I love a good liquidation sale. When a store is going out of business and needs to sell everything as quickly as possible raise money and pay off debts. Especially right now as I am trying to furnish an entire house, Why is everything SO DAMN EXPENSIVE?
Anyway, that is the way that I am looking at the Stock Market right now. The continued declines are just making me so excited. Last week after Walmart and Target reported earnings (more below), the market had its worst day since March 2020 (during the pandemic). Falling more than 4% on the day and the S&P 500 briefly entered into a Bear Market (down 20% or more).
Now even with that being said, there are very serious reasons for the declines we are seeing. I just continually choose to ignore those reasons because most of them are temporary (~1-2 years) issues. I am investing for 30 years down the line. So I am okay with declines today if it means I get the opportunity, like at a liquidation sale, to buy more of the things that I need. But it will be painful to look at, this is why I say to make this process as automated as possible so you never actually look at your portfolio.
Market Returns Last Week:
Tale of the Tape
Economy
I have been a bit of a Debbie-Downer about the economy lately.
BUT I have some good news about the economy this time around.
For anyone who has a 9-5 job, it seems the worker's power will remain for longer than I anticipated. As Emily Peck of Axios puts it:
Put simply, your boss needs you more than you need her/him. And it might stay that way, at least for some workers, particularly those on the lower end of the wage scale.
According to Aaron Sojourner, a labor economist at the University of Minnesota:
The labor supply has shrunk, which gives workers more leverage, more bargaining power and pushes employers to compete harder and improve job quality
Three main contributing factors to the tight labor market per Axios:
With all that being said, still, get that EMERGENCY FUND in place. It doesn't matter how tight the labor market is, things change HELLA FAST. Companies can change their tune in a second to meet the demands of their business. Netflix last week announced layoffs and other companies are moving in the same direction. Walmart, like Amazon, said it has too many workers as it tried to overstaff for the pandemic. As the philosopher Andy Mineo said:
If you stay ready
You ain’t gotta get ready
Earnings
Retailers are getting slapped. After announcing appalling earnings results for the first quarter of the year, Target and Walmart stock went sent under the ground. Both had their worst trading day since 1987 during the Stock Market crash known as Black Friday. Walmart fell 11% and Target fell 25%.
What Happened?
Simple Answer: Inflation and worker shortage (see above discussion).
People have begun to pull back on their spending as gas becomes a bigger portion of their regular budget. Transaction volume has slowed down drastically as people are starting to make conscious decisions on what they are buying.
Interesting anecdotes from earnings results:
People are now choosing to buy half-gallon milk rather than full-gallon.
People are also choosing to buy more of the Great Value brand of products over name brands.
After these two giants crashed, it was like a virus was spreading. Every other consumer product or retailer stock fell as well including Amazon, Coke, Home Depot, and Lowes. As the realization that the inflationary pressures are not going away any time soon. Especially with China's lockdown.
There is no safety in this market! Just gotta roll with the punches.
Random Interesting Facts
The percent of workers who "retired" last year but are back to work
As inflation continues to ravage all our bottom lines, more people are rethinking their retirement strategy for 2021.
Plus the Stock Market is not helping much either as it continues on, in this bear market.
There is something called the Wealth Effect. The idea is simple when people look at the value of their assets (stocks and homes) and see it flying
They believe they can make additional investments and consume more stuff. However, the opposite is also true
When interest rates go up and stocks act like the Titanic, people quickly lose confidence
This is how the Fed tries to control demand. The problem is by looking only at this part of the economy the Fed ends up looking after the richest portion of the economy
About 90% of stocks are owned by the wealthiest 10% of Americans
This leads to even more inequality
Nick Bunker, economic research director for North America at Indeed, said, "For people who were formerly retired and are now returning to work, it certainly is having an impact."
Existing home sales fell by 2.4% in April to their lowest level in two years
It seems we have finally hit the peak in the housing market as prices have flown over the last two years (Median Home Price: $391,200 an increase of 14.8% from last year)
Plus mortgage rates are making houses much more expensive to afford: the average mortgage rate is now 5.25%
Hopefully, this will lead to housing becoming more affordable over the next couple of years. Cause it has been crazy in the housing market
Looking Ahead
90% of the S&P 500 already reported earnings, so this week will be slim pickings for important earnings reports. However, there are two companies that I will be paying attention to Costco and Zoom.
Costco to see how the retail apocalypse reported by Walmart and Target is affecting its bottom line.
Zoom to see if business continues to grow or if things have slowed down as people have gone back into the real world.
This week we also get one of my favorite economic indicators, The Consumer Sentiment Index. Which has cratered in recent weeks as inflation picked up and the stock market continues crashing. I don't really expect anyone to be feeling good about their economic position right now. There is just too much stuff going on.
But the most important thing for me next week will be the NBA Conference Finals. The games have been so good so far. I hope it continues. I am pulling for a Warriors-Celtics final. Who y'all got?
But the most important thing for me next week will be the NBA Conference Finals. The games have been so good so far. I hope it continues. I am pulling for a Warriors-Celtics final. Who y'all got?
Unnecessary Man U Update
THANK GOD!!
The season is finally OVER!! My misery can finally end!!
Unsurprisingly Man U lost the final game of the season!
Now, I wait for the Champions League Final
Thank you for Rocking With ME
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾