The Stories Behind The Numbers

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When markets are volatile, it’s easy to lose sight of what we’re investing in.

Number goes down a lot, “uh oh, it’s so over.”

Number goes up a lot, “woo hoo, we’re so back.”

Most of the time, investors are focused on the numbers. The stock price, earnings, buybacks —whatever. But between the chaos are real companies with real people, and it’s important to pay attention to their stories that drive the numbers. Why are people buying or selling the stock? Why are margins going up or down? Why is cap-ex exploding?

I get the stories on Quartr.

In 2021, Sami Osman, one of Quartr’s founders, emailed Ben and I. We fell in love with the idea and with him, and decided to give them some money. We’ve invested more over the years as an idea blossomed into an incredible product.

I want to talk today about some of the stories that companies are telling their investors.

Remember the vibecession? A few years back, people were pissed off. If you listened to what they were saying, you would assume the economy was bad and getting worse. However, the hard data, as reflected in the economic numbers and company reports, did not corroborate those feelings. A wide gap was created between the soft and hard data, the likes of which we’ve never seen before. And it’s happening again today.

Consumers, economists, and anyone else with an opinion on the economic outlook are all bracing for impact. They should be. The trade war hasn’t hit our data yet, but it will. Unlike 2022, the fears will eventually manifest in the hard data.

In the movie Armageddon, Billy Bob Thornton says, “Well, it's coming right now. Right for us at 22,000 miles an hour. Not a soul on Earth can hide from it.” Without being too alarmist, and mostly because I wanted to sneak that quote in, that’s similar to how I’d describe the current economic situation.

Even if we do make a deal, damage is being done every day that we will feel. I’ll get to that in a different post. For now, I want to hear about what people are doing, not what they’re saying.

The first question on almost every earnings call I’ve listened to is about the macro uncertainty.

“Thanks, Ted and Greg. Our next question, or I should say we have received several questions, actually, understandably, about the economic environment and consumer sentiment as well.”

This comes from the Netflix call.

Here’s how Greg Peters answered that question:

“Based on what we are seeing by actually operating the business right now, there's nothing really significant to note. So what are we looking at? Primary metrics and indicators would be our retention, that's stable and strong. We haven't seen any significant changes in plan mix or planned take rate to part of that question. Our most recent price changes have been in line with expectations. Engagement remains strong and healthy. So things generally look stable from that lens.” ✅ ✅ ✅

Here’s how American Express answered the same question.

“While it's still very early in the second quarter, through the first 1.5 weeks in April, overall spending levels have remained consistent with what we saw in the first quarter in both Goods & Services and T&E and across all customer segments. Based on the steady spend and credit trends we've seen to date, we are maintaining our full year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50.” ✅ ✅ ✅

I get Amex is a premium product, so let’s check in with Capital One next, which serves a much different clientele.

“The U.S. consumer remains a source of strength in the economy. That's true for almost any metric that we look at. The unemployment rate is low and stable. Job creation remains healthy, real wages are growing. Consumer debt servicing burdens remain stable near pre-pandemic levels. In our card portfolio, we're seeing improving delinquency rates and lower delinquency entries, and payment rates are improving on a year-over-year basis. Now of course, the circumstances of individual consumers and households will vary as they always do. And what we look at often with national metrics is averages. And as we've discussed before, some pockets of consumers are feeling pressured from the cumulative effects of inflation and higher interest rates. And we're still seeing delayed charge-off effects from the pandemic, although our improving delinquency suggests that this effect may be moderating. But on the whole, I'd say the U.S. consumer is in good shape.”  ✅ ✅ ✅

Here’s JPMorgan Chase on the lower-income consumer:

“When we look at our card data and also our cash buffers in people's checking accounts, of course, it is true that it is relatively weaker in the lower-income segment. But when you take a step back and you ask, are we seeing signs of distress in the lower-income segment, the answer is no. So sure, the margin cash buffers are lower and you see some rotation of spend and spending is a little bit weaker than it was in the peak spending moments. But actually, some of the increases in spending that we're seeing in April are actually coming from the lower income segment. So no evidence of distress, I would say.” ✅ ✅ ✅

The point of all of these cherry-picked quotes (not hard to find a lot of negative ones as well) is not to diminish the uncertainty people are feeling; it’s to provide some context. I do think the commentary during the second quarter will look different, but for now, things are not looking dire at all.

We had the brilliant Rebecca Patterson on The Compound & Friends yesterday. During the show, we spoke about her incredible career. Rebecca was an MD at JPMorgan for 15 years, then became the CIO for Bessemer Trust, and later the Chief Investment Strategist at Bridgewater Associates. Currently, she’s an Independent Director at Vanguard and a Senior Fellow at the Council on Foreign Relations.

What. A. Resume.

Hope you enjoy the show. Have a great weekend!