September 11, 2023

Shoppers Start to Scale Back Spending, Kroger Warns

📰 News Organizations

  • Kroger Sales Show Shoppers Are Pulling Back. Kroger executives said inflation, high interest rates, and reduced government benefits are stretching shoppers’ budgets. Lower-income customers are buying smaller items and cheaper products.

  • Lending by US Banks Rebounds. Commercial and industrial loans rebounded by a seasonally adjusted $6.9 billion to $2.76 trillion in the week ending Aug. 30, the Fed said Friday. Lending has been dropping for four straight months through July following the collapse of Silicon Valley Bank.

  • Ripple Buys Crypto Infrastructure Startup In Its Second Acquisition Of 2023. Ripple announced on Friday it will acquire Fortress Trust, a startup specializing in crypto infrastructure, for an undisclosed sum. The deal will give Ripple a license in Nevada and allow it to expand.

  • Intuit Deceived Users With Offers Of ‘Free’ Tax Products, FTC Judge Rules. A Federal Trade Commission judge issued an initial ruling against Intuit, the maker of TurboTax, saying the company misled consumers with ads for free products.

  • Uber Working on TaskRabbit-Like Service in Potential Expansion. The potential new service, codenamed “Chore,” was discovered inside of Uber’s iPhone app within hidden code strings. According to the code, a “tasker” can be hired for a minimum of one hour.

  • Roblox Opens Marketplace to Masses. The company said on Friday that subscribers to the Roblox app’s upper-tier premium plans will be able to sell their 3D goods to other users. By allowing Roblox users to create and sell 3D goods, the company could gain more paid subscribers.

🐦 Twitter

  • The China/US decoupling is gaining steam. A good reflection of that dynamic is that Chinese share of US imports is on track to fall in half within a year. The decoupling is rewriting global supply chains. Broad based set of gainers, including MEX, CAN, JPN, Asia. Source.

  • Mortgage applications to buy a house are now lower than back during the post real estate recession GFC time period of 2009 to 2015. That impacts many different job categories. Real estate agents, home inspectors, mortgage brokers, and many others that are now in a deep recession. Source.

  • The pace of wage growth has slowed dramatically per Atlanta Fed. The current change of -2.8% over past year is just slightly worse than the year/year pace seen in late 2009 (a change of -2.7 percentage points). Source.

  • The value of global bonds dropped another $273bn this past week as the interest rate world is just repricing for higher real yields given the high level of govt debt in the US (current budget deficit 9% of GDP) which leads to global crowding out. Source.

  • End-August EBIT/EV ratio out 1 bp to 3.79 from 3.78. Still unusually high--higher than in 2000 and 2009. When the ratio goes up, value underperforms. When it goes down, value outperforms. Source.

Inflation and liquidity impact stock market performance. Historically, though, the business cycles have been the key determinant for equity returns.

Patrick Saner

📓 Online Publications

  • Consumer Homebuying Sentiment Has Plateaued At 'Pessimistic'. Most Americans polled by Fannie Mae last month said they would rather buy than rent, but a record-high 82% also said August was a bad time to buy, citing affordability concerns.

  • The "Home ATM" Stays Mostly Closed in Q2. In Q2 2023, mortgage debt increased $90 billion, up from $55 billion in Q1, and down from the cycle peak of $471 billion in Q2 2021. Almost 7 years of declining mortgage debt are distressed sales wiped out a significant amount of debt.

  • Household Net Worth Increased $5.5 Trillion in Q2. The net worth of households and nonprofits rose to $154.3 trillion during the second quarter of 2023. The value of directly and indirectly held corporate equities increased $2.6 trillion and the value of real estate increased $2.5 trillion.

  • AMD's Graphics Card Market Share Bounces Back. While AMD's graphics card shipments were down a whopping 48.7% year over year, shipments surged 46.8% from Q1. That huge increase was likely driven by the depletion of last-gen inventory and the launch of the RX 7600 in May.

  • US Real Housing Prices Outpacing Income. Real housing prices are now growing faster than real disposable income in the United States but that relationship has been relatively stable for the past 50 years or so. Incomes have kept pace with housing prices after accounting for inflation.

🎧 Podcasts

  • Earnings Surprises Amidst Ongoing Decline. In Q2 2023, 79% of S&P 500 companies exceeded earnings per share expectations, and 64% surpassed revenue projections. Nonetheless, the S&P index experienced its third consecutive quarter of year-over-year earnings decline, with a blended decline of -4.1%. Source(18:44)

  • Joe Biden Pushes for Bigger World Bank to Combat China’s Influence. The US has put forth its own plan to bolster the World Bank’s lending capacity by around $25 billion. This new proposal is an alternative to what the Chinese are offering on the other side. Source(3:10)

  • Grindr Loses About 45% of Staff After Strict RTO Policy. About 80 of the 178 employees at the dating app company were forced to resign after the company in August mandated workers return to work in person two days a week. Source(6:50)

  • US to Check on Chips Used in Huawei’s ‘Made in China’ Smartphone. Huawei recently came out with a new smartphone. This has Chinese consumers excited. The phone was a huge hit. But the US House Foreign Affairs Committee says Huawei violated US sanctions to get the chips. Source(5:15)