Instaprofits

Market scorecard

US markets took a hit yesterday after higher-than-anticipated US inflation data reinforced the notion that the Federal Reserve won't be quick to reduce interest rates. Inflation seems stuck at 3% but policymakers want 2%. The selloff was broad, with 10 of the S&P 500's sectors in the red, and real estate down the most. Ah well, these issues have been with us for a while.

In company news, Tesco (LON:TSCO) closed up 3.3% after the British grocer reported a big jump in sales and said there were signs of improving consumer sentiment. Elsewhere, Apple (NASDAQ:AAPL) ramped up its iPhone production in India, hitting $14 billion worth of assembly there last year, double the prior period. This move signals an intensified effort by the tech giant to expand its manufacturing footprint beyond China. About 1 in 7 iPhones now come from India.

Izolo, the JSE All-share closed up a tiny 0.04%, but the S&P 500 fell by 0.95%, and the Nasdaq was 0.84% lower.

One thing, from Paul

One of my core beliefs is that things are getting better. Not every day, of course, and not without setbacks, but over time humanity is advancing.

Not everyone feels this way. Older persons tend to believe that the world is getting worse, some even expect life on earth to end. Oddly, their forecasts for how long we've got often match how much time they think that they've got.

To some extent, deferring current consumption, saving money, and investing in the stock market requires that one has an optimistic outlook. Otherwise, why bother?

Anyway, I often see articles online which make me think "there you go, humanity making progress". For example, the chart below confirms that weather forecasting is getting much more accurate.

Another conviction that I hold is that humans are getting less violent. That's because wars are not as common and death by murder is declining across the world. Stephen Pinker wrote a whole book about this topic, called "The better angels of our nature: Why violence has declined", back in 2011.

However, Rob Henderson shared an interesting paper arguing that murder rates would be five times higher, if not for advances in medical technology. Violent attacks are still happening, but doctors are patching the victims up. That's a bit concerning. I was hoping for more fundamental improvement in human character.

Byron's beats

When Meta (NASDAQ:META) reports their quarterly results, they don't break down their revenues by platform. In other words, we can't see how much money Instagram, Facebook or WhatsApp makes by themselves.

According to Bloomberg, a recent court filing revealed some of these closely guarded secrets. Instagram brought in 30% of Meta's revenues in the first half of 2022.

The court documents showed that Instagram made $22 billion in 2020 and $32.4 billion in 2021, a huge jump. The $1 billion they paid for the app in 2012 was certainly money well spent.

Michael's musings

Creating generational wealth is a good life goal. I can't take anything with me when I die, but if everything goes according to plan, the work I do today will help create a better life for my great-grandchildren. Ben Carlson wrote a great blog piece on the topic recently - Teach your offspring to make good decisions with money.

Carlson makes the argument that keeping wealth is almost as hard as creating it in the first place. Many reading the newsletter have already done step one, and the next step is to ensure that the subsequent generation doesn't squander it.

Carlson makes this good point: "The hard part is the psychological and emotional side. Generational wealth can screw up the next generation if you're not careful. . . Warren Buffett once said, "Give your kids enough so they can do anything but not so much that they'll do nothing.""

Bright's banter

Krispy Kreme came back to public markets in July 2021. The new management team was tasked with finding ways to boost sales beyond the impressive $1.7 billion in doughnut revenue from last year.

Sure, they could introduce new flavours, open more stores, or crank up their marketing game, but that would be slow going. What if they could strike a partnership that puts their products in front of millions of hungry consumers?

That's exactly what happened when McDonald's (NYSE:MCD) announced they'd be selling Krispy Kreme's iconic glazed doughnuts at all their US locations by the end of 2026. The announcement caused Krispy Kreme's stock to soar 39% intraday. This follows a trend of other successful collabs like Wendy's teaming up with Cinnabon.

The biggest pebble in the shoe for companies like Krispy Kreme and McDonald's is the impact of weight-loss medications such as Ozempic and Zepbound on consumer preferences. Let's see how they navigate this hurdle.

Signing off

Asian markets are slightly higher this morning, recovering from their big drop earlier. Benchmarks rose in India, Japan, mainland China and South Korea while they fell in Hong Kong.

In South Korea, President Yoon Suk Yeol's right-of-centre party suffered a notable setback in parliamentary elections. In China, consumer prices saw minimal growth compared to the previous year, while industrial prices continued to decline. This highlights the persistent deflationary pressures that pose a significant risk to the economy's recovery.

US equity futures have edged higher in early trade. The Rand is trading around R18.73 to the US Dollar.

It's Thursday. Keep grinding.

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