The Kids Are Learning... 🤔

🤑 Forget Call of Duty… kids these days are starting to invest? February 23, 2024 | Peel #653 Silver Banana goes to... [The MBA Tour. ]( In this issue of the Peel: - 🇨🇳 Vibes in China just ain’t it—check out what’s going on. - 💉 Turns out a pandemic isn’t the only way for Moderna’s stock to go up… - 🤑 Forget Call of Duty… kids these days are starting to invest? Market Snapshot 📸 = Unlock Your Dream Career with The MBA Tour North America The MBA Tour North America is here to give you exclusive access to top business schools from around the world all in one place! Best of all, it's FREE! 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[Sign Up Now]( Macro Monkey Says 🐒 China Goes Full JPow “When in doubt, cut interest rates as much as you can and print cash as fast as humanly possible”—Jerome Powell, circa March 2020. We might’ve paraphrased that quote above, but it’s still effectively what happened. Now, almost 4 years later, China is following a similar path. At least, they’re following the first half of JPow’s wise words very closely. This week, the People’s Bank of China (PBOC) slammed its benchmark rate way lower than anyone was expecting. Let’s get into it. What Happened? Like the Federal Funds rate here in the U.S., every major Central Bank has its own “benchmark” interest rate on which all other rates in the economy are built. In China, it’s called the “five-year loan prime rate” and serves primarily as a key benchmark for housing-related interest rates. A new low has been reached as of this week, bringing the benchmark rate down from a super cool and chill 4.20% to 3.95%—cutting much further than many expected. [Source]( China’s economic downtrend has been so bad that this move barely even registered for investors. Meanwhile, rate moves in the U.S. are up there with the Super Bowl, moon landing, and Nvidia’s earnings calls for how much attention they get. The goal of these rate cuts is to further ease conditions in a dramatically embattled housing and commercial real estate market. According to the WSJ, the country’s “property market” once made up as much as 25% of China’s GDP. Now, it’s in the toilet. Much of this is thanks to the “zero-C-19” strategy the CCP embarked on during the pandemic, which is similar to the WFH movement here in the U.S. but put on steroids. Evergrande, once the largest property development firm in the entire world, was forced into liquidation just weeks ago. [Source]() The Lawnmower of Economics In addition to property markets that make $GME’s January 2021 move look rational, China’s economy is also experiencing deflationary pressures and other—to use the technical term—bad vibes. Cutting rates like grass can spur inflation back to life as credit is easier to access, and saving is less incentivized, encouraging higher rates of spending, especially on high-priced goods. But it takes a lot more than just mowing to keep a yard in good condition. Economists who know a lot better than me have speculated that a 25bp cut to just one of China’s key rates isn’t going to be enough. Like Steph Curry in 2017, an increase in government spending is (allegedly) the only game-changing option. But, as we can see in the above chart, Chinese regulators have good reason to be nervous about any growth in leverage. Side note: a country’s leverage ratio adds up all debt within a nation, not just government debt. For reference, China’s debt to GDP sits around 78%, an all-time high. But, the hesitation to dump helicopter money on the property sector isn’t limited to just debt burdens. Worries about reflating the property bubble loom large. At the same time, Chinese economists are seeking more surgical paths to ease access to credit in “preferred” industries like manufacturing while keeping it out of the hands of developers. The Takeaway? China is between a dragon and a fiery place. It’s clear something has to be done, and the PBOC apparently prefers to take action through rate cuts as opposed to further increasing their debt burden. While a country attempting to be financially responsible might sound insane to us here in the U.S., it is generally a good idea. The clock is ticking, however, with deflationary pressures continuing to drive prices lower. The longer a deflationary cycle lasts, the more difficult it is to stop. So, following the wise words of JPow, whatever China decides should be done “as fast as humanly possible.” What's Ripe 🤩 Nvidia (NVDA) 📈16.4% - Attracting more semiconductor analysts to Wall Street than Taylor Swift attracts women to football, Nvidia’s earnings set finance Twitter on fire last night. - Check yesterday’s Peel for the numbers because Nvidia is now approaching the $2tn market cap level already. And, this time, we can’t call it a bubble. - Earnings aren’t keeping up with the firm’s share price. They’re outperforming share returns. With this rise and 2024 guidance, the stock has only gotten cheaper. Moderna (MRNA) 📈13.5% - No vaccine is required to get in on these gains as Moderna posts its first solid quarterly numbers since the C-19 days. Don’t call it a comeback… - Reporting an EPS of $0.55/sh, this blew away estimates for a $0.97/sh loss, but they probably aren’t like comparisons. Sales of $2.81bn beat by 12%. - 2023 was a “turnaround year,” while 2024 is back in growth mode, according to CEO Stéphane Bancel. Guidance was upbeat, but we’ll see if it holds true. What's Rotten 🤮 Rivian (RIVN) 📉25.6% - I can smell Rivian shares way over here at TDP Global HQ, as this firm’s earnings stunk up the whole Street. Plus, 10% of jobs are getting cut. - Production estimates for 2024 might’ve been the worst part, originally expecting 81.7k trucks and now anticipating only 57k. Sales still beat in Q4, though. - Losses were wider than expected, however, burning $1.36/sh. The rest of the EV market suffered too on this and Lucid’s almost-as-garbage quarterly report (LCID, -16.8%). Fiverr (FVRR) 📉14.2% - Another one bites the dust—AI has been the epitome of “one stock’s trash is another stock’s treasure,” and sadly, Fiverr’s on the wrong side of that trade. - EPS managed to beat, but sales came up short. Execs tried to put a positive spin on it, saying they were focused on “high-quality buyers,” but… - It looks like they were focused on having no buyers instead. Freelance roles are already being replaced by AI tools, and it doesn’t look like this trend is stopping. Thought Banana 🤔 Just Keep Betting Baseball, day drinking, and degenerate gambling—three of the top contenders for the U.S.’s national pastime. But no one has the attention span to watch a baseball game anymore. And, unless you're at a tailgate or something, day drinking after college gives this weird “wtf am I doing with my life?” kind of vibe that my liver really doesn’t appreciate. And then, there’s gambling. With the legalization of online betting sweeping across U.S. states, the fervor around this great activity has surged. But, as anyone with a brokerage account back in early 2021 knows, we didn’t need DraftKings to become degenerates. The Kids Are Learning Watching GameStop run from less than $1 to over $480 in a matter of weeks, concerned parents and Wall Street pros wondered alike, “Is it good for my kid to be taking investment advice from Davey Day Trader Global?” 3 years later, we have an answer. It turns out that it might’ve actually been okay to introduce a whole new generation to the world of investing through outright gambling and speculation. Apparently, they’ve learned from their “mistakes.” [Source](=) As [the WSJ](=) points out and the above chart suggests, gambling on Robinhood was just the start. Now, the kids have graduated from brokerage accounts, allowing 18-year-olds to trade options to custodial accounts they’ll get control of when they hit their state’s age of majority. My new financial advisor was one of those 18-year-olds covered in the piece, [saying](=) she began her investment journey “…addicted to that adrenaline” only to then start “researching more,” eventually saying, “I realized it was highly unlikely to continue that aggressive profit.” Spittin’ bars. But the best part was [adding,]( “Since we’re young, we have the privilege of seeing our investment compound… the biggest lesson would be to start early.” Who Cares? I’m 24, so I can’t really call anyone a “kid,” but the Robinhood generation of investors appears to be moving in the right direction. While a few kids aren’t exactly a significant sample size, this does bode well for future generations of investors. Having a solid financial picture is good for the economy as high savings and investments discourage reliance on government support in retirement and before. Plus, consumer spending is more stable, financial stress is lower, and a million other benefits of a financially conscious generation. So, if your kid wants to start gambling, strongly encourage them to do so. Just maybe do it on Nvidia instead of that 7-leg parlay you drew up. 💭 The Big Question 💭: If you have kids, are they investing? Where are they even getting their money from? What implications does this have for markets? Banana Brain Teaser 💡 Previous 🗓 A certain university will select 1 of 7 candidates eligible to fill a position in the mathematics department and 2 of the 10 candidates eligible to fill 2 identical positions in the computer science department. If none of the candidates is eligible for a position in both departments, how many different sets of 3 candidates are there to fill the 3 positions? Answer: 315 Today 🕐 A survey of employers found that during 1993 employment costs rose 3.5 percent, where employment costs consist of salary costs and fringe-benefit costs. If salary costs rose 3 percent and fringe-benefit costs rose 5.5 percent during 1993, then fringe-benefit costs represented what perent of employment costs at the beginning of 1993? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “The best time to plant a tree was 20 years ago. The second best time is now.” — Old Chinese Proverb 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