The Case of the Missing Hafod Welsh Cheddar
It was a busy week as five of the most valuable U.S. companies in the S&P 500 reported earnings this week, and updates on three key economic indicators were released: gross domestic product (GDP), inflation, and the jobs report. Don’t think next week will be any quieter because we can look forward to the election and another expected rate cut from the Federal Reserve. I long for the days when the news was slow, and we had time to digest one thing before moving onto another. I sometimes think those days aren’t coming back.
A quote often misattributed to President Bill Clinton comes to mind this week. “The economy, stupid” is a phrase that was coined by Jim Carville in 1992. He was a strategist in Bill Clinton’s successful 1992 U.S. presidential election against incumbent George H.W. Bush. The reason it came to mind this week is because like then, voters today say their most important issue is the economy. Here’s what we know (or at least what we’re being told). GDP slowed nominally in the third quarter to 2.8% from 3% in the second quarter. This latest figure still reflects surprising durability, including an uptick in consumer spending in the quarter. However, offsetting some of that enthusiasm is business activity which slowed in the quarter and saw steep declines in investment in non-residential buildings such as offices and warehouses. Additionally, the unemployment rate fell to 4.1% in the quarter despite two major hurricanes and a major national labor strike. It turns out temporary job losses and strikes do not count toward the unemployment rate. And finally, today we learned the not so good news. It turns out only 12,000 jobs were created in September, down from the typical 150-250K. In fact, this drop in new jobs is the steepest since the pandemic. The silver lining is that this gives room for the Federal Reserve to continue cutting interest rates in the months ahead. While not great for savers, this is typically viewed favorably by equity investors and businesses alike.
In company news, we learned that Russia has sued Google for $20.5 decillion (that’s not a typo) over YouTube content moderation. What is at issue is YouTube banning the accounts of state media outlets, which Google considers pro-Moscow propaganda channels. To clarify, the fine is 20 followed by 33 digits and is the equivalent to all the money on Earth multiplied by 23,809,523 according to Digital Trends. I’m not completely positive that Google can pay this fine. In other company news, it was reported that Boeing and the machinist union have yet to reach an agreement. Considering this, Boeing announced it plans on offering $19 billion worth of stock and depositary shares to generate much-needed cash. This is a major dilution for current shareholders and justifiably explains why the stock is down 21% over the last few months. Lastly, I mentioned not that long ago that Volkswagen, for the first time, will begin reducing its headcount as automobile sales slump and competition increases in Europe. This week we learned the company plans on closing three German plants and laying off 300,000 employees. International isn’t always better.
In closing, I turn to a caper that is of the most delicious variety. Years ago, I brought you a story about maple syrup stolen in Quebec. I tried to find the story in my archives, but the story took place over a decade ago. The reason I mention this is that we learned of another heist of delectable proportions this week. Over 48,000 pounds of cheddar were stolen from a dairy in London. 1,000 cloth-wrapped wheels of cheese were stolen as thieves posed as agents of a French supermarket and told the dairy to deposit the goods in a particular warehouse for inspection. Once there, it was promptly stolen. The estimated value of said cheese is almost $400,000. If you or anyone you know has possession of said cheese, please let me know and I’ll make the necessary arrangements to eat dispose of it properly. Now you know.
Bruce J. Mason, MBA