THEME: Sing or Singed🔥

April 25, 2022

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

Credit: Photo and graphics by Michael Ashley

THEME: Sing or Singed🔥

GL🌍BAL

• CØVID: The International Monetary Fund (IMF) remains too optimistic even after downgrading its global growth outlook again in response to Russia’s war and supply disruptions from China’s Zero-COVID policy
• Alphaville: The Japanese Yen has declined sharply since early March and more so last week; it is at levels not seen in 20 years!!💴Simultaneously, 10-year Japanese government bond yields are up “huge” from 0.15% to 0.25%
• SolemnlXi swear: Xi Jinping and the Solomon Islands entered a security agreement where China can station ships and security forces in the South Pacific island chain 🏝 Australia, New Zealand, Japan, and the U.S. are in an uproar
• Mr. Putin’s Neighborhood: As hinted in last week’s update, Russia might not stop at Ukraine. Now, in a new rendition of Won’t You Be My Neighbor🎼, a Russian commander is signaling that the Transnistria region of Moldova (on Ukraine’s border, where separatists backed by Moscow hold sway) could be targeted💣
• Ill’in: Putin, in a televised meeting with Defense Minister Sergei Shoigu, is slouching, jerking his body, taping his right foot, gripping a table for stability, speaking softly, and bobbing a bloated head — this is not a projection of power but of illness — rumors of cancer, Parkinson’s, and thyroid disease
• Rubble: As mentioned a couple of weeks ago, Russia looks to be in default on its bonds. By May 4, owners of default protection (swaps) could start to get paid on $40 billion of contracts — whoever is on the other side of that deal will be singed🔥
• Unwind: Vladimir Putin ordered Russian companies to delist their overseas shares (depository receipts), further solidifying Russia’s time travel back several decades
• Macron, Macron defeated Marine Le Pen to be the first re-elected French president in two decades — but voter abstention rate was the highest in 50 years and protests broke out in Paris

BIZNOMIC$

• inDEBTed: How can the U.S. handle its huge debt burden if interest rates go up? As long as real rates remain negative or the economy (GDP) grows faster than the debt, it should be okay. With the 10-year Treasury yield near 2.9% and inflation at 8.5%, the real value of the debt is declining by -5.6%— It’s all relative as the great economist Albert Einstein once said💡
• Tighter: Monetary tightening by the Federal Reserve always leads to a slowdown, but not necessarily a recession; in 3 of 13 tightening cycles, growth slowed but remained positive
• The unMasked Singer: Sing and dance away without a mask on your next flight as most U.S. travel mask mandates were dropped when federal U.S. District Judge Kathryn Kimball Mizelle in Florida ruled the directive “unlawful”🤔 — BTW, the last unMasked Singer was Rudy Giuliani😫
• Dropflix: Netflix lost subscribers for the first time in a decade — and now trades for 3x revenues at a price-to-earnings ratio of 21. Hedge fund manager Bill Ackman took a $400MM loss on his shares — Netflix n’ chills💀
• HelpWanted: America’s job market is hottt. New unemployment claims dropped to 184K. Fewer people claim unemployment benefits now than at any time since 1970 when the population was 1/3 smaller— This is generally a positive economic indicator: more employment, more income, more spending🛍
• I want half: Federal Reserve Chair Jerome Powell blessed the idea of a ½% interest-rate hike next month as well as further interest rate moves higher to curb inflation — quite the sentiment swing from last year!
• Stayflation: As we approach the 1-year anniversary of recent inflation spikes, a higher base inflation rate should slow down the relative growth rate of inflation — in English, inflation going from 2% to 8% creates a larger spike than when it goes from 8% to 9% — Nonetheless, inflation is not disappearing anytime soon
• Bondage: Why own bonds? A fall in the long end of the yield curve (and a commensurate increase in bond prices) could occur in the second half of the year if either inflation retreats or the U.S. economy weakens — i.e., bonds still seek to provide balance for investment portfolios
• PalmOil🌴 Indonesia, the largest palm oil producer, will ban all exports of edible oil amid a shortage from weak output and the loss of Ukrainian sunflower oil — a move that caught countries and markets by surprise — 🌻panic buying of sunflower oil has begun in France, U.K., Iceland, Spain, and Turkey
• Schoolhouse Rock: Blackstone will buy PS Business Parks (office and industrial real estate) for $7.6B and pay $13B for American Campus Communities which owns student apartment complexes — expect rents to rise — private/real estate investments are the way to gain exposure to deals like these

CONTENT

• InfiReal: L.A. based metaverse pioneer Infinite Reality [cool website] will acquire e-sports conglomerate RektGlobal for $470MM; and Marina del Rey based Genies raised $150MM to make avatars🧟‍♀️ — Venture capital is the way to access deals like these
• Are your ears burning? Skullcandy’s ridiculously cheesy earbud collaboration with Doritos nacho cheese flavored chips is already sold out of all 420 pairs🎧 — yes, 420
• Katsuya, the trendy L.A. sushi playground, opened last month in Manhattan, NY🍣

PERSONAL

• Green: Attended a lovely evening charity event last week in Palos Verdes supporting Grades of Green
• Match-matcha-man: Compliance might not allow an outright recommendation, but my go-to café drink lately has been a soy-matcha-latte with a double shot of espresso🍵just sayin’
• Milken: Find me next week at Milken events in Beverly Hills/Los Angeles

Best wishes for the week ahead😊
Michael
~~~

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-22–14

. . .

Also published on LinkedIn.