THEME: Baby in a Corner

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May 16, 2022

Michael’s CIO (Check-It-Out) Report on the week just past — events, sarcasm, and global macro reflections

Manhattan Beach Rotary Club’s Celebrate MB: Photo and graphics by Michael Ashley

THEME: Baby in a Corner

GL🌏BAL

  • North Kovid: North Korea, population 26MM and unvaccinated, has experienced an “explosive” COVID🦠outbreak and reported over 1.2MM people with “fever” and fifty deaths — meanwhile Kim Jong-un, General Secretary of the Workers’ Party of Korea and 3rd Supreme leader of North Korea, is preparing to conduct another nuclear test🙈
  • Finland & Sweden set aside decades of neutrality to seek NATO membership — Finland has an over 800 mile border with Russia
  • +80 days of Russia-Ukraine war💀; over 6MM refugees have left Ukraine and millions more have been displaced within the country — Thankfully, a ginormous amount of western help, both reported and unreported, is amplifying Ukraine’s defense
  • Horn of Africa: Somalia elected 66-year old former leader Hassan Sheikh Mohamud (a member of the Hawiye clan and leader of the Union for Peace and Development party) as the next president; 36 candidates were in the race — Also President Biden will deploy hundreds of U.S. Special Operations forces to target leaders of the Somali terrorist group Al Shabab
  • wHEAT: India banned wheat exports as a heat wave damaged crops and prices soared; high fuel, labor, packaging, and transport costs only worsen the situation— more indications of coming famine for many countries

BIZNOMIC$

  • EarnUP: Expect U.S. corporate earnings to rise to new record highs over the next 12 months — The labor market is strong and the economy is growing, albeit at a slow pace
  • FedUp: The head of the U.S. central bank, Federal Reserve Chair Jerome Powell admitted what Running Point has said all along about the Fed, that “we can’t really affect supply with our policies. And supply is a big part of the story here,” and that whether or not we enter a recession may depend more on geopolitical events and “factors that we don’t control”🤦🏽‍♂️
  • Marginal: I feel we may be seeing the negative effects of margin calls across stocks and crypto accounts as margin rates (the cost to borrow money based on the value of one’s investment account) have increased, portfolio values have declined, and wealth effects have evaporated — That disappearing wealth effect will stress future consumer purchases and corporate projections
  • StayFlation remains our call; inflation will remain with us for longer and at higher levels than we’ve grown accustomed to over the last decade — expect inflation to peak this summer and to recede to 3%-4% next year
  • Terra unFirma: TerraUSD (UST), a so-called stablecoin (“I do not think it means what you think it means”), broke its 1-to-1 peg to the U.S. dollar and collapsed -85% in value; and Luna, the cryptocurrency associated with UST collapsed to almost zero😭
  • Baby in a Corner: A national shortage of baby formula aggravated by the health related closure of an Abbot factory in Michigan has sent parents scurrying and prices soaring — 3 companies, Abbott, Gerber, and Reckitt make nearly all domestic formula🍼and homemade formula is not considered safe

CONTENT

  • Salty: The California coastal commission voted down a $1.4B desalination plant in Huntington Beach for drought stricken SoCal—opponents said, not on my beach🌴⛱
  • Fine Print: A Coinbase bankruptcy could wipe out client accounts. Their recent mandatory 10-Q filing reported for the first time that, “in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.” — As we’ve written before, there are risks to keeping crypto assets on an exchange
  • Baby in Goop: Gwyneth Paltrow’s luxury brand Goop announced a “disposable diaper lined with virgin alpaca wool and fastened with amber gemstones, known for their ancient emotional-cleansing properties,” $120 for a 12-pack — A smart PR stunt to highlight the “diaper tax” that creates an unnecessary burden on lower income families👶🏽 i.e., many states tax regular diapers as a luxury good and don’t treat them as an essential item
  • “Mexican Pizza: The Musical” is Doja Cat’s and Dolly Parton’s new “off-Broadway” TikTok musical in conjunction with Taco Bell to be released May 26🌮🔔🍕—Could this be bigger than “Top Gun: Maverick”?👨🏼‍✈️

PERSONAL

Best wishes for the week ahead😊
Michael
~~~

Michael Ashley Schulman, CFA
Partner / Chief Investment Officer

“We deliver custom investment solutions, innovations, and unique perspectives to you and your family.”

Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22-24

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Also published on LinkedIn.