The New DARPA | The Daily Peel | 3/28/22

Market Snapshot

Like when you stroll into class, and suddenly the professor starts passing out a test you were completely unaware of, markets were confused as hell on Friday. Treasury yields gained, while oil and stocks, like you on question one of that test, had no clue what to do. All in all, the week was closed with an S&P gain of 0.51%, a Dow jump of 0.44%, and a Nasdaq loss of 0.16%.

Let’s get into it.

Banana Bits

• He’s not making any meat, but Joey B called Putin a “butcher” as Russian rockets continue to light up Lviv
• Uber: from utterly mauling the taxi industry to adding cabs to their platform
• Diplo is selling music royalties and exclusive access for $99 tokens
• Instacart slashes valuation by 39%, following in the steps of publicly-traded peers
• Apparently, the Oscars are still a thing and happening soon with expectations that streaming services are gonna clean up
• Russian equity markets said to reopen with no more weird rules Monday, but will still be only a half-day 

Macro Monkey Says

52-Year Low — Despite how the state of the world feels right now, no, this section header is not referring to global levels of optimism. In fact, quite the contrary.

It’s been a challenge to find good news in between all this talk about pandemics, inflation, war, impending nuclear disaster, and, of course, falling stock prices. But this past week, markets gave us a well-deserved breath of fresh, green air, so let’s try to keep the positive vibes going and take a look at the labor market.

The last time the US saw applications for unemployment benefits as low as they are now, we were still celebrating the moon landing while gearing up for a heated election between Richard Nixon and George McGovern (whoever that was).

Termed “initial jobless claims” and used as a proxy for nationwide layoffs, the number of Americans seeking unemployment benefits is at its lowest since 1969, hovering right around 187,000.

If that doesn’t blow your mind enough, keep in mind the 1969 labor force was less than half the size of the 2022 labor force. Now that your minds are sufficiently blown, let’s dive into what that means.

Most importantly, this is yet another statistic to confirm that the US labor market is about as tight as Arthur’s fist in that legendary meme.

The latest data show that US employers are looking to fill an aggregate of ~11.3mn jobs. But at the same time, we only have 6.3mn unemployed people looking to fill such jobs. Do you see a little imbalance there?

With that tightness comes a lot of benefits for the average worker, namely, pricing power. For the first time literally since ‘Nam, US workers have almost unlimited bargaining power when it comes to wages, hence the broad increase in average hourly pay seen across every single economic sector, particularly concentrated in lower-income earners. Still, 2021’s 4.5% nationwide average wage increase doesn’t hold a candle to inflation.

And that, of course, brings us to the downside. I know, we were all about positivity above, but it’s 2022, so what do you expect? JPow himself said it best during his March 16th press conference, explaining, “That’s a very, very tight labor market, tight to an unhealthy level, I would say.”

The unhealthiness creeps in when we consider why inflation might be running as rampant as possible. A wage-price spiral is essentially an economic process by which inflation picks up, so employers compensate their workers with pay raises, leading to increase costs for the end consumer, leading to even higher inflation, and you get the picture.

That’s the Fed’s main concern right now, it seems. Much of the motivation to raise rates was to loosen up the labor market to avoid such a wage-price spiral. We’ll see, but even in economics, good things quickly become too much of a good thing. Can’t have sh*t in econ.

What's Ripe

Tilray ($TLRY) — Shoutout to anyone that’s high and reading this right now. If you also happen to invest in what you ingest, your portfolio must be pretty high too.

That’s because a few U.S.-based cannabis stocks took off on Friday. Reports swirled that the House of Representatives will next week consider a bill to federally decriminalize a drug that half of America’s youth regularly does anyway.

The gains were widespread, but none boomed louder than Tilray, putting up a huge 22.8% on the day. Can you smell the bag yet?

GameStop ($GME) — It’s been over a year since the legendary Keith Gill uttered the immortal words of “I like the stock” right to the face of several unsuspecting Senators. Since then, the stock our man “liked” has returned right around 275%. We back at the moon yet?

I’m certainly no expert, but yes, we are. In just the last 10 trading days, shares are already up nearly 100% (aka, a doubling in value).

Insiders like Ryan Cohen buying shares hand over fist have been the primary catalyst, with company Director Larry Cheng snatching a light 400,000 shares this past Tuesday. There are myriad reasons why insiders might sell stock, but there’s only one reason why they’d buy.

See y’all on the ISS.

What's Rotten

The Honest Company ($HNST) — Richard Branson says if you want to be a millionaire, become a billionaire and then start an airline. Jessica Alba, on the other hand, says if you want to go completely broke, become a millionaire and then start a consumer goods company.

While she may not have said it explicitly, after watching her company plummet 22.5% on Friday to an all-time low, it kinda goes without saying.

Basically, the firm relied way too much on sales of COVID-era must-haves like masks and hand sanny. Now that that crutch is gone, combined with rising costs, the firm’s quarterly numbers were somehow more atrocious than Alba’s role in Fantastic Four.

Nio ($NIO) — Compared to firms like DiDi and Pinduoduo, Nio escaped the punitive clutches of the CCP relatively unscathed. Not on Friday. Shares plunged 9.4%, but don’t start blaming Chinese President Winnie the Po-, I mean, Xi Jinping, just yet.

Nio’s earnings dropped Thursday afternoon, and boy, was this one a doozy. Revenue came in well above expectations and shot up nearly 50% from last year’s Q4 results, but skyrocketing costs for the most important raw materials ate into profit margins and killed Nio’s chances of beating estimates.

Meanwhile, forecasts were a huge disappointment, adding salt to the wound of a missed EPS estimate.

Thought Banana

Is Yuga Labs the new DARPA? — No, they’re not. But like DARPA, they do a lot of crazy sh*t, and the latest iteration in the Yuga Labs story has officially taken the crown as the wackest one yet.

Let’s start with the beginning. Yuga Labs was founded, if you can believe it, in 2021 and already carries a VC-backed price tag of $4bn. You know them as the creators of the legendary Bored Ape Yacht Club, the project that played a key role in launching NFTs to a nearly $20bn asset class in 2021, according to BNP Paribas. Now, in 2022, Yuga absolutely dominates the NFT space.

With their recent acquisitions, including the IP of the number 1 and number 9 most popular NFT collections of all-time, being CryptoPunks and Meebits, Yuga now owns the 1st, 2nd, 3rd, and 9th most popular collections ever, per OpenSea. Sure smells like a monopoly to me.

And if the feathers of federal regulators like Lina Khan and Gary Gensler weren’t already ruffled enough, the company’s latest move is easily the most sus of them all. The latest sh*tcoin that burst onto the scene just last week is ApeCoin, also a Yuga Labs project. Except this time, ApeCoin and its launch were almost maybe definitely not legal.

Basically, ApeCoin is a governance and utility token native to ApeCoin DAO and incorporated with other Yuga communities. Nothing wrong with that, but the problem comes in the way that the tokens were issued.

See, there’s a big difference between something like BTC or ETH, where new coins are mined and produced as verifiably unique tokens with no promise of profit, making them definitely not securities, and the way that coins like ApeCoin or XRP were issued.

ApeCoin used a token drop as their method of distribution, with approximately half going to ApeCoin DAO and other community members, another 40% or so going to VCs and other funds, and 1% going to the Jane Goodall Legacy fund (because save monke).

Without getting too into the weeds, the function of a token drop on a particularly centralized project like ApeCoin is almost for sure a security. This would make $APE an unregistered security and, therefore, illegal for non-accredited investors to purchase. Moreover, that means Yuga distributed unregistered securities to non-accredited investors, which is a big, BIG no-no in the eyes of the SEC.

Of course, the SEC has not come out and made a statement specific to ApeCoin. In the past, things like ICOs and DAO token drops have been called securities by the SEC (remember the whole XRP debacle?), but the rules remain horribly unclear. It’s almost like issuers of tokens like ApeCoin are being criticized for breaking a law that doesn’t exist.

If the SEC doesn’t want to see companies issue tokens or take actions like this, they need to get off their f*ckin ass and regulate. For now, who knows. But be careful, apes.

Wise Investor Says