Authored by Simon Watkins via OilPrice.com,

• LNG requires much less infrastructure to be delivered than oil or gas sent through pipelines, so it is generally cheaper overall for sellers to develop and to expand their market share.

• After massive Russian oil and gas supplies were sanctioned following the 24 February 2022 invasion of Ukraine, LNG firmly became the world’s key swing energy supply.

• Russia stated just over a week ago that it would do everything it could to scupper new U.S. sanctions imposed on its Arctic LNG 2 project.

At the core of Russia’s hydrocarbon-centric geopolitical strategies for the future are its huge Arctic oil and gas reserves. And while global tensions stay high in the aftermath of 2022’s invasion of Ukraine and the ongoing Israel-Hamas War, the key emergency energy source remains liquefied natural gas (LNG). LNG requires much less infrastructure to be delivered than oil or gas sent through pipelines, so it is generally cheaper overall for sellers to develop and to expand their market share. Given this, it is also quicker and cheaper to increase or decrease delivery amounts at very short notice, as and when buyers require. In short, after massive Russian oil and gas supplies were sanctioned following the 24 February 2022 invasion of Ukraine, LNG firmly became the world’s key swing energy supply. When Russia was contemplating its first invasion of Ukraine in 2014, during which it annexed Crimea, it knew that the global importance of LNG would increase dramatically as a result, so it began to seriously expand its LNG capabilities. China knew the same as well – because Russia told it what its broad military plans were, according to several senior sources in the U.S. and European energy security complexes exclusively spoken to by OilPrice.com over the years. This is why China locked in huge LNG deals with Russia and later Qatar from that point, and doubled down on these deals from a year before Russia’s second invasion of Ukraine in 2022, as fully analysed in my new book on the new global oil market order. It is little surprise, then, that Russia stated just over a week ago that it would do everything it could to scupper new U.S. sanctions imposed on its Arctic LNG 2 project as part of a raft of restrictions targeting individuals and entities associated with Russia’s war effort in Ukraine.

The overall aim of the U.S. in dealing with Russia’s far-reaching ambitions in this key emergency source of global energy is to destroy them, according to a senior legal source connected to the U.S.’s Russia sanctions program exclusively spoken to by OilPrice.com last week. “Russia has huge [gas] resources in the Arctic, which could make it one of the leading LNG suppliers in the world pretty quickly, and we do not want it creating a dependency on it for these supplies as it did with gas and oil in Europe before [the] Ukraine [invasion],” he said. “[Russian President Vladimir] Putin sets great store by this, and so do we,” he added. Indeed, a sign long ago of how seriously Putin takes the expansion of Russia’s LNG capabilities came with the original Yamal LNG project (effectively ‘Arctic LNG 1’) – the first major attempt to capitalise on its vast oil and gas reserves in the Arctic, as also analysed in my new book. The Russian Arctic sector comprises over 35,700 billion cubic metres of natural gas and over 2,300 million metric tons of oil and condensate, the majority of which are in the Yamal and Gydan peninsulas, lying on the south side of the Kara Sea. According to comments by Putin, the next few years will witness a dramatic expansion in the extraction of these Arctic resources, and a corollary build-out of the Northern Sea Route (NSR) – the coastal route of which crosses the Kara Sea – as the primary transport route to monetise these resources in the global oil and gas markets, especially to China. 

Given this context, Putin additionally saw the Yamal LNG project at the time of its development as vital to Russian interests for three key reasons, according to Moscow-based analysts spoken to exclusively by OilPrice.com at the time. First, there was the physical expansion of Russian entities into the Arctic region, clearly marking the country’s claim to all the resources that the entire area has to offer. Second, for a long time Putin had thought that Russia’s status as an energy superpower – and especially a gas one – had not been reflected in its standing in the lucrative LNG sector. And third, LNG was even then a key part of Russia’s ongoing plans to secure as much of the still fast-growing Asia segment of the gas market as possible to bolster its pipelined-gas plans. Such was the Kremlin’s determination to move ahead with its Arctic projects that various Russian entities were inveigled in and around the time when the U.S. imposed its 2014 sanctions to finance key parts of the Yamal LNG project. The Russian Direct Investment Fund, for example, established a joint investment fund with the state-run Japan Bank for International Cooperation with each contributing half of a total of about JPY100 billion (then US$890 million) to it. The Russian government itself, having bankrolled Yamal LNG from the beginning with money from the state budget, supported it again when sanctions were introduced by selling bonds in Yamal LNG (the program began on 24 November 2015, with a RUB75 billion 15-year issue), and then provided it with another RUB150 billion (US$2.2 billion) of backstop funding from the National Welfare Fund.

One of Putin’s priorities in the build-out of Russia’s Arctic LNG projects – which began in earnest after sanctions were imposed after its 2014 invasion of Ukraine and annexation of Crimea – was to make the industry as ‘sanction-proof’ as possible, as also analysed in my new book on the new global oil market order. This meant Russian company Novatek – the key developer of Yamal LNG (and also the later Arctic LNG 2) – becoming as self-sufficient as possible in this regard. Novatek aimed to localise the fabrication and construction of LNG trains and modules to decrease the overall cost of liquefaction and develop a technological base within Russia, and it made great progress in realising this. As part of this objective, Novatek developed the ‘Arctic Cascade’ process for creating LNG. This is based on a two-stage liquefaction process that capitalises on the colder ambient temperature in the Arctic climate to maximise energy efficiency during the liquefaction process and was the first patented liquefaction technology using equipment produced only by Russian manufacturers. The overall goal of Novatek, as the company stated more than once, was to localise the fabrication and construction of LNG trains and modules to decrease the overall cost of liquefaction and develop a technological base within Russia.

So, given its overall goal to stop Russia’s burgeoning LNG industry in its tracks, the U.S. is focusing its immediate efforts on Arctic LNG 2 (the successor project to Yamal LNG). And this is being done for three key reasons, according to the senior U.S. legal source. The first is that it is set to be the biggest of Russia’s LNG projects by a considerable margin. Arctic LNG 2 aims for three LNG trains (manufacturing facilities) of 6.6 million metric tonnes per annum (mmtpa) each, based around the gas resources of the Utrenneye field, which has at least 1,138 billion cubic metres of natural gas and 57 million tons of liquids in reserves. The first train was successfully delivered in August on the western shore of the Gydan Peninsula in West Siberia. The second and third trains are expected online in 2024 and 2026, respectively. Second, despite Russian attempts to make ‘Arctic Cascade’ fully sanction-proof, there have been signs in the past that the lack of access to Western technology and parts can damage the process’ effectiveness, as also analysed in detail in my new book on the new global oil market order. And third, by trying out different types of sanctions on Russia’s flagship LNG project, the U.S. can work out which ones are most damaging, before it applies them to every other aspect of Russia’s LNG program. 

As Black Friday looms, a concerning trend has emerged: Affluent Americans are cutting back on spending – a shift which signals potential trouble for an economy reliant on robust consumer expenditure to ward off recession.

According to Bloomberg Second Measure Data of debit/credit card transactions by US consumers, in the three months leading to the holiday season, a collection of retailers serving the upper middle class, such as Apple, Coach, and Nordstrom, experienced their steepest sales decline in two years. This data, derived from Bloomberg Second Measure, also reflects a downturn in affluent mall traffic, contradicting the general uptick in retail sales figures.

On Tuesday, Best Buy Co. and Lowe’s Cos. cut their forecasts and warned that shoppers were pulling back on big-ticket items like appliances ahead of the holiday season. Kohl’s Corp. reported its seventh-straight drop in comparable sales, as a partnership with Sephora drew in customers but didn’t spur them to spend more money on other items at the department stores. Even positive results at some retailers left investors wanting more as shares slumped at Abercrombie & Fitch Co. and American Eagle Outfitters Inc. –Bloomberg

Kayla Bruun, a senior economist at Morning Consult, notesthat  the upper middle class “had been driving a lot of the stronger-than-expected spending.” However, households with incomes over $100,000 are becoming more frugal.

Bloomberg’s affluence index, comprised of 30 high-end retailers across various sectors, shows a marked deterioration in sales. All of the companies in the index have an average purchase price of at least $100, with some retailers such as Apple ($267) and West Elm ($292) far surpassing that. Since January, 70% of these companies experienced a sales decline, with a median drop of 14% — the worst in two years. The few exceptions, like Ugg, are in the minority.

Seattle resident Julie Robinson-Jasper, whose household income exceeds $100,000, is planning to tighten the reins this year – capping gifts for her two kids at $600 (consistent with the past three years, but with less purchasing power thanks to Bidenonimcs). Her family is also employing cost-saving measures like dining at home and checking out thrift stores. We don’t want to be caught with our pants down if something were to happen again, like a layoff or an illness,” she told Bloomberg.

Meanwhile, according to data from Placer.ai, a similar trend is happening with mall foot traffic, particularly in affluent areas. In October, 21 out of 25 top shopping destinations across the US reported a decrease in visits – from Birmingham, Alabama, to Garden City, New York, and Bellevue, Washington. This decline, the first since early 2021, could be an early warning sign for the overall economy.

The softness extends to areas that have gained population post pandemic. On the outskirts of booming Houston, where household income is 20% higher than in Texas overall, the Baybrook Mall saw foot traffic drop by 660,000 visits this year, or about 6%, according to Placer.ai, which analyzes mobile-phone location data. -Bloomberg

“Everybody is kind of in window-shopping behavior right now,” says Bre Clinton, an assistant manager at the Body Shop in Baybrook Mall, Texas. “They don’t have many bags in their hands.“

To entice customers, the store has resorted to giving away trial-size products.

Interestingly however, Brookfield Properties, owner of Baybrook Mall, reported an increase in retail sales in the past 12 months, suggesting a complex and varied retail landscape.

However, the broader economic context cannot be ignored. Persistent high inflation and rising interest rates have dampened consumer moods. The Federal Reserve’s significant rate hikes have made credit purchases, like for luxury items and appliances, more costly.

The slowdown at malls and retailers serving the upper middle class contrasts with the headline US retail-sales numbers, which have posted year-over-year growth since 2020, when the pandemic shut the economy down. While in lockdown, higher-end shoppers began splurging on their homes and new wardrobes. As Covid faded, spending shifted to services and experiences like vacations, restaurants and Taylor Swift concerts.

But years of high inflation and rising interest rates have soured the moods of some consumers. While the job market has remained strong, real incomes have had periods of decline, with parts of the upper middle class taking a bigger hit. -Bloomberg

According to Brunn, the Morning Consult senior economist, richer Americans have grown increasingly worried about their jobs, and are opting to pay off debt after splurging on summer travel. Shoppers have already reduced spending on big-ticket items such as washing machines, Botox and teeth straightening.

Edel O’Sullivan of Harley-Davidson encapsulates the sentiment, noting customers are “sitting on the sidelines” and “just putting this level of a discretionary purchase to the side in 2023.”

Revolve Group’s Co-CEO, Mike Karanikolas, echoes this concern, pointing to the diminished spending capacity of “aspirational luxury consumers.”

“Aspirational luxury consumers who were flush with cash 18 months ago just don’t have the same capacity to spend,” he said.

The pullback in spending by wealthier Americans is not just a blip, but yet another barometer of the economy’s health. With real incomes declining and property values in major markets dropping, the upper middle class’s spending cuts could presage broader economic challenges. As this key demographic pulls back, the ripple effects may be felt across various sectors, from retail to real estate, potentially steering the US economy into uncharted waters.

Authored by Michael Maharrey via SchiffGold.com,

The Consumer Price Index (CPI) drives markets and motivates policy, but it is nothing but speculation, estimation and wild guesses.

A recent “tweak” to the health insurance CPI reveals the formula is basically a scam.

As I’ve emphasized over and over, the CPI generally understates rising prices. The formula is designed to do so, and in the 1990s, the government made it even worse.

In 1998, the Bureau of Labor Statistics (BLS) followed the recommendations of the Boskin Commission, a committee appointed by the Senate in 1995. Initially called the “Advisory Commission to Study the Consumer Price Index,” its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation — by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this “issue” by ensuring the formula consistently spits out a smaller number.

In effect, the government cooked the books.

If we used the 1970s formula today, the CPI would approximately double.

That’s not to say that the 1970s formula accurately reflected rising prices. The entire process is suspect. The BLS builds in all kinds of geometric weighting, substitution and hedonics into the calculation. By manipulating the numbers in the formula, the government can basically create an index that outputs whatever it wants.

A close look at how the BLS calculates rental costs provides a good example.

Owner equivalent rent is supposed to reflect the amount of money a homeowner would have to pay in rent to live in the same house. The Bureau of Labor Statistics determines this number in a survey, asking homeowners, “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?” It is literally nothing more than the opinion of the homeowner. It has virtually no correlation to the actual cost of the home.

In fact, during the early stages of the latest price inflation surge, CPI only showed modest rises in rent even as actual rental costs skyrocketed.

THE HEALTH INSURANCE DEBACLE

In October, the BLS made an adjustment to the health insurance CPI formula that resulted in a 1.1% increase in health insurance costs. That’s a significant jump, but it wouldn’t surprise anybody who has actually priced health insurance recently.

But the dirty little secret is the BLS made the adjustment because the old formula reflected a 37% collapse in the cost of health insurance between September 2022 and September 2023. Through that 12-month period, according to the CPI, health insurance costs fell an average of 4% every single month. This dropped the health insurance CPI to 2018 levels.

Does any sane person living in the real world think health insurance costs dropped 37% over the last year?

Of course not!

This means that monthly CPI and core CPI were significantly understated for 12 straight months, and the annual numbers will carry this distortion forward for the next year.

But don’t fret; the BLS “fixed” the problem. In October, it introduced adjustments that will raise the CPI cost of health insurance over the next 12 months. The little upward tick on the right side of this chart shows the first adjustment.

As WolfStreet put it, “The BLS has turned the health insurance CPI into chickensh!t.”

Here’s what happened.

This ignominious fiasco of an important metric within the CPI data occurred because the model that the BLS used to estimate the health insurance CPI – the ‘retained earnings method’ – after working reasonably well for years, blew up amid the distortions and money flows during the pandemic.

“Rather than coming up with an alternative estimate right away, back in 2021 when these issues became apparent, the BLS let this fiasco run for two years, overestimating by a moderate amount health insurance inflation in 2022, and causing health insurance CPI to just collapse over the past 12 months through September 2023, back to 2018 levels.”

And this was just a tweak. The BLS didn’t rework the formula. It continues to use the same “retained earnings” method that blew up back in 2020.

If the BLS blew it this badly on health insurance, why should we believe what it tells us about the cost of food, energy or anything else?

This debacle reveals the sham that is the CPI. It is detached from reality. And yet economists, financial analysts and policymakers treat this data as if it was handed down from heaven on stone tablets.

Authored by Simon White, Bloomberg macro strategist,

Further declines in longer-term US yields will likely need signs of a near-term recession to trigger the pricing of more aggressive Federal Reserve rate cuts.

US 10-year yields have fallen over 50 bps since their recent high last month.

Almost all of this was driven by greater rate cuts being priced in.

The chart below shows the move in the 1-month OIS rate 10-years forward – an estimate of the market’s view of the long-run Fed rate – and the move in the nominal 10-year yield.

Both are almost the same, implying longer-term yields’ fall were driven by rising Fed rate-cut expectations.

It’s likely that will continue to be the case while Treasuries liquidity remains poor.

One of the worst 30-year Treasury auctions earlier this month was a stark example of how liquidity conditions have deteriorated.

Balance-sheet constraints, large fiscal deficits and elevated fixed-income vol are all contributing.

As long as liquidity is poor, USTs will face greater downside than upside risks.

Thus to see further significant falls in US yields likely requires rising rate-cut expectations, which in turn requires evidence that a recession is fairly imminent.

That’s not the case at the moment, with several leading data points turning higher, such as building permits.

Submitted By Newsquawk

The minutes from the October 31-November 1 FOMC meeting are due at 2pm ET, and while they will likely be more hawkish than current expectations, it’s worth recalling that the Minutes will also be considered stale, given they do not incorporate the soft October nonfarm payrolls and CPI data (and other lower inflation metrics), not to mention some survey releases (such as ISMs) having seen downward surprises, resulting in traders pulling back bets on further rate hikes, and adding to bets for cuts in 2024 – nearly 100bps of easing is now priced by the end of next year with a 25% implied probability of a cut as soon as the March FOMC.

Fed Chair Powell, speaking around a week after the FOMC meeting, struck a hawkish tone, and said that although progress had been made on inflation, there was still a “long way to go”; he reiterated that officials were not confident that they have achieved a sufficiently restrictive policy stance, adding that if it became appropriate to tighten further, the FOMC would not hesitate to do so, stating that the Fed will continue to move carefully, and decide on a meeting-by-meeting basis. His remarks have been largely echoed by colleagues, and that is likely to be reflected in the minutes, but market participants are following the dovish data right now rather than hawkish official commentary.

At its November policy meeting, the FOMC left rates unchanged at 5.25-5.50%, in line with both expectations and market pricing, and its statement saw only slight changes. The central bank maintained that “additional policy firming may be appropriate” and made a slight upgrade to its description of economic growth, highlighting that economic activity had been expanding at a “strong” pace in Q3, in contrast to the “solid” pace mentioned in September. It also acknowledged that job gains had “moderated since earlier in the year” (compared to the previous “slowed in recent months” language), but it continued to emphasize the strength of jobs growth and the low unemployment rate. Further, it included a new line to address the rise in Treasury yields ahead of the meeting, stating that tighter financial and credit conditions are likely to have a negative impact on economic activity, hiring, and inflation, in contrast to the September statement, which only acknowledged tighter credit conditions.

Chair Powell’s presser remarks echoed his previous recent views and outlined the Fed’s commitment to maintaining a restrictive monetary policy. He noted that the full effects of this policy were not yet clear. He described the economy as strong, paying attention to robust growth and labor demand. Powell stressed that inflation remains high, and tight labor markets have shown some signs of wage growth easing.

In the Q&A, Powell expressed uncertainty about policy and financial conditions, hinting at potential interest rate hikes. He also suggested that the Fed is close to the end of the current rate-hike cycle and was evaluating its approach. Powell confirmed that rate cuts are not being considered, but the focus is on how long to maintain a restrictive policy.

Authored by Lance Roberts via RealInvestmentAdvice.com,

As I wrote this blog, the S&P 500 index is up roughly 17% year-to-date. Most likely, your portfolio isn’t. This is a common frustration among many investors in the market this year in particular. As discussed previously, the S&P 500 index performance is a bit deceiving. The majority of the gain in the market this year has come from essentially seven stocks with the largest concentration in the index in terms of market capitalization.

The surge in those stocks has skewed the performance of the broad market index. The performance of the bottom 493 stocks remains markedly different.

As shown, the market capitalization of the top seven stocks is so large that it skews the performance of the index overall. We can see this visually by comparing the performance of the market and equal-weighted S&P 500 indices.

This market bifurcation may not change in 2024 if Goldman Sachs is correct in their estimates.

“Consensus expects the Magnificent 7 will continue to deliver faster growth than the rest of the index. Analyst estimates show the mega-cap tech companies growing sales at a CAGR of 11% through 2025 compared with just 3% for the rest of the S&P 500. The net margins of the Magnificent 7 are twice the margins of the rest of the index, and consensus expects this gap will persist through 2025.

From a valuation perspective, the Magnificent 7 trade at a large P/E premium vs. the rest of the market, but relative valuations stand in line with recent averages after accounting for expected growth. The Magnificent 7 trades at a P/E of 29x, 1.7x the 17x P/E multiple of the median S&P 500 stock. This ratio ranks in the 91st percentile since 2012. However, on an earnings-weighted basis, the Magnificent 7 long-term expected EPS growth is 8 pp faster than the median S&P 500 stock (+17% vs. +9%).”

Why am I telling you this? Well, when the end of the year comes, and you look at your performance relative to the S&P 500 index, you will likely be disappointed.

However, that is precisely what Wall Street wants you to do.

Wall Street Wants You To Compare

Comparison is the root cause of more unhappiness than anything else. Perhaps it is inevitable that human beings, as social animals, have an urge to compare themselves with one another. Maybe it is because we are all terminally insecure in some cosmic sense.

Let me give you an example I discussed with Adam Taggart at Thoughtful Money last week.

Assume your boss gave you a new Mercedes as a yearly bonus. You would be thrilled until you learned everyone in the office got two. Now, you are upset because you got less than everyone else on a “relative” basis. However, are you deprived on an absolute basis of getting a Mercedes?

Comparison-created unhappiness and insecurity are pervasive. Social media is full of images of people showing off their lavish lifestyles, giving you something to compare to. No wonder social media users are terminally unhappy.

The flaw of human nature is that whatever we have is enough until we see someone else who has more.

Comparison in financial markets can lead to awful decisions. For example, investors have trouble being patient and letting whatever process they have work for them.

For example, you should be pleased if you made 12% on your investments but only needed 6%. However, you feel disappointed when you find out everyone else made 14%. But why? Does it make any difference?

Here is an ugly truth. Comparison-related unhappiness is for Wall Street’s benefit.

The financial services industry is predicated on upsetting people so that they will move money around in a frenzy. Money in motion creates fees and commissions. The creation of more and more benchmarks, products, and style boxes is nothing more than the creation of more things to COMPARE with. The end result is investors remain in a perpetual state of outrage.

The lesson we want to drive home here is the danger of following Wall Street’s advice of beating some arbitrary index from one year to the next. What most investors are taught to do is to measure portfolio performance over a twelve-month period. However, that is absolutely the worst thing you can do. It is the same as being on a diet and weighing yourself every day. 

If you could see the whole future before you, making an investment decision knowing your eventual outcome would be effortless. However, we don’t have that luxury. Instead, Wall Street suggests that if your fund manager lags in one year, you should move your money elsewhere. This forces you to chase performance, creating fees and commissions for Wall Street.

We chase performance because we all suffer from the 7th deadly sin – Greed. 

Most of us want all of the rewards without regard for the consequences. However, instead, we should learn to “love what is enough.“

In a year like 2023, where primarily seven companies drove the S&P 500 index, many individuals, thinking they “missed out,” will want to change their strategy for next year.

As is often the case, such will likely be a mistake.

Goldman Sachs May Be Disappointed

The table below from Callan Investments is an excellent example of the risk investors take by chasing last year’s best-performing sector. If you pick any asset class, you will see they are rarely the top performer for long. A good example in 2023 was that “cash” won, and the S&P 500 index was down 18%. If you had chased last year’s best-performing asset class, you would have woefully underperformed the S&P 500 index in 2023.

While Goldman expects the S&P 500 index to have another winning year, as we noted in “Trojan Horses,” analysts are often wrong, and by a large degree.

“This is why we call it ‘Millennial Earnings Season.’ Wall Street continuously lowers estimates as the reporting period approaches so ‘everyone gets a trophy.’” 

The chart below shows the changes in Q4 earnings estimates from February 2022, when analysts provided their first estimates.

But while Goldman is very optimistic about earnings growth in 2024, the rest of the analysts community has already started cutting their previous estimates for next year.

Given still elevated interest rates, tighter lending standards, and slowing wage growth, there is more than a substantial risk of slower economic growth next year. While such would lower inflation, it will also reduce earnings growth, suggesting 2024 could be a lower return year for the S&P 500 index.

Conclusion

When you sit down at the end of the year to analyze your performance, I suggest not looking at just 2023 as your benchmark. Investing aims to achieve a rate of return over a long period to reach your financial goals. Therefore, look at the average rate of return you have achieved over the last 5-years and compare that to your goal. This will give you a better sense of how you are doing and reduce the potential for emotional mistakes.

For example, over the last 5-years, the S&P 500 equal-weighted index has returned on a nominal basis 43.21% versus 57.05% for the market-cap weighted equivalent. However, during that period, the returns from the equal-weighted index came with lower volatility, allowing you to stay invested during more troubling times. More importantly, if you need a 6% rate of return to reach your retirement goal, even though the equal-weighted index underperformed in 2023, the 8.6% average return still has you ahead of your objectives.

Financial Resource Corporation summed it up best; 

“For those who are not satisfied with simply beating the average over any given period, consider this: if an investor can consistently achieve slightly better than average returns each year over a 10-15 year period, then cumulatively over the full period they are likely to do better than roughly 80% or more of their peers. They may never have discovered a fund that ranked #1 over a subsequent one or three-year period. That ‘failure,’ however, is more than offset by their having avoided options that dramatically underperformed.

For those that are looking to find a new method of discerning the top ten funds for the next year, this study will prove frustrating. There are no magic short-cut solutions, and we urge our readers to abandon the illusive and ultimately counterproductive search for them.

For those who are willing to restrain their short-term passions, embrace the virtue of being only slightly better than average, and wait for the benefits of this approach to compound into something much better.”

If you want to be a better investor, do what most investors don’t:

• Look for stable returns – not the highest returns.
• Invest for a reasonable annual return to help you reach your investment goal.
• Don’t compare yourself to some anomalous index.
• Save, Save, Save!
• Manage your money – after all – it is your money.

It’s not as complicated as you think.

Days before Black Friday, one of the busiest shopping days of the year in the US, electronics retailer Best Buy posted weaker-than-expected third-quarter revenue and lowered guidance, warning about a deteriorating macro environment as “consumer demand has been even more uneven and difficult to predict.”

Chief Executive Corie Barry said, “We are reporting better-than-expected profitability on slightly softer-than-expected revenue for the third quarter. These results demonstrate our ongoing, strong operational execution as we navigate through the near-term sales pressure our industry has been experiencing for the past several quarters.”

However, Barry warned: “In the more recent macro environment, consumer demand has been even more uneven and difficult to predict. Based on the sales trends in Q3 and so far in November, we believe it is prudent to lower our annual revenue outlook. The midpoint of our annual non-GAAP diluted EPS guidance is slightly higher than the midpoint of our original guidance as we entered the year.”

She said the electronics retailer is “prepared for a customer who is very deal-focused” this holiday shopping season. Or, as we’ve noted, “Choiceful.” 

In the third quarter ending October 28, Best Buy’s sales were $9.76 billion, marking a decline of almost 8% from the previous year and falling short of analysts’ expectations of $9.9 billion.

Comparable sales, which adjusts for store openings and closings, slid by a steeper-than-expected 6.9%.

Here’s a snapshot of Best Buy’s third-quarter earnings:

• Enterprise comparable sales -6.9% vs. -10.4% y/y, estimate -5.71%

• International comparable sales -1.9% vs. -9.3% y/y, estimate -4.19%

• US comparable sales -7.3% vs. -10.5% y/y, estimate -5.98%

• US entertainment comp sales +20.6% vs. -4.6% y/y, estimate +5.67%

• US appliances comparable sales -15.1% vs. -9.6% y/y, estimate -8.2%

• US computing & mobile phone comparable sales -8.3% vs. -11.4% y/y, estimate -6.4%

• US consumer electronics comparable sales -9.5% vs. -12.8% y/y, estimate -6%

• US online comp sales -9.3% vs. -11.6% y/y

• Adjusted EPS $1.29 vs. $1.38 y/y, estimate $1.18

• Revenue $9.76 billion, -7.8% y/y, estimate $9.9 billion

• US revenue $9.00 billion, -8.2% y/y, estimate $9.15 billion

• International revenue $760 million, -3.4% y/y, estimate $755 million

• Online revenue as a percentage of total US revenue 30.6% vs. 31% y/y

• Gross margin 22.9% vs. 22% y/y, estimate 22.9%

Best Buy expects annual comparable sales to fall from 6.0% to 7.5%, citing weaker fall trends compared with its previous range of a 4.5% to 6% drop. 

• Sees comparable sales -6% to -7.5%, saw -4.5% to -6%, estimate -5.21% (Bloomberg Consensus) 

• Sees adjusted EPS $6 to $6.30, saw $6 to $6.40, estimate $6.19

• Sees revenue $43.1 billion to $43.7 billion, saw $43.8 billion to $44.5 billion, estimate $44.16 billion

Higher interest rates, a shift in consumer spending from goods to services, and the return of student loan payments have further weakened demand for electronics following a surge in demand during the Covid pandemic. 

Shares of Best Buy in premarket trading were down 4%.

Meanwhile… 

The state of the consumer:
– Abercrombie & Fitch falls 5.9%
– Kohl’s falls 5.2%
– Lowe’s falls 4.3%
– Best Buy falls 4.5%
– American Eagle plunges 9%

— zerohedge (@zerohedge) November 21, 2023

Morgan Stanley’s Mike Wilson may have been correct in his report a few months ago when he warned that ‘consumers are falling off a cliff‘. 

By Ven Ram, Bloomberg Markets Liver reporter and strategist

Come June, the macroeconomic landscape will be so fundamentally different that central banks in most developed economies will be doing an about-turn to start slashing interest rates. Or so the markets reckon. But beware the consensus trade.

There are instances in life when there is strength in numbers, but sticking with the consensus doesn’t often work out well from the perspective of managing a portfolio. You don’t have to rewind too far back into the past to find some glaring examples. At the start of the year, median expectations from our MLIV Pulse survey were that the 10-year Treasury yield would end 2023 at 3.50%. Yet we are here at 4.40% despite a rally over the past week.

The S&P 500 was supposed to be hovering around 4,000. Never mind that we are now almost 15% higher. Six months ago, traders were pricing almost 50 basis points of policy loosening from the Federal Reserve by the end of 2023. We all know that barring a catastrophe, that pricing isn’t about to fructify.

The markets had similarly priced out the prospect of further tightening from Australia. And yet not only did the nation’s central bank raise rates earlier this month, but its governor also sounded a warning shot across the bow just this morning by pointing to elevated inflation expectations.

Heading into 2024, investors are now convinced that inflation will recede so obediently as to persuade the major central banks to start cutting rates to accommodate weaker economies. That conviction seems to be growing by the day. But it’s often the contrarian trade that pays off.

Not too long ago, when asked about the assessment of inflation dynamics in the aftermath of the pandemic, Fed Chair Jerome Powell said: “We are going to have to be humble, but a bit nimble.” What he said on inflation may well resonate for positioning oneself relative to consensus.

Yemen’s Houthi rebels have released dramatic video of their Sunday hijacking of the Galaxy Leader, a vehicle-transport ship whose owner is a subsidiary of a company owned by an Israeli billionaire.

The ship is still in their control, with 25 crew members of various nationalities held hostage and the vessel now in the Yemeni port of Hodeidah.

The Red Sea incident received surprisingly little initial coverage by major media, considering it marked the opening of a new, maritime front in the multilateral regional conflict that erupted on Oct 7, when Palestinian Hamas militants invaded southern Lebanon, killing more than a thousand Israeli civilians and soldiers.   

The Iran-aligned Houthis, who’ve been battling Yemen’s Saudi-backed government since 2014, had already launched multiple drone and missile attacks on Israel in solidarity with Hamas and the people of Gaza. In announcing their seizure of the Galaxy Leader, the group said, “All ships belonging to the Israeli enemy or that deal with it will become legitimate targets.” 

“The detention of the Israeli ship is a practical step that proves the seriousness of the Yemeni armed forces in waging the sea battle, regardless of its costs and costs,” said Houthi chief negotiator Mohammed Abdul-Salam in a separate online statement. “This is the beginning.” About a fifth of the world’s oil must traverse the narrow strait between Yemen and Djibouti.

The professionally-produced, nearly four-minute Houthi video appears to have been shot from multiple cameras in the air and on the sea, including one mounted on the tail of a helicopter used to airlift the attackers onto the ship and others worn by the militants in action. 

It first shows a helicopter pursuing the 600-foot ship as it plows through the sea. Houthis then dismount the chopper atop the ship’s deck, fire AK-47 rifles and make their way to the ship’s bridge, where crew members surrender to them. In the final shot, the ship moving through the water, surrounded by several small watercraft. 

⚡️#BREAKING The Houthi group publishes a video of its seizure of the Israeli ship in the south of the Red Sea. pic.twitter.com/DYZIq2IPKh

— War Monitor (@WarMonitors) November 20, 2023

Maritime security company Ambrey tells the Times of Israel that the helicopter air assault tactic mirrors similar seizures perpetrated by Iran. The Houthis have declared themselves part of an “axis of resistance” against the Zionist state. 

Israeli Prime Minister Benjamin Netanyahu’s office characterized the hijacking as “an Iranian attack.” Iran distanced itself from the incident. “We have repeatedly announced that the resistance groups in the region represent their countries and make decisions and act based on the interests of their countries,” said the foreign ministry’s Nasser Kanani.

It appears there are no Israeli citizens on the ship, which was headed from Turkey to India. The crew includes Ukrainians, Bulgarians, Filipinos, Mexicans and a Romanian, The Times reports. The seized ship is operated by a Japanese company, Nippon Yusen. Japan’s foreign minister says his diplomats are in direct contact with the Houthis, while also “urging Saudi Arabia, Oman, Iran, and other countries concerned to strongly urge the Houthis for the early release of the vessel and crew members.”

The Galaxy Leader is ultimately owned by Ray Car Carriers, which was founded by Abraham “Rami” Ungar. With an estimated 2019 net worth of more than $2 billion, he’s among Israel’s 30 wealthiest individuals. According to wiretaps, Ungar was involved in scheme in which he’d pay an employee of then-Prime Minister Ehud Olmert $10,000 a month in exchange for her refusal to testify against Olmert. 

In a sign that cargo shipping could be significantly disrupted by the Houthi hijacking and their open-ended threat for more to come, two ships affiliated with the same maritime group — the Glovis Star and Hermes Leader — changed course on Sunday, Reuters reported Monday night. 

Ships navigating between the Red Sea and the Gulf of Aden and then the Indian Ocean must cross the Bab al-Mandab Strait. Its name translates to “Gate of Grief.” The waterway is only 20 miles wide, divided into two channels — one is 2 miles wide; the other, 16. 

With its multiple “first-person shooter” perspectives, the Houthi video led many people to think it must be fake…

Wild and terrifying! I honestly thought this was a video game at first. It’s real. Houthi terrorists hijack a cargo ship named “Galaxy Leader” in the Red Sea over the weekend pic.twitter.com/2JT7bo6Bvd

— Justin Hart (@justin_hart) November 20, 2023

Authored by Michael Snyder via The Economic Collapse blog,

U.S. consumers are getting weaker and weaker and weaker.  Today, debt levels have risen to unprecedented heights, but thanks to roaring inflation our standard of living has been steadily going down.  Most Americans are working extremely hard, but they have very little to show for it.  And now the latest economic downturn is really starting to bite.  Layoffs are starting to surge again, once thriving businesses are shutting down all over the nation, and hunger and homelessness are exploding.  If economic conditions continue to deteriorate at this pace, what will things look like a year from now?

For decades, we have been able to count on U.S. consumers to just keep spending money no matter what the economic outlook was, but now things have changed.

The following are 11 signs that U.S. consumers are in very serious trouble as we head into the final stretch of 2023…

#1 U.S. renters are spending 30 percent of their incomes just on rent…

Renters remained burdened in the U.S. during the third quarter of 2023 despite a slight improvement as insurance costs to landlords mounted, according to a new report by Moody’s Analytics.

Moody’s Analytics found that in Q3, the U.S. rent-to-income ratio (RTI) declined slightly by 0.5% and ended at 30%, a level that is the threshold for being rent-burdened. Renters are considered “burdened” if their rent payments consume 30% or more of their gross, or pre-tax, income. This comes after last year marked the first time that the median renter household in the U.S. paid over 30% of their income on an average-priced apartment when the national RTI reached a high of 30.8%.

#2 One food bank executive just told USA Today that she is seeing “the worst rate of hunger in my career” right now…

“This is the worst rate of hunger in my career,” said Morgan, who has worked at food banks in Boston, San Francisco and Anchorage, Alaska. “It’s so large, it’s hard to wrap your head around.”

#3 Wells Fargo just shut down 13 bank branches in a single week…

Six banks filed to close almost 40 branches last week leaving millions of Americans without access to vital financial services, with Wells Fargo alone axing 13 locations.

Wells Fargo has been a leader in the closure of branches around the country, having closed 160 in the first half of the year, according to data from S&P Global Market Intelligence.

#4 Average hourly earnings for all employees have fallen by 3.32 percent since Joe Biden entered the White House…

Millions of Americans have received a pay cut over the past two years thanks to high inflation, a blow to President Biden as he attempts to center his re-election campaign around “Bidenomics.”

The Labor Department reported Tuesday that average hourly earnings for all employees was $11.05 in October — a 3.32% decline from the $11.43 figure in January 2021, when Biden took office.

#5 Due to a lack of consumer demand, three different major Burger King franchisees have recently declared bankruptcy…

Premier Kings, a 172-unit Burger King franchisee whose owner died in 2022, declared bankruptcy protection, saying that operating losses even after the company closed restaurants forced the issue.

It’s the third time this year that a major Burger King operator has taken such a step, while several others closed restaurants around the country in the aftermath of the chain’s sales and profit challenges.

#6 Vice Media has announced that it will be laying off dozens of staffers…

Vice Media, the one-time digital media darling that has seen its value and influence greatly diminish in recent years, moved on Thursday to further hollow out its once prestigious news division, shutting down several shows and laying off dozens of staffers.

#7 According to Challenger, Gray & Christmas, almost 20,000 media jobs have already been eliminated this year…

Nearly 20,000 jobs have been eliminated across the media industry this year as of October, according to Challenger, Gray & Christmas.

#8 Amazon is laying off hundreds of workers in its Alexa division…

Amazon on Friday said that it is cutting “several hundred” jobs within its Alexa division.

The layoffs come as the e-commerce giant is “shifting some of our efforts to better align with our business priorities, and what we know matters most to customers —which includes maximizing our resources and efforts focused on generative AI,” an Amazon spokesperson confirmed to FOX Business.

#9 Just in time for the holidays, Citigroup has decided to conduct large scale layoffs…

Citigroup will soon begin layoffs in CEO Jane Fraser’s corporate overhaul, CNBC has learned.

Employees affected by the cuts will be informed starting Wednesday, with new dismissals announced daily through early next week, according to people with knowledge of the situation.

Those impacted will include chiefs of staff, managing directors and some lower-level employees, said the people. The cuts will spread to more rank-and-file staff by February, they added.

#10 As consumer wealth has dried up, federal tax receipts have been falling on a quarterly basis since the third quarter of 2022…

Rather, federal spending is rising even as federal revenues have fallen, year over year, for ten of the last twelve months. Moreover, on a quarterly basis, federal receipts have been falling—quarter-to-quarter—since the third quarter of 2022.

#11 80 percent of U.S. households are actually poorer than they were when the COVID pandemic originally hit this country…

As of June, the bottom 80% of households by income, when adjusted for inflation, had lower bank deposits and other liquid assets compared to their status in March 2020. The decline marks a significant shift from the initial phases of the pandemic, where various factors, including government financial support and restricted spending opportunities during lockdowns, led to an accumulation of excess savings.

Most Americans have been getting poorer, but the cost of living just keeps getting even more oppressive.

As a result, the middle class is literally being hollowed out.

The absolutely massive gap between the ultra-wealthy and everyone else has become an extremely pressing issue in this country, and it is going to lead to enormous civil unrest during the chaotic years that are ahead of us.

Our leaders were able to keep the economy propped up for a long time by injecting trillions of fresh dollars into the system.

But now the “endgame” has arrived, and it is going to be incredibly painful.

*  *  *

Michael’s new book entitled “Chaos” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.