Listen To The Fed
Great Ones, I know there’s something in the Federal Reserve’s smile. I get a notion from the look in its eyes, yeah. We’ve built an economy, but that economy falls apart. Your growth stock gains … turn to dark.
Listen to the Fed — when it’s calling for you.
Listen to the Fed — there’s nothing else you can do.
I don’t know where you’re investing, and I don’t know why. But listen to the Fed, before your returns go goodbye…
Roxette? Mr. Great Stuff, you are all over the place this week. Also, isn’t this just a little bit overly dramatic?
Overly dramatic? Me? Never.
OK, maybe just a little bit.
But have you seen the parade of Federal Reserve officials this week?
It isn’t exactly “doom and gloom,” but there’s a sense of urgency that wasn’t there before. And when you’re hoping for a gradual unwinding of Fed assets and interest rate hikes, urgency is the last thing you want to see.
For instance, Philadelphia Federal Reserve President Patrick Harker had this to say to the Delaware State Chamber of Commerce this morning:
If that sounds familiar, it’s because I’ve been chanting that mantra for nearly a year now.
But wait, there’s more! Federal Reserve Governor Lael Brainard — who is typically dovish toward Fed monetary policy — had this to say yesterday:
Currently, inflation is much too high and is subject to upside risks. The [Federal Open Market] Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.
The [FOMC] will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting.
There’s that sense of urgency again: “rapid pace.”
And then there’s San Francisco Fed President Mary Daly, who said this to the Native American Finance Officers Association:
I understand that inflation is as harmful as not having a job, that if you have a job and you can’t pay your bills, or I feel like I can’t save for what I need to do, then that’s keeping you up at night. And our goal is to make sure that people don’t stay up worrying about whether their dollar today will be the same and worth a dollar tomorrow.
It will mean interest rates go up, making it harder to finance a car or a business. Most Americans, most people, most businesses, hopefully people in tribal nations, you all have confidence that we’re not going to let this go forever.
Yet another hint at urgency. Incidentally, Daly also said that the economy “could teeter,” but that it wouldn’t tip “into recession this year.”
Any economist worth their salt knows that we’re looking at a leading indicator here and that a recession — whether or not one is coming — likely won’t happen this year. Probably 2023 or 2024, but not this year.
It’s a poor Band-Aid, but it is what it is.
Jeez, dude, you’re starting to scare me with all this … stuff.
I’m not trying to scare you. I’m only trying to prepare you. To give you an early warning that when the Fed starts talking about speeding things up, $!%# has likely already hit the fan … we’re just waiting for someone to flip the switch, so to speak, and see who gets painted.
Now, I don’t know if a full-blown recession is coming. I don’t know if “stagflation” is a thing that will make a reappearance. What I do know is that most of you Great Ones are not in a position to get steamrolled by the Federal Reserve.
Just remember what ol’ Mr. Great Stuff does when the earth quakes, and oil prices spike 50%, and the yield curve inverts and the Federal Reserve makes the pillars of Heaven shake. Yeah, Mr. Great Stuff just looks that big ol’ storm right square in the eye and he says: “Give me your best shot, pal. I can take it!”
Seriously, though. You can invest in your high-growth, leading-edge tech investments … so long as you are aware of what’s potentially coming down the road.
Just … maybe put some of your cash in relatively safe places and use common sense when investing. You know, bonds, gold, consumer staples, the usual “safe haven” investments.
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Going: Happy Little Tilrays
Profitability? In pot stocks? Like … really?!
Why, I never! If you smelled a slightly sweeter aroma coming out of the earnings confessional this morning, thank Tilray (Nasdaq: TLRY).
The canna-company posted $0.09 in earnings per share — count ‘em, that’s nine whole pennies — whereas Wall Street expected a loss of $0.08 per share.
Cannabis revenue specifically is up 32%, and beverage alcohol revenue is up 64% … even though total revenue missed estimates by a $4.2 million hair. But that didn’t stop Tilray from maintaining its lofty goal of hitting $4 billion in revenue by 2024.
While Tilray’s infectious optimism granted it a 9% pop on the Street, certain analysts had their fair share of doubts. See? It’s not just us here bringing realism back into the conversation. As MKM Partners’ Bill Kirk notes:
That’s a fancy way of saying Tilray’s rolling back costs to woo customers, sure … but it’s far from being the Walmart of weed that it wants to be. And Tilray’s slouching gross margin does take some of the mellow out of its touted 4,000% international revenue growth.
But … c’mon. This is Tilray. Our limbo bar for earnings expectations is disastrously low here already.
Going: Driving Uber-ing That Train
It’s a bus! It’s a plane! It’s a … super-app from Uber (NYSE: UBER)!
Ooh, ahh, what does it do?
You can, umm, not have to switch apps as frequently when booking travel plans! Yaay! Hey, we all had different working goals in mind during the pandemic, don’t judge…
Uber plans to launch a super-app this year that lets you book flight and hotel plans by “integrating leading partners into the Uber app.” Who doesn’t like app-based corporate synergies?
Before you U.S. Great Ones get carried away like Carmen Sandiego … Uber is only adding trains, buses, planes and car rentals to its UK app this year as part of a pilot that might be rolled out to other countries later.
The logic checks out to me: You gotta actually have the bus and train infrastructure for these rentals to work out, and no, Amtrak doesn’t count. I have a hunch that, should this program come stateside, everything outside of planes and cars will be awfully “limited” for all y’all Great Ones of suburbia.
Triathletes? You mean “rural commuting?”
Uber’s UK boss, Jamie Heywood, chimed in with more brilliant insight: “It’s fair to say that Covid made it a little bit hard for us to progress as quickly as we would like.”
You don’t say, Jamie. You don’t say.
Uber might also be behind on its globetrotting goals because it just won its spat with London regulators to remain “fit and proper” like … a week ago.
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Gone: Spirit Of The Frontier
Everybody’s talkin’ ‘bout inflation, stagflation, this-flation, that-flation — every conversation. All I’m saying is … y’all got time to add “airline consolidation” to the list?
Flying in the face of a previous tie-up with Frontier Group (Nasdaq: ULCC), Spirit Airlines (NYSE: SAVE) is now considering a buyout bid from none other than JetBlue (Nasdaq: JBLU).
JetBlue didn’t just show up with a halfhearted bouquet and a Whitman’s sampler, though: The big blue airliner approached Spirit with $3.6 billion … all cash.
You might be saying: “Now, what would JetBlue want with Spirit?” or “Is Frontier just gonna take that lying down?!” Or you might even be saying: “Aghhh, my lower lumbar still hasn’t recovered from that last leg home from Phoenix. What gives, Spirit?”
Today’s potential JetBlue/Spirit elopement can only mean one thing: JetBlue is now in a position where it needs staff more than it needs the extra cash. As travel resumes out of the pandemic doldrums, JetBlue thinks it can pick up Spirit’s pilots, flight attendants and fleet on the cheap.
And … it just might: “We can all agree that Spirit has a very different brand and product than JetBlue, and so at first glance you may not think we’d make a great pair,” said JetBlue CEO Robin Hayes and COO Joanna Geraghty.
Translation? You may be wondering what I’m doin’ foolin’ around with this floozy, but hey, somebody’s gotta take Spirit to the dance. And Frontier can’t even afford that trashiness…
Got another translation handy?
Sure, everybody knows that Spirit and Frontier are the laughingstocks of the air travel biz. But JetBlue knows it can better meet rising travel demand — and come out of the pandemic stronger — if regulators allow it to scoop up Spirit’s staff and fleets right now.
Plus, JetBlue’s alliance with American Airlines means Spirit can take its airborne discomfort all the way up and down the Eastern seaboard.
The only hitch in that giddyap is the “if regulators allow it” part. When you consider Frontier’s bid for Spirit was already met with some pushback … you can imagine how the antitrust crowd would feel about JetBlue swooping in for the score instead.
So, Great Ones … for the past several months, you have been inundated with a veritable avalanche of mainstream financial headlines claiming everything from “Stagflation Is Returning!” to “Y’all Are Crazy … The Market Is Just Fine!”
Hopefully, Great Stuff has fallen in the middle of that spectrum … hopefully. I know we do the occasional “OMG! The SKY IS FALLING!” kinda headline, but mostly that’s just tongue in cheek. Y’all know that, right?
Anywho, it’s poll day here at Great Stuff, and I figured it was high time to find out where you think the U.S. economy is headed.
A dangerous question, I know.
But y’all are down in the trenches. You can’t remove fuel costs and food costs from your inflation outlooks, assuming you’re even thinking about inflation to begin with.
So, from your perspective, Great Ones: