#59 – Mkts, Layoffs, Inflation, Fed, NFLX, TSLA

October 20, 2022

Markets

A key to calming markets is settling war in Ukraine. Pipeline blown up. Donbas annexed. Zelensky pushing for Nato. 

Hurricane Ian. Biden says get vaccinated. Actually, let’s keep it real. As I was Googling this video to queue up, it appears it was cherry picked from something in 2022. $30-$50b.  

Layoffs and Freezes and Downgrades and Upgrades

  • Lyft has frozen hiring. 
  • Meta froze hiring. 
  • Docusign cutting 9% of workforce. 

Apple downgrade: The iPhone maker dropped 4.9% after Bank of America cut its rating to neutral from buy, warning of weaker consumer demand for its popular devices. The selloff erased roughly $120 billion from Apple’s market capitalization.

Nike down 10%. Inventory up 44% QoQ.  Nike’s inventories in North America grew by 65% compared with the prior year, management said, and by 44% on a global scale. The company will be forced to heavily discount its products to get rid of the excess off-seasonal goods, management said, which will have a negative impact on margins.

Netflix

Netflix upgrade:

Netflix up 35% in quarter from $175 to $240. 

  • Advertising $’s. $65/1000 views. 
  • Advertisers may allocate from Meta to Netflix. 

Federal Reserve

The Fed led by Jerome Powell raised the Fed Funds rate 75 bps to 3.0 - 3.25%. Expectation is now 4.0 - 4.5% by year end. Powell is determined to sink the economy to drive inflation to 2%. Why 2 and not 3%. We have a strong economy, strong underlying demand, low unemployment and the Fed is determined to destroy that. Data suggests inflation is retreating. 

CathieDWood (@Cathie Wood) Tweeted: The Fed is basing monetary policy decisions on lagging indicators: employment and core inflation. Leading inflation indicators like gold and copper are flagging the risk of deflation. Even the oil price has dropped more than 35% from its peak, erasing most of the gain this year. 

Commodities

Commodities are down. 

  • Lumber: $410 down from $1300 in February 2022. 
  • Copper at $334 from high of $494 in March. 
  • Iron Ore $150 to $109.  
  • Oil? Not so much

Housing

Housing: 30 year mortgage rate is up from 3% to 7%. This has the effect of doubling the payment on the median house over the last year. 2 years ago: 30-yr mortgage rate was 2.88% & average new home price in the US was $405k. Today: 30-yr mortgage rate is 6.7% & average new home price is $522k.Result: $23k increase in down payment (assuming 20% down) and 100% increase in monthly payment (from $1,345 to $2,694).

Home Sellers are Scarce: Homeowners with low mortgage rates are balking at the prospect of selling their homes to borrow at much higher rates for their next homes, a development that could limit the supply of houses for sale for years to come.The number of newly listed homes in the four weeks ended Sept. 18 fell 20% year-over-year, according to real-estate brokerage Redfin Corp.

Tesla

Tesla Recall. NHTSA FUD. Tesla is recalling more than a million cars because of defects in their automatic windows that could injure passengers, the nation's auto safety regulator said. 

  • Great example of why its important to seek the truth and understanding. Stock is down for no logical reason; save market fears. 

FSD Beta. Rolling out to all owners with driving score >80. 

Margin domination: 50% CAGR Revenue and earnings. 

- direct distribution w/o 3rd party dealers

- vertical integration through owning their supply chain

- manufacturing & materials innovations

- higher ASPs

- industry leading output rates

- FSD & software rev

Tesla AI Day. https://twitter.com/elonmusk/status/1575499184764899328?s=51&t=_58cbojJsDAvJdNOoPt_-g

  • Note, this event is meant for recruiting AI & robotics engineers, so will be highly technical
  • As well as advanced chip & supercomputer engineers for next-gen training & inference

What are Jim and Mary thinking? 

Tesla Twitter: https://twitter.com/techemails/status/1575598387335901190?s=51&t=zkcLpxX1jtdlxESfptGgiw

Recommendations: 

  • Dahmer?? 
  • Elvis? Maybe. 
  • House of Dragon. Last episode jumped 10 years. 

Quote: Children are happy because: 

  • They’re not self conscious. 
  • They lack a sense of time pressure
  • They’ve no goals. 
I'm Sean Hathaway

Hi, I'm Sean

20 years of finance experience and obsessed with high quality results.

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