May 6 - Interactive Brokers

May 6, 2024 | Peel #703 Silver Banana goes to... [Interactive Brokers. ](=) In this issue of the Peel: - 🤕 Forget about fighting the fed… just let it beat the sh*t out of you. - 💊 Weight-loss drugs are really hot right now—Amgen stock is up. - 💔 Berkshire’s annual meeting went well, but my heart’s still broken. Market Snapshot 📸 = Help boost your returns with IBKR’s Stock Yield Enhancement Program Interactive Brokers’ Stock Yield Enhancement Program helps you earn extra income on fully paid shares of stock in your brokerage account. It works by allowing IBKR to borrow fully paid shares from you in exchange for collateral (either U.S. Treasuries or cash). IBKR then lends your shares to traders who want to sell them short. Each day that your stock is on loan, you will be paid interest on the collateral value for the loan based on market rates. Many brokers have similar programs but generally don’t disclose the market rates to you, which allows them to pay you a small piece of the pie while holding on to most of the profits. IBKR pays you 50% of a market-based rate. For complete transparency, you will see the interest rate that you are being paid on the collateral value along with the stock’s market-based rate. Participating is simple and automatic: IBKR manages all aspects of share lending. See why the best-informed investors choose Interactive Brokers. Member SIPC. Open an Interactive Brokers account today and start earning extra income on the shares you own with IBKR’s Stock Yield Enhancement Program at [ibkr.com/SYEP](=) Macro Monkey Says 🐒 Jobs Day Kind of like how we all secretly want to believe that an actor like Nick Offerman really is Ron Swanson, everyone also wants to believe the stock market is the economy. It’s not. As nice as it would be to have a good ol’ boy like Ron Swanson walking around, apparently, he only exists in the TV show. Markets and the economy have a similar relationship, only about 100x more frustrating. That was on full display on Friday as, yet again, bad news in the economy is good news for stocks. Let’s get into it. The Numbers [Source]( The April jobs report was released on Friday by the BLS, indicating that the U.S. economy added 175k jobs last month, well below the 240k guesstimate from economists. April’s figures were also well below those of the first quarter of 2024. January, February, and March averaged an insane 276.33k, suggesting this headline number is a clear sign of a slowdown. And, there was a lot more to suggest demand for labor is starting to slow materially. To a normal, rational person, that might sound bad, but the market was loving it on Friday. Clocking in at 3.9%, the unemployment rate ticked slightly higher but still remains at Hall of Fame levels now that the national unemployment rate has remained below 4% for 27 months straight. [Source]( That was just the first indication of a labor market slowdown. Diving deeper, we can see that the average hours worked declined slightly to 34.3 hours in April vs. 34.4 hours in March. Sure, 6mins doesn’t make a big difference on the individual level, but scaling this nationwide carries some very not chill implications. Further, JPow’s plans to make us poor are still going great. Average hourly earnings increased 3.9% for the month, above inflation but continuing to trend lower. So, essentially, what we learned here includes: - Hiring remains strong but is undeniably slowing, - Real wage growth remains but is also slowing, - Employers are less hesitant to cut workers, relying on temp workers/cutting hours, and - Despite how it sounds, all of this might actually be good long-term The Takeaway? Markets were loving this report because a slowdown in hiring should, in theory, lead to a slowdown in wage growth and then (hopefully) lead to a slowdown in inflation. Fingers crossed that’s actually how it works out, but the market’s already pricing in that Goldilocks scenario: [Source]() The market-implied odds of a rate cut occurring before the end of 2024 jumped, and we can see this most clearly in the last row of the above table, showing the odds of rates remaining where they are now by year end fell from 20.2% to just 8.5% in a week. Bad news for the economy is good news for stocks. Aside from that clear symptom of late-stage capitalism, this shows just how much control the Fed now has when it comes to market performance. “Don’t fight the Fed” has become “Let the Fed beat the sh*t out of you.” Lastly, the combination of slowing hiring, wage growth, and working hours is a recipe for slowing consumer spending down the line. At 70% of GDP, lower spending is the modern American nightmare. But hey, maybe we’ll continue this streak of Goldilocks-level economic performance. Banking on hope is always a worthwhile strategy, right?? What's Ripe 🤩 Amgen (AMGN) 📈11.8% - Everyone wants to be fashionably late, and Amgen is the king of that in the healthcare space. The firm’s earnings and drug trials are going well. - Earnings are gaining weight and customers are (allegedly) soon to be losing it now that the firm’s weight-loss injection drug showed strong early-stage trials. - EPS of $3.96/sh on sales of $7.45bn easily beat the $3.76/sh on $7.38bn expected. Live Nation (LVY) 📈7.2% - Rarely do we get to see a company stick two middle fingers at every one of its customers and vendors and still kill it on earnings. Shoutout to Live Nation. - The company, whose Ticketmaster brand is Public Enemy #1 in the ticketing space, lost $0.53/sh, more than the $0.20/sh expected. - Sales beat by 15.5%, however, as demand for experiences remains well above pre-pandmic levels, but struggles remain on the cost and supply side. What's Rotten 🤮 Expedia (EXPE) 📉15.3% - Just plain embarrassing. Companies like Expedia have been getting high (both the stock and its executives) on the travel boom, but sadly, sales haven’t. - Shares tanked despite beating estimates thanks to reduced guidance for the year. Execs cut sales expectations from “high single-digit” to “mid-to-high single-digit.” - Clearly, that’s worth a ~1/6th slashing to the firm’s market value. Expedia blames a slow return to growth at VRBO, its version of Airbnb, for the weak guidance. BigBear.ai (BBAI) 📉13.9% - No matter how many “AI” labels you slap on a stock, no amount of bubbly behavior can overcome quarterly results like this… - It’s always a good sign when a company blames other companies for its failures. BigBear said Virgin Orbit’s bankruptcy was the driver of its 21% revenue decline. - Losses fell further, too, from ~$26mn last year to $125mn this year, much wider than expected. = Thought Banana 🤔 Earnings Spotlight: Berkshire Hathaway It’s hard to imagine Batman without Robin, SpongeBob without Patrick, or Sundays without the scaries. Unfortunately, this weekend, we saw Statler without Waldorf for the first time at the annual Woodstock for Capitalists, a.k.a. the Berkshire Hathaway annual shareholders meeting. Mr. Warren Buffett was killing it as usual, but without Charlie, the vibe—and the number of uniquely sexual jokes—was severely lacking. Fortunately, however, performance was not. The Numbers Omaha, Nebraska, has a population of just under 500k. Yet this past Saturday, 70-80k people (or 14-16% of the town’s population) descended upon the sleepy railroad town in order to hear the local oracle speak. But this year, the annual meeting changed from the familiar above image on the left—with the spotlight on Warren and Charlie—to the “new normal” image on the right, with attention on Buffett and his deputies Greg Abel, Ajit Jain, and others. Actually, that was one of the biggest takeaways of yesterday’s meeting. Buffett disclosed that Greg Abel, Berkshire’s current Chairperson, will take over as captain of the firm’s $335bn equity portfolio, answering a long-time question for investors. It was clear that Buffett was operating at a much more slowed-down, reserved pace than usual. He deferred more questions than usual to managers and talked a lot about the post-Buffett days, kind of like Jesus at the Last Supper, but with less kissing. The Berkshire meeting and accompanying quarterly results tend to focus on much longer-term trends and the performance of the company. Buffett sounds a lot like Clark Gable when it comes to short-term numbers, preferring to not give a damn. Even though they don’t care, I still do—and Berkshire is doing just fine. Revenue grew 5.2% compared to last year, primarily due to improvements in the firm’s energy and utility business as well as increased interest and dividend income. Investment gains shrunk for the period compared to last year, largely due to less selling, and sit at just $1.87bn vs the $34.76bn for the same period last year. The firm’s massive equity portfolio overall shrunk in value compared to last year, largely due again to selling massive positions in firms like Apple and weaker performance of investments. Speaking of selling Apple, that was one of the hot topics of the day for investors. Buffett explained that the sale was largely for tax reasons, sounding like a true loyalist saying that the firm is “happy” to pay taxes. But, the other hot topic of the equity portfolio is the firm in which Berkshire has become a secret admirer of. Managers like Berkshire have to disclose the companies they invest in, but for about the past year, Berkshire has been accumulating ownership in an unnamed firm after receiving an exemption from the SEC to not disclose the name. That’s because this thing will pop the second investors find out what the company is, so to protect their buy price, Berkshire is keeping it hush-hush. We know it’s a banking/finance/insurance/investment firm, but that’s about it. It must be a relatively small-cap stock because even Berkshire couldn’t do much to massive firms like JPMorgan or BofA (personally, my bets on SoFi or Scwhab). = But overall, performance is as usual at Berkshire—slow, steady, pretty damn boring, but strong nonetheless. Some of the primary focuses going forward include operational improvements to the firm’s railway business with BNSF, improving Geico’s data analytics, and avoiding “AI scamming,” which Buffett identified as the next big growth area for the industry. Buffet did liken AI to nuclear technology at the same time, essentially just echoing the popular sentiment that AI could usher in a tech golden age or Ted Kaczynski’s worst nightmare. The Takeaway? Even without Charlie, Berkshire, Buffett, and their investors are doing well. Buffett left my girlfriend wondering why I was crying at the counter while watching the shareholder meeting, as Buffett referred to Greg as “Charlie” a few times during the call. But, the biggest knife in the heart was his closing words, as Buffett decreed that he “not only hope[s] you come next year, I hope I come next year.” 💭 The Big Question 💭: Will Buffett remain at the helm of the ship until he passes like Charlie? If not, what kind of role would he have? How will Berkshire change in a post-Warren environment? Banana Brain Teaser 💡 Previous 🗓 Of the land owned by a farmer, 90 percent was cleared for planting. Of the cleared land, 40 percent was planted with soybeans and 50 percent of the cleared land was planted with wheat. If the remaining 720 acres of cleared land was planted with corn, how many acres did the farmer own? Answer: The farmer owns 8,000 acres Today 🕐 Pumping alone at their respective constant rates, one inlet pipe fills an empty tank to ½ of capacity in 3 hours, and a second inlet pipe fills the same empty tank to ⅔ of capacity in 6 hours. How many hours will it take both pipes, pumping simultaneously at their respective constant rates, to fill the empty tank to capacity? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “To the extent that all I've done is pick stocks that have gone up and sat on my [behind] as my family got richer, I haven't left much contribution to society. I guess it's a lot like Wall Street. The difference is, I feel ashamed of it. I try to make up for it with philanthropy and meetings like this one today. This meeting is not out of kindness. This is atonement.” — Charlie Munger 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