Charts of the Month - April '22

US Budget, Netflix vs. Disney, Streaming Services, Owners of US Debt, Patagonia Supply Chains, Apple's Cash Hoard

Charts of the Month - April '22

US Budget Spend

Lex Fridman put out this tweet the other day that got me wondering “How many people actually know how their tax dollars are spent?”

My guess is very few, so I decided to peel it back a bit, and, as expected, the US government did not disappoint.

I’ll keep this brief otherwise it could turn into a full on rage against the machine editorial.

US 2021 budget

If you were analyzing a company, trying to understand its current state of operations and forecast its future state, you’d look at how it’s spending its capital.

Is it buying new productive assets that will generate future economic gains? What percentage of its total spend is for servicing its current state vs. its future state? What are the weak points the business needs to shore up and what are its strengths that it can leverage?

Analyzing a country isn’t much different.

A few highlights, but feel free to interpret however you’d like:

  • 5 of the top 6 spending categories go towards “servicing past operations/just keeping the ship afloat” – Income Security, Social Security, Health, Medicare, and Interest – combined, these take up 67% of the total budget of the United States…
  • Administrative operations (General Government plus Veterans Services), akin to the back-office operations of a company, represent $500 billion, which is more than Transportation, Administration of Justice, Agriculture, International Affairs, Community & Regional Development, Natural Resources & Environmental, Science, Space & Technology, and Energy… combined.
  • Everyone knows about the outsized defense spending, so I’ll just say it… $755,000,000,000.
  • Lastly, as we’re going through the worst spell of inflation in 40 years, driven most acutely by energy and food prices, have a look at the total budget spend on those two categories (hint: they’re near the bottom). To put the allocation to Energy ($6.1 billion) into perspective, $7.7 billion was allocated to “Federal Correctional Activities” – a sub budget item of the “Administration of Justice”, which is essentially spent on the federal prison system. Which means that last year, the United States spent more incarcerating its citizens than it did investing in its Energy infrastructure.

You can dissect this budget myriad of ways, and some might be fairer comparisons than others, but the key takeaway, in my opinion at least, is that the country is spending far too much on ‘servicing the past’ as opposed to ‘investing for the future’. In corporate speak, too much Opex and Overhead, not enough CapEx.

So, there you go Lex – hope this helps you sleep at night. (If anyone actually knows Lex please forward this to him.)

Netflix vs. Disney

If you don’t spend most of your life on Twitter (I envy you) you may have missed the massive sell-off in Netflix stock after they released Q1 earnings and announced that they lost subscribers for the first time in over a decade.

As of today, the stock is down 43% since immediately before the release – wiping out ~$67 billion in shareholder value overnight ($400 million of the loss was just Bill Ackman’s fund, in case you think you’re having a bad day).

Was this an overreaction?

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