To The Moon

My Investing Muse (08Jul24)

Layoffs & Closure news

• The death of the DVD has likely played a big role in the demise of Redbox parent Chicken Soup for the Soul, which just filed for Chapter 11 bankruptcy filing. - The Street

• Vanuatu, a South Pacific nation of 326,000 people, was left without an airline after its flagship carrier, Air Vanuatu, declared bankruptcy. - Yahoo Finance

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Here are some headlines of layoff news.

Layoff & closure news continued into the week.

USA Unemployment and Jobs updates

The unemployment rate has ticked up to 4.1%, going over 4% for the first time since November 2021. - 74% of jobs added last month came from government and healthcare education. - May jobs were revised down from 272K to 218K. - April jobs were revised down from 165K to 108K. - Black and Asian unemployment rates increased. - Full-time employment in June actually decreased by 28,000 workers. - Part-time employment went up by 50,000 workers. - In just over a year, the unemployment rate has increased from 3.4% to 4.1%. - From X user CollinRugg:

Sahm Rule defines recession if the 3-month average of the national unemployment rate has risen 0.5% or more from the previous 12-month low. The latest unemployment rate has risen 0.36% from its 12-month low over the last 3 months. - Yahoo Finance

From the updates above, the uptick in the unemployment rate would pose some concerns. Based on Sahm Rule, there would be an unemployment rate surge is another technical way to define inflation.

With more job data downward revision, the job market looks less robust as compared to initial. The loss of full-time jobs is not offset by the increase in part-time employment. This does not paint a strong outlook for the job market. Is this possible with a raging stock market? Absolutely.

Storms and Supply Chain

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Hurricanes cause major disruptions to supply chains and tend to be enormous stimuli for freight demand, but the path of Berryl could have the opposite effect. The reason - the primary driver of hurricane freight is FEMA. The path of this storm is right into the heart of Mexican production and distribution (Nuevo Laredo, after passing over the Yucatán), which is a huge driver of US freight volume. If this area of Mexico gets obliterated or flooded out, the Mexicans will react, but with a far muted level of response compared to the Americans. It could cause a sharp slowdown in cross-border freight, at least for a few months. - Craig Fuller

Supply Chain has always benefitted from the development of both man-made crises and natural disasters. Despite the challenges and disruptions, the result is typically inflationary, adding to the costs and complexity of the supply chain. We have seen shipping extensions of delays of 10 days and more as vessels avoid the Red Sea by going around the continent of Africa. This is inflationary and should take a while to dissolve.

I doubt that President Biden’s administration is able to address this. If they could, this should have been addressed. Hopefully, former President Trump can bring closure on this matter should he win the November Election.

My final thoughts

Here are some of my thoughts after revisiting William Green’s video, paying tribute to the late Charlie Munger:

Is our integrity based on convenience or conviction? Integrity does not change its standards. It is for us to meet them.

Being ethical is a competitive advantage.

We do better in life because we are ethical. - Charlie Munger

I have penned down my thoughts in this article about the world of honour - the wisdom of Mr Charlie Munger. Honour and integrity are gaining premium as the world falls into much disarray. The extreme weather is going to cause many disruptions which translate into increased costs. With the ongoing supply chain complexities, inflation is creeping slowly back into the market with container rates hitting pre-Covid high.

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The above is taken from a recent FactSet post about market outlook.

The S&P500 is expected to report Y/Y earnings growth of 8.8% for Q2 2024, which is slightly below the estimate of 9.1% earnings growth on March 31.

Let us consider hedging. It is possible for some of the market to be thriving while some segments struggle to cope. Looking at averages without understanding the impact to different demographics can skew our views easily. Let us research before investing.

@TigerStars

$S&P 500(.SPX)$