2024's First Inflation Report

Last month’s CPI posted a 0.3% acceleration from November, bringing the annual inflation print up to 3.4%. [The Daily Peel... ]( January 12, 2024 | Peel #625 Silver banana goes to... [CFA Institute. ](=) In this issue of the Peel: - Last month’s CPI posted a 0.3% acceleration from November, bringing the annual inflation print up to 3.4%. - DocuSign and Netflix had a ripe day, while Plug Power and Coinbase suffered share price declines. - The long-awaited ChatGPT Store is now officially available right alongside our old pal, ChatGPT. [image]( Market Snapshot Happy Friday, apes. We survived the first inflation report of 2024, and now it’s time to find out if we can survive Q4 earnings. The big banks start dropping today, and it’s only been a few weeks, but it feels like Christmas morning all over again. Markets had a jump scare in the morning, largely due to the inflation report that dropped but ended up closing flat when they realized that they had overreacted (more below). The S&P closed slightly lower by 0.07%, while the Dow had risen by 0.04%. Monkey sounds were coming out of The Daily Peel Global Headquarters as [WSO Alpha]() once again outperformed benchmark indices, rising 0.09%. I’m not sure what kind of tomfoolery is going on, but I’m sure you wouldn’t want to miss it. Let’s get into it. Set the standard. [image]( If you care about the state of the world and want to set it on a better course, we have a solution that may be somewhat surprising: work in finance. At CFA Institute, our courses are deeply rooted in ethical perspective. But we don’t just teach — we create codes of conduct, and impact key policy issues with global governments and regulators. Visit [cfainstitute.org/setthestandard](=) to join a global network of investment professionals setting the standard through performance with purpose. [Get Started]( Banana Bits - Are you gassy today? If not, we know one soon-to-be merged company [that’s about to be.](=) - Digital Asset bulls wasted no time getting in on the SEC-permitted degeneracy of [spot BTC ETFs yesterday.]( - The U.S. and U.K. have started launching strikes against Houthi rebels [throttling the Red Sea.](=) Macro Monkey Says CPI Almost every horror movie has that moment when you feel like there’s about to be a jump scare, but there isn’t. Even though nothing scary actually happened (at least, at that moment), your palms are still sweaty (knees weak, arms are heavy?), your heart is still racing, and I can only assume that, for most of us, your pants are still wet, too. That’s basically what reading yesterday’s CPI print was like—especially the wet pants, for me, at least. Anyway, we finally have the numbers for the last month of 2023 and, along with it, another full year’s worth of inflation data. After seeing the average annual rate of inflation come in at 8.02% in 2022, it’s a relief to see that 2023’s average was nearly half of that, clocking in at 4.13%. But that doesn’t really matter. And it’s still more than 2x the Federal Reserve’s 2% target. And, in December, we actually saw headline inflation continue to move away from that 2% target for the second month in a row by the monthly reading. Last month’s CPI posted a 0.3% acceleration from November, bringing the annual inflation print up to 3.4%. That might sound scary (like it did to me), but keep in mind that’s just the headline number. Core CPI, which strips out food and energy costs for being a little bit too rowdy, continued to decline in December, coming in at 3.9% for the year. Luckily, that 3.9% is still a decline from the 4.0% annual Core CPI reading posted in November. An uptick here would’ve been the real jump scare some of us were expecting. [image] [Source]() Still, markets initially threw up at the sight of the report. Equity indices sold off until everyone apparently had the time to actually read through the report beyond the first paragraph, and bond yields spiked at the open, with the 10-year briefly crossing back above 4.0% once again. That didn’t last long because, all in all, it was a relatively chill inflation report. Kind of like after you smoked just a little too much weed, you’re panicking a tiny bit, but overall feel chilled tf out. And once again, the primary culprit for this fake fear of an uptick in underlying inflation is those damn shelter costs. As we’ve said every month since… when did this newsletter launch?—shelter costs make up way too much of the CPI report, especially for how terribly measured they are. But this month, shelter made up only half of the monthly increase, whereas, over the last half a year or so, it’s been responsible for about 70% of any given monthly print. Shelter costs jumped 0.5% in December, primarily driven by a 0.5% increase in the most garbage, useless, agonizingly acquired line item in the entire report, owner’s equivalent rent. Meanwhile, actual rental costs jumped 0.4% for the month. Energy costs may have spiked 0.4% for the month as well, but the index still fell 2% for the year, thanks mostly to a massive 14.7% decline in fuel oil costs. Food, which I guess is kind of important too, saw costs increase 2.7% for the year, but those damn egg prices simply cannot stop rising, seeing an increase of 8.9%. The main takeaway from the report is that despite an unexpectedly strong labor market throughout December, as measured by the 216k jobs added, inflation didn’t necessarily have an equivalent spike alongside it. Underlying inflation continued to decline by the Core reading, but it’s also the 4th month in a row in which the index fell by only 0.1% or less. That very well could be too slow for the Fed’s liking, but according to [CME Group](=) probabilities, it didn’t change much. In fact, the odds of a 25bp rate cut in March only increased in yesterday’s response to the report, from ~65% on Wednesday to 70% as I write this. Now, the Fed does use a different reading for inflation with the Personal Consumption Expenditure report, or PCE, but the two readings generally have a strong correlation. PCE generally weighs shelter costs slightly less, however, which over the past few years has kept it chronically below the CPI reading. PCE also rebalances its own basket of goods more frequently, so before you start placing any bets on “to cut or not to cut,” maybe wait a few weeks for this print. Or, dial up the degeneracy, keep your fingers crossed, and start letting the dollars fly. Just keep us updated on how it goes. What's Ripe DocuSign (DOCU) $61.34 (↑ 9.34% ↑) - It must be nice to have two suitors competing over who wants you more. Is this what it feels like when target school students have competing offers from multiple banks because they got into the right school? - Most of us will never know, but DocuSign sure does. Like a 4.0 grad from Wharton, Bain Capital and Hellman & Friedman are both dying to add DocuSign to their books. - The digital signature firm has been looking for a buyout for a few months now, with even more potential acquirers like Black Stone already having dropped out. Even with yesterday’s gain, shares are off ~80% from the glory days of summer 2021. - Still, the stock manages to carry a 241x P/E, so even after an 80% tumble, this thing is still hella expensive. Thankfully, we’re pretty sure Bain and Hellman are good for it. Netflix (NFLX) $492.23 (↑ 2.91% ↑) - The King of streaming threw a parade on Wall Street today, flaunting its crown as the firm’s ad tier alone now boasts about as many subscribers as most of the firm’s competitors have in total. - Launched in 2022 and nearly coinciding with the streaming giant’s crackdown on password sharing, this free, advertisement-driven tier of service for the brokies like me who still use their parent’s account has done pretty well. - 23 million users are now signed up to watch Squid Game: The Challenge and the endless supply of other titles available on Netflix, much more than many were expecting. What's Rotten Plug Power (PLUG) $3.72 (↓ 7.92% ↓) - ESG now stands for “extremely sh*tty gains,” apparently, as a renewed outlook on this segment of the market is the latest change 2024 has brought us so far. - Susquehanna International Group, a.k.a. SIG, slashed its price target for Plug Power in half on Thursday, all the way down to $4.50, while changing their rating from “positive” to “neutral.” - The hydrogen fuel cell company is the latest green energy stock to fall victim to this tarnished outlook, one that solar stocks got used to at the end of 2023. - According to SIG, demand concerns weigh too heavily. Plus, they have so much conviction behind this downgrade that they even went as far as to say it should’ve been downgraded a lot sooner. Coinbase (COIN) $141.16 (↓ 6.70% ↓) - “A bird in the hand is worth two in the bush,” “Know thyself,” and “Buy the rumor, sell the news”—three of the oldest pieces of advice in the book. - And yes, once again, these all held true on Thursday, the first day on which spot BTC ETFs became available to retail traders in the United States. But now, analysts are having second thoughts on how this could impact Coinbase and other digital asset stocks. - Although they’re the custodian for a lot of these funds, Coinbase makes its nut by facilitating trading on their own exchange. Now, analysts are waking up to the fact that easy access to digital asset price action in your brokerage account may take volume away from Coinbase and other exchanges, like Robinhood (HOOD, -3.54%). - So, as great as the custodial fees Coinbase will receive might be, they certainly can’t replace the transaction fees that they fleece you on. BTC prices fell alongside the news, and at this point, it seems like hatred for the SEC is the real bull case for digital assets. Thought Banana GPTs Selling GPTs Every business owner wants a product that sells itself, much like cocaine or Amsterdam’s Red Light District. And if they didn’t have it before, OpenAI sure has that luxury now. The long-awaited ChatGPT Store is now officially available right alongside our old pal, ChatGPT. “Custom GPTs” are just what they sound like—chatbots like ChatGPT that can be customized for use cases where more streamlined answers are needed. OpenAI launched the ability for users to create their own GPTs during their DevDay on Nov 6th, 2023, and already, there are millions to choose from. Using the current “Trending” list as it stands now, some of the most popular examples are: - Consensus GPT—an AI research assistant specializing in academic/scientific research and information gathering. - AI PDF GPT—a PDF reader so you can upload documents and simply ask questions rather than reading it yourself or hitting “CTRL + F” all day. - Best Custom GPTs GPT—a GPT that searches for the best GPT tool to help with whatever task you’re “working” on. - Grimoire GPT—a coding tool that allows users to “create a website in one sentence.” - DALL-E GPT—a leading AI-based image generator. In barely over a year since the launch of ChatGPT, the first widely adopted LLM/GPT service, this thing is already being used to offer millions of others. Definitely go check them out because, as you can see, there’s a ton of cool sh*t on there already. The GPTs available will change every week, and OpenAI is seeking to engineer a “soft launch” of the platform by highlighting only 6 custom GPTs now available, including ones like “AllTrails GPT,” which reminds these LLM users that they actually are able to go outside every now and then. And you might be wondering, like I just asked myself, “y’all making any money off this sh*t?” and in short, yes, they are. The ChatGPT Store uses a revenue share model, so this isn’t being done out of the kindness of CEO Sam Altman’s heart. Lastly, the “ChatGPT Team” was also announced recently, allowing coworkers and teammates alike to work together within a shared ChatGPT environment. No word yet on whether ChatGPT’s Teams function better than Microsoft’s Teams, but that bar has been set pretty low, so we’re hopeful. The Big Question: Is a rev share model the right monetization strategy for OpenAI and the developers of these custom GPTs? What are some of your favorite custom GPTs? What’s next for OpenAI? Banana Brain Teaser Yesterday — What is the perimeter, in meters, of a rectangular garden 6 meters wide that has the same area as a rectangular playground 16 meters long and 12 meters wide? Answer 76 Meters Today — Last week, Jack worked 70 hours and earned $1,260. If he earned his regular hourly wage for the first 40 hours worked, 1.5 times his regular hourly wage for the next 20 hours worked, and 2 times his regular hourly wage for the remaining 10 hours worked, what was his regular hourly wage? Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “You can have a job if you wanted to have a job for personal satisfaction. But the AI would be able to do everything.” — Elon Musk 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