Elon’s CyberCap

Thursday evening, Tesla went HAM with their first major product announcement since the Cybertruck in 2019. The event went a helluva a lot better than that one, given that no one broke any windows, but we’ll see if this actually comes to fruition.

October 14, 2024

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In this issue of the peel:

  • I’m about to fall asleep with how boring these inflation reports have become. We just got the latest update on wholesale prices in September, and honestly, it makes me miss the good ol’ days of 2021. Find out why below.

  • The Most Wonderful Time of Year is back in full swing as earnings szn is here again. Fastenal and BlackRock got off to a hot start, but BNY Mellon couldn’t say the same. Meanwhile, Tesla shares got absolutely bullied for daring to focus on the long-term.

  • Thursday evening, Tesla went HAM with their first major product announcement since the Cybertruck in 2019. The event went a helluva a lot better than that one, given that no one broke any windows, but we’ll see if this actually comes to fruition.

Market Snapshot

Banana Bits

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Macro Monkey Says

Can’t Spell Inflation Without Flat

It must be nice to make everyone happy, even when your performance comes in below expectations.

As someone with world-class expertise in performing below expectations, I can assure you it usually has the opposite effect. And that makes me super jealous of inflation. 

Exhibit A: On Friday, the Bureau of Labor Statistics (BLS) reported that wholesale inflation in September clocked in well below expectations… and everyone was hyped.

Let’s get into it.

The Numbers

According to the BLS, the Producer Price Index (PPI) was completely flat in September, registering a monthly “growth rate” of 0.0%.

The PPI measures wholesale inflation, reflecting the rate of inflation that producers experience for the intermediate inputs used to create final products. Think of it as "seller's inflation," while the Consumer Price Index (CPI) represents "buyer's inflation."

PPI is split between goods and services, with goods accounting for ~30% of the total index and services making up most of the other 70%. For the month of September, services prices increased 0.1684% while wholesale goods prices fell 0.2156%.

Core PPI, which excludes food, energy, and trade services prices, increased 0.1% as energy prices were a big detractor.

On an annual basis, PPI increased by 1.8%, a rate so chill I thought the index was about to throw in a Zyn.

Once again, service prices led the way on an annual basis. 

The services index was driven by a 3% increase in deposit services, which measures the cost faced by banking institutions for holding and lending customer deposits. This is likely in response to the Fed’s interest rate cuts, which usually squeeze bank margins.

So, we can blame all you consumer banking apes for that increase.

Meanwhile, the index for goods fell 0.2% annually, led lower by a sweet 5.6% decline in gasoline prices. 

Similar to the monthly index, the annual core PPI increased faster than the headline index at 3.2%. Excluding energy really kills the vibe, given that the total index for energy fell a huge 13.8% from September of last year.

Coming on the back (pause) of Thursday’s CPI report, it’s clear the Fed’s 50bps cut did not go too far as to retrigger inflation… yet.

That could always change given the “long and variable lags” present with any monetary policy action.

However, given that the PPI measures price changes on intermediate goods, it can—at times—be viewed as predictive of the CPI. The two indexes have a strong, positive historical correlation of 0.92 going back to 2010, but correlation doesn’t imply causation.

The PPI doesn’t include taxation and prices for services like education and rent and is weighted differently than the CPI. But you can be damn sure I’m keeping my fingers crossed that October’s CPI follows the trend of September’s PPI.

The Takeaway?

Once again, inflation is getting boring.

Of course, monitoring price fluctuations will always be important for any economy, but inflation is no longer the most popular kid in school among economic indicators.

Really, the only risk present to inflation now is the rising rate of wage increases we’ve seen since July. 

So, if you really want to contribute to the economy, maybe go ask your boss for a pay cut.

Career Corner

Question

Generally, with networking, should I only follow up if the person doesn’t reply? In the case he does, and we get to chat on the phone, how often should I message back to keep the relationship? Also, I shouldn’t attach my resume when reaching out for networking, right?

Answer

If they don’t reply to your initial email, follow up in a week in the same thread. Every few months, get back on the phone with them, asking more questions. No, attach it once they agree to speak with you and you’re coordinating times. Generally, don’t send a resume until they ask for it.

Head Mentor, WSO Academy

What's Ripe

Fastenal (FAST) 9.76%

  • Carrying the entire American manufacturing industrial complex on their back, Fastenal put on a master class on how to perform in a struggling industry.

  • The industrial supplies distributor, specializing in fasteners, reported EPS of $0.52/sh on $1.9bn in sales, beating by $0.01/sh on the bottom and coming right in line on top.

  • The firm was able to gain market share in the safety supplies market as well, despite an ongoing contraction in U.S. manufacturing. A positive outlook for the sector and Fastenal’s market share growth drove Friday’s return. 

BlackRock (BLK) 3.63%

  • They should change the saying from “like taking candy from a baby” to “like taking money from investors.” At least babies put up a fight.

  • The world’s largest asset manager recorded record net inflows of $221bn in Q3, an annualized organic growth rate of 8%. YTD inflows now total $360bn.

  • BlackRock’s monetization improved as well, with higher performance fees and growing AUM driving a 15% revenue jump. The firm now manages a monstrous $11.5tn in AUM.

What's Rotten

Tesla (TSLA) 8.78%

  • Rookie mistake. Tesla actually thought that revealing a groundbreaking, world-class solution to one of humanity's hardest technological problems would impress Mr. Market.

  • Foisted again were Musk & Co. as shares tumbled after the firm’s “We, Robot” event. Markets were unenthused by the lack of near-term revenue opportunities.

  • The event revealed Musk’s long-term automation goals for Tesla. Although Musk doesn’t see the first autonomous vehicle getting sold until 2027, investors have learned to price it in longer timelines.

BNY Mellon (BK) 0.40%

  • Another rookie mistake, BNY Mellon made the classic error of being too damn honest. The firm had a solid Q3 but guided for lower Q4 net interest income.

  • The 240-year-old firm, founded by Alexander Hamilton, grew fee income by 5%, bringing revenue to $4.65bn against estimates for $4.54bn. Assets under custody hit $50tn, a new record.

  • Net interest income grew 3% for the quarter, and deposits grew 9% to $285bn. But, with declining interest rates, the firm anticipates lower income from interest in Q4, sending shares lower. 

Thought Banana

CyberCap

Following in the footsteps of his new political icon, Musk & Co. announced at their Thursday night event that Tesla officially has a concept of a plan for self-driving.

Much like California’s glorious high-speed rail project—already 16 years and $9.8bn deep to lay just 663 cubic yards of concrete and less than 0 track—Musk has been hyping up Thursday’s event for over a decade with little to show for it (for now).

But, this time, it might actually be different. Let’s dive in.

What Happened?

At last week’s “We, Robot” event—an invite-only product release held at Warner Bro’s studio in Bakersfield, CA and streamed line on X—Musk rolled on stage (nearly an hour behind schedule) to debut Tesla’s first-ever CyberCab.

The CyberCab, which looks like if auto executives in Blade Runner 2049 asked SpongeBob and Patrick to design their new model (and that’s a compliment), can be seen below: 

Musk gave no details on where these will be manufactured but said the company currently has 50 self-driving vehicles, including 21 CyberCabs, larger “Robovans,” and presumably, other models.

We got the most detail on the Cab, which is a 2-seater SUV with butterfly doors and inductive charging that’s otherwise similar to the Model 3.

Tesla plans to sell the vehicle for $30k or less.

The Robovan announcement was a surprise to most. Less detail was given on this autonomous model, but it’s meant for higher-density locations.

Meant to compete with buses, the Robovan can seat up to 20 people and costs about 90% less per mile than a traditional bus.

Lastly, Musk unveiled the latest version of Optimus, Tesla’s general-purpose humanoid robot, meant to do anything from work in factories to “babysit your kids,” according to Musk, apparently targeting the negligent-parent crowd.

The Takeaway?

The first step towards Tesla’s autonomous future begins with the CyberCab, which is intended to go into production in 2026 and start selling in 2027.

Buying one of these things isn’t just like buying a car, however. You’re also buying a variable-rate bond, as owners will be able to allow their CyberCabs to offer an Uber-like service when the owner is not using the vehicle.

Musk described the business model for owners of this vehicle as “Uber meets Airbnb” for personal vehicles.

This was Tesla's first big product launch since the Cybertruck fiasco in 2019. Compared to that event, this one went much smoother but failed to remove doubt from those cognizant of Musk’s habit of overpromising.

Although he does overpromise and delay timelines, the one thing you can say with certainty about Tesla and Elon is that, eventually, they get the job done… and usually shatter expectations in the long term.

We’ll see if they can do it again.

The Big Question: Will Tesla ultimately win the race to full vehicle automation? When can we actually expect to see these things on our streets?

Banana Brain Teaser

Previous

David used part of $100,000 to purchase a house. Of the remaining portion, he invested 1/3 of it at 4% simple annual interest and 2/3 of it at 6% simple annual interest. If, after a year, the income from the two investments totaled $320, what was the purchase price of the house?

Answer: $94,000

Today

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?

Send your guesses to [email protected]

❝

It's OK to have your eggs in one basket as long as you control what happens to that basket.

Elon Musk

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Happy Investing,
David, Vyom, Ankit & Patrick