it will be chaotic.
A lot has happened in a very short period. A lot more will happen in the coming days. Remember to find ways to Protect Your Peace. Cause the chaos actors will continue looking for ways to destroy that peace.
Returns
Tale of the Tape
Economy
Job Market Weak Flex
The market remains strong and all those who thought 2025 was going to be bad, have been proven wrong repeatedly.
🔢By The Numbers: On Wednesday, ADP said companies added 183,000 jobs in January. Annual Pay increased by 4.7%.
Leisure and hospitality continue to be the largest part of job growth with an addition of 54,000 jobs
Education and Health Services added 20,000 jobs
💬In Their Words: Chief economist of ADP, Nela Richardson said "We had a strong start to 2025 but it masked a dichotomy in the labor market. Consumer-facing industries drove hiring, while job growth was weaker in business services and production."
On Friday, BLS released the nonfarm payrolls and once again pointed to the economy being in a healthy place. The US Economy added 143,000 jobs in January. This was 26,000 less than expected. However, the unemployment rate dropped to 4%.
🔢By The Numbers: The total number of jobs added in 2024 was revised down by 590,000.
December Job Openings declined to 7.6 million from 8.15 million in November.
Just like with the ADP numbers, job growth came from the same industries:
Healthcare added 44,000 jobs
The government added 32,000 jobs
Retail added 34,000 jobs
Wages increased by 4.1%
💬In Their Words: Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, summed up my takeaway from these numbers when she spoke with CNBC, “Those who’d hoped for a soft report that would nudge the Fed back into rate-cutting mode didn’t get it.”
Takeaway: The lower jobs number for January was offset by upward revisions for the December and November job numbers. The labor market continues to hold steady even with rates remaining higher than we have gotten used to in the last decade. This is a great thing because it shows that the economy is in a healthy place overall.
Companies
Takeaway: Great earnings but increased capex spending and slower growth in cloud revenue scared off investors
📉Stock Move After Earnings: Stock tanked 9% after release
🔢By The Numbers: Revenues grew year over year by 12% to $96 Billion. Almost every aspect of its business saw a double-digit revenue growth.
Advertising grew 10.6% to $72 Billion
Search grew 12.5% to $54 Billion
YouTube grew 13.8% to $10.47 Billion
Cloud grew by 30% to $11.96 Billion versus an expected $12.19 Billion
Crazy how fast this business has grown that it now makes more than YouTube and it has not existed nearly as long as YouTube
Increased Capex spending in 2025 of $75 Billion.
💬In Their Words: Chief Financial Officer Anat Ashkenazi said on the earnings call, “We are in a tight supply-demand situation, working very hard to bring more capacity online. [Therefore], to support the growth of our business across Google Services, Google Cloud, and Google DeepMind [continued investment is needed].”
My Take: Investors are far too short-term focused. When you zoom out there are no real problems facing Google's problem right now. Also, the growth slowdown is in line with AWS and Azure showing it is not a problem for Google but an industry issue of capacity and not a lack of demand. Which makes sense as to why all these businesses are spending so much on Capex.
I took the chance to buy more of the stock.
👀What to Watch: The continued pressure on Google's Free Cashflow as they invest heavily for future returns.
The slowed growth of Waymo (down 39% from 2023) brought in much less revenue than expected ($400 million vs $600 million).
Takeaway: Q4 was amazing, and Amazon overtook Walmart as the number revenue-generating business in the world. However, increased capex spending and slow cloud growth overshadowed the results.
📉Stock Move After Earnings: Like Google and Microsoft, stock tanked 5%.
🔢By The Numbers: Revenues increased by 10% in Q4 to $187 Billion. That is not for the year that is in one quarter, $187 BILLION. This is an insane amount of money.
Profits doubled from a year ago to $20 Billion
AWS Cloud revenue grew by 19% to $28.8 Billion
Amazon Advertising grew by 18% to $17.3 Billion
Capital expenditures almost doubled from $14.6 Billion to $27.8 Billion.
Plans to spend $108 Billion this year
👆🏾My Take: See above My Take on Google's Earning.
👀What to Watch: Amazon unlike Microsoft and Google does not have its own internal AI Large Language Models (LLM) but rather allows others to leverage AWS to build out various LLM models. DeepSeek is one of those models, which means Amazon benefits from a wide variety of AI LLMs. How will this advantage grow as Amazon continues building out its own AI chipset?
Takeaway: Making money but losing subs.
📉Stock Move After Earnings: Stock fell 5% after earnings.
🔢By The Numbers: Revenues increased by only 4.8% to $24.69 Billion (it is kinda comically seeing this number after Amazon's and Google's numbers). Not that great of an increase but the beauty was in the growth of profit.
Profits increased 23% to $2.64 Billion. Driven by its blockbuster movie Moana 2 over Thanksgiving and the profitability of its streaming services.
Disney+ lost 1% of subscribers as it increased prices in the quarter. It now has 124.6 million. Hulu+ increased subscribers by 3% to 53.6%
My Take: This is the only company so far that the stock reaction matches what is happening with the company. However, the good news is Disney has figured out how to make streaming profitable. But they are still being saved by great content not uplifted by it, Disney will not always be the best-selling movie in theaters. What happens when these blockbuster movies no longer save the day?
👀What to Watch: When will subscriber losses stop? Netflix seems to be the only streamer that can increase prices and gain subs. The question is how can Disney do something similar? Otherwise, my entire thesis of investing in this company falls apart.
Disney also has new competition in sports with Amazon and Netflix going heavily into sports. It poses even more risk for Disney moving forward as it will have to spend heavily to defend its NBA, NFL, and various other sports packages.
Stats of the Week
The amount estimated to be wagered on the Super Bowl by Americans, according to The American Gaming Association. This is an 11% increase from last year. As more states legalize sports betting (Alabama, Georgia, South Carolina, Texas, Oklahoma, California, Alaska, Hawaii, Utah, Idaho, and Minnesota are the only holdouts left) expect this number to keep growing every year.
✂️20,000
The number of Federal employees that have taken on the Trump administration buyout agreement that would pay them through September if they agreed to resign. The unions that represent federal workers say the deal is not legal and urged its members not to sign. Mainly because there are no details in the announcement and the union fears that the individuals who take the deal will end up not being paid.
Takeaway: Chaos is the name of the game for Elon and Trump. This likely plays out like Twitter with multiple lawsuits for people who do not get paid.
According to the US Labor Department, 50% of people who have access to a 401(k) work plan are using it!!
The 401(k) isn't that old. It was only introduced 50 years old, mainly as a major benefit for executives of companies and for them to avoid taxes. It quickly took the place of Pension plans because it was far cheaper for companies.
The amount of money Big Tech Companies plan to spend on AI this year. The breakdown:
Meta - $65 Billion
Google - $75 Billion
Microsoft - $80 Billion
Amazon - $100 Billion in its best attempt to one-up everyone.
Looking Ahead
Economy
On Wednesday we get the Consumer Price Index (inflation) for January. Due to all the fears of tariffs, there's an expectation for inflation to be higher for the next few months. Companies are trying to front some of the new administration’s threats which can cause immediate impacts on businesses.
Company/Earnings
👀 What to Watch
Nothing is that interesting to me this week. Maybe Airbnb cause I am a shareholder but that is about it.
Sports I Love
This game was such a disappointment. I did not care who. All I wanted was a good game. Guess what I got?
NOT THAT
We got a BLOWOUT
🥲😭
*I am a tiny shareholder in this company.