The week ahead 02/13/2023
Happy early Valentine’s Day to all of our sweet readers.
Eagles fans may need an extra bouquet of flowers. To any Kansas City Chiefs fans — congrats. To any Philadelphia Eagles fans — sorry for the tough call at the end of the game.
With all of the football and random objects in the sky… you may not have noticed the ecological disaster that’s taking place in Ohio.
A train carrying hazardous materials crashed in East Palestine, Ohio on Friday — leading to a massive fire. Residents of the area were requested to evacuate Sunday night due to the risk of explosion.
There’s been substantial concern over how “properly” the crashed train cars have been handled since the events began to unfold.
East Palestine is located near the border of Ohio and Pennsylvania, within a few hours of Cleveland, Columbus, and Pittsburgh.
The train cars were carrying vinyl chloride, which produces hydrogen chloride when it is burned. Hydrogen chloride is a highly volatile substance that can bind with water vapor to produce hydrochloric acid and phosgene — a toxic gas that was deployed as a chemical weapon in WWI.
“We basically nuked a town with chemicals so we could get a railroad open.” — Sil Caggiano, hazardous materials specialist
There’s a lot of details to this situation, and here’s a great video breaking it all down.
Norfolk Southern Corp. (NSC) was the operator of the train and says that the derailment was caused by a mechanical issue. Incredibly, their stock is down less than -2% after a completely disastrous situation.
On top of this, Norfolk Southern put out a press release in which it announced a donation of (only) $25,000 to the community that was impacted.
Meanwhile, the environment of the East Palestine community and its surrounding areas is in serious danger and the lawsuits are pouring in.
We’re not quite sure why this isn’t getting more media coverage.
Key Earnings Announcements:
Airbnb looks to address an increasingly muggy public image and Palantir’s reliance on government contracts is set to be more deeply dissected.
Monday (2/13): Avis Budget Group, Check Point Software, Denny’s, Inotiv, Monday.com, Palantir
Tuesday (2/14): Airbnb, Cleveland-Cliffs, Coca-Cola, Devon Energy, Ecolab, Marriott, Peabody Energy, Suncor Energy, TransUnion, Tripadvisor, Upstart
Wednesday (2/15): Albemarle, Analog Devices, Barrick, Biogen, CF Industries, Cisco, Energy Transfer, Generac, Kraft Heinz, Marathon Oil, Roblox, Roku, Ryder, Shopify, Sunoco, The Trade Desk, Twilio,
Thursday (2/16): Applied Materials, Cenovus, Crocs, DataDog, DigitalOcean, DoorDash, DraftKings, Hasbro, HubSpot, Paramount, Redfin, Scorpio Tankers, Vale
Friday (2/17): Air Canada, AutoNation, John Deere
What We’re Watching:
In Airbnb’s last earnings release, the company reported nearly 100 million Nights & Experiences Booked in Q3’22 — a +25% increase YoY. Gross Booking Value of $15.6 billion was up +31% YoY and Revenue grew to $2.9 billion — +29% YoY and the highest quarterly result on record.
Meanwhile, investors still do worry that Airbnb has a brand problem.
Cleaning fees, check-in & check-out pains, unmet expectations with bookings, and a litany of legal fights continue to be thorns in the back of Airbnb’s image. Not to mention — the company had a Super Bowl let-down in the Phoenix area.
ABNB has soared +34.1% to start the year. The company projected Q4 2022 revenue in the range of $1.80 billion and $1.88 billion, reflecting growth of 17% to 23%. However, the company cautioned that the growth in Nights and Experiences Booked will moderate slightly compared to Q3 2022.
In Palantir’s last quarterly earnings release, the company reported Revenue of $478 million (+22% YoY), Customer Count of 337 (+66% YoY), Deals Closed of 273 (+63% YoY), and that its Government Business surpassed $1 billion in TTM revenue.
To the joy of investors, Palantir also reaffirmed its FY22 Revenue Guidance of $1.9 billion despite a negative $6 million currency impact.
PLTR has risen +19.1% to start the year. Analysts project ~21% sales growth for its Government Business and ~11% growth of Commercial Revenue.
Considering Palantir garners nearly 60% of its revenue from government agencies that use its software for counterterrorism, intelligence gathering, and other military purposes — we’ll be looking to see how PLTR execs address the steadily-rising unrest in international relations (i.e. Chinese spy balloon).
Investor Events / Global Affairs:
Understanding the “Fear Index,” Americans need to get out of Russia, “deep fakes” made through A.I., and mysterious lights in the Hawaii skyline are believed to be from more Chinese surveillance.
Why Won’t the VIX Move?
For years, market analysts have been using the CBOE Volatility Index (or “The VIX”) to help predict recessions.
When we zoom out on things, the base belief has been a VIX reading above 35-40 is needed for a recession to truly be coming and for the markets to really get rocked.
We like how the Financial Times said it — for a lot of people, a low Vix will always and forever be a sign that “things are quiet, too quiet.”
However, the days of using the VIX as a key indicator could be coming to an end. At the very least, it’s already become much less reliable. This is because the VIX only uses options that mature between 23-37 days to calculate its implied 30-day volatility level.
So that means the rapid increase in 0DTE options (essentially gambling on quick day trades) makes the gauge less valid:
Just look at the rapid rise over the last few years of options that expire in less than one week, when compared to longer-dated contracts:
“As a sign of the innovative times we live in, there’s another — more mechanical — reason that much of the fear we expect to be reflected in VIX appears to have been diluted:
The introduction of, migration to, and subsequent growth of extremely short-dated / daily-expiration options in the SPX index.
This explosion in ultra-short-dated trading dilutes demand for options expiring within the calculation window of 23 to 37 days-to-maturity for the SPX options that are utilized for extrapolation of the VIX level.
This shift has also seemed to impact skew levels as we have substantially lower skew of late. Both of these issues are integral to lower VIX levels…” — Don Dale, Curved Edge Strategies
American Citizens Told to Leave Russia Immediately
Early this morning, the U.S. embassy in Russia announced a request for all American citizens to depart from the country immediately.
While this isn’t the first of these announcements during the war with Ukraine, it’s the first of this extent since September’s mobilization of troops by Vlad Putin.
This resurfaces the tension of U.S. citizens in Russia for the first time since our swap of WNBA star Brittney Griner for Viktor Bout — Russia’s “Merchant of Death.”
“Russian security services have arrested U.S. citizens on spurious charges, singled out U.S. citizens in Russia for detention and harassment, denied them fair and transparent treatment, and convicted them in secret trials or without presenting credible evidence.” — U.S. Embassy in Russia
One of A.I.’s Biggest ‘Cons’
The reality must be recognized that A.I. technology “upsides” are also met with the “downsides” of destructive ‘deep fakes’ that can be made on a whim.
The most recent viral example is of the world-famous Joe Rogan making an ad for a random Amazon product.
This recording never happened and was pieced together to trick consumers on social media.
It’s Only Going to Get Worse:
Check out this New York Times article that shows two ‘news broadcasts’ that were actually made with fake avatars of humans. One of their pictures is shown above — truly a wild sight to see.
There’s an unbelievable amount of issues that can be solved using artificial intelligence, but let this serve as your reminder that you need to be more aware of spam than ever before.
Chinese Satellite Fired Green Laser Beams Over Hawaii
According to The Independent, astronomers have revealed that a Chinese satellite fired green beams over the state of Hawaii. Scientists at the National Astronomical Observatory of Japan (NAOJ) captured the mystery beams of light on video through its Subaru-Asahi Star Camera on Mauna Kea back on January 28th.
At the time, the space agency said that the lights were thought to be from a NASA remote-sensing altimeter satellite — but a few days ago the NAOJ made a correction that China was likely the source of the beams shooting across the sky in both Hawaii.
“It has many different instruments on it… Some kind of topographical mapping or they’re also used for measuring stuff in Earth’s atmosphere, and I think that’s what it is, environmental measurement satellite.” — Roy Gal, University of Hawaii Institute of Astronomy
“[I have doubts as to] why the Chinese – who are probably some of the most prolific polluters on the planet – would be collecting data on pollutants on this side of the Pacific”. — Ray L’Heureux, Former Chief of Staff of Marine Forces Pacific
Major Economic Events:
A hotter-than-previously-expected inflation reading is on the radar of investors.
Monday (2/13): NY Fed 1-Year & 5-Year Inflation Expectations
Tuesday (2/14): Consumer Price Index (CPI / Inflation), NFIB Small Business Index
Wednesday (2/15): Business Inventories, Capacity Utilization Rate, Empire State Manufacturing Index, NAHB Home Builders’ Index, Retail Sales
Thursday (2/16): Building Permits, Household Debt, Housing Starts, Philadelphia Fed Manufacturing Survey, Producer Price Index Final Demand
Friday (2/17): Import Price Index, Index of Leading Economic Indicators
What We’re Watching:
Consumer Price Index (CPI)
On Tuesday, the Bureau of Labor Statistics (BLS) will report a fresh set of inflation data.
As mentioned yesterday, recent revisions have shown that inflation was running hotter than previously reported.
Analysts predict that the headline CPI will increase by +0.5% MoM and +6.2% YoY. Meanwhile, core CPI is expected to rise by +0.4% MoM and +5.7% YoY.
After Fed Chair Jerome Powell’s “higher for longer” comments last week, the Fed Funds futures rose to a peak of 5.18% for the expected terminal rate coming in August. This rate is higher than the Fed’s 5.1% terminal rate that was included in its December Summary of Economic Projections (SEP) — which is updated four times per year.
The chart above tells a strong story about inflation expectations: American consumers remain confident that prices won’t accelerate in the years to come. However, they do expect inflation to remain high for plenty of shorter time horizons — something the Fed doesn’t like.
Leading Economic Indicators (LEI)
On Friday, we get the latest reveal of The Conference Board’s Leading Economic Indicators (LEI) — which has quietly become one of the most reliable measures of if a recession has begun / is coming. We’ll be sure to report back in the next Week in Review.
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
The New York Times added more than a million digital subscribers in 2022, bringing its total number of paying subscribers to 9.6 million.
Worth Calling Out — it’s important to remember that many major sources of ‘truth’ that we see in the news are still trying to run their own businesses too.
The New York Times (NYT) currently has a market cap of over $6.5 BILLION and hopes to continue to keep shareholders happy with its +58% return over the last five years.
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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.