Bill Ackman buys a stake in Nike; Cooling inflation; All eyes on the Fed; Real wage growth for 15th consecutive month; Pictures from Lake Sunapee, New Hampshire

1) My college buddy Bill Ackman of hedge fund Pershing Square is turning heads again...

In Friday's and Monday's e-mails, I took a close look at apparel and footwear giant Nike (NKE). I was impressed with its financials, but concluded that "I'm inclined to stay on the sidelines" – in part because:

... as long as the guy responsible for Nike's woes – CEO [John] Donahoe – is still in charge, I have little confidence that he'll be able to admit his mistakes and fix them. I would want to see a change in leadership – or at least clear evidence that current leadership is on the right track to fix issues.

My views on Nike's leadership are shared by many others, so I wasn't surprised to see that Ackman has been buying the stock. Reuters (via Yahoo Finance) has more on the story: Ackman's Pershing Square takes new stakes in Nike, Brookfield. Excerpt:

Billionaire investor William Ackman built new stakes in sportswear company Nike and investment management company Brookfield during the second quarter, according to a regulatory filing made on Wednesday.

This marks the first new investments for Pershing Square – which oversees roughly $17 billion in assets – since the firm put money into Google parent Alphabet during the first quarter of 2023...

For Ackman, who cemented his fortune by pushing companies for changes, this marks a return to a company he invested in late 2017 and made a $100 million profit on.

At that time, the investment was a rare passive one for Ackman, a passionate tennis player often photographed wearing the company's shoes, shirts and wristbands. This time, Ackman has not said what his plans are for the investment.

I have deliberately not spoken with Ackman about this so that I can speculate freely about what his plans might be...

While he isn't nearly the saber-rattling, proxy-contest-waging activist he once was, there's little doubt in my mind that he would push Nike to replace its CEO – privately at first, but then publicly if necessary.

Ackman has a long and highly successful track record of pushing companies to replace ineffective CEOs – a move that can unlock tremendous shareholder value in both the short and long run.

Just look at the example I covered in yesterday's e-mail, in which Starbucks' (SBUX) beaten-down shares soared 25% when it announced that it had poached the CEO of Chipotle Mexican Grill (CMG), Brian Niccol – interestingly, someone who Ackman helped install in 2018, trigging a nearly ninefold increase in CMG's stock price.

To be clear, I don't think Nike has that kind of potential... but I could easily see it doubling with Ackman pushing for change.

As I also said on Monday, my team and I at our flagship Stansberry's Investment Advisory newsletter will keep an eye on Nike to see if positive changes end up happening.

If and when we think the stock looks compelling enough to recommend buying, our subscribers will be the first to know. (If you aren't already an Investment Advisory subscriber, you can learn more and find out how to become one in a special presentation right here.)

2) Yesterday, the U.S. Department of Labor released its inflation report for July. The news continues to be excellent for the economy and for investors, as I've long predicted...

The consumer price index rose 0.2% from the previous month and 2.9% from a year ago – the lowest rate since March 2021.

The report mirrored Tuesday's producer price index report for July, which showed 0.1% growth from the previous month and 2.2% year over year – lower than Wall Street expectations.

Here's a Wall Street Journal article with more on the inflation report: Cooling July Inflation Sets Stage for Fed's September Rate Cut. Excerpt:

Inflation extended a run of cooler readings in July, sealing the case for the Federal Reserve to cut interest rates at its meeting next month...

A sustained and broad inflation slowdown provides the Fed with greater latitude to focus on shoring up any potential weakness in the labor market. The data were "very encouraging... and should give the Fed lots of confidence to start the easing process," said Kathy Bostjancic, chief economist at Nationwide.

3) With inflation muted and signs that the economy is slowing, all eyes are now on the Fed, which is certain to cut rates at its September meeting – the only question is by how much. As the same WSJ article notes:

... the debate at the Fed's September meeting would center on whether to cut rates by a traditional quarter point or by a larger half point.

Wednesday's inflation data won't resolve that debate, which instead will be shaped by coming indicators of job-market conditions – including weekly filings for unemployment benefits and the August payroll report, which is due on Sept. 6.

Richmond Fed President Tom Barkin said last week that officials are trying to "figure out whether this is an economy that is gently moving into a normalizing state that will allow you to, in a steady deliberate way, normalize rates and stick the landing... Or is this one where you really do have to lean into it?"

To be honest, I don't have a strong opinion on this question. If economic indicators over the next month are solid, then I would expect the Fed to only cut by 0.25%... If indicators soften, then the Fed will likely cut by 0.5%.

Either way, I think investors win.

4) Another piece of good news in yesterday's inflation report is that wages, both for salaried and hourly workers, continued to outpace inflation. Take a look at this chart from the same WSJ article:

Creative Planning's Charlie Bilello has more on this. As he wrote in a post on X yesterday, with an accompanying chart:

After a record 25 consecutive months of negative real wage growth, wages have now outpaced inflation on a YoY basis for 15 straight months. This is a great sign for the American worker that hopefully continues.

5) As I do every summer, I'm spending the first two weeks of August with my immediate and extended family at a property on Lake Sunapee, New Hampshire that my great-grandfather bought 102 years ago...

My parents met and married in the Peace Corps in 1962 and spent most of their careers in international development.

That meant we lived all over the place for most of my childhood: three years in Tanzania, three in California, three in Nicaragua, then back to California for a year before settling down for eight years in western Massachusetts to get my sister and me off to college before they headed overseas again to Ethiopia and, finally, Kenya (where they've retired).

But the one constant was spending most of the summer here at Lake Sunapee with all of my aunts, uncles, cousins (and second cousins, and third cousins... it's pretty funny – my daughters are closer with their fourth cousins than most people are with their first cousins).

It's a special place, and we're very fortunate to have kept it in the family for so long.

Below are a bunch of pictures – clockwise from the upper left: getting work done in my little alcove... taking my Dutch friend to see a Red Sox game at Fenway Park... our house and boathouse... painting the front of the house... driving the tennis court roller... going out for a ride in our 1907 lake launch... and 18 of us after dinner last night.

Best regards,

Whitney

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