To The Moon

Early results weren't encouraging.

Earnings season began last week with a few big banks and a report from $Pepsi(PEP)$ . We will learn more this week, but some comments were telling about the state of the economy and consumers.

Pepsi Reaches a Tipping Point

If you like salty snacks like I do, you’ve noticed an insane price jump over the past few years. A back of chips that once cost $4 at regular price and $3 on sale was suddenly $8.

Those high prices are unwinding and Pepsi is feeling the brunt of the impact as owner of Frito Lay. They’ve been losing sales, so they’re lowering prices to gain back market share.

I always chuckle at how management spins this. They aren’t backtracking on previous price increases. They are working on “different tactics to give the consumer what they want.”

And then now in the U.S., there is clearly a consumer that is more challenged and it's a consumer that is telling us that in particular parts of our portfolio, they want more value to stay with our brands. That is not for all the consumers. It's some consumers. That is not for all the portfolio. It's some parts of the portfolio. And we have been working different tactics to give the consumer what they want. And we see that is working.

Ramon Laguarta, CEO

Gouge consumers long enough and they’ll abandon your products. Win them back by lowering prices.

Gotta love competition.

What I’m more concerned about is, what does it say about the consumer?

Big Banks See More Weakness

$Wells Fargo(WFC)$ ’s stock crashed 6.0% on Friday after reporting earnings.

I’m not a bank analyst, but I look at banks to see how they feel about the consumer, who drives 70% of the economy. Wells Fargo doesn’t feel great…

However, the economy is slowing and there are continued headwinds from still elevated inflation and elevated interest rates.

Charles Scharf, CEO

Consumer deposits were also down sharply. Is this because high-yield accounts from $Robinhood(HOOD)$ and $SoFi Technologies Inc.(SOFI)$ are stealing customers? Or do people have less money in the bank than they used to?

I mentioned last week that I’m concerned consumers are cutting back more than investors expect. $Nike(NKE)$ expects sales to fall 10% in the current quarter and now we see Pepsi lowering prices and Wells Fargo bearish on the economy.

This is worth watching as earnings season wears on.

https://asymmetric-investing.beehiiv.com/p/early-earnings-takeaway