Landscape Shift/ Buybacks/ Canadian Unemployment/ Autos/ Munger’s Checklist/ Top Risks
Although it was an exciting week in current event terms, New Pope, Sabre rattling between India and Pakistan, and Air traffic control scares at Newark International Airport, the market itself was rather uneventful with respect to performance
We can’t say we saw too many themes worth mentioning this week, but there were a few.
Internet landscape shift?
On Wednesday, May 7th an Apple executive caught the market off guard.
We mention this, not because of the impact on GOOGL and AAPL, but from a broader thought process concerning the paradigm for internet usage.
How people use the internet for search may well be shifting, and we thought this post might explain it much better than we ever could.
Link: https://x.com/EugeneNg_VCap/status/1920844447472120053
Buybacks
Back to market impactful news. Buybacks are not slowing at all.
US companies announced $233.8 billion in buybacks in April, the second-highest amount since data began in 1984.
This is a sharp reversal from the $39.1 billion announced in March, the least since October 2020.
Year-to-date, repurchase announcements have reached a record $665.1 billion.
Buyback announcements have now surpassed the previous high of $598.5 billion set in 2022.
Canadian Unemployment
We know, why mention something as obscure as this? Well we were thinking this might be a canary in the coal mine with respect to tariff impacts. At least, that is what Canadian Government officials appear to be pointing to.
Link to the above recording: https://x.com/MarcNixon24/status/1920527384387698958
We looked at the recent correlation between the US and Canada with respect to Unemployment levels.
As the clip above provides, the most recent Unemployment levels were just released.
Canada’s unemployment rate surged to +6.9%, above expectations, marking its highest level since 2021. Canada’s youth unemployment rate now stands at a whopping 13.7%.
Are tariffs already taking their toll in Canada?
Some of the above rhetoric seems a bit alarmist to us, but the math suggests it is something to keep an eye on.
Autos
Is car ownership becoming a luxury?
US used car prices are surging. Wholesale used vehicle prices jumped +4.9% year-over-year in April, to their highest since October 2023. Month-over-month, car prices rose +2.7%, marking the 2nd consecutive monthly increase. The biggest year-over-year increase was recorded in the luxury and SUV segments, at +5.9% and +5.5%. Non-EVs, pickups, and EVs prices rose by +4.7%, +2.5%, and +1.6%, respectively. Car prices are now 38% higher than they were before the 2020 pandemic.
The issue with the higher prices.
Auto loan delinquency rates are up compared to a year ago. 4.8% of outstanding auto debt was at least 90 days late in Q4 2024, according to the New York Fed, up 15.8% from Q4 2023. Meanwhile, the percentage of auto loans that fell to 30 days past due was 8.1% in Q4 2024, up 5.1% from 7.7% in Q4 2023.
Fortunately, Auto loans only represent 9.2% of total consumer debt.
Notice the 9% orange color above though. Close to the second place Auto category, and as of this month the moratorium on paying student debt back is lifted. Will that be a straw on the camel’s back?
Munger’s Checklist
In honor of the annual Berkshire Investors meeting this past week, we thought it worth breaking the following out.
Charlie Munger’s checklist for clear thinking.
Top Risks
According to the UBS Global Family Office Report 2024, 62% of family offices cite a major geopolitical conflict as their top long-term concern. Even 58% rank it as the single greatest threat to their portfolios.
Have a great weekend!
Best,
Meraki Trading Team
About Meraki Global Advisors
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