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🍋 GDP Up, AMZN Down

🍋 GDP Up, AMZN Down

Short Squeez
October 28, 2022

"The most important part of every plan is planning on your plan not going according to plan." — Morgan Housel

Good Morning and Happy Friday! Elon Musk officially closed his acquisition of Twitter last night. His first order of business was cleaning house and firing four top executives including CEO Parag Agrawal. Musk says the platform won’t be a ‘free-for-all hellscape’ once he owns it.

Mortgage rates are above 7% for the first time in 20 years thanks to the Fed’s interest rate hikes. A Florida man dubbed the ‘Wolf of Airbnb’ was charged with running an illegal scheme in a posh Manhattan luxury building. And chip makers, once in high demand, are facing challenges with a sharp slowdown.

Mark Zuckerberg has officially lost $100 billion of his net worth this year. Meta is no longer a top 20 stock as the company continues to burn money on the Metaverse.

1. Story of the Day: GDP Up, AMZN Down

The economy is back - or is it? The U.S. economy grew 2.6% last quarter following strong GDP growth. But don’t be too sure we’ve dodged a recession yet.

GDP growth contracted in back-to-back quarters to start the year. Some would define that extent of a slowdown - two consecutive quarters where GDP fell - as an economic recession. But the economy broke that trend last quarter.

The Commerce Department reported that the GDP got a boost in Q3 from trade dynamics especially. The strong labor market didn’t hurt in stimulating growth, either. But investors aren’t sold the economy’s out of harm’s way.

The GDP report noted consumer-spending growth cooled last quarter. That’s not what economists want to see - some call consumer spending the ‘main engine’ of the economy. Even a small downturn in consumer spending can make negative ripple waves across the economy.

Big tech got rekt this past week with earnings - Facebook is down 25% on the week and Amazon sank 11% after-hours. Major indices closed lower on Thursday because of their heavy exposure to tech stocks.

Americans are dialing down on spending during uncertain times. Inflation is eating away at wage gains, and a weak housing market impacts many Americans. And the Fed seems all-in on fighting inflation, even if it leads to an economic slowdown.

Takeaway: The GDP report offers some positive signs, but overall sends mixed signals about the economy. GDP growth is great, but the real nuts and bolts of the economy - noticeably consumer spending and inflation - are shaky.

This month 98% of surveyed CEOs said they anticipate a recession over the next year. While positive Q3 growth is reassuring, yesterday’s report provides little guarantee the economy is already out of the woods.

2. Markets Rundown

If you want access to Wall Street insider interviews, industry deep-dives, and investment ideas, check out our Insiders newsletter.

Tech stocks dragged the market lower to close the day.

Movers & Shakers

(+) Shopify ($SHOP) +17% after beating on revenue estimates.
(+) McDonald’s ($MCD) +3% after higher menu prices boosted earnings.
(–) Credit Suisse ($CS) -20% after announcing a massive restructure.

Private Dealmaking

Ascend Elements, a sustainable EV battery manufacturer, secured $300 million in funding
Trigo, a cashier-free store technology platform, raised $100 million
Vesttoo, a capital markets platform for insurance companies, raised $80 million
Floryn, a B2B lending platform, raised $64 million
Reap, a web3 payments startup, raised $40 million
Moneyhub, a British payments platform, raised $39 million

A Message from Trending Stock News

One company is currently looking to identify, explore, and develop complementary battery metals technologies via open-source applications to improve the world and meet growing demand for electric vehicles.

It's uniquely positioned to acquire mining properties that produce essential battery materials and also operates in the global battery metals market ($11.3 billion in 2019) which is projected to reach $20.5 billion by 2027. Demand for battery metals is also expected to jump 500% by 2050.

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4. Book of the Day: Empathy Economics

Through Owen Ullmann’s intimate portrait, we glean two remarkable aspects of Yellen’s approach to economics: first, her commitment to putting those on the bottom half of the economic ladder at the center of economic policy, and employing forward-looking ideas to use the power of government to create a more prosperous, productive life for everyone.

And second, her ability to maintain humanity in a Washington policy world where fierce political combat casts others as either friend or enemy, never more so than in our current age of polarization.

As Ullmann takes us through Yellen’s life and work, we clearly see her brilliance and meticulous preparation. What stands out, though, is Yellen as an icon of progress—the “Ruth Bader Ginsburg of economics”—a superb-yet-different kind of player in a cold, male-dominated profession that all too often devises policies to benefit the already well-to-do.

With humility and compassion as her trademarks, we see the influence of Yellen’s father, a physician whose pay-what-you-can philosophy meant never turning anyone away. That compassion, rooted in her family life in Brooklyn, now extends across our entire country.

“Not only the first woman in the more than two-century history of the office, Yellen is the first person to hold all three top economic policy jobs in the United States.”

5. Short Squeez Picks

7 rules for saving money
6 strategies that will make you a better reader and person
How to get comfortable with uncertainty and change
Has the Internet reached peak clickability?
23 Chrome extensions to simplify your life

What Else to Read: The Best Interest Blog

"Important personal finance explained better than I've ever read."

That's how Kevin L. describes his experience reading The Best Interest, by Jesse Cramer.

Jesse mixes financial education with fascinating ideas to create actionable advice. Like the article “Selling and Surviving,” combining:

a real story about deer jumping off bridges
The book Dune
Physiology (did you know the amygdala is the “oldest” part of the brain?)
And 2022’s scary investing markets

Entertaining, curious, and educational. The result is a growing blog with 5500+ weekly readers.

Increase your financial expertise. Check out The Best Interest.

6. Daily Visual: Longer Podcasts are More Popular Than You Think

What is the average length of your podcast episode?

Source: Axios

7. Daily Acumen: Uncertainty

“A 98% chance is dramatically different than a 100% certainty.

Certainty isn’t on the spectrum of chance. It’s a different thing altogether. If the weather report says the chance of precipitation is zero, one should never walk outside into the rain.

When you leave yourself a few points of wiggle room, you can build more trust. Low chance of rain is fundamentally different than a slight chance of rain.

At the same time, if it actually is certain, say so.”