July 7, 2023 | Peel #496

In this issue of the Peel:

• The labor market continues to tighten, with private employers adding 497,000 jobs in June, predominantly in leisure and hospitality roles, driving Wall Street to anticipate further rate hikes.
• Market performance showed mixed results: Sweetgreen’s shares surged by nearly 20% following an optimistic assessment by Bank of America analysts, whereas Wayfair took a hit as key executives dumped a significant number of shares. Additionally, JetBlue’s shares dropped following the cessation of its cooperation with American Airlines.
• The fast-growing sport, pickleball is gaining significant attention, with related stocks like Escalade Incorporated and Lifetime Group Holdings potentially benefiting. Major League Pickleball is set to capitalize on this popularity, with a recent change in leadership aiming to secure new licensing, advertising, and sponsorship deals.

Market Snapshot

Happy Friday, apes.

Or maybe it won’t be, especially if yesterday’s performance is any indicator. Good morning, by the way.

Equity markets blundered across the board yesterday as all hope was lost amid the labor market being way too good. Yes, that’s actually what happened, as you’ll see below, but markets sold off like it was their job yesterday as the fear of JPow was struck back into investors’ hearts.

In the meantime, the 2-year treasury managed to cross into 5.1% territory—only briefly—to set a record high not seen since the GFC. With that, the yield curve became even more unbelievably inverted, ramping up talks of a (allegedly) looming recession. Fun times on Wall Street.

Let’s get into it.

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Banana Bits

• More than 30mn users in 24hrs is a pretty decent-ish start, I guess; Meta’s Threads app is already on fire, and Twitter is, well, as you might imagine they would be
• Everyone is looking at today’s jobs report, and no wonder because it’s looking hot
• 2-year treasury yields are going gangbusters and have hit a 16-year high amid expectations for further rate hikes
• NYC’s recent law effectively mandating a $17.96/hr minimum wage (how tf do you get that number?) is already getting the gang fired up

Macro Monkey Says

The Previews

Half the time when you actually go outside, get in your car, and drive all the way to a movie theater, you end up wasting that $37.50 on tickets and popcorn only to learn the previews were better than the actual movie. On Wall Street, they’re actually hoping that’s the case a little later today.

Instead of the new, overrated Marvel movie of the month, the only film worth watching this week for investors is today’s jobs report.

We don’t have the numbers yet (obviously, look at the timestamp), but Thursday’s preview into the June job’s data from the ADP Employment Report was like snorting coke off of a table made of xanny after popping a few pills of molly…just all around WAY too much.

Don’t do drugs, apes, and don’t get a job either because JPow will just try to take it from you. As we know, Powell has been beefing with a heavily tightened labor market since he and his pals in the Capitol dumped trillions on us.

"... expanding the unemployment rate ever so slightly without crashing this 787 has become the new game."

Now, as part of Operation Soft landing, expanding the unemployment rate ever so slightly without crashing this 787 has become the new game. So, knowing this, when Wall Street yesterday learned that, according to ADP…

• Private employers added 497,000 jobs in June
• Leisure and Hospitality roles drove 232,000 of those gains, along with other consumer-facing sectors leading the way
• Us losers in “financial activities” (that’s one way to describe it) lost 16,000 brothers and sisters back to the civilian world
• Companies with under 250 employees were responsible for almost all the gains

"... seeing the gains driven by the smaller players out there is more unusual."

Interesting. The gains seen across consumer jobs, especially those surrounding vacation, travel, and whatever else counts as “leisure and hospitality,” makes sense rolling into this time of year, but seeing the gains driven by the smaller players out there is more unusual.

We’ve been hearing about layoffs at large companies all year. This was mostly front-loaded in the winter and early spring, but clearly, the cuts continue to roll at household name firms. Mom & pop, however, have been doing fine.

Obviously, this is all preliminary for the data that really matters, set to drop later at 8:30 (or, as always, several hours ago for most of you after a thirsty Thursday).

Still, markets wasted no time in adjusting their rate hike expectations to >91% on the news. We’ve still got plenty of time for anyone and everyone to f*ck sh*t up before Powell and the FOMC decide our interest rate future again. Might wanna stay tuned…

What's Ripe

Sweetgreen (SG) ↑ 15.49% ↑

• I bet you wouldn’t have guessed. Think, on a day as blood red as yesterday, the dominant name of the day toppling the behemoth that is the S&P 500 was some kind of vegan / soy fast food place, huh?
• Nevertheless, it’s true. Sweetgreen boomed nearly 20% during the Thursday session on news of Bank of America analysts getting BeyondTM - Bullish on this veggie name.
• Citing automation and other cost reduction/scale-improving initiatives, BofA analyst Katherine Griffin juiced her price target to $17/sh (when it was trading near $13), representing still another ~13% upside from yesterday’s close.

Microsoft (MSFT) ↑ 0.92% ↑

• Yeah, okay, it’s a less than 1% move, but dammit, it was a tough day yesterday, okay?
• Anyway, most of the time, when a company that makes up ~6.76% of the S&P rises, it’s a good day for the market. Yesterday was not one of those days, as Morgan Stanley hyped up the $2.54tn name but couldn’t do the same for the overall market.
• The re-ratings and analyst opinions really seemed to drive the upside on the otherwise dreary almost-Friday we just had. MS analysts called the Big Boy of Bellevue a “Top Pick” for large-cap software, AI, and other bullsh*t investors like the sound of.

What's Rotten

Wayfair (W) ↓ 9.93% ↓

• For a stock with a W ticker, share sure took a fat L yesterday…and it was completely their own fault.
• When a company’s Chief 1) Commercial, 2) Operating, Technology, and Financial Officers all dump shares on the same day, it’s hard to be worried. Insider selling isn’t ever a positive sign, but the old saying of “many reasons to sell, only one reason to buy” generally calms nerves. Not yesterday.
• The market’s overly depressing mood likely spring-boarded the move, but all of those C-Suite execs dumped a combined ~$5.5mn on Thursday, most of which had just become available to sell per SEC rules on insider selling.
• Not exactly the locker room speech execs are supposed to be giving. Something tells me this will be coordinated a little better going forward.

JetBlue (JBLU) ↓ 7.18% ↓

• America’s 7th favorite airline just broke up with America’s 9th favorite airline, and somehow, they were the ones kicked out of the cool kids’ table.
• As part of their ongoing merger with the nightmare-inducing Spirit Airlines, JetBlue has severed ties with American Airlines in their (formerly) deeply intimate relationship up in the northeast corridor.
• Arguably, it was even romantic, but it is no more. JetBlue and American would share routes, passengers, and even revenue to better coordinate schedules. It was more of a fling than an engagement, however, as the program was only approved by the Federal Government under Donnie T’s administration.
• But, the DOJ killed the vibe and sued the sh*t out of American and JetBlue, arguing the deal is anti-competitive and would be even more so with a combined JetBlue-Spirit.

Thought Banana

Pickle Rick Goes Pro

Fine, let’s talk about it. As much as we’ve avoided all this nonsense around pickleball, I guess it’s about time we talked about the fastest-growing sport in the United States.

Pickleball is a sport that looks and is played about as…uhh…interestingly, let’s say…as it sounds. It has nothing whatsoever to do with pickles but does involve balls (and, according to some, lack thereof) as the sport is played much like a full-sized version of ping pong.

"And now, just about two years later, the search term 'pickleball' has absolutely exploded ..."

In fact, the sport is growing so fast that there’s even a professional league for it now. Major League Pickleball (creative) was formed in 2021 by a man named Steve Kuhn out of Texas.

And now, just about two years later, the search term “pickleball” has absolutely exploded, giving just a tad bit of insight into the sport’s rise to stardom. And don’t worry, I already know what you’re about to Google, and yes, you can get exposure to the game, specifically in:

• Escalade Incorporated (ESCA): The largest manufacturer of pickleball equipment in the United States
• Lifetime Group Holdings (LTH): The largest owner and operator of pickleball courts in the United States

Neither one are exactly a direct play, but you get the point. Recently, attention really picked up when it was reported that UBS analysts estimated pickleball injuries could rack up $377mn in injury-related healthcare costs this year alone. Not sure if that says more about the injury rate in pickleball or the cost of our healthcare, but…

Back to the sporting landscape of the sport, Major League Pickleball recently saw major shake-ups in their leadership. Now that there are over 36mn people pickleball players in the US as of data recorded in 2022 (over 10% of the population), the organization felt that a pair of fresh, new executives in the form of a recently brought on CEO and COO.

"... needless to say, building and, most of all, maintaining attention in this day and age is a rare talent."

Basically, the fresh blood was brought in to jump all over this major uptick in attention that has afforded the sport. New licensing, advertising, sponsorship deals, and much more are all reportedly top of mind, but needless to say, building and, most of all, maintaining attention in this day and age is a rare talent.

But then again, have you ever watched/played pickleball? Idk man, everyone should do what they want, but was there something wrong with tennis or, hell, even like basketball?

Banana Brain Teaser

Yesterday —

Look at the letters and figure out what letter replaces the blank.

• ACD
• BEG
• BKM
• COR
• DDH
• LN _

Answer: The answer is Z. The numeric value of the first two letters adds up to the numeric value of the last letter.

Today — Some words can be used as both nouns and adjectives. You will be given a definition, and that definition can be replaced by a single word that is used twice, once as an adjective, the other as a noun.

For example: "a 12 inch podiatrist specialty" is a "foot foot".

Given the following four definitions, what are the corresponding doublets?

1. an underweight source of illumination
2. an ordinary prairie
3. a quick period of not eating
4. a cruel average

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

Wise Investor Says

“Time is your friend; impulse is your enemy.” — John Bogle

Happy Investing,

Patrick & The Daily Peel Team

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