Common Sense, Rights of Human
Volume 1, Part 1 of the Thomas Paine, Detective Spooner, and Benjamin Graham Files
Investing takes many forms. People can invest money. They can invest emotionally into something. Another more basic commodity people can invest is time. We decide when to relax. When to work. And so on and so on. That is the beauty of free market capitalism. We get to decide how we want to spend the 24 hours of each day and the 168 hours of each week. We can work, eat, sleep, relax, go out to a movie, see friends or family, travel, or stay in with our immediate family or roommates if we are fortunate enough to live with family members or roommates.
Inherent to all investing is the utilization of signals. There are all kinds of signaling effects in traditional investing marketplaces. The most well known of these signals are economic indicators. GDP growth, inflation readouts, total factor productivity, and the like. Saltwater or freshwater economist, regardless of whichever camp you belong to, any economist worth listening to would tell you, however, that these factors are lagging economic indicators. It takes either an entire quarter or a month or a slightly shorter time period to generate these values. They usually come from trustworthy agencies such as the Bureau of Labor Statistics or the Federal Reserve. To get more instantaneous data, however, is not difficult. How a given service’s or good’s or sector’s market performs day to day can tell one a lot of information about how that market or series of market participants is either inherently performing or how the broader investing public or investing market perceives that one section or slice of the market, or a combination of both factors that can be split apart through conscientious attribution analyses.
To me, I am getting a lot of negative signals today from the broader B2C (business to consumer) consumer-focused array of tech behemoths and unicorns. For those unaware, in tech there are generally two kinds of businesses. There are B2B (business to business) firms and B2C firms. B2B generate the vast majority of their revenues or develop the vast majority of their products/services for ultimate end users in the business world, i.e., other business entities. B2C, on the other hand, are not so lucky. They must appeal to the ever-changing, ever-dynamic, and ever-fickle tastes of global consumers. While consumption, as opposed to manufacturing or energy/natural resources, drives the vast majority of most well-developed Western and Eastern economies (think the US, Canada, Germany, UK, France, Korea, Japan, etc.), there is only so much the global consumer can shoulder. The global consumer cannot support a global economy all on its own. There must be other portions to an economy other than consumption in order for the global economy to sustainably and efficiently maintain growth and a healthy standard of living for all people. That is why usually the first sector to feel growth pains in a high-rate environment is the field of consumer discretionary business, i.e., businesses whose business model involves selling non-staple goods to consumers who are willing to pay for these either luxury or quasi-luxury goods and services through either excess disposable income, savings, or credit.
Tune in tomorrow for Volume 1, Part 2 …