Sticky Inflation | The Daily Peel | 10/13/22

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Market Snapshot

Another month, another report of higher than expected price increases.

The producer-price index showed a slight 0.4% YoY uptick, double the expected 0.2% increase. It’s only a modest gain but still going the wrong direction.

Now you have the likes of Jamie Dimon saying the S&P could crater another 20%. Despite the dour mood, after weeks of punishing gains, markets mostly traded flat Wednesday.

At the close, the Dow ticked down 0.1%, the Nasdaq dropped 0.09%, and the S&P fell 0.33%.

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Let’s get into it.

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What's Ripe

Moderna ($MRNA) — Moderna shareholders probably thought the company’s breakthrough vaccine technology would keep shares elevated for years.

It ended up getting slammed along with the rest of the market on the back of rate hikes, and investors have been looking for new growth opportunities.

A new cancer vaccine and partnership with Merck announced Wednesday could be just what it’s looking for.

$MRNA was up 8.28% by the end of the day.

PepsiCo ($PEP) — Inflation doesn’t hurt much when you can pass on all cost increases to your customers.

That’s essentially what Pepsi told investors this week, as consumers ponied up for higher-priced drinks and snacks.

Sales and profit guidance were raised for the balance of the year, sending the stock higher.

$PEP was up 4.18% by the end of the day.

What's Rotten

Nissan Motor ($NSANF) — 1 euro.

That’s how much Nissan sold its Russian business for, booking a $687mn loss in the process.

That will sting for a while, but Nissan’s earnings forecast for the rest of the year was unchanged.

$NSANF ended the day down 7.04%.

Peloton ($PTON) — The dramatic crash and burn continued Wednesday, as an analyst report suggested that website trends didn’t look good in September.

This comes a few days after news that co-founder John Foley levered up on his shares in the company and faced repeated margin calls as the stock plummeted.

If this thing turns around, it’ll be a miracle.

$PTON is down 13.93% in the last month.

Thought Banana

Growing Out of Oil Wealth — If you haven’t seen the renderings of Saudi Arabia’s gargantuan new city plan, “Neom,” you should check it out.

The futuristic project is just the latest venture that the oil-rich state is taking to diversify itself in preparation for oil’s declining importance in world energy markets.

So, is this latest venture just a shiny new toy for its leaders? Or could this mammoth investment actually pay off?

• Oil wealth has been a blessing and a curse for many countries
• Venezuela has failed to translate its oil endowment into a functioning economy, while Norway has turned it into one of the world’s largest sovereign wealth funds
• An economy that depends on one industry is extremely fragile, and transitioning into more diverse industries is necessary for long-term health

Catapulting one’s country from relative poverty to economic abundance is easier said than done since many constraints get in the way.

These include available labor within a country, available land, and a sound “business environment” that includes safe city centers and enforceable contracts.

Between LIV Golf and this megacity project, Saudi Arabia is swinging for the fences with its new ventures.

Will it pay off? Big swings could mean big wins, but huge spending could also draw down oil wealth sooner than expected.

Wise Investor Says