Markets Cheer Peace at the Top | The Daily Peel | 11/16/22

Nov 16, 2022 | Peel #339

Market Snapshot

The arch nemesis of the little guy Ken Griffin called an inflation peak and said his team thinks a 2023 recession may be avoided.

Tech investors are liking the setup more and more and sent the Nasdaq higher Tuesday.

Increasingly cozy ties between Biden and Xi also added to the optimism.


Banana Bits


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Macro Monkey Says

MMT Is Dead

In hindsight, the growing popularity of Modern Monetary Theory (MMT) during the epic bull run of the 2010s should’ve been a clear sign that things were way too frothy.

In a nutshell, MMT posits that governments with a commanding economic position on the global stage can print their own fiat currency as much as they want. They’ve ascended above what logic would state, which is that at some point, the debts would spiral out of control, and the whole thing would collapse.

The resulting inflation from a money printing binge basically put that theory to bed.

  • Financial planning 101 states that you should save during good times so that you have a cushion during the bad
  • Name a large economy that’s done that in the last century. In real life, the temptation to flit away any surplus during good times has gotten the better of many a politician, leaving countries penniless when the downturn inevitably comes
  • Liz Truss tried to fit the Keynesian model for running an economy by cutting taxes and boosting subsidies during tough times, yet markets swiftly rejected her ideas

Collective belt-tightening across an economy, also called austerity, is obviously unpopular. People gravitate towards politicians that promise them stimmies and goodies, not fiscal responsibility.

The U.K. will be an interesting case study of how a modern economy deals with a range of bad options.

  • New PM Rishi Sunak can fire up the money printer, but that would likely exacerbate inflation
  • He could also zag the Truss proposals and raise taxes while cutting government spending. Have fun telling your people taxes are going up while they’re suffocating from inflation.

Regardless, the obituary for MMT has been written. What replaces it is up for debate.


Meme of the day

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Source


What's Ripe

Chinese Stocks ($MCHI) ↑ 5.01% ↑

  • Robust October retail numbers catapulted a broad basket of Chinese stocks, which have been heading in the wrong direction since early 2021
  • Online shopping is accelerating—one estimate showed retail sales grew 15% last month, compared to -10% in the prior quarter

Shopify ($SHOP) ↑ 4.22% ↑

  • Despite living in the red all year, $SHOP has been laying the groundwork for a dominant future through investments in logistics and point-of-sale software
  • Easing inflation could reignite the e-commerce boom, and investors like the value they’re seeing after a 70% YTD decline

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What's Rotten

Coffee Futures ($KCH3) ↓ 5.15% ↓

  • Coffee is one of the more inelastic commodities—prices could shoot up 10x, and people would still need their daily fix
  • Prices jumped over 100% in the last few years due to bad weather and a strong dollar, but a strong upcoming growing season is expected, which is sending prices back to Earth

Capital One ($COF) ↓ 7.18% ↓

  • People are fed up with credit unions. They haven’t been able to keep pace with new tech and market changes, and customers are abandoning them for bigger players
  • That’s partially why Capital One is up nearly 10% in the last month, but the bank ticked down Tuesday on concerns about its loan businesses

Data Peel

chart

Source


Thought Banana

No One Knows What to Expect in Qatar

The biggest sporting event in the world begins in just a few days in a tiny oil-rich country in the Middle East.

It’s the first time that soccer’s biggest show has set up shop in that part of the world, and the circumstances leading up to it have been…questionable.

  • FIFA’s been a cesspool of corruption since its founding, and the DOJ basically confirmed that Qatar bribed its way to the front of the line
  • It makes zero sense to host a world cup there—summer temps can soar past 110º F, which forced organizers to move it to November
  • Most of the big-name guys play for European clubs, whose seasons have been screwed up by the scheduling change
  • Social norms in Qatar don’t exactly jive with the West
  • To top it all off, it has nowhere near the existing infrastructure required for the biggest soccer showcase on the planet

Qatar is eager to focus the attention on the action rather than its own shady practices in a classic attempt at sportswashing. Saudi Arabia has pursued a similar strategy by buying up stakes in high-profile soccer clubs and its upstart LIV Golf tour.

On one hand, a successful event would show that people can put aside differing beliefs for the sake of sport. But there’s also an implicit excuse for blatant corruption and human rights abuses that are conveniently glossed over.

For as long as money talks, the path to hosting a world cup will probably continue to require lining some pockets. I’ll be glued to the TV regardless, but it sure would be nice to have a non-Mafia-like org putting the whole thing together.

The big question: Will fans around the world allow sportswashing to absolve the images of corrupt regimes, or will fair play win out?


Banana Brain Teaser

Yesterday — What number do you get when you multiply all of the numbers on a telephone's number pad?

0 - Anything multiplied by 0 will equal 0.

Today — It’s 150 bananas off the WSO's Elite Modeling Package. LFG!

A woman is sitting in her hotel room when there is a knock at the door. She opened the door to see a man whom she had never seen before. He said "oh, I'm sorry, I have made a mistake, I thought this was my room." He then went down the corridor and in the elevator. The woman went back into her room and phoned security. What made the woman so suspicious of the man?

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


Wise Investor Says

“In investing, what is comfortable is rarely profitable.” — Robert Arnott



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