Before the Open (Oct 11-15)

Good morning. Happy Friday.

The Asian/Pacific finished the week with solid gains. Japan, Hong Kong, South Korea, India, Taiwan and Australia led. Europe, Africa and the Middle East are currently mostly up. The UK, France, Germany, Finland, Spain, the Netherlands, Italy, Portugal, Israel, Sweden and Saudi Arabia are up; Poland, Turkey and Hungary are down. Futures in the States point towards a another gap up open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is flat. Oil and copper are up. Gold and silver are down. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

Bitcoin business

The SEC could decide as early as Monday to allow American ETFs to hold Bitcoin (BTC-USD) futures, making it easier for small investors to gain exposure to the cryptocurrency. The agency is facing a Monday deadline to decide whether to approve or deny a filing by ProShares to launch a ProShares Bitcoin Futures ETF. Several other ETF firms have also filed to launch similar funds and will be watching closely to see whether regulators green light ProShares’ plan.

Snapshot: Many investors have been anticipating the ability to trade crypto assets through exchange traded funds, but the SEC has yet to allow ETFs to directly hold things like Bitcoin. In the past, the agency has cited investor hazards like liquidity, manipulation and extreme price swings. The list of issuers that are currently anticipating the approval include names such as Valkyrie, Galaxy Digital, VanEck, ETF Series Solutions, ARK Invest, Invesco and ProShares.

“Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the SEC wrote in a tweet late Thursday. “Check out our Investor Bulletin to learn more.”

Movement: All the hype is adding to bullish crypto sentiment as Bitcoin traded up 3% overnight to over $59,000. At that level, the token has doubled in value this year and is near April’s record high of $64,895. While the proposed Bitcoin-futures ETFs won’t invest directly in crypto, issuers aim to trade futures contracts based on Bitcoin. (68 comments)

Indicted for MAX fraud

Mark Forkner, chief technical pilot of the Boeing (BA) 737 MAX program, has been indicted by a federal grand jury in Texas for allegedly deceiving safety regulators which had been evaluating the plane before its approval. As a result of a series of missteps, two MAX crashes occurred in late 2018 in Indonesia and early 2019 in Ethiopia that claimed 346 lives. While the pilots tried to regain control of the plane, both went into fatal nosedives minutes after taking off.

Backdrop: The “Maneuvering Characteristics Augmentation System” was a flight stabilizing program developed by Boeing that became notorious for its role in the fatal accidents. MCAS mitigated the MAX’s tendency to pitch up during certain maneuvers – because of the aerodynamic effects of its larger CFM LEAP-1B engines – though Boeing requested the FAA remove its description from aircraft manuals (leaving pilots unaware of the new system when the jet entered service in 2017). Meanwhile, the decision allowed the MAX to be certified as another 737 version, which appealed to airlines due to the reduced cost of pilot training.

737 MAX jets were grounded worldwide for more than a year and a half following the deepest corporate crisis in Boeing’s history. The FAA only approved the plane for flying again late last year after company made changes to MCAS. In January, Boeing also agreed to pay more than $2.5B in fines and compensation after reaching a deferred prosecution agreement with DOJ over the MAX crashes, which cost the company a total of more than $20B.

Justice comes knocking? Forkner is expected to make an initial court appearance today in Fort Worth, Texas. He faces a maximum penalty of 20 years in prison for each of the four counts of wire fraud, and 10 years in prison for each of the two counts of fraud involving aircraft parts in interstate commerce. That could mean decades behind bars if convicted. (45 comments)

LinkedIn reevaluates China

Microsoft (MSFT) is shutting down the Chinese version of LinkedIn, effectively turning out the lights on the last major American social media provider operating in the country. Beijing had once touted the model, which involves a partnership between LinkedIn and Chinese nationals who actually own the platform, as a way for American tech giants to access its market. However, the framework didn’t allow overseas headquarters to have too much control over the Chinese operations, making it an unpopular choice in Silicon Valley.

Behind the decision: “While we’ve found success in helping Chinese members find jobs and economic opportunity, we have not found that same level of success in the more social aspects of sharing and staying informed,” LinkedIn said in a blog post. “We’re also facing a significantly more challenging operating environment and greater compliance requirements in China.”

Back in March, LinkedIn temporarily paused new member sign ups in China to ensure it complied with local law. China’s internet regulator also told company officials to better regulate its content and gave them 30 days to do so. Since then, LinkedIn has notified a number of China-focused activists, academics and journalists that their profiles were being blocked for containing prohibited content.

Going forward: “Our new strategy for China is to put our focus on helping China-based professionals find jobs in China and Chinese companies find quality candidates. Later this year, we will launch InJobs, a new, standalone jobs application for China. InJobs will not include a social feed or the ability to share posts or articles. We will also continue to work with Chinese businesses to help them create economic opportunity.” (24 comments)

Bank earnings

It’s been a solid first week of Q3 earnings so far as the largest U.S. banks posted another robust round of quarterly results. A rebounding economy allowed lenders to release more cash they had set aside for pandemic losses, while equity financing and trading boosted bottom lines. Don’t forget about the deal bonanza that continued to ring the register for the banks’ Wall Street operations, with a hefty quarter for mergers-and-acquisitions fees.

JPMorgan (NYSE:JPM) – Q3 net interest income of $13.2B, driven by balance sheet growth and higher rates, while Asset & Wealth management net revenue came in at $4.3B (+5% Q/Q and +21% Y/Y).

Bank of America (BAC) – Regained the organic customer growth momentum it experienced before the pandemic, as well as reporting a record quarter for M&A transactions.

Wells Fargo (WFC) – Consumer Banking & Lending net income of $2.5B climbed 15% from Q2 and 181% from Q3 2020, while total outstanding loans were down from a year ago, but up from Q2.

Citibank (C) – Spending on Citi credit cards rose 20% Y/Y to a record and continued climbing from the summer, though “strong consumer balance sheets impacted lending.”

Morgan Stanley (MS) – Topped expectations as investment bankers scored their best quarter ever, with the division posting a 67% increase in revenue to $2.85B.

Commentary: “The banks painted a strong and healthy picture of the U.S. consumer,” said Edward Moya, senior market analyst at Oanda. “Wall Street can’t turn negative on the economy after seeing reserve releases, moderating trading revenue, mixed loan growth, and a consumer willing to take on debt.”

Today’s Economic Calendar
8:30 Retail Sales
8:30 Empire State Mfg Survey
8:30 Import/Export Prices
10:00 Business Inventories
10:00 Consumer Sentiment
11:45 Fed’s Bullard: “Optimal Monetary Policy for the Masses”
12:20 Fed’s Williams: “Monetary Policy and Macroeconomic Stars”
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening…

FDA panel recommends Moderna (NASDAQ:MRNA) booster for at-risk adults.

UnitedHealth (NYSE:UNH) drives managed care peers higher after solid Q3 beat.

Klobuchar & Grassley… Big Tech faces another bipartisan antitrust bill.

Army delays Microsoft’s (NASDAQ:MSFT) $22B AR goggles project.

McDonald’s (MCD) plans to test Beyond Meat (BYND) burger in U.S.

Coinbase (NASDAQ:COIN) suggests new crypto framework to replace SEC.

These stocks have the highest borrow fees for short sellers.

Johnson & Johnson (NYSE:JNJ) puts talc liabilities into bankruptcy.

Virgin Galactic (NYSE:SPCE) falls 13% as Unity 23 test flight is rescheduled.

TSMC (NYSE:TSM) confirms plans for semiconductor fab plant in Japan.

—————

Good morning. Happy Thursday.

The Asian/Pacific markets leaned up. Japan, Indonesia, India and the Philippines led while Malaysia was weak. Europe, Africa and the Middle East are currently posting solid gains. The UK, France, Germany, Russia, South Africa, Finland, Norway, Hungary, Spain, the Netherlands and Italy are leading. Futures in the States point towards a big gap up open for the cash market.

————— VIDEO: State of the Market —————

The dollar is down. Oil and copper are up. Gold and silver up. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Santa’s early start

The Port of Los Angeles, one of the busiest ports in the country, will begin operating 24 hours a day and 7 days a week to ease cargo bottlenecks that have led to shortages and higher consumer costs. While the neighboring Port of Long Beach, Calif., also started doing a 24/7 schedule last month, major ports in Europe and Asia have operated around the clock for years. The latest change was announced by the White House as it seeks to alleviate supply chain issues ahead of the holidays, though the increase in capacity will require cooperation from major U.S. companies like Walmart (WMT), FedEx (FDX) and UPS (UPS).

What happened? The root of the problem goes back to the beginning of the pandemic in spring 2020, when consumer demand slumped and shipping lines canceled sailings between Asia and North America. When demand came back in the summer, there were thousands of empty containers stuck in the U.S., and by the fall of 2020, the West Coast freight networks were bursting at the seams to handle the surge in imports. A wave of COVID-19 cases in Southern California over the winter exacerbated the issue by causing a labor crunch, with docks, warehouses and truckers that handled the cargo unable to find enough workers.

Companies like Amazon (NASDAQ:AMZN), Target (NYSE:TGT), Pottery Barn (NYSE:WSM), Ulta Beauty (NASDAQ:ULTA) and Gap (NYSE:GPS) are even offering discounts – or starting holiday advertising – six weeks before Black Friday. The goal here is to stretch out the year-end shopping season, as supply chain challenges could leave them with empty shelves closer to the holidays. The firms also have a load of goods that they brought in early, but with limited warehouse space available, they need consumers to buy the stuff to top off their cash balances.

Stats: According to a RetailMeNot survey of almost 1,100 consumers, 37% of shoppers began their holiday shopping between August and September (if not earlier). Another 22% said they would start shopping in October, while 24% planned to begin in November ahead of Thanksgiving. Americans are expected to spend about $1.3T this holiday season, per the latest forecast from Deloitte, marking a 7% to 9% increase over last year.

Tapering timeline

Fed officials signaled last month that they should start reducing emergency pandemic support for the economy in mid-November or mid-December, according to the latest FOMC minutes. The program could then end by mid-2022, though several participants said they’d prefer quicker pace of reducing purchases. Keep in mind that the central bank is currently purchasing at least $80B per month of Treasury securities and at least $40B per month of MBS.

What it means: “A number” of FOMC officials said they believed that the test of “substantial further progress” toward maximum employment had been met. That’s important because most Fed members also believe that the price stability requirement had already been fulfilled. Central bankers are looking for both of the standards to be met before the Fed reduces its rate of asset purchases.

“We still think November, but one month isn’t going to matter to markets at this point,” noted Lawrence Gillum, fixed income strategist for LPL Financial. “There was some interesting discussion on lift-off though and it looks like the Committee remains divided. The future make-up of the Committee only adds uncertainty to when lift-off will actually take place.”

Wild card: While the inflation outlook was raised in the near term after much discussion, Fed staff continue to predict the recent acceleration is “transitory.” CPI data on Wednesday showed headline prices rising by 5.4% Y/Y in September, marking the fifth consecutive month of annual increases of 5% or more. However, stocks continued to climb during the session as traders appeared to spend much of the last few weeks positioning themselves for a flaming number. (43 comments)

Mix and match

A new study has found that individuals who received a COVID-19 booster shot that was from a different manufacturer than the original series had significantly increased neutralizing antibody titers. The findings, conducted by the National Institutes of Health, examined individuals who had initially received either the Pfizer-BioNTech (PFE, BNTX), Moderna (MRNA), or Johnson & Johnson (JNJ) vaccine and then received a booster with one of the other jabs.

By the numbers: For participants who received the same vaccine for the initial course and booster, neutralizing antibody titers increased 4.2-20-fold. Individuals who received a different booster saw titers increase 6.2-76-fold. The results, which were published on medRxiv, have yet to be peer reviewed.

For the record, the CDC has recommended that individuals receive a booster shot from the same manufacturer and the primary series. Pfizer’s booster has also been the only one authorized by the FDA.

Elsewhere: The World Health Organization is establishing a new panel of scientists to lead an investigation into the origins of COVID-19. Earlier this year, President Biden ordered a similar systematic review, though that probe ended after China “continued to reject calls for transparency and withhold information.” Many scientists believe the virus jumped from bats to humans, though a lab leak theory has gained ground after initially being dismissed by many as a conspiracy. (67 comments)

Sci-fi becomes reality

William Shatner, known to many as Captain and later Admiral Kirk, launched into space yesterday aboard a Blue Origin (BORGN) New Shepard rocket, which reached an altitude of 350K feet before parachuting back to Earth. At the age of 90, the Star Trek actor is the oldest person to ever fly into space. Looking ahead, SpaceX (SPACE) is also prepping to launch three private passengers, who each paid $55M to fly to the International Space Station in 2022.

Bigger picture: Having Shatner on board brought star power to Bezos space tourism enterprise, given its appeal to baby boomers, industry watchers and space enthusiasts. Analysts also say the attention is incrementally positive in bringing attention to the space sector and space-related stocks like Virgin Galactic (SPCE), Redwire (RDW), Iridium Communications (IRDM), Rocket Lab (RKLB), Astra Space (ASTR) and Spire Global (SPIR).

“You have done something,” Shatner told Jeff Bezos, founder of Amazon (AMZN) and Blue Origin, after emerging from the capsule. “What you have given me is the most profound experience. I hope I never recover from this.”

Outlook: Congress has restricted the FAA from regulating the safety of commercial space flights since 2004 to help the sector develop without heavy compliance costs. The policy has been extended several times over the years and now runs until 2023. Crews today fly under a regime known as “informed consent,” meaning potential astronauts take on similar risks to skydivers and bungee jumpers. Companies are fighting for share in a space market that will triple in size to more than $1T in annual sales by 2040, according to Morgan Stanley, whose forecast assumes rapid developments in space tourism, moon landings and satellite broadband Internet. (47 comments)

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Producer Price Index
8:35 Fed’s Bullard Speech
9:00 Fed’s Bostic Speech
10:00 Fed’s Bostic Speech
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
1:00 PM Fed’s Williams Speech
1:00 PM Fed’s Barkin: “Talking About Outcomes”
4:30 PM Fed Balance Sheet
6:00 PM Fed’s Harker: Economic Outlook

Companies reporting earnings today »

What else is happening…

Analysts react: JPMorgan (NYSE:JPM) Q3 revenue beat is mostly expense driven.

Russia’s Gazprom (OTCPK:OGZPY) is pumping gas from storage to Europe.

U.S. announces plans for seven offshore wind farms by 2025.

Uranium ETFs, stocks rally in bet on nuclear power’s resurgence.

Purdue Pharma to resume work on its $10B settlement – AP.

As CRISPR (CRSP) continues to falter, other CAR-T names aren’t impacted.

Revival? Cisco (NASDAQ:CSCO) could follow Microsoft (NASDAQ:MSFT) path.

Taiwan Semiconductor (NYSE:TSM) beats consensus, guides above estimates.

Bill Gross sees 10-year Treasury yield rising to 2% over the next year.

—————

Good morning. Happy Wednesday.

The Asian/Pacific leaned up with some big movers. China, South Korea, India, Malaysia, Indonesia and Singapore did very well; Japan, Hong Kong, Taiwan and the Philippines were very weak. Europe, Africa and the Middle East currently lean up. Denmark, France, Turkey, Germany, Portugal, Israel, Sweden and Saudi Arabia are up; Poland, Russia and South Africa are down. Futures in the States point towards a mixed open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Ready, set, earnings!

Keep an eye on loan growth at JPMorgan (JPM) as the U.S. bank kicks off the Q3 earnings season today. Supply chain problems could help boost the multiple as companies need more revolvers to increase their working capital. Credit quality will also be in focus, as well as how an increasing amount of “buy now, pay later” options is affecting JPMorgan’s credit card portfolio, and whether dealmaking boosted advisory fees for its investment bank.

Key metrics: Analysts expect the bank to report a net interest margin of 1.64%, down from 1.82% a year ago, though it’s hoping that number has seen the bottom given the rise in Treasury yields. At the beginning of the year, JPMorgan has also guided for $55B in net interest income for 2021, but on a Q2 earnings call, management cut that guidance to $52.5B.

Fast forward to September… Marianne Lake, co-CEO of JPMorgan’s consumer and community banking division, said at a conference that prepayment rates – while still elevated – are no longer growing like they were and that management expects the NII guidance of $52.5B to hold up. Lake also provided some guidance, saying that in the division’s markets business, the bank expects revenue to decline ~10% from Q2 and Y/Y, which is not a huge surprise because, at some point, activity had to normalize.

Market movement: While trading on earnings announcements is a tricky play, consensus EPS and revenue estimates are $3.00 (+2.7% Y/Y) and $29.63B (+1.6% Y/Y), respectively. Over the last four quarters, JPMorgan has sold off immediately following earnings despite some strong numbers. For those looking for a good entry point, keep in mind that the stock is up 12% over the past quarter and usually finds its footing in the week or two after earnings.

A lot to watch

The major averages fell for the third straight session on Tuesday, and there is no shortage of “headwinds out there, especially as the threat of slower growth looms large,” said Chris Larkin, managing director of trading at E*TRADE Financial. Starting today, traders will be “looking for any and all indications of guidance” as the Q3 earnings season kicks off. In terms of actual numbers, earnings growth is expected to climb about 30% Y/Y this quarter following a 96.3% expansion in Q2, according to Refinitiv.

Not the only concern: The consumer inflation report for September will be released today at 8:30 a.m. ET. The figure has been coming in at over 5% since June (don’t worry it’s transitory) and the latest number is anticipated to flare up once again. Economists expect to see a rise of 0.3%, or a 5.3% annualized rate, but even excluding volatile food and energy, core CPI is still forecast to rise 0.3%, or 4% annualized.

Meanwhile, the IMF is sounding the alarm on price pressures, saying the global economy is entering a phase of inflationary risk. It even called on central banks to be “very, very vigilant” and take early action on tightening policy should inflation prove persistent. The fund also trimmed its 2021 global economic growth forecast by 0.1 percentage point to 5.9% vs. its July forecast, citing the effect of supply disruptions in advanced economies and worsening pandemic dynamics in developing countries.

Other data: Coming off the weak nonfarm-payrolls numbers on Friday, the Labor Department’s latest JOLTS report yesterday showed that 4.3M workers quit their positions in August. The record pace (highest since December 2000) continues a trend seen throughout the year, with hotel, restaurant and retail employees quitting in droves. The FOMC will also release the minutes from its September meeting at 2 p.m. ET, giving broader clues about the timeline surrounding the central bank’s tapering plans. (4 comments)

Coinbase NFT

Diversifying beyond cryptocurrency, Coinbase Global (COIN) is moving into the non-fungible token space. It’s aiming to create a peer-to-peer marketplace that’s intended to make “minting, purchasing, showcasing, and discovering NFTs easier than ever,” according to the company’s blog. “Just as Coinbase helped millions of people access Bitcoin for the first time in an easy and trusted way – we want to do the same for the NFTs,” noted Sanchan Saxena, VP of Product.

What’s an NFT again? It’s a type of cryptocurrency – usually run on Ethereum blockchain – that’s used to represent a unique asset and is valued as collectors’ items. They are usually art, but can also be a meme, GIFs, songs, videos or items in video games. NFTs work like other speculative assets, where buyers hope that the value of it goes up, so it can be sold for a profit.

Coinbase’s marketplace will help artists maintain creative control through decentralized contracts and metadata transparency. While the firm didn’t say when Coinbase NFT will start, users can join a waitlist for early access to the platform, which will initially support Ethereum-based ERC-721 and ERC-155 standards and “multichain support planned soon after.” The offering could also offer a new revenue stream after Coinbase shelved crypto lending plans last month due to regulatory pressure.

Stats: According to DappRadar, NFT sales exceeded $10B in the third quarter of 2021, marking a 704% increase from the previous quarter. (6 comments)

‘Bumpy ride’

Many questions have surfaced in recent weeks over the pace of the energy transition as a power crunch takes shape across the globe. While many arguments are covering specific policy details or green efforts, all appear to be in agreement that the world is not spending enough on future energy needs. Some of those risks were detailed in the new World Energy Outlook from the IEA, which advises governments on energy policy.

Quote: “There is a looming risk of more turbulence for global energy markets,” said IEA Executive Director Fatih Birol. “Spending on oil and natural gas has been depressed by price collapses in 2014-15 and again in 2020. As a result, it is geared towards a world of stagnant or even falling demand. If the supply side moves away from oil or gas before the world’s consumers do, then the world could face periods of market tightness and volatility. Alternatively, if companies misread the speed of change and over-invest, then these assets risk under-performing or becoming stranded.”

“The energy transition is not being handled properly,” OPEC Secretary-General Mohammad Barkindo declared last week at the Energy Intelligence Forum. “And hence we are beginning to see the fallout.” The fundamental problem has been the “hysteria” that has prompted a move away from fossil fuels, shrinking much-needed investment, even in developing countries. That being said, “we call on the leading polluters, the leading emitters” to pause and work on sustainable solutions when they gather for the November COP26 climate change summit in Glasgow, Scotland.

Outlook: Oil prices are up more than 60% in 2021, while U.S. natural gas prices have more than doubled this year. “At the same time, spending on clean energy transitions is far below what would be required to meet future needs in a sustainable way,” the IEA added in the report, advocating for annual spending on clean energy to triple to $4T by the end of the decade in order to achieve net-zero emissions by 2050. Emissions can drop by 40% using technologies that pay for themselves, according to the IEA, though the majority of the investment (nearly 70%) would have to come from private developers and Wall Street. This could also create “huge economic opportunities” for clean energy technologies such as wind turbines, solar panels, fuel cells, electrolyzers and a new era of batteries.

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed’s Business Inflation Expectations
1:00 PM Results of $24B, 30-Year Note Auction
2:00PM Treasury Statement
2:00 PM FOMC Minutes
3:30 PM Fed’s Brainard Speech
8:00 PM Fed’s Bowman: Monetary Policy and Economic Outlook

Companies reporting earnings today »

What else is happening…

Tobacco-flavored Vuse (NYSE:BTI) e-cigarette authorized by the FDA.

Netflix’s (NASDAQ:NFLX) Squid Game success leads Baird to boost price target.

LG to reimburse General Motors (NYSE:GM) for majority of Bolt EV recall costs.

Hasbro (NASDAQ:HAS) announces CEO death days after he took a medical leave.

EU may expand probe into Nvidia’s (NASDAQ:NVDA) $54B ARM (ARMHF) bid.

Moderna (NASDAQ:MRNA) draws muted response from FDA for COVID booster shot.

Boeing (NYSE:BA) to require COVID vaccinations for 125K U.S. employees.

Report: Apple (NASDAQ:AAPL) set to cut iPhone 13 production due to chip shortages.

Jack’s back! Alibaba (NYSE:BABA) chairman makes appearance in Hong Kong.

S&P Global (NYSE:SPGI), IHS Markit (NYSE:INFO) $44B deal to get EU antitrust approval?

—————

Good morning. Happy Tuesday.

The Asian/Pacific markets leaned down. Malaysia and Thailand did well, but China, Hong Kong, South Korea and Taiwan were weak. Europe, Africa and the Middle East are currently mixed and little changed. Denmark and Israel are up; the UK, France and Russia are down. Futures in the States point towards a positive open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Bird? Plane? Drone Delivery

Orders of sushi, beer and ice cream flew across the Tel Aviv coast on Monday as part of a government-led initiative to create a national drone network. The project intends to ease road congestion, improve air quality and be an economically viable option for the 9.2M consumers around the country. Flights have also been used for medical purposes, like delivering donated blood and plasma, though officials must ensure the skies could be cleared in case of turbulent weather, a war or an emergency.

Phase 3: The National Drone Initiative has a total of eight planned phases, with the latest stage conducting around 300 flights per day above open areas. The UAVs can currently carry a maximum load of approximately 2.5 kg (5.5 pounds) and have a 5-kilometer (3-mile) radius for missions, though the Israel Innovation Authority said that by next year the perimeter will be expanded to 100-kilometers (60 miles). Many of the 16 participating companies have links to Israel’s military, which is a global leader in drone technology.

It’s garnering “a lot of interest from other countries and regulators, as we are now far ahead,” said Sagi Dagan, Vice-President of Growth at the Israel Innovation Authority. “Israel has a competitive advantage in terms of the technologies, the drones and the air traffic management, all being co-designed through regulation and the market, and setting the new rules through work in the field. This is very unique.”

Over in the U.S.: Last December, the FAA introduced new drone rules to help open the skies for widespread commercial deliveries, allowing operators to fly small drones over people and at night under certain conditions. The regulations give the agency and law enforcement a handle on what’s actually flying around, requiring remote identification technology to pinpoint UAVs from the ground. Drones represent the fastest-growing segment in the entire transportation sector, with over 865K drone registrations and 247K FAA-certificated remote pilots.

Some history: UPS (NYSE:UPS) won the government’s first full approval to operate a drone delivery airline back in October 2019, while Alphabet’s (GOOG, GOOGL) Wing became the first company to get certification for a single-pilot drone operation. In August 2020, the FAA granted Amazon (NASDAQ:AMZN) permission for delivery trials, while Walmart (NYSE:WMT) jumped into the drone delivery race that September. Earlier this year, Google also sought approval to use drones to research firefighting in California and CVS (CVS) partnered with UPS to deliver prescriptions in Florida. (15 comments)

Changing of the guard

Henry Kravis and George Roberts are stepping down as co-CEOs of KKR, the private equity firm they founded with Jerome Kohlberg Jr. nearly half a century ago. The cousins are pioneers of the buyout industry, taking it from a niche market in the 1970s into one of the most pieces of Wall Street. The format allows a financial buyer to purchase a company using a small amount of equity and a significant amount of borrowings backed by the target’s cash flow. KKR -2.5% premarket.

What it means: Kravis and Roberts are known for engineering a dramatic cultural change in Corporate America, giving hefty incentives for management to increase earnings and stock prices, while prompting companies to run more efficiently. They also capitalized on the Michael Milken-financed junk bond, allowing them to raise debt to buy sizable corporations that were overburdened with huge layers of management. Today, many companies already operate like the KKR model, prompting the private equity giant to expand into new markets and change the way it does buyouts.

Joe Bae and Scott Nuttall, who started at KKR in their 20s in 1996, will replace Kravis and Roberts as co-CEOs. While the firm is now less focused on the big home runs, the two will need to convince investors that the firm can continue growing its asset base and industries, which extend from infrastructure to real estate. Alongside the management moves, KKR is simplifying its corporate governance by eliminating preferred shares in contrast to rivals like Blackstone (NYSE:BX).

Outlook: The $25B purchase of Nabisco in 1989 held the record for the largest-ever LBO until 2007, when KKR topped its own record by teaming up with rival TPG to buy Texas utility TXU Corp. for $31.8B. At the time, the Nabisco acquisition was so hot that it became the subject of the bestselling book Barbarians at the Gate. While those two deals weren’t so successful (Nabisco notched a negligible return and TXU filed for bankruptcy in 2014), Kravis and Roberts have transformed KKR into a global investment house with $429B in assets and a portfolio of companies that employ over 800K people.

Is Bitcoin worthless?

Jamie Dimon thinks so, but that didn’t stop Bitcoin (BTC-USD) from topping $57,000 overnight. While he staunchly remains a crypto-skeptic, his bank is willing to offer its clients access to the digital tokens. Back in 2017, the JPMorgan CEO notoriously called Bitcoin a fraud (when it was trading at $5,000), and while he later regretted that characterization, Dimon has repeatedly said he has no interest in the cryptocurrency.

Quote: “I personally think that Bitcoin is worthless,” he declared during an Institute of International Finance event. “I don’t want to be a spokesperson – I don’t care. It makes no difference to me. I don’t think you should smoke cigarettes either. Our clients are adults. They disagree. That’s what makes markets. So, if they want to have access to buy yourself Bitcoin, we can’t custody it but we can give them legitimate, as clean as possible, access.”

Does Bitcoin’s bull run and Dimon’s statements have an inverse relationship? Here’s a tweet from Ryan Selkis, founder @messaricrypto, rehashing Dimon’s outlook of BTC:

2014: “terrible store of value”
2015: “will not survive” “will be stopped”
2016: “going nowhere”
2017: “a fraud”
2018: “don’t really give a shit”
2019: [JPMCoin launch]
2020: “not my cup of tea”
2021: “I have no interest in it” “fool’s gold” “worthless”

Go deeper: JPMorgan’s wealth management division started offering clients access to Bitcoin funds in August and has been dabbling in the crypto world over the past few years. In February 2019, JPMorgan said it would roll out a digital currency called JPM Coin to make instantaneous payments using blockchain technology. In October 2020, the bank also formed a new unit for blockchain projects called Onyx. (92 comments)

Return to the office

In a letter addressed to Amazon’s (AMZN) “Amazonians”, CEO Andy Jassy revealed that individual team directors will have the final say regarding how many days a week their staff will need to be in the office when the company reopens its U.S. corporate locations. Amazon, which has more than 1M workers across the country, is currently anticipating employees to come back to the Seattle headquarters, and other locations, starting Jan. 3, 2022.

Excerpt: “We expect that there will be teams that continue working mostly remotely, others that will work some combination of remotely and in the office, and still others that will decide customers are best served having the team work mostly in the office,” he wrote. “At a company of our size, there is no one-size-fits-all approach for how every team works best. We’re intentionally not prescribing how many days or which days – this is for Directors to determine with their senior leaders and teams.”

Before the change in strategy, Amazon detailed plans that would’ve required all corporate workers to come in to their offices at least three days a week beginning in January (it previously targeted September). However, Jassy said that having most of its staff working remotely due to the COVID-19 pandemic led Amazon to re-evaluate its philosophy about workers needing to be in the office at all times.

Zoom in: Other tech giants have also embraced a remote environment. Twitter (TWTR) last year said its workers can work from home “forever” if they want, while Microsoft (MSFT) has postponed its return to the office “indefinitely.” Facebook (FB) and Google (GOOG, GOOGL) will also allow some employees to continue to work from home if their jobs can be done remotely. (33 comments)

Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
11:15 Fed’s Clarida: U.S. Economic Outlook and Monetary Policy
11:30 Results of $58B, 3-Year Note Auction
1:00 PM Results of $38B, 10-Year Note Auction

Companies reporting earnings today »

What else is happening…

Vans (VFC) slip-on shoe sales grew 7,800% following Squid Game release.

Tightened schedule? Southwest (NYSE:LUV) flight delays drag into fourth day.

Hasbro (NASDAQ:HAS) goes into holiday season with CEO on medical leave.

Utilities tumble with 10-year Treasury yield at highest since June.

Tesla (NASDAQ:TSLA) in Texas could help SpaceX (SPACE) plant a flag on Mars.

Lucid Group (NASDAQ:LCID) buys back $21M worth of shares from insiders.

Rising demand… Merck (NYSE:MRK) plans to double COVID pill supply in 2022.

Salesforce (NYSE:CRM) gets notice in wake of possible CEO transition report

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Good morning. Happy Monday. Hope you had a good weekend.

The Asian/Pacific were mixed. Japan, Hong Kong, Malaysia and the Philippines did well; New Zealand and Taiwan were weak. Europe, Africa and the Middle East are currently mixed Poland, Turkey, Russia, South Africa, Austria and the Czech Republic are leading; Denmark, Germany, Greece, Finland, Italy and Sweden are weak. Futures in the States point towards a down open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is up. Oil and copper are up. Gold and silver are down. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

Rising costs

Investors will be keeping a close eye on rising costs as the Q3 earnings season kicks off this week. Price pressures could pose a problem for corporate profits in the current quarter and beyond, with the S&P 500 already down 3.2% from its September record. Supply chain bottlenecks, labor problems and outsized demand are all leading to shortages, while a jump in raw material costs is pressuring companies’ bottom lines.

Red flags: Last month, FedEx (FDX) dropped 9.1% after reporting soft earnings and cutting its financial outlook due to a challenging labor market. Nike (NKE) also slid 6.3% on lower-than-expected revenue from lost production in Vietnam, while Bed Bath & Beyond (BBBY) plunged 22% after citing inflation for a sharp decline in quarterly sales. Ballooning costs could spread to the banking sector, with JPMorgan (JPM) kicking off Q3 earnings on Wednesday. Lenders may be squeezed by rising pay and hefty spending on technology to compete with fintech challengers.

Analysts expect that earnings from S&P 500 companies grew 29.6% in the third quarter from a year earlier, when businesses were working to recover from the effects of the pandemic. But that’s down from 96.3% growth in Q2, according to IBES data from Refinitiv, which also sees net profit margins declining from the previous quarter.

Commentary: Costs have emerged as “a great wild card for the quarter and for the outlook” of the industry, said John McDonald, senior analyst for large-cap banks at Autonomous Research. “If they’re having to pay more and they’re unable to pass it on to end purchasers or consumers and it’s hitting profitability, that’s something that will be concerning,” added Holly MacDonald, chief investment officer at Bessemer Trust. Companies have already attempted several techniques to clamp down on costs, such as cutting back on customer services and conveniences, or shrinkflation, where product sizes are slimmed down but prices are kept the same.

Growth outlook

Stock futures are edging lower once again in volatile October trade as investors continue to digest the weaker-than-expected jobs market published on Friday: The Labor Department reported that the economy added just 194K jobs in September, compared to estimates for 500K, giving way to debate about future tapering. Some feel that could push the Fed’s timeline into next year, though others feel it had to be an extremely bad report to derail plans for removing stimulus.

Not helping the situation: Economists at Goldman Sachs have cut their outlook for U.S. growth this year and next, pointing to a delayed recovery in consumer spending. Along with a forecast that semiconductor supply won’t improve until the second half of next year and that inventory restocking will be postponed, “argues for a less front-loaded recovery from here than we had expected,” they added. Growth of 5.6% on an annual basis is now expected in 2021, versus a previous estimate of 5.7%, as well as 4% in 2022, down from prior forecasts of 4.4% (the downgrades were mostly offset by upgrades to their projections for the following two years).

“The pace of growth is decelerating, but it’s still at a meaningful level,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. Given the labor shortages and inflationary pressures, “we’ll be looking to see to what extent demand is there, and what does it mean for the important holiday spending period.”

Elsewhere: More data on the health of the economy will also be published this week, with the U.S. consumer price index for September being released on Wednesday and retail sales data on Friday. Meanwhile, WTI crude oil futures (CL1:COM) continue to extend their uptrend, up 2.6% to $81.42/bbl, amid a global energy crunch and tightening supply outlook. “Energy markets are solidifying at the upper end of recent trading ranges as the fear factor and right tail risks become more embedded heading into the winter months that could exacerbate the energy crisis in Europe and Asia,” wrote analysts at TD Securities.

Flight disruption

#SouthwestAirlines was a trending topic on Twitter over the weekend, but not in a good way. Tens of thousands of travelers were stranded in airports across the country as the carrier canceled over 1,000 flights on Sunday, or 28% of its schedule, with over 500 flights delayed. That’s on top of the 808 cancellations on Saturday, or nearly one in four flights.

In comparison: American Airlines (AAL) canceled 63 flights on Sunday (2% of its operation), Delta (DAL) canceled three flights (less than 1% of its book) and United (UAL) canceled six flights (less than 1% of its schedule), according to FlightAware. The developments also came during a busy travel holiday weekend. Some businesses, government agencies and banks will be closed today for Columbus Day or Indigenous Peoples’ Day, though the stock market will be open.

Southwest (LUV) blamed the disruption on air traffic control issues and weather, though as mentioned above, other major airlines did not experience delays or cancel flights at an elevated rate. There is loose speculation that some Southwest employees have called in sick in a form of protest over the mandatory vaccination rules in place, but those rumors have not been confirmed. The Southwest Airlines Pilots Association (SWAPA) already asked a court on Friday to block the airline from requiring vaccination, in anticipation of an upcoming federal mandate.

So what happened? Staffing has been a persistent problem in the airline industry since the sharp recovery in demand (many employees also took early retirement or voluntary separation packages at the start of the pandemic). The issue gets compounded when there are delays, cancellations, or workers call in sick, which has the ability to create a domino effect along a carrier’s schedule (especially when there aren’t enough staff on standby). Shares of Southwest are still up 15.7% YTD, and have outperformed Delta and United due to its higher mix of leisure and domestic customers helping it through the pandemic recovery.

007

It’s the last James Bond film of the Daniel Craig era and the actor’s last turn as 007. No Time to Die took in an estimated $56M during its opening weekend in the U.S. and Canada, marking the fourth-best debut of any James Bond film in the franchise’s nearly 60-year history. While Universal (NASDAQ:CMCSA) released the film internationally two weeks ago (topping $300M globally), MGM (OTC:MGMB) is handling the domestic release (Amazon previously announced plans to buy the latter studio for $8.5B).

Snapshot: While it isn’t Marvel numbers, Bond has always had an older audience which is less likely to rush out for opening weekend. In fact, around 25% of ticket buyers who went out to see No Time to Die this weekend said it was their first time returning to theaters in more than 18 months, according to MGM. A streaming or hybrid release was also never considered for the movie, unlike many other films released during the pandemic.

“It’s been a long time coming to get this movie on the big screen,” noted Erik Lomis, the head of distribution for United Artists Releasing, noting the year-and-a-half delay due to COVID-19. “Michael Wilson and Barbara Broccoli are huge believers in the theatrical experience. That was hugely important to us, to them and to the theater owners. And when you see this kind of result, it’s very gratifying.”

Go deeper: Besides being the longest Bond film ever at two hours and 43 minutes, No Time to Die was also expensive, with a reported production price tag of around $250M (marketing costs added another $100M). Craig revitalized the franchise since landing the role in 2006’s Casino Royale, and while he briefly lost his 007 designation to a younger agent (Lashana Lynch) during the latest film, many are wondering about the Bond of the future as Craig steps off the stage.

Today’s Economic Calendar
6:00 PM Fed’s Evans Speech

Companies reporting earnings today »

What else is happening…

Banks’ Q3 earnings likely to reflect reserve releases, weak loan activity.

Which sectors do best when rates are rising? – Sector Watch.

Shale producers seen ramping up as natural gas prices surge.

Emerson (NYSE:EMR), AspenTech (NASDAQ:AZPN) in talks about merger.

REIT boom continues as M&A transaction volume hits record $108B in 2021.

Lyft (NASDAQ:LYFT), Plug Power (NASDAQ:PLUG) make top 20 short squeeze list.

A look at the biopharmas developing new treatments for liver diseases.

Sports betting stocks on watch as NFL action delivers on expectations.

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