Reddit Showdown
In this issue of the Peel:
Market Snapshot
Happy Wednesday, apes.
We’d like to say it was a happy Tuesday, but after asking Mr. Market, Reddit moderators, and those people stuck in that submarine, you’d be hard-pressed to make that argument. Anyway, we’re still here, so let’s see how this 24hr period goes.
For equity markets, they’re not exactly coming into the day on a high note. After a few days of bottle poppin’ and no-stock-droppin’, the tides have turned at the close of last and start of this week. What many are now calling the “worry rally” may have run its course, according to traders everywhere reducing their equity exposure given recent upswings.
Bull markets are often said to “climb a wall of worry” right up until people start calling for a bubble, so take it as you will.
Treasuries, on the other hand, saw a more moderate session. The 2- and the 10-year yields both fell, but barely. And in case you forgot, yes, in fact, they are still wildly inverted. Anyway.
Let’s get into it.
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Banana Bits
Macro Monkey Says
Oprah’s Housing Starts
Many of you have no doubt heard about the U.S. government’s?free lighthouse giveaway , but just like that push along with moves like Oprah giving away cars to anyone with a pulse, the U.S. housing market may be headed in a similar direction.
Well, the median sales price of an existing home in the U.S. is still approximately $388k away from $0, but still getting closer!
Nevertheless, nothing drives down prices like?supply. And in May, the U.S. housing supply, as measured by groundbreaking on new single-family homes, hit a 33-year high. According to the Census Bureau:
"Basically, they’re calling cap on the Census Bureau ..."
?And those were just some of the highlights of the report. In fact, the rebound in U.S. housing starts was so stark that some, if not most, economists simply don’t believe what their eyes are seeing.
One Wall Street bank economist called the data “so far off trend that it calls substantially into question.” Another was even nerdier with his critique and quipped that “housing starts data tend to be volatile, and this figure may be revised down in coming months.”
Basically, they’re calling cap on the Census Bureau, if that wasn’t obvious enough. The idea is that numbers were so good and?so?against?recent trends that minor, regional situations have to be considered.
For example, another nerd—excuse me—*economist reminded us that a brutal tornado season seen in the midwest has spurred a need for new construction, a phenomenon that can’t (and for the apes in the midwest?shouldn’t) be relied upon for future support.
Nevertheless, the sheer magnitude of the change, the Fed’s decision to pause rate hikes, and the sheer acceleration of sentiment among homebuilders tell us there’s something new in the water.
?"... breathed life into a sector that has seen the average interest rate on their products nearly double in just over a year."
Even though credit conditions continue to tighten given an adjustment of expectations to higher rates for longer, along with the lagged effect of those existing rate hikes barely having worked their way through the economy, JPow’s Pause appears to have breathed life into a sector that has seen the average interest rate on their products nearly double in just over a year.
And, as always, we’ll save the best news for last.
While we don’t have the hard data to confirm yet, the two key ingredients in knocking down the price of any asset are 1) higher discount rates and 2) increased supply. We already know the mortgage market has seen its fair share of #1 above in the past year, but it looks like #2 might be getting in the mix as well.
For all you millennials desperately trying to not be homeless once your lease ends, things may have just gotten a little easier to drop that down payment. Best of luck, apes.
What's Ripe
Builders FirstSource (BLDR)?↑ 4.41% ↑
Tesla (TSLA)?↑ 5.34% ↑
What's Rotten
Lemonade (LMND)?↓ 7.97% ↓
Alibaba (BABA)?↓ 4.53% ↓
Data Peel
Thought Banana
Have You Read It?
You know, the big changes going on at Reddit? So, have you read it?
Well, if not, fear not—we got you (as always).
Most of you likely got your introduction to Reddit when r/WallStreetBets became the world’s leading hedge fund and Bloomberg left actual airtime to explain meme lingo on the subreddit (sorry, that’s the best video I could find after a ~4min search).
But you get the point. Then, Reddit was all over the financial news and largely praised by retail traders for being a platform for the people. Now, the app is in the news for the exact opposite reason.
On June 8, 2023, Reddit co-founder and CEO Steve Huffman (aka “spez”) announced plans for the platform to begin charging certain third-party app developers for access to Reddit’s APIs (the tech bullsh*ts used to scrape data from a given site).
Huffman and Reddit claim the move is to create a “more sustainable business model” in addition to their ad sales platform as the app prepares for a long-awaited IPO (ideally) later this year. Now, Reddit has pissed off the group their business arguably relies on the most: the moderators (or “mods”).
?"Huffman and Reddit claim the move is to create a “more sustainable business model” in addition to their ad sales platform ..."
The mods tend to be those power users that often rely on 3rd-party sites to browse the app. The role of the moderators is basically to manage their own specific subreddits or particular pages on the website focused on a specific topic, such as r/WallStreetBets, r/History, and our personal favorite, r/Aww.
Mods, who are unpaid and do it simply for the love of the game, enforce the community guidelines specific to their subreddit, basically doing all of Reddit’s work for them, including filtering out spam and other mundane tasks.
"Now, over 80% of Reddit’s top 5,000 subreddits by daily active users have gone full-blackout or partial blackout."
?Now, over 80% of Reddit’s top 5,000 subreddits by daily active users have gone full-blackout or partial blackout. Meaning some are no longer allowing new users of posts in their forums (full blackout) while others have updated and memeified their rules, such as r/Aww limiting posts to content that involves John Oliver (aka John “Awwliver”).
It’s a battle for the ages and a standoff on par with that guy and that tank on that day when absolutely nothing happened in T. Square in ‘89.
Reddit isn’t backing down, but given the site’s reliance on users to create the content that then subsequently drives more usage, Huffman and his posse are caught between a keyboard and a hard place.
The big question:?Who is going to win the epic Reddit Standoff of 2023? How will this move and the end result impact other businesses reliant on user-generated content?
Banana Brain Teaser
Yesterday?—?Unscramble the words below, then take the letters from each word as instructed to form another word that is the answer to this teaser:
Unscramble the letters you collected. What do you get?
Answer:
Unscramble the above letters to get CHIMERA.
Today?—?The following sentences have two blanks that can be filled with two words that are anagrams of each other. Please find those words.
Shoot us your guesses at?[email protected] ?with the subject line?“Banana Brain Teaser”?or simply?click here to reply!
Wise Investor Says
“Investing without research is like playing stud poker and never looking at the cards.”?— Peter Lynch
How would you rate today’s Peel?
Happy Investing,
Patrick & The Daily Peel Team