Markets Take a Breather | The Daily Peel | 9/2/22

Market Snapshot

Bring on September. Stocks had an August to forget, with the 3 major US indices dropping 4-5%.

Thursday was a wash. European and Asian indices got hammered, but US exchanges were mostly flat.

WTI Crude plunged to $86 a barrel, and bond yields are approaching their highs for the year.

At the close, the Dow gained 0.46%, the Nasdaq gave up 0.26%, and the S&P inched up 0.30%.

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What's Ripe

The US Dollar (DXY) — Compared to a basket of large currencies, the greenback is at a 20-year high. A cocktail of aggressive rate hikes mixed with a resilient economy has driven the boost.

While the American economy is teetering, things are much worse elsewhere in the world. We’ve told you about China’s real estate woes and Europe’s energy crunch, and the dollar is brawny compared to the Euro and Yen right now.

Predictions about the end of The Benjamin’s reign on the global stage have been premature up to this point, and the dollar is getting stronger faster than MLB sluggers in the 2000s.

The DXY ended the day up 0.89%.

Moderna ($MRNA) — Whether Bill Gates puts chips in them or not, vaccines are a huge industry, and business is A-boomin’.

$MRNA must not believe its luck with how C19 has played out.

They went public less than two years before the pandemic started. Widespread jabs were issued at the start to prevent the spread, but then it spread anyway, and now they can keep pumping out new boosters as the thing evolves.

The big news for $MRNA on Thursday was Canada’s authorizing of their omicron-focused shot for adults. I’m hearing that we’ll basically just get one of these per year with a flu shot, giving investors confidence in that recurring revenue going forward.

$MRNA finished the session up 5.05%.

What's Rotten

China Evergrande Group ($EGRNF) — What’s happening at Evergrande these days is a tale as old as capitalism. The company has more debts than it can repay, and bondholders are hashing out who will take the biggest haircut.

Foreign creditors recently presented a new plan to restructure its debt—essentially, they want the chairman to issue new shares in the company, buy those shares, and use the proceeds to pay down the debt.

Few people think the company will actually accept this proposal, but it might move the two sides closer to a resolution of this clusterf*ck.

$EGRNF finished down 8.56%.

WeWork ($WE) — If you haven’t seen WeCrashed on AppleTV, Jared Leto plays an incredible Adam Neumann. Definitely a lot of similarities between him and the Joker.

Neumann is on to the next thing with his Andreesen-backed startup Flow, but WeWork is still a real public company. It’s worth less than half its IPO price, but new management is focused on cutting out the BS and turning a profit.

The good news is that insiders are snapping up stock, indicating this thing is undervalued after being overly battered by bad press. Without all the hoopla attached, it can actually be valued as a standard commercial real estate play.

$WE finished down 3.89%.

Thought Banana

The Cheap Money Hangover — Last week, I cracked open Michael Lewis’s Boomerang to revisit how cheap money nearly crashed the world a decade ago. The big banks aren’t going under today, but government debt is again exploding, a trend that makes the likes of Greece and Iceland shudder.

For those that haven’t read it, the book centers around Lewis’s tour of some of the worst-hit victims of the cheap money bubbles around 2010, including Greece, Iceland, and Ireland.

Each had their own vices that fueled their bank bubbles—the Greeks almost universally cheated on their taxes, while Icelanders thought they could go from fishermen to masters of the universe overnight.

Despite their differences, they shared an addiction to cheap money and disregard for the consequences of debt.

Economists and politicians like to think we’ve learned from that painful period, but both the US and Chinese governments have been printing and spending money like it’s going out of f*cking style.

Now the hangover is starting. It’s much more fun to throw stimmies at sh*tcoins and digital apes than deal with the resulting inflation and painful rising interest rate period.

I’m not gonna pretend like I can predict the future, but human nature is a tough b*tch to change. The fear and greed cycle is part of our DNA, and even the most advanced monetary theory has a hard time coming to grips with that fact.

Currently, it seems like JPow and Joey B are pulling on opposite ends of the inflation rope. The Fed is trying to reduce purchasing power to stem inflation, while the Biden admin spends new federal dough on student loan relief and the IRA.

Who knows what impact these spending packages will have on inflation. Regardless, it brings to light how hard it is to kick cheap money once you’ve tasted the forbidden fruit.

Wise Investor Says