No More Mr. Nice Guy | The Daily Peel | 9/1/22

Market Snapshot

JPow isn't messing around anymore, and markets are finally taking his determination to quash inflation seriously.

That means both good and bad news. The good is that inflation expectations are lowering, but the bad is that economic pain is on the horizon.

After a punishing start to the week, stocks remained in the red. The Dow closed down 0.88%, the Nasdaq lost 0.56%, and the S&P dropped 0.78%.

WTI Crude sank to $89, and BTC rose a hair above $20k.

WSO's DCF Modeling Course can get you up to speed on all things discounted cash flow that you will need to both survive and excel in finance. From the big picture, to fundamentals, to enterprise and equity valuation practice, you'll take a deep dive into topics that are crucial for anyone who wants to work in Finance.
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Let's get into it.

Banana Bits

  • Less than 10 years after Flint's water crisis, Jackson, MS is facing a similar emergency
  • Elon is doing whatever he can to slither out of his Twitter purchase
  • China's property developers are posting disastrous results. Many are describing the state of the property sector as a "severe depression"
  • Don't @ me…NFTs were a bubble
  • Certain skills are invaluable in finance, and we can help you master them

Banana Brain Teaser

Yesterday What do you toss out when you want to use it but take it back when you don't want to use it?

An anchor.

Today - It's 50 bananas off of our DCF Modeling Course for the first 15 correct respondents. LFG!

A girl was ten on her last birthday, and will be twelve on her next birthday. How is this possible?

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

Macro Monkey Says

The Global Interest Rate Seesaw - While Big Daddy Powell tries to quash U.S. inflation by hiking rates, China's central bank is doing the opposite. Out of the left field, The People's Bank of China cut two key rates recently as it tries to give CPR to a fledgling economy.

Geopolitical conflict and supply chain snags have dented every major economy in 2022, and China hasn't been spared.

But two other key issues have hammered it further:

  1. A property market in freefall
  2. Draconian lockdowns triggered by a C19-zero policy

You may remember the epic demise of Evergrande earlier this year, which drove panic over a total property collapse in China. A staggering 70% of China's wealth is held in real estate, and the sector has long been a key driver of the country's growth.

If you thought the U.S. housing market was a shitshow, get a hold of this.

Unlike in the West, Chinese developers are allowed to sell homes before they're built.

But as projects continue to be delayed by cash crunches, citizens are refusing to pour in more money until they see some progress. Imagine paying off half your mortgage before ever opening your front door.

This payment strike could cause a domino effect. Developers are already short on cash, and lower payments could cause many of them to default, further straining the sector.

Most economists think the rate cuts will have little effect on stoking demand.

When hundreds of billions in payments are at risk of default, cheaper money as a solution is simply child's play. Might need to bring out the heavy artillery and fire up the money printer again.

If China's mammoth economy continues to slow, the ripple effects will be felt far and wide.

U.S. investors are much more preoccupied with Big Daddy's mood, but it's worth keeping an eye on the other major superpower.

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Our robust curriculum will help you thrive in the most prestigious jobs on Wall Street. Book your course today.

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What's Ripe

Snap ($SNAP) - Snap got a nice bump Wednesday, but not because a rosy future is around the corner. It's slimming itself down in anticipation of softer ad revenue, including a haircut of 20% of its staff.

With a market cap of about $17bn, Snap is now worth just a third of its IPO valuation.

Despite immense popularity among teenagers, even during the TikTok era, the company hasn't been able to monetize its platform well enough.

The future is murky at best, but investors are cheering Snap's frugality. By the end of the day, shares had jumped 8.64%.

Pinterest ($PINS) - The news on Snap's guidance was the main catalyst for Pinterest's rise on Wednesday.

In Snap's disclosure to investors, it delivered the medicine of steep job cuts with a sweetener-revenue is actually growing in Q3, despite a consensus expectation of flat growth.

The market took this news to mean that its peers could grow more than expected too. $PINS finished the session up 4.92%.

What's Rotten

Bed Bath & Beyond ($BBBY) - Wednesday's announcement from this beleaguered retailer and Ape favorite can be summed up with a few words: everything is terrible.

It was a full menu of crappy news: stores are closing, workers are getting laid off, and new debt is being raised to bolster a shaky balance sheet.

Oh, and if that wasn't enough, sales will be lower going forward too.

$BBBY's stock chart is absolutely insane. 88% down from its high in 2014, down 38% YTD, and up 63% in the last month. The monkeys are at it again.

$BBBY closed the day down 21.3%.

Gamestop ($GME) - The OG meme stock has had an August to forget, sinking 17% since the month started.

Chairman Ryan Cohen has the full confidence of the monkeys that own his stock, despite a tough outlook for the rest of the year.

Stemming the tide of quarterly losses is priority numero uno for execs at $GME. We'll see if Cohen and team can deliver for the band of apes relying on them.

$GME finished down 4.02%.

Thought Banana

The WFH Divide - If you're reading this while eating Lucky Charms in your boxers, here's your trigger warning.

The work-from-home tug-of-war between employees and bosses heated up throughout the summer.

Bosses are complaining about being alone in the office while their workers log on from Airbnbs on the beach. Some people are holding 3 remote jobs simultaneously and waiting for the party to end.

Malcolm Gladwell ruffled a lot of feathers recently when he decried WFH, apparently showing his hypocrisy as a coffee shop-dwelling writer himself.

But he's not alone-there's a growing chorus (mostly Boomers) that is loudly resisting the death of the office, claiming it's too important for mentoring and collaboration.

At least for now, employees seem to have the upper hand, as the labor shortage shows no signs of slowing.

CEOs probably wouldn't admit it, but many of them are licking their chops at the chance to yank their employees back to their cubicles in the event of a recession.

Right now, workers told to RTO can pretty much tell their bosses to f*ck off and jump to one of the thousands of remote-first companies looking for people.

But if those remote opportunities start to dry up in a recession, bosses can play the "come back or else" card, and it would carry more weight.

It's hard not to think about the broader implications of WFH. You apes out there just getting your careers off the ground may be able to live in a cheaper location but also might lose out on promotion opportunities and other perks enabled by the office.

On a national level, big cities are desperate for a broader return to offices, as urban restaurants and other businesses that depend on vibrant downtowns are struggling.

On the other hand, up-and-coming cities are more than happy to welcome young, remote Excel grunts who will buy up property and boost their economies.

The point is, a hell of a lot is riding on the future of the WFH movement, societally and economically. The next recession, whenever that is, may declare a winner going forward.

Wise Investor Says

"The stock market is filled with individuals who know the price of everything, but the value of nothing." - Philip Fisher

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