To all my Partners,
By now all of you have received your individual monthly statements. If for any reason you have not, please contact me and will be glad to resend it to you.
I’ve mentioned in our past newsletters that for 70 plus years since 1945, when the incumbent President is running another term, the S&P always ended higher. Until last month, the incumbent Joe Biden was running but has now taken himself out of the race (I agree maybe the term should have been ’pushed out of the race by the Democrat party) but now Kamala Harris the sitting Vice President is now the Democrat challenger against former President Donald Trump.
The Federal Reserve decided to pass on July’s Fed. meeting and not lower interest rates, possibly waiting for their next meeting in September. With new information coming from the Bureau of Labor, job hirings are going down but unemployment is rising. What does this mean? It means the economy is slowing and just as the Federal Reserve waited too long two years ago to start raising rates, they possibly are waiting too long in now cutting them!
According to a recent release from Goldman Sachs, stocks from Mid-July to October, stocks tend to be the most volatile with actually more down days than up ones! The Vix (the volatility index) tends to be higher and does not settle down until the end of October. We’ll see if this year will be one of the same or….will be different!
U.S. consumers are shrugging off recession fears, flocking to Walmart stores for low-cost groceries. We’ve owned Walmart in our portfolio for years! The country’s largest retailer (see the chart at end of this Partner’s Letter) posted this past week strong quarterly sales and it’s CEO, Doug McMillon, said he doesn’t see any fraying of demand.
The Commerce Dept. said its personal-consumption expenditures inflation gauge rose 2.5% last month compared to one year ago at this time. According to many on Wall Street the PCE (personal-consumption expenditures) is the preferred gauge of the Federal Reserve on inflation. The economy grew faster than expected with the gross domestic product (GDP) of the U.S.
+2.8% +1.4%
First Quarter Second Quarter
Over the last three years, the U.S. economy as seen more than a 19% rise in inflation:
U.S. Economy from January 2021 – June 2024
+19.2% -1.9%
Overall inflation Real wages adjusted for inflation
Source: Bureau of Labor
Inflation is still rising as in the examples below from January 2021 to the present:
| +19.2% | +46.86% | +44.81% | -1.93% | +144.76% | +21.5% |
| Consumer prices | Gas prices | Credit card debt | Real hourly wages | 30-yr mortgage | Groceries |
The end of July finished with some of the major tech stocks declining:
Big Tech’s Pullback
|
-25% |
-14% | -11.5% | -9.5% | -9.5% | -8.5% |
| Nvidia | Meta | Alphabet/Google | Amazon | Microsoft | Apple |
Big Tech’s R&D Capital Expenditures into A.I.
(June Quarter results)
|
$8.17 Billion |
$13.19 Billion | $14 Billion | $19 Billion |
|
Meta |
Alphabet/Google | Amazon | Microsoft |
The economy is slowing….
Amazon (which is owned by Bena Capital) reported their first revenue miss in almost two years!
Their online sales slowed to +5% from +7% and Amazon’s CEO Andy Jassey, said people are turning to lower priced items. It was Amazon’s worst day (after releasing their 2Q earnings, since April, 2022!). Just a rundown of the ‘Magnificent 7 earnings for the 2nd quarter of this year:
| Mag 7 | 2nd Quarter Earnings/Revenue (Hit or Miss?) |
| Tesla | Beat |
| Alphabet/Google | Beat |
| Meta (Facebook) | Beat |
| Amazon | Missed |
| Apple | Beat |
| Nvidia | Released 8/28 |
Our fund was down -1.97% for July, which makes our YTD performance for Bena Capital, now at +9.49% from January through July.
|
Bena Capital up months |
Bena Capital down months |
| February | January |
| March | April |
| May | July |
| June |
So how does the rest of 2024 look?
As I write this, the S&P 500 has just finished an 8-day win streak and that’s coming off a huge stock sell-off on Monday, August 5th! An interesting ‘bit of trivia’, according to Oppenheimer, there have been 4 times in the last 20 years with the S&P 500 on an 8-day winning streak and everyone of those 4 times, the S&P 500 ended that year….with a gain!!
(Last 4 times, that had an 8-day winning streak and how that year ended)
| 2013 | +29.6% |
| 2017 | +19.4% |
| 2019 | +28.9% |
| 2021 | +26.9% |
| 2024 | ? |
Source: Oppenheimer
As I write this, our Bena Capital Fund is up for the month of August
+7.09%
August 1 thru August 19th
So what do we do?
History reminds us that it has typically been better to ‘buy’ than ‘bail’.
We at Bena Capital Fund are playing the long game! By that I mean in two to three years from now, we really won’t remember did the Federal Reserve cut 2 or 3 times back in 2024? If markets drop for a month, or more it may create a market correction which have occurred naturally throughout the years.
For all 24 corrections in the S&P 500 since W.W. II (1945), it took only 4 months to recover losses.
Never let your emotions become your portfolio’s worst enemy.
So, how did we do?
| For July | 1-year (12-month) Returns: | ||
| Dow Jones: | +2.78% | Dow Jones: | +13.3% |
| S&P 500: | +0.12% | S&P 500: | +17.55% |
| Nasdaq: | -2.17% | Nasdaq: | +19.92% |
| Berkshire Hathaway: | +6.78% | Berkshire Hathaway: | +17.18% |
| Bena Capital Fund: | -1.97% | Bena Capital Fund: | +21.95% |
Some highlights of last month:
- July’s unemployment rate rose to 4.3%, highest in nearly 3 years
- July’s Non-farm payrolls added 114K jobs down from June’s 179K jobs
- July’s Average hourly earnings up +3.6% Y/Y (down from June’s +4.3%)
- Labor Force Participation for July rose to to 62.7% from June’s 62.6
- 2nd Quarter GDP rises at a 2.8% rate as households ratchet up their spending
- July’s PPI (Producer Price Index) for Y/Y up +2.2% vs. June’s +2.7%
- July’s Core PPI excluding food & energy Y/Y dropped to 2.40%
- A staggering 14% of illegal aliens are admitting to being registered to vote in this upcoming election
- Bud Light slips to #3 in sales after Boycott
- Netflix Keeps Crown in Strong 2nd Quarter rising 17% YOY in revenue
- GM delays electric vehicle buildout in new sign of weakening demand for EV’s
- UPS cuts prices amid weal profit losses trying to lure back customers
- New survey by Charles Schwab say that most Americans feel they need $1.8 million to retire but only 43% feel they will meet that goal by the time of retirement.
President Joe Biden’s Fiscal Year 2025 Budget Proposal
| +19.32% | +20.93% | +48.05 | +133.6% | +44.35% |
| Overall | Food | Credit Card debt | 30-Yr Mortgages | Gas prices |
U.S. Credit Card Debt
| $1.14 Trillion | $27 Trillion |
| Total debt | April-June debt added |
June’s unemployment breakdown
4.3% 6.3% 5.3% 3.7% 3.8%
Overall Black Hispanic Asian White
Source: WSJ / BLS
An end of an era
Southwest Airlines will soon assign seats on flights and sell some with extra legroom to broaden the airlines’ appeal and boost revenue. Open seating had been a Southwest Airlines business model since getting its start over 50 years ago.
Bud Light Slips to #3 After Boycott
Bud Light, just over a year ago was the #1 beer in sales has now fallen further to #3 in sales according to consulting firm Bump Williams and the Wall Street Journal. The top selling beers by sales volume are now:
#1 Modelo Especial by Constellation Brands selling 9.7% of beer sales
#2 Michelob’s Ultra selling 7.3%
#3 Bud Light by Anheuser-Busch (InBev) selling 6.5%
Source: WSJ; July 20, 2024
Netflix Keeps Crown in Strong 2nd Quarter
Netflix continues to add new customers in the 2nd Quarter and continues to increase its strength while legacy entertainment companies grapple with cable’s demise. Netflix added 8.05 million more subscribers in the 2nd quarter. Revenues for Netflix rose 17% year over year for the 2nd quarter. Netflix ended the 2nd quarter with 277.65 million customers globally.
Top 3 streaming companies by size are:
#1 Netflix
#2 Disney
#3 Warner Brothers Discovery
Source: WSJ; July 20, 2024
How much do you need to retire?
According to a new survey from Charles Schwab finds that Americans think they need to save $1.8 million for retirement and only 43% of those responded feel they will achieve that retirement goal.
That $1.8 million savings would come out to about $78,000 annual income in retirement with expectations for that money to be lasting about 23 years according to Charles Schwab.
Source: Charles Schwab, July 26, 2024
The Higher the Rates…the Shakier the Gound:
$6,200.00 $200.00
Average balances kept on credit cards Monthly 29% average interest of credit card
2nd Quarter of 2024
Source: Federal Reserve / WSJ, July 22, 2024
Tis the Season!
Tough time of the year
* Mid-July to October
* Vix tends to rise
* More down days than up ones
Source: Goldman Sachs; July 25, 2024
So much for ‘fill her up’
1 in 5 or 20%
Electric vehicle charging stations in America do not work
Source: Georgia Institute of Technology & Harvard Business School
Tax Revenues Before and After 2017 Trump Tax Cuts
$3.31 Trillion $4.89 Trillion
FY2017 Receipts FY2022 Receipts
+47.73%
Percentage increase in Revenue
Source: Congressional
IRS increasing of audits for those making under $200K
Passage last year of the ‘Inflation Reduction Act’, an increase to the IRS was included for $80 billion to hire 87,000 more agents and the promise that this would go towards audits for those making $400K or more. Now, according to the Treasury Inspector General for Tax Administration (page 16) in his August 31, 2023 report says:
“63% of SB/SE Division’s FY2023 total new examinations will be on taxpayers with less than $200,000 TBI.”
Well, so much for believing a politician!!
Walmart is America’s largest grocery store:
(Share of U.S. grocery sales in 2034)
28.3% 10.1% 9.2% 6.4% 4.8% 3.0% 2.7% 2.0%
Walmart Kroger Costco Albertsons Publix Amazon Target HEB
& Sam’s Club & Whole Foods
I’ve been asked to repeat this from our March’s Partner’s Letter, so:
History has shown that some months are kinder than others to investors.
According to records spanning over 95 years, since 1929:
Months with the biggest gains: Months with the biggest losses:
January, April, July, and December February, May, August, and September
The S&P Rises 3 out of 4 years since 1926!
The S&P is up approx. 75% of the time going all the way back for almost 100 years (since 1926)!
| S&P | % advance each year |
| 20%+ | 36% |
| +10% to +20% | 21% |
| 0 to +10% | 15% |
| 0 to -10% decline | 15% |
| 10%+ decline | 13% |
Source: Dimensional Funds
Have you moved?
If you have moved or changed addresses to where your 1099’s should be sent, please contact me with the new information.