Rising American Confidence

🤩 The American economy’s confidence is finally rising back up! February 12, 2024 | Peel #645 Silver Banana goes to... [CapLinked. ]() In this issue of the Peel: - ❄️ BofA says the cold & wet weather is making consumers spend less. - 🤑 Maybe we won’t have another bank run as NYCB is up again? - 🤩 The American economy’s confidence is finally rising back up! Market Snapshot 📸 Banana Bits 🍌 - Bank of America says small caps might be [at a turning point]( - Jeff Bezos is dumping Amazon shares, and [he ain’t stopping](=) - The entertainment we need—Elon and the SEC coming [face-to-face]() Open a Caplinked Enterprise Plan and Go To The Main Stage! What do VDRs and Coachella have in common? Nothing really, but CapLinked is still sending you on a VIP Coachella experience A. because it’s badass. And B. because why have drinks with VDR salesmen when you could be hanging out with Emrata at a music festival instead? (No promises, but it is a celebrity party fest. We get you in VIP, who you hang out with is up to you). So, go to some bar to meet up with Dave or [sign up for an Enterprise plan with CapLinked and go to Coachella](? Your call. Macro Monkey Says 🐒 Saving For A Sunny Day A “Rainy Day Fund” is a term advisors, retirement planners, and other spending narcs use to describe a pile of cash set aside for emergencies or “rainy days.” But according to Bank of America data from January, consumers stuck a middle finger to that term and decided the only spending they were doing on rainy days was time in bed, apparently. Rough weather was allegedly to blame for a decline in consumer spending in January. As someone who follows my dog under the bed when we hear thunder, I don’t know what to be more scared of. Consumer Spending Declines in January In a report released Thursday, Bank of America peed in the punchbowl by highlighting that spending via cards issued by the bank was 0.2% lower than the year prior. I’m scared already—given that the U.S. economy is roughly 2/3rds driven by consumer spending—but don’t fret. According to BofA… “The weather appears largely to blame” as wet, wild, and wintery weather across the country allegedly kept consumers inside. And while trapped in the great indoors, our Amazon orders of Stanley cups and other overpriced, [lead-filled](=) goods couldn’t make up for a distinct lack of getting f*cked up at local bars and restaurants. [Source]( A damn shame—this data suggests January really is the Monday of the months. But, going beyond just headline spending numbers, the data tells us much more about how consumers are spending during these rainy days. Put It On the Plastic Despite the lower spending, consumer confidence is still moving in the right direction. Strong wage growth and labor markets allowed consumers to continue their habit of spending as much money as humanly possible each month in 2023, but finally, they’re actually starting to feel pretty good about it too: [Source](=) Gas price declines that we’ve been waiting for since ‘Nam may be fueling this surge in confidence, but it didn’t translate to an increase in spending in sectors consumers typically run up when they’re feeling themselves, such as bars and restaurants. Still, that confidence has led consumers to maintain a balance between credit and debit spending that’s surprised experts given the insane $1.13tn in total credit card balances outstanding. [Source](=) Credit card utilization rates are—surprisingly—right in line with historical levels. According to BofA, “There is no obvious rise in the share of spending being financed on credit cards vs debit cards.” With higher interest rates, credit balances, and delinquency rates, as discussed last week, the fact that consumers aren’t relying on credit in order to keep up their purchases is a solid sign that consumers aren’t stressing yet. The Takeaway? Consumers have been eating right, hitting the gym, and staying in shape. Just kidding—this is the United States we’re talking about, but the financial equivalent of doing so remains true. Consumers have jobs, climbing real wages, and aside from not wanting to get their shoes and hair wet, they seem ready to continue to support 2/3rds of GDP. And to all consumers—we thank you for your service. What's Ripe 🤩 Cloudflare (NET) 📈19.5% - Standing on business in Q4, Cloudflare beat estimates by earning larger contract values and telling all others, “If you ain’t got no money, take your broke *ss home.” - The content distribution and security company (whatever that means) reported $0.15/sh on $362mn vs expectations for $0.12/sh on $353mn expected. - The firm is trying to get in on the AI race as well, looking to provide GPUs to developers. With that, guidance for the next quarter fueled the hype as well. New York Community Bancorp (NYCB) 📈17.0% - An epidemic of whiplash is sweeping through the portfolios—and necks—of NYCB shareholders. Luckily, however, the confidence is back. - Insiders are loading up on shares as a display of that confidence to the market, despite the firm going 3/3 in credit downgrades last week. - Exposure to office assets and the CRE market, in general, is an issue unlikely to go away anytime soon. Hopefully, that’s not true for share price turbulence. What's Rotten 🤮 Expedia (EXPE) 📉17.8% - Cancel your summer plans—Expedia’s going down and bringing everything travel with it. It was the stock’s worst day since March 2020. - And when you look at earnings, it’s no surprise why. Gross bookings missed for the third quarter in a row and their successor CEO failed to fire up the future. - Several banks then cut estimates and ratings for 2024, dragging down shares even more. So, the triple whammy gave ‘em the PTSD from the C-19 days. Pinterest (PINS) 📉9.5% - Despite all the inspiration Pinterest gives its users, it couldn’t inspire investors with weak numbers from in Q4. Digital ads are a tough biz unless you’re Meta. - Hipsters’ favorite app missed revenue estimates, delivering only $981mn vs $991mn expected. No one cared that they did manage to beat on earnings. - Users are still growing strongly, but not enough to justify inspiring guidance heading into 2024. That downbad view put them on the same path as SNAP. Thought Banana 🤔 The Confidence Economy Bullying is a great tool for knocking people down to size or destroying their confidence. Unfortunately, alongside Michelle Obama’s robbery of sugar-filled joy in lunchrooms across America, bullying has plummeted, and confidence has spiked. This leads to moments [like this](), when Grant Williams embarrassed himself and the Boston Celtics in the most effective way possible by saying, “I’ll make ‘em both!” and then proceeding to miss two clutch free throws and lose the game (yes, I’m still mad). Clearly, having too much confidence is a problem. And right now, the U.S. economy is oozing with that stuff. So we can only ask—is it time to start bullying each other? Getting Cocky As discussed above, we know consumers have been feeling themselves lately… but consumers are id**ts, just look at me, for example. Let’s see how people who at least pretend to be smart are feeling: = [Source](=) CEO confidence is following right in the consumers’ footsteps. These people are good at at least convincing that they’re smart, so maybe this should get us more hyped than nervous. But it doesn’t stop there: = Investor confidence, or the confidence of people who think that they themselves are smart, is booming as well. Bullish sentiment was flat in the latest reading, but bearish sentiment moved lower. We’ll take a double negative. Even outside of sentiment readings that are about as helpful in forecasting markets as Taylor Swift was in the [Chiefs/49ers] win last night, we can tell confidence is high just by looking at our good friend, the S&P 500: = [Source]( As writer Ben Carlson put it, “Despite two bear markets this decade, the S&P 500 has hit new all-time highs on 11% of all trading days in the 2020s.” Not bad, and sounds pretty roaring to me. But we all know confidence can only take you so far. To actually keep markets and the economy moving in the right direction, improvements to revenue and, most of all, earnings by U.S. companies will be key. This earnings szn, 75% of S&P 500 companies that have reported earnings so far (being 67% of the index) have beat expectations. That’s decent but below the 5-year average of 77%. At the same time, people who get paid to try and actually be smart—Wall Street analysts—have been losing confidence. Estimates for earnings this szn have declined 1.4% in the aggregate so far, which is less than average declines, but still isn’t the direction we want to be moving in: [Source]() The Takeaway? Like your guests who came over to watch the Super Bowl yesterday, economic confidence is usually late to the party. Human beings are much more exposed to negative emotions than positive ones. So, it takes a lot to get investors to feel strong, and because it takes so much time, it’s not uncommon for consumers and investors alike to be nervous while things are going well. This is the idea of climbing a “wall of worry.” But, going forward, the big concern is if that confidence is simply reactive to the strength of the past year and things like lower prices at the pump or if that confidence is proactive and forward-looking. As usual, we don’t have the answers. It’s all about asking the right questions. And hopefully, someone smart can tell us the answers… eventually. 💭 The Big Question 💭: Is widespread market and economic confidence justified going forward? Should we be getting worried? Where is the boogeyman to all this confidence, if there is one? Banana Brain Teaser 💡 Friday 🗓 If the average (arithmetic mean) of x, y, and z is 7x and x does not equal to 0, what is the ratio of x to the sum of y and z? Answer: 1:20 Today 🕐 If the amount of federal estate tax due on an estate valued at $1.35mn is $437k plus 43$ of the value of the estate in excess of $1.25mn, then the federal tax due is approximately what percent of the value of the estate? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Fate loves irony.” — Elon Musk 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