SNAP Gets Lambasted, Big Week Ahead

Market Snapshot Futures were mixed Friday morning. If I had to sum up earnings in one phrase so far, I’d say that they didn’t totally f*cking suck like we all expected. Over the weekend, BTC hovered around 22.5k while ETH toyed with 1.6k. Treasury yields retreated ahead of what could be another big rate hike, and WTI crude closed around 95 bucks. With an FOMC meeting and a potential 75 or even 100 bps rate hike on the table, 175 companies from the S&P 500 reporting earnings, and huge economic data on deck, this could be a huge week for markets. Friday at the closing bell, stocks closed lower after a decent week. The Dow was down 0.43%, the S&P lost 0.93%, and the Nasdaq shed 1.87%. The fast pace of private equity demands a certain set of skills, and WSO’s PE Master Package can help you acquire the tools that you need to propel your career forward in the industry. From deal flow to LBOs, we can help you sharpen your skills to maximize your potential. [WSO’s PE Master Package]( Let’s get into it. Banana Bits - Germany is set to [bail out]() utility names clobbered by Russian energy contagion - Certain skills are invaluable in PE, and we can help you [learn and master them]() - Rich people [won’t stop borrowing]() even amidst rising interest rates - Very unlike Barron’s to publish something akin to an [$AMZN sales pitch](=), but it’s a decent read nonetheless - It’s so hot that the roads are melting in Europe, and as the [Tour de France](=) wraps up, some are asking, is this worth continued investment? Banana Brain Teaser Friday — What never asks questions but is often answered? A doorbell. Today — It’s 100 bananas off of our [PE Master Package]( for the first 15 respondents. LFG! The person who makes it has no need for it. The person who purchases it does not use it. The person who does use it does not know he or she is. What is it? Shoot us your guesses at [vyomesh@wallstreetoasis.com](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) with the subject line “Banana Brain Teaser” or simply [click here to reply!](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) Macro Monkey Says Big Data — Welcome to Monday, Apes. Hopefully, you had a great weekend and didn’t sweat to death in the summer heat. This is a big week for data. At the macro level, this is a huge week for earnings, with more than a third of the S&P 500 reporting their earnings from this most recent quarter. That, however, is not the big data we are talking about. That basically just means it’s a busy week for earnings. The real big data is both the Fed’s preferred metric for inflation and the 2Q2022 GDP numbers. The employment cost index, a corollary to the PPI, also comes out Friday. The Fed loves to use the personal consumption expenditure index as a gauge for price increases in the United States. The PCE excludes volatile consumption items like food and energy and, in the eyes of the Fed, is a stellar metric to which the actual cost of being an American consumer can be pegged. I personally think that the big news story of the week will be GDP contraction in the second quarter. Imports are going to be way up because of a strong dollar; we’ve seen commodity markets slow down, meaning demand for raw materials is likely slowing because of reduced economic output. The final nail in the coffin is probably soaring gas prices, which deflated consumer spending this quarter. When consumer sentiment is lower than it has ever been, it’s hard to convince Americans to spend money. This potential GDP contraction means that we will have two consecutive quarters of GDP contraction, aka, a recession. This is that inbound r-word that I wrote so often about this spring and early summer. I think that a 75 bps rate hike is priced into equities markets and that 100 bps is probably off the table unless something whacky happens. But what will data that shows that a big, bad recession is already here do to markets? I’ll leave that to each of you to decide. WSO PE Master Package [image]() The fast pace of private equity demands a certain set of skills, and WSO’s PE Master Package can help you acquire the tools that you need to propel your career forward in the industry. From deal flow to leveraged buyouts, we have more than 250+ video lessons that can help you sharpen your skills as a PE professional. This deal is available for a limited time only. Come learn from industry pros and take your seat at one of the most prestigious firms on the Street. [WSO’s PE Master Package]( What's Ripe HCA Holdings ($HCA) — The biggest winner in the S&P 500 on Friday was HCA Holdings. Their shares ended the day higher, climbing 11.43%. Even though their earnings declined year-over-year, their top and bottom line beats in their earnings report were good enough to send shares soaring. They suffered from rising costs and a tight labor market. That being said, their performance will be attached to C-19 for the coming few quarters. We will see whether another variant propels them towards further profitability or whether an elevated C-19 DGAF factor among regular Americans will slow that down. American Express ($AXP) — The only thing more American than credit card debt is probably Apple Pie or Football with a side of Turkey on Thanksgiving. Consumer debt is on the up and up, and as we venture further into the economic unknown, CC spending is expected to continue to rise and be a bigger chunk of Americans’ debt load. On Friday, shares of $AXP were up 1.88%, making it the biggest climber in the Dow. What's Rotten Snap Inc ($SNAP) — $SNAP’s earnings last week were a colossal disappointment. These cats missed on the top and bottom line, and they also announced plans to slow hiring. It sounds like they’re having cash flow problems and that their platform is not as successful right now as their leadership had hoped. Another big challenge is volatility in their marketplace; things are so bad that their management declined to even provide guidance for the third quarter. The Street did not like this. Shares of $SNAP were down 39.08% Friday. Meta Platforms ($META) — Tech took a hit on Friday, anchored by cratering shares of $SNAP. The artist formerly known as Facebook had a rough day. Shares of the online marketing giant dumped 7.59% as investors are starting to realize that we are already in an online ad and marketing recession. The ad spend is just not there. Investors are also cautious about whispers of antitrust proceedings against the Book of Face. We will see if their shares recover this week. Thought Banana The EV Revolution? — When you hear about battling climate change, some of you probably think about jobs. Unfortunately, it’s not the kind of news about jobs that politicians and job seekers alike would predict. For example, to move from only producing less than 30k EVs in 2021 to a 2026 number of a whopping 2 million per annum, the Detroit-based automaker Ford is slashing up to 8k jobs. In order to fund the transition, internal combustion engine vehicle producers need to find the money somewhere. There’s an opportunity cost, and that means ICE vehicles need to be more profitable to automakers, which not only means more efficient production but it also means eventual price increases too. Another major challenge is the battery supply chain for EVs. Ford just last week entered into a deal with a Chinese supplier for more battery packs which will enable them to 10x their EV production by the end of 2023. Indeed, even Elon is struggling with batteries. Recently quoted saying, “The fundamental rate limiter for Earth transitioning to sustainable energy is how fast can you grow lithium-ion battery output per year,” Musk was cautious about committing to increased production due to significant limitations in the EV supply chain. Chinese companies dominate the Li-ion-meets-EV battery space, as do other Chinese raw materials producers in the rare earth metals game. This limitation highlights to me the importance of both a partnership between EV makers and China as well as Western policymakers and Beijing. Without these partnerships, getting to an EV-fueled future won’t happen on schedule. These aren’t the only challenges for EVs. First, the electric grid in many places probably couldn’t handle an extra several thousand large appliances with relatively serious amperage draws each day in order to keep the wheels spinning in that microcosm of the local economy. Next, the infrastructure for charging is not there. In a country with 145k gas stations, there are only like 6k EV charging stations, many of which do not guarantee receptacle or interface compatibility with your particular flavor of EV. Elon is trying to help with an answer to that problem too. In a fiscal environment that is ripe for anyone pivoting towards green solutions, Tesla is jockeying for public dollars from federal and state governments to expand its supercharging network to accommodate non-Tesla EVs. Tesla already operates almost a quarter of EV charging stations in the United States, so this seems like a logical pivot for the EV maker. The EV space has some political challenges to overcome, but we won’t get into those here. The final serious challenge for the EV market is the cost of the vehicles compared to their ICE predecessors. The average cost of an EV is significantly higher than that of a traditional car or truck, and that’s hard to stomach for the average American. With all this talk about this green revolution and a future powered by electricity, it makes me wonder: when will this future actually get here? Wise Investor Says “It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble.” — Robert Shiller Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel [here](. [ADVERTISE](=) // [WSO ALPHA]() // [COURSES](=) // [LEGAL](=) Don't want The Daily Peel? [Unsubscribe here](. Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353