And what a happy Friday it is. Notice how you’re not hungover after yesterday’s High Holiday (pun intended)? Yeah, almost like that stuff should be federally legalized or something.
For much of the day, equity markets were riding that high as well. But mid-afternoon blues started a downtrend that took out the day’s earlier gains before rising briefly just prior to 4:20 pm. Stocks like Snap-On and Steel Dynamics were some of the S&P’s top performers, but none of the U.S. majors managed to eke out a gain.
Bond prices moved higher in just plain rude fashion as the 2-year didn’t even have a chance to hover around 4.20% like we’re all pleading for. Get ‘em next year.
Meanwhile, the dollar’s erratic psychopathy displayed this week nicely sums up just how confused, uncertain, and coiled markets are on both sides of any given trade. Despite losing 7.5% since an early-week peak, BTC still boasts a +70% return YTD, almost 10x that of the S&P.
Let’s get into it.
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Banana Bits
Your home’s value fell (on average) the most it has in more than a decade
Spongebob and Squidward, you and the stock market, and the U.S. and China: these are some of the most impactful love-hate relationships of our time. One of them made big news yesterday.
No, I’m not talking about the 6.9% loss your portfolio saw, but Treasury Secretary Janet Yellen did come out with an intendedly powerful speech towards China that can be summed up with the following: why can’t we be friends? Sensational.
JPow’s predecessor and Steve Mnuchin’s successor had a clear message to send on relations between the two largest economies in the world on Thursday. Essentially, she made the case that while the two are programmed to be heated competitors, this doesn’t necessarily have to be as bad of a thing as it currently seems.
The competition is good. This is a big part of why we all want to marry capitalism, as forcing people and organizations to compete forces each and all to be better. So, it follows then that competition between these powers would be an overall good thing for the globe and its population. In recent months, the fear of WWIII has gotten a little too real for most of our liking, but JYell is at least out here trying to chill things out.
To summarize, Yellen made a case for:
U.S. and Chinese independence, cooperation, and security
Restricting economic ties when it comes to national security
Efforts on the part of China to avoid a series of Belt and Road initiative-induced defaults from some of the globe’s poorest countries
Regardless of whatever side of the political aisle gets you fired up, avoiding global economic collapse and world wars are good things to work towards. Yellen’s rhetoric is a step towards getting back to where relations were prior to Balloongate back in February, right before U.S. Secretary of State Antony Blinken was (supposed) to be heading to China.
Meanwhile, representatives from the Chinese embassy in Washington expressed the belief that economic and geopolitical cooperation was possible in saying it “should not be a zero-sum game.”
And it probably doesn’t have to be. Now, we’ll probably never live in a world where the leading global superpowers are best buds, but we don’t necessarily have to live in one where they’re the opposite. Ties between the nations, such as agricultural trade, iPhones and other tech products, and much more, have made these frenemies like coworkers that got into a fistfight at the last happy hour. They don’t have to like each other as long as they can work together.
Call it idealistic, but aiming high seems like a reasonable starting point. As with anything, the speech alone is less than meaningless until something actually comes of it. For that, we’ll see, but my mom used to tell me that time heals all wounds. Once again, we’ll see.
What's Ripe
ATAI Life Sciences ($ATAI) ↑ 6.83% ↑
4/20 was a tough day for weed stocks this year, with names like ETF $MJ down over 3%, but some drugs (thankfully) put the team on their back.
Specifically, German psychedelic therapy maker ATAI Life Sciences surged almost 7% on the day despite basically no news to drive it. Joe Rogan and his lieutenants have, however, been planting the seeds (or should I say spores?) of the prospects within this industry for years now, so maybe he and the boys are finally having an effect.
Media attention on the sector is growing, thanks largely to (scarce, yet real) Wall Street expectations for shares to gain over 500% by year-end.
D.R. Horton ($DHI) ↑ 5.64% ↑
Recently we acknowledged and derided the homes out there that are, in fact, not homies. This guy, this guy right here, represents a big reason why.
D.R. Horton, the largest homebuilder in the United States, got a respectable boost after an earnings report that confirmed just how disrespectful this thing was to American home buyers recently.
Given JPow’s attempt to square up with the entire economy, analysts assumed the highly cyclical housing sector would face a beat down last quarter. Results were still hot trash on an annual basis, but somehow flat sales of $8bn came in roughly in line with last year while earnings of $2.93/sh fell “only” 32% compared to the 52% decline priced in.
Guidance was GOATed as well, with management calling for a far rosier quarter than analysts had expected.
What's Rotten
Tesla ($TSLA) ↓ 9.75% ↓
As pointed out below, Musk is having a big week. Something tells us that his rocket blowing up and the pillar company of his business empire losing over 11.5% since Tuesday’s close hasn’t made it too much fun.
Shares in the King of the EVs fell further following financial results posted on Wednesday. Tesla officially hit a 3-month low and brought its YTD return down to “just” 50% by yesterday’s close as profitability concerns continue to weigh heavily.
For a company this highly valued that carries such a fervent base of fanboys, any clear catalyst will carry outsized results on this thing. It’s one of the most liquid stocks in the world, and moreover, that high multiple carries a degree of reflexivity noticeably higher than other, chiller names.
Most importantly, however, who do we think Elon was smoking with last night?
AT&T ($T) ↓ 10.43% ↓
As I use this scam company’s “Wi-Fi” to write this right now, I’m actually pleasantly surprised my connection has only been lost once so far. That junk mail Spectrum sends on a daily basis is looking pretty sexy right now.
Anyway, the world’s largest telecom company by revenue posted earnings so bad that its customers actually got some joy from it for once, as they were given an opportunity to simply point and laugh. EPS of $0.60 beat by a narrow margin while revenue missed by the same.
Postpaid phone plans, however, came in at ~2/3 the size of customers added in the year-ago quarter. It was the lowest reading since the pandemic, and with new and larger competitors like Google Fi and Comcast getting into mobile, it’d be hard to argue things will get much better. Damn right.
Thought Banana
Elon Week
Much like the Discovery Channel creating the most hyped week of all in Shark Week every year, Elon Musk appears to be branding this week as his very own. Just this week alone, he:
Reported Tesla’s latest earnings
Blew up the largest rocket ever shot into the sky
Removed legacy Blue Checks from (formerly) verified Twitter profiles
Celebrated his favorite Holiday
And it’s only Friday morning, so we still got a couple of hours left. We’ll stay tied to his Twitter feed so you don’t lose brain cells doing it on your own.
It’s been a big week for the boy, to say the least. Focusing on what was objectively the coolest one of all, SpaceX’s 394-foot, 11-million lbs Starship rocket blew up in spectacular fashion. I mean, just check this
. How sick is that? Maybe science can be cool.
Now, watching this $2-3bn piece of (metallic) a** blow up, you might’ve thought, “damn, we got a Challenger round 2 on our hands.” I don’t blame you, but apparently, blowing up a few minutes into the flight was more than good enough for the team.
Plus, this was (thankfully) an unmanned flight, so no schoolchildren watched their teacher get eviscerated on live television.
Still, apparently, the fact that this thing was even able to get off the ground is a marvel in itself. Now, Starship officially holds the title of the largest and most powerful vehicle ever flown, even if it didn’t exactly reach its destination.
And, of course, that destination was simply space, or ~100km above Earth’s surface. Starship made it nearly 40% of the way there yesterday before going boom-boom, officially making it the biggest thing to ever fly. Unfortunately, one of the hallmarks of this rocket is its goal of complete reusability, which, after yesterday, is looking far less hot than the flames that engulfed the ship.
The only ignition that seemed to work yesterday was the kickstart of yet another media cycle centered on the space economy. Turns out this is one of those weird industries that sounds as insane as it is, yet apparently wasn’t entirely a symptom of a decade of ZIRP. We don’t have time for that today, but here are some overpaid randos from McKinsey pontificating on this as if they have a clue.
Regardless of how much of that McKinsey report is pure nonsense, the space economy sure is off to an explosive start already. Just proceed with caution.
The big question: What can we expect from the next planned Starship launch just a few months away? How will Musk’s early SpaceX investments impact the space economy long-term? Will I ever actually be able to vacation on the moon?
Banana Brain Teaser
Yesterday— I sit on a bridge. Some people will look through me, while others wonder what I hide. What am I?
Sunglasses.
Today — It’s 50 bananas off the M&A Modeling Coursefor the first 3 correct respondents. LFG!
You start with 1000, then add 40. Add another 1000, then add 30. Add another 1000, then add 20. Add one more 1000, then add 10. What is your answer?
“It's nice to have a lot of money, but you know, you don't want to keep it around forever. I prefer buying things. Otherwise, it's a little like saving sex for your old age.” ― Warren Buffett
Happy Investing,
Patrick & The Daily Peel Team
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