WSO Platinum Banana: Macro Story of the Year

Under the category marked "Macro Story of the Year," the 2023 Platinum Banana award goes to “The War on Inflation!” [The Daily Peel... ]( December 26, 2023 | Peel #613 In this issue of the Peel: - The Leading Economic Index (LEI) fell 0.5% for the month of November, which was an improvement to the (revised) 1% fall in October. - Karuna Therapeutics and Rocket Lab had an absolutely ripe day, while NetEase and Nike saw their share price decline. - Under the category marked "Macro Story of the Year," the 2023 Platinum Banana award goes to “The War on Inflation!” Market Snapshot Happy Tuesday, apes. Of course, Happy Holidays to you all. Hope the resale value of all your gifts this year is enough to plug your portfolio’s losses, and if you’re sitting on gains, congrats on the additional funding for FY 2024. We can’t wait. And markets couldn’t wait either. Trading is back in action today after yesterday’s shutdown for Christmas, but we can’t forget about Friday. We ended the week alright, but it was a choppy session to get there. The Dow did end up shedding 5bps while all the other U.S. majors were higher, with the Russell 2k’s 0.93% leading the way. WSO Alpha was in the holiday spirit as well, managing to put 0.31% on the board and reminding us all about the true meaning of Christmas—making money. In the meantime, treasury yields moved higher on the day after a high and fast spike late in the session. “High and fast” also happens to be how I took most exams in college, but unlike me, that spike probably at least worked out well for someone. The 10-year settled a hair below 3.9% while the 2-year was hanging around 4.35%. Let’s get into it. The Ultimate Program to Land a 6-figure Job in High Finance [image]( With over 17 years of experience, 900k+ members, and an insane network, WSO has cracked the code to making 6 figures right out of undergrad. We’ve helped over 1k students from all backgrounds break into these careers. WSO Academy is a 12-week program (with many lifetime benefits) that puts everything we’ve learned on a silver platter for you—to dramatically improve your odds at landing a high finance offer. The waitlist for WSO Academy just opened again, and we’re only accepting 20 students into the next cohort. So if you’re serious about breaking into high finance, you need to sign up for the waitlist asap because we are opening applications next week (people on the waitlist will be the first to know). [Get on the waitlist -> Applications opening next week and capped at 300]( (so we can review all of them carefully). No reason for you to be sleeping on this. Macro Monkey Say Losing Economic Index Despite all the economic fears abounding throughout 2023, Santa Claus was ostensibly still able to make the rounds this year. The pile of coal under my tree confirms this, but it also confirms that those economic fears may have been just a tad bit justified. We learned last week that Q3 GDP growth, while still coming in hot, was below what we first estimated. Don’t get me wrong, we’ll take the growth, but Friday’s biggest macro drop gives some insight into why. The Leading Economic Index (LEI) tracks 10 leading economic indicators to attempt to gauge the direction of a given economy. They release indexes that track the whole globe, certain regions, and certain countries, and because we’re feeling selfish today, we’re gonna stay focused on the U.S. Spoiler alert: it wasn’t great. Overall, the index fell 0.5% for the month of November, which was right in line with expectations and an improvement to the (revised) 1% fall in October, but still… not great. [image] [Source]( Meanwhile, the Conference Board’s sister index released alongside the LEI, the Coincident Economic Index (CEI), managed to spread some holiday cheer. "Spoiler alert: it wasn’t great. Overall, the index fell 0.5% for the month ..." Where the LEI seeks to predict future performance, the CEI uses a basket of just 4 “coincident” indicators, meaning they try to measure the economy as it is now. These include: - Payroll Employment - Personal Income less Transfer Payments - Manufacturing and Trade Sales - Industrial production All four moved higher in November, bringing the index 0.2% higher overall. Moreover, in the past 6 months, the CEI has seen a 1% gain overall, accelerating from the 0.7% gain seen in the prior 6 months. "... we’re not trying to kill the vibe. It’s a light week ahead in terms of economic indicators, trading volume, and basically anything ..." We have, again, something we seem to be getting a little too used to in the U.S. economy—a tale of two cities. Now, things are purported to be okay, but as has been the case for the past *checks notes* seemingly forever, we can’t be sure who to trust. Now, the LEI doesn’t actually mean a whole lot because anytime indicators seek to measure everything, they largely end up measuring nothing… of value, at least. But it could be the case that now that we seem to have beaten inflation like Israel Adesanya did to Sean Strickland, this could be a burgeoning sign that we may have gone too far. But, for once, we’re not trying to kill the vibe. It’s a light week ahead in terms of economic indicators, trading volume, and basically anything that doesn’t involve conspicuous consumption of food, alcohol, or all of the above. Remember, it’s what Santa would want. What's Ripe Karuna Therapeutics (KRTX) $317.85 (↑ 47.71% ↑) - Christmas came early for shareholders in this biotech name, with Friday combining both the holiday and a stock’s equivalent of draft day at the same time. - Despite the fact that Karuna has “not generated any product revenue related to its primary business purpose to date,” according to their latest quarterly filing, shares boomed on Friday in response to news of a $14.5bn acquisition by pharma giant Bristol Myers Squibb. - Karuna makes—or better yet, has been trying since 2009 to make—a kind of drug that Mr. Market could really use: antipsychotics. Seeing that the firm has never earned a dollar related to their products, maybe their acquirer could use a dose, too. - But, as is common in biotech, they’re not buying necessarily for the business but simply for the research and “eventual” product (fingers crossed). Getting bought like this is how biotechs get pulled up to the big leagues, so we’ll see if they can speed things up now that they’re up in the major leagues. Rocket Lab (RKLB) $5.44 (↑ 22.80% ↑) - Some of the best holiday gifts are when mom & dad, grandma & grandpa, or someone else who has to get you something but doesn’t know what to get just decides to give you cold, hard cash. - That’s when you realize that Santa might not be real, but that dreams really do come true. And for Rocket Lab, that happened on Friday as the space company’s mom & dad (a.k.a. the U.S. government) decided to toss them $515mn. - That’s just slightly more than what I got, but for that cash, Rocket Lab actually has to do something useful for society. For that $489mn base + $26mn in options and incentives, Rocket Lab will be custom building, delivering, and operating 18 “space vehicles” for Uncle Sam. What's Rotten NetEase (NTES) $87.64 (↓ 16.07% ↓) - Sometimes the holidays giveth, and sometimes they taketh away. And leading into this holiday weekend, China chose the latter path. - Since 2021, China’s government has essentially declared war on online gaming. The country hosts—by far—the largest online gaming market in the world, and as of Friday, there are some new laws to restrict playing. - To close last week, Beijing passed legislation that will ban games “from giving players rewards if they log in every day, if they spend on the game for the first time or if they spend several times on the game consecutively,” according to Reuters. - If you’re smelling what I’m smelling, it seems like there’s a lot of wiggle room within that loose framing. But investors were spooked by the resurgence of policy risk this presents, which they thought was pretty much over. Nike (NKE) $108.04 (↓ 11.78% ↓) - Speaking of trouble over in China, Nike jumped on that train on Friday as well. But in this case, it’s kinda their own fault. - In their earnings released on Friday, Nike cited demand weakness in the world’s second-largest economy as a reason to drastically cut their revenue forecast for next year. EPS of $1.03/sh on $13.38bn in sales beat the bottom line, but that sales figure couldn’t overcome the $13.39bn expected. - So, the sneaker firm missed last quarter’s target and killed the vibe even more by saying next year’s sales are probably gonna suck too. In addition to China’s demand weakness, upstart brands like Allbirds, On, and others are threatening the king’s market share as well. Thought Banana Platinum Banana: Macro Story of the Year Back at it again to finish out the year, we’ve got even more Platinum Banana awards to bestow upon the soon-to-be forever-changed heads of our lucky winners. This week, we’re getting into the big ones, so let’s get right into it. 2023 has been a crazy year on the macro side, and that’s saying something. Rarely (if ever) does the macroeconomic picture, and especially trying to invest based on short-term macro views, ever add value. And like author Tom Peters said, “If you're not confused, you're not paying attention.” "... but 2023 has just been confusing." That was especially the case this year. We often hear about years that are particularly bad or good, but 2023 has just been confusing. You have morons on TikTok claiming we’re in the “worst economic time in U.S. history” as if the Great Depression is chopped liver or something while unemployment is near a 50-year low and inflation is falling by the month. It’s not and never is perfect, but it could be and has been a helluva lot worse. But amid all that chaos, confusion, and calamity, one story has been the overarching driver of it all. If you haven’t guessed it already, I suggest you go back and re-read every Daily Peel ever (or just one over the past year), and you’ll see why the lucky winner of the 2023 Platinum Banana award for Macro Story of the Year is… The War on Inflation! Fed Chair Powell declared war on this economic phenomenon back in March of 2022. Then, the word “transitory” was used as frequently as the F-word in the men’s bathroom at a crowded college bar Thursday—Sunday night. It was met with a lot of skepticism, but the Fed went on a tirade. The effective federal funds rate, the base interest rate across the economy in which just about everything is linked, was hiked 10 times in a row and 11 in total, taking us from effectively 0% to the 5.25%-5.5% range where we sit today… in just 16-months. Historically, that’s almost completely unprecedented in U.S. economic history. The best historical comparison we can make is to the bombing of Nagasaki… because it was brutal, painful, and (almost) unprecedented. "Fed Chair Powell declared war on this economic phenomenon back in March of 2022." Back in March of last year, headline CPI clocked in at 8.5%. Not only had rates not been touched, but the Fed was still actively buying mortgage-backed securities, driving up asset values in the housing and other markets in which it operates. June 2022 saw CPI hit a PR at 8.9%, and since then, JPow has been able to lasso the beast back down to 3.1%. The impacts on everything from the housing market to consumer spending to damn Argentina deciding to dollarize their economy have roots in this war against inflation, but we’ll need more time to properly dive into that. Basically, every other economic release this year was immediately met with the question, “But wait, what does it mean for the inflation picture?” When indicators that usually are the story, like the monthly jobs report, for example, become just part of a larger narrative, you know something crazy must be going down. We’ll be going deep into that dynamic later this week as well with our 2023 Macro Recap, but for now, just be sure to congratulate the War on Inflation for securing such a high, prestigious, and esteemed honor of winning this Platinum Banana award. Stay tuned. The Big Question: When will inflation go back to the targeted 2%? Did JPow manage to achieve a soft landing? What will be the Macro Story of the Year for 2024? Banana Brain Teaser Friday — How many times do the hour and minute hands cross each other in a twelve-hour period? Answer 10 times if you start when the hands are already on top of each other; otherwise, it's 11 times. Today — Can you find three consecutive even numbers that total 85,008 when multiplied together? Shoot us your guesses at vyomesh@wallstreetoasis.com Wise Investor Says “I have no idea on timing. It’s easier to tell what will happen than when it will happen.” — Warren Buffett 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