Ark and retail army BTFD
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SIX things you need to know this week in <5 minutes:
Everyone’s reaction to the CPI print
Man + Machine
Ark and retail army BTFD
Battery recycling startups get a boost
Ethereum transitions to Proof-of-Stake
Peloton’s co-founders bail/cash out
1. MACROEveryone’s reaction to the CPI print:
Stop me if you’ve heard this before: inflation data came in hotter than expected.
Consumers got huge relief at the gas pumps with the energy component of CPI dropping by its largest amount since April 2020.
That decline, however, was overshadowed by surges in the food and OER (owners’ equivalent rent) components which rose at their fastest rates since 1979 and 1986, respectively.
On the wholesale side of the equation, we saw a similar story where a sharp drop in energy prices (which slipped through to consumers at the pump) was offset by increases elsewhere, primarily services prices which rose for the fourth consecutive month.
GRIT’S TAKE: The market is expecting a 75 bps hike next week with some (20% according to CME) calling for the Fed to drop the hammer (100 bps).
GRIT’S ACTION: The Fed has a needle to thread: too little and inflation persists, too much and the economy enters a recession.
Under the Radar
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2. DEALSMan + Machine
Man plus machine is greater than just man or just machine.
At least that’s the way Amazon seems to view things.
The online giant has been on an acquisition spree recently centered around automating its logistics operations.
In its latest move, the company has bought warehouse robotics firm Cloostermans, whose technology it has been using since 2019 to move, stack, and package products.
Amazon—which recently added its first fully autonomous mobile robot—plans to use the company’s tech to “help robots operate alongside its warehouse employees”.
GRIT’S TAKE: The company recently paused the expansion of its US logistics network as online retail demand has slumped—this acquisition will help it optimize it.
GRIT’S ACTION: Long AMZN 0.00
3. STOCK MARKETArk and retail army BTFD
On Tuesday, the S&P had its worst day since June 2020 and its 9th worst day in the past decade.
Over in the Nasdaq 100, every single stock closed red for the first time since March 2020.
“Hold my beer.”
-Cathie Wood & the retail army, probably
Cathie Wood’s Ark went on its biggest shopping spree (top chart) since February—buying shares in 27 stocks across 8 of its funds—citing deflation “in the pipeline”.
The retail army shared Wood’s BTFD mindset as investors bought over $2 billion (bottom chart) worth of the dip, including the biggest one-day buying of S&P 500 ETF SPY 0.00 since July 2021.
GRIT’S TAKE: Professional investors, on the other hand, yanked nearly $6 billion out of SPY which was the largest single-day decrease in 5 months.
GRIT’S ACTION: Dollar cost-averaging into S&P 500.
4. COMMODITIES Battery recycling startups get a boost
The battery supply chain is currently dominated by China.
To address this dependence, the US has facilitated billions for battery startups through Energy Department loans and last year’s infrastructure bill.
Now, with the Inflation Reduction Act tying EV tax credits directly to the sources of battery materials (i.e., rewarding domestic production and recycling), automakers are pouring billions into battery recycling startups that promise to build new components out of old batteries.
Companies like Redwood Materials (run by Tesla’s former CTO) and Li-Cycle Holdings (LICY 0.00) have pledged to spend billions toward this end while startups like Ascend Elements—which makes new components out of old li-ion batteries—are completing $300 million raises.
GRIT’S TAKE: Due to the high costs and manufacturing costs associated with EV batteries, profitability could prove elusive until this generation of batteries is phased out.
GRIT’S ACTION: Everything clean energy is getting a boost—subscribe to GRIT Carbon to find out how to position yourself to profit from it!
5. CRYPTOEthereum transitions to Proof-of-Stake
Around 3 am EST this morning, Ethereum developers confirmed that new blocks (now called slots on PoS) were being produced and finalized.
Translation: Merge successful.
The Merge is the culmination of 7years of work and its completion will drop the new supply issuance of Ether by 90% (or the equivalent of three Bitcoin halvings).
Though gas fees and transaction costs remain unchanged for now, the Ethereum network will be consuming 1/1000th of the energy it previously required (that’s an energy reduction of 99.95%!).
Another big change that comes with the transition is how ETH is created.
Where before it was mined, new ETH will now be generated by validators who pledge large amounts of pre-existing ETH.
GRIT’S TAKE: Bitcoin may be the face of crypto, but Ethereum is the backbone of DeFi, NFTs, DAOs, Layer 2’s, and so on with 3,500 active dapps (decentralized apps). This is a big deal.
GRIT’S ACTION: Dollar-cost averaging into BTC and ETH.
6. ENTERTAINMENTPeloton’s co-founders bail/cash out
So, it didn’t exactly happen like that, but at the end of the day—that’s pretty much how it went down.
Peloton’s co-founders, John Foley and Hisao Kushi, are leaving the company as new CEO Barry McCarthy (formerly at NFLX 0.00 and SPOT 0.00) tries to right a ship that has already sunk over 90% from its 2021 highs.
McCarthy—who seems to have surrendered to the whole “iPad on a treadmill” argument—is attempting to take the pandemic sweetheart in a different direction.
That direction includes selling bikes and products on Amazon, introducing rental options, certifying pre-owned bike sales, pushing to expand its digital subscriber reach, and adding third-party content to the iPads bike screens.
GRIT’S TAKE: It’s still just a treadmill with an iPad slapped on it.
GRIT’S ACTION: I own a Peloton. I do not own PTON 0.00.
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*SOURCES
1. CNBC, CNBC
2. WSJ
3. Bloomberg, Bloomberg
4. WSJ
5. Blockworks
6. CNBC
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