Inflation’s Down, but Don’t Get Too Comfy Yet | The Daily Peel | 11/15/22

Nov 15, 2022 | Peel #338

Market Snapshot

Fed Governor Christopher Waller was the buzzkill over the weekend, noting that rates will continue getting cranked higher for the foreseeable future. Stocks saw modest losses as investors weighed the outlook.

Cryptos rallied after last week’s bloodbath but are still having a horrendous year.

Banana Bits

Gen-Z'ers in their early 20s are sitting on the sidelines of the labor market
Daddy Bezos is planning to give away his $124bn pile to climate change and political causes in his lifetime
Binance chief CZ is launching a “crypto recovery fund” in an effort to head off mass contagion in the industry
Xi and Biden are warming up to each other after making several agreements at the G20 summit in Bali

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Macro Monkey Says

Queen Cathie’s Ready for a Roaring 2020s

A tweetstorm from beleaguered ARK founder Cathie Wood that suggested we could be headed for a Gatsby-style Roaring Twenties had Twitter buzzing over the weekend.

The crux of her thesis is that slowing inflation will reignite investment in revolutionary tech that can propel the U.S. into a broad-based growth period.

Not everyone’s inhaling her hopium.

Cathie’s been railing on the Fed for hiking rates too quickly, which has pummeled the growth stocks that made her famous
She’s maintained that natural deflationary forces—such as the proliferation of AI and other disruptions—will be enough to squelch inflation
Inflation was raging after WW1/Spanish Flu in 1920, but surprisingly fell off a cliff in 1921, which ignited an economic explosion
On the other hand, if the Fed continues cranking rates higher, she thinks the economy could spiral into a depression

Cathie’s never been one to hold back on hot takes, so this shouldn’t come as a surprise. But predicting either a historic expansion or implosion of the economy simply based on the Fed’s moves feels excessive.

We have to keep in mind that she’s talking about her book a bit here, also. Tapping the brakes on rate hikes would be great for growth stocks and, therefore, ARK, whose flagship fund is down 60% on the year.

She’s not wrong that JPow and his cronies have to keep deflationary forces in mind, but the Fed has kept a united front in prioritizing halting inflation over short-term economic health. The sudden pivot she’s suggesting seems pretty far-fetched.

Meme of the day

Source

What's Ripe

AMC Entertainment ($AMC) ↑ 1.94% ↑

The new Black Panther movie notched a record for the largest November release in the chain’s history
The blowout numbers show that the right movie can still get butts in seats despite rabid streaming competition

Universal Music Group ($UMGNF) ↑ 4.28% ↑

The Dutch parent of high-profile labels like Def Jam, Capitol Records, and Abbey Road Studios has had one hell of a month
Higher Apple Music subscription prices mean more licensing revenue, which has helped shares rise nearly 27% in the past 30 days

What's Rotten

Coinbase ($COIN) ↓ 7.38% ↓

CEO Brian Armstrong
this past weekend and portrayed his company as the good guys of crypto
A deluge of regulation is expected across the cryptoverse in the coming months, and investors are jittery about the implications for earnings

Softbank ($SFTBY) ↓ 10.74% ↓

Masa took another major L in the FTX disaster, with reports saying the loss could total $100mn
If that wasn’t bad enough, its Vision Fund gave up $7.2 billion in the quarter, putting it at a net loss since its inception

Data Peel

Source

Thought Banana

Gen Z’s Just Vibin’

Teens were absolutely raking it in last summer.

With the labor market at peak tautness, Zoomers holding down part-time gigs and summer jobs enjoyed bigger paydays than their predecessors. Many older siblings lamented the pennies they made lifeguarding compared to the $20/hr that has become the norm for many entry-level jobs.

But despite the big wage increases, adolescents are dipping out of the labor force at a huge clip.

The labor force participation rate for 20-24 yr olds peaked at 73% in May 2019 but currently sits at a hair above 70%
They’re not the only age group that’s not working—older workers have vanished from the labor force since C-19, but that makes more sense given health concerns
Many are returning to college after shunning a Zoom degree, but that doesn’t explain the entirety of the decline

To be fair, the Fed has a long way to go in figuring out how to measure labor force participation in the new economy. Making a few bucks off of TikTok or YouTube and running a few UberEats orders each month are hard to categorize.

But there could also be a broader mindset shift around work that’s been bubbling under the surface for a while.

Most of Gen Z was more preoccupied with recess than the global economy during the GFC, but they had a firsthand look at the pain it caused their parents and older siblings

College had been sold as a promise of a better future, but all they saw were young people slaving away at jobs they were overqualified for, while having 6-figure debt weighing them down
The quiet quitting trend has built on the lie flat movement that started in China, as young people around the globe turn their noses at capitalism and traditional work

The big question: What will it take for Gen Z to join the labor force in greater numbers? Will companies have to adapt to them, perhaps by adopting more flexible arrangements?

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A kite.

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Wise Investor Says

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