Wednesday's inflation report was spicier than the last level of Hot Ones. Thursdayâs inflation report was the tall glass of milk you get at the end to stop the crying and humiliation. The August PPI report just dropped, giving us a glimpse into the wholesale side and (potentially) the direction of CPI going forward. September 13, 2024 | [Read Online]( Silver banana goes to⦠In this issue of the peel: - Wednesday's inflation report was spicier than the last level of Hot Ones. Thursdayâs inflation report was the tall glass of milk you get at the end to stop the crying and humiliation. The August PPI report just dropped, giving us a glimpse into the wholesale side and (potentially) the direction of CPI going forward. - Krogerâs latest earnings give us confidence in the consumer while putting to be that whole grocery store âprice gougingâ thing. Roku TV got fired up from the team at Wolfe Research, while Modernaâs new business plan extinguished any fires it had left. Finally, Wells Fargo reiterates why theyâre the bad boy of banking. - The housing market is more insane than usual and has been since the onset of the pandemic. My personal assistant put some slides together for me below, and I think we need to talk about them. Market Snapshot Banana Bits - The Fedâs tough decisionâ[go big or go home](. - Bank of Americaâs Consumer Checkpoint gets us [hyped on consumers](. - They did it. JPMorgan and Bank of America announce new policies [capping junior banker hours at 80hrs/week](âweâll see if they actually hold to it. - A federal judge just confirmed that betting on the U.S. Presidential election is not only legal [but f*ckinâ sick too](. - Adobe shares plummet more than 9% [after-hours on earnings](. - Japan is a rising sun in the world of [private equity](. Introducing the First Search Engine for Stocks Understand a stock in seconds with Revv, the first search engine for stocks. Discover top stocks in key trends like AI, space, and biotech, and intuitively understand each company's business model and stock risk profile. Search free, and understand over 2,000 stocks free! With Revv: - Instantly see what a business does and how it generates revenue. - Visualize how a company stacks up to its peers on growth, profit, and more. - Intuitively understand why a companyâs revenue spiked or why its profit margins fell. - Evaluate a stockâs risk and volatility before making an investment. [Get Early Access]( Macro Monkey Says Weâre Gonna Need A Bigger Cut In Jaws, Police Chief Martin Brody was smart enough to realize thatâunless they got a bigger boatâthat shark was about to turn them into the next Titanic. Fed Chair JPow is in a very similar seat. Instead of a 3-ton shark, heâs watching something much scarierâslight upticks in the risk of a minor recession. I don't know what's worseâgetting eaten alive or another harrowing 0.1% increase in unemployment. I do, however, know that Iâll need a new pair of pants if I find out. Letâs get into it. The Numbers Since the inflation rate started heading back towards the Fedâs target of 2%, the primary macro risk has shifted to rising unemployment and the potential to create a recession. Although Augustâs jobs report implied relatively stable unemployment, this weekâs declining inflation data are making macro watchers second-guess purported strength in the labor market due to the inverse relationship between inflation and unemployment. Yesterdayâs PPI report for August was like watching the labor marketâs arm shake by their 2nd rep on the benchâit really makes you question its strength. [Source]( According to the BLS, producer prices rose 0.2% last month, an increase from Julyâs 0.0% and in line with Juneâs 0.2% rise. Amazingly, economists got this one right, guesstimating a 0.2% rise in August. Augustâs 0.2% increase was entirely attributable to final demand services, rising 0.4%, while prices for final demand goods didnât budge. The rise in services prices was led by a 0.3% spike in final demand for services less trade, transportation, and warehousing. Finished consumer goods drove this index, rising 0.4%. However, one of the most random index line itemsââguestroom rentalsââwhich I assume just means Airbnbs, rose 4.8% monthly, obfuscating lower inflation present in much more commonly purchased items. Nearly half of all line items in the services index declined, with the 2.7% decline in transportation services leading the way. [Source]( Annually, producer prices increased by just 1.7%, the lowest since Februaryâs 1.6% rate. However, if we exclude food, energy, and trade servicesâbecause what business ever needs that stuff?âwholesale inflation clocked in at 3.3% last month. Trends were similar to the monthly side, with services leading the way, up 2.6%. At 67.2% of the PPIâs total weighting, this increase, relative to the annual rise in prices for final demand goods of 0.0%, drove the total 1.7% rise. But PPI wasnât the only shark fin showing over the waters of macroeconomics yesterday. [Source]( Initial jobless claimsâa.k.a., the number of new Americans filing for unemployment benefitsâincreased 2k to 230k from the prior weekâs revised total of 228k. The Takeaway? This was one of the most boring inflation reports in a long time. Unlike how Wednesdayâs August CPI report scared markets into thinking the economy wasnât falling apart fast enough for a series of rate cuts, yesterdayâs PPI confirmed that inflation is more gone than Aaron Hernandez and the risks like in employment. Markets digested the data well, and the implied probabilities for a 25 vs a 50bp rate cut next week returned to levels seen on Tuesday, prior to the Wednesday morning mayhem triggered by the CPI report. [Source]( Now, the odds for a 50bp cut sit at 27%, nearly doubling from the day priorâs 14% but well below last weekâs 40% odds. Thank god. I was worried the economy was gonna be healthy going forwardâcan you imagine what terror strong growth and employment would bring to my portfolio? Hopefully, millions of people lose their livelihoods so we can get an extra 25bps of cutting. What's Ripe Kroger (KR) 7.18% - Just like when I leave self-checkout and have to bag my own groceries, Krogerâs earnings report was a mixed bag that didnât make much sense. But investors arenât mad about it. - The countryâs 2nd-largest grocery chain (behind Walmart) reported EPS of $0.93/sh vs estimates for $0.91/sh while sales of $33.9bn grew 1.2% YoY and missed expectations. - Iâve been hearing a lot about grocery stores price gouging, but Krogerâs gonna have to step up their game because this is honestly embarrassing: - Despite the lack of robbing consumers, investors were pleased to see that people are still buying food as the retail sector wanes with spending concerns. Roku (ROKU) 5.67% - Are boomers finally cutting cable? They must be, given how bullish analysts at Wolfe Research just became on streaming platform provider Roku. - The research firm lifted its price target on shares to $93, increased sales, earnings, and free cash flow expectations, and said risks are âmore balancedâ as shares had been cut 21.2% YTD. - After trying to convince my parents to cut cable, they told me itâs bundled with their home phone and internet, so itâs not as simple as my brilliantly youthful mind imagined. Maybe the tides are turning⦠What's Rotten Moderna (MRNA) 12.36% - They really thought they did something. Moderna just got booed off the talent show stage as the company announced new plans for its path forward. - Speaking with CNBC on Thursday, CEO Stephane Bancel unveiled his game plan, including $1.1bn in cost cuts and 10 new products by the end of FYâ2027. - However, that f*cked the marketâs expectations. Analysts say the path to profitability has now been pushed out >2yrs and arenât happy with slashed R&D expenses. Wells Fargo (WFC) 4.02% - Itâs a tough day to launder moneyâAmericaâs best bank for fraudulent transactions just got out of the principalâs office with a big punishment. - The Office of the Comptroller of the Currency (OCC), which supervises all [national banks](, issued enforcement action against the firm for failure to maintain adequate KYC/AML controls. - Basically, that means the bank didnât do enough to verify the sources and recipients of funds and didnât monitor potentially fraudulent transactions closely enough. Thought Banana Housing: Outlook or Lookout? I might have to hire Torsten Slok as my full-time assistant. As Chief Economist of Apollo, Iâm sure heâd jump at the opportunity. Already, heâs doing a great job of taking care of my research. This time, our focus was on housing. Letâs dive in. What Happened? Earlier this week, certified smart pants Torsten Slok published [this 116-page]( chartbook summarizing the U.S. housing market. As you might assume, there are a lot of charts in that bad boy, but some of our key takeaways are summed up in these three: [Source]( Since the Fed dropped their rate hike nuclear bombs on the economy, the extremely frozen housing market weâve been living in is, in fact, the steepest slowdown on record. Much of the frozen state of the housing market is due to reduced investment in residential construction. [Source]( But Iâm not as mad at homebuilders (talking to you, dad) today as usual because it looks like they have a reason for it: [Source]( Costs remain elevated in the industry, discouraging investment due to a lower ROI and, therefore, leading to less construction. With short-term demand below historic levels, this becomes even more understandable. But, in the longer term, the demand is there for the profit. [Source]( [Source]( [Source]( The Takeaway? As many inputs as there are in sizing up the equities market, the housing market takes that and multiplies it⦠by 10⦠million. Rate cuts have the potential to increase both demand and supply by making access to mortgage credit less restrictive and reducing borrowing costs in the construction process. However, that doesnât necessarily mean prices will move anywhere. To bring prices down, supply creation would need to vastly outpace demand. Looking at the charts above, that race is tougher to win than a triathlon against Usain Bolt, Michael Phelps, and Lance Armstrong (when he was on steroids). Buying a home is never easy, but at least you can smoke we*d without worrying about your landlord (in some states). I canât imagine a better reason to buy. The Big Question: Will the housing market ever ânormalizeâ to pre-pandemic trends? How else can we incentivize builders to construct more supply? Banana Brain Teaser Previous At a garage sale, all of the prices of the items sold were different. If the price of a radio sold at the garage sale was both the 15th highest price and the 20th lowest price among the prices of the items sold, how many items were sold at the garage sale? Answer: 34 Today Company C produces toy trucks at a cost of $5.00 each for the first 100 trucks and $3.50 for each additional truck. If 500 toy trucks were produced by Company C and sold for $10.00 each, what was Company Câs profit? Send your guesses to vyomesh@wallstreetoasis.com â The human side of every person is the greatest enemy of the average investor or speculator. Jesse Livermore How Would You Rate Today's Peel? [All the bananas]( [Meh]( [Rotten AF]( Happy Investing,
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