My investing muse - layoffs, bankruptcies and USA election
My Investing Muse (16Sep24)
Layoffs & Closure news
KPMG leases 100,000 square feet in downtown San Francisco, will depart KPMG building after two decades - BizJournals
PWC is planning to lay off 2000 staff. What is going on? - WSJ
Shell, the oil and gas giant, is planning to cut down its workforce by 20%. The job cuts are anticipated to affect the oil and gas exploration staff, per a report by Reuters.
Oaktree Capital Management has reproached private equity groups Advent and Silver Lake over the bankruptcy this year of Thrasio, an e-commerce start-up once valued at $6bn that all three had backed. - FT
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The Trucking Industry is losing over 400 Carriers Per Week! The Average Net Change in Trucking Authorities has been negative every week outside of just a few since Nov of 2022. There are currently 345k total available carriers, down from a peak of 390k when this decline started.
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452 large companies have now declared bankruptcy year-to-date, the 2nd highest number in 14 years. This is only below the 466 bankruptcies recorded in 2020 when economic activity was halted by lockdowns. In August alone, 63 firms have gone bankrupt, up from 49 in July, marking the 4th worst month in 4 years. By sector, the greatest number of bankruptcies have occurred in the consumer discretionary sector, at 69, followed by 53 in industrials and 45 in healthcare. For the first time since the pandemic, the economy seems to be slowing down. We expect more volatility ahead.
Layoff & closure news continued into the week.
The Burden of Debt
One man’s debt is another man’s assets. - Ray Dalio
Global debt total at $315.1 trillion with mature markets accounting for $209.7 trillion.
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Mature markets hold nearly double the amount of debt across all sectors compared to emerging markets. Global debt rose by some $1.3 trillion to a new record high of $315 trillion in Q1 2024. One man's debt is another man's asset. - Source: Voronolapp
Some news about debts
With U.S. debt now at $35.3 trillion, the cost of paying the interest on all that borrowing has soared recently and now averages out to $3 billion a day, according to Apollo chief economist Torsten Sløk. Any concern? - FortuneInterest on U.S. debt tops $1 trillion for the first time. In the first 11 months of the fiscal year, interest payments totaled $1.05 trillion, up 30% from a year ago, the Treasury Department reported. Remember, government overspending is the real cause of inflation. X user DogeDesigner
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55 cents out of every dollar the federal gov't spent in Aug was borrowed... ...we're in trouble. - X user E.J. Antoni PhD.
Is the USA going to trip over her debts?
Most consumers, corporations and governments carry some form of debt. Debt may not always be bad news but borrowing with no means to return will be a major concern - especially if you are the global reserve currency. When there seems to be no means and intent to repay, this creates much concern for citizens, countries and corporations holding on to assets in the reserve currency. Debt can cripple any empire.
USA Election 2024
The election can be polarizing. Both parties have their pros and cons. While I lean towards a certain party, I ponder about the lack of choices available to the citizens.
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Do we vote her in for the things that she was supposed to be doing for the last 3.5 years? If 3.5 years is not enough for the first term, can she deliver if given another 4 years?
It can boil down to sticking with the familiar (Harris) or seeking changes that will come with Trump. For those who think that America is in a much better place, they are likely to stick with Harris. Some think that America needs to change. This can tilt them towards Trump.
Is this a matter of the choice between a lesser evil or the choice based on a single issue like pro-life or pro-choice?
Change needs to come from the top or it will come from the bottom. Inflation has the power to bring down empires and set up new ones. Is there adequate time, resources, and leadership to steer America towards another chapter of prosperity, breakthroughs and innovations?
Is America too big to fall or too big to save?
My final thoughts
The market has priced in a Fed pivot - reduction of the interest rates as inflation has been weakening over time. Unemployment is the other consideration from the Fed. The Fed’s interest rate decision is the most watched economic data for the coming week. It is not just about the degree of cut but the outlook concerning future cuts that can bring volatility into the market.
We are learning more about layoffs, bankruptcies, commercial real estate (CRE) weaknesses, and the regional banks as office vacancy hit 18.1%, an increase of 100 basis points from a year ago.
Technically, the S&P500 is seeing a double top formation which typically leads to a drop in the coming days. This should not be the only reference coming to technical analysis but there are a few that imply bearish movements.
Let us consider some hedging, spending within our means and also to avoid leverage during this time. I wish all a blessed Mid-Autumn ahead.
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