Yelling At The Clouds
Whether you come from the streets or the rarified air of high finance, few things get the blood boiling or the crowds ooooohing more than some direct disrespect. Generally speaking, billionaire feuds are a great source of fodder for financial journalists, and for good reason. After all, in some twisted way it is quite satisfying to sit back and watch two dudes with 10-figure net worths battle it out (Sometimes live! On TV!).
The latest billionaire spat to make waves features PIMCO legend, neighbor hater, and general all-around oddball, “Bond King” Bill Gross in the blue corner, and up-and-coming “Boxcar” Jeff Gundlach of DoubleLine in the red. (Yes I made the Boxcar part up.)
Gross landed the initial blows, apparently chafing at the idea that his street cred as the “Bond King” was being replaced by Gundlach in the fixed income world when he stated that “First of all, to be a bond king or queen, you need a kingdom,” and disparaging Gundlach’s measly AUM as “$55 billion” or so, which, you know, pales in comparison to PIMCO’s $2 trillion AUM during Gross’s tenure.
Ooooooh.
Gundlach then proceeded to counter with a death blow on Gross’s gross effort to grasp at relevance, replying that “It’s sad for somebody that’s been out of the business for 10 years and is still trying to exorcise the demons… I hope he retires and feels better about himself.”
Masterful.
It’s not every day you see a billionaire get murdered by words. It’s all the more incredible because anything Gross says in reply will now be seen as the equivalent of a Billionaire Grandpa Simpson yelling at the clouds.
Look, I’m sorry but there’s just something objectively hilarious about watching this man, a billionaire with resources and means virtually unfathomable to the common man, make a desperate bid for relevance only to get absolutely cooked.
In The Land Of Giants
It wasn’t all that long ago that the financial media were publishing “Death By Amazon” lists, which were essentially market hit-lists of companies expected to see their collective lunches be eaten by Amazon over time.
While the impact of Amazon and the other major tech behemoths has certainly changed the competitive landscape of e-commerce, web search, and smartphones, in some ways the change has been a lot less pronounced than expected. A recent article from the Economist made the argument that—despite the presence of giants—companies can still thrive in the economic underbrush by finding and serving niche markets.
The three stocks mentioned in the article (MercadoLibre, Dropbox, and Garmin), have all outperformed the broader S&P 500 in the last year by a healthy margin.
To be sure, niche company results may vary (anyone looked at Snap’s stock chart lately?), but it is heartening to see that investors can still be rewarded by finding companies that are profitable and which play in the same arena as the monsters of the market.
Those looking for winners amidst more traditional retailers or non-internet competitors to big tech are sure to be disappointed—pending some unforeseen miracle miracle, a company’s like Macy’s (just as an example) is never going to be restored to its former glory.
In other words, if Amazon is the schoolyard bully pushing around the weaker companies, you don’t want to bet on the weaker companies—you want to bet on the bully’s toadies cheering him on.
Also this is not an endorsement of bullying, don’t come at me.
The Beatings Will Continue
In an unexpected twist, inflation came in hot this morning. After slowing to 0.2% growth (excluding foot and energy) in June and July, inflation reaccelerated 0.3% in August, and unwelcome development.
So, what will be Big Daddy Powell’s next move? Well, I honestly think that this won’t change the overall calculus too much (though I have no way to say this with any certainty), but should inflation come in unexpectedly high again next month, then it is likely that the Fed will put the proverbial screws to the economy once more.
On the other hand, despite the headlines surrounding energy as the main driver in this month’s print, it is not unlikely that the Fed could examine core CPI and decide that, hey, this economy just isn’t learning its lesson.
This could be the case because, as the chart below illustrates, core CPI (items less food and energy) has been lapped on the way down by the measures which include food and energy. Again, despite the energy headlines, energy prices are still down over the last twelve months.
Other News…
A New iPhone
Apple debuted its new iPhone 15 lineup, which promises some minimal improvements over the prior version and which didn’t inspire a whole of enthusiasm or investor confidence.
One big change is the ditching of the lighting charging port in favor of a USB-C port as part of Apple’s effort to comply with EU regulations. In other words, despite Apple’s long and storied history of planned obsolecence, you can now thank the EU for the fact that your iPhone lightning port will go the way of the dinosaur.
No One Wants To Be Fiscally Responsible Anymore
Readers of a certain age will recall a time in American politics when Republicans and Democrats had, like, actual positions on real monetary and tax issues that impacted actual Americans and did not simply float like the feather in Forrest Gump from one social media outrage to another. Ah, simpler days.
An article from the Wall Street Journal today makes the case that, at least when it comes to spending and tax cuts, Republicans and Democrats are more in agreement than ever (hint: nobody thinks the country should spend less or rake in more money).
Nothing Good Can Ever Happen to BP
Among oil majors, BP is something of a runt (at least where shareholder returns are concerned). In the press release, the company stated that now-former CEO Bernard Looney failed to fully disclose relationships with colleagues. Huh.
Either way, with BP now on its third chief executive in the two decades, it seems that the misery of shareholders is unlikely to abate any time soon.
Nothing Good Can Ever Happen to Citi
Speaking of laggards in their respective fields, Citi announced it is undergoing a major reorganization that aims to “simplify the bank’s structure.”
Judging from the bank’s performance over the last 10 years versus competitors J.P. Morgan and Bank of America… well… maybe developing a plan to make the bank run more efficiently is better late than never.
Final Thoughts
Both members of Mexico’s congress and people who are waaay too online were duped into believing that a pair of hilariously, obviously fake ‘alien bodies’ were the real thing. Walmart’s CEO feels ‘Pretty Good’ about U.S. consumers. China has yet again flexed on Apple. In a bad sign for restaurants everywhere, Cracker Barrel whiffed on earnings. Fears are growing over the potential Japanification of China. Consumer data collection by retailers is worse than you think.
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