In this issue of the peel:

• We’re officially sending out the Bat Signal, calling all apes to waste money on something today to save our beautiful economy. Retail Sales data was fine on the monthly side, but annual growth rates aren’t living up to the world “growth” in any real sense. Find out why below.

• Turns out selling the highest-demand products in the world is a good business model, as Taiwan Semi figured out last quarter. Meanwhile, Uber has a new $20bn crush, and Lucid needs to borrow a dollar. Finally, Elevance is the latest health insurer to get shaky on future Medicaid payouts.

• Ahhh…. okay, now I see why consumer spending data is all over the place. Consumers themselves have no clue what to do in this environment, as we can see in the latest sentiment data. Check it out below.

Market Snapshot

Banana Bits

• Earnings estimates in Europe are falling faster than Poland in 1939.

• Netflix turned Love Is Blind into Investors Are Blind this quarter, as the firm’s latest earnings report shows a huge 35% jump in ad-tier subscribers.

• Uber is reportedly considering an acquisition of Expedia for ~$20bn.

• Blackstone reports stellar Q3 numbers on some of the best returns its infrastructure and private equity portfolios have seen.

• What would a round 2 of President Trump look like for global trade?

• Thank whatever God or lack of one you believe in—Google announced plans to block the election and…  just not until polls close.

What do Nvidia and Amazon have in common?

Well, other than trillion-dollar market caps. Both Nvidia and Amazon chose to collaborate with Miso. Miso’s the leader in AI-powered kitchen robots. That’s why Nvidia offered Miso its premier AI vision tech, and Amazon handpicked Miso to partner and use its RoboMaker simulation environment. Now, Miso launched their first commercial AI-powered robot, and it sold out in seven days. On the back of that success, they’re focused on scaling to 170+ US fast food brands in need.

Invest in Miso by 10/18.

Macro Monkey Says

Retail Sales

For a group of people who love to whine about high prices, Americans seem to have no problem paying those prices.

Which actually makes a lot of sense if we think about it; this combines two favorite hobbies of the American people—complaining and wasting money.

And nobody does those two things better than me. But last month, the rest of you gave me a run for my money (no pun intended) on total spending.

Let’s get into it.

The Numbers

Yesterday, the Census Bureau released its “Advance Monthly Sales For Retail And Food Services” report, a.k.a the “Retail Sales” report, for September.

According to the report, total retail sales increased 0.4% for the month. That was faster than the 0.3% guesstimate from economists and an improvement from August’s revised 0.1% increase.

Excluding auto sales, total retail sales increased by 0.5%, exceeding guesstimates pegging (pause). This monthly increase is at 0.1%.

Excluding “food service and drinking places,” as apparently employees at the Census Bureau have never been invited to a “bar or restaurant,” retail sales increased 0.3% in September and 1.4% from September 2023.

Nonstore retailers, a.k.a online stores/e-commerce/Amazon, saw sales rise 7.1% for the year. Meanwhile, restaurants posted annual sales growth of 3.7%.

In total, retail sales posted an annual increase of 1.7%, also above consensus guesstimates, but not enough to outpace inflation.

In September, the Consumer Price Index (CPI) increased by 2.4%, implying real annual growth in retail sales of -0.67%.

In any given year, consumer spending will make up somewhere between 67-71% of total U.S. GDP. So, if consumer spending falters or falls below inflation, generating real GDP growth becomes quite the challenge.

According to the Bank of America consumer spending data we reviewed earlier this week, total consumer spending per their internal data declined 0.9% annually in September.

Meanwhile, August’s PCE report signaled healthy consumer spending levels, with real personal consumption expenditures up 2.9% from August 2023.

We won’t get the next PCE report until Halloween, so we’ll have to wait until then. Fingers crossed, it’s not too spooky.

At the same time, on Thursday, the Labor Department released its initial jobless claims data for the week, showing a 19k decline in those filing for initial unemployment to 241k.

Economists had expected initial claims data to post numbers right in line with the prior week at 260k, especially given the assumed negative impacts from hurricanes Helene and Milton.

So, compared to economist guesstimates, this week’s consumer spending and labor market data held up well. However, when factored against other economic forces like inflation, the data paints a less rosy picture.

The U.S. economy has been in a Goldilocks zone for some time now. Maybe the bears are on their way home?

The Takeaway?

Compared to economist guesstimates, consumer spending is holding up well.

Compared to inflation, recent data gives reason for concern.

So, for the data that matters, consumer spending growth appears to be at an inflection point. Seasonality plays a huge role this time of year, so we could be seeing consumers saving up before splurging on holiday gifts in November and December.

Speaking of which, feel free to send gifts to the Daily Peel Global Headquarters. Your mailman will take care of the rest.

Career Corner

Question

Hi mentors, how should you answer a question about your desired salary when you are required to select a number on the app?

Answer

Research their average salary on the WSO company database, glassdoor, etc., and put that.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Taiwan Semiconductor Manufacturing Co. (TSM) 9.79%

• Surviving another quarter without its homeland playing host to the first shots of World War III, Taiwan Semi was the prom queen and starting quarterback in Q3.

• The world’s largest chip foundry capitalized on global AI demand, posting 36% revenue growth and a 56% surge in profits. Both easily beat Street estimates.

• TSMC anticipates 30% sales growth in FY’24, up from prior guidance of 20-25%. The Q3 and Q4 ramp-up in production of Nvidia’s Blackwell chips is crucial to hitting that target.

Expedia (EXPE) 4.75%

• I still can’t decide if this was a match made in heaven or the downstairs bathroom of a nightclub in Berlin. But at least we know how they’ll book their honeymoon.

• Rumors emerged Wednesday evening that Uber has a new crush. The ride-sharing firm is reportedly exploring a $20bn takeover of Expedia.

• This would be Uber’s largest-ever acquisition, but The FT reports that interest is still in the “early stages.” Maybe potential travel benefits could make Uber One actually worth it.

What's Rotten

Lucid (LCID) 17.99%

• You’re allowed to raise three things on Wall Street: bonuses, EPS targets, and the roof. One thing you’re definitely not allowed to raise? Equity financing.

• This down bad EV maker learned that the hard way after announcing plans to raise $1.67bn through a secondary sale and a private placement.

• Lucid is selling 262.5mn common shares along with a private placement of 374.7mn shares to Saudi Arabia’s PIF. The goal is to dilute investors, I mean raise funds for capex and “general corporate purposes.”

Elevance Health (ELV) 10.59%

• Let’s kill two birds with one stone—if Elevance expanded into insuring losses on its stock, they could raise guidance and reverse yesterday’s sell-off. Harvard can send my honorary MBA as an NFT. 

• Elevance is having the same issues as UnitedHealth after reporting Q3 earnings. Coming changes to Medicaid bonuses are screwing these companies, so hopefully, that means it’ll be good for customers.

• Q3 wasn’t the problem for Elevance, beating estimates across its managed care business. However, the firm now sees FY’24 EPS of $33/sh, down from a prior projection for “at least” $37.20/sh.

Thought Banana

Vibes Are Off

Consumers… what’s going on?

We have a highly esteemed and honorable election between two close friends going on, peace all around the world, and a totally trustworthy media establishment to keep us dearly informed about all of it.

I can’t imagine why confidence is falling, and uncertainty is on the rise. Let’s dive in.

What Happened?

In the last week, the New York branch of the Federal Reserve and the University of Michigan published their latest findings from surveying consumers on their thoughts about the economy. And this time, the results were weirder than usual.

According to the NY Fed, long-term consumer inflation expectations are on the rise.

Since July, expectations of the median inflation rate in the next 3 and 5 years have climbed higher, from 2.3% and 2.8%, respectively, to 2.7% and 2.9%.

Finding out what caused this is like finding a brain cell on Capitol Hill.

Consumers indicated marginal decreases in earnings growth, overall financial health expectations, and a worsening hiring market—all anti-inflationary forces.

Meanwhile, the University of Michigan’s sentiment survey, of course, only makes this more confusing.

Respondents to the reigning National Champion’s poll indicated lower inflation expectations, yet near-record high levels of consumers citing “high prices” as a top concern.

Overall sentiment, according to UMich, also declined 1.7% from August, but on the bright side, it is up 8% since last year.

The Takeaway?

The NY Fed and the University of Michigan ask questions differently, which can explain the divergence in their sentiment readings. 

But, what doesn’t make sense is:

• Respondents to the NY Fed survey saying long-term inflation will be higher, but the forces that drive higher inflation will simultaneously be more anti-inflationary and

• Respondents to the UMich survey stating they expect lower inflation but simultaneously saying high prices are a growing concern.

Yet again, the divergence between and within these sentiment indicators underscores the high degree of general opacity in the economic outlook.

No one knows what to expect, least of all Jerome Powell, and Americans can feel that uncertainty.

The Big Question: Does declining sentiment play a role in the worsening consumer sentiment data?

Banana Brain Teaser

Previous

A souvenir vendor purchased 1,000 shirts for a special event at a price of $5 each. The vendor sold 600 of the shirts on the day of the event for $12 each and 300 of the shirts in the week following the event for $4 each. The vendor was unable to sell the remaining shirts. What was the vendor’s gross profit on the sale of these shirts?

Answer: $3,400

Today

A rug manufacturer produces rugs at a cost of $75 per rug. What is the manufacture’s gross profit from the sale of 150 rugs if 2/3 of the rugs are sold for $150 per rug and the rest are sold for $200 per rug?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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