Think You're Fooling Us?

Liquidity conditions might remain tighter than what markets think… January 30, 2024 | Peel #636 Silver Banana goes to... [CapLinked. ]() In this issue of the Peel: - 🚰 Liquidity conditions might remain tighter than what markets think… - 📦 iRobot is broke, and Amazon is up, as they’re no longer getting married. - 💰 Spot BTC ETFs came out two weeks ago—how did they do? Market Snapshot 📸 = Banana Bits 🍌 - Computer chips meet human brains—Elon Musk claims his startup Neuralink has implanted the [first device in a human patient]() - Real rates could be the [new biggest problem]( for the homie JPow - Big Lizzy W is back on JPow’s back [to start cutting]() like a damn barbershop - Global freight costs spiked nearly [140% in the past month]() CapLinked’s Data Room is (Literally) Paradise We joke that a good data room is paradise. But what if your VDR provider sent you to actual paradise? That’s exactly what CapLinked is doing. Because they know their data room — which is the most intuitive VDR on the market — can make your workday almost as easy as kicking back on the beach. So they’re sending clients who open an enterprise-level data room on a luxury trip to Thailand. Because they deserve it. But now’s your last chance to get in on the action if you haven’t already — [get the ball rolling on a new Enterprise VDR]( before the end of the month to claim your PTO. Macro Monkey Says 🐒 QT Gets Cutesy Oh, JPow, you think you’re fooling us?? The Federal Open Market Committee (FOMC), the primary monetary policy-setting arm of the Federal Reserve, meets again this week to decide the economic fate of you, me, and the other 336mn of us. Nobody on Earth expects the Central Bank to begin cutting rates at this meeting, but since the last rate decision on December 13th, all eyes have been on easing. By “easing,” we mean any potential steps the Fed could take to loosen monetary policy—think of it as the Fed increasing the size of the financial pipes money runs through in the U.S., making dollars easier to access (i.e., increasing liquidity). However, while the outlook on easing has gotten as popular as Travis Kelce’s girlfriend in recent months, JPow and the gang might be pulling a fast one on us. What’s Going On? Two crucially important events in American finance are set to occur relatively soon. First, on Wednesday, the U.S. Treasury will come out with its latest Quarterly Refunding Announcement (QRA) at 8:30 am ET, hours before JPow speaks at the FOMC meeting. This is when Treasury Secretary Janet “JYell” Yellen and the rest of the fiscal policy gang give us an update on how broke they are—I mean—*how much they need to borrow for the coming quarter (typo, my b). [Source]( In total, JYell expects us to collectively spot them $760bn. Surprisingly, we don’t have exactly that much here at The Daily Peel Global Headquarters, but hopefully, they’re able to scrape it together. Keep in mind—this is just an estimate. We’ll get the real amount on Wednesday, but the QRA is of particular importance nowadays due to 1) the enormous deficits the U.S. government has been running and 2) a shift in duration called the “Yellen Pivot.” Running enormous deficits means, very broadly, that the U.S. has to issue more debt in order to stay funded—like a company that’s not making enough to fund its current obligations, so it has to raise more. The “Yellen Pivot” describes a shift in the makeup of the debt that is issued. Basically, Yellen & Co. have decided to shift towards offering a higher percentage of shorter-term maturities so that money market funds can put their trillions of dollars in idle cash to work. [Source](=) The problem here is that increases in the size of treasury auctions spook markets because it signals the U.S. government is on tough financial footing. If that $760bn figure holds, it’s a slight reduction from the $766bn issued in Q4 of 2023. That might sound good, but reducing issuance also means lower liquidity in the treasury market, which is the exact opposite of the easing described above. Secondly, it seems that nobody is talking about this, but a key monetary policy facility is set to dry up in March, and the ramifications of this are… in short, unclear. The Bank Term Funding Program (BTFP) is a lending facility the Fed began following the collapse of SVB, Signature, and other piece-of-sh*t banks to make sure the U.S. financial system didn’t collapse. Now, the thing about the BTFP is that it was created in a crisis scenario, meaning policymakers at the Fed didn’t exactly think through the pricing… To make a long story short, when rates began collapsing in mid-December, the cost of borrowing funds from the BTFP facility fell below the interest rate banks would earn via the IORB—a rate the Fed pays on deposits held by banks at the Central Bank. Basically, these banks had an arbitrage opportunity where they were able to borrow money from the Fed for less than the Fed was paying them. [Source]( Clearly, that’s not good for the Fed to be giving out free money. As a result, the Fed 1) jacked up the cost of the BTFP and 2) announced that the facility would close on March 11, 2024. What The Hell Are We Talking About? The above is a criminally non-detailed explanation of these two events, but you get the idea. In case you don’t… To summarize: - Markets are hyped about the easing of financial conditions, but - If the Treasury issues less debt and - The Fed closes a lending facility that’s giving money to these banks, then - Liquidity is falling on both the fiscal and monetary side of the U.S. financial system, so… - This reduction in liquidity could serve as an effective tightening of conditions that markets may not be expecting right now Damn, I’m out of breath. The Takeaway? A further underlying tightening of financial conditions via reduced liquidity could catch markets off guard, implying potential weak performance of equities and further craziness in the “smart money” bond market. We’ll see on Wednesday if any of this is on the Fed’s mind or what kind of guidance they issue on the tightening/easing conversation, but one thing is clear—even with no move in rates, this could still be an exciting FOMC meeting. Man, wild speculation really is fun. What's Ripe 🤩 SoFi Technologies (SOFI) 📈20.2% - Nobody wants to hear my 2 cents on anything, but investors were pumped to get SoFi’s $0.02/sh in earnings on Monday. The digital bank’s quarter was so fine. - Wall Street was expecting SoFi to break even, forecasting $0.00/sh. But, strong lending demand, +$2.9bn in deposits, and a jump in customers carried the team. - Growth in lending was the key driver, with student loan origination volumes jumping 95% and home loans skyrocketing 193% compared to Q4’22. Ryanair (RYAAY) 📈2.6% - Europe’s version of Spirit Airlines is doing precisely the opposite of its U.S. counterpart as of late. Things are actually going well across the pond… - Shares were off slightly in the premarket on the firm’s earnings results, given the company foresees margin challenges in 2024 due to rising fuel costs. - Plus, we got a masterclass in “good for investors, bad for customers,” as the airline said they’d buy “any 737 MAX 10 aircraft” from customers who don’t want them. What's Rotten 🤮 iRobot (IRBT) 📉8.8% - Everyone salute and get ready to play Taps. What was once the cutest couple of the year is no longer as Amazon breaks up with Roomba maker iRobot. - Really, iRobot is broke, and Amazon is up. The tech behemoth saw “no path” to getting the thumbs up from regulators and decided it wasn’t worth the trouble. - Now that the acquisition is called off, iRobot is laying off 350 employees (31% of staff), including CEO Colin Angle, who is (allegedly) “stepping down.” Philips (PHG) 📉5.5% - There ain’t no rest for the wicked, and yesterday, we found out there’s also no rest for those of us with sleep apnea. Recalls were just the start. - Phillips, a Dutch health tech conglomerate, wants all the smoke from the FDA as the firm is no longer allowed to sell sleep apnea devices in the U.S. for a few years. - Following a 2021 recall, the FDA stepped up enforcement by banning the firm from selling these products until they come into compliance with regulations. Thought Banana 🤔 BlackRock 🤝 BTC Almost nobody actually enjoys their first sip of coffee, beer, or any other of life’s pleasures. But, over time, and usually with a lot of peer pressure, we eventually succumb. And that’s basically the story of Blackrock and digital assets. A Hate-Love Relationship It’s been exactly 19 days (12 trading days) since spot BTC ETFs began trading here in the United States. As if it wasn’t clear enough then, some obvious winners are starting to emerge. On Friday, history was made as BlackRock’s iShares BTC ETF ($IBIT) reached $2bn in total AUM. That makes the world’s largest asset manager also the first non-Grayscale BTC fund to achieve that milestone. [Source]() Now, it’s also been exactly 2,024 days (hey, that’s the current year!) since BlackRock CEO Larry Fink was publicly trashing digital assets, saying, "I don't believe any client has sought out crypto exposure," on July 16th, 2018. In that same Bloomberg interview, Fink also denounced digital assets as a tool for tax evasion, drug smuggling, and probably to wipe your *ss if there was a physical version of these things. Now, not even 6 years later, Fink’s firm is dominating at the intersection of traditional and blockchain-based financial services. Spot BTC ETFs Check-In Not even two weeks into the launch of spot BTC ETFs, we can already see some clear signs of future winners and big, BIG losers. The biggest loser so far has absolutely been Grayscale—the owners of GBTC, a (former) trust that held BTC for clients in a clunkier, non-ETF style of management. $2.2bnmn in outflows from GBTC hit the issuer last week. Meanwhile, the rest of the issuers at the cool kid's table with spot BTC ETFs gobbled up $1.8bn of inflows. [Source]() Overall, these assets netted $500mn in total outflows last week. There’s no doubt some diehard BTC investors who had cash locked up in GBTC are dumping to move to other managers. The OG of digital assets on public exchanges, Grayscale, is charging a 1.5% fee, while others like Fidelity and Bitwise are nearly 10x cheaper. January 11th will always be a holiday in the eyes of BTC bulls and others who tell people to “have fun staying poor” on X, but since then, it’s become clear the spot ETF launch was a clear sell-the-news moment. Just check out BTC’s price since: [Source]() Now, it hasn’t been horrendous, but the price of the token certainly hasn’t made new all-time highs as some particularly obnoxious X users were calling for. $5.94bn in total has flowed into spot BTC ETFs in the U.S. since Jan 11th—making these funds some of the most successful ETF launches in history. On Thursday alone, $IBIT purchased 4,300 BTC to maintain its NAV, bringing it over $2bn. Not far behind is Fidelity, with a total of ~44k BTC in this fund, putting the firm just over $1.9bn in AUM. The Takeaway? Spot BTC ETF launches have been some of the most successful in history. In fact, they’ve been so successful that the cash to be made from BlackRock’s 0.25% AUM fee was enough to get the 71-year-old CEO and [farmer](=) to hop on board with the new age of finance. BlackRock and Fidelity are clear industry leaders already, but it will take time to see who can catch up. Although BTC hasn’t seen the spike in price many had called for, with flows like this and the forced purchases, what these giants of asset management will have to do might provide the kick the digital assets need. Stay tuned. 💭 The Big Question 💭: What other issuers will see success from their BTC ETFs? How low will the inevitable race to the bottom fees go? Banana Brain Teaser 💡 Yesterday 🗓 Ada and Paul received their scores on three tests. On the first test, Ada’s score was 10 points higher than Paul’s score. On the second test, Ada’s score was 4 points higher than Paul’s score. If Paul's average score on the three tests was 3 points higher than Ada’s average score on the three tests, then Paul’s score on the third test was how many points higher than Ada’s score? Answer: 23 points Today 🕐 The price of a certain stock increased by 0.25 of 1 percent on a certain day. By what fraction did the price of the stock increase that day? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Every informed person needs to know about Bitcoin because it might be one of the world's most important developments.” — Leon Luow How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh]() 😩[Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA](=) // [ACADEMY]() // [COURSES]( // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353