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Investors are hunkered down

QUICK HITS FROM GRIT
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Investors are hunkered down

QUICK HITS FROM GRIT

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Happy Friday Everyone! đź‘‹

Whatever is happening in the world and the markets, days like yesterday are a good reminder that the most important assets in life are family, friends, and health.

MARKET UPDATE

US Equity Markets staged the biggest one-day reversal on record

Yesterday, big intraday short covering led rally

NASDAQ biggest low-to-close since March 2020, +7.3%

Unprofitable technology staged a 16% reversal to end +8%

Rates:

  • Odds of a 25 bps hike = 100%

  • Odds of a 50 bps hike fell to 10% from 30%

Flight to safety trade: look at the DXY above 97 and Gold finally breaking $1,900 again.

PCE Deflator up 6.1% y/y

9am: European Central Bank President Lagarde speaks

Crude 93.40

  • Biden working with other major nations on coordinated reserve release

  • Iran nuclear talks are ongoing

  • Energy fell, XLE -0.8%

  • Is Energy (XLE) topping?

Ag commodities down this morning: Wheat -5%, Corn -3%, Soybeans -2%, Oats -2%

Russian News Source: Putin open to talks with Ukraine

  • Russia’s top diplomat said talks are contingent on Ukraine’s surrender

  • Meanwhile, Russian forces getting close to the capital Kyiv

Taiwan Semi

  • stock down 4% yesterday

  • Company said supply-chain risk from Ukraine is manageable

  • Company said it will comply with export control rules on Russia

Crypto

  • Bitcoin has been inversely correlated with gold this month

  • But if we just zoom out a little…

GRIT STOCKS:

  • Advanced Micro Devices: Announced a new $8B share repurchase

  • Square/Block: Beat Earnings Q4 $0.27 vs $0.22. Stock +16% (down 68% from highs)

Earnings

  • Coinbase: Crushed top- and bottom-line estimates. Revenue of $2.5 billion vs consensus of $1.94 billion and EPS of $3.32 vs consensus of $1.85. However, Q1 guidance low.

  • Intuit

  • Vale

  • VMware

  • Autodesk

  • Monster Beverage

  • Dell

  • Sempra

  • Liberty Sirius

  • Foot Locker -16%

QUICK HITS FROM GRIT

SIX things you need to know this week in 60 seconds.

  1. Russia invades Ukraine

  2. The IPO market is effectively shut down

  3. Correction territory

  4. Lumber is back & home-prices hit record

  5. Retail traders want more options

  6. Elon trolls Warren (again)

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1. MACRO

Russia invades Ukraine

Russia—the world’s second-largest producer of natural gas and one of the biggest oil-producing nations—invaded Ukraine in the early hours Thursday morning.

This sent the prices of Brent and Crude oil up as high as $105 and $100 on the day, respectively. E.U. natural gas prices are also surging as the region depends on Russia for more than a third of its supply.

The Russian stock market got crushed, losing ~33% of its value in one of the biggest single-day modern-day market meltdowns ever.

President Biden announced a second wave of harsher U.S. sanctions yesterday and included measures to hinder Russia’s ability to do business in dollars, pounds, and yen. Sanctions were also levied against banks and state-owned enterprises.

GRIT’S TAKE: No sanctions yet on Russian oil from the U.S. or the E.U. Biden said the U.S. will release additional oil as conditions warrant.

GRIT’S ACTION: I bought the dip at 945am yesterday morning. Added to $AAPL, $JPM, $RY, $LVMUY & $BAM.

Under the Radar

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2. DEALS

The IPO market is effectively shut down

New York stock offerings this year have gotten off to their slowest start since the Great Recession. And that was before we were on the brink of WWIII!

Bankers had been gearing up for an uptick in action starting in March but those plans have been put on hold after Russia’s invasion of Ukraine has effectively shut down the market for IPOs in the U.S. and Europe.

Before the geopolitical tensions, companies were already having a tough time selling shares given the Fed’s tightening monetary policy and the consequential heightened volatility.

Now it could be a while before those companies feel bold enough to reignite offerings if the situation doesn’t cool off soon.

GRIT’S TAKE: Historically, IPOs have been among the last segments of the markets to turn around after sell-offs.

GRIT’S ACTION: I’ve been turning down investing in *NEW* private deals.

3. STOCK MARKET

Correction territory

Image

The S&P 500 has officially entered correction territory for the first time since Covid rocked our world 2 years ago.

Reacting to inflation and the likelihood of higher interest rates, last month investors pulled a record $134B out of money market funds (highest amount on record). Taxable and muni bond funds also saw their first monthly outflows since March 2020.

On the other hand, investors are showing a healthy appetite for tech—hold the big tech. The Nasdaq equal-weight ETF (not concentrated on big tech like QQQ) saw the largest inflows in its 10-year history this week, with investors pouring in $165M to the small fund.

GRIT’S TAKE: Money is still flowing into big tech too, though: QQQ saw $3.2B in inflows on Tuesday—that’s the most since March 2021.

GRIT’S ACTION: Tech doesn’t have the same supply-chain issues ; )

4. COMMODITIES

Lumber is back & home-prices hit record

It’s been a little less than a year since lumber went on its epic meme-like run, but the commodity is surging again, rising 227% since August 2021.

Rail and trucking disruptions are causing a shipping and logistics nightmare scenario for lumber producers who can’t get inventory out the door and are being forced to slow down production because they’re literally running out of space to store it.

The driving force behind the last squeeze was the housing boom which just hit a record with home-price growth of 18.8% over the last year. That increase is the highest since the Case-Shiller index began in 1987.

GRIT’S TAKE: Thankfully (for first-time buyers), home-price growth has been decelerating in recent months and is expected to continue to do so as mortgage rates climb (mortgage applications just dropped to lowest in 2 years).

GRIT’S ACTION: If you can, own real assets (like your house) in an inflationary environment.

5. CRYPTO

Retail traders want more options

In news that should shock precisely no one, it turns out crypto traders like to be aggressive.

Last month volumes in crypto derivatives totaled nearly $3T and accounted for over 60% of crypto trading.

Right now most futures and options activity takes place with minimal oversight in offshore venues on exchanges overseen by firms like Binance, but crypto companies are starting to push into the highly regulated U.S. derivatives by way of acquisitions.

Big firms like Coinbase and Crypto.com are buying up smaller, regulated platforms that offer derivatives like options and futures to meet the demand of retail clients looking to make levered bets on crypto.

GRIT’S TAKE: Yeah, being on the right side of an options trade on a risk asset is cool…but have you considered the downside?

GRIT’S ACTION: We don’t like options. We like to own the real thing.

6. ENTERTAINMENT

Elon trolls Warren (again)

In December Senator Elizabeth Warren took a shot at “The Person of the Year” (Elon Musk) accusing him of freeloading off taxpayers. Musk went on a several tweet counter-attack which culminated with a fatal blow, by Internet standards:

“You remind me of when I was a kid and my angry friend’s Mom would just randomly yell at everyone for no reason. Please don’t call the manager on me, Senator Karen.”

This week Warren came back for seconds, pointing out that Musk paid zero federal taxes in 2018 (which is true). Musk maturely replied that he just paid the single biggest tax bill for an individual ever.

This is also true: Musk’s 2021 tax bill is estimated to be over $11M, which is more than some countries make in a year, as Musk himself has observed.

GRIT’S TAKE: No word on whether or not he got that cookie.

GRIT’S ACTION: Maximize the use of your losses, but always pay your taxes.

A lot of chatter on WallStreetBets about Oil and Corn:

*SOURCES
5. FT

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Disclaimer:The publisher does not guarantee the accuracy or completeness of the information provided in this page.  All statements and expressions herein are the sole opinion of the author or paid advertiser.

Grit Capital Corporation is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.  

THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.  THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.  INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.  

Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.  They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.  The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.

The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).  To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.

Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.

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