Petroyuan and Oprah's Credit

[The Daily Peel... ]() Jan 10, 2023 | Peel #375 Silver banana goes to... [SRS Acquiom. ]() Market Snapshot Happy Tuesday, apes. Man, the Fed really isn’t letting us have any fun, huh? Everything was fine and dandy until the Atlanta Fed President came out and said the Fed should hold a 5% funds rate for a “long time.” That was a major vibe killer, but most equity indices still finished slightly positive. Over in the even nerdier side of finance, treasuries were bought hand over fist, with the 2-year settling around Elon’s favorite number, 4.20%. Let’s get into it. Paradise? No, but Here’s a Smarter Way to Manage Your Deals. [image]( What we’re supposed to say: The SRS Acquiom suite of [M&A solutions]() can take you and your clients from pitch book to post-closing yadda yadda. Our [experienced team]( will deliver unbiased and precise support across this, that, and everything else. What you really need to hear: SRS Acquiom is one big solution to help you get every little part of the deal done right without fantasizing about your resignation letter the whole way through. Our private client portal, virtual data room, and more equip you to open things up strong, close them up strong, look great to your clients and colleagues, and get on to the next thing. There are plenty of specifics we can provide, and that’s what [our website]( is for. [CLICK HERE FOR THE HARDER SELL]( Banana Bits - Rock beats scissors, but Bulldogs eviscerate Horned Frogs as Georgia trounces TCU in the [most dominant title game AND bowl game](=) in history to become the College Football National Champs - The vibes were vibing in tech stocks yesterday as shares in names like [Tesla and Nvidia]( gained like there was a raging global pandemic - I wish banks had a name for their employees like tech companies do. Then I could write something like, “Goldman is [cutting up to 3,200](=) of its Sachs in a fresh layoff announcement.” Smh… - The Winklevii twins have found [their biggest beef]( since The Social Network dropped in DCG’s Barry Silbert. The [tweets are hysterical]()…for corporate America Macro Monkey Says Credit Where Credit Is(n’t) Deserved Oprah Winfrey appears to have moved on from giving us all a raise to giving us all a heaping pile of credit. Thanks, Oprah, we can always count on you. The Oprah Winfrey credit market appears alive and well. Yesterday, the Federal Reserve released the nation’s credit report for the month of November, and your instincts are right; everyone’s getting some credit. US consumers ran up their borrowings by $27.9bn in November of last year. Sure, that might’ve been a decade ago, but now you see why economists are always tweaking about this alleged “lag” all the time. Speaking of economists, their consensus forecast came up short, anticipating debts to increase by just $23.5bn. But honestly, can’t even blame ‘em this time. Diving into the report gives us a view as to exactly how Americans ran up their debts to kickstart the holiday season. Most notably, revolving credit utilization (aka mostly just credit cards) spiked a massive 16.9%, the 5th largest jump in the Fed’s 55-year dataset. Sure, a jump in credit usage at the onset of the Holiday season isn’t exactly as surprising as the sophomore year, when you found out Santa wasn’t real, but the degree of growth sure is. Maybe splurging on the Holidays following a year of inflation, war, and market collapse coming on the back of a two-year pandemic makes sense, but it sure wasn’t expected. In hindsight, we do deserve to be happy once in a while, right? Meanwhile, outstanding consumer credit in the form of auto loans, student loans, and other kinds of credit cards grew at a solidly steep 7.1%. Okay, I can see your heart rate increasing and your eyebrows tightening through the screen. Don’t freak out yet. Like anything else, we can’t analyze credit growth in a vacuum. Let’s check out the other side of the coin. Coming out of the pandemic, Americans were legitimately drawing in cash. Personal savings hit an all-time high as JPow, along with Big Dawgs Biden and Donnie blessing your bank accounts. Meanwhile, spending on extravagances hit an all-time low. This kinda created the perfect storm. But you know what Americans truly are the greatest in the history of the world at? Spending money. And that’s not just conjecture. Already, the personal savings rate has fallen to a 17-year low and ranks among the lowest in history at 2.4%. Alongside, a metric called “financial obligations as a percentage of disposable personal income” (really, no acronym??) has been creeping up from its all-time low (12.6%) in Q1 2021 to the 14.5% level we’re at now. We can only hope JPow is taking notice. Knowing that consumer outlays drive over two-thirds of our economy, deriving caution in hiking rates from this data seems just as legit as any data out of the labor market. But don’t go all Michael Burry on me now. Consumers are still in much better shape than in previous recessions (for the most part), but everything has a breaking point. Hard to imagine data like this doesn’t keep Powell up at night. What's Ripe Coinbase ($COIN) ↑ 15.06% ↑ - Strike up the band, pop the champagne, and strap on your seatbelts; we’re heading back to the moon, apes!! Okay, maybe let’s actually calm down. Yes, Monday was the first good day for crypto since ‘Nam, but let’s take a look at why. - Stocks exposed to digital currencies have demonstrably tracked the price of BTC and others with a tight correlation. As these assets broadly gained yesterday and over the weekend, the exuberance bled into stocks. - Meanwhile, Coinbase alone also has a ~30% short interest, that’s 6x the average for US stocks, and this thing is considered a “leader” in crypto, so just imagine what we’re looking at for the others. - Lastly, optimistic bulls that think, “it can’t get much worse than this, right?” are licking their chops at this dirt-cheap stock right now. I won’t tell you what its current P/E is, but let’s just say it’s the same as the number of dots after this sentence… Salesforce ($CRM) ↑ 4.69% ↑ - Like showing up to your first AA meeting, Marc Benioff and the team have taken the first step in solving any problem: admitting they have one. - Remember all those elite memes back when Salesforce bought Slack and seemed to accidentally add a few zeroes to the price tag? Me too, and now that’s coming back to haunt them. - Benioff and team have been thinking nonstop about cost-cutting and expense-waste management, especially revealed in the company’s all-hands meeting last Thursday. And what’s Wall Street’s second favorite thing besides money growth? That’s right, cost reduction. What's Rotten Lululemon ($LULU) ↓ 9.29% ↓ - When life gives you lemons…you end up succumbing to inflation and downgrading your Q4 gross margin guidance, letting shares tumble nearly double digits in a single day. - That’s how the saying goes, right? Either way, it was Lulu’s reality to kickstart this glorious week. For Q4, aka the most important quarter for retailers, upward cost pressure driven by inflation took a bit out of Lulu’s lemons, spooking investors. - But, conspicuously absent from the ticker tape was the athleisure leader’s (that’s a mouthful) rising revenue forecast for the same period. Still, 25% sales growth ain’t worth a time when inflation reigns supreme, apparently. Macy’s ($M) ↓ 7.68% ↓ - This thing has been headed for the grave since we were all shopping there for our 8th-grade semi-formals. But you know what? It just won’t die! - Or will it? After yesterday’s performance, Macy and the rest of her department store friends might need CPR. Shares plunged 7.7% after providing similar but almost opposite guidance to Lulu. - Basically, Macy told us that she expects sales to have slowed throughout Q4 while not anticipating a material hit to EPS for the holiday season. How that is possible in the face of eye-gouging inflation is anyone’s guess, but we’ll find out in March when the company’s full-year numbers drop. Thought Banana The Most Powerful Weapon Ever Nope, not the atomic bomb, hydrogen bomb, or even your career as a weapon of academia. We gotta go bigger. Fortunately for Americans, the US still does control the most powerful weapon in the world, that, of course, being the US Dollar. Sure, dropping a bunch of dollars on a city won’t eviscerate it immediately. But the inflation that follows might, and for what it’s worth, economic warfare can get particularly nasty. 2022 gave us a front-row seat to this fact. Russia’s invasion of Ukraine was met, in geopolitical terms, immediately with the ousting of oligarchs and others from countless economic privileges controlled through USD, such as the SWIFT payments network. But what happens in war? Oh yeah, people fight back. And that’s exactly what we’ve seen from countries such as Russia, Iran, and in particular, China and Saudi Arabia. You’ve almost definitely heard of the petrodollar, but the new guy on the block is officially the petroyuan. China, as the world’s largest oil importer, naturally has an interest in controlling the currency it uses to pay for its oil imports. Unfortunately for Xi, nearly 90% of international trade involves an exchange of USD for X asset somewhere along the way. But as of late 2022, China had already penned a $30bn oil deal with Saudi Arabia in order to buy the goods via Chinese exchanges. The petroyuan was born. Of course, $30bn is pennies when we’re talking about the market for FX and/or international trade. This isn’t a freak-out moment like when the FDA almost banned Juuls, but it is a step in the direction of concern for US international interests. And as usual, JPow didn’t do much to help either. Tightening monetary policy means higher anticipated returns on that asset, driving that same asset’s value up a mountain. This is exactly what we saw with the dollar’s immense gain throughout most of 2022. But, when the US Dollar’s market value increases, that means other countries have to use more of their currency to get a USD. As you can (hopefully) already tell, other nations hate to see a rising USD. Putting all of this together, we can see the direction things could head. For the US to maintain its absolute, utter economic and geopolitical dominance held since the end of the Cold War, controlling the global reserve currency is a must. For China, it’s a must-destroy. While everyone was anticipating the first shots to be fired in the South China Sea, it seems as though the economic Cold War is already raging in your wallet. The big question: Does the petroyuan deal signal a broader trend in the international community to move away from reliance on the USD? If so, what’s next?? Banana Brain Teaser Yesterday — You are outside the room with 3 switches, each controlling one of the light bulbs. If you can only enter the room one time, how can you determine which switch controls which light bulb? Turn on two switches (call them A and B) and leave them on for a few minutes. Then turn one of them off (switch B) and enter the room. The bulb that is lit is controlled by switch A. Touch the other two bulbs (they should be off). The one that is still warm is controlled by switch B. The third bulb (off and cold) is controlled by switch C. Today — It’s 100 bananas off the [Hedge Fund Interview Course]( for the first 15 correct respondents. LFG! First, I threw away the outside and cooked the inside. Then I ate the outside and threw away the inside. What did I eat? Shoot us your guesses at [vyomesh@wallstreetoasis.com](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) with the subject line “Banana Brain Teaser” or simply [click here to reply!](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) Wise Investor Says “Everyone always says, ‘What’s the catalyst?’ Well, you never know until after the fact.” — Jeff Gundlach How would you rate today’s Peel? [All the bananas]() [Decent]() [Rotten AF](=) Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel [here](). 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