Inflation Less Hot | The Daily Peel | 8/11/22

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Market Snapshot

Futures boomed after yesterday morning’s CPI print, with markets soaring following the 8.5% headline number. Interest rate expectations actually fell following the print, and growth names immediately started to catch a bid in hopes that growth wasn’t totally dead. The 10-year fell to 2.67% or so following the print, and the yield curve steepened yesterday.

All sectors in the S&P moved higher, with energy and utilities as our laggards and materials leading the way.

Investors were ecstatic with the lighter-than-expected CPI numbers, fueling a little bit of a rally. At the closing bell, the Dow was up 1.63%, the S&P climbed 2.13%, and the Nasdaq was up 2.89%.

Final days to invest in the $1.9B boba market. Bobacino could lead an industry projected to grow 128% in five years with fully-automated bubble tea kiosks in high-traffic areas around the country. Invest in Bobacino before 8/12

Let’s get into it.

Banana Bits

Boba is a growing $2Bn industry
The misnomer that is Inflation Reduction Act includes an excise tax on stock buybacks
Inflation has slightly cooled, but 8.5% inflation is still something you’d expect from Russia, Zimbabwe, or 1930s Germany
In likely the first of many, USC Boosters are forming a NIL collective to bolster the talent pool
If you want to pay $500/night for a Motel6, here’s your chance

Banana Brain Teaser

Yesterday — What can be taken, stolen, mistaken, or changed, regardless it is around you your entire life?

Your identity.

Today — It’s 150 bananas off of our PE Master Package for the first 10 respondents. LFG!

What coat goes on wet?

Shoot us your guesses at [email protected] with the subject line "Banana Brain Teaser" or simply click here to reply!

Macro Monkey Says

Has it Finally Peaked? — The big macro news of the day yesterday was the CPI print, signaling to the world that maybe, just maybe, inflation has peaked.

Given the lagging nature of the effects of fed funds rate hikes, it’s likely that 200 bps of rate hikes has finally stopped inflation from growing.

The good news: the year-over-year headline CPI number came in at 8.5%. This is considerably lower than the 9.1% number from last month, and it is less than analysts’ estimates of 8.7% for July. Inflation “beat” estimates, and markets ripped.

The core CPI print landed at 5.9%. This is pretty rough, but it’s the same number as last month’s YoY core CPI.

That being said, it’s not all sunshine, rainbows, and unicorns. The bad news: inflation is still above 8% YoY across the entire basket of goods and services in the CPI. That’s disgusting.

We are still near 40-year highs, back to the Volcker days in the early 1980s. Even if inflation has peaked, it remains to be seen if it will move towards the Fed’s target or move sideways in the interim.

Prices tend to rise quickly and remain sticky when inflation eases. Read through the lines: unlike commodity prices, the costs of core CPI goods are not going to ever go back down.

There is a bit of a double-edged nature to this good news. Inflation easing can mean that consumers have more money in their pockets to spend on leisure or travel activities. This can introduce further inflation into certain areas of the economy, particularly when consumers are all of a sudden not terrified of the C19 virus.

Oil prices have been on the decline, and a major chunk of this pullback in the headline CPI print is the pullback in gas prices. We’ve watched our pain at the pump decline by like a buck a gallon—but that doesn’t make me happy about filling up for $4/gallon when I paid less than $2 a couple of years ago.

There are still a lot of the last three rate hikes in the pipeline. The ripple effects have not completely made their way through the economy.

Hopefully, the Fed can engineer a soft-ish landing and not plunge us directly into a recession.

Final Day To Invest In The 128% Boba Boom

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Get your Bobacino shares before the opportunity closes tomorrow

What's Ripe

Plug Power ($PLUG) — Squarely, a growth name, Plug is having a little bit of trouble getting its costs under control. They declared earnings yesterday, but I wouldn’t call it “earnings,” more like “losings.”

After a net loss, investors still pumped the hydrogen fuel cell company higher, with hopes that some of the provisions in the Inflation Reduction Act will increase demand for this technology. It is more than a touch ironic that “inflation reduction” will result in increased demand.

On the news and updated outlook, shares of $PLUG climbed 16.66%.

Disney ($DIS) — Shares of Disney popped slightly heading into earnings.

There are really two components to the market’s expectations here.

First, the theme parks are likely selling tickets, memories, and experiences like crazy. Side note, if you’re ever in the Disney area and want to experience an amazing meal, check out Victoria & Albert’s. It’ll cost you a pretty penny, but for $1500, you probably can’t find a better meal in Orlando.

The next piece of news is Disney+ subscriber growth. The platform is expected to onboard 10 million new subs this quarter. In a world filled with subscription fatigue, this is fantastic news.

Shares of $DIS rose 3.98% going into their earnings yesterday afternoon.

What's Rotten

OptimizeRX ($OPRX) — Macro factors discussed during $OPRX’s earnings call sent shares lower yesterday.

Some of these factors include slowing drug approvals by regulators, life sciences industry talent challenges, turnover at client companies, and longer sales cycles.

Or, basically, they’re blaming everyone but themselves for poor performance.

The Street saw right through this. Shares of the next-gen Rx company closed lower by 30.02%.

JD.com ($JD) — When you’re down as a tech stock during a tech stock rally, that raises a couple of red flags for me.

JD.com is in that boat. Whether it’s because of delisting fears or the general consensus that much of the financial data reported in China is less than the full truth, the Chinese tech name was down yesterday.

$JD was down 2.77%. It is a pretty beat-down name, but I’m not sure you’d want to go near it just yet amidst the uncertainty surrounding this type of KWEB name.

Thought Banana

Leave Pizza to the Pros — Pizza has a special place in my heart and is on the list of my favorite foods. I’m sure many of you are in the same boat.

While I’m no Dave Portnoy, I do tend to judge pizza based on a single slice. I’ll start with just our boring ol’ Cheese or Margherita, and if it’s any good, we can think about diversification.

The major big pizza chains in the US have had relative success in making money and feeding customers for the last few decades. Pizza Hut, Little Caesars, Papa John’s. You’ve probably tried most of them.

If you’re an investor, you may have considered throwing money into Domino’s Pizza. They’re a fintech platform-meets pizza chain. It’s arguably one of the more cutting-edge brands when it comes to bringing a tolerable delivery experience to the customer.

Americans eat a lot of pizza, and usually, we don’t complain too much about its quality. But, Italy is a different story. Allegedly it’s the birthplace of pizza. I dated someone from Jersey, and I thought she was a pizza snob. But Italians put her to shame. They just prefer a more artisanal pizza experience, apparently.

Case and point: Domino’s just closed its last franchise in Italy after seven years of struggling to gain a foothold in the market. EPizza SpA, a Domino’s brand that operated exclusively in Italy, originally planned to open nearly 1000 pizzerias by 2030.

Competition from local restaurants, as well as forced lockdowns, crippled the brand. Food delivery apps in Italy also changed the delivery game, eating into ePizza’s margins and making it hard to make the kind of money that they were used to in North America. After the better part of a decade, Domino’s finally gave up on the struggle.

Look at the balls on these bulls, trying to sell big box pizza to Italians. As a pizza connoisseur, when I get Domino’s, it’s not about quality or taste; it’s about convenience.

Their original goal was to bring delivery pizza to Italy, but the competition brought delivery everything to that market before Domino’s could get off the ground.

Finally, it would appear that Domino’s corporate gets to eat some humble pizza pie.

Wise Investor Says

“If stock market experts were so expert, they would be buying stock, not selling advice.” — Norm Augustine

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