Big banks means big earnings

October 15, 2021 Big banks means big earnings Good morning traders, Welcome back to The Daily Setup. It was greener than your dad's mowing shoes yesterday, as all 3 major US indexes rose over 1%. Here's what's on the docket today: - Demand for coal is heating up (as is the Earth) - Major banks made major money this past quarter - Beyond Meat is going through the drive thru So have a cup of coffee, read through the newsletter, and let's ride into the weekend. See ya Monday, Jeff Chart of the Day – Coal The price of coal (in USD per metric ton, above) has climbed to record highs all over the world. Recovery from the pandemic has ratcheted up demand that suppliers can't meet. The new hunger for dirty energy sources is especially dispiriting in light of recent climate conferences detailing how most nations are [lagging behind]( the goals set by the Paris climate accords. In the short term, dirty energy sources are likely to remain in high demand. The need to transition to renewables is more urgent than ever and will probably speed up, potentially making investments in clean energy infrastructure more profitable. ‘vid vacs, kicking cans, and quittin’ jobs BIGGEST MOVER Can you take me higher? Grove, Inc. (GRVI), a producer and distributor of products containing hemp and CBD, has decided to graduate from its status as drug dealer lite. It expanded into the Amazon aggregator space yesterday by launching its new company, [Upexi](, which aims to [acquire and scale]( Amazon e-commerce businesses. - Shares were up over 60% as of noon on Thursday before leveling off to a modest 39.32% gain on the day. - Investors go bananas over Amazon seller aggregators-- they poured almost $10B into these companies in 2020 alone. It's not hard to see why, as aggregators are basically scaling machines. The pandemic has further accelerated e-commerce spending enough that going big means real big *cough* Thrasio *cough*. - Grove, who's already expanded into the nutraceutical, beauty, and pet care spheres with their CBD products and recent acquisitions, has a strong foothold in markets and a robust advertisement team to offer to prospective businesses that might sell. No, Theranos, we're not looking at you. Action Item: With revenue from their hemp business [more than doubling]( in the past year, Grove's got a strong business model they can use as a springboard into the aggregator space, and investors know it. What makes the company's prospects particularly dank is that they've tied two up-and-coming industries together-- the Amazon aggregate market and that sticky 'icky. Whether or not you feel you've missed the boat on Grove's recent surge, it's worth looking into both of the growing markets. [Major Banks be like…]( U.S. markets rallied more than 1% Thursday in response to strong earnings both on the top and bottom lines of major banks. Investors have been watching corporate earnings closely to gauge the impact of rising inflation, energy prices, and potential interest rate increases over the next two years. [Major bank earnings were as follows](: - Bank of America ($BAC) reported a profit of $.85/share vs. estimates of $.71/share on revenue of $22.8B vs. expectations of $21.8B. - Wells Fargo ($WFC) reported a profit of $1.17/share vs. estimates of $1/share on revenue of $18.8B vs. expectations of $18.3B. - Morgan Stanley ($MS) reported a profit of $1.98/share vs. estimates of $1.68/share on revenue of $14.8B vs. expectations of $14B. - Citigroup ($C) reported a profit of $2.15/share vs. estimates of $1.65/share on revenue of $17.2B vs. expectations of $16.9B. Action Item: Bank of America and other major banks have released or will soon release billions of dollars in reserves that were set aside to absorb potential defaults during the pandemic. A capital-efficient way to trade bank stocks is through the [Financial Select SPDR Fund (XLF)]( which has holdings in all major banks. That is unless you'd prefer to trust your financial advisor at Wells Fargo with all 10 of your accounts (even though you only asked for one). Lead with the Jab Walgreens Boots Alliance ($WBA) [reported a knockout quarter]( on Thursday, sending shares higher by 7.43 at the end of trading. The company may have found a winning strategy to drive traffic to stores by using 'rona vaccines as a loss leader. - The company administered 13.5M vaccines during the quarter vs. expectations of 7M, most likely driven by employer mandates. Looking at you, Southwest. - In a move smacking of vertical integration your business school professors told you about, the company also announced an agreement to invest $5.2B in primary care provider VillageMD. - No word on whether a corporate rebrand is on tap, since Walgreens Boots Alliance sounds like a low level tag team that would always lose to The Road Warriors. ACTION ITEMS: - ✅ Getting foot traffic into stores is imperative for WBA as they fight online competitors, so vaccine mandates and booster demand could be a positive for the company since people popping in for a shot are likely to pick up a Butterfinger and a Fresca as well. Perhaps the Hallmark aisle could be repurposed since nobody in their right mind is spending $7.99 on a greeting card.. Our recommendation? Bringing back drug store wines. After all, there’s nothing a card can say that a bottle of Night Train can’t say better. Slowdown Speed Racer Buy the Rumor [– live look at J-Pow & friend moving towards tapering]( The [FOMC Minutes](, released from committee’s policy-setting meeting held about two weeks earlier, signaled that it [could start reducing]( its bond-buying program as early as mid-November. Sounds like Black Friday is coming early this year. It also mentioned that the [Fed eyes mid-2022]( as the end to its stimulus program. St. Louis Fed President James Bullard once again urged the central bank to pursue a more rapid tapering, as he sees only a 50% probability that inflation naturally dissipates in the next 6-months. Call me crazy, but when the [Dollar Tree considers raising its prices above one dollar](, inflation is uncomfortably high. ACTION ITEMS: - ✅ The CBOE Volatility Index (VIX), otherwise known as the “fear gauge” of the market, has dropped from a high of 24 on October 1st to under 18. The last two times the VIX dropped below this level (September 16th and September 24th), the market sold off over the next couple of trading sessions. This could signal a complacency in the market despite the threat of rising inflation, supply-chain shortages, and rising oil and natural gas prices. Keep the $SPY, $QQQ, and $IWM on your radar to give context to broad market behavior. Microchips and Mickey D’s Other News [All that and a bag of chips]( Taiwan chip manufacturer TSMC, the world's largest contract chipmaker, posted a 14% net profit in the third quarter but warned that it will continue to operate with tight capacity throughout 2022. [Chip shortages have been one factor hampering the global economic recovery](. Sales are expected to grow by 24% in 2021. - To increase chip production, TSMC plans to invest $100B over the next few years to increase production. - They have announced the building of a new manufacturing plant in Japan. - Apple, I'm sure you've heard of them, accounts for almost a quarter of TSMC's revenue. Action Item: [TSMC (TSM) has been trading between $108-$125 over the last six months](. The stock put in a low of $107.58 on October 6, and with this blowout earnings report, may look to retest its range highs of $125. Keep this stock in your watchlist. Two Meat Patties Special Sauce Lettuce Cheese… First off, apologies for putting that old McDonald's jingle in your heads, where it will no doubt be firmly lodged for a week. The house that Ronald built is [testing a new menu item]( called the "McPlant" sandwich made with, you guessed it, Beyond Meat (BYND). The test locations are in California, Texas, Iowa, and Louisiana. Let's just hope for MCD shareholders' sake that the company didn't pay big consulting fees for advice to test a Beyond Meat sandwich in Texas. - BYND shares were up 1.5% on the news but are down about 15% in 2021, possibly due to decisions like trying to sell Beyond Meat in Texas. - This partnership follows the Q1 announcement that YUM Brands would feature "plant-based protein menu items" at KFC, Taco Bell, and Pizza Hut. - I for one am totally on board with the notion that people who frequent the Taco Bell drive-thru at 2 am are concerned about getting their plant-based protein fix inside their Doritos Locos tacos. Action Item: At first glance this seems like more of a needle mover for BYND than MCD, as the horribly named McPlant sandwich seems destined to be the McDLT 2.0. This might fly in California, but in Texas, Louisiana, and Iowa, something tells me that customers would be much more interested in the return of the McRib. If MCD ever tries to sell me a plant-based Quarter Pounder, that clown is going to catch these hands. Vladimir, will you accept this Doge? Trolls and oligarchs all over the world rejoiced on Thursday at the news that [Vladimir Putin tolerates cryptocurrency]( and sees it as a legitimate payment option. Just like [poisoning your political rival]( is a legitimate debate tactic. But while neither regulation nor a ban appear to loom in Russia's future, Vlad's enthusiasm was tempered-- he's repeatedly said [he wouldn't use cryptos to trade]( (yet). - Putin, not exactly famous for open-mindedness, has chosen to broadcast this opinion following China's full-scale ban of the technology and U.S. threats of regulation. If miners are looking for a new safe haven where they can warm the planet in peace, it just might pay for Putin to be a fun uncle about this. - And there's another motive. Ever since 2014, when Putin was hit with sanctions for his excessive love of Crimea, he's complained that the U.S. has used the dollar to control him. But they can't control Bitcoin, or any of the unsavory Russian things he could do with it. ACTION ITEMS: - ✅ BTC is doing well now that the approval of crypto ETFs appears imminent. All international F-you’s aside, Putin’s embrace of the technology is a sign that he, like many other world leaders, believes that cryptocurrencies are here to stay and can thus be leveraged in the global power game (we’re talking about you, El Salvador). That means crypto could see more direct investment, but especially more indirect investment in the form of ETFs like Volt Equity’s, or ARK’s for those having a midlife crisis. [Image] RagingBull, LLC 62 Calef Hwy. #233, Lee, NH 03861 [Unsubscribe from all RagingBull emails]( Questions or concerns about our products? 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