Our mild fall came to an abrupt end this last week. November came in like a lamb but has quickly turned into a lion. Cold and snow seems to have spread across most of the nation. It appears that we will have a white Thanksgiving, something that has rarely happened since I was a kid. My snow shovel, ATV plow, front end loader on my tractor and my snow blower are all set to go at the first sign of flakes falling from the sky, they haven’t got a chance this year.
Not a lot of reports this past week. The job numbers are pretty static, the market continues to be strong for those looking for work. The only report that raises any concerns is the Michigan Consumer Sentiment report. It took a big tumble in November falling from 59.9 to 54.7. Every aspect of the report showed significant weakness. In particular, the buying conditions for durables fell sharply. Higher interest rates as well as the current level of prices appear to have consumers rethinking larger purchases right now. We will have to watch the automotive sales closely. The supply chain seems to be improving at the same time consumers are starting to pull back.
Small business owners are already bracing for a weak Christmas season. Many stores have mimicked the Amazon Sale by offering black Friday deals early. The effort is to clear shelves early, grabbing cash in the event of the anticipated slow down. Nothing worse than hold over inventory that will have to be stored until next year.
The October CPI came in at .4%. This was the same as September but lower than expectations. The market in an overly exuberant reaction, jumped over 1,000 points. However, the number hardly represents any kind of real change, nor does it indicate we are past peak inflation. Shelter expenses as well as energy increased significantly in October. Food prices rose .6%. However, in September that increase was .8%. Medical care and commodities pulled the inflation rate down under the September level. While this might be a breather in the rate of increase, .4% is still way too high when placed on top of the prior months of inflation. The cost of energy and food will both be on the rise over the next few months. The supply of beef has peaked and will cause prices to rise, likely for years. Fuel oil, diesel as well as natural gas will be rising as supplies are short. Let’s hope when the November or December numbers show a rise that the market does not over react to the down side.
It may not be WeWork 2.0, but the collapse of FTX has many of the same ear marks as Adam Neuman’s fiasco from just three years ago. What seems to be all too familiar, is investors lining up to give untested and ill-equipped people butt loads of cash without considering if the business model will work. Prudent investors will analyze the financial statements or forecasts with an eye toward realism as well as set controls and oversight to assure the business is run properly. The Billions of dollars that were lost, stolen or misappropriated in both WeWork and FTX is staggering. In my seminars I make the comment, “I Can’t Fix Stupid!” My dad also had a comment, “A Fool and His Money Are Soon Parted”. Both are applicable here. It is sad to think that our major banks, investment funds and even pension funds, foolishly pour money into misguided ventures with no oversight and then are Shocked, Yes Shocked when a 30-year-old is incapable of running a multibillion-dollar entity.
We honestly do not need more regulation to stop this foolishness. What we do need is more leaders in the financial industry who follow and understand 1 Timothy 6:10, For the love of money is the root of all evil.
Have a great week.