This week we look at Elizabeth Holmes, Trump running in 2024, Bobs of Disney, Cap on Russian oil prices, how far Fed would go, and the World Cup.
C Thomas: Happy Hump day! Welcome back to Looking Backwards Looking Forwards.
https://www.bbc.com/news/business-58336998
Austerity: Let’s start with Elizabeth Holmes. She is convicted with 11 years of prison. Let’s remind our listeners, she was on top of the world in 2014 as she claimed that she founded a breakthrough technology in diagnostics, and she was named youngest self made female billionaire. But the court now has ruled that she committed fraud.
C Thomas: Well, I think the most important thing you just said was she claimed. That seems to be happening quite a bit recently, right? So she claimed to have a blood technology that would tell you everything you need to know about yourself, and everybody lined up to sign up for her service, and she had all kinds of fancy investors that just couldn’t wait to invest in this billionaire. It sounds just like the crypto thing that’s going down with Sam Bankman-Fried. He claimed to do something. Someone else claimed to do something. What we have here is another example of everybody wants to have – Fomo. The fear of missing out, “oh my gosh, this is going change the world”. People need to stop just putting their money in something without doing their due diligence. That’s what needs to change. And so when these people come through with all of these things, you’re just gonna have to let it be and and miss out. Otherwise you can be a victim of fraud. And that’s what she is. That’s what the entire crypto thing is facing right now. And believe me, before this, stock market selloff is over. There’s gonna be a lot of other people that are facing fraud because we know there’s a certain automaker out there that claim to have self-driving cars. Five years ago, and now he’s about to get sued and I don’t even want to open up that can of worms, but these are all “I claim, she claims, we claim”.
https://edition.cnn.com/2022/11/15/politics/trump-2024-presidential-bid/index.html
Austerity: About the US elections, the picture is now clearer than last week, the Republicans now have the US House majority. And we also heard from Trump last week who announced that he is running in 2024. How does all these affect global politics in the midst of energy crises, a war in Europe, and quite a few tensions in other geographies?
C Thomas: I think there’s a couple different ways we can break this down. The Republicans having the house majority and it looks like the Democrats are gonna continue to have the Senate that kind of puts gridlock in terms of government and particular government spending. I think it’s gonna be a lot harder for us to spend money and send it to Ukraine. I think it’s gonna be a lot harder for us to spend money and do a lot of things because the Republicans are now gonna just block Biden’s policies and things like that, which is good from an inflation perspective.
Trump trying to run and win is gonna be very difficult. I think there will probably be a contender, probably DeSantis, possibly DeSantis. He is the really, probably the only person I could think of that could really take on Trump and have a chance to win. The problem I have with that is if Trump runs and DeSantis isn’t in there, he just lost to Joe Biden and Joe Biden couldn’t find an egg on an Easter egg hunt right now. He lost to Biden. So why are we running this guy again if we want to have an alternative to Biden? That’s about it. It’s very concerning. But from a geopolitical standpoint, Trump is definitely not who China and Russia want to see getting into office because he will have no qualms about having a lot more authoritative response to them. I think if they think that the deck is cleared and it’s gonna be Trump versus whoever the Democrats run, I think the Republicans have an okay chance against that. But I mean, not a great chance. I just think it’ll move up the timelines. If China was gonna go into Taiwan, they probably have two years to do it. That’s probably what they’re thinking. So if it’s gonna happen, it’s gonna happen fairly soon. The Trump thing might be overblown, because I just think that there will be so much pushback. He will pull poorly. Whether it’s the Roe versus Wade argument or the fact that he already went lost to Joe Biden, I’m not sure that’s the guy that can run him and win.
Austerity: Well, he is back on Twitter.
C Thomas: That will help. He will get more popular again, unless he gets banned again. I don’t know what’s going on with Twitter. It’s a whole another debacle.
https://www.dw.com/en/shock-ceo-swap-at-disney-bob-iger-returns-bob-chapek-goes/a-63827421
Austerity: Once again, swaps of “Bob”s at Disney.
C Thomas: Iger is back. Chapek is out. I found interesting that everybody is in such great demand to focus on subscribers on these Disney Plus versus Netflix versus everything. That particular enterprise is losing billions and everyone’s chasing subscribers when really we seem to have forgot that companies are not interested in subscribers, only market participants in the stock market. What we’re really need to be focused on with 6%, 7%, 8% inflation, and higher interest rates is: profit. And that thing is not turning a profit. I don’t care how many times you can watch Bambi on that site, it’s not making no profit yet. And so, you can advance that all you want, but ultimately that company exists to make money. And that’s where Iger did a very good job of historically, and I think you need to get back to the roots. And I think he’s gotta go in there and he’s gonna have to do the same thing Meta did when Zuckerberg came out and said, we’re gonna cut costs. Sorry, I was wrong. I’m still doing my metaverse cause I have a lot of money in the bank, but we need to cut costs. And you’re seeing that. It becomes not just a trickle, but a torrent. Right now across all these companies, everybody’s talking about cutting costs right now, whether it’s layoffs in the automotive industry, whether it’s layoffs in tech, whether it’s Disney, they’ve gotta figure out how to get profitable and they need to start cutting costs on things that are unprofitable like that.
https://finance.yahoo.com/news/us-russian-oil-price-cap-221014717.html
Austerity: It is finally arriving. cap on Russian oil prices. What’s your take on this?
C Thomas: That’s coming up very soon and it’s going to have an effect, but I don’t know where it’s going to all be felt first. They say that they’re gonna put a cap on this. And then part of the follow up is they’re going to not allow ships that are insured by American or European companies, which is basically going to put a whole bunch of this stuff that’s not going to be allowed to be shipped here because this boat is now going to be part of the sanctions and that’s going to have a considerable impact on literally the distribution of oil around the world. So the only thing I can see, and this is weird because oil was down considerably this week, primarily due to China’s demand. And they’re not reopening or they are reopening, or they’re not reopening. So you have China demand putting the kibosh on oil a little bit, but then you have the floor of OPEC+, you have the US which is going to be releasing anymore of the strategic petroleum reserves and then you have a cap on on Russia. So you have these two forces that are pushing in different directions. And so I don’t have a good feel on what oil prices are gonna do right now, because I think we have to see what happens. I think if China opens up, OPEC+ says, oh my gosh, we have real issues with supply. And then we are taking oil off the market in the United States, I think you could have a huge explosion at oil prices and that would totally screw up all of their declining inflation plans. That’s a really, really dangerous situation, and I think the person that holds all the cards here Xi. Because if he says, COVID zero is over, we’re gonna open up and we’re gonna start buying oil and using a whole bunch of oil. And then you have supply constraints, and then you have all these other issues. Oil could get outta hand really, really quickly, and this inflation could take off again.
https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
Austerity: Today, Fed will release the meeting minutes for the latest policy meeting conducted earlier this month. The transcript could provide clues as to how far Fed officials are willing to raise interest rates.
C Thomas: I think that the market is not prepared for how high the Fed thinks it can go. And let me explain. If you’d have told me seven months ago that we’d be at 4% with a planned 50% cut coming up next month and that nothing had broken, I would’ve said hogwash. No chance. Instead, we are literally having Fed Governors come out and say, we’re looking maybe even at a higher range of 5% to 7%. Now we know that these rate hikes have a slow and predictable lag, but we are really, really going for it and we’re going quite high. And I think that one of the reasons is, this stock market just keeps going up. This unemployment situation keeps staying low and we’re not having layoffs be felt nearly as much as everyone thought they would. And what’s gonna happen is, is this is going to take this rate really, really high. And if that’s the case, when the effects of that do get felt, I think they’re gonna be really extreme. Like, this is how you break something, is you take this up higher and higher and hey, everything’s good. Everything’s good. Well, all of a sudden then you’re just gonna be hit with wave after wave after wave of issues, right? Where people can’t get refinancing, the credit market sees up, something’s gonna break, and the Fed seems determined to keep going until they do. So the question is, is it gonna be at five, is it six or is it seven or higher? The good news is, inflation usually gets broken when the rate that they’re raising goes above the inflation rate. Or like they talk the PCE price. That’s their goal. Well, that all works as long as, like we just discussed a minute ago, oil doesn’t take off again because if oil takes off, then they’re gonna be chasing again, and then we have another problem. So a lot of it depends on oil because it’s such a driver of everything that. I think if oil stays where it’s at mid seventies, eighty on Brent, and we are able to stay here for a while, the Fed could go a little bit higher and we can start to ease on this inflation. The problem is, this world’s not staying constant, very fast anywhere. Everything’s changing.
https://edition.cnn.com/2022/11/22/business/budweiser-unsold-beer-world-cup/index.html
Austerity: Lastly, the world cup.
C Thomas: Boy, everybody is dying to get out there and they’re gonna pitch their cause. The Iranian players aren’t singing the national anthem, and now the Iranian media says that’s why they lost because they were trying to support the women of Iran. That’s their little social thing that they’re doing. And then over in the European countries, “we’re gonna wear a rainbow arm band”. And then they said, whether you do that, we’re gonna give you a yellow card to all the captains, and then they backed off. Everybody wants to get out there with their little social cause in front of the big world stage. What the hell is going on here folks? I thought we were playing sports. You think of a sporting event, you think of a whole bunch of fans showing up and drinking beer and, oh wait, they can’t do that either in Qatar. Knowing you’re gonna have crazy drunk fans coming from all over the world to support their teams. And then two days before it starts, they come out and say, nope, we will not serve any of the alcohol at the stadiums. Our big sponsor, Budweiser will not be able to sell any. So Budweiser turned around and said, well, the winning team is gonna get all of the beer that we were gonna sell at the stadiums. So if there has not been an incentive enough to win the World Cup, there is now because that’s gonna lead to the biggest damn party you’ve ever seen.