😡 JPow Just Won't Shut Up...

Someone please kidnap and put JPow away for my portfolio’s sake. April 18, 2024 | Peel #691 Silver Banana goes to... [Brilliant. ](=) In this issue of the Peel: - 😡 Someone please kidnap and put JPow away for my portfolio’s sake. - 🤑 Seems like dollars are more important than passengers’ safety. - 🙌 Banking is BACK! Investment Banking revenue is up across the board. Market Snapshot 📸 Banana Bits 🍌 - The new risk for rates? Cuts might not start [until March… 2025]() - GDP growth in China leaps over [expectations at 5.3%]() - Meanwhile, expectations for U.S. GDP growth have [surged as well]( - The battle over Ukraine funding took an [interesting turn yesterday]() Become an ApeGPT = Warren Buffet says the best investment to make is in yourself. That seems to have worked out for him and his $130bn, so how can we hop on our own boat to billions? Luckily, there’s Brilliant. Young Warren only had dusty old books and gray-haired suits to learn from, but today, we apes have the chance to become our very own ApeGPT with the power of Brilliant. You will… - Excel-erate your knowledge of math, data analysis, and programming and embarrass the rest of your analyst class by binging on Brilliant. - Say goodbye to “Pls Fix” emails as Brilliant’s courses ensure the first-principles framework for decision-making you’ll learn hits it right on the money every single time - Plot your path to becoming a certified Master of the Universe with Brilliant’s customized learning plan, allowing you to optimize for the brilliance you need. Stop doom-scrolling the brain-rot of social media. Stay ahead of the rest and become the best - they’re even giving you Daily Peel apes 20% off a premium annual subscription. What more could you want? Get in while you can and make Warren Buffet proud by hopping on the boat to billions with Brilliant. [Sign up now!](=) Macro Monkey Says 🐒 JPow Speaks Somebody needs to duct tape JPow’s mouth shut. I’m sick of this guy. Unless he’s pumping my stocks, of course, but that’s the exact opposite of what he did on Tuesday. Federal Reserve Chairman Jerome “JPow” Powell said that inflation is still not even close to chill enough to get a bid. Needless to say, markets weren’t exactly too pleased to hear it. So, let’s get into it. What Happened? Yapping at a forum on economic policies between the U.S. and Canada, Powell said, “More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal.” Don’t freak out yet, however. The above statement gives the vibe of “we might have to further increase rates,” but Powell went on to comment “That said, we think policy is well positioned to handle the risks that we face.” Essentially, Powell is telling us that rates aren’t budging anytime soon. Not long ago, markets had expected to potentially see as many as seven 25bp rate cuts in 2024. Now, it seems we’ll be lucky if we get two. We won’t get fresh PCE data until next Friday, so expect little change on this front until then, barring any further comments from other central bank officials. The Fed barely care about CPI in making policy assessments, however, given the lag between this and the March PCE report, the flattening in Core CPI could be what’s driving this increased concern. Since October of last year, the trend of falling core inflation on an annual basis has gone from month-to-month declines to declining over a period of two months. While that’s not as much of a red flag as someone who uses the word “delta” to sound smart, it’s a clear indication that this process is gonna take longer than expected. JPow’s message over the past few months has been one of “inflation is moving in the right direction, but we know it’s gonna take time to get back to 2%.” But, the phrase “lack of further progress” indicates a slight delta in this outlook. Basically, the Fed’s view now sounds something more like “if we don’t see further progress on inflation in the next few reports, we may have to consider restricting policy even further.” One of, if not the most essential trends in getting inflation back to that 2% level is a continuation of normalizing wage growth. Rapidly rising wages, as the U.S. economy has broadly seen in the post-pandemic environment, have been a big driver in the cost-push inflation we’ve experienced. Recent data shows wage growth returning to historical rates, but we’re still way above trend. And as we’ve said for 2-3 years now, the only ways to slow wage growth is through 1) reducing demand for labor or 2) increasing the supply of labor. So, holes in the southern border may actually help kill inflation even more than JPow does. But that doesn’t mean prices will fall back to their pre-pandemic level just because wage growth does. The other big factor that doesn’t get nearly enough attention is… I feel like everyone was talking about the growth in the money supply back in 2020, but it’s almost flying under the radar now. This explosion is money supply is what keeps prices sticky and ultimately destroys purchasing power. In just over a year, the U.S. increased supply of U.S. dollars by 40%. This is the stat that was getting thrown around at the time, but the fact that supply has decreased by only 4.5% since then virtually guarantees prices won’t return to historic levels. A tight labor market and rapid increases in wages are what drive inflation higher, but it’s the growth in the supply of money that keeps those price increases sticky. Said differently—wage growth increases prices, and money supply growth destroys purchasing power. The Takeaway? Believe it or not, reducing wage growth is (at least in theory) the safest way to get inflation to chill with the least amount of side effects. Sudden and rapid declines in the money supply can bring about deflationary pressures, putting us in a much worse economic position than inflation. That’s because deflation disincentivizes spending now, because why buy something today when it’s gonna be cheaper tomorrow? But, going back to our original point, maybe someone could just lock JPow away for a few months while our economy figures this sh*t out. What's Ripe 🤩 United Airlines (UAL) 📈17.5% - What, is there a premium for almost killing passengers or something? Just a month after an engine went up in flames mid-flight, shares are popping. - But good earnings will do that. United posted a much narrower loss than expected at just $0.15/sh while sales of $12.5bn beat as well. - But, it was guidance that lifted shares into takeoff. Analysts were expecting $3.76/sh in Q2, but United is calling for $3.75-$4.25 while reiterating full-year guidance. Interactive Brokers (IBKR) 📈1.7% - That’s how you buy a positive return on mid earnings—just throw more money at investors via a raised dividend. - The discount brokerage platform for traders grew revenue by 14% and interest revenue by 17%, leading to a beat on sales and a $0.01/sh beat on EPS. - But the firm also hiked its dividend from $0.10/sh to $0.25/sh, hyping up investors by giving them more money and showing confidence. What's Rotten 🤮 J. B. Hunt Transport Services (JBHT) 📉8.1% - What do bedroom activities and the U.S. trucking industry have in common? No one likes it softer than expected. Sadly, that’s what happened to J. B. Hunt. - Profits fell 35% in Q1 for the trucking and logistics operator, while revenue fell 9% to $2.94bn, both big-time missing expectations. - Operators say an oversupply of trucks has led to weaker pricing. Plus, the firm’s freight brokerage business saw a 22% dive, adding fuel to the fire. ASML Holding (ASML) 📉7.1% - Well, this can’t be a good sign. Despite beating on EPS and sales, the semiconductor equipment supplier tanked on earnings. - ASML supplies “lithography machines,” which I can barely spell, let alone describe, but I’m told these are what foundries need to make AI chips. - Bookings fell 4% annually despite the beats on the top and bottom lines, but management expects conditions to improve later this year. - This report came as an outsized concern for markets as weaker earnings here could imply weaker earnings for the whole chip sector. = Thought Banana 🤔 Banking is BACK We’ve been saying it for a while, but now that [the WSJ](=) said it, it’s gotta be true. Banking is BACK. If the revival of the IPO market and slow return of M&A activity wasn’t enough for you, maybe earnings reports will finally be. The 6 largest banks in the U.S. all reported earnings over the past few days. Most disappointed overall, as banks tend to do, but this time, it was to investors instead of customers. Let’s see what they said about investment banking. The Numbers For starters, the 6 largest banks in the U.S. and their returns on the day they dropped their Q1 earnings were: - JPMorgan Chase, -6.47% - Bank of America, -3.53% - Wells Fargo, -0.39% - Morgan Stanley, +2.47% - Goldman Sachs, +2.92% and - Citigroup -1.70% Total profits fell 3% to $35.63bn for all 6 players above combined, according to [the WSJ](=). But, despite the weak-*ss Q1 numbers, there was one shining star in most reports that saved these banks—and most of your career aspirations—from pure, utter despair. Investment banking revenues surged, with Wells Fargo leading the league with a very nice 69% annual growth. Bank of America, Goldman, and Citi put up strong numbers too, growing 38%, 32%, and 32% for the year, respectively. Morgan Stanley’s IB revenues rose 16%, and JPMorgan’s grew 27%. The fact that 16% growth in this segment was the weakest kinda tells the whole story. Most of these banks saw similar trends underpinning that growth. Equity underwriting was the largest growth driver, surging nearly 2x at banks like Morgan Stanley and Wells Fargo. But, on the other side, advisory revenues declined nearly across the board. Debt underwriting surged as well, nearly setting a new record on the number of quarterly debt deals ever done. Meanwhile, Goldman’s trading desk was almost the only one to grow trading revenues, putting on a clinic with 10% growth. Citi’s plunged 10% while JPMorgan and the others were relatively flat. The Takeaway? With all that said, most other revenue segments were under pressure. Deposit flight remains a key risk, with rising rates initially hooking up these banks, but now they present more of a risk as customer demand higher APYs on deposits. Plus, high rates have driven banks like Bank of America to hold a bag of dogsh*t worth about $109bn in unrealized losses in their bond portfolios. Massive FDIC payments from losses triggered by SVB and others also weighed last quarter, but that should be the last quarter where this will have an unusually material impact. The key word there is *should.* But, despite the fact that banking is confirmed BACK by the WSJ, we all know it’s still not the easiest task to break into one of these firms. As always, give us a look [if you want some help](… 💭 The Big Question 💭: How will banks perform in a flat or cutting-rate environment in 2024? Can we expect the growth in banking revenues to continue? Banana Brain Teaser 💡 Previous 🗓 The quotient when a certain number is divided by 2/3 is 9/2. What is the number? Answer: 3 Today 🕐 The price of gasoline at a service station increased from $1.65 per gallon last week to $1.82 per gallon this week. Sally paid $26.40 for gasoline last week at the station. How much more will Sally pay this week at the station for the same amount of gasoline? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “It’s OK to have your eggs in one basket as long as you control what happens to that basket” — Elon Musk How Would You Rate Today's Peel? 😁[All the bananas]() 😐[Meh]() 😩[Rotten AF]() Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA]() // [ACADEMY]( // [COURSES]() // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353