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Happy Friday Everyone! 👋
Remember, since 1900 the U.S dollar has lost 98% of its purchasing power. Meanwhile, the S&P has returned 315,853% inflation-adjusted.
Not owning stocks is risky.
MARKET UPDATE
FED meeting next week
Market expectations: Not Volcker
Rates
Big shift in market expectations after yesterday’s inflation print.
Market now pricing in a +60% probability of 8 rate hikes this year, which would bring the FED funds rate up to 2-2.25% by year end.
6:30 a.m. Putin: talks are “constructive” with Ukraine
“there are certain positive developments, as far as negotiators from our side informed me”
At the same time, Russia launched attacks on Western Ukraine for the first time
Finland’s president is scheduled to speak with Putin today after speaking with Zelensky earlier
Crude and Wheat are down on the news
Russia/Ukraine
Biden set to call an end of normal trade relations with Russia
This would put Russia in the company of Cuba and North Korea
Crude $105
What is the positive shift from Putin’s point of view?
Probably, it’s that Ukraine is not getting into NATO
Iran Nuclear deal talks have been suspended for now
Earnings
Oracle
Rivian
Ultra Beauty
DocuSign -18%
WeWork
Crypto
Crypto markets haven’t been able to hold recent rallies
Russian based crypto volume remains high
Bitcoin pull/call ratio has come down from last month
And implied volatility is creeping up
QUICK HITS FROM GRIT
SIX things you need to know this week in 60 seconds.
I guess we’re just walking everywhere now
Carbon-transformer will test SPAC waters
Retail buys the dip, Wall Street just dips
The cost of everything is up
Busy week for crypto off the field
From the founder of r/WallStreetBets: the “Insider Portfolio”
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1. MACRO
I guess we’re just walking everywhere now
The national average for gas at the pump is $4.318 a gallon. That’s the highest since 2008 (although in today’s dollar, gas was $5.31 in June 2008).
For months oil prices had already been rallying as the global economy rebounded from the pandemic on lower output levels than before.
As one of the world’s biggest oil producers, Russia’s invasion of Ukraine caused a global supply shock that sent Brent over $130 this week.
Biden has said he would release millions of barrels from the US Strategic Petroleum Reserve, but it’s not expected to make a material impact on prices at the pump.
GRIT’S TAKE: The White House—after banning Russian oil and gas—is now discussing the possibility of replacing Russian imports with supply from some not-so-great sources, like Venezuela and Iran.
GRIT’S ACTION: Not chasing this energy trade. “The cure for high oil prices, is high oil prices”
Under the Radar
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2. DEALS
Carbon-transformer will test SPAC waters
LanzaTech is one of many companies developing technologies to decarbonize high-emitting industries through capture and reuse.
The Chicago-based “carbon-capture and transformation” technology firm traps carbon emitted during industrial processes and then turns it into sustainable chemicals and products—such as ethanol—using bacteria.
Manufacturers like steelmakers will use LanzaTech technology in their manufacturing process to reduce their environmental footprints, and companies like Unilever and Coty are buyers of the resulting end products.
The company will be testing the choppy open SPAC waters soon after announcing this week a $2.2B merger with SPAC AMCI Acquisition Corp. II.
GRIT’S TAKE: CNBC’s SPAC Post Deal Index, which is comprised of SPACs that have completed mergers and gone public, is down 56% YoY.
GRIT’S ACTION: Carbon might buck the trend. I have seen at least 6 carbon deals hit my desk in the last couple of weeks. Institutional appetite is strong!
3. STOCK MARKET
Retail buys the dip, Wall Street just dips
This generation of retail investors’ strategy can be summed up with 4 words, or just 4 letters, really: BTFD.
The retail army held strong this week, pouring $1.51B into equities on Monday despite a massacre that saw the S&P and Nasdaq drop nearly 3% and 4%, respectively.
Since Russia’s invasion of Ukraine, retail investors have bought roughly $12B worth of dip. Hold the chips.
On the other hand, we’re seeing hedge funds deleveraging from equities.
While the risk of capitulation remains, hedge-fund positioning has become so bearish that the risk-reward of holding equities is skewed to the upside.
GRIT’S TAKE: The level of active deleveraging is the biggest aside from March 2020 (pandemic) and January 2021 (GameStop).
GRIT’S ACTION: Adding to my core “sleep-at-night” portfolio. Volatility is an opportunity.
4. COMMODITIES
The cost of everything is up
The geopolitical wake of Russia’s invasion has propelled both the Bloomberg Commodity Spot Index and the UN’s global food index to record highs.
Grain markets are skyrocketing, led by wheat which peaked at a record $12.94 per bushel this week (Russia produces 11% of the world’s wheat is and is the largest exporter).
Peter Schiff is living his best life with gold getting above that pesky $2k mark for the first time in 18 months.
The price of nickel surged 250% over 2 days this week to briefly top $100k per ton, prompting the London Metal Exchange to suspend trading and investors to check between the couch cushions for loose change.
Oil volatility remains with Brent crossing above $130 a barrel briefly before coming back down, potentially on concerns over demand destruction.
GRIT’S TAKE: There’s no sugarcoating it: the future is going to cost more money.
GRIT’S ACTION: Own stocks with pricing power. Banks & Tech.
5. CRYPTO
Busy week for crypto off the field
Biden finally announced his crypto executive order this week: Ensuring Responsible Development of Digital Assets. It will task federal agencies to produce reports on and consider new regulations for digital currencies. It will also explore the possibility of creating a digital version of the USD.
The biggest hedge fund names—like Alan Howard and Paul Tudor Jones—are also expanding their crypto investments. With crypto markets large and liquid enough to be tradeable, mainstream hedge funds are now seeing crypto as a fifth asset class.
It’s not a hedge fund, but this week Bain Capital launched a $560M fund (with a tone-deaf announcement!) that will invest in mainly crypto-focused infrastructure and DeFi by assembling a portfolio of 30 new companies or protocols.
GRIT’S TAKE: All of this points to increased institutional adoption! Coinbase reported $1.14T of crypto trading from institutions last year which is more than double the $535B that individual investors traded.
GRIT’S ACTION: After a pullback of ~40%, we believe NOW is the best time to go hunting for alt-coins! Subscribe to GRIT’s *NEW* crypto newsletter to follow us on this journey!
6. ENTERTAINMENT
From r/WallStreetBets: the “Insider Portfolio”
Nancy Pelosi and her husband are reported to have made as much as $30MM over the last decade on investments in companies the lawmaker is responsible for regulating.
Whether it’s call options on Nvidia or leaps on Tesla, you really can’t go wrong by following the Senator’s path when it comes to picking stocks.
That’s why the founder of r/WallStreetBets is pitching the “Insider Portfolio” which—with the help of our friends at Unusual Whales—tracks and mimics trades made by Pelosi and her husband.
The product can be found for $1 a share on an obscure exchange called MERJ based on an island off East Africa and is only available to investors who use the WallStreetBets app (there’s an app!?).
This is where a big NOT FINANCIAL ADVICE stamp would typically go.
GRIT’S TAKE: Unfortunately this fund might be dead in the water as multiple bills are being considered to ban members of Congress from trading stocks, which means WallstreetBets is going to have to go back to doing things the old fashion way: pumping meme stocks!
GRIT’S ACTION: If it sounds too good to be true… it usually is!
What stocks are trending in the news?
*SOURCES
1. CNBC
2. WSJ
5. WSJ, Blockworks, WSJ
6. NY Post
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