Cooling Inflation Likely Ends Fed Rate Hikes; Tingo Group halted; Update on Planet Fitness; Greetings from Namibia
1) I predicted early this year that inflation was going to stabilize between 3% to 4% and cease to be a concern, which would lead the Federal Reserve to stop raising rates.
Yesterday, we got another piece of data affirming this point of view, as the U.S. Labor Department reported that consumer prices were flat last month and only rose 3.2% year over year... The Wall Street Journal has the story: Cooling Inflation Likely Ends Fed Rate Hikes. Excerpt:
Inflation's broad slowdown extended through October, likely ending the Federal Reserve's historic interest-rate increases and sparking big rallies on Wall Street.
Consumer prices overall were flat last month and rose 3.2% from a year earlier, a slower pace than in September, the Labor Department said Tuesday. Overall inflation hit a recent peak of 9.1% in June 2022.
Increases in so-called core prices, which exclude volatile food and energy items, also showed underlying price pressures are abating. Core inflation for the five months ended in October was at an annual rate of 2.8%, down from 5.1% during the first five months of the year.
The easing reflected lower prices for cars and airfares and milder growth in the cost of housing and other services. Core inflation is often viewed as a better predictor of inflation's future trajectory than the overall numbers.
"The hard part of the inflation fight now looks over," said David Mericle, chief U.S. economist at Goldman Sachs.
Stocks and government bonds soared as investors concluded the Fed was done raising rates and shifted attention to when officials might begin cutting rates.
The Nasdaq closed up 2.4%, while the S&P 500 rose 1.9%, the biggest one-day jumps for both since April. The Dow Jones Industrial Average added nearly 500 points, or 1.4%.
Yields fell sharply across Treasurys, with the benchmark 10-year note declining 0.191 percentage point to 4.440% on Tuesday. That was the largest single-day decline since Silicon Valley Bank failed in March. Yields fall as bond prices rise.
The market is now pricing in only a 5% chance that the Fed raises rates at its next meeting in December:
The decline in inflation is across the board:
It's especially good to see lower food-price inflation:
2) Another day, another fraud/promotion collapses...
I first warned my readers about Tingo Group (TIO) in my June 7 e-mail, immediately after reading Hindenburg Research's report on it, writing:
Yesterday, Nate Anderson of Hindenburg Research exposed another obvious fraud, New Jersey-based Tingo Group (TIO), which claims to be operating a wide range of businesses in Nigeria, most of which, Hindenburg claims, don't even exist...
This is one of the most egregious frauds I've ever seen, and the SEC should immediately suspend trading in the stock.
On September 1, I added:
This is the craziest story about one of the most obvious frauds I've ever seen... I warned my readers about it on June 7...
The stock was cut in half yesterday in the aftermath of this report: Tingo Group: Fake Farmers, Phones, and Financials – The Nigerian Empire That Isn't.
The stock closed that day at $1.45 per share and steadily sunk to an intraday low of $0.83 per share on Tuesday. But then it soared yesterday to an intraday high of $1.84 per after the company reported second-quarter earnings, in which it claimed the revenue rose 8,072% year over year from $12 million to $977.2 million (I'm not making this up).
Hindenburg immediately published a response, showing the absurdity of the company's claims: Tingo Forges Ahead With Its Brazen Scam as $725 Million in Claimed Cash Disappears From Its Balance Sheet in One Quarter. Excerpt:
These reported numbers and stated guidance would of course be exciting, were it anywhere close to reality. However, a careful review of the company's recent releases indicate Tingo has done little but continue to lie about every key aspect of its business – all while failing to address every question we've raised.
It bears repeating: we have never seen a scam so thorough, obvious and brazen as Tingo – a true outlier, even in a market rife with fraud.
The stock is down around 20% this morning, quickly on its way to zero. Regulators should halt it immediately.
Sadly, it took regulators more than five months – during which time the stock fell to $0.69 per share – before they finally halted the stock yesterday:
Tingo will likely only trade again on the pink sheets for pennies per share, so shareholders have been wiped out...
3) My friend sent me the following comments regarding what I wrote about Planet Fitness (PLNT) in yesterday's e-mail:
PLNT's reported "adjusted EPS" number, not GAAP, is the correct metric for calculating the company's earnings multiple. It's not a bogus metric that is adding back stock comp or other real expenses – instead, it adds back some massive non-cash purchase accounting amortization, then takes away smaller amounts for higher pro-forma taxes and a slightly higher pro-forma share count.
Current consensus for 2024 adj. EPS is $2.51, which is probably correct, so the stock, at $65 today, is trading at 26x earnings – a very reasonable (if not downright cheap) multiple for a capital-light franchisee business that can grow double-digits for a long time to come...
4) Greetings from Namibia, the 82nd country I've visited – the 54th for Susan and 34th to 38th for our daughters – but who's counting?!
It's a fascinating country – enormous, but mostly desert. Its population is only 2.5 million – giving it the third-lowest population density in the world (after Greenland and Mongolia).
Yesterday we flew two hours from Cape Town to Walvis Bay on a commercial flight and then, after clearing customs, took a charter flight (a Cessna Caravan, the workhorse of Africa) another two hours to the Okahirongo Elephant Lodge in the far northern part of the country near the Skeleton Coast.
It really feels like the end of the Earth here – it's totally barren and hasn't had rain in six years.
Only 651 people live in this huge area, almost all nomadic cow and goat herders – the land simply can't support more. Today we visited a local village – though that word is generous, as it was a circular enclosure only 100 yards across with fewer than a dozen huts/families.
We did scenery/game drives and saw two beautiful sunsets and a few animals: giraffes, ostriches, baboons, and oryx.
Here are a few pictures (I've posted more on Facebook here):
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.