My investing muse (12 Feb 2024) about layoffs & 3Ds - deglobalisation, dedollarisation & debt
My investing muse
Updates about layoffs news in the past week:
McKinsey & Co. has warned about 3,000 of the firm’s consultants that their performance was unsatisfactory and will need to improve. - Fortune
FRENCH digital payments company Worldline said on Wednesday (Feb 7) it would cut its global workforce by around 8 per cent as part of a cost reduction plan initially announced in October. - Business Times
40% of 2000 Singaporeans (polled) felt they were likely to lose their jobs in the next three months, compared to 25% in the same period last year. - NTUC. Aren't things looking good?
Orsted, the world’s largest offshore wind developer planned to become a leaner and more efficient organization: a reduction of 800 jobs worldwide, a pause for dividends and a retreat from markets in Norway, Spain and Portugal. - CNBC
Amazon Health Services is cutting “a few hundred” employees from its One Medical chain and Amazon Pharmacy - Forbes
JPL said it would lay off about 530 employees, as well as 40 contractors, after exhausting other efforts to reduce costs given potential spending reductions for NASA - Space News
Snap said it will lay off 10% of its workforce worldwide, around 500 employees, to “promote in-person collaboration.” - CNBC
MAC lipstick maker Estee Lauder slashed its annual profit forecast on Monday (Feb 5) and announced a restructuring programme aimed at cutting about 3 to 5 per cent of its workforce to rein in costs. - Business Times
Société Générale plans to cut about 900 jobs at its Paris headquarters through voluntary departures - Business Times
The news of layoffs continues to hit the market as more was reported during the last week.
De-globalisation is inflationary. De-dollarisation is one of the developments. USD would remain the main global currency. For near-shoring, friend-shoring, & reshoring to work, there are aspects of supply chain, raw material, resource, infrastructure, policy, & competency needed.
A recession is a time of wealth redistribution
Wealth is not lost but redistributed to favour the rich likely. During a recession, wealth is not lost but merely re-distributed. Some will gain and some will lose. There will be a good portion going to the rich. How will the luxury market be affected? If so, luxury items should be “rather” recession-proof.
Market Abnormality - The A-D Line alert
There were twice as many losers as winners in the market Friday. That last happened the day after Black Monday, and it's "not ideal," David Rosenberg said. - Yahoo Finance article on 6th Feb 2024.
This is from investing that explains the A/D line.
If the majority of the S&P500 is not doing well and yet the index continues to surge due to weightage, the average does not paint a full picture. A rising index can hide struggling sectors. Vice versa, a falling index can hide recovery. Without details, we could be left with the impression that the market is doing well. This is not an indicator that guarantees a crash but twice the number of falling stocks is an issue.
US Federal Debt
When we borrow from future generations, we will burden our kids and grandkids with debts that we incur now. $10T worth of treasury should expire by 2024 and be extended at current rates.
Biden Treasury Secretary Janet Yellen says the U.S. will "borrow $760 billion in the first quarter". This sets the US on a trajectory towards $3 trillion in annual federal debt.
This implies that the US may need to borrow the entire nominal GDP of the 7th biggest country in the world (2023) - ie France due to its deficit.
This sets me thinking who else is willing and able to help?
This sets me pondering if this is sustainable.
This implies that the US needs to borrow the entire annual GDP of France to finance its current lifestyle and expenditure in one year. With $10T worth of treasury expiring in 2024, these are likely to be refinanced at the current (high) interest rates. With a Federal deficit of $34T, the US economy has yet to suffer any consequences. This can be sustained so long as countries are willing to take on the debts through the issue of treasury assets. Failing which, they can always turn to their money printing machine.
With the S&P500 hitting the historical 5000 mark, this affirms the positivity of the market and the outlook for most investors. Yet, we cannot ignore the weaknesses that are in the economy. From layoffs, inflationary impact of de-globalisation, and market concerns like for the banking sector, it is wise to thread with caution.
Can China help with its deflation? Is Europe in survival mode?
Let us spend within our means, invest with what we afford to lose and avoid leverage. It is important to update our watchlist regularly so that we can buy great companies at good discounts when prices fall.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.