Friday, Feb 11th 2022

Pay more, make more, sweat more

Commentary

The below content and projections are the opinion of the authors. Any conclusions or takeaways are their own. This should not be considered as investment advice. Investing involves the risk of loss and returns are not guaranteed.

Three Things this week —

1) Big wheel keeps on turning. Peloton is a company some folks may be tired of hearing about. They make an exercise bike with a big iPad attached to the front of it, and the company’s stock price has gone down a lot in the last year. Big whoop. There are other companies. But a comment from its new CEO Barry McCarthy continues to ping around in our heads: it’s the kind of reality serum many Covid-era darlings probably need to hear. “Where [Peloton] got over its skis is it built out a cost structure as if Covid was the new normal,” McCarthy told the Wall Street Journal. When you’re in the moment and sales seem to double every quarter, the addressable market appears to be growing relentlessly, and investing into unforeseen growth is the only sensible thing to do. Except the economy continues to normalize from Covid-era changes. Some habits — like full- or part-time remote work — appear to be sticking around. Others, like turning the only remaining space in a cramped apartment into an exercise studio, may be less appealing long-term.

2) Pay me my money. Multiple outlets reported this week that Amazon is raising the upper limit of its base pay range for white collar workers to $350,000 from $160,000. The Information reports that hundreds of workers have left Amazon to join delivery upstarts like Instacart and Gopuff in the last year. These stories are related. Both Instacart and Gopuff are expected to go public soon. And while Amazon has been a public market star for two decades, the company’s stock has lagged the market over the last 18 months, rising 10% from July 1, 2020 through the close on February 10, 2022 against a 42% gain for the Nasdaq. These defections, and Amazon’s moves to combat them, suggest there are some in the rank-and-file that believe the biggest financial homeruns offered to Amazon employees have already been hit. The scale of Amazon’s pay restructuring also suggests the pandemic has reshaped the value of time for many workers. After having two years of plans wiped out or reshuffled, waiting to reap the rewards of any job may be less appealing as we’re less sure than ever before about what the future might bring.

3) Still inflating, like a hot air balloon. In January, consumer prices rose 7.5% from the same month last year. This is the fastest increase since February 1982. The arcane nature of the financial market stressors that resulted in the housing crisis and the 2008-’09 recession has led many in the investing business and beyond to believe the world’s biggest problems are the ones no one is talking about. Yet unlike so many events that shake up financial markets but go unnoticed by the public, you’d be hard pressed to find anyone not picking up on higher prices. The worlds of investing and policymaking are often faced with the challenge of communicating solutions to problems no one is asking about. Today, solutions must be offered to a problem everyone is thinking about. A different challenge altogether.

Two notes on re-opening —

Disney and Uber, both holdings in Titan’s Flagship portfolio, reported earnings after the market close on Wednesday, February 9.

And both companies had positive things to say about the economy’s continued recovery from the Covid-19 pandemic.

In Disney’s parks business, spending per guest during the fourth quarter of 2021 was up 40% against the same quarter back in 2019. A trip to Disney doesn’t cost a little bit more than it did before Covid-19 — it now costs way more. But that doesn’t appear to be hurting demand, as revenues and profits for its domestic parks business exceeded pre-pandemic levels even with capacity restrictions still in place. The things people will do for a picture with Mickey Mouse.

Uber hasn’t quite made it all the way back, but CEO Dara Kohsrowshahi told analysts on Wednesday that gross bookings for Uber rides “nearly recovered” to 2019 levels in December. In the early part of 2022, Omicron cooled things off, and rides fell 21% from December to January. But that effect appears to be short-lived. Kohsrowshahi said the Covid-related impact on its business “has come and gone relatively quickly,” with bookings last week up 25% over the prior month.

Disney tells us consumer balance sheets remain healthy enough to pay up for experiences where folks can, while Uber suggests behavior is slowly approaching whatever we called “normal” at the end of 2019. So perhaps these two notes on the re-opening are just one takeaway — it continues.

One thought for the weekend —

The Super Bowl will be played in Los Angeles on Sunday. Some people watch the game, others watch the ads, others craft a whole personality around not caring about the Super Bowl.

This year’s broadcast is expected to feature several crypto commercials with a possible NFT sighting during the halftime show. Wherever crypto culture goes from here, Super Bowl 56 is probably going down in history as the Crypto Bowl.

The scale of today’s biggest stars, biggest events, and biggest companies can feel hard-coded at times. But we don’t need a doctorate in history or cultural studies to know that as time goes by, things will change.

And as the event grows larger each year, it’s worth remembering that the Super Bowl wasn’t always like this. The first Super Bowl was played in Los Angeles 55 years ago. The game was not a sell-out. And it wasn’t even called the Super Bowl.

In a way, however, it is this constant and assumed change that ultimately elevates an event like the Super Bowl. Whether you care about the game or not, we’re asked to take our collective cultural temperature at a specific moment in time, whether we want to see the results or not.

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