Since the Fed began hiking rates last year, residential housing prices have remained intact for longer than many expected.

The data, though, is increasingly mixed: Sales of previously owned homes were down 23% in April from a year earlier 😬

But that’s not as bad as it sounds.

The New York Fed estimates that 14 million mortgages were refinanced during the pandemic era at rock-bottom rates. Why would these existing homeowners want to move and start over with considerably higher interest rates?

Exactly.

That dynamic has reduced the supply of homes available for sale, which actually supports housing prices. Sometimes it’s not always as simple as rates up, prices down.

— Shawn

 Here's the rundown:

Today, we'll discuss two items in the news:

• ESPN’s pivot to streaming

• What Walmart’s earnings tell us about the economy

• Plus, our main story on the legend investor Guy Spier

All this, and more, in just 5 minutes to read.

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IN THE NEWS

📺 ESPN Plans to Stream Flagship Channel, Eyes Cable’s Demise (WSJ)

ESPN is laying the groundwork to sell its channel directly to cable cord-cutters as a subscription-streaming service in coming years, according to The WSJ.

• As consumers continue to cut the cord and move away from cable TV, ESPN is preparing for that shift, though there is no firm timeline for the change.
  

• Still, it'd have a large impact on cable providers, which rely on ESPN since it's one of the main attractions for a cable bundle.

Why it matters

This is the next step in ESPN's progression from a traditional cable TV behemoth into a streaming and subscription company.

• The sports-media giant took its first step into streaming in 2018 with the launch of ESPN+, a monthly streaming service whose live programming includes golf events, certain Major League Baseball and professional hockey games, and a variety of scripted and unscripted programming. It has 25.3 million subscribers.
  

• But ESPN+ doesn’t offer access to the ESPN channel itself, including high-value programming such as the NBA and NFL telecasts that are only available on TV. Project “Flagship” is about helping ESPN transition the full channel to streaming.

Tricky shift: Every big media company is carrying out a tricky shift from the traditional TV business, which has been very lucrative, to a streaming world where the economics are more uncertain. Consumers for decades have paid for large bundles of channels under long-term, hard-to-cancel cable contracts.

Of note: ESPN gets a $9.42 slice of the average cable TV bill—it collects fees from cable providers for each customer—compared with an average of 49 cents per subscriber for other U.S. cable networks, according to S&P Global Market Intelligence.

• “It’s a huge decision for us to make, and we know that we’ve got to get it right both in terms of pricing and timing,” Disney CEO Bob Iger said earlier this month (Disney owns ESPN).

🛒 Walmart Raises Guidance, Bucks Trend (FT)

Earlier this week, Home Depot signaled that Americans are shifting their spending away from home projects and into services, namely travel and leisure.

Meanwhile, Walmart just raised its guidance after first-quarter results topped expectations. The world's largest retailer has bucked the more cautious tone from rivals Home Depot and Target on U.S. consumer spending.

• “Stubborn inflation” in dry grocery and consumables was still weighing on some families and creating uncertainty about the outlook for the second half of the year, Walmart’s CEO told analysts.

• The world’s largest retailer raised its full-year forecasts, predicting 3.5% sales growth rather than the 2.5% to 3% guidance it had reaffirmed last month.

Why it matters

Taken together, it was an encouraging, upbeat tone that provided insight into the consumer's and broader economy's resilience.

• Walmart continued to gain market share in grocery, including from higher income consumers who have become more price-conscious as inflation has persisted. Cheaper private-label brands also claimed a larger share of its U.S. sales in the quarter.

• Corey Tarlowe, a retail analyst at Jefferies, said the increases Walmart saw in both the number of consumers coming to its stores and the amount they spent on average were “very encouraging”.

Confidence: Its more confident outlook than Target’s suggests Walmart could gain market share as U.S. consumers are becoming “more and more stretched,” Tarlowe said.

• Also, Walmart pointed to a 28% sales increase from its stores in China as the country eased Covid-related restrictions. And it

  reported double-digit sales growth from the Walmex business in Mexico and from Flipkart, its e-commerce business in India, where McMillon said it saw “a big opportunity” to increase exports of several categories of goods.

MORE HEADLINES

🐔 Chick-fil-A’s first restaurant is closing after more than a half-century in business

💸 Deutsche Bank will pay $75 million to victims of Jeffrey Epstein

🚀 Netflix stock jumps 10% as it boasts strong ad-tier growth

THE EDUCATION OF A VALUE INVESTOR

Investing exceeds money

Guy Spier is a spectacular value investor who marries financial know-how with intellectual curiosity. He’s a Switzerland-based Warren Buffett admirer whose disciplined investing has earned him global acclaim.

Spier, a South African native with Oxford and Harvard degrees, founded Aquamarine Capital in 1997 and authored The Education of a Value Investor.

In his book, he shares lifelong lessons about investing and finance. But he’s more than just an author, boasting an astonishing 463% return — outperforming the S&P 500's 167% since the capital was founded in 1997 until the book was written in 2014.

That’s a solid testimony to Spier's mastery of finance through learning from others and self-reflection.

His book also reveals his investment philosophy, confirming his position as a thought leader while emphasizing more than just monetary returns, which, in his opinion, become irrelevant over time.

He advocates for a fulfilling life by expressing gratitude to others. Spier manifests his gratitude by writing appreciation letters, which also bring optionality and unexpected opportunities in life.

He claims that “as wealth grows, the goal is to give back to society and seek spiritual growth.”

Blood, sweat, and tears

Spier also shares some of his life's darker moments confronting his moral compass, which, ironically, may have taught him more valuable lessons than any of his successes.

He starts his story as an Oxford University graduate, where he studied politics, philosophy, and economics.

Later, he excelled as a top student at Harvard Business School when he stumbled upon a job listing at DH Blair Investment Banking Corp in New York City.

It looked like a fantastic chance to not only make immense wealth but also gain prestige along the way.

Unfortunately, the job was far from what Spier had anticipated, becoming miserable within six months. Things worsened, and he felt he couldn’t trust anyone, from supervisors to colleagues.

Even more disturbing, he realized the company had an enormous conflict of interest, but no one really cared.

The firm was primarily focused on amassing fees from deals, regardless of their quality, essentially financing them through public investors lured by hype. Employees strove to maximize their gain, often at the expense of their colleagues.

However brutal, this experience was a cleansing moment. It helped him understand that, arguably, the most important thing in life isn’t what people think of you but what you think of yourself.

• Spier later revealed: “I had been dangerously blind about the motives and ethics of my colleagues.”
  

• “This was powerful proof of just how dumb even smart, well-educated people can be. It certainly took me far too long to grasp that this business was set up in such a way that if I wanted to win, I would have to lose whatever was left of my moral compass”.

Key Lessons to Live by

In his book, Spier shares his journey in finance, investing, and staying true to yourself. He offers valuable lessons for aspiring investors that can bring wealth, fulfillment, and great relationships.

Five key takeaways are:

1. Importance of Self-Reflection: Self-awareness and introspection are critical to developing a successful investing strategy. Understanding your strengths, weaknesses, and biases will help you make better investment decisions.
   

2. Learn from Mentors: Spier highlights the value of learning from experienced investors like Warren Buffett and Charlie Munger. By studying their principles, practices, and mistakes, investors can formulate their own investment philosophy.
   

3. Focus on the Long Term: A long-term perspective is the cornerstone of value investing. Spier advises investors to be patient and concentrate on the underlying business fundamentals rather than short-term market fluctuations.
   

4. Circle of Competence: Invest in businesses you truly understand and can confidently evaluate. By focusing on their circle of competence, investors can identify undervalued companies with higher chances of long-term success.
   

5. Be Contrarian: Spier encourages investors to think independently and be willing to go against the crowd. Following the herd may lead to overvalued investments, while contrarian investing can uncover hidden opportunities.

Dive deeper

To soak in Guy Spier’s philosophy, read his book “The Education of a Value Investor.”