Post 236

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.

I’m back from our vacation in Costa Rica.  Lots of nice birds and some spider monkeys.  Diet time.

Summary

News

Movies

Top five worldwide grossing movies so far in 2024 (boxofficemojo):

  1. Dune: Part Two: $179 million
  2. The Beekeeper: $151 million
  3. Bob Marley: One Love: $146 million
  4. Mean Girls: $104 million
  5. Argylle: $92 million

Top three from all of last year:

  1. Barbie: $1.45 billion
  2. The Super Mario Bros. Movie: $1.36 billion
  3. Oppenheimer: $956 million

Top Five in 1977:

  1. Star Wars: Episode IV – A New hope: $307 million
  2. $1.562 billion adjusted for inflation
  3. Smokey and the Bandit: $126 million
  4. Close Encounters of the Third Kind: $116 million
  5. Saturday Night Fever: $94 million
  6. A Bridge Too Far: $51 million

Some of the top Songs that year:

  • Hotel California: Eagles
  • Tonight’s The Night: Rod Stewart
  • I Just Want To Be Your Everything: Andy Gibb
  • Evergreen: Barbara Streisand
  • Undercover Angel: Alan O’Day
  • Dancing Queen: ABBA
    • Their only number one hit in the US.
  • Margaritaville: Jimmy Buffet
  • Telephone Line: ELO 
  • Rich Girl: Hall & Oates 
  • Car Wash: Rose Royce (love that name) 
  • On and On: Stephen Bishop
  • Looks Like We Made It: Barry Manilow

PM: Note that these are just some of the top songs and not in order as the top songs of the year depend on the source.

Boing, Boing, Gone

The Federal Aviation Administration or FAA, has completed its audit of Boeing and its supplier Spirit AeroSystems:

  • It “found multiple instances where the companies allegedly failed to comply with manufacturing quality control requirements.”
  • The issues were said to be “systemic” and that improving safety standards at Boeing requires:
    • “Profound improvements.” 
    • “Foundational change.”
  • Boing has 90 days to put together a plan that will address these issues.
  • In the meantime, the FAA has halted production expansion of the Boeing 737 MAX.
  • PM: Bad news indeed but let’s see if Boeing subsequently announces a share buy-back.

Food For Thought

According to the USDA:

  • Prices for food-at-home were up 5.0% in 2023.
    • In 2022 prices rose 11.4%.
    • The 20-year average annual price increase is 2.5%.
  • Pork was the only food category that fell in price in 2023: -1.2%.
  • From 2019, prices are up 25%.

Americans spent 11.3% of their disposable personal income on food in 2022.

  • For the lowest quintile (5th) of income earners: 31.2%.
    • Equating to $5,090.
    • For the highest quintile: 8.0%
      • Equating to $15,713.
  • Similar numbers to that of the 1980s.

The top three field crops in the US are:

  • Corn
  • Wheat
  • Soybeans
  • The average price of these three crops was up 83% in 2022.

Used Car Prices

The Manheim Used Car Index:

  • Feb 2020 – Pre-COVID: 156.6
  • Dec 2021 – Peak: 257.7
  •  Jan 2024: 204.0
    • Down from peak: -21%
    • Up from pre-COVID: +30%
  • This is impacting profits at car rental companies as they have to write down the price that they expect to get when they retire cars from their fleet.

Volkswagen

Some brands owned by Volkswagen:

  • Audi
  • Porsche
  • Bentley
  • Scania
  • Skoda
  • Lamborghini
  • Bugatti (prices range from $3 million to $12 million.  PM: I wonder how much an oil change costs)

4Q/2023 Results

  • Sales were up 14.5%.
  • For all of 2023, deliveries of battery electric vehicles were up 35%.
  • Over the last five years its share price is down almost 20%.

Africa

There are 54 countries in Africa with a total population of 1.2 billion.

  • Four of them have a population of 100 million or more:
    • Nigeria: 224 million
    • Ethiopia: 127 million
    • Egypt: 113 million
    • Democratic Republic of the Congo: 102 million
      • Not to be confused with the Republic of the Congo: 5.8 million.

Debt Binge

According to CNBC:

  • The US national debt is increasing by $1trillion every 100 days.
  • The total debt is now $34.4 trillion (USdebtclock.org)
    • Per citizen: $102,000
    • Per taxpayer: $266,000
    • Savings per family: $11,240.
      • PM: Remember that averages like this would include the savings of billionaires which skews the number much higher than it would otherwise be i.e. many people have no savings at all or just enough to last them two weeks.

Canadian Tired

Canadian Tire is a retailer which sells automotive, sports goods and housewares.

  • They also own Mark’s and SportCheck among other banners.
  • Started in 1922 as Hamilton Tire and Garage Ltd at the corner of Gerrard Street and Hamilton Street in Toronto.
  • Changed the name to Canadian Tire in 1923
  • In the 1930s they had clerks on roller skates who would fill catalogue mail orders.
  • By 1961 the Canadian tire money was being printed on real banknote paper.

4Q/2023 Results

  • Adjusted retail sales: Down 6.8%.

Retail sales by quarter:

  • 1Q: -2.5%
  • 2Q: +0.1%
  • 3Q: -1.6%
  • 4Q: -6.8%

Sport Chek:

  • 1Q: +3.7%
  • 2Q: +0.1%
  • 3Q: -7.4%
  • 4Q: -6.4%

Mark’s:

  • 1Q:  +4.8%
  • 2Q: +0.4%
  • 3Q: +0.2%
  • 4Q: -7.2%

Consolidated sales by year:

  • 2021: +8.2%
  • 2022: +2.7%
  • 2023: -2.9%

Words the company used were:

  • A challenging macroeconomic environment
  • Significant headwinds
  • Softer consumer demand
  • Their Financial Services unit saw higher net impairment losses.

But it’s ok, they announced a share buy-back.

Inflation

Eurozone:

  • Nov: 2.4%
  • Dec: 2.9%
  • Jan: 2.8%
  • Feb: 2.6%

Services: +3.9%

Energy continues to drag inflation lower, but at a lesser rate:

  • Jan: -6.1%
  • Feb: -3.7%

Core inflation excluding food and energy:

  • Jan: 3.3%
  • Feb: 3.1%

Financial Ructions

Share Buy-Backs To The Rescue

Further to the Canadian Tire results above.

  • The CEO said that given the uncertain economic environment that they were “placing heightened attention on our financial flexibility.”
    • PM: I’m not sure that spending hundreds of millions of dollars on share buybacks squares with that?
    • At a price of $139 per share, the recent 4.9 million share buyback program amounts to $680 million.

Liquidity

Over the last year:

  • Reverse Repo:
    • Feb 28/2023: $2.188 trillion
    • Feb 29/2024: $502 billion
      • $1.686 trillion of liquidity injected into the system.
  • Fed Assets:
    • Feb 28/2023: $8.340 trillion
    • Feb 29/2024: $7.568 trillion
      • $772 billion of liquidity drained from the system.
  • Just considering the above two factors:
    • $914 billion of liquidity was injected into the system over the last twelve months.
  • Note that a lot of that liquidity injection went into short-term US Treasury Bills.
    • Money market funds, which invest in shorter-dated securities were taking money from reverse repo and investing in treasury bills.
      • Money market funds reached a new record in terms of assets: $6 trillion.
    • The government was able to help keep a lid on rates this way i.e. if they had been issuing the normal percentage of long vs. shorter dated securities it would have put upward pressure on the 10 yr rate.
    • That may indeed happen through the year as the government rolls over 1/3 of its debt.

Debt Binge

The OECD (Organisation for Economic Cooperation and Development), reports that the group’s 38 countries will issue $15.8 trillion of debt this year.

  • New bond sales: $3.2 trillion.
  • Refinancing: $12.6 trillion.
    • $7.6 trillion of that is in the US alone i.e. 1/3 of their total debt rolls over this year (Swissre.com).

Total debt in the US: $34.4 trillion

  • Total US GDP: $27.9 trillion
    • Debt to GDP: 123%
    • PM: Note that the total debt number above includes debt that is held by government entities, so this should be eliminated to get a more accurate look at the debt owed.
    • Total US debt held by the public (FRED): $26.3 trillion.
      • Debt to GDP: 94%
  • PM: Feel better?

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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