200 Years Later… | The Daily Peel | 1/6/23

Jan 6, 2023 | Peel #373

Silver banana goes to...

Market Snapshot

Happy Friday, apes.

This economy, I swear. Might as well just set fire to your textbooks now. The “good news is bad news” trade continued full steam ahead yesterday with some data releases that would seem positive, contributing to yesterday’s selloff.

Treasury yields broadly rose as investors dumped their holdings in response to strong jobs data (a sentence sure to make Adam Smith roll in his grave), while Energy was the sole S&P sector to finish the day in the green.

Let’s get into it.

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Banana Bits

Keep your fingers crossed in hopes that fewer Americans than expected were able to sustain a livelihood last month; the economy depends on it
Crypto lender Genesis has been flirting with bankruptcy for a while now, and it seems like they’re finally gonna say “yes”
Bulls run loose in Beijing as outside investors slowly start to load up on Chinese shares again
“Did we win?” was the first communication received from Bills safety Damar Hamlin after he finally started to improve after days in intensive care. Yes, Damar, you won BIGTIME, my man

Macro Monkey Says

Data Dump Meets Market Dump

Phew! You catch your breath yet? There was plenty of fun to be had yesterday (if you’re short the market, of course), with Thursday morning’s data releases driving stock market selling and Betterhelp subscription-buying.

And this mentality shows no plans of stopping, particularly today with December’s jobs data flooding your news feed at 8:30 am sharp. Prayers up, to say the least.

In fact, yesterday’s losses can largely be attributed to the preliminary employment data that gave us a peak into the headlining NFP print coming out today. These releases include:

ADP Employment Change: 235k actual vs 148k estimated
Initial Jobless Claims: 204k actual vs 225k estimated
Continuing Jobless Claims: 1.69mn actual vs 1.72mn estimated

Oh yeah, and Amazon thought it’d be a funny prank to announce the layoff of 18,000 employees before the open as well. Good one, guys; really got us there.

Aside from Amazon, all of the above data would be cause for celebration in a normal market environment. The problem is “normal market environments” rarely exist.

Once again, stronger than expected labor market data (which drives things like outsized consumer spending and GDP growth) did nothing but tell us to batten down the hatches for JPow’s next rate hike.

There’s still some hope as the number that matters drops later this morning, but you probably aren’t reading this until your first class/meeting of the day starts, and by then, something tells me that hope will be sorely lacking.

Meanwhile, in case the above wasn’t enough reason for pain and suffering in this bizzaro-macro (bizzarmacro?) world we live in, the Census Bureau went full-on sadist in releasing November’s trade balance data, and the news was great (kinda).

Most of the time, alleged experts opine that the U.S. trade deficit desperately needs to narrow. In November, it actually did, only to be met with a fat “not good enough” from market participants.

The deficit fell by $61.5bn over the period on the back of both falling imports and falling exports. “Normally,” a decline in the deficit is a miraculous, almost unheard-of event. But when it comes from falling exports (aka, other countries buying less of our sh*t) that’s like when Kim Kardashian started schilling random sh*tcoins. No one wants that.

While the data drops tomorrow, all anyone on the Street will be thinking about is how this will impact JPow’s psyche come Feb 1st, the date of the most important Fed meeting of all time…until the next one. See you there!

What's Ripe

Energy ($XLE) ↑ 1.82% ↑

We’re not even 6 days in, and oil is already having a nightmarish 2023. Crude prices experienced their worst start to a year in over three decades thus far, leaving a lot less energy across the sector.
I mean that both figuratively and literally. Not only has the oil trade been a dumpster fire this year, but supplies in the U.S. appear to have dwindled in recent weeks as a storm driving absolutely brick temperatures froze the nation.
As a result, inventories and other supplies of heating energy sank. At the same time, the Line 3 pipeline from Colonial Pipeline was abruptly shut down due to “unscheduled maintenance.”
So despite the mama bear tending engulfing energy, this one slight chapter of the overall macro situation makes sense. Less supply = higher prices = finally, a non-horrific day for energy stocks in 2023.

Stitch Fix ($SFIX) ↑ 9.37% ↑

A big, fat middle finger was sticking out of the asphalt on Wall Street yesterday as investors gave a not-so-nice goodbye wave to departing Stitch Fix CEO Elizabeth Spaulding.
Shares took that news and ran, gaining almost 10% on the day. Replacing Spaulding at the helm is Founder and former CEO Katrina Spaulding.
The street looooves founder-led firms, so yesterday’s trade wasn’t all just pure hatred for Spaulding. Still, gotta give credit where it’s due; Stitch Fix has also recently announced a 20% RIF and, I mean, gotta respect that they’re starting with the highest-paid person. Tone at the top, man, tone at the top.

What's Rotten

Silvergate Capital ($SI) ↓ 42.86% ↓

Should I even write about this? I feel like the story (and the stock) is better served if we just start playing “Taps” as loud as we can. Shares in crypto’s version of a “blue chip bank” lost nearly half their value yesterday as a self-described “crisis of confidence” caused a mild bank run and sent shares off a cliff.
This comes just one day after shares popped 27%, and I’d call it a roller coaster, but the only one that would fit the description is this one.
And while “blue chip” and “bank” are two words no one should ever use if you want to be cool in the cryptoverse, it probably won’t even matter anymore if trends like this continue. Just to cover deposits and stay afloat, Silvergate was forced into a fire sale of $5.2bn in assets leading to a $718mn loss.
That loss clocks in at more than 2x the firm’s combined net profit for the last 7 years. Read that again. Yeah, exactly. Thanks, SBF!

Bed, Bath, and Beyond ($BBBY) ↓ 29.88% ↓

Sorry, there’s a slight typo above. Meant to write Bed, Bath, and *Bankruptcy, my b.
At least, that’s kinda what the company announced yesterday. While bankruptcy might not be in the name, it sure as hell is in the cards as executives dropped the dreaded phrase “going concern” that functions as a corporate version of a 14th-century plague doctor’s office.
The firm expects a nearly 40% increase (drop?) in losses for the 2022 fiscal year and said it would not be able to pay off existing debt obligations…just a month after announcing a potential plan to take on more debt to pay off old debt.
In case you couldn’t tell, things are going great over at HQ.

Thought Banana

200 Years Later…

…and we’re up to the same ol’ shenanigans. In case you live under a rock, you know that the U.S. midterm elections occurred this past November.

Yes, they were great fodder for ruining familial relationships around the Thanksgiving table, but they’re also a great way to remind yourself that no matter what, you’ll never take an L as fat as Kevin McCarthy. It was those exact midterm elections that set him on a path to political humiliation on just about the grandest stage.

We don’t get political at the Peel, but this is objectively the worst possible outcome for a Speaker election the GOP could’ve imagined.

Okay, so we all know how the U.S. Congress has two chambers, right? House, Senate, blah blah blah…anyway, the leader of the Senate is “officially” the Vice President. On the other hand, the leader of the HoR is known as the Speaker. When one party seizes control of the House from the other, that winning party is then tasked with selecting compatriots to contend for the Speakership.

And this time, House Republicans have thrown most of their weight behind California Representative Kevin McCarthy. But it turns out that may have been a mistake as devastating as Kanye going on the Alex Jones show.

To win the Speakership, an individual needs a simple majority from the entire chamber. With 20 members of his own party building a wall far more effective than that on the Southern border, the House may be in for some groundbreaking stuff.

After 11 official votes, there is no GOP simple majority leader for the House’s highest position, one that is also second in line to the presidency, only behind the VP.

Those 20 “rebels,” as they’ve been dubbed, show zero sign of changing their minds despite days of voting, countless concessions, and even an endorsement from Big Donnie T. Now, members and commentators alike are beginning to get creative with potential replacement nominees.

If the GOP is unable to rally support behind a Rep to take the leadership spot, the Constitution does technically allow the House to elect a Speaker that isn’t even a member of Congress. That’s right, the leader of the House does not actually have to even be a member, going by a strict interpretation of the Law of the Land.

Yes, that means you yourself are in contention, too. Personally, I’ve been campaigning since Christmas, but other outsiders like Paul Ryan might have me slightly beat.

That’s not to say an outside, non-elected individual is likely to take the position just two heartbeats away from the Leader of the Free World, but the fact that people (way smarter than me, that is) are even talking about this just confirms exactly how insane American politics have become. Yeah, this is exactly what George Washington would’ve wanted…I just know it.

The big question: Will Kevin McCarthy ever be able to rally enough support to put him in the Speaker’s chair, and what will he have to give up in order to do so?

Banana Brain Teaser

Yesterday — I am taken from a mine, and shut up in a wooden case, from which I am never released, and yet I am used by almost everybody. What am I?

Pencil lead.

Today — It’s 150 bananas off the WSO's Elite Modeling Package. LFG!

You are in a place called Wally’s World, and there is only one law. There is a mirror but no reflection. There is pizza with cheese but not sausage. There is pepper but no salt. There is a door, yet no entrance or exit. What is the law?

Shoot us your guesses at [email protected] with the subject line “Banana Brain Teaser” or simply click here to reply!

Wise Investor says

“What goes down usually goes back up, if you’re willing to be patient and don’t hit the panic button.” — Mark Mobius

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