Four rate hikes, Jerry

January 11, 2022 Good morning traders! Welcome back to The Daily Setup. Markets were mixed yesterday. Here’s what’s on the docket today: - Zynga gets acquired - Goldman Sachs calls for four rate hikes - Bitcoin is in the news thanks to... Kazakhstan Let’s get to work. Nick How’d the markets look? Market Outlook 👀 DOW 36,068.87 -0.45% S&P 500 4,670.29 -0.14% NASDAQ 14,942.83 +0.04% BITCOIN $41,666.19 -1.70% Zynga, Rate hikes, and Crocs BIGGEST MOVER Let’s play a game Zynga skyrocketed [40.67%]( Monday on the news that it will be acquired by Take-Two Interactive for a cool $12.7B. As is typical of acquisition announcements, Zynga saw big gains, while Take-Two tumbled [13.13%]( to $142.99 by markets’ close-- though some of Take-Two’s plunge may be due to investors’ fear that another developer could outbid them (wouldn’t be the first time [EA stole their girl](). - Take-Two is paying $9.86/share, a [64% premium]( on ZNGA’s Friday closing price. - This is a clear bid by Take-Two-- the developer of Grand Theft Auto and Bioshock-- to expand into the mobile market. While Take-Two predicts just 12% of its net bookings in fiscal 2022 to come from mobile gaming, it expects that number to grow to [50%]( by fiscal 2023. Take-Two also believes the deal will save [$100M annually]( in cut costs. - Meanwhile, Zynga lucked the f*ck out. Known for creating FarmVille and Words With Friends, the mobile developer had a rough year despite the stay-at-home trends of the pandemic, with shares falling [nearly 40%]( in 2021 while the S&P 500 rose 23%. Many see this announcement as validation for a long-undervalued Zynga, and thus a smart move by Take-Two. Zynga’s products transformed online gaming-- for better or for worse-- by making microtransactions more popular and games more addicting, and Take-Two is highly respected in the console space. The hit to Take-Two’s stock is all about a.) classic market activity and b.) the suspicion that the deal’s not a sure thing-- but only because the acquisition’s such a good idea that other developers might try to have it. If the deal goes through, Take-Two’s in a good place. Would you believe... four rate hikes? No, you were close, Jerome. Really, you were.^ Goldman Sachs announced on Sunday night that it expects the Fed to serve up [four rate hikes]( this year, in March, June, September, and December. The bank also moved its timeline for the Fed’s balance sheet runoff up to July. So grab your popcorn, because sh*t’s about to get normal. - Goldman attributed its new predictions to a tightening labor market and the Fed’s new hawkish ‘tude. Now that unemployment has dropped below 4%, J-Pow finally seems to feel that upside inflation risks outweigh downside growth risks. And [nonfarm payrolls]( can go f*ck themselves, I guess. - This killer combo has Goldman thinking that the Fed will simultaneously raise interest rates a whole percentage point and shrink the size of the [$8.8T balance sheet]( via [passive runoff,]( aka just sitting there while bonds mature and not reinvesting the proceeds. Once again you’ve got your classic rate hike story. In the short term stocks take a hit while bond yields rise, but the long view is harder to suss out. In the past, news of more and faster hikes has increased market optimism with the promise to slow inflation, but that won’t happen if a global market contraction follows rate hikes. That event would send bonds even higher and stocks still lower. The more secure everyone feels, the better bonds will fare. Just look at bonds from banks across the pond. Looks like someone had a case of the Mondays Crocs (CROX) had a rough day and probably needs to sit down, take a load off, and soak the old feet. Shares of the ugly footwear maker beloved by chefs and nurses alike were down almost 7% during intraday trading [before closing the day]( down 2.47%. This came despite raising its growth expectations for 2021 to 67%, up from the 65% predicted by analysts. Investors are never happy. - The company also provided a revenue estimate of $2.31B, up from previous expectations of $2.28B. Crocs’ 2020 revenue was $1.38B demonstrating that ugly rubber clogs are an economic growth engine. - Crocs [acquired Italian footwear company]( Heydude in December, and this nugget of information sent me on a quest to find out if the Nickelodeon show from the early nineties of the same name is streaming anywhere online. Good news, it’s on Paramount Plus. - In case the standard clog style isn’t heinous enough for your taste, Crocs also makes boots that somehow take the worst aspect of Crocs and Uggs and blends them together into an eyesore smoothie. This one might be one for my watch list, as Crocs doubled in share price last year. The shoemaker had a strong 2021 and management is projecting the momentum to continue in ’22. And for those curious, [Hey Dude]( ran from 1989 to 1991 and featured a young Christie Taylor before she was snubbed for the Oscar for her performance as [Kate Veatch]( in Dodgeball: A True Underdog Story. Crazy in Kazakhstan Token Talk ^ me and the boys when Bitcoin prices go back up The Bitcoin hashrate is almost back to full strength after being slowed for several days thanks to an [internet blackout in Kazakhstan](. The small nation is the second biggest Bitcoin miner in the world behind only the United States (USA! USA! USA!), so when its miners were online the network’s computing power fell by 11%. - Kazakhstan has been dealing with a smattering of civil unrest recently after protests broke out over a rise in electricity prices. - The Kazak power grid has struggled to keep up with increased demand due to Bitcoin mining which is surprising because I think we all expected a small Central Asian former Soviet country to have state-of-the-art infrastructure. - The [protests]( saw 164 people killed and over 8,000 detained and the nation’s president referred to them as “terrorist aggression” so things seem to be going well over there. Bitcoin prices have been falling in recent weeks, and briefly fell below $40K... granted these levels could present buying opportunities. The situation in Kazakhstan merits continued monitoring, however, as the country is important to the Bitcoin network and future hashrate slowdowns could impact prices. Or maybe just go watch Borat again. Shooing Away the Flu Rumor has it A [universal flu vaccine]( may finally be on the horizon, thanks to COVID, the gift that keeps on giving. Pfizer (PFE) and Moderna (MRNA) are working on flu shots that use mRNA technology which could create vaccines that are more effective against the seasonal flu than traditional annual shots. - The traditional shots are only about 40%-60% effective, and by the end of the season that figure can fall to 10%. - When mRNA technology is used, the dominant virus strain is all that needs to be sequenced, allowing for speedier development and production times. - If scientists are successful, a one-time shot that protects against all flu strains may become a reality. Way to shrink your market base guys. If ‘rona boosters don’t wind up becoming an annuity for Pfizer and Moderna they are going to need another area for growth, so the flu may be an opportunity to leverage existing technology for new markets. Pfizer is also working with BioNTech on a [Shingles vaccine]( based on mRNA technology, that is when they aren’t too busy sponsoring every show on television. Link Roundup 📿 Other News Other News Link Roundup - Unicorn hunting – SEC to force private companies to disclose more information to the public ([link]() - Meta macks on Microsoft – Facebook’s parent company poaches Microsoft employees to build Metaverse ([link]() - It makes cars go – BofA calls semiconductors the economy’s “new oil” ([link]() - High demand – Tilroy’s revenue spikes 20% as marijuana grows more popular ([link]() - Your money or your life – A weak pandemic and conservative Fed spell trouble for gold ([link]() Do you remember this episode? [via @tobin_tweets]( [Unsubscribe from all RagingBull emails]( Questions or concerns about our products? Call or text us on your mobile: 1.800.123.4567 © Copyright 2020, [RagingBull]( - [Refund Policy]( - [Privacy Policy]( - [Terms & Conditions]( DISCLAIMER: To more fully understand any Ragingbull.com, LLC ("RagingBull") subscription, website, application or other service ("Services"), please review our full disclaimer located at [(. FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. Any RagingBull Service offered is for educational and informational purposes only and should NOT be construed as a securities-related offer or solicitation, or be relied upon as personalized investment advice. RagingBull strongly recommends you consult a licensed or registered professional before making any investment decision. RESULTS PRESENTED NOT TYPICAL OR VERIFIED. RagingBull Services may contain information regarding the historical trading performance of RagingBull owners or employees, and/or testimonials of non-employees depicting profitability that are believed to be true based on the representations of the persons voluntarily providing the testimonial. However, subscribers' trading results have NOT been tracked or verified and past performance is not necessarily indicative of future results, and the results presented in this communication are NOT TYPICAL. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, market dynamics and the amount of capital deployed. Investing in securities is speculative and carries a high degree of risk; you may lose some, all, or possibly more than your original investment. RAGINGBULL IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Neither RagingBull nor any of its owners or employees is registered as a securities broker-dealer, broker, investment advisor (IA), or IA representative with the U.S. Securities and Exchange Commission, any state securities regulatory authority, or any self-regulatory organization. Employees, owners, and other service providers of [RagingBull.com](, LLC are paid in whole or in part by commission based on their sales of Services to subscribers. WE MAY HOLD SECURITIES DISCUSSED. RagingBull has not been paid directly or indirectly by the issuer of any security mentioned in the Services. However, Ragingbull.com, LLC, its owners, and its employees may purchase, sell, or hold long or short positions in securities of the companies mentioned in this communication. [Unsubscribe from all RagingBull emails](