CP-Sigh

Inflation bad, apes sad. Market Snapshot Okay, so today, we do care about inflation and rate hikes. A complete 180 from yesterday, but I guess that’s expected when you wake up to “highest inflation in 40 years” flashing across your Bloomberg Terminal. It definitely didn’t set up a great day, leaving markets to suffer, with the Nasdaq shedding 2.1%, while the S&P lost 1.81% and the Dow fell 1.47%. Let’s get into it. Macro Monkey Says CP-Sigh — Remember the other day when we talked about how inflation might not be that bad? Well, this is gonna be the polar opposite. The January CPI print dropped yesterday morning, registering an annual increase of 7.5%, the highest since 1982 (aka, 40 years ago). For the month alone, prices jumped 0.6%. Economists, in their endless pursuit of intellectual masochism, had expectations of around 7.2% for the year and 0.4% for the month. If the 0.4% MoM increase had been accurate, that would’ve represented a slowdown in inflation from December’s print of 0.6%, and we would be having a different conversation. Unfortunately, we live in reality. And in that reality, food, electricity, and shelter (aka, the stuff we need to live) were the top three major contributors to the historic price jump. The food-at-home index itself has jumped 7.4% annually, most of which is driven by those groceries you just bought. But, inflation was more broad-based last month. Or, as the labor department puts it, “virtually all component indexes showing increases over the past 12 months.” Pleasant. Going back to our basic needs for survival, sheltering costs rose 4.4% from January to January. But, here’s the catch: a big piece of how the Labor Department evaluates shelter costs is a brainless survey-based method known as “Owner’s Equivalent Rent.” The survey that makes up a majority of inputs into sheltering costs, which themselves are 40% of the total CPI basket, comes from a response to one question. No, I’m not joking here. The question they ask is, “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished, and without utilities?" No measurements, no numbers, and certainly no quants - instead, they just ask what homeowners think. Okay, rant over. Of course, the implications here are what matter more than just the report itself. The key takeaway is likely that this higher than expected reading intensifies JPow and the FOMC’s willingness to raise rates in March and puts upward pressure on the degree of the increase. Following the report, St. Louis Fed President James Bullard said he is in full support of a 50bp hike in March and bringing the economy’s base rate up to a full 1% by July. Might not sound like much, but going from 0-0.25% to 1% is an increase of at least 300%. Moral of the story? Whatever happens, it won’t be easy. The Fed Chair job might be the least wanted job in Washington. All you can do is fail. If your monetary policy supports the economy well, the President gets all the credit. If not, you are literally burned at the stake and exiled from economic nirvana forever. So shoutout to our boy JPow. He’s got a lot on his plate, and whatever happens, he’s gonna make someone mad. What's Ripe Disney ($DIS) — The Magic was back at Disney yesterday. The Mouse House reported Q4 earnings yesterday, sucker-punching analysts directly in the face with how much they beat expectations and sending shares up 3.4%. Wall Street pegged fourth-quarter EPS as $0.63, but Disney registered close to double that figure earning $1.06/sh. Much of that beat was the >100% annual growth seen in the Parks & Experiences segment…for obvious reasons. Most importantly, however, was the beat on Disney+ subscriber additions. 12mm people added Disney+ to their repertoire of streaming content last quarter, well above the ~8mm expected. Not bad, Chapek. Sonos ($SONO) — It got real loud at Sonos earnings call late on Wednesday, leading to an even louder trading session yesterday. Beating the sh*t out of both top and bottom line projections, Sonos reported $1.02/sh on $665mm vs. $0.98 on $637mm expected. Still, it got even better when the company increased 2022 guidance, seeing $2bn in top line next year as they basically just mooch off the growth in housing and WFH. It helps to be in the right place at the right time. Shares gained 4.5%. What's Rotten Uber ($UBER) — Uhh…I’m sorry, what, Wall Street? I get it. Sometimes even good earnings aren’t good enough. But am I missing something here? After dropping Q4 earnings late Wednesday, clocking in EPS of $0.44 on $5.8bn in revenue vs. -$0.32 on $5.3bn expected, Uber held an investor presentation yesterday highlighting an ambitious next couple of years. Projecting $5bn in 2024 EBITDA on $165-$175bn in bookings in the same year, Wall Street scoffed as this wasn’t above its own estimate of $5.3bn EBITDA on $168bn in bookings. Shares tumbled 6.1%. Hey traders? Maybe chill out for a sec? Affirm ($AFRM) — An early contender for FinTwit tweet of the year, Affirm came way too close to violating securities law yesterday. The payments firm *accidentally* tweeted out quarterly results just hours before reporting on Thursday, which included details of a 77% revenue jump from last quarter to this and more that led to Wall Street sending shares up as much as 7%. Once the actual numbers came out, however, shares tanked almost 30% intraday and finished down 21.4%. I guess the only one having a worse day than Affirm is their (probably former?) social media manager. Thought Banana Pelosi Capital — One of the most iconic hedge funds of all time with trading staff akin to Jesse Livermore and George Soros, the famed Pelosi Capital may soon have to close its doors. That’s right, the firm whose returns caught the entire world’s eyes in 2020 and ‘21 will in 2022 face their toughest challenge yet: trading ethics laws. For the first time in recorded human history, Republicans, Democrats, Libertarians, the Green Party, the Tea Party, hell, even Vermin Supreme (probably) agree on something, and that’s a stock trading ban on members of Congress. Now, there are a plethora of different forms this legislation could take. Some, like Senator Gillibrand’s proposal, would ban individual stock trading for members of Congress and require increased disclosure from the Judicial branch. Wait, the Supreme Court? Why are they here? Yes, the Supreme Court, and they’re here because Pelosi Capital wasn’t going down without a fight. Speaker of the House Nancy Pelosi made clear she would support a stock trading ban only if some form of disclosure rules applied to the Judicial branch. Many believe this to be an attempt to stop the trading ban in its tracks, as it will almost certainly raise questions of constitutionality. But, regardless, some commonalities among legislation proposals will likely have their day in the sun. A ban on trading individual names, forming blind trusts, and disclosure requirements for days are the key themes to keep an eye out for. So, rich politicians stop making themselves richer, but we lose the ability to easily follow their trades and make $. Who’s the real winner here? Wise Investor Says “Based on my own personal experience – both as an investor in recent years and an expert witness in years past – rarely do more than three or four variables really count. Everything else is noise.” — Martin Whitman Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel [here](). [ADVERTISE](=) // [WSO ALPHA](=) // [COURSES]( // [LEGAL](=) Don't want The Daily Peel? [Unsubscribe here](. Click to [Unsubscribe]( from ALL WSO content Wall Street Oasis (IB Oasis Corp.) 20705 Saint Charles St Saratoga, California 95070 United States