Goodbye Smartphones?

In this issue of the peel:

• 2023 has been a year defined by slowing wage growth. Low-earners who saw a 7.1% jump in pay in January got only a 4.5% rolling-12-month wage in October.
• Blink Charging and Unity Software had an absolutely ripe day, whereas Plug Power and The Trade Desk suffered share price declines.
• Humane, a brand-new, San Francisco-based tech company founded by former Apple designers Imran Chaudhri and Bethany Bongiorno, has announced their latest, first, and only product: the AI pin.

Market Snapshot

Happy Monday, apes.

We ask again—is it ever a happy Monday? Probably not, but it might be a little better if you watch that schizo dude with a mustache on The Daily Peel Livestream later today. Sure, you could wait and watch the podcast later, but isn’t telling us how wrong we are to our faces way more fun?

Speaking of fun, that’s all markets were having on Friday. Stocks ripped higher throughout the day as a sudden bounce off late October lows has translated to a >5% move higher for the S&P 500 so far this month. All 11 S&P sectors moved at least 0.5% into the green, a strange sight to see but a welcome one at that. The risk-on trade was real, allowing the Nasdaq’s 2.05% gain to lead the way.

So, while stocks have pivoted their trend and started to move higher, bond yields did the exact same thing on Friday. Treasuries were sold off across the curve, leading the 2-year back up over the key 5% line, while the 10-year yield rose as well, but to a slightly lesser degree. Always fun, isn’t it?

Let’s get into it.

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Banana Bits

• Like finding out your friend is throwing a party through Instagram, investors are getting FOMO once again.
• Marvel fans can’t help but marvel at how stupendously bad the franchise’s latest film—“The Marvels”—performed at the box office.

Macro Monkey Says

Friendly Inflation

Quantum physics, the construction of the pyramids, and the decisions you made drunk on Saturday night: what do all of these things have in common? That’s right—none of them make any sense.

Allegedly, however, they are all real, although only one of them carries that deep sense of regret you still feel right now looking back over the weekend. Anyway…

Few things in macroeconomics make sense in real-time, too. Sitting in a “Monetary Policy” or similar classroom over the last few years may have actively hurt your knowledge of the macro world, especially when trying to make investment decisions, as the peculiarities of an ample-reserve vs scarce-reserve environment are complicated enough.

And then, we added in the most egregious rate hiking cycle we’ve ever seen just to keep you on your toes.

So, when I say this next sentence, don’t leave me just yet as I promise it does not make any sense at first (or maybe at all), but—consumers don’t seem to mind inflation as much as we thought they did, and really, they don’t seem to mind it at all.

"... we added in the most egregious rate hiking cycle we’ve ever seen just to keep you on your toes."

Sure, there were plenty of posts on X (the app formerly known as Twitter) complaining about $7 cartons of eggs, $15 packs of chicken, and don’t even get us started on what $4/gal gas outside of California will do to your timelines. But that’s not what we’re talking about.

Despite the highest inflation rates of the past 40+ years dominating the post-C-19 environment, consumers really didn’t slow their spending… if at all. They complained nice and loud, but their dollars didn’t stop.

Now, a lot of that is almost certainly attributable to the ungodly amounts of money JPow and JYell double-team dropped on us, but those actions were also very much what caused this inflation in the first place. It was both our savior and the reason we needed savings.

"... consumers refused to stop spending even as that excess cash wore thin."

But, as pointed out in last week’s discussion of surging credit card debt, consumers refused to stop spending even as that excess cash wore thin. Instead of chilling out, cutting back, and enjoying a more modest lifestyle, we simply put it on the plastic to run up gobs of credit card debt instead.

Much of that continued spending was powered by surging wages across the income spectrum, concentrated at the lowest end. Low-end wage earners saw by far the largest relative increases in earnings since C-19 showed up, and, with the largest propensity to spend of any income group, their spending largely put the economy on their backs in 2023 and drove us to that 4.7% GDP growth rate last quarter.

However, 2023 has also been a year defined by slowing wage growth. Low-earners who saw a 7.1% jump in pay in January got only a 4.5% rolling-12-month wage in October, so to economists banking on the poorest among us to carry the team in 2024, it’s a scary sight to see. Halloween is over, but it’s always spooky szn for macro observers.

Slowing wage growth almost always translates into slowing spending growth over a long enough period. With wage growth even more depressed than the people receiving those wages, we’d be hard-pressed to expect consumer spending—especially that of the lowest end—to buoy things for the rest of us in 2024.

Moreover, if that spending slows enough to cause a slowdown or even that recession we’ve been walking on eggshells around since March of 2020 finally materializes, those same low-earners will almost certainly get hit the hardest, too, leading to a lower propensity to spend among this group and therefore lower consumer spending for all of us.

So, does it make sense to say that inflation wasn’t actually even all that bad? Yeah, $7 eggs suck, but at least the labor market—and the stock market—were able to stay strong in 2023. People weren’t losing their jobs unless your name was George Santos, and, as a result, we all lived happily ever after… for now.

Who knows if wage growth will slow enough for any of this nightmarish negative GDP growth to manifest but regardless, the economic story of the past year kinda sounds more like Winflation in hindsight.

What's Ripe

Blink Charging (BLNK) ↑ 24.80% ↑

• Anybody who's tried knows this, but competing with Elon Musk is hard. Blink Charging, however, managed to make it look easy last quarter.
• Sure, losing $0.16/sh still isn’t great, but when everyone expects you to lose $0.37/sh, you might as well have hit the lottery. Revenue easily toppled estimates as well, with the $43.38mn they reported bringing them over their full-year 2023 guidance already.
• While demand for EVs and other things that require credit may be down, those of us already on the EV wave kept plugging and chugging with Blink.

Unity Software (U) ↑ 7.01% ↑

• Talk about an all-time comeback. On Friday, Unity Software joined the likes of Tom Brady and the Patriots coming back from down 28-3 to win the Super Bowl after dropping this earnings report.
• The stock opened down 11% from Thursday’s close but finished the day with a big run-up once analysts actually had time to read the report. Don’t get me wrong, they had expectations for EPS of $0.17/sh on $554mn vs. actually delivering a $0.33/sh loss on $544mn. It was still horrific.
• But it got slightly less horrific when put into context. For starters, sales growth was “weak” despite surging a very nice 69% annually, while the firm still managed to reduce costs by just about 50%.
• So, once analysts had time to actually consider the results instead of just relying on their trading bots, to the moon it was.

What's Rotten

Plug Power (PLUG) ↓ 40.47% ↓

• Shares in clean energy stocks were done dirty to close last week, headline by names like Plug Power, after the company issued the most dreaded notice possible in corporate America: a going concern warning.
• Basically, Plug Power came and said they may soon no longer be a concern because they just can’t keep going. The hydrogen fuel startup will need an infusion of cash within the next 12 months, or… that’s all they wrote.
• In response, Wall Street said, “Don’t worry about it, we’ll get you 40% of the way there,” and sent shares tumbling. Maybe selling the most common element in the entire universe wasn’t an ideal business strategy…
• Declining demand combined with massive jumps in costs for items such as power purchase agreements and provisions for lost contracts have been the primary drivers. Apparently, the hydrogen supply chain network is falling apart.

The Trade Desk (TTD) ↓ 16.67% ↓

• Looking at this name, you might think this company runs one of those scam-artist YouTube channels telling you to “just make 2% a day, bro!” but sadly, it’s a lot less fun for everyone involved.
• Trade Desk is a digital ad company that helps buyers of online advertising optimize their strategies to suck the most eyeballs and dollars out of the victims of these apps. Apparently, that isn’t going well as the stock lost nearly 20% after reporting $0.33/sh on $493mn vs. the $0.29/sh on $487mn expected.
• So, that part of the report was fine. But given that Mr. Market only cares about how much money you’re going to make him regardless of how much you’ve already made him, shares tumbled thanks to Q4 revenue guidance of $580mn, falling below the $610mn estimated prior.

Thought Banana

Step Aside, Steve Jobs

If you guys thought internet search tracking, ChatGPT & AI in general, and all the other big tech nonsense of the last few decades weren’t dystopian enough, then you’re in luck! Humane has the solution for you.

Humane, a brand-new, San Francisco-based tech company founded by former Apple designers Imran Chaudhri and Bethany Bongiorno, has announced their latest, first, and only product: the AI pin.

I don’t know about you guys, but whenever I’m walking around with my phone in my pocket, I always think, “damn, I wish I had some kind of pin on my shirt that was constantly listening to and observing my every sentence, movement, or thought and that also showed off what a rich nerd I am.”

And now, thanks to Chaudhri and Bongiorno, all of our problems are solved!

"... thanks to Chaudhri and Bongiorno, all of our problems are solved!"

The AI pin—beginning at $699 with a $24/month data subscription fee from T-Mobile—seeks to replace your smartphone. If that sounds insane, well, trust your instincts… it is.

But it just might work. Smartphones weren’t some crazy, breakthrough technology on their own, necessarily. They were and have been the next iteration of human-computer interaction, and despite how it might seem, we actually are able to survive without them.

Smartphones became this latest iteration in computing platforms as chips got small enough, networks got fast enough, and batteries became strong enough to power a useful computer that fits in your pocket rather than on your lap, desk, or filling an entire room, as they once did.

Now, Humane has come out with an even smaller version of this same kind of computer via the AI pin.

"... the pin already has the capability to replicate everything ..."

Allegedly, the pin already has the capability to replicate everything you already do on your smartphone by replacing the physical, hand-held aspect with more of a quasi-physical AR-style display. The device will project a “screen” onto your palm, and it really makes a lot more sense if you watch even the first 2-minutes of the above video.

So, you can (again, allegedly) do things like search the internet, make/take phone calls, send/receive messages assuming you have people that want to talk to you, and much more. No word yet on whether you can post hot selfies to the gram and then stress over how many likes it gets.

Posting to the gram might be even tougher as the device doesn’t have “apps” but has “AI experiences” that I’m sure will make it even easier for companies to read your mind.

Orders for the AI pin open on Thursday, and purely out of coincidence, the Unabomber is hosting a meet-and-greet on Friday. I’m sure he and his tech-loving buddies will have a lot to say…

The big question: Will the AI pin actually replace smartphones? If not, what will and when?

Banana Brain Teaser

Friday —

Nicole finds 27 buttons on the ground that are black. She adds them to her collection of 4 blue buttons, 3 black buttons, 13 white buttons, and 3 red buttons. What is the probability that Nicole will draw a black button out of the container that holds all of her buttons?

Answer

3/5. You have to add the 27 black buttons to the 3 that Nicole already had.

Today —

A racing driver drove around a 6-mile track at 140 miles per hour for 3 miles, 168 miles per hour for 1.5 miles, and 210 miles per hour for 1.5 miles. What was his average speed for the entire 6 miles?

Shoot us your guesses at [email protected].

Wise Investor Says

“If investing is entertaining, if you’re having fun, you’re probably not making money. Good investing is boring.” — George Soros

How would you rate today’s Peel?

All the bananas

Decent

Rotten AF

Happy Investing,

Patrick & The Daily Peel Team