Starlink Everything, Nominal Noggin, Retail Firm Spending, Electric Price Shock, Film & TV Layoffs, Stablecoin Battle

“The ultimate result of shielding men from the effects of folly is to fill the world with fools." ― Herbert Spencer

INVESTING

The Folly of Thinking in Nominal Terms

• Reading a mainstream financial publication will let you know that since December 31, 2021, the S&P 500 is down 16.5%.
• But the real number is more like 22.9%, since the dollar is worth 6.4% less today than in January 2022.
• "This propensity to think in nominal terms is a ubiquitous human foible."
• This "money illusion" issue exists in a many forms. One good example being, whether to pay a large sum of money toward a mortgage or invest that sum.

Nuggets of Investing Wisdom

Don't Let Management Tell You The Company's Value

• Some companies have been communicating their estimated value-per-share in investor presentations.
• "This is a phenomenon that exists ubiquitously in private markets."
• Humana "abruptly and somewhat comically" showed their "EPS CAGR and bridge for the next 3 years" in an investor presentation.
• "Of course most of the time management teams believe their stock is undervalued and rarely are management teams wont to call out their stock as overvalued."
• "In fact, if a management team believes their shares to be materially undervalued, isn’t a lack of share repurchase activity a breach of fiduciary duty?

Old Rope

Warren Buffett: Why We Don’t Do More Due Diligence

• "We’ve made plenty of mistakes in acquisitions. Plenty. And we made mistakes in not making acquisitions, but the mistakes are always about making an improper assessment of the economic conditions in the future of the industry of the company."
• "They’re not a bad lease. They’re not a specific labor contract. They’re not a questionable patent. They’re not the things that are on the checklist, you know, for every acquisition by every major corporation in America. Those are not the things that count."
• "What counts is whether you’re wrong about — whether you’ve really got a fix on the basic economics and how the industry’s likely to develop, or whether Amazon’s likely to kill them, you know, in a few years, or that sort of thing."

The Acquirer's Multiple

BUSINESS

Elon Musk's Starlink internet in demand across industries

• Starlink is SpaceX's broadband service that beams internet connectivity from satellites in orbit. Elon Musk's service is designed to get remote areas online.
• It has more than 400,000 users worldwide, has partnered with airlines and cruise ships, and played a role in the Ukraine war.
• SpaceX launched its first satellites in May 2019 and now has more than 2,900 satellites in low-earth orbit. The goal is to have up to 42,000 satellites by mid-2027.
• A Starlink subscription is $110 per month and another $600 for the Starlink kit, which includes a mounting tripod, a WiFi router, and a terminal to connect to the company's satellites.

Business Insider

Layoffs Ahead in Film & TV Industry

• New show pitches have declined recently. Less jobs posted in Los Angeles TV production.
• Netflix layoffs again. Warner Bros Discovery lays off 100 TV ad sales people. Paramount might axe Showtime standalone app.
• “The very foundation that the streaming business sits on has been devolving on sand,” said Walt Disney Co. CEO Bob Chapek.
• Disney lowered content spending forecast this year by 10%. Studio execs are even killing star-attached projects or back burnering them. And want 20% reduction in series budgets.

Bloomberg

Walmart & Target Canceled Billions of Dollars in Orders

• "John David Rainey, Walmart’s EVP and CFO, said it had cleared most summer inventory, was reducing exposure in electronics, home and sporting goods, and canceled “billions of dollars in orders” to realign inventories."
• Target states it has reduced “inventory exposure in discretionary categories” during Q2 by canceling over $1.5 billion of orders and marking down prices.
• Macy’s and Kohl’s recently also stated they are canceling orders.

The Economic Collapse / RetailWire / Footwear News

Where are Walmart, Target, and Amazon Spending Billions?

• Many retail sector businesses are increasing Capex spending significantly.
• Walmarts capital spending increased 50% the first half of this year. And its spending budget will increase 26%.
• Amazon, last week, announced it's acquiring Belgian warehouse robotics firm Cloostermans. Their tech helps organize heavy palettes of goods and packing products for delivery.
• "Investments made by big-spending leaders like Walmart, Amazon and Home Depot are likely to result in taking customers from weaker rivals next year..."
• "After the 2007-2009 downturn, 60 companies Gartner classified as “efficient growth companies” that invested through the crisis saw earnings double between 2009 and  2015, while other companies’ profits barely changed"

CNBC

More U.S. Companies Switch to U.S. Based Production

• Moving to U.S. production could help them avoid serious supply chain issues experience during the pandemic in recent years due to reliance on foreign production.
• Here is New Balance's story of their venture into U.S. production...

ECONOMICS

Electric Bills Skyrocket Nationwide as Winter Nears

• Natural gas prices are continuing to rise do to global supply issues and the war in Ukraine. They have already doubled this year.
• Fossil fuels account for over 50% of electricity generation. Natural gas alone, being the largest source, accounts for 38% of electricity generation.
• Customers' electric bills are expected to continue increasing nationwide
• The EIA (Energy Information Administration) says, "the residential price of electricity will average 14.8 cents per kilowatt-hour in 2022, up 7.5% from 2021."

WSJ

Winners & Losers of China's Economic Downturn

• China's yuan weakened roughly 8% against the dollar in the past 12 months. This will soften inflation in the U.S. according to Bank of America.
• However, China's fresh COVID lockdowns might disrupt supply chains. Shipments to the U.S. are at the lowest level since June 2021.
• The impact on Europe might be limited due to already factored risks of production cutbacks from winter gas rationing.
• Latin America is more exposed to China, accounting for 40% of exports from Chilean and 30% of Brazilian and Peruvian exports. so the slowdown could negatively affect their growth.

Markets Insider

CRYPTO

Stablecoin War Fueled By Climbing Interest Rates; Binance Makes Moves

• Binance, the world’s largest crypto exchange, said it would automatically convert users’ deposits of several rival stablecoins into its own stablecoin, Binance USD, starting this month.
• Their decision could escalate the rivalries among other stablecoin players, such as Tether and Circle, and generate more revenue for Binance.
• Stablecoin issuers run a lucrative business by investing user deposits in cash and cash-equivalent assets like short-duration U.S. Treasurys.
• Circle Internet Financial Ltd., which issues the second-largest stablecoin, USD Coin, held $40.1 billion in short-term Treasurys as of Sept. 15; earned $28.5 million in interest.

WSJ

MISC