Post 368: Energy Shock, Mortgage Shock, and a Stretched Consumer

Post 369: Even Ozempic Can’t Keep Canada Out of Recession

* Generic versions of weight-loss drugs are now on the market. * Costing less to lose more. * Hormel is a U.S. food-processing company based in Minnesota. * Sales improved slightly but it’s all price: volume is still negative. * We take a look back at the maker of Spam. * Sharks vs. Coconuts cage match. * Lululemon makes some changes to its board of directors. * While its share price continues to struggle. * Weight-loss drugs have become so popular that they are blowing holes in the budgets of some municipalities and public health plans. * House prices in Canada have been outpacing income for many years. * And now a whole generation is priced out of the house market in some markets. * Chicken prices are soaring in Canada. * And so are World Cup soccer tickets. * Car prices have risen so much that Americans are buying fewer of them. * Costco continues to chuck along and are a beneficiary of the weight-loss drug craze. * In Financial Ructions: * Despite Canada being subjected to the lowest average tariff rate in the U.S. vs. any other G7 country. * It’s the only one in a technical recession. * Related: Jobs in Canada for younger people are hard to find. * Book Review * We start a new book: Onward: How Starbucks Fought For Its Life Without Losing Its Soul. * We take a slightly different approach to the review. * Right away we see the importance of focusing on the customer rather than the share price.

Post 368: Energy Shock, Mortgage Shock, and a Stretched Consumer

* The fallout from the Iran war in terms of rising energy prices may just be beginning. * US gas prices are up 45% from last year. * Canadians renewing their 5-year fixed rate mortgages in 2026 will see the biggest shock yet to their monthly payments. * More Americans are moving from California and New York to Texas and Florida. * Wendy’s same-store sales have declined in the U.S. for five straight quarters. * Its share price is back to where it was in 1993. * McDonald’s has had four straight quarters of positive comparable store US sales growth. * Although consumer sentiment is worsening and the next quarter will not be as strong. * And a look back. * Walmart continues to drive impressive same-store sales growth in the U.S. although their most recent print is the lowest in two years. * And they too are seeing cracks in consumer sentiment. * Lowe’s eeks out a comparable store sales gain. * But notes that this is the most difficult housing market since the Great Financial Crisis. * Campbell’s Soup has only seen one quarter of adjusted sales growth out of the last ten. * It is walking back some price increases on chips and like Pepsi/Frito Lay, they will be surgical about it. * Its share price is back to 1994 * Core inflation in Canada (excluding energy) continues to tick lower. * The main risk is that it’s due to a struggling economy. * The percentage of Americans making withdrawals from their pension plans for hardship reasons has tripled. * In Financial Ructions: * The yield curve continues to increasingly uninvert. * It’s a bear steepener which doesn’t usually lead to a recession. * Although we had a nasty one in the early 1970s. * We look at the supply of base money relative to M2. * And why inflation soared in the early 2020s. * Judy Shelton makes the case for a shrinking Fed balance sheet and lower interest rates. * Book Review * We complete the last two chapters of the great book False Dawn by George Selgin. * Monetary policy was highly accommodative during World War II. * But not after the war ended, despite yield curve control still being in effect. * We must learn the lessons of the Great Depression and resist resorting to the New Deal playbook. * And a shout out to Hayek.

Post 367: The War on Cash, Business and the Next Generation

* Father’s Day trumps Mother’s Day.  * Don’t shoot the messenger. * Comparing Uber with Lyft.  * I’ve started using Lyft more often. * Canada’s youth are suffering from bad government policy.  * While the country’s baby boomers benefit. * A look at cash.  * Most people still carry it but unfortunately its relevance is declining.  * This is a really bad thing. * An Op-Ed from former Starbucks CEO Howard Schultz.  * Pointing out how the anti-business government policies in the state of Washington are driving jobs to other states. * Headline inflation in the U.S. is the highest since 2023 as the war in Iran takes its toll.  * Core inflation that excludes energy is also rising. * Financial Ructions:  * Bond yields are soaring from what are still relatively low levels.            * This will eventually matter. * Wholesale inflation in the U.S. soared to 6.0%  * This will eventually matter. * Book Review: False Dawn by George Selgin  * Although government spending plummeted after World War II the economy soared.  * Despite the warning from Keynesian economists. * Official unemployment numbers would have been higher if it included all of the women who lost their jobs with men returning home after the war.  * But many of the women who left the workforce had no intention of staying there once the war ended. * Private investment is the source of economic prosperity.  * In particular, net private fixed investment is what matters.

Post 366: Central Bank Policy That Resulted In Unaffordable Homes and Basic Necessities

* Clorox continues to struggle to grow its top line.  * And its share price * A look at real residential real estate price appreciation over the years in:  * Canada * U.S.A. * China * UK * Costco sales are still soaring.  * And a look at the profit model. * Whirlpool's sales and share price are tanking.  * Tariffs to the rescue.  * And a look back at 1992. * The US jobs numbers for April were weak.  * But the headline number looked OK due to a massive adjustment.  * Full-time jobs are down by over a million from last year. * Canada has lost jobs in three of the last four months.  * And underneath the hood the quality is even worse. * In Financial Ructions:  * The Canadian government launches the Canada Strong Wrong Fund.  * And no, it’s not a Sovereign Wealth Fund. * A look at an article on value investing.  * Time horizon is the great differentiator. * Book Review:  * Uncertainty with respect to monetary policy has a dampening effect on capital investment.  * PM: Over the last 16 years, the certainty that the Fed will always bail out Wall Street has had an amplifying effect on stock markets. * Keynesians worried that as World War II ended and government spending was slashed that it would result in a new Great Depression.  * Not only did the government cut spending but the country enjoyed a budget surplus for the first time since 1930.  * The economy soared.

Post 365: Home Sizes Shrink as Their Prices Soar And Spirit Soars No More

* Home Depot is still experiencing slow growth due to consumer uncertainty and normal interest rates. * Spirit Airlines goes bankrupt. * No taxpayer rescue. * Prices of Kimberly-Clark products are falling and volume is rising. * There are many apologists out there for soaring home prices i.e. those who own houses. * But no, increasing home sizes do not justify higher home prices. * And home sizes have been falling over the last ten years. * Financial Ructions * The driver of Canada’s GDP growth has been government spending. * And investment has been weak. * Which does not bode well for our economy’s future productive capacity. * Book Review * In the next two chapters of George Selgin’s False Dawn we see that: * Herber Hoover was much very much a Keynesian while Franklin Roosevelt was not. * And that the Roosevelt administration was extremely hostile to business. * And thus the collapse of investment.