Let The Pain Begin | The Daily Peel | 9/22/22

Market Snapshot

JPow told us it was coming, and now the only question is when we hit bottom.

The 2-year is going nuts, topping 4.1% at the close. Mortgage rates sailed past 6% and continue to march higher.

Central banks around the globe are raising rates in sync with the Fed to tame their own inflationary problems, but they’re also suffering from increased dollar strength.

At the close, the Dow fell 0.35%, the Nasdaq sank 1.37%, and the S&P dropped 0.84%.

The fast pace of private equity demands a certain set of skills, and WSO’s PE Master Package can help you acquire the tools that you need to propel your career forward in the industry. From deal flow to LBOs, we can help you sharpen your skills to maximize your potential. WSO’s PE Master Package

Let’s get into it.

Monkey Meme of the day

Source

Banana Bits

Banana Brain Teaser

Macro Monkey Says

WSO PE Master Package

What's Ripe

Eli Lilly ($LLY) — An upgrade from UBS sent shares of the pharma giant soaring Thursday on optimism in Mounjaro, its new diabetes drug.

It’s no secret that obesity and diabetes are endemic issues in this country, and that means big bucks for drugs that can treat them.

Mounjaro has the potential to help with both, causing some to predict it becoming a $100bn per year drug.

At the end of the session, $LLY was up 4.85%.

Ripple (XRP-USD) — XRP sits at number 6 on the crypto power rankings, but it saw a big boost Thursday on reports of progress in its legal battle against the SEC. Ripple is the company behind XRP.

There’s a lot of legalese to sift through with this case, but it basically comes down to the all-important question of whether cryptos should be treated as a currency or as a security.

This lawsuit has been stuck in the courts since the end of 2020 and wasn’t expected to wrap up until Q2 2023. But with new motions being submitted from both sides, the end could be sooner than that.

XRP was up 20.19% by the end of the day.

What's Rotten

AMC Entertainment ($AMC) — The skilled humorists at the SEC came out with this video back in May to discourage meme stock mania. Real knee-slapper.

Looks like the apes aren’t holding the line, as AMC plunged Thursday.

The list of potential blockbusters for the rest of 2022 is pretty weak. You got another Black Panther that could be big, and maybe the new Avatar will be cool, but after that, it’s pretty much crickets.

Combine that with a zillion other headwinds (inflation, equity dilution, crushing debt, landlord disputes… I could go on), and even the most diamond-handed amongst us are looking for the cash register.

$AMC closed the day down 8.72%.

Natural Gas Futures — While Europe has been embroiled in all kinds of crises, US nat gas producers have been building up reserves at a breakneck pace.

A nice blend of bigger-than-expected output and reserve growth plus mild fall weather forecasts have brought prices down substantially.

Lowered commodity prices may ding producers, but it helps bring inflation down for the rest of us.

By the end of the day, nat gas was down 7.35%.

Thought Banana

Back to the Volcker Era — If you’re a regular person not addicted to the mania of the stock market, you might ask why regular people need to feel more pain to lessen the pain from inflation.

It should be a real discussion since, for lots of people, it’s more than just stomaching a plunging 401(k)—recessions can tip tons of people into poverty that are already teetering.

It might not come as much concession, but back in Volcker’s days, the pain was much worse.

He managed to bring inflation down 7% in just 4 years, but at the cost of not one, but two recessions. And that’s not all—he also oversaw a double-digit unemployment rate and an unhinged stock market.

If Ben Graham’s Mr. Market is manic and irrational, then it’s the Fed’s job to play psychologist, both to the market and to the public.

At the depths of Volcker’s inflation fight in the early ‘80s, domestic banks were failing, emerging economies were in hyperinflation spirals, and everything just seemed terrible.

Then, he lifted his foot off the economy’s neck and cut rates in 1982, kicking off a protracted bull market paired with moderate inflation.

You can call it lucky, but his timing was on point.

Things could get bad here soon. The stock market is a forward-looking mechanism, and the bloodbath that’s been the past 12 months will likely start to ripple through the economy.

But to find light at the end of the tunnel, look to history.

Wise Investor Says