weekly market update
""inflation is real" - everyone else" - the Fed
This is a weekly market update (I post daily to TikTok). I publish these once a week (beta phase), as well as single stock pieces (1-3x a month) and macro deep-dives. I also publish on TikTok, Youtube, and Twitter!
YouTube Linked HERE
Fun fact, i’ve never seen the office. that is how deeply it has integrated itself.
Market
The market closed weaker this week because the Fed hinted at tapering, which tbh, is pretty rude of them. This market wants easing and !easing! only (bonds responded loudly to this). ~Read the room~, they say.
Inflation: Jamie Dimon is positioning for rising interest rates by “hoarding cash” which will allow JP Morgan to buy higher-yielding assets when inflation does manifest. My prediction? Dimon will run for President soon.
Everyone is expecting inflation. Mostly because the supply chain is running super hot - but what happens when demand does temper down, and we have oversupply? We are in unprecedented times - and structural weakness in the supply chain is BAD, but oversupply and underconsumption could be worse?
The Real Bitcoin ETF: MicroStrategy is taking full advantage of their financial engineering tools and issuing $1bn in common stock + $500mn in bonds to get some more ~Bitcoin~. It has no time to wait for the SEC to approve a Bitcoin ETF! It will become ONE.
Malls are Dying: Washington Prime Group filed for Bankruptcy. I am not sure how to feel about this - I’m actually pretty bullish on physical retail vs e-commerce especially post-COVID. But malls are gross and expensive.
The importance of incentives: Oil companies are rewarded much more for cash generation vs exploration/capex - so guess what they are going to focus on?
Anything can happen. Remember negative oil? It’s completely recovered since - that’s why I worry about the “inflation is permanent” argument. How we think about market mechanics seems to be completely flipped on its head.
High Yields: There is a ton of junk debt - lots of companies with terrible balance sheets getting additional funding because there is a dry up in liquidity. HY Credit spreads are tight - meaning that there is literally no premium to them relative to IG or Treasuries.
People are confident in the economy (but are they actually considering the compression in yields over the weekend???), considering this rush into corporate debt - but what happens when rates rise? We have a lot of zombie companies - might be time to send them to the grave.
Also the stock/bond correlation gets tight when inflation rises - so if we have a grossly over leveraged system, potential inflationary pressures, and stocks at ATH (which isn’t a bad thing!) - what does that mean for diversification opportunities?
Some Single Stock Ideas
Ulta is a really powerful company. That’s all. Never underestimate vanity and luxury.
White Claw is not a powerful company. Watch that space. They are going the way of Cider.
RBLX is doing music! We love revenue diversification.
Only Fans is going public! Valued at $1bn - I think its worth much more. Never understate vanity, luxury, and lust!
OnlyFans for a $1 billion valuation: - 130M registered users - $2 billion in Sales in FY20 - Takes a 20% Cut on Creator Sales - Sales upwards of $400M - Apparently growing at a rate of 100% in FY21 - London Based Value Investment
The Economy
Used car prices are absolutely rocketing. Forget about AMC and GME, used cars are going to the moon.
Infrastructure is broken. We have to fix it and invest. But that is a long term solution to a problem that people want short term solutions to.
Margin debt is at all time highs, which is incredibly concerning! to say the least!
FOMC Meeting
THERE IS A NEW DOT PLOT. The Fed median projections show two rate increases by end of 2023. The market lost its mind when it first saw this - but Jerome reminded it that the dots ~really dont matter~ and it calmed down (until the end of the week at least)
EVERYONE WANTS RRP - They raised the RRP rate by 5 bps and now we will easily get to one trilly. Even Zoltan was wrong about this.
Even after liftoff, the Fed expected to remain accommodative. Powell trying to remain dovish, but there are a lot of hawks - and talking about talking about it can be retired. Let’s just say we are quickly moving towards taper - potentially quicker than what Powell was hinting at.
Crypto
Crypto is still going through it.
Coinbase hired someone from the SEC, which is really sneaky of them! Smart to evade the law in this way. Few.
Dogecoin is successful because of their community. not anything else
Titan - have a tiktok on this (see below). Basically, it lost the peg, bad spiral downwards. Or it was a rug pull.
Stablecoins acting wacky.
The Week Ahead
The market has a lot to digest this week, and I think we are going to see some acid reflux. Futures were red over the weekend, and bond yields cratered because of the FOMC announcement - only time will tell!
Earnings
Economic Data
Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Great content!