Are We Winning Against Inflation?

July 11th should be a new federal holiday as inflation died July 12, 2024 | Peel #749 In this issue of the Peel: - 🌟 July 11th should be a new federal holiday as inflation died - 🏠Housing stocks love less inflation, but Tech is getting hammered - 🛩 Earnings szn is here and Delta got us off to a rough start Big Announcement 📢 The Daily Peel is moving newsletter platforms to help us reach your inbox easier starting on Thursday, July 18th... this means you will no longer be getting our emails from wallstreetoasis@wallstreetoasis.com but from either news@thepeel.co OR [thedailypeel@mail.beehiiv.com](mailto:thedailypeel@mail.beehiv.com). This also means the newsletter will have its own domain at [thepeel.co](=) where you can read past issues and subscribe. One way you can help? Reply or click anything in the email starting next Thursday (July 18th) Market Snapshot 📸 Banana Bits 🍌 - Despite yesterday’s drop, 2024 is on track to be one of the [best years in market history]() - Calls for President Biden to step aside [got even louder]() - Pepsi shares seemed to be up out of pity on Thursday on a [mostly dogs*t Q2 earnings report]() - $15/hr is on its way to $0/hr as automation [readies to takeover](=) Talk Like a VC in Just 4 Hours There’s a reason venture capital is considered the mountaintop of investing. It’s laid back, sexy, and generally just f*cking awesome. Patagonia vests and Allbirds to work, weekends off, and the potential to make stupid sums of money from just one home run are just some of the reasons why many see it as the best job in the industry. The hardest part is breaking in. Unless you rub elbows with tech titans or founded a unicorn recently, it’s gonna be a tough slog. But if you’ve got 4 hours on Saturday, July 27, you can gain an edge on a huge number of other applicants through [WSO’s VC Bootcamp.]() Learn the essentials of the space—including early-stage instruments, term sheet modeling, and due diligence—in this jam-packed live training session. Because we’re so confident that Peel readers would love the bootcamp, we’re also giving out free access to our Excel Modeling Course for the first 5 Peel readers to sign up for the bootcamp in the next 24 hours. Don’t let this slip your mind—spots are filling up fast. The next Uber is out there, but you can’t get a piece of it if you’re on the outside looking in. [Take the first step]() towards becoming a Sand Hill Road legend today. Macro Monkey Says 🐒 The Day Inflation Died Election days, the day after the Super Bowl, and Black Friday—I think we can all agree that these sacred days should be federal holidays here in the U.S. Add to that list July 11th. We might not have an absolute banger like American Pie by Don McLean to celebrate this day (yet), but we certainly can drink whiskey and rye and start singing since this was the day inflation died. Before we do, let’s get into the latest consumer inflation report. The Numbers Yesterday, the Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI) for June, showing that inflation grew just 3.0% annually and actually fell 0.1% for the month. I don’t mean “fell,” as in the growth rate slowed. I mean, broad price levels declined from May to June. Yes, you read that right. [Source]() This is the first time American price levels have fallen on a monthly basis since January 2019, excluding the spring of 2020, for obvious reasons. Annually, this is the lowest inflation reading since March 2021 and, ironically, is tied with the 3% reading from June last year. The battle has been won. JPow and the FOMC might need more time to declare victory, but it appears that price pressures have receded. Most of the decline in June can be attributed to falling energy prices, with the Energy Index shedding 2% in both May and June. Gas prices fell 3.8% to an average of $3.54/gal. Energy prices could storm higher alongside demand increases for heat this winter. However, if we maintain record low levels in the Strategic Petroleum Reserve and global warming keeps up the good work, this shouldn’t be as much of a concern. [Source]( While the all-items index did ramp higher after seeing similar data late last summer, core inflation has continued to tick lower since peaking at 6.6% in September 2022, clocking in at just 3.3% in June, the lowest since April 2021. Core inflation excludes the price indexes for food and energy. As usual, the shelter index drove more than 70% of June’s 3.2% annual increase. However, the 0.2% and 0.3% increases in monthly shelter and rent prices were the lowest since August 2021. This tracks right along with increasing housing inventory, as discussed yesterday. Plane tickets and medical care were two of the biggest contributors to the monthly decline in core prices. Airline fares fell 5% monthly after falling 3.6% in May, while the cost of medical care increased just 0.2% in June vs 0.5% the prior month. The Takeaway? Fed Chair JPow claims to be like Big Sean when it comes to CPI, saying, “I don’t give a f*ck about you or anything that you do.” But the market certainly does give a f*ck, and we can see this in the 16.6% jump in the market-implied odds of a September rate cut: [Source]( Powell’s recent messaging has indicated that the FOMC’s evergreen paranoia has shifted from the “price stability” half of their mandate to the “full employment” half. Unemployment has been on the rise for 3 months in a row for the first time in 8-years. The July and August jobs reports will likely be the greatest determinants of the FOMC’s move in September. We’ll also get a few consumer spending reports, and Q2 GDP estimates between now and then, undoubtedly factoring into the FOMC’s decision-making process. Stay tuned. But, today, inflation joins Buddy Holly, Ritchie Valens, and Jiles “Big Bopper” Perry in the day inflation died. Meanwhile, we’ll get started on recording Inflation Pie ASAP. What's Ripe 🤩 QuantumScape (QS) 📈30.5% - European automakers are an unexpected driver of the global tech industry, but SoundHound AI (+5.9%) and now QuantumScape aren’t upset about it. - Thursday was the latter’s time to shine as Volkswagen announced plans to license QuantumScape’s solid-state battery tech for its next-gen EVs. - The market loves this as a proof-of-concept for QuantumScape’s products, although any financial benefit will likely take several quarters. Housing Stocks (XHB) 📈5.9% - Prospective homebuyers have been fishing for good news for years now. But this week has been like shooting fish in a barrel on inventory and rate news. - Builders like D.R. Horton (DHI, +7.3%), suppliers like Builder’s FirstSource (BLDR, +7.4%)—both in the WSO Alpha portfolio—and retailers like Home Depot (HD, +2.8%) are loving it. - Yesterday’s surge stems from the spike in rate cut probabilities at the FOMC’s September meeting, thanks to the deflation seen in June. What's Rotten 🤮 Tesla (TSLA) 📉8.4% - Most new Teslas can go 0 to 60mph in ~4 seconds or less. Shares have felt a similar acceleration in recent months, but now we’re slamming the brakes. - The sudden halt comes as [Bloomberg reports](=) that the launch of the company’s robotaxi service is approaching a yellow light. - Musk had been getting investors ready for an August release. Now, Tesla heads will have to wait until October for the company’s next game changer. Nvidia (NVDA) 📉5.6% - Like when superheroes destroy the infrastructure of a city they’re trying to “save,” Big Tech stocks utterly destroyed the market on Thursday, led by Nvidia. - Captain Semiconductor plummeted on little news and an apparent bout of profit-taking across Big Tech stocks heading into Q2 earnings szn. Thought Banana 🤔 Earnings Spotlight: Delta Airlines (DAL, 4.0%) Being too good is obviously a common problem for us at WSO. But it’s rare to see stocks suffer from too much demand. Enter Delta Airlines. The travel boom hasn’t been as much of a blessing to carriers as we may expect. Delta’s Q2 earnings and the selloff triggered yesterday paint this picture well. Let’s check it out. What Happened? On Sunday, July 7th, the Travel Security Administration screened 3.013mn passengers, an all-time record high for the agency. As a result, Delta’s revenue held up well in Q2, but problems emerge the further you glance down its income statement. Last quarter, Delta earned $2.36/sh on $16.65bn in sales, mixed against estimates for $2.37/sh on $16.25bn expected. The basic problem is that too many poor people are flying on Delta’s planes. Airlines, as we can see in the 5% decline in airline fares observed in June’s CPI, are following the same strategy as Shein and Temu, with a race to the bottom in prices. It’s important for airlines to appear at the top of the list on flight aggregators like Google, credit card companies, Booking.com, and other similar services because of the prevalence of customers to sort prices from lowest to highest. Ostensibly, Delta has done too well, throwing prices off a cliff. We can see this in the airline’s average revenue earned per seat mile flown, falling 1% last quarter from $22.58/sm to $22.31/sm. At the same time, fuel costs grew from $2.52/gal to $2.64/gal. In addition to wondering how Delta is paying less for gas per mile than I am, we can see this clear margin squeeze on a per-seat mile basis. The Takeaway? Despite this reaction, Delta has done a comparatively better job of adapting to the post-pandemic airline market than others. More than 50% of Delta’s revenue now comes from high-margin segments like its loyalty club and premium ticket sales. However, it’s clear that the discount war had more magnitude in Q2. We’re just glad to see Delta was able to carry all its passengers… despite flying Boeing planes. The Big Question: Will other airlines perform even worse than Delta? Do you have any travel plans for the rest of the year? Banana Brain Teaser 💡 Previous 🗓 In the first week of the year, Nancy saved $1. In each of the next 51 weeks, she saved $1 more than she had saved in the previous week. What was the total amount that Nancy saved during the 52 weeks? Answer: $1,378 Today 🕐 Team A and Team B are competing against each other in a game of tug-of-war. Team A, consisting of 3 males and 3 females, decides to line up male, female, male, female, male, female. The lineup that Team A chooses will be one of how many different possible lineups? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” — Peter Lynch How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh](=) 😩[Rotten AF]( Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE](=) // [WSO ALPHA]( // [ACADEMY](=) // [COURSES](=) // [LEGAL](=) [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 14435 Big Basin Way PBN 444 Saratoga, California 95070 United States