This Week in Summary 9/30/2022

Sep 30, 2022 | Bubble Monitor, No Bull Economics

Bubble Monitor Chart

Here is a test for our readers: what caused the 9/29/22 market sell-off that sent the S&P 500 to its lowest level so far in 2022? A) Hurricane Ian, B) jobless claims hitting a 5-month low – implying the need for more Fed hikes to “cool” the economy, C) increasing attention to weakening European economies and currencies, D) NATO’s threat to retaliate against the apparent sabotage of Russia’s Nord Stream natural gas pipeline which was already shut-off, or E) Russia’s preparation to annex 4 regions in Ukraine. Ok, we admit that we are not exactly sure of the answer, especially after the S&P 500’s inexplicable +2% increase the previous day. In any case, the Bubble Monitor for the period ending 9/29/22 doesn’t look good and mirrors FedEx’s recent announcement that its real retail sales are “pacing to have the worst decline since The Great Recession”. Maybe the best part of all that red in the dashboard is the drop in crude oil prices which will hopefully lead to even lower gas prices, thus strengthening the stressed low-income consumer. In any case, those wishing to cheat on the above test may simply answer: silly rabbit, we don’t have to worry about the sell-off because we have Modern Monetary Theory to save us. Let’s go with that!     


Is FedEx a “canary in a coal mine”?

Currency Wars

Modern Monetary Theory

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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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