🔥 The gas also rises

Monday, September 26, 2022 by Robinhood Snacks |
A tank full of problems (Brandon Bell/Getty Images)

A tank full of problems (Brandon Bell/Getty Images)

A tank full of problems (Brandon Bell/Getty Images)

A tank full of problems (Brandon Bell/Getty Images)

Last Week’s Market Moves
Dow Jones
29,590 (-4.00%)
S&P 500
3,693 (-4.65%)
Nasdaq
10,868 (-5.07%)
Bitcoin
$19,377 (-1.98%)

Hey Snackers,

The latest thing social media’s ruining: Trader Joe’s. Influencers and TikTok videos have inspired people to make a run on special fall items (think: pumpkin ice cream and ube mochi). Next time you can’t find any Cinnamon Bun Spread, blame the Insta hoarders.

It was another no good, very bad week for stocks: the big US indexes plunged at least 4% for the week and the Dow hit a fresh 2022 low as a barrage of bearish news stoked recession fears.

BTW: Happy new year to Snackers celebrating Rosh Hashanah!

Brewing

The streak’s over… and pump anxiety returns: Last week US gas prices rose for the first time in nearly 100 days. On Wednesday, the average price of a good old-fashioned gallon ticked up to $3.68. That’s nowhere near the $5 average in mid-June, but prices might keep rising. A few things that could make the energy crisis worse:

  • War: On Wednesday, Russian President Putin declared a “partial mobilization” of 300K reservists to fight in Ukraine — and even made a nuclear threat.
  • Weather: Hurricane season could cause supply disruptions, with Hurricane Fiona hitting Category 4 on Wednesday.

A bitter cocktail… Gas is just one ingredient. At the base we have inflation, which is weakening consumer demand as it sticks near 40-year highs. To fight the inflation Grinch, we have something just as painful: soaring interest rates. Last week the Fed approved its third “jumbo” hike and signaled more are likely (several other central banks also lifted rates). Mix in a looming energy crisis, and the dark-and-stormy combo is complete:

  • Earlier this month: Russia’s Gazprom indefinitely shut down natural-gas flows to Europe, blaming Western sanctions. This year Europe’s electricity bills have nearly 4X’d.
  • Last week: Germany announced it would nationalize Uniper (its biggest Russian-gas importer) as Europe races to store supplies to keep homes warm this winter.
THE TAKEAWAY

Uncertainty hurts most, but does help some… While most sectors have tanked, energy stocks like Occidental Petroleum and Valero have had a banner year. Considering gas prices, it’s no surprise that energy has been the best-performing sector, followed by utilities. Meanwhile, growth stocks that rely heavily on the prospect of big future returns (think: tech) have plunged. A dollar today is worth more than a dollar in a year, and rising interest rates incentivize investors to earn off their cash now (think: savings accounts, bonds). Meanwhile, some investors are turning to slower-growing companies with historically stable earnings vs. unprofitable growth companies.

Zoom Out

Shoot for the stars… Even if you miss, you might land at a Hilton. Space tourism isn’t light-years away: last week Voyager Space tapped Hilton to design a space hotel set to launch in 2027 (feat. a galactic gym and room service). The space economy is forecast to hit $1T by 2040, and the space-tourism race is heating up: Voyager, Axiom Space, Blue Origin, and Northrop Grumman are using NASA funding to build private space stations. Virgin Galactic, Blue Origin, and SpaceX are now selling trips to space for between $50K and $55M.

Here comes Santa Claus… with a much lighter sleigh. FedEx sent shivers through the market this month after announcing cost-cutting measures on a slowdown in shipping demand and plunging profits — oh, and its CEO forecast “a worldwide recession.” Package deliveries have dipped for nearly all major couriers this year as the ecomm boom cools. Over half of Americans say it’ll be harder to afford holiday gifts. Holiday sales are expected to grow only 4 to 6% this year, down from 15% last year.

Events

Bed Bath &… Beyond repair? Expectations are low for Bed Bath & Beyond when it reports Thursday. Last month, the coupon legend announced plans to close 150 stores and lay off 20% of employees as it struggles to address slumping sales and sliding market share. BB&B has missed earnings expectations for four straight quarters, and its losses 7X’d last quarter as it struggled to stock items customers actually wanted. BB&B raised $500M in financing last month, hoping to head into the holidays with more cash and less baggage.

Air Jordan problems… Nike may be the most popular sneaker company, but it has big shoes to fill when it reports Thursday. Nike's direct-to-consumer sales grew 7% last quarter, but revenue in North America (its biggest market) fell 5% as inflation curbs sneaker splurges. In China, sales fell 20% as Covid lockdowns trip up demand. Now Nike’s focusing on ecomm (which make up a quarter of its sales) to offload kicks. It’s a steep climb: Nike’s spending 5X what it did prepandemic to ship products, and this year the stock’s down 41%.

ICYMI
  • Blank: “SPAC King” Chamath Palihapitiya is shuttering two special-purpose acquisition companies worth a combined $1.6B. SPAC-tivity has dwindled this year, with 600 SPACs scrambling to find acquisitions before their deadlines.
  • Hole: Prices of crypto-mining machines have tanked 70% this year. The issue: plunging BTC prices + surging electricity costs = lower profits for mining companies, which means lower demand for new equipment.
  • Play: Spotify launched a pay-to-download audiobook service for US users, taking on Amazon and Apple. Audiobooks are experiencing a growth chapter, and Spotify wants to change the playbook for these “B-list” products.

What else we’re Snackin’

  • Bloat: Swedish company OceanSky has blimp-sized plans to launch luxury airship cruises in 2026. Views of the North Pole await travelers willing to plunk down $205K per cabin (scenic glass floors included).
  • Pie: Butter prices churned up 25% in August from last year as producers prep for baking season (pumpkin-flavored everything). After farmers cut dairy-herd sizes on rising cow costs, milk supply is down.
  • Inflate: Web3 star Helium promised crypto in exchange for supporting its wireless network. But early on, company execs (and friends) reportedly mined over a quarter of the project's HNT token, worth $250M at peak.

Snack Fact of the Day

One-way flights out of Russia sold out after Putin’s call for reservists, and since Wednesday prices out of Moscow to Istanbul have soared to thousands of dollars

This Week

  • Monday: National Chimichanga Day
  • Tuesday: Rosh Hashanah ends. Earnings expected from BlackBerry and Cracker Barrel
  • Wednesday: Earnings expected from Paychex, Cintas, Vail Resorts, and Duckhorn
  • Thursday: Jobless claims. Earnings expected from Nike, Bed Bath & Beyond, Micron, CarMax, and Rite Aid
  • Friday: Earnings expected from Carnival

Authors of this Snacks own: shares of Amazon, Apple, Blackberry, and Spotify

ID: 2442406