Let The Pain Begin

Market Snapshot JPow told us it was coming, and now the only question is when we hit bottom. The 2-year is going nuts, topping 4.1% at the close. Mortgage rates sailed past 6% and continue to march higher. Central banks around the globe are raising rates in sync with the Fed to tame their own inflationary problems, but they’re also suffering from increased dollar strength. At the close, the Dow fell 0.35%, the Nasdaq sank 1.37%, and the S&P dropped 0.84%. The fast pace of private equity demands a certain set of skills, and WSO’s PE Master Package can help you acquire the tools that you need to propel your career forward in the industry. From deal flow to LBOs, we can help you sharpen your skills to maximize your potential. [WSO’s PE Master Package]() Let’s get into it. Monkey Meme of the Day [image](=) [Source](=) Banana Bits - A flurry of rate hikes from central banks, including Japan, Switzerland, and the UK, caused one analyst to dub yesterday “[Super Thursday](=)” - An activist investor is fed up with Kohl’s performance and trying to [give the CEO the boot](=) - Meta is looking to [cut expenses]() by 10% through *not* layoffs - Mortgage rates climbed for the [fifth straight week](, and at 6.29%, are at their highest levels since ‘08 - Certain skills are invaluable in PE, and we can help you [learn and master them]() Banana Brain Teaser Yesterday — There was a green house. Inside the green house, there was a white house. Inside the white house, there was a red house. Inside the red house, there were lots of babies. What is it? Watermelon. Today — It’s 100 bananas off of our [PE Master Package]() for the first 15 respondents. LFG! If an electric train is traveling south, which way is the smoke going? Shoot us your guesses at [vyomesh@wallstreetoasis.com](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) with the subject line “Banana Brain Teaser” or simply [click here to reply!](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) Macro Monkey Says Simon Says Hike Rates — At least we have the dollar. That’s probably what JPow and Joey B are saying to themselves as the US purposefully plunges itself into recession. Higher rates will cause pain, but more competitive exports from a strong dollar will lessen the blow somewhat. Other countries aren’t so lucky. Higher mortgage rates and slowing GDP are felt at home, but the pain isn’t confined to US borders. The IMF has expressed concern about JPow’s rate hike war path. Its managing director [warned the Fed]( to be “mindful of the spillover risks to vulnerable emerging and developing economies.” One of those risks includes weaker investment in developing countries. When the risk-free rate (basically whatever US Treasuries are paying) goes up, pouring money into risky developing economies isn’t as appetizing. Plus, the rate hikes that prop up $USD by definition harm other currencies. That makes it more expensive for developing nations to import necessities at a time when the global food supply is in a tenuous spot. It’s not JPow and team’s role to manage the global economy, but it is their job to beware of boomerang effects. They could be poking a bigger bubble than they realize. WSO PE Master Package [image]() The fast pace of private equity demands a certain set of skills, and WSO’s PE Master Package can help you acquire the tools that you need to propel your career forward in the industry. From deal flow to leveraged buyouts, we have more than 250+ video lessons that can help you sharpen your skills as a PE professional. This deal is available for a limited time only. Come learn from industry pros and take your seat at one of the most prestigious firms on the Street. [WSO’s PE Master Package]() What's Ripe Eli Lilly ($LLY) — An upgrade from UBS sent shares of the pharma giant soaring Thursday on optimism in Mounjaro, its new diabetes drug. It’s no secret that obesity and diabetes are endemic issues in this country, and that means big bucks for drugs that can treat them. Mounjaro has the potential to help with both, causing some to predict it becoming a $100bn per year drug. At the end of the session, $LLY was up 4.85%. Ripple (XRP-USD) — XRP sits at number 6 on the [crypto power rankings](), but it saw a big boost Thursday on reports of progress in its legal battle against the SEC. Ripple is the company behind XRP. There’s a lot of legalese to sift through with this case, but it basically comes down to the all-important question of whether cryptos should be treated as a currency or as a security. This lawsuit has been stuck in the courts since the end of 2020 and wasn’t expected to wrap up until Q2 2023. But with new motions being submitted from both sides, the end could be sooner than that. XRP was up 20.19% by the end of the day. What's Rotten AMC Entertainment ($AMC) — The skilled humorists at the SEC came out with [this video]() back in May to discourage meme stock mania. Real knee-slapper. Looks like the apes aren’t holding the line, as AMC plunged Thursday. The list of potential blockbusters for the rest of 2022 is pretty weak. You got another Black Panther that could be big, and maybe the new Avatar will be cool, but after that, it’s pretty much crickets. Combine that with a zillion other headwinds (inflation, equity dilution, crushing debt, landlord disputes… I could go on), and even the most diamond-handed amongst us are looking for the cash register. $AMC closed the day down 8.72%. Natural Gas Futures — While Europe has been embroiled in all kinds of crises, US nat gas producers have been building up reserves at a breakneck pace. A nice blend of bigger-than-expected output and reserve growth plus mild fall weather forecasts have brought prices down substantially. Lowered commodity prices may ding producers, but it helps bring inflation down for the rest of us. By the end of the day, nat gas was down 7.35%. Thought Banana Back to the Volcker Era — If you’re a regular person not addicted to the mania of the stock market, you might ask why regular people need to feel more pain to lessen the pain from inflation. It should be a real discussion since, for lots of people, it’s more than just stomaching a plunging 401(k)—recessions can tip tons of people into poverty that are already teetering. It might not come as much concession, but back in Volcker’s days, the pain was much worse. He managed to bring inflation down 7% in just 4 years, but at the cost of not one, but two recessions. And that’s not all—he also oversaw a double-digit unemployment rate and an unhinged stock market. If Ben Graham’s Mr. Market is manic and irrational, then it’s the Fed’s job to play psychologist, both to the market and to the public. At the depths of Volcker’s inflation fight in the early ‘80s, domestic banks were failing, emerging economies were in hyperinflation spirals, and everything just seemed terrible. Then, he lifted his foot off the economy’s neck and cut rates in 1982, kicking off a protracted bull market paired with moderate inflation. You can call it lucky, but his timing was on point. Things could get bad here soon. The stock market is a forward-looking mechanism, and the bloodbath that’s been the past 12 months will likely start to ripple through the economy. But to find light at the end of the tunnel, look to history. Wise Investor Says “If your investing approach requires that you become Nostradamus to succeed, then you are destined to fail.” — Barry Ritholtz 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 IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353