Petroyuan and Oprah's Credit | The Daily Peel | 1/10/23


Give your silver bananas to...

ad logo

Market Snapshot

Happy Tuesday, apes.

Man, the Fed really isn't letting us have any fun, huh? Everything was fine and dandy until the Atlanta Fed President came out and said the Fed should hold a 5% funds rate for a "long time."

That was a major vibe killer, but most equity indices still finished slightly positive. Over in the even nerdier side of finance, treasuries were bought hand over fist, with the 2-year settling around Elon's favorite number, 4.20%.

Let's get into it.

Banana Bits

  • Rock beats scissors, but Bulldogs eviscerate Horned Frogs as Georgia trounces TCU in the most dominant title game AND bowl game in history to become the College Football National Champs
  • The vibes were vibing in tech stocks yesterday as shares in names like Tesla and Nvidia gained like there was a raging global pandemic
  • I wish banks had a name for their employees like tech companies do. Then I could write something like, "Goldman is cutting up to 3,200 of its Sachs in a fresh layoff announcement." Smh…
  • The Winklevii twins have found their biggest beef since The Social Network dropped in DCG's Barry Silbert. The tweets are hysterical…for corporate America

Paradise? No, but Here's a Smarter Way to Manage Your Deals.

banner image

What we're supposed to say: The SRS Acquiom suite of M&A solutions can take you and your clients from pitch book to post-closing yadda yadda. Our experienced team will deliver unbiased and precise support across this, that, and everything else.

What you really need to hear: SRS Acquiom is one big solution to help you get every little part of the deal done right without fantasizing about your resignation letter the whole way through. Our private client portal, virtual data room, and more equip you to open things up strong, close them up strong, look great to your clients and colleagues, and get on to the next thing. There are plenty of specifics we can provide, and that's what our website is for.


Macro Monkey Says

Wrong Place, Wrong Time, Wrong Everything Else

2022 has been the year of Elon Musk. To be fair, he and his shenanigans have been a pretty big deal basically every year since about 2015, but this time it really was different.

And while the attention he's garnered this year is largely due to his completion of the most overpriced acquisition maybe ever, taking a look at Musk's day job as CE-*ahem* Technoking of Tesla provides maybe the clearest lens into the 2022 zeitgeist that you can get.

Right off the bat, we know that 2022 has been crazy, and who, I ask, is crazier than Mr. Musk himself? Exactly, almost no one, and certainly no other S&P 500 CEOs.

But, of course, it goes deeper. Let's take a peak and see if we can find out exactly what the f*ck I'm talking about.

Tesla's stock price in 2022 began right around $400/sh. 12 months and -72% later, shares trade right around $112, essentially summing up the brutality of this year's stock market.

With Tesla being the high-flying growth name that it is, this downfall shows that simply being big no longer cuts it for surviving a market downturn with little in terms of losses. It wasn't just a stock getting cut, it was the growthiest growth name in Growthville, and shares got absolutely shlacked.

Further, in years past, investors have poured money into megacap tech to take cover when markets aren't on their best behavior. The duck-and-cover trade into big tech names provided absolutely no shelter from the bombings of 2022, suggesting that finding safety in markets may now only be accomplished by finding safety in actual safe investments like treasury bonds.

But Tesla isn't just a growthy-ass tech company, is it? No, kinda the opposite in a traditional sense. At the end of the day, it's still a car company, and boy, did those have their fair share of problems these past few years.

C-19, macro headwinds, and supply chain meltdowns have all slammed into Tesla like a Model 3 slamming into a highway guardrail. While far from specific to the Austin-based car maker, Tesla sits at the top of the list of companies that got f*cked by all of the above, and maybe that's largely due to China.

Zero C-19 really pushed the pause button on production in the nation for a while, not to mention deteriorating demand caused by weaker consumption trends and new competition. Plus, Tesla isn't even close to being out of the woods yet. Just this week, the firm had to close the doors of its largest plant, based in Shanghai, for *hopefully* only about a week or so.

So what we see here in Tesla isn't simply a car/tech titan controlled by a madman. We see a car/tech titan controlled by a madman that's also a helpless victim of the times, taking on forces like mangled supply chains, EV competition, economic headwinds (not to mention rate hikes), and so much more. For a microcosm of the state of macro and markets, look no further than to Elon and his homie Tesla.

What's Ripe

Coinbase ($COIN) ↑ 15.06% ↑

  • Strike up the band, pop the champagne, and strap on your seatbelts; we're heading back to the moon, apes!! Okay, maybe let's actually calm down. Yes, Monday was the first good day for crypto since 'Nam, but let's take a look at why.
  • Stocks exposed to digital currencies have demonstrably tracked the price of BTC and others with a tight correlation. As these assets broadly gained yesterday and over the weekend, the exuberance bled into stocks.
  • Meanwhile, Coinbase alone also has a ~30% short interest, that's 6x the average for US stocks, and this thing is considered a "leader" in crypto, so just imagine what we're looking at for the others.
  • Lastly, optimistic bulls that think, "it can't get much worse than this, right?" are licking their chops at this dirt-cheap stock right now. I won't tell you what its current P/E is, but let's just say it's the same as the number of dots after this sentence…

Salesforce ($CRM) ↑ 4.69% ↑

  • Like showing up to your first AA meeting, Marc Benioff and the team have taken the first step in solving any problem: admitting they have one.
  • Remember all those elite memes back when Salesforce bought Slack and seemed to accidentally add a few zeroes to the price tag? Me too, and now that's coming back to haunt them.
  • Benioff and team have been thinking nonstop about cost-cutting and expense-waste management, especially revealed in the company's all-hands meeting last Thursday. And what's Wall Street's second favorite thing besides money growth? That's right, cost reduction.

Join 80,000+ Wise Primates

Subscribe to get the most critical market moves each morning, Monday through Friday.

What's Rotten

Lululemon ($LULU) ↓ 9.29% ↓

  • When life gives you lemons…you end up succumbing to inflation and downgrading your Q4 gross margin guidance, letting shares tumble nearly double digits in a single day.
  • That's how the saying goes, right? Either way, it was Lulu's reality to kickstart this glorious week. For Q4, aka the most important quarter for retailers, upward cost pressure driven by inflation took a bit out of Lulu's lemons, spooking investors.
  • But, conspicuously absent from the ticker tape was the athleisure leader's (that's a mouthful) rising revenue forecast for the same period. Still, 25% sales growth ain't worth a time when inflation reigns supreme, apparently.

Macy's ($M) ↓ 7.68% ↓

  • This thing has been headed for the grave since we were all shopping there for our 8th-grade semi-formals. But you know what? It just won't die!
  • Or will it? After yesterday's performance, Macy and the rest of her department store friends might need CPR. Shares plunged 7.7% after providing similar but almost opposite guidance to Lulu.
  • Basically, Macy told us that she expects sales to have slowed throughout Q4 while not anticipating a material hit to EPS for the holiday season. How that is possible in the face of eye-gouging inflation is anyone's guess, but we'll find out in March when the company's full-year numbers drop.

Thought Banana

The Most Powerful Weapon Ever

Nope, not the atomic bomb, hydrogen bomb, or even your career as a weapon of academia.

We gotta go bigger. Fortunately for Americans, the US still does control the most powerful weapon in the world, that, of course, being the US Dollar.

Sure, dropping a bunch of dollars on a city won't eviscerate it immediately. But the inflation that follows might, and for what it's worth, economic warfare can get particularly nasty.

2022 gave us a front-row seat to this fact. Russia's invasion of Ukraine was met, in geopolitical terms, immediately with the ousting of oligarchs and others from countless economic privileges controlled through USD, such as the SWIFT payments network. But what happens in war? Oh yeah, people fight back.

And that's exactly what we've seen from countries such as Russia, Iran, and in particular, China and Saudi Arabia. You've almost definitely heard of the petrodollar, but the new guy on the block is officially the petroyuan.

China, as the world's largest oil importer, naturally has an interest in controlling the currency it uses to pay for its oil imports. Unfortunately for Xi, nearly 90% of international trade involves an exchange of USD for X asset somewhere along the way. But as of late 2022, China had already penned a $30bn oil deal with Saudi Arabia in order to buy the goods via Chinese exchanges. The petroyuan was born.

Of course, $30bn is pennies when we're talking about the market for FX and/or international trade. This isn't a freak-out moment like when the FDA almost banned Juuls, but it is a step in the direction of concern for US international interests.

And as usual, JPow didn't do much to help either. Tightening monetary policy means higher anticipated returns on that asset, driving that same asset's value up a mountain. This is exactly what we saw with the dollar's immense gain throughout most of 2022.

But, when the US Dollar's market value increases, that means other countries have to use more of their currency to get a USD. As you can (hopefully) already tell, other nations hate to see a rising USD.

Putting all of this together, we can see the direction things could head. For the US to maintain its absolute, utter economic and geopolitical dominance held since the end of the Cold War, controlling the global reserve currency is a must. For China, it's a must-destroy.

While everyone was anticipating the first shots to be fired in the South China Sea, it seems as though the economic Cold War is already raging in your wallet.

The big question: Does the petroyuan deal signal a broader trend in the international community to move away from reliance on the USD? If so, what's next??

Banana Brain Teaser

Yesterday You are outside the room with 3 switches, each controlling one of the light bulbs. If you can only enter the room one time, how can you determine which switch controls which light bulb?

Turn on two switches (call them A and B) and leave them on for a few minutes. Then turn one of them off (switch B) and enter the room. The bulb that is lit is controlled by switch A. Touch the other two bulbs (they should be off). The one that is still warm is controlled by switch B. The third bulb (off and cold) is controlled by switch C.

Today - It's 100 bananas off the Hedge Fund Interview Course for the first 15 correct respondents. LFG!

First, I threw away the outside and cooked the inside. Then I ate the outside and threw away the inside. What did I eat?

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

Wise Investor Says

"Everyone always says, 'What's the catalyst?' Well, you never know until after the fact." - Jeff Gundlach

Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel here.   ADVERTISE // WSO ALPHA // COURSES // LEGAL

Join 80,000+ Wise Primates

Subscribe to get the most critical market moves each morning, Monday through Friday.

Comments (1)

WSO Monkey Bot, what's your opinion? Comment below:

Earum laboriosam numquam ab asperiores. Eum sunt alias ad ex eos maiores facilis aperiam. Alias autem nisi eos quis modi accusantium eum. In est doloremque ut et quis.

Qui ad facilis dolorem aut pariatur. Nihil debitis et qui aspernatur. Totam alias quibusdam officia placeat ipsam nam. Explicabo consequatur repellat at.

Et voluptas distinctio et modi illo aut. Sunt laudantium sit veniam repellat cupiditate. Eum voluptatem unde praesentium beatae omnis et. Natus eum similique magni minus voluptatem aut.

Amet est debitis minus maxime velit corporis nihil. Eveniet fuga ipsa fuga et maxime consequatur architecto nisi. Accusantium ab provident beatae. Totam ducimus distinctio nulla sint quia molestiae.

Start Discussion

Career Advancement Opportunities

March 2023 Investment Banking

  • Lazard Freres (+ +) 99.5%
  • Lincoln International (= =) 99.1%
  • Jefferies & Company (▽02) 98.6%
  • Financial Technology Partners (▽01) 98.2%
  • William Blair (▲10) 97.7%

Overall Employee Satisfaction

March 2023 Investment Banking

  • William Blair (▲04) 99.5%
  • Lincoln International (▲11) 99.1%
  • Canaccord Genuity (▲17) 98.6%
  • Stephens Inc (▲10) 98.1%
  • Financial Technology Partners (▲04) 97.7%

Professional Growth Opportunities

March 2023 Investment Banking

  • Financial Technology Partners (▲05) 99.5%
  • Lincoln International (▲01) 99.1%
  • Lazard Freres (▲14) 98.6%
  • Jefferies & Company (▽03) 98.1%
  • William Blair (▲02) 97.7%

Total Avg Compensation

March 2023 Investment Banking

  • Director/MD (6) $592
  • Vice President (27) $425
  • Associates (141) $260
  • 3rd+ Year Analyst (9) $194
  • 2nd Year Analyst (86) $170
  • 1st Year Analyst (264) $171
  • Intern/Summer Associate (45) $165
  • Intern/Summer Analyst (194) $92