RIP Gas Prices

American oil prices via WTI had soared 4.31%, while their international counterpart, Brent crude, gained as much as 4.16%. [The Daily Peel... ]() October 10, 2023 | Peel #560 Silver banana goes to... [CapLinked. ]( In this issue of the Peel: - American oil prices via WTI had soared 4.31%, while their international counterpart, Brent crude, gained as much as 4.16%. - Defense stocks and Zscaler had a ripe day, whereas Mirati Therapeutics and Airlines stocks took a significant hit for the day. - Joe Biden's administration is getting ready to roll out even more export restrictions on chips and chip-making technology crossing the Pacific. Market Snapshot Happy Tuesday, apes. Shoutout to Christopher Columbus for being an idiot and thinking he discovered a new path to India. Whatever it takes to get a day off from school, we’ll take it. And speaking of whatever it takes, that’s exactly the effort it took from equities to post a green day on Monday. Stocks opened much lower but quickly reversed that trend and ended up higher across the board. The S&P led the way with a 0.63% rise, mostly on the back of defense and energy stocks and other assets hyped about increasing energy prices. Meanwhile, treasury yields had a hectic day but ended up with a fairly flat session. The 10-year yield spiked in response to the outbreak of war in the Middle East but ended still right around the 4.8% mark, a high since 2007. The dollar followed a similar trajectory but had a more boring session, closing around 106 via the DXY. Let’s get into it. Want a Lambo for the Weekend? 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[Contact CapLinked for details.](mailto:sales@caplinked.com) Banana Bits - Death tolls rise on both sides as the [freshly baked war](=) between Israel and Hamas continues. - Just days after getting the boot, Rep Kevin McCarthy is already [eyeing a new job]()… and it happens to be the exact same as his old one. Macro Monkey Says Energized Oil Inflation might be on its way down, but that still doesn't mean your bills are. In yet another instance of “heads the economy wins, and tails your disposable incomes loses,” energy prices are back on the move… in the wrong direction. As of yesterday’s U.S. stock market close, American oil prices via WTI had soared 4.31% on the day while their international counterpart, Brent crude, gained as much as 4.16%. To make matters worse, if you were thinking about running out to fill your tank now before these gas station owners squeeze even more out of you, don’t worry—it’s already too late. Prices at the pump move up with crude prices a helluva lot faster than they go down… and in reality, it’s only because f*ck you, that’s why. Anyway, the primary driver for Monday’s move is obvious. The objectively tragic re-escalation of conflict in the Middle East—the region primarily responsible for supplying the world with energy—complicates the picture even beyond the human suffering it has and will continue to cause. "Prices at the pump move up with crude prices a helluva lot faster ..." But, according to experts, a fresh, new war wasn’t even necessary to drive crude prices higher. Just take a look at the chart: [image] [Source](=) Clearly, oil prices were moving in this direction anyway. The extra oomph provided by this conflict will just make sure you pay even more to go anywhere, do anything, or simply not be cold as we head into winter here in the Northern Hemisphere. This whole sh*t show in energy prices began way back when Russia invaded Ukraine over a year and a half ago. Despite recent moves lacking the craziness of 2020 when crude oil futures prices went negative, this time, they’re moving in very much the wrong direction. Following Russia’s invasion, oil prices shot as high as $123/bbl. That skyrocket in prices was diminished by about this time last year as oil producers pooped on their own party by increasing production—thanks to those higher prices—which naturally led to those prices falling right back down to Earth. But, then 2023 saw heavy production cuts from OPEC+ nations with the goal of getting prices back up, and most traders started betting we’d see $100/bbl prices before we see Santa Claus later this year. "Now, the ever-sought-after dance toward equilibrium continues." That was until last week, when prices fell briefly, only to once again have the party ruined by this new escalation of conflict. Now, the ever-sought-after dance toward equilibrium continues. As we speak, non-OPEC+ countries are trying their hardest to ramp up production, but with global oil inventories as low as they are and this new conflict, it certainly doesn’t look like consumers are leading this waltz. Maybe it’s time to invest in a few extra blankets and a bus pass or something. Anything to avoid seeing that dreaded $4 or higher at the pump… my night sweats are already bad enough. What's Ripe Defense Stocks (ITA) ↑ 4.45% ↑ - Sadly, tragically, and unfortunately, investors are making bags off of global escalations in conflict. Similar to their immediate reactions after the invasion of Ukraine, defense stocks spiked Monday in response to the declaration of war between Israel and Hamas. - We love making money as much as the next guy… but stemming from a tragedy just feels wrong. No jokes today. - Needless to say, the idea is that the escalation in conflict will increase demand for the products from aerospace and defense manufacturers. Given that the U.S. has already pledged support to Israel, the hope is for increased orders from DoD and other allied nations. - Names like Northrop Grumman (+11.43%), L3Harris (+9.93%), and Lockheed Martin (+8.93%) led the way. Zscaler (ZS) ↑ 3.22% ↑ - Stocks are just about the only thing in the world where being “overweight” is better than not. And Barclays gave that blessing to this cloud security stock on Monday. - Shares were upgraded to the overweight status all the way from underweight previously, skipping over healthy weights—or “neutral” —entirely. The firm is expected to outperform, as noted by the British bank, since shares were brutalized enough last year, and cyber threats show no sign of stopping. - And that brutalization, driven by JPow’s tortuous rate hikes, occurred even during a period where the stock was able to double annual recurring revenue (ARR) in just two years. Maybe now they’ll get their money’s worth for it. What's Rotten Mirati Therapeutics (MRTX) ↓ 5.28% ↓ - Most of the time, shares in companies getting acquired spike when the deal is announced. Well, not if you’re Mirati Therapeutics. - You might be thinking, “damn, these guys must suck,” and you wouldn’t be totally wrong, but it’s more so that the acquisition’s structure isn’t ideal for existing Mirati shareholders. Bristol Myers Squibb, the giant pharma company buying Mirati, agreed to pay $58/sh for Mirati (below Friday’s closing price) with a special sweetener to make up for the lower headline price. - BMS is paying $4.8bn in shares to acquire Mirati at the $58/sh price, but the deal also includes a $12/sh contingent value right. Basically, if Mirati is able to achieve a certain goal, Bristol Myers will pay an additional $12/sh to Mirati shareholders, adding $1bn in value to the deal. - In this deal, the CVR is contingent on acceptance of a key new product from Mirati by the FDA within seven years after the close of the acquisition, which is expected in the first half of 2024. Fingers crossed, I guess. Airlines Stocks (JETS) ↓ 2.56% ↓ - I guess that calculus-inventing *sshole Isaac Newton was onto something when he said that every action has an equal, opposite reaction. On Monday, airline stocks were on the wrong end of that Law of Physics. - That’s because share prices nosedived in response to the run-up seen in prices of oil and energy commodities on the escalation of conflict in the Middle East. The headwinds come amid the story of the week, month, and maybe even year with Israel and Hamas back in full-scale war mode. - Oil is by far the largest non-personnel cost to airlines. So naturally, when that cost increased, shareholders foresee a dent in margins and potentially earnings as well. Oil price up → airline stocks down… aka, action → reaction. Thought Banana Best Frenemies Back At It Good friends help each other accomplish their goals. But best friends make sure the other never wins. By that standard, I think the U.S. and China are secretly in love with each other. Because you can be absolutely certain that neither side will ever let the other get a step up on them… unless it comes with billions of dollars in economic value or something else small like that. Even as the two geopolitical powers of this decade gear up for a friendly reunion between leaders planned in November, both sides are taking steps forward in hopes that the other takes a step back. "The importance of this region can rarely be overstated ..." For example, last month, President Joey B was in Hanoi, Vietnam, seeking to reinvigorate the relationship between the U.S. and their Southeast Asian counterparts. The importance of this region can rarely be overstated, and not just because of its dope beaches and food. Southeast Asia boasts a booming manufacturing sector as companies flee China, meaning trade ties between them and everyone else become more important by the day. Moreover, Taiwan is in Southeast Asia, and anyone even mildly afraid of an outbreak of WWIII knows how important that little semiconductor-producing island is to absolutely every single person in a developed economy’s life. "... trade ties between them and everyone else become more important by the day." Now, Chinese President Xi Jinping is planning a trip to Vietnam as well, following in Joey B’s footsteps and hoping to fill his shoes at the same time. In the meantime, Joey B’s admin is also getting ready to roll out even more export restrictions on chips and chip-making technology crossing the Pacific, just to make sure their best frenemy has an even tougher time. Naturally, China wasn’t vibing with the escalation, even calling it “technological bullying.” It might seem minor, but the fact that these two can’t even play nice when both sides are explicitly trying to kiss and make up is a tough sign for that development… and for those of us without a plan to escape to a nuclear bunker. The big question: Will the U.S. and China ever be friends again? Will China’s economy actually ever overtake that of the U.S.? Banana Brain Teaser Yesterday — What is the first number in this series? ?, 14, 15, 92, 653, 5897, 9323 Answer The first number is 3. 3, 14, 15, 92, 653, 5897, 9323, ... This series, known as "Slices of Pi," is the digits of pi grouped so that each term is greater than the one before. Today — Which is more: Buns in a dozen baker's dozens or hours in a week? Shoot us your guesses at vyomesh@wallstreetoasis.com Wise Investor Says “Over the long term, the price of oil is likely to rise, reflecting growing demand from emerging countries and the costs of finding and producing the remaining oil reserves.” — Ray Dalio 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? [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") 20705 Saint Charles St Saratoga, California 95070 United States