Markets are closed today in observance of President's Day.
We needed it!
Cause my goodness the selloff has been heavy and continuous. The main reason is Russia-Ukraine. The potential ripple effects of Russia invading Ukraine are massive for the entire world. But I really hope this is just a massive fake from Putin to make sure the rest of the world knows that Russia matters and that they are still a Superpower.
Other things affecting the markets or at least investors mindset:
Interest rates are rising
Inflation does not seem to be slowing down, hitting decades high
The Federal Reserve is signaling increasingly rate hikes and selling down their balance sheet
Companies are no longer reporting record profits and revenue
Indices Result for the Last Week:
As always we talk about these topics but it does not mean we need to act on them. We remain optimistic about the future and so we remain invested.
Tale of the Tape
ECONOMY
The American Superpower is right back at it.
Even with inflation at a 4 decade high, we are still shopping like there is no tomorrow. Retail sales from December to January increased by 3.8%, FAR above expectations (1.8%). Even crazier is the fact that it was above the holiday season rush of November-December. It is like the old saying
It's not what you say
It's what you DO.
People keep complaining about inflation but continue spending money like there is no tomorrow. With job and wage growth remaining strong, people are still confident. Top selling items:
Furniture sales roles 7.2% as people continued to buy new homes
General Store merchandise rose 3.6%
Department Store sales rose 9.2%
Online sales had a blowout jump of 14.2%
This shows that sometimes what we see, hear, or read on the news is what we end up regurgitating even though our actions prove otherwise. It's like someone who is always telling you about all the latest diets and workout trends. However, you never actually see them going to the gym or eating healthy.
In the end, talk is cheap.
Your dollars are signaling and have signaled to companies that you are willing to accept higher prices. So don't be surprised when we do see higher prices. We spoke loud and clear and companies have listened. On the bright side, this is great for the economy. Almost 70% of the economy comes from consumption.
The American Dream is getting Hijacked by Institutional Investors.
Institutional Investors are flooding into the housing market, causing home prices to increase drastically (in some areas up to 30% Year over Year price increases). Making it harder for regular folks to buy homes. In the US, the number one way to build wealth for most people is their homes (sidenote your house should not be the largest asset just my 2¢). The median price for an existing home is $350,300 a 15% increase from last year.
Investors have doubled their purchases over the last year. Going from making up only 10% of ownership to now owning almost 19%, according to research from Redfin. Investors bought roughly 80,000 homes worth $50 billion during the last three months of the year.
According to Axios,
Over the last two years, the pandemic triggered a home-buying boom amid record-low mortgage rates and house-bound families' desires for home offices and more space. Affordability has fallen sharply, as prices have surged.
Combine that with supply chain issues leading to a reduced supply of houses; home price increases are not slowing down any time soon.
EARNINGS UPDATE
The only company that challenges Big Tech in its ability to bring in money, reported earnings on Wednesday last week.
They brought in $152.9 billion in revenue
However, unlike Big Tech companies, Walmart is not a high-margin business.
Walmart only kept $3.56 Billion in net income, which is about a 3% margin
The good news is Walmart being a low-cost provider is able to use that to its advantage during these inflation periods
Like the CFO, Brett Briggs said during an interview to CNBC
“We know that consumers are focused on inflation, and we’re continuing to watch key item pricing to ensure that we help them through this. This type of environment plays to our strengths.”
However, it is costing Walmart a whole lot of money to play this game
Supply chain issues cost Walmart $400 million more than expected
Worker issues due to Covid cost them $300 million more than expected
But on the bright side, Walmart increased the dividend by 1¢ so that's something 🤨😑
Looking Ahead
YUP using the same picture from last week. Until Russia decides to pull back its forces. Nothing else really matters. Read this post to learn what Russia wants and why Putin might be doing all this.
EARNINGS
Home Depot ($HD) and Lowe’s ($LOW) will be interesting for insights on housing construction issues and supply constraints. I have a stake in Alibaba so they will be interesting to listen in on as well.
Other than that, this week is very MEH at best
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Totally Unnecessary Man U Update
Surprisingly, Man U actually won a game this week. I think even the players were surprised that they didn’t poop the bed at the end. Trust me, they tried!
The scores of both games might lead you to believe that Man U was dominant in both games. Well, don’t believe the lies. THEY WERE NOT!! In both games, it came down to the wire and in both games, they almost handed the game to the opponent. There is still A LOT of work to be done. But I will take these victories.
Thank you for reading
I hope you all have A WONDERFUL WEEK. I will see you back here on Wednesday for another post. In the meantime, Go subscribe to Rambling Mind Podcast for mid-week stock market updates. You can also catch me on TikTok, Instagram, and YouTube every day.
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾