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This is the model China uses for every industry they want to enter. In the early 2000s we bought solar panels primarily from Japan and South Korea. We never sold a Chinese solar panel. By the time I left the industry in the mid-2010s it was difficult to compete without selling Chinese panels. Today they own the market and most of the non-Chinese brand panels are manufactured in China.
Customers would ask about Canadian Solar as a non-Chinese brand. Their sales office is in Ontario. Everything else is owned and operated in China.
During periods when I was not managing my own company I most often worked at public software start-ups as an analyst, product manager or in a technical sales capacity. At these companies compensation is almost always weighted heavily toward stock options and stock based performance awards. One of the best pieces of advice I got early on was to always sell stock as it vested. That is, don't play roulette with small company stock where you work - An all your eggs in one basket argument. This story reminded me how dangerous it is to be heavily invested where you work.
One of the things I'm sure has been happening is that bears have been covering so they don't have to explain to clients why they not only missed the beginning of a bull market but were positioned against that idea. Bears playing catch-up. I think those folks will find themselves getting whipsawed later this summer. We'll see. For now I'm clipping coupons while we're in the middle of selling one house, building out another and working through the final design and early permit phase of a 3rd one. It's going to be a busy summer.
Thanks. And that was true this time. Early in the rally it was all tech. Really all the big seven tech companies and it was a good time to nibble on preferrerds.
One of the problems with materials/goods based cost-push inflation is that wage inflation is a laggard but always catches up most to all the inflation cost. Thankfully in the US 60% of all mortgages are still under 5%. Not great for lenders but good for consumers. It's likely a major reason US consumers haven't thrown in the towel or been in the streets protesting.
Powell reiterated today that two more rate hikes were "probable". What I find interesting is that my preferreds are up 1/2% today. I would have thought they'd be down and I could do some buying. This market feels way too hopeful. Reminds me of the line from Dumb and Dumber where Jim Carrey is trying to get a date with Lauren Holly and she tells him; you're chances are about one in a million. Carrey's character says, "so you're telling me there's a chance".
Although I don't see much strength or growth in the economy over the rest of this year, I also don't see much of a chance of a meaningful recession. In that case the Fed will keep muddling through until the jobs market weakens, the consumer quits spending and/or inflation returns to 2%. I don't see any of those as likely scenarios until at least after summer.
Now that the Fed has indicated there may be two additional 25bp hikes this year, there is additional time to get into preferreds. If there's another regional bank default it may be a good time to add preferred shares in some of the big banks.
One wonders when Barr finally realized this?
They get bored and/or impatient. They feel invincible so why not take extreme chances to do something as inane as getting into the Guinness Book a few times. Hopefully it won't end up as another Kobe moment. See his Instagram post below. Apparently they knew it was less than ideal conditions.
From JP's statement Wednesday afternoon one could surmise that the July meeting will result in a 25bp hike. CME Fed Watch estimates a 75% chance of a July hike in rates. Below is from this morning's Barron's:
I had mentioned the other day that the Fed will most likely hammer the American consumer later this year because they can't be controlled any other way. The market wants consumers to, well, consume. The Fed wants consumers to calm down, maybe save some money. This is the battle I've seen coming for a couple of months now. I don't think this ends well for those with debt. Below is a good article on the subject from Barron's:
Why Americans Are Still Splurging Even as Inflation Bites
Airfares and hotel prices might be soaring, but that won’t stop Sophie Tsagronis from traveling to attend six weddings this year.
With the Covid-19 pandemic in the rearview window, Tsagronis, 26, believes it’s important to spend time with family and friends, even if she needs to splurge on travel costs to do so. “Travel is one of those luxuries that I’m not really willing to pull back on,” says the Memphis-based public-relations professional, who notes that she’s looking to pinch pennies elsewhere.
Persistently high prices are forcing many Americans to get creative with their budgets. More than eight in 10 have implemented cost-saving measures this year, according to a survey of more than 2,000 U.S. adults conducted in May 2023 by The Harris Poll. Many consumers are trading down, shopping at less expensive retailers, or substituting cheaper alternatives for name brand products. And that trend is likely to continue, so long as inflation remains around 4% on an annual basis, as was the case in May.
Yet, like Tsagronis, a majority of Americans are cutting back on everyday purchases to afford the occasional splurge, Harris found. FIfty-four percent of those surveyed said they succumbed to the allure of splurging in 2023—a trend especially prevalent among the millennials Harris surveyed.
The Harris Poll labeled the scrimp/splurge phenomenon a “split-brain” budget, but others have called it “the lipstick effect.” That’s because research has shown that lipstick sales tend to pop during recessions, even when consumer spending is otherwise depressed. Buying decisions are less a matter of “or” but “and,” according to McKinsey, a pattern often seen during economic downturns.
“It is both surprising and fascinating to witness Americans adopting a conscious approach to balancing their expenses, making deliberate choices to cut back on essentials while treating themselves to the luxuries that bring them joy,” says Abbey Lunney, managing director of thought leadership and trends at The Harris Poll.
Many spending categories considered more “luxury” than everyday—including beauty, travel, and entertainment—have seen an uptick since the Covid pandemic. While the pandemic helped shift consumers’ thinking toward indulgence, higher paychecks help explain this trend, too. Wages in the U.S. have grown by 10.7% over the past two years, according to the Bureau of Labor Statistics.
Beauty sales have climbed about 4% a year in the past three years, although McKinsey projects they will grow by 6% year-over-year in the coming half-decade. “With consumers focused on their mental wellness more than ever before, beauty products are benefiting,” Larissa Jensen, an executive at Circana, a data provider for the consumer sector, said at a recent event.
Travel and entertainment are bigger-ticket outlays, but the story is similar there. Half of Americans plan to take a summer vacation this year, complete with an overnight stay at a hotel or other paid lodging, according to a Deloitte report released in May. The Transportation Security Administration said it screened more travelers during this year’s Memorial Day weekend than in 2019—and the volume of passengers traveling on the Friday of the holiday weekend hit a postpandemic record.
Meanwhile, Live Nation Entertainment [ticker: LYV] expects concert and event attendance in 2023 to outpace 2022.
When consumers practice restraint, they are much more likely to treat themselves after it is no longer necessary to curb their impulses, researchers at the University of Michigan found. That makes sense especially after so many people were unable to travel, attend live events, or spend in-person time with others during the pandemic years. “People want to live again,” says Wendy De La Rosa, a professor at The Wharton School at the University of Pennsylvania, who focuses on behavioral science and the impact on consumers’ financial well-being.
For Tsagronis, there is a desire to rebuild community after the pandemic, which she says makes her feel less guilty about spending money on dining out. “Whether I go to Kroger or to a restaurant, it’s expensive, but if I’m going to a restaurant that’s [run by] a local business owner, I feel like I’m supporting something a little bit more important,” she says.
Perhaps it is no coincidence that the demand for experiences and the tendency toward indulgence come when American wages have jumped, because of labor shortages and bursts of increased consumer demand. But higher paychecks have been tempered by high inflation, and the diminished spending power of wages doesn’t always click with consumers. “People are much more likely to pay attention increases in their income compared to increases in their expenses,” De La Rosa says.
The timing of a paycheck also has an impact. The more frequently you get paid, the richer you feel, De La Rosa says, adding that she is seeing increased payment frequency proliferating mostly for lower-income workers who have been hit harder by the effects of inflation.
Uber UBER +0.37% drivers, for example, can cash out their earnings up to five times a day, while Amazon Flex gives workers the option to be paid daily.
Higher spending on luxury goods and experiences is welcome news for many industries hurt by pandemic-related closures, including travel, events, and hospitality. But it also makes the Federal Reserve’s job of bringing inflation down to its 2% target more challenging.
The Fed has raised interest rates 10 times since the start of March 2022, to a target range of 5.0% to 5.25% in May, in a bid to cool demand, and inflation. If spending across the economy doesn’t abate, the Fed will need to keep hiking rates, as Federal Reserve Chair Jerome Powell said at a press conference Wednesday.
Nearly a third of people surveyed by Harris admit they are spending above their means, including half of millennials. That’s another concern: The personal savings rate was down to 4.1% in April, well below the average of more than 8%, and the credit-card interest rate is 20.69% this month—the highest rate on record.
Consumer spending increased 0.8% month over month in April, ahead of expectations. “People are continuing to spend as though there’s no recession coming,” De La Rosa says.
Things might work out: Inflation could fall in coming months, and the Fed could stop raising rates, making consumers feel richer. Meanwhile, watch the lipstick.
Daniel Ellsberg who leaked the Pentagon Papers, has died at 92. The Nixon administration wanted him in jail for over 100 years for espionage. Of course that president was recently proved to be a traitor and got caught up in the Watergate shenanigans. It's funny how true criminals get convicted for their lesser crimes.
Thanks Nick. I didn't know Juneteenth was a market holiday.
Communications and Tech sectors are selling off a bit today. Both down ~1/2%. Renewable energy is the industry down the most today, 1.7%.
Well done Elroy. I agree, there's no reason to do much more than trim some exposure.
Quick post regarding my preferred stocks. They all took a hit when JP said we'll likely have two more bumps up in 2023. That portfolio is now down 1.25% since inception earlier this year. I'm not concerned because; A) I'm always early and B) This is a long term holding. As each of these 12 throw off dividends I'm adding a few shares while keeping my cost basis very similar in each holding - not the market value. Some, like AT&T and Southern Co. are up nicely and others like Schwab and Metlife are down. I don't want to chase the losers. In aggregate these preferreds are down 16% from par, roughly where I bought them. If it takes four years for them to return to par my return will average 10% a year. If it continues to perform weakly this summer I'll bump it up from 20% of holdings to 25%.
Regarding the economy:
JP's job is to kneecap the economy if he has to, to bring inflation under control. There was a good article in the WSJ a few days ago talking about how the treasury had to 'catch up' selling bonds this summer after the debt ceiling goofy-verse. That means there may be more treasury debt sellers, (yeah, that seller), than buyers which will drive up the cost of debt. They speculated 6% for 2-year bonds. As I've said before, the hobo government is desperate to get back to near zero short term bonds and it's JP's job to make sure that happens.
Any Democrat with a brain is only paying lip service to how truly sorry they are about student debt payments beginning again. People are still too flush with money after the pandemic giveaway and the huge Social Security bump in 2023. If they can't break the consumer they can't stop inflation. They've tried breaking the jobs market but that didn't work, now they're going directly after the consumer's pocketbook.
Just my opinion but it makes complete sense to me. You can't tell American consumers to do anything, you have to break them. Volker and Reagan did that. JP knows that lesson well. So does Biden. He's been around that block before.
I spent some time tonight reviewing several of my technical indicators and - no surprise - tech is overbought. In fact, the SPX is up on the back of a handful of tech stocks. The rest of the ~500 are just muddling along. What did surprise me is that there is no confirming evidence that this bull run in tech is over. Personally, I think it's almost over but today I can find no confirmation. Let's see how it goes for the rest of June.
Funny. Musk could not have helped this guy more. Really, 24,000 followers? On Twitter, that's not much more than a club. Now he might get famous.
One more note from the NYT:
Gasoline consumption, which accounts for about a quarter of world demand for oil products, will decline after 2026, the agency, (IEA), forecasts.
Hey Google - show me the money. From the NYT:
Google Might Owe You Money. Here’s How to Get It.
As part of a legal settlement, Google agreed to pay $23 million to users who clicked on a search link from 2006 to 2013. Individual payments are estimated to be less than $8.
Anyone who clicked on a Google search result link from October 2006 to September 2013 is entitled to a piece — however small — of a $23 million settlement that the tech giant has agreed to pay to resolve a class-action lawsuit.
The settlement’s administrators set up a website for people to submit claims. According to the site, the estimated individual payout stands at $7.70. But that figure can fluctuate based on the number of people who make valid claims.
Google, which is owned by Alphabet Inc., agreed to the settlement in August. The consolidated class-action lawsuit filed in 2013 accused the company of “storing and intentionally, systematically and repeatedly divulging” users’ search queries and histories to third-party websites and companies.
This, according to the lawsuit, amounted to a privacy-law violation and a breach of Google’s own privacy pledge to its users.
The lawsuit argued that Google search queries often contained sensitive and “personally identifiable” information, including “users’ real names, street addresses, phone numbers, credit card numbers, Social Security numbers, financial account numbers and more, all of which increases the risk of identity theft.”
Google, which has admitted no wrongdoing, is required as part of the settlement to update its frequently-asked-questions page and its “key terms” page to disclose how search queries can be shared with third parties.
A court will decide whether to approve the agreement at a hearing on Oct. 12, according to the claim administrator website. It is not clear when payments will be distributed. Even if the court grants final approval of the settlement in October, appeals can slow the process, according to a claim notice from the administrator.
Users who wish to file a claim have until July 31 to submit their full name, street address and an email address. Anyone who wishes to object to or be excluded from the settlement must submit a form by mail by the same deadline.
Last year, Meta, Facebook’s parent company, agreed to pay $725 million to settle a similar class-action lawsuit over its handling of user data.
Their CEO was on CNBC this morning going 100% carnival barker and declining several times to say when they'll be profitable.
From CNBC:
China to see the world’s biggest millionaire exodus this year, new study shows
That's not surprising as Xi tightens control. It was surprising how many millionaires are leaving the not-so United Kingdom.
Britian's new tag line: Not as bad as China
China's slowdown continues to accelerate.
Investment down 6% January-April, 7% in May
Property sales down .4% January-April, .9% in May
New construction down 21% January-April, 22.6% in May
Developer funds raised down 6.4% January-April, 6.6% in May
Given all of the negative economic data and upcoming student loan requirements, I don't understand this market so can't jump in.
CAVA is going public momentarily. Listed at $22 initially it's up as high as $44 as JPM and others carny-up the rubes. Check in on this one in October.
Maybe they could make us an honest legislator.
Not surprising based on core CPI. This is a "hawkish pause". Could be as many as 4 more rate hikes.
The market has been selling off for the last couple of hours as everybody rebalances and/or raises cash to hopefully be ready for the Fed announcement. The market normally will jerk one way and then the other at 2:00 and then more volatility when JP begins to speak.
That's fine with me. Treasuries and munis at 5%+ until November of 2024. I'll be posting pictures of the fish I catch. Of course you can't eat the fish you catch in the Chesapeake but you can sport fish.
This morning the WSJ editorial board is begging Donnie to just shut up. It turns out Rupert is upset that Biden's DOJ is keeping Trump in the spotlight because Rupert knows Donnie has no chance of winning in 2024. The WSJ editors ask GOP primary voters to read the indictment, (they provide a handy link).
I've not heard such anguish and whining at the Journal since Tricky Dick went down. I asked ChatGPT to write a haiku celebrating this moment. Hilarious, sounds like a 13 year old who realized Liam Payne doesn't know she exists.
In darkest abyss,
Anguish devours my essence,
Soul screams, trapped in pain.
- The Wall Street Journal editorial board
It appears a Fed pause is built into the market now. I think they'll still be cautious because core inflation numbers have not subsided.
I'm a little slow so others have likely already figured this out by now; Trump is losing everything so he wants to be a martyr. He really does see himself as some bizarre combination of Putin and Jesus. As the legal noose tightens and Jack Smith prepares to drop J6 charges Trump can see there's no way out. He may escape the New York state charges, his friends in Georgia may remove Fani Willis and end that investigation, he may find one or more true believers on the jury in Florida but he's going down in DC for sedition or worse. He will have no friends in DC when the ~12 other elected seditionists understand they will turn on him or go down with him.
We now know Nixon was a traitor and got away with it, (undercut the Vietnam peace agreement as a candidate in 1968), and it's very likely Reagan was also a traitor and got away with it, (undercut the deal to release Iran hostages in 1980), but maybe we'll turn the corner here and put a stop to this nonsense. We'll see.
That Trump, such a mensch. A last meal before prison for Mr. Nauta and Cuban!
EV market growth in the US is well behind EU. I don't expect that will change quickly. Socially we're quite different and there's an expectation that any vehicle should be able to drive across the country seamlessly. That's still 3-5 years away. Regarding TM; sale up 2% last year to 10.56MM vehicles, revenue up 8%. The largest vehicle manufacturer in the world still has pricing power.
Their nearest competitor VW; sales down 7% and revenue down 7%. Their EVs are crap. Unlike TM, they jumped in before they had a good product.
I think of TM much like I think of CVX, when the time is right, they'll be an EV company. Until then, they'll mostly stick with what's working.
Energy commodities; gasoline, (all types) and fuel oil, fell 5.6% in one month. We'll have to see if this trend continues this month. Spot price for oil this morning is $67.12. Oil prices fell this low in March and in December 2021. Oil contracts a decade out are now below $50.
Backwardation is not the normal state of the oil market but this is the state we find it in today. My chart below based on data from the WSJ.
The stats don't seem much different than they've always been when it comes to "actively disengaged" employees. It really doesn't matter how good an employer you are there will always be a few people who take their job for granted or feel somehow slighted. As a business owner or department manager/director it's your job to know who is the least useful and/or most disruptive person and encourage them to look elsewhere for employment. If you don't you'll find the majority of your employees are disengaged. These people love to hang out together and the rest of your employees won't respect you or the company.
May CPI for all items came in at .1% which sounds good but the fall in energy prices accounted for this as the core CPI is still at .4% or 4.8% if extrapolated out to a yearly basis. The chart below from BLS shows how sticky core inflation has been over the last year. I expect the Fed will say inflation is moving in the right direction but the fight is not over.
Changes over the last 12 months
Gasoline down 19.7%
Fuel oil down 37%
Nat gas down 11%
Transportation services up 10.2%
Toyota seems to have an excellent short term and long term plan. The mixture of hybrid, EV and possibly hydrogen should do well in the marketplace.