You BTFD? | The Daily Peel | 3/8/22

Just… wow. What a brutal way to start the week. We promised it would be another week of fun, and depending on how you look at it, we got just that. 

A full “explanation” is in store below, but for now, just know the Nasdaq cratered a massive 3.62% while the S&P lost 2.95% and the Dow fell 2.37%, putting the index in correction territory for the first time in two years.

Let’s get into it.

• The mighty Dow Jones enters correction territory for the first time since the c-virus arrived 
• When the U.S. says no, countries go to China 
• Rival UNC embarrasses Duke in the legendary Coach K’s final home game
• The new Batman movie must've extorted half of America to get box office numbers like this
• Shell gets more hate than slow-walkers for buying Russian oil
• Strangely, you can still order McNuggets with a Coke in Russia
• Stay bullish, apes, even in a nuclear war… apparently
• Hacker group Anonymous wreaks CIA-level havoc on Russian tech services

Murder on Wall Street — Is everyone okay? Are we all still alive? I know I got my face ripped all the way off yesterday, and I’m guessing a lot of you did too. Don’t fret, apes. We’re in this together.

Yesterday was a brutal day to be an equity investor. Unless you’re in commodities, you likely have tears dripping into your coffee right now. Maybe we can get the long energy gang to lend us some bills to dry our tears. 

So, what happened yesterday? Well, we can’t be exactly sure, but we’re here to speculate, so let’s do just that. 

First, energy prices continued to soar, with Brent rising another 4.6% by 4 pm. The consensus view seems to be that energy prices will remain elevated, along with a slew of other commodities like wheat and corn, and that this added cost will pump the brakes on global macro growth, largely triggering the flattening in the yield curve seen yesterday.

At the same time, the dollar continues to rip, trading at its highest level since March 2020 when compared to a basket of other large-economy currencies. The dollar index, DXY, and the S&P have a monthly correlation of -0.21, meaning their relationship is inverse by a mild degree. 

This is largely due to the fact that when the dollar falls, profits earned abroad are worth more once converted back into dollars, and vice versa. A rising dollar means any earnings that come from Japan, the Eurozone, China, etc., are worth lesser dollars. If that doesn’t immediately make sense, just trust me on this one.

And lastly, yesterday, we also witnessed a dramatic spike in expected inflation. 10-year TIPS breakevens reached an all-time high of 2.785%, implying the bond market sees long-lasting, elevated inflation. Like a wise man once said, “I don’t trust people; I trust dogs and the bond market.”

Yeah, not a whole lot to be positive about. Even crypto was crying yesterday, with BTC down 3.1% and ETH down 5.8% at the time of writing. Now the only question remaining is: You buying the dip?

Russia Roundup — Yeah, something tells me we’ll be talking about this for a while. Again, no groundbreaking changes yesterday, but let’s see what’s going on in eastern Europe.

First and foremost, Ukraine and NATO still can’t agree on a no-fly zone proposition. President Zelensky has been pleading with NATO forces to institute a no-fly zone over the country. 

But the problem is, that means NATO would be required to shoot down any Russian plane flying over the nation, effectively bringing the alliance into direct conflict with Russia. This is exactly what we want to avoid.

However, as the U.S. does, we innovated. Rather than provide direct defense, the U.S., Poland, and Ukraine are entering a fantasy football-esque three-way trade to make something work. 

Basically, the plan would be for Poland to supply Ukraine with Soviet-made fighter jets to assist in preventing Putin from gaining all-out air superiority. But Poland wouldn’t agree to do so without getting replacement fighter planes, and that’s where the U.S. stepped in, offering to provide U.S.-made jets as a replacement. 

No deal has been reached yet, but as the Russian bombardment of cities like Mariupol and Vinnytsia ramps up, Ukraine needs help fast.

Second, we’d be remiss not to go over actions taken by private corporations to help out in the whole “f*ck Russia” effort. The “private sanctions,” if you will, include (but are not limited to):

• Apple deciding not to sell products in the country anymore
• Google blocking all Russian media from its platforms
• Meta not allowing access to any Russian state media outlets
• TikTok banning new content from Russia
• Netflix suspending all operations within Russia
• Spotify ceasing all Russian operations
• Visa, Mastercard, AmEx pulling out of Russia
• Exxon pulling out of a massive oil and gas project with Russian companies
• Boeing, Airbus refusing to supply parts to Russia
• Ford suspending operations in the country
• Mercedes suspending sales and deliveries to Russia
• Toyota, Volkswagen halting production across the nation
• Disney pressing pause on new releases in Russia
• Nike temporarily shutting down all Russian store locations

And many, many, MANY more. In terms of morale across the population, these private sanctions could have even more effect than government-implemented restrictions. We’ll see what happens. I know I’d be big mad if I couldn’t post on TikTok anymore.