Apple TV+ Increases Its Price Once Again

　　Apple has raised the price of its Apple TV+ streaming service for the second time in a year, effectively doubling its monthly cost in that span.

　　Albert Edwards: The Fed's Interest Rate Hikes and the Coming Recession

　　Albert Edwards, a strategist at French investment bank Société Générale, has gained prominence in recent years for his controversial takes on Wall Street. He famously coined the term "greedflation" during the pandemic, arguing that corporations exploited COVID-19 and the Russia-Ukraine war to increase profits, potentially jeopardizing the future of capitalism. Earlier this month, he issued a warning that the current stock market bears striking resemblance to the era preceding the October 19, 1987, crash, known as Black Monday, when the Dow Jones industrial average plunged 22.6%.

　　Edwards, known for his bearish disposition, has consistently warned over the past two years that the Federal Reserve's rapid interest rate hikes will ultimately trigger a U.S. recession. Despite a robust third-quarter GDP estimate, Edwards remains cautious.

　　He believes that small businesses in America are struggling under the weight of rising borrowing costs and persistent inflation, and their plight will eventually surface. The increasing number of small-business bankruptcies will ultimately be the final nail in the coffin of the U.S. economy, following years of headwinds and recession predictions. "The vast majority of economists are stampeding away from their recession calls," he wrote in a recent note. "The notion that we are at the start of a new economic cycle seems preposterous to me." Edwards elaborated on his reasoning, drawing a parallel between Jerome Powell and his six fellow Federal Reserve board members' interest rate hikes and the New Testament's destruction myth, referring to them as the "Seven Fed Horsemen of the Apocalypse."

　　"You only need to turn your gaze to the smaller listed and unlisted companies to witness the torture being inflicted by the Fed's interest rate garroting," he wrote.

　　The Overlooked Small-Business Recession

　　Small businesses play a vital role in the health of the U.S. economy, as Edwards emphasizes. Firms with fewer than 100 employees generated 63% of all new jobs between 1995 and 2021. According to the U.S. Chamber of Commerce, small businesses currently account for approximately 43% of U.S. gross domestic product. However, with the availability of loans for small businesses declining and the cost of the remaining loans rising, mom-and-pop operations are facing significant challenges, especially when compared to their larger competitors. Edwards asserts that small-business credit conditions are "at recession levels."

　　The strain on smaller companies is reflected in the performance of U.S. stocks. The small-cap-focused Russell 2000 index has declined over 6% year to date, while the SP 500, which tracks the 500 largest U.S. firms by market cap, has gained roughly 8% over the same period.

　　Even within the SP 500, Big Tech companies have been the only real winners this year amid rising interest rates. "The SP would in fact have been in negative territory without the stellar performance of the 'Magnificent Seven' megacaps," Edwards explained, referring to the trendy new name for the largest Big Tech firms.

　　'Trampled Underfoot'

　　Edwards argues that the pain experienced by small- and medium-size businesses has not yet translated into rising unemployment, but this is solely due to the labor shortages during the pandemic, which left many firms playing catch-up on hiring. Many business leaders are also more hesitant to lay off workers despite worsening business conditions, fearing they will be unable to hire enough workers when things improve.

　　However, Edwards warns, "Post-pandemic labor shortages (reflected in payroll resilience) should not disguise the fact that smaller companies are being trampled underfoot—not by the Magnificent Seven, but the Seven Fed Horsemen of the Apocalypse."

　　He points to rising bankruptcies as evidence that the seven members of the Federal Reserve Board are indeed leading the economy toward a nightmare scenario. Between January and the end of September, there were 516 total corporate bankruptcies in the U.S., according to data from SP Global. This represents a 38% increase compared to the total number of bankruptcies in all of 2022.

　　Edwards also believes that many smaller so-called zombie companies sustained their unprofitable business models through cheap debt during the era of near-zero interest rates that followed the Great Financial Crisis and the pandemic. These firms were essentially kept alive on "extended life support," he argues. "But now the sharp rise in rates is causing a surge in bankruptcies beyond one's worst Freddy Krueger nightmares."

　　Some analysts and economists have suggested that AI could be a potential savior for the economy and stock market this year, arguing that it could boost productivity and reduce costs for businesses. Edwards himself previously argued that the profit boost from greedflation may have helped delay a recession by enabling corporations to continue hiring. However, on Thursday, the strategist cautioned that the corporate greedflation tailwind has faded and that AI's impact is likely to be less significant than anticipated.

　　"The simple fact is that the one-off fillip from 'greedflation' is over and excited AI EPS optimism may yet prove a pipe dream," he wrote.

　　Overall, Edwards believes that the recent positive GDP and unemployment reports, as well as the stock market's positive performance this year, are merely "disguising the depth of pain the Fed has inflicted on the economy, which will soon be obvious to all."