Today’s comment
March 28, 2023
Eoin Treacy
March 29
Video commentary for March 28, 2023
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: dollar extends decline, oil rebound, bitcoin holds breakout, bond yields steady, stocks ease, non-US markets outperform.
Logic, magic and the outlook for retail stocks
This article from Barron’s may be of interest to subscribers. Here is a paragraph:
Investors are worried about a potential recession, but you’ve said that retail discretionary spending is already in a recession. How do you expect it to unfold?
It appears that over the past few months we have seen a consumer discretionary recession. The consumer still has money, but you don’t need a new big screen TV if you bought one during the Covid pandemic, or new outerwear if you bought a new coat last year when people started going out again.
We’re seeing consumers return to pre-pandemic behaviors — things we talked about 10 years ago, like shopping close to need, shopping during events, looking for promotions. The problem, which has been consistent but sequentially improved, is that inventory cannot be adjusted that quickly. Also, when the stimulus dollars flowed, consumers were not as price sensitive because they had money in their pockets. Now the sensitivity has increased.
Is inflation now semi-permanent?
I think so. Prices will hold, and there may be disinflation, but there will not be deflation. We are at a new level because of manpower; we will see some relief in shipping and average unit cost for some ingredients, but labor costs will be sticky. Clothing has been problematic, because the price of shirts has basically been the same for a decade. A little inflation is healthy, but this level has wreaked havoc on demand trends. Your grocery costs at Walmart increased by a percentage in your mid-teens [in recent months]. It is a good indicator of how the whole country is doing.
Eoin Treacy’s view
Penny pinching has come to the consumer sector, and it’s about the clearest sign of reduced purchasing power we can observe. Unemployment hasn’t yet started ticking higher, so for now, consumers don’t need to make major spending adjustments. However, the tightening of monetary conditions continues to tighten the noose, so caution is warranted.
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Sweden is struggling with an economic crisis built at home
This article from Bloomberg may be of interest. Here is a paragraph:
Sweden has long failed its constitutional pledge to provide an affordable place to live for all of its 10.4 million people, but until recently that was masked by the growing economy that had helped hide flaws in the system.
The lack of affordable housing affects recruitment. The Stockholm Chamber of Commerce reported last year that three out of four HR managers said the housing situation made it more difficult for their firms to hire new staff.
Rent is negotiated annually by landlords and the tenants’ association. Proponents say the system helps create a rental market in Stockholm where teachers, police officers, street sweepers and other public servants can afford to live alongside bankers, software developers and civil servants. Yet supply has not kept up with demand for decades. The average waiting time for a rent-controlled apartment is now 9.2 years, but can stretch up to 20 years in some parts of the capital.
Eoin Treacy’s view
Socialism’s only hope of working is to ensure that the cost of living never rises. It means creating a social contract where the only way to generate personal wealth is through ingenuity and productivity. It’s a high bar and seemingly unattainable for long.
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Santander launches a blockchain-based currency service using Ripple’s technology
This article from CNBC may be of interest. Here is the section:
Santander’s blockchain-powered currency platform is currently live in four different countries – Spain, UK, Brazil and Poland. A wider rollout is expected in the coming months, the bank said.
Innoventures, a $200 million fintech or financial technology venture capital fund set up by Santander, was one of a number of investors that participated in Ripple’s first funding round in 2015.
Ripple has partnered with several banks and other financial institutions, including Santander. Banks are less keen on using the firm’s digital currency XRP, but earlier this year two money transfer firms, MoneyGram and Western Union, announced projects involving the cryptocurrency.
On Wednesday, Ripple invested $25 million in a fund started by Blockchain Capital, a venture capital firm dedicated to blockchain.
Eoin Treacy’s view
Ripple first became known as the banks’ symbol of choice, but not much came of the initial enthusiasm. Ethereum later became the vehicle of choice and went on to have a significant bull run.
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Eoin’s Personal Portfolio: Commodity Cards started on March 23, 2023
One of the questions subscribers ask most often is how to find details of my open trades. To make things easier, I will simply repost the latest summary on a daily basis until a change occurs.
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© 2023 Eoin Treacy
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