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Good Morning Everyone!
Remember the stock market is the only place that goes on sale and everyone’s sad.
MARKET UPDATE
Reversal of yesterday’s relief rally
Yesterday, Powell raised interest rates by 75 basis points
Biggest increase since 1994 (they are behind the curve and trying to catch up)
Powell signalled another big move next month
Fed Chairman Powell was very clear that the Fed can impact demand, but doesn’t have control over supply, particularly of commodities.
A rising cost of capital does have some impact on commodity investment though.
Investors are Bearish, highlighting how difficult it’s going to be to slow inflation without causing a recession
S&P 500 earnings are rising but the multiple is collapsing
#1 question for CEOs
What will be your earnings in a recession?
Not, what will be your earnings next quarter.
Cyclicals generally don’t perform well as economic growth is slowing and markets think it will slow more, perhaps a lot more. I think it’s prudent to respect the market and expect some weakness.
Bank of England
raised rates by 25 bps
5th straight increase to 1.25%
Signals that more hikes are on the way
Other Central Banks raising rates
Switzerland, Hungary
Crude 114 -1%
The current rally in oil and natural gas is more about global supply rather than demand.
The question will be how far global demand falls relative to supply.
Right now:
Global supply of refined products trails global demand for a number of different reasons:
Shuttered global capacity during the pandemic
conversions of capacity
a reduction in Russian supply of finished refined products and intermediates
a reduction in refinery utilization and export quotas in China
high natural gas prices globally
Elon Musk speaking at the Twitter all-hands meeting today
Twitter has cancelled companywide retreat scheduled for January 2023 at Disneyland
Saying: cost-cutting measures to reduce corporate travel
GRIT STOCK:
Amazon
Holding annual Prime Day July 12-13
Expanding its online marketplace into Belgium, Chile, Colombia, Nigeria, S.Africa
Earnings
Kroger Raising EPS guidance
CRYPTO
The Fear & Greed Index is at Extreme Fear levels:
During the crypto winter of 2018 Bitcoin futures experienced backwardation—a result of weak demand and price expectations:
We’re seeing a similar trend playout now with both BTC and ETH:
Here’s a look at the publicly-traded companies with the most Bitcoin exposure on their balance sheets:
By the way, MicroStrategy CEO Michael Saylor—noted Bitcoin hoarder—denies the company has been margin called and dismisses risks as “much ado about nothing”
The downturn in the markets is starting to be reflected in headcount reductions at companies across the industry
Coinbase lays off ~1,100 or ~18% of workforce, CEO Brian Armstrong says the company “grew too quickly”
BlockFi cited a “dramatic shift” in macro conditions when it laid off ~20% of its staff
Crypto.com laid off 5% (260 workers) due to the “market downturn”
Interestingly, Binance is going against the grain when it comes to hiring
CEO Changpeng Zhao says it’s a great time to increase investment in talent & acquisitions
“We have a very healthy war chest”
MEME OF THE DAY
WallStreetBets is not very optimistic this morning:
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