Ramblings On A Thursday Night -- September 26, 2024

Locator: 48405ARCHIVES.

Tag: private finance

When I listen to the talking heads on "Fast Money" and similar CNBC I am always negatively impressed with how little they seem to "tap into" the huge amounts of money .... there's no way anyone can get their heads around this immense amount of wealth. A lot of its paper wealth -- market value  -- electronic entries in someone's spreadsheet x (times) number of shares. But a lot of it is also cash flow, free cash flow and otherwise.

My dad loved investing. He was in the market during the 80s and 90s and absolutely loved it, but the companies that were in the news then had market values (I suppose) in the hundreds of millions and maybe late in his life in the hundreds of billions, but never trillions. 

And yet analysts are trying understand companies that are so unlike "traditional" companies in so many ways, not least of which their market value. 

I don't even care about the investing story: I'm simply fascinated by what we're seeing. An average congressman or US senator can't fathom what's going on. Readers get irritated with Nancy Pelosi in the market, and we're talking one million, five million, ten million dollars, whatever, and she's investing in companies with a market value of $3 trillion. 

These companies are going to build data centers that will require so much energy they're going to go nuclear. We have simply never seen anything like this before. 

First Industrial Revolution. Real.

Second Industrial Revolution. Real.

Third Industrial Revolution. A book. AKA, The Information Age. Onset: development of the transistor: 1947.

Fourth Industrial Revolution. Real. Current. Now. 

Klaus Schwab. 2016. Rapid technological advancement in the 21st century: AI, gene editing, advanced robots, blurring the lines between the physical, digital, and biological worlds.

What comes next? 

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Trillions

Investors have never seen anything like this before.

Market value today:

• AAPL: $3.46 trillion
• NVDA: $3.04 trillion
• AMZN: $2.01 trillion
  
• META: $1.44 trillion
  

• BRK (A&B): $0.980.6 trillion

 

• LLY: $0.864 trillion
  
• AVGO: $0.832 trillion
• TSLA: $0.797 trillion
  
• WMT: $0.642 trillion
• XOM: $0.501 trillion
  
• ORCL: $0.466 trillion
• COST: $0.400 trillion
  
• QCOM: $0.192 trillion

• DIS: $172 billion -- parks
  
• PFE: $164 billion -- retail pharmacy
  
• SBUX: $110 billion -- coffee
  
• GM: $51 billion -- cars
• RIVN: $11 billion -- vans
  
• US Steel: $8 billion -- specialty steel
  

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Existential Questions

Why hasn't Russia, in Ukraine, gone nuclear yet?

Why hasn't Iran gone nuclear yet?

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Presidential Politics

No matter who the next US president is, it's going to be the most interesting US administration the world has ever seen. Neither candidate has a moral compass nor a Jeffersonian vision.

Never has this been more concerning: "That which does not kill us makes us stronger.”

And unless it's an "obvious" electoral landslide, we may not know for weeks, even months after November 5th. We have any number of circuit courts that could get involved. And the US Supreme Court may not get involved until the lower courts rule. The requirement to hand count all ballots in Georgia  is  insane ... and then the recounts. Unless, of course, it's a landslide. This, too, will be fascinating. 

And, of course, the polling and the reporting on the polling, is a joke. The Hill says Trump leads in Georgia; tied in North Carolina. The lead in Georgia? One point. And that's a poll.

The Only Word Not Used In This Article: Goldilocks -- From The WSJ -- November 1, 2023

Locator: 45892ECONOMY. 

This is an incredibly good article. Greg Ip has it exactly right. But despite all his "research." Greg Ip is/was unable to answer the question, "why are Americans in such a rotten mood?" There are four obvious answers. Actually five. Archived.

Link here.

This is an incredibly long article for The WSJ.  

This is such a great article I may break it up into three or four posts.

The beginning:

Last week we learned that the economy, far from sliding toward recession as economists had predicted over the past year, has actually picked up steam thanks to indefatigable consumers.

Not only has economic output made up all the ground lost during the pandemic, but it is also above where it would have been had the pandemic never happened, judging by what the Congressional Budget Office projected in early 2020.

The same goes for the job market. The unemployment rate at 3.8% is only marginally above where it stood in January 2020. For a while, low unemployment overstated how healthy the job market was because so many people had left the labor force. But except for those over 64, they have mostly returned. The share of the population ages 15 to 64 with jobs topped its prepandemic peak in August.

So if the economy is so good, why are Americans so gloomy? Confidence readings are depressed. Some 69% of respondents to a Wall Street Journal survey in August said the country is headed in the wrong direction. President Biden’s approval ratings are mired around or below 40%, and approval for his handling of the economy is even lower.

The most popular explanation for this dichotomy is that good feelings about jobs are more than offset by high inflation. There is a lot of evidence for this, but it is still not an entirely satisfying answer.

There are two longstanding surveys of consumer confidence. The index produced by the Conference Board, a business research group, incorporates attitudes about the labor market, but not inflation. And this index remains well above its lows around the 2008 and 2001 recessions. No dichotomy there.

By contrast, the University of Michigan sentiment index is at recession-like levels. It appears to be more sensitive to inflation, in part because it asks people if they are financially worse off, and recently 40% of those feeling worse off blame inflation.

But can inflation be the whole story? After all, since peaking at 9.1% in June last year, based on the consumer-price index, inflation has fallen to 3.7%. Some gauges put underlying inflation at around 3%, and the Federal Reserve thinks it is headed gradually to 2%, relieving it of any need to raise interest rates for now. And yet, sentiment is up only moderately since inflation began falling.

And, yes, the next section is on the "misery index." I might post that later.

Biggest Investing Story Of The Day? October 20, 2023

Locator: 45777ECONOMY.
Locator: 45777RETAIL. 

Updates 

October 22, 2023: The WSJ.

October 21, 2023: not so much talk about a recession right now. JPow has lots of room to maneuver.

October 21, 2023: just out of curiosity, if one was living paycheck to paycheck, if one was worried about the economy, if one was worried about saving money for retirement, what part of your life would you give up first to save cash? Everybody will answer differently.

For me, I would argue that going out to eat would be number one on my list, and if not number one on the lists of other folks, it would certainly be among the top ten "things" to give up. 

[Moving to a state with no state income tax might be the best way to save money, but that's not a reasonable option for many / most.]

US retail sales in September, 2023, came in 4x what was forecast.

Quick! What sector inside "retail sales" led the pack? Answer: restaurants and bars. Is anyone paying attention? Households still have a lot of money.

From CNBC:

 “The U.S. consumer cannot stop spending,” said David Russell, global head of market strategy at TradeStation.

“All three retail sales reports for Q3 were above estimates, which puts us on track for a strong GDP number later this month. It also gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%.”

Sales gains were broad-based on the month, with the biggest increase coming at miscellaneous store retailers, which saw an increase of 3%.

Online sales rose 1.1% while motor vehicle parts and dealers saw a 1% increase and food services and drinking places grew by 0.9%, good for a yearly increase of 9.2%, which led all categories.

There were only a few categories that showed a decline; electronics and appliances stores as well as clothing retailers both saw decreases of 0.8% on the month.

Original Post

Time to answer the question. Yesterday I posted this:

Link here.

Will be posted later. Connects a lot of dots.

See if you can think what that story will be.

Hints:

• Fortune 500 company;
• earnings;
• record results;
• meme: it's for old, rich people
• fact: millennial and Gen Z customers fastest growing demographics

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The Answer: American Express

I think this was the most important retail / financial story yesterday. It connects a lot of dots.

The biggest dot to connect: just where is all that money coming from that allows Americans to keep spending. Remember: in September, American-retail-spending came in four times what was forecast.

Imagine if the headline had been: Apple's profits come in four times expectations.

And yet the fact that Americans spend four times what was forecast seemed to get very, very little media play.

So, from where is all that money coming?

Here are the dots to connect:

They're living at home, rent-free, mortgage-free:

Another dot to connect: how much money is being saved by working from home, not buying gasoline, or even a car in some cases?

Enough of that. I'm sure you can think of a lot more examples. 

Oh, one more example: the millennials have no health care expenses. Their health insurance premiums are being paid for by their employer and because they are in great health (young age and not pregnant) they don't have any deductibles or co-pays about which to be concerned. 

Think how much more discretionary / disposable income you would have if you had:
no mortgage

• no mortgage or rent expenses
• no swimming pool expenses
• no internet, Hulu, Netflix, HBO expenses
• no car (gasoline, maintenance even if paid for; monthly payments)
• no health care premiums or out-of-pocket health care expenses
• no college payments for child (children)
• no diapers, no formula for new babies

Now back to American Express.

Link here (same as above). From the very, very well-respected Barron's:

From the article:

Consumers keep shopping and traveling and that translated to American Express announcing its sixth consecutive quarter of record revenue.

Revenue at American Express climbed 13% from the year-ago quarter to $15.4 billion.

Profit topped expectations -- by 12% -- growing 30% to $2.45 billion, amounting to earnings of $3.30 a share, another record for American Express. Analysts had been projecting that Amex would earn $2.95 a share. [Think what AAPL would do if profits topped expectations by 12%.]

Total card member spending climbed 7% to $420 billion on a currency-adjusted basis. In the U.S., card spending climbed 9% year over year, while the company’s international segment saw a 15% increase in spending after adjusting for currency. [Of course a lot of that has to do with inflated prices.]

American Express noted that households and businesses have not lost their propensity to spend on going out with travel and entertainment expenditures climbing 13%, helped in large part by restaurant spending.

And then look at this:

The company also was optimistic about its continued ability to court younger clients. Millennial and Gen Z customers are American Express’s fastest growing demographic, with spending up 18% year over year and the group accounting for 60% of new accounts.

Why are millennials and Gen Zers using the most expensive, most prestigious credit card available? Because they can. These are folks with high paying tech jobs with no car payments, no mortgages, no health care costs.

And that's why retail sales came in four times greater than expected. 

If it weren't for Sophia, I wouldn't need a car. As it is, I'm spending $25 / month on gasoline for a car that has been paid off since 2017. 

The Market And Energy Page, T+326; Saudi Shenanigans -- Reason #45 Why I Love To Blog; BLM Estimates Wyoming Wind Farm Will Kill Upwards Of 64 Eagles Per Year -- December 14, 2017 -- This Page Is Complete But Details May Yet Be Added

Disclaimer: in a long note like this, there will be factual and typographical errors. It is often difficult to separate fact from opinion in a post like this. Read it at your own risk.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

Some days there is just too much to post. Amazing how fast things seem to be moving.

Economy: the economic news this morning was simply stunning. I will fill this in later when I get caught up, but the retail sales simply blew the socks off anyone really paying attention. Steven Liesman was one of those paying attention and he said he was unable to find such a huge month-over-month increase in retail sales as far back as he could look. I think he said he went as far back as 2004. CNBC has this story on retail sales: the increase in US retail sales for the month of October was almost triple what experts expected. The jobs data was reported elsewhere; it, too, was stunning and nothing was mentioned about Trump's campaign promises.

Trump gets no credit: after those numbers were released and comments about the great economy made, President Trump was not mentioned. Instead, CNBC immediately switch to Europe and went on to suggest that all of this was a global phenomenon, having nothing to do with the US president. It never quits. One can be sure had this happened under the Obama administration we would hear no end of his great policies.

Yellen: by the way, Steve Liesman, again CNBC, noted that with regard to the stock market, she said it was neither "red nor orange." As Liesman noted, there's only one color left and that's green. The stock market at this level does not scare "the Fed" (red), nor the stock market at this level lead "the Fed" to be cautious (orange), but rather, Liesman suggests that "the Fed" is suggesting US equities are enticing (green). [This, by the way, is/was in great contrast to what a former Fed chairperson said about the frothiness of the stock market.]

Gasoline demand. I posted the weekly petroleum report and the "gasoline demand" graph yesterday. Gasoline demand actually exceeded that for the same time period a year ago. But this was the headline story over at Reuters: oil slips as US gasoline stock build overshadows crude draw. 

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Saudi Shenanigans

I talked about "Saudi shenanigans" and/or "Saudi smoke and mirrors" all through 2015 and 2016 when Saudi was talking about their surge, and then their "cuts" in production. In the big picture, the surge was a $1 trillion mistake and the cuts in production simply brought them back to where they were before the surge. I probably won't provide all the links but  google search of the site will lead one to those posts.

Now, today, a reader sent me an Oilprice.com article that said the very same thing about "Saudi cuts." That article was full of interesting data, which I will come back to later, but for now this paragraph from the article:

More important than demand, however, was the November supply of OPEC oil, which declined by 133.5K to below 32.5 million bbl, a fresh six month low if only 195K bbl lower than last year's output, confirming that ahead of last year's production cut agreement, OPEC furiously ramped up production effectively offsetting the subsequent output limit.

Saudi Shenanigans link. The graph at this post is one of my favorite graphs; as is this one; and this one. I hope the latter is updated a year from now.

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Huge WTI-Brent Spread Boosts US Crude Oil Exports

Also at Oilprice.com, an update on US crude oil exports. One word: wow! But it's been previously posted on the blog: U.S. crude grades into China climbed to a record in November.

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The White Butte Jore Federal Permits

This is just a reminder to myself to post my thoughts regarding the White Butte Jore Federal permits. This is a huge story, especially in light of the announcement this week that Oasis is selling its "non-core assets" in the Bakken to buy acreage in the Permian. The most recent post on these permits is at this post. 

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GE Hitachi Nuclear Confirms North Carolina Layoffs

Incredible. I just pointed this out a couple of days ago. The Washington Post link is here. I talked about this at this post, "Reality of Renewables," December 12, 2017.

The reader who sent me that story asked if I thought there might be a capacity surplus of electricity in the US right now and that we might see a cutback in some of that capacity next year (2018). This was my reply:

The decommissioning of a nuclear plant, if this is what this is, is a huge bullish story for natural gas.

In my "Reality of Renewables" post, December 12, 2017, linked above , I mentioned that there is no way solar/wind will be able to replace all the electricity provided by nuclear plants being decommissioned.

On top of that, I get the feeling that tax credits for wind/solar are going to be eliminated/significantly reduced under the new tax bill. Of course that could change. But every time I see a nuclear plant being decommissioned, I know that natural gas will benefit; even if they add a bit of wind/solar it won't be enough and natural gas peaking units will be needed.

With regard to your question: I don't think there is a surplus of electricity as much as there is a mismatch between when/where electricity is needed and how it is supplied.

I could have added that renewables will simply increase the cost of electricity to all consumers, all else being equal.

By the way, for those faux environmentalists who love wind farms, note that the largest wind farm in the US (yet to get started), the Chokecherry and Sierra Madre Wind Energy Project in Wyoming has been give carte blanche with regard to killing eagles and other migratory birds. Perhaps not carte blanche but awful darn close:

A team researches golden eagles, as an "eagle take" permit is necessary. The research is to be continued during construction and operation of the wind farm so as to be compared with the condition prior to construction. The $3 million research project is paid by PCW. The Bureau of Land Management estimated 40-64 eagles per year for 1.000 turbines, whereas the Fish and Wildlife Service estimates 10-16 for 500 turbines. 

It's amazing how they can get such a great estimate: an upper limit of 64. Why now 66 or 61 or 73for 1,000 turbines; and, for 500 turbines, why not 14 or 21 or 17 for the upper limit. Of course anything over the limit will result in an inconsequential fine, which will be passed on to consumers, regardless.

First-Time Unemployment Claims Drop To Seven-Year Low; Pre-Recession Levels

Updates

May 17, 2014:  AP is reporting:

Unemployment rates fell in nearly all U.S. states last month, and half the states now have rates below 6 percent. The figures are a sign of widespread, if slow, improvement in the nation's job market.

Unemployment rates fell in 43 states in April.

Hiring wasn't the whole reason rates fell in many states: Fewer Americans also looked for work. The government doesn't count those out of work as unemployed unless they are actively hunting for jobs.

Many of the states with low unemployment are small. North Dakota continues to have the lowest rate nationwide at 2.6 percent. That's the same as the previous month and down from 3 percent a year ago. Vermont's rate of 3.3 percent is the next lowest.

But some larger states are also seeing improvement. Texas' unemployment rate fell to 5.2 percent in April from 5.5 percent in March. Employers added 64,100 jobs last month, the most of any state.

Rhode Island reported the highest unemployment rate at 8.3 percent, followed by Nevada at 8 percent. Both states saw significant improvement, with Rhode Island's rate falling from 8.7 percent and Nevada's from 8.5 percent.

Based on the comments, it sounds like most readers don't believe these figures.

Original Post

Now that inflation is ticking up, and long-term benefits have run out, people have to get back to work. Jobless claims hit seven-year low. is reporting: Reuters is reporting:

New applications for U.S. unemployment benefits hit a seven-year low last week while consumer prices recorded their largest increase in 10 months in April, pointing to a firming economy.

The economy's outlook was further brightened by other data on Thursday showing factory activity in New York state expanding at its quickest pace in nearly four years in May.

Analysts miss again:

Initial claims for state unemployment benefits declined 24,000 to a seasonally adjusted 297,000, the Labor Department said, offering fresh evidence the jobs market was strengthening.

That was the lowest reading since May 2007 and brought claims back to their pre-recession level. Economists had forecast first-time applications ticking up to 320,000 last week.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 2,000 to 323,250.

Question?

This is the question readers need to be asking themselves. Analysts had expected claims to tick up to 320,000 (a gain of 1,000, from 319,000 the week before). So, the analysts were off again, this time by 25,000. One has to ask the question: how can the analysts be off by so much? I know the analysts have trouble with the "human factor," predicting how many folks will voluntarily drop out of the labor market, quit looking for work, but that statistic (the number of folks who drop out of the labor force) should not affect "first time claim applications." If indeed this is a trend, we've had two months, of fewer first time claim applications, it's a great sign for the economy. My hunch is that we have probably moved to a new number about which to oscillate. Up until recently that number was 320,000. Perhaps the new number is 300,000.

Could The Market Surge?

I am unable to find it, but several weeks ago I posted my thoughts on the economy this year, from an investor's point of view. Regular readers know I am an incurable optimist. No matter how bad the economic news, I remain bullish on the American economy.

In that post I can't find, I opined that most likely the economy in 2014 would just meander along, not making much movement, but the general trend would be "up" as measured/tracked by the stock market. I said that in "my reality arena" I did not expect a sudden surge or a sudden turnaround.

However, in "my crazy arena" I said there are tea leaves that suggest the economy could jump significantly, taking everyone by surprise.

In the reality arena, the numbers do not look good: the real unemployment numbers, the housing numbers, the debt, the deficit.

But in the crazy arena, there are some interesting things to note. Last quarter's GDP was reported as 0.1 and on revision may come in below zero, a contraction in the economy for 1Q14. But now we are hearing that the GDP for the current quarter, 2Q14 GDP, could approach 4%.

This is what I'm talking about, from MarketWatch:

The U.S. economy has warmed up after a frigid first quarter and there’s no reason to expect it to cool off again anytime soon.

A cluster of economic reports this week, spearheaded by sales at retail stores, are expected to show a faster pace of growth in April and May. And all trends point to the nation’s gross domestic product climbing to a 3%-plus annual clip in the second quarter after hardly any growth in the first three months of the year.

Yet none of these reports, however rosy, will offer much clue on whether the economy will stay on a hotstreak after the second quarter ends.

At the same source, I ran across this headline story at MarketWatch:

Hang on, say some strategists. Rather than a wholesale rout, they expect the retreat in growth stocks to only cap the advance in the mega-cap benchmarks.

“It certainly will be a drag,” said Paul Nolte, portfolio manager at Kingsview Asset Management. “The S&P 500 won’t go significantly higher but you’ll see significant dramatic sideways action.”

Plus, record cash on corporate books may see its way to increased mergers and acquisition activity and investment — and that may replace growth as the next catalyst.

“The next step to that is merger activity,” Nolte said. “ It’s a way to grow business and earnings, where one plus one is greater than two.”

Again, in the reality arena, "the S&P won't go significantly higher," but in the crazy arena, once some big-name M&A stories are told, it's very possible the market could surge. I honestly don't think that will happen, but I won't be surprised if this turns out to be a very, very interesting (and rewarding) year for investors.

While searching for that earlier post, I was reminded of all the energy companies that have increased their dividends this year or have announced that they will be increasing their dividends -- another reason that keeps me so optimistic. Companies don't increase their dividends if they think they are going to have to manage some difficult economic news.

As far as I can tell, all the bad news has been announced and baked into the numbers going forward, most importantly: ObamaCare, the deficit, and the debt.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.