Bell bottoms, Cabbage Patch dolls, pet rocks, Disney popcorn buckets — the list goes on. This year it is the Stanley Cup Quencher in a rainbow of colors. Fads are part of our society. They are different than trends or cults and most have a limited life.

 

There are fads everywhere you look. Fashion, diets, music, clothes, and especially toys. Who remembers the Power Rangers? They seem to come out of nowhere, blaze a path of widespread adaption by multitudes of people, and then crash into sudden decline seemingly overnight.

 

Take the Stanley Cup for example. I had no idea that the thermos company of my youth had transformed its reliable "hammer tone" green-bodied container of my working days into a plethora of sippy cups that are now the rage in America.

 

I credit a local story by Meg Britton-Mehlisch in the Berkshire Eagle this past weekend, that revealed how this venerable 110-year product was not only invented by William Stanley Jr. but was manufactured in Great Barrington just a stone's throw from where I sit. It is also true that when the inventor announced his invention back then, he did so through that very same newspaper in 1915!

 

It was the first vacuum-insulated steel bottle and it found its way into the hands of mainly working men for the next century.

 

But I digress. Fads, as I have discovered, can be driven by several factors. Social influence, marketing, novelty, word of mouth, and in this age of TikTok, the internet. In the case of the Stanley Cup, it seems the product took off after it was profiled in the New York Times. From there, social media influencers on a site called #WaterTok, that focuses on hydration, went bonkers over the cup. After all, who wouldn't want another plastic water cup that not only fits in your car's cup holder but features a straw and a handle in 26 glorious colors?

 

By January 2024, videos of what is now called an "adult sippy cup" have been viewed over 201.4 million times on TikTok. Stanley fans, of which many appear to be women, have been called a sisterhood. Marketers and advertising firms jumped on the bandwagon pitching the product to women as not only a sustainable product, but one that can be part of a woman's day-to-day accessories, thus the number of colors offered. As such, it is being promoted as a lifestyle essential on many social media sites.

 

"Limited" is a keyword that marketers use time and time again when promoting fads. Not only does it convey a feeling of exclusivity and urgency but usually triggers that fear of missing out on a product. It is what causes fistfights among consumers. 

 

The Stanley Quencher certainly has had its share of that kind of behavior.    

 

And what fad would not be complete without a growing interest in collecting these $45 reusable water bottles? The Winter Pink Starbucks Collaboration cup is a hot item. Collectors are selling some hard-to-get models like that one for $400 on the resell market. Others command two and three times the purchase price, which is nothing new in the world of crazes. The trick is not to be caught with inventory when the worm turns and the fad fades.

 

Fads can be fun and sometimes generate a sense of community. They can also trigger new ideas and innovations at times. But they can also lead to overconsumption and waste. The idea behind reusable water bottles 15 years ago was to cut down on all those plastic water bottles we were dumping in the trash. Today, there are hundreds of different models and colors of water bottles sold by dozens of companies for a product that was supposed to be a once-in-a-lifetime sustainable purchase.

 

I do wish the Stanley company well in Fad Land. It just so happens that I have a black and silver, two-stage lid, one quart, Stanley thermos in mint condition for sale. Do I hear $100, $150, or maybe trade for the Winter Pink Starbucks cup? 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

January is turning out to be a roller coaster of ups and downs for investors. Last year's fourth-quarter gains have reversed somewhat, and the future is becoming murkier as the day progresses. Hold on to your seatbelts.

 

The economic data is certainly not cooperating with the bull's scenario of slowing job growth, a fast decline in inflation, and a continued decline in bond yields. The reverse has happened. The benchmark Ten-Year Treasury bond has risen back above 4 percent. The dollar has strengthened, the week's jobless number declined, and the Consumer Price Index for December came in slightly hotter than economists were expecting. On the other hand, the December Producer Price Index was a tad cooler.

 

As such, the wildly bullish expectations that the Fed will begin to cut interest rates as early as March, and continue cutting all year, is going the way of the dodo bird. That disappointment has soured the mood and investor sentiment is beginning to turn less positive. That is probably a good sign if you are a contrarian.

 

The geopolitical scene has also failed to inspire confidence. The Houthi rebels have been stepping up their game in the Red Sea. The U.S. and its allies are responding with naval and air strikes in Yemen. This could further embroil the U.S. in the ongoing Middle Eastern conflict between Israel and Hamas, Hezbollah, and the Houthis.

 

The Ukraine/Russian conflict does not help. It seems to be stuck in a stalemate. Oil and gas prices are rising because of all this turmoil. As is precious metals. Supply chain issues are also causing pressure on prices and that hurts expectations for further declines in inflation.

 

Washington has still not figured out a way to keep the government from shutting down. The Republican-controlled House continues to shoot itself in the foot time after time. The 118th Congress is one of the most unproductive in modern history. Their members have been paired down to a razor-thin majority. Legislation has ground to a halt. At best, it appears that the most we can hope for is another continuing resolution that solves nothing and continues to leave the country hostage to a tiny, group of politicians.

 

This week, the long-awaited Securities Exchange Commission approval of 11 issuers that applied for bitcoin exchange-traded-funds (ETF) finally occurred. It looked like a classic sell-on-the-news event. After an initial pop, bitcoin lost almost 4 percent on Thursday before rebounding by the end of the day.

 

Interest seems high but the jury is still out on whether investors will embrace these ETFs with open arms. I think it will take a few weeks before things shake out. The good news for investors is there is a race to the bottom as far as fees charged for these ETFs are concerned.

 

It is the beginning of earnings season with the multicenter banks kicking off results on Friday. Investors will be focusing attention on overall results to see if the present stock market valuations are justified or not. Prepare for company misses to be penalized heavily, while beats may not be rewarded all that much given the run-up in many stocks over the last few months. Corporate guidance for future sales and earnings will be key.

 

Beginning next Wednesday, global money flows into financial markets, which have supported markets for weeks, will begin to taper off. This will have a negative impact on prices overall, regardless of asset class. Short term, I expect the markets will remain volatile with maybe one more bounce before some serious downside begins over the next few weeks.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

There are two shortcuts to moving goods around the world, the Suez Canal and the Panama Canal. Drought has more than halved the traffic able to sail through the Panama Canal that connects the Atlantic and Pacific Oceans. That was bad enough, but the alternative shortcut around the world has all but shut down.

 

This is a serious matter since maritime transport accounts for 80 percent of global trade. Under normal circumstances, the Panama Canal would account for about 3 percent of that global trade and 46 percent of container traffic moving from northeast Asia to the East Coast of the U.S. On average, more than 13,000 vessels passed through the Panama Canal per year — until last year.

 

Climate change, and now the El Nino climate pattern, has sabotaged Panama's ability to keep the system of water locks and infrastructure functioning properly. What is worse, Panama's dry season began last month and will run into April 2024. That is draining even more water from the locks. As such, the prolonged waiting times and capacity limitations that have plagued the man-made 40-mile canal will not be alleviated anytime soon.

 

This has already delayed American exports of grains bound for East Asia. In the case of Japan, U.S. corn exports account for more than 65 percent of that country's needs and 71 percent of its soybean imports. It is only a matter of time before these delays begin impacting the Japanese consumer. The Panama bottlenecks have also increased costs. Shippers have bid up the price for a transport slot through the canal as waiting times lengthen. A slot can now cost anywhere from $1.4 million to $2 million. That effectively raises the price of transporting grain to Japan from the U.S. by 50 percent. Charter rates have also increased by about 30 percent as well.

 

Given this background, is it any wonder that shippers had decided to opt for the Suez Canal, instead, even though it adds about 18 days to the trip? And that is where the shippers found themselves between a rock and a hard place.

 

The Israeli/Hamas war started in October 2023. It did not take long for those aligned with Hamas to begin retaliating against Israel and its allies. Over the border, missiles and drones failed to avoid Israel's air defense system. In late November 2023, the Houthi rebels found an easier target. Armed attacks against defenseless container ships in the Red Sea were launched by the Houthi Militia. To date, the Iran-backed militia that controls northern Yemen is targeting all shipping, some with not even a remote connection to Israel. 

 

For those who are unaware, the Red Sea is a narrow strip of water, west of Sudan and Saudi Arabia and Yemen to the east. At the northern end of the sea sits the Suez Canal. At the southern end lies a strait, called the Gate of Tears, which borders Yemen. It is where the Houthis have been targeting many of the tankers and container ships with increasing ferocity.

 

This waterway is a crucial piece of the world's supply chain. Up to 15 percent of the world's shipping sails through the Suez Canal. It is the most direct ocean route between Asia and Europe. And now it has become part of what appears to be the tip of a widening conflict in the Middle East.

 

In the maritime industry, shipping companies can buy war risk insurance. Almost overnight, the premium on this kind of insurance went from 0.02 percent to 0.7 percent of the total value of the ship and its cargo. Container ships can easily carry hundreds of millions of dollars' worth of cargo, so insurance fees alone are now in the millions. Shippers are now passing on those extra costs by charging higher fees for transporting cargo in that area. Average costs to ship containers have doubled in the last two months.

 

As more and more attacks occurred, shipping companies began rerouting vessels to avoid the area altogether. For those vessels who were already on a detour from using the Panama Canal, costs are continuing to mount. The new alternative route has ships going around the Horn of Africa, and then back into the Mediterranean. That route can tack on an extra 14-15 days to a trip already delayed by avoiding the Panama Canal. 

 

The costs of extra fuel, labor, and penalties for late deliveries must now be added to already sky-high shipping fees. Europe and Asia are feeling the brunt of this extra cost. But in the end, I suspect that given the interconnectedness of global supply lines, it should be only a question of time before the U.S. is also whacked from this new threat to global supply chains.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Investors were greeted with a brutal bout of selling as 2024 unfolded this week. The stocks that had gained the most last year were obvious targets. Is this the end of the rally or is this simply a minor bump in the road?

 

The Santa Rally reversed, and the Grinch stomped on investors' hopes for further gains. The NASDAQ led stocks lower with the Magnificent Seven taking it on the chin. For those who believe in the idea that the first five trading days of January forecast the direction of the market for January and for the year overall, the market’s performance does not fill one with confidence.

 

It is nail-biting time for the bulls. The first three trading days of the year were negative. That has happened 12 times since 1950. Only three times has the market managed to turn positive by day 5. To me, the jury is out until the market closes on Jan. 8.    

 

As for the disappointment that Santa did not come to Wall Street this year, let's look at history. Over the last 80 years, there have been 15 times where we have had negative results over the last five days of December and the first two days of the following January. Out of those 15 times, the market managed to deliver positive returns 10 times with a median return of 3 percent.

 

From a technical point of view, the sell-off did not even dent the bullish cast of the markets. As I have written over the last few weeks, the markets were overheated and each day we gained that condition worsened. The good news is that the selling has relieved that overbought condition without seriously impacting the upward momentum of the markets.

 

Even as the markets declined, some of the areas that lagged the markets during 2023 moved higher. The health-care sector, for example, saw some great gains, as did energy stocks and utilities. Those areas underperformed the markets drastically last year.

 

While most readers are focused on stocks, the main drivers of the last two months' gains have been the steep decline in bond yields and the declining dollar. Both areas have reversed this week with the benchmark Ten-Year U.S. Treasury bond seeing its yield break above 4 percent this week on the upside. And as we know, bond yields up usually mean stocks are down. Assets that are on the other side of the dollar (precious metals, materials, crypto, emerging markets) were hurt as well.

 

I am sure one of the reasons this occurred was a reverse in sentiment by bond traders. The betting on future interest rate cuts in 2024 had gotten out of hand, in my opinion. Some were betting up to six rate cuts in the year beginning in March. That to me was a case of irrational exuberance. Just because the Fed may have finished raising interest rates does not automatically mean the central bank will start cutting rates. In other words, the Fed's "higher for longer" is still the name of the game.

 

The economic news certainly did not support the need for the Fed to cut interest rates anytime soon. The economy is growing. Unemployment is not rising. Instead, the jobs market, per Friday's non-farm payrolls, surprised economists on the upside. The economy added 216,000 jobs, which was a big beat compared to the forecasts of 175,000 jobs.

 

On a different subject, the U.S. government was also responsible for some big price movements in two sectors this week:  crypto and pot stocks. The Securities and Exchange Commission (SEC) has until Jan. 10 to rule on a proposal by Ark Invest and 21Shares. Both firms are applying to issue a bitcoin spot currency exchange-traded fund.  Many other big brokers and asset managers such as Fidelity, Invesco, BlackRock, Van Eck, Wisdomtree, and more have done the same.

 

The SEC could reject the proposed application outright, delay it, or approve it. It looks to be a binary event that should send Bitcoin substantially higher (or lower) depending on the outcome. The betting ranges from 90 percent approval to zero chance.

 

On Wednesday, an October 2023 letter from the Drug Enforcement Administration (DEA) to a member of Congress, was revealed. It made clear that the agency had "the final authority to schedule, reschedule, or deschedule" drugs under the Controlled Substances Act (CSA). The DEA also told lawmakers it is "now conducting its review" of whether to soften federal regulation of marijuana under the CSA. The news instantly sent marijuana stocks higher.

 

Last year, I wrote that the Department of Health and Human Services had asked the DEA to review marijuana's Schedule 1 status and to reduce it to a Schedule III substance. That request triggered a huge run in the sector. This was largely due to the differential in federal taxes that would occur if the DEA granted marijuana Schedule III status. The industry would immediately experience a large decline in taxes leading to a big jump in profitability.

 

At the time, Industry experts believed that the DEA review would only happen in the second half of the year and closer to the elections. I advised readers not to chase the stocks, but rather wait until investor attentions were focused elsewhere. That happened. Hopefully, you were able to pick up some stocks or an ETF on the cheap.  

 

Fortunately, some of that fluff has now come out of the markets, which to me is a positive development. I think we now have a chance to see new highs over the next week or two. However, that does not mean that we are up, up, and away into the rest of the first quarter. I am still expecting a more savage decline sometime soon that could begin as early as late January, or early February.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The proliferation of streaming services over the past few years appears to have reversed course. Price increases, the introduction of advertising, and fewer hit shows have consumers finally looking at the number of streaming services they are paying for.

 

Wall Street has also lost its love affair with streaming companies, except for Netflix. That company continues to benefit from its competitors' woes. During COVID, when Americans were trapped at home, they spent hours watching television. Streaming services could do no wrong.

 

However, times change, and the couch potato behavior is disappearing. As it does, the willingness to pay higher prices for something few are watching is also declining. Throw in the fact that due to the writers and actors strikes last year, there will be fewer streaming products available, and you have a ready-made excuse to pare back on streaming services.

 

From Wall Street's perspective, there are simply too many services competing for your dollars. The major players led by Netflix include Disney+, Hulu, Paramount+, Max, Starz, Peacock, Discovery+ and Apple TV+ are facing lower profitability or no profits at all. Few of these streamers have developed the scale necessary to achieve profitability.

 

There are two main options to turn around profitability — increase prices, add advertising, or merge with other streamers. Over the past several months, most of these services announced price increases. In addition, levels of pricing were offered, if you want to put up with advertising. Those who do can pay a lower price.

 

Starting at the end of this month, for example, Amazon Prime Video will be charging viewers another $2.99 per month. If you don't pay the extra fee, you will be forced to watch advertising interspersed within all your shows. Disney, Netflix, Max, Apple+, and others have raised prices, and some have introduced advertising as well.

 

These moves have had a predictable knee-jerk reaction from their audience. Consumers who didn't care suddenly became interested in discovering exactly how much they were paying and for what services.

 

Back in June 2022, I pointed out in a column "Streaming Come of Age," that almost a third of U.S. consumers underestimated how much they spend on subscriptions by $100 to $199 per month, according to a study by market research firm, C+R Research. It was also true that many people (42 percent) have forgotten that they are paying for a streaming service that they no longer use. That appears to be changing. In the past two years according to Antenna, which studies subscription services, about 25 percent of consumers who had subscribed to the major streaming services have dropped three or more of these services.

 

Some consumers, like my brother-in-law, who is an avid sports fan, are debating whether cutting cable or cutting streamers is the cheapest way to go. This is surprising since streaming services have been the beneficiary of the recent trend of cutting cable services. By the end of 2023, over half of U.S. consumers (54.4 percent) have dropped cable TV and traditional Pay-TV services, according to Insider Intelligence.

 

For some streamers that lack the scale needed to achieve profitability, the only course that makes sense is merger or acquisition. Paramount, for example, is in discussions with Warner Brothers Discovery to combine forces. Rumors abound that other streamers are going down the same path. Disney+ is acquiring the remaining 33 percent stake in Hulu it does not already own from Comcast.

 

Merging two unprofitable streaming services into a single service might improve scale, but probably not enough to guarantee profitability. Subscribers of both services could save money, but beyond that, I can't see how the costs of producing content would change. 

 

It may be that we are on the verge of a "back to the future" moment where bundles of streaming services are offered at a discounted price as they were on cable. What bothers me more is that the trend toward reinstating advertising in streaming services takes us back to a time when audiences were forced to watch hours of mindless drivel on cable. I was saved with the advent of DVR which allowed fast-forwarding through ads. It is not available on streaming. That puts most of us between a rock and a hard place. Who knows, it may make cable a better option for many once again.  

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.