Remote Work
Another sign that workers will be coming back to the office was a report that showed tech companies over-hired and that working from home did not prove to be that effective. Year to date, tech companies have laid off approximately 168,000 people and the layoffs are occurring for a couple reasons. First, they discovered that people were working only 4 to 5 hours a day logging in at 11 o’clock in the morning and wrapping up and logging off by 4:30 that same day. It was also discovered that some tech companies did become overzealous and looked at hiring more people as an ego boost and an indication that they felt business was going to grow rapidly in the future and they would need a lot of employees. Part of the hiring was done to keep talented employees from going to the competition, a hoarding of employee talent so to speak. No matter how you slice it, this is not a problem with the economy, but more with tech companies and people working from home.
Special Purpose Acquisition Companies
Another year has passed, and more data is in on what a bad investment Special Purpose Acquisition Companies, also known as SPACs, were. I hate to tell people I told you so but back when these blind investment pools were hot, we warned people. In 2022 the total write downs amounted to $11.6 billion a huge increase from $2.7 billion in 2021. The reason for the write downs is based on what is known as goodwill. This comes about when a business is acquired for more than the value of its assets. Accounting rules require the measurement of fair value to the assets annually. If that figure is less than the amount recorded in the books, the value of goodwill must be reduced. I have been in the investment world for 40 years, and I continue to see these hype investments that make Wall Street a lot of money. Unfortunately, in many cases the average investor loses money. This is why I continue to be a value investor and invest in a company when it’s on sale and sell it when it’s overpriced.
Value Stocks
I know people are fearful about investing now and when I tell them I expect to have a very good year come December 31st, I think they question my thoughts. Currently value stocks are very inexpensive compared to growth stocks. They are discounted more than they have been for four-fifths of the time in the history of the stock market. Another study also showed when inflation runs between 4% and 8% per year value stocks outperform growth stocks by 6 to 8%. People may be afraid of inflation, but it actually is a benefit to value stocks. I will keep investing!
YouTube TV for NFL Streaming
You may have heard that YouTube, which is owned by Alphabet, purchased the NFL Sunday Ticket package for $2 billion/year for the next seven years. DIRECTV had been paying $1.5 billion annually and decided to let the contract go. Downside is a full season of Sunday ticket will now cost $449 if you don’t want to subscribe to YouTube TV. That is up from the $300 that DIRECTV was charging per year. If you want the red zone channel that will cost an additional $40 for the subscription. Sorry about the bad news but there is some good news and that is if you sign up before June 6th you will get the Sunday Ticket at a discounted price of $349, a $100 discount. There are other ways to get a lower price which would include paying $72.19/month for YouTube TV's base video package, which includes major broadcast and cable networks.
Patriotism
Patriotism in the United States has dropped to 38% of Americans who highly value patriotism and say they are extremely proud to be an American. This could be part of the reason why last year the United States army, which I was proud to serve in back in 1974, hit only 75% of the recruiting target for the year. In addition to not wanting to serve, the military also does require soldiers to be able bodied and in decent shape. Currently 77% of young Americans are unfit to serve for health reasons. The military is what keeps our nation strong and safe. I think we need to keep our teenagers away from donuts and fast food. Also, let’s stop knocking our country and talk about how great it can be.
Tik Tok Ban
Last week, the lawmakers of Montana voted to ban TikTok in the entire state of Montana. The bill will be sent to the governor to sign within the next couple of weeks after the Montana house voted 54 to 43 to ban TikTok. It came along with fines for violating the law of $10,000 per violation. There could be other states that follow Montana as a domino effect could begin, but it is expected that there will be legal challenges, and this could perhaps go all the way to the Supreme Court.
Teenage Labor Force
Unemployment is now just 3.5%, but I was shocked to learn that it’s 9.8% for teenagers. Looking at the labor force participation back in the late 70s for 16 to 19-year-olds It was nearly 60%. Today, it is only 37%. It is not all the teenagers' faults. There are laws in some states that 14 to 15-year-olds must get permission from the state to work. I believe there should be limits for teenagers but overall, I do believe that teenagers working creates a good foundation for productive work habits and they learn the importance of being punctual and dependable. It can also teach them the value of money and how to invest and save as they grow older. Some people may not like the fact that I am going to blame some parents for making things too easy for kids. Life is not always easy and it’s important to challenge oneself and learn time management. My own personal view on my kids was in high school and through college my kids either had to play a substantial sport or work a part-time job. I’m happy to report that all four of my kids are doing well (ages 20 to 40) and have not suffered at all from learning about discipline and hard work at a young age. It was not cruel, it was parenting.
Manufacturing Facilities
Some good news was released last week on Manufacturing. I’m not talking about any surveys; I’m talking about construction of new US manufacturing facilities. It hit an all-time record in 2022 of $108. This is helping the current construction industry and going forward there will be more well-paying manufacturing jobs here in the United States.
Lending Capacity
Last week the IMF estimated that the US will see about a 1% decline in lending capacity in 2023. Based on that estimate they are saying the GDP, which is the Gross Domestic Product, could drop by about 0.44%.
India’s Population
It appears that this year, China will lose its top spot regarding having the world's largest population. It is predicted by the end of this year India's population will stand at 1.429 billion, more than China’s population of 1.426 billion. India is the world's largest democracy and is a natural partner and investment destination for the United States. The economy in India suffers from 16.4% of the population living in poverty and a labor force participation rate of only 39.8%, well below the US participation rate at 62.6%. The job market is so tight in India that when they posted 35,000 job openings for their national railway system, more than 10 million people applied for jobs. The good news is that as relations with China continue to have concerns, perhaps some of those jobs could move to India. Currently production line workers in China make five times the salary that would be paid to a worker in India.
Streaming Services
If you feel like you just don’t have enough time to watch all the movies and TV programs you would like, it is not your fault. I remember in the old days we used to say there’s nothing to watch on TV. Now with all the streaming services, at any time of day or night you have at your disposal 36,674 TV shows and movies and this is just from the nine largest subscription services. To make you feel a little bit better not all of them are quality movies or shows. According to Reelgood’s data, less than half of those available TV shows and movies are considered to be quality. So now we’ve narrowed it down to about 16,870 based on the data. I must admit, there are times when I’m looking for something to watch and I still can’t find anything worthwhile. I guess I need to spend more time finding the nearly 17,000 quality shows.
EV’s for the Environment
We are in such a hurry to clean the environment by switching our vehicles to clean burning EV’s that we could be destroying our country over the next 50 years. The United States has always been a good producer of oil, but the same cannot be said for the required materials it takes to make an electric vehicle. A big component of electric vehicles is copper and about 40% of the worlds copper supplies comes from Perú and Chile, both have unstable governments. I hate seeing more dependence on China but 60% of the world's lithium is processed in China and 47% of copper is smelted there. Because of our pollution laws the United States only has two copper smelters in operation far below the 12 that we used to have. What is even worse in my opinion, another important component is cobalt and 70% comes from the Democratic Republic of the Congo. That’s a country we should have a long-term commitment to, NOT! I love clean air as much as the next guy, but maybe we need to slow down on this rush to EV’s a little bit before we get the country so dependent on foreign governments. I guess we did not learn from what we went through with oil and the Middle East in the 70’s.
Vehicle Value
At the end of this year, I will be considering what to do with the lease on my Escalade. The problem I will be facing like many of those who lease is that the value of the vehicle will be higher than the residual value. Chances are I will either buy the car or redo the lease for another couple years. This is creating problems for dealers because many who lease their cars are not turning them in at the rate that they used to. This is leading to a lower inventory of used cars. New vehicle inventory is up 73% from a year ago to 1.8 million units as of last month. That is a big improvement from a year ago but compared to inventory before the pandemic, it was over 3.5 million units. It does not appear this will resolve itself at least for another year or so as car manufacturers continue to produce as many cars as they can.