The Week Ahead: Are We at the Point Where Trillions Is Considered Relatively Small?

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Last Week

The biggest economic news from last week wasn’t an economic data release but rather an “insert foot in mouth” moment from none other than the shortest person to every serve as Chairperson of the Federal Reserve, the one, the only, Ms Treasury Secretary herself, Janet Yellen.

During an economic forum presented by The Atlantic, Yellen said, “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat.” Concerning additional fiscal stimulus in the works…“Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates.”

This Week

We have a far more manageable number of earnings reports to be had this week, and here are the ones that we are focusing on, and we think the market will be doing the same:

Monday, May 10

Marriott (MAR) - Last quarter the company reported an earnings surprise of 20%. Consensus estimates are a 46.6% YoY decline in revenue to just under $2.5 billion and an 88.5% decline in EPS to $0.03. Those abysmal results are because in Q4 2020 occupancy rates at worldwide comparable system-wide properties were down nearly 36% and average daily rates were down almost 28%. We will be looking for their outlook for business travel versus tourist, the prior being more profitable, and their regional outlooks.

International Flavors & Fragrances (IFF) - on the other end of the spectrum, IFF is expected to report revenue growth on the order of 79.5% YoY in Q1, reaching $2.42 billion, but EPS is expected to have declined 7.4% YoY to $1.50. The company is expected to have benefited from pandemic purchases of packaged food (I mean how much longer do we have to cook every meal?), personal care and hygiene products. Growth in emerging markets is expected to have been robust, but as we’ve been hearing from many who have already reported, escalating material costs are likely to have hit profitability.

  • Merging with the Nutrition and Biosciences business from Dupont (DD) - look for synergies and cost savings that could drive EPS higher
  • Nestle above — need to make these plant based alternatives taste good — can’t have milk that tastes like peas FFS

Trex (TREX) - Who doesn’t love a company who’s deck boards are made of 95% recycled materials like plastic bags? Shares of the company are up over 25% YTD and nearly 100% over the past year, so clearly, there’s a lot of “I need a new backyard” going around. Shares have greatly benefitted from the skyrocketing lumber prices of late, which make its products more affordable by comparison. Management has guided for around 20% YoY growth in Q1 at the midpoint of the range, but its bottom line may suffer as it expands its manufacturing capacity. We’ll be looking for guidance coming out of the everything-from-home world and into the lumbar-is-the-new-gold world.

Tuesday, May 11

Hanesbrands (HBI) - The sock, T-shirt, and undies maker is expected to see EPS increase by 420% to $0.26 on revenues up nearly 13.8% YoY to $1.5 billion.

  • Cotton prices are up 46% YoY - and we’re wondering if our tighty whities, t-shirts and socks are going to cost more in the coming quarters.

Wednesday, May 12

Wendy’s (WEN) and Jack in The Box (JACK) - 

  • comp store sales ahead of the April Retail Sales report
  • comments on the re-opening of their dine-in business, and its implications for the likes of Coca-Cola (KO),PepsiCo (PEP), Keurig Dr Pepper Snapple (KDP). 

Poshmark (POSH) - Shares are down around 60% since its IPO in January while shares of competitor ThredUp(TDUP) closed up 29% from its IPO price on its first day of trading. POSH shares currently trade at a multiple of price to trailing 12-month sales of about 12, and it has a price to free cash flow multiple of just over 30. That's far cheaper than its social commerce peer Pinterest (PINS), which trades at 26 times sales while earning a sub-1% free cash flow margin. We’ll be looking for XXX

Sonos (SONO) - the WiFi speaker-maker has been music to investors’ ears, with shares up about 62% YTD and nearly 300% over the past year as the pandemic lockdown-life required a soundtrack. Consensus expectations are for a 54.2% YoY increase in EPS to a quarterly loss of $0.22 on a 43.6% increase in revenues to $251.49 million. Competitor Dolby Labs (DLB) reported uninspiring March quarter results with a decline in both net earnings and sales.

 Thursday, May 13

  • Alibaba (BABA) - Chinese digital shopping but also its cloud business for what many consider to be the Amazon of China
  • MakeMyTrip (MMYT) is an online travel company serving India, the United States, Singapore, Malaysia, Thailand, the United Arab Emirates, Peru, Colombia, and Indonesia. 
    • What does it see given the state of the pandemic in India?

Friday, May 14

  • Airbnb (ARNB) - Trying to book a proprty on Airbnb has been near impossible as a result of the pandemic, but is that changing as restrictions are dropping and travel is heating up? What the company says could have implications for hotel companies like Hilton (HLT) and Marriott (MAR).
  • Farfetch (FTCH) sits at the intersection of digital shopping and luxury goods - we know consumers in the US are opening their wallets and historically sales of luxury goods tend to be more insulated  during an economic downturn but comparing FarFetch’s results against those from Poshmark will tell us if that notion still holds true as we put the start to put the pandemic in the rear view. 
  • Walt Disney (DIS) - The House of Mouse will share its latest figures for Disney+, which have been booming as result of the pandemic, Grogu and the Marvel shows on the streaming service. How the company sees its movie box office and parks/hotels business performing in the second half of the year will determine how much further DIS shares can go after climbing 67% over the last year. 

Economic Data to Watch This Week

Tuesday, May 11NFIB Business Optimism Index is all about the small biz sentiment. Now that the US is opening up, what are they seeing with respect to hiring, managing inventory, the coming months? We keep reading about businesses having a tough time hiring, from people not responding to job openings to failing to show up for an interview. What are these smaller companies experiencing here. On that note, we’ll also be looking at the JOLTs report for the level of Job Openings versus Hirings and the number of folks looking for work. Last month the number of openings had reached 7.37 million, nearly back to the all-time high of 7.57 million in November 2018. Hired last month were at 5.4 million, which is right about where they were from 2018 through to the start of the pandemic. 

Wednesday, May 12 brings CPI inflation data which from last month’s report hit 2.6% in March from 1.7% in February, slightly hotter than the expected 2.5%. The pace is expected to heat up to 3.6% on Wednesday.

Thursday, May 13 brings another inflation indicator in the form of the Producer Price Index which saw prices rise 4.2% YoY in March. Expect to see this number go higher due to the crash in prices this time last year. Thursday also brings the usual weekly jobless claims - we’ll be looking to see them continue to decline if the story of a strong second quarter is to be believed.

Friday, May 14 brings the most important report of the week, Retail Sales for April, which are expected to rise just 0.2% MoM after last month’s bonkers high 9.8% increase. On a year-over-year basis, retail sales in March were up 27.7%, can that kind of pace keep up when we still have over 16 million people unemployed? For those who just can’t get enough of the econ data points, we’ll also be looking at Capacity Utilization for April. This matters because as long as we have meaningful excess productive capacity in the economy, it is tough to get sustained inflation. 

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Related: The Week Ahead: Earnings Rule the World



Lenore Hawkins, Chris Versace

Chris Versace  00:01

This is the week ahead brought to you by advisor pedia and powered by automatic research I'm Chris Versace Connecticut's Chief Investment Officer and joining me as she always does is Lenore Hawkins dometic as chief macro strategist. Now Lenore, you know that I've been kind of tied up this week with some personal stuff. . .

So we're gonna rely on you a little more than usual to carry the ball. So tell us help us get some context for the week ahead by just quickly quickly telling us the 234 things that might have been key from the economy last week. Notice that list continued to grow as

Lenore Hawkins  00:36

I got more about the week. We Who are you talking to here?

Chris Versace  00:41

Right. So I'll say Well, I'll tell you what, I'll tell you what, I'm gonna go take a nap. You just keep going.

Lenore Hawkins  00:46

It's good. Okay, so here's where we are. markets, the tech side struggling. So as we record this Friday morning, even more, so when we just got the jobs report, we'll talk about that. The s&p 500 is flat ish, a little bit down from its high over the past week. The Dow did manage to eke out a new record high on Thursday, volatility has been up as much as 24%. Nude week by Thursday, the 10 year yield has been falling, the dollar little change, gold kind of working its way back up. And if we see a break above 1800, that's going to be meaningful. Now what we've seen here with gold, the driving force has been the effectiveness of the Fed and its rhetoric to drive real interest rates lower yet again. The real ...

Chris Versace  01:34

I'm sorry, I'm sorry, I'm sorry. I'm laughing. I'm just as you're talking about the Fed. I'm just thinking midweek. Like, what did Powell like? What was it? When Yellen was like,

Lenore Hawkins  01:44

Yeah, maybe what they have to, we're gonna get totally, totally abandon

Chris Versace  01:48

what he is totally appending his narrative,

Lenore Hawkins  01:51

But just say that, right. So back to the real five year note yield declined 27 basis points in less than three weeks to negative 1.8. That's the real yield on it. And when it was anywhere near close to this level, earlier, back in mid February, gold was trading at 1840 an ounce. So expect to see that coming back up. So as you were saying, quite possibly the biggest economic news from last week really wasn't anything to do with an official data release. Although we will get to jobs because the job

Chris Versace  02:27

title is what it was.

Lenore Hawkins  02:30

No, it was an absolute insert foot in mouth moment for none other than the shortest human being to ever serve as the chairperson of the Federal Reserve the way Hey, you mister,

Chris Versace  02:41

Wait a minute. Wait a minute. Wait a minute. Wait a minute. Don't? Don't pick short people.

Lenore Hawkins  02:55

Yellen is to be shortest. And Yellen also has the lowest interest rates. You've seen that chart? Where?

Chris Versace  03:02

So is that? Is that a leading indicator then propel before he goes, do you think? I don't know. I it just was that we totally destroyed the chart. You can never use that chart again.

Lenore Hawkins  03:20

During an economic forum presented by the Atlantic Yellen actually said this, it may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, then concerning additional fiscal stimulus and the word works, she said, even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates. Oh, my God. Okay. So what she just said is my boss, you know, that guy, Joe Biden, how he wants to go spend a bunch of money to stimulate the economy? Well, the thing is, right now, we're a little worried that the economy may be overheating. So we'll have to raise rates. So wait a minute, one part of the government is saying we're worried we may need to raise rates overheating economy, and the other part of the government is saying we need to spend record amounts to get this economy going a little confusing, kind of like driving with your foot on the brake.

Chris Versace  04:17

Two things to add to that. One is, it's the government. So it's not that surprising. I hate to say that's the truth. The second thing is, and I'm actually going to defend Yellen a little bit here. Is it possible because we have seen this in the past that quotes get lifted way out of context, in that she might have been saying something else in the talking heads the mainstream media might have focused in on those particular sets.

Lenore Hawkins  04:39

Well, hang on having been having been the former head of the Federal Reserve, she should know the importance of not putting the word overheating interest rates.

Chris Versace  04:49

I don't I don't disagree with that. But I but we know that the effort to drive clicks and attention and everything else. It's certainly possible in your Point is taken that she she's been in the Powell job before he would think that she knows better. And I'm just saying maybe it's possible. Well, she got we need to give her a little benefit of the doubt.

Lenore Hawkins  05:09

She quickly had to backtrack that later on the very same day. This was on Tuesday. But what I Another point that I find rather interesting is we're now at the point where trillions of dollars is considered relatively small. Now, when it comes to federal spending, now, the US GDP was only about 22 trillion in the first quarter on an annualized basis. So trillions, couple of trillions

Chris Versace  05:32

Didn't come on, it's like 10% 10% 10%.

Lenore Hawkins  05:36

Well, what would be interesting to see is that talking about that overheating is what happens to GDP expectations now that we've had the very much less than exciting employment report on Friday,

Chris Versace  05:50

I didn't see it. How did it come in? Because the locations were like, like a million

Lenore Hawkins  05:54

I woke up. Firstly, I woke up I rolled over And I'd like, gotta get me a little econ.

Chris Versace  05:59

Life. The Economist. Yeah,

Lenore Hawkins  06:00

Yeah, exactly. But I really did. I woke up with a quite apropos John's, because I'm in San Diego, so it was really early my time. So I'm gonna I'm gonna do a little drumroll. expectations were for nearly 1 million jobs to have been created in April. And the employment rate was expected to go from 6% to 5.8. What we got so 1 million, that's what they're going for 1 million, what we got was 266,000. So columns 26% of what we were looking for, and the unemployment rate, rather than dropping from 6% to 5.8. The employment unemployment rate actually went up to 6.1%. Now part of that is because the labor participation rate rose. So when you think of unemployment, it's actually a number that I know, I'm not a big fan of because it doesn't. The unemployment rate just tells you people who are looking for a job and can't find a job. It doesn't tell me anything about Google and said, I'm out. I give up.

Chris Versace  06:53

Exactly right. Exactly right. There'll be

Lenore Hawkins  06:57

more people are now looking for a job.

Chris Versace  06:59

So Joe must be happy with this number.

Lenore Hawkins  07:01

Yeah, Joe's I think Joe's one see told you need spend.

Chris Versace  07:05

He got he Well, I think he I think he's more like …

Lenore Hawkins  07:10

Now we can spend the march number was also revised lower place significant amount, if you all remember, March number was 916,000 new jobs, that got dropped to 770. So that's pretty meaningful.

Chris Versace  07:27

So So I understand. We're focusing on the jobs here. But there were two other pieces of data, right. There was the manufacturing data that came out earlier in the week, the pmis. And then the services, data as well. And again, I was kind of out and about didn't really dig into it. But the services number missed expectations that

Lenore Hawkins  07:45

Yeah, so I assume service number dropped unexpectedly. It was expected to go up a bit instead of drop down. Now, as an absolute level, it's still really good. I mean, it's it dropped,

Chris Versace  07:58

it's still an expansion category.

Lenore Hawkins  08:00

There's no it's more than an expansion. I mean, it is in damn good category. Right. So that's so good. But it's we're always looking at not just the absolute level, but you're looking at the vector looking at the change. So this was the first time since April of 2020. Not a good time that we've seen both services and manufacturing fall in the same month. Now, the biggest takeaway from the two of them was that the business activity component saw the hardest decline since April of 2020. So what I read this when you have business activity, so the biggest decline since April of 2020. The kind of that was a little bit of a preview of the jobs number may not be as exciting as we were looking for in that business activity has been falling in three out of the past four months. So that's telling me things are not as rosy as the headlines would want you to believe now. We're still having production constraints. And demand continues to outpace supply, which is not surprising, because again, people are we are, we had starting last March, you had demand cratering, demand, just we don't all got locked at home, and it was going to work. So demand for pretty much everything just crashed, and the supply couldn't crash as quickly as the demand crash. Now we're in the reverse where things are opening up. So demand is going up. Now supply needs to respond. And it's taking a bit of time. So we've still got that which is keep in mind that that's a situation when we're looking at those inflation numbers. The Tory number Yeah, because we're still looking. I mean, here it is. We're may so we're looking at the April data in April data in 2020. Just horrifying, absolutely horrifying. So comparing year over year, this year, the last year it's there's so different there's still a lot.

Chris Versace  09:45

I think it's gonna be more interesting comparing the two q numbers versus the two q numbers year over year. That's what I think is gonna be a little more enlightened as to where we are.

Lenore Hawkins  09:54

I'll be looking for q3 more because q2 I mean, q2, April, May June. That was still working

Chris Versace  10:02

well, but think think of the straw. So so for certain certain industries that are, you know, coming back, whether it's the rails, the trucks, retail restaurants, the second quarter numbers should be off the freakin charts year over year. So to your shit, I think the third quarter numbers really start to show the real speed of the economy, not the real speed but a closer approximation of what's going on with and then the fourth quarter will be even more so?

Lenore Hawkins  10:29

Well, I think it is it is really interesting when you look at. So we have all these job openings, because next week, or looking at this job Next week, we'll be looking at the jolts report, and it's talking about the job openings. And what will be interesting is seeing just how bad that's gotten with, we'll talk about this when we talk about the upcoming stuff, how bad it's gotten between the job openings, and yet you've got this massive pool, so people and you can't match them. Well, there's actually, this morning, I saw the cover or the front page of The Wall Street Journal online, had a story called millions are unemployed. Why can't companies find workers skills, it was a couple of things, the state there was a survey. One is a fear of getting or spreading COVID-19. So people particularly like if you're in hospitality, if you're in something where you're actually interacting with people a lot, they're concerned that could get it or could spread it and don't feel like the pay is worth it. Another big reason has been lack of childcare, great if people if your kids aren't going to school, what are you going to do if your kids aren't going to school and you can't find anyone that you can afford to take care of them? It's actually a really big problem in the country. Because school has really been daycare for a lot of people. And if it's not open, what are you gonna do? Another reason cited has been that unemployment pays more than the job. And finally, skills mismatch. You know, people are finding that the job that they used to have, they really can't get that one anymore, and they're not really looking to retrain and get a new job and instead employment and paying more than they can get out of any other job. They're just saying no,

Chris Versace  12:10

I think those first two, the fear of over COVID and the lack of childcare, though, because of schools, that's going to fall by the wayside increasingly over the next few months. those last two though, the the fact that unemployment pays more than a regular job and the skills mismatch mismatch. One is structural, the other takes time and train. Yeah, I don't I the hard part, I think is if people are trying to make ends meet, put food on the table, save do whatever they're doing, when do they have time to retool themselves?

Lenore Hawkins  12:41

And do it in their own care of out there? Yeah. Kids are gone to school.

Chris Versace  12:46

So it's, it's it's a tough one. It's a tough one.

Lenore Hawkins  12:49

But actually, it's something I'd really like to see some some focus on helping people retool, because it's only going to get worse with everything.

Chris Versace  12:57

Did you hear that part of what Biden's infrastructure plan is to treat people as infrastructure and have a whole job training category of that. That was fascinating to me.

Lenore Hawkins  13:08


Chris Versace  13:09

We'll see. We'll see. Anyway, so last week, we had about 1500 companies report, you know, fast and furious and there are a number of other company reports the kind of jumped out. So what do you say we just jump into it? There were two right out of the gate. That kind of touched on what we were saying earlier about year over year comparisons being off the chart. The first was from MasterCard, their APR spending pulse that measures us in store and online retail sales across all sorts of payment formats, unbelievable numbers, retail sales, excluding auto and gas, up 20 of just over 23% year over year in April, and they were up get this almost 11% compared to April 2019. That has got to be stimulus checks, pent up demand in perhaps rising employment as well. But that's bonkers in terms of spending. online sales were up almost 20% year over year as well, again,

Lenore Hawkins  14:04

It's amazing to look at how compared to April 2019. I mean, we're not talking April 2020.

Chris Versace  14:10

No, no. Well, April, April 2019 was up almost I can't even believe this is right like 97% which is crazy, because you think of the huge shift last year towards online shopping. We saw that spike but but this is the thing that gets me though. When was the last time you saw overall retail sales grow faster than online sales that 20 over 23% for it's just almost 20% for online sales in April, I can't remember in the last year.

Lenore Hawkins  14:38

But that also tells you well you wouldn't have been last year because you couldn't go to the blog.

Chris Versace  14:41

But that's my point. It's other other areas are opening up and shopping people are going back to shop.

Lenore Hawkins  14:48

It also really tells you that the data, you have to take this data in context you cannot do and it's one of the things that we humans tend to do. We tend to linear do linear trends. with whatever is going on in the future, no, no, no. Every time you look at the data between now and kind of the late fall, you have to remember that the world was falling apart fear.

Chris Versace  15:12

Well, let's let's have another example of that Costco Wholesale I, as a stock as a company, I simply loved the place. There April sales were up 33 and a half percent year over year simply crushing it. comp sales in the US for 30.4%. They beat out the consensus of 28.9. You know, their business in Canada was up over 30% as well. You know, just up huge across the board. But here again to write comm sales over 30% e commerce only up just a little over 17 people are going back and buy it. That's what these two reports tell us. So I think in I don't want to steal your thunder. But I think when we talk about the APR retail sales report that will be out next week. These are two big drivers that say this is going to be big this report. It's going to be big.

Lenore Hawkins  16:03

Well, it has to be compared to April of 2020. I mean, it doesn't have to be that it doesn't have to be that big to be massive.

Chris Versace  16:13

Like I heard that someone before anyway, the but it is gonna be interesting. What I'll be looking for more is the categories when we get the April Retail Sales Report. We'll we'll talk about that a little bit. Just a couple other quick things. teladoc was down this week after Walmart, Walmart agreed to buy a telehealth provider me AMD now I find that fascinating that Walmart is moving into the healthcare space a little more particularly since we know Amazon is doing something the same with their own health care business.

Lenore Hawkins  16:43

So Walmart and Amazon do kind of have a Wait, what's he doing? relationship?

Chris Versace  16:47

Totally agree. Totally agree. But it but it but it's interesting that to the two largest retailers are pushing more and more into healthcare. And we know you and I know because of our aging population investment theme that healthcare is a growth market in its massive market as well. So it's not that surprising. But Walmart, Walmart and telemedicine. I just don't see it yet.

Lenore Hawkins  17:11

Well, I think what this what the signals that I actually really liked to see is that they think the so when the pandemic hit a lot of what I would call some rather silly rules around kind of restrictions in the economy were lifted. One of those restrictions was that you couldn't have a doctor in one state helping a doctor in another state, right. So we didn't really telemedicine just really wasn't viable. Well, when everybody's locked at home, and you really don't want people leaving in the house during your pandemic, suddenly telemedicine made sense. And this tells me that they think those telemedicine restrictions that got lifted during the pandemic are not going to be reinstated, which is a really good thing. Because what we've seen is a lot of these restrictions have helped to improve productivity. Because you think about it, like if you have a little sniffles or something and you really I don't mean to get in the car, drive to the doctor sit in the waiting room for an hour, then go sit in the exam room for another half an hour then talk to the guy for roughly 15 to 20 seconds. All that can be accomplished from just on a little screen right that those those kinds of things that help improve productivity all just really good for the economy.

Chris Versace  18:26

So let's transition to this with the question of sorts. We've got almond milk, oat milk, we've got coconut milk, we've got blends of all of those. We've got head milk. You have a personal favorite.

Lenore Hawkins  18:40

Almond, coconut almond.

Chris Versace  18:43

I I'm a fan of that. But I have to admit I'm shifting over towards oat milk. I just don't know why… Anyway, anyway, the point the reason I asked this question is because Nestle is going to challenge Danone with a new plant based milk that's made out of ready for this pea protein. No peas. Maybe it's too late to be there. It's just too late maybe two maybe it's me as a kid thinking and eating baby Lissa rupees I just don't see. But but they are bringing this to market. It's protocol wonder and it'll be available in Europe in the next I wonder if anyone will drink it. The well here here's the thing. They're they're looking to leverage this into other alternatives for dairy for yogurts, like yogurt and other ingredients, perhaps ice cream and things like that. So it'll be interesting to watch. But the reason I point this out is it's another company pushing harder into these alternatives and plant based products which is you know, as part of our cleaner living investment theme

Lenore Hawkins  19:52

It's everywhere. It's amazing the amount of the amount of focus on eat healthier, cleaner home less stuff in them.

Chris Versace  20:02

All agree, totally agree. Although, well, we'll get to this in a second. But there is one caveat that I have with plant based products global. We'll get to that in a second So we're gonna talk about it, or we're gonna talk about peleton.

Lenore Hawkins  20:18

We can go into that. Well, just a quick one. peleton, which is is a personal favorite. I have both the treadmill and the bike, and also a stock I love

Chris Versace  20:27

Locations. Do you have that treadmill and buy?

Lenore Hawkins  20:31

Yeah, I I'm pretty sure I am the only person in Italy that has a peloton, I actually spent more money to get the darn bike to Italy than it cost itself because I was desperate to have that bike. So they actually issued a recall on both the treads plus which is the original treadmill, and then they became the tread plus that has laps in it instead of a instead of a band. Yeah, it's a lot softer, a little easier on your joints. And and the newer treadmill, which is now called the tread, that is the band, they issued a recall on both of them the one with the band because it gets there's a problem with the monitor not being super stable. But the the big one is the tread plus, which is the one that I have. Because apparently a child died, got sucked under and there have been multiple injuries. What I think will be interesting so I got I got a couple emails from them today. They they By the way, they recorded this we blew it out of the ballpark yet again.

Chris Versace  21:33

But they did say that they're delaying the release of their lower costs one of their lower cost products, right?

Lenore Hawkins  21:39

Oh, no, they they've stopped so you cannot buy a treadmill from peloton right now. Yeah, no, they stopped both of them. And they sent emails out to people who have treadmills. So I've had this treadmill, three years, something like that a long time. And I was probably one of the first buyers that I can get a full refund. Or they will move the treadmill to a room where there are no children or pets or something. And well I will be watching for is actually to see what level they actually get. Because it's a voluntary recall. You don't have to they're going to continue to support them. They're going to do something I apparently from what I understood, they're going to do something to to make it a little bit harder for something to go underneath the bed because the treadmill is arguably it's a bit higher then all other treadmills I've had other treadmills and I mean I'm looking at it going I don't really get how this thing is so different from any other treadmill. So, but I'll be I'll be watching that because it really is it's a cult brand. And we'll see if I suspect you're not going to have as much of a pickup as the stock is indicating could

Chris Versace  22:48

I agree with you because to your to your point I think a lot of people are going to be keeping their dreadnoughts well they'll be keeping the treadmills because they've been using their treadmills The only way would really work would be if they had like what car dealerships do and they go hey, we're gonna take your your peloton, and we're gonna give you a loaner while we work on yours. Yeah,

Lenore Hawkins  23:06

Yeah, exactly. I don't I don't, I don't want to have that thing when they've added some safety measures. So we'll see. But I it, it could actually be for investors, this could be a good time to be looking at the company

Chris Versace  23:19

Would be good. So that springboards us into next week where I think we've got roughly 800 companies reporting far more manageable than just 1800 like last week. And, you know, again, there'll be a handful of ones that we're looking at. Marriott is one of the ones I'll actually be staying at Marriott next week when I go do some stuff for my dad. But you were talking about the earnings that they've been doing and the abysmal, abysmal occupancy rates. So Oh my God, when you dig into this, what are you looking for?

Lenore Hawkins  23:50

So last quarter, the company reported earnings surprise, it was 20% higher and consent but 20% higher than a lot of this is so horrible. And consensus estimates for this quarter artists nearly 50% year over year decline in revenue to just under 2.5 billion and get this an 88.5% decline in EP s to just three cents but I gotta say like any money being positive at all, that's

Chris Versace  24:16

Well that write that down. 50% jives with what Hilton has said Hilton's actually said that they see business travelers about 50% of where it was, but strangely, personal travel is actually picking up.

Lenore Hawkins  24:29

Well, what we've been hearing, particularly from very large employers, right, you know, the big guys, the big guys that will have the contracts with these enormous chains because they have so many employees and they're having their employees move around, is that and it's this is kind of in line with that cleaner living thing. It's an ESG perspective on their travel policy. We're seeing a lot of these huge companies saying, you know, we spent over a year having to instead of fly someone there be doing these zoom meetings and we feel going forward, we owe it both to our shareholders in terms of managing costs and as stakeholders of the planet to not engage in as much business travel which, okay, from an environmental perspective, that sounds fantastic from an airline and hotel perspective. Odd Damn. Not so great. So that's actually what we'll be looking for out of Marriott to see, what is their mix right now? What are they seeing in in terms of business versus tourist travel? So if we looked at comps for Marriott, and in q4 2020, occupancy rates at kind of comparable facilities worldwide are down nearly 30% 36% and had an average daily rate that was down almost 28%. So it's still really bad, what obviously, right? We will be looking to see what their what their outlook is, what are they seeing For Bookings in the coming quarters,

Chris Versace  26:03

I think the other thing to look for is going to be to the extent that they are rationalizing their capacity and what what I mean by that is, I mentioned that I've gotta go stayed in a Marriott next week, take care of my dad, but I had to search, there were three hotels where I grew up that have shut in the last year as a result of the pandemic. So I you have to wonder if they're going to start closing down some of these underperforming or underutilized assets. So that's, that's something else, I think it'd be listening for

Lenore Hawkins  26:32

it talking about it. Interesting. That's actually a really interesting real estate issue as well. Because this pandemic has really exacerbated what we were seeing with retail, right? So a lot of retail shops are never opening again. malls that were on the verge of dying are now dead.

Chris Versace  26:50

Well, I was I was gonna say it's shifting the conversation, right, because we knew that online shopping digital shopping wisdom is just pummeling, retailers brick and mortar retailers but now you know, the extent that this continues it's going to hit that the not not just the travel industry but the lodging industry as well. Because that's not gonna come back to the extent that we were doing before the pandemic

Lenore Hawkins  27:14

Highly unlikely. business travel is going to be lower and what we saw with so many the boom in people buying motorhomes,

Chris Versace  27:23

Yeah, camping world, baby,

Lenore Hawkins  27:24

Boom, right? That's also going to be a bit of a hit to future tourism.

Chris Versace  27:29

Well, it goes back to the comment on peloton, right? where, you know, I bought this asset, I'm using it, I can't give it away, got to us.

Lenore Hawkins  27:36

And let's, and let's not forget that just in the United States, we still have 17 million people that need a job. So it's not going on holiday and spending a bunch of money, let alone what's happening in the US is is really the as we're always saying, the cleanest shirt in the laundry, the coolest dirty shirt in the laundry. If you look over at Europe, I mean, the lock downs there are ongoing, still much more rigid than anything you have here. And the economic hit There has been much more substantial than anything you've seen here. For no for no other reason. Then there was lockdowns have been much longer and much more restrictive than what you saw in the US. So the damage there has been more profound.

Chris Versace  28:20

Okay, okay. Well, let's get back to my comment on pea protein and wet point about how …

Lenore Hawkins  28:25

To make it drinkable.

Chris Versace  28:26

Yes, correct is in that's really, with any of those plant based products. It's really all about taste. That's why I'm really kind of curious to hear what one of my favorite companies has to save next week. That's international flavors and fragrances. You know, I'm a big by the bullets, not the guns type of guy. I like these ingredient companies and IAFF. Again, both flavors and fragrances and we know Estee Lauder and interpark foods have had great quarters. The fragrance business should be good people are getting back out again, no secret to your point you were just making they want to smell good. They want to look good. In the flavor side, I think is gonna see a real push from two things. One is plant based alternatives. But also to I want to hear about the merger that they're doing with the nutrients excuse me nutrition and bio science business from DuPont. What are the cost savings? What are the synergies? What does that mean for APS now? also keeping in with our cleaner living team, one of the companies that and I didn't know this until we were really digging into it. I didn't know that treks is the biggest recycler of plastic bags.

Lenore Hawkins  29:32

Did you know that and then anything that's how do you not love this company? This is a company that makes deck boards and they are they're fantastic. You don't have to do anything with them just heavy down

Chris Versace  29:44

I'm sorry. Is there any company on here that you don't have something from ...

Lenore Hawkins  29:50

I do not have any protein.

Chris Versace  29:52

Not yet. You have almond milk but you have almond milk. Crazy anyway, so he given all the blue When building it stands to reason, though, that tracks should put up a good revenue quarter I think the input cost question is going to be the one to watch in terms of recycling and capacity and what that does to their margins and what their outlook is the other thing too. And we've talked about price well lumber prices, the alternative but also how what is their supply chain? Like?

Lenore Hawkins  30:24

Yeah, yeah, right, because everyone was struggling with supply chain, but I'm suspecting that that these guys are really loving seeing those lumber prices skyrocket. Because trucks is a premium product. It is more it it has been more expensive than just getting say, treated wood to use for your deck. But as lumber prices, lumber is becoming the new gold. It's making trucks a lot more affordable.

Chris Versace  30:47

Yeah, absolutely. Let's Let's pick up the pace here, Hanes brands is going to report the only reason I really want to know about that is cotton prices are up about 46% year over year I want to know are my tighty whities my T shirts, my socks gonna cost more in the coming quarters. We've also got Wendy's and jack in the box. Again, ahead of the April Retail Sales Report. I want to know what their comp sales are. That'll give us some indication as to as to the degree the restaurant industry is bouncing back and really some insight on dining. And I want to know that because of what it could mean for Coca Cola, Pepsi and Keurig. Dr. Pepper, their fountain soda businesses have been sucking serious wind as a result of the pandemic. Are those businesses starting to come back? Now? I know you like to buy stuff online. Do you buy used clothes online?

Lenore Hawkins  31:36


Chris Versace  31:38

So you're not a poshmark? person?

Lenore Hawkins  31:40

Yeah, no, I, I have a little bit of a clean obsession. So it kind of freaks me out.

Chris Versace  31:47

That's fine. That's fine. But these guys are going to report next week. And they it's gonna be their first first report, sorry, first reportable quarter since they went public. So it'll be interesting to hear. Of course you want it well, one another, let the metrics and things like that. But I'm really kind of curious as people are getting out and wanting to refresh their wardrobe, or they benefit, or they actually seeing people go elsewhere because they want the new new thing, not someone's old thing.

Lenore Hawkins  32:15

Also, just how much that spending is because when we we look at where all that stimulus money's going an awful lot of it continues to go to paying down debt and not spending.

Chris Versace  32:26

Mm hmm. Okay. We also got Ali Baba, gonna be interesting to see what's going on from China and they're spending make my trip this is going to be curious because they're an online travel company that focuses in on India, and a number of other countries. But given what's going on with the pandemic, what are they seeing? What are their expectations? to watch. July, Airbnb,

Lenore Hawkins  32:49

That's going to make that make my trip report one same thing.

Chris Versace  32:50

Well, Airbnb to your point about vacation, you know, really earlier in the pandemic, you could not find a booking available on Airbnb, is that starting to happen? And if so, what does that mean? And if not, what does that tell us about the prospects are for you know, again, Hilton or companies like Marriott we were just talking about. Farfetch this was a rock star of a stock in 2020 sits at the intersection of digital shopping and luxury goods. We know consumers are spending we were just talking about that a few minutes ago. Historically, sales of luxury goods tend to be a little more insulated during economic downturns. But I think that the Compare and contrast between Farfetch is new products and posh marks and meet Ellen's of sorts. That's going to be kind of enlightening to tell us what consumers are really thinking and doing and then of course, they were late in the week the House of Mouse the the the master of Marvel, Star Wars, all of it Disney's gonna report and of course, they're probably gonna there's gonna be a lot of focus on the Disney plus numbers, how could it not be between grabouw the Marvel shows and other things on that streaming service but to me that people are expecting that the real insight The Real News is going to be what's going to happen with the box office in the second half of the year what's going on with their parks and hotel business in the second half of the year and I say that because Disney shares are up like 67% year over year largely not entirely because Disney plus we need the other businesses to turn on by a drive that stock price higher. Okay, now, quickly because I know we're we've been Chitty chatty. What are the three four things we're looking for next week?

Lenore Hawkins  34:37

On Tuesday, NFIB business optimism, that's all about small businesses we'll be looking to see is this what are they saying about trying to find people to come and work right and 17 million people that need to find jobs, and yet we're not really seeing that happening. And that's also part of the jolts report on Tuesday. The jolts report is a job opening and labor turnover We're looking to see what the job openings look like versus what hiring is looking like. And that's clearly hiring not so great compared to the job openings. Because last time we looked at this for the data for March, job openings were up at 7.4 million. That's nearly back to the all time high of 7.6 million in November of 2018. So what's going on there looks like we really do have a problem in the labor market. Wednesday, we'll be looking for inflation data last month hit 2.6%, up from 1.7. In February, why we hotter than expected, the pace is expected to heat up to 3.6 on Wednesday, Thursday, we get another inflation indicator, the producer price index that saw last time in March prices rise up to 4.2%. Expect this number to go higher. But again, it's because transitory is because we're comparing to, oh my god, the world is falling apart.

Chris Versace  35:56

And then if we get blowout numbers on those two, and by blow up numbers, I mean to the upside, meaning inflation is hotter than expected. What do you think's gonna happen?

Lenore Hawkins  36:06

I think it'll be a lot of talk, it's still just one month, one month does not make you know, I mean, a couple of months, even like three, four months does not make a trend, not when you're comparing just the world falling apart last year, and and you're also not only that those comparisons are off. But not only that, but we still have supply chain messes. I mean, right now, the ports in the major ports in the United States have ships jammed full of stuff, they're just having trouble getting it through fast enough because of the COVID restrictions on it. So there's tons of things, they're sitting on the ships, there lots of inventory, it's just taking some time to get them in and speed the process up.

Chris Versace  36:46

So no matter what the numbers are, you're going to give it a pass. That's what it sounds like.

Lenore Hawkins  36:51

I'm gonna take it in context. Fair enough. Okay. The most important number of the week is gonna be the retail sales report. That's expected to just be up a wee little point 2% month over month after last month, bonkers high 9.8% increase. On a year over year basis, retail sales were up 27.7%. But again, think about what are people buying in March. So I would expect April, year over year to be pretty spectacular. The other thing we'll be looking for is if you're really geeking out is a capacity utilization. Keep in mind that when you have a lot of excess capacity, and we still have excess capacity, it's very difficult to get inflation going because inflation really is demand is just remains consistently much higher than supply. When you have excess capacity, that's not going to happen.

Chris Versace  37:43

So if you see, just to put it in context, if the inflation numbers are, you know, high or warmer than expected, but capacity utilization is still they're still showing a lot of slack in the economy. You're not that worried.

Lenore Hawkins  37:55

Know exactly. If I have 17 million people on the sidelines who need to be employed, I have excess capacity, that is both of those are not inflationary. And on top of that, what we are continuing to see is productivity gains and about three fourths of the growth in GDP last quarter was from productivity gains. So all of that that's not inflationary. That's disinflationary so

Chris Versace  38:21

Well, one way or another, the data is going to tell us and all that data is in the week ahead.


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