Tuesday, February 15, 2022
1. The market has reacted favorably to news this morning that Russia says it’s begun to partially pull back from the Ukraine border. The S&P was up 1.4% and the Dow up 1.2%. The only issue is allies on the ground haven’t seen the pullback actually begin. Whoops! But IF true, Putin will have received the metaphorical Smack Down to his candy ass (…still can’t get over the Rock’s arms that were on display at the Super Bowl). So how have these antics benefited Russia to date? Hard to see many positives here. Instead, it’s easy to see the opposite……they’ve managed to strengthen Ukraine’s sovereignty and ensure the Russian neighbor is better armed and prepared with the latest and greatest weaponry. It’s also brought the West and NATO closer together around a common goal and purpose. And, hopefully, opened the eyes of the world to the importance of a reliable energy provider (Germany is still shaking in their boots!). With all due respect (whoever that’s for), the West needs to pull their heads out of the sand and quickly ramp up plans for energy production as well as diversification (e.g. more natural gas). As mentioned the other day, the American energy industry has a very important role to play here. There is abundant supply of clean, affordable energy to support our nation and nations around the world. And if done properly, still focus on the energy transition and balancing the rest of the world dynamics. Remember b*tches….chess, not checkers! (Also, it took everything in me to not include another Rocky IV metaphor in here…..you’re welcome.)
2. An ambitious climb. Aiming higher, and higher and higher. A bird? A plane? No….inflation! I mean, WTF is going on? And when will we see the Fed actually do something swift and decisive to combat it? They are in a tough situation which I sympathize…but their rhetoric alone won’t fix anything. There is a clear lack of faith in policymakers, with 71% of small business owners NOT confident the Federal Reserve can control it. Forcing companies to utilize more capital to purchase bulk inventory to ensure better prices today vs tomorrow AND ensure that they can even get what they need today vs tomorrow (back to the overall supply chain issues currently at play). Not a great situation to be in if you’re a business owner. Also, don’t be tricked into thinking you are only seeing a 7.5% inflation impact (which comes from the CPI). If your purchase habits are as well balanced as the items in the CPI’s basket of goods, you’re likely in line with 7.5%. If not…..well you’re basically f*cked even more.
Example changes worth noting over the past year:
- Gas prices +49.6%
- Hotel rates +23.9%
- Used cars +37.3%
- New cars +11.8%
- Home values +19.6%
- Chicken +10.4%
- Beef +13.0%
- Pork +15.1%
- Fish +8.4% (pescatarian’s for the win!!!!)
Fed Reserve Chair J.Powell (aka Powdogg) confirmed the Central Bank is prepared to raise rates more rapidly than originally planned which will likely begin in March. Goldman Sachs estimates we could potentially see 7 rate hikes this year. So much for what was originally dubbed “transitory inflation”. And the key to it all…can they raise these rates without triggering a recession? Time will tell, but don’t bank on it!
3. Let’s end on something a little lighter. Coinbase, a leading cryptocurrency exchange, had an embarrassing moment on Sunday during the SuperBowl. After spending a hefty amount of money for their Super Bowl commercial they were apparently shocked....that it actually worked!! It actually drove people (over 20 million people in one minute) to their landing page where they had promised $15 in Bitcoin for those who signed up for an account. The only small/tiny/unforeseen/miscalculated problem they experienced was six times more engagement than planned. Leading to millions of potential new customers with a message of “unplanned maintenance.” Disaster scenario right!?!?!? Well, maybe not so after all. For starters, the commercial itself was a hit and the aftermath even more so with everyone posting videos on social media of their watch party all sitting in silence anticipating if the square box/QR code (# WindowsScreenSaver # DVDscreensaver # theOffice) would hit the perfect corner edge…..only to erupt in wild excitement and cheer if it did. And second, and more importantly, the Coinbase app went boomtown and ended up landing at the #2 spot on Apple’s App Store. It’s amazing if you think about it……square box bouncing around a black tv screen, triggers an insane amount of people to go nucking futs, crashing the intended destination for those people and still making it one of the top apps of the year. If aliens are watching us what must they be thinking??
4. Noteworthy earnings to wrap up earnings season this week are....AirBNB (ABNB), WalMart (WMT) and Nvidia (NVDA). Can’t wait to see how they will be justifying the need for price increases to combat rising costs……..while continuing to deliver outsized profits. In the end, I clearly support a company’s ability to pull supply and demand levers (price being one of them), but I do hope they turn around and invest that in their people (another shout-out to Amazon!!) and in technologies that ultimately lower the overall costs based which can hopefully then be passed down to consumers!