J-Pow J-pologizes

[The Daily Setup] March 22, 2022 Good morning traders, Welcome back to The Daily Setup. Markets were down yesterday thanks to comments by the Fed. Here’s what’s on the docket today: - Jerome Powell discusses more aggressive action - Goldman Sachs gets further into crypto - Berkshire buys Alleghany for $11.6B Let’s make it a good one. Nick How'd the markets look? Market Outlook [Market Outlook] Bravo for Anaplan Biggest Mover [Activision Blizzard, Inc. ]( Shares of financial planning software company Anaplan rose [27.64%]( yesterday on the announcement that giant software investor [Thoma Bravo will acquire Anaplan]( in a $10.7B all-cash deal. TBA will pay $66/share, which represents a [30.46% premium]( on Friday’s closing price and a 46% premium on last week’s five-day weighted average. The deal will take Anaplan private and is expected to close in the first half of this year. - According to analysts, this generous $10.7B valuation is nonetheless justified. Some expect the rival of SAP, Microsoft, and Oracle (ever heard of ‘em??) to grow its revenue [more than 30%]( for the fiscal year of 2023 and maintain that trend into the future… which one admittedly expects of a financial planning company. - But also, it’s not like Thoma Bravo really struggles to conjure up this kind of funding. Thoma Bravo has over $103B in assets under managements and has acquired or invested in [over 375 companies]( in the past two decades, so Anaplan’s a drop in the bucket for them. - Still, it’s a big purchase– Anaplan has over 1,900 employees. It was also [started]( [in a]( [barn](, a fact that has no bearing whatsoever on this story or anything Anaplan does but which the press can’t get enough of because there is truly nothing interesting to say about business performance management. This deal looks good for both companies. Thoma Bravo’s picked a good time to purchase a cloud computing software firm (cf. Elliot Management and Vista Equity Partners [buying Citrix for $16.5B]( in January) given how tech’s stock-market bedwetting suddenly made cloud companies affordable. Expect Thoma Bravo to do well and for more cloud computing acquisitions to follow. J-Pow J-pologizes Street Stories [Cycling Downhill] Jerome Powell finally admitted what we’ve all known for months now: that inflation is, in fact, too damn high. No sh*t Sherlock. Following Wednesday’s FOMC meeting, J-Pow restated the Fed’s general position, which is that the organization is now considering [half-point rate hikes rather than quarter-point hikes](, with the interest rate likely rising just under 2% by the end of the year. Embarrassment is transitory. - Core inflation was 5.2% YoY in February according to the [PCE]( or [7.9%]( as measured by that month’s CPI. Either number that you choose to go by is just a tad higher than the Fed’s target of 2%, so it is definitely time for the Fed to pull this trigger. - The Fed might also start shedding assets from its $9T balance sheet as early as the May FOMC meeting– an unusually daring and vigorous option coming from old Jerome. - While his tone was generally penitent, J-Pow emphasized that the factors contributing to such prolonged high inflation were unstoppable global ones that had nothing to do with asset purchases (i.e. Russia’s being a chode, COVID supply chain snags). Which is probably true, but makes him sound guilty, I gotta say. The question now is whether the Fed can pull off a “soft landing,” which is not an erectile dysfunction joke and instead describes the tasty equilibrium achieved when the Fed is able to decrease inflation without creating a recession. If this sounds like the exact opposite of what was attempted last year, it is. As the Fed makes tougher policy, expect Treasury yields and bonds to benefit at the expense of stocks (especially volatile ones). Over the Counter Token Talk It was inevitable that Wall Street banks would eventually get around to trading crypto derivatives and the first one in the water was none other than the old [vampire squid](, Goldman Sachs ([GS](). The firm traded a BTC related instrument called a non-deliverable option with counterparty Galaxy Digital ([GLXY]() that appears to be (from my exhaustive 15 seconds of perusing their website) a crypto focused investment bank/asset manager. - The OTC transaction [was the first]( for a major U.S. bank where it acts as the principal and assumes the related risk. - The young crypto derivatives market is mainly controlled by three firms so far: Galaxy Digital, Genesis, and GSR Markets. Apparently having your firm start with G is the key to first mover advantage in the space. - Derivative instruments will [allow hedge funds to customize their exposure]( to crypto markets, to which we at The Daily Setup are completely and totally confident that fund managers won’t take on crazy risks or over leverage themselves. If you thought crypto prices were volatile before, you might want to hold on, because now that Goldman is involved and putting together exotic trades for hedge fund clients, things are about to get nuts. For those that are crypto curious but haven’t taken the plunge yet, GS shares could be a picks and shovels way to dip a toe in the water since their digital assets desk may be a new revenue center. The fees the squid slaps on crypto derivatives are likely to be higher than the first ten rows at a Phish concert. Buffett’s Slump Buster Deals and Rumors [Deals and Rumors] Merger Mondays are always fun and exciting to read about as the masters of the corporate universe build and dismantle empires, except when Berkshire Hathaway ([BRK.B]() is involved. The insurance focused conglomerate announced that [it is purchasing Alleghany]( ([Y](), which is, you guessed it, an insurance focused conglomerate. Berkshire is buying the company for $11.6B, or $848.02 per share, which sent Alleghany shares up almost 25%. - The deal proves once again that nobody goes harder in the paint than Grandpa Warren since there is no debt or stock being used for the purchase, it’s “[straight cash homie](”. - This is the largest acquisition by Berkshire since it purchased Precision Castparts for $37B six years ago. - March has been big for Buffett & Co. as this deal follows last week’s news that Berkshire’s Class A shares closed about $500K for the first time. Just don’t ask him to consider paying a dividend. Warren’s deal drought is now over, so is the Oracle about to go on a run like a new divorcee who just discovered Tinder? In the [2022 annual shareholder letter]( written one month ago, Buffett and wingman Charlie Munger said that they found “little that excites” them in terms of potential acquisitions… which just goes to show that you can never trust two old men, regardless of how sweet they seem. Even after swiping the debit card for the $11.6B to buy Alleghany, Berkshire is still sitting on north of $100B in cash that needs a home. Looks like it’s time to fire up the old stock screener and focus on super boring companies in sleepy industries. Maybe Warren would be interested in a plucky internet newsletter? Link Roundup Other News Other News Link Roundup - Das not good - German producer prices leap a historic 25.9% ([link]() - Another day, another limit down - Price of nickel falls 15% in one day after doubling earlier in March ([link]() - “Ah sh*t here we go again” - 132 die in Boeing 737 crash in China ([link]() - This one’s for the ladies - Women are seeing the largest pay increases YoY ([link]() - Do it? … Just did it - Nike beats earnings and gains afterhours ([link]() Meme Of The Day [Via me]( 62 Calef Hwy #233 Lee, New Hampshire 03861 United States Questions or concerns about our products? Call or text us on your mobile: 1.800.123.4567 © Copyright 2022, [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 [(. 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