DHUnplugged #700: Seven Hundy

Earnings season winners and losers.

Episode 700 – been a great run – plenty more to come.

New airline regulations and what that means to all of us.

Inflation – its not over just yet.

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Warm Up
- Show #700
- Guess the date of EPISODE #1 (Show # 1 was Sep 16, 2008)
- - No Agenda episode  #1  - October 26, 2007
--- The Disciplined Investor Podcast show #1 -  Mar 02, 2007
- ALL economic series showing signs of inflation
- The great money in God - Top Wealthiest Pastors
- Fiducuary rules fo Retirment Plans

Market Update
- Shaking off some and smacking others - earnings season underway
- April not a great month for US equities - April now in the books
- Earnings seasons - winners and losers
- Yields on I Bonds Updated
- European stocks end April down 1.49%, posting first negative month since October

Derivative AI Investing
- Secondary play - Utilities
- We spoke of the huge demand for electricity/power from any source to power datacenters
- Investors looking for a unique way into the stock market’s artificial intelligence boom are finding an intriguing bank shot in what’s traditionally the most boring corner of the equities universe: utilities.
- Southern Company, NextEra, Excelon, CMS Energy also Eaton, Hubbell
-- Bad couple years as this is an interest sensitive sector - but massive consumption increase coming

Bird Flu in Milk
- The U.S. Department of Agriculture confirmed milking cows in Colorado tested positive for Bird Flu, following earlier infections in Texas, Kansas, Michigan, Ohio, Idaho, New Mexico, North Carolina and South Dakota.
- Additional tests of milk showed that pasteurization killed the bird flu virus, federal health officials said on Friday, as Colorado became the ninth U.S. state to report an infected dairy herd.
- The U.S. Food and Drug Administration (FDA) late on Friday said preliminary results from gold-standard PCR testing showed pasteurization killed the virus in milk and baby formula. It did not say how many milk products it had tested but added that it plans to do more testing on 297 products from 38 states.

Good Money in God
- Most Wealth Pastors
- Benny Hinn, 71 Estimated net worth: US$60 million
Joel Osteen, 61 Estimated net worth: US$100 million
- Kenneth Copeland, 87 Estimated net worth: US$300 million

Apple Headset and More
- Earnings coming May 2
- Big slowdown in sales in China has been widely telegraphed
- Not much excitement about the product line or any innovation at this point
- AI is going to be conversation they will start to help push shares
- Apple slashes Vision Pro production, cancels 2025 model in response to plummeting demand
-- Analysts are cutting their sales for the Vision Pro in HALF!
- - Apple may decide not to release a new model in 2025 - was expecting a cheaper version possibly

Back to Inflation
- Inflation showed little signs of letting up in March, with a key barometer the Federal Reserve watches closely showing that price pressures remain elevated.
- The personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, the same as in February, the Commerce Department reported Friday. That was above the 2.7% estimate from the Dow Jones consensus.
- Consumers showed they are still spending despite the elevated price level. Personal spending rose 0.8% on the month, a touch higher even than the 0.7% estimate. Personal income increased 0.5%, in line with expectations and higher than the 0.3% increase in February.
- GDP Report showed more pricing pressures
- Overall, 100% of recent reports showed that the inflation monster is not dead

More Economics
- U.S. economic growth was much weaker than expected to start the year, and prices rose at a faster pace, the Commerce Department reported Thursday.
- Gross domestic product, a broad measure of goods and services produced in the January-through-March period, increased at a 1.6% annualized pace when adjusted for seasonality and inflation, according to the department's Bureau of Economic Analysis.
- The price index for GDP, sometimes called the "chain-weighted" level, increased at a 3.1% rate, compared to the Dow Jones estimate for a 3% increase.
- - - SO, we have slowing GDP and prices that are staying high - NOT Stagflation yet, but getting worrisone.
--- Stagflation (wiki): In economics, stagflation or recession-inflation is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.

Case Shiller
- February S&P Case-Shiller Home Price Index 7.3% vs. 6.7% Briefing.com consensus; prior 6.6%

- Shares of Hertz Global slumped 24% and were on track for their sharpest one-day percentage fall on record last Thursday after the company reported a wider-than-expected quarterly loss, highlighting its struggles with the EV rental business (We covered this a couple months ago)
- The company is slimming down the business due to weak demand, with plans to sell 10,000 more EVs, taking its total planned sales to 30,000 this year. Higher repair costs also weighed on the company's overall fleet maintenance expenses.
- Hertz said it took a $588 million hit in vehicle depreciation costs during the quarter, of which $195 million was related to EVs held for sale.
- Alphabet (Google) shares rallied on Friday after the company reported results that topped analysts' estimates, showed soaring profits in its cloud division and announced its first dividend and a big buyback increase ($70 BILLION)
- Net income jumped 57% to $23.66 billion, or $1.89 a share, from $15.05 billion, or $1.17 a share, a year earlier.
- Operating income in Google's cloud business more than quadrupled to $900 million, showing that the company is finally generating substantial profits after pouring money into the business for years to keep up with Amazon Web Services and Microsoft Azure.
- - The jump lifted Alphabet's market cap past $2 trillion to an ALL TIME HIGH
- Microsoft - In its earnings report last Thursday, Microsoft said capital expenditures jumped 79% from a year earlier to $14 billion. The company is spending much faster than it's increasing revenue — sales climbed 17% in the period.
- Generally Microsoft put up good numbers - could be one of the "ready to go" AI play with Co-Pilot actually bringing in $$ for the company.
--- Microsoft posted a 17% increase in revenue, to $61.9 billion, with $21.9 billion in profits, up 20%, and earnings of $2.94 per share.
- Facebook (META): Mark Zuckerberg's net worth plunged by $18 billion Thursday after comments from the Meta CEO on the earnings call sent his company's stock price to its steepest decline since October 2022.
- While Meta beat expectations on revenue and profit but delivered a lighter-than-expected revenue forecast. Zuckerberg told investors that the company would continue to spend billions of dollars investing in areas like artificial intelligence and the metaverse, even though Meta counts on advertising for 98% of its revenue.
- - Investors freaking out a bit as they are worried that the money spend is going to get out of control again - Like Zuk did with the Metaverse.
- "We've historically seen a lot of volatility in our stock during this phase of our product playbook where we're investing in scaling a new product but aren't yet monetizing it," Zuckerberg said on the call.
----*** ZUCK: And I also expect to see a multi?year investment cycle before we’ve fully scaled Meta AI, business AIs, and more into the profitable services I expect as well.
- - - -
Translated - what no one else is saying - going to take a VERY long time to monetize whatever this AI things actually is.
- Tesla stock popped nicely even though the company reported a miserable quarter and outlook was not so good.
---- Perhaps the worst is over ? That is what investors must be thinking. (little in that report was really encouraging)

More Tesla
-Shares of Tesla rose sharply on Monday, their best day since March 2021, after the electric carmaker passed a significant milestone to roll out its advanced driver-assistance technology in China.
- The company’s share price closed up 15% as investors reacted to news surrounding Tesla CEO Elon Musk’s visit to China.
- Tesla on Sunday said local Chinese authorities removed restrictions on its cars after passing the country’s data security requirements.

Old is New?
- Ford Motor Co posted first-quarter earnings last Wednesday that beat Wall Street's expectations, bolstered by a strong performance in its commercial vehicle division and an increase in its hybrid vehicle sales.
- The company said it expects to achieve the higher end of its projected annual guidance of $10 billion to $12 billion in earnings before interest and taxes.
- The carmaker recorded a $1.3 billion operating loss for its EV and software division in the first quarter. More broadly, executives expect this section of the company to sustain a pre-tax loss of between $5 billion to $5.5 billion for the year.
- Ford shares rose slightly then slipped - should move higher if markets cooperate

New Airline Regulations
- The U.S. Transportation Department finalized new rules Wednesday requiring upfront disclosure of airline fees and mandates quick cash refunds for canceled flights, as well as for delayed baggage or inoperative services like onboard Wi-Fi.
- The rules, which were nearly three years in the works, will require airlines and ticket agents to tell consumers upfront about baggage or change and cancellation fees. The department said consumers are expected to save $543 million annually in excess airline fees.
- The refund rules apply to cancelled flights by carriers regardless of the reason including if it is because of weather. But passengers are not entitled to refunds if they are rebooked and travel on another flight
- The government will also require airlines to refund baggage fees if bags are not delivered within 12 hours of domestic flights arriving or 15 to 30 hours of their international flight arrivals, as well as for services that do not work or are not provided. Airlines must promptly and automatically issue refunds if flights are canceled.
- Airlines will find ways to make up the money - the cost factors will be made up with greater inconvenience somehow and higher fares.

McDonald's - Warning
- McDonald’s missed quarterly earnings estimates as same-store sales fell short of expectations.
- Boycotts over the conflict in Gaza weighed on the chain’s Middle East sales again.
- Higher prices have helped McDonald’s revenue, but scared away some low-income customers.
- Discussed how inflation is a problem and higher wages eating into profitability (Californian Min wag $20)
- Earnings per share: $2.70 adjusted vs. $2.72 expected
- Revenue: $6.17 billion vs. $6.16 billion expected

- Treasury released the next 6 month rate - 4.28%
-- Wonder how this will look moving forward

- Japan doesn't really care...

Sticker Shock

Good news for 401k Holders - and a warning
- The Biden administration issued a final rule on Tuesday that cracks down on the investment advice that advisors, brokers, insurance agents and others give to retirement savers.
- The U.S. Department of Labor regulation — which follows a rule proposal in October — aims to ensure that investment recommendations are in savers' best interests, according to agency officials.
- In legal terms, the final rule expands the scope of when a broker, advisor or other intermediary must act as a "fiduciary," meaning they are required to give advice that puts the client first.
---- This is important for those with 401ks and other retirement plans that are looking for advice - especially from those people selling high commission products

- Pot stocks powering higher following reports the DEA will soon reclassify marijuana from a Schedule I drug to a Schedule III drug that can be lawfully prescribed as medication.

  • MSOX +43%, CGC +36%, TLRY +30%, LFLY +30%, MAPS +23%, ACB +22%, MSOS +22%, MJ +18%, CRON +12%

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