THEME: Mayday, happy May Day

May 2, 2022

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

Credit: Graphics by Michael Ashley

THEME: Mayday, happy May Day

GL🌍BAL

• May Day: The U.S. economy plunges into summer mode with still positive growth and domestic demand — the economy can remain hearty while price inflation moderates to Stayflation
• Mayday: Globally, recession fears have displaced inflation as a top concern as Chinese lockdowns from its Zero-COVID policy, fallout from Russia’s spreading war, higher energy costs in Europe, and tighter U.S. financial conditions intensify — A strong rise in the U.S. dollar currency is an indicator of this global distress — As mentioned last week, international growth projections are too optimistic — Slowbalization anyone?
• EverChina: COVID-related staff shortages in China have caused a renewed backlog of cargo ships waiting to unload/load (figuratively grounding ships around Shanghai and Ningbo-Zhoushan) and exasperating supply-chain problems — Expect more economic and policy stimulus from China to aid its economy
• Frenemies: Both Russia and China are lowering interest rates to prop their economies. China also reaffirmed its support for Putin—This may cause Europeans to re-evaluate their economic ties to Beijing
• Not rushin’: News headlines are coming round to the idea that Russia’s horrific war in Ukraine may drag on for months or years — but no one really knows — Putin is further solidifying Russia’s time travel back several decades to a different era

BIZNOMIC$

• Markets are competitive mechanisms: The Fed is raising interest rates to slow activity and lower inflation, but the impact (if it even works) will take time to materialize — Thus every day a debate plays out in the stock and bond markets between those that believe markets are underestimating inflation and overstating recession risks and those that believe the opposite
• Pow!!: Powell will probably implement ½% interest rate increases in May and June and then slow down to ¼% increases later in the year — It’s beneficial to remind ourselves that the Fed has only raised short-term interest rates +¼% so far, yet mortgage rates are up +2% year-to-date and real five-year Treasury yields are up over +1% — Rising interest rates pose risks to companies with no earnings, leveraged balance sheets, or hopes of future cashflows
• Grease Lightning: In a week full of surprises, Ford will deliver F-150 Lightning electric pickups to consumers ahead of Tesla’s Cybertruck (now scheduled for 2023)⚡systematic, hydromatic, ultramatic
• LuluLeMembership: Recall previous discussions about the subscription economy💸[see February’s tidbit “Subscribe to mine”]? Lululemon will launch a monthly membership program this fall for clothes, events, and classes, and create an “immersive fitness marketplace” along with their Mirror service and other providers💪🏼
• Game of Homes🛡⚔ Home prices have not retreated but sales are down. Everyone points to higher mortgage rates, and yes they are to blame, but so too is economic uncertainty, declining stock markets, global fear from Russia’s war with Ukraine and Moldova,…and what might be next
• Twivate: Elon Musk will take Twitter private for $44B🤫deal to close in 3 to 6 months
• Miso popular: Following up on our Miso Robotle tidbit in March about Chipotle and White Castle incorporating fast-food robots,🤡Jack in the Box will test a Miso Robotics arm for frying and Panera will test a Miso coffee system — examples of how companies can invest in technology, increase supply, improve productivity, and fight inflation
• No Heads, No Tails: Central African Republic becomes the second country (after El Salvador) to embrace Bitcoin as legal tender

CONTENT

• Snap, Pixy, Pop: Snap launched a camera drone called Pixy, Dress Up for augmented clothes shopping, and other augmented features for pop music festivals and video editing🤳🏼🎶
• MetaRhyme: The metaverse will be great someday, but wouldn’t it be nice if some of it rhymed? — just sayin’
• 3D-egas: Christie’s auction house takes a $25M Degas sculpture on tour with hologram technology from L.A.’s Proto. Also happening is the Venice Biennale art show 🖼
• CryptOmaha: Investing icon Warren Buffet downplayed Bitcoin at his annual investor meeting in Omaha; and Marc Andreessen (co-founder of VC firm Andreessen Horowitz) downplayed Buffet’s crypto criticism — BTW: Here is a 2014 video of Buffett blasting Bitcoin as a “mirage”🤔
• TikTok, which reached 1B active users last October, is the #1 downloaded app globally — maybe the CIO Report should be on it?🙊

PERSONAL

• Quoted: Running Point and I were quoted in two separate articles last week regarding the declining Japanese Yen and Starbucks' unflattering transition to be just another fast-food establishment🚘☕
• Milken: Find me this week at Milken events in Beverly Hills/Los Angeles and a VC dinner in Santa Monica
• PE/PC: Find me at a private equity and private credit event in Laguna on May 10
• M.C.🎙 Will moderate a panel of CIOs and strategists at the Markets Group Private Wealth Southern California Forum on May 11
• MB: Find Running Point at Celebrate Manhattan Beach on May 13 at the Westdrift Hotel

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

“We deliver custom 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-22–18

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Also published on LinkedIn.