It’s a short week for the U.S. markets. Thanksgiving is on Thursday, so everyone will be busy adding an inch or two to their waistline from too much turkey, mashed potatoes, and pumpkin pie. And then, fortunately for all those in need of recovery, it’ll be a short trading day on Friday.
I’ll be wishing you an official Happy Thanksgiving in just a few days, but let me say it early here as well…
I wish you all safe travels if you’re traveling, safe cooking if you’re cooking, and a wonderful time with friends and family regardless.
In case, for some reason, you run out of topics to talk about with Uncle Harry or Cousin Sarah – or if the conversation turns to politics or other sensitive subjects – feel free to capture everyone’s attention with one of the five following market stories.
Except, perhaps, for No. 2.
And definitely not No. 5.
1. It’s Tough To Be a Homeowner
You probably know – or can guess – that I’m a big proponent of homeownership. There are tax benefits, equity benefits, and appreciation benefits – not to mention the freedom of being able to care for your home how you see best.
Normally, I’d throw in the benefits of predictable payments as well, since fixed-rate mortgage payments are… well… fixed. But according to Rick Palacios Jr., director of research at John Burns Research and Consulting, that appeal might not be quite the same as it once was.
It’s always been historically more expensive on paper to own than to rent thanks to such things as taxes and footing the bill whenever anything breaks down. We’re talking about a 14% difference on average. But that figure has now ballooned to 35%. So it’s no wonder that the housing market is as it is with no signs of letting up.
The good news for homeowners is that there’s still a happiness component to owning that’s hard to beat. A Redfin survey last month found that 69% of homeowners aged 18 to 43 consider themselves better off now than they were four years ago compared to 52% of renters in the same demographic.
And, of course, it doesn’t hurt how much more homes are worth today than they were at the turn of the decade.
2. It’s Even Tougher To Be Jaguar
Everyone knows that the first rule of marketing is to know your audience or consumer set. Which only makes sense since it’s that consumer set who will make or break your business. If they’re impressed with what you made, how you made it, and the price you’re offering it for, then your sales should be good. If they’re not impressed?
Then you might be Jaguar.
Last week, the iconic car brand pre-released its new marketing campaign ahead of its official launch on December 2. “Copy nothing,” the commercial signals. “We’re here to delete the ordinary. To go bold. To copy nothing.”
The latter claim is delusional since, to quote King Solomon, “There is nothing new under the sun.” Everything we create is inspired by something else, whether good or bad. But the Jaguar marketing team definitely did “go bold” and “delete the ordinary” by featuring a group of unsmiling and, by all appearances, unimpressed endogenous models striking poses while wearing bizarre fashions…
With no car in sight.
That kind of avant-garde messaging can and does work for select niche products in select niche markets. But it’s no surprise to me that Jaguar fell flat on this one. More tone-deaf still is how the company isn’t backing down from its “understanding” of its audience, with Managing Director Rawdon Glover declaring on Saturday: “If we play in the same way that everybody else does, we’ll just get drowned out. So we shouldn’t turn up like an auto brand.”
Except that Jaguar is an auto brand.
At least it used to be.
(For the record, I once owned a Jaguar, and it was a nightmare, so of course I’m biased.)
3. Target Continues to Miss the Mark
I like Target (TGT).
My local store is a convenient drive away. It’s clean. And it usually has what I need. In fact, it wasn’t long ago that we held shares in our Wide Moat Letter portfolio. But we closed the position for an approximate 2% gain back in September.
And I’m glad we did…
There’s just not much love for Target these days, as bigger, badder competitor Walmart (WMT) continues to grow.
Target reported third-quarter earnings on Wednesday, with comparable sales up 0.3%, “driven by strong traffic and digital performance,” according to its official release. Digital comparable sales grew 10.8% from almost 20% “growth in same-day delivery powered by Target Circle 360TM and double-digit growth in Drive Up.” And beauty comparable sales rose more than 6%.
Yet Target’s gross margin rate fell 0.2% and its adjusted earnings per share dropped 11.9% year-over-year to $1.85. Absolutely unimpressed, investors sent its shares down 22% last week. And the slide might very well continue over the next few days (or longer) considering how the retailer slashed its full-year earnings guidance from between $9 and $9.70 to between $8.30 and $8.90.
Walmart is definitely part of that problem, and it has been ever since inflation took off in 2021. Slowly but surely, consumers began looking for cheaper options… and Walmart was right there waiting with open arms. Worse yet for Target, Walmart was quick to recognize that it had a shot at families making more than $100,000 per year – Target’s traditional audience. And so it began capitalizing on that potential.
Since Walmart is also seeing success with Gen Z, it’s looking like Target might need a new marketing strategy… just as long as it’s not Jaguar’s.
4. Sorry to Everyone Who Needs Eggs for Thursday
You may have already noticed bare refrigerated shelves in your grocery store where the eggs usually sit. In which case, CBS has an answer to your bewilderment.
In an article published on Friday, titled “Eggs are getting scarcer and pricier ahead of the holidays. Here’s why,” it reports how:
Some stores around the U.S. are running short of eggs, especially those operating in states that require eggs from cage-free hens, as cases of Highly Pathogenic Avian Influenza (HPAI) flare and the virus spreads from wild birds to commercial flocks. More than 40% of the nation’s roughly 300 million egg-laying hens are raised in cage-free facilities, but roughly 60% of “bird flu” cases recently detected involved cage-free farms.
“After two months of no outbreaks, we had them recently in Utah, Oregon, California, and Washington, and three of those states are exclusively cage-free,” Emily Metz, chief executive and president of the American Egg Board, told CBS MoneyWatch. “Where we are hearing reports of shortages, it’s at stores like a Whole Foods or a Trader Joes.”
Unfortunately, there have been reports of other grocery-store chains experiencing the same problems since. So if you need eggs and you see eggs?
Get them while you can.
5. A Man With an Economic Plan
On Friday, President-elect Donald Trump nominated Scott Bessent for Treasury Secretary, a man who knows the U.S. economy inside and out. Part of the rationale for the pick, Trump wrote, was that:
Scott has long been a strong advocate of the America First Agenda. On the eve of our Great Country’s 250th anniversary, he will help me usher in a new Golden Age for the United States, as we fortify our position as the world’s leading economy, center of innovation and entrepreneurialism, [and] destination for capital, while always and without question maintaining the U.S. dollar as the reserve currency of the world.
Bessent is the founder of Key Square Capital Market and previously served as CIO at another enormous hedge fund… Soros Fund Management. That’s quite the connection considering how much George Soros and Trump are at ostensible odds about everything. Bessent has also been a long-time Democrat donor.
Yet he seems to be all MAGA now.
He also seems to be quite the fan of former Japanese Prime Minister Shinzo Abe and his “three arrow” economic plan. Though, of course, that tri-fold focus has to be adapted per country to make it work. For the U.S., Bessent believes it would involve:
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Slashing the budget deficit to just 3% of GDP by 2028
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Encouraging GDP growth through deregulation
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Producing an extra 3 million barrels of oil per day
The While Street Journal also writes that:
To get government spending under control, Bessent has advocated extending the 2017 Tax Cuts and Jobs Act but with so-called pay-fors to lower its cost. That would involve either reducing spending or increasing revenue elsewhere to offset the impact.
You know I’m all for lowered taxes, reduced regulations, and a trimmer government that’s (much) more careful with its spending. So if Bessent can help Trump achieve that?
Then I think we’ll all have one more reason to be very grateful not just this Thanksgiving, but also for quite a few more to come.
Regards,
Brad Thomas
Editor, Wide Moat Daily