🏫 Biden’s big loan forgiveness
Hey Snackers,
Yesterday was Ukraine’s Independence Day, which commemorates its separation from the Soviet Union in 1991. Yesterday also marked exactly six months since Russia’s invasion, which has led to tens of thousands of deaths and the displacement of millions.
Stocks ticked up yesterday, led by tech. Today, all eyes are on the Fed's annual meeting, which kicks off in Jackson Hole, Wyoming. JPow takes the stage on Friday, and any remarks on monetary policy could turn investors’ heads.
Biden cancels $10K in student-loan debt for millions, offering relief as prices soar
A little less loan-ly… Yesterday, President Biden announced plans to cancel $10K in federal loan debt for people making under $125K/year, and $20K for Pell Grant recipients (loans granted after June 30 aren’t eligible). The plan also relieves loan-holding parents, and extends the 2020 payment freeze (yet again). It might face delays because of lawsuits, but it’s expected to happen. As Biden would say, “Here’s the deal”:
- Most of the 45M borrowers who owe $1.6T in loan debt will get relief, with about 15M expected to get their full debt canceled.
- The move’s forecast to cost $300B, but the true cost could be less because billions in defaulted debts likely wouldn’t have been repaid anyway.
Mixed response… Since Biden campaigned on the promise of loan forgiveness, it’s a victory ahead of midterms. But some don’t love it:
- Critics worry the plan will exacerbate inflation and penalize those who paid off their debt. Economists say it’s unlikely to boost short-term inflation since loan payments have been paused since March 2020.
- Supporters say it’ll help money-strained Americans get by, but progressives want cancellation of all $1.6T in student debt.
It’s a big relief, but not a long-term one… US student-loan debt is higher than credit-card debt, so Biden’s plan will significantly relieve Americans’ IOU stress. But it’s not a long-term fix for college affordability. Tuition’s jumped 5X more than inflation in the past half century, and economists worry college could hike tuition even more if students expect forgiveness. Loans will likely pile up again, though Biden says he wants to improve loan requirements to prevent ballooning.
Peloton spins onto Amazon in its first retail partnership after it loses its pandemic traction
New DIY Peloton bike… straight from your Amazon cart. Peloton’s stock jumped 20% yesterday after the struggling spin icon signed a distribution deal with Amazon — its first retail partner. Peloton's products are usually sold exclusively through its site or IRL showrooms. Now Pelo-fans can snag its signature bike with an Amazon click (you can even assemble it yourself).
- Making Lulu sweat: Peloton says it also plans to sell apparel and merch on the Zon, like water bottles, yoga pants, and leggings.
- Full cycle deal: Amazon could account for nearly 40% of all US ecomm sales this year, and has reportedly already seen 500K searches for Peloton products.
Rocky road… Peloton had lost nearly 90% of its market value over the past year as consumers opted for gym classes over $3K spin bikes. In January it paused production as unsold bikes piled up. Last month it outsourced all its manufacturing to save on pricey US production and focus on subscriptions. This month it laid off 800 workers (its third round of cuts this year) and raised prices on premium equipment to bolster sagging sales. We’ll see how it’s holding up when it reports earnings today.
Direct-to-consumer brands might go DTR… direct to retailer. Instead of waiting for consumers to return to Peloton, Peloton wants to meet ’em where they are. That means gaining exposure to Amazon’s 300M active customers. Since Amazon manages several supply steps (think: warehouses, drivers), the deal could also help Peloton simplify its operations.
What else we’re Snackin’
- Sublet: Lyft says it’ll sublease nearly half of its SF, NYC, Nashville, and Seattle office space. As workers quit cubicles, Salesforce and Yelp are also selling or renting unused space.
- Console: Nvidia disappointed on earnings and guidance. The chip titan’s stock has fallen 43% this year as its gaming revenue sags. Microsoft, Sony, and Nintendo have also suffered gaming slowdowns.
- Baby: Employers including Hulu are cutting parental-leave benefits (think: 8 weeks vs. 20). Mid-pandemic, employers boosted PTO for new parents to attract labor. Now many are offering only what’s legally required.
- Tank: Tesla rival Xpeng reported a much-worse-than-expected quarterly loss and lowered its delivery guidance for this quarter. The Chinese electric-car maker said Covid crackdowns slowed store traffic.
- DeFy: Stablecoin giant Tether reportedly might be violating US sanctions by not blacklisting accounts tied to Tornado Cash, which US officials said North Korean hackers used to launder $455M in stolen crypto.
Thursday
- Earnings expected from: Dollar General, Dollar Tree, Dell, and Peloton
Authors of this Snacks own: shares of Microsoft, Amazon, Tesla, and Nvidia
ID: 2395948