To The Moon

My Investing Muse (15Apr24)

Layoffs & Closure news

• ConvergeOne blamed rising interest rates and a downgraded credit rating as reasons for its recent financial struggles. The company has $1.8 billion in debt, and it reported $1.525 billion in revenue for 2023. - Reuters

• A popular West Coast pizza chain Mod Pizza shuttered five of its California locations shortly before the state enacted its new minimum wage law this month that raises fast-food workers’ pay from $16 an hour to $20. - NYPost

• More layoffs hit logistics which is the blood of the economy. over 1300 layoffs hit logistics companies across US - FreightWaves

• The Associated Press (AP) reported last week that 614 Apple employees were notified in late March that they would be laid off effective May 27. - HCAMAG

• The job eliminations are separate from a restructuring programme which could lead up to 8,000 of Novartis's 78,000 global workforce being cut, it said. - Reuters

• In a bid to claw back $2.15 billion, the struggling pharmaceutical giant Bayer CEO is doing away with middle managers and 99% of the company’s 1,362-page corporate handbook, allowing nearly 100,000 employees to self-manage. - Yahoo Finance

• Citi's 7,000 laid-off staff were paid an average of $214k each - E Financial Careers

We continue to learn of more layoff and closure news in the past weeks and we can expect more to follow in the coming weeks.

Iran launched waves of attacks towards Israel

As per the news article above, Iran launched rockets towards Israel. This further escalated the tension in the Middle East. There are Iranian claims that the retaliation is over as we await to see if Israel would respond to this attack. Should this take place soon, we should see a volatile market in the coming days.

Iran has warned of all vessels linked with Israel. After storming MSC Aries, they could do so to other vessels that have links with Israel. The shipping community will need to reroute vessels and look for other routes to service the clients in the region. Unfortunately, the impact will cause supply chain delays and inflate different costs, especially shipping. One of the expected results would be a surge in the price of oil as it is one of the commodities that use this route.

The shipping industry would be one of the beneficiaries of this indirectly. Though there will be operational changes and delays, that would be more costs chargeable to clients in lieu of such threats in the region.

CPI (inflation)

CPI (index referencing inflation) in the US came in much hotter at 3.5% year on year. This was much higher than what the market anticipated, leading to concerns about the Fed pivot in the coming months. If inflation continues to surge, it would be difficult for the Federal Reserve to conduct any interest rate cuts. Larry Summers the former US Secretary of the Treasury has suggested that an interest rate hike could be back on the cards if the coming inflation results continue to trend unfavorably.

While President Biden promises interest rate cuts, this would seem more political than probable unless inflation is brought under control.

Conclusion

The geopolitical tensions in the Middle East will be the main mover of the market in the coming days. Iran has concluded its retaliation towards Israel. No, the eyes of the world rest on Israel and her response to this provocation. This is not a good start for the new Q1/2024 earnings season. Even if the earnings turn out to be good, the geopolitical tension can continue to bring fear to the market.

There is a possibility of this escalating to a much bigger conflict. Iran has warned America to stay away and America has promised Israel backing and support. It seems like the joint efforts of the UK, America and Israel have successfully brought down most of the missile & drone threats.

These are good reasons for the price of crude oil to climb when the market opens in a few hours. Should the tension persist, crude oil prices can surge. With danger in this region, shipping companies will be forced to divert vessels away from this hotspot. This would be inflationary in price impact and bring more supply chain disruptions to the rest of the world.

Let us hope that the leaders are willing to head to the negotiating table instead of the battlefield. Let us continue to tread cautiously in the coming days.

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