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Broad Insights. Deep Analysis.

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Housing: It’s Complicated. A Perspective on Homebuilders and Home Improvement Retail

Key Points: The housing market is typically the Fed’s most reliable transmission mechanism, and while housing activity has slowed markedly, the tack-on effects have yet to sink the economy or the consumer. Housing is a complex subject, and there’s no shortage of data to analyze. We focus our energies in this report on demographics, the normalization of pandemic effects, spending on home improvement, and the labor market. Housing turnover has reacted to rate hikes much

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Consumer Staples: Are We There Yet? A Deep Dive into Tactical and Fundamental Issues

Key Points: We’ve been bullish on the consumer and that’s created a bias for discretionary stocks over staples. Staples, though, have lagged the market by ~20% over the past year, and the aim of this report is to determine whether it’s time to buy this beaten-down group or if we should continue to tread lightly. The decision to own consumer staples stocks cannot be made in a vacuum. That’s because staples often act more like

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Consumer Stocks: Our Idea Generator Can Help Navigate a New Paradigm

Key Points: We’re often asked when the consumer will crack. We’ve been concerned about the low-end of the income distribution for some time, but when it comes to the aggregates, we don’t see red flags waving. The bigger question we have is how a shift from nominal growth to real growth will affect the stock selection process. We’ve modified our Idea Generator to emphasize business model dynamics like asset intensity and operating leverage. Our updated

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Consumer Stocks: Repositioning to Reflect the Shift from Nominal Growth to Real

Key Points: Consumer stocks had a rough third quarter. Staples continued their downward slide. Discretionary stocks tend to outperform when staples are cratering, but that’s not been the case this time around. We’re mindful of the fact that spending seems to have slowed post-Labor Day, but we think the consumer will regain their footing. We built a new interactive model that projects income, spending, and savings through 2025. We stress test assumptions to determine where

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A Deep Dive into the Low End. Will They Rise from the Ashes or Fall into the Abyss?

Key Points: We’ve refined our models to incorporate new data on the distribution of income, spending, and savings. Overall, we think that the consumer will continue to power through, but we remain concerned about the low-end of the income distribution. The question we seek to address in this report though, is whether the market has already braced for that outcome. Stocks that cater to the low-end consumer have taken a beating – they’ve underperformed a

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FAQ: The Questions Our Clients Are Asking

Key Points Investors seem to have accepted the notion that the consumer is resilient. Our sense though, is that this new-found optimism is tenuous, and if consumers tap the brakes for one reason or another, it won’t take long for skeptics to come out of the woodwork. This report seeks to address the most common concerns we are hearing from our clients. Q: Is excess savings still a thing? The concept is an abstraction that

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"UP-TO-DATA" PODCAST​

Savings, Inflation, Immigration, the Low-End, Food, and Mattresses

In issue #3 we analyze immigration, excess savings, and the low-end consumer.  Immigration has been a big contributor to the labor force, and with elections in the offing, it presents more than a trivial risk.  We track the amount of construction put into place due to the CHIPS Act.  We also offer an analysis of the US mattress industry.  We…

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The “Energy Effect”, Credit Card Dynamics, and Housing

In issue #2 we analyze the effect rising energy prices may have on consumption.  One month ago, energy prices would’ve been a 75 basis-point “good guy” for the consumer.  Now it’s more of a marginal friend.  We measure inflation by income cohort, also focus on credit card delinquency trends and the profile of housing inventory.

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