This Week in Summary 10/7/2022

Oct 7, 2022 | Bubble Monitor, No Bull Economics

Bubble monitor Chart
Bubble Monitor Chart

It is a common practice of economists and policymakers to use forecasts to assess the prospects of everything from the economy to climate change, to public health. In a recent post, we examined the challenges of confusing fact-based scientific discovery with the unreliable ART of forecasting. In the real world, economic forecasts were used to justify the Fed’s purchase of trillions of dollars of bonds to ease both the Great Recession and the economic collapse caused by the covid lockdowns. Apparently, these same models failed to forecast the current bond bubble which is disrupting both the bond and stock markets as the Fed unwinds its past excesses with aggressive rate hikes during a recession that is made further evident by a recent BLS report that August job openings decreased -6.2% m/m to 10.1MM (representing the biggest one-month decline since April 2020 in the early days of covid). We suggest that a focus on continual process tweaks is superior to implementing monumental forecast-driven policy decisions. For instance, the US needs a sensible strategy today to offset OPEC+’s potential plan to cut oil production to push prices back above $100/bbl. An important long-term process improvement would be to consider more practical, cost-effective ways to extend the US life expectancy. Fortunately, a great deal of economic resiliency is provided by well-run US companies that help offset many of the monumental blunders that policymakers could otherwise avoid by shifting from a reliance on unpredictable forecasts to a focus on process improvement. This is exactly how US blue chips like Costco can generate such strong results in this challenging economic environment while the government drowns in debt. Imagine what the US government might look like if we let Costco have a try at steering the ship?       


What Does Pfizer Have to Say About Fossil Fuels and Disease?

Why is it so Dangerous to Forecast a Crisis?

Bursting Bond Bubble

What is Costco’s Key to Success in 4Q22?

The Cost of an Extra 10 Years

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Latest Release for Personal Consumption Expenditures (PCE)

The consumer still looks good according to the government’s recent release of personal consumption expenditures (for August 2023) as there have not been any material changes in growth for either disposable income or consumption expenditures.

Small Biz Insights on Trucking Industry

In this post, we discuss the massive post-covid changes to the trucking business with Tony Lovallo who has been running his own freight company since 2010. Tony’s insights provide a 360 look into the shipping business & consumer patterns with important economic implications.

Darden 1Q24: Sales +11.6% Y/Y, Comps +5.5% Y/Y

Darden reported that industry same-restaurant sales increased +0.9% and industry same-restaurant guest counts decreased -4.2% during its fiscal 1Q24. The chain’s comps outperformed the industry by +4.1% and its traffic outperformed by +4.3% (= flattish traffic for Darden during the quarter).

Job Market Looks Solid

In this chart, we subtract total quits from total hires. The excess of hires over quits looks very good relative to the historical level even though the positive gap recently dipped slightly. Workers are staying at their jobs longer even as they continue to have new employment opportunities.

The Economics of Politics

As the U.S. gears up for the 2024 elections, it is important to consider changes to our elections and governance that can unite the citizens of this great country.

2Q23 Retail Same Store Sales

NoBull’s Retail Same Store Sales Report benchmarks 80+ large consumer retail companies by domestic same store sales including annual (2019 – 2022) and quarterly results (2Q22 to 2Q23).

Walmart Investor Presentation: Inflation Here to Stay

While general merchandise prices are lower y/y, they remain elevated compared to 2 years ago. As Walmart does not believe general merchandise and food (dry grocery) & consumable prices are ever going to completely disinflate, management suggests the need for a country-wide wage increase rebalancing.

Interesting Conversation with Fed Chair Powell

Okay, Powell didn’t actually take our call, but we offer a transcript of a potential discussion between the Fed Chair and John Q. Public. It’s very insightful, so please read on.

The Problem with Investment Diversification

Every investment advisor and business student knows that portfolio diversification is key to wealth building. Show me an investor who can beat the S&P 500 Index by buying a few handpicked stocks and I will show you a hedge fund manager in the making. However, there is a huge problem with this strategy that no one is talking about.

Part 3: Analyzing Performance of Low-Income Oriented Retail Companies

We created an index for the financial performance of 5 low-income oriented retail companies to assess the health of this demo. While we recognize that these companies have benefited from the trade-down of higher-income consumers, things look reasonable at least through calendar 2Q23. 

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