Stimulus, Rent the Runway, and do people know how angry the average consumer is?
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Chinese Stimmies
Chinese inflation data for November dropped this morning and it’s bleak. Consumer prices (CPI) rose an anemic 0.2% from the year prior, while producer prices fell 2.5% from year-ago levels, their 26th straight month of declines. The market was expecting CPI growth of 0.5% in November, better than the 0.3% recorded in October. The reported number was a material miss. Worse, on a month-to-month basis, consumer prices fell from October to November.
There are two issues worth considering. First, the lackluster performance of China’s economy. Inflation is low in the country due to underperforming domestic consumption. The second is the risk of deflation. If consumer prices contract — again — GDP growth could become harder to earn given the country’s debt overhang across levels of government.
The Chinese government, sensing that CPI deceleration is a real risk despite its prior, modest efforts to bolster its economy, is turning on the spigots. Here’s Reuters with the critical quote:
China will adopt an "appropriately loose" monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic growth, the Politburo was quoted as saying on Monday.
Or if you want a machine translation from the official release (emphasis added):
The meeting pointed out that next year, we must adhere to the principle of seeking progress while maintaining stability, promote stability through progress, adhere to the right path and innovate, establish before breaking, integrate systems and coordinate, implement more proactive fiscal policies and moderately loose monetary policies, enrich and improve the policy toolbox, strengthen extraordinary counter-cyclical adjustments, and play a good policy "combination punch" to improve the forward-looking, targeted and effective macro-control.
Chinese shares rallied late in the day on the news.
There is an inherent tension between cash-strapped local governments and the central authorities regarding incomes and responsibilities thanks to how monies are collected and spent in the nation. Details regarding how large and long-lasting upcoming stimulus measures will be will prove critical to both businesses and administration. But if you were China, staring down possible deflation as your GDP growth slips and a hawkish set of folks are about to take over the White House, you might reach for something stiffer than economic vitamins to get things moving again.
Fork time?
Yesterday evening, I was reading Holden’s economic calendar for the week, adding a few more data points that I’m looking forward to seeing. While verifying his earnings rundown—thank you, Holden; I use your work every week—I noticed a name in the upcoming rolls that I had not heard for some time: Rent the Runway.
I was pretty skeptical of its financials when it listed back in 2021. Those concerns have been borne out:
Note that we’re using a percentage change chart instead of a share price chart due to a 1-for-20 reverse split earlier this year.
The company was worth around $50 million before the market opened today. It lost another 20% during regular trading today. That despite the company managing to dramatically limit its cash burn, generate adjusted EBITDA, and grow its top line by a little under 5% in its most recent quarter that it just reported.
Reading the company’s earnings release, it seems that Rent has its head on straight and is in the middle of making hard, required changes to sort out its business. This newsletter does not offer investment advice, but the gambler in me wonders if there isn’t more inertial pessimism in the market regarding Rent the Runway today than is truly warranted.
Do business people understand how mad regular folk are?
When news broke that a health insurance executive was murdered, I knew that some people were going to post mean things that might get them fired. As expected, people posted mean things.
Early on, it seemed that there was a left-right divide on social media. Some lefty accounts were in the ‘insurance companies are ghouls who kill people by denying claims, seeing one of their own taken out is indicative of anger stemming from a broken system’ camp, while responsive right-leaning commentary went something like ‘no, that’s bad, and America’s health insurance system is neutral at worst, and pretty good at best.’
Taylor Lorenz made waves with her social media posts, leading to one over-caffeinated tech denizen arguing that journalists want you dead. Anyway.
What quickly became apparent, however, was that the right-left divide concerning the ethics of health insurance companies wasn’t. More accurately, there is a divide between the business community and the rest of the nation. It’s just not right-left, as we tend to consider the nation’s main political fault line. No, it’s class-based.
The comments on this Ben Shapiro video entitled “The EVIL Revolutionary Left Cheers Murder!” are instructive. They ran so against Shapiro that their bent went viral on Reddit.
I think that gas prices explain this mess.
I never understood the focus on them around election time, or really any other time. Why? To be blunt, the cost of fuel has not been a material line item on my family’s income statement since I was in high school. I figured it out when I realized lots of folks are living so close to the financial edge that if the cost of filling their car goes up, that price bump can take a real bite out of their grocery budget, to pick an example. And we focus on gas prices around election time because they impact consumer sentiment very, very strongly.
For the business class, gas prices are immaterial. Similarly, having one’s insurance claim denied is not a big deal for the wealthy; you can cover the gap or difference with cash. For many people, that’s not the case. Throw in a few decades of rising health insurance prices, middling attempts at reform at best, and a system that still doesn’t support people the way that most payees expect, and you have discontent across the nation that doesn’t fit into trad ideological lines.
Do the business people not understand how much the average person hates the nation’s health insurance industry?
No. That’s why, I’d hazard, there’s been such a knee-jerk reaction amongst opinion-setters and business leaders to politicize the murder instead of investigating the underlying anger. Not that murder is acceptable. It’s not. But if you take that to be a fair, and reasonable statement, you’re have to have a response to the following line of argument, because it’s the national tenor today, and you can’t ignore it as merely the agitation of your political foes:
