The consumer services sector is another hot target for PE and family-owned businesses. Through the first half of 2024, consumer and retail investing accounted for 45% of the total deal count. Roughly 80% were valued at $50 million or below, and like the logistics and supply chain services sector, the consumer services contain a plethora of small business ventures that spread over the home service, fitness, and beauty sectors. Rolling these into a “brand name” streamlines marketing and advertising efforts, as well as operational synergies.

The U.S. is seeking more favorable market access for rice, soybeans, and wheat exports. Japanese and South Korean farmers are a powerful lobby, and the political climate with the coming parliamentary elections in Japan brings substantial political risks. South Korea’s government turned over in June, and the new left-leaning coalition is publicly confident they can reach an agreement, but did express concerns with President Trump’s latest ultimatum.

Cutting expenses is important, but meaningful cuts would only be made in the areas previously mentioned - Social Security, Medicare/Medicaid, and defense. To the President’s credit, he has expressed a desire to negotiate with China, Russia, and others to engage in coordinated defense spending cuts. Regarding Social Security and Medicare/Medicaid, the electorate is still not in a position to support a mature conversation, unfortunately.

While portfolio diversification strategies aimed at dedicating 45% to alternatives is not for every individual 401(k) holder, somewhere between 10 and 20% is reasonable. Empower is the second-largest provider of US workplace retirement plans. Earlier in May, the company announced a multi-partner deal with the private investing behemoths Partners Group and Apollo Global Management among others to begin allowing private equity, credit, and real estate in some of the accounts Empower manages. 401(k) plans typically hold public stocks and bonds, and many employers have been reticent to wade into private investments due to liquidity constraints and the valuation learning curve. Portfolio diversification strategies, however, are leading the change with five companies already signed on with Empower.

The advantage of the President’s strategy of enacting tariffs across the world all at once is it creates panic. That panic brings trade partners to the negotiating table en masse where multi-lateral negotiations can take place. Enacted one by one, the President’s supporters argue, would take too long and allow some nations to coast on – namely, China.

The Fed is “trapped” at the moment, reluctant to make any significant policy moves until they can gauge the true effects of President Trump’s policies. During the Fed’s most recent March 18-19 meeting briefing, Fed Chair Jerome Powell cited a form of the word “uncertainty” a worrisome 18 times. The target range for the federal-funds rate remains at 4.25% to 4.5%, and Fed officials are projecting stagflation – lower growth and potentially higher inflation – for the year.

For the vast majority of 2024, approximately 500,000 barrels per day of crude oil shipments from Mexico to the US were dispatched to US Gulf Coast refiners. It is now expected that some percentage will likely be diverted to Europe or Asia. US Atlantic Coast motor fuel markets are forecast to be hit the hardest, and regional natural gas spreads could also be affected, which would ultimately increase consumer prices.

Former NBA star Kendrick Perkins was known as an enforcer for the Boston Celtics. He no longer patrols the hardwood, having now transitioned into running the company, Nilly, alongside veteran Wall Street investor Chris Ricciardi. Nilly offers student athletes upfront money for the exclusive rights to sell or use the athlete’s NIL. During a period of up to 7 years, Nilly and its investors receive anywhere between 10% and 50% of the athlete’s earnings.

Paving the road to a nuclear revival are small modular reactors (SMRs). These reactors are approximately a third of the size of a typical plant and are prefabricated, thus reducing the capital costs that larger plants contend with. Oracle recently announced plans to power a new data center with three SMRs. To date, there are only three SMRs operational in the world. Constellation is in talks to build an SMR at one of its facilities, but most experts agree that SMRs won’t reach a commercial stage until the next decade. Last year an SMR project in Idaho was canceled as the project’s costs skyrocketed from $5 billion to $9 billion due to high interest rates and inflation.

It was difficult to avoid the national news coverage of the International Longshoremen’s Association (ILA) strike during the first week of October. Doomsday scenarios, people hoarding toilet paper, and Union President Harold Daggett’s 7,136-square-foot New Jersey home, complete with a brick pizza oven and a snappy Bentley in his carport, were social media sensations. However, the heart of the ILA’s concerns surrounds automation and its eventual impact on union jobs.

Borrowing costs are at levels not seen since the former Fed Chairman Paul Volcker era. Since the inflation peak of 9.1% in 2022, the CPI has declined steadily until late 2023 and early 2024. March 2024 CPI numbers revealed month-by-month increases, but not by overly significant margins: food was up by 0.1%, energy up 1.1%, and shelter up 0.4%. While unemployment is low, US consumer sentiment, as some economists believe, strongly correlates with borrowing costs and consumer credit supply, explaining much of the economic unease the country is experiencing.

In February, Rivian announced it would be cutting 10% of its workforce, prompting Tesla CEO, Elon Musk, to opine over X that the company would go bankrupt in roughly 6 quarters at the current trajectory. Musk then added, for good measure, “They need to cut costs massively, and the exec teams need to live in the factory or they will die.” Although Tesla aims to begin producing a more affordable model, Musk also warned his investors that 2024 Tesla EV sales are likely to be “notably lower.” Tesla reported quarterly revenue of $25.17 billion, falling short of analyst estimates of $25.64 billion.

The average credit card APR is a record high of 20.75%. Paying off $5,000 in debt at this rate would take 279 months and $8,124 in interest. The flip side, however, is that U.S. incomes, on average, have risen to equal or greater levels than the increased costs for services and goods. Inflation is also down from previous highs, but psychologically, we always pay more attention to how much we’re spending as opposed to how much more we’re bringing in.

When pharmaceutical patents expire, a revenue drop follows as generic drugs enter the market. Depending on the size of the revenue share for the company, an expiring pharmaceutical patent can be a drop akin to a handful of stairs or a cliff. Pharmaceutical patent cliffs are not new, but the size of the impending cliff has the industry concerned. By 2030, approximately 190 drugs will lose pharmaceutical patent protection. Historically speaking, the last decade also featured some pricey expirations.

In the aftermath of the 2008-2009 recession, interest rates were held down by increased savings from an aging population. Coupled with overall uncertainty, people were reticent to spend. This also resulted in less investment which ultimately ushered in a period of secular stagnation. The term “secular stagnation” initially appeared in the 1930s during the Great Recession. But it was Summers who revived it following the 2008 financial crisis.

If we zoom out and look at global trade growth, there is little evidence to suggest we are in a deglobalization moment. At the onset of the pandemic global trade growth slowed, but it has since rebounded and is arguably at its highest value ever. Yet, viewed solely as a share of GDP, here is where we see a dip. Most of the dip can be explained by China and India. From roughly 2003 to 2010 both economies were exporting goods and services at a steady clip. India continued to climb but eventually began declining by 2013 while China has experienced an unvarying decline since 2010.

“Nothing is so permanent as a temporary government program.” The first rule of economics is two-fold - resources are scarce, and resources have alternative uses. It’s rather intuitive if you let it sink in. When it comes to politics, however, can you guess what the first rule is? We’ll cut to it, no time for hints and innuendos – the first rule of politics is to ignore the first rule of economics. That’s a heck of a generalization, you’re thinking. Perhaps, but even the most “aligned” politician to whatever set of beliefs you hold, strays from basic economic principles every now and again.

When the yen depreciates, the value of the forwards increases. Disbursed over a 2-year period (24 months), once existing contracts expire, they immediately open new ones. Moreover, there are also forward contracts flowing in the opposite direction - converting dollars into yen at present rates. Yet, the cost of this hedge (dollar to yen) has gone up principally due to interest rate differences in Japan and the US.

The US manufacturing sector owes its standing to Oliver Evans. Not a household name, Mr. Evans built the first automatic flour mill back in 1785. At the time, few would have assumed that factory work in a flour mill would eventually lead to the manufacturing sector accounting for 40% of American jobs at the height of World War II. Work in manufacturing was traditionally viewed as a path to the middle class. Higher levels of education weren’t required and the pay was above average. Yet, over the past thirty years, manufacturing has taken a hit. The sector has witnessed a precipitous drop from its mid-20th century heights, and some are wondering if the golden years are officially behind us.