DHUnplugged #606: Broken Gentleman’s Agreement

TwitDrama is still going strong.

Oil prices are back up and this is cause for some concern.

Massive rebound in small-cap tech, still needing of stabilization before investors willing to trust this market condition.

Bernanke in an unusual twist....

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Warm Up

- Coming up for Air - Epic Arizona adventure - cut short by death in family

- Everyone I know seems to have a "cold"

- It goes on and on and on and on - Twitter/Musk

- Everyone talking about dead-cat or bear-market bounce (The watch out)

- Bernanke just may have violated the Gentleman's Agreement

Market Update

- Calming a BIT - Buyers Step in (BMB or Real?)

- Oil prices on the way up again

- Food prices big problem

- China relaxing lockdowns

- Crypto Crash and StableCoin cause unease

OMG OMG - Seriously - some of these stocks down UP 25%-50% in past few days. (COIN, U, RBLX, UPST)

We Have A Problem

Crude Oil Price Chart

 Earnings - Tale of the Tape

- Walmart misses by $0.18, beats on revs; guides Q2 EPS in-line, revs above consensus; Q1 comps +3%; lowers FY23 EPS guidance; raises FY23 sales guidance; CFO seeing consumer "behavior changes" due to inflation

-- WMT issues lowered guidance for FY23, sees EPS of -1% yr/yr to $6.40 from mid single digit growth prior guidance, excluding non-recurring items

- Stock down 11% - Worst day since 1987

- Home Depot beats by $0.40, beats on revs; guides FY23 EPS above consensus, revs above consensus

- - Reports Q1 (Apr) earnings of $4.09 per share, $0.40 better than the S&P Capital IQ Consensus of $3.69; revenues rose 3.8% year/year to $38.91 bln vs the $36.78 bln S&P Capital IQ Consensus.

--- Comparable sales for the first quarter of fiscal 2022 increased 2.2 percent, and comparable sales in the U.S. increased 1.7 percent.

-- Co issues upside guidance for FY23, sees EPS of up mid-single digits vs. +3.7% yr/yr or $16.12 S&P Capital IQ Consensus;

-- Sees FY23 revs of ~+3.0% to ~$155.7 bln vs. $154.02 bln S&P Capital IQ Consensus.

Food prices - Bad energy plan

- Brazilian sugar cane mills are cancelling some sugar export contracts and diverting production to ethanol to cash in on high energy prices

- Production mix change and crop delay

- total cancellations recently estimated of 200k-400k raw sugar production

- production is shifting in favor of ethanol as high energy prices driven by pandemic recovery and war in Ukraine spur more fuel output

Bernanke

- On why Fed waited too long: “One of the reasons was that they wanted not to shock the market,” he said. “Jay Powell was on my board during the Taper Tantrum in 2013, which was a very unpleasant experience. He wanted to avoid that kind of thing by giving people as much warning as possible. And so that gradualism was one of several reasons why the Fed didn’t respond more quickly to the inflationary pressure in the middle of 2021.”

- Former Federal Reserve Chair Ben Bernanke said the central bank erred in waiting to address an inflation problem that has turned into the worst episode in U.S. financial history since the early 1980s.

- BUT WHY IS HE TALKING NOW??????

---- Bernanke’s new book is “21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19” and will be released officially Tuesday.

More Fed

- Powell speaking today (free lunch for him) - Financial conditions have tightened significantly

- Comments in line with expected (2) 50 bps hikes expected over next 2 meetings.

- Markets dumped a little on that comment, USD climbed,, BTC and Gold dropped

Baby Formula - Serious Shortage

- Shelves bare

- Baby formula aisles at U.S. supermarkets have been decimated since top U.S.