Shake It Off | The Daily Peel | 9/15/22

Silver Banana goes to...

Market Snapshot

After the worst day in over two years, markets attempted a hump day comeback.

Bulls played down the inflation data that crushed stocks yesterday, pointing to a minimal month-over-month increase.

But the YoY jump is what struck fear in investors who are expecting to get walloped by JPow at the September meeting.

At the close, the Dow ticked up 0.10%, the Nasdaq gained 0.74%, and the S&P rose 0.34%.

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Let’s get into it.

Banana Bits

Banana Brain Teaser

Macro Monkey Says

Bankers are old school. Deal-making shouldn’t be.

What's Ripe

Nikola ($NKLA) — Wonder where they got the inspiration for their name…

This non-Tesla EV maker has had a rough go of it in the last few years.

Last year, its founder Trevor Milton was indicted for fraud for, and this is a direct quote, lying about “nearly all aspects of the business.” Ouch.

But $NKLA popped on Wednesday after an analyst report pointed to tailwinds from the Inflation Reduction Act and higher nat gas prices that could give the stock a boost.

It closed the day, having gained 6.76%.

Moderna ($MRNA) — Gotten that third C19 booster yet?

Moderna and Pfizer are rolling out Omicron-focused boosters across the country, advising people to knock out their flu shot and C19 booster in one visit.

But the main reason the stock jumped Wednesday was CEO Stephen Bancel’s comment that the company is chatting with China about supplying it with C19 vaccines.

Nothing is finalized yet, but a billion additional vaccines means $$$.

$MRNA closed the day up 6.17%.

What's Rotten

Steel Stocks — The steel industry has always been sensitive to the temperature of the economy, and they’re getting rocked by a slew of headwinds.

Higher energy costs are shrinking margins. Lockdowns in China have reduced demand in one of the world’s biggest steel markets. Rising interest rates suggest slower demand going forward.

Investors don’t expect much growth from this industry overall, so as long as the big players can keep dividends and buybacks flowing, they should be able to weather the storm.

Nucor, Steel Dynamics, and U.S. Steel dropped by 11.31%, 8.99%, and 8.63%, respectively.

DISH Network ($DISH) — You’d think the streaming revolution would kill a company like DISH, but they’re still kicking. Unfortunately, the stock is at the same level it was in 2002.

Believe it or not, there’s still a segment of Americans that like good ol’ linear TV. Its streaming arm, Sling TV, competes with YouTube TV and other streaming-like services that operate more like a traditional TV package.

Investors hope that the legacy DISH business can keep chugging along while Sling TV continues to grow. But there’s never been more competition in that space than there is today, so it’ll be an uphill climb.

It ended the session down 6.27%.

Thought Banana

Chips Are on the Table — It’s hard to overstate the global economic and political implications of chip manufacturing. In a world where just about every product has a computer inside it, controlling where and how these chips are made significantly influences power dynamics.

It seems pretty straightforward then—create incentives to supercharge chip manufacturing in the U.S., and it won’t be so reliant on Taiwan and other foreign producers to make complex products.

Intel broke ground on a gargantuan semiconductor plant in Ohio on Friday, surrounded by cheering politicians, including Joey B.

So why has Intel’s stock price gotten cut in half in the last year?

Turns out that national security and shareholder returns may not totally be aligned here. Capital-light companies that can print money are the darlings on Wall St, and chip manufacturers that require billions of dollars in Capex to build factories don’t exactly fit that mold.

A mix of government subsidies and protections has historically reduced the incessant focus on returns on capital in places like Japan, Taiwan, and South Korea. So, naturally, the market prioritized making chips there instead of in the more expensive U.S.

In short, it’s more complicated than it seems to ensure chip security. If Joey B and team are dead set on making them in the U.S., it’ll require heavy subsidies and government interventions to overwhelm the free market’s interests.

Wise Investor Says