After a brief hiatus (courtesy of a historic Southern ice storm), Adam and Will return to find an index-level market that looks deceptively calm—roughly flat since their last episode—while significant damage has been done beneath the surface to individual stocks. The disconnect between index stability and individual-stock carnage is the central thread of the episode.
As a child, I remember reading comics in the newspaper. My favorite was Calvin and Hobbes, which told the story of an imaginative six-year-old boy, the former, and his stuffed tiger/best friend, the latter. Having just celebrated 30 years since its last publication, we will look to it as inspiration for our 2025 recap and 2026 outlook. Out of respect for the Watterson estate and copyright laws—there are no actual comics in this post. We strongly recommend you taking few minutes to check them out online if you never have before…
We take a detour into the Dickensian in evaluating the state of the economy. First, the recent inflation print, which showed a significant decline in the level of price increases, was a fiction worthy of Dickens, with the majority of the data simply made up as a result of the government shutdown. Setting that aside, since 2021, wage growth has not kept pace with inflation for food, shelter, and services, though we can count our blessings that at least alcohol prices have not increased as much…
After Thanksgiving, we take a look at poultry, especially how dove-ish the Fed is now expected to be, a sharp reversal from a few weeks ago. We also discuss the odds-on favorite for the next Fed chair and how his political leanings may (or may not) influence which direction the Fed takes. Recent employment data has been lackluster, to put it mildly, which is forcing the Fed’s hand as it relates to continued cuts. To wit: Total change in private employment – Negative 32k Manufacturing and construction – Negative 27k Small businesses – Negative 100k
After a long hiatus (no, not related to the government shutdown) we return with a look at the economy and markets. On the economic front, despite a lack of formal data, signs point to a weakening labor market. Consumers in the bottom 80% have spending post-Covid that has barely kept pace with inflation, with prices higher by around 25% since 2020. Unemployment has climbed to over 9% for those between 20 and 24 years of age. All these are signs of a K-shaped economic recovery, with a strong stock market supporting higher spending for those in the top 20% of incomes. The Fed faces a challenge with a weakening labor market but inflation near 3%; the odds of a December rate cut have fallen to 50%. - weakening job growth this summer (only +22k jobs in August, mostly in health care). - likelihood of significant negative revisions this week. - unemployment that would be over 5% if not for lower labor force participation.
Though technically not the actual title (Oedipus was a tyrant (tyrannus), not a king (rex)), we can never pass over a good pun. Accordingly, we comically (or, maybe satirically) use a play on words here as our theme.
In this episode, we talk a pay homage to Will’s mentor by focusing on value and discipline, two things very much out of favor in the market at present. It is easy to see why as in the wake of five consecutive months of market gains, statistically the odds favor further appreciation. Moreover, even though valuations are high, historically valuation has proven a sub-optimal timing tool as it relates to near-term returns. With the Fed now more inclined to look more at weakening employment versus inflation, accommodative monetary policy seems supportive of valuation even at these elevated levels. - weakening job growth this summer (only +22k jobs in August, mostly in health care). - likelihood of significant negative revisions this week. - unemployment that would be over 5% if not for lower labor force participation.
In this episode, we talk a lot about the job market, which is anything but hot, and its implications for the Fed, which is under pressure. All of the below tend to support President Trump’s criticism of Powell being “too late”: - weakening job growth this summer (only +22k jobs in August, mostly in health care). - likelihood of significant negative revisions this week. - unemployment that would be over 5% if not for lower labor force participation.
In this episode, Will and Adam examine former Secretary of Labor Robert Reich’s comments comparing today to the Gilded Age. We acknowledge there are several similarities, including increasing wealth disparity, the emergence of disruptive technology, and widespread commingling of government with business. We specifically discuss the recent discussion around the government taking stake in public companies, which, though has a precedent, was used in the past during times of financial crisis, i.e., to keep automakers afloat during the financial crisis.
In this episode, we provide a recap on earnings so far in Q2, which, so far, have been good enough for the market to remain near all-time highs. We also delve a little deeper into some of the megacap earnings, especially as it relates to whether accounting rules are optically improving earnings while cash flow is shrinking as spending on capital expenditures, specifically AI chips, is draining corporate coffers. To wit, free cash flow versus capex for the four biggest spenders (GOOG, META, AMZN, and MSFT) is as follows (in billions):
