June 27, 2023 | Peel #489

Silver banana goes to...

In this issue of the Peel:

• A new bull market has been confirmed, with traders making bullish bets as indicated by call option buying activity.
• PacWest and Lucid are seeing positive movements, while Carnival Corp is struggling. Despite a promising earnings report, Carnival's shares dropped, whereas Lucid's shares got a boost from a deal with Aston Martin.
• Baseball viewership is increasing due to new rule changes that speed up the game. The changes have cut down the duration of games, improving their popularity and potentially reviving baseball as America's fave pastime.

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Macro Monkey Says

Running Ahead of Recession

2022 seems to have been the year that Gen Z discovered back pain and portfolio pain. We’d heard rumors of both for years but never actually thought either one was possible. As usual, we were wrong.

In fact, the bear market that led to that portfolio pain last year was historical—not so much in the severity of that pain but in its longevity.

That bear market of the past year-and-a-half or so was the longest on record since at least 1973. Now, the return of a bull market has been confirmed, and it looks like traders are hopping on board with big dollars.

"Bullish bets measured by call option buying activity are hitting multi-year highs."

Bullish bets measured by call option buying activity are hitting multi-year highs. That implies traders are betting volatility going forward will have a positive bias, meaning Wall Street could be putting money where its mouth is in seeing a higher likelihood of upside this year.

FOMO appears to be making a full-steam-ahead return as call volume piles up. Leading this recent trend, of course, are those tickers leading the AI and chips trends markets have been milking all year.

"Markets tend to be leading indicators for the overall economy, but never before have returns completely front ran a recession."

Along with the call option buying, positioning by portfolio managers has been trending towards higher equity and other risk-on exposure, giving support to a burgeoning bull market.

Markets tend to be leading indicators for the overall economy, but never before have returns completely front ran a recession. If we do end up seeing a recession later this year or in the first half of next, that will be the first time in the U.S. that we went full cycle—from bull to bear, back to bull market—before the recession even starts.

Or, maybe markets are thinking this whole “soft recession” thing actually has some possible chance of occurring.

Of course, Wall Street could be wrong. If there’s one thing the bunch of former D3 athletes and Ivy League douchebags running trading shops bring to the table, it’s an overly optimistic view of their own future. But this time, maybe let’s hope that they’re more right than wrong (for once).

What's Ripe

PacWest (PACW) ↑ 4.01% ↑

• Regional bank shareholders tend to be of the more boring, “don’t lose all my money” type of mindset (strange, I know), but that’s about as far as it gets from the year they’ve had so far.
• Nevertheless, despite Treasury Secretary Janet “JYell” Yellen’s recent comments indicating more mergers could be on deck, things were only looking up and up for PacWest yesterday.
• Yesterday, the party centered on the $3.5bn sale of a loan portfolio to asset manager Ares. Given the big fear has been legitimate bankruptcy this year, trading debt for cash is pretty much the dream scenario for PacWest owners.

Lucid (LCID) ↑ 1.46% ↑

• A $225mn check sounds pretty good to just about anyone, but only Lucid shareholders were the lucky winners of that payout yesterday (that we know of).
• That’s the minimum amount Aston Martin has agreed to spend in relation to their new deal with EV maker Lucid Group announced Monday. James Bond’s preferred auto manufacturer is coughing up $232mn in total to Lucid through cash and equity, giving shares a much-needed boost.
• On this news, shares are back to a roughly flat return for the year so far. That doesn’t help much, given they remain more than 50% below their late January peak, however.

What's Rotten

Carnival Corp (CCL) ↓ 7.59% ↓

• Cruise operator Carnival on Monday posted a record-setting, expectation-beating earnings report, more than doubling revenue annually. Naturally, traders sent shares down the toilet.
• Doubling revenue, hitting record-setting deposit levels, and posting a loss of $0.31/sh vs. expectations for $0.34/sh is a pretty good quarterly stat line, all things considered.
• No one cared. The lack of profitability seen for going on 3 years now seems to be getting to even the most loyal investors. Management announced they expect to return to actually creating some kind of economic value in the latter half of this fiscal year.
• Clearly, that wasn’t good enough for Mr. Market. He’s a high-maintenance partner, but we’ll see if he can get over this one.

Thought Banana

Bulls Are Back

Believe it or not, we’ve got some juicy news on one of America’s great national points of pride you probably pay no attention to.

Baseball: it’s America’s game. We know, we love it, but no one watches it. Or, at least, no one was watching it.

"Those game-shortening rule changes have allegedly taken off an average of 31 mins per game as well so far this year."

So far in 2023, baseball viewership, both at the ballpark and parked on your couch, has risen by about 7% on average in televised games through mid-May. Much of this can be chalked up to recent rule changes that (thankfully) speed up this very slow-paced, non-Gen-Z game.

Those game-shortening rule changes have allegedly taken off an average of 31 mins per game as well so far this year. For a 4-5hr matchup that ends 2-1 on 5 combined hits, taking a half-hour might not seem like much on an individual viewer basis, but in the aggregate, that makes a world of difference.

For a sport in desperate need of a revamp, it’s a huge blessing, both in terms of dollars and cultural relevancy.

Of course, not all these gains are felt equally across the diamond—more popular teams like the Yankees and Dodgers have seen viewership for their home games up as much as almost 10%.

"... maybe just get steroids involved a little again ..."

While it’s still got a long way to go if we want to get back to the glory days of peak baseball back in the early-mid 2000s, maybe just get steroids involved a little again—everyone just wants to see guys hit the ball deep anyway.

The big question: Is baseball back as America’s national pastime?

Banana Brain Teaser

Yesterday — The owner of Senior Pete's Pizza decided to celebrate his birthday by giving away free pizza to anyone who can solve his puzzle:

If a pizza's radius is defined as "z" and it's depth defined "a", then what is that pizza's volume?

Can you answer Pete's puzzle correctly?

Volume = (pi) (radius)^2 (depth)
V=pi(r)(r)(d)
So, pizza volume = (pi)(z^2)(a) = pizza

Today — Mo was nine years old when he was taken from his home to a soft, dark place. A couple hours later, a fairy came and took him away, and he was never seen again. What happened?

Shoot us your guesses at [email protected] with the subject line “Banana Brain Teaser”.

Wise Investor Says

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” — Sir John Templeton

Happy Investing,

Patrick & The Daily Peel Team

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