The Fed Goes Jekyll And Hyde
Great Ones, there’s something funny about the Federal Reserve.
I mean, when I talk about the Fed, I’m typically talking directly about Federal Reserve Chairman Jerome Powell — aka J. Pow or J. Money depending on which subreddit you’re on.
Everybody funny, Mr. Great Stuff. Now you funny too.
Gee, thanks Mr. Thorogood … now, where’s my bourbon?
The thing about the Fed is that it’s not just one man. In fact, the Federal Open Market Committee (FOMC) consists of 12 members, who, in my mind, are all sitting at a round table clad in the purest samite…
But I digress. The FOMC is in charge of setting U.S. interest rates and monetary policy, i.e., raising or lowering rates, buying U.S. Treasurys and bonds, etc. This 12-person ruling body, if you will, is the one that meets every month or so to discuss how best to stimulate or rein in the U.S. economy.
Yes, we’re all familiar with the Fed. What’s your point? Is it funny “ha ha” or funny like George Thorogood?
I was getting there … and it’s more Thorogood. Do you see anyone laughing today? I didn’t think so.
Over the past several days, a pair of Federal Reserve Presidents spoke to the financial media … and gave almost completely opposing viewpoints. See? Funny Thorogood, definitely.
First, St. Louis Federal Reserve President James Bullard said last Thursday that the Fed should raise interest rates by a full percentage point by July. Bond yields jumped on the news, and stocks sold off … as you’d expect for such hawkish language.
Then on Sunday, San Francisco Fed President Mary Daly urged caution and patience with regard to the FOMC’s monetary policy:
When asked about an interest rate hike at the FOMC March meeting, Daly said it was too early to tell.
The exchange prompted Bullard to speak up yet again this morning on CNBC’s Squawk Box. Bullard rebutted Daly’s cautious approach noting that inflation has run too hot for too long to be cautious:
Now you’re worried about credibility? I think the credibility ship has already sailed, Bullard.
We all know that raising interest rates and winding down the Fed’s balance sheet are the right things to do right now. They need to happen. But if the Federal Reserve Presidents can’t decide on how to make that happen … well, you get what we have here, which is … failure to communicate.
Oh, and volatility. Lots and lots of stock market volatility. And what else would you expect?
If the people who set U.S. monetary policy can’t agree on U.S. monetary policy, that puts a metric ton of uncertainty on the stock market. And we all know how Wall Street absolutely loves uncertainty. (That’s sarcasm, in case you didn’t catch that…)
And the Fed is just one of Wall Street’s worries. You’ve got Russia/Ukraine, supply chain woes, the Great Resignation, wage inflation, real estate inflation, rising energy costs … you name it, something’s probably wrong with it right now.
But just because Wall Street is on the verge of a volatile mental breakdown doesn’t mean you have to develop your own market mental illness. (It’s too late for me, son.)
What I mean is that there are ways to not only mitigate Wall Street’s interest rate temper tantrum, but to profit bigly from it as well.
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The Good: Investor Love Is In The Air
Random thoughts for Valentine’s Day, 2022. Today is a rip-roaring day to be a Rivian (Nasdaq: RIVN) investor … especially if you owned shares of the company before Wall Street was made aware of George Soros’ stake in the lean, mean, electric vehicle (EV)-making machine.
That’s right, Great Ones. If you were wondering why Rivian stock ripped higher today … it’s because billionaire investor and philanthropist George Soros apparently took a $2 billion stake in the company last quarter. That’s it. That’s the big news.
Soros Fund Management, Soros’ family investment office, now holds about 20 million shares of RIVN stock, or roughly 2% of Rivian’s total realm.
While Rivian isn’t Soros’ sole EV suitor — his fund also holds stakes in EV startup Fisker (NYSE: FSR) and electric bus maker Proterra (Nasdaq: PTRA) — the investment does give Rivian more credibility after the company’s rough-and-tumble start to the year, which saw RIVN stock falling more than 43% year to date.
Ah, so Rivian’s rise is all just a big game of follow-the-leader?
Well, kinda sorta. Wall Street tends to watch where big kahunas like Soros stash their cash because they obviously became big kahunas by making smart — and lucrative — investment decisions.
Though considering Soros Fund Management also holds a $13.3 million stake in Peloton (Nasdaq: PTON) … I wouldn’t put all my eggs into this particular billionaire’s basket.
The Bad: Mickey D’s Delivery Fees
It wasn’t all roses and chocolates on Wall Street today — some of us prefer the unromantic unhealthiness of Big Macs, you know.
McDonald’s’ (NYSE: MCD) golden arches lost some of their patina this morning after The Wall Street Journal released a report saying DoorDash (NYSE: DASH) is raising its fees on orders that Ronald McDonald restaurants are slow to prepare — or that they bungle up entirely.
Who here hasn’t placed a late-night cheeseburger order on DoorDash and wound up with two squashed filet-o-fish sandwiches instead? No? Just me?
Well, beginning next year, McDonald’s will start eating higher commission fees for less-than-appetizing delivery times and mishandled orders.
In return, McDonald’s gets to enjoy lower commission rates across the board for all its DoorDash deliveries — dropping from 15.5% to 14.1% on orders from paying DashPass subscribers and 11.6% on orders from nonsubscribers.
In theory, this is actually a money-saving opportunity for McDonald’s — and not an evil deed on the part of DoorDash. Since “delivery is one of the largest growth engines of the McDonald’s business globally,” negotiating lower commissions should put more money back into the restauranteurs’ golden coffers.
I say “should” because this is still McDonald’s we’re talking about … and the odds of every order across every franchise going off without a hitch are about as high as me winning the McLottery. It’s entirely possible, just not probable.
I’m assuming the details surrounding this new penalty system are the reason for MCD stock’s sea of red this morning. Either that or investors are really, really bummed over rumors of those missing Chicken Big Macs. Pick your poison … erm, McDonald’s menu item.
The Ugly: Weber’s Tangled Earnings Web
Wall Street was all fired up over Weber’s (NYSE: WEBR) latest earnings report this morning, which came out too charred for analysts — or anyone, for that matter — to sink their teeth into.
The grillmaker reported wider-than-expected losses in the first fiscal quarter to the tune of $0.19 per share, on top of an 8% drop in sales.
The company also said adjusted fiscal 2022 EBITDA will be in the range of $275 million and $325 million … coming in much rarer than Weber’s previous $325 million and $345 million forecast.
Why the drastic decline? I’ll let chief executive officer Chris Scherzinger explain:
In short, the usual suspects are to blame for the griddle marks left on Weber investors’ portfolios this morning. Wall Street seems to be losing its appetite for supply chain excuses, however, as it let WEBR stock sizzle more than 16% lower on the day.
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Boy howdy, do we have just the sweetest of chart-worthy treats for you today!
If this is about Singles’ Awareness Day, don’t remind me…
Oh, nay nay. A much finer festive day is upon us: It’s Great Stuff Picks earnings week!
Oh… Yay, I guess.
What’s with the ‘tude, dude? All of Great Stuff’s favorite picks are about to strut their stuff for Wall Street’s ever-so-finnicky analysts.
Just take a look at the names entering the earnings confessional this week, courtesy of Earnings Whispers on Twitter:
Right off the bat, you know what I’m looking at this week: Roku (Nasdaq: ROKU) and Nvidia (Nasdaq: NVDA).
As always, ad revenue is the name of the game for the Rok-ster. (I know nobody calls Roku that, but you can’t stop me now.)
It’s been a year now since Roku bought out Nielsen’s Advanced Video Ad unit, meaning it can slip targeted ads into your streams … seamlessly.
It also means Roku better come to the earnings table packing heat as far as ad revenue goes, or you will have one very upset Mr. Great Stuff.
Now that Nvidia’s ARM deal is a no-go, all y’all nervous NVDA nellies will want to watch the company’s report to see all the reasons why we’re still in the stock. What am I looking for with Nvidia’s report? What am I not looking for?!
From gaming and crypto mining to cloud data center processing and self-driving AI … Nvidia has its fingers in so many tech-centric pies that its earnings reports are getting longer than a CVS receipt.
Elsewhere in the semiconductor space, current Great Stuff Pick Applied Materials (Nasdaq: AMAT) will report on Wednesday, while past pick Amkor Technology (Nasdaq: AMKR) will have already reported by the time you read this.
Considering that Applied Materials is literally the chipmakers’ chipmaker, you’ll want to tune in to AMAT’s report for deets on those “supply chain problems” you might’ve heard about concerning semiconductors.
Outside of Great Stuff Picks holdings, I’m watching out for reports from a few other favorite names that often grace these virtual pages: DraftKings (Nasdaq: DKNG), Roblox (NYSE: RBLX) and Crocs (Nasdaq: CROX).
Crocs? A favorite? It’s more likely than you think. If you’ve read any of Croc’s recent reports, you’ll know that more than a few of you anti-Croc haters must be fibbing, as the casual clog company keeps blowing away analysts’ estimates (and hopes for humanity) each quarter.
With DraftKings, we’re still waiting for the company’s actual earnings to catch up to its ever-growing and uber-expensive marketing budget. And hey, we’re talking about throwing cash off into the digital void — how can Roblox not be a part of the conversation?
Oh yeah … and there’s this little ol’ company called Walmart (NYSE: WMT) also reporting this week. You can find anything your heart desires at Wally World … as long as those ever-looming supply chain holdups don’t put a damper on Walmart’s report.
What earnings are you looking out for this week? Got any trades lined up in your sights for the week?
GreatStuffToday@BanyanHill.com is your one-stop shop for hot takes and spit takes, earnings trades and options plays, rants, raves, questions … and everything in between. Come join in the fun for Friday’s edition of Reader Feedback!
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Until next time, stay Great!
Editor, Great Stuff
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