From Hoenig to Hamlet | The Daily Peel | 4/12/2023

Apr 12, 2023 | Peel #438

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Market Snapshot

Happy Wednesday, apes.

Queue the Jeopardy music, start twiddling your thumbs and say a quick prayer that we get some action sometime soon.

Without major news like pandemics and massive bank failures to entertain us, markets seem to have gotten a little bored lately and sure have made us a lot bored. Thankfully, today at 8:30 am, we’ll get the CPI report to egg markets on to do something crazy/stupid, and if that’s not good enough, Friday’s bank earnings should do the trick.

Yesterday, US equities were so boring the S&P actually moved 0.00%, or about 17 bps lower. Stocks broadly rose after the early morning in yesterday’s session, only to come crashing back into a flat day around 3 pm. Exciting stuff!

Even the hero of all of our undiagnosed ADHD cases, the 2-year treasury yield, mellowed out big time yesterday, apparently remembering to take its meds. Yields on this tenor remain hovering above 4% as the rest of the maturities out there follow suit. The dollar was the only thing to keep us from gouging our eyes out, losing value throughout Tuesday’s trade against a basket of other currencies.

Let’s get into it.

There is no more looking away from the AI and robotics that are driving the future. In fact, food tech is already being revolutionized.

Enter Blendid. The team of seasoned Silicon Valley veterans have built a state of the art, fully robotic 5-star chef that makes sure you'll be able to get whatever savory food your heart desires. More importantly, the automated kiosks allow for 24 hour availability and affordable prices!

We all know far too well how expensive food has gotten, as well as the compounding issue of labor shortages that operators are facing. Well, the geniuses at Blendid have decided to combat this issue and bring you gourmet food from an entirely automated chef while keeping the costs low and the food delicious.

Not only that, but when we say whatever you want, we mean WHATEVER YOU WANT as Blendid’s tireless machines churn out entirely customizable, fresh food, 24/7. Time is running out to invest in the future. Just one week left until Blendid closes this campaign!

Banana Bits

• Consumers in China might not be as downbad as we thought, according to BofA, as new data suggests inflation has reached an 18-month low and consumer spending is holding up far better than expected (lucky bastards)
• EY’s audit and consulting divisions have been seeking a divorce, but thanks to the kids, it looks like the two partners will stay together
• Kids, don’t try this at home. Leaking national intelligence documents related to supporting Ukrainian war efforts isn’t cool.
• It’s not often that +90 years old men get to be trendsetting, but in our world, anything Buffett buys immediately becomes a hit, even something as esoteric as Japanese trading houses

Macro Monkey Says

He Said, He Said

In the Soviet Union, Aldus Huxley’s Brave New World, and of course, the Federal Reserve, dissenting from the majority opinion isn’t exactly a normal thing to do.

See, the Fed, like Mustafa Mond and Stalin, like to keep this air of “we’re so smart that everyone agrees we’re so smart and no one disagrees with our decisions. Unlike the other two, FOMC legend Thomas Hoenig broke up that party real quick.

Back in the days of the GFC, Hoenig was the OG economist to call the Fed’s rate policy “too low for too long” in the post-financial meltdown world. His dissents took the Fed out of the world of utopian order and into a place where debate actually occurred.

Since then, publicly recorded dissents by FOMC members are seen as much less boat-rocking than they once were. Today, it’s gotten to the point where open, but not yet what we could exactly call “explicit,” beef occurs between Fed officials.

Usually, it’s Boston and New York that have major beef, but this time, it’s NYC and Chicago. Fed Presidents John Williams (NY) and Austan Goolsbee (Chi-town) have issued seemingly at-odds statements in recent days with regard to May’s FOMC meeting. To hike or not to hike remains the question, and here, economists are about as certain as Hamlet was when he had a similar question.

Now, this wouldn’t be all too weird, except for the fact that the FOMC, and especially the committee’s voting members as both of the above name-drops are, is basically an economist’s version of a frat, but with fewer kegs and more shirts. With arguably its most powerful policy tool being the confidence (or lack thereof) the Fed can institute in markets and the public, the Central Bank has historically sought to show unity in its decision-making to maximally reduce financial FUD.

Not anymore. Goolsbee this week seemed to try and coin his own term of “prudence and patience” for the Fed’s next rate decision, but in Fedspeak, that roughly translates to “please oh god Daddy JPow stop hiking my rates.” Meanwhile, Williams called a 25-bps hike “a good starting point” for the committee’s policy debates. Doesn’t get much more heated than that at the nation’s top economic board.

At the same time, non-voting member Susan Collins, President of the Boston Fed, broke tradition by apparently siding with Williams of NYC. In her remarks, Collins stated that “modest additional policy tightening” is her current base case for the rest of 2023.

I don’t know if FOMC members disagreeing is weirder or not than people from Boston and NYC agreeing, but we can confirm that neither one is exactly making businesses, consumers, markets, and the overlords of the simulation we have to live in feel more confident these days.

According to the market, however, JPow and the gang have a two-thirds chance of raising rates by 25 bps on May 3rd. Powell himself has already come out and said that the bank failure of last month could basically be equivalent to a 25-bps hike. I hope someone is checking his math on that one, but as long as it means my stocks might start to go up again, I’ll take it.

Fortunately, you don’t have to just “think” about what the Fed is gonna do; you can degenerately gamble on it too. Good luck.

What's Ripe

WW International ($WW) ↑ 58.98% ↑

• Usually, my understanding of weight loss is that you’re essentially trying to go down. Apparently, shares in market leader Weight Watchers International did not get that memo.
• Goldman Sachs gets the assist on this one. Analysts at GS came out with a rating upgrade, moving expectations from Neutral to Buy and saying shares had the potential to triple as the company enters the obesity drug market.
• I mean, tripling seems like a lot, but 2-3 more days like yesterday, and we’re golden. Best of luck, team.

CarMax ($KMX) ↑ 9.64% ↑

• Earnings szn hasn’t exactly started yet, although it will later this week when the likes of JP Morgan, Wells, Citi, BlackRock, PNC, and more drop on Friday, but CarMax is coming out swinging early and getting us off to a hot start.
• The used car retailer took off on Tuesday following a phenomenal quarterly report in which the firm smashed EPS estimates while just barely missing on revenue.
• Expectations were for EPS of $0.24/ on $6.05bn in top line, while the firm was actually able to do more with less, pulling in a huge $0.44/sh on sales of just $5.72bn. In this economy, the ability to do more with less goes one hell of a long way, and CarMax’s share price move ain’t gonna disagree.

What's Rotten

Tilray ($TLRY) ↓ 8.03% ↓

• Go grab your lighter and get ready to spark. I’m not sure if we’re celebrating or drowning out the pain, but we definitely need to smoke up.
• Tilray should be able to help out with that, especially once yesterday’s announced acquisition of fellow Canadian pot maker Hexo is completed. The deal that’s been building up for years now as Hexo and Tilray have gotten closer and close in terms of their production finally consummated the relationship.
• And shares plummeted for both companies. The deal gives Hexo an implied value of ~$1.25/sh through the 0.4352 shares of $TLRY they will receive for each Hexo share they currently own.
• In the immediate aftermath, investors on both sides of the deal shunned the acquisition. But, analysts on the Street say that while Canadian cannabis is still a weedy industry, consolidation like this that leads to cost cuts should be a step in the right direction.

Moderna ($MRNA) ↓ 3.06% ↓

• Like an athlete who only plays well under pressure, Moderna might just be only able to make good vaccines under extreme “save the world” kind of pressure.
• The vax maker that legitimately everyone and their mother now knows fell short of reporting “early success” in an announced late-stage critical trial. That sounds an awful lot like applying to Harvard and not getting in on early acceptance…like it sucks, but it sure ain’t over yet.
• Moreover, CNBC reports the company stated during its presentations that there essentially weren’t enough cases of the needed diseases like influenza among the groups in the experiment. Fewer people getting sick kinda sounds like a good thing to me, but I’m not a doctor (in case that wasn’t obvious).

Thought Banana

BTC is Back

Much like Eminem, digital assets like BTC have had their fair share of experiences being “chewed up, and spit out, and booed off stage.” But they kept grinding.

Everyone who had BTC and other cryptos as the best-performing asset class of Q1’23, please put a hand up. Now kindly pat yourselves on the back because, I mean, what a call. Congrats, apes.

Believe it or not, but the price of the industry’s primary token is back above the key $30k level at the time of writing (9:57 pm ET). The thing is up goddamn 80% this year, and as BTC and other associated words like “blockchain” and “NFT” seem to have quickly exited the public’s consciousness, almost no one saw that one coming.

But it’s true (would we ever lie to you??). The rest of the digital asset market isn’t too shabby either, surpassing the $1tn market cap mark once again this year and currently flirting with ~$1.3tn, roughly equivalent in size to Google.

So, what gives? Since C-19 showed up, these things have traded like tech stocks and followed the liquidity vibe to glory as well as damn near the grave. Sure, mega-cap tech as represented by the $MGK ETF (no, not for Machine Gun Kelly, please stop) along with Cathie Wood’s $ARKK ETF of pure speculation have ripped 18% and 28%, respectively, this year, the drastic outperformance of BTC is a little fishy…

Honestly, this might be bold, but the thing’s been trading somewhat similarly to gold. Now, the correlation is far from 1-to-1, of course, but like we always say, it’s about the direction more so than the level.

And in terms of trading peer groups, assets like BTC and other digital currencies might actually be taking the early, baby steps to actually becoming digital gold. It’s a bittersweet idea as something so historic would be really f*cking cool to live through, but then again, that means every a**hole with laser eyes and “have fun staying poor” quotes on their Twitter pages will be proved right…eventually.

The question, as always, is whether or not this trend can be maintained. I definitely didn’t even see it starting, so I’ll let you take care of losing your money. Place your bets now.

The big question: Is BTC actually back? How long can digital assets like this continue to outperform just about every other asset class?

Banana Brain Teaser

Yesterday — What belongs to you, but others use it more than you do?

Your name.

Today — It’s 100 bananas off the PE Master Package for the first 3 correct respondents. LFG!

James ordered a fishing rod, priced at $3.56. Unfortunately, James is an Eskimo who lives in a very remote part of Greenland and the import rules there forbid any package longer than 4 feet to be imported. The fishing rod was 4 feet and 1 inch, just a little too long, so how can the fishing rod be mailed to James without breaking the rules? Ideally, James would like the fishing rod to arrive in one piece.

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

Wise Investor Says

“Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.” — Nassim Taleb

Happy Investing,

Patrick & The Daily Peel Team

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