August 14, 2023 | Peel #521

In this issue of the Peel:

• Despite slowing inflation, prices are still accelerating faster than desired by the Federal Reserve. The report showed that producer prices increased 0.3% in July, translating to a 0.8% annual gain. Core PPI grew 2.4% annually.
• UBS Group's shares surged following its acquisition of Credit Suisse. News Corp reported a drop in sales but has strategies leaning into AI. Cano Health's stock dropped significantly due to concerns about its future. Penn Entertainment's deal with ESPN has introduced uncertainties, leading to a decline in its stock price.
• Greta Gerwig's Barbie and Christopher Nolan's Oppenheimer films have been defining the Summer of 2023 with record-breaking earnings.

Market Snapshot

Happy Monday, apes. Hope you had a great weekend.

Welcome to what will be one of the quietest weeks of the year, with little macro data on tap and only a few earnings reports that actually matter. Plus, every trader on the Street is at their Hampton vacation house anyway.

Regardless, equity markets still managed to mostly disappoint on Friday. With the Dow and Russell 2k both gaining (barely) while the Nasdaq and S&P both falling (barely), the vibe of the day was that there was no real vibe at all. Gains in the energy sector were basically the only area of the market with any real thrust, gaining 1.54% in the XLE.

Yields moved slightly higher on the day in the meantime, while the U.S. Dollar inched higher as well. Commodities like oil, natural gas, and other energy trades, for the most part, moved higher, too, largely on the back of the day’s PPI report.

Let’s get into it.

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Banana Bits

• FTX’S SBF gets F’d in the A as a judge revokes his bail because this scumbag is accused of witness tampering
• The horrific forest fires in Hawaii have tragically claimed 93 lives, setting a century-long record for fatalities in a wildfire
• Days after Elon and the Italian government hyped up “The Fight,” Zuckerberg throws cold water (and shade) at the idea

Macro Monkey Says

PPI

You’re paying higher prices, I’m paying higher prices, and it was confirmed on Friday that, yes, poor, sweet corporations are paying higher prices too.

Despite the fact that everyone knows that inflation is slowing, it’s easy to forget prices are still accelerating at a rate faster than JPow and the gang at the Fed would like. But at this point, we’re kinda chillin—for now.

Producer prices increased 0.3% over the month of July, which translated to a 0.8% annual gain. Excluding the annoyingly volatile line items of food and energy, Core PPI grew at a much more rapid 2.4% clip annually.

Source

For the most part, the increase in demand was once again your fault. Final demand services and their 0.5% increase in July drove most of the gains, indicating that wage pressures in the service sector continue to push it.

Final demand foods grew at that same 0.5% clip, but as a smaller portion of the overall calculation, no one was freaking out too much. Just don’t look at your grocery bill.

"... a single line item was responsible for 40% of that 0.5% jump ..."

On the services side, a single line item was responsible for 40% of that 0.5% jump: a 7.6% increase in portfolio management services. So yes, this time, it actually was your fault.

The report came just a tad above expectations for July producer price expectations, but Mr. Market managed to keep a cool head (for once).

Odds for an additional rate hike according to market-weighted odds on interest rate futures, traders are pricing for a 10% probability of a further 25 bps hike. Ironically enough, that is actually down from Friday’s close, as well as being down prior to even before the report. Not sure how that makes sense, but all we can do is sit back, watch, and lose money.

We still have well over a month before the next FOMC Super Bowl, so there’s a lot to stay tuned for. With too-high inflation lasting this long, I’m kinda getting jealous of China’s deflation.

What's Ripe

UBS Group AG (UBS) ↑ 5.61% ↑

• Like the dad that doesn’t want a dog but then loves the pet more than anyone else in the family, UBS shareholders finally seem pleased with their new pet Credit Suisse.
• Following the “mini” banking panic back in March, UBS ended up acquiring Swiss rival (*cough* *cough* archenemy) for $3.2bn and a bag of chips. As part of that deal, the Swiss govt provided up to ~$10bn to backstop potential losses. On Friday, UBS said, “Thanks, but no thanks.”
• It’s a good sign the deal is going well since, well, they don’t need the free money for losses. We’ll take it.

News Corp (NWSA) ↑ 4.58% ↑

• News Corp, one of those like 5 or 6 media companies seeking to control your every thought and action (obviously), had a damn good end to last week following solid earnings at the company.
• Some of the most well-known propaganda published out of News Corp includes Dow Jones (aka, the WSJ, Barron’s, MarketWatch, etc.), Fox Corp, HarperCollins Publishers, and a bunch of random bullsh*t in Australia and the U.K.
• Whole lotta mind control from the scariest-named man in media, Rupert Murdoch. Regardless, his firm dogged it last quarter, reporting a 9% drop in sales to $2.4bn and a $0.01/sh loss for the quarter.
• Likely seeing that garbage but not wanting shares to fall, execs naturally followed the rational path of shouting out random ideas for ways to lean into AI, or at the very least, to not have AI eat their lunch.

What's Rotten

Cano Health (CANO) ↓ 73.00% ↓

• Nope, that’s not a typo above. The stock actually did lose just about three-quarters of its value in the 24 hours between Thursday and Friday’s close.
• Damn. Cano was one of those cracked-out names that went public in mid-2020, just as markets were getting really into the pandemic run-up. Now, investors are concerned about the business’s ability to continue business going forward.
• The firm dropped the dreaded phrase of expressing doubt in their ability to continue as a “going concern.” Even still, shares still have 100% more to fall.

Penn Entertainment (PENN) ↓ 6.41% ↓

• It turns out the deal brokered by business genius, stock trader, and dealmaker of the century Dave Portnoy may not have been the win-win-win we thought it was earlier this week.
• Penn, the company that just dumped Barstool to run into ESPN’s arms, dove on Friday as investors started to digest what is actually in the deal as opposed to basing price targets off Portnoy’s Twitter/X rants.
• Specifically, clauses in the deal, like the ability for EPSN to end the relationship after 3 years if certain metrics aren’t met and others, have ramped up the uncertainty of the win-win-win nature of the deal.
• As long as I can gamble with either Dave or Mickey Mouse, I’m happy. Shareholders, on the other hand, may disagree.

Thought Banana

Oppenbie

That’s what it’s called, right? Oh, oh wait, that’s right…’scuse me I meant Barbenheimer.

Disinflation, aliens, Taylor Swift, and Barbenheimer have outright defined Summer 2023. Now that it’s been just about a month since both films were released, let’s take a look—and no, we’re not talking about it because I just finally saw Oppenheimer yesterday.

"Although the two only existed in the real world together for a short 8 years, they had no idea how aligned they’d eventually be."

Anyway, it’s been records on records for Greta Gerwig’s Barbie and (to a lesser extent) Christopher Nolan’s Oppenheimer. Although the two only existed in the real world together for a short 8 years, they had no idea how aligned they’d eventually be.

To look at some stats (so far);

• Barbie has generated just under $1.2bn at the global box office
• Oppenheimer is at a (still ridiculous) $650mn
• That makes Oppy the 7th-highest-grossing R-rated movie of all time
• Barbie raked in $155mn on opening day domestically and another $182mn globally, while Oppenheimer raked in $80.5mn and $93.7mn
• Barbie is now the highest-grossing film of the year, surpassing Super Marios Bros

Combined, Barbenheimer has raked in a grand total of just about $1.85bn, still a solid $400mn less than 2022’s top-grossing film Avatar 2 at over $2.2bn.

We’ll see if they can catch up (they won’t), but one has a shot at closing the gap on 2022’s $1.5bn Top Gun: Maverick. The other one is a 3-hour, age-restricted biopic about a physicist helping put an end to World War 2. Exciting stuff!

"... one has a shot at closing the gap on 2022’s $1.5bn Top Gun: Maverick. The other one is a 3-hour, age-restricted biopic ..."

Can confirm Oppenheimer was, in fact, exciting, but to be fair, I could’ve done without the last 30-45 mins. Barbie will be available to stream on HBO as soon as Labor Day weekend, according to estimates, and although Oppenheimer will hop on Peacock by November, you gotta see that one in IMAX.

Regardless, looks like the real winners will be, at least temporarily, the meme stock king AMC and other theater-related names. You buying?

The big question: Which one did you like more, Barbie or Oppenheimer? Does Napoleon or any other movies set to be released later this year have a chance at catching up?

Banana Brain Teaser

Friday —

Without a bridle, or a saddle,
across a thing I ride a-straddle.

And those I ride, by help of me,
though almost blind, are made to see.

What am I?

Eyeglasses.

Today — The stoic rabbit lives under the sea. Lamented bears took honey from a bee. Let me now ask you: Can you find, in this little rhyming riddle, sea creatures three?

Shoot us your guesses at [email protected].

Wise Investor Says

“There are three ways to make a living in this business: be first, be smarter, or cheat.” — John Tuld, Margin Call

How would you rate today’s Peel?

All the bananas

Decent

Rotten AF

Happy Investing,

Patrick & The Daily Peel Team

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