Amazon's China Play, Private Credit Danger, Pricing in the Election

While ostensibly the topic is about Amazon competing with Temu and Shein, it's really a story about growing commerce in China. I worry this is going to be dangerous as we continue to apply tariffs. I prefer a firm to continue to grow in the US.

I comment on the Fed's bank stress tests, but the real danger is private equity - something we don't talk about enought.

Then the question will come up - the election. The market is telling us a Trump presidency is good for growth. That is just the market's opinion.

Munson on CNBC Talking Parcles, Payments and Packaged Foods

I go through my thoughts on Fed Ex, Paychex, and General Mills.

My concern about Fed Ex is the lack of growth and the inability to harmonize their ground unit versus what we traditionally think of as Fed Ex - you know, the letter packages. They are organized as two totally separate units, and you know this if you ever had an issue getting a package. However, the next day the firm surprised to the upside. Hopefully for their investors they can keep it up.

Paychex is simple. It's hard to grow when employers are not hiring as much and employment is tight.

General Mills is a big slow growing firm. While I love that they decided to sell their yogurt division (can't compete, so stop trying), I would rather look at higher growing stocks. I can buy a value ETF if I want a slow growing names.

CNBC The Exchange Munson Back with Kelly Evans

I was so excited to do a hit with Kelly now that she is back in the studio. While we always like to have of mix of buys and sells - today was mostly stuff to stay aways from.

Dropbox, I love the service personally, but they lost 50k subscribers last year and their AI offering isn't out and unclear it will move the needle. When the CEO blames tech layoffs, it tells me they lack value.

Then we got to ZipRecruter - but it's just a job board! Other firms like Manpower have upskilling programs or higher skilled customers. The CEO says there is nothing they can do until the "macro" improves.

As for Sphere - you know, the big marble in Las Vegas - it would be a wonderful speculation on a one trick pony, but half the revenues come for MSG Networks, a regional sports network with declining earnings trying to make a go of streaming. Better to see a concert than buy the stock.

This just shows that household names are no sure thing.

CNBC The Exchange and Lee Munson Talk Boeing, Visa, and Hilton

A nice mix of a company with everything going for it in the macro aerospace industry yet can't seem to execute, one firm that has a strong monopoly but the stock is tied to consumer spending, and the last one has some interesting expansion plans that could actually move the needle.

What makes this group interesting is how some stocks can be at the right place at the right time, and still not be able to perform. Whereas some firms have headwinds yet are able to find ways to increase revenues in untapped areas of their industry.

Munson Interview on Inflation and Oil

Maria Bartiromo and her co-hosts asked my opinion and strategy regarding inflation and oil, and why not gold while we are at it. As I expected, the CPI prints are still coming in hot. This dashes hope of of Fed cuts earlier in the year. Why investors think this was going to be easy is beyond my understanding. Shelter is high, services inflation is sticky, and let's not get into food and fuel.

My prediction since nobody really knows, is that the current inflation scare could be the trigger for a mild selloff in stocks to what should be a pretty decent year of earnings in the US. Time will tell.

Munson on OXY and GOATs

I used to own OXY for myself and a few clients who like to have some individual stock exposure. My thesis was in part based on the ownership of Berkshire Hathaway and Warren Buffet's strong opinions on the management skills of CEO Vicki Hollub. But, I do my own research and like when management is clear on strategic direction.

In the end, I didn't like that management said they had no need to do more acquisitions and several weeks later they did the opposite. On top of that, I'm unclear on the strategy on carbon capture and it's lack of profits. For my money and the money of those I represent, I saw a glimpse of what Peter Lynch might call "diwrosification." I'm no expert on everything relating to gas and oil - I'm an expert on people who do what they say they will do. When they don't, it's time to consider moving on.

Most people are afraid of doing something they think is against the grain or selling a position that famous billionaire owns. But let me tell you - you never really know why a legendary investor owns something - or really, if they own it that day. You get a 13F from the SEC that tells you what a big manager owned at the last day of the quarter. You don't know if they have side deals, own derivatives, own debt, have other reasons for owning beyond just the stock going up. No great investor is going to call you to tell you when they buy or sell or why.

The point of keeping an eye on the GOATs is simply for idea generation. But I find in general that GOATs are just that - people who made a lot of good decisions in the past, when they were younger, more aggressive, and now have a lot of money they don't want to lose.

Retail Stocks: Just Peter Lynch It

I was asked my opinion about Burlington Stores, American Eagle, and Victoria's Secret. Dom Chu ended the segment with "harsh." But retail has stiff competition.

Burlington's story is about opening up 500 new stores - a 50% increase over five years partially based on taking over the stores of Bed Bath & Beyond. What a great example of creative destruction. What I don't have an opinion on is if management can pull it off. Time will tell.

Then we get to American Eagle. Teenagers love it. Stock has been sideways for 10 years. They really execute well and raising guidance, but it takes more than that to make profits that will move the needle. I suggest listening to the investor conference the next day that management said would lay out the strategic plans going forward.

We end with Victoria's Secret. Dead and dying. New stores with a make-up counter isn't going to change a waning brand.

The big picture is that a great firm doesn't always translate to a stocks that go up.

Observations on the Yield Curve, and Term Structure of Breakeven Inflation Rates

In this research piece, Jesus discovers more questions than answers. “If anything, this highlights the volatility of investors’ expectations on short term inflation over the last year.” Volatility in expectations is an understatement. This is why we only take the long end of the curve during melt-downs in yields, and we don’t pin our hopes for stocks solely based on Fed rate hikes.

Observations on the Yield Curve, and Term Structure of Breakeven Inflation Rates

CNBC The Exchange Asks Lee Munson: Homes, Hackers, Hot Wings

I love the tag line to this segment. We cover TOL - a luxury homebuilder that is making a structural shift to what they call affordable luxury - what I call building a McMansion on a cheaper lot with less upgrades to undercut custom builds. And, really, just selling more affordable homes. The lesson is about how you have to be flexible and change with the prevailing economics.

Then we talk hackers with Palo Alto Networks. It's the even of earnings and the next day the stock would drop over 20%. I mention that any small issues in billing could put pressure on the stock - wow, was I right about that one - it's a lesson about stocks priced for perfection and anything that can double in a year can see some big volatility up and down.

Lastly is Wing Stop. As a vegan I don't eat the product, but my analyst does and explained why it has a competitive advantage. They are cheap to franchise, they require three locations per franchisee, and almost half of the sales are coming from delivery partners like Uber Eats and Door Dash. The unknown question is: can they keep opening 250-300 stores a year for a few more years before saturating the market and seeing less growth? Let me know if you have a crystal ball - outside of that, you need a wing and a prayer...

Inflation Bites Again

Fun morning hit with Maria Bartiromo asking me about my thoughts on the hot CPI print along with the recent announcement of job cuts from Cisco and Morgan Stanley.

I have been saying for months to expect some hot CPI prints and this week it happened. But let's look at some positives. Investors know that the Fed will be cutting less and later. I suggest looking at the shelter component of CPI, as it's a large part of why the estimates where off. When you look at the current inflation rates in rents, it's a lot lower than 6%. Perhaps investors are seeing through the numbers and looking ahead.

Same with job cuts. I saw this back in 2003 as we were exiting a horrible bear market, firms started cutting and laying people off. It take about 6 months to get those cuts to hit the bottom line. This will add some tail wind to earnings. If rates moderate and we escape a recession, it sets up for higher earnings a better times ahead.