Michael’s CIO (Check-It-Out) Report on the week just past — events, sarcasm, and global macro reflections
November 14, 2022
THEME: Turn! Turn! Turn!—”To Everything There Is a Season”—Russia/Ukraine, Musk, Twitter, inflation, stock markets, crypto, & tech
The last couple weeks have been full of turns, U-turns, Y-turns, and flip flops from Russia/Ukraine, Elon Musk, Congress, Twitter, inflation, stock markets, crypto, and tech companies in general—What does it all mean?
GL🌍BAL
Congress: The U.S. Senate has not turned and has remained under Democrat majority, but the U.S. House of Representatives may swing towards a Republican majority
Aissur: Russia turned about and left Kherson, the first and only regional capital it had captured in its war in Ukraine—My take is that this news, lower than expected inflation numbers, and resultant short-covering caused U.S. stocks to turn positive on Thursday
Stock$: U.S. stock values shot up on Thursday ostensibly on the back of 1️⃣) Lower than expected inflation numbers (CPI), the idea being that lower inflation means the Fed can slow down its interest rate hikes and won’t have to force the country into recession to stem inflation—The problem is that the Fed looks at a different inflation indicator called PCE—2️⃣) A resultant massive short-squeeze (when investors that bet the market would decline suddenly have to turn-around and buy stocks to close their bet and thus drive prices higher); 3️⃣) A pivotal turn in Russia’s war on Ukraine; and 4️⃣) Hopes that the meeting between Xi Jinping and Joe Biden will exceed low expectations ➜ Could we have seen a turnabout in the stock market downtrend?
Twists and turns: The yield curve is as bizarrely twisted as ever with one-year rates at 4.58%, well above everything else, roller-coasting down to 10-year rates at 3.88%, rising back up to 20-year rates at 4.27%, and then drifting down to the 30-year at 4.05%📈📉📈 ➜ It is telling us that the bond market believes U.S. inflation will lessen and/or the economy will enter recession
FedUp: What would cause the Fed to turn policy and slow down or stop raising interest rates? A lessening of inflation would temper their interest rate hikes. But heightened credit pressure, i.e., stress in the lending markets, would be the most likely trigger to lower rates. Credit stress offshore combined with tightening credit at home would accelerate our economic slowdown➜Our economy, and capitalism in general, works well as long as people can borrow; but once credit disappears, business grinds to a halt⚙
disSavings: Consumer savings is shrinking from its pandemic highs; i.e., people have spent down ¼ of the excess $2,3 trillion they accumulated from government transfer payments during the pandemic. Simultaneously, wages are increasing as are employment numbers; i.e., we have more people working with on average higher earnings➜Assume that increased earnings and spending will continue to fuel inflation until/unless the Fed tips us into severe recession😧😯
Nuclear Parking Lots: A new French law requires parking lots of 80 spots or more to be at least half covered with solar arrays➜The expected solar output may be roughly equivalent to 10 nuclear reactors
BIZNOMIC$
Fried Chicken: Sam Bankman-Fried’s empire (which included crypto exchange FTX and trading firm Alameda Research) turned billions to zero and filed for bankruptcy—This could be slightly positive for gold , elevating its status as a store of value — You know it’s bad when the guy (John J. Ray III) who cleaned up Enron is put in charge of your company🙅🏽♂️
Twitter spins: Elon Musk has done multiple about-faces regarding access to and charges for “official” blue and grey verification checkmarks/Twitter badges. Musk also said the company may declare bankruptcy—maybe we were not far off a few weeks ago when we suggested offering less than 10% of Musk’s purchase price to take the burden off his hands
Unplugged: Mass layoffs have begun to occur at tech giants as companies reign in expenses and U-turn on strategies; e.g., Amazon, Booking.com, Carvana, GoFundMe, Lyft, Meta (Facebook), Netflix, Opendoor, Peloton, Redfin, Robinhood, Salesforce, Shopify, Snap, Stripe, Twitter, Zendesk—Note: Layoffs at older firms should make it easier for venture backed startups to recruit talent—Tech workers remain in demand👩🏽💻
CONTENT
Heart: Research suggests that “interesting and visually striking art” in the workplace improves employee well-being—call it head-turning art😏
UnicornArt: Microsoft co-founder Paul Allen’s trove of 60 artworks made auction history by fetching more than $1.5 billion🦄—the priciest collection ever sold at auction—and set auction records for two dozen artists🎨
Turn it up: Running Point is expanding & hiring. We seek a Portfolio Operations Associate, a Tax Manager, and a Tax Associate II — please send recommendations or contact me for more information on the positions👩🏽🎓👨🏽🎓
PERSONAL
Money Animals: I attended the excellent Money Animals’ Financial Health Day in Santa Monica🐿🐘🦁🐻🐎 — “live by design and not default”
S&P Global: Running Point and I were quoted by S&P Global Market Intelligence in an article — by Priyanka Boghani and Umer Khan, “Dual Hong Kong listings still attractive to US-listed Chinese TMT companies” — regarding recent U.S./China financial transparencyàThe upshot is that Chinese companies listed on U.S. exchanges will probably seek a dual listing in Hong Kong
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-22-63
