The Sunday Drive - 06/25/2023 Edition
The Sunday Drive - 06/25/2023 Edition
Musings and Meanderings of a Financial Provocateur
👋🏼 Hello friends,
Greetings from Saratoga Springs, NY! Let's take it easy and enjoy a leisurely Sunday Drive around the internet.
🎶 Vibin'
This week, I’m vibing to a song that elicits a sense of Carpe Diem - Seize the Day. It’s important to know when it’s time to act and take control of one’s destiny.
I hope you enjoy the Vibe of the Week… Van Halen’s (Van Hagar?) 1991 hit, Right Now.
💭 Quote of the Week
“The pursuit of excellence is less profitable than the pursuit of bigness, but it can be more satisfying.” — David Ogilvy
📈 Chart of the Week
The Chart of the Week shows the performance of large cap (S&P 500 index) and small cap stocks (S&P 600 index) in the years following the bursting of the Dot.com bubble in the early 2000’s.
I’m not sure what the catalyst will be for a change in the current mega-tech market leadership, or when it will arrive, but it’s coming. In the last decade, the Nasdaq 100 has grown from 6% of global market cap to nearly 20%, tripling its share of the market. That kind of outperformance can go on for quite a long time, but I would say with a high degree of confidence that it can’t go on forever.
Small caps are very cheap relative to larger cap stocks, and also in terms of absolute valuations. At some point, there will be a rotation into small caps, and if history is any guide, it could continue for a number of years. The “easy money” will be made in the early phase of the rotation, and it would be wise to have allocated in that direction before it begins. Patience will be rewarded.
🚙 Interesting Drive-By's
📉 Labor Market Math - from Patrick Watson of Mauldin Economics:
Quite a few experts think the US economy will enter recession soon. If so, someone forgot to tell the labor market.
Historically low unemployment, brisk hiring activity, rising wages, and many employers still unable to find enough workers aren’t typical recession signals.
Now, it’s also true economies tend to grow until they don’t. This could all change quickly. But I think the bigger problem is a continued worker shortage that holds back growth.
📈 The Breathtaking Growth of Amazon’s Logistics Empire - from Chartr.co:
Package deal
UPS plays a crucial role in the US delivery market, handling roughly 1-in-4 parcels shipped in the country, processing an astonishing 19 million parcels per day during the first quarter of this year. But in recent years it's faced increasing competition from Amazon.
Over the past decade, the tech behemoth has rapidly expanded its logistics division, going from a market share of less than 1% a decade ago to a substantial 23% in 2022, per data from Pitney Bowes. Currently, Amazon sits just 1% behind UPS, having surpassed FedEx in 2020.
💰 Related to our ongoing theme of ongoing demographically driven labor shortages, and structurally higher inflation, there is also this from Chartr.co:
Shipping strike
On Friday, the Teamsters union, representing 340,000 UPS workers, voted overwhelmingly to strike if no agreement is reached with the company before the contracts expire at the end of July. That's a major deal, as a walkout at UPS could become the largest work stoppage in the US since the steelworkers strike in 1959, when ~500,000 workers walked out for nearly four months.
The union achieved a significant breakthrough last week when the company tentatively agreed to include air conditioning in vehicles, following incidents of UPS drivers suffering from heatstroke. However, the Teamsters see this as just the beginning — pushing for higher wages, more full-time work opportunities, the removal of surveillance cameras in delivery trucks, and improved working conditions.
💡 Asset Managers Pressure Tech Companies of Possible AI Misuse - from the Financial Times.
Big institutional investors are increasing pressure on technology companies to take responsibility for the potential misuse of artificial intelligence as they become concerned about the liability for human rights issues linked to the software.
The Collective Impact Coalition for Digital Inclusion of 32 financial institutions representing $6.9tn in assets under management — including Aviva Investors, Fidelity International and HSBC Asset Management — is among those leading the push to influence technology businesses to commit to ethical AI.
🤓 More deep thoughts about the impact of ChatGPT on businesses:
👋🏼 Parting Thought
Best Science Fair project ever!!!
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em at me.
I hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mike
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