👉 The Investing Week Ahead: 11/28/22

According to the BBC, there are eight stadiums, seven of which were built for the tournament. Some 100 new hotels have also been built, as well as a new metro system, new roads, and an extension to Hamad airport. Qatar has also built an entire new city around the Lusail stadium, in which the final match will be played.

17-year FIFA President Sepp Blatter (who was forced to step down and banned from FIFA due to fraud investigations) has said that it was a mistake to host the World Cup in Qatar due to it being too small a country and a reservoir for human rights violations.

Either way — we'll be cheering on Team USA at 2pm ET tomorrow!

What We’re Watching:

Salesforce will report earnings on Wednesday (11/30), with expectations of $7.8B in revenue and EPS of $1.22. At less than 4X 2024 sales, 15X 2024 FCF, and 22X 2024 EPS — both Morgan Stanley and Wedbush Securities both generally like CRM at this time. The amount of layoffs taking place within Salesforce’s customers has raised serious cause for concern that the company will continue facing a slow drawdown in user activity. We’re adding CRM to the watchlist.

Speaking of layoffs — HP recently announced that it’s cutting up to 6,000 employees over the next three years. The company reported unimpressive results in commercial and consumer PC sales during the quarter ended October 31, and also gave light earnings guidance for FY’23. HP joins the headcount reduction ranks of tech giants like Meta (11,000 jobs cut), Twitter (3,700 jobs cut), Coinbase (1,100 jobs cut), Stripe (1,100 jobs cut), Shopify (~1,000 jobs cuts), and many others.

Key Speakers Include:

Why Care?

Amazon is one of the best companies in the world and any time they are bringing together dozens of global business leaders — it’s wise to at least scope it out for important soundbites. We’ll report back with what we find! 

What We’re Watching:

This Wednesday, Jerome Powell will discuss the economic outlook during an appearance at the Brookings Institution. This speech comes the day before the Fed’s favorite measure of inflation — Core PCE (below) — is released on Thursday.

“He’s probably going to use the speech to be hawkish and describe the dimensions of imbalance in the labor market,” said Julia Coronado, founding partner at MacroPolicy Perspectives. Powell could frame those labor market dynamics as “a reason that they need to be committed to a tight policy for longer.” — Bloomberg

The Core PCE is the Fed’s preferred gauge of inflation because it more accurately reflects consumer spending habits than the Consumer Price Index (CPI). According to the Bureau of Labor Statistics, CPI sources data from consumers, while PCE sources from businesses.

The scope effect is a result of the different types of expenditures CPI and PCE track. For example, CPI only tracks out-of-pocket consumer medical expenditures, but PCE also tracks expenditures made for consumers, thus including employer contributions. The most recent Core PCE reading came in at +5.1% year-over-year. Economists expect +5.0% this time around.

As always, it’s important to remember how closely Jerome Powell and the Fed are watching employment data. Job openings unexpectedly increased in the most recent reading and another strong batch of results could suggest that there could be increased wage pressures:

“Powell is likely to remind markets that the Fed isn’t about to pivot and will keep tightening until there’s compelling evidence inflation is coming down sustainably.” — Bloomberg Economists

“We’re never going to say that there are too many people working, but the real point is this: Inflation—what we hear from people when we meet with them is that they really are suffering from inflation.

And if we want to set ourselves up, really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn’t.

So, what we need to do is get rates up to the point where we’re putting meaningful downward pressure on inflation, and that’s what we’re doing. And we certainly don’t hope, we certainly haven’t given up the idea that we can have a relatively modest increase in unemployment. Nonetheless, we need to complete this task.” — Jerome Powell’s September Press Conference

Last week, Disney’s board of directors fired CEO Bob Chapek and reinstated Robert Iger — the company’s former Chairman & CEO who left the company at the end of 2021.

This month, the company reported weaker-than-expected earnings results and faces widening losses in its Disney+ streaming business. The most recent report revealed a -$1.47 billion loss from Disney’s streaming biz — more than double the loss from the year before. The $180 billion giant seems to have a spending problem with Disney+ and an operations problem with Disney parks. We’ll be keeping an eye on resolutions to these crippling cash flow issues.