Leisure and Hospitality Take the Lead| The Daily Peel | 4/10/2023

Apr 10, 2023 | Peel #436

Silver banana goes to...

Market Snapshot

Happy Monday, apes.

And belated Happy Easter to those who kickstart spring with a sibling-rivalry-fueled egg hunt.

Markets may have taken the day off on Friday, but economic data sure didn’t (more below). It’s all good, though, because Thursday had us covered with another immaculately boring day of normal market behavior. Such a shame.

Industrials, materials, and energy were lower on the day, while every other S&P sector was chilling. Once again, big dawgs like Microsoft and Alphabet carried indices into the green on a day that otherwise would’ve likely sent us into the long weekend in a bad mood.

But the long weekend’s over, and we won’t see another until Memorial Day (May 29th). Bond markets were turned on for only half the day on Friday, but on the week’s last full trading day, yields managed to reach a 7-month low. Following data releases from Friday, that new low was reversed with as much drama as a 9-week-old puppy trying to walk downstairs. After flirting with 3.50% just last week, 2-year yields closed much closer to 4% on Friday.

Let’s get into it.

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Banana Bits

• February saw the slowest credit growth among consumers in over two years, and that was BEFORE SVB went kablooey
• Used car prices are coming back to Earth, but according to Barron’s, your car is probably outperforming stocks over the past year
• Didn’t think it was possible for the most popular wearable tech product of all time to get even better, but Apple is apparently researching the possibility of adding a touchscreen to the Airpods’ case
• In other news that definitely can’t be possible, NASA is developing an AI set to take on…the sun? Bold move, but hey, I guess you gotta shoot high

Macro Monkey Says

Jobs

Mr. Market might have to take days off from time to time, but our economy is an all-time grinder – no days off.

With that Mamba mentality, economic data releases don’t sleep either. While you were struggling to get out of bed after an extra-degenerate Thirsty Thursday, the labor department began its Good Friday with the March jobs report.

And according to the BLS, the US economy added 236,000 jobs from sea to shining sea last month, coming in almost exactly in line with expectations (nice job on this one, guys) and bringing the unemployment rate back down to 3.5%. February’s employment growth numbers were revised up in the meantime, moving from 311k to 326k.

Expectations had the unemployment rate pegged to stay at 3.6%, but the 0.1% decline, representing about 166k workers, came from a surprising uptick in the labor force participation rate.

An increase in labor force participation means the supply of labor across the country is more abundant; hence, the lowest wage growth we’ve seen in nearly 2 years was also reported in this release.

Source

Growth in leisure and hospitality jobs still absolutely dominated the overall labor growth seen last month, putting this line item up with the legacies of the New England Patriots or the US Women’s National Soccer in terms of sheer dominance.

But there are still huge, glaring problems with the way we size up employment these days. The BLS still relies on survey data collected primarily in the middle of the relevant month, which in this case, would be the week of about the 12th-19th, just hours after the collapse of SVB and the others that joined in for the ride, meaning there is no way the data collected would have had time to capture that absolute meltdown and all it’s domino-style implications.

It’s the 21st century, goddamnit. We can code genetics, harness the power of the sun in multiple different ways, and bullsh*t like ChatGPT has taken AI to extraordinary levels in just a few months since its release. You’re telling me we can’t track this in real-time?

Alternatives like the ADP employment report have far superior data collection methods, using as-real-time-as-possible figures from its databases of payroll and other HR information for 860k clients, or about 26mn workers. But therein lies the exact problem - 26mn is just 15% of the labor force, and ADP’s services are likely skewed towards a certain kind of employer.

So, we have the ability but lack the execution, much like Caitlin Clark and the Iowa Hawkeyes in their loss to Angel Reese and the LSU Tigers this year. Like Iowa, it’s time to step our game up so the boy JPow can have some real data to f*ck the economy with.

Speaking of which, this report will likely be well-received by JPow and his buddies in the FOMC. Declining labor force growth and, in particular, falling wages have really put a smile on his face for the past year or so.

What's Ripe

AMC Entertainment ($AMC) ↑ 20.99% ↑

• Well, I guess this hell isn’t exactly over yet, as we’re still talking about damn AMC over 2 years after the hype of the meme stock mania.
• But hey, who doesn’t love a good mania, right? AMC shareholders were sure loving it to close out last week, ripping 21% before closing for the week on news that a Delaware judge has slowed the company’s plans to add its preferred $APE shares to the theater chain’s normal common equity $AMC shares.
• This at least slows down the wild dilution investors will see when that goes through, so for the time being, shares ripped on the realization that their ownership won’t be disgustingly diluted just yet.

Sweetgreen ($SG) ↑ 9.08% ↑

• Yup, shares definitely lived up to the company’s name for Sweetgreen yesterday, ending the day nearly 10% higher after the firm quickly resolved to settle its beef with big, bad Chipotle.
• You know the “you can copy my homework, but change it a little so it’s not obvious” play from high school? Yeah, that’s essentially what Sweetgreen tried to do in calling its newest salad addition the “Chipotle Chicken Burrito Bowl”... can’t believe they got caught!
• Yeah, it took all of a few days for Chipotle to hit Sweetgreen with the trademark infringement suit. The settlement was reached as Chipotle decided that SG’s new name of “Chicken + Chipotle Pepper Bowl” was just fine.
• After all, as much as Chipotle is a mid-ass-Mexican restaurant, chipotle is also just some kind of pepper. Maybe we should all just stop trying about it and let this case do what salads do best: get tossed.

What's Rotten

Levi Strauss ($LEVI) ↓ 15.98% ↓

• Drastic declines following not-that-bad earnings reports have become so common over the last year it seems to be in the market’s genes…or, in this case, their jeans.
• Good one, right? I’ll be here all week. Anyway, that is exactly what happened to Levi Strauss and explains why shares were absolutely mauled just a day before that glorious long weekend. The company reported earnings that came in right in line with expectations and surpassed Wall Street estimates when adjusting for (aka, totally ignoring) one-time line items from the past quarter.
• The mauling began when the company forewarned of anticipated margin pressure in 2023, saying that higher costs and increased promotional events would tear a hole into some of the jean-maker’s margins.
• I think the real lesson to take away here is that Levi Strauss is gonna be having fatty deals all year by the sounds of it. Go exploit those deals and make their next quarter even sh*ttier. Why not?

Airbnb ($ABNB) ↓ 4.90% ↓

• A lawsuit like this coming Airbnb’s way was about as obvious a call as “predicting” that Big Donnie T would plead not guilty. Just had to happen.
• Anyway, Airbnb shares tumbled nearly a clean 5% as online short-seller The Bear Cave used their Substack to drop a damning report detailing a probe into negligence from Airbnb’s individual hosts. C’mon, it’s like these hosts were killing babies or kicking people out in the middle of the night, right?
• Oh wait jk; that’s exactly what they were doing. Safe to say infanticide is not the vibe most people want to get behind, but the problems appear more extensive than just one-off instances.
• On Airbnb’s debut as a publicly traded company, shares gained 113% from the IPO price, approximately the same gain in the cost-per-night of a room once all those bullsh*t, hidden fees are revealed. How are you gonna get mad at me for not cleaning when I paid a $150 cleaning fee, Michael?!

Thought Banana

Dollar Making ‘Em Holler

Lacking anything else to freak out about for the time being, all the pseudo-intellectuals, charlatans, fear-mongers, and Jason Calacanis-es of the Twitterverse decided to become macro, geopolitical, and currency trading experts all in one over recent weeks.

Since the immediate aftermath of the SVB collapse got cleaned up rather swiftly (word is, of course, still out on continuing aftershocks), all those listed above and more had to resort to another problem to pontificate in order to maintain their self-perceived status as Twitter-thought-leaders (is that really a title anyone should want?!) Apparently, what they’ve settled on is the demise of the US Dollar.

Now, this is a huge topic – excuse me, I meant a HUGE topic – and not one we could effectively cover in one section or even one Peel, for that matter. This will be an ongoing topic, so get ready because we’re gonna annoy the hell out of you with it.

Let’s start this “series” with the primary claims thrown around on the brain-dead bird app. Basically, the claim can be summarized as follows: Recent trade deals between China and other nations show they all want off the dollar standard, and with the horrific state of American national finances along with dollar-based sanctions, it makes sense they’d want to stop relying on USD.

All of that is true, so we have no problem with the claim. But, when you follow that claim with a resolution like, as commonly seen online, “BTC fixes this,” “China and the yuan are gonna take over soon,” or “the US now is Rome in 476 AD.”

Every one of those claims can be rectified with one step towards thinking in second-order effects, namely:

• BTC is so volatile it’s almost not even worth pointing out. It would require widespread, near-universal adoption to replace USD, and my grandmother, who can’t figure out how to answer a phone call on her iPhone, ain’t spinning up a MetaMask wallet anytime soon.
• The yuan is low-key pegged to the USD and other currencies through its use of a state-controlled floating exchange rate. This allows the CCP near total control over the value of its currency, not something that jives in a global free market economy.
• The US hasn’t even been a superpower for a century, let alone a millennium, meaning we have no right to be compared to Rome. Further, we got problems, but no Visigoths or Gauls are invading, we haven’t had a string of Presidential assassinations, and our military is still functional (for now).

Moreover, the moves China has made in recent months to supplant USD dominance have been more overhyped than that stupid-a** Cocaine Bear movie (trash). Essentially all they’ve done is:

• Pen deals with Brazil, Russia, and Pakistan to not need to use the USD in direct trade solely with each other
• Ask Saudi Arabia if it might be possible to start buying oil using yuan, and
• Develop a competitor to the US’s international transaction settlement system called SWIFT, naming their own CIPS

To be clear, we’re not saying these developments mean nothing and can be overlooked, but we are saying that Tucker Carlson’s 15-minute de-dollarization rant was far more politically than informatively motivated.

Nothing lasts forever, especially relationships, market outperformance, global superpower standings, and, unfortunately, long weekends.

The big question: Will the USD eventually lose its status as the global reserve currency? If so, when?

Banana Brain Teaser

Yesterday — What is a Caribbean shape that makes ships disappear?

Triangle, as in the Bermuda Triangle.

Today — It’s 50 bananas off the Consulting Interview Course for the first 3 correct respondents. LFG!

I can bring tears to your eyes, resurrect the dead, make you smile, and reverse time. I form in an instant, but I last a lifetime. What am I?

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

Wise Investor Says

“I’m always looking for patterns, and patterns of human behavior repeat themselves over and over again.” — Jim Simons

Happy Investing,

Patrick & The Daily Peel Team

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