This Week in Summary 11/11/2022

Nov 11, 2022 | Bubble Monitor, No Bull Economics

The market melted up on Thursday 11/10/22 with the NASDAQ increasing over +7% and the S&P 500 up over +5.5%. Wow! While this is broadly attributed to an inflation number that came in at +7.7%, slightly down from the previous +8.2% reading, it seems unlikely that this is the real cause. After all, the Fed has made it abundantly clear that it will not stop with rate hikes until inflation gets to its +2% target (much lower than +7.7% for the record). Rather, we believe this melt-up is more likely related to a huge relief rally based upon the strong likelihood that mid-term election results mean we are now safer with a divided government. In any case, we believe it would be better if this election, and the government in general, was less central to the market. A lot of productive brain power gets wasted on following the Fed and anticipating government policy and elections. Should I lay off 15% of my workforce because the Fed is set to continue raising rates for the foreseeable future? Should I hold off on capex investments because the government is set to raise taxes? Should I be concerned that excessive government spending and debt might bankrupt the nation? Let’s pretend as part of a thought experiment that the government was 75% smaller than it is. Would anyone really care who wins the mid-term elections? Let’s continue with the thought experiment – what if there were many political parties (rather than just 2)? What if we had term limits with short durations for every position of power, elected and unelected? What if political fundraising was limited to very small contributions? Somehow, we need to get everyone united around the common pursuit of chasing the American Dream and for this to happen we need to shift the country’s focus from government to business.

Publications

Doordash’s Grip on Labor Costs is Funding New Investments

3Q Results For Bloomin’, Texas Roadhouse & Cheesecake

Are We in a K-Shaped Economic Recovery?

UPS & AMEX Provide Valuable Insight into Consumer Health

the Challenge is to Staff & Operate Late Night

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← DoorDash's Grip on Labor Costs is Funding New Investments Low-Income Customers Prioritizing Wingstop →

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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.

Part 2: Incremental Interest Payments Squeeze Disposable Income

In this post, we quantify the pressure on disposable income driven by credit card & auto loan payment increases since the onset of the Fed rate hikes in early 2022 in addition to the impact of the coming resumption of student loan payments in October 2023.

Part 1: Keeping an Eye on the Consumer’s Top-Line

The consumer’s top-line benefits from a high employment rate, generous raises, and a healthy savings rate which indicates an income surplus.

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