🗿 Dr.Copper Crash Signals Trouble

MARKET UPDATE

Good Morning Investor! On Tuesday, shares of Starbucks ($SBUX), the purveyor of liquid rocket fuel for sleep-deprived mortals, hitched a ride to the moon, soaring over 21% on the announcement that the company not only fired its existing CEO, but it also poached Chipotle’s ($CMG) CEO, Brian Niccol. This corporate espresso-nage left Chipotle's stock looking as deflated as a day-old guacamole, tumbling almost 7% on the day.

TODAY’S BIG HEADLINES

The Commodities Crash Flags Warning Sign

AI-Fueled Surge in Energy Provider Profits

Equinox’s Budget Gym Goes Bankrupt

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MACROECONOMICS

The Commodities Crash Flags Warning Sign🗿

When Rocks Send a Warning: The vitally important mineral Copper, colloquially known as "Dr. Copper" (because apparently, even rocks can get medical degrees these days), doesn't have its spot price just trade up and down for show. No, this metallic medic's price movements have long been a useful barometer for global economic health in previous downturns. If you're looking for a canary in the coal mine for the global economy, here we are again, with Dr. Copper flagging its warning sign once more.

• When copper prices drop, it’s usually a sign that trouble is brewing for the global economy. Just recently, copper prices have been slipping… fast. In fact, since reaching a high back in May, copper futures are down over 20% flashing a warning sign that the broader economy could be in for some rough times.

The Copper Conundrum: One of the biggest drivers of this, as you'd expect, is China, the biggest consumer of copper. China is dealing with an economic slowdown that's cutting into demand faster than a hot knife through butter, driving prices down from $10,000 per ton earlier this year to around $8,000 per ton. However, we can't pin all of the blame on just China. That would be like blaming your dog for eating all the cookies when there's chocolate smeared all over your face. Across the board, commodities are taking a hit as fears of a global economic downturn mount.

• The Dow Jones Commodities Index ($DJCI) is down almost 10% since May, signifying just how broad this sell-off has been. It's like watching a group trust fall exercise, but nobody's there to catch anyone.

• Oil prices have slid by around 10% this year, while lumber, another key economic indicator, has seen prices drop by nearly 20%. What we’re starting to see is commodities investors dancing to the new tune “Panic on the Trading Floor.” It's less "Stayin' Alive" and more "Stayin' Solvent."

UTILITIES & INDUSTRIALS

AI-Fueled Surge in Energy Provider Profits🛢️

Mo’ Power, Mo’ Money: We're now at the tail end of this earnings season, and we've gathered more insight than a nosy neighbor with binoculars. While most of the economy is doing the financial equivalent of treading water, one industry has been doing laps around the competition — the Independent Power Producers (IPPs). These energy mavens are lighting up the market faster than a Christmas tree on December 1st.

The Dollars Dreams are Made of: These IPPs are seeing levels of profitability that are unheard of, thanks to the surge in demand for energy, fueled by AI data centers with appetites for electricity that would make Godzilla blush — roughly 10X larger than their traditional cloud data centre siblings. These power producers are raking in the dough faster than a bakery during a carb-lovers convention.

Crystal Ball Glistening: “Capacity" prices, which IPPs receive for being available to generate electricity, have risen nearly ninefold in 13 states. That's a spike sharp enough to make a porcupine jealous! This surge gives a clear indication of the scale of increased demand we're witnessing in the US. As a result, power producers are ramping up their forecasts in their latest earnings reports, probably while cackling maniacally and rubbing their hands together.

The Usual Suspects: Looking at individual companies, Talen Energy ($TLN), Constellation Energy ($CEG), and Vistra ($VST) are already up around 130%, 75%, and 150% year-to-date, respectively. Vistra is one of the best performers in the S&P 500, certainly debunking the "Mag 7, and everything else" rhetoric we've seen proliferating online faster than cat videos.

• Constellation Energy meanwhile, has raised its 2026 earnings forecast by 14% above analyst expectations, while Vistra has raised its 2025 EBITDA guidance by roughly 4%.

It’s a Sellers Market: IPPs currently find themselves with their bums in the butter, benefitting from what is effectively a bidding war. Tech giants and power distributors are battling it out for energy capacity like it's the last slice of pizza at a frat party. IPPs are raking in the dough, utilities are getting squeezed harder than a lemon at a lemonade stand, pressured into double-digit bill increases. Unable to own power plants in certain states, the ladder sector is now pushing for legislative changes that reduce IPP reliance.

LIFESTYLE & HEALTHY LIVING

Equinox’s Budget Gym Goes Bankrupt💪

Plenty Pain, No Gain: After suffering losses more painful than leg day during the pandemic, the gym industry has seen a slew of bankruptcies that would make even the most dedicated couch potato break a sweat. The latest victim? Equinox's budget-friendly Blink Fitness, a gym that offers memberships for as low as $15. On Monday, Blink announced it was filing for Chapter 11 bankruptcy, proving that even discount suffering isn't recession-proof.

fter suffering significant losses during the pandemic, the gym industry has seen a slew of bankruptcies with Equinox’s budget-friendly Blink Fitness, a gym that offers memberships for as low as $15, announced on Monday that it filed for Chapter 11 bankruptcy.

Keep Calm and Cardio On: Blink currently boasts over 100 US locations, 2,000 employees, and 440,000+ paying members who apparently enjoy pain with a side of neon lighting. In an effort to keep its existing members and staff happy, Blink said it would keep its doors open and treadmills running while it looks for a buyer to deadlift it out of bankruptcy.

Questionable Lifts: Blink, much like its peers who've been doing financial burpees, blamed its woes on the pandemic, which forced it to close for nine months. This unplanned rest day led the company to rack up $280 million in debt. This year, however, Blink made multimillion-dollar upgrades to its most-visited gyms, which have likely led to its current position.

• 24 Hour Fitness, Gold's Gym, and Town Sports International all went bankrupt in 2020 and 2021, proving that even pumping iron can't make you immune to financial flu. Home-fitness company Bowflex filed for Chapter 11 in March, and Peloton's slashing its expenses as demand spins down faster than a stationary bike with no resistance.

MORE NEWS

Additional market-moving events🌎

Power Couple: With “Deadpool & Wolverine” and “It Ends With Us” dominating the box office over the weekend, Ryan Reynolds and Blake Lively became the first husband-wife duo to star in the big screen’s top two flicks in 34 years. (usatoday)

China’s New Richest Man: Temu’s Billionaire Founder Colin Huang replaces bottled-water king Zhong Shanshan and Becomes China’s Richest Person. (Bloomberg)

EV Sales: Global EV sales rose 21% YoY in July, driven by a 31% increase in China despite declining demand in Europe. BYD (BYDDF) saw significant growth in plug-in hybrid sales, while analysts expect little impact on Tesla (TSLA) from E.U. tariffs on Chinese imports. (Reuters)

Music Deal: Universal Music Group expanded its licensing agreement with Meta ($META) to cover WhatsApp for the first time, enhancing opportunities for UMG's artists. (Reuters)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection. Lastly, on August 6th, we initiated a position in Celsius holdings.

Here’s how the stocks have performed since:

• Hims & Hers Health: $15.68 (📈+8.39%)

• PayPal: $65.20 (📈+7.52%)

• Celsius: $39.50 (📉-2.11%)

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