Financial Modeling and Economic Insights

Aug 25, 2024

Lecture on Financial Modeling and Economic Updates

Introduction to the Financial Modeling Module

  • Launching in 3 weeks at the applied level.
  • Focus on building models for Costco (US retailer) and CapRE (Canadian apartment RE).
    • Starting with a blank Excel worksheet.
    • Building a full model.
  • Tools provided:
    • Costco's last 10K (September 2023).
    • Goal to project 2024 results and compare with actuals.
    • Understanding how to update models with new data.

Key Concepts in Financial Modeling

  • Highlighting important information from financial statements.
  • Walkthrough of Costco's business model:
    • Understanding revenue drivers: membership fees and merchandise sales.
    • Importance of decomposing growth rates into variables.
  • Forecasting steps:
    • Membership fees.
    • Merchandise revenue.
  • Example: Executive members' 2% reward as a liability.

Model Building Strategy

  • Building an income statement on one worksheet.
  • Avoiding multiple tabs for easier maintenance and auditing.
  • Using assumptions and scenarios pages.
  • Forecasting price and quantity for revenue.
  • Creating a scenarios page for different cases.

Economic Data and Updates

  • Economic data from the past week:
    • US Leading Index and its recession signals.
    • Inflation updates from Canada.
    • US non-farm payroll revisions.
  • Powell's speech insights:
    • Labor market focus over inflation.
    • Expected 25 basis point cut in September.
  • US Dollar and global economic impact:
    • Impact on crude oil and gasoline stocks.
    • Retail sales and economic activity reports from Mexico and Canada.

Market and Investment Insights

  • Market reactions to economic data.
  • US Dollar Index fluctuations and its effect on commodities like oil and copper.
  • Strategies for dealing with dollar depreciation:
    • Focus on US-based commodity producers.

Portfolio Adjustments and Considerations

  • Current stock positions and potential adjustments.
  • Selling strategies in reaction to market conditions.
  • New positions moving to applied level module.
    • Detailed insights and strategies will be available for subscribers.

Conclusion and Upcoming Changes

  • New positions information will be available in the applied level.
  • Encouragement to subscribe for full access to future updates and strategies.

These notes summarize key points from the lecture on financial modeling and recent economic data. The speaker provides a comprehensive overview of strategies for building financial models using real company data, insights into economic indicators, and considerations for adjusting investment portfolios in response to market changes.