April 25, 2022

• Stocks are down across the board because of the predicted rapid rise in central bank-set interest rates.
• There is now a majority belief that this rate will reach above 3% in the USA.
• Traders are pricing-in a slow-down in the economy.
• The question is, will there be a recession?
• About 80 per cent of companies are beating Wall Street estimates, by an average of about 8%, right in line with historical averages.
• Earnings growth is at 7% – again, inline with historical averages.
• Investors are picking larger, lower-risk (read, less leveraged, slower-ish growing) companies.
• The very large tech companies are still doing better than most – even if they are down.
• However, it isn't exactly smooth:

• Price increases are driving a lot of this debate, of course.

“If I raise interest rates today, it is not going to bring the price of energy down,” Lagarde said.

• The problem is being seen in the fact that prices are rising around the world (inflation), but the solutions take time and a desire to invest (based on profit expectations).
• The market always under-estimates the risk of collapse.

Bloomberg Economics makes sense of the circus of recession probability models, and explains why their human judgment sees the risk of a U.S. downturn “in the vicinity of 15%” in the next 12 months.

That’s significantly higher than the odds spit out by the BE’s own model as well as Fed Chair Jerome Powell’s preferred measure, both of which are close to zero. But it’s lower than other popular models, such as those that rely on the 2-year/10-year yield-curve spread (29%) or the 3-month/10-year yield-curve spread (17%).

• These models rarely align with reality, but always interesting.

• There is a division between company CEOs and major financial investors in new USA reporting regulations.
• The SEC is forcing large investors to report on increases in ownership faster.
• The rules are suppose to expose hostile takeovers of companies by "activists" investors
• "Activists investors" are those who actively try to affect financial valuation of a company – for their own ends – through purchasing enough stock to get seats on decision making boards or affect a plurality of votes.
• Activist investors are usually hedge funds (also, Elon Musk) and sometimes pension funds.

Big video streamers hope to crowd out pirates in the way music specialist Spotify has done. Amazon this week renamed its ad-supported site Freevee. Disney+ plans to launch its ad-supported subscription model in the US later this year. Netflix, in a volte face, is hatching similar plans.

• The BBC says there were nearly 1mn fewer licences in force than two years previously.
• Turns out that most folks are going for no more than 2 paid streaming services at once.
• The increase in "reality" style shows on the streaming services are also unable to really compete with user-generated social media, which sells the same garbage.
• It all sounds like bad TV to me.

• Case increases in areas outside of the Shanghai lockdowns have lead to expanded quarantine areas.
• Shanghai cases have leveled, but Beijing, Jiangxi, and Jiangsu are seeing massive growth.
• The West keeps complaining that it is affecting the global economy, but the Chinese government seems determined to side with its own population – unimaginable for most of the West.

• Lockdowns are hard. Dying is worse:

• Employees at Amazon's Staten Island sorting center will vote on whether to unionize from today until April 29.
• Members at an F-35 fighter jet plant in Texas voted to ratify a new contract with Lockheed Martin that included wage hikes and improvements to retirement benefits.
• Apple Stores, where employees at several stores in Atlanta and New York are mobilizing.