China's Latest Performance

Time for China’s regular check-up, and we regret it immediately July 16, 2024 | Peel #751 In this issue of the Peel: - 🇨🇳 Time for China’s regular check-up, and we regret it immediately - 🆙 Trump-related stocks shot higher while Macy’s trip started to wear off - 🗿 BlackRock just reported earnings. Check it out at WSO Alpha 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 🍌 - Fed Chair Powell said the same thing about rates that he’s [been saying for the past week](=) - Small-cap fund inflows reached a high since [December last week]( - ~48hrs after getting shot, Trump selects J.D. Vance [as his running mate]( - Digital assets funds saw their 5th largest inflows [of all time last week]( - There’s about as much explanation for the motives of the [would-be assassin]() as there is information on the Jeffrey Epstein files Tilt the Odds in Your Favor In the competitive world of high finance, every advantage counts. Our exclusive curriculum, designed by industry experts, sharpens your skills and knowledge, making you a top candidate. Enjoy personalized coaching, targeted internship opportunities, and a robust network of finance professionals with [WSO Academy.]( Macro Monkey Says 🐒 Check-In on China While the United States was dodging assassinations this weekend, China was busy dodging economic growth. Some fear-mongers thought we’d be on the brink of a Civil War if Trump hadn’t—at the last second—turned his head back and to the right (lol), but China is actually on the brink of a recession. That is if we define a “recession” as GDP growth below 5% annualized, which it might as well be for the Middle Kingdom. Economies are slowing down all over the world. So, let’s check in on China. What Happened? This weekend, China’s National Bureau of Statistics reported that the country’s second-quarter annualized GDP growth clocked in at 4.7%, below expectations. China targets 5% annualized GDP growth, similar to how the Fed targets 2% inflation here in the U.S. The difference is China usually hits its goal eventually. Q2’s 4.7% growth rate came as quite a disappointment to most China market watchers. In addition to missing the 5% target, an extra layer of dismay emerged, given that this was the first quarter with no impact from the pandemic. Q2’23 was the first full quarter following the termination of the country’s “zero-C-19” policies that turned out to be nearly as economically destructive as communism itself. Many analysts expected that the first handful of quarters following zero-C-19 would be particularly expansive. However, that hasn’t been the case so far. The biggest cause of concern emerged from monthly retail sales data as this proxy for consumer spending fell back into negative territory for the first time since July 2023. Consumer spending isn’t as big of a deal in China as it is in the U.S., encompassing slightly over 50% of GDP in any given year. In the U.S., it tends to be 65-70%. Specifically, spending on discretionary items was the primary detractor. Cosmetic products saw the worst decline among the bunch, falling 14.6% in June. That tends to be particularly concerning as, similar to what we discussed on U.S. consumer spending yesterday, pullbacks of this degree on discretionary items imply that consumers are rebalancing their budgets and allocating more to necessities. However, spending did see strength in other mostly discretionary segments. Sales done online increased 8.8% through the first half of 2024, while total services consumption grew 7.5%. China also saw slowdowns in credit growth through the first half of 2024, indicating a decline in the velocity of money that could threaten spending and growth going forward. In total, household credit growth through the first half of 2024 fell by 47.8% vs 2023. Slowing spending and credit growth is a classic symptom of deflationary pressures, which China has experienced for quite some time now. [Source](=) It’s no surprise that China’s GDP growth and spending data aren’t coming in as high as the pre-pandemic days, but 1) national macro data is turning out largely worse than expected, and 2) all eyes are on China’s central bank. The People’s Bank of China (PBOC) has options like cutting rates and/or increasing asset purchases. However, yesterday was also the start of China’s Third Plenum, an every-5-year meeting of the Chinese Communist Party to recalibrate its economy. Many expect China’s leader Xi Jinping to focus on de-Westernization of the economy or making China less reliant on the West. Expected goals include things like heavy investment in manufacturing, especially in advanced tech like semiconductors, electric vehicles, clean energy, and more sectors to put a smile on Greta Thunberg’s face. The Takeaway? China, like most of the world, is entering a precarious slowdown in the post-pandemic days. Deflationary pressures make conditions more worrisome, however. So, don’t be surprised if you hear some wild sh*t coming out of China over the next week or so to fend off the evil of deflation. Hopefully, they can also come up with a catchier, less booger-sounding name than the damn “Third Plenum.” Maybe it sounds better in Mandarin. What's Ripe 🤩 Trump Media & Technology Group (DJT) 📈31.4% - Do I need to explain this one? Former President Trump accidentally guaranteed himself a Round 2 in the Oval Office after getting shot this weekend. - TMTG doesn’t really have much of a business model, but the stock trades on sentiment around the “Trump” brand. - Winning the presidency is pretty sick for a brand, I’d say. Supporters of the former President bid up the stock, plus it could bring more people to Truth Social. Smith & Wesson Brands (SWBI) 📈11.4% - Do I need to explain this one too? It seems that the January 6th crowd is loading up (no pun intended) to become the former President’s new Secret Service detail. - Firearm stocks tend to get more volatile during election years as anticipated regulatory changes could impact gun sales in either direction. - Given the odds of another Trump presidency spiked this weekend, analysts likely anticipate fewer unfavorable gun laws for the next 4-years. What's Rotten 🤮 Macy’s (M) 📉11.7% - Like when the shrooms start to wear off, Macy’s and its shareholders alike are exiting their hallucination that someone might put an end to their misery. - The sadomasochists in the board room of this department store unanimously voted to end negotiations with the PE firms that were trying to buy this thing. - The offer was for a nice $6.9bn, but at close, Macy’s sat at $4.6bn… and that’s with a 413x P/E multiple. This [turnaround plan]( better be damn good. Solar Stocks (TAN) 📉5.9% - As my sunburn knows all too well, the UV index was high this weekend. And as the WSO Alpha portfolio knows, solar stocks did the opposite on Monday. - SolarEdge led the way lower by announcing layoffs of 400 employees to improve profitability. - Further, when Trump locked up the election by getting shot, the odds that solar tax credits get reduced/eliminated spiked, taking away demand incentives. Thought Banana 🤔 Earnings Spotlight: BlackRock The Taylor Swift of asset managers (a.k.a. the best but most hated on) just reported earnings for the second quarter. BlackRock shares traded like a heartbeat monitor on Monday as investors couldn’t figure out if they liked what they saw or not. So, let’s get into it. The Numbers Being the world’s biggest assman (short for asset manager, you freaks), BlackRock’s earnings are less about strictly focusing on EPS and revenue. But they made sure to hold onto the title of world’s biggest assman, posting record assets under management (AUM) of $10.645tn. If that was a country’s GDP, it’d be the 3rd largest in the world—basically the size of Germany + Japan + Australia. Assmans like BlackRock value AUM over anything because their business model relies on charging fees on those assets. So, the more the merrier. The firm’s largest revenue segment, Investment Advisory & Admin Fees, grew 8.6% annually and 1.65% quarterly, primarily thanks to increases in performance fees, growth in the market value of assets, and a strong year for its technology services business. But, the more important thing to focus on in BlackRock’s report is flows data. Cash and ETFs dominated growth in AUM measured by organic flows into BlackRock products. The tough part is that these tend to be the lowest fee-earning part of the business, contributing to the miss in organic base management fees. The Takeaway? Asset managers are off to a mixed start this earnings szn, with the next largest publicly traded assman (State Street) reporting earnings today. Analysts will have more conviction in their assessment of performance once comparable companies start reporting. Personally, we’re not waiting for sh*t. The wise apes subscribed to WSO Alpha have already seen it, but we just published a full breakdown of the most important data from BlackRock’s [report here](, finishing with a rating of the stock. Go check it out. The Big Question: How will opinions on BlackRock’s report change once we get comps data? Is the declining flows into higher fee assets a long-term trend? Banana Brain Teaser 💡 Previous 🗓 A border of uniform width is placed around a rectangular photograph that measures 8 inches by 10 inches. If the area of the border is 144 square inches, what is the width of the border, in inches? Answer: 3 inches Today 🕐 How many prime numbers between 1 and 100 are factors of 7,150? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “[BTC is] an index for money laundering.’ - 2017 “I believe BTC is legitimate. I'm not saying there aren't minuses like everything else, but it is a legitimate financial instrument that allows you to have uncorrelated returns.” 2024 — Larry Fink 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