Equities tried their damndest to keep that Friday energy going yesterday, but apparently, by about midday, traders realized it was, in fact, Monday, and stocks became just as depressed as the rest of us. Still, through all that, the main U.S. indices were basically flat as the big dawgs like Apple and Alphabet carrying the team on their backs. Bonds ran with the pullback in yields that kicked off last week but bounced higher late in the day, while natty gas sold off like it just got C-19.
Let’s get into it.
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I wouldn’t blame you if you thought you had wandered into the Berenstain household over the past year or so with all these bears walking around.
Rarely is anything normal in investing, but seemingly just as rare are periods where things are as purely backward as they have been since that stupid virus showed up.
Nevertheless, it’s far too common for market watchers to think we got it all figured out. Everyone knows hindsight is 20/20, but it’s easy to forget that foresight is almost 0/0.
With that said, obviously, I am the one who actually does have it all figured out and knows absolutely everything. You’re welcome in advance, but let’s talk about what has been maybe the most anticipated recession of all time.
The homie Ryan Detrick, CMT has blessed FinTwit once again with his not-so-simple yet simplistic observations. This time, he points out that just a few weeks ago, market sentiment, as measured by the AAII Sentiment Survey, hit a 52-week high. Clearly, traders were just excited to celebrate the beloved Valentine’s Day, but since then, Mr. Market has taken a turn.
Sentiment now is so bad that bears outnumber bulls by just under 2x (thanks again, Ryan). Investor feelings about the future seem even more volatile than the stocks they’re trading, but one trend has been clear since about last summer: most people appear bearish and expect a recession.
Anecdotally, RiskReversal head and regular CNBC panelist Dan Nathan went into depth this past week about how difficult it has been to find guests for his podcast that disagree with
, and these guys have been more bearish than Smoky.
More statistically, but still only a survey, the Michigan Consumer Sentiment remains about even to where it sat in April 2009.
But, as Michael Batnick points out here, the S&P 500 is roughly 10.5% higher since June of last year, the same month sentiment bottomed. Despite the substantially depressed sentiment levels, enormous rate hikes, and huge spikes in treasury yields, equity markets have been surprisingly strong.
Warren Buffet says to be greedy when others are fearful, and if you did that at max broad economic concern reflected by the consumer, you might actually be doing just fine.
What's Ripe
BridgeBio Pharma ($BBIO) ↑ 51.98% ↑
Short kings rejoice! A company you’ve never heard of is here to save us all from the despairs of being…let’s go with “vertically challenged.”
Last time I said I’d venmo anyone who’s heard of a no-name company like this, I was made a fool, so let’s try to avoid that this time (for as long as possible at least).
BridgeBio Pharma, a biopharma firm (duh) out of Palo Alto just published results from a clinical trial showing that their drug for dwarfism caused patients to show an average annualized improvement of 3.03cm to their heights.
Shares soared, just like the height of the company’s patients. Nothing’s official yet, as it’s just preliminary data, but we might all be able to stop capping in our Tinder bios soon enough.
Snap Inc ($SNAP) ↑ 9.48% ↑
Snapchat’s come a long way. First, its target audience was teenagers, and now the company’s primary target? Joe Biden.
Never thought I’d see the day, but it’s 2023, and nothing makes sense anymore, so f*ck it. Nevertheless, Snap shares boomed yesterday, gaining nearly 13% midday to finish just under 9.5% up.
Basically, lawmakers are preparing actual legislation to ban your favorite app in the United States. If TikTok does get hit with the Joey B ban, you might have to resort to that garbage “Spotlight” TikTok-carbon-copy on Snap’s photo app. Investors got hyped on the news.
What's Rotten
Spirit Airlines ($SAVE) ↓ 8.76% ↓
The only company less capable of achieving a soft landing than the Fed proved that point yesterday as shares tanked thanks to the Department of Justice.
Rather than one of their pilots doing it, the DOJ sent the company into a tailspin yesterday as news broke that the department intends to buck the pending merger between this garbage airline and the slightly less garbage airline, JetBlue, on antitrust grounds.
This’ll be a long court battle, and no one’s excited, least of all shareholders. Now, it’s just a lawsuit for now, so the deal could very well still go through. Spirit was valued at $7.6bn on the OG merger terms and closed yesterday under $2bn. Anyone tryna get a piece of that arbitrage?
Silvergate ($SI) ↓ 6.24% ↓
You don’t fall nearly 98% in less than a year and a half for nothing. Last week, the non-crypto crypto bank began its fall off a cliff as it dropped the morbid phrase of “going concern” difficulties while delaying its quarterly filings.
Yesterday, we found out the firm is even more FUDed. Silvergate suspended its crypto payment network and once again made sure the whole street knew that everyone from the teller to the CEO have doubts about the firm’s viability. But the question is, you still buying the dip?
Yes, the war in Ukraine has absolutely been a humanitarian disaster and a great tragedy of the 21st century already. No one is glad that it occurred or is ongoing, and the Russian invasion was entirely unjustified. But…
If we had to find one group that might be a little less outraged at the war, that would be commodity traders.
According to a study by Oliver Wyman, as reported by the FT, commodity trading profits have been estimated to have hit a record of $115bn in 2022, smashing any and all previous years.
These trading profits come from one thing: volatility. It’s a trader’s best friend. And over the past year, all the volatility we may have expected in stocks may have just been hogged by the commodity market.
I mean, even yesterday, prices of natural gas crashed by over 12% by midmorning alone on mild reports of increased output by Freeport LNG and slightly smaller-than-expected demand for the energy commodity in the U.S. and Europe this week.
We talked recently about how commodities of all kinds, like energy, metals, softs, and alike, haven’t exactly behaved as a textbook may have predicted at the start of the invasion. Well, safe to say this absurd volatility, whether causal or symptomatic, might be playing just a bit of a role.
According to the report, “gas, power, and carbon trading” drove the majority of the estimated surge in trading profits. Commodity trading giant Glencore benefited particularly well, tripling profits and raking in over $17bn.
As geopolitical tensions seem to continuously simmer, these commodities will likely become even more exposed to regulatory and political risk in markets across the world. More profits could be incoming, but let’s just say that a bull market in the space wouldn’t exactly be great for JPow and his inflation bestie.
The big question: How will commodity markets perform as the Russian invasion of Ukraine heads into a ramping-up phase this spring? Can traders expect similar profits in the coming years, or was 2022 a total anomaly?
Banana Brain Teaser
Yesterday— I have no voice and yet I speak to you, I tell of all things in the world that people do. I have leaves, but I am not a tree, I have pages, but I am not a bride or royalty. I have a spine and hinges, but I am not a man or a door, I have told you all, I cannot tell you more. What am I?
A book.
Today — It’s 150 bananas off the Venture Capital Coursefor the first 3 correct respondents. LFG!
Travel a mile and I will change, travel a million and I will end as I started, What am I?
“Buy when everyone else is selling and hold until everyone else is buying. That’s not just a catchy slogan. It’s the very essence of successful investing.” — J. Paul Getty
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