Pick Your Poison | The Daily Peel | 10/6/21

Silver Banana goes to...



Market Snapshot

From the reckoning we awaken. Traders bought tf out of yesterday's dip, sending U.S indices back in the right direction. The Nasdaq rose 1.25% while the S&P gained 1.05% and the Dow jumped on board gaining 0.92%.

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Let's get into it.


Macro Monkey Says

Oil - Energy commodities are having their day in the sun, as much of the world heads into the cold, dark winter season. The all stars, oil and natural gas, are flirting with decade-long highs and have been on an absolute tear since early 2021, representing the shitstorm that is global supply chains right now. Not only is there a shortage in supply of oil going around now (thanks, OPEC+), but even delivering that oil as a final consumer product, like gasoline, is challenging as there are seemingly less than zero truck drivers in the entire country. Just a few days ago OPEC+ came out and gave a giant, petro-soaked middle finger to the entire world by saying they would not change their predetermined plan to gradually raise oil prices. But, hey, this is literally a cartel, so at least they aren't flooding other countries with cocaine.

If you're a big ESG proponent, don't get too happy yet. One of the only other abundant and cheap fuel sources that could be used as a substitute for oil is coal, which is way, way worse for the planet. Despite the phasing out of pollutive energy sources, it turns out oil still basically runs the world. Regardless of your beliefs, diversifying our energy sources can only be a good thing, as this process will decrease fragility by opening up alternative routes to deliver the power behind the goods and services we all love. But, for now, oil remains king and is fighting hard to keep the throne. Don't tell Greta Thunberg I said that.


LIBOR Losers - Markets are going through a lot right now. Pandemic recovery, asset tapering, looming bills totaling $4.5tn, and an energy crisis, just to name a few. Add Fed Governor Randal Quarles friendly (not-so-friendly) reminder of one of the biggest changes financial markets have seen in decades to that list. Yesterday, Quarles stepped on his soapbox and reminded market participants that LIBOR, the London Interbank Offering Rate, has its day numbered.

Currently the base rate for essentially every single floating rate note (FRN) and many other debt instruments, LIBOR is being replaced by the hip, new SOFR, or Secured Overnight Financing Rate. This is a huge deal for the fixed income, rate, and swap markets that have relied on LIBOR since the mid-80s. Right now, LIBOR, the rate that powers some of the largest markets in the world, is based on little more than a daily survey. SOFR, on the other hand, is determined through actual transactions, giving a more accurate rate of supply and demand forces in these markets. SOFR is to LIBOR as an iPhone is to a telegraph. You'll be hearing more and more about this as we approach the massively significant date of December 31st, the last day FRN's get to spend with their old buddy LIBOR.


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What's Ripe

Netflix ($NFLX) - Like D Wade to LeBron, Cowen & Co tossed the ultimate alley-oop to Netflix yesterday, sending shares on a 5.2% ride. Cowen released survey data where U.S consumers were asked what VOD services give the best content. Netflix won by a landslide, and not just because of Squid Game, handily beating YouTube, which many thought would take an easy W. Cowen took on the role of ultimate hype-man for Netflix, as the streaming king will release earnings on the 19th. BTW if you haven't watched Squid Game yet, you're missing out bigtime.

Facebook ($FB) - Satan's dumpster fire, aka Facebook, managed to rally back yesterday and reclaim some of Monday's losses. Shares popped 2.1% after probably the worst news day in the history of social media, as investor's addiction to buying any dip came handy for Zuck's wallet. It appears the firm is laying low after the nuclear bomb that came earlier this week related to platform governance and allegations of destroying U.S society. Believe whatever you want, but $32bn in free cash flow speaks for itself.


What's Rotten

Annovis Bio ($ANVS) - Annovis Bio is getting absolutely hammered. Not like you on Saturday night, but like down 27% in six days kind of hammered. Everyone is pissed - traders, investors, and lawyers, and they are all coming at the firm as it was recently realized that Annovis "failed to disclose" that its lead product was basically a dud. Yesterday, shit really hit the fan, with the firm losing 13.5%.

U.S Treasuries - On Friday, one of two things will happen: we will get confirmation tapering is coming, or, we will remain in this weird limbo state for probably another month. Jobs data for September comes out then, and JPow has basically been saying this whole time that as long as the labor market holds up, tapering will begin. Tapering in all likelihood will cause yields to rise as the Fed eliminates their "artificial" demand of $80bn T-bonds per month. Today, yields fell as investors loaded up on bonds in a display of fear of what Friday's data will reveal. Imagine being scared of a number?


Thought Banana:

NFTs are NFL - Not fucking leaving, not the National Football League. The digital art market, that you either lost money on or are too poor to participate in, roared back in Q3. From a combined $2.4bn sold in the first half of the year, Q3 took it to another level (literally) by shooting up 4.5x against the year's first 6 months and 8x compared to the rookie numbers seen in Q2. This has more to do with prices going absolutely through the roof for some of the dumbest things you could possibly imagine, than it has to do with more normal people getting involved in the space. For example, Bored Ape Yacht Club's cheapest Bored Ape that I could find, recently sold for $194,000 while the most expensive go for close to $3mm. And this makes sense - the $3mm one has laser eyes, so obviously its intrinsic value is 30x its competitive set. Around the world, Axis, from the popular play-to-earn game Axie Infinity are blowing up, clogging the Ethereum network while making millionaires. Honestly, I don't think anyone has any clue what is going on in this market, but like the wise penguin Skipper once said "just smile and wave boys, smile and wave."



Wise Investor Says

"Take feedback from nature and markets, not from people."

Naval Ravikant


Happy Investing,

Patrick & The Daily Peel Team

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