Tag: resources

Watch this ‘canary in the coal mine’ for signs of trouble in markets, Neuberger Berman CIO says

[ad_1]

Neuberger Berman, an asset manager with eight decades under its belt, is on the lookout for cracks in credit markets from the Federal Reserve’s rate-hiking campaign.

Erik Knutzen, chief investment officer of multi asset, worries that several factors could be a tipping point for the economy, from an economic slowdown in China to U.S. consumers finally becoming exhausted by higher rates.

Yet Knutzen expects the high-yield, or junk bond, market to serve as the “canary in the coal mine” for broader market volatility, acting as “perhaps the most visible threat, and therefore one we think could be priced in sooner than later.”

The Bloomberg U.S. High Yield Bond Index has returned 6.4% through the end of August, producing one of the year’s highest gains in fixed income, helped along by a “resilient U.S. economy coupled with still-available financial liquidity,” according to the Wells Fargo Investment Institute.

But Knutzen worries that as the high-yield maturity wall draws closer, “the first policy rate cuts get priced further and further out, raising the threat of expensive refinancings.”

The 10-year Treasury yield’s
BX: TMUBMUSD10Y
climb to a multidecade high in August of almost 4.4% left many major U.S. corporations in early September hesitant to borrow beyond 10 years.

Starting next year, some $700 billion of high-yield bonds are set to mature through the end of 2027, with a big slice of the refinancing need coming from companies with riskier credit ratings below the top BB ratings bracket.

The junk-bond maturity wall.

Bloomberg, Wells Fargo Investment Institute, Moody’s Investors Service

The two big U.S. exchange-traded funds linked to junk bonds are the SPDR Bloomberg High Yield Bond ETF
JNK
and the iShares iBoxx $ High Yield Corporate Bond ETF
HYG,
both up 1.8% and 1.5% on the year through Monday, respectively, while offering dividend yields of more than 5.8%, according to FactSet.

Of note, fixed-income strategists at the Wells Fargo Investment Institute also said they see risks emerging in junk bonds for companies rated B and below, particularly with spread in the sector trading less than 400 basis points above the risk-free Treasury rate since July. Spreads are the premium that investors are paid on bonds to help compensate for default risks.

Top corporate executives appear hopeful that the Federal Reserve will cut rates sooner than later. Fed Chairman Jerome Powell said in Jackson Hole, Wyo., in August that the central bank is prepared to keep its policy rate restrictive for a while to get inflation down to its 2% target.

To that end, Neuberger Berman, which has roughly $443 billion in managed assets, sees several sources of volatility lurking through year’s end, and has a “defensive inclination” in equity and credit, favoring high-quality companies with plenty of free cash flow, high cash balances and less expensive long-term debt.

U.S. stocks booked gains on Monday after a week of losses, with the S&P 500 index
SPX
and Nasdaq Composite Index
COMP
scoring their best daily percentage gains in about two weeks. The Dow Jones Industrial Average
DJIA
advanced 0.3%.

[ad_2]

Source link

September 11, 2023

Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks

[ad_1]

Investors in index funds have been well rewarded by a high concentration in the largest technology companies over the past decade. But there are also continuing warnings about the risk of such heavy concentrations, even in index funds that track the S&P 500. Solutions are offered to limit this risk, but if you expect Big Tech to continue to drive the broad market returns over the coming years, why not make an even more focused bet?

Comparisons of three index-fund approaches highlight how successful concentration in the “Magnificent Seven” has been.

The Magnificent Seven are Apple Inc.
AAPL,
+0.16%,
Microsoft Corp.
MSFT,
+0.72%,
Nvidia Corp.
NVDA,
-2.03%,
Amazon.com Inc.
AMZN,
+2.17%,
Alphabet Inc.
GOOGL,
-0.27%

GOOG,
-0.32%,
Tesla Inc.
TSLA,
+9.37%
and Meta Platforms Inc.
META,
+1.67%.
We have listed them in the order of their concentration within the Invesco S&P 500 ETF Trust
SPY,
which tracks the S&P 500
SPX.
The U.S. benchmark index is weighted by market capitalization, as is the Nasdaq Composite Index
COMP
and the Russell indexes.

SPY is 27.6% concentrated in the Magnificent Seven. One way to play the same group of 500 stocks but eliminate concentration risk is to take an equal-weighted approach to the index, which has worked well for certain long periods. But here, we’re focusing on how well the concentrated strategy has worked.

Let’s take a look at the group’s concentration in three popular index approaches, then look at long-term performance and consider what happened in 2022 as rising interest rates helped crush the tech sector.

Here are the portfolio weightings for the Magnificent Seven in SPY, along with those of the Invesco QQQ Trust
QQQ,
which tracks the Nasdaq-100 Index
NDX
and the Invesco S&P 500 Top 50 ETF
XLG
:

Company	Ticker	% of SPY	% of QQQ	% of XLG
Apple Inc.	AAPL, +0.16%	7.05%	10.85%	12.46%
Microsoft Cor.	MSFT, +0.72%	6.65%	9.53%	11.76%
Amazon.com Inc.	AMZN, +2.17%	3.30%	5.50%	5.84%
Nvidia Corp.	NVDA, -2.03%	3.02%	4.44%	5.33%
Alphabet Inc. Class A	GOOGL, -0.27%	2.17%	3.12%	3.83%
Alphabet Inc. Class C	GOOG, -0.32%	1.88%	3.11%	3.32%
Tesla Inc.	TSLA, +9.37%	1.79%	3.10%	3.17%
Meta Platforms Inc. Class A	META, +1.67%	1.77%	3.60%	3.12%
Totals		27.63%	43.25%	48.83%
Sources: Invesco Ltd., State Street Corp.

The same group of seven companies (eight stocks with two common share classes for Alphabet) is at the top of each exchange-traded fund’s portfolio, although the top seven for QQQ aren’t in the same order as those for SPY and XLG. QQQ’s weighting was changed recently as the underlying Nasdaq-100 underwent a “special rebalancing” last month.

Here’s a five-year chart comparing the performance of the three approaches. All returns in this article include reinvested dividends.

FactSet

QQQ has been the clear winner for five years, but it is also worth noting how well XLG has performed when compared with SPY. This “top 50” approach to the S&P 500 incorporates many stocks that aren’t listed on the Nasdaq and therefore cannot be included in QQQ, which itself is made up of the largest 100 nonfinancial companies in the full Nasdaq Composite Index
COMP,
+0.45%.

Examples of stocks held by XLG that aren’t held by QQQ include such non-tech stalwarts as Berkshire Hathaway Inc.
BRK.B,
+0.77%,
Johnson & Johnson
JNJ,
+0.79%,
Procter & Gamble Co.
PG,
+0.94%,
Home Depot Inc.
HD,
-0.12%
and Nike Inc.
NKE,
-0.42%.

Now let’s go deeper into long-term performance. First, here are the total returns for various time periods:

ETF	3 Years	5 Years	10 Years	15 Years	20 Years
SPDR S&P 500 ETF Trust SPY	40%	69%	223%	370%	531%
Invesco QQQ Trust QQQ	41%	113%	430%	882%	1,158%
Invesco S&P 500 Top 50 ETF XLG	41%	85%	262%	404%	N/A
Source: FactSet

Click on the tickers for more about each ETF, company or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

There is no 20-year return for XLG because this ETF was established in 2005.

For five years and longer, QQQ has been the runaway leader, but for 5, 10 and 15 years, XLG has also beaten SPY handily, with broader industry exposure.

Something else to consider is that during 2022, when SPY was down 18.2%, XLG fell 24.3% and QQQ dropped 32.6%.

For disciplined long-term investors, the tech pain of 2022 may not seem to have been a small price to pay for outperformance. And it may have been easier to take the pounding when holding SPY or even XLG that year.

Here’s a look at the average annual returns for the three ETFs:

ETF	3 years	5 years	10 years	15 years	20 years
SPDR S&P 500 ETF Trust SPY	11.8%	11.0%	12.4%	10.9%	9.6%
Invesco QQQ Trust QQQ	12.0%	16.3%	18.2%	16.4%	13.5%
Invesco S&P 500 Top 50 ETF XLG	12.2%	13.1%	13.7%	11.4%	N/A
Source: FactSet

So the question remains — do you believe that the largest technology companies will continue to lead the stock market for the next decade at least? If so, a more concentrated index approach may be for you, provided you can withstand the urge to sell into a declining market, such as the one we experienced last year.

Here is something else to keep in mind. In a note to clients on Monday, Doug Peta, the chief U.S. investment strategist at BCA, made a fascinating point: “The only novel development is that all the heaviest hitters now hail from Tech and Tech-adjacent sectors and are therefore more prone to move together than they were at the end of 2004, when the seven largest stocks came from six different sectors. “

Nothing lasts forever. Peta continued by suggesting that investors who are tired of big tech taking all the glory “need only wait.”

“[I]f history is any guide, their time at the top of the capitalization scale will be short,” he wrote.

Don’t miss: These four Dow stocks take top prizes for dividend growth

[ad_2]

Source link

September 11, 2023

C3.ai, GameStop, UiPath, ChargePoint, Yext, BlackBerry, and More Stock Market Movers
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/stock-market-movers-3fac9192
Updated Sept. 7, 2023 6:33 am ET / Original Sept. 7, 2023 4:37 am ET

Order Reprints

Print Article
[ad_2]

Source link
September 7, 2023

Mortgage rates reach highest level since 2001 and are likely to go higher, Freddie Mac says

[ad_1]

U.S. mortgage rates increased for the fifth week in a row, with the 30-year reaching the highest level since 2001.

The 30-year fixed-rate mortgage averaged 7.23% as of Aug 24, according to data released by Freddie Mac
FMCC,
+0.18%
on Thursday.

It’s up 14 basis points from the previous week — one basis point is equal to one hundredth of a percentage point.

The last time rates were this high was in June 2001.

A year ago, the 30-year was averaging at 5.55%.

The average rate on the 15-year mortgage rose to 6.55% from 6.46% last week. The 15-year was at 4.85% a year ago.

Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.

Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging at 7.36% as of Thursday afternoon.

What Freddie Mac said: “Indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term,” Sam Khater, chief economist at Freddie Mac, said in a statement.

“As rates remain high and supply of unsold homes woefully low, incoming data shows that existing homes sales continue to fall,” he added. “However, there are slightly more new homes available, and sales of these new homes continue to rise, helping provide modest relief to the unyielding housing inventory predicament.

What are they saying? Other industry experts also believe rates could move higher.

“Earlier this year, it looked as though inflation was being brought under control and the Fed may be almost ready to declare victory… now, however, as inflation has ticked up and bond yields are rising amidst economic uncertainty, it is a different situation,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. “Instead of talking about rates falling to 6% this year, the question is how much above 7% are we going to go?”

[ad_2]

Source link

August 24, 2023
Austin Pets Alive! | Progress Update of APA!’s Veterinary Services…
[ad_1]
Aug 23, 2023

The City of Laredo and Laredo Animal Care Services (LACS) partnered with Austin Pets Alive! (APA!) in February 2023 as a result of the city’s desire to meet the Laredo community’s need for shelter improvement. Due to limited resources, LACS has historically faced challenges in implementing veterinary best practices, struggling to save half of the 8,000 pets that come into its shelter. Recognizing that a change was needed, LACS contracted with APA! to provide veterinary care services and updated shelter operations. Because LACS has unnecessarily delayed implementing animal welfare industry standards at its shelter, APA! is calling on the citizens of Laredo to join our efforts in advocating for the thousands of pets who are at risk of being euthanized.

APA! has been helping LACS with rescue transport since 2020 and partnered with LACS during Winter Storm Uri, which led to this bigger partnership. In May 2023, after working with LACS over many months, APA! built a set of customized recommendations and an implementation plan to establish Laredo as a leader in animal sheltering throughout South Texas. LACS has been presented with its first opportunity to accept resources, in the form of time and money, from a transformational organization to help save more animal lives. APA!’s objective is to help fill the gap in necessary training and support, at the request and with the cooperation of LACS, to help people and their pets in Laredo.

APA!’s implementation plan includes shelter best practices such as support at intake,Trap, Neuter, Release (TNR) program, lost pet reunification, and placement programs. A people focused intake model, which includes an appointment-based intake of animals in non-emergency situations into the animal services facility, is a modern practice that prioritizes sick or injured pets, animals in immediate danger, or dogs that pose a threat to public safety. Organized intake frees up shelter resources to ensure emergencies and critical situations are handled promptly and effectively.

PROGRESS IN SAVING LIVES

APA!’s vet and national shelter support teams have made significant progress at LACS:
- Since March, APA! doubled spay and neuters with over 1,000 animals, and in 2023 since the start of the contract, we have brought the feline live outcome rate to over 65%. APA! is responsible for over 1,100 live outcomes in 2023 through rescue transport.
- Implemented treatment protocols to ensure every sick, treatable animal receives medication and vaccines, health certificates, and more to increase the number of pets saved.
- Performed an elevated level of medical attention for shelter animals, including leg amputations, mass removals, surgeries, and more to save the pet’s life. Previously animals requiring this care would have been automatically euthanized.
Furthermore, APA! designed free custom staff training, over 30 standard operating procedures, and an implementation plan for LACS based on best practices that include:
- Intake Counseling and Triage – To help provide treatment and care to the animals in need, providing consent-based resources for pets that may not need to come to the shelter, and reducing euthanasia rates.
- Trap, Neuter, Release (TNR) program – To ensure stray cats aren’t euthanized upon intake at alarming rates.
- Lost Pet Reunification – To ensure that at least the national standard number of lost pets make it back to their families.
- Placement Programs- Rescue/Transport, Adoption, Case Management, Foster, Volunteer – To help reduce the number of pets at the shelter by promoting adoptions, fostering, and working with rescue partners.
The implementation of these programs and procedures is fundamental to the success of the contract between Austin Pets Alive! and Laredo Animal Care Services to increase adoptions and provide community guidance to better support the people and pets of Laredo. APA! is also providing additional resources such as:
- 5 Full-time employees (4 directly operations focused and local to Laredo and 1 focused on marketing and communication)
- National Field Services in-person training
- Online course module with in-person guidance and assessment for free
- Weekly transport van and driver dedicated to picking up Laredo animals and taking in-state partners.
- Once a month, state transport van and driver assistance are dedicated to Laredo animals.
- $90K pet food donation for the community via HSUS/Chewy secured by APA!.
- Adoption incentive grant of $3,000 for gift bags for adopters.
- Handouts, flyers, resources, and posters – printed for the front lobby, and for staff to hand out to the community to help people with their pets.
CHALLENGES BEING FACED:

While APA! has addressed the many issues with LACS’s current practices by providing recommendations, staff training, and standard operating procedures, LACS has unnecessarily delayed implementing animal welfare industry standards at its shelter.

APA!’s implementation plan, introduced in May 2023, includes shelter best practices such as support at intake, Trap, Neuter, Release (TNR) program, lost pet reunification, and placement programs.

To be successful, Laredo Animal Care Services needs to implement these changes immediately and take the community’s and animals’ needs into consideration. Many of the recommendations made by APA! in May have yet to be implemented, leading to the continued killing and warehousing of shelter pets.

HISTORY

When APA!’s team first arrived at LACS, they encountered dire conditions, including an extremely high rate of disease in pets–predominately parvovirus; overcrowding, unsanitary kennels; inadequate water and food supplies; and unattended injured animals in urgent need of medical care.

Upon arrival, APA! quickly identified and implemented immediate solutions to solve these harsh conditions and continued to work with the LACS team to implement additional medical and treatment protocols. These actions have already contributed to saving the lives of several hundred pets that most certainly would have died without intervention due to lack of medical care and euthanasia. The year-end goal is to increase live outcomes to 90%, almost double what they were when APA! first arrived.
[ad_2]

Source link
August 23, 2023
U.S. banks and regional lenders slide across the board as S&P is latest to downgrade ratings

[ad_1]

U.S. banks and regional banks fell across the board on Tuesday, after S&P Global Ratings downgraded five smaller players after a review of risk related to funding, liquidity and asset quality with a focus on office commercial real estate.

Adding to the gloom, Republic First Bancorp. Inc.’s stock
FRBK,
-41.90%
tanked by 39%, after Nasdaq told the company that its stock would be delisted on Wednesday, after it failed to file its annual report in time.

S&P’s move comes just days after Fitch Ratings analyst Christopher Wolfe reduced his operating environment score for U.S. banks to aa- from aa due to the unknown path of interest rate hikes and regulatory changes facing the sector.

And Moody’s Investors Service just two weeks ago upset investors when it downgraded some lenders and said it was reviewing ratings on bigger banks, including Bank of New York Mellon
BK,
-1.71%,
State Street
STT,
-1.59%
and Northern Trust
NTRS,
-1.73%.

For more, see: Bank asset quality, weaker profits spark Moody’s reviews and downgrades as it weighs potential 2024 recession

The S&P 500 Financials Sector has fallen for seven consecutive days, and is on pace for its longest losing streak since April 7, 2022, when it also fell for seven straight trading days.

Individual bank names are also performing poorly, with Goldman Sachs Group Inc.
GS,
-0.94%
and Citigroup Inc.
C,
-1.68%
down for 10 of the past 11 days and Charles Schwab Corp.
SCHW,
-4.84%
down 11 straight days.

Goldman alone has fallen for seven straight days for a total loss of 6.3%. It’s the longest losing streak since Feb. 28, 2020, when it also fell for seven straight days as the pandemic was taking hold.

The KBW Nasdaq Regional Banking Index
KBWR
is down for 11 straight days. and the KBW Nasdaq Bank Index
BKX
is down for seven straight days.

S&P downgraded Associated Banc. Corp.
ASB,
-4.20%,
Comerica Inc.
CMA,
-3.82%,
KeyCorp
KEY,
-3.58%,
UMB Financial Corp.
UMBF,
-2.42%
% and Valley National Bancorp.
VLY,
-4.19%
by one notch and said the outlook on all five is stable.

Read also: More challenges await U.S. banks but analysts think the worst may be over for the year

The rating agency affirmed ratings on Zions Bancorp
ZION,
-4.17%
and maintained a negative outlook, meaning it could downgrade them again in the near-term. And it affirmed ratings and a stable outlook on Synovus Financial Corp.
SNV,
-3.37%
and Truist Financial Corp.
TFC,
-1.36%

“We reviewed these 10 banks because we identified them as having potential risks in multiple areas that could make them less resilient than similarly rated peers ,” S&P said in a statement.

“For instance, some that have seen greater deterioration in funding—-as indicated by sharply higher costs or substantial dependence on wholesale funding and brokered deposits—-may also have below-peer profitability, high unrealized losses on their assets, or meaningful exposure to CRE.”

The steep rise in interest rates orchestrated by the Federal Reserve over the past year has raised deposit costs as banks are now competing for savers seeking higher returns and that’s forced some to pay up on deposits and discourage their clients from heading to other institutions and instruments.

The sector has been skittish this year following the collapse of Silicon Valley Bank and other lenders that led to a run on deposits at a number of regional lenders.

However, S&P said about 90% of the banks it rates have stable outlooks and just 10% have negative ones. None have positive outlooks.

The widespread stable outlooks shows that stability in the U.S. banking sector has improved significantly in recent months.

S&P is expecting FDIC-backed banks in aggregate to earn a relatively healthy ROE of about 11% in 2023.

KeyCorp. and Comerica both fell more than 3% on the news. Of the two, KeyCorp. has more outstanding debt and its 10-year bonds widened by about 5 to 10 basis points, according to data solutions provider BondCliq Media Services.

As the following chart shows, the bonds have seen better selling on Wednesday with buyers emerging around midmorning.

KeyBank net customer flow (intraday). Source: BondCliQ Media Services

The next chart shows customer flow over the last 10 days.

Most active KeyBank issues with net customer flow (last 10 days). Source: BondCliQ Media Services

The next chart shows the outstanding debt of the downgraded banks, with KeyCorp. clearly the leader with almost $16 billion of bonds.

Outstanding S&P downgraded banks debt USD by maturity bucket. Source: BondCliQ Media Services

Don’t miss: Capital One confirms roughly $900 million sale of office loans as property sector wobbles

[ad_2]

Source link

August 22, 2023

Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs

[ad_1]

Wall Street looks ready to build on Monday’s gains, the first in five sessions for the S&P 500
SPX
and Nasdaq Composite
COMP.
That’s as expectations build around Nvidia, which has had a lackluster August, to knock it out of the park with earnings on Wednesday.

Investors have had months to focus on AI darlings such as Nvidia. In our call of the day, Goldman Sachs takes a look at stocks to trade after the big AI trade. A team led by strategists Ryan Hammond and David Kostin complied a basket of companies with the biggest potential long-term earnings per share boost from the impact of AI adoption on labor productivity.

Their analysis indicates that following widespread AI adoption, EPS for the median stock in that basket could be 72% higher than the baseline, versus 19% for the median Russell 1000 stock.

“We estimate the potential productivity-related EPS boost from increased revenues or increased margins, using a combination of company-level estimates of the share of the wage bill exposed to AI automation and the labor cost to revenue ratio,” said the Goldman team.

Since early 2023, when AI emerged as a theme for investors, they note their long-term basket of stocks has outperformed the equal-weight S&P 500 by just 6 percentage points, far less than near-term beneficiaries such as Nvidia
NVDA,
-0.49%,
Microsoft
MSFT,
+0.94%
or Meta
META,
+0.51%.

Goldman Sachs Investment Research

“The estimated AI-driven earnings boost is likely to occur over the next few years, but should be reflected in stock valuations sooner. However, the eventual share price impact will depend on the ability of companies to use AI to enhance earnings,” said Goldman.

While unable to pin it exactly, Goldman expects AI adoption will start to a have a “meaningful macro impact” between 2025 and 2030, with regulatory constraints and data privacy concerns likely to slow widespread adoption. Nearly 75% of CEOs see AI take-up impacting companies or cutting labor needs within the next five years, even if they don’t right now.

Firms with the biggest workforce exposure to AI and larger and more innovative ones, will likely adopt generative AI earlier than others, say the strategists. They say to “expect valuation multiples for these companies to increase first as the adoption timeline crystallizes, even if actual adoption and the associated EPS boost is occur later.”

Goldman’s estimates on the potential earnings boost for those long-term AI beneficiaries consist of several factors: the share of each company’s wage bill exposed to AI automation, how much of a company’s wage bill is exposed to AI automation and labor cost as a share of revenue.

“For the typical Russell 1000 stock, 33% of the wage bill is potentially exposed to AI automation and labor costs currently represent 14% of total sales. The potential boost from higher sales would increase earnings by 11% and reduced labor costs would increase earnings by 26%, all else equal,” say the strategists.

Here is a taster of their long-term AI beneficiaries basket:

And a few more:

Read: U.S. stocks may bounce this week, but summer selloff is only halfway done, analysts warn

The markets

U.S. stocks
SPX

COMP
are trading mixed. The yield on the 10-year Treasury
BX:TMUBMUSD10Y
is steady at 4.33%.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

Microsoft
MSFT,
+0.94%
has proposed a Ubisoft license to win U.K. regulatory approval for its Activision Blizzard
ATVI,
+1.09%
buyout. Activision shares and Ubisoft
UBI,
+9.93%
surged in Paris.

On the heels of a 7% surge, EV-maker Tesla
TSLA,
+2.77%
is up 1.8%.

Opinion: SoftBank’s Arm is going public, but it faces a rapidly growing threat

Lowe’s shares
LOW,
+3.34%
are up after the DIY retailer’s earnings topped expectations, though it notes lower discretionary demand.

Among Monday’s late earnings news: Fabrinet
FN,
+27.25%
is up 18% after the high-tech manufacturing services company upbeat forecast, with new AI products helping drive results. Videoconferencing group Zoom Video Communications
ZM,
-4.15%
is up 4% after reporting an earnings jump and guidance.

Read: Why Amazon is this analyst’s top internet stock pick

The world’s biggest miner BHP
BHP,
-0.98%
reported a 58% slump in annual profit amid tumbling commodity prices in part due to China’s economic troubles. U.S.-listed shares are up 4%.

Arm Holdings filed its long-awaited IPO, which could be the year’s biggest. The chip designer aims to raise up to $10 billion with a valuation of $60 billion to $70 billion.

Existing home sales for July are due at 10 a.m., with several Fed speakers throughout the day: Richmond Fed President Tom Barkin at 7:30 a.m. and Chicago Fed President Austan Goolsbee and Fed. Gov. Michelle Bowman both at 2:30 p.m.

Best of the web

‘Own what the Mother of All Bubbles crowd doesn’t.’ This market strategist expects stagflation and is investing for it now.

New video shows the day police raided 98-year old Kansas newspaper owner’s home.

Hitler’s birth house in Austria will be turned into a police station with a human rights training center.

The tickers

These were the top tickers on MarketWatch as of 6 a.m.:

Ticker	Security name
TSLA, +2.77%	Tesla
NVDA, -0.49%	Nvidia
AMC, -17.31%	AMC Entertainment
NIO, -1.87%	Nio
APE, -11.32%	AMC Entertainment Holdings preferred shares
TTOO, -6.13%	T2 Biosystems
GME, -3.63%	GameStop
AAPL, +0.63%	Apple
MULN, -19.19%	Mullen Automotive
AMZN, +0.15%	Amazon.com

The chart

Is tech dancing to the beat of its own drum? The Chart Report flagged this one from Scott Brown, founder of Brown Technical Insights, showing performance of the Technology Select Sector SPDR ETF
XLK
:

“It’s only been a week, but consensus and conventional wisdom suggest higher yields are bad for Growth/Tech stocks. Meanwhile, Tech is acting like it never got the memo. It’s still too early to tell if Tech is trying to tell us something, but Scott points out that the sector is facing a crucial test this week at the March 2022 highs (around $163). $XLK is solidly above $163 after today’s bounce, but where it ends the week will likely hinge on $NVDA, as the company releases earnings on Wednesday evening,” says Patrick Dunuwila, editor and co-founder of The Chart Report.

Random reads

“We are the champions.” Spain erupted in celebrations to welcome its Women’s World Cup victors. And England’s Lionesses got a 1,000 soccer-ball tribute.

No, Tropical Storm Hilary didn’t flood Dodger Stadium.

These thirsty beer-drinking thieves are raccoons.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.

[ad_2]

Source link

August 22, 2023

Union Throws a Curveball in Battle for U.S. Steel
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/u-s-steel-usw-right-bid-cliffs-89cbf208
Updated Aug. 18, 2023 2:15 pm ET / Original Aug. 18, 2023 11:58 am ET

Order Reprints

Print Article

The battle for

United States Steel

has already taken a number of unexpected twists and turns. Investors just got another one.
[ad_2]

Source link
August 18, 2023
Mortgage rates could hit 8%, economists say, citing a worrying sign not seen since the Great Recession

[ad_1]

With mortgage rates firmly above 7%, homeownership has become much more expensive. But will rates go even higher?

Three experts told MarketWatch that if the economy continues to show signs of strength, and the U.S. Federal Reserve hikes its benchmark interest rate once again, rates could go up to 8%.

High rates have already taken a toll on the U.S. housing market. Even home builders, who have in recent months experienced strong demand from homebuyers, are reporting a drop in buyer traffic as those rising rates rattle their customers.

But experts also stressed that the U.S. economy is showing early signs of cooling, and that the rate of inflation is easing. That could lead to a slowdown — or even a drop — in mortgage rates. But such forecasts are not a guarantee, as Tuesday’s stronger-than-expected U.S. retail sales figures suggested.

How high can rates go?

Even though the 30-year fixed mortgage rate was averaging 7.26% as of Tuesday evening, the highest level since November 2022, economists say rates could go up further.

The 30-year is “at a critical stage,” Lawrence Yun, chief economist at the National Association of Realtors, told MarketWatch.

“If the 30-year-fixed mortgage rate can hold at a high mark of 7.2% — and the 10-year yield holds at 4.2% — then this would be the high for mortgage rates before retreating,” Yun said. “If it breaks this line and easily goes above 7.2%, then the mortgage rate reaches 8%.”

As of Tuesday afternoon, the 10-year Treasury note
BX:TMUBMUSD10Y
was above 4.2%.

“Mortgage rates could rise significantly if global investors demand higher yields for fixed-income assets,” Cris deRitis, deputy chief economist at Moody’s Analytics, told MarketWatch.

Currently, the spread between the 30-year fixed-rate mortgage and a 10-year Treasury bond is around 300 basis points, which is “elevated and highly unusual,” he said.

“‘Historically, the mortgage-rate spread has only been around this level only during periods of financial crisis such as the Great Recession or the early 1980s recession.’”

— Cris deRitis, deputy chief economist at Moody’s Analytics

“Historically, the mortgage-rate spread has only been around this level only during periods of financial crisis such as the Great Recession or the early 1980s recession,” deRitis added. “The historical average is closer to 175 basis points.”

If the 10-year continues to rise — and the U.S. Federal Reserve chooses to interest rates once again — it could go beyond 5%. If the spread stays elevated at 300 basis points, deRitis added, “a mortgage rate of 8% or more is a distinct possibility in the near term.”

Consumers seem to be prepared for 8% rates. In February, households surveyed by the New York Federal Reserve as part of its Survey of Consumer Expectations, found that they expect mortgage rates to rise to 8.4% by the following year, and 8.8% in three years’ time. Yet few saw the moment as an opportunity to buy.

To be clear, rates have been far higher in the past. In 1981, the 30-year mortgage rate went up to 18%, according to Freddie Mac
FMCC,
+31.97%.
That year, the rate of inflation was 10.3%, according to the Minneapolis Fed.

“So in theory, mortgage rates can go up as much,” Selma Hepp, chief economist at CoreLogic, told MarketWatch. “But I don’t think they’re gonna go much beyond where they are right now.”

The yearly rate of inflation in July was just 3.2%. There was runaway inflation in the early 1980s. Though the year isn’t over yet, it is highly unlikely that the rate will suddenly surge, as economists expect the cost of housing — one of the biggest drivers of inflation — to ease in the coming months.

What happens to housing if rates surge?

If the 30-year mortgage interest rate reached 8%, there would be serious consequences for the housing market, Yun said. “At 8%, the housing market will re-freeze, with fewer buyers and far fewer sellers,” he added.

But don’t expect high rates to hurt home prices just yet, Yun added: “As long as the job market doesn’t turn negative, then home prices will be stable — though home sales will take another step downward. If there is a job-cutting recession, then home prices will fall as some will be forced to sell while there are few buyers.”

Other experts said that high rates have already taken a toll on the U.S. housing sector. “A mortgage rate in excess of 6% has already sidelined a large number of potential homebuyers, especially first-time home buyers,” deRitis said.

He noted that the monthly mortgage payment for a median-priced home at the prevailing 30-year mortgage rate has risen from close to $1,100 per month in January 2019 to over $2,100 today. “At 8%, the monthly payment would rise to over $2,300, excluding an even larger number of potential buyers with above-average incomes,” deRitis added.

High rates also discourage homeowners from selling, since they may have to surrender an ultra-low mortgage with a low monthly payment for a high rate. They may end up with a smaller budget to purchase a home, or worse, not find any listings at all, given an ongoing inventory crunch.

With high rates, many home buyers may be priced out of the market. Yet some buyers — particularly baby boomers — who have the means to put in all-cash offers on homes are keeping home prices elevated, Hepp said.

So who would be able to buy and sell? Cash buyers. “They tend to be older people like baby boomers who own their homes free and clear,” she added. “If they live in more expensive areas, like anywhere in California, they can sell their home and walk away with in excess of $500,000. And that in some markets buys them two homes.”

deRitis said that the ultimate fate of home prices falls on the strength of the job market. Even though rates are high for now, home prices may not fall significantly, as some buyers can still purchase homes with cash, he added.

But “if the labor market should weaken and unemployment rise, home foreclosures would rise,” deRitis added, “placing downward pressure on home prices.”

“So the housing market is definitely suffering from high rates,” Hepp said. “But I think even higher rates would be pretty devastating for the housing market.”

[ad_2]

Source link

August 17, 2023
U.S. Steel Takeover Talk Rattles Manufacturers

[ad_1]

U.S. Steel Takeover Talk Rattles Manufacturers

[ad_2]

Source link

August 15, 2023
Greedflation is not letting up. Here’s what companies are saying about it.

[ad_1]

The second-quarter earnings season so far is showing that one trend that featured in the first quarter has not gone away.

“Greedflation,” or the practice of companies raising prices to protect their profit margins, is alive and well, based on the number of companies that have so far acknowledged raising prices yet again, even as inflation readings have come down and as some acknowledge that their input costs are falling.

At the same time, companies continue to emphasize on earnings calls that their customers are showing signs they are weary of higher prices and are shopping more frequently at more stores, while spending less per trip.

See: Consumers are shopping in more stores than ever before to save money

“Across industries, we’ve seen the same story over and over the last two years,” said Liz Zelnick, director of economic security and corporate power at Accountable.US, a liberal-leaning consumer-advocacy group.

“CEOs claim outside forces made them gouge consumers, then turn around and give themselves raises and boast of record profits and billions in new investor handouts,” she said, referring to the billions of stock buybacks and dividend payouts the same companies have made.

See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike

Also read: U.S. wholesale inflation slows to a crawl, PPI shows

Procter & Gamble Co.
PG,
-1.10%,
for example, said it raised prices by up to 9% in its latest quarter, after raising them up to 10% the previous quarter and up to 10% in the same quarter in 2022.

On a call with analysts, Chief Executive Jon Moeller signaled more price increases to come, which he attributed to the company’s innovation pipeline, which is creating must-have products.

“If you look back historically, pricing has been a positive contributor to our top-line growth for something like 48 out of the 51 last quarters and again as we strengthen our innovation program even further, that will provide opportunities to continue to benefit from modest pricing,” said Moeller, according to a FactSet transcript.

See also: Colgate to keep raising prices as inflation slows to boost margins and profit

The company blew past earnings estimates with adjusted per-share earnings of $1.37, ahead of the $1.32 FactSet consensus, and sales of $20.6 billion, versus the $20 billion FactSet consensus.

Gross margin increased 380 basis points from a year ago, driven by 340 basis points of pricing benefit and 290 basis points of productivity savings.

Coca-Cola Co.
KO,
-1.51%
also swept past estimates and raised guidance after the drinks and snacks giant increased prices by 10%. The company’s adjusted operating margin rose to 31.6% from 30.6% a year ago.

Conagra Brands Inc.
CAG,
-0.62%
raised prices by up to 17%, which Chief Executive Sean Connolly described as “inflation-justified.” The parent of brands such as Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim also reported that its customers are buying less food to stretch their budgets.

For more, see: Consumers are now ‘hunkering down’ rather than ‘trading down’ on groceries, Conagra says

Oreo cookie maker Mondelez International Inc.
MDLZ,
-1.82%
raised prices in North America by 10.4 percentage points in the second quarter and raised prices for all developed markets by 12.4 percentage points. That’s after raising North America prices by 15 percentage points and prices in developed markets by 13.4 percentage points in the first quarter.

The company’s second-quarter gross margins expanded by 3.1 percentage points to 39.4%. Revenues rose 17%, while volumes were flat.

At Campbell Soup Co.
CPB,
-1.05%,
sales for its fiscal third quarter were up 5%, led by “favorable net price realization,” as the company disclosed as the very first bullet point in its release. Campbell raised prices of meals and beverages by 9% and if snacks by 15%, after raising them by 15% and 13%, respectively, in the second quarter.

However, volumes were down in the third quarter as shoppers proved sensitive to higher prices.

Kraft Heinz Co.
KHC,
-0.82%
on Tuesday said it too has lost business because it raised prices more than its competitors, but it’s not planning to cut prices to try to get those customers back anytime soon.

“[W]hile we did lose share in the quarter, as price gaps have stayed wider for longer than we would have liked, we are managing the business for the long term and still generated mid-single-digit top-line growth within the range of what we expected,” Chief Executive Miguel Patricio said.

The company, parent to brands including Kraft Mac and Cheese, Heinz Ketchup, Jell-O and Lunchables, indicated on the post-earnings conference call with analysts that rather than increasing discounting, or just cutting prices, it will remain focused on protecting margins, which has been allowing it to accelerate investment in the business, particularly in marketing, research and development and technology.

Besides, as Chief Financial Officer Andre Maciel said, the gaps between Kraft’s prices and those of competitors are not getting worse. “If anything, they are slightly getting better,” Maciel said, according to an AlphaSense transcript.

Considering the market-share losses and with inflation coming down, “do you think you took too much price, given you said you took price ahead of competitors, and they have not followed?” UBS analyst Cody Ross asked on the conference call.

CEO Miguel Patricio’s answer was simple: “No.”

“I mean, we had very high inflation. And we are leaders in the vast majority of categories where we play. And it’s our role as leader to try to compensate … this inflation with price increases,” Patricio said. “So I would do everything again. I mean we can always go back on price if we think we have to or when we have to. But we had to lead price increases.”

All of that leaves families to foot the bill for higher food prices, said Accountable.US’s Zelnick.

The Consumer Staples Select Sector SPDR exchange-traded fund
XLP
has gained 1.2% in the year to date, while the SPDR S&P Retail ETF
XRT
has gained 10.3%. The S&P 500
XRT
has gained 17%.

Tomi Kilgore contributed.

[ad_2]

Source link

August 4, 2023
Greedflation is not letting up. Here’s what companies are saying about it.

[ad_1]

The second-quarter earnings season so far is showing that one trend that featured in the first quarter has not gone away.

“Greedflation,” or the practice of companies raising prices to protect their profit margins, is alive and well, based on the number of companies that have so far acknowledged raising prices yet again, even as inflation readings have come down and as some acknowledge that their input costs are falling.

At the same time, companies continue to emphasize on earnings calls that their customers are showing signs they are weary of higher prices and are shopping more frequently at more stores, while spending less per trip.

See: Consumers are shopping in more stores than ever before to save money

“Across industries, we’ve seen the same story over and over the last two years,” said Liz Zelnick, director of economic security and corporate power at Accountable.US, a liberal-leaning consumer-advocacy group.

“CEOs claim outside forces made them gouge consumers, then turn around and give themselves raises and boast of record profits and billions in new investor handouts,” she said, referring to the billions of stock buybacks and dividend payouts the same companies have made.

See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike

Also read: U.S. wholesale inflation slows to a crawl, PPI shows

Procter & Gamble Co.
PG,
+0.18%,
for example, said it raised prices by up to 9% in its latest quarter, after raising them up to 10% the previous quarter and up to 10% in the same quarter in 2022.

On a call with analysts, Chief Executive Jon Moeller signaled more price increases to come, which he attributed to the company’s innovation pipeline, which is creating must-have products.

“If you look back historically, pricing has been a positive contributor to our top-line growth for something like 48 out of the 51 last quarters and again as we strengthen our innovation program even further, that will provide opportunities to continue to benefit from modest pricing,” said Moeller, according to a FactSet transcript.

See also: Colgate to keep raising prices as inflation slows to boost margins and profit

The company blew past earnings estimates with adjusted per-share earnings of $1.37, ahead of the $1.32 FactSet consensus, and sales of $20.6 billion, versus the $20 billion FactSet consensus.

Gross margin increased 380 basis points from a year ago, driven by 340 basis points of pricing benefit and 290 basis points of productivity savings.

Coca-Cola Co.
KO,
-0.49%
also swept past estimates and raised guidance after the drinks and snacks giant increased prices by 10%. The company’s adjusted operating margin rose to 31.6% from 30.6% a year ago.

Conagra Brands Inc.
CAG,
-0.75%
raised prices by up to 17%, which Chief Executive Sean Connolly described as “inflation-justified.” The parent of brands such as Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim also reported that its customers are buying less food to stretch their budgets.

For more, see: Consumers are now ‘hunkering down’ rather than ‘trading down’ on groceries, Conagra says

Oreo cookie maker Mondelez International Inc.
MDLZ,
+0.09%
raised prices in North America by 10.4 percentage points in the second quarter and raised prices for all developed markets by 12.4 percentage points. That’s after raising North America prices by 15 percentage points and prices in developed markets by 13.4 percentage points in the first quarter.

The company’s second-quarter gross margins expanded by 3.1 percentage points to 39.4%. Revenues rose 17%, while volumes were flat.

At Campbell Soup Co.
CPB,
-0.95%,
sales for its fiscal third quarter were up 5%, led by “favorable net price realization,” as the company disclosed as the very first bullet point in its release. Campbell raised prices of meals and beverages by 9% and if snacks by 15%, after raising them by 15% and 13%, respectively, in the second quarter.

However, volumes were down in the third quarter as shoppers proved sensitive to higher prices.

Kraft Heinz Co.
KHC,
-1.75%
on Tuesday said it too has lost business because it raised prices more than its competitors, but it’s not planning to cut prices to try to get those customers back anytime soon.

“[W]hile we did lose share in the quarter, as price gaps have stayed wider for longer than we would have liked, we are managing the business for the long term and still generated mid-single-digit top-line growth within the range of what we expected,” Chief Executive Miguel Patricio said.

The company, parent to brands including Kraft Mac and Cheese, Heinz Ketchup, Jell-O and Lunchables, indicated on the post-earnings conference call with analysts that rather than increasing discounting, or just cutting prices, it will remain focused on protecting margins, which has been allowing it to accelerate investment in the business, particularly in marketing, research and development and technology.

Besides, as Chief Financial Officer Andre Maciel said, the gaps between Kraft’s prices and those of competitors are not getting worse. “If anything, they are slightly getting better,” Maciel said, according to an AlphaSense transcript.

Considering the market-share losses and with inflation coming down, “do you think you took too much price, given you said you took price ahead of competitors, and they have not followed?” UBS analyst Cody Ross asked on the conference call.

CEO Miguel Patricio’s answer was simple: “No.”

“I mean, we had very high inflation. And we are leaders in the vast majority of categories where we play. And it’s our role as leader to try to compensate … this inflation with price increases,” Patricio said. “So I would do everything again. I mean we can always go back on price if we think we have to or when we have to. But we had to lead price increases.”

All of that leaves families to foot the bill for higher food prices, said Accountable.US’s Zelnick.

The Consumer Staples Select Sector SPDR exchange-traded fund
XLP
has gained 1.2% in the year to date, while the SPDR S&P Retail ETF
XRT
has gained 10.3%. The S&P 500
XRT
has gained 17%.

Tomi Kilgore contributed.

[ad_2]

Source link

August 3, 2023

Manufacturing stalled in the first half. But now the stage is set for a recovery, says JPMorgan.

[ad_1]

The Institute for Supply Management’s manufacturing index is due for release Tuesday, which outside of inflationary periods (i.e., now), tends to be one of the more important economic indicators for financial markets, given its record as a bellwether.

ISM manufacturing data during the current rate-hike cycle (in red) has lagged other periods.

Even compared to other rate-hike cycles, the ISM manufacturing series has been one of the worst in history, points out Jason Daw, head of North America rates strategy at RBC Dominion Securities. Daw makes the case that the U.S. economy overall is not very strong for this period of the cycle, and the manufacturing data, not just ISM but also industrial production, has been particularly feeble.

But the call of the day comes from JPMorgan’s economic team. They note that while global manufacturing stalled in the first half, the non-manufacturing components rose at a 3.2% annualized rate, allowing the global economy to grow at an above trend 2.7% rate.

The team led by Bruce Kasman say that the typical channels through which weak manufacturing would bring down the broader economy haven’t materialized. “A major channel by which weakness in goods sectors broadens out is through depressing corporate income and pricing power. While our start-of-year outlook anticipated elevated wage gains to pressure corporate profits, the surprising strength in [first-half] global GDP was accompanied by upside surprises to inflation,” they say. In turn, there have been solid gains in both labor income and profits, and while margins have come off their peaks, they are well above pre-pandemic levels.

Business hiring, they add, is the ultimate signal of confidence, and employment growth has continued even though expectations have soured.

Now, say the JPMorgan team, the stage is set for a goods sector recovery. Labor income, when adjusted for inflation, is rising, while finished goods inflation is falling sharply.

Also, business capital spending continues to expand, particularly in emerging economies outside of China. And importantly, inventories are swinging from a drag to a lift. In the first half, the step down in the pace of stock building depressed global industrial production by 3.4 percentage points.

“Even if the pace of stockbuilding was only to level off, the impulse to global industry would be material. Add to that a potential desire to align the pace to firming demand growth and the boost could generate a jump in factory output in the coming months,” they say.

Finally, they note, the tech spending decline after the 2020 to 2021 surge looks to be ending, and global motor vehicle production is picking up as supply-chain bottlenecks ease.

The markets

After an okay finish for the S&P 500
SPX,
-0.29%
to a strong July, U.S. stock futures
ES00,
-0.36%

NQ00,
-0.42%
were a bit lower as the seasonally weak month of August commenced. Gold futures
GC00,
-1.28%
were trading below $2,000 an ounce. The dollar
DXY,
+0.42%
rose.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

The ISM report is due out at 10 a.m. Eastern, when the job openings and construction spending reports also come out. Monthly auto sales also will be released throughout the day.

Pfizer
PFE,
-0.03%,
Caterpillar
CAT,
+4.05%,
Uber Technologies
UBER,
-3.96%
and after the close, Starbucks
SBUX,
-0.35%
and Electronic Arts
EA,
-0.61%
highlight the day’s earnings reports. Pfizer lowered its sales guidance while Caterpillar beat Wall Street earnings estimates and Uber reported a surprise profit.

JetBlue Airlines stock
JBLU,
-8.56%
slumped as the airline says it no longer expects to report a profit in the third quarter, owing to what it called a challenging environment in the northeast, as well as a preference by consumers for long-haul international flights.

CVS Health
CVS,
+0.48%
is going to cut 5,000 corporate jobs, according to The Wall Street Journal.

Best of the web

BlackRock
BLK,
-0.56%
and MSCI
MSCI,
-0.42%
are targets of a Congressional probe into facilitating U.S. investment in China.

The first new U.S. nuclear reactor in nearly seven years starts operations.

Modern-day Oppenheimers see the future of nuclear energy — and it’s mobile.

Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

Ticker	Security name
TSLA, -1.13%	Tesla
TUP, +14.28%	Tupperware Brands
NIO, -4.97%	Nio
AMC, -0.27%	AMC Entertainment
PLTR, -2.60%	Palantir Technologies
GME, -1.80%	GameStop
NVDA, -0.74%	Nvidia
AAPL, -0.15%	Apple
NKLA, +14.79%	Nikola
AMSC, +54.02%	American Superconductor

The chart

The inflation-adjusted equity premium is looking pretty bleak. That’s calculated by taking the expected return to the S&P 500 and subtracting 10-year TIPS yields. “While admittedly this graphic is skewed by the few megacaps trading at huge multiples, it’s sobering nonetheless,” says Michael Ashton, better known as the Inflation Guy.

Random reads

Granted, Philadelphia’s a big sports town, but there were actual tailgates to get the Eagles’ throwback Kelly green jerseys that went on sale.

A Chinese zoo has denied that a bear is human after video of the creature standing on two feet.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.

[ad_2]

Source link

August 1, 2023

Commodities Sizzled, Then Fizzled. What’s Next.

[ad_1]

The Commodity Rally Has Paused. What’s Next for Oil, Copper, and Producers’ Stocks.

[ad_2]

Source link

July 8, 2023
How to Harness the Power of Acceptance for Success | Entrepreneur
[ad_1]

Opinions expressed by Entrepreneur contributors are their own.
The troubled young founder, her voice heavy with concern, confided in me over the phone, “I’ve got to slash the marketing budget, and it’s going to bring growth to a screeching halt.” I took a moment before suggesting that this seemingly crushing setback might just be the catalyst she needed to unleash her inner creative genius.

In the same week, a founder of another rapidly growing startup employing over 500 people suddenly faced an unexpected crisis and slower sales cycles. To control spiraling costs and extend their runway, the founder had to make the heart-wrenching decision to lay off 100 dedicated employees. The founder was emotionally drained and down — I had never seen him like that.

As a SaaS founder and mentor, I interact with several entrepreneurs each week, grappling with trepidation and uncertainty. For many, the fragile economy of the last year or two has delivered a series of gut punches they’ve never experienced before. And you can’t blame their sense of shock. They had primarily experienced good times, with companies founded in the last 4-5 years when the economy was relatively healthy.

The availability of cheap capital and funding excesses of 2021 and 2022 resulted in startups flush with VC money going all out, chasing growth at any cost. With the slowing economy and tightening money supply, founders suddenly have to shift their mindset to efficient growth.

Related: Entrepreneurship Often Involves Uncertainty. Here’s How to Deal With It Productively.

Adopting a value mindset

I try to support these young founders by helping them to adopt the “Value Mindset.” I define this as predominantly three things:
1. Avoid wastage at all times
2. Accept what you have
3. Find a way to win
Let me take you back to when our company fit into just two small rooms in Chennai, India. Feeding my six teammates was hard because cafes were too far, and our car tires kept getting slashed, so the whole idea of each driving to different places to buy lunch was unfeasible. At lunchtime, we moved the laptops and keyboards out of one room and turned them into a makeshift cafeteria for an hour.

Fast forward to 2023, and thousands of employees now enjoy an array of delicious meals in our cafeteria. Initially, we were paying twice what we needed to, as staff sampled dessert from one vendor while choosing main courses from another. To circumvent this issue, we set up a separate dessert station offering yogurt and poppadoms, eliminating extra costs.

In a contrasting example, McDonald’s restaurants in Chennai provide trays for customers to deposit unused ketchup packets. Meanwhile, I’ve observed American patrons frequently discard these packets into the trash, often simply because they’re unaware of this eco-friendly alternative.

Avoiding wastage, accepting our constraints and finding a way to win comes naturally to me and many of us Indians, thanks to our middle-class upbringing when resources were always scarce.

Related: Mindset Matters: How to Prepare Your Company for Ongoing Change

Understanding the value mindset

Whether switching off the lights on your way out or finishing up the last morsel of food on your plate, these have become deeply ingrained habits from our childhood. In one sense, most of India has a value mindset. That’s why I still can’t understand why all the lights stay on through the night in downtown stores in the U.S., especially when the whole world is struggling with climate change and energy efficiency.

Accepting what you have is an essential part of this philosophy. Whether it’s a team, or a budget, a captain of business or sport has to accept what they have and learn to play and win with that. If you start the game complaining about why the team isn’t right or there aren’t enough resources, one thing is guaranteed. You are never going to win.

Related: 5 Ways to Create and Maintain an Abundance Mindset

Navigating your desires

Waste and unnecessary expenditure aren’t exclusive to the realm of food. They pervade every aspect of a business. To help budding founders navigate these challenges, I encourage them to embrace their circumstances, maintain belief in their perseverance and devise innovative solutions to bridge the gap between available resources and aspirations.

The recent economic slowdown and the pandemic’s lingering effects have highlighted our desires’ precarious nature. The operative term for businesses of all sizes now is ‘efficiency.’ Adversity has a unique ability to ignite creativity, giving rise to ingenious strategies that enhance efficiency, promote mindful spending and pave the way for future expansion.

In our case, we’ve eliminated many licenses for third-party software products that we barely use and change our laptop replacement policy from four to five years. We’ve also encouraged our employees to share their ideas to help spend more efficiently. Because of this and other measures, we can spend more in areas that need greater investment. This is who we are and how we serve customers facing the same constraints.

Related: Your Potential Success is Limitless, Despite What You’ve Been Told

I take heart from remembering that great companies are born and prove themselves in times like these. In the early 2000s, for instance, Google went from an ‘also-ran in search’ to the brand defining the category. Amazon was under pressure from Wall Street to trim its ambitions. Instead, Jeff Bezos held fast, and today Amazon is one of the planet’s most valuable enterprises. LinkedIn and Tesla Motors debuted during this same period – two companies that remain steadily successful today.

The obstacles to success may be higher now, but I believe this is still the time to win — if you focus on your positives and act prudently. Hold fast to your vision, and don’t be afraid to cut back now if it will drive you ahead later. The value mindset will help you in good times and bad. As I say to my team in Tamil, “Paathukalam” — come what may, we’ll be ready to face the outcome.
[ad_2]

Girish Mathrubootham

Source link
June 27, 2023
These Drilling Stocks Could Be Gushers as the Oil Industry Rebounds

[ad_1]

Offshore oil drillers were about the worst place to be in 2020 as oil prices were falling and demand for crude seemed to be seeping away. Now, the stocks may be the ones to own as investors realize that oil will be needed to make the world go around for decades.

[ad_2]

Source link

June 26, 2023
Alibaba, Dice, Arcellx, Avis, PayPal, and More Stock Market Movers
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/stock-market-movers-fb3791aa
Updated June 20, 2023 9:56 am ET / Original June 20, 2023 4:49 am ET

Order Reprints

Print Article
[ad_2]

Source link
June 20, 2023
New York Empire State, Philadelphia Fed factory indexes mixed but show signs of optimism

[ad_1]

The numbers: Two U.S. regional gauges of manufacturing sentiment showed signs in June that they may be improving after a rough patch, according to data released Thursday.

The Philadelphia Federal Reserve’s manufacturing index slipped further to a reading of negative 13.7 in June from negative 10.4 in the prior month, but economists had expected a reading of negative 14.8, according to a Wall Street Journal survey of economists. This is the tenth straight negative reading.

The…

[ad_2]

Source link

June 15, 2023
April U.S. factory orders rise for fourth gain in five months

[ad_1]

Orders for manufactured goods rose 0.4% in April, the Commerce Department said Monday. It is the fourth increase in factory-goods orders in the past five months.

Economists surveyed by the Wall Street Journal were expecting a 0.6% rise.

The gain was led by transportation equipment. Excluding that sector, orders were down 0.2%.

Durable-goods orders rose 1.1% in April, unrevised from the initial estimate last week. The advance durable-goods data is always released ahead of the full report. Nondurable-goods orders fell 0.1% in April.

Orders for nondefense capital goods, excluding aircraft, rose a revised 1.3% in April, down slightly from the prior estimate of a 1.4% increase. The gain was led by computers and machinery.

[ad_2]

Source link

June 5, 2023