Brief Thematic: Volatility Is Back – And That’s Bad for Credit and more

In this briefing:

  1. Volatility Is Back – And That’s Bad for Credit
  2. Our Needs…

1. Volatility Is Back – And That’s Bad for Credit

Fredgraph

Volatility is back:

  • As of Monday close, the S&P 500 was almost 5% down from its July peak.
  • The S&P 500 implied volatility index (VIX) closed at 21.09 on Monday, off the 2017 lows (9.14) albeit far from the extreme levels it reached in 1998 and 2008 (45.74 and 80.06 respectively).

Rising stock market volatility is also bad news for credit, as we explain below.

2. Our Needs…

  • Nike: Nike is advancing its DTC efforts as it acquires a predictive analytics SaaS platform and launches a sneaker subscription service for kids.
  • Logistics: FedEx ends U.S. ground delivery with Amazon as USPS reports its first package volume decline in nearly a decade.
  • Lyft & Uber: The share prices of Lyft and Uber are each down 7% since reporting earnings last week on Lyft’s shocking news it is moving up its lock-up period to August 19 from September 24 and Uber’s mind-numbing net loss of $5.2B.

I don’t know about you but I’m starting to fear for my safety. Last weekend, we had the tragic mass shootings at a Walmart in El Paso, Texas and at a bar in Dayton, Ohio. Last week, the bodies of the triple murder fugitive teenagers from Port Alberni were discovered, and on Saturday morning the American financier and convicted sex offender Jeff Epstein was found dead in his prison cell. Closer to home, the Sea to Sky Gondola in Squamish, which we ride up nearly every weekend to picnic and go for a hike, became a crime scene on Saturday morning after someone sabotaged it by cutting the gondola cable, sending all 30 cable cars crashing to the ground. If that wasn’t scary enough, on Saturday afternoon when we were driving home from a family bike ride, we spotted a dozen policemen and a police boat facing off against a guy armed with a knife at Sunset Beach.

This all made me start to think about Maslow’s hierarchy of needs — specifically the second layer — which is our need for safety. It’s interesting as the customer capital side of the value pyramid actually corresponds to Maslow’s pyramid as the functional level is about meeting physiological and safety needs, the emotional level is about love/belonging and the psychological level is about meeting our self-actualization needs. One way companies are advancing up the customer capital side of the value pyramid is through launching subscription services. For example, Nike, which is advancing its DTC efforts with the acquisition of predictive analytics SaaS platform Celect, just launched a sneaker subscription service for kids called Nike Adventure Club. Likewise, Bloomingdale’s is launching “My List at Bloomingdale’s”, an apparel subscription rental service. And Disney just announced it is bundling its Disney+ streaming service with ESPN+ and ad-supported Hulu. Meanwhile, we saw developments from two companies that have built cult-like membership followings by capitalizing on our desire for self-actualization with Equinox announcing it will be entering the on-demand fitness streaming space this fall and WeWork preparing to file for its IPO as early as this week.

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