Congress Spending Deal

Over the weekend, Congressional leaders were able to come to an agreement on top-line spending of $1.59 trillion [The Daily Peel... ]( January 9, 2024 | Peel #622 Silver banana goes to... [SRS Acquiom. ]( In this issue of the Peel: - Over the weekend, Congressional leaders were able to come to an agreement on top-line spending of $1.59 trillion to avoid a government shutdown. - Crocs and Nvidia had a ripe day, seeing their share price rise. On the other hand, Boeing and Energy stocks suffered share price declines. - In November, credit card balances jumped by the most since March of 2022, with total credit surging by $23.8bn, more than 4x of the growth seen in October. [image] Market Snapshot Happy Tuesday, apes. Hopefully, you haven’t been in any Boeing planes lately, but if you have, I’m just glad to see you made it back to the ground. Maybe let’s all just stay down here for a while… Meanwhile, markets certainly were not going to stay down. Strong performance on Monday, as seen above, bled over into our WSO Alpha portfolio, but needless to say, the apes still underperformed. 2024 has gotten off to a hot start within the portfolio. A lot of trades have been placed to get our rebalancing underway, so make sure you get in on the gains/points and laugh at our pain [here.]( Let’s get into it. Stay Friends With the Trends Into 2024 [image]( Past performance is no guarantee of future results, but it never hurts to know the trends—especially when they shift. The private M&A market saw its fair share of shifts in 2023, and SRS Acquiom was following them the whole way. As you can probably guess, SRS Acquiom will be spotlighting those shifts (and more) in their 2024 M&A Deal Terms Study. To tide you over until then, SRS Acquiom is offering an early glimpse of the most important trends of the past year and what they could mean to you and your clients in the year to come. Tracking more than 200 private-target deals, this briefing from SRS Acquiom includes information and insights no one else has. Closing consideration, indemnification provisions, termination fees, earnouts, carveouts, escrows, holdbacks—there’s a whole lot of trends packed into just two pages. It’s fast, it’s free, it’s definitely worth a download. [So download it now.](=) Banana Bits - Deforestation continues at Nike, but this time, the only Woods[getting removed was Tiger]( after a 27-year partnership. - Samsung just raised the guillotine for themselves as the firm prepares the market for a potential [35% plunge in profits.]( - Clearly, grocery stores haven’t gotten the message, but food prices continued to [decline in December](=)… do I smell margin expansion? - Insiders are getting ready for hibernation, apparently, as the Insider Transaction Ratio officially [entered bearish territory](=) yesterday. Macro Monkey Says Shutdown Showdown Congress is back in session, and the boxing gloves are back on in Washington, D.C. The goal to kickstart 2024? Keep the government running. In addition to becoming the world’s greatest hedge fund, as discussed a few days ago, Congress has officially become the world’s greatest reality TV show. Just like the S&P, the shenanigans in D.C. appear to be approaching all-time highs. Over the weekend, Congressional leaders were (amazingly) able to come to an agreement on top-line spending figures. House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer shook hands on a headline number of $1.59tn, but of course, it’s a lot more complicated than that. See, this time around, the federal government actually has two dates of potential shutdown to worry about. Following the advice of all the great investors, they’ve diversified partial government shutdowns to Jan 19th and Feb 2nd. "... the federal government actually has two dates of potential shutdown to worry about." Keep in mind that a government shutdown is different than the debt ceiling limit that set markets ablaze last summer. Borrowing limits have been suspended until January 1st, 2025, meaning that there’s no risk of defaulting on our debts until then. But that doesn’t mean the government will run smoothly in the meantime if we can ever really say that it is. Congress needs to reach a more specific spending agreement by January 19th in order to avert a shutdown for certain agencies, including housing, transportation, veterans' affairs, military construction, and the Energy Department. The rest of the government runs out on Feb 2nd. "... seeing lawmakers agree on headline spending numbers is a solid first step." Now, getting back to this weekend’s developments, seeing lawmakers agree on headline spending numbers is a solid first step. But, the challenging part centers on how to actually go about spending those dollars. There are a few ways Congress could go about this. Historically, the legislator has passed 12 Appropriations Bills annually, each specific to certain agencies and activities. In recent decades and years, the gang in D.C. has opted to lump these bills altogether into essentially one sweeping appropriations bill to avert shutdown after shutdown. Now, Congress has exactly 10 days to figure out how to allocate that $1.59tn. Otherwise, the above-listed agencies will shut down until some kind of spending agreement is reached. Within that $ 1.59 trillion, $886 billion has been allocated to the military, whereas the remaining $704 billion is set for domestic, nondefense spending. Then, to add confusion to the mix, Congressional leaders have agreed to a nice $69bn side deal that further allocates that amount to nondefense spending if certain conditions are met, bringing full FY’2024 federal spending to a grand total of $1.66tn. Republicans hate it, Democrats hate it, and that’s how you know it’s the beginning of a compromise. See, the two parties are essentially in an endless tug of war where the right refuses to give up a dollar of defense spending, yet the left firmly believes much of that defense spending should get reallocated to domestic needs. What did I tell you? It might involve less Prada and perfume than most reality shows, but the drama in D.C. is unmatched. Markets weren’t too nervous about a shutdown yesterday, at least, and betting odds on peer-to-peer gambling website [Kalshi]( put the market implied probabilities of a shutdown following 11:59 pm on January 19th at 18%, much lower than the 30-35% odds given prior to this past weekend. What's Ripe Crocs Inc (CROX) $104.03 (↑ 20.33% ↑) - The world’s drippiest shoe manufacturer showed us exactly why it earned that title to kickstart this week, bursting more than 20% on increased sales guidance. - Crocs had been expecting to see a ~1%-4% decline in Q4 sales compared to the prior year. But yesterday, the company released a [statement]() saying they now expect a 1% increase in Q4 sales as both brands—classic Crocs and newly acquired HeyDude—have allegedly gained market share. - Now, full-year 2023 revenue figures are expected to clock in at $3.95bn, an 11% annual increase. Keep in mind this comes just weeks after the world’s largest shoe manufacturer, Nike, said it was expecting a 1% annual decline this year. - As if we needed further evidence, that divergence just proves that Crocs must officially be way cooler than Nike. Now, I just can’t wait to see the sneaker deal Lebron inks with the new top dawg—Crocs would look great on the court. Nvidia (NVDA) $522.53 (↑ 6.43% ↑) - Miley Cyrus’ “We Can’t Stop” has once again showcased why that song alone is a better stock price forecaster than anyone on Wall Street. Nvidia shares have once again raised the roof on all-time highs. - Before even stepping on stage at the Consumer Electronics Show (CES), traders were already bidding up shares of the chipmaker. - When they actually did get on stage, Nvidia unveiled new chips that really got the nerds goin’. New desktop graphics chips will make using AI on your PC even easier while also upgrading older tech to allow for 4k resolution. - Plus, new partnerships with firms like Amgen for drug discovery, Getty Images for picture generation, and Li Auto for self-driving were all announced, reminding us exactly how this company tripled sales and more than 10x its net income in Q3 of last year compared to 2022. What's Rotten Boeing (BA) $229.00 (↓ 8.02% ↓) - That’s it. I’m officially never flying again. As if being in a metal tube launched 35k feet in the air wasn’t scary enough, now these things are falling apart. - Well, I guess “now” isn’t the right word because Boeing’s planes have apparently been made of paper mache for a good few years now, but the problems persist with the 737 MAX model. - 16k feet above the ground and 20mins into their flight, passengers on Alaska Airlines flight 1282 on Friday were treated to a nice, in-flight horror movie as an entire damn door panel blew out and exposed passengers to the beauty of the night sky. Somehow, no one was injured, and the plane landed safely. - But now, the FAA has grounded all 170 operational 737 MAX 9 aircraft from Boeing so airlines can inspect them and actually keep their passengers in the aircraft. Fuselage maker Spirit Aerosystems tanked on the news as well, falling 11.13% on Monday, while Alaska Air shed just 0.21%. Energy Stocks (XLE) $83.70 (↓ 1.16% ↓) - There was a party at Greta Thunberg’s house tonight as oil stocks sold off for the day on an apparent lower demand outlook from Saudi Arabia. - The kingpin on the OPEC+ cartel surprised everyone on Monday with an announcement that they’ll be cutting export prices for their barrels of black gold by $2/bbl, signaling a need to artificially spur demand. - But at the same time, banks, including Truist and Piper Sandler announced improved outlooks on U.S. oil majors, including Exxon Mobil, Chevron, and ConocoPhillips. Thought Banana “Debt Will Set You Free” Consumers have evidently taken to heart some robust, well-thought-out financial advice from comedian and apparent personal finance guru Tim Dillon. “Debt will set you free” has been confirmed as the official, prevailing vibe of this holiday season. In November, credit card balances jumped by the most since March of 2022, the same month that rate hikes began and the regional banking crisis ensued. With that comforting comparison in mind, total credit surged by $23.8bn as we began to splurge on holiday spending. That’s more than 4x of the $5.8bn growth seen in October, and $19.1bn of that total was classified as revolving credit outstanding, which basically means credit cards. "In November, credit card balances jumped by the most since March of 2022 ..." The remaining ~$4.6bn in credit comes from non-revolving facilities, which primarily includes debt for things like vehicles and college binge drinking—I mean—“education.” Anyway, this data flies in the face of how we might expect consumers to behave if the $1tn in excess savings identified by J.P. Morgan last week actually was what we thought it was. Given the egregiously high rates that come with new loans these days, it’s hard to imagine consumers wouldn’t have dipped into that pile of reserves first. But now, the only thing growing along with debt balances is fears of retractions in consumer spending going forward. "... the only thing growing along with debt balances is fears ..." Of course, the stronger-than-expected hiring and wage growth data from December tempers those fears, but not by much, given the magnitude of credit growth. Consumer spending still drives anywhere from 65%-70% of U.S. GDP in any given year, but when we’re just putting that all on the plastic while JPow actively tries to bankrupt us all, it’s harder to be hopeful regardless of what that GDP growth figure says. The Big Question: Will we reach a breaking point where consumers default en masse? If so, how will that play out in the economy? Have you paid off your balance for the holiday season yet? Banana Brain Teaser Yesterday — A grocer has 400 pounds of coffee in stock, 20 percent of which is decaffeinated. If the grocer buys another 100 pounds of coffee, of which 60 percent is decaffeinated, what percent, by weight, of the grocer’s stock of coffee is decaffeinated? Answer 28% Today — A rope 20.6 meters long is cut into two pieces. If the length of one piece of rope is 2.8 meters shorter than the length of the other, what is the length, in meters, of the longer piece of rope? Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “Rather go to bed without dinner than to rise in debt” — Benjamin Franklin 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