Finance
Finally! The Fed Recognizes Inflation’s Retreat; Financial Markets Celebrate
Despite the fact that markets were 90%+ certain that the Fed was done hiking, both the equity and fixed-income markets were surprised that the hawkishness, that had been so prevalent for the past 18 months, had completely disappeared. We were surprised, too! The dovish policy statement and Chair Powell’s demeanor complemented each other. We think that most of the Fed meeting was devoted to what the rate cutting cycle should look like and its cadence. Clearly, the Fed is now reading from the same hymnal as the markets regarding the inflation devil. Officially, then, the inflation war is over and the inflation foe has been vanquished. And, as we predicted in our September 22nd blog, “Higher for Longer” did prove to be “transitory.”
10-Year Treasury Rate
Universal Value Advisors
Market reaction was swift in both the equities and fixed-income markets. The S&P 500, already near an all-time high, rose 1.4% on Fed Day (Wednesday, December 13th) and bonds had a monster rally as seen in the chart of the 10-Yr. Treasury whose yield touched 5% just two months ago. On Friday (December 15th) it closed at 3.915% and, we believe, is headed lower.
Last Tuesday (December 12th), the day before the Fed met, the odds of a rate cut at their March meeting was 40%. As of market close on Friday, they were 70%. The Fed’s Survey of Economic Projections (SEP), more widely known as the “dot-plot,” is published every quarter. The one published after the recent meeting showed a median Fed Funds Rate of 4.625% at the end of 2024, down 75 basis points from current levels (i.e., three 25 basis point rate cuts), falling another 100 basis points (four cuts) in 2025 to 3.625%, and then to 2.875% by the end of 2026 (3 more cuts) (see chart). And that is assuming a soft landing for the economy (i.e., no Recession). Of course, rate cuts will be swifter, and likely at the 50-basis point level, when the Recession arrives.
Dot-Plot (December ’23)
Universal Value Advisors
What happened to cause such an unexpected turn of events? We think that the reality of the rapid pace of disinflation finally set in, as we have discussed in our blogs for the last few months. Also, as noted by Rosenberg Research, the Fed’s own Beige Book, a quarterly survey of business conditions in each of the 12 Federal Reserve districts, told them that eight of the 12 districts reported either zero growth or actual declines, a result that was worse than Beige Book reports leading up to either the ’01 or ’08 Recessions.
In the after meeting press conference, Chairman Powell’s demeanor was anything but hawkish. While leaving himself and the FOMC an out in case inflation flared up, he admitted that the Fed’s hiking cycle was likely over, and that the next Fed move would be a cut. Once again, he didn’t commit to when the first rate cut would occur, but, as noted above, market odds show a 70% likelihood that the first cut will be in March. If history is any guide, the average number of months between the first pause and the first rate cut is nine. March is the eighth forward month (close enough for government work!).
Inflation – CPI
Playing a key role in all of this has been the inflation data. Both CPI and PPI reports came out this week, and both were supportive of the view that inflation had been beaten. The CPI, while still elevated in the year over year headline (3.1%), is actually exhibiting some signs of deflation, especially on the goods side. The table shows the annualized inflation rate for various time periods over the past year.
Annualized Inflation over Recent Time Periods
Universal Value Advisors
Note that over the past three months, inflation has quickly cooled, a major factor in the Fed’s move toward dovishness and the bond market’s view of when the Fed will first cut rates. To show how prevalent falling prices are, the next table shows price changes for the month of November for selected goods and services, examples of the disinflationary (deflationary) environment that the economy has entered.
Price Changes for Goods and Services
Universal Value Advisors
Inflation – PPI
The Producer Price Index, a leading indicator of future CPI results, came in at a non-inflationary 0.0% in November. October’s reading was -0.4%. Year over year, the PPI has grown just +0.9%. If one looks at PPI items similar to what is in the CPI, one would find that reading was also 0.0% in November after a -0.6% reading registered in October.
Inflation Overview
The war against inflation appears to have been won! We even see this in the price of oil (left chart), now hovering around the $70/bbl. level (closed at $71.79 on Friday). It is way off its $93/bbl. September-October peak, and this is with disruption in Russian oil delivery to the West and OPEC+ discussing further output reductions.
Crude Oil Futures & Crude Oil Production (% of world total)
Universal Value Advisors
Part of the reason the price could fall was that the production slack and then some was taken up by U.S. operators (right hand chart above). Note that U.S. production has been rising for some time, including at the peak in oil prices in September-October. Because of these factors, it appears that the bulk of the large fall in the price of oil has been from falling demand.
Even the prices of food and used cars, two poster children for this inflation plague, are on the wane.
Foodstuffs Price & Used Car Vehicle Index
Universal Value Advisors
Rent CPI is Gradually Receding
Bureau of Labor Statistics, Apartment List
Other Observations
The Rents Issue: The CPI has been buoyed higher by the lagging rents issue. But, as we get further and further into 2024, it will be pulled down by those very rents. As noted in prior blogs, shelter costs weigh in at a 1/3rd weight in the CPI, but are lagged 12 months. In other words, the current CPI is using rents from a year ago. On the chart above, the purple line shows the true picture of rents (-1.1% in November) and how rapidly they have declined. The blue line is the rental number used by the Bureau of Labor Statistics (BLS) in the CPI calculations (7.2% in October), and the red line is the resulting CPI (3.2% in October).
By mid-2024, the CPI shelter component will be approaching negative territory. And, once there, it is likely to stay simply due to the record supply of new apartments that will be coming on line.
Nearly 1 Million Apartments are Under Construction
Universal Value Advisors
According to Rosenberg Research, the faulty shelter methodology used by the BLS added 220 basis points to the headline CPI. That is, the CPI would currently be below 1% if accurate, up to date, rents were used. So, it’s not a wonder why the Fed has turned dovish!
Banks – Lending and Delinquencies: The U.S. economy runs on credit. The left hand side of the chart below shows that banks have stopped lending, i.e., commercial and industrial loan balances are the same as they were a year ago. The right hand side shows that consumers have run out of gas. Note the steep upward slope in delinquencies. No lending; rising delinquencies – a formula for banking headaches and an economy that will come to a screeching halt without its needed flow of credit.
Commercial and Industrial Loans; Delinquency Rate on Consumer Loans
Universal Value Advisors
Final Thoughts
The Fed has finally recognized that inflation is dead. The November CPI and PPI reports nailed that. The rate at which rates will come down depends on the health of the economy. The next Fed meeting is in March. That’s when we think the first rate cut will occur. We have held this position for several months; nice to see that the markets have caught up (70% chance per Bloomberg).
There are too many companies announcing layoffs – it seems like every day another major layoff is announce. Challenger, Gray and Christmas data on layoffs and job openings have been downbeat. While Retail Sales for November surprised slightly to the upside, Johnson Redbook same store sales were quite negative, so we expect that November’s Retail Sales numbers will be revised down when December’s sales are announced in mid-January. In addition, Retail hired many fewer seasonal employees than normal, and we think this is a prelude to disappointing holiday sales.
We still see 2024 as a Recession year!
Merry Christmas and Happy New Year to all our readers!
(Joshua Barone and Eugene Hoover contributed to this blog)
Solid Revenue Growth Coupled with High Gross Profit Margin (73%) and Non-IFRS Profit (RMB 376 Million)
BEIJING, March 26, 2025 /PRNewswire/ — Bairong Inc. (the “Company”, “we” , “us” or “our” ; HKEX: 6608), a leading cloud-based AI turnkey service provider, today announced the consolidated results of the Company for the year ended December 31, 2024.
Mr. Zhang Shaofeng, our founder, chief executive officer and chairman of the Board, commented:
“As a leading cloud-based AI turnkey service provider, Bairong achieved revenue growth and sustained profitability in 2024 when the industry as a whole was weak. We also generated an operating cash flow of RMB 303 million in 2024, which fully demonstrates the resilience of our business. In terms of technology and products, our VoiceGPT continues to iterate rapidly, and at the same time, new products such as the digital human All – in – One Machine AvatarGPT and Cybotstar Agent Platform have been further implemented. In 2025, we will increase our investment in new businesses and new scenarios, especially in the two fields of Pan-financial AI and Pan-industry AI, so as to achieve a vertical and horizontal business layout supported by AGI.”
Financial Summary
|
Year ended December 31, |
|||
|
2024 |
2023 |
Change |
|
|
(RMB in thousands, except percentages) |
|||
|
Revenue |
2,929,267 |
2,680,915 |
9 % |
|
Model as a service (“MaaS“) |
932,473 |
891,248 |
5 % |
|
Business as a service (“BaaS“) |
1,996,794 |
1,789,667 |
12 % |
|
BaaS – Financial Scenario |
1,410,695 |
1,184,728 |
19 % |
|
BaaS – Insurance Scenario |
586,099 |
604,939 |
(3 %) |
|
Gross profit |
2,141,712 |
1,954,532 |
10 % |
|
Operating profit |
285,234 |
346,886 |
(18 %) |
|
Profit for the period |
266,029 |
335,259 |
(21 %) |
|
Non-IFRS measures |
|||
|
Non-IFRS profit for the period |
376,051 |
375,064 |
— |
|
Non-IFRS EBITDA |
486,176 |
463,782 |
5 % |
Revenue
Our total revenue increased by 9% from RMB2,680.92 million for the year ended December 31, 2023 to RMB2,929.27 million for the year ended December 31, 2024, primarily attributable to our enhanced capabilities of providing products and services despite a challenging macroeconomic and consumption environment.
For the year ended December 31, 2024, our MaaS business reported revenue of RMB932.47 million, representing an increase of 5% year-over-year. During the Reporting Period, the number of Key Clients reached 211, while average revenue per Key Client was RMB3.37 million. Our Key Client retention rate was 97%.
Key metrics of MaaS
|
Year ended December 31, |
|||
|
2024 |
2023 |
Change (%) |
|
|
(unaudited) |
(unaudited) |
||
|
(RMB in thousands, except percentages) |
|||
|
Revenue from MaaS |
932,473 |
891,248 |
5 |
|
Revenue from Key Clients(Note) |
711,328 |
744,489 |
(4) |
|
Number of Key Clients |
211 |
213 |
(1) |
|
Average revenue per Key Client |
3,371 |
3,495 |
(4) |
|
Retention rate of Key Clients |
97 % |
99 % |
(2) pct |
|
Note:“Key Clients” are defined as paying clients that each contributes more than RMB300,000 total |
|||
In 2024, our BaaS – Financial Scenario business reported revenue of RMB1,410.70 million, representing a year-over-year increase of 19% from RMB1,184.73 million for the year ended December 31, 2023. During the Reporting Period, we maintained growth against the industry’s downturn, with our brand gaining increasing recognition from more and more partners. A significant number of institutions prioritize choosing us as their partner of choice, indicating that the brand effect has been established.
MOBILE, Ala. (WALA) – A former finance director for the City of Semmes has been arrested and charged with theft by deception and credit card fraud, according to jail records.
According to the Mobile County Sheriff’s Office, 48-year-old Heather Davis is accused of embezzling between $3,000 to $6,000 from her current employer, McDonald’s.
According to a post on the City of Semmes Facebook page from March 4, 2023, Davis began working for the city in February in 2023 as the finance director.
However, Semmes Mayor Brandon Van Hook told FOX10 News Davis has not worked for the city in over a year.
The Mobile County District Attorney’s Office said these charges do not stem from her position with the City of Semmes.
Davis was also a former city clerk for the City of Satsuma.
Davis turned herself in today after a warrant for her arrest was issued, according to investigators.
Jail records show Davis has since been released on a $10,000 bond.
This is a developing story
Copyright 2025 WALA. All rights reserved.
By Nupur Anand
NEW YORK (Reuters) – U.S. consumers are starting to curb their spending in response to high prices and a worsening economic outlook, according to consumer finance company Synchrony Financial (SYF).
Americans have been accumulating more debt amid strain in their finances, with delinquencies edging up for auto loans, credit cards and home credit lines, the Federal Reserve said last month.
Philadelphia Federal Reserve President Patrick Harker has also warned that trouble may be brewing for the U.S. economy, which is showing signs of stress in the consumer sector with consumer confidence also waning.
The belt-tightening indicates that Americans, whose finances are broadly healthy, are preparing for their finances to be more stretched, said Max Axler, chief credit officer of Synchrony. Most clients are still keeping up their loan repayments, he added.
“Purchase volumes have gone down across the industry as consumers across all income groups become more thoughtful about spending,” Axler told Reuters.
Synchrony, which issues credit cards in partnership with retailers and merchants, has more than 100 million consumer credit accounts.
U.S. consumer sentiment plunged to a nearly 2-1/2-year low in March as inflation expectations soared. Some economists have warned that President Donald Trump’s sweeping tariffs could boost prices and undercut growth.
Concerns about higher prices have driven consumers’ long-term inflation expectations to levels last seen in early 1993.
Retailers including Target and Walmart have said that shoppers are being careful with their spending, waiting for deals or making tradeoffs to lower-priced items.
Household spending cuts could be a precursor to increasing late credit payments or loan defaults, analysts said. While default rates have remained broadly steady, spending is being watched carefully as an early indicator of deteriorating consumer finances.
Borrowers could also become more cautious, taking out fewer or smaller loans and crimping a key source of revenue for banks. Across the industry, loan growth slowed by 5% to 12% in February versus a year earlier, HSBC analyst Saul Martinez said.
“There is clearly a slowdown, and it shows that the consumer is vulnerable,” Martinez said. “And for banks, slowing loan growth could result in lower net interest income and revenue,” he added.
The concerns about household finances have also weighed on consumer finance stocks with shares of American Express (AXP), Capital One (COF), Synchrony, (SYF) and Discover (DFS) down between 15-22% over the past month, Martinez said.
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