As Strong as Jack Harlow’s Game | The Daily Peel | 1/26/23

Jan 26, 2023 | Peel #386

Market Snapshot

Happy Thursday, apes.

It was a hard-fought battle, but despite Microsoft’s earnings pooping on the party, we managed to squeeze a relatively flat day out of one that opened lower than the world’s opinion of SBF. Equities spent the whole day fighting off declines, yet the Dow was the only U.S. index that matters to finish green. Meanwhile, the U.S. Dollar Index, along with treasury yields, just kinda bounced around, finishing pretty flat as well. Fun day.

Let’s get into it.

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Banana Bits

  • The NYSE is now blaming Tuesday morning’s “glitch” on short-sellers, the easiest target in the book
  • Can’t stop, won’t stop. Just shut up and take my money. Tesla smashes financial records as it beats on the top and bottom line last quarter. Maybe there’s a direct correlation between Tesla’s performance and how distracted Musk is by his other ventures??
  • George Washington would never stand for this. Global stock markets are absolutely Treading On Us this year and showing signs of chilling tf out
  • For all you Fed apologists or haters out there, this is the website for you. No association, just great content, like the idea of rate movements working against other forms of QT (spooky)

Macro Monkey Says

Pardon My Inquisition…

Well, that was fast. Not even 4 months ago, all anyone could talk about was how clapped Europe was about to get by a looming recession. The U.S. view was a little less clear, but the vibes were similar.

Now, it’s all sunshine and rainbows. An FT headline even went as far as to say Europe was “set to avoid recession” this year. Strong words for a journalist. Someone must be getting paid to drug us all in our sleep or something to give us this selective, ubiquitous memory loss. Damn George Soros…

Earlier this week, S&P Global dropped their latest figures for a little reading called the PMI, or Purchasing Manager’s Index, for the U.S. and Europe. It’s a measure of broad economic activity with a benchmark of 50.

  • Above 50 = expanding
  • Below 50 = contracting
  • At 50 = chillin’, vibin’, coolin’

On Tuesday, the report, known as the flash composite PMI, really got the bullish juices flowing. It basically serves as a preliminary reading of global manufacturing, sectioned by country and region, prior to each nation’s labor department dropping the official figures…if they have one.

Historically, the correlation between the preliminary from S&P and the official numbers tends to be almost as strong as Jack Harlow’s game. This past month, that reading hit 50.2 for the Eurozone, up from 49.3 in December. Yes, that means expansion and actually registers the first sign of growth in the reading since June ‘22. Maybe even more important in Mr. Market’s eyes, the reading beat consensus estimates of 49.8.

Shoutout to Germany because improvements over there contributed big to the region’s growth figures. As the world’s 4th-largest economy, it did its job. France and Great Britain, on the other hand, did not.

French manufacturing still improved, but not enough to outweigh their other economic woes. Great Britain, on the other hand, was an embarrassment to the continent. British PMI hit its lowest reading in 2 years as the BoE continues to roil the economy with rate hikes (sound familiar?) alongside growing worker strikes and falling demand from consumers.

Now to get to the country that actually matters, the U.S. was way more down bad than Europe overall. PMI rose to 46.6, still a contraction, but less so than December’s 46.2. Slower growth in the U.S. than in Europe is like seeing bigfoot…it doesn’t happen, and even when it does happen, we can just choose not to believe it.

In both the U.S. and Western Europe, services were the primary driver of PMI growth. Representing 2/3 of the U.S.’s economy, this is a solid sign until you consider that much of that increase is entirely attributable to upward-trending labor costs. Meanwhile, goos producers saw a steeper drop off than expected, continuing a JPow-induced downtrend beginning early last year.

And that’s exactly why JPow is between a rock and a rate hike. Experts argue that while falling production from goods makers is not the vibe, rising labor costs give JPow a leg to stand on for future rate hikes.

I’ll say it again for the people in the back. Isn’t this exactly what we want?? A slowdown in production is warranted after the U.S. played above its potential for the past few years, plus it’s a clear sign that rate hikes are working. Meanwhile, the Lulu-tight labor market has held up against rate hikes this whole time, with wages barely budging and certainly not going down. WHY IS MAKING MORE MONEY BAD?!

Okay, I’ll calm down, but there looks to be no reason why JPow couldn’t come out next week and say, “yeah, we’re seeing a mix of results, but things look to be heading in the direction we want. We’re just gonna chill at 4.25-4.5% for now.” Maybe that just makes too much sense, or maybe JPow reads this and needs some ideas…

What's Ripe

MarketAxess Holdings ($MKTX) ↑ 10.25% ↑

  • The silver medalist of returns earned in the S&P 500 during the 2010s decade (#1 was Netflix) was back in old fashion yesterday, ripping up over double-digits by close.
  • MarketAxess, the standard-bearer for bond trading platforms, screamed higher on stellar Q4 numbers. The firm posted $1.76 EPS vs. the $1.73 expected while beating narrowly on the top line as well. Nicely done. *Shakes hands with stock*
  • In case you were in a trauma-induced coma in 2022 (which, to be fair, was totally understandable by March), you know that volatility reigned supreme. Exchanges and trading providers like MarketAxess loved it. They don’t give a damn if you’re bullish, bearish, a liberal arts major, or literally anything; they just want bonds to trade hands.
  • In the worst year for bonds in decades or even centuries, depending on how you measure, trading bonds is like being in California in 1848.

AT&T ($T) ↑ 6.58% ↑

  • Meanwhile, the gold medalist for the most indebted company in the world also spent the day poppin’ bottles yesterday. Shares in AT&T boomed higher on an earnings report that wasn’t exactly good but sure was better than expected.
  • EPS beat, revenue missed, but no one cared. All eyes were on subscriber growth, aka future revenues and, hopefully, future earnings. Churn (a measure of subscriber attrition) fell by a whole basis point, hitting 0.84% vs. 0.85% previously. We’ve said it before, and we’ll say it again; direction matters way more to investors than level.
  • New phone subscribers missed, but overall subscribers beat the hell out of estimates, almost single-handedly leading to those gains. Maybe the firm can pay off that >$250bn of debt…someday.

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What's Rotten

Intuitive Surgical ($ISRG) ↓ 5.50% ↓

  • No amount of doctors could’ve possibly performed a good enough surgery to save Intuitive Surgical’s last quarter.
  • Shares plunged following a weak a** earnings report. EPS missed, clocking in at $1.23 vs. the consensus of $1.26 and down from last year’s figures of $1.30. Revenue was in line, but even an ape knows that’s not gonna be good enough in this economy.

Norfolk Southern ($NSC) ↓ 5.05% ↓

  • I’d love to say, “choo choo, all aboard,” but I don’t think trains can really do that after crashing like this. Norfolk Southern, a family member of North America’s rail oligopoly, slid off the tracks hard yesterday, losing over 5% following earnings.
  • But here, earnings actually beat, except it was for all the wrong reasons. When you’re a rail operator, your position improves as either 1) volume increases or 2) prices of deliveries increase (kinda obvious, but had to say it). The former is far preferred, as that would represent growing market share as long as the reasons for higher volumes aren’t something like major pricing discounts.
  • Unfortunately, NSC took the opposite camp. Revenues and earnings beat estimates to a pulp, riding the wave of higher delivery values. The number one contributor to that was good ol’ coal, rising 28% in segmental sales.
  • But what else happened to coal last year? Oh yeah, the commodity absolutely mooned as energy supply through LNG and petro spooked investors. The gains to their income came almost entirely from market conditions, not really anything the firm did better. But hey, like we always say, a win is a win…right?

Data Peel



Thought Banana


Oh, it’s SO bad. I’m too excited for this one, so no preamble today. Let’s just get into it.

Hindenburg Research is a(n) (in)famous / notorious short reporter, first becoming a popular name after nailing their fraud call on Nikola. The firm wakes up in the morning and chooses to kill the vibe of others in hopes of protecting other people’s money…allegedly.

Short reporting is fine, but Hindenburg will make this announcement similar to your loser friend from high school trying to become a rapper, posting things like “big things coming fr.” Then, they drop a massive short report just in time to (probably) cover their short position while institutional investors get out and the retail gang holds the bag.

Yesterday Hindenburg dropped a report on what it lovingly called “the largest corporate fraud in history.” Today’s victim? The Adani Group, one of India’s largest conglomerates, with ownership of industries ranging from media to concrete companies. It’s a wild one, but CEO Gautam Adani just so happens to be a top-5 richest person in the world, battling it out daily with Mr. Jeff Bezos and Bill Gates for the #3 spot (behind Bernard Arnault at #1 and Elon Musk at #2).

The report published by Hindenburg is a cool 30,000+ words. I doubt even the writers read the whole thing, but to try and sum up some of the major allegations:

1. Accounting fraud

  • Adani Group’s accounting “firm” is so small it doesn’t have a website
  • The sending of $ from onshore private firms to offshore publicly traded ones to manipulate earnings
  • The group has been investigated for fraud 4x now
  • Execs at the company are majority family members
  • An absolute plethora of offshore shell companies

2. Market manipulation

  • Parking insider-owned stock with Ketan Parekh, a convicted market manipulator banned from Indian exchanges
  • Evidence of large, undisclosed related party transactions
  • Evidence of insider trading

3. A whole lot more... Just look how small the scrolly thing on the right gets on the page of the actual report.

To be fair to Hindenburg, they do publicly disclose their short position against the firm, whose 7 publicly traded entities lost nearly $13bn in value yesterday.

Gautam Adani, the patriarch of the firm and the family, owns a certified f*ckload of basically every business unit. That’s a great sign for a normal, non-fraudulent publicly traded company, but given some of the alleged market manipulation tactics used to pump the firm’s share prices, which have mooned in the past 3 years, that might suggest the CEO owns the shares for other reasons.

Hindenburg calls for an 85% downside to fair value on the conglomerate. Looking back at Nikola, shares fell about 90% following Hindenburg’s wrath. Obviously, all of these are just allegations at his point, but when Hindenburg is this confident in something, it usually doesn’t work out for the target. IF you’d like to donate to Gautam’s soon-to-be much-needed GoFundMe, please find that 


The big question: Is the Adani Group and its $115bn founder/owner truly the largest corporate fraud in world history? Is Hindenburg getting a little too big for their bitches? Stay tuned to find out.

Banana Brain Teaser

Yesterday — Who makes it has no need for it. Who buys it has no use for it. Who uses it can neither see nor feel it. What is it?

A coffin.

Today — It’s 100 bananas off the WSO's PE Master Package for the first 15 correct respondents. LFG!

Two boxers are in a match scheduled for 12 rounds. (Pure boxing only. There are no kicking or takedowns). One of the boxers gets knocked out after only six rounds, yet no man throws a punch. How is this possible?

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

Wise investor says

“Patterns of price movement are not random. However, they’re close enough to random…” — Jim Simons

Happy Investing, Patrick & The Daily Peel Team


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