Staying Positive | The Daily Peel | 3/29/23

The Daily Peel...

Mar 29, 2023 | Peel #429

Silver banana goes to...

Vantage Point.

Market Snapshot

Happy Wednesday, apes.

Nerves were high, volume was low, and prices were all over the place. The equities trade on Tuesday was stubbornly range bound as insecurity-plagued investors waited for an actual catalyst to emerge.

Mega Caps were weak on the day as underlying breadth wasn’t strong enough for a sizable move in either direction. Ultimately, the main US indices had another Pinot Noir day, ending on a light red note.

Meanwhile, treasury yields continued to climb, with the 2-year not finishing decidedly above that key 4% mark. The 10-year climbed in tandem, although to a lesser degree, as the bond market continues to call cap on JPow’s planned “higher for longer” strategy.

As we said, it was Pinot Noir day, and we only hope that continues for you tonight on this wonderful Wine Wednesday.

Quick side note: we need your help! We’re conducting a quick survey about the working conditions in IB this year. We’d like to know how you feel about your hours, pay, and culture. The survey will only take <5 minutes, and it’s completely anonymous. Please click here and share your insights with us.

Now, let’s get into it.


A.I. Forecasts: Understand the Banking Debacle


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Quick note to report that VantagePoint forecasts have proven to be accurate in predicting the banks that were shuttered and stopped trading, as well as the banks still trading. What will go down in the history books of the banking industry also represents a pivotal feat for this technology.

Artificial intelligence forecasts are not merely a "nice to have," but a necessity to make informed decisions in these turbulent times.

Trade with confidence with the most powerful technology in the world, and register to Watch Live How It Works In This FREE LIVE A.I. Market Training.


Banana Bits

  • Add another point to the “Gen Zers might actually be able to buy a house someday” column as home prices cool, and even fall in some forsaken cities, in January
  • Wow, I guess having digital access to your bank account in your pocket 24/7 (along with VC investor panic attacks on Twitter) really did accelerate the bank run at SVB… whoulda’ thunk??
  • The King of Wall Street will soon testify over his firm’s decision to keep a certain (now) dead pedophile on as a client…yikes, Jamie
  • Prominent Russians are starting to tweak over a looming, sanction-induced financial crisis expected to come next year

Macro Monkey Says

Confidence isn’t Key; It’s THE Key

The highest inflation rates in decades, an S&P 500 still flirting with bear territory, and a historic bank failure with lingering contagion…how’s everybody doing today?

Apparently, very well, at least according to consumer confidence reports, that is.

The Conference Board, a non-profit research organization out of NYC, on Tuesday, reported findings from its latest consumer confidence surveys, essentially conducting a vibe check on consumers for the month of March.

Given all that tomfoolery listed above, you, me, and every economist on Earth would probably expect the average American to be down horrendous right now. Spoiler alert: they are not; far from it.

Expectations were for a modest reading of around 101. Keep in mind, anything above 100 means consumers are more confident than they were when the 1985 benchmark of 100 was set. Luckily, confidence isn’t subject to inflation (as far as we know), but March’s consumer confidence reading still came in at a towering 104.2.

To say the very least, that was way above expectations. Now, consumers are generally an optimistic bunch, expecting tomorrow to be a little bit better than today, as it has been for decades across the world, particularly in the West.

But amidst the 2nd and 3rd largest bank failures in history?! Consumers feeling themselves this much is just a little strange, and frankly, that’s the confidence I wish I had when talking to someone at a bar.

Anyway, to be fair, this is just a tiny uptick in sentiment from the February reading of 103.4 in February. But like we always say, it’s not about the level; it’s about the direction.

If you had told me two weeks ago that consumer confidence would be up this month, the conversation would’ve ended right there. Despite coming in contrast with the University of Michigan’s reading earlier in the month, which showed sentiment contracting, this reading shows that tighter conditions across the lending and the broader financial sector hasn’t been nearly enough to kill the spending vibe among consumers.

That’s something we need to hear right now. At the end of the day, the performance of the US economy over any given period centers around one thing: the health of consumer spending. Historically, confidence and spending have a surprisingly weak correlation, but in this economy, we’ll take all the wins we can get.

Moreover, a lack of confidence is exactly the kind of thing that sparks, I don’t know, the 2nd and/or 3rd largest bank runs in a nation’s history with the potential to trigger more. So, seeing this slight tick-up should help keep the nightmares away for now.


What's Ripe

Alibaba ($BABA) ↑ 14.26% ↑

  • Like Voldemort with his Horcruxes, Alibaba has decided that it can only be better if the company splits itself up into a bunch of little pieces. On Tuesday, Alibaba, which is basically the Amazon of the East, announced it would be splitting into 6 different units that are far too wordy to list here.
  • After facing years of intense regulatory scrutiny that has done nothing but rip value out of the stock, management at Alibaba has decided that the parts are worth more than the sum. Soon, legacy Alibaba will go from conglomerate to holding company, with the potential to be holding 6 different publicly traded or otherwise externally financed subsidiaries.
  • See, stocks tend to get valued at multiples applied to their least exciting business unit. The lowest common denominator wins, so when you trap a booming cloud business like that of Alibaba under the umbrella of a retailer, some of that value-add from higher multiples is bound to disappear. Needless to say, investors were psyched, and now, one can only turn an eye to Amazon to see what this implies over in Bellevue.

AMC Entertainment ($AMC) ↑ 13.19% ↑

  • Speaking of Amazon, this might be the first time we’re writing about AMC for an actual reason! Let’s find out why.
  • Now that this shitco, uncomfortable-chair-a** movie theater chain is priced at less than 1/10th of what it was less than 2 years ago, it turns out there might actually be some potential here, at least according to founder and (ex) CEO Jeff Bezos.
  • According to reports out of The Intersect, the now-legendary CEO is exploring an acquisition of the movie theater chain to serve as a key marketing and branding tool for Amazon’s booming entertainment biz. Like how Apple stores act as holy sites to the iBrand, these theaters could serve as a driving touchpoint for Prime consumers and, of course, soon-to-be consumers.
  • It appears that Bezos’ quest to occupy every facet of your life is not over. No official terms have been offered nor any confirmation given, but the reports were all AMC needed to have a much needed good day.

What's Rotten

Lyft ($LYFT) ↓ 7.60% ↓

  • It appears that Lyft shares took Snoop Dogg’s sage advice when he said, “pop it like it’s hot, drop it like it’s hot,” a little too literally…
  • What started out as a big compliment from Wall Street quickly turned into a big middle finger as Lyft shares took a turn for the worst about 5 minutes into Tuesday’s session. Shares had opened up a clean 5% on news that Uber’s little brother was shaking up its management team.
  • Obviously, anyone getting a promotion, including new CEO David Risher, replacing the two co-founders, took this as a huge compliment. However, 5 minutes into not-even-actually-started tenure, Risher made the mistake of implying that the company wasn’t simply just looking to kill itself.
  • Did I say kill? Sorry, meant *sell, my bad, but it is essentially the same thing for a company of this stature. Mr. Market’s selloff following the news of Lyft wanting to remain its own company kind of speaks for itself, no?

Affirm ($AFRM) ↓ 7.34% ↓

  • Alright, once again, we ask that someone somewhere starts playing taps. Tim Cook is coming in for the kill.
  • Affirm, the buy-now, pay-later tycoon that rode the pandemic wave like a world-class surfer, is under literally the largest possible pressure it could be in. As of yesterday, the firm now counts Apple as one of its competitors.
  • Apple watchers have been waiting for this for a while. The ginormous super-company officially announced its “Apple Pay Later” service, which functions exactly how it sounds: you buy now but pay in periodic installments *later.* Unfortunately, that happens to be exactly what Affirm does, and as Apple can easily build this into a default setting on its somewhat popular smartphone, investors got a tad spooked.

Thought Banana

SBF’s Cell Just Got Even Smaller

Just as we all keep getting older, the pending trial of Scum Bag-Fraud just keeps getting better and better.

And by that, we, of course, mean that the scumbaggery just gets even scumbaggery-er (stay with me here). Turns out, according to reports swirling yesterday from the (former) crypto wunderkinds’ prosecution team, this man (allegedly) paid $40mn in bribes to a Chinese official.

Yikes. If that sounds horrifically bad to you, trust your instincts.

Essentially, this bribe was a classic case of “c’mon, pretty please with $40mn on top?” Prosecutors allege that Scum Bag-Fraud himself ordered a $40mn digital currency payment from an Alameda Research wallet to a private wallet address linked to a top Chinese official.

If that’s not bad enough, payments out of the same wallet made at a later date for “tens of millions” worth of digital assets were made to “complete” this sketchy-a** payoff.

(Allegedly) The purpose of this (alleged) bribe was to “influence and induce one or more Chinese government officials to unfreeze certain Alameda trading accounts containing over $1 billion in cryptocurrency, which had been frozen by Chinese authorities.” Crypto in all forms has been illegal in China for years now, meaning this bribe is a direct violation of the US’s Foreign Corrupt Practice Act.

For those wondering, the explicit purpose of this act is to prevent Americans from bribing foreign officials to conduct or retain business…which is exactly what SBF’s $40mn payment to unlock $1bn locked up in Chinese-based addresses was for.

All in all, this likely won’t have too much of an impact at trial. The guy’s already (allegedly) committed wire fraud, securities fraud, and every other kind of fraud under the sun, along with a little campaign finance law violation mixed in. Maybe we get a few more years tacked onto the sentence, but considering how boned Scum Bag-Fraud already was, this is really just even more reason to point and laugh.

And it’s important to remember that the 3 next highest execs at FTX have already turned on SBF in an about-face more predictably than Congressmen asking ridiculous questions at the TikTok testimony. Sadly, we’ll still have to wait until October for this absurdity to go to trial. But we’ll keep the popcorn warm and buttered until then.

The big question: When (or I guess, “if”) SBF does get locked up, what kind of a sentence are we looking at? How do newfound bribery charges in China impact Americans’ and American regulators’ views of this nascent space?


Banana Brain Teaser

Yesterday — An open-ended barrel, I am shaped like a hive. I am filled with the flesh, and the flesh is alive! What am I?

A thimble.

Today — It’s 150 bananas off the Private Equity Master Package for the first 3 correct respondents. LFG!

A three-letter word I’m sure you know, I can be on a boat or a sleigh in the snow, I’m pals with the rain and honor a king, but my favorite use is attached to a string. What am I?

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


Wise Investor Says

“The key to successful investing is not predicting the future, but managing risk.” — Howard Marks


Happy Investing,

Patrick & The Daily Peel Team

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