The Vibes are Vibing - Market Update Jan. 16-19, 2024
Consumers are finally feeling good about the economy
This newsletter is 2,405 words an 11 min read
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Congress passes a bipartisan $78 Billion Bill to help families with kids (and more tax cuts for businesses)
Stats of the Week:
80% of the US had below-freezing temperatures last week
$3 Overdraft Fees - Consumer Financial Protection Bureau wants to limit how much banks charge for overdraft
46 New York City office buildings being converted to apartments
7,785 employees in tech have been laid off so far this year
234.6 million iPhones shipped in 2023
$15.6 Billion fine charged to the Big Banks (JP Morgan, Wells Fargo, Bank of America)
Looking Ahead
Warmer Weather 🤞🏾
Q4 GDP Numbers
Netflix, Tesla reporting earnings
Sports I Love
AFCON is in full swing - Nigeria don’t suck
Real Madrid lost to Athletico
No Man U games last week. Thank GOD
Ravens beat the Texans
Other NFL Playoffs results
Extra
Election Rant
Markets
NEW ALL TIME HIGH has been achieved!! 🍾🍾🍾🍾🍾🍾
The stock market has once again climbed a wall of worry and reached a new all time high. Proving once again that waiting and doing nothing after investing, is the greatest investing strategy you can have.
Tale of the Tape
Economy
To the surprise of absolutely everyone, Congress agreed to a bipartisan $78 billion tax policy to help businesses and kids.
🔍Details: According to Morning Brew, the bill includes the following
Something for the Ds: The bill would help lower-income families get more refundable child tax credit, even if it exceeds their tax bill.
Right now, most lower-income families aren’t able to claim even close to the $2,000 per child credit most middle- and upper-income families can.
The Center on Budget and Policy Priorities (which leans left) said the proposed tax credit could lift 400,000 children above the poverty line in the first year of the program.
Something for the Rs: It includes $33 billion in corporate tax breaks (that businesses can also take retroactively) related to costs for interest payments and research and development.
And for both: The whole bill would be paid for by sunsetting a fraud-ridden Employee Retention Credit.
💬In Their Words: Senator Chair Ron Wyden (D-Ore) said in a statement, "By incentivizing R&D, this plan is also going to promote innovation and help sharpen our economic competitiveness with China and the rest of the world. My goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I'm going to pull out all the stops to get that done."
Senator Jason Smith (R-Mo.) added, "American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs."
😳Takeaway: Who knew that freezing temperatures would be the thing that got the gears turning for our forever-bickering-get-nothing-done leaders?
Lawmakers are hoping to pass the deal before tax season starts at the end of January. Will it happen? Who knows? If you are doubtful, trust your instincts.
🙁😕My Takeaway: Reread the things added to the bill. There just seems to be some imbalance in how we continue to help corporations with more tax breaks. I get incentivizing investing and business development and at some point, we have to get a return that will benefit the rest of society not just business owners or shareholders. Then again I guess it is work in progress because as Steve Wamhoff, the policy director of the Institute of Taxation and Economic Policy said, "As unwise as these corporate tax breaks are, there was a time when Congress might have enacted them without much consideration and without attaching provisions that also help low-income families."
Seems everyone is finally feeling a bit better about the economy.
🔍Details: According to the University of Michigan's Consumer Sentiment Survey, US Citizens have not felt this good about the economy since 202. The survey saw its highest two-month rise in sentiment since 1991.
With inflation receding (read low gas prices) and a strong labor market, everyone is starting to feel good about life again.
Takeaway: How consumers feel about the economy is extremely important because GDP is two-thirds of consumer spending. If consumers do not feel good enough to spend money, they can induce a recession by choosing not to spend. It’s a weird self-fulfilling prophecy. We believe a thing and then do things thinking it is happening when it is not happening. This causes the thing we think is happening to happen.
However, people are still not as happy about the economy as they were pre-pandemic. But we def feel better than others.
Bonus Chart: Consumers also believe they are doing better than their neighbors or peers. Someone said we are in the “I’m fine but everyone else’s life sucks economy” because of the information we consume on social. Where negativity will always take center stage.
Stats of the Week
80% of the United States saw temperatures below freezing last week for an average of 3 days. I live in Atlanta and I can tell you, the weather was not our friend at all. Schools and many offices were cancelled due to possible ice on roadways (it rained during the period as well, ATL aint built for icy roads).
The crazy part is the week ahead, we can expect temps to be in the high 50s and low 60s (see below). LIKE HUH 🤔🤨🙃
The Consumer Financial Protection Bureau is proposing new rules that would cut overdraft fees to between $3-$14. Currently, most banks charge $35 or more per overdraft and find ways to stack those overdrafts to make as much money as possible.
Tip: If you ever get an overdraft, you can get it waived by calling your bank. Especially if you know the money was in transit. I do it all the time and since college when I knew nothing about money, I have never paid an overdraft fee.
The number of office buildings in New York that are being converted to residential housing. It is expected that these buildings will create 2100 housing units according to the New York Mayor's office. This is a pilot program to see how feasible it is to turn offices into apartments.
What to Watch: This is a very important pilot not just for New York City where housing is always a problem. But also for the rest of the country, as businesses are leaving downtown areas because hybrid work is now the norm (as much as some people hate to accept it) and the housing supply remains tight. If business buildings can be changed to residential complexes quickly and not cost a fortune. Then it will be something that can be copied by other cities.
According to Layoffs.fyi, 58 tech companies have laid off 7,785 employees so far this year with more being announced almost daily. Some companies are announcing hiring freezes to avoid the bad PR. A few companies that have announced layoffs include all the usual suspects: Google, Salesforce, Duolingo, Cloudflare, and even Apple.
Why?: Companies are reducing the types of workers they need. Focusing heavily on individuals who are skilled in using AI to accomplish tasks. They want to use fewer workers to accomplish the same amount of work.
Takeaway: Job security is a facade. These companies are not your family. They are cutthroat businesses focused on one thing and one thing only, PROFIT! So do what is best for you and your family AT ALL TIMES!
Apple shipped 234.6 million phones in 2023. Big deal because it surpassed Samsung as the number 1 smartphone seller globally. Although, Apple has dominated in the US for like forever. On the global stage, Samsung had the crown. However; over the last 5 years, Apple has been stealing market share from Samsung, and last year it took the crown. The key change is that people are willing to spend much more on their smartphones, as it has become a key way for everyone to do anything.
The banking collapse that we all forgot about will cost the FDIC to ensure all depositors are made whole. However; the government will not swallow the cost, the four banks (JP Morgan, Wells Fargo, Bank of America, and Citigroup) with uninsured deposits over $5 billion will cover that cost. But don't worry about any of these banks, they made so much money over the last year that the $5 Billion payment they each had to make was nothing to them.
My Takeaway: The system worked so well and no one realized it. Rather we had a bunch of idiotic fear-mongers proclaiming the end of the financial system. Tell me one other governmental system where you can deposit your savings and be GUARANTEED that regardless of what happens to a bank, you can get all your money out.
Looking Ahead
Warmer Weather
Economy
On Thursday, the Bureau of Economic Analysis will release fourth-quarter GDP numbers. It is expected to be very strong as the year ended on a high note of increased wages, increased number of jobs, retail sales increasing, and inflation receding.
Earnings
This week will mark the start of heavy hitters reporting earnings for the fourth quarter of 2023. The two biggest (at least for me) are Netflix, Tesla, American Express, Visa, and Intel.
What to Watch
Netflix reports on Tuesday. The focus will be on subscription growth in the new ad-supported tier and an increase in free cash flow generation. Netflix heavily reduced its content budget by focusing internationally. I want to see how that has helped it improve its financials.
Tesla reports on Wednesday. The focus will be completely on demand growth or decline. Many other automakers have announced a decline in consumer demand, I wonder if Tesla is immune to those changes.
American Express reports Thursday and Visa reports Friday. These two companies combined with MasterCard have total control over essentially all consumer transactions. They can provide a healthy view into the state of consumers, especially in the credit market. They can give us a good view of how much debt consumers are carrying on their credit cards and the level of defaults on those debts.
Intel reports on Thursday. This was an old stock holding of mine but I sold it for a massive 50% loss. I just want to see how the turnaround story is playing out. Are they gaining market share in their ability to manufacture chips for other chip designers like AMD or Nvidia to meet the massive AI chip demand?
Other Companies Reporting:
Sports I Love
African Cup of Nations (AFCON)
Can’t believe Nigeria tied Equatorial Guinea. At least we had a decent win against Ivory Coast. Hopefully, we keep this up and win this year.
Real Madrid lost to Atletico
Guess we can’t win ‘em all.
Real Madrid lost their chance at doing “The Treble” this year, after losing to Atletico this week in the Copa del Rey tournament. The Treble is when a club wins the following: Its domestic league, its league tournament, and the Champions League in the same year.
Man City did it last year. It has only happened 10 times in football history. Real Madrid has never done it. Barcelona (2), Bayern Munich (2), Manchester United, Ajax, PSV, Celtic, and Inter Milan are the only teams to have accomplished it.
No Man U Games last week.
Thank GOD
Ravens beat the Texans
Lamar had me worried about this one. The way they were playing at the end of the first half had me worried that the Texans might win. However, the second half started and the Ravens showed why they were the best team in football this year. It was a full repeat of the match-up in week one. The Ravens dominated on both sides of the ball.
CJ Stroud (Texans QB) had no time in the pocket and the running game of the Texans was completely shut down by the Ravens.
This guy will be a great QB in the league if he keeps playing the way he plays. He is only a rookie and you can see he has all the necessary skills for a QB.
The Ravens dictated tempo up and down the field with their running game. Lamar made a lot of great runs to force the defense to play on their heels. His numbers never look flashy but they come at the best times.
Next up the Ravens face the Chiefs in what will be an amazing game to watch with two completely different styles of football.
Other NFL Playoffs results
Extras
Election Rant
The Iowa caucus shocked me to my bones. I cannot believe that ex-President Trump is still so powerful. The fact that neither Nikki Haley nor Ron DeSantis challenged him is insane. It is shocking to me how people refuse to take Trump for who he is. I do not know what better angels folks see in this man. I understand that he represents a certain populist standpoint that speaks to a certain audience but I thought that was not the general majority. But once again I was proven WRONG!
For all those who are debating between Biden and Trump, please I want you to think through both men's presidencies. What have they done not just for you but for your neighbors? The answer is probably next to nothing because local laws are much more important than we like to think. The more I learn about economics, finance, and politics, the more I know a president has little power to change how the economy is doing.
And even saying all that, it is so obvious to me who has helped the general population (although still very much with flaws) and who has enriched a very specific part of the population.
I say all this knowing that humans are emotional and not logical. So the facts are not important in this election or any election ever. It comes down to who has the better story and what tribe I want to be associated with. So I guess, may the best story win. Unfortunately, there is one guy who is a great storyteller and another who is old. 😕😤
Rant Done
*I am a tiny shareholder in this company.