Grandpa Joe and Crypto

March 10, 2022 Good morning traders! Welcome back to The Daily Setup. Markets were way up yesterday. Here’s what’s on the docket today: - The buzz about Bumble - Amazon is in the DOJ’s crosshairs - The President issues an executive order on crypto Let’s make today a good one. Nick How’d the markets look? Market Outlook 👀 DOW 33,286.25 +2.00% S&P 500 4,277.88 +2.57% NASDAQ 13,255.55 +3.59% BITCOIN $41,716.29 +8.31% Bumble, Blackrock, Amazon, and Blackrock BIGGEST MOVER What’s all the buzz about? Shares of the dating app Bumble shot up [41.90%]( yesterday following the release of [Q4 earnings and full year 2021 results]( so rosy that BMO analysts upgraded the stock from "market perform" to “outperform.” While BMBL’s Q4 revenue fell short of expectations, clocking in at [$208.2M]( compared to the expected $209.6M, the number was up 25.8% YoY, while [EBITDA grew 24.3% YoY to $54.8 million](. The lovestruck BMO analysts went so far as to express their belief that the stock could pop off [up to 200%]( in the future... meanwhile I can’t get a match. - CEO Whitney Wolfe Herd [explained]( that Bumble’s success was due to its ability to accomplish its goal of simultaneously scaling up and increasing profitability. Yup. That checks out. - Bumble did warn, though, that the next quarter’s earnings will take a hit from the Russian invasion of Ukraine, since BMBL suspended service in Russia and Belarus and people can’t exactly party in Ukraine right now (their words, not ours). As a result Bumble will lose about [2.8%]( of its customer base. - While this price action generated lots of buzz, it’s worth remembering that prior to the spike BMBL’s stock was down [nearly 66%]( from its February 2021 high (read: when the company went public). So the company’s still making up lost ground. Still, things are looking up for Bumble. The app has passed the initial management test of figuring out how to handle economies of scale, and this sea of change in public sentiment should give Bumble the momentum to keep the turnaround alive. It’s a buy from me (and BMO). The bigger they are... Snoop Dogg famously called this exact development years ago. Who’s ready to rumble? A bipartisan congressional committee sent a [letter]( to the DOJ yesterday claiming that Amazon [lied about anti-competitive practices]( and refused to disclose information that would have shown evidence of that misconduct. At issue is how Amazon [used its data from third-party sellers]( to develop its own private brands and then prioritized those in-house products on Amazon search results... and then lied about it under investigation. But maybe it’s nothing, because Amazon continues to deny everything-- and [why would they lie?]( - You might remember that an Antitrust Subcommittee investigated Big Tech eons ago, before the plague and color TV. But while the Subcommittee tore into Apple, Alphabet, Amazon, and the artist formerly known as Facebook in October 2020 for [general antitrust antics](, Amazon’s the only one still in their crosshairs for "obstruction." - When asked to provide evidence that showed that Amazon didn’t make anticompetitive use of third-party data, the company’s lawyers refused, claiming they had [proved Amazon’s innocence without supporting evidence.]( You know, how you prove things, without evidence? It seems like further investigation is both warranted and on the way. If the DOJ required AMZN to do more scrupulous advertising it’s possible that profits would wane over time, but at the moment Amazon’s stock hasn’t taken much of a hit from the news of the letter. Though the company’s had a rough week, Amazon’s stock was up [2.40%]( yesterday by markets’ close and over 6% afterhours. If I owned AMZN, I’d be holding for now. A Bad Bet on Red Every turbulent market period inevitably leads to stories about bold investors who make a killing on trades that go against the grain. Blackrock ([BX]() is going to need some vodka after one of their in-house hedge funds saw the invasion of Ukraine as an opportunity to [plow headlong into Russian stocks](. Bold doesn’t always mean right however, and the Emerging Frontiers fund is probably regretting putting 9% of its assets into Russian stocks in February. - The fund lost 10% in the month of February and currently has no Russian exposure as all positions were written down. - The brains at BX thought Russia was a buy after a research trip in January that highlighted cheap valuations and an undervalued currency. Note to self, never trust a research team that thinks it is a good idea to visit Russia in the dead of winter. - Blackrock halted all purchases of Russian stocks across its fund universe on February 28th, to which shareholders replied, “Nyet sh#t Sherlock”. Intrepid researchers may try to find out what the rest of the Emerging Frontiers positions are and open fire, because hedge funders are wonderful people and like to attack one another when there is blood in the water. Other funds on the [wrong side of the Russian trade]( when the Iron Curtain dropped include EDL Global Opportunities, H2O Asset Management, and Pharo Management. Those guys are probably snapping up [vintage Ladas]( to flip right now. Russia highlights the trouble with emerging markets, as they rarely seem to emerge. We're From the Government and We're Here to Help Token Talk President Biden [issued an executive order]( that directs Federal agencies to build the regulatory framework in the crypto space using a unified approach. Government being government however, the Treasury Department released a positive response to the order before the White House actually announced anything. Your tax dollars at work. The crypto market reacted positively since at first glance it [doesn’t appear too onerous]( and a unified approach should prevent the Treasury, the OCC, and the SEC from getting into a circular firing squad situation. - The order focuses on six areas: consumer protection, financial stability, illicit activity, U.S. competitiveness, inclusion, and innovation. - Investor protection looks to be one of the hot buttons for the Feds, because letting adults make their own financial decisions is an alien concept in Washington. - Los Federales are also concerned about illegal activity and use cases that would leverage crypto to avoid sanctions, which is a strange thing to worry about for transactions that take place on a transparent public blockchain. Besides, cash has never been used for any illicit activity so their concerns are totally justified. The order does not take an official position on crypto and tasks the Treasury to create a report on digital assets and the "future of money". The neutral initial position is probably the best crypto investors could hope for since the government didn’t drop the banhammer from the start. The Commerce Department looks to be the leader in developing the actual framework, which is another positive development. One could only imagine how the markets would have reacted if the DOJ or FBI were the lead dog. GE is Making Moves, Welcome to 1996 Deals and Rumors Like American Idol and Major League Baseball, General Electric ([GE]() is trying to remain relevant in the modern world. The company [announced some corporate initiatives](, and rumors are swirling about what the fate of its legacy insurance business will be. A $3B stock buyback is the big news, because nothing says innovation like buying your own shares. GE will also suspend operations in Russia, except for power generation and healthcare. - The buyback should be welcome news to shareholders after the past several years have focused on debt repayment to the tune of $87B. The market [reacted positively](, sending shares up 3.52%, but you have to wonder if holders would prefer the money be used to juice the 0.36% current yield. - GE doesn’t write long term care insurance anymore, but still has a block of business on the books that it needs to find a home for. - The company is expected to provide further details at an [investor event]( today... The eventual landing spot for the insurance portfolio will be something to watch for when GE splits into three companies focused on aviation, healthcare, and power generation. If the company can’t find a buyer for the block of policies, it may decide to saddle the business that it perceives to have the weakest prospects with the insurance albatross. Link Roundup 📿 Other News Other News Link Roundup - Panic attacks and products?? – Twitter diversifies business by adding shopping feature for retailers ([link]() - Wake up sheeple – 1 in 5 American adults left their jobs in 2021 ([link]() - Gotta take the highs with the permanent, terrifying highs – Analyst warns that exorbitant prices and labor shortages could mean decades of high inflation ([link]() - Or else Gary gets to give you a Wet Willie – SEC ruling requires companies to disclose data breaches within 96 hours ([link]() - Bringing back the early 2000’s – LimeWire pivoting from pirating to return as NFT marketplace ([link]() - Guess everyone forgot about inflation – Congress proposes $13.6B bill to aid Ukraine and fund the government ([link]() Meme of the day He might be onto something here, via friend of the newsletter [@elonmusk]( Questions or concerns about our products? 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