📈 Putting The Gold in Goldman

Hate on DJ D-Sol all you want, but Goldman’s stock is up. April 16, 2024 | Peel #689 Silver Banana goes to... [Hear.com. ](20Street%20Oasis///) In this issue of the Peel: - 💸 Retail sales grew 0.7% monthly and 4.0% annually in March - 🏦 Hate on DJ D-Sol all you want, but Goldman’s stock is up. - 💰 Check out what’s going on with some of the largest asset managers. Market Snapshot 📸 Banana Bits 🍌 - Tesla is cutting 10% of its workforce, leading shares [to sell off on Monday]( - Swifties rejoice! Live Nation—owner of Ticketmaster—is getting hit with a [lawsuit from the DoJ]( - The Atlanta Fed GDPNow tracker is posting 2.8% annualized growth in Q1, [rising from 2.4%]() - Gold prices are [still surging](=) The Smallest, Mightiest Hearing Aid on the Market 20Street%20Oasis/// Say hello to Horizon by [hear.com](20Street%20Oasis///). This tiny German hearing aid is now taking the U.S. by storm. Why? Partly because it’s tiny. Like James Bond-device tiny. Partly because it boasts the world’s first-ever dual processing system. And with double the power comes double the clarity. In non-science-y talk, it just means you get maximum speech clarity with minimal background noise and, as a result, effortless conversation wherever you go. If you like, you can also stream music, adjust settings via app, and enjoy ultra-HD sound all day, every day. Ready to join the 385k+ who can hear with crystal clarity thanks to [hear.com](20Street%20Oasis///)? Sign up for a 45-day no-risk trial to test drive the best-selling Horizon hearing aids. [Sign Up Today](20Street%20Oasis///) Macro Monkey Says 🐒 Shut Up And Spend Who’s that? Inflation? Hmm… never heard of ‘em. That’s what every single consumer from sea to shining sea said last month. Well, they actually probably said, “Damn, I can’t believe this plain white t-shirt costs $19.89,” but they still bought it in March. Yesterday, we got the latest data on donations to the economy—a.k.a. retail sales—and I gotta say apes, you must’ve been feeling particularly generous last month. The Numbers In March, retail sales grew 0.7% compared to February’s revised figures and 4.0% annually. [Source](=) For me, looking at the above chart always feels like looking into a mirror based on how ugly it is, but nonetheless, the far right-hand portion shows the growth (or lack thereof) of consumer spending across those retail items for the month. We can see that while February’s 0.9% revised jump is almost entirely due to spending on autos, advance estimates for March show auto spending in decline while the less-high-ticker items put them on their back. 0.7% growth was way above guesstimates from “expert” economists who pegged March’s growth at 0.3%. Excluding auto sales, our donations to the economy increased 1.1% in March. All of this data is nominal, but that’s still solid growth when factoring in a CPI of 0.4% monthly and 3.5% for the year, respectively. Overall, spending in Q1 was relatively weak in comparison to years past, but ending on a strong note in March gives confidence that a strong labor market and resilient spending are still here to last. Over 2/3rd of U.S. GDP in any given year is driven by consumer spending. So, strong growth here is a gold mine, but we’re moving back towards “good news is bad news” at the intersection of macro and markets. That’s because resilient spending and a strong labor market are exactly the two trends that will keep rates elevated. Remember, Powell wants you poor, unemployed, and homeless, so his goal of slowing the economy may still have a ways to go. [Source]() Spending at gas stations was a big driver of the uptick in March, with rising prices at the pump driving 2.1% MoM growth in this line item. Online sales led the league in growth, however, rising 2.7% and padding Amazon’s bottom line. Perhaps most important, however, was the surge in spending at “food service and drinking places” or what normal people call “restaurants,” but as most government employees have never been invited to one, we can’t blame them for not knowing. Anyway, restaurant spending grew 6.8% for the month and a huge 11.0% for the year. We focus on this category because restaurant spending is the macro equivalent of a high beta stock. It’s the most discretionary purchase, so seeing a surge here is a fat vote of confidence (no pun intended) in favor of the health of U.S. consumers. The Takeaway? I can already feel it, so don’t come at me with the “yeah but credit card delinquencies also hit an all-time high…” bullsh*t. Not true—they did rise, but it’s not even close to a new record. [Source]( Regardless of where it’s coming from, U.S consumers are throwing bands right now. Obviously, rising credit card delinquencies can be worrying, but this is also exactly what the Fed was going for. As important as headline retail sales are, seeing discretionary purchases like restaurants spiking is a great sign. But, pulling in the exact opposite direction is the fact that spending on items like clothing dropped 1.6%. The Goldilocks economy rolls on. In case you’re wondering, “Goldilocks economy” is just a euphemism for “soft landing achieved.” But without a due date for JPow and the FOMC gang, arguments around a soft landing can be made across any timeframe. Long story short, keep the donations coming… maybe we actually will be able to make it out of this thing alive. What's Ripe 🤩 M&T Bank Corp (MTB) 📈4.7% - Thomas Jefferson is rolling in his grave, knowing that not all bank earnings are created equal. M&T’s strong interest revenue and EPS proved it. - Unlike the big banks that reported on Friday, M&T’s guidance for full 2024 interest revenue of $6.8bn surprised to the upside, driving the gains. - The bank beat on EPS as well, reporting $3.15/sh vs estimates for $3.01/sh. Interest-bearing deposits grew, but CRE exposure concerns still loom. Goldman Sachs (GS) 📈2.9% - Goldman’s HQ might have the highest concentration of douchebags in the world, but as you can see in our [video coverage](, they put on a clinic in Q1. - Now we know why the other banks disappointed on banking fees—Goldman was snatching them all up. This segment saw 32% YoY growth in Q1. - Mortgage financing, prime brokerage, and customer platforms ballooned as well, with operating expenses barely changing, up just 3% YoY. - This led to GS beating the sh*t out of estimates, with EPS of $11.58/sh on $14.21bn in sales vs expectations for $8.56 on $12.92bn. What's Rotten 🤮 Salesforce (CRM) 📉7.3% - Insert the “Everybody Hated That” button here because, you guessed it, everyone hated Salesforce and Informatica (INFA, -6.5%) on Monday. - The massive CRM platform is looking to acquire Informatica, a buzzword-filled data management firm, for $10bn—lower than the firm’s close on Friday. - Investors view Salesforce as having a habit of overpaying for acquisitions. And despite this low-ball offer, investors are still pissed. Reddit (RDDT) 📉5.4% - This firm’s IPO was supposed to be an ad for other companies to list in 2024, but it turned out to be more of a bad Yelp review, especially on Monday. - Reddit shares dove once again thanks to banks initiating coverage of this name. MS, GS, and JPM all slapped on equal-weight/neutral ratings yesterday. - In sell-side lingo, “neutral” means “sh*tty.” Deutsche Bank’s “Buy” rating probably gave investors more reason to sell, too, because, well… it’s Deutsche. Thought Banana 🤔 Battle of the Brokers Politics, war, and earnings szn—three of the most brutal battles possible in the human experience. And within the great battle that is earnings szn, brokerage companies face a battle of their own—pocketing as much of their client’s money as humanly possible. BlackRock, State Street, and Charles Schwab are all different in their own respects, but these huge asset managers have more in common than not. So, let’s take a look at how these big dawgs of U.S. investing fared in Q1. What Happened? Yesterday, Charles Schwab dropped their earnings report for the first quarter, hot on the heels of the larger two that released their numbers last week. You might assume that Schwab is clearly the one killing it, as they have the high honor and privilege of providing custodial services for the WSO Alpha portfolio but diving into the numbers may reveal a different story. And in the above chart, we can see that for most of the past 2 years, Schwab has led this “league” of “asset managers.” Now, the difference in counting AUM vs AUC vs Client Assets and the million other ways to divvy this stuff up is important, but the general trend remains true no matter how pedantic we get. But let’s expand our view and see how these businesses are doing overall. BlackRock: Although net flows at BlackRock were relatively healthy QoQ, the firm’s net income plummeted 65% compared to Q1’23. Much of this is driven by changes in the investment mix at BlackRock, with clients moving funds out of fee-earning accounts and assets and into safer plays, like treasuries and whatever other “smart” investment boomers make. Removing restructuring costs, BlackRock’s EPS of $0.81/sh did come right in line with expectations, but they still couldn’t satisfy the Street. State Street Especially in the post-C-19 environment, the 232-year-old firm that is State Street (literally founded during Washington’s first term), this giant asset manager thinks it’s still the Adams administration—and its investment servicing fees have suffered as a result. State Street is the epitome of a firm nervous to get with the times, facing a sizable innovator’s dilemma challenge. They were able to grow fee revenue this quarter, easily the most important segment for asset managers, so it wasn’t all bad as the share price might suggest. Profits fell 10%, and the bank is carrying massive unrealized losses of $5.9bn, mostly in its bond portfolio, but investors were pleased to see that operating earnings of $1.04/sh beat expectations. Schwab = Finally, Schwab came in hot this Monday morning, flexing a fresh $96bn in core net new assets from clients. Net interest revenue makes up the largest segment for Schwab, which declined 19% for the quarter. But investors had priced this in already, so beating on sales and EPS was more than enough to send shares higher on the day. Despite beating, revenue still fell 7.3% overall. But, with assets growing, daily trades growing, and net income falling less than expected, there wasn’t much for investors to be upset about. 💭 The Big Question 💭: Which of these semi-similar asset managers will dominate in 2024? How will potential rate cuts impact this performance? Will State Street ever change its logo to be relevant post-18th century? Banana Brain Teaser 💡 Previous 🗓 Makoto, Nishi, and Ozuro were paid a total of $780 for waxing the floors at their school. Each was paid in proportion to the number of hours he or she worked. If Makoto worked 15 hours, Nishi worked 20 hours, and Ozuro worked 30 hours, how much was Makoto paid? Answer: $180 Today 🕐 If (1-1.25)N = 1, then N equals what? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “I consider my ability to arouse enthusiasm among my people the greatest asset I possess, and the way to develop the best that is in a person is by appreciation and encouragement. There is nothing else that so kills the ambitions of a person as criticism from superiors.” — Charles Schwab How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh](=) 😩[Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA]( // [ACADEMY]() // [COURSES]() // [LEGAL]() [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353