Re-meme-ber WSB

Remember the meme stock craze? Those were fun times. Now the payback: Robinhood says it is slashing 23% of jobs, blaming “deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash.”. This has further reduced customer trading activity and assets under custody. Robinhood cut headcount by 9% in April but this did not go far enough.

Tough times for the retailer broker, which released quarterly results a day early. Revenues fell to $318m from $565m in the same quarter a year before. It also lost almost 2m customers over the quarter – or about one in eight of its base. Monthly active users decreased 1.9m sequentially to 14m. Net deposits however were up 22% to $5.2bn, so it’s not all doom and gloom. In fact, normalisation is probably a good thing – less hot money chasing stupid trades is surely a good thing?

Speaking of which, Michael Saylor is stepping down as CEO of MicroStrategy to spend more time with his Bitcoin. No, really. Saylor says the move to executive chairman role will let him “focus more on our Bitcoin acquisition strategy and related Bitcoin advocacy initiatives”. Undeterred, the company booked a $917.8 million impairment charge on its Bitcoin holdings, leading to a net quarterly loss of $1.06bn compared with a loss of $299.3 million in the same quarter of last year.

But…remember meme stocks? Remember the clever short squeeze tactic for GameStop? More than half of MicroStrategy shares are on loan for shorts, according to S3 Partners. Shorts are selling into the recent pop for the stock which mirrors a small rebound for crypto markets and the broader tech space since bottoming around the middle of June. With that kind of heavy short exposure it’s a prime target for the ‘degenerates’ to take aim -a short squeeze on MSTR could be brutal. We will look to see what kind of options activity might be in play.

But for now, their sights are set on AMTD Digital (HKD): the stock soared 126% on Tuesday to set a new high of $1,679. It’s by far the most mentioned stock on WallStreetBets, the Reddit thread for stock trading that became famous during the meme frenzy. HKD only IPO’d a couple of weeks ago and is up 30,000% since. It’s owned by AMTD Idea Group, a Chinese financial company traded under the ticker symbol AMTD. No one knows what is going on…meme central.

MSTR is also among the most talked about companies. I have nothing to say except be careful out there if trying to trade this kind of stock.

Earnings coming thick and fast…

Uber – better guidance – In Q3 Uber expects gross bookings between $29 billion and $30 billion and adjusted EBITDA of $440 million to $470 million. Free cash flow positive for the first time despite a large net loss (?), revenues up but losses widen…Shares flew +19% almost.

Airbnb – $2bn share buyback scheme announced as it pointed to benefitting from continued higher booking prices (+40% above pre-pandemic levels). However earnings were a little light and the number of nights booked was lower than expected. Guidance for the next quarter was similarly soft on bookings. Shares fell about 8% after-hours.

Just Eat Takeaway – books a €3bn loss from its $7.3bn acquisition of GrubHub…more importantly for us was the absolute whopper of an inflation number: 7% decline in transactions and 7% increase in revenues.

Don’t bet on a pivot: Fed officials are dripping on the wires – pushing back against what they see as the market betting on an early pivot to greater accommodation…as I have said here consistently there is no way the Fed pivots until inflation is well down and that is not going to happen soon.

San Francisco Fed president Mary Daly, normally quite dovish, said the US central bank was “nowhere near” done with raising rates. Chicago Fed president Charles Evans said a 50bps hike in September would be appropriate but left the door open for 75bps…the comments sent the Treasury market into a sell-off and riled the bond bulls who’ve been reading way too much into remarks made by Jay Powell last week. US 10yr yields jumped to 2.75% from around 2.55% earlier in the session.

An NY Fed survey shows inflation is pushing up household debt, credit card +13%, the highest in 20 years. Delinquencies remain low but lowest income households are higher. Not necessarily alarming levels here but certainly something to watch as consumers wear the inflation – when do they stop wearing it? Or rather, when are corporates forced to stop passing on higher costs?

Labour market finally cracking? JOLTS job openings declined to 10.7m, from 11.25m, and well below the 11m expected – the drop is 3rd biggest on record, with only Covid-era declines worse. Remember the Fed wants this so it’s not ‘bad news is good news’ necessarily.

OPEC+: Will they heed Biden’s call for more oil? Trick question. If they pump more it’s nothing to do with the toothless Biden administration. Yesterday the Joint Technical Committee (JTC) of OPEC+ said it expects the supply surplus in 2022 to be 0.8m bpd on average, a –200k downward revision. The JTC also predicts that the oil supply surplus will stand at 0.5m bpd in 2023. This will only help OPEC members decide not to increase production in September. This coupled with worries about a global downturn – evidenced this week by the soft manufacturing PMIs. Crude prices are not doing a huge amount ahead of the meeting with WTI towards the bottom of the bear flag/descending wedge around $93.

Elsewhere, human hand grenade and house speaker Nancy Pelosi landed in Taiwan to stir up the hornet’s nest a little more. Not sure what she is trying to achieve right now. Michael Burry has a view.

So a Republican goes to Taiwan at this time, of all times. A traitor, possibly a terrorist. Irresponsible and careless. Complete disregard for the safety of the Taiwanese and indeed the entire world. Just to distract from criminal proceedings against his wife. No words.

— Cassandra B.C. (@michaeljburry) August 2, 2022

European stock markets are mixed in early trade after a down day for Wall Street following those Fed speaker comments.

Big level for the dollar: the confluence of support held and DXY bounced hard yesterday. Next upside test is around 107.25 or we could see another attempted breach of the trend.