Winter Wonder Land - Market Update 1/6/25-1/10/25
We Need More Slow Days
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This has nothing to do with the markets, but I just had to share my awe at seeing snow in Atlanta. It was so beautiful to witness, and I had a couple of days to do nothing but stay home and truly rest.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economic News
🫨Reality Distorters
💪🏾Job Market's Big Flex
🙅🏾♂️🙆🏾Two's A Crowd
Company News
📺Disney Buys FuboTV
Stats of the Week
💳48% of people carry over debt monthly
🌊$93 Billion Worth of Damages in 2023
Looking Ahead
🎈Inflation Takes Front Page
📈Q4 Earnings Season begins
Sports I Love
🏈Ravens Dominate Steelers
⚽Real Madrid Wins Supercopa
Extras
🤖AgentForce Incoming
Markets
Stocks started the week on a high with Nvidia CEO, Jensen Hwang, speaking at CES about the potential of its new chips for further AI development. However, that did not last long as the week progressed. The jobs report (more below), although positive, sent stocks into the nether realm to end the week. We are back to the world of Good News for the economy for some weird reason becomes Bad News for Stocks (explanation below).
Returns
Tale of the Tape
Economy
Last week, Mark Zuckerburg announced that Facebook will be eliminating fact-checking on its various social media platforms. Instead, it is going the same route as Twitter and introducing "community notes."
💬In His Words: Zuck said, "It's time to get back to our roots around free expression. We're replacing fact checkers with Community Notes, simplifying our policies and focusing on reducing mistakes. Looking forward to this next chapter."
Why Now: There is a noticeable change in the atmosphere, and it has been driven by one man, our president-elect Donald Trump. It has forced the entire world to bend the knee to his demands and his whims.
In November and December, we saw a litany of announcements of businesses either going to Florida to see the president-elect or donating to his inauguration
Trump has also been on the attack suing media companies and promising that he will have retribution for any outlet that he believes is against him.
Trump's Force and Authority has emboldened a new media machine that is very much in line with the MAGA movement. That caters to some of the darkest parts of our natures.
🚨Outcome: Truth is increasingly elusive, and facts are twisted for political gain. Examples:
Wildfires in LA are weaponized as political attacks, with Trump blaming Gavin Newsom for fires and water shortages.
Reality: Climate change is the driving force. California has made significant policy changes to manage water supplies, but wildfires remain largely unpreventable phenomena.
🔎What We Can Do: Realize that all media, including this newsletter, is biased in a direction. Anything presented as black and white is often flawed and is shared to play on your emotions not your reasoning ability.
Resist the urge to share all information you read without first checking the source.
Pay attention to where the information is coming from. What could the party be trying to gain?
Assume everything you see on social media is not information but entertainment.
💪🏾Job Market's Big Flex
As the year begins, the labor market is in a great place but is showing some signs of slowing growth. At least that is what I thought on Wednesday and Friday I was corrected by the BLS' Nonfarm Payrolls.
🔢By The Numbers: On Wednesday, ADP released its monthly private payrolls. 122,000 jobs were added to the economy in December.
This was far less than the expected 136,000 jobs
Less than the 146,000 jobs added in November.
Education and healthcare continue to be the strongest category of job growth. 57,000 jobs were added
Construction added 27,000 jobs
Large companies (more than 500 workers) were the drivers of the job additions.
They accounted for 97,000 jobs
Wages rose 4.6%, a solid amount but it is the slowest wage growth in 3 years.
💬In Their Words: Nela Richardson, ADP's chief economist said, “The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains.”
On Friday, BLS released the nonfarm payrolls and completely shocked everyone. The US Economy added 256,000 jobs in December. Far exceeding economist's expectations of 153,000 jobs and 44,000 more jobs than was added in November.
Unemployment also dropped from 4.2% to 4.1%. This is as labor participation remained the same at 62.5%
Wages increased by 3.9%
Industries that added the most jobs:
Healthcare added 46,000 jobs
Retail added 43,000 jobs after losing 29,000 jobs in November
The government added 33,000 jobs
Leisure and hospitability added 43,000 jobs
Takeaway: The labor market remains resilient. Depending on your perspective on things this could be a good or a bad thing. For investors, they have deemed this to be bad news and sent stocks tumbling on Friday after the report was released. At the same time, bond yields soared on the news. With the economy seemingly humming along, there is no reason for the Fed to cut rates further as the year begins.
My Takeaway: I get to keep my above 4% savings accounts for longer!!
Barry Blitt writes in The New Yorker, "On January 20, 2025, the next leader of the United States — and of the free world — assumes power. Also on that day: Donald Trump is sworn in."
Companies
On Monday, Disney surprised everyone with the announcement that it had reached a deal with Fubo to combine its Hulu+ Live TV with Fubo's live sports streaming.
Although the platform will still operate under the Fubo name, Disney will own 70% of the company.
🔢By The Numbers: The combined streamers will be the second largest live TV streaming service behind YouTube TV. The combined service will have 6.2 million subscribers.
It is estimated that the combined platform to bring in $6 Billion a year in revenue.
📈Stock Move After Announcement: Fubo stock flew 250% after the announcement.
Takeaway: This deal saves Fubo from going the way of the Wishbone Offense in Football, Non-Three Point Shooting Big Men in the NBA, or the basic 4-4-2 formation in soccer.
In simpler terms, it saves Fubo from going extinct. This deal helps Fubo become cash-flow-positive
On the other hand, this is Disney's way of trying to defend and strengthen its kingdom. With new threats like Netflix entering the live sports world, Disney has to find a way to build its edge or risk becoming like CBS and FOX.
Stats of the Week
💳48%
According to a report from Bankrate, 48% of credit card holders carry over debt month to month. It was 44% last year.
Credit Card debt is now $1.17 Trillion
The average interest rate is 20%
The average credit card balance is $6,380 up 4.8% from last year
Combine both of those factors and you get most people never being able to breathe financially. Bankrate estimates that most people have 18 years to pay off their debt.
In 2023, the US saw 28 weather and climate disasters that cost over $1 Billion. The Damages totaled $93 Billion, the highest ever. It is estimated that this year will be much worse. California's wildfire is estimated to cost $20 billion and could go as high as $50 Billion in damages.
Takeaway: We can keep lying to ourselves if Climate Change is real or not but the fact is these disasters are not going anywhere. According to data from First Street Foundation, 90% of the US is almost uninsurable
Looking Ahead
Inflation Takes Front Page
On Wednesday, the CPI for December will be released. Although not the preferred inflation gauge (that's PCE released at the end of the month) for the Fed, it will give us a sense of inflation's direction.
Q4 Earnings Season will officially kick off next week as the Big Banks report Wednesday through Friday.
👀 What to Watch
Sports I Love
🏈Ravens Dominate Steelers
This game was not close. From the kick-off, the Ravens came out knowing what needed to be done and they handled business. They kicked the Steelers in the face and kept their boots on their neck the entire game. It was awesome to watch King Henry and LaMV3 just dominate for the entire game.
Now a bigger challenge comes up next. Ravens go up to Buffalo to take on the Josh Allen and the Bills. It will be a good game for sure.
⚽Barcelona Killed Madrid
I cannot believe Madrid got smoked this badly. Barcelona completely has Madrid’s number this year. They have beaten them in every single game so far this year and none of the games have been close. Barcelona abused every flaw that Madrid had during the game.
Extras
As AI continues advancing rapidly, the newest use case is an AI agent at work.
In His Words: Sam Altman CEO of OpenAI said in a recent blog post, "We believe that, in 2025, we may see the first AI agents 'join the workforce' and materially change the output of companies."
Takeaway: There is a high possibility that companies can get some tasks done by AI agents instead of using human labor. Examples: research assistant, sales correspondence, design marketing, project management.
One truth has held for the entirety of US history, profit margins are everything. Driving down labor costs to zero is the goal of the American machine and businesses will do anything to cut costs. From slavery to the Gilded Age. America has stood on keeping labor as cheap as possible
AI agents open a new era to continue to drive down wage costs. Not only for hard labor like manufacturing which the answer was to ship the jobs elsewhere. But now with knowledge work as well.
What You Can Do: Last year, I read a post from Aswath Damodaran on the coming AI age. He gave 4 ways for us to be able to beat AI:
Be a Generalist.
This is antithetical to everything we have been taught in the current economy where specialization is the goal.
In the AI age, your ability to adapt to various things because of your various skill sets will enable you to avoid being replaced by a specialized machine.
Practice Story Telling
Humans love other humans because we bring out emotions that nothing else can. The best way to do that is with the ability to tell stories.
This is the one thing AI can never take from us. Yes, it can learn and adapt and recreate old stories, but it will always be missing something. That something is the human emotion.
Learn to be able to weave stories in your mind and then learn to either put it on paper or video.
Mind Wandering
Allow yourself to explore weird and useless paths.
Inefficiency is now the name of the game, the way you come up with new and creative solutions is not by beating your head against the problem. It is by combining random things.
Give yourself space to be able to just wander and to get carried away with pointless activities.
Reason Regularly
It is important to balance the mind wandering with balanced reasoning.
Combining wandering and reasoning is what creates magic.
Don't depend on computers to find all the answers. Take the time to use your head to think and to remember and to solve
Good luck to all of us. We are in new territory but then again that is all of human history.
*I am a tiny shareholder in this company.