A Roundup of Events Around the Market: Banks, LVMH, and Costco

My interests have been focused recently on some events: the awful Tesla event, my hate of David Tepper, the Chinese rush, and defense companies. Because my interests have been placed in some specific matters, I have not touched on some important events in the market. Today, we will do a bit of a roundup. First, the banking earnings, a review, and how this changes the market. Second, an LVMH (Louis Vuitton Moët Hennessy) earnings review. Then, we will do a little Costco stuff, specifically around their recent platinum stuff. Spoiler alert, I love that they are selling platinum.

Okay, the banks. JPMorgan, Citibank, Bank of America, and Wells Fargo have all reported earnings in the past few days. There are a few key lessons we should take away from these reports.

First, consumers are stronger than many think. These banks are some of our country’s best measure of consumers, and they are all spending above what they were spending one year ago. Higher-income individuals are spending quite a bit, middle-class consumers are a mixed bag, and lower-income individuals are definitely weaker. This is about expected and signals to me that The Federal Reserve is cutting at the right time. Next quarter, I would expect consumer spending to be weaker, but at the same time, The Fed will be cutting rates and alleviating pressure. This should return us to a relative equilibrium.

Second, while there is overall strength, consumers on the lower side have taken some hits. For example, credit card delinquency and borrowing have both increased at a relatively similar rate. This means that the poorer Americans are having to borrow to pay for necessities or wants and are failing to pay back on time.

Third, the housing market is about to heat up again. In general, the market has been completely frozen for about a year, after a completely insane 2021 and 2022. Mortgage borrowing has increased at JPMorgan, but it fell at Bank of America and Wells Fargo. I think the Bank of America and Wells Fargo fall can pretty much be ignored. I think that is more a symptom of these banks sort of being mid, but JPMorgan is a great bank, and I think they can be used as a marker of mortgage borrowing much more.

Fourth, money is about to pour into equities. Because rates have been higher, money-market funds and Treasurys have become popular. With rates falling, banks will have to pay less in rates to get customer money and prices will likely increase in equities as financial advisors reverse course.

Fifth, on the corporate banking side, things are picking up again as well. Goldman Sachs for example, saw their IB revenue increase by 20% and equities revenue by 18%. Profit is up for them 45% since this time last year. That is spectacular, and I see no reason why these numbers will not continue to increase.

Okay, let’s talk about LVMH and their paltry earnings. The earnings were bad, but that is irrelevant. LVMH has been the pinnacle of luxury for decades now, but they, and the rest of the fashion industry, are struggling right now. I do not see a reason why this downturn will reverse course either. China continues to slow down, and the country is becoming more anti-West. The country is not taking stimulus as seriously as they should, they are not trying to get to the core of the problem, and these luxury companies, who have been so dependent on China for so long, are feeling the pain.

I would stay away from all luxury. Ferrari is the only luxury company I own because they are unique. Louis Vuitton, Gucci, Hermes, etc… are not unique in their product, and they are not unique in their dependence on China. All of these companies are a stay way.

Now is the fun part, where I get to talk about Costco. If you are one of my dedicated Pax Romana Capital readers (there are millions of you), then you know that I love Costco stock. I do not have enough time or space in the universe to explain all the reasons why I love Costco, but suffice to say, they are an impeccable, innovative, unique company. They are always looking for an edge, and they found another with their recent invention, a platinum bar.

They are selling these bars for a bit over $1,000, an 8% markup. Costco also sells gold bars as well. These little perks add to the value of the brand and the value of a Costoc membership, the real moneymaker. I assure you that thousands of people across America will get Costco memberships specifically to pay Costco over $1,000 for a platinum bar, and I assure you that tens of thousands have done the same for gold bars.

I love Costco stock, and they are a buy at any price because they do stuff like this.