The U.S.-China trade war rages on, with new tariffs from Joey B. May 22, 2024 | Peel #715 Silver Banana goes to... [CapLinked. ]( In this issue of the Peel: - ð¨ð³ The U.S.-China trade war rages on, with new tariffs from Joey B.
- ð¤ It was a good day to be in EV as Teslaâs stock went up.
- ðµ Herd behavior is becoming more prevalent among analysts⦠Market Snapshot ð¸ Banana Bits ð - Markets are taking their time to price in the central bank [divergence we all know is coming]()
- The least respected international organization of all is [losing yet another ally]()
- Canada registers its lowest inflation [rate in 3-years](=)
- Check out this [rundown on rents]() with CNBC Become the office HERO! Time to give Caplinked a try. Become the office hero by ditching those old, tired, and overpriced data rooms for Caplinked. Look, we get it. It's easy to just go with the flow and stick to the same software the partners were using 25 years ago. But hey, this is 2024! It's time to embrace the future and get with the times. Caplinked isn't just a data room; it's your ticket to efficiency, affordability, and simplicity. Make the switch and show your team who is deserving of a promotion. Choose Caplinked, and let's make history together by turning the page on outdated practices. [Be the change your firm needs]( and enjoy the hero status that comes with it! Macro Monkey Says ð Commanding Free Markets When I make a sandwich, it usually tastes like a combination of grease and depression. But, when someone else makes me a sandwich, itâs like Gordon Ramsey is leading a symphony of meat, cheese, and, of course, buffalo sauce across my taste buds. So, it makes sense that one is more valuable than the other. In cooking, Iâll take someone elseâs meal over mine 366 days a year. But itâs a little different when it comes to international trade. This is a rare arena in which people prefer to make their own sandwiches. Or, more accurately, have someone else make it, as long as theyâre within their nationâs borders. What Happened? Last week, big dawg U.S. President Joe Biden did his best Trump impression by signing brand new tariffs on a bevy of important imports (no pun intended). [Source]() Most of the attention from the media is on the 100% tax slap on electric vehicles, but the actual legislation especially targets semiconductors and steel too. Basically, Bidenâs new tariffs are meant to do what any tariffs doâsafeguard domestic industry from cheaper or otherwise more competitive producers abroadâbut these new quasi-taxes are focused on one nation in particular. Any guesses who it could be? If you didnât guess China, go read Cat in the Hat instead, respectfully. These new tariffs are intended to protect the U.S. EV, chip, and steel industries, but thereâs only one problemâthese tariffs target approximately 0.47% of total U.S. imports. In fact, if this was really about protecting U.S. industry and was done âin response to Chinaâs unfair trade practices,â as this [White House Fact Sheet]( suggests, then the U.S. should have targeted other countries or targeted other imports. As we can see above, the only goods targeted by these new tariffs that China is even a top 5 exporter to the U.S. of is semiconductors at $962mn in 2023. The vast majority of the U.S.âs $427bn worth of imports from China include cell phones, computers, and âtoys, games, and sports prerequisites.â Meanwhile, the top exporters to the U.S. of the goods in these tariffs include Canada, Germany, and Vietnam. Already, this makes little to no sense in accomplishing their stated goals. Canât say weâre surprised as expecting a President who can barely read a speech to understand international trade policies is like asking a dog to doâinstead of eating your algebra homework. But we donât get political here at the Peel, and big dawg Joey Bâs tariffs were already one-upped by former big dawg Donnie T saying he would slap a 200% tariff on Chinese EVs, doubling the 100% levied by Biden. [Source]() Who Cares? As usual in U.S. politics, both sides of the aisle are wrong and/or lying about their true intentions. Like, itâs fine if you're gonna cap in politics, but at least be accurate in your capping. What matters here isnât necessarily the tariffs themselves, the goods they target, nor even whoâs signing the legislation. The issue worth paying attention to is the integration of U.S. industrial policy with political pressure on the basis of ânational security.â Itâs the kind of planning Joseph Stalin would be proud of. While countries like China and others stick to long-term economic development plans, the U.S. has historically let the free market run, accepting the cheapest, fastest, and/or best option regardless of the flag flying in the factory where it was made. There is a certain element of trade that should tie into foreign policy, but imposing tariffs that donât matter just to harm another country and score political points isnât a worthwhile reason to do so. The Takeaway? [Source]() No matter how much we dislike it, China is still the U.S.âs #2 trading partner, although probably not for long. No one wins in a scenario where the two leading global superpowers are increasing their beef. Leave that for Kendrick and Drake. From the U.S. perspective, it is understandable to retaliate against legitimate unfair trade practices by China, like stolen IP or sanction skirting. But, targeting $18bn worth of imports is like screaming at a teenage Starbucks barista for not giving you your 3 cents in change. To drive actual change, the U.S. has other options. Trade issues like this can and have historically been resolved through diplomacy. With China, that strategy would be a little tougher, but China is like the fringe friend that found out they got left out of the group chatâthey want to be friends with us even more than we want to be friends with themâas their economy relies more on the U.S. than the U.S. does on China. Lastly, and at the end of the day, the company making the best products should win, regardless of government-imposed market dynamics. If Americans like Chinese EVs but canât get them due to tariffs, that doesnât sound very American to me. What's Ripe 𤩠Tesla (TSLA) ð6.6% - Thatâs the good thing about having so many products and segmentsâwhen one is sucking, you just point to the other and say âSee? Look how shiny!â
- A Tesla exec, surprisingly not biologically related to Musk, Dan Priestley, gave us a master class on this yesterday as he gave an update on Tesla Semi.
- He said the company is ârampingâ a factory in Nevada that should pump out 50k/yr of these babies by 2026.
- Right now, theyâre still in beta testing for Pepsiâs Frito Lay. Iâm sure they just hope Marques Brownlee likes it better than the [Cybertruck](=)⦠and definitely the [Fisker](. Xpeng (XPEV) ð5.9% - It was a good day to be an EV maker on Tuesday, perhaps for the first time since Elon launched that Roadster into solar orbit. Xpeng had a good Q1.
- The Chinese EV maker breathed hope into the berated sector by reporting a net loss of $0.10/sh, much better than the $0.33/sh expected.
- The best part was the 49% sales growth to $859mn, confirming to Wall Street that Chinaâs EV market is alive and well, and helping lift the whole sector. What's Rotten 𤮠Peloton (PTON) ð16.4% - Peloton really wishes they had a college degree so the U.S. government would just forgive all their debts, but unfortunately, the e-bike maker is on their own.
- Pulling up their bootstraps, Peloton announced Monday plans for their own company debt relief plan, involving a $1bn new 5-year loan.
- But Peloton will begin with a $275mn convertible loan and a $100mn line of credit because taking out debt to pay existing debt never hurts⦠right? Palo Alto Networks (PANW) ð3.7% - Santa Clara-based Palo Alto Networks disappointed investors with more than just their geography knowledge on Tuesday after reporting very not-hype guidance.
- The cybersecurity firm announced earnings that included beats across the board, earning $1.32/sh on $1.98bn in sales vs the $1.25/sh on $1.96bn estimate.
- Bookings guidance for the rest of 2024 came in at $7.99bn-$8bn, up from $7.95bn-$8bn, but not up enough to impress Mr. Market. Thought Banana ð¤ Analysts Without Analysis Disagreements make markets, and markets are hella fun. Agreements make stability, and stability is hella boring. Sure, stability also means we and our money are safer, fewer people are starving, etc., but then what the hell am I gonna bet on? And more importantly, what am I gonna write about in this newsletter? Thatâs why the trend weâre seeing among analysts is worrying, to say the least. So, letâs get into it. What Happened? [Source]() Thereâs too much agreement going on among Wall Street analysts. From an Adam Smith-style classical economic perspective, this makes sense as actors behaving rationally should come to the same conclusion given the same information. But humans arenât rational. The whole point of being an analyst is to conduct research that supports client assets and hopefully contributes to above-market returns or client satisfaction in some other way. The above chart indicates the opposite is occurring on Wall Street. The Y-Axis measures dispersion among analysts' views of S&P earnings in the next rolling 12-month period. As we can see, dispersion is narrowing. And itâs not just limited to earnings estimates. [Source]() Economic forecasts are facing the same trend of commoditization. As we can see in CPI forecast dispersion above, estimates are coalescing around the same level as well. Who Cares? Given larger volumes of more accurate data, again, it makes sense that estimates would coalesce if analysts are truly ârational.â However, some analysts are still projecting revenue growth for AMC, so we know thatâs not entirely true. The issue comes down to the commoditization of estimates. In theory, the value of an analyst should come from having views that differ from consensus as this is where alpha is found⦠as long as those views are correct (or, at least, profitable). It is in the interest of analysts and firms to have positive views of the companies they cover, as execs of public firms hate sell ratings and could become more hesitant to speak with the bank that has a short position on them. Further, there is career risk in taking a divergent view from the Street. If your hot take is correct, youâre a hero. But, if your hot take is wrong, youâre fired (maybe). Plus, like we said up top, divergent views are just way more fun. It gets boring reading the same things over and over, and also devalues the analyst role both individually and at scale, so joining in with the crowd plays some role in its potential destruction. Anyway, happy Wednesday! ð The Big Question ð: Is this a long-term trend or a short-term fluctuation? How does analyst dispersion differ in bull vs bear markets? Does anyone have any hot takes they want to share? Banana Brain Teaser ð¡ Previous ð Mark and Ann together were allocated n boxes of cookies to sell for a club project. Mark sold 10 boxes less than n and Ann sold 2 boxes less than n. If Mark and Ann have each sold at least one box of cookies, but together they have sold less than n boxes, what is the value of n? Answer: 11 Today ð A certain highschool has 5,000 students. Of these students, x are taking music, y are taking art, and z are taking both music and art. How many students are taking neither music nor art? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says ð¤ âThereâs a game of thrones going on in tech around AI, they have clear growth challenges ahead.â â Daniel Ives How Would You Rate Today's Peel? ð[All the bananas]() ð[Meh]() ð©[Rotten AF]() Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA]( // [ACADEMY]( // [COURSES]() // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis")
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