The insanity over the Starbucks “Bearista” cups tells you everything you need to know about the US economy and markets
Upper-income consumers and megacap tech companies are both a) doing well and b) supply constrained.
The lack of bear cups is almost too much to bear.
A $30 ursine coffee cup offered by Starbucks seems to be too popular. Customers are literally fighting to get their hands on one, and the company has already apologized for not having enough supplies to go around.
We can probably safely infer that anyone willing to spend $30 on an admittedly very adorable bear cup probably isn’t pinching pennies to make ends meet. A bear cup is a bear necessity, but not a bare necessity. I have a deep envy of anyone for whom access to a bear cup is what inspired you to make your William Wallace-esque last stand.
Starbucks customers are generally more affluent than average. That means they’re part of a cohort that Bank of America has recently flagged as enjoying better pay growth than lower-income Americans, and, accordingly, showing more robust growth in spending.
Turning to financial markets...
Nvidia’s doing well! CEO Jensen Huang recently boasted of more than $500 billion in orders for its flagship chips through 2026.
Microsoft’s doing well, too! Its Azure cloud business is on fire and has a massive backlog.
But the thinking is that they could be doing even better if not for pesky supply constraints, which in this case do relate to something that is a bare necessity: power.
The most charitable interpretation of Jensen Huang’s remarks this week on how tight the AI race is between the US and China is that the CEO is trying to hold the government’s feet to the fire on the urgency of boosting energy supplies to meet the power demands of the AI boom.
For his part, Microsoft CEO Satya Nadella recently said his biggest problem right now is “not a supply issue of chips; it’s actually the fact that I don’t have warm shelves to plug into.”
The top of the heap, among households and businesses, have little to complain about but supply issues. Those supply issues are still hurting lower-income Americans, too — coffee prices are near all-time highs, and electricity prices have surged — but not in ways that seem to be bad enough to tip the aggregate “economy” in a negative way.
Lower-income earners are supply-of-income constrained, and even major US companies that fall outside the so-called Magnificent 7 cohort appear to be less well-off this year on the earnings front than analysts expected at the beginning of April, as this chart from Apollo Chief Economist Torsten Slok shows:
