Physical BTC Prices Rip

In this issue of the peel:

• Housing market data releases in the past week have been like drinking out of a fire hose. It’s too much for me to handle, so I’m forcing you all to take a sip with me. Anyone who doesn’t want to live in the basement forever should check it out.
• Trump Media proves that shares do have the ability to rise. The explosion in AI demand has chosen a new winner, while “winning” for Stitch Fix now means not going bankrupt. Finally, U.S. automakers crashed on weak demand, high inventories, and bad news out of China.
• Breaking News: It turns out there’s a physical version of BTC out there. I had no idea, but something called “gold” has been ripping all year. Find out why—and how long it can last—below.

Market Snapshot

Banana Bits

• VP and Democrat nominee Kamala Harris announces plans to offer $100bn in subsidies for U.S. manufacturing.
• The House of Representatives just bought the U.S. another few months before running out of cash.
• Zuckerberg uses this year’s Meta Connect event to release their latest VR hardware.
• OpenAI’s CTO, Mira Murati, resigns from the firm.
• LinkedIn is humbled and honored to be the place CEOs and executives love to induce cringe among all unfortunate enough to view their posts.
• Sherwood News breaks down the freaky finances of the WNBA.

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Macro Monkey Says

Slowly But Surely

Now that I’m more than a month into owning my home, I think I could probably burn it to the ground and pocket that fat insurance check with no questions asked.

Probably not anymore now that I just said that publicly, but regardless, it would take a check far above the value of my little house far from the prairie to get us out.

Not because the house is anything special, but just to stay out of the absolute hell that is the current housing market.?

According to the latest reports, improvements are coming but taking their sweet time. Let’s get into it.

The Numbers

Yesterday, the U.S. Census Bureau and the Department of Housing and Urban Development (HUD) released the latest data on new home sales in August.

As most things from government agencies do, the numbers were—at best—disappointing.?

Source

Annualized and seasonally adjusted, new single-family home sales slipped 4.6% from July to August yet rose 9.8% from August 2023. The increase on the annual side will keep wannabe homebuyers sane but speaks more to the weakness of last summer.

The median sale price of these homes clocked in at $420.6k with an average of $492.7k, both up slightly from the prior month. Meanwhile, months supply of new homes also slightly increased from 7.3 to 7.8 months of inventory at the current sales rate.

Days prior to this report, the National Association of Realtors reported commensurate data on sales of existing homes. Spoiler alert: it wasn’t any better.

Source

Nationwide, sales of existing single-family homes declined 2.5% monthly and 4.2% annually in August, despite my best efforts to pump those numbers up.

The median sale price of those homes increased 3.1% annually, the 14th month in a row of nonstop gains, something I’d kill to get my portfolio to do.

Lastly, the inventory of existing homes increased slightly to 4.2 months of supply at the current rate, a 0.7% improvement.

So, according to these reports, the U.S. housing market is experiencing:

• Continued declines in activity,
• Much-needed supply increases,
• Yet despite the apparent decline in demand and increase in supply, prices still kept moving higher.

We can see price appreciation outside of this report too. Going back to July, the latest S&P Case-Schiller data shows home prices setting a new all-time high, up 5% YoY. That’s a slight slowdown from the 5.5% in June, but a 14th consecutive record high isn’t exactly encouraging to wannabe buyers.

Source

According to more updated data from Redfin, home prices appear to have ticked down slightly in August from the prior month but still increased by 3.2% annually.

Finally, and very conveniently, one of the nation’s largest homebuilders, KB Homes, just reported their third-quarter earnings for the period ended August 31st.

While the headlining figures looked solid, flexing 10% revenue growth on an 8% increase in deliveries and a 3% rise in average sales price, the company’s outlook and margin pressures led to a selloff.

KB specializes in custom-built homes, meaning their finances will disproportionately reflect dynamics among wealthier home buyers. Even with this target market in mind, KB’s CEO made comments that mortgage rates almost entirely drive demand.

Another comment made reflects the challenges the firm is facing, with their CEO saying, “We are encouraged by this strengthening in demand for our affordably priced personalized homes.”

A+ for the effort of a positive spin, but if most demand is coming from “affordably priced” homes, it’s not hard to understand why homebuilding operating margins declined from 11.3% last year to 10.8% this year.

Source

With that context, Redfin’s further reporting that houses became more affordable in August despite allegedly rising prices starts to make sense.

According to the firm, August was the first month since 2020 in which affordability—measured by the income needed to reasonably afford a home assuming a 15% down payment—improved.?

The firm says this was entirely attributable to mortgage rates registering their first annual decline in 3 years.

The Takeaway?

Damn, that was a lot of data.

The most encouraging aspect of the above data is the increase in supply on both the new and existing sides of the market, along with KB’s plans to ramp up the production of affordable homes.

As always, this will take time to play out. Plus, national housing data barely matters at all when it comes to individual purchases, as the market is extremely locally driven.

Stay tuned… and good luck.

What's Ripe

Trump Media & Technology Group (DJT) 10.48%

• Trading purely on “f*ck around and find out” vibes, the latest f*ckery from Trump Media proved that shares do actually have the ability to rise.
• Hardly any news has ever emerged from this “company,” but after plummeting >80% from March to Monday, it doesn’t take much to cause a good day.
• The stock is up over 12% since Monday’s new lows, likely because no insiders have sold (yet, as far as we know) now that the lockup period is over. The Donald owns 114.75mn shares, worth $1.62bn as of the close.

Hewlett Packard Enterprise (HPE) 5.14%

• It makes sense that Nvidia's boomer version took a little longer to stand up and get on the AI hype ride. HP Enterprise shares are ripping on a fresh upgrade.
• The alley-oop HPE received was thrown by analysts at Barclays, postulating that the firm hasn’t yet been recognized by the growth potential in its server unit.
• Their thesis rests on expected accretion from the recent Juniper acquisition combined with growing server demand triggered by increased AI workloads.

What's Rotten

Stitch Fix (SFIX) 39.47%

• Kinda like how your little league coach would say, “Good cut!” even though you missed, Stitch Fix’s CEO said he’s “proud” of his company’s 18.3% YoY sales decline.
• And that made the market sick. Shares tanked on dogsh*t numbers for Q4 and FY’24, like a 27% decline in both adjusted EBITDA and net income.
• Total clients of 2.51mn decreased by 4.7% for the quarter and 19.6% annually, not giving much hope for improvement heading into fiscal 2025.

U.S. Automakers (RIVN, GM, F) 6.84%, 4.85%, 4.14%

• The U.S. just sent off another flurry of missiles in its economic war against China. Yet, somehow, U.S. automakers took the hit—largely thanks to Morgan Stanley.
• The Forgotten Jonas brother, Adam Jonas, an analyst at Morgan Stanley, spent his day downgrading shares of GM, Ford, and Rivian on inventory build-up.
• The view is that companies will have to cut prices to move inventory off the lot, hurting margins.
• At the same time, the U.S. just moved to ban virtually all imports of modern Chinese cars and car parts. Although the Chinese consumer is in a difficult position, pending retaliatory measures will hinder long-term demand.

Thought Banana

Physical BTC

Needless to say, wise apes, we all obviously know that BTC and other digital assets are the only forms of currency anyone should care about.

But did you apes know that, apparently, there’s a physical version of BTC? This is news to me, but apparently, this thing called “gold” has done well this year.

Let’s dive in.

What Happened?

Similar to the idea of an IRL podcast, like sitting in a room and talking to your fellow trailblazers without cameras or microphones, the concept of physical BTC surprised me.

However, apparently, this sh*t has been around for a while.

Source

And it just set a new all-time high.

Gold prices have been ripping this year, up 29.45% YTD, outperforming the Nasdaq and the S&P 500 but underperforming its digital counterpart, BTC.

This week, it seems that every tick in the value of one ounce of this shiny yellow rockets a new record high. According to my data, the updated all-time high now sits at $2,661, set yesterday.

As a result, investors from your deranged uncle building his second apocalypse bunker to central banks around the world and even the average Costco customer have all been pouring in.

According to the World Gold Council, total holdings among central banks reached a new high this week, reaching 3,182 metric tons. Central banks now account for roughly 25% of all physical gold purchases, double their pre-2022 levels.

Source

Individuals have been helping push prices higher too, with Wells Fargo estimating that Costco was selling up to $200mn per month in gold bars.

The Takeaway?

It’s not just demand that‘s pushing prices higher either.

By cutting rates, the Fed is weakening the value of the dollar. So, when gold prices are quoted in dollars as the dollar falls, gold will appreciate even more.

Finally, investors tend to view gold as a safe haven amid rising geopolitical tensions. I don’t know if you guys are aware, but multiple wars around the world and shenanigans over in Taiwan aren’t great for the whole avoiding WWIII thing.

Maybe your uncle and his bunkers aren’t as deranged as we think.

The Big Question: How far can gold prices run up? Are you buying??

Banana Brain Teaser

Previous

The toll T, in dollars, for a truck using a certain bridge is given by the formula T = 1.50 + 0.50(x - 2), where x is the number of axles on the truck. What is the toll for an 18-wheel truck that has 2 wheels on its front axle and 4 wheels on each of its other axles?

Answer: $3.00

Today

A garden center sells a certain grass seed in 5-pound bags at $13.85 per bag, 10-pound bags at $20.43 per bag, and 25-pound bags at $32.25 per bag. If a customer is to buy at least 65 pounds of the grass seed, but no more than 80 pounds, what is the least possible cost of the grass seed that the customer will buy?

Send your guesses to [email protected]

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Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have – or don’t have – in their portfolio.

Nassim Taleb

How Would You Rate Today's Peel?

?? All the bananas

?? Meh

?? Rotten AF

Happy Investing,

David, Vyom, Ankit & Patrick