Bottoms Up | The Daily Peel | 9/28/22

Market Snapshot

After a morning bounce, major indices were mostly flat at the close. They’re down about 20-30% YTD.

So…is this the bottom? Most traders aren’t making that call since a hell of a lot could still go wrong from here.

Home price data came in and showed decelerating growth, marking the first MoM decline since the start of 2019. We could be looking at 7% mortgages here soon.

At the close, the Dow lost 0.43%, the Nasdaq ticked up 0.25%, and the S&P dropped 0.21%.

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Let’s get into it.

Monkey Meme of the Day

Source

Banana Bits

China’s not ready to see the yuan go the way of the pound and is taking steps to buttress its strength
Goldman is in hot water after documents surfaced that alleged an “uncorrected culture of sexual assault and harrassment”
Fake meat sales aren’t providing the sizzle investors hoped for
NASA successfully crashed a spacecraft into an asteroid in a planetary defense test

Banana Brain Teaser

Yesterday — There is a barrel with no lid and some wine in it. “This barrel of wine is more than half full,” says the woman. “No, it's not,” says the man. “It’s less than half full.” Without any measuring implements and without removing any wine from the barrel, how can they easily determine who is correct?

Tilt the barrel until the wine barely touches the lip of the barrel. If the bottom of the barrel is visible, then it is less than half full. If the barrel bottom is still completely covered by the wine, then it is more than half full.

Today — It’s 150 bananas off our VC Course for the first 15 correct respondents. LFG!

We traveled the sea far and wide. At one time, two of my sailors were standing on opposite sides of the ship. One was looking west and the other one east. And at the same time, they could see each other clearly. How can that be possible?

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

Macro Monkey Says

Vacation or Washing Machine? — When you’re locked inside for months, it would make sense that you’d spend extra cash on stuff instead of experiences.

That’s exactly what people did in 2020 and ‘21 and was a big reason why the supply chain got so f*cked up last year.

Producers weren’t prepared for that kind of demand deluge since there’s usually a better balance in spending between goods and services.

With most of the world being open in 2022, the pendulum swung back. People had already upgraded their washing machines and remodeled their kitchens and were ready to blow some cash on vacation.

Now many are starting to ask where that balance goes from here.

Durable goods (products lasting at least three years) orders dropped again in August, and that’s not necessarily a bad thing—a cooling of demand should help ease inflation and allow manufacturers to address their still-huge order backlogs.

But as the Fed works against manufacturing demand, it becomes more uncertain when we’ll return to a more predictable environment in that sector.

The last two years have been an absolute seesaw, and it might still be a while before we get a sense of the new normal in the global supply chain.

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What's Ripe

DICK’s Sporting Goods ($DKS) — While tech companies are sending employees to the curb, DICK’s and other retailers are ramping up hiring for the holidays.

Since beating Q2 estimates a month ago, $DKS has been mostly flat, and investors piled in Tuesday in hopes that the huge seasonal hiring means the company has big plans for the holiday season.

$DKS shot up 8.15% on the day.

WTI Crude — Crude kicked off 2022 at $76/bbl.

On Tuesday, it closed at about $76/bbl. In between, it reached a high of $123/bbl.

To the delight of American drivers, the price has been steadily sinking since the middle of summer. A mix of tepid growth, a brawny dollar, and global interest rate hikes have put pressure on it since then.

Some traders think oil prices could spike again if Russian production grinds to a halt, but for now, it’s back where it started the year.

Crude gained 2.33% by the end of the day.

What's Rotten

Lumber (LBS) — Tech stocks haven’t been alone in their C-19 run-up and collapse. Lumber has followed a similar pattern.

When everyone looked at their four walls all day during Peak Pandemic, they started remodeling like crazy, sending wood prices soaring.

Lumberyard owners are feeling the pinch, but the rest of us will enjoy deflationary tailwinds that hopefully result in more and cheaper homes being built.

Lumber is down 15% in the last month and 63% YTD.

Bitcoin (BTC) — Since plummeting to the $20k level in June, BTC has mostly held steady.

It hasn’t been the inflation protection that its evangelists had hoped for. Instead, it’s mirrored the movement of stocks, more or less.

Maximalists will tell you it’s going to $1 million, and the likes of Charlie Munger will say it’s going to zero.

For now, it’s struggling to hold onto $20k.

BTC is down 60% YTD.

Thought Banana

Amazon Gets the W — It’s no secret that sports are king of live TV, and it’s even less of a secret that most of TV is moving to streaming.

So, Amazon’s recent debut of the NFL’s Thursday Night Football on Prime shouldn’t have been much of a surprise. But the ratings blew expectations out of the water, registering 15 million viewers.

It’s even better than it seems. The audience skewed younger than the average audience for NFL games so far this season, which has advertisers drooling for several reasons:

Amazon can target ads in a way that TV broadcasters can’t, and buying something based on a commercial is just a click away, unlike with TV
Advertisers prefer a younger audience since they buy more discretionary items and can be loyal to a brand for decades
The NFL has been trying to reach younger people for decades, as most of its audience skews older

The game we’re talking about was Chargers vs. Chiefs, which is about as marquee of a matchup as you’ll get. Herbie and Mahomes lit it up in a close game that had all the ingredients of a great TV product.

As we come out of that game, there are several key questions:

Can Prime continue to draw these kinds of audiences when the matchups aren’t as good?
Will advertisers pay a premium to target specific audiences and have their products available just a few clicks away on Amazon?
Could this success propel Amazon or a different behemoth like Apple to go after the NBA once its TV deal expires in 2025?

It was only Week 1, but still a big W for Bezos & Co.

Wise Investor Says

“Take a simple idea and take it seriously.” — Charlie Munger

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