Monthly Market Debrief

Market Snapshot

The stock market had an impressive rally in May thanks to the TACO trade - Trump Always Chickens Out.

The market refuses to believe that worst of the threats will ever be enacted. Investors believe that Trump will continue to chicken out before any artificial deadline he sets. The market downer is now the bond market. 

Following the “Big Beautiful Bill” details and Moody downgrading US debt, the Treasury auction for 20-year bonds saw shockingly little demand. This caused a three day decline in the S&P 500 from Wednesday to Friday. Bond investors are increasingly worried about the US debt and deficit as Congress passes a bill that cuts taxes today but waits to cut spending for five years. In other words, massive deficit and debt increases.

Then, over the Memorial Day weekend, Trump chickened out on his EU tariffs which revived the TACO trade and sent the market back into the green for the rest of May.

I don’t know how long the tariff back and forth will last. I also think there will come a time when he doesn’t chicken out. Which is why I repeat what I said when “liberation day” first occurred, stay the course. Don’t gamble on the TACO trade. The only consistency with this administration is a lack of consistency.

In addition to the green market, CPI numbers came in at 2.3% which is beautifully close to the 2% goal. It also means I must admit defeat. I predicted that inflation wouldn’t dip below 3% for all of 2025. I was very wrong. 

I must admit that the Fed did not cut interest rates too early, as I thought. They were correct. Now, we will see what happens with tariffs. I am actually done making predictions. I am just staying the course. 

Company Highlight - Cal-Maine Foods

Eggs. 

Americans eat a lot of eggs. Each person eats around 284 eggs per year. In 2023, 382 million hens laid 9.1 billion dozen eggs or 109 billion eggs. So, a lot of eggs. 

In April, egg prices hit a record $6.23 per dozen as bird flu continues to choke supply. Bird flu has killed over 150 million hens since January of 2022. So one can assume that as millions of hens are killed, the egg producers are also feeling the pain… 

Well, Cal-Maine, the largest egg producer in America, just posted its largest quarterly profit EVER of $508 million. That is three times their profit from one year ago.

Cal-Maine produces 1 in 5 eggs in America. You probably haven’t heard of them because their eggs are all sold under different brand names like Egg Land’s Best, Land O’Lakes, and Farmhouse Eggs. While other egg producers are losing millions of hens, Cal-Maine has lost fewer hens thanks to $70 million spent on bio security since 2015 (after a previous bird flu). 

Cal-Maine sprays all vehicles with a disinfectant before coming into their facilities. They isolate all their hens. They control all aspects of their supply chain from hatching new hens, growing hens, collecting eggs, cleaning eggs, and delivering eggs. So while supply across the board decreased (increasing price), Cal-Maine was able to produce far more relative to other suppliers.

At first, I was pissed hearing about their record profits. Then, I realized these profits are nearly 10 years in the making. Following a 2015 bird flu epidemic, Cal-Maine took steps to protect them from this outbreak. Smart decisions lead to higher profits. 

There is one other aspect at play here though. Cal-Maine, when receiving a lot of criticism for their profits, quickly responds with “we don’t set the price of eggs.” 

Eggs are a commodity traded on an open market at spot prices. The USDA and Urner Barry are the two major entities that set egg prices based on supply and demand. Cal-Maine says they are “price-takers” not “price-makers.” Meaning they sell their eggs at the price set by Urner Barry.

Now, I am not going to sit here and say Cal-Maine, the largest egg producer in America, just wakes up, sees the price, shrugs, and sells their eggs. I firmly believe there is some manipulation at play. They talk. No chance they don’t.

As a firm believer in capitalism and unbound greed of large corporations, I hold both beliefs comfortably: Cal-Maine deserves high profits for their smart investments and they have influenced the price of eggs to ensure high profits. 

I am not the only one skeptical as the DoJ announced an investigation into Cal-Maine to sniff out any market manipulation.

This is just the surface of a very deep egg rabbit hole. I never understood that Always Sunny in Philadelphia had a point with this episode, but Charlie Day wasn’t messing around. 

It really isn’t. 

What we are listening to:

The Journal - Eggs are Still Expensive. Is This Company to Blame? If you want more on Cal-Maine and a tiny dip into Bird Law, give this a listen.

Debrief on Deck

Next Week, we are going to talk about the Big Beautiful Bill. We will look at the tax cuts, spending cuts, time frames, and some fun other “cherries on top.”