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Where's the Tuna?

This week was a bit of a reversal as the markets trended a bit higher.  While I can confidently say we all like it more when the markets move up, I wouldn’t read too much into this latest increase.  The end of the second quarter is coming quickly, and it is not uncommon for a bit of “window dressing” to occur.  The real test will be in the coming weeks when earnings announcements begin to roll in.  Some companies will have a difficult year-over-year comparison due to COVID and closures which started abruptly in the second quarter last year.  I’m thinking of the consumer staples companies that provided the essentials, such as toilet paper, with nary a roll to be found on supermarket shelves.  On the other hand, there are companies that all but shut down in Q2 and should have an easy year-over-year comparison.  At the end of the day, most investors will want to know what company’s’ expectations are for the rest of the year and the impact inflation may have on their bottom lines.  I too am eagerly awaiting their statements.

I need to get something off my chest.  In years past, the Federal Reserve spoke with one voice.  Generally, it was the chairman of the Fed that presented both the face and the voice of its policies.  That’s not to say that everyone harmoniously agreed or that there wasn’t serious dissension among its ranks.  I suppose it would be naïve to say times have changed or that those were simpler times, because they weren’t.  However, I can’t help but notice the often-public disagreement among the Fed’s board of governors.  I don’t know whether to chalk it up to a desire to be in the spotlight, or simply a jockeying for position to be next in line for the chair.  All I can say is the constant TV appearances and statements coming from the various members of the Fed has served to undermine its unity and its message.  To some degree, the uncertainty in the markets is due to the mixed messages we hear on a weekly basis.  It may be too late to put the genie back in the bottle, but it just might serve the Fed better to say less and do more.

In company news, I read that American Airlines had to cut flights not because of a lack of demand, but because it couldn’t find enough employees to serve those flights.  It seems the current worker shortage isn’t just among low-paying service jobs.  Highlighting some of the challenges, Delta announced it is looking to hire over 1,000 pilots by next summer.  I suspect, much like the fast food industry, the travel and hospitality industry will continue to face labor issues for the foreseeable future.

In other news, it seems the landscape is changing in both subtle and not so subtle ways.  Just this week we learned of antitrust legislation and litigation coming for certain companies in the technology sector, drug pricing reform and legislation coming for the pharmaceutical industry, and the reality of a carbon-free goal in the Energy sector.  It seems companies are now being challenged on new fronts and in new ways.  With a little under eighteen months until the mid-term election, it is too soon to say whether these challenges will be sustained or whether they will die on the vine.  However, it is becoming clear that companies will be forced to navigate a new set of hurdles if they are to succeed going forward.

In closing I return to a story I first talked about in 2012.  The story back then was that a substantial amount of fish found in supermarkets and on menus is mislabeled.  For example, red snapper and tuna are amongst the most often to be a different species.  Some 87% of red snapper sold today is falsely branded.  So when I came across this most recent story, my heart sank.  It seems Subway is on the hook after a lab report found there is no actual tuna DNA in its sandwiches.  After testing tuna sandwiches from three different Subway restaurants in Los Angeles, they found the purported tuna was made from “a mixture of various concoctions.”    The conclusion the lab drew is that either there’s just nothing there that’s tuna, or it is so heavily processed that whatever they could pull out couldn’t be identified.  Well, I guess that means I’ll have to switch to McDonald's chicken nuggets instead.  Now you know.

Bruce J. Mason, MBA