🤢 The inflation Grinch

Wednesday, September 14, 2022 by Robinhood Snacks |
We already “be inflation” (Patrick T. Fallon/Getty Images)

We already “be inflation” (Patrick T. Fallon/Getty Images)

We already “be inflation” (Patrick T. Fallon/Getty Images)

We already “be inflation” (Patrick T. Fallon/Getty Images)

Yesterday’s Market Moves
Dow Jones
31,105 (-3.94%)
S&P 500
3,933 (-4.32%)
Nasdaq
11,634 (-5.16%)
Bitcoin
$20,141 (-10.09%)

Hey Snackers,

The world’s next big boy band could be a Bored Ape group. A pair of Grammy-winning producers signed on to create music for an “NFT band” of cartoon apes. We’re expecting hits like “That’s What Makes You Fungible.”

Stocks had their worst day of the year yesterday after August inflation came in too hot. Tech led the plunge with the Nasdaq tanking 5%.

Grinch

Seeing red… Stocks had a no good, very bad day after August inflation numbers came in hotter than expected. Lower gas prices helped slow the pace of inflation for a second straight month, but the TL;DR is that it’s still ridiculously high, with consumer prices up 8.3% from last year.

  • Why does $5/gallon sound cheap? Energy prices fell 5%, with gas down 10.6%. But while pump and airfare prices were lower, utility and electric bills ticked up.
  • Why is this croissant $9? Food prices were up nearly 0.8% month over month, with cereal and bakery products up 1.2%.
  • Why is rent my entire paycheck? “Shelter” prices rose 0.7% over the month as housing gets even pricier. FYI: The median monthly rent in America’s 50 largest cities hit a record $1.9K in July as prices increased for 16 months straight.

No rest for JPow… Before this bummer report dropped, investors were gaining confidence that inflation could be slowing for real (which could compel the Fed to cool its ’flation-fighting crusade). Now there’s a lower chance of a Powell pause (aka: a Pow-se).

  • It’s likely the Fed’ll raise rates by 75 basis points at its meeting next week, instead of the 50 basis points some were hoping for.
  • To tamp inflation to a benchmark target of 2%, the Fed’s already had four hikes this year — including two jumbo hikes of 75 basis points in June and July.
  • Tech stocks have been hit hard, as high rates lower the potential future earnings of companies whose valuations are largely tied to growth… potential.
THE TAKEAWAY

Inflation’s a Grinch… The holidays are months away, but more than half of Americans are already stressed about buying gifts this season. While ’flation erodes spending power, rate hikes make borrowing pricier (think: credit-card debt). That could put a dent in major retailers’ biggest splurge season of the year.

Thread

Zoom sweats > Gucci-blazer rental… Rent the Runway is falling out of fashion as more users ditch designer rentals. RTR offers clothes from 800+ designers for one-time rental, monthly membership, and discounted purchase. Last quarter the “shared closet” biz notched record revenue of $76M and shrank its quarterly loss from last year. But that didn’t keep the stock from tanking nearly 40% yesterday.

  • Torn seams: Last quarter, Rent the Runway's active subscribers dropped 8% to 124K as penny-pinching fashionistas paused (or ended) their memberships.
  • Cloudy forecast: RTR lowered its sales expectations for the year and said it planned to lay off a quarter of its 1K+ employees to cut costs.

Hangin’ by a thread… As consumer prices skyrocket, even trendsetters are cutting back on discretionary buys (think: new $2K Moncler puffer). Thanks to the rise of hybrid work, the number of Americans wearing business-formal fits has dropped by half since prepandemic. For companies like RTR that means shifting inventory to include more casual and social fits.

  • Only 20% of RTR subscribers looked for work-related rentals during the first half of the year, down from nearly 35% in 2019.
THE TAKEAWAY

Past performance ≠ future results… Despite RTR’s record quarter, investors tanked the stock because they’re always looking to the future, and the future may not look as bright for retailers. Instead of splurging on new styles every season, consumers are saving by buying fewer outfits that are good for lots of occasions. That shift in shopping patterns is starting to squeeze results for retailers like Target and Amazon.

What else we’re Snackin’

  • Blue: Twitter shareholders approved Elon Musk's $44B acquisition bid. The problem: Musk's (still) trying to ditch the deal, and Twitter's suing. Expect an October court case.
  • Nah: The NYT and NBC News unions defied a mid-September return-to-office mandate (free lunch boxes weren't a draw). RTO resistance isn't limited to media as tech workers (think: Apple) reject office desks.
  • ETHwaste: Ethereum miners will no longer be needed after the Merge, but their computer rigs won't end up in the dump. Mining companies plan to diversify by repurposing the machines for cloud computing and AI.
  • BTCitadel: Wall Street titans like Fidelity, Schwab, and Citadel announced a crypto exchange. Finance OGs may be embracing the “if you can’t beat ’em, join ’em” approach, despite crypto winter.
  • Streamy: Netflix and Apple won big at the Emmys with “Squid Game” and “Ted Lasso,” proving that streamers can compete. But cable star HBO's "The White Lotus" garnered the most awards.

Snack Fact of the Day

Streaming of Netflix’s “The Crown” has surged 9X since Queen Elizabeth II died

Wednesday

  • Earnings expected from Li-Cycle Holdings

Authors of this Snacks own: ethereum and bitcoin and shares of Amazon, Apple, and Rent the Runway

ID: 2423903