July 2023 Dear clients and fellow shareholders: The 15% S&P 500 increase during the first half of 2023 caught most pundits off guard – a fact that likely says much more about pundits than the stock market itself. (In December, the median forecast of 41 strategists polled by Reuters was a 6% return for the S&P 500 for the year.) It serves as a reminder of the substantial risk long-term investors assume when they try to predict short-term movements in stock prices – regardless of whether their forecasts are based on politics, the economy, underlying business fundamentals, the Federal Reserve … Read More
Hollywood unions battle tech threat
I don’t fault union officials for doing everything possible to save the jobs of their members, but I have bad news for the writers and actors unions currently on strike: if technology can effectively and efficiently replace a human, it will. In May, 11,500 movie and television writers went on strike, followed by the 160,000 Screen Actors Guild (SAG) members on July 14. (Disclosure: I am a former SAG member.) In addition to a renegotiation of residuals from streaming media, the unions are seeking guaranteed minimum employment protection from artificial intelligence and computer generated/enhanced on-screen background extras. As an industry … Read More
Bailout discrimination is logically inconsistent
In declaring the president’s plan to cancel student loan debt unconstitutional, the U.S. Supreme Court did not rule on the morality or advisability of forgiving the loans. While I am personally a strong proponent of people fulfilling their contractual obligations, there is a logical inconsistency at work in Washington. I can forgive student loan borrowers who wonder why their poor college funding/studies decisions aren’t treated similarly as big companies that foolishly ignore FDIC insurance limits. The FDIC mistakenly released a document that revealed private information about the largest depositors at the failed Silicon Valley Bank (SVB). These companies included venture … Read More
Unintended consequences often ignored
To help those allergic to sesame seeds make better dietary choices, Congress passed a law requiring food manufacturers to label sesame on their products. In response to the law, many companies began using sesame in their products for the first time, a measure to prevent potential recalls due to trace amounts of unlabeled items. By including “sesame” on the label, the companies had complied with the law, even though those affected are now inadvertently consuming sesame in products they had safely eaten for years. The law of unintended consequences. In response to a late 19th century epidemic of cobra attacks … Read More
UT softball attracts huge TV viewership
In the past 10 years I have attended more University of Tennessee softball games than UT football and basketball games combined. Apparently, my affinity for college softball isn’t uncommon, at least not according to television ratings. According to Sports Media Watch, on June 3, the SEC champion Lady Vols softball team game against Oklahoma was broadcast on ABC, drawing 1.4 million viewers. That same day, 736,000 people watched the UT vs. Clemson men’s baseball game on ESPN2. (For context, 21 bowl games last football season drew fewer viewers than the UT-Oklahoma softball game, along with every televised home game in … Read More
Debt lever tilts both ways
While commentators and analysts focus attention on the ballooning U.S. national debt, it is tempting to overlook the importance – and threat – posed by total debt, including consumer; corporate; and local, state and federal governments. Debt is a lever that creates huge potential benefits in periods of low and declining interest rates. And it is a massive threat when rates are high or increasing. The official federal debt is currently $31.9 trillion, or 120% of annual Gross Domestic Product. (GDP is a measure of the total size of a country’s economy.) But that figure only paints part of the … Read More
All aboard the AI bandwagon
The newest way to cheaply imply that your company is on the cutting edge of technology is to repeatedly chant “Artificial Intelligence” (AI) to shareholders and customers. In first quarter conference calls with analysts, references to AI increased 77% from a year earlier. Alphabet (Google) mentioned AI 65 times in its April call, compared to only 7 times in April 2022. Meta (Facebook) and Microsoft combined for 109 AI references, compared to 29 a year earlier. As Jeremy Achin, CEO of DataRobot explains, “everyone knows you have to have machine learning [AI] in your story or you’re not sexy.” DataRobot … Read More
Real crises are seldom predicted on social media
If your social media feed or favorite cable news show is full of dire warnings for weeks about an impending economic crisis, that’s a pretty good clue that there is no impending economic crisis. Real financial calamities are almost always surprises, although most are followed by plenty of after-the-fact claims of “I told you so.” As I think about the real financial crises that have occurred in the almost 40 years I’ve been investing, I realize that none were discussed on television for weeks ahead of time. And the horrible things that are predicted for weeks on television seldom, if … Read More
Retail theft is a growing and expensive problem
The economic value of social order and peace is significant, and it seems we are seeing the reverse of that some areas of the U.S. In a recent press release, retail giant Target said that merchandise theft will likely rob shareholders of $500 million of earnings this year – bringing the two-year theft total to $2 billion. Walmart lost $3 billion to thieves in 2022. Total U.S. retail theft last year is estimated at more than $100 billion. This is not an old problem that has suddenly become a convenient excuse for big businesses to demonstrate some long-held animus toward … Read More
Retail theft is a growing and expensive problem
The economic value of social order and peace is significant, and it seems we are seeing the reverse of that some areas of the U.S. In a recent press release, retail giant Target said that merchandise theft will likely rob shareholders of $500 million of earnings this year – bringing the two-year theft total to $2 billion. Walmart lost $3 billion to thieves in 2022. Total U.S. retail theft last year is estimated at more than $100 billion. This is not an old problem that has suddenly become a convenient excuse for big businesses to demonstrate some long-held animus toward … Read More