Before the Open (Jan 3-7)

Good morning. Happy Friday.

The Asian/Pacific markets leaned to the upside. Hong Kong, South Korea, Australia and Indonesia did well; Taiwan and the Philippines were weak. Europe, Africa and the Middle East are currently little changed. Denmark, Germany, Finland, Spain and Sweden are down the most. Futures in the States point towards a gap down open cash market.

————— VIDEO: Themes to start 2022 —————

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

Stories/News from Seeking Alpha…

Jobs Day

The last non-farm payrolls report for 2021 will be released this morning, with expectations that the U.S. economy added 400K jobs in December, compared to 210K jobs added in November. The figures – which represent the total number of paid workers in the U.S. minus farm, government, private household and non-profit employees – come as many grow concerned over the direction of the U.S. recovery in 2022. Despite the fears, the unemployment rate is expected to drop to 4.1%, from 4.2% in November, with an unprecedented number of job openings across the economy.

Bigger picture: The NFP picture should be taken with a pinch of salt, given the fact that the “December figures will not yet capture the impact of the surging Omicron variant on employment,” noted Lauren Goodwin, economist at New York Life Investments. In recent months, the market has also seen a big divergence between actual figures and expectations, like the November jobs report, which showed an increase of 210K payrolls despite a forecast of 550K. The prior three months weren’t any better, with calls for 450K jobs in October (vs. 531K actual), 500K payrolls in September (vs. 194K actual) and 750K positions in August (vs. 235K actual).

There are several factors at play, but what’s happening is the Bureau of Labor Statistics is struggling to get data during the pandemic. In fact, the agency already adjusted its initial estimates for payrolls growth by nearly 1M jobs in 2021, which was the highest adjustment ever. Businesses from which the BLS forecasts its estimates are not responding to surveys in time, which means more assumptions are included in the equation, while seasonal factors, such as customary back-to-school adjustments, have been upended by COVID-19.

Go deeper: Fed policymakers pay close attention to the data (higher payrolls can contribute more economic growth) and the market narrative begins to take shape shortly after the first numbers come out. Given that the Fed is now more focused on the other side of its dual mandate – price stability vs. maximum sustainable employment – investors will be particularly focused on some sub-components of the NFP data due to concerns about a price-wage spiral. Keep an eye on the labor-force participation, which reflects people working or actively seeking employment, and average hourly earnings that are expected to climb 0.4% in December, or 4.2% Y/Y.

Supreme stakes

The Supreme Court will hear legal challenges today to two of the Biden administration’s COVID-19 vaccine mandates, with rulings likely to follow in short order. The first, which is estimated to cover two-thirds of the private sector, or 100M workers, would compel businesses with 100 or more employees to ensure their staff is vaccinated against COVID or are tested weekly for the virus. A separate healthcare worker mandate, which would require vaccinations for workers at facilities that treat federally funded Medicare and Medicaid patients, is currently blocked in half of the 50 U.S. states.

Snapshot: While the Supreme Court had already ruled several cases about COVID vaccine mandates (like healthcare cases in New York and Maine), this time around the case centers around actions by federal agencies. The key legal question here is not whether the mandate is reasonable or necessary in light of the pandemic, but rather if Congress has provided the Occupational Safety and Health Administration with the authority to issue such directives under relevant statutes. Employers who don’t adhere to the requirements could face penalties of up to $13,653 for each reported violation, while OSHA has said it will check on compliance through company record-keeping and some in-person inspections.

The Biden administration feels that OSHA not only has the authority, but also the responsibility to act. Backing this argument is the ability for the agency to issue emergency workplace rules to protect employees “exposed to grave danger” from “substances or agents determined to be toxic or physically harmful or from new hazards.” On the other side of the courtroom, a coalition of business and religious groups, Republican attorneys general or governors, and national industry associations like the National Retail Federation and the American Trucking Associations, say the mandate represents massive overreach. OSHA cannot take a step with such “vast economic and political significance” without specific authorization from Congress, according to the group, which pointed to severe consequences like labor shortages and increased costs for employers.

Nation divided: More than half of employees who work in workplaces with 100 employees or more (the size of companies covered by the federal requirement) either say their employer already requires vaccination (36%) or say they want their employer to require it (17%), according to the Kaiser Family Foundation, while four in ten (41%) say they don’t want their employer to demand a jab. Meanwhile, 37% of unvaccinated workers say they would rather leave their jobs than comply with a jab or testing mandate, while another 46% would get tested weekly and 11% say they would get the shot (6% don’t know or refused to answer the poll).

Media consolidation

The current wave of media consolidation is picking up speed following Vox’s merger with Group Nine and BuzzFeed’s purchase of Complex. The latest deal will see The New York Times (NYT) scoop up sports subscription site The Athletic for $550M, with the all-cash transaction expected to close in the first quarter. Also don’t forget about Dotdash’s acquisition of Meredith’s National Media Group in October, as well as Axel Springer’s purchase of Politico.

What’s happening? “‘Fewer, better’ is a sentiment that rings true for many marketers when it comes to their media plan,” said Kelsey Chickering, a principal analyst covering media at Forrester. “Market consolidation allows brands and agencies to work with one partner who can give them a variety menu in audiences, content franchises and passion points.” Besides competing better against social platforms for advertising, consolidation allows audiences to visit various sites in a company’s portfolio, as well as giving them the ability to net more subscriptions and revenue.

In the case of The Times, the purchase of The Athletic will go a long way toward its long-term subscriber goals. The Athletic’s 1.2M subs will be added to the paper’s existing stable of 8.3M subscribers, moving it closer to achieving its goal of 10M paid subscribers by 2025. While the transaction is expected to be immediately accretive to NYT’s revenue growth rate, it will be dilutive to operating profit for about three years (as NYT scales subscriptions and builds its ad business), and accretive after that.

Statement: “We started The Athletic to bring fans closer to the teams, players and leagues they love through deep, immersive journalism and storytelling,” said Alex Mather and Adam Hansmann, who founded the website in 2016. “Today marks a thrilling milestone for that dream, one realized because of the hard work of every single one of our employees. We are proud to have The Athletic become part of the Times Company’s family of subscription products.”

Factious social media

If the first anniversary of the Jan. 6 Capitol attack wasn’t divided enough, the disarray is shifting online again, just as it did in January 2021. Partisan politics are not only taking place in Congress, but are increasingly enveloping Corporate America, as well as how citizens work, operate and interact on social media. The latest development can be seen with the launch date of TRUTH Social, which has been listed in Apple’s app store with an expected launch date of Feb. 21 (the date coincides with Presidents’ Day).

He said, she said: Former President Donald Trump announced the social network back in October, which would be merged with SPAC Digital World Acquisition (NASDAQ:DWAC). Just like it did in October, the latest launch announcement sent shares of DWAC flying, with the SPAC soaring nearly 20% on Thursday to close at $60. Trump is marketing the platform as an alternative to social media giants Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB), both of which banned him on the grounds of inciting the U.S. Capitol riot on Jan. 6.

“I created TRUTH Social and video-on-demand service (TMTG+) to stand up to the tyranny of Big Tech,” Trump said at the time. “We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable. Trump Media & Technology Group’s mission is to create a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.”

Outlook: Other big personalities are also jumping ship, or at least hedging their followings, citing concerns over free speech and cancel culture. “Just in case shit over at Twitter gets even dumber, I’m here now as well. Rejoice!” said star podcaster Joe Rogan, who wrote his first post on Gettr this week. As of November 2021, the Twitter alternative (started by Trump aide Jason Miller) had almost 3M total users and almost 400K daily average users. In the last week alone, Gettr witnessed half a million new users with the joining of Rogan, Dr. Robert Malone and the Twitter suspension of Congresswoman Marjorie Taylor Greene.

Today’s Economic Calendar
8:30 Non-farm payrolls
10:00 Fed’s Daly: Monetary Policy
12:15 PM Fed’s Bostic Speech
12:30 PM Fed’s Barkin Speech
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

What else is happening…

Mortgage rates begin 2022 with increase to 3.22%, highest in 20 months.

Apple (AAPL) CEO Tim Cook bagged $100M in compensation last year.

GameStop (NYSE:GME) surges 30% on report of new NFT project.

Are Kazakhstan riots driving the price of Bitcoin (BTC-USD)?

BTC should bottom around $38K-$40K – Galaxy Digital’s Michael Novogratz.

Electric vehicle reset as mainstream auto giants charge in.

Unity (NYSE:U), Hyundai Motor (OTCPK:HYMTF) partner to build Meta-Factory.

Lost in Space helps Netflix (NASDAQ:NFLX) maintain streaming lead.

Alibaba (NYSE:BABA): Munger’s buy outweighs J.P. Morgan’s skepticism.


Good morning. Happy Thursday.

The Asian/Pacific markets posted big losses. Japan, China, South Korea, Australia, New Zealand, Malaysia and Thailand all down big. Europe, Africa and the Middle East are currently very weak. The UK, Denmark, France, Germany, the UAE, Russia, South Africa, Switzerland, Norway, the Netherlands, Italy and Portugal are down big. Futures in the States point towards a flat open for the S&P and a moderate gap down open for the Nasdaq.

————— VIDEO: Themes to start 2022 —————

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

Stories/News from Seeking Alpha…

End of easy money

A new era of monetary policy is starting to hit investors in the face after previously estimating that any tightening would be limited and gradual. FOMC minutes released on Wednesday showed that officials were fully on board with a faster scale back of the central bank’s asset purchase program, which would give it greater flexibility to raise interest rates and could happen as soon as March. Stocks tanked on the news, with the Nasdaq ending the day down more than 3% for the worst start to a calendar year since the financial crisis (more on that below).

Excerpt: “It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate. Some participants judged that a less accommodative future stance of policy would likely be warranted and that the Committee should convey a strong commitment to address elevated inflation pressures.”

The Fed is also going to be more aggressive in reducing its nearly $9T balance sheet, and while it didn’t put a timetable on a runoff (that’s when it shrinks holdings by allowing bonds to mature), many are estimating the tightening could happen as soon as the summer. “Participants judged that the appropriate timing of balance sheet runoff would likely be closer to that of policy rate liftoff than in the committee’s previous experience… and could warrant a potentially faster pace of policy rate normalization.” Some officials even said in the minutes that they preferred to “rely more on balance sheet reduction” and “less on increases in the policy rate” to avoid flattening the yield curve.

Whoops? “Participants remarked that inflation readings had been higher and were more persistent and widespread than previously anticipated. Some participants noted that trimmed mean measures of inflation had reached decade-high levels and that the percentage of product categories with substantial price increases continued to climb. While participants generally continued to anticipate that inflation would decline significantly over the course of 2022 as supply constraints eased, almost all stated that they had revised up their forecasts of inflation for 2022 notably, and many did so for 2023 as well.”

Tech gets wrecked

With the Fed ready to aggressively dial back on pandemic-era easy policy, equities took a beating, especially high multiple tech stocks. Growth shares like Alphabet (GOOG, GOOGL) and Meta (FB) ended the day down around 4%, while other names did a lot worse, like Okta (OKTA) and Salesforce (CRM), which closed the session about 8% lower. Piling on the pressure was a rise in U.S. Treasury yields, with the rate on the 2-year Treasury note – the maturity most sensitive to Fed policy expectations – shooting to its highest level since the pandemic began in March 2020.

Analyst commentary: “People expected rate hikes this year, and that was talked about, but I don’t think people were expecting the Fed to already be speaking about letting the balance sheet run off, even as soon as the first rate hike,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “If you ride a wave of liquidity to the upside and that liquidity starts to go away, I don’t think it’s terribly surprising that you’re going to see a reaction,” added Kathy Jones, head of fixed income at Charles Schwab.

Even before the FOMC minutes and tech carnage, a rotation was being played out in the previous four sessions. For example, Goldman Sachs’ hedge fund clients scooped up shares linked to airlines, energy and industrial names that benefit from the reopening trade and an improving economy. Value and cyclicals also outperformed despite benchmark indexes moving lower, with consumer goods and retailers like Walmart (WMT) and Walgreens (WBA) finishing the session in the green.

Next steps: Traders are hedging for volatility this year amid tighter Fed policy, supply chain problems and inflationary effects on corporate earnings. As remarked in Wall Street Breakfast’s What To Expect In 2022, the current landscape can create different risks and opportunities. Besides the overall equity outlook, there are also individual pockets of the market that can benefit investors, like the rotation seen over the past few sessions.

Going radioactive

Operations of all financial institutions in Kazakhstan have been suspended, including banks and the stock exchange located in Almaty, as turmoil continues to escalate in the country. Dozens of people were killed this morning and 400 were hospitalized as authorities cracked down on protesters that were said to have stormed government buildings. At least a dozen police officers also died, including one who was found beheaded, while more than 350 were injured.

Snapshot: The protests began in the country’s west but quickly spread to Almaty and the capital Nur-Sultan over a worsening energy crisis and rising fuel prices. Sentiment quickly shifted into anti-government riots, feeding off resentment of three decades of rule by ex-president Nursultan Nazarbayev. While hand-chosen successor Kassym-Jomart Tokayev stripped his powerful predecessor of the role as head of the country’s security council earlier in the week, that has failed to quell the demonstrators’ anger, with Nazarbayev still widely seen as the main political force in the country and believed to control much of the economy.

Following an internet blackout and airport capture, Russia sent in paratroopers under the Collective Security Treaty Organization, which also includes former Soviet states like Armenia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan. Kazakh President Kassym-Jomart Tokayev had appealed for the help, blaming foreign-trained “terrorist” gangs for the violence. The move marks the second action by the Kremlin in as many years to bolster an ally facing unrest, after supporting Belarusian leader Alexander Lukashenko in 2020.

On watch: Kazakhstan has the largest proven oil reserves in the Caspian Sea region and is a big crude exporter, but perhaps more important than global energy markets, the country accounts for around 40% of global uranium production. Stocks linked to the radioactive metal are climbing on the news as the situation goes from bad to worse. Shares of Cameco (NYSE:CCJ) is up 17% since the protests began, and is up another 4% premarket, while volumes of Sprott Physical Uranium Trust (OTCPK:SRUUF) has already eclipsed prior record highs.


Retailer margins are on watch this season as longer return windows and higher shipping costs can end up costing companies a lot more than usual. The pandemic has also shifted much of traditional commerce online, and those have return rates that are two to three times higher than sales at brick-and-mortar stores, according to Pete Madden of consulting firm AlixPartners. That’s not all, with inflation and higher wages incurring higher costs for retailers to process returns than were seen in the past.

Some statistics: Products worth $112B-$114B could be returned to U.S. retailers after the holiday season, up from $100B in 2020 and $95B in 2019, according to a forecast from liquidation inventory company B-Stock Solutions. UPS (NYSE:UPS) also estimates it will handle more than 60M return packages from Nov. 14 through Jan. 22, a 10% increase from the previous year.

In fact, both UPS and FedEx (NYSE:FDX) are raising their average shipping rates by 5.9% across most services in 2022, which is the first time in eight years that either company has had annual increases above 4.9%. The National Retail Federation also found that 11% of total retail sales were returned in 2020 – up from the 8.1% in 2019 – and that about 1 in 5 e-commerce sales were returned with the apparel category leading the pack.

Go deeper: Looking to cut down on costs, some companies are turning to innovation. Last year, Gap (NYSE:GPS) bought Drapr, which enables customers to quickly create 3D avatars and virtually try on clothing. Saks Fifth Avenue and others also use algorithms that help customers find the right apparel based on a size they are in a different brand. While the shift online has also triggered a “return culture,” it has also promoted more transactions and a new economy. “When customers know that they can get their money back just as easily as they can spend it, they’ll shop with more confidence and spend more,” said Sanaz Hajizadeh of Paypal-owned Happy Returns.

Today’s Economic Calendar
Auto Sales
7:30 Challenger Job-Cut Report
8:30 Goods and Services Trade
8:30 Initial Jobless Claims
10:00 Factory Orders
10:00 ISM Service Index
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet

What else is happening…

WarnerMedia (NYSE:T), ViacomCBS (NASDAQ:VIAC) eye sale of CW Network.

Bitcoin (BTC-USD) dips below $45K following hawkish Fed minutes.

Cathie Wood unloads shares of Twitter (NYSE:TWTR) and Pinduoduo (NASDAQ:PDD).

Roku (NASDAQ:ROKU) tumbles after Atlantic sees 50% downside amid competition.

Nike (NYSE:NKE) claims Lululemon’s (NASDAQ:LULU) Mirror is infringing on its patents.

Mercedes (OTCPK:DDAIF) stuns at CES with concept EV that has 620 miles of range.

Amazon (NASDAQ:AMZN) tech set to power millions of Stellantis (NYSE:STLA) vehicles.

Meta (NASDAQ:FB) halts project to build its own VR/AR OS, sticks with Android.

CDC recommends Pfizer (NYSE:PFE) COVID vaccine boosters for teens.

Moderna (NASDAQ:MRNA) hits a six-month low shedding over $15B in value.


Good morning. Happy Wednesday.

The Asian/Pacific markets were mixed. India, New Zealand and the Philippines did well; China, Hong Kong and South Korea were weak. Europe, Africa and the Middle East currently lean up. France, Turkey, Germany, Finland and Saudi Arabia are up; Russia is weak. Futures in the States point towards a down open for the cash market.

————— VIDEO: Themes to start 2022 —————

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

Stories/News from Seeking Alpha…

What happens in Vegas

What happens in Vegas stays in Vegas, except at CES… hopefully. The world’s biggest tech expo, known as the Consumer Electronics Show, is making a comeback this year after going virtual in 2021 due to the pandemic. Exhibitors are optimistic the technology displayed at the event will spread into the broader market, and with thousands of attendees hunting for innovations of the future, there’s a good chance that it will.

Hybrid event: While some companies like Amazon (NASDAQ:AMZN), AMD (NASDAQ:AMD), Intel (NASDAQ:INTC) and Meta Platforms (NASDAQ:FB) have canceled in-person appearances because of the rapidly spreading Omicron variant, there will still be plenty of tech on display. Expect to see the latest advances in robotics, self-driving vehicles, space, artificial intelligence, digital health, 5G, NFTs and the Metaverse. Up to 75,000 attendees and over 2,200 exhibitors are expected to arrive for this year’s conference, which will take place from Jan. 5 to Jan. 8.

Those showing up to CES in person must be fully vaccinated, wear masks and have been asked to test themselves for COVID within the 24-hour period prior to entering the venues. “Certainly, it will be different from previous years. It may be messy. But innovation is messy. It is risky and uncomfortable,” said Gary Shapiro, President of the Consumer Technology Association. While the actual conference starts today, a flood of CES announcements has already made headlines with keynote addresses and a “Media Day” taking place on Tuesday.

Notable revelations: Sony (NYSE:SONY) unveiled an electric vehicle prototype as it explores entering the EV market, while Deere (NYSE:DE) showed off the world’s first autonomous tractor that will be available to farmers this year. Intel’s Mobileye also set an audacious new self-driving car path, securing technology partnerships with Ford (F), Volkswagen (OTCPK:VWAGY) and China’s Geely (OTCPK:GELYY). On the chip front, AMD revealed a $200 graphics card, Nvidia (NVDA) showed off a $249 gaming card, while Intel unveiled a new generation of laptop chips.

No. 1 automaker in America

The global chip shortage is impacting carmakers differently, causing uneven effects down the supply chain. The latest… After 90 years as the top-selling automaker in America, General Motors (NYSE:GM) has lost its sales crown to Japan’s Toyota (NYSE:TM), which also became the first non-domestic automaker to take the top spot. Newly released figures showed U.S. sales for Toyota jumping 10% last year to 2.3M, compared to the 2.2M vehicles sold by GM, whose sales were down 13% for 2021 (Ford (NYSE:F) will report 2021 sales results later today).

Better management: The modern car can have hundreds, if not thousands, of computer chips, and with a growing semiconductor shortage, Toyota began stockpiling silicon ahead of its rivals. It was also earlier to bet on a recovering U.S. car market, cutting parts and production orders less sharply than competitors to make it better prepared for a return in demand. While Toyota executives were successful in navigating many supply chain problems, they don’t expect their newfound sales title to lead to a permanent shift.

“Yes, we did surpass General Motors in sales,” said Jack Hollis, Toyota’s senior vice president of operations in North America. “But to be clear, that is not our goal, nor do we see it as sustainable.”

Siphoning market share: Lofty car prices are expected to persist amid bare dealership lots and an inventory crunch, but those who are able to deliver are poised for outsized gains. Research firm Cox Automotive estimates Tesla’s (NASDAQ:TSLA) U.S. sales jumped 61% in 2021 and the EV maker’s stock already climbed 9% this week after hitting delivery and production records (Tesla doesn’t break out its U.S. sales). Shares of Ford (F) also closed nearly 12% higher on Tuesday as a rise in orders led it to double production plans for its new electric F-150 Lightning pickup truck.

Colonel Sanders tries vegan

Kentucky Fried plant-based Chicken is becoming a thing next week as restaurants nationwide add Beyond Meat’s (BYND) products to their menus. The new offering will be served as part of a combo meal, or in six- or 12-piece orders (the six-piece order will start at $6.99, but may vary by location). Shares of Beyond Meat took off on the news, advancing 9% in premarket trade and giving the alternative protein maker a much-needed jolt. In the last 12 months, the stock has lost half its value, taking the firm’s market cap down to $3.9B.

Backdrop: The highly-anticipated national launch follows years of testing by the Yum! Brands (YUM) chain and Beyond Meat to create the right chicken substitute. The first plant-based chicken from the partnership debuted at an Atlanta KFC restaurant in August of 2019, followed by tests in Nashville, Charlotte and southern California in 2020. Last year, Beyond announced a formal partnership with Yum to make exclusive meat substitutes for Pizza Hut, Taco Bell and KFC.

“This is really about where the customer is going; they want to eat more plant-based proteins,” said Kevin Hochman, U.S. president of KFC. “It’s January, so it’s a time of New Year’s resolutions and wanting to do something different in your diet.”

Go deeper: Looking to execute some high-profile launches in 2022, Beyond Meat poached industry veterans from Tyson Foods (TSN) for its C-suite in December. Doug Ramsey took up the role as chief operating officer after three decades of overseeing Tyson’s poultry and McDonald’s (MCD) businesses. Bernie Adcock was also assigned to a newly created position of chief supply chain officer following 30 years of working on operations and supply chain management at Tyson.

Resignation nation

Some staggering statistics were displayed in the Labor Department’s latest JOLTS report, which details information on job openings, hires, layoffs and those that quit their positions. Employers posted 10.6M openings in November – marking the six straight month the figure has topped 10M – against 6.9M unemployed people across the nation (meaning 1.5 jobs per unemployed person). In another wild data point, the number of workers voluntarily quitting their jobs surpassed 4.5M, which was even above the prior record of 4.4M reached in September.

Who holds the power? Job turnover has been largely concentrated in hospitality, food services and other low-wage industries, where strong competition for employees has given workers the leverage to seek better pay. Many are also seeking more flexible arrangements (like remote work) with many school districts temporarily returning to virtual learning, or even within their jobs, with volatile waves of coronavirus threatening to upend their industry (early retirees?). Others are fed up with having to take on multiple roles (better work-life balance), such as flight attendants, who have unexpectedly been turned into cops or conflict resolution negotiators.

Labor disruptions are likely to persist this year, but are not likely to stall economic recovery, with total hires jumping from 6.5M to 6.7M in November, the highest level since July. “Workers continued to switch jobs in light of the many opportunities the current labor market provides,” said Nick Bunker, director of research at job services company Indeed. The JOLTS report comes three days before the Labor Department releases its closely watched non-farm payrolls figure for December, which is expected to show growth of 400K jobs and the unemployment rate ticking down to 4.1%.

Outlook: In recent months, employees have gone on strike at Deere (DE), Mondelez (MDLZ) and Kellogg (K), as workers find themselves with increased leverage due to a massive labor crunch. The bargaining position has even seen average hourly earnings increase 4.8% in November from the same period a year ago, though the pay bump is having trouble keeping up with inflation. The Consumer Price Index, the Fed’s preferred gauge of inflation, surged 5.7% in November compared to a year ago, wiping out all of the wage gains.

Today’s Economic Calendar
Auto Sales
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Composite Final
10:30 EIA Petroleum Inventories
2:00 PM FOMC Minutes

What else is happening…

Oil and gas stocks sizzle on OPEC deal; Brent crude tops $80.

Jack Dorsey, Elon Musk weigh in on nuclear energy debate.

Blackstone’s Byron Wien is an old-school energy bull for 2022.

BlackBerry (NYSE:BB) turns out the lights on its iconic phones.

Charlie Munger boosts Alibaba (NYSE:BABA) stake with another 300K shares.

Pinterest (NYSE:PINS) slumps 9% as Guggenheim warns of further weakness.

Next-gen glasses: Chips prepped by Qualcomm (QCOM) and Microsoft (MSFT).

Macy’s (NYSE:M) tweaks store hours to adjust to staffing shortages.

Walmart (NYSE:WMT) shut down 60 locations last month in COVID hotspots.

Pfizer (NYSE:PFE) to deliver additional 10M courses of COVID pill to U.S.


Good morning. Happy Tuesday.

The Asian/Pacific markets did well. Japan, India, Taiwan, Australia, Singapore and Thailand led. Europe, Africa and the Middle East are currently up doing great. Denmark is down, but the UK, France, Germany, South Africa, Finland, the Netherlands, Italy, Austria and the Czech Republic are up 1% or more. Futures in the States point towards a moderate gap up open for the cash market.

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

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

Stories/News from Seeking Alpha…

$3T club

The first trading day of 2022 resulted in a historic day for the U.S. stock market as Apple (AAPL) became the first company in history to reach a valuation of $3T. The tech giant crossed the market cap milestone in afternoon trading, with shares climbing nearly 3% to $182.88 apiece. Lifting investor confidence was the belief that Apple will keep launching best-selling products as it explores new markets like self-driving electric cars, augmented-reality glasses and possibly the Metaverse.

Runners-up: The only other company that is currently in Apple’s market cap ballpark is Microsoft (MSFT), which has a valuation of $2.5T. Google (GOOG, GOOGL) parent company Alphabet recently slipped out of the $2T valuation club, and was at $1.93T in market cap on Monday. It took Apple just a year and a half to tack on its latest trillion dollars after reaching a $1T valuation in mid-2018 and $2T in value in August 2020.

“Being the first company to join the $3T club is a “flex the muscles moment” for [Apple CEO Tim] Cook and company,” said Wedbush analyst Dan Ives, adding that it was a “watershed” event for the iPhone maker. “The company continues to prove the doubters wrong with the renaissance of growth story playing out in Cupertino.” Ives also said that Apple is continuing to see strong demand for the iPhone 13, and the company’s services business is on track to be worth $1.5T alone.

iEcosystem: Nearly 1.65B people across the globe connect to the internet through an Apple product, like the iPhone, iPad or iMac. That has led to steady revenue growth, cash flow, and key products having a strong long-term outlook. It has also benefited from demand for consumer electronics during the pandemic, while the company has managed to largely avoid disruptions seen elsewhere in the supply chain, as well as regulatory threats from Washington.

New general in town

The Organization of the Petroleum Exporting Countries, otherwise known as OPEC, is getting a new public face, with the election of Haitham al-Ghais as its new secretary general. Al-Ghais, an oil industry veteran and former Kuwaiti governor to OPEC, will take the reins this summer, navigating a somewhat fractious alliance at a time of a volatile crude market. The secretary general is in constant contact with international bodies, and convenes the group’s meetings, which used to happen twice a year, but now includes almost monthly extraordinary sessions.

Bigger picture: Al-Ghais will succeed Nigeria’s Mohammad Barkindo, who will have served the maximum two three-year terms when he leaves office at the end of July. Holding the position since 2016, Barkindo helped clinch a deal with non-OPEC, which revitalized the group by bringing Russia and other key producers on a board for a series of production cuts since 2017. That helped shore up the market following the supply glut and oil plunge of 2014-16, while the alliance stayed in place through the coronavirus crisis in 2020, when the pandemic crashed the price of oil and saw it even briefly go negative.

As he heads for the exit, OPEC gave a salute to Barkindo as being “instrumental in expanding OPEC’s historical efforts to support sustainable oil market stability through enhanced dialogue and cooperation with many energy stakeholders.” Others are keeping their hands by their waist. The group has recently come under heavy criticism from the U.S. and other countries for creating “artificial tightness” in global energy markets, with Washington even coordinating a release from the Strategic Petroleum Reserve after OPEC refused to more aggressively boost output.

Today’s meeting: OPEC+ will convene for its latest monthly gathering today as WTI crude futures (CL1:COM) near $80 a barrel. The group is expected to continue to stay the course by modestly boosting production by 400K bbl/day from February. “Number one driver [of global oil prices] at the moment is management of the supply side of the market by [producer alliance] OPEC+,” said Virendra Chauhan, an analyst at Energy Aspects, adding that demand concerns from Omicron are subsiding and the planned release from national strategic petroleum reserves was smaller than expected.

Celebrity CEO to convicted felon

A federal jury late Monday convicted disgraced former Theranos (THERA) CEO Elizabeth Holmes on four of 11 counts that her once-hot biotech startup swindled investors out of hundreds of millions of dollars. The failed blood-testing firm was worth about $9B at its peak, reportedly giving Holmes a $4.5B net worth at the time, but was dissolved in 2018 after facing regulatory investigations. Among those allegedly duped by the 37-year-old former CEO are media mogul Rupert Murdoch, the DeVos family, Walmart’s Walton family and other wealthy investors.

Snapshot: Known for wearing black turtleneck sweaters like late Apple co-founder Steve Jobs, many saw Holmes as Wall Street’s next great entrepreneur. She and former Theranos President Ramesh “Sunny” Balwani falsely claimed that the company had developed a device that could test a single drop of human blood for multiple diseases at once, but the product didn’t actually work, and “misleading results” were eventually run on conventional equipment. Authorities expect to try Balwani – whom Holmes had a romantic relationship with – later this year.

After 50 hours and over seven days of deliberations, jurors in U.S. District Court in San Jose, Calif. finally convicted Holmes on three counts of wire fraud and one count of conspiracy to commit wire fraud, but acquitted her on four charges related to defrauding patients and remain deadlocked on the last three counts of deceiving investors. Holmes faces up to 20 years and $250,000 of restitution for each count covering her role in the collapse of Theranos, though she’ll probably get a lot less than that. Holmes pleaded not guilty to all the charges and she can appeal her conviction to the state appeals court.

Lessons learned? “I don’t think a verdict is going to change the way founders and VCs work in the ecosystem,” said Angela Lee, a professor who teaches venture capital at Columbia Business School and runs an investment network called 37 Angels. “I can’t tell you how many times I hear, ‘So-and-so is in this deal, they’re a name-brand VC, you have five days – are you in or are you out?’ People don’t want to miss out. I am not seeing more thoughtful diligence. If anything, I’m actually seeing a sped-up timeline for diligence in the last couple of years.”

5G safety dispute

Verizon (VZ) and AT&T (T) have pulled a 180 on their 5G rollout, agreeing to delay the launch of new service following pressure from Transportation Secretary Pete Buttigieg. The wireless firms previously declared that they would forge ahead with their plans despite a warning that it could interfere with aircraft electronics. The latest U-turn came after a flurry of calls from the White House, airlines that threatened legal action, and possible flight restrictions from the FAA that would have disrupted air travel and cargo shipments nationwide.

At issue: A new band of faster 5G wireless service, called the C-Band, is located near frequencies used by aircraft equipment to compute altitude. Aviation groups and the FAA fear it could put safety at risk, especially in low visibility conditions, but wireless companies and the FCC (which approved the service) have said there are no dangers. “We know aviation safety and 5G can co-exist and we are confident further collaboration and technical assessment will allay any issues,” AT&T said in the statement.

Under a new deal inked last night, the wireless providers will postpone the debut of their ultrafast wireless networks by an additional two weeks. They also previously agreed not to deploy towers for six months near 50 airports identified as having the greatest impact to the U.S. aviation. In turn, the industry agreed not to escalate its campaign against the new service, and will look at ways of minimizing the potential impact of interference on flight operations over the next two weeks.

Lot at stake: Verizon has the most at stake in the standoff, spending more than $45B last year to acquire C-Band licenses. It also shelled out several more billion on payments to clear away satellite operators that could have created interference with cellphone towers on the ground. Telecom industry groups have further pointed to C-Band frequencies that have already been deployed worldwide, like in France, saying there have been no reported incidents involving 5G and aircraft.

Today’s Economic Calendar
8:55 Redbook Chain Store Sales
10:00 ISM Manufacturing Index
10:00 Job Openings and Labor Turnover Survey

What else is happening…

White House goes after meat packers in a move to fight inflation.

What could go wrong in the electric vehicle revolution? Not enough lithium.

Vanguard ETFs take two of the top three positions for capital inflows in 2021.

Starbucks (NASDAQ:SBUX) to require COVID vaccine or weekly test for U.S. workforce.

U.S. daily COVID-19 cases top 1 million as Omicron rages.

FDA authorizes Pfizer’s (NYSE:PFE) COVID booster for 12- to 15-year-olds.

World’s largest coal exporter, Indonesia, bans coal exports.

Big milestone… Lockheed Martin (NYSE:LMT) beats 2021 target for F-35 deliveries.

Blackstone believes China will curb speculative investments in housing.

Investors worry Alibaba (NYSE:BABA) could convert ADRs into Hong Kong shares.


Good morning. Happy Monday. Happy New Years.

Several Asian/Pacific markets were closed. India and Indonesia did well; Hong Kong, Malaysia and the Philippines were weak. Several Europe, Africa and the Middle East markets were closed too. Among those open, big gains were posted. Poland France, Turkey, Germany, Russia, Hungary, Italy and Portugal are up 1%. Futures in the States point towards a moderate gap up open for the cash market.

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

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

Stories/News from Seeking Alpha…

On your marks

U.S. stock index futures are starting the year with some more champagne as contracts linked to the Dow and S&P 500 rose 0.6% overnight, while the Nasdaq climbed 0.7%. It follows a strong 2021 for each of the indices despite fears of inflation, tighter monetary policy, business disruptions and new COVID-19 variants. Investors seemed to focus on the bright spots of the macroeconomic picture instead, such as increased consumer spending, hiring ramp-ups and solid corporate earnings growth.

Snapshot: The S&P 500 rose 27% in 2021, hitting 70 all-time highs in the interim. That’s the most new records for the benchmark index since the 77 it set in 1954. For the first time in history, all the sectors of the S&P 500 also posted double-digit gains last year, but some are wondering if the strong returns will continue, especially with the index now trading at 26x earnings.

For a full breakdown of risks and opportunities going into the coming year, see Wall Street Breakfast: What To Watch In 2022. The edition covers inflation fears, central bank policy, economic growth, the supply chain and stock returns. The Wall Street guard is also weighing in on equity valuations for 2022, with differing opinions among analysts.

Breakdown: “Marginally less accommodative monetary policies may weigh on equity valuations. As a result, we expect returns on the asset class to be more muted in 2022. Over the medium term, though, we believe a focus on quality growth companies still makes sense. Coming into a period of sub-par returns, active management and skillful stock selection will be key.” – Barclays

“Our positive base case and the prospect of real yields remaining in negative territory leave us particularly bullish on equity markets, especially in the first half. We expect to see some compression of price/earnings ratio multiples for the S&P 500 as rates rise. However, strong earnings growth could still translate into about a 10% total return, in our view.” – BNP Paribas

“While we acknowledge that absolute equity valuations are elevated, this is true for all major asset classes relative to history. We expect global earnings to grow 8% in 2022; this should support a reasonably strong year for equity markets overall and our targets in each region imply about an 11% total return in global equities.” – Goldman Sachs

“The core of our cautious 2022 view on the S&P 500 is our belief that during a mid-cycle transition, price-earnings ratios typically compress. The median S&P 500 stock has corrected 15% from its 52-week high. However, the index is down only 3.5%. What’s keeping the index aloft is that the 15 largest companies now account for 40% of the index’s market capitalization. Consider rebalancing portfolios: U.S. equities versus non-U.S.; growth versus value; cyclicals versus defensives; mega-cap versus small- and mid-cap stocks; and active versus passive management.” – Morgan Stanley

Fading into the sunset

The new year brings new changes, and some of them can be seismic. The London Interbank Offered Rate, which has underpinned the pricing derivatives and loans – ranging from mortgages and student loans to business funding and credit cards – is ending a role it had held for about four decades. Banks have spent around $10B preparing for Libor’s demise, according to an estimate by management consultancy Oliver Wyman, which may not be that much given that the rate is tied to $265T worth of contracts globally.

Quote: “It’s one of the biggest transitions in financial markets in decades,” said Dixit Joshi, group treasurer of Deutsche Bank. “This is a milestone for the regulators since the great financial crisis about lessons learned.”

Libor was set each day by collecting estimates from a series of global banks on the interest rates they would charge for different loan maturities. It was also calculated across five of the biggest global currencies and quickly became the default standard interest rate at the local and international levels. However, over the last decade, Libor has been fraught with scandals and calamities, such as the role it played in worsening the 2008 financial crisis, as well as the big bank manipulation scheme – and collusion – that surfaced in 2012.

Go deeper: The Secured Overnight Financing Rate (SOFR) will be the main replacement for Libor in the U.S. The SOFR benchmark, which is based on the rates U.S. financial institutions pay each other for overnight loans, is said to be more accurate and secure around pricing. As for existing loans, Overnight Libor, 1-month, 3-month, 6-month, and 12-month USD maturities will continue to be published through June 2023.

Shattering estimates

How will Tesla (NASDAQ:TSLA) fare in 2021? Well, before the first trading day of the year, the latest blowout numbers from the company sent its stock up 7% premarket to $1,130. The high-flying EV maker set records for both production and delivery in 2021, topping its own annual estimates. “This was a ‘trophy case’ quarter for Musk & Co. with massive momentum moving into 2022,” tweeted Wedbush analyst Daniel Ives, while Musk added, “Let’s make the roaring 20’s happen!”

By the numbers: Tesla delivered more than 308K vehicles in Q4, which is 40K more than the average Wall Street estimate. It also delivered more than 936K vehicles over the entire 2021, which is almost double 2020’s totals. In terms of output, about 306K new vehicles rolled off its production lines in Q4, or 68K more than the preceding three months, notching a new record for volume in the final quarter.

The numbers are even all the more impressive given the supply chain problems that have roiled the auto industry during the pandemic. Tesla was able to scale vehicle deliveries by ramping up production at its first overseas factory in Shanghai, leaning on in-house software engineering, as well as making changes to the cars it produces in Fremont, California (e.g. removing radar sensors from Model 3 and Model Y vehicles in North America). With Giga Berlin and Giga Texas due to start increasing production this year, Wall Street is predicting another leap in sales, with deliveries expected to reach 1.42M in 2022.

Outlook: It’s not just a significant milestone for Tesla, but for the entire electric vehicle industry as a whole. Demand for EVs is getting stronger, and while Tesla is leading the pack – with an edge in scale, margins and technology – competition may be in the rear-view mirror. In some areas, like pickup trucks, Tesla is also lagging rivals. The company will get its Cybertruck on the road after other competitors, like Rivian’s (NASDAQ:RIVN) R1T and Ford’s (NYSE:F) electric F-150 Lightning, though it remains to be seen if those challengers will be able to scale their production.

Travel chaos

Many Americans are dreaming about road trips these days as air travel appears to be only getting worse. More than 2,600 U.S. flights were canceled on Sunday due to inclement weather and the Omicron variant, which is causing severe staffing shortages among crews. That’s on top of the 2,700 cancellations on Saturday, with delays seen for the majority of flights that managed to take off over the weekend.

Staggering statistic: U.S. carriers like United Airlines (NASDAQ:UAL), American (NASDAQ:AAL), Delta (NYSE:DAL), JetBlue (NASDAQ:JBLU), SkyWest (NASDAQ:SKYW), Alaska Airlines (NYSE:ALK) and others have canceled more than 10,000 combined flights since Dec. 23, which is among the busiest days for travel due to the holiday season.

Cabin crews, pilots and support staff have been reluctant to work overtime during the holidays despite offers of financial incentives. According to some airline unions, many also fear contracting COVID-19 during the peak travel season or don’t want to deal with unruly passengers. In recent months, many flight attendants have unexpectedly had to take on additional roles, like cop or conflict resolution negotiator, with disorderly behavior plaguing many planes.

Taking steps: Looking to deal with the shortages, United Airlines is now offering its pilots triple pay to pick up trips for most of January. Pilots were already offered three-and-a-half times their pay for flying open trips between Dec. 30 and Jan. 3, but the latest offer is good for the next month. United flight attendants are also getting extra pay for picking up trips, though other airlines haven’t had much success in raising crew compensation to avoid holiday flight disruptions.

Today’s Economic Calendar
9:45 PMI Manufacturing Index
10:00 Construction Spending

What else is happening…

AT&T (NYSE:T), Verizon (NYSE:VZ) reject request to delay 5G C-band launch this week.

Evergrande (OTCPK:EGRNF) shares halted pending release of ‘inside information.’

Israel to offer fourth COVID vaccine to people over 60s, medical staff.

Walgreens (NASDAQ:WBA) receives offer from Bain for its Boots U.K. chain.

Virgin Orbit (NASDAQ:VORB) falls back to Earth in second post-SPAC session.

Strong numbers… Chinese automaker BYD (OTCPK:BYDDF) posts EV deliveries.

With focus on renewables, Germany shuts three of six remaining nuclear power plants.


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