Michael’s CIO (Check-It-Out) Report on the week just past — events, sarcasm, and global macro reflections
August 8, 2022
THEME: Putin on the Risk (not Puttin’ on the Ritz)
GL🌍BAL
Putin on the Risk (not Puttin’ on the Ritz): Vladimir Putin, President of Russia, created a tsunami of turmoil with his invasion of Ukraine; the ripple effects will persist for years: safety and sovereignty concerns across Europe, a refugee problem of over 10MM displaced Ukrainians, high oil prices that may hasten recession in Europe, increased defense spending that will strain budgets, and uncertainty over global food supplies (even though some Ukrainian grain has recently shipped)—Companies around the globe are still coming to terms with the fallout
Grease is the word: 🛢Oil prices don’t have to keep rising to make things worse. Just by staying high, they increase the projected manufacturing and transportation costs of nearly all physical goods and reduce household purchasing power—Labor shortages, regulation, and a lack of new investment is limiting U.S. oil production recovery—The “hope” is that slower global activity will reduce oil demand, but we may be one major hurricane or refinery disaster away from another price spike—Private equity oil projects may stand to benefit. [Also, RIP Olivia Newton-John, aka Sandy]
JapAnomaly: Japan is the only major developed economy whose output remains below pre-COVID levels; it never emerged from the pandemic recession, domestic demand remains chronically weak, and the💴yen is the cheapest major currency
China++: Pundits say that China’s record $101B trade surplus last month indicates that global growth may not be as weak as suspected—My suspicion is that July’s high number could be a catch-up on lost orders from the beginning of the year when economies were under Omicron🦠lockdowns and trade surpluses were significantly lower
StayFlation: Inflation is peaking, which means it is still rising, but not as fast, and some things, like used car prices, are declining. Inflation will dampen when supply chain and labor bottlenecks ease. Our StayFlation call from last year remains intact with inflation settling above 3%—Private real estate, credit funds, and collectible investments may provide a hedge here
wHEALTH
Bills: Congress’s new bill (see below) ratifies a 15% minimum corporate tax on large firms, a 1% tax on the value of stock buybacks, and $80B extra for Internal Revenue Service enforcement—Always a good time to speak with a tax consultant
Outcomes: A multifamily office manages financial structure, not just a portfolio—human capital, properties, social security, taxes—returns are a subset of outcomes
BIZNOMIC$
Tax, drugs, & climate: The Inflation Reduction Act, a partisan tax, health, and climate bill is passing through Congress. Medicare will be allowed to negotiate drug prices (can’t believe they couldn’t do this before)! Expanded climate and energy spending and tax credits will further shift capital flows—Like many government bills, regardless of party (or country), the act will probably do the opposite of its name; i.e., there is a chance it increases inflation😏just sayin’
Pent-up demand: Even if there is a U.S. recession, pent-up demand for new automobiles and homes will not disappear. Cars eventually need to be replaced and new households and families will form. The veiled demand for such large purchases is just sitting on the sidelines waiting for supply and will help make any recession less severe
iMazon: Rumor is that Amazon is buying iRobot🤖, the maker of the Roomba vacuum cleaners and other robotic devices, in order to map peoples homes for data on pets, furniture, and toys—In the smart connected home, data + context = knowledge
CONTENT
Proxima Chorizo: Prominent French physicist Étienne Klein’s tweeted a hoax photo of Proxima Centauri, the closest star to our sun—It was actually a close up picture of a chorizo slice🔴
PERSONAL
Less is more: Running Point and I were quoted by Investor’s Business Daily regarding cutting expenses to improve lifestyle—Simplify routine, reduce complications
A picture is worth: We were also quoted by Reuters regarding Elliott Management’s interest in Pinterest—Visual search engines offer distinct marketing
Make it a great week😊
Michael
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Michael Ashley Schulman, CFA
Partner & Chief Investment Officer
Running Point Capital Advisors, your family office
“We deliver custom investment solutions, innovations, and unique perspectives to you and your family.”
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22-51
