$pending | The Daily Peel | 1/31/22

$pending — On Friday, we discussed just how talented Americans are when it comes to spending money. Well, it turns out most of that talent was employed by U.S. businesses because spending by U.S. consumers actually fell in the fourth quarter by 0.6%, roughly in line with expectations. Economists actually got a forecast (mostly) correct, so good on them.

Consumers were far less willing to dole out cash compared to the previous quarter, suggesting the economy may be slowing by itself. This is strange, especially during the Holiday season, and even worse, throws a major wrench into the plans of the Federal Reserve.

Low interest rates encourage spending on big-ticket items due to the low cost of financing they create. Since March 2020, low nominal rates and negative real rates have encouraged spending out the wazoo, driving economic growth and inflation and arguably pulling us out of a recession.

Now, as consumer spending slowed in the fourth quarter void of any discretionary rate hikes, this suggests the economy may be slowing under its own volition.

This puts the Fed in a tough spot. We’ve held rates at 0 for almost two years now, and they can’t stay there forever, but if the Fed continues down the planned path for rate hikes, one in which the market is pricing-in four 25bp hikes, we might just pull ourselves into a recession.

Keep in mind the whole reason for these rate hikes was to slow an overheating economy or, more directly, to slow inflation. Inflation is at least partially a function of spending, so if spending falls on its own, that reduces our need for rate increases to discourage frivolous buying.

In short, this is not a good look for JPow. He and the FOMC have a tough decision to make soon that just might result in him being the first Fed Chair to plunge us into two recessions.

Worse yet, he might have actually been right when he role-played as a broken record that just could not stop saying “transitory.”

Can I Get You a Drink? — Every now and then, we like to spotlight a whacky, deep-tech startup that’s attempting to do something straight out of 2100. Today, that startup is Cana Technology.

Fed up with the amount of waste produced by bottled beverages, Cana set out to find a better solution. You might think it's some bamboo-cardboard container or a bottle that’s later used as toilet paper or something, but no. Cana went big.

The company has developed a microwave-sized machine to act as a prototype for their system of 3D-printing beverages. That’s right, Cana says its prototype can “print” coffee, juice, cocktails, and much more through its molecular printers.

CEO Matt Mahar explained the goal is to reduce waste in the global beverage business while also increasing convenience (and potentially alcoholism) to customers by putting every drink in the world at their fingertips. Step 1 to achieving this goal was just completed with the firm’s $30mm seed round funded last week by The Production Board.

No, unfortunately, you can’t trade options on this yet. Sorry to break the news to all the degenerates out there. But hey, if all goes well, maybe one day you can day trade OTM calls on Cana while drinking coffee from their machine. Only, once you see the result from such trade, you might want to make that coffee Irish.