Omi-C’mon | The Daily Peel | 1/25/22

 Market Snapshot

Mr. Market must’ve broken his neck yesterday because that whiplash was like riding Kingda Ka with your eyes closed. Falling almost 4.3% by noon, the Nasdaq still managed to lead U.S. indices into the green, finishing up 0.63%. Meanwhile, the Dow rose 0.29% and the S&P followed closely rising 0.28%.

Let’s get into it.

 

Macro Monkey Says

Omi-C’mon — If you’re the kind of person that eats food, listen up. You may have noticed an uptick in empty shelves and disappointed moms in grocery stores across the country lately. If this is true, I assure you that you’re not alone.

Like bell-bottom jeans and leather jackets, empty shelves are coming back in style. This time, however, it’s not because of pandemic hoarders, but rather issues on the supply side. The Omicron variant and its success of going viral have stifled the recovery of global supply chains, from keeping workers at home to making sure groceries don’t reach your home, more than ever right now according to some industry executives. Looking at the chart from the WSJ below, you can get a sense of just how problematic this is.

It’s been nearly two years since C19 pulled up to the party but we’re still trying to kick this guy out. Since then, U.S. labor force participation rates have yet to fully recover, while a Census bureau report from a few weeks ago highlights that 9mm Americans were temporarily out of work on account of falling ill with the O or its parental variants or taking care of someone else who did. It goes without saying that nearly 10mm people being unable to work is not a great sign for a nation’s labor market.

Still, as we’ve said before, the pandemic has arguably given the power to the people for the first time since the steel strikes of the early 20th century. There’s good, there’s bad, we’ve seen the ugly, and now we’re hungry. Here’s a tip — if you can, hit the grocery store in the AM, you just might be the old people to that last Bang Energy.

In-stock levels of selected products in US retail stores

This Week — Apes, it’s gonna be a fun week. Not necessarily in stock price returns of course, but we got a Fed meeting on deck later today and plenty of earnings coming. Buckle up, it’s gonna be volatile.

The FOMC will start their first meeting of the new year later today. When I say all eyes are on JPow, I mean literally every single eye. Even Hellen Keller would be watching because this meeting is set to be the most consequential in months as investors are dying to hear the Fed’s thoughts on everything from inflation to geopolitical tensions to interest rate policy. Bear in mind the Fed is still actively buying bonds and will continue to do so until March, so if we hear any change of course in our planned monetary policy tightening process, you might need two seatbelts.

Wrapping up on Wednesday, the end of the FOMC meeting doesn’t mean the fun is over. Tesla reports earnings on Wednesday and Elon has promised to return to the investor call this time. If that’s not interesting enough for you, be on the lookout for Microsoft, Apple, Boeing, Robinhood, Raytheon, Lockheeed Martin, McDonald’s and plenty more who all drop earnings this week. Coincidentally, that is also probably a sneak peek at what you’ll find in What’s Ripe and What’s Rotten later this week as well. 

Stay tuned.

 

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What's Ripe

Unilever ($UL) — Activists and acquisition targets alike for Unilever recently have really been pulling the company’s…lever. Yesterday, it was all about activists, and one in particular. Nelson Peltz and his hedge fund Trian Partners have reportedly built a stake in the consumer goods giant. After taking an activist role in P&G back in 2018, industry experts weren’t too surprised by Peltz’s interest in Unilever, but nevertheless, the market was. Shares gained 8.6% in hopes that Peltz can save the day.

Kohl’s ($KSS) — $9bn is a whole lot of Kohl’s Cash, but that’s not stopping Sycamore and Acacia from trying to scrounge it together. PE firm Sycamore Partners and Acacia Research Corp are going to war this week in a heated competition to buy Kohl’s. Acacia began firing with a $64/sh offer to which Sycamore pulled the classic “Price is Right”-move and offered $65/sh two days later. Both offers are substantial premiums to Friday’s close, which sent shares up 36.0% yesterday on the battle. 

 

What's Rotten

Netflix ($NFLX) —  NFLX investors will soon be wishing Squid Game was real if shares keep moving like this. After losing nearly 22% on Friday alone, investors weren’t at all convinced that that was the bottom, sending shares tumbling another 2.6% yesterday. Missing those subscriber numbers hurt, but disappointing on subscription growth expectations going forward was the true knock-out blow. Rumors have it that the executives will be running their own Money Heist soon.

Tesla ($TSLA) — Has Cathie Wood set up a GoFundMe yet? With Tesla down 1.4% today and over 22% YTD, she might need to look into that soon. EV stocks almost across the board got hammered yesterday, largely due to continued consensus for incoming rate hikes. 

But that’s not all. Tesla is reporting earnings on Wednesday, a usually joyous occasion for Musk’s investors, so it’s interesting to see shares trade down so much going into it. Saying the firm has a lot to live up to is a major understatement. Shareholders will be looking for continued insane growth like they saw with last year’s ~90% growth in vehicle sales. Good luck to stockholders and even more luck to you, options degens.

Thought Banana:

Shut Up and Take My Money — Is it just me or is there something ironic about using dollars to fund a new financial system? Like, imagine if Instagram was so cash-strapped they started running ads for TikTok… that’d be a little weird. Well, it doesn’t matter because ironic or not, that’s exactly what’s happening.

And as of 2021, it’s happening at record levels. We’ve discussed many a time how VCs were venturing their capital more than ever last year, but it’s time to spotlight the digital asset market. In 2021, $32.8bn flowed from VCs to crypto/blockchain startups — more than every single other year in history combined. That $32.8bn helped stand up at least 47 crypto unicorns, and no that’s not just another random sh*tcoin. That’s 47 cryptoverse startups with at least a $1bn valuation. Although, “crypto unicorns” isn’t a bad name…

Within that $32.8bn, investors spread their bets across a bunch of sectors (sectors?) within the digital asset world. 43% of funds poured into TradFi challengers like decentralized exchanges, lending protocols, and trading & investing services while another 17% was thrown into NFT, web3, and metaverse startups, leaving the other 40% to be dumped into “sectors” like infrastructure, custody, law, and whatever else is out there.

While we can’t shoutout specific coins or projects for you to throw money at (thanks,  Patrick), what we can say is – watch out. Watch out for a bunch of cool new projects coming soon, some of which might finally be useful in everyday life. Digital currencies and blockchain startups are officially VC certified, but keep in mind that venture funding hit $643bn in 2021, record levels of its own. There’s two ways to look at that: 1) 2021 was a wildly speculative year with record VC funding in itself so of course blockchain startups got more investment than ever or 2) blockchain startups are still only 5.1% of the total VC investing pie. Choose wisely. 

Wise Investor Says

“If you don’t know who you are, this is an expensive place to find out.” — Adam Smith (pseudonym for George Goodman)

 

Happy Investing,

Patrick & The Daily Peel Team

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