Good morning. Happy Friday.
The Asian/Pacific markets did well. Japan, Hong Kong, South Korea, India, Australia, Malaysia and the Philippines posted solid gains; New Zealand and Indonesia fell. Europe, Africa and the Middle East are split. Turkey, the UAE, South Africa, the Netherlands, Italy and Sweden are up; Russia, Hungary, Spain, Austria and the Czech Republic are down. Futures in the States point towards a positive open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is flat. Oil is down; copper is up. Gold and silver are down. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Brexit drama returns
The United Kingdom and European Union are back at the negotiating table today in an attempt to dodge a looming trade war. While Britain officially left the EU in January 2020, a number of hard-fought trade arrangements that have been inked since then have been criticized for disrupting trade. Specifically, the U.K. feels there are difficulties in implementing required checks on goods moving from Great Britain to Northern Ireland, which lies just across the Irish Sea to the west.
Backdrop: Last month, the European Commission proposed to adapt certain parts of the trade deal in an effort to make it easier for these checks to take place. However, EU officials have since complained that the government of U.K. Prime Minister Boris Johnson is not showing a willingness to negotiate and its proposals mark “a significant difference” from the original trade deal.
In fact, U.K. Brexit Minister David Frost feels that all checks on goods moving from Great Britain to Northern Ireland should come to an end. Businesses would instead be trusted to inform authorities if products will stay in Northern Ireland or continue to the Republic of Ireland, which is part of the EU. The European Commission does not want to leave the trust up to companies due to worries that products (that don’t meet European standards) could end up in the EU’s single market.
Tough talk: Frost has gone a step further, threatening to trigger Article 16 of the Northern Ireland protocol, which could lead to the suspension of part of Brexit trade deal on the basis that it’s causing “economic, societal, or environmental difficulties.” The EU is meanwhile preparing a package of retaliatory measures in case that scenario should play out. “Senior EU officials are extremely gloomy about the outlook and believe escalation in the form of a trade war, probably early in the new year, is now almost unavoidable,” according to analysts at consultancy group Eurasia.
Crisis in Europe
Tensions are also flaring in Eastern Europe, where a buildup of Russian forces is amassing near the Ukrainian border. The U.S. has sounded the alarm, warned EU allies that Moscow may be planning to invade Ukraine, though Russia said the military deployments are on its territory and denies any aggressive intentions. Back in 2014, Russian special forces were deployed to occupy Crimea during the Ukrainian Maidan revolution, though they ended up taking over government buildings and the republic was annexed by Russia following a disputed referendum.
Forex movement: The ruble weakened on the latest developments, slipping 0.5% against the dollar to a six-day low. The currency also came under pressure this week after data showed that U.S. inflation had accelerated to a level not seen in more than 30 years. Fears of higher interest rates are expected to have a negative impact on emerging market currencies.
The fresh warning over Ukraine comes on top of a bigger standoff between Poland and Belarus, which is a close Russian ally. Top EU officials say President Alexander Lukashenko is luring thousands of migrants and refugees to Minsk – with the promise of helping to get to western Europe – after sanctions were imposed on his regime following a contested election to a sixth term and a crackdown on internal dissent. The problem is being compounded by migration policy that has divided EU member states and has seen the European Commission so far resist calls to fund walls and barriers.
Freeze or lift sanctions: “We are heating Europe, and they are threatening to close the border,” Lukashenko declared, referring to the Yamal-Europe pipeline. “What if we cut off gas to them… We should not stop at anything to defend our sovereignty and independence.” Tight supplies before winter have already led to feats of shortages in Europe, sending natural gas contracts soaring. Gazprom (OTCPK:OGZPY) had just started filling up storage tanks in Europe as Vladimir Putin seeks to leverage his country as an oil and gas superpower and pressure European regulators into approving Nord Stream 2. (23 comments)
To profit or not?
AstraZeneca (NASDAQ:AZN) is moving away from the non-profit model it used during the pandemic by signing its first money-making deals for its COVID-19 vaccine. The announcement could help out with earnings as shares of the Anglo-Swedish drugmaker slid 4% in premarket trade following the release of its third quarter results. AstraZeneca’s vaccine contributed $0.01 to earnings per share in Q3, though the company lost $0.03 per share from its development since the start of the year.
Bigger picture: Despite being a lot cheaper and easier to transport, vaccine production delays and worries about blood clotting resulted in AstraZeneca losing market share in developed countries to rivals using new mRNA technology. The company generated $1B in COVID vaccine revenue during the third quarter, which is far less than amount seen by its rivals. Pfizer (PFE), which split profits with partner BioNTech (BNTX), notched $13B in sales from its vaccine, while Moderna (MRNA) reported revenue of $5B.
“AstraZeneca’s scientific leadership continues to provide strong revenue growth and exceptional pipeline delivery, with eight positive late-stage readouts across seven medicines since June, including our long-acting antibody combination showing promise in both prevention and treatment of COVID-19,” added CEO Pascal Soriot.
Note: AstraZeneca’s shot, developed with the University of Oxford, will remain non-profit for developing countries. While the vaccine isn’t yet cleared for use in the U.S., the company also hopes to eventually seek full authorization from the FDA.
Toshiba breakup
Siemens (OTCPK:SIEGY) did it. General Electric (NYSE:GE) did it. Now, Toshiba (OTCPK:TOSYY) is thinking of doing it. The once-championed diversified conglomerate is losing its sheen, with many seeing more risk than reward for sprawling companies with numerous sub-divisions. The trend has been going on for several years, as companies try to simplify their businesses with unique mission statements and let individual assets fend for themselves in the markets.
What caused the change? There has been a strong shift towards leaner cost structures and away from the idea that central management can never fully offset the downsides that conglomerates can bring. This is particularly strong for industrial businesses, which are no longer the talk of the town, and have market caps that come nowhere close to their technology rivals. As a result, they must have a more focused story to tell investors, especially in the current information age and investing landscape.
Under threat by activist investors in Japan, Toshiba now plans to split into three independent companies. It will spin off two core businesses – energy, infrastructure and heavy engineering, as well as electronic devices, AI and quantum computing – leaving its flagship name to manage a 40.6% stake in memory chipmaker Kioxia and other assets. As for the timeline, Toshiba hopes to complete the reorganization by the second half of fiscal 2023.
Under fire: Turmoil at the company began with a 2015 accounting scandal and has continued this year. A report released in June found that Toshiba executives and officials at Japan’s Ministry of Economy, Trade and Industry had collaborated to stifle foreign shareholders’ voices ahead of an annual shareholder meeting in July 2020. The new decision to split up may not fully satisfy some of those foreign investors, which have called for Toshiba to be taken private after an offer was made by U.K.-based CVC Capital in April.
Today’s Economic Calendar
10:00 Consumer Sentiment
10:00 Job Openings and Labor Turnover Survey
12:10 PM Fed’s Williams Speech
1:00 PM Baker-Hughes Rig Count
4:30 PM Fed Balance Sheet
Companies reporting earnings today »
What else is happening…
Alibaba (NYSE:BABA), JD.com (NASDAQ:JD) score Singles Day shopping records.
Goldman Sachs (NYSE:GS) builds thematic ETF lineup with new disruptive funds.
Court rejects Apple’s (NASDAQ:AAPL) request in Qualcomm (NASDAQ:QCOM) patent case.
Another breakup… Johnson & Johnson (JNJ) plans to split into two public companies.
Moderna (NASDAQ:MRNA) offers to sell COVID-19 vaccine to Africa at $7 per shot.
U.S. will not open trade probe into Asian solar manufacturers.
Gold sees new momentum as U.S. inflation surges to 30-year high.
General Mills (NYSE:GIS) considers $3B sale of Progresso, Helper brands.
DiDi Global (NYSE:DIDI) prepares to restart apps in China by year’s end.
Lordstown Motors (NASDAQ:RIDE) pushes pickup production to later in 2022.
—————
Good morning. Happy Thursday.
The Asian/Pacific markets leaned down. China and Hong Kong did well, but India, Taiwan, Australia and the Philippines were weak. Europe, Africa and the Middle East are split. Denmark, Turkey, the UAE, South Africa and Sweden are up; Poland, Russia, Norway, Hungary, Spain and Portugal are down. Futures in the States point towards a moderate gap up open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is up. Oil is down; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Inflation aberration
On Veterans Day, Seeking Alpha expresses appreciation to all U.S. military personnel for the sacrifices you have made for our freedom. Thank you for your service.
Inflation is looking a lot less “transitory” after CPI figures released yesterday, which showed consumer prices jumping 6.2% from a year ago and the fifth straight month higher than 5%. It’s also the fastest rate since 1990, and while that might cause some worry in the general population, Wall Street appears to be discounting the effects. Many continue to argue that the Fed won’t get too aggressive, inflation could moderate next year, while some think stocks could even benefit along with a rise in asset prices.
Snapshot: Businesses are passing on higher costs to consumers, with 60% of small business owners raising prices in the previous 90 days, according to a November survey of 560 firms by Vistage Worldwide. Companies are struggling to get materials and are delaying orders, adding to demand pressures, while a labor shortage is putting upward pressure on wages. Some feel that will need to prompt a shift in U.S. economic strategy, which sought to jolt pandemic demand through unprecedented fiscal stimulus, though others say supply logjams are at the heart of the issue and targeted spending could help ease those problems more broadly.
“Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me. With the [infrastructure] bill we passed last week, and the steps we’re taking to reduce bottlenecks at home and abroad, we’re set to make significant progress,” President Biden said in a statement. “Very soon we’re gonna see the supply chain start catching up with demand, so not only will we see more record-breaking job growth, we’ll see lower prices, faster deliveries as well. This work is going to be critical as we implement the infrastructure bill and as we continue to build the economy from the bottom up and the middle out by passing the Build Back Better plan.”
Outlook: The hot inflation figures continue to worry West Virginia Sen. Joe Manchin, who has been warning of fiscal spending and serious price pressures since the summer. That could further endanger the economic agenda of the White House, which has not yet given into business demands to ease tariffs on Chinese imports and failed to persuade OPEC+ to increase oil production. “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day,” tweeted Manchin, who must vote for the coming $1.75T social spending package if it has any chance of passing the Senate. (18 comments)
Musk unloads
In his first sales in more than five years, Elon Musk this week let go of $5B of stock in Tesla (NASDAQ:TSLA). It comes just days after he promised Twitter he’d sell a 10% stake in the electric carmaker, with 58% of respondents voted “Yes” in a highly-publicized poll. While the new SEC filings reveal that Musk knew in mid-September that some of his shares were slated for sale this week (as part of a pre-arranged trading plan), it’s unclear if those sales would be included as the first installment in making good on his Twitter promise. Here’s a breakdown of the transactions:
Monday: Exercised 2.1M stock options to “satisfy tax withholding obligations” and sold more than 934K of them to raise $1.1B.
Tuesday and Wednesday: Sold more than 3.5M shares worth $3.9B in a series of trades that were not part of a pre-planned stock sale, known as a 10b5-1.
Shares of Tesla plunged 16% in the two days following the Twitter poll as investors worried about the effects of shedding such a big block of stock. The 4.5M share sale from Musk equates to about 3% of his total holdings in Tesla, which makes up the majority of his estimated $281.6B fortune.
Thought bubble: Musk is the PR Technoking, often taking to Twitter to troll his critics or expand his sphere of influence. The way he framed the recent poll, and related tweets, is that he’s willingly paying taxes at a time when there’s a debate whether billionaires should pay taxes on unrealized gains. By agreeing to pay his “fair share,” he received the approval of the Twitter mob who says he’s avoiding taxes, while at the same time giving him the ability to sell his stock.
Go deeper: Current and former board members including chairwoman Robyn Denholm, Elon Musk’s brother Kimbal Musk, Ira Ehrenpreis and Antonio Gracias also sold hundreds of millions of dollars worth of TSLA shares after the EV maker’s market cap topped $1T on Oct. 28. Among the insider sales, Kimbal’s was the only transaction that was not listed as a 10b5, or planned sale. He even sold around $109M worth of shares a day ahead of his brother’s poll on Twitter. (39 comments)
House of Mouse
The magic faded at Disney (DIS) on Wednesday as shares of the company fell nearly 5% in AH trading. Subscription growth for Disney+, its flagship streaming service, slowed in the latest quarter, fueling fears that the days of big subscriber counts have plateaued. Only 2.1M subscribers were added during the fiscal fourth quarter (for a total of 118.1M), down from the 12.6M new subs notched in FQ3.
What it means: Slowing growth among rival streaming services like HBO Max, Paramount+ and Peacock suggests strong pandemic gains are disappearing as more people seek entertainment outside the house (only Netflix (NFLX) bounced back last quarter).
“I believe that there will be a couple players at the end of the day that will both be able to do well and be very robust direct-to-consumer services,” noted CEO Bob Chapek. “I certainly think that Disney is going to be one of them. When you have the combination of our brands, our franchises, great storytellers, plus our commitment to this marketplace, I think we’ll be there in the end.”
Disney talks Metaverse: Chapek also outlined a vision to use the Disney+ platform for an immersive experience that several big companies have been investing in and touting. While the platform wouldn’t be limited to virtual reality headset and goggles, it would “blend our digital beings with our physical beings.” Pressed for a better definition, Chapek said it “would create a 3D canvas for creative storytellers to paint, to create experiences that have otherwise been defined [exclusively] as a ‘park experience,’ ‘movie experience’ or a ‘book experience.'” (64 comments)
Xi’s growing power
China’s Sixth Plenum is wrapping up in Beijing, where President Xi Jinping summoned hundreds of top Chinese Communist Party leaders this week for an annual meeting. The party’s central committee is expected to approve a resolution that would pave the way for a historic third term for Xi and potentially position him as ruler for life. That would also have ramifications for the Chinese economy, which is expected to become the world’s largest within a decade.
Commentary: “The great irony is that in the 2020s and beyond when China needs to embrace a new development model, there would normally be a strong case for more decentralization and experimentation,” said George Magnus, research associate at Oxford University’s China Center. “But Xi’s model calls for precisely an inflexible and flawed opposite structure. He may rue this governance model sooner or later.”
Over the last few months, sweeping crackdowns have been seen across many of China’s economic sectors. Those include technology, e-commerce, social media, fintech, gaming, ride-hailing and crypto miners. The decisions have wiped a trillion dollars off both stock markets and commodity futures, showing investors that Xi is willing to force through painful reforms at all costs and making his hold on the Communist Party look even stronger.
View on America: “Right now, China-U.S. relations are at a critical historical juncture,” Xi declared, according to a recent letter addressed to the National Committee on U.S.-China Relations. “Following the principles of mutual respect, peaceful coexistence and win-win cooperation, China stands ready to work with the United States to enhance exchanges and cooperation across the board.” The letter comes ahead of a first (virtual) meeting with President Biden, which could take place as soon as next week. (3 comments)
Today’s Economic Calendar
No events scheduled due to Veterans Day
Companies reporting earnings today »
What else is happening…
Bitcoin (BTC-USD) notches new all-time high after inflation data.
Rivian (NASDAQ:RIVN) dazzles in IPO debut; shares end day at $100.
Moderna (NASDAQ:MRNA) patent conflict over COVID shot is heading to court.
Johnson & Johnson (NYSE:JNJ) wins ruling to halt tens of thousands of talc lawsuits.
Winding down iBuying, Zillow (ZG) offloads 2,000 homes in 20 U.S. markets.
Hershey (NYSE:HSY) acquires fast growing pretzel brands for $1.2B.
U.S. officials raise question of security risks in EU tech regulations.
Beyond Meat (NASDAQ:BYND) tanks on weak outlook, production disruptions.
More to come: AMC (NYSE:AMC) CEO Adam Aron sells $25M in company stock.
Lordstown Motors (NASDAQ:RIDE) jumps on more details about Foxconn partnership.
—————
Good morning. Happy Wednesday.
The Asian/Pacific markets leaned down. Hong Kong and India did well, but Japan, China, South Korea, New Zealand and the Philippines were weak. Europe, Africa and the Middle East are mostly down. The UK and Saudi Arabia are up, but Denmark, Poland, Russia, Greece, Hungary, Israel, Austria and the Czech Republic are down. Futures in the States point towards a down open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is up. Oil and copper are little changed. Gold and silver are up. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Start your motors!
The next EV maker to hit the public markets is set to make an electrifying debut today. Rivian Automotive (RIVN) has priced its IPO at $78/share, above an already-elevated range of $72 to $74, raising a whopping $11.9B for the biggest share sale of 2022. With a market capitalization of over $66B, Rivian would be roughly on par with Nio (NIO) and Lucid (LCID), but way bigger than Honda (HMC), Ferrari (RACE) and Fisker (FSR).
Backdrop: Rivian was founded in 2009 by RJ Scaringe, the same year he finished his doctorate in mechanical engineering at MIT. The EV maker originally set out to make a sports car, but pivoted to electric pickup trucks and SUVs due to their growing popularity among consumers. Over the past two years, the company has burned through cash (about $2B in 1H21 alone) to retool its factory and prepare for large scale production. Rivian hopes to launch three models by year’s end, including an electric pickup called the R1T (deliveries began in September), a midsize SUV called the R1S and an electric delivery truck designed and built for Amazon (AMZN).
Rivian outlined its ecosystem in advance of the IPO, which includes vehicle technology, the Rivian Cloud, product development, analytics, accessories and services. The ecosystem, which also details plans for a charging network, is described as competitive in comparison to peers. Rivian estimates its total addressable market at $9T, and its serviceable available market at $1T.
Go deeper: Tesla (TSLA) is mentioned in the IPO filing by Rivian due to a trade secret lawsuit that is currently underway between the two companies. With Amazon a big backer of Rivian (it has a 22.4% stake), the sometimes edgy battle between Elon Musk and Jeff Bezos will extend to a degree from the space race to the electric vehicle industry. Rivian also wants to skip dealership sales like Tesla, selling directly to consumers and asking for a refundable deposit when people order their vehicles on its website. (54 comments)
Should you scoop up some shares? SA authors Victor Dergunov and David Trainer take sides in articles Rivian: Why I Want In On This EV IPO vs. Rivian: Even At A Lowered Valuation, Don’t Buy This IPO.
Sizzling inflation
Get ready for some early action this morning as the consumer price index for October is published at 8:30 a.m. ET. The figure is expected to come in flaming once again, rising 5.8% Y/Y, though some economists even see a 5.9% advance or above, which would be the biggest Y/Y increase since December 1990. While the Fed has maintained that the pickup in inflation will be transitory (how long is that?), the stance has recently shifted with the central now seeing prices staying elevated into next year.
Analyst commentary: “There is a risk it could be even higher,” Grant Thornton chief economist Diane Swonk declared. “We’ve got some unusual distortions with used car prices, airfares going up and hotel room rates rising. You could get some surging prices in services, at the same time you had a snapback in used car prices and new car prices also went up because demand went up with the flooding from summer hurricanes.”
Economists expect core CPI, which excludes food and energy and is the Fed’s preferred gauge of inflation, to have risen 4.3% Y/Y. That would be the fifth consecutive month above the 4% level, and if things were to continue heating up, it could prompt the central bank to speed up tapering or hike interest rates sooner than expected. Yesterday, Treasury Secretary and ex-Fed Chair Janet Yellen said policymakers would not allow a repeat of 1970s-level inflation, and attributed the recent price pressures to supply bottlenecks, labor shortages and heavy consumer spending.
How is the CPI calculated? The measure uses a “basket of goods” approach that aims to compare costs of various consumer goods and services. These can include transportation, food, rent, haircuts and medical care (80,000 items are included in the report). Each month, data collectors from the Bureau of Labor Statistics call, visit, or check the websites of thousands of retail stores, professional offices and other establishments to assess nationwide price information. Specialists then examine the data for accuracy and make statistical adjustments based on any given item’s value. (10 comments)
Union fight
Workers at three Starbucks (NASDAQ:SBUX) stores in and around Buffalo, New York, will begin voting today on whether they want to be represented by Workers United, an affiliate of the Service Employees International Union. Never in the coffee chain’s 50-year history has it relied on union workers to serve up its lattes, making the rare unionization drive a big deal. The votes will be counted on Dec. 9, possibly creating a first-ever labor foothold among Starbucks’ 9,000 corporate-run stores in the U.S.
Thought bubble: While Starbucks has fought off a handful of unionization efforts over the past two decades, this time around the campaign is happening at an unusual moment for the American worker. A tight labor market has given the demographic an outsized influence, while some have even looked to demand greater compensation for the risks they shouldered during the pandemic. In recent weeks, thousands of unionized workers at Deere (NYSE:DE) and Kellogg (NYSE:K) went on strike, while Amazon (NASDAQ:AMZN) warehouse workers in Staten Island are seeking a union election this fall.
The pro-union Starbucks workers in Buffalo won a key victory last week when the National Labor Relations Board allowed store-by-store unionization votes at three separate locations. Starbucks appealed the decision, but the vote may proceed even as a review is held at the NLRB (following President Biden’s appointments, three of the labor board’s five members now have union backgrounds). “It’s a much bigger deal than the number of people would suggest,” said former NLRB chair and union attorney Wilma Liebman. “Winning is contagious, and it could spread like wildfire [in the broader restaurant industry].”
High-profile appearance: Employees interested in unionization say they like Starbucks, but want to secure a say over schedules, wages and how the company deals with harassment from customers. However, the coffee giant feels it has cultivated a progressive brand more than its peers, closing stores to hold racial bias trainings, offering health benefits to part-timers and recently announcing it would implement a $15 minimum wage nationwide. Starbucks even brought in former CEO and Chairman Emeritus Howard Schultz last week to discuss the happenings in Buffalo, where he told workers that “no partner has ever needed to have a representative seek to obtain things we all have as partners at Starbucks, and I am saddened and concerned to hear anyone thinks that is needed now.” (2 comments)
DASH wolfs down Wolt
Shares of DoorDash (DASH) rose as high as 20% in premarket trading after announcing its biggest acquisition to date: Helsinki-based food delivery startup Wolt. The all-stock deal, worth approximately $8.1B, will not only accelerate DoorDash’s international growth, but it will allow the company to specifically expand into the highly competitive European market.
Bigger picture: Founded in 2014, Wolt currently has about 4,000 employees, 12M registered customers and runs delivery services and platforms in 23 countries. DoorDash also considered a deal with German food delivery company Gorillas earlier this year, and while those talks fell apart, it is planning to confirm a $400M investment in grocery app Flink as soon as today. Last week, in an effort to expand beyond its traditional food delivery services, DoorDash announced a partnership with Ulta Beauty (ULTA) to provide same-day delivery of beauty products.
“People are going back inside stores, and in-store dining is seeing record highs,” DoorDash CEO Tony Xu said after the deal. “And so we are seeing a normalization of growth rates, but I think it’s important to put this in context that delivery is here to stay.”
Wave of consolidation: Last year, Grubhub agreed to merge with Europe’s Just Eat Takeaway.com (GRUB), while Uber Eats (UBER) snatched smaller rival Postmates for $2.7B. (2 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
8:30 Initial Jobless Claims
10:00 Wholesale Inventories (Preliminary)
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
12:00 PM EIA Natural Gas Inventory
1:00 PM Results of $25B, 30-Year Note Auction
2:00 PM Treasury Statement
Companies reporting earnings today »
What else is happening…
Amid big bull market, U.S. contends with a soaring Misery Index.
Pfizer (NYSE:PFE) asks FDA to expand COVID booster eligibility for all adults.
U.S. government to buy $1B more worth of Merck’s (NYSE:MRK) COVID-19 pill.
Coinbase (NASDAQ:COIN) slides after Q3 results reflect declining crypto prices.
Amazon (NASDAQ:AMZN) in talks to settle EU antitrust investigations – Reuters.
Monday.com (NASDAQ:MNDY) hits new high before earnings, up 190% since June IPO.
Royal Caribbean’s (NYSE:RCL) long-time CEO Richard Fain to step down.
‘Squid Game’ creator says Netflix (NASDAQ:NFLX) will bring a second season.
U.S. energy report sees oil market oversupplied by early next year.
Tesla (NASDAQ:TSLA) tanks on insider selling worries; Musk loses $50B in two days.
—————
Good morning. Happy Tuesday.
The Asian/Pacific markets leaned down. Taiwan and Indonesia did well; Japan, Malaysia, Singapore and the Philippines were weak. Europe, Africa and the Middle East are quiet and little changed. Denmark and Turkey are up; Poland and Saudi Arabia are down. Futures in the States are unchanged (S&P) or up (Nas 100)
————— Masterclass Overview –>> here —————
The dollar is flat. Oil is up; copper is down. Gold is up; silver is down. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Time for a breakup
Unveiling one of the biggest changes in the industrial giant’s history, General Electric (GE) announced plans this morning to split into three global public companies:
Aviation: Helping customers achieve greater efficiency and sustainability and invent the future of flight.
Healthcare: Driving innovation in precision health to address critical patient and clinical challenges (spinoff targeted for early 2023).
Renewable Energy and Power: Supporting customers and communities seeking to provide affordable, reliable, and sustainable power (spinoff targeted for early 2024).
Backdrop: After CEO Larry Culp took the reins in 2018, he went on to apply a similar philosophy he used to revamp diversified conglomerate Danaher (DHR). In one of his first moves, he slashed GE’s valued dividend to a token penny a share. Two years later, he sold off GE’s BioPharma business to his former employer for $21.4B, and in March, he combined GE Capital Aviation Services with AerCap (AER). He also implemented a 1-for-8 reverse stock split, which went into effect in July, to reduce the number of shares outstanding to an amount “more typical of companies with comparable market capitalization.”
“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees,” Culp said in a statement. “Through the transition, GE will be able to monetize its stakes in AerCap and Baker Hughes (BKR), prioritizing further debt reduction. Each of the three resulting independent companies will be well capitalized with investment-grade ratings.”
Bottom line: Following the transactions, General Electric will be an aviation-focused company. Culp will serve as non-executive chairman of GE Healthcare upon its spinoff and will remain chairman and CEO of GE until the second spinoff, when he will lead the GE “pure play” aviation company going forward. The company expects to incur ~$2B in one-time separation, transition and operational costs, and less than $500M in tax costs. GE +11% premarket.
Brainard interview
President Biden looks like he’s getting serious about possibly replacing Jerome Powell as head of the Federal Reserve. According to a report from Bloomberg, Fed Governor Lael Brainard was interviewed for the top job at the U.S. central bank when she visited the White House last week. At the time, Biden said he’d make a decision “fairly quickly,” with Powell’s current term expiring in February.
Bigger picture: Brainard is the only Democrat on the Fed’s Board of Governors and the only non-Trump appointee. She has opposed Powell on numerous occasions, including on matters of big bank oversight and regulation, and has found a path to address climate change through the Fed’s financial stability mission. Brainard has also advocated for making the financial system more inclusive and is seen as a safe bet that would continue Powell’s interest rate policy.
Meanwhile, Fed Governor Randal Quarles announced yesterday he would resign in December, giving the Biden administration another opportunity to influence the direction of future monetary policy. Quarles was already on the fence about leaving after his role as vice chair of bank supervision expired in October and his time as chair of the Financial Stability Board was due to run out next month. A trading controversy already led to the resignation of two regional Fed presidents (Kaplan and Rosengren) in September, while Biden could fill several other seats on the seven-member Fed Reserve Board within the next few months (Clarida’s term expires in January and there is still a vacancy from Janet Yellen).
New lineup: Even if she is not nominated as chair, there’s a good chance Brainard could replace Quarles as vice chair of supervision. That would not only give her increased influence over the nation’s banking system, but she would also be “given a reasonable amount of free hand,” said Tom Graff, head of fixed income at Brown Advisory. “Obviously, Brainard would be a stronger, more stringent regulator than Quarles was.”
Winning workers
A labor shortage across the U.S. is leading retailers to sweeten their pay and benefits. Macy’s (NYSE:M) is latest to raise its minimum wage to $15, which will go into effect for new and current workers by next May. Once that happens, the company’s average base pay will be above $17/hour across its workforce of 100K employees, and average total pay will be $20/hour.
That’s not all: Macy’s is partnering with Guild Education for a program that will offer bachelor’s degrees, boot camps, English language learning and professional certificates. 100% of tuition, books and fees will be covered under the program, which is expected to cost $35M over the next four years. Target (TGT), Walmart (WMT), Starbucks (SBUX) and Chipotle (CMG) have also offered similar perks.
“This is not just a reaction to the tight labor market, although to be sure, this is a difficult market to hire in,” said Danielle Kirgan, chief transformation and human resources officer at Macy’s. “This is more of our signal to our colleagues that this is really how we operate – investing back in our colleagues in a variety of ways.”
Go deeper: Economists say changing demographics like aging and retiring workers are also a factor behind the recent labor shortages, as well as demands for better pay and flexible working arrangements. Macy’s may be trying to combat all of those factors with its new moves, especially with many people today willing to walk away from their jobs or switch employment. On a macro scale, a shortage of retail workers could threaten the economic recovery amid further disruptions to the supply network.
#COP26
The U.N. climate talks in Glasgow, known as COP26, are continuing this week, with many of the parties looking for concrete pledges to combat the damaging effects of climate change. It’s a trend that’s been seen since the 2015 Paris Agreement to curb warming at 1.5 degrees Celsius above pre-industrial levels, where progress is yet to be made despite many workshops, summits and conferences. “It is always ‘the time is now,’ ‘the time has come,'” said Kenya’s Environment Minister Keriako Tobiko. “Actually there’s no more time, let’s put the money on the table.”
Case in point: A global deal to eradicate new car emissions by 2040 is struggling to attract support from the world’s biggest automakers. Volkswagen (OTCPK:VLKAF) has said it would not sign the agreement, while Toyota’s (NYSE:TM) signature is unlikely to agree given the reluctance of key governments – like the U.S., Germany and China – to join the pact. They have expressed concerns over infrastructure needed to support the shift, as well as options of pursuing synthetic fuels with lower carbon content, though Ford (NYSE:F), General Motors (NYSE:GM), Daimler (OTCPK:DDAIF) and Volvo Cars (OTCPK:GELYY) have all signed on to the accord.
“Sadly, the COP26 looks set to become the biggest finance greenwash event in history,” stated Kenneth Haar, researcher at the Corporate Europe Observatory, adding that “self-regulation” among companies with a heavy carbon footprint was at the heart of the private finance proposals.
Outlook: Greenwashing claims aren’t limited to corporations. At a U.N. climate summit 12 years ago in Copenhagen, rich nations promised to hand developing countries $100B a year by 2020 to help them adapt to climate change, though that hasn’t happened yet (the COP26 Presidency now feels that could happen by 2023). The negotiations ultimately boil down to questions of fairness and trust, as well as language and enforcement mechanisms that will ensure the money will be spent appropriately.
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
7:50 Fed’s Bullard: “Monetary Policy: Limits? What Limits?”
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
9:00 Jerome Powell Speech
11:35 Fed’s Daly Speech
1:00 PM Results of $39B, 10-Year Note Auction
1:30 PM Fed’s Kashkari Speech
Companies reporting earnings today »
What else is happening…
Nvidia (NASDAQ:NVDA) CEO highlights Omniverse strategy at GTC event.
Regeneron (NASDAQ:REGN) antibody therapy could provide vaccine alternative.
PayPal (NASDAQ:PYPL) issues disappointing revenue forecast for next year.
U.S. officials grab $6M in ransom payments, expect Ukrainian to face charges.
Robinhood (NASDAQ:HOOD) hacker gets millions of names and email addresses.
Will government contracts boost Palantir’s (NYSE:PLTR) Q3 earnings?
EVs the newest fashion for underwear designer Naked Brand (NASDAQ:NAKD).
Roblox (NYSE:RBLX) skyrockets on bookings beat, daily users jump 31%.
AMC (NYSE:AMC) pursuing popcorn and Dogecoin, will diversify stock.
McAfee (NASDAQ:MCFE) sold to investor group for more than $14B.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets leaned up. China, India, Taiwan, Indonesia, Singapore and the Philippines did well; Japan and Hong Kong were weak. Europe, Africa and the Middle East also lean up. Denmark, Turkey, the UAE, Greece, Austria and the Czech Republic are up; Poland and Hungary are down. Futures in the States point towards a flat open for the cash market.
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The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up big.
Stories/News from Seeking Alpha…
Take your pick
Shares of Tesla (NASDAQ:TSLA) are down 6.5% to $1,142 in premarket trade after Elon Musk took to Twitter with a poll about selling 10% of his stake in the electric carmaker. Before the tumble, a tenth of his holdings were valued at $21B, a substantial sum, even for the world’s richest person. “Much is made lately of unrealized gains being a means of tax avoidance,” Musk wrote in the tweet, adding that he would “abide by the results of this poll, whichever way it goes.”
What happened? About 58% of 3.5M voters backed the move, putting Musk on the hook to follow through on his pledge. However, many expressed concern that such a sale would hurt the stock, especially after a new high of $1,229.91 reached last week and a 43% surge in October. Last month, Musk slammed a Democratic proposal to tax billionaires’ annual unrealized capital gains, saying, “eventually, they run out of other people’s money and then they come for you.”
Meanwhile, the current top tax rate on long-term capital gains is 23.8%, but Congress has also considered raising it (changes often take place immediately to prevent gamesmanship). Many have additionally pointed out that Musk would have anyways needed to sell millions of shares this quarter due to a looming tax payment of around $15B. He was awarded TSLA options in 2012 as part of a compensation plan and CNBC noted this could have been the real reason for the sale.
Commentary: “Elon still can’t talk the stock down for long. And remember the people voted for him to sell. So what, he sells 1-2 mil shares. It’s peanuts on a $1.5 tril company,” tweeted Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management. “It’s extremely rare in fact to have a founder with so much of their worth in their public company. Many like Zuck and Bezos have been extracting billions in cash for years from stock sales.” (40 comments)
Tourists return
Today, the U.S. is finally lifting pandemic travel restrictions that have barred many international visitors from visiting America. The measures were first instated by the Trump administration in March 2020 to limit the spread of COVID-19, but were later upheld by President Biden to include more than 30 countries like Brazil, South Africa, the U.K. and much of Europe. The reopening of the border comes with a new set of rules, but is being looked upon as aiding in the economic recovery.
Fine print: International visitors will have to show proof of vaccination by a jab approved by the FDA or listed by the World Health Organization (including Pfizer/BioNTech, Moderna, J&J, AstraZeneca, Covishield, Sinopharm and Sinovac). The U.S. will also require proof of a negative COVID test from within the past three days (rapid antigen and PCR are both accepted). Exceptions include travelers under age 18 and those traveling from countries with low vaccine availability.
Airlines are celebrating the news, with United Airlines (NASDAQ:UAL) saying it expects 50% more international inbound passengers on Monday from a week earlier (when it carried 20K people). Delta (NYSE:DAL) also anticipates strong demand over the next few weeks, while American Airlines (NASDAQ:AAL) forecasts international capacity for November and December to be more than double that of a year ago and down only 28% from 2019. According to airfare-tracking site Hopper, international flight searches to the U.S. have more than quadrupled since the Biden administration announced it would lift the restrictions in September.
Go deeper: The border opening is likely to drive up revenue for hotels, restaurants and retailers. Global visitors contributed more than $43.4B of shopping in 2019 – or 27% of the total shopping driven by travel and tourism. “The return to the service and the experience economy is going to be positive and beneficial for retail and it’s going to be enhanced furthermore by these international visitors returning to the U.S.,” declared Matt Shay, CEO of the National Retail Federation. (9 comments)
Anti-COVID pills
Oral treatments to fight COVID-19 have been sought after since the start of the pandemic. Merck (MRK) announced it would seek U.S. authorization for its pill molnupiravir in October, while Pfizer (PFE) jumped aboard the train on Friday. The company, which already has one of the most popular COVID vaccines in its arsenal, disclosed strong clinical trial results for its anti-COVID pill, sending the stock up 11% and pressuring early-stage developers of rival therapies.
Quote: This is “a game-changer” that “demonstrates the power of science,” Pfizer CEO Albert Bourla said in a statement. “I think this medicine will change the way things are happening right now. It will save millions and millions of lives. It has the potential to do it.”
The COVID-19 oral antiviral treatment candidate reduced the risk of hospitalization or death by 89% in an interim analysis of the company’s Phase 2/3 EPIC-HR study. President Biden also outlined the U.S. has secured millions of doses of the new pill, which would be “another tool in our toolbox to protect people from the worst outcomes of COVID.” Pfizer has invested $1.2B to produce the new COVID medicine at scale, meaning it has the capacity to produce 500M pills, or 50M courses of treatment, in 2022.
Outlook: The development of a successful oral pill that can treat severe disease or prevent hospitalization could affect vaccine and testing requirements. On Saturday, a federal appeals court temporarily blocked President Biden’s vaccine mandate for private businesses, just a day after they had officially gone into effect. The Biden administration has until tonight to respond, though the Labor Department’s top lawyer, Seema Nanda, responded that it is “fully prepared to defend this standard in court.” (37 comments)
Biden’s economic agenda
After months of negotiations and a standoff between progressive and moderate Democrats, the $1T package of road, broadband, and other “hard” infrastructure improvements has passed the U.S. House of Representatives with a 228-to-206 vote. While a signing ceremony wasn’t able to come together this weekend, President Biden said one would be scheduled “soon” after he hailed the bill as a “once-in-a-generation investment.” The legislation will go a long way for railways, roads and other transportation infrastructure, and is intended to create jobs and increase American competitiveness.
Drama to come: Democrats have yet to bring the larger $1.75T package on social infrastructure and climate change initiatives over the finish line. That would be the largest increase in the social safety net since the 1960s, but moderates Joe Manchin and Kyrsten Sinema had balked at the original $3T price tag and some provisions such as paid family leave and immigration reform.
While Democratic leaders wanted to pass both bills in the House on Friday, the larger bill was delayed after centrists called for a nonpartisan accounting of its costs. The centrists agreed to vote for the bill by Nov. 20 on the condition that the nonpartisan Congressional Budget Office estimate of costs line up with the White House forecast. However, one change the Democrats made to the $1.75T bill would raise the cap on SALT deductions to $80K from its current $10K level; the higher cap would stay in place through 2030, then return to $10K in 2031.
On watch: Stocks that could benefit from the infrastructure bill include Caterpillar (NYSE:CAT), Deere (NYSE:DE), Martin Marietta Materials (NYSE:MLM), Vulcan Materials (NYSE:VMC), Terex (NYSE:TEX), and United Rentals (NYSE:URI). (578 comments)
Today’s Economic Calendar
9:00 Fed’s Clarida Speech
10:00 Fed’s Montgomery Speech
10:30 Jerome Powell Speech
12:00 PM Fed’s Harker: Economic Outlook
12:30 PM Investor Movement Index
1:00 PM Results of $56B, 3-Year Note Auction
1:50 PM Fed’s Evan Speech
Companies reporting earnings today »
What else is happening…
Cyclical stocks may be about to turn ‘manic’ – Sector Watch.
Berkshire (BRK.A, BRK.B) ratchets up buybacks, cash pile grows to record.
Alphabet (GOOG, GOOGL) is knocking on the $2T market cap door.
Potential release from U.S. oil reserves seen failing to ease prices.
Fossil fuel retreat… BHP (BHP) confirms $1.35B coal mine sale to Stanmore.
Ether (ETH-USD) continues record run, tops $4,700 for first time.
President’s Working Group urges Congress to regulate stablecoins.
Semiconductor ETFs outperformed all other funds last week.
China’s tech crackdown leads SoftBank (OTCPK:SFTBY) to report $3.5B loss.
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