What to know today

  • About that dot plot…
  • “Selling an AI pipe dream”
  • The Reddit IPO is red-hot.
markets

What the Fed Chair Said

It still looks like three rate cuts this year.

In the eye of Fed Chair Jerome Powell, not much has really changed since December.

That’s a beautiful thing as far as investors, traders, and speculators are concerned.

“The details are quite dovish,” said Sonu Varghese of Carson Group, “because they’re leaving rate cuts on the table even while projecting slightly higher inflation and more economic growth.”

As Powell put it, though, recent data "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road to 2 percent.”

As Eddy Elfenbein noted on X, you can spot almost exactly when the FOMC statement dropped yesterday on the one-minute chart of the SPDR S&P Regional Banking ETF $KRE:

https://img.mailinblue.com/4658540/images/content_library/original/65fb62cb40c2a494ec926cde.png

one-minute chart of SPDR S&P regional banking ETF $KRE after FOMC statement march 20 2024

Powell also said the Fed would begin to slow the pace of its balance-sheet runoff to provide some stability to money markets.

There's still a general consensus around three rate cuts in 2024. The Fed did revise upward its forecast for core Personal Consumption Expenditure Index inflation to 2.6 percent from 2.4 percent.

But it also revised upward its GDP growth forecast from 1.4 percent to 2.1 percent.

Here’s the bottom line, as articulated by Jerome Powell, who is a lawyer and not an academic economist: "We don't really know if this is a bump on the road or something more. We'll have to find out.

"Here are some bumps. Are they more than bumps?"

The Bank of England – once the seat of global power – will make its own policy announcement today.

More important for investors, traders, and speculators will be initial jobless claims for the week ended March 15, a combination of early manufacturing and service sector surveys for this month and leading economic indicators and existing home sales data for February.

Lululemon Athletica $LULU, Nike $NKE, and FedEx $FDX will provide insight on consumers and the broader economy.

My broad guess is that their numbers will support the narrative around a relatively healthy economy, softening a little but not too much.

deep dive

"We Are Short $EQIX"

And that makes sense if you read the report.

This is just the beginning – post No. 3 in a thread of 45 on X – of Hindenburg Research’s takedown of Equinix $EQIX:

Even if you ignore our findings & take the financials of $EQIX at face value, the company trades at elevated levels; an ~86% premium to its peers on a price to forward AFFO basis and a ~59% premium on a price to forward FFO basis.

The notorious short seller’s investigation included a review of company documents and interviews with 37 former EQIX employees, industry experts, and competitors.

Its report concluded that the data center REIT manipulates accounting for its key profitability metric, adjusted funds from operations.

Hindenburg said EQIX overstated its AFFO by at least 22 percent last year alone.

The stock closed down 2.33 percent on Wednesday after falling as much as 5.64 percent from Tuesday’s closing price.

equinox EQIX stock clsing pprce on tuesday march 19th

“During our investigation,” reads No. 8 in the X thread, “former employees and executives provided an array of examples of obvious maintenance CapEx being classified as growth CapEx in order to boost reported AFFO metrics.”

It gets granular at No. 11: “Batteries represent one of the largest data center replacement costs. A former operations director explained how Equinix would classify routine battery replacements as growth CapEx by characterizing it as ‘replacing a battery system.’”

And at No. 12: “Equinix’s accounting even went as far as classifying light bulb replacements as growth CapEx, per former employees. ‘Say you changed out fluorescents to LED light bulbs, that’s a capital improvement. You’re not replacing light bulbs, you’re enhancing.’”

Post No. 45: “We are short $EQIX.”

deep dive |
March 21, 2024

"We Are Short $EQIX"

Communication services

$RDDT Is a Thing

IPO activity seems to be picking up.

On Sunday, Reuters reported that Reddit’s initial public offering was “between four and five times oversubscribed,” citing “people familiar with the matter."

Early Wednesday, word on the street was Reddit would indeed fetch the top end of or even above the $31-to-$34 per share insiders sought.

Just after the market closed, it leaked that Reddit would get $34, would raise $748 million, and would be valued at about $6.5 billion. 

Reddit was valued at $10 billion in its last private fundraising round in 2021. The company, which was founded in June 2005, has lost money every year it’s been in operation.

Both its strength and its weakness is its hard core of redditors, the subreddits where they gather, and the communities they form.

It’s pretty cool that management allocated IPO shares to that hard core, even if some of it has been skeptical about the move.

a picture of someone tapping the reddit app icon on their phone

As of March 20, we’ve seen 35 IPOs on the US stock market so far this year. That’s up from 30 at the same time last year.

Astera Labs $ALAB popped more than 60 percent in its debut on Wednesday. And CG Oncology Inc. $CGON is up more than 107 percent from its January 25 offering at $19.

$RDDT will start trading on the New York Stock Exchange today.

The cashtag had nearly 2,500 followers on StockTwits less than 10 minutes after that platform made it available Wednesday afternoon. There’s already a RDDT meme fan token.

And, of course, r/wallstreetbets is involved, posting on X Wednesday evening: “This Next Big Pump Will Be Legendary.”

This could be explosive.

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