RIP to SPY Puts

[The Daily Peel... ]() Nov 11, 2022 | Peel #336 Market Snapshot It’s about damn time for a decent CPI! Prices rose [only 7.7%]( in October, marking the tiniest YoY increase since the year began. Markets rejoiced, and a face-ripper ensued. Meanwhile, FTX has a balance sheet hole the size of Credit Suisse and looks to be on death’s door. [image] Master DCF Modeling Today [image]() WSO’s DCF Modeling Course can get you up to speed on all things discounted cash flow that you will need to both survive and excel in finance. From the big picture, to fundamentals, to enterprise and equity valuation practice, you’ll take a deep dive into topics that are crucial for anyone who wants to work in Finance. Our robust curriculum will help you thrive in the most prestigious jobs on Wall Street. Book your course today. [Master DCF Modeling Today]( Banana Bits - The owner of Dr Pepper invested $50mn into a [nonalcoholic brewing company](, highlighting the rapid rise of guilt-free booze - The layoff bug is spreading from tech to finance, with multiple banks [mulling over hefty cuts](=) - After steadily rising for the past decade-plus, corporate bonds have [fallen off a cliff](=) - Birth rates around the globe are diverging, setting up [big shifts in population density]( in the future Macro Monkey Says The World Will Make a Lot Less Stuff in 2023 Imagine managing a factory in the last few years, say starting in 2017. There are a lot of moving parts you have to keep track of—making sure you have enough staff to cover demand, staying close with vendors to know what raw materials are coming in, and keeping an eye on the market to guess what demand is likely to be. It’s a game of predicting the future and crossing your fingers that you’ve guessed right. When you’re wrong, it’s like trying to turn a massive ship around in a tight river. - Now it’s 2020—the world goes into lockdown, and you prepare for the worst - Furloughs are made where possible, but layoffs are inevitable. Any cost that’s not absolutely essential is on the chopping block. - Wait—never mind! The money printer is in full gear, and consumers have spending power again. Demand is coming back! - But…you don’t have any employees. They’re terrified of a still-unknown virus, and stimmies are keeping them afloat for the time being. Plus, you can’t get any raw materials to service that demand. - Supply chain woes give you headaches for all of 2021, and you’re relieved when the snags finally start to unwind Whoops! Consumers already bought all the durable goods they wanted during lockdowns when they had nothing to do but browse new patio furniture and home gym equipment. Now they’re antsy to get out and spend on experiences. - The manufacturing industry is reeling from these wild swings and isn’t designed to adapt to jagged changes in demand - Rate hikes have kicked off a nasty feedback loop—consumers tighten their belts in anticipation of a slowdown, producers make less stuff as a result and need to lay people off, causing those people to tighten their belts…on and on The industry is praying for some kind of soft landing. That’s looking less and less likely, but at the same time, the consumer has been unbelievably resilient in the face of all kinds of headwinds. For anyone that’s been managing a factory lately—I feel u. Meme of the Day [image] [Source]( What's Ripe Pretty Much All Crypto - After falling off a cliff yesterday thanks to FTX, the crypto universe rallied, although many coins still have heavy losses for the week - Despite recovering some ground, BTC has sunk through its $20k floor, bringing its yearly return down to -63% YETI Holdings ($YETI) ↑ 31.58% ↑ - The official cooler of Chads everywhere blew the lid off of Q3, proving the power of its brand - The focus [is now on](=) “winning the fourth quarter gifting occasions” as inventory levels have normalized What's Rotten Bond Yields - For a few weeks, it looked like the 10-year was getting comfortable above 4%, but a weak CPI sent its yield below 3.9% - Odds of a 50 bps hike in December shot up after the print, sending Treasuries soaring, which in turn [brought yields down](=) Campbell’s Soup ($CPB) ↓ 1.73% ↓ - The classic American brand tends to be a good proxy for consumer staples overall, but it was down Thursday despite the index rising - $CPB is up over 13% YTD, but higher prices can only mask volume declines for so long Data Peel [image] [Source]() Thought Banana FTX in Shambles, Part Deux At peak crypto mania, there was a sense that the brainiacs writing this revolutionary blockchain software would be able to sidestep all the bloat and greed associated with traditional finance. The future was decentralized. If everyone had a stake in the larger whole, the kinds of blowups and bailouts that harm Main Street without touching Wall Street would be over. Yet, at the end of the day, the [FTX disaster]() was basically just a good ole fashion run on the bank. - When times are good, and people are turning in fiat dollars for crypto, balance sheet holes can be easily masked - Limiting counterparty risk was the big unlock that blockchains promised, but the issue of exchange risk was always lurking in the background. Big exchanges like Coinbase and FTX seemed about as risk-free as a Fidelity or Schwab, but the story was very different under the hood - FTX saw nearly [$5 billion in withdrawals](=) in a single day this past week, and it had nowhere near enough cushion to take that kind of hit - The scramble for funding any and everywhere is in full gear, but the odds of anyone wanting to take on this toxic waste are slim SBF has taken full responsibility for the mess, [saying](=), “I f*cked up twice.” The apology rings pretty hollow when your holdings go to zero. It’s a story as old as time. Likable founder promises a new future and attracts massive assets as a result. The temptation to juice returns on that float always comes, and risky bets are made with investor funds. That founder’s net worth hits a “b,” and they think they’ve conquered the world. Everything they touch turns to gold, so they might as well keep it goin’. Then before they know it, the rug gets pulled, and they’re insolvent overnight. This incident isn’t going to kill crypto. It’s sunk its teeth into the world of finance and beyond and will continue to occupy a seat at the table. But hopefully, these exchanges can be reined in, and the freewheeling gambles they make with people’s cash will end. The big question: Will the FTX mess push people towards holding crypto themselves in hot/cold wallets rather than trusting exchanges to hold it for them? Banana Brain Teaser Yesterday — There are three light switches outside a room. Inside is a single light bulb, controlled by one of the three switches. You need to determine which switch operates the bulb. You can turn the switches on and off as many times as you wish (they are all off to begin with), but may only enter the room once. There is no one there to help you. The door to the room is closed, and there are no windows, so you cannot see inside. How can you discover which switch operates the bulb? Do the following: 1. Turn ON two switches, and leave one OFF. 2. Wait a few minutes. 3. Turn one switch from ON to OFF. One is now ON and two are OFF 4. Enter the room. - If the light is ON, it is controlled by the switch you left ON. - If the light bulb is OFF, touch it. If it is warm it is controlled by the switch you turned ON and OFF. If it is cold, it is controlled by the switch you never turned on. Today — It’s 30 bananas off the [WSO's DCF Course](). LFG! If you randomly choose one of the following answers to this question, what is your chance of getting it right? A) 50% B) 25% C) 0% D) 25% 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) Wise Investor Says “Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman How would you rate today’s Peel? [image]( [image]( [image]() [All the bananas]() [Decent]() [Rotten AF]() 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