To The Moon

My Investing Muse (11Nov24)

Layoffs & Closure news

• Stellantis to lay off 400 workers at Detroit parts facility - Reuters

• Boeing to repay furloughed staff, proceed with job cuts - Reuters

• THE head of HSBC Holdings’s new global wholesale banking division said the lender will seek to wrap up an ongoing restructuring “very quickly” and could announce the first round of job cuts within weeks. - Business Times

• Sharan Hegde, the influential financial content creator with over 2.7 million Instagram followers, has announced the layoff of 15 per cent of his workforce. - LiveMint

• KPMG to Lay Off 4% of U.S. Audit Workforce to Counter Fewer Voluntary Exits - WSJ

• $5B petrochemical complex ceases operation in southern Vietnam - VN Express

• SPH Media cuts 10% of tech employees in restructuring move in bid to stay sustainable This comes amid a division-wide exercise as the group adjusts the scope and size of several teams across tech - Business Times

• TGI Fridays operator files for bankruptcy amid financial woes - Reuters

The US economy shed 46,000 manufacturing jobs in October, the biggest drop since April 2020. Manufacturing jobs have declined in 4 out of the last 5 months by a total of 88,000. In effect, manufacturing payrolls reached their lowest level since July 2022 and are in a clear downtrend. This comes as total private jobs plummeted by 28,000, the most since December 2020. Interestingly, government jobs have been rising and are now up 40,000 over the same timeframe. Job market data continues to weaken. - X user The Kobeissi Letter

This should lead to more trade imbalance. Is this the bottom of will this get worse for the manufacturing sector? The secondary markets affected would involve the supply chain, energy and employment that support the ecosystem.

Layoffs Summary from ChatGPT:

In early November 2024, layoffs continued across major industries in the U.S. as companies responded to economic pressures, AI-driven automation, and sector-specific challenges.Tech, automotive, and retail were hit hardest. General Motors (GM) announced layoffs at its Fairfax Assembly plant in Kansas, cutting 1,695 jobs as it adjusts production. The retail sector also saw significant reductions, with LL Flooring filing for bankruptcy and planning to lay off around 2,000 employees due to store closures. Meanwhile, in the tech industry, Splunk, which focuses on data analytics, let go of 560 employees, restructuring amid shifts in demand.Workforce downsizing also extended to telecommunications, with companies like Verizon implementing voluntary separation programs that led to thousands of employees leaving. This trend reflects a broader movement as companies seek efficiencies through voluntary separations rather than traditional layoffs, especially where demand for certain roles has decreased due to automation​.These reductions are part of a broader pattern expected to continue into 2024, as sectors like construction, software, and finance anticipate further staff reductions. The increasing adoption of AI in workplaces also continues to influence downsizing decisions, particularly for roles that are becoming redundant due to automation​

Layoff & closure news continued into the week.

Do we have a Commercial Real Estate crisis on hand?

The delinquency rate on commercial mortgage-backed securities (CMBS) for offices spiked to 9.4% in October, the highest in 11 years. The delinquency rate of office CMBS loans has now risen by 5 TIMES over the last 2 years. Delinquencies are officially rising at a pace only seen after the 2008 Financial Crisis. This puts the office CMBS delinquency rate on track to surpass an all-time high of 10.3% seen in July 2012. Meanwhile, the overall US CMBS delinquency rate rose to 6.0%, the most since the 2020 pandemic. The commercial real estate crisis is real. X user The Kobeissi Letter

Can the wheels come off the CMBS soon? This should be owned by current administration.

Other News:

Office CMBS Delinquency Rate Spikes to 9.4%, Highest Since Worst Months after the Financial Crisis - WolfStreetThe office delinquency rate reached 9.37%, up from 8.36% in September and 5.75% a year ago. Who will take the hit? - ConnectCREBanks face growing risk as double defaults on commercial loans mount - FT

Commercial real estate maturity wall $950B in 2024, peaks in 2027 (Source: S&P Global article). More mortgages are expected to mature in the coming months and refinancing would imply costs increase at the (recently) heightened interest rates.

Fortune’s article above has reported that we are expecting $1.5 trillion of commercial real estate debt is due in 2025, with challenges expected for refinancing.

There could be spiraling effects that spread from real estate to banking, construction, materials, retail (for shops supporting the vicinity) and the local state government. Banks have varying exposure to this. Will this lead to more banking volatility? This is something that we should watch.

My final thoughts

I am relieved with the recent US election results. I am more thankful that there are no chaos and a peaceful transition looks to happen.

USA has incurred over $35.8 trillion worth of debt. Given the post COVID spending, I am not sure if America is able to repay the debt. $10 trillion worth of treasuries would require refinancing soon. Many businesses are holding out for lower interest rates. However, some could face challenging returns given the current climate. This could be one of the motivations in reducing the interest rate.

Following the election, there is much work to be done. There would be lots of activities that include mass deportation, securing of the border, cryptocurrency focus and many more developments. This should translate into various ways of creating opportunities and revenue for the market.

The market has surged to new highs. Following the euphoria, we can expect the market to “settle down” and should expect some retracement in the coming days. We need to give the new administration time to plan, implement and improve. It is unlikely that the market would have the patience to “wait” that long for structural and policy solutions to be put in place.

Price needs to be supported by value. This largely explain the market swinging from overbought to oversold. With the attention turning to earnings, this could be one of the key players bringing volatility with macro data stirring the pot of uncertainty.

Let us research before investing. With due diligence, we are able to anchor our confidence when the market moves in unexpected directions. Let us consider focusing on our circle of competence and attack with the favorable margin of safety.

@TigerStars

@TigerStars

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