My Investing Muse (04Nov24)
Layoffs & Closure news
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Surprise, surprise…
August jobs revised: 159K to 78K (-81k)
Sept jobs revised: 254K to 223K (-31k)
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Chevron Corp. indicated potential US job cuts as part of a new cost-cutting plan. - LiveMint
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Manulife Financial has cut hundreds of jobs in its global wealth and asset management business, representing about 2.5 per cent of the division’s staff. - Business Times
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Publicis Groupe to lay off up to 200 employees at its digital agencies The holding company let go of more than 100 people at its media shops last week - Adage
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Broad Institute of MIT and Harvard Lays Off 87 Workers in Restructuring Effort - The Crimson
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Intel's biggest revenue decline in five quarters to hit amid broad layoffs and missed AI boom - Calcalistech
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Dropbox is laying off 20% of its workforce as the cloud company undergoes what CEO Drew Houston calls a “transitional period.” - Techcrunch
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Visa to lay off around 1,400 employees and contractors, WSJ reports
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The entire 410,000-bpd plant (in China) is due for shutdown around mid-2025. Half of the capacity has already been mothballed. Dalian govt pushed for refinery relocation after accidents. - Reuters
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Volkswagen plans to shut at least three factories in Germany, lay off tens of thousands of staff and shrink its remaining plants in Europe's biggest economy as it plots a deeper-than-expected overhaul - Reuters
Layoff & closure news continued into the week.
Has the oil price provided a warning for the market?
Oil markets are trading like we are in a recession: Oil prices are down another -7% today and now down -20% over the last 6 months. Despite record-high stock prices and a Fed calling for a "soft landing," oil markets are crashing. What are oil markets telling us? - X user the Kobeissi Letter
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While all of the focus has been on the Fed, oil markets have been flashing recessionary signals. Headlines like the one below are the new norm. The reality is that global oil demand has cratered, particularly in China. China is the largest consumer of oil in the world. - X user the Kobeissi Letter
Oil can be seen as a forward indicator. While there are sustainable energy options, the demand for oil and its derivatives remains. Oil goes into many products and this can reflect the outlook of the producers in anticipation of market demand.
Revision of governmental data
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The Labor Department has revised the last TWO jobs reports LOWER by a combined 112,000 jobs. Initially reported numbers showed that the US added 254,000 jobs in September which was just revised down by 31,000, to 223,000. At the same time, the August jobs report was revised down by 81,000 jobs, from 159,000 to 78,000. 8 out of the last 11 jobs reports have now been revised lower. Neary, 1 MILLION jobs have now been revised LOWER over the last 2 years. What is happening here? - X user the Kobeissi Letter
Does this frequent revision warrant concern? Should we give them more time? Would people prefer something delayed over something wrong? Is the methodology under review?
My final thoughts
The most important event of the coming week will be the US presidential election, followed by the Federal Reserve's interest rate decision. Both events will cause volatility in the market. There are concerns that civil unrest should unfavorably result surface. From the current oil prices in China's market outlook, we are expecting a drop in the demand of oil. China is the world’s global factory and this drop in demand can be a good reference for the economic outlook in 2025. Some have expressed concerns about a pending recession. Some remain bullish and suggest that this could be a retracement in the short term.
It is possible for both outcomes to be correct but differ in time frame and duration. Market fundamentals can be tossed aside during this week of election results and interest rate decisions. While it is important to be data-driven, let us not ignore how sentiment can swing the market too.
Continuous revision of macro data such as job numbers can lead to a gradual erosion of the confidence of governmental data. When trust is lost, it would be difficult for the government to drive their policies in an objective manner. When negative market sentiments take over, the result could be amplified as the market tends to swing from extremes of overbought to oversold.
Berkshire Hathaway is sitting on cash estimated at $325 billion, following their sales of Apple and Bank of America stocks. Should we exercise some caution for the big tech and banking sector in lieu of such sales? Let us consider some hedging and caution for the coming weeks.
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