The Fed has shrunk its balance sheet by almost $1tn in a more indirect attempt to slow the pace of economic growth and inflation [The Daily Peel... ]( September 11, 2023 | Peel #539 Silver banana goes to... [The Motley Fool. ](=) In this issue of the Peel: - The Fed has shrunk its balance sheet by almost $1tn in a more indirect attempt to slow the pace of economic growth and inflation
- Pot stocks are continuing to spark, lighting up Bloomberg Terminals across Wall Street as shares trade just like their customers' mental states: high
- Outages in Squareâs payment network were widespread, forcing customers to pay for their items in cash Market Snapshot Happy Monday, apes. 22 years ago today, 2,996 Americans were killed in one of the worst terrorist attacks the world has ever seen. Since then, countless other lives have been affected, and we honor, respect, and thank all those who have served. E pluribus unum, apes. Now, to the matter at hand. Leading into the anniversary of this most tragic historic day, equity markets tried their hardest to get us going on a good note. It worked out for the most part with all except the Russell 2k printing a green day, with the Dowâs 0.22% gain leading the way. Industrials and real estate were the only sectors to post a loss, aka, theyâre huge losers. In the meantime, the debt of the country made victim to such a horrific attack saw yields fall into Friday, only to gain again over the weekend. The 2-year canât decide if it wants to settle above or below 5% yields while the 10-year continues to flirt with 4.3%, and every investor is just hoping those levels reverse (eventually). Letâs get into it. Stock Advisor is Now $79 For New Members [image](=) If you're tired of reading about other people getting rich in the stock market, this might be a good day for you. The Motley Fool is offering new members a big discount off the list price of its top stock-picking service, plus a complete membership fee-back guarantee. Join over half a million investors, who like you, are on their investment journey with us. Once you sign up, you'll have access to our library of expert stock recommendations and much more. If youâve heard about The Fool and our market-tripling stock picks, you probably donât want to miss checking this out. [Join Today](=) Banana Bits - Already in a 77% drawdown before even going public, [Instacart now targets]( a valuation range of $8.6bn to $9.63bn, from $39bn just 2 years ago
- India and the U.S. [are still homies](=), apparently, as the pair agreed to a sizable railway and sea traffic deal Macro Monkey Says 9 Days Away Iâm not sure if youâve heard, but there are these things called âinterest rates,â and apparently, theyâve risen a lot lately. At their most fundamental / pretentiously philosophical level, interest rates are the mechanism that allows us to trade money for time and/or vice versa. You might agree that money and time are slightly important in any economy, so itâs no wonder their rapid rise has had quite an impact. "... interest rates are the mechanism that allows us to trade money for time and/or vice-versa." If youâve opened a news article between March 2022 and now, youâre all too familiar with these rate hikes. Weâre all aware of the hissy fit theyâve caused so far, but naturally, the most important rate decision of all time is waiting for us next week (until the next one, of course). To give a quick summary, we can reflect and see that since coming off of 0% from March 2020 to March 2022, the FOMC: - Raised rates to 1% by May 2022, followed by 4 consecutive 75bps hikes from then until November 2022, where we reached 4%
- From then, Fed Chair JPow and the FOMC gang raised by 50bps in December
- February, March, and May of this year each gave us another 25bps
- Then, in July, we finally reached the point of asking, âHave we raised rates enough? Maybe by too much?â as we hit 5.25% in June and held there
- July gave us another 25bps and now, much like children on a road trip, weâre only left to wonderâ¦are we there yet?? Now, weâre sitting in September with a target range of 5.25%-5.5%. Raising from 0% to the mid-5% range in just under a year and a half is an obscene pace of increase, at least with respect to the historic moves, leaving us all now to wonder what comes next. There are a few complicating factors, but for now, everyone and their mother seem to agree that rates will be held steady at the September 19th-20th meeting. Basically, JPow and the FOMC are expected to cash in and buy some time before making another decision. "... the Fed has at the same time shrunk its balance sheet by almost $1tn in a more indirect attempt to slow the pace of economic growth and inflation." In the meantime, the primary complicating factor, this idea of âlong and variable lagsâ in response to monetary policy changes, will have its impact assessed. Along with rate hikes, the Fed has at the same time shrunk its balance sheet by almost $1tn in a more indirect attempt to slow the pace of economic growth and inflation. Altogether, and especially using data sources that seem dated even to the boomer-est boomers, their effect is incredibly challenging to asses and craft a follow-on response to. But recent trends in labor markets and price levels have sought to suggest in the clearest way possible that itâs time to chill tf out. As the below WSJ chart shows, labor markets are falling back to Earth: [image] [Source]() Now, as pointed out in the above piece, the chefs of the economy who are central bankers have only the finishing touches to cook up. Weâve entered âfine-tuningâ mode as economists now collectively wonder, âWhat the f*ck difference does one 25bps hike make?â Thatâs what we call asking the important questions, in only the most professional manner, of course. Market implied odds have a âholdâ in September at 93% right now, and, unless the latest inflation data on Wednesday and Thursday have anything else to say, that likely wonât change much. As always, place your bets now. What's Ripe Canopy Growth (CGC) â 22.61% â - Pot stocks are continuing to spark, lighting up Bloomberg Terminals across Wall Street as shares trade just like their customers' mental states: high.
- Shares in cannabis producers and distributors and, f*ck it, probably smokers too have been ripping lately as various U.S. institutions have slowly and quietly signaled support to, at the very least, the decriminalization of this wonderful plant.
- The problem here has neither been the demand nor supply, but regulations. Right now, in the U.S., marijuana is federally just as illegal as heroin, meth, LSD, and others.
- Continued optimism and real momentum around our government getting its head out of its a** per these regulations has been the driver, and we just hope theyâre right. Snowflake (SNOW) â 3.82% â - Snowflakes typically fall, but this stock sure doesnât, at least not at close last week. They and their shareholders can thank DA Davidson for that.
- Prominent wealth management and middle-market investment banking shop DA Davidson initiated coverage of the cloud-based data warehousing and AI firm with a big, fat Buy rating. The firm is optimistic about Snowflake's ability to capture market share amid an allegedly burgeoning enterprise AI boom.
- Weâll see, but for now, shareholders are just basking in the glory of that Buy stamp. What's Rotten RH (RH) â 15.63% â - RH must stand for âreal hardâ because thatâs exactly the kind of day the company had on Friday.
- The company formerly known as Restoration Hardware, aka âRHâ, crushed its latest earnings report, despite that lame a** name. The luxury furniture and home decor retailer posted a $3.63/sh bottom line on $800mn in sales, well in excess of the $2.56 on $785mn anticipated.
- But naturally, a downbad outlook stole the spotlight. As mortgage rates get higher and higher to the point theyâre about to OD, RH gave investors a heads up that less household formation = less demand for their products. Block (SQ) â 5.28% â - Thereâs failing to deliver on an earnings report, and then thereâs just failing to deliver. At the end of last week, the firm behind the payments system youâve all used called Square was absolutely going through it.
- Outages in Squareâs payment network were widespread, forcing customers to pay for their bullsh*t in cash, or, much more realistically, simply walk away and not buy anything (who carries cash?).
- Naturally, the outages led to a drop in share price. CashApp, however, which is the firmâs competitor to Venmo that allows drug dealers and their clientele to transact, seemed fine throughout. Regardless of the share price, we just hope youâre able to buy your coffee this morningâ¦without dirty, grubby, dusty olâ cash. Thought Banana Health Is Expensive 18 and 21 probably were/will, in all likelihood, be the most important birthdays of your and my life. But thereâs something to be said for 26⦠At age 26, under the Affordable Care Act, health insurers are no longer required to cover dependents, meaning all of us little boys and girls have to actually go out and get our own healthcare plans. I donât know about you, but I can barely schedule a dentist appointment for myself. Trying to set up a healthcare plan sounds more complicated than whatever the hell backs ChatGPT, but if youâre in or approaching your mid-20s, time to listen up. If you were born between 1997 and 2001, you are going to have to get your own health insurance within the next 5 years, whether it be through your employer or not, but mom and dad canât buy it for you. At the same time, costs are rising at their fastest rate in years. "Trying to set up a healthcare plan sounds more complicated than whatever the hell backs ChatGPT... " Projections include for rates to jump to their highest annual clip in a decade in 2024, gaining 6.4% next year. Keep in mind thatâs more than double the headline consumer inflation rate right now. Definitely not ideal, but you might find solace in knowing this should hurt your company more than it hurts (most of) you. "Health insurance costs for employers average around $14.6k per employee... " Health insurance cost for employers averages around $14.6k per employee, which is a gross average across geographies and scales, but itâs what we have. Already, employers are facing difficulties in spending decisions thanks to a potentially looming recession and radical jumps in interest rates (see above) adding layers of uncertainty to an already difficult decision. There are plenty of ways this jump in costs could play out, but with drivers including increased cost of labor (aka wages) for healthcare workers as well as an obsession with new, wildly pricey obesity drugs, a slowdown doesnât seem to be coming soon without some changes. Again, Happy Monday. The big question: How will U.S. businesses react to decades-long increases in health coverage costs? Is there a breaking point at which a demand for a reformed healthcare system is achieved? Banana Brain Teaser Friday â If a chessboard has 64 squares and you roll a die across white, what is the probability of the die landing on a white square? Answer 32/64 or 1/2 Today â What has rivers but no water, cities but no buildings, forests but no trees, deserts but no sand, and mountains but no rocks? Wise Investor Says âRisk comes from not knowing what youâre doing.â â Warren Buffett How would you rate todayâs Peel? [All the bananas]() [Decent]( [Rotten AF]() Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend.]() [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")
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