Margs with Daddy JPow | The Daily Peel | 5/5/22

 

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Market Snapshot

Feliz Cinco de Mayo. Hopefully, you get a chance to celebrate. We know we will, especially after seeing all that green yesterday.

The futures yesterday morning were up slightly, but by the end of the day, stocks were ripping higher. Finally, we received the news we’ve all been waiting for, a 50 bps rate hike by our savior Daddy JPow, and investors are betting on a soft landing. Payrolls were up, but not as much as expected. BTC was back above 39k, and the market shifted towards risk-on.

Markets soared. The Dow ended the session up 2.82%, the Nasdaq was up 3.19%, and the S&P closed up 2.99%.

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Let’s get into it.


Banana Bits

  • In the spirit of ESG, the EU is finally proposing a ban on Russian energy imports
  • Generating additional returns with your crypto is possible, no specialized terms and conditions necessary
  • According to the ADP Payroll report, payrolls expanded from March to April, but not as rapidly as analysts expected
  • Not doing our GDP numbers any favors, the US monthly international trade deficit climbed to its highest level in history
  • Chinese hacker group Winnti has been successful in a PRC-backed cyber-corporate espionage campaign for like three years now

Banana Brain Teaser

The first Ape to respond with the right answer to this interview brain teaser will get access to our WSO Elite Modeling Package for 100 bananas off the 497 Banana sticker price. LFG, Apes!

Ryan’s mom has four children. Two are adopted, and two are biologically hers. The youngest child’s name is March. The oldest child’s name is May. The second child’s name is April. What’s the name of the fourth child?


Macro Monkey Says

Save us, Daddy JPow — The Fed concluded its 2-day FOMC extravaganza yesterday, finishing off the festivities with an announced 50 bps rate hike and some additional guidance on the unwind of their balance sheet.

The quantitative tightening formula that Daddy JPow’s team is using is a bigger unknown to the markets than the anticipated rate hikes.

In the recent past, the Fed has actually been the largest buyer in the treasury markets through its quantitative easing program. Now that this is no longer the case, I’m not sure the market really knows what to expect.

Rising interest rates will hopefully whip inflation for the dollar in the tail. Expect central bankers across the world to start considering moves in interest rates, except for the Chinese.

Earlier in April, their central bank made a surprise move to keep interest rates at record lows. Mind you, yesterday’s FOMC announcement was the second rate hike of this tightening cycle, and the Chinese were actually considering lowering rates.

China still has historically low-interest rates, and with the ongoing application of zero-C19 policy, you can expect to see more stimulus from their government to boost economic output.

Even in an inflationary environment, the Communist Party demands an expansion of the Sleeping Dragon’s GDP. Keeping tens of millions of citizens under lockdown does not support 5.5% year-over-year GDP growth, so loose monetary and fiscal policy is how China will force growth.

But won’t this add fuel to the inflationary fire? The answer, of course, is yes. Chinese goods are already getting more expensive due to inflation in China.

Chinese manufacturers, seen as the world’s factories, have had no choice but to drive up prices, putting upward pressure on prices throughout the global economy. But that’s not the end of it.

PRC policy is also injecting inflationary pressure into the global food and steel markets.

The Communist Party has placed significant restrictions on steel production while introducing import tariffs on the critical raw material; this is steel that producers in other countries rely on to produce goods for other markets. Apparently, China wants to curb production – literally to become more ESG.

China has also introduced fertilizer export restrictions. We’ve talked about a potential food crisis as a result of fertilizer concerns due to the Russia-Ukraine War; well, this restriction isn’t helping things.

Finally, the global pork supply is another point of contention. There’s a complicated cat and mouse game of tariffs with complementary retaliatory tariffs between China and other countries, and this inefficiency is inflationary.

None of this makes Daddy JPow’s job any easier. Maybe, in the words of Paul Tudor Jones, Central Bankers should start looking for another job?


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What's Ripe

Moderna ($MRNA) — You might think that we love Moderna here at the Daily Peel. No, we just love stocks that rip. If you have high beta and some good yolo potential, we will cover you. Moderna fits that mold.

After a solid quarter, shares of the biotech innovator were up 6% pre-market. Not only did they blow out earnings for the quarter, but they also TRIPLED covax sales compared to expectations. $MRNA closed up 5.81%.

Advanced Micro Devices ($AMD) — Shares of $AMD ripped 9.10% yesterday after a strong quarter led by its data center business. AMD saw great revenue growth and margin expansion. The company also is excited about secular growth opportunities in the next 3-5 years, affirming strong guidance for the future.

Are semis dead? It doesn’t look like it just yet. Congrats on a great quarter, Lisa Su and company.


What's Rotten

Lyft ($LYFT) — Is it just in my circle of friends that the phrase “Order an Uber” can mean a car from either Lyft or Uber? There’s probably a reason why this is the case for many of us.

Lyft posted a new loss for the quarter, but the Street was really disappointed with continued driver incentives and light guidance for the rest of the year. $LYFT closed down 29.91%.

Tupperware ($TUP) — This was a dumpster fire of a quarter. After missing on every metric possible AND retracting its formerly positive full-year guidance, shares of this boomer brand were down by 22% during pre-market trading.

Citing operational uncertainty (whatever that means for plastic food storage containers), the plastics and cosmetics brand blamed the War in Ukraine as well as continued C-19 lockdowns for their miss and negative outlook. Shares of $TUP closed down 32.16% yesterday.


Thought Banana

The Digital Economy — Everyone’s second favorite rideshare, Lyft, is licking its wounds after a net loss this most recent quarter.

It’s a pure rideshare play. It has significant public policy dependencies on the legality of independent contractor drivers, and it is at the mercy of rideshare demand in a world that is probably still “reopening.”

After its earnings announcement Tuesday afternoon, shares of Lyft traded significantly lower. Uber’s shares followed suit, which is only logical given the nature of the duopoly.

After watching its cousin get smashed after hours, Uber even decided to move its earnings announcements to yesterday morning at 5 am PDT from its originally planned Wednesday afternoon call. They posted a loss even though revenues and volumes were solid.

We won’t sugarcoat it. These rideshare darlings are beat down.

Not a surprise, to be honest: Lyft loses money and is still a growth play in a market that has seen unprofitable but rapidly growing companies lose something like 50-60% of their market caps this year. Even after a surprise profit, Lyft was down 25% pre-market and then proceeded to end the day down almost 30%.

Airbnb, on the other hand, was up sharply after posting a slight loss. This loss was slimmer than the Street expected. They finished the day up more than 7%, a nice pop after an earnings win compared to other announcements from this quarter.

The difference: it appears that the non-traditional hotel alternative is on a path towards profitability, whereas Lyft is just doing more of the same.

Unironically, Uber, Lyft, and Airbnb are still Web2.0 ideas. They’re probably not the killer app for a Web3.0 or 5G environment.

How do they compare to Web3.0 ideas?

Well, frankly, we don’t know. As we always say at the Peel, we left our crystal ball at home.

But when you ask what a successful Web3.0 application looks like, we’ll give you the answer that any good MD keeps in reserve for moments like this: “I don’t know, but I’ll know it when I see it.”


Wise Investor Says

“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather



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