Operating at the Intersection of Technology and the Capital Markets
Month: August 2022
The 2-Year Treasury yield sits at approximately 3.42%. Therefore the Fed ought to raise the Fed Funds Rate by 100 bps which would put the Fed Funds Rate lower and upper bound at 3.25-3.50%. The next FOMC meeting will be held September 20th and 21st. Simultaneously, the Fed ought to stick to its plan of … Continue reading Powell Should Raise By 100 Basis Points
Google's AI leadership position will pay dividends for decades to come as natural language AI increasingly becomes part of our day-to-day lives. We are only in the first inning of AI's evolution insofar as how we interact with it on a day-to-day basis. Google's AI ingests more data and learns at a faster rate as … Continue reading Don’t Give Up On Google
We do not subscribe to the premise that the consumer is not weakening. If PCE were adjusted for the true cost of price inflation, total real spend would be down year-over-year. We believe that unit sales are down year-over-year across most categories and that "growth" in consumer spending is a function of unit price increases. … Continue reading The Consumer Is Weakening
Back in May we wrote that this is a difficult environment in which to get M&A transactions done. Bloomberg reports that more than $150 billion of M&A deal activity has been "scrapped or stalled" given the interest rate environment and economic backdrop. Our view is that the state of M&A deal activity will get worse … Continue reading The M&A Slowdown
When may this occur? Don't hold your breath. Investors' obsession with interest rates will likely persist until the market finds a bottom. It is unlikely that equity markets will find a bottom while the Fed is tightening monetary policy. We saw the NASDAQ Composite recover in October 2019 as the Fed became more accommodative. We … Continue reading A Return To Fundamental Investing
It appears we were correct several weeks ago when we wrote that the Fed will maintain elevated interest rates for longer than markets expect. What are the repercussions for business? A persistently higher interest rate environment will expose hidden zombie companies much like the dry Paluxy River bed in Texas recently exposed dinosaur tracks. However, … Continue reading Higher Interest Rates & Growth
Today many non-believers got religion and came to the realization that the Fed will have to raise rates a bit higher (north of 4%?) and hold them there for longer in order to fight inflation. A fall or winter Fed pivot feels like more than wishful thinking.Today was the first Chair Powell speech I've heard … Continue reading No More Bear Market Rally
The Fed's motto ought to be "too little, too late", because that is the reality. To use the words "hawkish" and "Fed" in the same sentence is laughable. If we were to play this inconsequential short-term game of a 50 vs. a 75 basis point hike in September we would guess 75 basis points. Core … Continue reading 75 BPS in September If We Were To Guess
It's a bit of an eye test and may require you to pinch and expand your phone screen. The takeaway is that the purple line that exceeds 300% year-over-year growth is the Money Supply (M1) measured at monthly intervals. When the Fed prints money and mails it to people they will spend it. In this … Continue reading Chart of The Day
A piece of simple advice that will help drive M&A-related ROIC significantly higher: acquire quality companies led by quality management teams. Put companies led by quality management teams at the top of your M&A target list. Quality companies led by quality teams cost more, but they trade at a premium for a reason and will … Continue reading Acquire Quality Companies Led By Quality Teams
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