THEME: Endurance — Crisis, Content, Elections, and Leather versus Lace

March 14, 2022

Michael’s CIO (Check It Out) Report on the week just past — events, sarcasm, and global macro reflections

Photo and graphics by Michael Ashley

THEME: Endurance — Crisis, Content, Elections, and Leather versus Lace

UKRAINE/RUSSIA

• WARning: Social and economic ripple effects from Russia’s invasion of Ukraine have created uncertainty regarding the price and valuation of nearly everything — What is the value of a car if you can’t find gas or what is the value of 847 inoperable McDonald’s restaurants in Russia? Additionally, Boeing and Airbus passenger jets leased in Russia may be written down to zero!
• Crisis: Terrible logistics and morale problems amongst Russian troops is not creating relief for Ukrainian citizens — sadly, it will get worse before it gets better — A humanitarian crisis is at hand as 2.8MM Ukrainians have crossed borders for safety
• 300: Demise of an Empire: Over 300 companies have partially or fully withdrawn from Russia amid the invasion — “This Is Where We Hold Them. This Is Where We Fight.” — Russia is entering a severe recession or worse and could technically default on its debt this Wednesday; Ukraine has already been devastated
• TikTok war: To combat misinformation and reach a broad and relatively young U.S. audience, the White House held a special video briefing on the war for 30 of the most popular content creators on (Chinese owned media company) TikTok — Ironic how the world flips🤸🏽‍♀️ — Note: TikTok may soon sign a deal with Oracle to store U.S. user data in order to assuage security concerns

GLOBAL

• SK: Yoon Suk-yeol won the presidential election by the smallest margin in South Korea’s history, less than 1% — he takes office in May
• Chile swore in its youngest president ever, 36 year old Gabriel Boric, a former student activist with an ambitious social-democratic agenda that we mentioned in December — Boric’s female-majority cabinet was also sworn in😊
• Crude: Oil saw multiple $15 or more bounces up and down last week, rocketing up to $130 on Monday and ending the week around $109 per barrel
• FiNuclear: Europe’s first nuclear plant in 15 years began production on Saturday (13 years behind schedule) — it will reduce energy imports
• CHF: The Swiss franc has rallied strong over the last year and briefly reached parity with the euro before the Swiss central bank intervened
• China targets 2022 growth of 5.5% and further loosened monetary policy to help achieve that — COVID cases are also on an upswing there
• President Maduro released 2 political prisoners after discussions with US about lifting sanctions against Venezuela in exchange for oil

BIZNOMICS

• Flat like the earth🌍 The U.S. Treasury yield curve from the 2-year bond to the 10-year bond has flattened to a ¼% difference. Flattish yield curves are thought to portend economic problems; war, inflation, concerned investors, and a vocal Federal Reserve are all exerting their influence
• The Fed still seems intent on tightening until inflation is under control. The problem is that the Fed is pushing on a string; raising rates does not stem inflation until a tipping point that pushes the economy into a recession — not a cheery prospect
• A quarter: Expect the Fed to raise base interest rates by 0.25% this week
• A nickel: A short squeeze drove nickel prices up +250% in less than 24 hours and sent metal traders into a frenzy
• Mergers and Additions: Even in an imperfect environment, there is room for companies and private equity (PE) firms that are in a strong position (with plenty of capital) to do opportunistic small and midsize additions
• Initech: Pandemic proofing, mandated energy efficiency, and other health and safety aspects could mean obsolescence and reduced values for more than half of existing office real estate😟 — nonetheless, we are seeing new high-end office space command premium pricing in the right places
• DocuSigh😔 Docusign stock fell an additional -20% on Friday and is down -76% from a September 2021 high of $310 to $75
• StayFlation: Prices are up for goods, services, and salaries. Thought-provoking to see wage growth by age cohort [in the chart below] — Gen Z pay up +11%

CONTENT

• Endurance: Dr John Shears and the Falklands Maritime Heritage Trust found Ernest Shackleton’s ship, lost since 1915, in the Weddell Sea off Antarctica — remarkably intact
• Back in play: Major League Baseball is back on track for a full 162-game schedule, starting April 7. And Tom Brady came out of a lengthy two-month retirement😏
• Leather vs. Lace: Carlyle will buy storied Italian motorcycle protective clothing brand Dainese for 630MM euros from Investcorp🏍…and…Savage X Fenty, the Rihanna-founded lingerie company, could be valued at $3 billion💸if it publicly sells shares

PERSONAL

• Niche real estate (RE): I had the pleasure of helping lead an insightful and lively roundtable forum on niche RE investments last week at a marcusEvans Private Wealth Management Summit — outdoor storage, Impact RE, Biolab space🧬, Virtual or metaverse RE, RV parks, Mobile home parks, ⛵Marinas, Campsites🏕, film studios, Cold storage 🧊…

Best wishes for the week ahead😃,
Michael
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Michael Ashley Schulman, CFA
Partner / Chief Investment Officer

“We deliver bespoke investment solutions, innovations, and unique perspectives to you and your family.”

Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22–06

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Originally published on LinkedIn.com.