The Tango Wall Street
Great Ones, I have a question for you: Would you like to tango?
You want to tango NOW? I’m so mad that I don’t know what to do!
I get it. Stocks are falling like stones, losses down to your bones.
And to top it all off, I’m with you.
Feel like going insane, got a fire in your brain and you’re hating that stinking gasoline.
As a matter of fact…
Honey, I know this act. It’s called the tango Wall Street.
The tango Wall Street! It’s a dark, dizzy merry-go-round.
As she keeps you dangling, your portfolio she’s mangling. And you toss and you turn ’cause her sell-offs can burn. Yet you panic and sell, then … rebound?
I think I know what you mean … but, please get to the point.
Sorry, like Harry Tasker from True Lies, I can’t resist a good tango.
And boy, what a tango Wall Street has laid out for us. I mean, it’s looking like even Federal Reserve Chairman Jerome Powell and his band of merry men won’t be able to save us.
But you said inflation was transitory! Transitory!
I did, and I stick by that … but it looks like it will take a lot longer to wind down than expected. Thanks, Russia! Thanks, COVID-19!
Here’s the skinny…
According to the CNBC CFO Council — that’s just a fancy name for a bunch of CFOs at top corporations who are willing to talk to CNBC on a regular basis — the Fed’s interest rate hikes aren’t going to do bupkis.
Actually, the article itself says that the U.S. consumer won’t save the economy. But if you read the thing, it’s the U.S. consumer that’s saving the economy from a full-blown recession right now.
You see, consumer spending continues to rise despite soaring inflation … which makes sense if you think about it. After being locked inside for two years due to the pandemic, U.S. consumers are sitting on about $2 trillion in excess savings.
Excess savings? What are those?
CNBC’s words, not mine. But the point is that consumers are still relatively well-off as a whole … your particular situation notwithstanding.
Travel demand is skyrocketing, expensive restaurants are seeing excessive demand and companies like Procter & Gamble say that y’all are “trading up” to higher quality and more expensive products right now.
Additionally, business spending is on the rise with expansions, acquisitions, mergers, stock buybacks and dividends flying around like confetti lately.
And none of this activity shows any sign of slowing, despite the Federal Reserve’s steady march on raising interest rates.
But you know what else continues to march higher despite the Fed’s attempts to pull the emergency brake? Inflation. In fact, April’s Consumer Price Index is expected to hit 8% when the data is released on Wednesday.
So, what gives? Why aren’t the Fed’s actions having any impact whatsoever?
Well, the problem isn’t soaring demand … which the Fed’s interest rate hikes are designed to curb.
It’s supply. Plain and simple.
If you’ve studied Econ 101, you know that prices are subject to two forces, much like a tango: supply & demand.
Right now, demand is a bit on the excessive side, but that’s to be expected after your entire consumer base was locked inside for two years.
Demand is strong. But in any other situation than this one, it’s not overly strong.
But we’re not in a normal situation right now. Supply chains have also been largely “locked inside” for two years, and they’re taking their sweet, sweet time getting up and running again.
And it doesn’t help that China, the world’s manufacturing center, is still dealing with COVID-19 lockdowns — creating massive production and shipping issues.
Supply is the problem here, not demand. And, unfortunately, the Federal Reserve can’t do anything about that at all. Just listen to Minneapolis Fed President Neel Kashkari:
The lesson here is that the Fed has the tools to slow down excessive spending and demand growth — and, ostensibly, curtail inflation — but it can’t do jack about the supply side.
The tango Wall Street finds itself in right now is weird. There’s plenty of demand but not enough supply. Ideally, low interest rates prop up supply by encouraging businesses to spend to increase production, but that hasn’t worked against COVID-19 lockdowns so far.
The best thing to do right now is to hunker down in safe-haven investments such as gold, bonds and strong, profitable companies you believe in.
I’d even buy the Bitcoin dip right now … assuming you aren’t nearing or in retirement. You won’t see crypto prices like this again, I think.
Also, it would be a great help to find an expert to help you through … like the plethora of market gurus here at Banyan Hill, for example.
Because, Great Ones, we’ve gotta dance ’til our Wall Street diva is through. You pretend to believe her, ‘cause in the end, you can’t leave her. But the end, it will come, though this whole thing is dumb and you’re glum and you’re bummed, don’t turn blue!
Why do we love when she’s mean?
And she can be so obscene … my Wall Street.
You know, I feel great now.
I feel lousy.
The tango Wall Street.
In this tango … er, market … you need every single hedge against inflation you can scrounge up.
As we all know, there’s a limited supply of real estate. I mean, you can’t just make more … how would that even work?
So when inflation hits, this limited supply of real estate also gets more expensive — aka, rises in value. But unlike dollars and cryptos, real estate is a basic need. What? You gonna build a house out of dollars? Eat some bitcoin? Good luck.
In short, there’s always going to be demand for real estate. During a recession. During a market collapse. And yes, even during periods of soaring inflation.
The problem is not everyone has the time to find and manage lots of property all by themselves. And then there’s the cost… You can’t just hop on to Robinhood and buy a “few shares” of real estate, right? Or can you?
Say hello to Fundrise. Fundrise gives you an easy way to invest in real estate assets for as little as $10. And the best part … you could get paid for “holding” real estate with Fundrise!
Going: Tesla’s Shanghai Shenanigans
As if Tesla (Nasdaq: TSLA) investors didn’t have enough to worry about these days, it seems rumors involving the health of Tesla’s Shanghai facility were greatly exaggerated…
After temporarily shutting down in March over China’s coronavirus concerns, the plant finally reopened in April just to shut down most of its operations again this week.
Why? Well, it comes down to that little problem I mentioned earlier: supply chain constraints.
Basically, Tesla can’t get the parts it needs to build fully functional electric vehicles, and there’s no point in keeping an entire plant open if you can’t actually do anything with it. (Logic, you speak it?)
Interestingly, TSLA stock shrugged off this bit of news with nary a whimper. I guess investors can only stay in panic mode for so long. And with the rest of the market knee-deep in the red, Tesla’s plant problems look like small potatoes compered to … well, everything else right now.
Still, with Shanghai’s plant production falling from a monthly record of 71,000 vehicles in December to just 1,512 vehicles in April … to God knows what this month … TSLA enthusiasts will need to keep an eye on this situation.
Going: Peloton’s Never-Ending Pain
The last time we peddled Peloton (Nasdaq: PTON) in these here virtual pages, it was caught between a sales problem, a paid-services price hike and a hard place.
Things … haven’t gotten much better in the meantime.
The exercise equipment maker reported a wider-than-expected quarterly loss on top of a weakening sales outlook … which is saying something considering Peloton already had a puny post-pandemic growth story to begin with.
• Loss per share: $2.27 versus $0.83 expected.
• Revenue: $964.3 million versus $972.9 million expected.
Adding pain on top of pain, Peloton anticipates a higher churn rate now that it’s offloading all its revenue problems onto customers by hiking prices.
(Is it possible for Peloton to have negative customers? ‘Cause that’s where the company’s headed if it keeps spinning its stationary wheels…)
Personally, my favorite part of Peloton’s report came from still-CEO Barry McCarthy, who had this to say when speaking on Peloton’s future: “Turnarounds are hard work.”
This is the top-notch analysis that Wall Street lives and breathes for, believe you me.
Unfortunately, McCarthy’s musings didn’t do anything to bolster the Street’s resolve … and Peloton got pounded into the pavement, plummeting a hearty 12%.
Gone: Upstart Upended
With Wall Street and Main Street eating themselves over inflationary fears — and the Federal Reserve fighting fire with fire by raising interest rates — the cracks are starting to show for lending companies like Upstart (Nasdaq: UPST).
…if you consider the near-60% drop in UPST stock a “crack,” that is. Please, everyone join me in a collective chorus of: Oooooooof.
The backstory here is that Upstart, which presents itself as an AI-powered lending platform, reported first-quarter earnings and revenue that came in higher than Wall Street’s estimates … right before it warned investors of slowing second-quarter growth and the possibility of a recession.
Oh, Mylanta! They said the dirty word!
Oh, indeed. But CEO Dave Girouard didn’t stop there:
That … doesn’t sound great.
But what does all this really mean in, like, layman’s terms?
Well, when interest rates rise, borrowing money becomes more expensive — and that can eat into lending companies’ growth as consumers grow much more conscientious of how they spend their dollars.
In other words, there’s a potentially perfect storm a-brewing between people saving more money — ha, speak for yourself, buddy — and those borrowing less from lenders. And neither of those scenarios is conducive to Upstart’s continued growth, hence the hellacious decline in UPST stock.
Now, lending is a cyclical business … but judging by the looks of things here lately, a rebound could be a while off. So, to any of y’all Upstart investors who’re left: Please proceed with caution.
You may not know it by Upstart’s sloucher of a report, but by 2030, AI tech will be eight times bigger than blockchain. 10 times bigger than virtual reality. And 12 times bigger than 5G.
That’s why the world’s biggest companies are piling into AI right now. (Not you, Upstart. Sorry, not sorry.)
And right now, there’s a little-known stock at the center of it all. Click here for details.
Alright, let’s hear it for the bitcoin bulls! Where are y’all at?
*crickets* *tumbleweeds pass by*
Yeah … that’s kinda what I expected. With BTC crashing over 17% since last Friday, it’s a rough week for bitcoin traders, investors and mere gamblers alike.
But, as we know, not all bitcoin hodlers are built alike. No sir!
Sure, a few of you might be slinking away from the virtual golden coins. But when some of you Great Ones say “goodbye!” — others are saying “hello, good buy!” (The Beatles’ Magical Mystery Tour was actually just about their ill-fated crypto adventures … little bit of trivia.)
Anyway… Bitcoin bulls are piling in to buy the dip on that sweet, sweet BTC this week. One trader’s sell-off is another’s fire sale, right?
And never was there a bigger bitcoin bull than the country of El Salvador:
Do you remember? The ninth day of September? That’s when we first talked about El Salvador’s acceptance of bitcoin as an official currency.
With the latest bitcoin sell-off, El Salvador just loaded up on another 500 bitcoins for a total of $15.5 million. It’s El Salvador’s biggest BTC buy since the country first set bitcoin as legal tender last year, and it’s a strong testament to … to…
To what, Great Stuff? A testament to crypto’s staying power and dominance? C’mon now…
Well, while El Salvador’s president is as bullish as they come for bitcoin, not everyone is thrilled about the country dipping its toes into the murky crypto waters — especially amid such a volatile time for, well, basically everything.
Even the International Monetary Fund (IMF) wants El Salvador to stop using bitcoin as legal tender, stressing “that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.”
Financial integrity? Fiscal contingent liabilities? Seems like the IMF has been using the corporate B.S. generator…
Nevertheless, you can bet your bottom bitcoin that Great Stuff will be watching El Salvador’s crypto career with great interest. And if the country does indeed face fierce fiscal contingent liabilities due to bitcoin … you’ll be the first to hear it.
But today? Why, just admire the gall of President Bukele using his (taxpayers’) money to BTFD, if you know what I mean.
Before we go, though … and hear me out on this … what if the answer to using crypto as legal currency isn’t about bitcoin?
Ian “The Crypto” King has been telling his readers — and really, anyone who will listen — about this Next Gen Coin the financial elite say could be 20X bigger than bitcoin.
That’s because, as this presentation explains, this coin has the ability to “power the rails of global finance” … a $100 trillion industry.
Thing is, 99% of Americans don’t even know this coin exists.
But that’s about to change (for you). Because I’ve got all the details on this coin … and why you should invest in it today … right here for your viewing pleasure.
After you’ve checked that out, let me know what you think about El Salvador’s big bitcoin buy in the inbox. Once you’ve shared your thoughts, here’s where else you can find us across the interwebs:
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Until next time, stay Great!
Editor, Great Stuff