👀 Inflation, just like the 80's 📉

January 13, 2022 Good morning traders! Welcome back to The Daily Setup. Markets were up slightly yesterday. Here’s what’s on the docket today: - Jefferies reports earnings - Consumer Inflation hits 7% YoY - Checkout.com’s valuation reaches $40B Let’s make today a good one. Nick How’d the markets look? Market Outlook 👀 DOW 36,290.32 +0.11% S&P 500 4,726.35 +0.28% NASDAQ 15,188.39 +0.23% BITCOIN $43,897.80 +2.82% Jefferies earnings, Inflation, and Checkout.com BIGGEST MOVER Bad News On Deck for Banks? Like breakups and birds & the bees, some conversations are inherently difficult... but annual reviews for traders on Wall Street this year must be tough considering buying an S&P 500 Index fund likely turned out better. Jefferies Financial (JEF) [reported results]( on Wednesday and trading revenues were down, particularly in the fixed income area. Shares fell by 9.27% on the day. - Overall trading revenue was down 28% from the year prior, with fixed income leading the nosedive by falling 50%. Thoughts & prayers to JEF traders at bonus time. - The company’s total revenue was [down 3% YoY]( to $1.81B but investment banking was a bright spot, up 5% from last year. - Unsurprisingly, the company said it would focus on building out its capital markets business going forward. Hopefully for shareholders’ sake they didn’t pay some consulting firm millions of dollars to tell them that. I’m watching JEF because it may be a harbinger of what other banks may announce, granted we won’t have to wait long since Jamie Dimon’s crew and Citigroup both report earnings Friday. Growing investment banking results may also be a sign of continued M&A activity in the broader economy. But if there’s one takeaway from Jefferies earnings, it’s that it should replace its trading desk, if they need to improve performance. Inflation, just like the 80’s The 80s called-- they want their inflation back. The [December 2021 CPI]( numbers rolled in yesterday, and YoY inflation hit 7%-- the highest it’s been in almost 40 years. The last time inflation was this high was back in '82... it was falling after a whopping [14.8% climax]( during the Carter administration (seems like everything climaxed during the Carter administration, except Bill, who instead climaxed when he was in office). Here’s to hoping it’s the same this time around. - It looks like we’re on the comedown. Spikes in product prices and delivery times [started easing]( in December, and gas prices dropped 0.5% (though food prices rose as much). Plus [J-Pow said]( everything would get better this year, and he’s never been wrong. - Another reason for hope is the low unemployment ([3.9%]() that prompted aggressive Fed action and seems to signal the weakening of COVID. It’s almost like laborers matter. - On the other hand, unemployment is low mostly due to wage increases, which have both increased general purchasing power and business costs- two factors that exacerbate inflation. [57%]( of small businesses raised prices in December, and 50% plan to institute more price hikes in the coming three months. There’s no obviously preferable course of action here since Omicron introduces uncertainty into the inflation equation. Inflation generally seems like it’s leveling off, which is good across the board (but especially for bonds) and bad for volatility-loving stores of value like fine art and gold. But if Omicron causes further supply chain disruptions (more on that later), the consequent inflation will f*ck bonds in particular, and be bad for everything but gold. The wise thing would be to wait. Price Guns Blazing London based fintech Checkout.com now[sports a $40B valuation]( after raising $1B in its latest fundraising round. That’s right, it raised a unicorn’s figure in just one round (calm down [bronies](). The company didn’t raise outside money until 2019, but now is up 20X from that initial round, meaning early investors can actually afford to go grocery shopping these days (or at least have someone do it for 'em) - Checkout.com is an online payment processor that moves money between customers and merchants, which has been a nice sandbox to play in while most of the world has been stuck at home for two years. - The company plans to use the capital to fund its U.S. growth and grow its cryptocurrency business, which helps customers move money in and out of digital assets. - New investors included Franklin Templeton and the Qatar Investment Authority. CEO Guillaume Pousaz, who sounds like he should be prepping for the [luge]( at the Winter Olympics instead of running a tech startup, said the company plans to go public eventually but is in no hurry. He expects the company to “have a long life in the public market” but “we have a couple years before we get there”. Note to self, be on the lookout for the impending S-1. Baer Bull on Crypto Token Talk Don’t sell your sh*tcoins just yet. SEBA Bank AG, a specialist in digital assets, raised 110M Swiss Francs (or [$119M in real money]() on Wednesday. Investors included such heavyweights as Julius Baer Group, Alameda Research, Altive, and DeFi Technologies, the last of whom recently struck [a partnership deal]( with SEBA. - The Swiss bank said it would use this money to expand into Asia-Pacific and the Middle East, though they were coy about the valuation that the funding round netted. - Maybe that’s because SEBA wants to lay low. See, crypto received more money in 2021 [than in every other year combined](, prompting the SEC to lick its regulatory chops. That in turn has set off a surge of interest in (presumably) more legit crypto investment vehicles like large institutional investors. That looks good on paper for SEBA, but may turn sour if the bank gets too loud and proud and the SEC decides to eat them for lunch. Further institutional investment in crypto is good for the market in establishing its legitimacy for the long term, but each cash infusion brings the SEC a step closer to regulation. When that happens crypto prices will likely tank, at least in the short term. Granted prices are already doing that now without regulators help. More supply chain woes Rumor has it HSBC analysts warned on Wednesday that we’ll be in for a [holy mother]( of a supply chain crisis if the full force of Omicron hits China. The world’s largest trading nation has generally fared better than the Western world thanks to especially aggressive measures taken to preempt infection- but that kind of makes them a COVID time bomb in the event that they fail. - And failure seems to be upon them. Seaport hub Ningbo and tech production center Shenzhen have [both]( been temporarily shut down thanks to spikes in the virus, and dozens more confirmed cases have rolled in from [other provinces]( like Henan and Guangdong. If the outbreaks get bad in these last two places, you can kiss your semiconductors (read: everything you love in this world) goodbye. - The reason these factories didn’t close before was China’s “zero-Covid” policy, which enabled them to keep factories and supply chains open at the cost of [their citizens’ individual liberties]( and [access to basic resources.]( Zero Covid means zero fun. - China may still be able to avert catastrophe. Some factory owners are opening up alternative facilities that can quickly rotate in for a shuttered OG factory, so fingers crossed for risk distribution. If China gets it bad then almost everything will suffer. I say almost because countries that have already sustained and managed their Omicron surge could pick up China’s production slack and see the value of their currency appreciate (read: the U.S. and Europe). Check out low-risk options like bonds of European banks and index funds for the European and U.S. stock markets. Link Roundup 📿 Other News Other News Link Roundup - Fifth Harmony was right, you CAN work from home – Robinhood allows employees to permanently work remotely ([link]() - See you in September Liz, good thing orange is an autumn color – Holmes to be sentenced this fall ([link]() - Ain’t no party like a BoJo party – British PM in hot water over lockdown party ([link]() - Bah Gawd, that’s The Trustbuster’s music! – WWE sued for monopolistic practices ([link]() - Billy Bitcoin bets big – Legg Mason’s manager Bill Miller has half his net worth in BTC ([link]() Enjoy another day at your 9-5, [via @businessinsider]( [Unsubscribe from all RagingBull emails]( Questions or concerns about our products? 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