My Investing Muse (29Apr24)
Layoff & closure news
Some are laid off to trim the excess. Some are laid off to reduce costs. Some are laid off due to innovations and improvements. Some are laid off due to falling demand. The last one would be of most concern for the economy.
Theft and organized crime were the reasons why Target in October 2023 closed nine stores in four states. Walgreens in early 2022 and 2021 closed seven stores in San Francisco because of crime. Walmart in 2023 closed 24 stores in 14 states. - The Street
Layoffs under Swiss banking giant UBS's cost-cutting programme announced after its takeover of Credit Suisse will take place in five waves this year starting in June, the newspaper SonntagsZeitung reported on Sunday. - Reuters
A recent string of mass layoffs across the U.S. could be the sign that the country's economy is finally sliding into the recession many feared would hit the nation last year, financial analyst Gary Shilling told Newsweek. - Newsweek
Schools across the U.S. announce teacher layoffs American schools are facing layoffs as enrollment falls and pandemic-era aid dries up. - Straits Times
Whirlpool, the owner of the Maytag and Amana appliance brands, is cutting about 1,000 salaried positions worldwide to reduce costs. - Straits Times
Bayer executive has suggested that those managers impacted will be in the thousands, not hundreds. - Fortune
Space and defence startup True Anomaly has laid off around 25% of its workforce and cancelled its summer internship program, TechCrunch has learned. - TechCrunch
Tesla is laying off more than 6,000 employees in the states of Texas and California, according to reports. Reuters reported that 3,332 jobs will be eliminated in California, while 2,688 roles will be cut in Texas starting June 14. - HCAMag
U.S. regulators have seized Republic First Bancor and agreed to sell it to Fulton Bank, underscoring the challenges facing regional banks a year after the collapse of three peers. - Reuters
March 2023 - Chad is nationalizing all assets from multinational oil giant Exxon Mobil, including its hydrocarbon and exploration permits, said the government. What happens to foreign investment should this continue?
Control of media
Control of our minds is a constant battle. We owe it to ourselves for due diligence. People see what they want to see, and hear what they want to hear. And yet mainstream media is losing trust when their delivery comes with propaganda and inadequate content.
Behind every post is content, applied with delivery. Yet many of us do not question the intent behind this post. We owe to ourselves to do necessary due diligence for the information we digest. I recommend multiple sources for validation then the need to conduct research before we incorporate some of this news into our action plans. Using the recent Iraq war as an example, most of us bought into the news of Iraq having weapons of mass destruction. At the end of the war, we have not uncovered any of these weapons.
Inflation
Inflation data from CPI and PCE have shown resilience in inflation. We have seen inflation data moving upward in the last few months. We have increasing tensions in the Persian Gulf as the shipping route faces more threats. This has led to shipping lines rerouting their vessels. This will lead to a delay of two weeks and increased costs for the various shipping routes affected. For some items such as food and other perishables, this increase in shipping lead time is not good for its products. Industries will need to contend with shipping delays that will lead to production disruptions. The result is likely to be inflationary for the affected countries and companies.
This has pushed up the price of crude oil. Should this price remain inflated, we should see an increase in costs hitting both producers and consumers alike. It could start with an increase of petrol prices.
While the market hopes to get interest rate cuts in the coming months, we can no longer rule out the possibility of interest rate increases too. The cost of living is becoming an issue for more families. This has led to them taking on additional jobs, people delaying retirement and some coming out from retirement back to work.
Investing considerations
Price is what we pay. Value is what we get. The disconnect is a reason to buy or sell. Don't forget the margin of safety.
I need to remind myself the price of a company stock does not always represent the value and fundamentals it possesses. The price is the result of demand meeting supply. When the price is far away from its value, it is an opportunity to reconsider the positions. If the price is far below its intrinsic value, this can be a good entry point to buy up stocks of good company at great discounts.
Coming to value investing, having a margin of safety is the most important factor. It is not just about buying the stocks of a great company, but it is also about buying the stock when it is available at a good discount. Some of us use different methods to value a business. This can lead to different valuations due to the different considerations and risk rewards we embedded into our formula. This is easier said than done. For me, using a technical approach to buy and sell helps me insulate my feelings from the news and the stock.
My final thoughts
The earnings of the big tech are ongoing. The results of the magnificent 7 should conclude soon after Apple and NVIDIA. The magnificent 7 have played a big role in the recent rally of the various indices. The magnitude of the stock price change can take place in either direction.
I am paying more attention to the banking sector following the end of the BTF program. I am monitoring closely the commercial real estate (CRE) space as more buildings were transacted at great losses.
I doubt that America can support multiple war fronts. Money, supply chain and finance should play their part in limiting America’s influence.
Let us continue to exercise caution and consider hedging as one of our current strategies.
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