Can’t Have Fun Anymore

Uncle Sam needs you to blow your whole paycheck at the bar this weekend. Consumer spending data from Bank of America paints a spooky outlook for an economy that’s 70% driven by consumer wallets.

Silver banana goes to…

In this issue of the peel:

  • Uncle Sam needs you to blow your whole paycheck at the bar this weekend. Consumer spending data from Bank of America paints a spooky outlook for an economy that’s 70% driven by consumer wallets.

  • SoFi and Fortress Investments are the new hot couple on Main Street. Meanwhile, Warren Buffett is slowly growing his ownership of #DaddyGang, and Caterpillar just got a brand new hater. Lastly, somehow, things got even worse for Boeing.

  • Unlike Tesla products, Elon Musk is actually good at launching rockets. He showed that off this weekend as SpaceX set a record for most records achieved related to space in a single day. Neil Armstrong, who?

Market Snapshot

Banana Bits

How WSO Power Users Leverage Macabacus Linking

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Macro Monkey Says

Go Down Swinging

It feels like we can’t have fun anymore.

Great American traditions like gambling, drinking & driving, and even reaching for an officer’s service weapon are now heavily frowned upon or have their vibe killed by tyrannical messaging like “bet responsibly.” Is this what the Founder’s wanted? 

Doubt it. And that’s exactly why free and independent thinkers like us need to save the country and the economy. Step one? Waste as much money as humanly possible.

Based on September’s consumer spending data, we gotta move fast. Let’s get into it.

The Numbers

According to Bank of America’s credit and debit card spending data in September, total consumer spending increased 0.6% monthly yet declined 0.9% from September 2023. 

The U.S. economy relies on consumer spending like Lance Armstrong relied on steroids. 70% of GDP in any given year comes directly from our wallets.

That’s why it’s crucial to start racking up as much credit card debt as possible—the economy needs you.

Some of the annual decline is attributable to a rapid decrease in spending by consumers in Florida, Georgia, North & South Carolina, and Tennessee at the end of the month thanks to Hurricane Helene, bringing spending in those states down 4%.

Meanwhile, the 7-day moving average of spending for the rest, apparently more patriotic, of Americans shot up to 1.8%.

However, non-weather trends are at play here as well.

The uptick in wage growth across the income spectrum Americans have experienced since early 2024 has been the primary driver of continued strong spending levels and the 0.6% increase from August, underpinned by a robust labor market.

Last month, a rise in the rate of wage growth, particularly at the higher end of the income spectrum, buoyed spending. But it wasn’t enough to register an annual increase.

Longer-term factors like debt, particularly within auto loans, and the housing market shifted spending dynamics as well.

The median monthly payment on auto loans has increased by 30% since 2019, with most of that growth coming from lower-income households, which tend to have the highest propensity to spend.

Car prices are up 20% in that period, and I’m sure I don’t have to tell you, wise apes, how rates have changed since 2019. Now, around 60% of households that make under $50k per year carry an auto loan of >$500/month. 

That crowds out other spending these high-propensity households may have pursued, thus denting total spending levels.

At the same time, however, the housing market is seeing the opposite dynamic. 

Home equity is at its highest level since 1950, averaging nearly 75% of the property’s value, but that’s heavily skewed toward higher-income households.

The rise in home prices has done most of the heavy lifting in increasing owner’s equity. However, while property values have been rising, lending against those properties has fallen just as quickly.

The utilization of HELOCs, or home equity line(s) of credit, has fallen from an average of 45% of homes before the pandemic to just above 31% today. 

Given that most home equity is concentrated in the top 20% of income earners, this doesn’t drive spending growth as much as we may expect because higher-income consumers have a lower propensity to spend than lower-income consumers.

Case in point, BofA data shows that most of the elites are using the few HELOCs out there to pay down other existing debt… when they’re not busy mind-controlling us through 5G towers, obviously.

The Takeaway?

So, the breaking news of the day is that rich people are fine while lower-income consumers are struggling. We might win a Pulitzer from this story…

Consumer spending relies on wage growth in the lower-income spectrum. While wages are growing, they’re struggling to keep up with growth in car payments, crowding out spending in other categories.

The annual decline in September is concerning, but with declining rates, threats like higher car payments and lower HELOC utilization should abate. 

Fingers crossed that translates into hot spending growth.

Career Corner

Question

How long are these calls even supposed to be? My first few were all about 25-30 minutes long and felt pretty dragged out. I just had one that was 15 minutes on the nose and felt way more natural.

Answer

It depends on the person. Did it feel rushed? It doesn’t seem so, so I think you are ok. No need to overthink it. That person is likely busy—Mondays can be easily distracting for people as they are all coming back from the weekend.

Head Mentor, WSO Academy

What's Ripe

SoFi Technologies (SOFI) 11.43%

  • There’s a new hot couple in the lending space this week as SoFi teams up with Fortress Investment Group in a $2bn expansion of the firm’s loan business.

  • Fortress invested $2bn into SoFi, which the online bank will use to establish a new lending platform for personal loans. 

  • SoFi gets paid for originating and brokering loans, while Fortress earns the actual return. Investors love the expansion and vote of confidence in the banking young buck.

SiriusXM (SIRI) 7.90%

  • The legendary duo of Call Her Daddy host Alex Cooper and noted #DaddyGang member Warren Buffet are making miracles again as SiriusXM shares rip.

  • The Oracle of Omaha has upped his stake in the parent company of America’s second most popular podcast. Buffet bought 3.6mn more shares last week, increasing Berkshire’s holdings to 108mn shares. 

  • That’s a 32% stake in the radio company. Berkshire claims the interest was born out of splitting off from Liberty Media, but we all know he wants to become Cooper’s cohost.

What's Rotten

Caterpillar (CAT) 2.01%

  • Caterpillar really thought they could turn into a beautiful butterfly after hitting an all-time high on Friday. Now, Morgan Stanley is calling the company fat.

  • “Bloated inventories” is how MS described the company, which supplies farm and industrial equipment to people who actually contribute to society.

  • Now, there’s a risk of de-stocking. Plus, analysts are nervous about Caterpillar’s exposure to China, so shares have moved heavily on any new stimmy announcements (or lack thereof).

Boeing (BA) 1.34%

  • Business students and future micromanaging MBA associates alike will study this disaster for years to come. Boeing shares continued to descend faster than the doors flying off their planes. 

  • The nosedive on Monday came from the aerospace manufacturer’s plans to cut 10% of its workforce, or 17k jobs, and to further delay the company’s new 777X plane model.

  • An ongoing machinist strike is causing much of the trouble, but Boeing is also now guiding for a quarterly net loss of $6bn due to write-offs from failed jet and defense programs.

Thought Banana

Catching Rockets

As anyone who was on my beer league softball team, The Bad News Beers, knows all too well that I’m not the best at catching fly balls.

Elon Musk’s SpaceX must’ve seen a couple of games as they wisely chose not to tap me as the guy to catch their rockets as they return to Earth.

I prob could’ve done it, but maybe after next year’s tryouts. Let’s dive in.

What Happened?

This weekend, Elon Musk’s favorite child—his satellite launch, internet connection, and Mars colonization firm, SpaceX—conducted their fifth test flight of the enormous Starship launch vehicle, the rocket that could take humanity to Mars.

This one was especially cool for a few reasons. Unlike launching new Tesla products, Musk is actually good at launching rockets, with Sunday’s fifth launch of Starship coming earlier than expected.

Starship is the largest object ever to take flight. As such, it is a crucial part of SpaceX’s plans to ferry humans to and from Mars and NASA’s Artemis program to get people back on the moon.

SpaceX wants to make Starship as reusable as possible. To do so, the SpaceX team designed the ship’s “Super Heavy” booster to be fully reusable.

And on Sunday, that reusability was on full display. 7-minutes after launch, Starship’s booster returned to its launch pad in Boca Chica, TX, and was literally caught in mid-air by what SpaceX describes as “two giant chopsticks” called “Mechazilla.”

Apparently, catching rockets with Mechazilla speeds up turnaround time compared to traditional, run-of-the-mill, super basic, and easy rocket re-landings.

The Takeaway?

They call it “the final frontier” for a reason.

Spacetech developments generally take a long time to achieve, and not just because the government is involved. Getting to space is really hard.

With SpaceX’s goal of full reusability and NASA’s renewed interest in going back to the moon, however, spacetech developments can be expected to return to the ways of the 1970s and 80s.

Past technologies that originated in space include things like GPS, camera phones, wireless headsets, and even memory foam, which were born out of space exploration.

Imagining what might be next really has no limits. Ambitious—and maybe drunk—companies and their executives have teased plans to do things like mine asteroids, manufacture goods in space, and, of course, make humanity multi-planetary.

Maybe the future isn’t looking so bad.

The Big Question: What other impacts could fully reusable rockets carry? When will man take its first steps on Mars?

Banana Brain Teaser

Previous

A certain work plan for September requires that a work team, working every day, produce an average of 200 items per day. For the first half of the month, the team produced an average of 150 items per day. How many items per day must the team average during the second of the month if it is to attain the average daily production rate required by the work plan?

Answer: 250

Today

Guadalupe owns 2 rectangular tracts of land. One is 300m by 500m, and the other is 250m by 630m. The combined area of these 2 tracts is how many square meters?

Send your guesses to vyomesh@wallstreetoasis.com

I would like to die on Mars. Just not on impact.

Elon Musk

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Happy Investing,
David, Vyom, Ankit & Patrick