Is FAANG Dead? | The Daily Peel | 4/28/22

 

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Market Snapshot

After getting schwacked Friday, a stunning reversal on Monday, and another significant down day Tuesday, futures pointed towards greener pastures yesterday morning. The VIX declined but remains elevated, ending yesterday at 31.64. Crude prices are back above $100. BTC, just like the QQQ, has been down more than 10% in the last month.

By the closing bell, the major indices gave back most of their gains. The Dow closed up 0.19%. The S&P moved higher by 0.21%, and the Nasdaq ended in the red by 0.01%. We started the year at north of 21x forward earnings for the S&P and are approaching 17. Where does it end?

market summary

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Let’s get into it.


Banana Bits

  • In case you’ve forgotten, Brittney Griner is still trapped in a Russian prison #FreeBrittney
  • Bill Hwang is back in the news again. Is all press good press?
  • We were tired of no value middlemen and illiquidity in the commercial real estate market. Tax-advantaged opportunities, check. Unfettered access for all, check.
  • Cramer says that we need to stop being so bearish, so basically, we’re going to have an r-word
  • The World Bank thinks degen commodity traders won’t be able to regulate energy prices in the first price shock since the 70s
  • Russia is still extorting its neighbors, demanding payment for energy shipments in Rubles and cutting off supplies to Poland and Bulgaria

Macro Monkey Says

Living Somewhere is Hard — Have you looked for a new place to live lately? Even shopping for apartments seems outrageous. Hard to believe that getting “outbid” on what amounts to a closet in Tribeca is a thing.

If you’re homeless, you probably don’t care about this, so you can skip to the next section. If you live under a roof, you might find today’s Macro Monkey insightful.

The housing market is pretty out of whack for a lot of reasons, both on the supply and the demand side.

Builders have had a tough time over the last decade.

  • Housing starts have been below demand since the last financial crisis
  • Builders have had an aversion to building spec homes since the last market decline
  • Land prices are on the rise
  • Labor costs are higher than ever
  • Material costs for lumber, tile, stone, and other raw materials are near all-time highs

Those looking for a new place to live have been struggling with a handful of $hitty diapers themselves.

  • Increasing interest rates, dissuading new home buyers and refis
  • Low inventory
  • Mortgage turnover mentality: why trade a 3% interest rate for a 5 or 6% mortgage?
  • Excessive competition unlike ever before
  • Inflated prices during a two-year housing price boom

Indeed, both sides of the equation are working in tandem to more or less screw us all.

Yesterday we received data on rental vacancies and the pending home sales index. It turns out that the housing market is slowing, but we have by no means bottomed out in terms of the rate of home sales.

The solution to this housing conundrum is probably not just demand destruction or generating a glut of supply. Fingers crossed that the invisible hand figures this one out.

meme/tweet

 


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What's Ripe

Visa and Mastercard ($V, $MA) — Both credit card giants are up in a big way today, and increased demand and consumer spending probably have something to do with it.

After a stellar beat on this most recent quarter’s earnings and schwacking analysts’ estimates across the board, $V ended up a sharp 6.47% at close.

stock chart

Given how similar the payments models of the two companies are, it’s logical that shares of $MA would rise in tandem. Mastercard reports its earnings tomorrow, but their stonk had a great day yesterday, ending up 5.07%.

stock chart

Microsoft ($MSFT) — Finally, someone from Big Tech didn’t get bruised and beat down after their earnings. Shares of $MSFT were up yesterday after another great quarter for the tech giant.

Microsoft’s executives conveyed “absolute resolute confidence” that they’d be able to capitalize on existing momentum. You degens and the rest of the street gobbled it up, sending shares up by 4.81%.

stock chart


What's Rotten

Boeing ($BA) — Boeing had a $hitty quarter. After retreating more than 5% yesterday, Boeing was down 4% pre-market yesterday and ended Wednesday down 7.53%.

Their stock is in reverse, down at its 52-week low. I guess this is what happens when you don’t make money and announce that you’re pausing huge chunks of your business to wait for demand to catch up. Sorry about your jets, bro.

stock chart

Google ($GOOGL) — Google, compared to its older, more boring tech counterpart Microsoft, did not have a good quarter. For the first time in a handful of quarters, Google failed to meet earnings estimates, coming in shy of analysts’ predictions by 3.61%.

Not all of the Nasdaq is created equal; even on a rebound day, shares of the tech giant were lower by 3.67% on the earnings news.

stock chart


Thought Banana

Cheaper Dollars — Interest rates are going up. Even if the 10-yr yield’s slow creep towards 3-3.5% has stalled in the last week or so, we will eventually watch the yield curve transform, especially as the Fed raises rates.

This means a lot of things for a lot of different people.

  • Valuations will adjust downward
  • Growth stocks will look less attractive
  • Cost of credit increases
  • Mortgage rates will rise
  • Housing inventory will increase
  • Home prices will steady and potentially allow you to buy something for less than $100k over asking

I’m simplifying, just hitting the highlights here for you. Of course, there’s more to it, but you get the gist.

On a personal finance note, rising rates and an inflationary environment can have a subtle silver lining. It’s not exactly a unicorn with a f*cking rainbow shining out its a$$, but there are some things to consider.

If you own a home, it’s very likely that your mortgage APR is way lower than inflation right now.

If you have student loan debt, it’s also likely that your consolidated interest rate is also lower than this most recent 8.5% CPI print.

Goldman CEOFor millennials and the elderly of the Gen Z, mortgage debt and student loans are probably your biggest bills to pay.

Student loans in the US total more than $1.75 Trillion, with a capital f*cking T. (See what it looks like.) Comparing that to credit card debt, that’s more than double the roughly $850bn floating around on our personal consumption swipey cards.

Occasionally you’ll hear a joke about the Fed and the Treasury working together to “monetize the debt.” This means that you turn the money printer on so loud and so hard that the dollars that the government owes are devalued, i.e., inflation kicks us all in the teeth, and the government pays back its debts with dollars that are worth less than the ones it borrowed in real terms.

This means that you turn the money printer on so loud and so hard that the dollars that the government owes are devalued, i.e., inflation kicking us all in the nuts and the government paying back its debts with dollars that are worth less than the ones it borrowed in real terms.

Well, that’s kind of happening to us right now if you have low-interest rate debt.

If you bought a pickup during Truck Month at 0%, you’re paying your gas guzzler off with cheaper dollars.

If you have a 3.5% 30-yr fixed-rate mortgage, you’re paying your home off with dollars today that are worth less than the ones you borrowed.

You get the idea.

This idea is just something to consider when selecting whether or not to just make the minimum payment each month. I know what I would do.


Wise Investor Says

“The most important thing to do if you find yourself in a hole is to stop digging.” — Warren Buffett, the Oracle of Omaha



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