Maximum Fun Optimization

[The Daily Peel... ](=) Mar 30, 2023 | Peel #430 Silver banana goes to... [GoSun. ](=) Market Snapshot Happy Thursday, apes. If Tuesday was a Pinot Noir, yesterday was like Augusta National - nothing but green. Equities opened higher, but this time, they actually managed to maintain that elevated level, with the S&P closing above both its 50 and 200-day SMAs. The risk-on trade was back, and the Nasdaq’s 1.8% rise compared to the Dow’s 1% up-day speaks to Mr. Market’s appetite for risk assets in this environment, as long as yet another bank failure isn’t the primary headline of the day. Treasury yields, meanwhile, were mostly lower, although they did grant us a bit more relative volatility than stocks for the day. Something’s gotta keep us on our toes, and while the 2-year yield is still ~50 bps higher than it was at the end of the last week, the risk-on trade seems to grow stronger every day another giant bank *doesn’t* collapse. Let’s get into it. [image]( [RAD AI](=) is an artificial intelligence company automating ROI-based creative intelligence. Their mission is to deliver quantitative performance metrics that brands trust. Recently, they’ve seen a spike in commercial adoption with brands looking to activate influencer marketing programs using their AI-based solutions. RAD has landed many industry-leading clients throughout the healthcare, technology, and hospitality sectors (to name a few). Some major clients within these spaces include Accenture, Condé Nast, Dignity Health, and Fortune 500s. Their revenue run rate is currently sitting nicely at $2.85M, with a 310% annual revenue growth rate, and a $300M potential serviceable market that they are already having great success tapping into. And it’s no secret that they’ve been doing great things: they’ve been frequently featured in major news publications such as [Techcrunch](), [Entrepreneur](, [Benzinga](, and [Venture Beat](. RAD has currently raised $3M in equity crowdfunding this year, and is backed by Fidelity Investments & Expert Dojo, the 3rd most active US seed investor after Techstars and Y Combinator. [Invest in RAD AI: AI marketing platform built to understand emotion](=) Banana Bits - Every action has an equal opposite reaction, and every slight decline in mortgage rates has a slight uptick in demand, or at least [it did last week]() - With a few new rules and a whole lot of drama, [Major League Baseball returns today]( with all 30 teams taking the diamond - Taiwan’s President Tsai Ing-wen [arrives in New York](=), much to the ire of top Chinese officials - Major [shake-ups are incoming]() with Google’s AI team(s)...I wonder if the AI helped make that decision… Macro Monkey Says Maximum Fun Optimization Don’t you just love it when normally boring things are actually genuinely fun? Take financial media, for example; you probably read the Peel because of our undeniably and blatantly well-polished, professional, and lethally insightful coverage of all things markets, and, I guess, maybe because we’ll crack a joke here and there, too. But it turns out other media outlets are hopping on the fun train as well. Take the FT, for example. After perusing fresh research from Goldman Sachs on the topic of AI and how much it’s gonna f*ck up every aspect of our lives, the FT didn’t just copy and paste the bullet points for an article - they had [ChatGPT turn it into a sonnet.]() And it’s pretty not-bad, too. Anyway, this example of making boring things fun with AI is arguably a hyper-meta example of what AI could (and should) do to our economy in the coming decades. By the early 20th century (that’s the 1900s for those about to Google it), post-Civil War developments in crop yielding and other farming technologies absolutely exploded in the United States. The cotton gin had been around for a while, but when the tractor and others burst onto the scene in the 1890s, it was game over for farmers. Let’s check the stats. It’s estimated that 43% of the U.S. worked in agriculture in 1890. 130 years later, in 2020, that number has plummeted to about 1.3%. These technological developments in farming, along with those that followed, allowed unitary productivity in farming to skyrocket so far, so fast, that we almost didn’t know what to do with all these extra farmers laying around. Moreover, those farmers had no idea what to do with all the extra time they had on their hands now that machines could do in 15 minutes what took them a whole day. In 2023, artificial intelligence poses the same challenge faced by farmers after they bought their very first tractors. According to estimates, 36% of the U.S. is employed in “knowledge” jobs - in other words - desk jockeys with a lot of degrees. Now, let me preface this by saying that absolutely no one has any idea of how swift or vast the AI economy will emerge, but one thing we can all agree on is that it’s coming. According to Goldman: - 7% of workers will lose their jobs in the decade after generative AI reaches 50% of employers - About 2/3rds of the workforce is exposed to some AI replacement risk, with about 5% of the workforce expected to see AI replace >50% of their tasks - Any job where >50% of tasks are replaced by AI will disappear - Developed economies will experience this change harder and faster than emerging markets - Basically, the more time you spend staring at a screen, the higher the chances are that ChatGPT is gonna take your job As someone who stares at screens for 15.5 out of my 16 waking hours, this was a bit concerning at first. But, like anything, it’s probably not going to be as bad (nor as good) as expected. Per that same FT article, 60% of workers today are employed in jobs that simply did not exist even less than 100 years ago, in 1940. This implies that 85% of employment growth in the last 83 years can be attributed to a myriad of technologies creating brand-new jobs. Meanwhile, the sheer size of our civilian labor force has nearly tripled in the same period. Finally, the productivity growth expected out of generative AI is anticipated to double the current rate of annual productivity growth across the U.S. as a whole. Alone, that represents a 2x to the productivity growth rates we’re seeing now. TLDR: A sh*tton of jobs are gonna be replaced by AI, and the productivity boosts we gain will mean we’ll have a whole lot more time for fun maximization on our hands, provided this thing doesn’t go full Terminator. But just because your job is slowly getting automated away doesn’t mean you should start shopping for cardboard boxes to live in just yet. As farmers experienced around the turn of the last century, U.S. workers are set for a blistering change to their daily lives. Fingers crossed, this one goes as well as the last one. What's Ripe Lululemon ($LULU) ↑ 12.72% ↑ - Breaking news: rich people are still rich. I know it’s shocking news, but the latest earnings report out of Lululemon certainly confirms that fact. - The athletic apparel and incredibly-comfortable-underwear maker absolutely killed it over the holiday quarter. EPS of $4.40/ on $2.8bn in top-line came in just above expectations for $4.27/sh on $2.7bn. - In a quarter where guidance has been all that matters on earnings day, Lulu’s beat on expectations for the upcoming quarter got investors grinning truly from ear to ear. In case you just woke up, Q4’22 was not exactly the best for retailers or businesses of any kind, really. - But apparently, rich people still had money…and spent it wisely. Micron ($MU) ↑ 7.19% ↑ - On the other hand, it’s still entirely possible (apparently) to have absolute dog water earnings and still make shareholders’ day. - No lie. This was just plain foul. To cut right to the chase, it was the [widest loss in company history](=) over a 90-day period ($2bn), which was more than 2x the loss expected by the Street. - At the same time, gross margins were just that - gross. The firm managed to eviscerate $2.4bn before even getting to operating expenses with their -33% gross profit on less than half the revenue of the same quarter last year. - But still, according to some analysts, the overly-bullish move could be a sign that investors see the results as so bad they can’t possibly get any worse, just like what happened back in the GFC. What's Rotten Volatility Index ($VIX) ↓ 4.26% ↓ - Clearly, Mr. Market is smoking weed or something out here because there’s just no other way his vibes were mellowed so fast by any other means. - Closing around 19.1 for the day, below its long-term average of about 19.5 and signaling staunch serenity, traders appear to be betting the worst is now behind us. Keep in mind the VIX measures expected volatility, not actual, meaning this is essentially just how our guy Mr. Market is sizing things up. - Barely a few weeks ago, this thing was flirting with 28, a level far exceeding the index’s long-term standard deviation of 6.5. The about-face is a bit of a shock to market watchers, but in an environment with jitters this high, the schizophrenia is excused for now. PVH Corp ($PVH) ↓ 3.60% ↓ - You’ve probably never heard of this company, but you’ve probably at least wanted to wear their clothes before. - The owner of pretty much every luxury brand that isn’t already owned by LVMH lost 3.6% on Wednesday as the rest of the market stormed higher. What’s causing all the hate, you may ask? Well, it seems we have a classic 2-day Icarus moment on our hands. - Very much like Icarus flying too close to the sun (idiot), PVH shares soared higher yesterday on solid quarterly earnings. A day following, it looks like some profit-taking may have been the predominant vibe. Thought Banana “Enough of Ur BS” That would be a direct quote, according to rumors, of what UBS said to its (former) Chief Executive on Wednesday. Barely a week following the announcement of UBS’s acquisition (definitely not a merger) of Credit Sus, CEO Ralph Hamers was put on the chopping block, giving the reins of one of the world’s largest banks back to an absolute legend in the streets of Zurich. Sergio Ermotti held the CEO spot at UBS from November 2011 through October 2020. This guy brought UBS from a third-string, weirdly structured European bank to the global powerhouse it is now. Days following the big bank’s announcement to do the Swiss government a $3.2bn favor, he’s back in the top spot. And quite honestly, you couldn’t ask for a better replacement. Ermotti is largely credited with UBS’s post-GFC decision to lean hard into wealth management, as opposed to IB and trading, like Credit Sus did, which, I mean, seems to have maybe, possibly been the right call between the two. At the same time, this was a massive kick to the you-know-wheres for Hamers. UBS’s former CEO was seen as an odd pick by most at the time, and yesterday’s 4.31% gain in the company’s stock confirms the market is more than down for this switcheroo. The problem came down to a few things, including Hamers’ purported [ban-inducing use of buzzwords](, but the primary issue stemmed from a distinct lack of big deal expertise in the boardroom at UBS. For one, ol’ Ralphie-boy was brought in mostly as a tech guy, destined to lead the bank to greatness through an enhanced digital experience. So, naturally, the soon-to-be $5tn in managed assets firm had to bring in a leader with actual big deal chops. While this mega-deal that now has over [half of the Swiss population against it]() will take a whole long time to play out, the idea is that someone with as much of a legend status as Sergio Ermotti should help. We’ll see. The big question: How does bringing Ermottie back to the top spot change the dynamics of the deal and the long-term vision for the combined bank? Will a vote of confidence from markets like this be enough to cool nerves across the European banking system? Banana Brain Teaser Yesterday — A three-letter word I’m sure you know, I can be on a boat or a sleigh in the snow, I’m pals with the rain and honor a king, But my favorite use is attached to a string. What am I? A bow. Today — It’s 50 bananas off the [Consulting Interview Course]() for the first 3 correct respondents. LFG! I was carried into a dark room, and set on fire. I wept, and then my head was cut off. 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 “Thus for the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.” — John Maynard Keynes How would you rate today’s Peel? [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. 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