🔬Just How Dead is the IPO Market? And Much More.

"If you are going to panic, panic early"
- Barry Sternlicht

“Buy low, sell high. Fear? That’s the other guy’s problem” 
- Louis Winthorpe III, Trading Places

Table of Contents

Hot Headlines
Joke Of The Day
A.M. Allocations: Expectations vs. Reality
Trivia
Market Movers
Market Update

Hot Headlines

JUST HOW DEAD IS THE IPO MARKET? - The reopening of the IPO market has been further delayed due to disappointing performances from major companies like Arm Holdings and Instacart, leading to a cautious outlook for the rest of 2023. Rising interest rates since late 2021 have made safer investments more appealing, diminishing the attractiveness of new, riskier IPOs, especially in the volatile technology sector. The overall stock market's instability - marked by significant swings reacting to factors like surprise interest rate hikes and banking crises - has also contributed to the slowdown and occasional halts in the IPO market. Basically, only your dumbest/greediest bankers are pitching deals right now. (WSJ)

WALL STREET DIVIDED - Wall Street banks are divided over the Federal Reserve's potential interest rate cuts in 2024, with UBS Group AG and Morgan Stanley expecting substantial cuts due to anticipated economic downturn and inflation normalization. In contrast, Goldman Sachs Group Inc. predicts fewer and later reductions, maintaining higher rates due to post-crisis economic stability and persistent budget deficits. This divergence reflects varying views on the future state of the economy, with UBS and Morgan Stanley foreseeing a need for aggressive easing, while Goldman Sachs anticipates a stronger economy requiring less stimulus. (Bloomberg)

CHIP LEADER NVIDIA LAUNCHES NEXT-GEN GPU - Nvidia is flexing its tech muscles with the new H200 Tensor Core GPU, a beast with 141 gigabytes of memory, ready to leave rivals eating its silicon dust with up to 90% performance boosts. This AI chip powerhouse, however, is priced like a small car at around $25,000 each. (Barron’s)

Mmmm…chips.

GAS PRICE NEARLY UNPROFITABLE - Gasoline prices are taking a winter dip to $3.41 a gallon (down 9% in a month), but refiners with a measly $11 per barrel crack spread* - an indicator of refiner profitability - are barely covering operating costs. So why keep producing? The real party is in the diesel, jet fuel, and heating oil market, which comes from the heavier distillate, where the crack spread is a more festive $44 per barrel. So, while gasoline might be the awkward guest at the refinery Christmas party, as long as diesel keeps the dance floor full, refiners will keep churning out both, like a DJ who can't switch tracks. (WSJ)

*The crack spread is the difference between the cost of a barrel of oil and the cost of a barrel of gas.

RETAILERS CAUTIOUS OVER BLACK FRIDAY - Walmart and Target are facing an uncertain Black Friday season, with mixed signals about consumer demand influencing their strategies. Analysts are cautious, noting the impact of rising credit card debt, depleted pandemic-era savings, and higher interest rates on consumer spending. Walmart is not hiring seasonal holiday workers, reflecting expectations of lower shopper traffic, while Target, which relies heavily on non-essential items like clothing and electronics, is projected to see a 4.8% drop in sales. (Reuters)

So none of this? Darn. ‘All I want is a pack of batteries!!’

YEN REACHES FRESH LOWS - The Japanese yen remains near a three-decade low against the dollar, struggling amid the Bank of Japan's continued ultra-easy (or low interest rate) monetary policy, which is at odds with the global trend of higher interest rates. Despite attempts to phase out negative interest rates and hints of ending the yield curve control policy, these measures have had limited impact on bolstering the yen, especially as central banks worldwide maintain a hawkish stance. (Reuters)

(Bloomberg) The Elon Eras: A Brief History, Tesla to X - How you gunna skip Zip2 and PayPal? Anyway, they’re launching a new ‘Elon, Inc’ podcast - which I assume is basically cribed from the new Walter Isaacson book that just came out (which was super interesting).

(Barron’s) EVs Were Supposed to Be the Answer. Now They’re the Problem - Brave of them making a bearish call on EVs after they already blew-up massively. I did a look at EV profitability a few weeks back.

(Mashable) Apple AirPods Pro 3: Every single thing we know so far - USB-C charging (finally) and potentially some health stuff like heart rate monitoring and hearing tests.

(CNN) Marvel used to reliably churn out billion-dollar hits. Now Disney has a mess on its hands - New flick ‘The Marvels’ is looking like another bomb. Cost +$200 million and just did $46 million on opening weekend (context: Infinite War did $260 million).

(Reuters) Morgan Stanley sees S&P 500 ending 2024 at 4,500 - Oh yeah? 2% Higher? Don’t hurt your @$$ on the fence.

(Morningstar) Tesla's Cybertruck contract restricts reselling vehicle within the first year - Oh why, oh why would anyone consider selling?

Joke Of The Day

I quit my job to start a cloning business and it's been great, I love being my own boss.

I fly often for business. Yesterday, I had three bags to check.

I said, "I'd like this bag to go to New Orleans, this one to Seattle, and the third to Chicago."

The gate agent rolled her eyes and said, "We can't do that!"

I immediately shot back, "Why? You did it last week."

A.M. Allocations

Expectations vs. Reality

• The New York Federal Reserve’s monthly survey on Consumer Expectations came out Monday. Nothing too shocking with median year-ahead inflation expectations dropping in October to 3.6% from September's 3.7%, and expectations for the five-year horizon dropped to 2.7% from prior month's 2.8%.

• What stood out to me is that individual expectations for changing homes within the next year (13.8%) is only 0.1% higher than the its lowest month in decades. Further proof that high mortgage, record house prices and tight supply have forced most people to stay put.

Take-Aways: Now that might not seem like much at first pass, but in financial markets it’s rarely the most obvious thing that comes to bite you. It’s the derivative. The thing that happens after the thing you weren’t worried about happens.

For example, few people guessed that the 1997 Asian and 1998 Russian Ruble crises were a big deal to Western financial markets, as they were generally regionalized and the broader economy was on sound footing. But the nobel-laureate-founded, world’s largest hedge fund, Long-Term Capital Management, was levered 25:1 in the bond and futures markets, and blew-up in dramatic fashion when bond spreads went wonky. To stave off the calamity on Wall Street, an emergency bail-out was arranged with 14 of the world’s largest banks. That would have taken some 3D Chess mindset to figure out in advance.

Conversely, who would have guessed that the Nasdaq would be up 48% and 27% in 2020 and 2021, respectively - smack dab in the middle of the worst pandemic since the 1918 Spanish Flu. But stimulus cheques, a bored populus, new low-cost trading platforms and some new Tech Bubble-esque hype helped see to it. Again, some mental gymnastics to get there ex-ante.

What I’m slowly getting at is that something as innocuous as the movement of people between residences can actually end up having real consequences broadly. Moving is when the a significant proportion of new appliances are bought. It’s when the majority of major renovations are completed. So little things, like the price of lumber, the unemployment rate of realtors/carpenters/movers, or the sale of ceramics and welcome mats could end up seeing material declines.

Taken on their own, these won’t be devastating things, but as more cracks emerge in the economy, these secondary effects will build-up and could end up turning a soft-landing recession into something more protracted or harmful. But then again, who knows.

Trivia

History of money trivia today…

1. The first known currency is believed to be:
   A) Roman Denarius
   B) Mesopotamian Shekel
   C) Chinese Cowrie Shells
   D) Greek Drachma

2. The Earliest Form of Paper Money:
   A) Yuan Dynasty, China
   B) Ancient Egypt
   C) Roman Empire
   D) Gupta Dynasty, India

3. Largest Denomination of a Banknote Ever Printed:
   A) Zimbabwean 100 Trillion Dollar
   B) Hungarian 100 Quintillion Pengő
   C) U.S. 100,000 Dollar Bill
   D) Yugoslavian 500 Billion Dinar

(answers at bottom)

Market Movers

Winners!

• Montauk Renewables (MNTK): [34.4%] Upgraded by Scotiabank to outperform, citing an overreaction to its Q3 earnings and outlook.

• Penumbra (PEN): [15.1%] Gained after SELECT trial data for Wegovy, with analysts noting less negative impact than expected on device makers as the study didn't show significant Wegovy benefits for nonfatal stroke. Yes, med-tech stocks go up when people die.

• monday.com (MNDY): [10.5%] Beat on Q3 EPS and revenue, with raised Q4 and FY23 revenue outlooks. The company's strong customer demand, mondayDB success, and financial performance were positively noted by analysts.

• Boeing (BA): [4.0%] Increased on news of China possibly resuming purchases of its 737 Max aircraft before the Xi-Biden summit. Emirates Airline also announced a $52B order for 95 Boeing aircraft.

• CrowdStrike (CRWD): [2.4%] Upgraded to buy from hold at Stifel, with analysts highlighting its effective, lightweight, and scalable cloud-based endpoint technology that their cybersecurity software is good.

Losers!

• Verve Therapeutics (VERV): [-40.8%] Weak clinical trial data for VERVE-101. Analysts remain generally positive but cautious due to the high-risk study population.

• N-able (NABL): [-15.0%] Beat on Q3 EPS and revenue but projected weaker Q4 revenue.

• Tyson Foods (TSN): [-2.8%] Beat FQ4 EPS expectations but fell short in revenue and gross margin. Chicken sales were below consensus, with weaker pricing despite slightly higher volumes. FY24 revenue guidance is below market expectations, despite an increased quarterly dividend.

Market Update

Trivia Answers

1. B) Mesopotamian Shekel

2. A) Yuan Dynasty, China

3. B) Hungarian 100 Quintillion Pengő. Had to check how big that is…

   

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