To The Moon

News and my thoughts from last week (23Dec24)

• Powell has said that "it's pretty clear we've avoided a recession." Do you agree?

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• China is dominating the global auto market: China’s share of world car production is now at 39%, the highest on record. Since the 2008 Financial Crisis, this percentage has doubled. Its share is also ~11 percentage points larger than Europe, Japan, and the US combined. To put this into perspective, China’s share in global automotive production was just 1% in 2000. By comparison, the US, Japan and Europe accounted for 14%, 20% and 32% of production in 2000, respectively. China has taken over the global car market. X user The Kobeissi Letter

• Globalization brings access to bigger markets, costs savings and leads to better quality of life. When we limit access, will the reverse happen?

• Corporate injustice has a separate path of mitigation. Murder cannot address the issues. Is this a systematic issue that demands policymakers' review? Can we go after a child for what the father has done? There should be a way for accountability but to justify murder is wrong.

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Does a government shutdown imply that there will be a total collapse of the country & the essential services? Is this Congress failure who waited till recently to lodge a bill too big and bundled with too many other topics? - USAToday

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The Walmart Recession Signal has jumped to the highest level since the 2020 pandemic. This is a recession indicator measured by Walmart's stock price, $WMT, divided by the S&P Global Luxury Index of luxury goods stocks. The gauge has almost doubled this year, as $WMT has risen 83%, while the S&P Global Luxury Index has remained unchanged year-to-date. In previous economic cycles, such a significant divergence signaled a recession was coming. Is the US economy headed for a recession? - X user The Kobeissi Letter

In 2001 it took over a year to get the final estimate for Q1 GDP. It was revised from +2.0% to -1.3%. It took more than 12 months to find out that the US economy fell into a recession in Q1 2001.

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XPO, UPS, and now FedEx will soon be out of the "trucking business"

• Can AI make one lazy and less smart?

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30-Year Mortgage Rate soars to 7.512%, the highest level since May

https://www.mercatus.org/research/data-visualizations/what-if-us-regulatory-burden-were-its-own-country

The regulatory burden in the United States adds up to $4 trillion. X user The Rabbit Hole

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3 Layers of Debt: - Budget Deficit (1.4 trillion) - Current National Debt (31.5 trillion) - Unfunded Obligations (75.3 trillion) - X user The Rabbit Hole

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*U.S. DECEMBER PHILADELPHIA FED FACTORY INDEX TUMBLES TO -16.4; EST. +2.9; PREV. -5.5 *LOWEST SINCE APRIL 2023 - Investing

• New Zealand’s economy sank into recession in the third quarter as activity dived far more sharply than expected and output in the prior quarter was slashed, a dire result that cements the case for more aggressive rate cuts. - CNBC

• LA Port, the busiest U.S. container hub saw a total volume of 884,315 twenty-foot equivalent units in November - an increase of 16% from November 2023. It was also 15% above the port’s five-year running average for the month of November. - FreightWaves

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Only 32% of S&P 500 stocks have outperformed the index year-to-date. This marks the second consecutive year with such a low percentage after 29% was recorded in 2023. Over the last 70 years, there was only one other period when such a streak occurred: in 1998-1999, before the Dot-com bubble popped. To put this into perspective, the historical average has been ~50%. Meanwhile, since 2023, the S&P 500 has rallied 57.6% while the equal-weighted index is up just 28.8%. A few stocks are driving the entire market. - X user The Kobeissi Letter

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Retail investors are buying stocks like never before: Off-exchange trading as a % of total market volume hit 57% in December, an all-time high. Off-exchange trading run by firms like Robinhood or Charles Schwab is a proxy for retail investors' participation in the stock market. This year, off-exchange trading has jumped by ~15 percentage points. This is also nearly DOUBLE the percentage seen before the 2020 pandemic. Tesla, $TSLA, and MicroStrategy, $MSTR, have been among some of the most actively traded stocks by retail. Retail investors are piling into the market. - X user The Kobeissi Letter

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*NY FED DECEMBER EMPIRE STATE MANUFACTURING INDEX PLUNGES TO +0.2; EST. +6.4; PREV. +31.2 - Investing

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The Magnificent 7 stocks now reflect a record 33% of the S&P 500. This percentage has DOUBLED in just 5 years. Furthermore, the total market cap of the Magnificent 7 stocks now exceeds $18 trillion for the first time in history. The group is up 50% year-to-date, nearly doubling the S&P 500's gain of 28%. At the same time, the remaining 493 companies of the index have returned just 20%. Big Tech is massive. - X user The Kobeissi Letter

• Electricity prices in Germany break historical records - Handelsblatt. 936 euros per MWh - electricity prices in Germany, which broke a historical record! - X user Geo Monitor

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33 European companies have defaulted on their debt year-to-date, the most since the 2020 CRISIS. This is also way above the 2009 levels during the Great Financial Crisis. The European economy is in dire straights. - X user Global Markets Investor

• Low cost labor is not actually the most important consideration. More critical factors include: access to raw materials and a network of suppliers, skilled labor, distribution and logistics infrastructure and tax incentives. - Forbes

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US debt interest costs are mind-blowing: Interest costs on federal debt hit a whopping $87 BILLION last month, the most out of any November on record. This is up $7 billion from $80 billion seen a year ago. This means the US government paid $2.9 BILLION of interest PER DAY last month. Interest costs came in at $80 BILLION or higher in 9 out of 11 months this year, a trend that has never occurred before. The worst part? Interest payments are set to reach as high as $150 billion in December, a new monthly record. Truly concerning. X user The Kobeissi Letter

• US banks face rising distress as commercial property values slump Modifications are typically sought by struggling landlords looking to put off making payments and get short-term extensions on loans. Their increased use is the latest sign of rising distress in CRE credit as a wave of loans come due for refinancing. - SCMP

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