Lower inflation, Holidays and Look at Me

By Jeff Kelly on December 9, 2022

Sandra decorated our home for the holidays this past week. It’s always a treat to see the different decorations acquired with love and affection over many years. Some remind us of great years and good times. Others bring back tougher memories with the associated pain. All together they tell a story of our family holidays over many decades. When we were engaged Sandra sent me a Christmas ornament with a note every day for 10 days (she didn’t know any better). I lived in San Francisco, and she was in Los Angeles. We still have most of those ornaments. One of them has the year, 1988, on it. A lifetime ago, yet a blink in time.

Sandra put up a fresh cut Christmas tree. She also did some baking. The combination of the evergreen tree scent and the baking took me back to being a boy. My mom would bake many batches of cookies at just about this time of year. We always had a fresh cut tree. It’s a terrific memory for me of days gone by. And if it sounds like I haven’t done much work on the Christmas decorations this year, well that would be correct. Sandra did a great job!

The importance of the holiday season is the people, traditions, and memories we share. The shared memories are good and bad. Memories, families, and holidays are never perfect. We’ve all had holidays turn out poorly. The best of families overcome the bad memories and move forward together. The country we share is no different. Somewhere along the way many have decided we can’t disagree without calling for civil war. It’s not just here in America. In Germany 25 were arrested in a plot to overthrow the government.

German police arrest 25 over far-right plot to overthrow government

Are we headed to a similar outcome? I hope not but the continued strident rhetoric makes it a real possibility. If we learned one thing in the past few years, never say never.

Markets continue to chop around based on daily news and economic reports. Under the surface it’s better and worse. Bonds have likely seen their highs in yields and lows in price, better. This will help to cushion but not eliminate the coming earnings declines, worse.

The chart above shows the earnings and sales for the S&P 500. The earnings leader was energy, up 149% quarter over quarter. Oil is now 71.00 per barrel, below the price one year ago. The high for oil was reached in the 1^st quarter of 2022 with the Russian invasion of the Ukraine at 130.50 per barrel. Last night a well-known yoga pants retailer reported their earnings. They had a good quarter. Sales and earnings exceeded expectations. Today the stock was down 12%. The reason, unsold inventories were up to 1.7 billion dollars (an increase of 85% from last quarter) and they lowered guidance for the coming quarter.

These are excellent operators. Others are not. Inventory will need to be cleared in retail. Other areas will be challenged as well. Chopping around until the new year seems likely. It’s a big data week next week with CPI and the Fed meeting. We’ll see how it goes.

CHARTS FROM THE WEEK PAST

Producer Price Index lower on the month over month and heading much lower.

Why? See commodity charts below.

Diesel down 52.8% from its high, 40.9% from recent high.

Gasoline down 52% from highs.

And gasoline is now down year over year.

Remarkable.

Not down much but we’ll take it.

Oil down 41.9%.

Lumber down 72% from the high and 59% from a more recent high.

Copper down 24.6% from its high.

Corn down 24.5%.

Wheat down 50.7%.

Aluminum down 39.8%.

Steel down 58.4%.

Soybeans down 18.3%.

Rents are starting to decline from peak levels.

Used car prices continue to decline.

ISM Services at 56.5 vs. 53.5 expected.

A nice beat. Lots of hair on the number but a good beat.

Morgan Stanley sees earnings falling in the new year.

Interesting to see what countries are more affected by rising rates.

Lots of Europe outside of France and Germany.

Inventory of homes down a bit post-Thanksgiving.

A look at Nasdaq 100 relative to energy comparing February 2000 and November 2020 to date.

It tightly followed the pattern so far.

Financial conditions are starting to affect jobs.

Wage growth is likely still too strong for the Fed.

They want to see big jobless numbers despite all other evidence inflation is slowing quickly.

Eurozone lending standards and high yield spreads moving higher.

That’s negative for the Eurozone.

Fewer families with young children affect total housing units needed.

Breath signals used to be more powerful.

Now there are too many of them.

If you can’t move, remodel!

This would bother me as a patient.

Elon Musk finally discovered how to get housing built in San Francisco.

I sure hope SBF is having somebody tasting his food.

China may get top ownership of US lithium mine.

This man worked at the White House…Sean, December 7^th is the anniversary of the attack on Pearl Harbor.

D-Day was June 6^th, 1944. We wonder why the country has issues.

Our world.

WEEKEND HOMEWORK

Horrendous. Doctors arranged for more than 10,000 Canadians to end their lives last year. Now eligibility for assisted suicide in Canada is going to be expanded to the mentally ill. This isn’t health care. It is legalized murder. And it is monstrous.

The Ethics of Assisted Dying

Big price declines in Trucking in November.

Transportation capacity up, prices see ‘sharpest rate of contraction’ in November

A terrific podcast about winning and teams.

Colossus | Shane Battier – The No-Stats All-Star

On September 29, 2006, Michael Monsoor and two SEAL snipers watched vigilantly for enemy activity from their rooftop post in Ar Ramadi, Iraq. When a grenade thrown from insurgents bounced off Michael’s chest, he could have escaped. Instead, he threw himself onto the live grenade, shielding his fellow soldiers from the immediate explosion. Michael died thirty minutes later, having made the ultimate sacrifice.

As George Monsoor (Michael’s father) and Rose Rea show us in Defend Us in Battle, Michael had prepared for this selfless act all his life—a life that inspires us to have a similar generosity of heart. This fast-paced, compelling biography

• tells the true story of a quiet boy from California who achieved his dream of becoming a Navy SEAL and saved numerous lives throughout his deployment
• recounts how Michael’s childhood of asthma and being bullied made him a staunch defender of justice and passionate about never quitting
• draws on interviews, military documents, and eyewitness accounts to detail Michael’s remarkable military career and devotion to God and others
• is perfect for readers of fans biographies such as Unbroken, as well as for anyone eager to remember that this world still has heroes

In addition to the Medal of Honor, Michael received a Silver Star, a Bronze Star Medal, and the Purple Heart for his years serving his country. But his greatest legacy is in the hearts of those he inspired to live, and even die, for the sake of brotherly love.

Get that holiday shopping done! Have a terrific weekend.