Investing Thread

[Uncle Rico]

I have to say that I honestly have no idea what the actual truth about our economy is presently.  I have read various "leading" economists in several sources that have said one thing in the last 9 months, "changed their opinion", went back to their original prognostications, and now are taking about either a soft landing or a recession.  I mean they honestly sound no different from Jim Cramer.  All this said we seem to  know that the dollar isn't going as far as it used to but at the same time the consumer spending and GDP have exceeded expectations.  I have several questions:  Do you trust these numbers as facts?  Have economists become more political?  Who do you actually believe?  What exactly will determine Powell not raising interest rates anymore?  Is your cost of living/overall expenses in your community more, less, or about the same as they were say a year ago?

No, I put all my money into bronze

[Skatastrophy]

I have to say that I honestly have no idea what the actual truth about our economy is presently.  I have read various "leading" economists in several sources that have said one thing in the last 9 months, "changed their opinion", went back to their original prognostications, and now are taking about either a soft landing or a recession.  I mean they honestly sound no different from Jim Cramer.  All this said we seem to  know that the dollar isn't going as far as it used to but at the same time the consumer spending and GDP have exceeded expectations.  I have several questions:  Do you trust these numbers as facts?  Have economists become more political?  Who do you actually believe?  What exactly will determine Powell not raising interest rates anymore?  Is your cost of living/overall expenses in your community more, less, or about the same as they were say a year ago? 

GDP is still growing, inflation is still a bit high, wages are still growing, the labor market is still tight. What are you curious about?

Anyone telling you they know the future of the economy is blowing smoke. If they knew, they'd be keeping it quiet and making big bucks. Economic forecasting is more akin to astrology than it is to meteorology. Like Warren Buffett said, “We think any company that has an economist has one employee too many.” Also, Buffett said, “I don’t pay any attention to what economists say, frankly. [...] You have all these economists with 160 IQs that spend their life studying it, can you name me one super-wealthy economist that’s ever made money out of securities? No.”

This is the investing thread, not the economy thread. The economy thread got locked long ago on the Covid forum, maybe it's time to start one up again?

[MuggsyB]

GDP is still growing, inflation is still a bit high, wages are still growing, the labor market is still tight. What are you curious about?

Anyone telling you they know the future of the economy is blowing smoke. If they knew, they'd be keeping it quiet and making big bucks. Economic forecasting is more akin to astrology than it is to meteorology. Like Warren Buffett said, “We think any company that has an economist has one employee too many.” Also, Buffett said, “I don’t pay any attention to what economists say, frankly. [...] You have all these economists with 160 IQs that spend their life studying it, can you name me one super-wealthy economist that’s ever made money out of securities? No.”

This is the investing thread, not the economy thread. The economy thread got locked long ago on the Covid forum, maybe it's time to start one up again?

Why is Powell continuing to raise interest rates in your estimation?  It seems to me there is a disconnect between wages increasing and overall expenses increasing.  It sounds to me like you believe economists essentially Whistle Dixie and serve little purpose. 

[21Jumpstreet]

I trust the numbers, but not the analysis.

Such an excellent statement and distinction.

[Skatastrophy]

Why is Powell continuing to raise interest rates in your estimation?  It seems to me there is a disconnect between wages increasing and overall expenses increasing.  It sounds to me like you believe economists essentially Whistle Dixie and serve little purpose. 

Powell is raising rates because - GDP is still growing, inflation is still a bit high, wages are still growing, the labor market is still tight. There is still risk of the economy overheating and inflation running out of control. We are nowhere near a deflationary environment where raising rates is risky.

Raising rates is not supposed to increase wages, it's a lever we can pull to control inflation. The economy is a giant experiment, especially during/after black swan events like covid. JPow is just trying stuff to see if it works, and so far raising rates has been working great. By great I mean compared to our peers, not compared to ideal. Wild times right now, but Mr Market believes we're in the clear

Here's some charts to compare our inflation/CPI to other western nations. Other countries are getting smoked right now. JPow & the government have been doing a pretty great job.

https://www.ft.com/content/088d3368-bb8b-4ff3-9df7-a7680d4d81b2

[tower912]

Housing is up marginally.
Car dealers are posting huge mark ups on cars they have.
Eggs are back to $1.50 a dozen.
Milk $2.79
Gas just jumped from $3.30 to $3.70, but that is probably an oil exec with indigestion.
Still some greedflation going on.
Pretty much anyone who wants a job has one.

Still a war in Ukraine.
Still extreme weather in the wheat/corn belt.
Still surprisingly high demand.

So, Muggsy, yeah, I believe the numbers.  And, as always, I believe there are and will be challenges and headwinds.

[jesmu84]

"inflation" is still up. Sure, but how much of that is profiteering?

If we acknowledge profiteering is present, and, as demonstrated over and over, is the single greatest contributor to "inflation" then is the feds reaction likely to result in a recession?

[MU82]

FWIW, the Wall Street Journal put this in yesterday afternoon's email newsletter:

Gross domestic product, bolstered by stronger business investment, grew at a seasonally- and inflation-adjusted 2.4% annual rate in the second quarter, the Commerce Department said. The economy has expanded at better than a 2% pace over the past year, following a mild contraction in early 2022. Economic growth is roughly in line with the rate recorded in the decade before the pandemic took hold. The new data suggest the U.S. is steering clear of a recession, despite the Fed pushing interest rates to a 22-year high.

The emphasis in bold is mine. The WSJ's analysts are now saying a recession is unlikely. Are they right? Nobody knows.

As others have said, this is the investing thread. So here's something as it relates to investing ...

Procter & Gamble reported earnings this morning. PG is considered one of the "bellwether" stocks for indicating consumer and manufacturer behavior and sentiment. Here is the Seeking Alpha synopsis of today's report:

Procter & Gamble (NYSE:PG) rallied in early trading on Friday after smashing expectations with a 8% gain in FQ4 organic sales vs. +6.0% consensus. Pricing was up 7% during the quarter and the effect of a favorable mix was +2%, while volume fell 1%.

The organic sales gains were led by a 11% jump for the Beauty segment, with prices up 8%. Within the segment, hair care organic sales increased high single digits due primarily to increased pricing and positive product mix, partially offset by volume declines in Asia Pacific and Greater China. Skin and Personal Care organic sales increased low teens due to increased pricing, positive mix from the growth of the super-premium SK-II brand and volume growth from innovation. No P&G segment saw an organic sales increase of less than 5% during the quarter.

Gross margin was up 380 basis points for the quarter, or 450 basis points on a currency-neutral basis. Gross margin topped the consensus expectation by 80 basis points. The increase was driven by 340 basis points of pricing benefit and 290 basis points of productivity savings. These were partially offset by 110 basis points of contract material price increases net of a modest reduction in commodities, 20 basis points of product and package reinvestments and 50 basis points of negative product mix and other impacts.

The Cincinnati-based consumer products giant's operating margin for the quarter increased 190 basis points from a year ago, and was up 310 basis points on a currency-neutral basis.

Procter & Gamble (PG) guided for fiscal year 2024 all-in sales growth in the range of 3% to 4% and organic revenue growth of +4% to +5% vs. +4.4% consensus.

As I read that, PG had a solid quarter, partly thanks to consumers' willingness to absorb a 7% price increase for the company's products. It beat analysts' estimates for both earnings and sales, and it is projecting continued organic revenue growth to be at least as robust as analysts' consensus.

Mr. Market likes this report and guidance. As I write this, PG stock is trading up 3% on the day. (Disclosure: I hold PG stock but I'm not planning to buy more now as I believe it is somewhat overvalued.)

So what does all of this mean? Nobody knows. You get data and you try to interpret it as best as you can to help your investing decisions and portfolio management, but anybody who says he or she knows what's going to happen is fibbing.

It's why, as an investor, I just keep on keepin' on, and why I take a long-term focus.

[Skatastrophy]

"inflation" is still up. Sure, but how much of that is profiteering?

If we acknowledge profiteering is present, and, as demonstrated over and over, is the single greatest contributor to "inflation" then is the feds reaction likely to result in a recession?

Profiteering is always omnipresent in capitalism. Inflation is oftentimes caused by people agreeing that inflation is happening and prices raising to their expectations. If people were unwilling or unable to pay, then prices would not be rising.

Rates get raised to discourage spending, which will drive down inflation.

Conversely if rates get cut, spending will increase and so will spending. It's true because of psychology moreso than math.

Theoretically: Deflation causes the GDP to dip, and the GDP declining for two consecutive quarters is what's defined as a recession. If GDP dips the fed could stop raising rates, or even decrease rates, which would increase spending which will increase inflation as well as raise GDP. Deflation has only occurred twice in the past 60 years, and now that we are out of our nightmarish 0 rate environment the fed has the tools at hand to avoid deflation easily.

[MUBurrow]

Profiteering is always omnipresent in capitalism. Inflation is oftentimes caused by people agreeing that inflation is happening and prices raising to their expectations. If people were unwilling or unable to pay, then prices would not be rising.

Yeah I'm starting to lose the thread on the popular understanding of when profiteering is a feature and when its a bug.  Like, we don't have anyone price gouging on bottles of water in a disaster or anything like that right now.  So barring monopolistic activity or price fixing, shouldn't everyone be charging as much for whatever they're selling as they can?

[Coleman]

The problem arises profits are merely rent-seeking, i.e. adding no value because of broken markets or monopolies.

[SoCalEagle]

Housing is up marginally.
Car dealers are posting huge mark ups on cars they have.
Eggs are back to $1.50 a dozen.
Milk $2.79
Gas just jumped from $3.30 to $3.70, but that is probably an oil exec with indigestion.
Still some greedflation going on.
Pretty much anyone who wants a job has one.

Still a war in Ukraine.
Still extreme weather in the wheat/corn belt.
Still surprisingly high demand.

So, Muggsy, yeah, I believe the numbers.  And, as always, I believe there are and will be challenges and headwinds.

Roast beef prices are also down.  What this all means, I'm not sure.  Time for an Arby's run?

[MU82]

A notable analyst who usually leans bearish and who has been wrong about the market for nearly a year now, Morgan Stanley's Mike Wilson, has now flipped to bull and says the current rally will only grow stronger:

https://seekingalpha.com/news/3993344-morgan-stanley-bear-wilson-sees-a-2019-like-rally-this-year

The comments are pretty funny, with many of them saying Wilson's turnabout now means the rally is over.

[Herman Cain]

Warner Brothers Discovery ( WBD )has been a dog the last two years. Barbie has done well for them at The Box office yet the share price has not been impacted.  No word yet of more Barbies in the pipeline.

The company is heavily levered and has been going through a lot of operational cost cutting and restructuring .

This is the kind of junk stock that can get legs if the bull market has legs . Stick has been bouncing  around in the 12s . Although it did close above 13.

I am long WBD as a pure speculation. There is no investment merit whatsoever.

[MU82]

I used to own T and got some WBD in the spinoff. Sold it immediately. I wish you luck with it. Maybe it’ll have a turnaround.

[TSmith34, Inc.]

Warner Brothers Discovery ( WBD )has been a dog the last two years. Barbie has done well for them at The Box office yet the share price has not been impacted.  No word yet of more Barbies in the pipeline.

The company is heavily levered and has been going through a lot of operational cost cutting and restructuring .

This is the kind of junk stock that can get legs if the bull market has legs . Stick has been bouncing  around in the 12s . Although it did close above 13.

I am long WBD as a pure speculation. There is no investment merit whatsoever.

Zaslav is an ass. Remove him and the company has a chance to turn it around.

[Hards Alumni]

We're not going to discuss the downgrade by Fitch?

[MU82]

We're not going to discuss the downgrade by Fitch?

From Seeking Alpha:

The market reaction to Fitch's downgrade of U.S. debt reflects puzzlement over its timing, but indicates confidence that government securities and the dollar will remain safe havens. "We expect that after the initial negative reaction in markets, investors will largely disregard this move," said 22V Research's Kim Wallace, as there is no threat to the dollar reserve currency status and no roadblock to servicing debt. That could explain why the market isn't taking the downgrade as badly as it did when S&P cut its U.S. rating in 2011. Treasury Secretary Janet Yellen called the downgrade "arbitrary," while JPMorgan (JPM) CEO Jamie Dimon said it was "ridiculous."

[MUBurrow]

We're not going to discuss the downgrade by Fitch?

From Seeking Alpha:
The market reaction to Fitch's downgrade of U.S. debt reflects puzzlement over its timing, but indicates confidence that government securities and the dollar will remain safe havens. "We expect that after the initial negative reaction in markets, investors will largely disregard this move," said 22V Research's Kim Wallace, as there is no threat to the dollar reserve currency status and no roadblock to servicing debt.

[MU82]

Market is down today, but one that started the day up after reporting surprisingly decent earnings: BUD. Strong growth overseas, particularly in the Asia Pacific region, helped offset declines in North America due to the Bud Light controversy.

Looking ahead, BUD maintained its 2023 forecast that EBITDA would grow in line with its medium-term outlook of between 4% and 8%.

Good turnaround plays often come from stocks that have been troubled by short-term "noise." As others have pointed out, though, BUD was a lousy performer long before its most recent woes, and I'm not interested in owning the stock. (FWIW, I already have STZ in that industry.)

[ZiggysFryBoy]

We're not going to discuss the downgrade by Fitch?

https://twitter.com/TheBabylonBee/status/1686864960654106624?t=85M4FaUaBFhFnkqvmIW0uw&s=19

[Skatastrophy]

https://twitter.com/TheBabylonBee/status/1686864960654106624?t=85M4FaUaBFhFnkqvmIW0uw&s=19

Alt right onion. Classy.

[JWags85]

Market is down today, but one that started the day up after reporting surprisingly decent earnings: BUD. Strong growth overseas, particularly in the Asia Pacific region, helped offset declines in North America due to the Bud Light controversy.

Looking ahead, BUD maintained its 2023 forecast that EBITDA would grow in line with its medium-term outlook of between 4% and 8%.

Good turnaround plays often come from stocks that have been troubled by short-term "noise." As others have pointed out, though, BUD was a lousy performer long before its most recent woes, and I'm not interested in owning the stock. (FWIW, I already have STZ in that industry.)

Taking the politics out of it completely, I never really bought the "LOL look at the stock price" as a good argument for the Bud Light boycott.  Any stock price movement was purely negative press and PR fueled.  Which can drive marketing and perception changes.

But as for the actual financials, Bud Light does in the range of $6-7B in retail sales annually.  Now AB InBev sells through distributors, so their Bud Light actual revenue is obviously lower.  AB InBev does close to $60B in revenue globally. Even if their Bud Light sales completely evaporated (which it never would), it wasn't going to drive a 10/15/25% share decline on a go forward basis.  They are by far the most dominant beer brand global with a HUGE portfolio.  It was never going to cripple them.  The majority of people boycotting Bud Light, if actually beer drinkers, were still probably buying other ABInBev products without realizing it

[Coleman]

Alt right onion. Classy.

Also just generally not very funny.

If it was funny, I wouldn't care about the politics. Funny is funny.

[MU82]

Taking the politics out of it completely, I never really bought the "LOL look at the stock price" as a good argument for the Bud Light boycott.  Any stock price movement was purely negative press and PR fueled.  Which can drive marketing and perception changes.

But as for the actual financials, Bud Light does in the range of $6-7B in retail sales annually.  Now AB InBev sells through distributors, so their Bud Light actual revenue is obviously lower.  AB InBev does close to $60B in revenue globally. Even if their Bud Light sales completely evaporated (which it never would), it wasn't going to drive a 10/15/25% share decline on a go forward basis.  They are by far the most dominant beer brand global with a HUGE portfolio.  It was never going to cripple them.  The majority of people boycotting Bud Light, if actually beer drinkers, were still probably buying other ABInBev products without realizing it

Good points. Lots of folks have no idea that Stella Artois and Bohemia are Ambev.

I try to take emotion and politics out of investing, but it's difficult for me to see a big comeback for a stock that has been a chronic underperformer for years. There's probably money to be made trading BUD, but for more long-term, buy-and-holdish investors, it's a tough case to make.