June 9, 2023 | Peel #478

Silver banana goes to...

In this issue of the Peel:

• The economy might achieve a "soft landing" in its war against inflation, despite initial skepticism
• Carvana and Tesla's stock prices have surged significantly, while GameStop and Signet Jewelers have experienced losses due to various factors
• Falling population growth poses a challenge, highlighting the importance of demographic trends in economic development

Market Snapshot

Happy Friday, apes.

And, much more importantly, happy 6/9. Hope you have a nice day (get it?). A holiday second in prominence only to 4/20, let’s hope markets decide to celebrate with us on this glorious occasion.

Equity markets were getting in the spirit of things, that’s for sure. Stocks broadly gained on the day, with leadership out of the large caps and giant consumer cyclicals like Amazon and Tesla leading the way. Volume was notably down from Wednesday’s levels, but hardly anyone can be mad when all the US major indices print green.

And now that JPow and the FOMC have chilled with their nightmare-fuel rate hike warnings, bond markets seem to have calmed down. Heading into next week’s FOMC decision day, treasury traders seem confident in their pricing, with yields trading range bound from 4.1% - 4.2% on the 2-year note.

Let’s get into it.

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Banana Bits

• Run it back. Former Pres Big Donnie T seems to be enjoying fresh indictments on a quarterly basis now as the man gets hit with 7 new federal charges.
• Believe it or not, the S&P 500 has officially re-entered bull market territory, gaining over 20% from recent lows.
• Following in the footsteps of bitter rivals LIV and PGA merging, Tesla and GM have decided to work together in pursuit of electrifying American roads.
• Cities like NYC, Boston, and Philly are getting a bit of a reprieve from Canada’s hotboxing of the region, but according to the NYT’s live tracker, southern cities from DC to Atlanta might be next.

Macro Monkey Says

Entering Final Descent

The phrase “soft landing” isn’t just what happens at the end of your average Tinder date; it’s what economists have been begging, hoping, and praying for as a result of the Fed’s all-out war against inflation.

Most people wrote this off as a possibility almost immediately. But despite the common feeling among the average American consumer/worker, the economy has hummed along decently well in retrospect.

Sure, we had a couple of bank runs here and there, but still, not a single depositor lost money, and regional bank ETF $KRE is up >22% since May.

"... these reports certainly aren’t clearing up any of that post-C-19 fog that seems to still be confusing markets."

Last Friday, we saw the Labor Department drop the latest figures on the monthly employment situation. Yesterday, we got the weekly initial jobless claims data, and although not bad, these reports certainly aren’t clearing up any of that post-C-19 fog that seems to still be confusing markets.

Take a look here:

As you’ll notice, last week’s initial jobless claims figure, which measures on a weekly basis the total number of people in the US filing for unemployment insurance for the first time ever, rose to the highest level since October 2021.

If you recall, last Friday’s employment report showed a monstrous gain in job additions, but at the same time, saw growth in unemployed persons as well. This data certainly follows that trend, leaving us only to wonder—who tf is getting hired??

"... these unrevised figures can be confusing in the short term."

With the way the government collects this data via at-times discrepant Establishment and Household surveys, these unrevised figures can be confusing in the short term.

Moreover, recessionary conditions typically bring initial jobless claims up into the 350k-400k range, suggesting we still have room to run.

"Sadly, there’s no official definition of that outcome ..."

Apparently, “rampant fraud” in states like Massachusetts had been skewing the numbers over the past few weeks, overstating the level of unemployed persons in the economy on this metric.

Forgetting all the bullsh*t, the trends are clear. JPow and the FOMC might actually be in their final descent on the way to an official “soft landing.”

Sadly, there’s no official definition of that outcome, but I think we can all agree that settling for a “no recession” outcome is damn good enough.

Time will tell, or maybe not. Let’s just enjoy each day of this non-recessionary environment for as long as we can because, like Randy Marsh says, “Yea, it is an angry and unforgiving Economy.”

What's Ripe

Carvana ($CVNA) ↑ 56.02% ↑

• I guess there’s a reason why this company gets its name from the Hindi version of heaven, as shareholders officially entered Nirvana yesterday.
• Much like Jon Snow in Game of Thrones or Leonardo DiCaprio’s character in The Revenant, many investors had left this stock for dead. No longer as shares stormed well over 50% yesterday as the heavily-shorted company rises from the ashes.
• Yesterday, Carvana announced an update to their fiscal guidance for the next quarter, in which they actually expect to be non-GAAP profitable, while analysts were expecting a loss.
• Obviously, making money instead of burning money is great news. But, the sudden rise on the news forced a certain amount of short-sellers to buy back shares in order to cover their positions, adding buying pressure and pushing yesterday’s return to levels that make the average ape investor look like Jim Simons.

Tesla ($TSLA) ↑ 4.58% ↑

• Elon & Co are back at it again, with shares ripping a massive 40% over the past month and well over 10% in just barely a week. Sorry if you missed out, but the wise apes among you that trade with us here must be printing like JPow.
• Once a dream, then a 
  , and now carrying the team, the Cybertruck appears to be driving all this charged-up hype. No stranger to setting the stage for massive production then (usually) missing at first, Electrek reported Thursday that Tesla plans to produce ~375,000 of these things per year.
• That, to use an industry term, is a f*ckton. In 2022, the firm sold just 252,000 units of its most popular car, the Model Y. If Tesla were to sell each Cybertruck it produced, it would’ve been the 4th most popular car in the US last year.
• Lofty goals, to say the least, but if anyone’s crazy enough to get it done, it’s the Tesla team.

What's Rotten

GameStop ($GME) ↓ 17.89% ↓

• Yup, definitely didn’t see this one coming with yesterday’s after-hours collapse. Remind me, why are we still talking about this sh*tco again?! Oh yeah, because it’s just plain hysterical, that’s right.
• Anyway, GameStop shares did what they typically do and crashed through the floor yesterday, losing almost 1/5th of their value.
• Garbage earnings, a dishonorably discharged CEO, and a man-child at the helm in the form of Ryan Cohen aren’t exactly points most analysts would want to include in a pitch deck. Unfortunately, that’s exactly what we get with $GME…for now.

Signet Jewelers ($SIG) ↓ 10.66% ↓

• Everyone loves ripping cigs inside, obviously, but absolutely no one on Earth wanted $SIG inside their portfolio yesterday.
• Apparently, there’s a 3-year standard cycle from dating to ring-buying that jewelers expect in most relationships. Now, I sure don’t know from experience (not even close), but that’s just what actually happy people tell me.
• Anyway, 3 years ago in the last quarter, a teeny little virus made sure that nobody was meeting up with each other and, as a result, disrupted that typical 3-year cycle that people (allegedly) engage in (no pun intended).
• As a result, Signet toned down its guidance for the next quarter and the fiscal year, citing macro headwinds. The numbers for last quarter weren’t even that bad, but for a company that essentially trades on love, that’s gonna be an uphill battle in 2023, to say the least.

Thought Banana

One Bet Away

Apes, it’s time to start having more sex. That’s not me asking; that’s essentially what JFK told you to do when he said, “Ask not what your country can do for you. Ask what you can do for your country.”

That’s because more sex = more babies, and as you can see from the above and below charts, we’re in desperate need of those little f*ckers.

Most people seem to think there is an overpopulation problem on the planet. However, according to most experts, the world is actually becoming underpopulated, or more specifically, population growth is falling off a cliff.

This is a huge topic we can’t possibly address entirely in one Thought Banana, but as population growth is one, if not the fundamental driver of economic growth within an economy, we have to talk about it. Like Adam and Eve to humanity, nothing gets going in an economy without a population, and a growing one at that.

"As you can see, the US, along with the entire rest of the developed world, is on the wrong side of that line."

In order to maintain a population level, each person needs to be responsible for, on average, over 2 babies. Most of the time, we cite that “replacement rate” at 2.1, but as it takes two people to create one new one, anything above two will suffice.

As you can see, the US, along with the entire rest of the developed world, is on the wrong side of that line.

This makes sense. As economies develop and things like healthcare, safety, women’s rights, and education abound, birth rates tend to collapse. Overall, all those things we listed are undeniably great things to pursue, but managing population growth in their aftermath creates a new challenge.

Fortunately, in the United States, our massive levels of immigration compared to *checks notes* literally every other nation in the world keeps our population growing despite birth rates falling below that 2.1 replacement level.

It’s an issue we’ve talked about before, but one that seems to continue moving in the wrong direction. If we want economies to grow, we need more people out there spending money and contributing to that growth. Moreover, the more people we produce, the greater the odds we get an Albert Einstein or Steve Jobs to spur economic growth like gas to a flame.

To address the elephant in the room, you may be concerned about this idea of “running out” of resources. Fun fact: humanity has never once “run out” of a raw material without something to immediately replace it.

"Innovation, substitution, and new discoveries have kept the engine humming..."

Innovation, substitution, and new discoveries have kept the engine humming, and while past performance is no indicator of future results, an even slightly positive view of humanity suggests optimism.

We spend all day talking about debt ceiling this, inflation that, but really, those are temporary problems. Issues like population growth and other demographic trends harness the power to truly make or break an economy, as well as individuals that are on the right (and wrong) side of the trade.

The big question: How can Western and other developed nations spur population growth? Will productivity gains from technology be enough to replace growth in number of humans? How do ongoing demographic trends change the geopolitical balance of power in the years, decades, and centuries ahead?

Banana Brain Teaser

Yesterday — I have three sisters, and all of us are mothers. My sister Kay has two nephews and three nieces. My sister Jane has one nephew and three nieces. My sister Belle has one nephew and five nieces. I have one daughter. How many nephews and nieces do I have?

I have two nephews and four nieces.

• Kay has two girls.
• Jane has one boy and two girls.
• Belle has one boy

Today — What three-letter word best completes the words below?

• SW...
• ...Y
• AL...
• F...
• W...

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

Wise Investor Says

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” — Mark Twain

Happy Investing,

Patrick & The Daily Peel Team

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