š¦š Thanksgiving and Shopping: Two Peas in a Pod
Happy Thanksgiving Eve!
We wish you a happy (early) Thanksgiving š¦ Weāre so thankful for having been able to grow this newsletter from 3,500 subscribers at the beginning of this year to over 8,700 of you today! If you have been enjoying your time reading us, please consider sharing with a friend.
In this weekās feature story, we talk about the trends weāre seeing surrounding shopping, the changes in work culture that weāre thankful for, and how the future of our economy may affect those changes.
Enjoy this weekās Hump Days!
- Humphrey, Rickie & Tim
Featured Story
Tomorrow is Thanksgiving in America! A national holiday where we step back and remind ourselves to be thankful for all the good things we have in our lives. Itās best known for turkey dinner, the Dallas Cowboys on TNF, and of course, shopping. In a previous edition of Hump Days, we wrote about the excess supply that retailers were holding onto and that we expected those retailers to use offer steeper and steeper discounts as we got toward the end of the year.
Last year around holiday time, we saw shortages across the board as demand outweighed supply for many products including computer parts, bicycles, clothing, etc. As a result of insufficient inventory, things were selling at full price; retailers didnāt need heavy discounts to get rid of products. This year, companies made sure to build up rich stocks of inventory ahead of the holidays many months in advance in preparation, but are now slashing prices worried that they overestimated demand.
A survey conducted by BCG found that of nine countries including the U.K., Australia, France, and Germany, the U.S. was the only country where shoppers planned to spend more this year than last. This is in line with Amazonās gloomy forecast which warned that holiday sales were likely to be weak, especially in its international business.
According to experts, a lot of warning signs have been flashing in U.S. retail, but consumers have been resilient. The question is how much longer will they be resilient, which is what everyone in retail is holding their breath for.
On another note, an often overlooked cog in the machine that is Black Friday shopping is the workers of brick-and-mortar retailers. In the 2010s, retailers began welcoming customers earlier and earlier until they eventually just decided to stay open on Thanksgiving Day. This year, however, most major U.S. retailers will remain closed. A partial driving force for this decision is the āGreat Resignationā where retailers donāt want to risk mass resignation by forcing people to work that day.
Employees have had increasingly more leverage since the Covid-19 pandemic in the midst of one of the hottest job markets earlier this year. People quit their jobs to earn more somewhere else, to work remotely, or because they were tired of being mistreated. White-collar workers fought return-to-office mandates and many hourly workers sought flexible schedules to make more time for family and hobbies. However, as the economy slows and with how high unemployment may get as the Federal Reserve raises rates to tame inflation, workers will inevitably lose some of the leverage they have enjoyed the past two years.
While we donāt know how bad the job market will get, weāre thankful for the change in work culture that allows for more time spent with loved ones, without sacrificing productivity. We donāt see that going anywhere anytime soon.
Weekly News Roundup
Home Sales Fall for the Ninth Straight Month in October (CNBC)
High interest rates and surging inflation is keeping home buyers on the sidelines resulting in home sales declining for the ninth straight month in October. Sales of previously owned homes dropped 5.9% month over month, the slowest pace since December 2011 (with the exception of a very brief drop at the beginning of Covid). Year over year, sales were 28.4% lower, but supply is still stubbornly low. The median price of an existing home sold was $379,100, 6.6% higher than the year before but price gains are shrinking.
HY: Theyāll fall even more with interest rates set to rise for the next 6-9 months. The Bay Area, where Iām from - still has incredible real estate prices due to shortage of housing IMO.
Hedge Funds Cut Risk, Betting Bounce is a Bear-Market Trap (Bloomberg)
Professional speculators are staying cautious even after the latest equity rally that caused many funds to unwind their short positions at one of the fastest paces in years. Fund clients saw their combined trading flow fall for a fifth straight week suggesting that the smart money believes the recent equity bounce is nothing but a bear-market trap. Many funds have avoided adding fresh long positions despite a second straight monthly advance in the S&P 500 Index.
HY: David Sacks of the All-In Podcast believes this is a double-dip recession, which what that means is that in Q1/Q2 we experienced a technical recession (two quarters of negative GDP), now weāre seeing a slight bounce back in the markets, but next year could spell pain aheadā¦ Iāll have a video on my portfolio allocation for 2023 on YouTube in early December. It will likely include more cash than usual.
White House on Ticketmaster Debacle: Capitalism Without Competition is Exploitation (CNBC)
Ticketmasterās parent company Live Nation is reportedly facing an antitrust probe over the fiasco Taylor Swift fans faced in trying to snag seats for her upcoming Eras Tour. White House Press Secretary Karine Jean-Pierre reiterated President Joe Bidenās stance on the matter saying:
āHeās been crystal clear on this, and I quote: ācapitalism without competition isnāt capitalism, itās exploitation.āā - Karine Jean-Pierre
The New York Times reported Friday the Justice Department opened a probe over monopolistic practices. The Live Nation and Ticketmaster merger was approved by the Justice Department in 2010 but since then, the company has been repeatedly accused of abusing market power by hiking ticket prices and adding arbitrary fees.
HY: Fuck Ticketmaster. That is all.
Chart of the Week
Thanksgiving dinner is a little pricier this year.