The Retail Army Is VERY Bullish

Do with this information as you see fit: Jim Cramer said this week he doesn’t see a recession in the cards for the US…

Market

Prices as of 4 pm EST, 7/19/23

Macro

The end of Fed hikes may be on the horizon but what about their effects on the economy?

• According to TD, the peak impact from a rate hike occurs ~4 quarters later for GDP and ~6 quarters later for inflation.

• In other words, what we see now is the effect of policy rates from mid-2022.

• That means the peak impact of rate hikes on the economy has yet to be felt.

• As Apollo’s Torsen Sløk notes, this will likely lead to further deterioration in credit conditions and lending growth.

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Corporate bond spreads act as a proxy for overall macro concern among bond investors.

• What are they saying?

• Excluding a spike in March following the banking crisis, spreads have declined since October.

• In fact, spreads are just as low now as they were before the banking failures.

• This suggests investors believe the impact of macro headwinds on future earnings will be minimal.

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Housing starts in the US fell by more than expected in June.

• Building permits also declined against estimates for a modest gain.

• Permits for single-family homes (SFH), however, increased by 2.2% and have been steadily rising which points to a rebound in SFH starts ahead (chart).

• On the other hand, permits for multi-family units fell to the lowest since October 2020.

@RenMacLLC

Stocks

Apple has hopped on the AI bandwagon, sort of.

• Noticeably absent from the recent AI buzz, the company is now developing AI tools to compete with Microsoft and Google.

• It has created a framework called “Ajax” to build large language models (LLMs).

• It’s also created an internal AI chatbot referred to as “Apple GPT”.

• Though it has no clear plans for releasing any new tech to the public currently, it’s aiming for a major AI announcement by next year.

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If you invested in Carvana on January 1, you’d have a ten-bagger on your hands today.

• Shares jumped 40% yesterday after it announced a deal that would reduce outstanding debt by +$1.2 billion.

• The stock has climbed over 1,000% YTD.

• At ~$56 a share, however, it still has a long way to go in reclaiming its 2021 high of $376.

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Yesterday we noted the divergence in sentiment between institutional and retail investors – here are some points on the latter:

• Retail investors have never been so aggressively positioned ahead of an earnings season (chart).

• The AAII Bull/Bear Ratio just flipped above 50% this morning for the first time in more than 2 years.

• Consumer sentiment is at its highest since September 2021.

• The put/call ratio is at its lowest since late 2021.

Vanda Research

Energy

Total US petroleum inventories fell by 1.1 million barrels last week, according to the EIA.

• This follows a massive 17 million barrel build in the previous week.

• At Cushing, meanwhile, crude stockpiles fell by the most in almost 2 years to the lowest in May.

• Separately, last week marked the first time since March that the Strategic Petroleum Reserves were left untouched.

Commodity Context, @rory_johnston

Earnings

Yesterday’s highlights:

Tesla TSLA: $0.91 EPS (vs. $0.82 expected), $24.93 billion in sales (vs. $24.47B expected).

• Price cuts and incentives led to lower profit margins despite record revenue.

• Specifics and dates for Cybertrucks and robotaxi-ready vehicles were not provided.

• Musk warned production would slow in Q3 because of factory shutdowns and upgrades.

Netflix NFLX: $3.29 EPS (vs. $2.86 expected), $8.19 billion in sales (vs. $8.3B expected).

• Subscriptions and revenue rose 8% and 4% YoY, respectively.

• The company expects higher sales in H2 and is forecasting a 7% YoY rise in revenue for Q3.

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What we’re watching today:

• Taiwan Semiconductor Manufacturing TSM

• Johnson & Johnson JNJ

• Abott Laboratories ABT

• SAP SE SAP

• Philip Morris PM

• Intuitive Surgical ISRG

• Marsh & McLennan MMC

• Blackstone BX

• Infosys INFY

• CSX CSX

• Freeport-McMoRAn FCX

• Kenvue KVUE

• Truist TFC

• Capital One COF

• DR Horton DHI

• The Travelers Companies TRV

• Newmont NEM

• PPG Industries PPG

• Genuine Parts GPC

• Nokia NOK

• Fifth Third Bank FITB

Top Headlines

• Financial plumbing: Today the Fed launches FedNow, a real-time payment system.

• USD ban: The US has banned 14 Iraqi banks from conducting dollar transactions.

• Fed fine: Deutsche Bank will pay a $186 million fine for inadequate measures against money laundering.

• CRE SOS: Distressed office buildings in the US have reached $24.8 billion.

• Activist stake: Activist investor Elliott has taken a significant stake in drug manufacturer Catalent.

• CEO banks: Microsoft’s payouts to CEO Satya Nadella have surpassed $1 billion.

• Box office: “Barbie” and “Oppenheimer” are expected to bring in a combined $200 million over the weekend.

• Powerball: A Californian was the sole winner of the $1.08 billion Powerball, the 7th largest lottery price ever.

Crypto

Prices as of 4 pm EST, 7/19/23

• Compiler unveiled: Solana Labs has rolled out Solang, a new compiler aimed at enhancing Ethereum compatibility.

• Wild West: The SEC’s Gary Gensler has requested increased funding from lawmakers to police the “Wild West” of crypto markets.

• Custody pause: Nasdaq will pause plans to launch a crypto custody business due to regulatory concerns.

• BTC vs. bonds: Fueled by the Bitcoin BTC/USD rally, bonds in El Salvador have surged by 62%.

• Luxury NFTs: A Ferrari F40 sold for $2.5 million on luxury NFT marketplace Altr.

Deals

• AUM leader: Blackstone is inching its way to becoming the first private equity firm to reach $1 trillion in assets.

• Deadline: Microsoft and Activision have agreed to extend their deal deadline to October 18.

• Healthcare IT: Private equity firm TPG will buy Nextech for $1.4 billion.

• IAC + AI: Media and Internet holding company IAC is implementing AI tools in its M&A prospecting.

• Shapewear unicorn: Kim Kardashian raised $270 million for her Skims apparel brand at a $4 billion valuation.

Meme Of The Day