In Search of Good Economists | The Daily Peel | 1/10/22

  Market Snapshot

Another day, another dollar, unless you're invested in the stock market. U.S. indices saw another red day to close out last week, bringing 2022's first week of returns to a loss of 2.5% for the S&P. Specifically on Friday, the nation's primary index lost 0.41% while the Nasdaq dropped 0.96% and the Dow barely budged but still lost 0.01%

Let's get into it.

 

Macro Monkey Says

Jobs - Like me continuously attempting to manage my portfolio, economists must love to make themselves suffer. Friday's jobs report (and my 2021 returns) confirm these facts.

After predicting 422,000 job additions for the month of December, Friday's report showed that these estimates missed the mark by about 76%, clocking in only 199,000 hires across the country. Nice try guys, but once again, way off.

Meanwhile, the unemployment rate dropped to 3.9%, getting closer and closer to the pre-pandemic level of 3.5%, which, if you recall, was a 50 year record low. Putting last month in perspective, things are looking not-too-bad for the U.S. labor market. Considering we had record setting COVID cases all throughout the month courtesy of our new friend Omicron, companies adding 199,000 non-farm payrolls is pretty decent. Once again, leisure and hospitality led for growth within sectors, adding 53,000 employees.

A highlight of the report showed that wage growth increased above expectations, rising 4.7% YoY and giving most of those gains to lower-income earners. Still, when we recall November's CPI print of 6.8%, that rise, to put it frankly, ain't sh*t. We'll get December's CPI reading on Wednesday, from which we can really put wage growth into perspective.

As always when the Employment Situation Summary is released, everyone wants to know what this means for interest rates. The truth is that it's unclear, but we can still do what we traders love to do and speculate wildly. Realistically, this report likely won't influence JPow or the FOMC's opinions too much as the growth we saw proved adequate all things considered. If we saw truly abysmal or even negative growth, this would be a different story.

Now, all eyes turn to Wednesday for the aforementioned CPI report. Hold on to your bananas, apes, it's gonna be a fun month.

 

 

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What's Ripe

GameStop ($GME) - What you're about to read may sound absurd, but given that meme'ing is the only strategy that worked for GameStop in literally decades, it kinda makes sense. The video game retailer and king of Robinhood traders announced last week that it would be jumping into the NFT space by creating their own marketplace for the digital assets. Investors loved it and showed their affection by sending shares up 22% at open only to close out the day up 7.34%.

Of course, the GameStop NFT hub will center around skins, weapons, and other video game related items, but that's not all. The company is leaning heavily into the cryptoverse by partnering with crypto-specialized firms to develop new games that use blockchain and NFT technologies. I guess when you have a successful strategy, you might as well lean into it, hence this strategy of meme-squared. If it ain't broke, don't fix it.

DraftKings ($DKNG) - Degenerates rejoice, especially those of you that find yourselves in the state of New York. This past Saturday, online sports betting officially became legal in the state, although if you're reading this newsletter, you probably already know that. The timing here is immaculate for DKNG and other betting names as the NFL Playoffs roll around, meaning gambling degeneracy will be off the charts in the weeks to come. Now it's time to go and get your bag, although if you're a DraftKings shareholder, Friday's 5.6% rise already secured it for you.

 

What's Rotten

The New York Times ($NYT) - I guess being around the Knicks and Jets too much has started to rub off on the New York Times. Shares, like those teams, have been an absolute disaster recently, culminating in Friday's 10.7% fall. The stock received that brutal beating on news of an announcement that the NYT plans to acquire fellow news org The Athletic for a cool $550mm all in cash. The risk-on acquisition comes at a time when subscriber growth has slowed for the NYT and company management hopes that The Athletic can bring about more revenue and subscribers in a new niche that the stalwart of news media has historically struggled with.

Nvidia ($NVDA) - When Frank Sinatra in 1966 said "I've been up, and down and over, and out…", he may not have known it, but he was aptly describing Nvidia's 2022 trading patterns. Shares found themselves in the down category on Friday, losing 3.3% for some opaque reasons. Analysts theorize that a weak showing at CES was the primary driver despite positive comments on the stock from Citi dropping the same day. Sometimes, it's clear that analysts forget randomness exists, and it seems likely we have a case of the randoms on our hands.

Thought Banana:

Anotha One - Bob Dylan, Bruce Springsteen, Neil Young, and Stevie Nicks are all music legends. But what else do they have in common? They made absolutely obscene amounts of money selling the rights to their music to large companies mostly in the private equity space. Add to that list one Mr. John Legend, who just did the same.

Legend, who's 43, sold copyrights and royalties to KKR and music group BMG. While the terms weren't disclosed, odds are it was a whopping amount considering Dylan got $300mm for his and Springsteen took in a massive $550mm for his music catalog. What makes Legend's deal unique, however, is that he is much, much younger than his catalog-selling compatriots. 

There's a lot going on in music lately. It seems that royalty investing, purchasing the rights to intellectual property and other assets, is growing quite popular with yield-starved but cash-rich investment firms. And it's understandable. If I saw that one of my homies took in over half a billion dollars by signing a piece of paper, I'd be next in line too. 

Wise Investor Says

"The financial markets generally are unpredictable. So that one has to have different scenarios…The idea that you can actually predict what's going to happen contradicts my way of looking at the markets."  - George Soros

 

Happy Investing,

Patrick & The Daily Peel Team

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