The military-industrial complex is once again attracting significant investment... [The Daily Peel... ]( Aug 1, 2023 | Peel #512 In this issue of the Peel: - China's economy is not following the inflation trends seen in Western countries but instead struggling to reignite growth. With consumer inflation at 0%, concerns grow over deflation and a contraction in industrial activity. Housing market sales also fell, with a significant monthly decline.
- SoFi Technologies and Palantir Technologies stocks rose sharply, with SoFi seeing a nearly 20% increase on impressive earnings results. Palantir is being hyped as a leader in AI. Meanwhile, Johnson & Johnson faced a stock drop amid ongoing legal challenges, and Xpeng's stock fell by over 10%.
- The military-industrial complex is once again attracting significant investment, with almost $11 billion invested in defense technologies in the first quarter of 2023. This may result in the development of next-gen weapons and signifies a renewed relationship between Silicon Valley and the military. Market Snapshot Happy Tuesday, apes. And happy August. Welcome to the final full month of summer and hopefully one that involves slightly less smoke from those damn Canadian wildfires. Can we figure it out up there, guys? Anyway, equity markets managed to figure out a way to steal some green from the jaws of an otherwise red day. US markets traded mostly lower throughout the day as fears about earnings and probably just life, in general, took center stage. Still, a last-minute gap upward right before the 4 pm buzzer kept the bulls on top to start the week and close the month. In the meantime, treasuries had a more muted and boring day, as they probably should. These things are supposed to be safe, but you might not know it by looking at price action in the last few years. The DXY managed to push the dollar above 102, which for no reason at all, kinda makes me want to start doing a âUSA!â chant. Letâs get into it. Crack the Code to PE Interviews Are you dreaming of the buyside? Do you want to learn how to ace not just the paper LBOs but the full-blown LBO modeling tests and PE cases? If so, you need the [WSO Private Equity Interview Course,](=) the ultimate resource for mastering all the skills and concepts you need to get hired in PE. Itâs not just another online course that teaches you LBOs. Itâs a comprehensive and practical guide that covers every angle of the PE interview process, from networking and resume tips, to deal experience and behavioral questions, to paper LBOs and full-on modeling tests. It also gives you access to over 2,000 real-life interview questions from 200+ PE funds, as well as 12-month access to the WSO Video Library and Company Database. With the WSO PE Interview Course, youâll be able to: - Learn from experts at top PE megafunds and UMMs
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- Gain confidence and clarity on how to talk about your deals and sound like an investor Donât miss this opportunity to invest in your career and [achieve your PE goals.](=) Macro Monkey Says China Check-In You know how when someone tells you to do something one way, and that immediately makes you want to do it in the complete opposite way? Thatâs kinda sorta how the Chinese economy (at least appears) to be set up. And with this unique basis, China set itself up to pretty much always be zigging as others zag. Now, that idea seems to be holding true. For the last ~18 months or so, Western economies like the US, Canada, UK, etc., have seen rip-roaring inflation causing outrage everywhere, from the gas station to the chicken coop. While some have fared better than others in their battle against inflation (looking at you, [England]()), China has had the opposite problem: reigniting growth. "... deflation ... is a far tougher monster to fight than inflation because why buy something today when itâll be cheaper tomorrow?" Consumer inflation in China settled at a whopping 0% annually last month, which might sound great, but itâs important to keep in mind that deflation, or falling price, is a far tougher monster to fight than inflation because why buy something today when itâll be cheaper tomorrow? Spending and activity come to a halt. On the industrial side, we received yesterday the latest Purchasing Managers Index from Chinaâs National Bureau of Statistics, which suggested activity remains in contraction. Now, it could be a lot worse (just look at 2020), but given Chinaâsâto use the technical termâbig-a** impact on the global economy, this could spill any hardships over into the global economy. While the data below alone would have JPow smashing âBREAK GLASS FOR EMERGENCYâ boxes and firing up his trusty olâ money printers again, Chinaâs economic overseers seem far less keen on the idea. Already, the Chinese economy has received minor forms of public stimulus, but these efforts have done almost nothing to actually solve any kind of problem. "... the Chinese economy has received minor forms of public stimulus ..." Later in the day, we also learned that the housing marketâone of the primary weights dragging down the overall economyâsaw the largest monthly decline in almost a year throughout July in new home sales, falling 33.1% compared to last July. China, of course, is full of surprises and tends to be one of those things that seem to always figure it out. After all, the countryâs been around for damn near 3,500 years. The only problem is whether or not to actually trust their data. What's Ripe SoFi Technologies (SOFI) â 19.90% â - Shares in SoFi were looking so fine on Monday as the sh*t-kicked former fintech darling soared nearly 20% on earnings results that make Barbie look like a flop.
- SoFiâs most important business line, its lending unit, saw a 37% increase in origination while expanding margins earned on those loans at the same time. If thatâs not goldilocks enough, Deposits also jumped, rising 26% YoY.
- With that, the companyâs strong Net Interest Income was a big help in beating the Streetâs forecast for the quarter.
- Clearly, the market was hyped, but no one was more excited than CEO Anthony Noto, who described the firmâs position as âthe quarter in which all the pieces have come together.â As always, weâll see how that goes. Palantir Technologies (PLTR) â 11.40% â - It was a great day to name your company â... Technologiesâ on Monday (apparently) as Palantir joined SoFi in leading the market on a mostly mid Monday.
- Earnings for Q2 arenât due for another week or so, but that didnât stop Wedbush Equity Research Director Dan Ives from hyping this name like no other on the day. This guy described Palantir as âthe Messi of AI.â
- Whether that means that the firm is the GOAT or that it will get traded to another country and make a bunch more money is unclear, but both are great for investors. What's Rotten Johnson & Johnson (JNJ) â 3.98% â - When you hear about a stock dropping on allegations that the company gives babies cancer (allegedly), you probably think that story is out of a movie. Johnson & Johnson would give anything for that to be the case, even $8.9bn.
- Shares in the big pharma giant saw their worst day in more than 3 years to start the week. Driving all the fun was the rejection by an NJ judge in the firmâs second attempt to go Chapter 11 in the face of the firmâs baby powder lawsuits.
- In case you missed it, JNJ is being sued for approximately 1 f*ck ton of money for (allegedly) neglecting to remove cancer-causing substances in the firmâs baby powder. As a result, theyâve loaded all those lawsuits into a subsidiary called LTL Management in order to take the bankruptcy on the chin.
- As was done several months ago, the judge denied the appeal on the grounds of lacking a good faith basis. Wow, never wouldâve guessed that literally giving babies cancer would be considered ânot good faith,â but hey, itâs 2023. Xpeng ADR (XPEV) â 10.56% â - Haters gonna hate, and as a result, stocks are gonna drop. Exhibit A of that universal law yesterday was none other than Xpeng Inc.
- The Chinese EV firm has had a stellar 2023, gaining almost 130% YTD (before yesterday, of course). And according to UBS, that very gain is cause for concern going forward as the Wall Street firm sees Xpeng as priced for perfection.
- Xpeng couldnât handle the hate and tumbled as a result. The company will have a chance to fire back in late August with its next earnings report, but until then, it should be an interesting ride. Thought Banana Eisenhowerâs Worst Nightmare The military-industrial complex: You know it, you love it, and you watch it (probably). Naturally, Silicon Valley has fallen in love. Technology and the military have always had a love-love relationship. However, in recent decades, many tech companies have taken on various forms of protest against selling their products to the US military, allied militaries, contractors, and other parties involved. Investors are absolutely dumping piles of cash into defense technologies in the Valley, almost $11bn in the first quarter of this year, to be exact. Of course, there appear to be three primary drivers here, including: - Russiaâs invasion of Ukraine
- The US-China sword rattling over Taiwan / WWIII
- Higher interest rates Of course, those first two are pretty spooky to consider. Together, they represent an increase in global geopolitical tensions rivaling beef only previously seen between Jim and Dwight. "... an increase in rates means higher-risk investments like VC have a daunting opportunity cost ..." Naturally, more cash will flow to products and services made for this market. However, higher interest rates driving investment in this space are more speculative and likely the most coincidental. But an increase in rates means higher-risk investments like VC have a daunting opportunity cost in other asset classes. That means investment dollars will follow safer bets, such as bets on companies supplying products and services to an organization with an [$825bn](=) budget in 2024. Maybe most importantly, this probably also means more money is being put to work to develop next-gen weapons like AI drones and God knows what other weapons designed to keep you up at night before theyâre even invented. "... this probably also means more money is being put to work to develop next-gen weapons ..." Hopefully, we at least get to see some sick explosions along the way. If not, I guess you could always go see Oppenheimer. The big question: Is the Military Industrial Complex falling back in love with Silicon Valley? What does this mean for the venture industry and, much more importantly, global warfare? Banana Brain Teaser Yesterday â What special characteristic do the following words have in common? - anyone
- before
- envy
- foresee
- seedy
- teepee
- tutu Their pronunciations consist exclusively of the sounds of the letters (âaâ through âzâ) and/or the digits (0 through 9), as follows: - anyone - ne1
- before - b4
- envy - nv
- foresee - 4c
- seedy - cd
- teepee - tp
- tutu - 22 Today â What can be driven yet has no wheels and can be sliced yet still remain whole? Shoot us your guesses at vyomesh@wallstreetoasis.com with the subject line âBanana Brain Teaserâ. Wise Investor Says âYou need patience, discipline, and agility to take losses and adversity without going crazy.â â Charlie Munger How would you rate todayâs Peel? [All the bananas]() [Decent]() [Rotten AF](=) Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend](). [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")
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