Goldman CEO Quits DJing

The firm’s CEO, David “DJ DSol” Solomon, will have to give up his side hustle as an accomplished DJ. [The Daily Peel... ]() October 18, 2023 | Peel #566 In this issue of the Peel: - Yesterday was a big day for economic releases, including the retail sales report from the Department of Commerce. - Wyndham Hotels and Bank of America had a ripe day, whereas Nvidia and Lucid Group declined in share price. - The firm’s CEO, David “DJ DSol” Solomon, will have to give up his side hustle as an accomplished DJ. Market Snapshot Happy Wednesday, apes. Hope everyone’s doing well today, or at the very least, better than NFL legend Terrell Owens after his tussle with the front side of a car yesterday. I guess that other guy’s hands were the one thing this man couldn’t catch. What he could catch, however, was a vibe with equity markets yesterday. Markets were more scattered than usual yesterday, as isn’t uncommon during earnings szn, with a majority of S&P sectors seeing a modest gain. The Russell 2k led the day with the only tangible gain, rising 1.12%, while the useless Dow was basically flat, and the other ones that matter saw slightly red days. Treasuries rose sharply early on the day in response to economic releases (with the most important one detailed below). They spent the rest of the day trying to correct that jump but still closed the U.S. day session slightly higher. The 10-year yield continues to set records and is approaching the 4.9% level, while the 2-year ripped well over 5.2%. Let’s get into it. The Ultimate Program to Land a 6-figure Job in High Finance [image]() With over 17 years of experience, 900k+ members, and an insane network, WSO has cracked the code to making 6 figures right out of undergrad. We’ve helped over 1k students from all backgrounds break into these careers. WSO Academy is a 12-week program (with many lifetime benefits) that puts everything we’ve learned on a silver platter for you—to dramatically improve your odds at landing a high finance offer. The waitlist for WSO Academy just opened again, and we’re only accepting 20 students into the next cohort. So if you’re serious about breaking into high finance, you need to sign up for the waitlist asap because we are opening applications next week (people on the waitlist will be the first to know). [Get on the waitlist -> Applications opening next week and capped at 300]() (so we can review all of them carefully). No reason for you to be sleeping on this. Banana Bits - For a group of people who love nothing more than to hear themselves talk, [selecting a Speaker](=) has proven to be the ultimate challenge. - Who would’ve thought? As mortgage rates continue to reach multi-year highs, the NAHB Housing Market Index [continues to fall.]() - The U.S. is taking even more of its chips and [going home.]() - Elections in Poland trigger a looming, [major shakeup]() to the status quo in the country that has been arguably the most ardent supporter of Ukraine as they defend themselves against Russia. Macro Monkey Say The Harvey Specter Economy If you haven’t before or aren’t currently watching Suits online, I’m not really sure how else you could occupy your day. What—are you studying? Hanging with friends? Buncha losers… But, for all the big brains out there that do know Suits, you know Harvey Specter. He’s a lawyer who’s never taken an L in his life, and the American consumer seems to be following in his footsteps. Yesterday was a big day for economic releases, and the most interesting of the bunch, at least to us, was the retail sales report from the Department of Commerce. There was a lot to learn here. The most important takeaway was that, much like Mr. Specter, American consumers simply cannot lose. Spending remained strong throughout September despite countless warnings and expectations that we were all going to become “financially responsible” all of a sudden. Hang on, this is the American consumer we’re talking about. Retail sales grew 0.7% monthly throughout September. Economists had been expecting less than half that rate, guesstimating the increase at 0.3%. "Spending remained strong throughout September ..." Annually, the figure for retail sales boomed much higher than expected as well, growing 3.8%, while the annual gain in August was just a measly 2.9%. Given the challenges to personal finances laid out all over the financial media and in yesterday’s Peel, we only have one question—what the hell is going on?? Couple things. Primarily, Americans have been able to continue to spend and hold up the economy like damn Atlas holding up the world because: - Real wage growth remains positive at 1.5% per [September data](=) - The labor market remains favorable to employees, with the economy adding 336k jobs [last month]( - There remain 1.5 job openings for every unemployed American - Savings rates are only just about now falling back to pre-pandemic levels So, it’s not exactly a mystery, but given the magnitudes, it’s definitely a surprise to most economists. Right now, all signs point to the final quarter of 2023 being an inflection point for U.S. economic performance. Inflation continues to normalize while other effects from the pandemic are almost entirely warning off. Demand for items like vehicles and travel remained elevated, likely a response to supply chain disruptions and entire life disruptions, respectively, brought on by C-19 as well. But as each month, week, and day pass, all of those trends appear to be redacting. "... it’s not exactly a mystery, but given the magnitudes, it’s definitely a surprise to most economists." Yesterday’s spending data certainly suggests that the outlook for growth remains elevated beyond our previous expectations, but as any self-respecting pessimist knows, the risks to that growth are far more heavily weighted to the downside. So, American consumers still look relatively healthy, besides their waistlines, for the time being. Increased credit utilization, resumption of student debt payments, a gradually un-tightening labor force, and still-too-high inflation all threaten that, so this retail report was quite similar to when a company does well on earnings but provides lower guidance for the rest of the fiscal year. At the end of the day, spending money officially replaced baseball as the country’s national pastime long ago. Just like Harvey Specter, consumers don’t take losses in this arena, but we just hope they can handle their emotions a little better than him… What's Ripe Wyndham Hotels (WH) ↑ 8.96% ↑ - If you weren’t convinced M&A deals were officially BACK just yet, maybe this is the convincing you needed. Choice Hotels is trying to merge the two companies. - Now, although neither one stayed at a Holiday Inn Express last night, the move is probably smart. Hotels exist in a fragmented, low-margin (mostly) industry under attack by the likes of Airbnb, VRBO, and high-priced flights, so consolidation can bring about benefits of scale enjoyed by the likes of IHG and Marriott to these two. - But Wyndham has already told Choice where exactly they can shove the acquisition. Both firms are very similarly sized, each earning about $300mn on $1.5bn in sales last year, with Wyndham having a slightly larger hotel base (9.1k vs 7.5k locations). - To investors, however, the idea that someone wants to purchase this thing at above market cap is still music to their ears, sending shares to the skies. For it to go through, however, a few more zeroes or some other sweetener is key. Bank Of America (BAC) ↑ 2.33% ↑ - Earnings szn continued in earnest yesterday, and with big bank earnings still to come, we’re just getting started. Yesterday, Bank of America was the big winner for financial firms… and emphasis on “big” there. - The 2nd largest U.S. bank by market cap, BofA, reported earnings of $0.92/sh on $25.3bn in revenue, easily just outpacing estimates for $0.80/sh on $25.2bn. On a day when the rest of the Street wasn't looking so hot, BofA reminded investors to keep their will to live. - The massive consumer and investment bank was boosted by a 4% growth in net interest income, gaining to $14.4bn on higher rates and beating analyst estimates as well. But, because CEO Brian Moynihan leaned into purchasing long-dated treasuries and other bonds during the pandemic, the firm was less assisted and even noticeably hurt by rising rates, much more so than the likes of JPMorgan and Citi. - The held-to-maturity portfolio of unrealized losses—the line item that took down SVB—continues to be a “thorn in the side” of the bank, but otherwise, the sizable growth in NII should only improve as the rates picture stabilizes (hopefully). It’s the worst-performing large U.S. bank of the year (that didn’t go under, at least), down 18% YTD still. Are you buying? What's Rotten Nvidia (NVDA) ↓ 4.68% ↓ - For most of 2023, Nvidia has been following the playbook set by the highly prestigious hedge fund Davey Day Trader Global and simply only went up. Unfortunately for them, they broke that strategy yesterday. - Shares in Nvidia and other chipmakers slid on increased export controls related to sending chips to China imposed by the Joey B Admin. Coming under fire this time around are the A800 and H800 chip lines. - The 800s were specially designed to avoid earlier export controls of the H100 and A100 chips from Nvidia, which have become the industry-standard processor for AI-related tasks. Once Joey B waved his finger at the idea of Nvidia sending those to China, the 800s were created as slimmed-down versions. - And now, they can’t even sell their slimmed-down versions in China. The only question now is, for the next attempt, do we just go down to the A700 and H700, or should we just skip a few hundred and put an end to this sh*tshow? Lucid Group (LCID) ↓ 5.30% ↓ - Every earnings szn, there are heroes and losers forged in the fires of your portfolio’s performance. On the other hand, some companies don’t even need to report earnings to fall into that second category. - And that’s where we find Lucid on Tuesday. Shares took a dive on reporting third-quarter delivery and production figures, both of which disappointed analysts almost as much as I’ve disappointed my parents. - Actual earnings will be out on November 7th, but unless they can drastically improve from the 1,550 cars produced and 1,457 units delivered last quarter, I think we can tell how that’s gonna go. Thought Banana Earnings Spotlight: Goldman Sachs Tragic and unexpected news struck the financial world in recent days as we learned about the terrible, unfortunate, and sympathy-requiring news out of Goldman Sachs. The firm’s CEO, David “DJ DSol” Solomon, will have to [give up his side hustle]() as an accomplished DJ. I know it’s tough to hear. Not only was his music surprisingly non-cringe, but we hope Solomon will still be able to feed his family after giving up this income stream. But if Goldman continues to perform as strongly as it did last quarter, we’re not too worried about it. "While the numbers weren’t bad ... Wall Street remained less than pleased." Yesterday morning, the Darth Vader of U.S. banking reported its latest quarterly earnings. While the numbers weren’t bad on their own, Wall Street remained less than pleased. Revenues for the quarter came in at $11.82bn, roughly on par with the same period last year and a cool 8% above that of Q2. From that, the firm was able to rake in $2.06bn or $5.47/sh on the bottom line, with earnings falling a disgusting 33% from last year but still managing to beat the depression-inducing estimates of $5.31/sh. According to Goldman, the semi-disappointment mostly stems from lower earnings in its Asset and wealth management division. Private equity investments bored a hole in the ship as real estate and other investments took a turn for the worse during the quarter, but for GS, this is far from the line of business that matters. Unlike the other large banks discussed earlier this week, Solomon’s firm is laser-focused on Wall Street and could care less about us poor losers on Main. Rising rates help them a lot less, especially when most of their business comes from IPOs and M&A. Both of which haven’t been doing so hot this year, in case you forgot. While recent activity has brought these business segments back to life, we’re still far off from the glory days of 2020 and 2021. "... it was far from a great quarter, but still not horrendous." In Q3, Goldman saw 26% and 27% jumps in equity and debt underwriting revenues, respectively, and that might sound high, but it’s mostly due to 2022 just being so nightmarishly horrific for banking revenues. M&A advisory fees, however, remained in the gutter, down 15% from last year. Garbage performances were also put up by the firm’s fixed income, currencies, and commodities (FICC) team, declining 6% compared to last year, while competitors JPMorgan and Bank of America both saw growth in these areas. Lastly, the not-so-bad overall results incorporate a fatty write-down of the firm’s GreenSky division, impairing the asset by $864mn, as the home financing lender continues to get assaulted by the broader housing market. So, it was far from a great quarter, but still not horrendous. Investors weren’t pleased as they tend to expect more from the likes of Goldman Sachs, but maybe a simple name change to Silverman Sachs would help reset expectations. The big question: Will the trend of deals and IPOs coming BACK save Goldman in Q4? How will the numbers from rival Morgan Stanley compare when they report today? Banana Brain Teaser Yesterday — A man is biking on a 40-mile trip. He travels the first half of the trip at a speed of 15 miles per hour. If he wants his average speed to be 20 miles per hour, at what speed should he travel during the second half? Answer 30 miles per hour. Today — For being good at the garden fete, four children were each given two sweets. Jack had an orange sweet. The child who had a red one also had a blue one. No child had two sweets of the same color. The child who had a green sweet also had a red one. Jim didn't have a red sweet, and Joe had a green one. James didn't have an orange one, and Jack had no blue sweets. Knowing that there were two sweets of each color, can you tell the colors of the sweets each child had? Shoot us your guesses at vyomesh@wallstreetoasis.com Wise Investor Says “Know what you own, and know why you own it.”—Peter Lynch How would you rate today’s Peel? [All the bananas](=) [Decent]() [Rotten AF](=) Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? 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