Silver banana goes to…

In this issue of the peel:

• On Friday, VP and Democrat nominee Kamala Harris revealed parts of her economic policy proposals for her potential Presidential administration. We hate talking politics at the Peel, but we gotta discuss what’s important. Suffer through it with us below.

• Hawaii and Alaska show that even from the edges, they bring a unique vibe to the contiguous 48 states. Palo Alto Networks crushed earnings by eating up CrowdStrike’s customers. Meanwhile, Boeing continues to fall just like Warren Buffett’s ownership of another company.

• The Kansas City Fed’s annual middle-of-nowhere conference in Jackson Hole begins tomorrow. Find out why all eyes are on Wyoming below.

Market Snapshot

Banana Bits

• Take a look at what economists have to say about VP Harris’ proposals (or just read below). 

• Circle K’s parent company is targeting a proposed acquisition of the parent company of 7-Eleven.

• OpenAI has a company in the AI lawsuit game as Anthropic gets hit with a class action suit from three authors claiming copyright infringement.

• Estee Lauder posted mixed results, leading to a share price drop yesterday.

• Bank of America says technical data points to a “rotational” rather than a “toppy” market.

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Macro Monkey Says

Harris-onomics

Don’t freak out.

Everyone knows we don’t get political at the Peel. But this is the first election year since The Daily Peel was born back in June 2021. 

So, as the largest and most trusted new organization in the world (obviously), we need to discuss the economic policy proposal by our esteemed, dearly beloved, totally non-psycho Presidential candidates.

We’re not giving opinions on policy—just going over the proposals. Tomorrow will be Trump’s turn, but today, we’re gonna focus on Harris. Let’s get into it.

What Happened?

On Friday, U.S. Vice President and Democrat Presidential nominee Kamala Harris unveiled her economic policy proposals if she were to win the election.

For starters, we should state that both sides of the political aisle broadly want the same things for the economy, like lower prices, higher incomes, more jobs, reasonable spending, etc. Disagreements emerge only in methodologies.

With the last 5yrs of inflation data picture above seared in the back of American’s minds, it’s no surprise prices are at the top of the list.

Branded the “Opportunity Economy,” Harris’ proposals carry a violent echo to that of her boss, President Biden. It’s as if she’s sitting at a poker table, saw Biden’s bet, and said, “I’m gonna double it.”

For example, some of the key pillars of her policy initiatives include:

• Expanding the child tax credit to $3,600 and $6,000 for newborns.

• Earmarking $40bn for local, affordable housing construction.

• Additionally, targeting the construction of 3mn new housing units.

• Issuing a “federal ban on price gouging.”

• Raising the corporate tax rate to 28%.

In addition to being her “key” policies, the above are some more… unique… proposals.

For instance, an additional 3mn housing unit is approximately double the current annualized rate of home completions. Plus, not that they would all come on the market at the same time, but adding 3mn units would more than double the number of active listings in the US.

But, with housing as a primary concern for many young Americans, just like inflation, it’s no surprise to see candidates come out swinging with ambitious proposals to try to solve these issues.

Speaking again of inflation, one of Harris’ most “unique” proposals centered around what she and her campaign view as corporate-driven inflation across crucial industries.

In Friday’s speech delivered in North Carolina—a state that’s recently been flooded with young new residents hunting for apartments in cities like Charlotte and Raleigh—Harris promised to “crackdown” on what she views as collusive behavior.

According to Harris, large apartment operators collude via rent pricing algorithms, which she believes to be unjustly driving up prices.

Further, Harris capitalized on a popular but misleading trope that the disgustingly expensive housing market is primarily due to investment firms like BlackRock buying up homes to turn around and rent them out, promising to ban this practice.

Saving the best for last, Harris’ most controversial proposals centered around prices at the grocery store.

She began by highlighting stricter merger requirements for big food companies. But, she went further, implying the potential for price controls on food and groceries.

Harris didn’t outright call for price controls, but she did strongly allude to it, seemingly not wanting to tie herself to that policy but wanting to create the image of a $4 limit on gallons of milk or something.

Universally, economists warn against price controls outside of extreme circumstances, like war. But the campaign trail is the time to f*ck around. It’ll be months before anybody’s forced to find out.

The Takeaway?

“Aggressive” is a great word to describe some of Harris’ goals.

Raising the corporate tax rate to 28% appears to be the main (maybe only) plan to pay for these aggressive ideals. According to the CBOE, way back in 2018, a 1% corporate tax hike would allegedly increase federal income by $96bn annually.

That sounds great, but per the same organization, Harris’ full proposals would rack up an additional deficit of $1.7tn over the course of 10yrs.

Whatever happens, it promises to be interesting.

What's Ripe

Hawaiian Holdings (HA) 11.34%

• Like leaving the doctor’s office after getting some tests done, no news is good news for Hawaiian Holdings as the DOJ is not allowing this ongoing merger.

• Since December 3rd, the DOJ has been reviewing the proposed combination of Hawaiian with Alaska Air Lines. As of yesterday, the ball is out of their court.

• The lack of an objection to the deal is effectively as good as approval from this regulator. Now, the companies are just waiting on the Department of Transportation.

Palo Alto Networks (PANW) 7.18%

• CrowdStrike has a lot to learn from its top competitors. Turns out that if you don’t blow up the entire global digital infrastructure, you’ll do well on earnings. 

• Palo Alto Networks reported a 16% jump in full-year revenue, rising to $8.0bn. Excluding a tax benefit, annual net income soared 125% to $2.58bn.

• Guidance and the firm’s 43% ARR growth both came in stronger than expected. Along with CrowdStrike’s misery, analysts gained confidence and rushed upgrade ratings.

What's Rotten

Boeing (BA) 4.20%

• I wouldn’t trust Boeing to make a damn RC car without it blowing up in my face. They’re great at making money, but unfortunately, not air and spacecraft.

• It’s so comical it’s not even funny anymore. Shares followed the trajectory of their planes yesterday on news of technical errors with Boeing’s 777X.

• This model remains in the testing stages, but those tests have now been grounded. In addition to further evidence of incompetence, the ROI for this new fleet has implicitly been delayed.

Bank of America (BAC) 2.47%

• As I know from personal experience, it’s always sad when dad doesn’t want you anymore. Bank of America is going through the same thing as 12-year-old me.

• Anyway, daddy Buffett revealed on Tuesday that he’s continuing to dump Bank of America, selling 14mn shares, or $550mn, from Thursday to Monday.

• Buffett & Berkshire still own 928mn shares, but it’s clear something has changed for the Oracle and his ~$300bn cash pile. What has changed is much less clear.

Thought Banana

Deciding Everything in the Middle of Nowhere

It’s a quiet week for macro news.

So, it only makes sense for every professional nerd to meet in a quiet location to discuss the economic fates of… everyone on Earth.

The Fed’s annual meeting in Jackson Hole, Wyoming, begins tomorrow. Every sentence, word, stutter, grunt, cough, and fart from Fed Chair Jerome Powell will be poured over as if he was giving us the Ten Commandments 2.0. Let’s dive in.

What’s Happening?

Jackson Hole is more than just a beautiful place meant to distract from the mindnumbing monotony of talking about interest rates for days on end.

Discussing boring, I mean interest rates will include fellow Central Bankers from around the world, like the UK’s Andrew Bailey, the EU’s Philip Lane, and Japan’s Kazuo Ueda, among many others.

All eyes are locked in on what’s to come at this week’s meeting, with Fed Chair Powell’s Friday morning speech as the primary focus.

At the 2022 Jackson Hole conference, JPow declared war on inflation. Given the current transitionary period in monetary policy, everyone with a WSJ subscription expects him to outline a plan for loosening policy.

Many expect to get guidance for plans at the September FOMC meeting, despite the fact that there’s almost no doubt at all about what the Fed will do.

Less than a month away, the only question is how much JPow and the gang plan to cut. The market’s odds favor a 25bp cut, but given that Powell is a man of conviction, don’t be surprised if he continues to go hard in the paint.

However, Jackson Hole is usually the Fed’s equivalent of a shareholder meeting.

It’s where central bankers outline longer-term visions, hyping up apes and analysts alike for all the gains to come while strategically avoiding commitments to any explicit policy actions.

But, given that we’ll get two inflation reports, an updated Q2 GDP growth estimate, and a new jobs report between Jackson Hole and the September meeting, take it all with a heaping pile of salt.

Stay tuned.

The Big Question: What else will we learn from the Jackson Hole conference? How aggressive will Powell be in loosening policy?

Banana Brain Teaser

Previous

What is the greatest number of blocks, 8cm by 6cm by 9cm, that will fit into a storage space that is 60cm by 72cm by 96cm?

Answer: 960cms

Today

A certain company that sells only cars and trucks reported that revenues from car sales in 1997 were down 11% from 1996, and revenues from truck sales in 1997 were up by 7% from 1996. If total revenues from car sales and truck sales in 1997 were up 1% from 1996, what is the ratio of revenue from car sales in 1996 to review from truck sales in 1996?

Send your guesses to [email protected]

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Happy Investing,
David, Vyom, Ankit & Patrick

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