Keep On Tightening | The Daily Peel | 9/14/22

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Market Snapshot

August CPI is in. Drumroll, please…

…and it’s 8.3%. Womp, womp.

Markets went into freefall on the worse-than-expected print. It looks like JPow is gonna have to sharpen his elbows to bring prices down, either with a few more 75 bps hikes or even a 100-pointer.

At the close, the Dow sank 3.94%, the Nasdaq fell 5.16%, and the S&P lost 4.32%.

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Let’s get into it.

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What's Ripe

The VIX ($VIX) — If you live for the adrenaline rush from stock market volatility, it’s your lucky day.

The VIX surged Tuesday amid a broad market sell-off. Wall Street’s fear gauge still isn’t at the levels we saw earlier this year, but it’s spiked since mid-August.

“Fear” is relative in macro environments like this one. If you’re getting killed by your grocery bill each week, you’re praying for an inflation reduction, even if it dents your 401(k).

But if you’re long the S&P, the rate hikes necessary to get inflation down are much scarier.

The VIX ended the day up 16.25%.

Nintendo ($NTDOY) — You’ve heard of Mario Kart and Pokémon, but what about Splatoon 3?

The third-person shooter has exploded in Japan, with Nintendo reporting record sales for any Switch game in its catalog.

It’s a great signal for Nintendo ahead of the all-important holiday season. New Pokémon games are lined up for release in November, which should boost sales in the U.S. market.

$NTDOY gained 2.53% on the day.

What's Rotten

MicroStrategy ($MSTR) — Michael Saylor, head honcho at MicroStrategy, has turned a public company into essentially a bet on BTC.

$MSTR has been around since the ‘90s and has enjoyed success during the internet boom of the 2000s. But since then, its business intelligence unit has languished amid heavy competition.

Then, Saylor decided to put all his chips into BTC, betting that the dollar would weaken quickly under the weight of trillions in government debt.

Now, $MSTR has billions in BTC on its balance sheet, and its stock is essentially a bet on magic internet money. It has moved alongside the price of BTC and collapsed in the last year as a result.

Investors aren’t as confident in Saylor as they once were. $MSTR ended the day down 12.07%.

Carvana ($CVNA) — So much for yesterday’s 15%+ journey to the moon.

Carvana got hammered Tuesday amid a broader market sell-off triggered by a nasty August CPI.

While used car prices actually fell in August, an overall higher CPI means consumers have less spare change to upgrade their vehicles.

Buying a car out of a vending machine is cool, but if groceries are getting more expensive each month, it’ll have to wait.

$CVNA finished the session down 12.94%.

Thought Banana

A Turning Point in Ukraine — There weren’t too many updates on the war in Ukraine over the summer. For months, it seemed like both sides were slogging it out in a kind of stalemate, without much ground being given up on either end.

But that changed this week.

Ukrainian forces were able to notch significant territorial gains in the northeastern part of the country, stunning the Russians. It marks a key turning point in the war that some are comparing to D-Day.

I try to take these updates with a grain of salt because the game of telephone that starts on the front lines thousands of miles away can distort what’s really happening. The “fog of war” is always a factor.

But legit sources, including Secretary Blinken, are hyping up Ukraine’s counteroffensive and saying that it could hasten the end of the war. Or worse, light a fire under Putin to take more drastic action.

If an end to the war comes sooner than expected, it could change Europe’s near-term economic fortunes. Support for the war has been waning in the EU, with many more focused on an imminent recession and skyrocketing energy prices.

Ukraine is hoping its recent success will convince its Western supporters, including the U.S., to keep weapons and other resources flowing in.

Whatever happens from here will have huge implications for Europe’s economy. For a million reasons, let’s hope this ends soon.

Wise Investor Says