Let It Burn

[The Daily Peel... ](=) Jan 27, 2023 | Peel #387 Market Snapshot Happy Friday, apes. What a day. Nearly 200 publicly traded U.S. companies reported earnings yesterday, and it was an absolute doozy. Sentiment was mixed throughout the day, but you sure wouldn’t know that looking at equity indices. Nearly all rose while bond yields gained along a rotation into equities while the dollar slid mildly. Soft commodities like sugar and coffee also had themselves a day, gaining amid an apparent upsurge in teenage Starbucks-goers. Here’s to a strong end to the week (pretty please). Let’s get into it. [image] Talk the Talk of IB With Our M&A Modeling Course [image](=) Imagine if Nike saw big growth potential in $120 yoga pants, and decided to acquire Lululemon. How would it go about deciding what price to pay? What would the process look like from start to finish? Who are the players involved? Unless you’ve been in the heat of a deal before, it’s hard to get a good grasp on these questions. Until now. WSO’s M&A Modeling Course walks you through the above scenario, and teaches you the tools of the trade in the process. Take a peek into the modeling requirements of a deal like this, how it’s different from other types of mergers, and what the buy side cares about vs the sell side. This course is absolutely jammed to the gills with good stuff that’ll help you land a gig on Wall Street. We know Peel readers will get a ton of value out of it, so we want to also give out free access to our Accounting Foundations Course for the first 5 Peel readers to sign up for the M&A course in the next 24 hours. That’s an insane amount of value that you can’t afford to pass up. Walk into any room with the confidence that you know your sh*t. Do your future self a favor and [sign up today](=). Banana Bits - The King of social media is back as Facebook parent Meta has decided to let this absolute wildcard of a former President [back on its platforms]( - No one has ever cared about the Bank of Canada before, but when they announced plans to [pause rate hikes]() going forward, Wall Street perked up like a dog that heard a rustling in the leaves - The SEC may have just turned its brain on with plans to [ban ABS traders]( from selling products to clients the firm is actively short - From Google and Amazon to Nana’s Bakery…small businesses are [hiring like mad]() as Big Tech is just mad Macro Monkey Says Good News is Good News? Slow down there, apes; it’s not like the economy makes sense just yet. Yesterday, the Commerce Department released the official™ numbers used to size up the U.S. economy for the fourth quarter. And judging by market reactions, investors loved it. But, much like characters on dating shows like Love Island or The Bachelor, we have to wonder whether it’s for the right reasons. Well, let’s find out. No. It isn’t. Okay, that’s it for Macro Monkey today. Bye, everyone! JK jk, you apes know I could never do that to you. Let’s take a minute to comb through the data and find out why investors loved this latest GDP report, but just not for the reasons you might think. GDP is made up of 4 parts: Consumption, Investment, Government, and Net Exports (CIGNX). Because national economies are so vast, it’s difficult to get an assessment of conditions on the ground by looking only at the headlining numbers. Sure, the Commerce Department reported a faster acceleration than anticipated, at 2.9% annualized real growth for the quarter, but the makeup of that 2.9% is what matters. Consumption: Spending by consumers like you, me, and yes, even your roommate makes up ~68% of the overall economy. The degree to which morons like us throw around money essentially makes or breaks the American economy. For the fourth quarter, that figure rose 2.1%, representing solid growth yet still a decline from Q3. You can blame yourself for that decline. Retail sales data shows a fat dropoff in dollars spent for November and December, which is usually the other way around. Maybe if you bought your parents a Christmas present, we wouldn’t be in this situation. Regardless, consumption spending dropped significantly in areas like electronics, furniture, and other “delicacies” that you do need but can manage to live without. Spending on the most discretionary items sank like a rock, suggesting consumers don’t have the cash nor the credit lines to keep pace with past times. To be fair, having to spend $8.39 on a carton of eggs will do that to you. Investment: Fixed investment may not be 68% of the economy, but dollars spent on projects like these drive the spending of future dollars. Homes, factories, plants. Anything big and stationary that an accountant would have to depreciate is included here. This sh*t sank like a rock over the quarter. Alone, residential fixed investment dropped by nearly a third, losing over 27% in the quarter as builders saw new home construction as an investment as valid as buying the land surrounding Chernobyl. On the other hand, inventory spend hurt its back last quarter, carrying around 1.5% of the growth figures for the team. Government: Much like the peasants they rule over, the U.S. government is really, really good at spending money. Especially last quarter. Federal government spending grew 6.2% over the period, driven by non-defense outlays, while smaller governments at the state and local level grew at 2.3%. Net Exports: This is basically the quarter’s trade deficit, taking export values and subtracting by total imports. In Q4, the deficit did narrow marginally, but not enough to drive anything significant in this reading. The strength of the dollar at the start of the quarter and volatility throughout the latter half makes this metric a little schizophrenic for the time being. The point is the economy grew faster than expected but in the wrong places. Growing faster = good, in the wrong places = bad, but that means that more rate hikes = less likely. In this environment, everything leads back to the Fed. Stripping all else out, domestic demand grew 20bps over the period, a clear sign that the burning desire to spend every dollar you earn as quickly as possible is fizzling out. And we still haven’t nearly felt the full effect of these rate hikes. Trust me, JPow packs a punch. What's Ripe Tesla ($TSLA) ↑ 10.97% ↑ - Just when you think they’re down and out, they PULL YOU BACK IN! - Tesla shares boomed like there was a pandemic going on yesterday on the back of all-time record sales amid a quarter where Elon went from crazy CEO on Twitter to crazy CEO of Twitter. Absolutely sensational. - The firm smashed records, mostly in the first half of the quarter, but no one cared after seeing those top-line figures. The models S, 3, X, and Y are apparently just too sexy to stop buying. After losing over 72% from December to December, Elon & Co. could use a day of relief. Nicely done, gang. Chevron ($CVX) ↑ 4.88% ↑ - Chevron loves Chevron as Kanye loves Kanye, maybe even more. Screw paying a dividend, said Chevron; let’s kick things up a notch. - As of Wednesday’s closing price, Chevron announced plans to repurchase ~20% of itself through a newly announced $75bn share repurchase program. This comes on top of the increased 2023 dividend as well, meaning Chevron wants nothing more than to dump last year’s record profits into the pockets of investors. - But Chevron and shareholders were pretty much the only ones happy about this. Boring politicians and Twitter users alike were tweakin’ about the “morals” of the firm returning capital to shareholders on the back of massive cost of living increases driven by the commodities the company profited off of. - News flash: this is Wall Street. If you want morals, go read Nietzsche. What's Rotten Sherwin Williams ($SHW) ↓ 9.00% ↓ - Y’all ain’t f*ckin’ with paint anymore? That’s a damn shame if you’re a Sherwin Williams shareholder. Shares tanked almost 9% on lousy earnings, largely driven by a weak home market where less paint was needed to spruce up fewer homes. - Earnings still beat, registering $1.89/sh vs. $1.84 expected. The issue came when CEO John Morikis came out and said the firm is “not immune” to “very challenging demand” this fiscal year. - Then again, no one owns this thing for its price. All holders want is its dividend, which has increased for a massive 43 years in a row now. Fingers crossed, 2023 doesn’t break a streak as old as Ronald Reagan’s inauguration. International Business Machines ($IBM) ↓ 4.46% ↓ - IBM is a boomer among tech names, so when it tried to hop on the hot tech trend of firing people (by firing 3,900 people), investors didn’t think it was very cash-money of them. - Shares fell almost 4.5% on a narrow revenue beat and in-line earnings paired with an otherwise “meh” report. A few announcements trickled in, like investments in M&A, production facilities, and quantum computing, but investors were still about as pleased as Ben Shapiro watching a Joe Biden speech. Data Peel [image] [Source]() Thought Banana Let It Burn Plenty of people have stumbled across a would-be dream home and said, “yeah, it’s nice, but wouldn’t it be way cooler if this thing was on fire?” At least, that’s what one Tennessee man thought when he saw that now-infamous Zillow listing containing a photo of the house literally burning down listed on its website. Talk about being greedy when others are fearful. I’m guessing most of you out there have already seen the [images](, but recently we learned that the home is already under contract by one Mr. Mike Thakur, the lucky buyer of the $1.5mn home. The only thing hotter than the fire itself was real estate agent Paula Duvall’s cell phone. She tells Axios that her phone was “inundated” with calls and emails of desperate buyers clamoring for the soon-to-be renovated home. But Thakur won, and as a result, he is now going for the title of the all-time record of most insane house flipping ever (that’s the official title, btw). This insanity is something you may expect to see in a ZIRP environment, but what the hell is this psycho doing buying a house like that in this economy? Well, two things stand out. First, honesty is the best policy. Duvall says they were really just trying to be as transparent as possible about the eye-popping listing. They had no idea a photo of the home actively burning to the ground would stir up so much heat, but dammit, it worked. Well, that’s where the second standout comes into play. Content creation as a business story has kind of gone by the wayside, along with random crypto projects and 16-year-olds giving derivative trading advice on TikTok. But unlike the latter two, this insanity demonstrates the resilience of content creation and independently made entertainment. Thakur stated he plans to fully renovate the home while documenting his progress on social media sites like Instagram. Not only will he have a renovated home and the ability to (probably) sell at a profit, but he has amassed thousands of viewers for his journey already. And that was Mike’s whole plan going in. He saw a fire-torn home and thought “cha-ching,” seeing the novelty of such an endeavor as a way to drive eyeballs and dollars his way. It’s like the Barstool Sports / Dave Portnoy philosophy: everything is content. Moreover, interest in home buying registered its first uptick since Fall 2021 during December, with pending home sales rising 3% nationwide. Housing is back? Burning down homes is cool? Maybe 2023 will be a cool year after all. The big question: Is content creation as a business model still on its secular uptrend? Does the uptick in housing demand have legs? Banana Brain Teaser Yesterday — Two boxers are in a match scheduled for 12 rounds. (Pure boxing only. There are no kicking or takedowns). One of the boxers gets knocked out after only six rounds, yet no man throws a punch. How is this possible? The boxers were female. Today — It’s 50 bananas off the [WSO's M&A Modeling Course](=). LFG! They fill me up and you empty me almost every day; if you raise my arm, I work the opposite way. What am I? 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 “With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future.” — Carlos Slim Helu 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