🌪️ Big-cycle debt crisis coming

and we're in a cardboard box recession

Morning Download from Invincible Money

Personal finance + economics + markets

Finance in 5 minutes a day to help you make better money decisions.

Good morning investors! We’re in a cardboard box recession and the beginning of a debt crisis. However, A.I. will save us all! Except, probably not San Francisco…or GameStop.

📊 Economy 

A Charles Schwab analyst said we’re in a “cardboard box” recession, pointing to falling demand for cardboard boxes, down 8.4% in Q4, due to consumers cutting back.

Box orders falling has previously preceded a downturn for the U.S. economy.

  • However, this could bring down inflation and weaker earnings.

  • The Purchasing Manager’s Index, which includes boxes, usually leads inflation in the U.S. by 6 months.

  • He said, "Europe's latest PMI price index shows inflation may track from the current 6% to near 2% during the next 6 months. Inflation might just continue to recede as fast as it rose."

Our take: Forecasting inflation to go down to 2% in 6 months is a bit hopeful and simplistic as there are a lot of factors at play. Not to mention that inflation went up last month, but fingers crossed.

The Bank of Canada raised rates 25bps to 4.75%, the highest since 2001.

The OECD (Organization for Economic Cooperation and Development) sees limited growth for this year and next year at 2.7% and 2.9%, respectively.

Credit card debt hit another all-time high, rising 6.8% over last year.

📰 News

Ray Dalio

Big-Cycle Debt Crisis

Billionaire hedge fund investor, Ray Dalio says the U.S. is at the beginning of a “Big-Cycle Debt Crisis.”

  • He said yesterday, “We are at the beginning of a late, big-cycle debt crisis when you are producing too much debt and have a shortage of buyers.”

Hilton SF Union Square, largest hotel on the West Coast with 1,921 rooms

San Francisco real estate in trouble

The owners of the Hilton SF Union Square (the city’s largest hotel) and Parc 55 announced they’re walking away from the downtown properties and turning in the keys to the bank on the $725 million loan.

The decision was based on fewer people returning to work downtown and increasing crime rates.

  • Tim Pools take on what’s happening in San Francisco is interesting.

Nordstrom recently announced they’re closing both downtown San Francisco stores.

Andreessen’s famous 1996 cover at age 24.

Andreessen says A.I. will save the world

Internet pioneer turned VC, Marc Andreessen posted an insightful thread for those who are worried about A.I. spelling our doom.

Who is he? Andreessen co-created the first commercial web browser and coined the phrase, “software is eating the world” in 2011. Now he runs one of the most famous VC firms.

He argues that A.I. won’t take our jobs, but will augment humans and could provide a tutor for every child, a mentor or therapist for every adult and a decision-making assistant for every leader.

A.I. will lead to more productivity, which will lower prices, increase wages and spur economic growth and new jobs and industries.

He asked regulators to let A.I. develop unencumbered so it can develop in the U.S. and China.

📈 Stocks

Spotlight: C3.ai (AI -0.55%) partnered with Google Cloud Marketplace and Amazon Marketplace

The company reporting mixed financial results.

  • C3.ai reported sales of $72.4 million in the fiscal fourth quarter of 2023, which was in line with the higher end of its preliminary sales numbers. Sales growth was flat year over year.

  • Subscription revenue was 79% of sales at $56.9 million. The company saw a loss of 13 cents per share, compared to a 21 cents loss a year ago. Free cash flow from business operations was $16.3 million during the quarter.

  • For the fiscal year that also ended April 30, 2023, C3.ai had sales of $266.5 million-$266.8 million, above earlier views of $264 million-$266 million.

  • The enterprise AI provider expects sustainable profitability by the end of fiscal 2024. Analysts polled by FactSet expect 19% sales growth for the year ending April 2024. In May, C3.ai partnered with Google Cloud Marketplace and Amazon Marketplace.

Summary: C3.ai's financial performance in the fiscal fourth quarter was mixed. Sales were in line with expectations, but the company's loss widened and its free cash flow was negative. However, the company is still in its early stages of development, and it is not uncommon for young companies to experience losses. If C3.ai can execute on its plans, it could be a very successful company in the years to come.

Who? C3.ai is a software company that provides enterprise AI solutions. Its platform is designed to help organizations harness the power of AI to improve operational efficiency and make data-driven decisions. The company is still in its early stages of development, but it has a strong management team and partnerships with major players in the enterprise software market.

Rough Day for GameStop

GameStop [GME -17.89%] missed on earnings, reporting -$0.14 (vs. -$0.12 expected) and sales with $1.23 billion (vs $1.36 billion expected) and the stock nosedived!

Oh and they also fired their CEO and named their largest investor, Ryan Cohen, as executive chairman. Cohen founded Chewy (CHWY) before becoming an activist investor.

🔐 Crypto

Kevin O’Leary on Crypto

The Shark Tank investor said in an interview that he’s moved his crypto allocation from 20% down to 5% while he waits for the fight between the exchanges and the SEC to play out.

  • Once the dust settles he’ll go back to 20%.

  • He said there’s no institutional appetite for crypto, but still believes in the space long-term.

  • He also expects a soft landing for the economy, but another 50 bps in rate hikes.

Gensler lying? Robinhood and Coinbase both have now said today they tried for months to “come in and register” with the SEC and were rebuffed.

Binance wants Gensler to recuse himself from the SEC lawsuit claiming he once offered to serve as an advisor in 2019, prior to joining the SEC. Really Gary?

💵 Personal Finance

Patience is an investing virtue

Investors who are patient and not emotional have the best returns. However, it’s not easy being patient, which is why so many people trade. It’s exciting but 95% of day traders lose money.

Sound investing is as exciting as watching paint dry, so here are 2 tips for how to be a more patient investor:

  • Focus on the long term. The stock market is volatile in the short term, but it has historically trended upwards over the long term. If you focus on the long term, you're less likely to be discouraged by short-term fluctuations.

  • Don't check your investments too often. It's tempting to check your investments every day, but this can lead to anxiety and impulsive decision-making. Instead, set a schedule for checking your investments, such as once a month or once a quarter.

💰 Be a Better Investor

"The stock market is a device for transferring money from the impatient to the patient."

- Warren Buffett

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