Fake Recessions

Tragic news, apes. Our beloved Bureau of Economic Analysis has fallen victim to the Fake News media. We just got our final GDP growth update for the second quarter, but that wasn’t even close to the biggest reveal of the data release. Get caught up on your economy below.                                                                                                                                                                                                                                                                                                                                                                                                                 September 27, 2024 | [Read Online]( In partnership with In this issue of the peel: - Tragic news, apes. Our beloved Bureau of Economic Analysis has fallen victim to the Fake News media. We just got our final GDP growth update for the second quarter, but that wasn’t even close to the biggest reveal of the data release. Get caught up on your economy below. - Micron’s third-quarter earnings just put on a clinic, carrying the entire market on its back yesterday. Southwest Airlines didn’t need the help to take off as the firm announced new Q3 guidance. Super Micro has new super macro problems, and Sonos’ garbage app redesign is racking up the haters. - Meta just announced a slew of new products guaranteed to make sure you never reproduce. Investors weren’t disappointed, but they have little reason to be excited either. Find out what was included in the announcements below. Market Snapshot Banana Bits - OpenAI [doesn’t even know what to do]( with (former) CTO Mira Murati’s remaining equity now that she’s gone. - Even more stimulus from Beijing is the lifting of [Chinese and China-linked equities](. - Productivity growth has skyrocketed faster than [any Fed easing cycle since 1968](. - New York Community Bank shares ripped as the [“heavy lifting” is allegedly over](. - DirecTV and Dish are nearing a deal that [both parties have wanted for years](. Trade Smarter with these Free, Daily Stock Alerts It’s never too late to learn how to master the stock market. You’ll receive [daily trade alerts]( sent directly to your phone and email detailing the hottest stock picks. The best part? There’s no cost to join! Expert insights will be at your fingertips instantly. [Subscribe Now for Free]( Macro Monkey Says The Fake Recession We all know that evil, satanic Fake News runs rampant in American media. MSNBC, Fox, CNN, etc.—they might as well be run by Bernie Madoff, Jordan Belfort, and Sam Bankman-Fried. But apes—I have tragic news to report. Our beloved Bureau of Economic Analysis (BEA) has fallen into the jaws of Fake News too, causing them to report a Fake Recession. This tragedy was uncovered in the latest assessment of U.S. GDP growth in the second quarter. We just got the third and final estimate, so let’s get into it. What Happened? Yesterday, the BEA completed its bean-counting and reported the third and final estimate of GDP growth in Q2. As a reminder, the BEA estimates quarterly GDP growth three times. Not just because three is the lucky number but also to ensure the highest degree of accuracy possible. [Source]( The first graph above is the BEA’s second estimate of Q2 GDP growth, released in late August. The second is the third and final estimate, released yesterday, along with an “Annual Update,” including revisions to the last 5 years of GDP data. Notice any difference? I’ll give you a hint—Q2’24 didn’t change at all. The BEA is damn confident that GDP grew at a healthy 3% in the second quarter. But… check out Q2’22. At the time of the second estimate, the BEA still indicated that a technical recession (two consecutive quarters of declining GDP) had occurred in the first half of 2022. However, now, the BEA is reporting GDP actually did grow in Q2’22. That means there was no post-pandemic recession at all, which is as shocking as it is amazing. We shut down the economy for months, and still, the U.S. didn’t experience a technically defined recession. Someone give JPow a Medal of Honor. Service members get it for protecting our lives, but this guy’s out here protecting our portfolios. Maybe it’s time to crown him King. If that’s not enough to convince you to bend the knee for King JPow, maybe this is. [Source]( One of the best updates to the report was the 1.4% increase in income earned by me, you, and all the other apes out there. Growth rates for both real and nominal disposable personal income were revised higher by 1.4%. Nominally, incomes grew 5%. After subtracting the updated inflation reading of 2.5%, real disposable incomes grew by 2.5%. Although the headline GDP growth figure was unchanged, underlying industry growth rates varied quite a bit. [Source]( The order of contribution remains unchanged, with nondurable goods manufacturing leading the way, along with you apes in finance and insurance. It is constructive to see certain discretionary spending items, such as arts, entertainment, & recreation, growing healthily in the quarter. However, it appears that the magnitude of declining discretionary line items makes consumer spending a concern. Accommodation & food services, retail trade, and services, excluding government, all declined in the quarter, which was sad for both our economy and our appetites. The strong increase in durable goods spending rebuffs this to a certain degree, but looking at the durable goods data we also happened to get on Thursday, there’s definitely a reason for concern. [Source]( The above GDP report covers the period from April to June, but the data in the above image tells us how much we spent on durable goods in August. And as we can see, there was no change at all from July to August, with new orders registering growth of a blinding 0.0%. Most consumer-centric durable goods show low but healthy growth in August. Computers and electronics grew by 0.4%, motor vehicles and parts by 0.2%, and excluding transportation, total new orders grew by 0.5%. The Takeaway? To recap, today we learned: - GDP grew 3% in Q2. - Post-pandemic GDP growth was stronger than we thought. - There was NO recession in 2022, meaning the U.S. hasn’t been in a recession since June 2009. - Key consumer industries mostly didn’t flash warning signs in Q2. - Weakness in August’s durable goods orders gives reason for concern in Q3 and Q4. We’ll get updated income and spending data tomorrow to tell us if we should be crying ourselves to sleep for the rest of the year. Can’t wait, stay tuned. Career Corner Question If I agree to an interview with a person through LinkedIn without the use of email, should I send the thank you note on LinkedIn or email? Answer Stick to LinkedIn if they have been responsive on that. Head Mentor, WSO Academy [Check out]([WSO Academy]( What's Ripe Micron (MU) 14.73% - Shares in this memory chip maker were ripping Thursday, and not just because every other company is now indebted to Micron for lifting the entire market. - The company crushed its latest earnings, reporting a 93% annual sales jump to $7.75bn and earnings of $1.18sh, up 90% quarterly, both humiliating estimates. - “Robust AI demand” was the key phrase that fired up the firm’s financial outlook, guiding sales of $8.7bn next quarter vs estimates of just $8.3bn. Southwest Airlines (LUV) 5.42% - Sometimes, a stern talking to is all you need. In this case, that stern talking comes with losing your livelihood for Southwest executives, but it’s safe to say the message was received. - As the airline fights activist pressure from Elliott, including a push for new leadership, Southwest raised guidance for Q3 and authorized $2.5bn in buybacks. - Q3 unit revenue is now projected to come in 3% higher than anticipated, demonstrating to analysts that the firm’s internal plans are working (for now). What's Rotten Super Micro Computers (SMCI) 12.17% - Super Micro—and its shareholders—are facing super macro problems. After already delaying 10-K for this year, the firm now has the DOJ’s attention. - The Department of Justice announced a fresh probe into Super Micro on the heels of delayed filings as well as a recent report from a stock serial killer. - On August 27th, short-seller Hindenburg Research published [this book]( alleging “accounting manipulation, sibling self-dealing, and sanctions evasion.” Big oof. Sonos (SONO) 4.45% - What, guys can’t blast music and annoy the sh*t out of their neighbors anymore? Hobbies are illegal now, I guess? Or maybe the Sonos app just sucks. - That’s certainly what Morgan Stanley thinks. The bank double-downgraded shares and massacred their price target from $24 to just $11 on Thursday. - That’s a 110% return reversal from Wednesday’s close, now expecting 12% downside vs 98% upside, all because the firm’s app redesign in May looks like using the Temu version of Spotify in 1984. Thought Banana Getting Meta It's a huge day for anyone who plans to never pass on their genes. Following in the footsteps of their way cooler older brother, Apple, Meta just wrapped up its 2024 Connect event. This year seemed like a pivotal moment for Zuckerberg’s empire, kicking out the old and firing up every vegan hipster from Brooklyn to… the other side of Brooklyn. Let’s dive in. What Happened? Meta showed investors where it’s putting that $37-$40bn/yr of capital expenditures. Only time will tell if it was worth it, but with shares up 1.31% throughout the conference, I’d say investors are as fired up as me when my boy sends me a sh*tty meme. It’s a nice thought, but it didn’t get the job done. [Source]( This chart might explain why. Despite the tens of billions invested in Meta’s Reality Labs segment—its AR/VR product line—revenue has declined every year since the segment was created. In 2021, Reaily Labs pulled in $2.274bn, declining to $1.896bn by 2023, a 17.8% decline. There were basically four announcements worth caring about: - Orion AR Glasses: This was the only cool new thing they announced, and they’re not even on sale yet. The glasses guarantee that you never lose your virginity. They have AI and AR capabilities that allow users to project holograms, talk to their glasses, make video calls, send and read texts, etc. An example the firm gave of its AI capabilities includes looking at your fridge and asking the bot to come up with a recipe for a meal you can make. -  Meta Quest 3S: This is the latest version of Meta’s AR/VR headset product. The cool thing about this model is the price, which has been lowered to $300. Plus, by year-end, Meta will 86 its older Quest models, so users can only buy this or their high-end counterparts. - Meta Rayban Update: Meta added AI features to its AR sunglasses, including speech improvements to its in-built Meta assistant and the ability to do things like set reminders and improve real-time language translation. - Meta AI Updates: Now equipped with voice options, including responses in the voices of celebrities like John Cena and Awkwafina, Meta AI is much more promising. You can also now use it to edit photos and videos, describe images, and more. The Takeaway? There was no breakthrough new product, at least not until the Orion glasses are available for sale. But, the firm is defining its direction. The AR/VR and AI intersection seems like a fruitful investment for the social connection firm, but it likely won’t bring any meaningful results until the tech is dramatically improved. All I want is to sit on my couch and think I’m on the floor at the TD Garden, watching the Celtics win their next championship. Zuck, can we make that happen in time for next year? The Big Question: You buying any of these products? You buying Meta shares based on this announcement? Banana Brain Teaser Previous A garden center sells a certain grass seed in 5-pound bags at $13.85 per bag, 10-pound bags at $20.43 per bag, and 25-pound bags at $32.25 per bag. If a customer is to buy at least 65 pounds of the grass seed, but no more than 80 pounds, what is the least possible cost of the grass seed that the customer will buy? Answer: $96.75 Today If the amount of federal estate tax due on an estate valued at $1.35mn is $437,000 plus 43% of the value of the estate in excess of $1.25mn, then the federal tax due is approximately what percent of the value of the estate? Send your guesses to vyomesh@wallstreetoasis.com ❝ Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves. Peter Lynch How Would You Rate Today's Peel? [All the bananas]( [Meh]( [Rotten AF]( Happy Investing, David, Vyom, Ankit & Patrick [Free Month of Access to WSO Company Database]( Share The Peel You currently have 0 referrals, only 1 away from receiving Free Month of Access to WSO Company Database. [Click to Share]( Upcoming Rewards For each referral you drive, you will unlock rewards when you hit milestones. 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