YOUR QUIVER | March 1, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Contraction
ISM factory activity for Feb was 47.7. Below 50 is in contraction. The median estimate was 48 pre-release. ISM new orders rose in Feb, by the most since 2020, yet bookings were still below 50. Prices paid for materials was up to 51.3, meaning that costs are up. ISM labor data showed a decline in headcount for the month. The 10yr UST yield today hit 4%.
No Bueno Blackstone
BREIT limited withdrawals for the fourth month in a row. Blackstone’s $71bn real estate trust only allowed ~35% of redemption requests (~$1.4bn) to occur. Investors are probably re-thinking their liquidity expectations they had going into the trust.
Lowe Expectations
To no surprise to anyone watching earnings season, Lowe’s is forecasting a rev decline in 2023 with a roughly flat profit level given weaker housing and consumer conditions. Also this morning, Kohl’s gave a soft outlook for the year. Rivian was down because of supply-chain issues. Novavax warned about staying afloat.
A New Puzzle
The Fed is trying to fight inflation while not cratering growth, but when looking at labor data, it’s facing a puzzle that’s unusual. The jobs market is tight (extremely low unemployment) while wage growth is slowing. Typically a tight market gives employees more power to increase wages, but that’s not what is happening. The hope is that folks are expecting inflation to moderate, so they’re not pressuring their bosses, and companies aren’t hiking prices as much to offset current and future input cost rises. But that is just a hope. It may be more nuanced, wherein the demand for service employees keeps certain wages high, versus less pressure on other employees’ wages where companies are facing slower demand functions.
Drowning in Debt
More Americans are coming to dealers an ave $5.5k underwater on their trade-in vehicles whose values are cooling off. Folks buy new cars too soon, so they’re paying high prices for new cars and rolling debt from older to newer cars, with loans extending to 7 yrs, according to BBG. With debt that’s higher than their vehicle’s value, alarm bells are going off in the industry. 2 of 13 Americans are making car payments >=$1k. Cox Auto stated that in Jan severely delinquent auto loans reached their highest rate since 2006.
Bridge Under Water
After a few years of challenging returns, with Dalio now as mentor versus leader, mega investment firm Bridgewater is focused on reducing costs, increasing exposure to Asia, adding products that use individual stocks to express macro views, expanding in ESG, and increased tech tools such as AI and machine learning. The firm is looking to bring in billions of dollars in assets for each initiatives, to reduce its dependence on Pure Alpha and All Weather strategies.
Losing Your Footing
Lori Lightfoot lost her re-election bid for Chicago mayor. Bottom line, it came down to crime. While typically we don’t focus on political news here, given the next couple of years’ potential impact on markets, we are flagging this as a trend. We had a good friend in Chicago politics over this week who projected this loss, and we note for all politicians calling for police defunding to rethink that strategy, and think more about reform. Even if you do a great job getting your locale’s finances in order, voters care about crime and improving several aspects of the community.
Dark Skies
GS is considering selling GreenSky, a payment plan biz it bought for $2.24bn in late 2021. It’s part of its Platform Solutions biz that’s been losing money.
