The Weekly Drop: Jan 6
2023 starting off on a positive note, but Fed unhappy with all the positivity 💫
Hey friends 👋
Week 1 of 2023 is already under our belt. I managed to disconnect from the world while completing a 4-day hike up to Machu Picchu, stock markets are up, the labor market is strong, and unemployment is at it’s lowest. Though seemingly good news, a strong labor market and lower unemployment is actually bad news for inflation as they are indicators that the economy is not slowing down fast enough, much to the Fed’s dismay. But I’ll take it as a win overall to start the year on a positive note.
I had a near-private, once-in-a-lifetime experience at Machu Picchu. With protests restarting in Peru, this was an example of reaping outsized returns by taking some calculated risks. Grateful that everything worked out 🙏.
The experience was a sort of reminder that crises sometimes provide the biggest opportunities. A few hedge funds reaped outsized returns in 2022 seeing opportunity where the rest of us saw obstacles (see “Finance / Fintech” section). 2023 is set to be a rough year, but will also post some opportunities. Let’s keep our eyes open!
With that, let’s dive into this week’s drop.
Tweets of the week
Markets & Macro
Weekly market visual: 2023 off to a good start with Dow, Nasdaq and S&P 500 ⬆️ for the week, but is the rally premature?
Interest rates hikes expected to continue and stay high well into 2024 as the Fed is not content with the pace of the economic slowdown given December reports show strong labor market and historically low unemployment. Wage growth slowdown was the only positive indicator. Consumers have increased credit card use as they feel the pain of inflation.
On Thursday, ADP reported that payroll rose by 235k in December, well ahead of the 153k Dow Jones estimate, and the 127,000 initially reported for November
Goods-producing sector increased by 22,000
Service providers added 213,000
Today, December jobs report showed that job growth is slowing, but still higher than the Fed would like
Nonfarm payroll increased at a slower pace than November (223k vs. 256k), but still above the Dow Jones estimate of 200k
Unemployment rate unexpectedly fell to 3.5% reverting to a historic low, but prime-age labor force participation has ebbed
Wage growth slowed; average hourly earnings rising 0.3% (vs.0.4% expected) and increased 4.6% from a year ago (vs. 5% expected)
Uptick in employment across all industries
More Americans are using credit cards for everyday expenses according to the US Census Bureau’s Household Pulse Survey
More than 35% of households used credit cards or loans in December to cover spending needs in the past week
That’s up from around 32% in November and 21% in April 2021
Finance / FinTech
Few hedge funds knocked it out of the park in 2022 finding opportunity while most had lost hope
Haidar Jupiter’s fund posted a mammoth 193% gain
Brevan Howard's two biggest funds posted returns of 20% and 28%
Chris Rokos's macro fund delivered a 51% return
AQR Capital’s longest-running strategy had its best year since its inception in 1998, posting a gain of 43.5% net of fees
2023 starts slow for FinTech investments with 14 deals recorded globally; none in the US
Wells Fargo was ordered to pay $3.7 billion for repeated consumer finance violations including unjust foreclosures and vehicle repossessions
Real Estate / PropTech
CRE brokerages are exploring cost-cutting measure like layoffs to respond to i-sales slowdown
NYC REIT to give up REIT status as CRE recovery 'remains challenged'; They will become a taxable C corporation, as it plan to expand the scope of its assets and businesses
Apartment rent increases slow, a relief to tenants after 2 years of steep rises
Pending home sales dropped 32% annually during the 4-week period ending Jan. 1, with the biggest drop-offs recorded in markets that took off during the pandemic
Blackstone’s nontraded BREIT fund receives a $4bn cash injection from the University of California
Short sellers make their move on WeWork shorting more than 27% of WeWork’s publicly tradable shares as of Dec. 15, according to MarketWatch
The student housing sector rent growth remained robust, with 96.6 percent of beds at Yardi 200 academic institutions preleased as of September
Manhattan office leasing declines 47% in Q4 with 4.9mn sq ft of space leased, the lowest quarterly leasing volume since Q2 2021 and the sharpest quarterly drop since the pandemic began
Warehouse leasing tumbled at the end of 2022 as companies leased 132mn sq ft of industrial space across the U.S. in Q4, down 28.2% from Q3
Crypto
Bitcoin volatility fell to historic low this week raising concerns of lower liquidity as traders stay out of the market
SBF/s character flaws seem to be infinite
Pleads “not guilty” to the 8 counts of criminal charges against him; trial set for October 2023
Is seeking access to $450mn in seized Robinhood shares to pay his legal fees
DNP3, a Twitch streamer and the founder of the Goobers NFT collection and various other Web3 projects, has admitted to gambling away all of his investors’ hard-earned money.
Other
Tesla fell 12% on Monday after a 3rd straight delivery miss (427,000 estimated vs. 405,278 delivered); TSLA slashed prices in China for the 2nd time.
Microsoft reportedly plans to use ChatGPT’s A.I. for search. The company, which invested $1bn in OpenAI, is working on incorporating the tech into a new version of its Bing search engine. That could help Microsoft get a leg up on Google, which has declared ChatGPT a “code red.
Grubhub agrees to pay $3.5mn to settle a consumer protection lawsuit accusing it of deceiving customers over the final cost of food orders.
OpenAI in talks to raise capital at almost $30bn valuation
Bed Bath & Beyond may go bankrupt after a disappointing holiday sales season
Amazon to layoff 18,000 more employees worldwide, but is still fully committed to “Alexa”
Thanks for reading!
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