As we approach the end of 2022, below is an updated look at the drawdown in market cap that we’ve seen in the US equity space since major indices peaked on the first trading day of the year.  Using the Russell 3,000 as a proxy, the US stock market has seen an $11.7 trillion drawdown from the peak on 1/3/22.  The max drawdown was $13.6 trillion at the low on 9/30, so we’ve seen market cap increase by just under $2 trillion since then.  In dollar terms, this drawdown has been more extreme than anything investors have ever experienced.  That’s pretty deflationary if you ask us!

Of the $11.7 trillion drawdown in US equity market cap, just over $5 trillion of the drop has come from six companies!  Below is a look at the six current and former “trillion dollar market cap” club members that have now collectively lost about $5.07 trillion in market cap from their peaks.  As shown, Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta (META), and Tesla (TSLA) have all lost at least $750 billion in market cap from their highs.  And Amazon (AMZN) is the first to lose more than $1 trillion in market cap!  Just a few years ago, no company had a market cap of more than a trillion dollars, and now we have a company that has lost more than a trillion dollars in market cap.

For all six of these companies, their current drawdowns are easily their biggest on record.  Apple (AAPL) has lost $880 billion, Alphabet (GOOGL) is down $846 billion, Meta (META) and Tesla (TSLA) are both down more than $760 billion, and Microsoft (MSFT) is down $784 billion even though it was down close to a trillion at its lows in November.  Click here to learn more about Bespoke’s premium stock market research service.

The economic calendar is particularly light today with the only release in the US being homebuilder sentiment from the NAHB.  In spite of mortgage rates sitting 0.8 percentage points below their early November peak, homebuilder sentiment has continued to fall reaching a new low of 31 in December versus expectations for a modest increase to 34.  December’s reading is now only one point above the spring 2020 low of 30.

The two-point drop in December was entirely a result of the decline in present sales.  That reading fell from 39 to 36, matching the April 2020 low. Meanwhile, future sales saw a large increase rising from 31 to 35.  That is only back up to the same level as October and a historically muted reading, but the month-over-month increase was the largest since September 2020.  The index for Traffic went unchanged at 20 which is the lowest level since April 2020.

The regional readings on homebuilder sentiment echo the weakness from the headline levels, albeit there has been slightly more variability.  For starters, the Northeast has seen sentiment hold up the best as current readings are a bit more elevated off of COVID lows. The Midwest is also handily above the spring 2020 lows, but there was massive deterioration with a 5-point drop this month.  Meanwhile, the West dropped another 3 points to match the new post-COVID low and the weakest reading since January 2012. Finally, the South was the only region to see improvement in December with the index rising 2 points, but even with that, it is right near the lowest levels since the pandemic.

Homebuilder stocks, proxied by the iShare US Home Construction ETF (ITB), traded lower in the wake of today’s release after months of outperformance. As shown below, the ETF is trading well above its moving averages compared to the S&P 500 which has moved back below both its 50 and 200-DMAs in the past few days. As such, the relative strength line for homebuilders has continued to move higher. Click here to learn more about Bespoke’s premium stock market research service.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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Crypto

Exclusive: How a secret software change allowed FTX to use client money by Angus Berwick, John Shiffman, and Koh Gui Qing (Reuters)

A small change in FTX code allowed Alameda Research to borrow indefinitely, regardless of the value of collateral posted by the hedge fund to the exchange. [Link]

All the young dudes carry the bags by Louis Ashworth (FTAV)

Using data from bank customers, JPMorgan made some basic demographic estimates about who bought crypto when. The results are about what you would think. [Link; paywall]

C-Suite

Bob Iger vs. Bob Chapek: Inside the Disney Coup by Joe Flint, Robbie Whelan, Erich Schwartzel, Emily Glazer and Jessica Toonkel (WSJ)

An inside account of the downfall of Disney’s CEO to Disney’s previous CEO, fueled by investor angst over streaming losses and perceptions that Chapek was driving the company into the ground. [Link]

Musk Shakes Up Twitter’s Legal Team as He Looks to Cut More Costs by Ryan Mac, Mike Isaac, and Kate Conger (NYT)

As turmoil mounts at Twitter, the company has stopped paying rent, refused to pay charter flight bills, and mulled the possibility of not paying severance promised to employees fired since the takeover. [Link; soft paywall]

Housing

Why This Housing Downturn Isn’t Like the Last One by Ben Eisen and Nicole Friedman (WSJ)

Few low quality mortgage loans, big equity cushions, and lots of people waiting for a dip in prices make this period of falling prices look very different from the subprime mortgage collapse. [Link; paywall]

Why Are Market Rents Decelerating? It’s Probably Not Because Of The Fed by Alex Williams (Employ America)

Rents started to slow before the rapid interest rate hikes of 2022 started, making them unlikely to be a consequence of Federal Reserve policy to slow the economy. [Link]

EU Politics

EU strikes deal with Hungary, reducing funding freeze to get Ukraine aid approved by Paola Tamma (Politico)

Hungary will see less of its EU funding frozen in exchange for lifting a veto on Ukrainian aid, part of a complicated process of negotiations that is par for the course when it comes to European Union legislating. [Link]

Emergencies

Gun Violence Is Falling In 2022 by Jeff Asher (Jeff-alytics)

National statistics showed a widespread uptick in shootings during the pandemic, but that spike appears to be reversing in 2022 as society returns to something more like normal. [Link]

Calling 911 in Charlotte? Your ambulance might show up without lights and sirens. by Genna Contino (The Charlotte Observer)

Ambulances are starting to run without sirens and lights in an effort to make emergency calls safer in the vast majority of calls to 9-1-1 that do not involve life-threatening emergencies. [Link; soft paywall]

Electric Vehicles

Ford increases F-150 Lightning price, now starts at $56,000 by Fred Lambert (Electrek)

The lowest-priced tier of Ford’s electric pickup now goes for 40% more than its original base price thanks to huge demand and soaring materials costs; higher-end versions are significantly more expensive. [Link]

Trading Education

School of Quant: At $29,000, a Public NYC College Outclasses Princeton by Heather Perlberg (Bloomberg)

An NYC resident will pay less than $30k for a Masters that will let them earn nearly $170k before bonus fresh out of graduation. [Link; soft paywall]

Accounting

The $80tn “hidden debt” and what it really means by Daniel Davies (FT)

When trying to assess financial vulnerability, labels matter. That’s especially true when it’s not entirely clear how those labels should be applied. [Link; paywall]

Grammar

Solving grammar’s greatest puzzle by Tom Almeroth-Williams (University of Cambridge)

A complicated system of 4,000 rules has finally been unlocked in full, with the 2,500 year old algorithm of Sanskrit word assembly’s last rule determined by a Cambridge PhD student. [Link]

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