Tuesday, June 14th, 2022 – Volume 2 – Issue 241
Breathing room… That’s what the market gave us today after a brutal Monday to start the week.
The S&P 500 slipped a bit lower today, pushing deeper into bear market territory. The Nasdaq, on the other hand, was able to come out with a modest gain after yesterday’s near-5% loss.
Rates: The 10-year Treasury yield hit 3.45% (a new 11-year high) and the 2-year jumped 14 basis points to 3.418%. Traders are expecting a 90% chance of a 75-basis-point rate hike on Wednesday.
Crypto: Celsius (CEL) briefly surged 8X today in a majestic short squeeze, but quickly returned to its lows. BTC and ETH continued to bleed in a big way as crypto liquidations hit $1 billion over the past 24 hours.
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Now, for the top news stories of the day…
Source: Heat Map & Sector Performance — Finviz.com
Crypto Billionaires Are Getting Wrecked
How much have crypto billionaires lost?
The global crypto market dropped below the $1 trillion level, putting a massive dent in the fortunes of the crypto elite. We got used to seeing cryptocurrencies create millionaires and billionaires, racing their Lamborghinis and sipping champagne by the beach — times change quickly.
Seven of the wealthiest crypto founders lost a combined $114 billion from November to June:
- CEO and founder of Binance, Changpeng Zhao’s net worth dropped from $95.8 billion to $10.2 billion — an $85.6 billion paper loss in 8 months.
- Founder of FTX, Sam Bankman-Fried’s net worth fell from 15.1 billion to 8.9 billion.
- The cofounders of Coinbase each took a hit — Brian Armstrong’s net worth plunged $11.6 billion from $13.7 billion to $2.1 billion, and Fred Ehrsam’s fell from $4.5 billion to $2.1 billion, down $2.4 billion.
- Galaxy Digital founder Mike Novogratz’s net worth fell from 8.5 billion to 2.1 billion.
- The Winklevoss twins are fairing the best, with their net worths falling just $800 million each to $3 billion each.
Keeping up with the crypto crash. Yesterday, Tyler Winklevoss tweeted “Cool as a cucumber” in response to Bitcoin’s 15% drop. His brother Cameron wrote, “Haven’t been on here in a minute, what’d I miss?”
A laser eyes comeback? Michael Saylor, the CEO of MicroStrategy, a company with an unrealized loss of around $1 billion and potentially eyeing a margin call over its crypto bet, published a new profile picture of himself with laser eyes and separately tweeted, “In #Bitcoin We Trust.”
CEO Confidence is Down, But it's Not The End of the World
The Business Roundtable surveyed 177 leaders of America’s biggest companies to find out how they were feeling about the current state of the market and economy (namely in relation to hiring and investment).
Here’s what the survey found:
- 50% plan to increase employment levels in the next 6 months (down from 68% last quarter).
- 47% plan to increase capital investment plans within that time frame (down from 60% last quarter).
- 72% expect sales to increase in the next 6 months (down 10% from last quarter).
Not Terrible, Not Great: “The softening of quarterly CEO sentiment reflects uncertainty driven by the unprecedented times we face as a nation and global community,” General Motors chief executive Mary Barra, who chairs the Business Roundtable, said in a statement.
But it doesn’t look like all executives are on board with Jamie Dimon’s “economic hurricane” viewpoint… CEOs look to be bracing for a slowdown for sure, but half are still willing to increase capital investment and employment over the next 6 months.
One Way to Save on Sky-High Gas Prices
Well, do I have good news for you! Today, to help offset some of the pain at the pumps, the IRS announced it was increasing the the standard milage deduction rate by 6.8%! Meaning you will now save an additional $4 on every 100 eligible business miles, stop the savings madness!
- The rate will increase from $0.58.5 to $0.62.5.
- The upgraded rate will take into effect on July 1st, helping self-employed individuals and small businesses catch a tiny, tiny, itsy-bitsy break from the pain, which has no end in sight.
- This will only apply to trips taken in the second half of 2022.
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Coinbase is Cutting 18% of its Workforce...
Cryptos saw over $1 billion in liquidations over the past 24 hours as bitcoin and ethereum crashed in dramatic fashion.
- (remember: liquidations occur when an exchange forcefully closes a trader’s leveraged trade due to partial or total loss of initial margin)
Amid the broader market rout, crypto companies are realizing that they may have been trying to grow a little too fast… Coinbase just announced that it would be laying off 18% of its workforce, or 1,100 employees. At the end of the current quarter, COIN will have 5,000 total employees.
- Over the past 5 days, COIN stock is down a whopping 25% to just $51.58.
Other crypto companies are feeling the growing pains as well… Crypto.com crypto exchange and lending platform BlockFi plan to cut a total of over 400 jobs.
- Crypto.com is cutting nearly 5% of its workforce, and BlockFi CEO Zac Prince said “roughly 20%” of its workforce would be let go.
Zooming Out: Gemini and the Winklevoss twins cut 10% of their workforce last week as crypto companies seem to be preparing for a real ‘crypto winter.’ Back in November, the total crypto market cap was $3 trillion. Today it’s under $1 trillion…
This is How Long Bear Markets Last
With the S&P entering bear market territory yesterday, and the Nasdaq being in a bear market since March, how long should one expect this pain to last? While no two bear markets are the same, history often repeats itself, and the past could foreshadow what’s to come.
The Basics: Since 1928, there have been 26 bear markets. The shortest bear market was the 2020 covid crash, which lasted all of 33 days, while the longest bear market was in the early 70s lasting 630 days.
The average: According to Hartford Funds & Seeking Alpha, the average bear market is about 268 – 289 days, or 9 months. In that time, stocks lose roughly 36% of their value on average.
A Rough Estimate: Taking this into consideration, this would mean one could expect the bear market to end in March of 2023, while the S&P still has roughly 16% to shed.
Historically, the Nasdaq gets hit particularly hard, with a drop of 75% during the dot-com bubble and 60% in the early 70s. The index was the first to enter bear market territory back in March and is now down roughly 33%.
Fun Facts: Over the last 92 years of market history, bear markets only comprised of 20.6 years, meaning stocks are on the rise 78% of the time. Just because there is a bear market doesn’t mean there is a recession, as there have been 26 bear markets since 1929, but only 15 recessions.
Nio – (NIO): +16.57%: Nio stock surged today amid strength in Chinese ADRs and the announcement of a product launch event tomorrow.
FedEx (FDX): +14.41% – FedEx raised its quarterly decided by 53% to $1.15 per share. The company also added two directors to its board just two weeks into new CEO Raj Subramaniam’s reign.
Oracle (ORCL): +10.41% – Oracle beat analysts’ expectations on the top and bottom lines. The company said it was seeing a “major increase in demand” for cloud infrastructure.
Zillow (Z): -6.42% – Zillow stock hit a new 52-week low today as the real estate market continues to be put under pressure with a deteriorating environment.
Carnival Corp (CCL): -3.94% – Carnival stock hit a new 52-week low today amid multiple downgrades due to increasing oil prices, a pullback in summer travel, and inflationary pressures.
Sunrun (RUN): -3.32% – Shares of Sunrun are under pressure after being double-downgraded by Morgan Stanley, cutting its price target from $89 to $70.
Netflix (NFLX) – Benchmark downgrades Netflix from hold to buy being “skeptical” of a sustained recovery. “We have made mild estimate revisions off continued U.S. dollar strength, including vs. the yen and European currencies, that is likely not fully reflected in prior 2Q22 guidance or analyst consensus. We are skeptical on any sustained Netflix stock recovery even as bulls are (or were) talking up its 14.1x forward P/E off 2023 consensus estimates.”
Robinhood (HOOD) – JPMorgan cut its price target on Robinhood from $11 a share to $7 over weaker trading volume outlook. “We maintain our Underweight rating as the market continues continue to deteriorate for Robinhood as regulatory risks rise.”
CoinBase (COIN) – JPMorgan downgraded Coinbase from overweight to neutral as crypto prices slide. “While we continue to be believers in the cryptocurrency markets and blockchain technology, the extreme decline in the price of cryptocurrency markets in 2Q22 combined with Coinbase’s ramp in investment would appear to not only make it challenging for it to generate a profit in the near future but also to meet its annual loss cap of $500mn of annual EBITDA.”
Quote of the day: “If you haven’t worked for it, if you haven’t sacrificed for it, then you don’t deserve it, and you will not get it.” – Unknown
Fun Facts: A 2009 study by chemist Yuegang Zuo of the University of Massachusetts Dartmouth found that 85 percent to 95 percent of paper money in circulation contains traces of cocaine.