Canada Debt/Taxes, Inflation -PPI, Election, Home Depot, Starbucks, Macys
Mid Day Market Report
Chart of the Day – Bad news for Canadians, especially in Ontario.
In fact California is the 5th largest economy in the world since 2017. The government of Ontario now has the most debt out of all sub-national governments in the world.
The average Canadian family in 2023 spent 43% of its income on taxes and 35.6% on basic necessities such as food, clothing, and shelter, says Fraser Institute. The average household earned $109,235 in 2023 and paid $46,988 in total taxes, including income taxes, payroll taxes, sales taxes, property taxes, fuel taxes, carbon taxes, and vehicle taxes. In 1961 taxes were 33.5%.
“Considering the sheer amount of income that goes towards taxes in this country, Canadians may question whether or not we’re getting good value for our money,” Fraser Institute director of fiscal studies Jake Fuss said in a statement. Look at the above chart, taxes are only going higher.
U.S. producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services. The PPI for final demand gained 0.1% last month after rising by an unrevised 0.2% in June. Economists polled by Reuters had forecast the PPI gaining 0.2%.
On a year-over-year basis, headline PPI rose 2.2%, a sharp drop from the 2.7% reading in June.
A low number considering a 0.6% jump in final demand goods prices, the biggest move higher since February and due primarily to a 1.9% surge in energy, including a 2.8% increase in gasoline. Countering the move was a 0.2% slide in services, the biggest move lower since March 2023, according to the BLS. Trade services prices fell 1.3% while margins for machinery and vehicles wholesaling tumbled 4.1%
It appears weakness in the economy is affecting services. The Fed focuses more on Core PPI excluding food and energy and that was flat. We see what tomorrows CPI brings but at this stage things look good for the Biden administration to get a rate cut before the elections.
And on the US election
A judge ruled that Robert F. Kennedy Jr. could not appear on New York’s ballot because he had used a “sham” address to maintain his New York residency. Kennedy vowed to appeal. Yup they certainly don't want Kennedy diluting the vote in this heavy Democratic State.
I predicted Biden would not make it 3 years of his presidency, but the Democrats and their media shills covered up his decline for a long time. I thought the Democrats would pull a real rabbit out of the hat, but Kamala Harris, unreal. One comment I came across and believe, is “ Kamala Harris remains the weakest Democratic presidential candidate since Walter Mondale.”
She is not the consensus pick of the Democratic party, because no voter ever cast a ballot for her in the primary. She is simply the product of Democrat insiders hoping they can spin a narrative to get women and black votes. It is obvious with all the negative media about Trump with women.
Kamala is not popular and not inspiring to most. Also important is she has no base of support and was basically a Biden tag along. She has no policy proposals to better the country and has been a big supporter of Bidenomics which most voters are not happy with. She does not come across as a strong speaker with poor grasp of national politics. It appears the Democrats have no depth of good candidates, she ended up with her as default because Biden couldn’t string together a coherent sentence. I don't like to say it, but Harris was selected as VP in the first place because she is a Black woman.
The election is Trump's to lose and these days who knows what could happen.
Elon Musk interviewed Trump on X. I re-posted here https://x.com/Ron_playstocks. It is an hour and I have not listened to it yet.
The interview began with Elon Musk highlighting a massive DDoS attack that disrupted the live broadcast and delayed it well past its scheduled 8 PM broadcast.
Musk commented "This massive [DDOS] attack illustrates that there's a lot of opposition to people just hearing what President Trump has to say."
They discussed the state of America, touching on issues ranging from censorship to border security to political lawfare to the attempted assassination of Trump. It revealed a deep concerns about the country's direction.
Market Movers and Shakers
Macy’s Inc. (M) $15.95
Macy’s faces significant challenges as brick-and-mortar retail continues its decline in favor of e-commerce. The company has been grappling with declining foot traffic in malls, leading to store closures. Additionally, Macy's struggles to compete with online giants like Amazon, which offer a broader range of products at competitive prices. Supply chain disruptions and rising costs have squeezed margins, and Macy’s attempts to pivot to digital sales have been slow and costly. The company’s debt levels remain a concern, limiting its ability to invest in necessary innovations. With consumer spending likely to contract in an uncertain economy, Macy's prospects seem dim.
Macy’s is closing nearly a third of its stores, impacting malls and communities across the U.S. The retailer plans to shut down about 150 locations by early 2027. These closures represent 25% of Macy's total square footage but only 10% of its sales. Macy’s will focus on its remaining 350 stores.
The stock has been in decline since 2021 and is down about -28% from this years high.
JetBlue (JBLU) $4.68
JetBlue is navigating through turbulent skies, with rising fuel costs, labor shortages, and increasing competition from low-cost carriers putting pressure on profitability. The airline's ambitious expansion plans could backfire if travel demand slows, exacerbating capacity issues. Additionally, JetBlue's operational inefficiencies and inconsistent customer service ratings have hurt its brand reputation. Regulatory hurdles and potential delays in the Spirit Airlines acquisition could further strain resources and distract from core operations. With the macroeconomic environment uncertain, JetBlue's stock may face continued downward pressure.
Shares cratered 21% on Monday for its largest session loss on record. The catalyst was a plan to raise more than $3B in debt, the majority backed by its loyalty program called TrueBlue. Included in the proposal was a $400M convertible note offering to repay maturing bonds, but the move triggered a credit downgrade at all "Big Three" rating agencies.
Home Depot (HD) $345.30
Home Depot is highly sensitive to the cyclical nature of the housing market, which is showing signs of cooling. Rising interest rates have dampened home buying and renovation activity, reducing demand for Home Depot’s products. Additionally, the company is facing increased competition from online retailers and smaller, specialized stores, leading to market share erosion. Inflationary pressures are squeezing consumer spending, and supply chain challenges continue to cause inventory issues. These factors collectively threaten to weigh heavily on Home Depot's growth prospects.
Today, Home Depot Q2 results exceeded quarterly expectations but warned of weaker sales in the latter half of the year due to high interest rates and consumer uncertainty. The company expects full-year comparable sales to drop 3% to 4%, a sharper decline than the previously forecasted 1%. Consumers are delaying home purchases and renovations. Net income for the fiscal second quarter dipped slightly, with comparable sales dropping 3.3%, marking the seventh consecutive quarter of declines. Not a sign of a good economy
Starbucks Corp. (SBUX) $94
Starbucks is battling several headwinds that could limit its growth. The company faces increasing competition from both premium and low-cost coffee brands, as well as rising labor and input costs. Global economic uncertainty, particularly in key markets like China, poses a risk to international expansion plans. Additionally, ongoing unionization efforts in the U.S. could lead to higher operating costs and potential disruptions. As consumer preferences shift towards healthier and more sustainable options, Starbucks may struggle to adapt quickly enough, potentially eroding its brand appeal and market share.
The stock has been very weak and was down -25% on the year but today the market saw a ray of sunshine. Starbucks announced that CEO Laxman Narasimhan is stepping down and will be replaced by Chipotle's CEO, Brian Niccol. Starbucks shares jumped big time in this morning (+$17), while Chipotle's dropped. Niccol has been credited with turning Chipotle around since 2018 and will officially take over Starbucks on Sept. 9.
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