Before the Open (Apr 4-8)

Good morning. Happy Friday.

The Asian/Pacific markets closed mostly up. China, Hong Kong, India, Indonesia and the Philippines were led. The Europe, Africa and the Middle East markets are mostly up. The UK, France, Turkey, Germany, the UAE, Greece, South Africa, Finland, Norway, Hungary, Spain, the Netherlands, Italy, Austria and the Czech Republic are doing well. Futures in the States point towards a positive open for the cash market.

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

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

Stories/News from Seeking Alpha…

Dollar dominance

Check out original Seeking Alpha show The Weekend Bite! This week we discuss the relative imbalance in the labor market, 4 stock picks, and why the inverted yield curve does not signal a recession with Charles Lieberman, CIO at Advisors Capital Management. We also dive deep into Seeking Alpha PRO which highlights under-the-radar stock ideas for those investors looking for an edge in the market (sign up today for a free trial).

Many of the recent sanctions leveled on Russia have power because they’re based on the U.S. dollar, which is the most widely used currency in global financial markets, trade and central bank reserves. However, some are cautioning that weaponizing the greenback in this fashion could erode its dominance, stoking fears that smaller currencies like the renminbi could gain a bigger role on the international stage. China is already buying Russian energy with the yuan, while India is looking into a rupee-ruble trade arrangement. “Wars upend the dominance of currencies and serve as a doula to the birth of new monetary systems,” cautioned Zoltan Pozsar, analyst at Credit Suisse.

Snapshot: This time around, the U.S. went ahead with unprecedented sanctions on Russia’s central bank, which has roughly a fifth of its $630B of foreign reserves in dollar-denominated assets. Many central banks across the globe have dollars in their “rainy day funds” given their longtime markings of continuous stability, but data from the IMF shows that reserves have been coming out of the dollar and trickling into other currencies. There was $12T worth of foreign reserves held by central banks around the world at the end of 2021, with the dollar accounting for about 59% of the total, down from 71% in 1999 (the year the euro was launched).

“This is the beginning of the end of the dollar’s monopoly in the world,” declared Vyacheslav Volodin, speaker of the Russian Duma lower house of parliament. “Anyone who keeps money in dollars today can no longer be sure that the U.S. will not steal their money.” While the ruble this week recovered all of the losses seen since the invasion of Ukraine in February, many caution that the rebound was due to severe capital controls imposed by the Kremlin, a doubling of interest rates and foreign traders being barred from exiting their investments. “Sanctions cause the U.S. to lose its credibility and undermine the dollar’s hegemony in the long run,” added Zhang Yanling, former executive vice president of Bank of China.

Outlook: While the decline of the dollar has been predicted many times before, the U.S. has been through many turbulent periods with its currency still reigning supreme in global markets. America is also coordinating its sanctions with major allies, meaning other key currencies that can be used as an alternative (like the pound, euro, yen) are also off the table. Moreover, countries may be hesitant to diversify their reserves to currencies like China’s yuan, which is still not fully convertible and mixed into added geopolitical risks associated with the country. On the other hand, the U.S. market offers a level of liquidity that is not seen anywhere else in the world, backed by free markets and strong financial institutions. (14 comments)

Crypto craze

Down at the Bitcoin 2022 conference in Miami Beach, billionaire venture capitalist Peter Thiel is causing a stir, listing an enemies list for Bitcoin (BTC-USD), or individuals he believes are holding the cryptocurrency from reaching its highest levels. Speaking in front of the attendees, Thiel named fellow billionaire Warren Buffett of Berkshire Hathaway (BRK.A, BRK.B) enemy No. 1, describing him as a “sociopathic grandpa from Omaha.” JPMorgan’s (JPM) Jamie Dimon was also part of the “finance gerontocracy,” as well as BlackRock (BLK) CEO Larry Fink.

Quote: “If you have some of these large institutional investors, they need to be allocating some of their money to Bitcoin,” Thiel said at the conference. “When they manage state pension funds in the U.S. or they get trillions of dollars in assets… When they chose not to allocate to bitcoin that is a deeply political choice and we need to be pushing back on them. We need to say, you have to get onboard on this. It’s a movement, and it’s a political question whether this movement is going to succeed, or whether the enemies of the movement are going to succeed in stopping us.”

Recall that investor Charlie Munger, best-known as the No. 2 man at Buffett’s Berkshire Hathaway, called Bitcoin “rat poison” back in February. Buffett has also touched on cryptocurrency, saying, “I don’t own any and I never will.”

More from the conference: Thiel decried ESG, or environmental, social and governance investing, as another enemy of Bitcoin. “I think ESG is just a hate factory,” said the co-founder of PayPal (PYPL) and Palantir (PLTR), comparing it to the operations of the Chinese Communist Party. “They are into social and governance. Environmental is sort of fake, it’s probably also fake in a lot of these cases… ESG has been surprisingly inclusive. As far as I can tell, the only things that are sort of not liked are some of the carbon industries and Bitcoin, because most of the other companies are subject to political control.” (196 comments).

MLB debut

Apple (NASDAQ:AAPL) will be shooting for a home run tonight as it steps up to the plate with its first live sports broadcast. Friday Night Baseball will debut on Apple TV+ with a streaming doubleheader as the New York Mets meet the Washington Nationals at 7 p.m. and the Los Angeles Angels host the Houston Astros at 9:30 p.m. ET. Apple reportedly paid $85M for the two games each week, which will be available for free for a limited time without having a $4.99/monthly subscription to the streaming service.

More details: “Throughout the Friday Night Baseball broadcasts, fans can enjoy on-screen callouts about batters’ walk-up songs from Apple Music, test their knowledge of baseball trivia with help from Siri, and more,” Apple wrote in a blog post. “Friday Night Baseball will also incorporate new on-screen graphics that include innovative new probabilities-based forecasts of different situational outcomes, plus highlights and live look-ins from around the league integrated right into the broadcast.”

The deal with Apple TV+, which had about 20M paid subscribers in 2021, comes after ESPN (DIS) slashed its broadcast rights to MLB games this season. It’s also part of Apple’s push to generate more cash flow from an expansion into online services. Streaming rival Amazon (AMZN) aired several Yankees games back in 2019 and just inked an 11-year agreement (valued at $1B per year) to exclusively stream Thursday Night Football games on the Prime Video app.

Go deeper: Niche sports leagues may be the next frontier in acquisitions for the ravenous streaming industry, according to CNBC’s Alex Sherman, who observes that rising sports rights fees mean content giants will be paying up one way or another. The trend points towards a potential buyout for groups like Formula One (FWONA), NASCAR, World Wrestling Entertainment (WWE) or Ultimate Fighting Championship (EDR). Interestingly, ESPN shelled out $1.5B for five-year UFC TV rights through 2025, and a renewal could set back the company even more after passing on a $4.3B deal to buy the sports company outright in 2016. (2 comments)

‘Almost every trade’

What was supposed to be a staggered nine-day lockdown in Shanghai is morphing into something bigger, with a record of 20K daily new coronavirus cases reported in China’s largest city on Thursday. The restrictions have since grown in severity and have been extended to the entire city. There are even reports of food and healthcare shortages, price gouging and parents being forced to separate from their children.

Quote: “Basically everything else is not moving but is being diverted away from Shanghai to other parts of China,” said Mads Ravn, global head of air freight procurement at transport and logistics giant DSV. “It’s affecting every commodity you can think of and will have a global effect on almost every trade.”

Mainland bottlenecks can result in ocean shipping delays due to the buildup in orders and goods. As the virus spreads to more cities and provinces, alternate shipping channels may also be disrupted by lockdown measures, further weighing on the global supply chain. While China has conducted zero-COVID lockdowns before, they have never been on this scale, hitting important manufacturing, financial and logistical regions all at once. Note that 88% of the country’s 1.4B population have been fully vaccinated with jabs from providers like Sinovac (NASDAQ:SVA) and Sinopharm (OTCPK:SHTDY), according to the National Health Commission of the PRC.

Analyst commentary: “The COVID situation in China has deteriorated at an alarming pace, but abandoning zero-COVID now could be perceived as conceding that the strategy did not work in the first place,” Nomura economist Ting Lu said before the Shanghai lockdown began last month. “With the much worsening pandemic and Beijing’s resolution in maintaining its [zero-COVID strategy], we believe China’s ‘around 5.5%’ GDP growth target this year is becoming increasingly unrealistic.” Nomura now estimates that 23 cities and nearly 200M people are under full or partial lockdown across China. (9 comments)

Today’s Economic Calendar
10:00 Wholesale Inventories (Preliminary)
1:00 PM Baker-Hughes Rig Count

What else is happening…

EU bans coal imports from Russia, Japan may follow suit.

Natural gas rips to 13-year high on storage report, LNG hopes.

Costco (COST) stuns with comp beat. Is a special dividend next?

Backing away from Twitter (TWTR), NYT (NYT) resets newsroom.

Robinhood (HOOD) says Lightning Network is coming to the app.

Tesla (TSLA), GM (GM) take part in White House EV battery meeting.

Walmart (WMT) gets aggressive about finding new truck drivers.

Cheers! Constellation Brands (STZ) hikes dividend after earnings beat.

Pfizer (PFE) higher after FDA booster meeting and ReViral purchase.

NLRB may look to disrupt mandatory union-focused gatherings.

Auto software maker CDK Global (CDK) bought out for $8.3B.


Good morning. Happy Thursday.

The Asian/Pacific markets closed mostly down. Japan, China, Hong Kong, South Korea, Taiwan and the Philippines were weak. The Europe, Africa and the Middle East markets are mostly up. Denmark, France, Turkey, Germany, Greece, Russia, Switzerland, Hungary, Spain, Italy Portugal, Austria and the Czech Republic are leading. Futures in the States point towards a flat open for the cash market.

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

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

Stories/News from Seeking Alpha…

Wing takes flight

The first commercial drone deliveries in the U.S. will take off today as Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Wing unleashes its aircraft over the suburban towns of Frisco and Little Elm, which are located just north of Dallas, Texas. If successful, the service could revolutionize how goods are currently transported around cities. Wing has partnered with Walgreens (NASDAQ:WBA), Blue Bell Creameries, Easyvet, and Texas Health for the initial rollout, meaning consumers will be able to order prescription pet meds and ice cream, among other items.

How it works? Retail workers will load up the drones outside participating stores – rather than a Wing facility – carrying small packages that weigh 2.6 lbs or less. They will then climb to a cruise height of around 150 feet above the ground and travel their routes autonomously (remote pilots will be on standby to take control if something goes wrong). Once a delivery drone reaches its destination, it will stay at roughly 23 feet while lowering the package on board into a customer’s yard via a cable.

“I do want to set clear expectations: Not everyone who lives within range of our drones will be able to order on Day 1,” Wing CEO Adam Woodworth declared. “We’re going to invite customers in groups to make sure everyone has a good first experience with drone delivery.” Eventually, Wing hopes to expand the service to all the tens of thousands of homes in Frisco and Little Elm, and then to other regions in the Dallas-Fort Worth metro area.

Go deeper: Wing has been testing its service in the Dallas suburbs since last year following experiments in Christiansburg, Virginia; Helsinki, Finland; and Canberra and Logan, Australia (the division just made its 200,000th delivery). Similar to sister company Waymo, Wing is focused on achieving testing milestones before pressing the button on wide-scale deployment. Amazon Prime Air (AMZN) and Uber Eats (UBER) have also promised to ratchet up drone delivery operations in the near future, but until now, the technology has been mainly focused on small-scale trials. (6 comments)

FOMC minutes

All FOMC members are in agreement that the Federal Reserve will have to adopt a faster pace in shrinking its balance sheet than it conducted during the 2017-’19 period. “Participants generally agreed that monthly caps of about $60B for Treasury securities and about $35B for agency MBS would likely be appropriate,” per the minutes from March 15-16 gathering. That means the Fed could trim its roughly $9T balance sheet by more than $1T per year, while hiking rates “expeditiously” to fight the hottest inflation since the early 1980s.

Bigger picture: The process for reducing the balance sheet could start as early as next month. “Participants also generally agreed that the caps could be phased in over a period of three months or modestly longer if market conditions warrant,” the minutes revealed, though some FOMC officials said they’d be comfortable with “relatively high monthly caps or no caps.” They also reaffirmed that the balance sheet reduction should be done “over time in a predictable manner primarily by adjusting the amounts reinvested of principal payments received from securities.”

Meanwhile, many participants preferred a 50-basis-point interest rate increase at the meeting in March, but a number of them judged that a 25-bp hike “would be more appropriate” due to the greater near-term uncertainty resulting from Russia’s invasion of Ukraine. “Many” of the FOMC members also said one 50 bps rate hike or more could be warranted if inflationary pressures stay high or intensify. U.S. equities slid for the second straight session on Wednesday amid fears that aggressive tightening could hurt economic growth or lead to a recession.

Price pressures: A few of the officials even saw a “significant risk” that elevated inflation and inflation expectations could become entrenched if the public isn’t convinced of the committee’s determination to adjust policy to control inflation. They argued that “expediting the removal of policy accommodation” would reduce the risk and that would leave the committee “well positioned to adjust the stance of policy if geopolitical and other developments led to a more rapid dissipation of demand pressures than expected.” To give an indication of how prominent inflation was in their discussion, the word appeared 83 times in the minutes, up from 73 mentions in the January meeting and 75 references flagged during the get-together in December 2021. (181 comments)

Off the sidelines

Warren Buffett is definitely making a return to dealmaking after bemoaning the lack of good investment opportunities. Fresh off an $11.6B deal to buy insurance firm Alleghany Corporation (Y), the Oracle of Omaha is sinking $4.2B into HP (HPQ), taking an 11.4% stake in the computer and printer maker. Back in March, Buffett also disclosed a 15% stake in Occidental Petroleum (OXY) worth $7.6B amid rising oil prices and Russia’s invasion of Ukraine.

Commentary: “We view Berkshire buying HPQ shares as a positive that validates HPQ’s strategy/deep value,” wrote Evercore ISI tech analyst Amit Daryanani. HPQ shares are up 15% to $40 in premarket trading, giving a much-needed boost to a company that has lagged behind tech rivals for much of the past decade.

Before the recent spate of acquisitions, Buffett had gone six years without making a major deal, leaving Berkshire Hathaway (BRK.A, BRK.B) with a nearly $150B cash hoard. While he was likely involved in the latest HP purchase, the stake could have also been amassed by his two investment lieutenants. Todd Combs and Ted Weschler together run around 10% of Berkshire’s $350B equity portfolio.

Response from HP: “Berkshire Hathaway is one of the world’s most respected investors and we welcome them as an investor.” (41 comments)

Sanctions list

It has now been six weeks since Russia’s invasion of Ukraine, which has resulted in 1,563 confirmed civilian deaths, but likely thousands more. Western governments have promised to unleash the “mother of all sanctions” from the onset of the war, though it can be hard to keep track of all the penalties dealt to Moscow and its related entities. Here is a full list of U.S. sanctions since the start of the crisis:

February 24: Restricting exports of chips, computers and other high-end technologies to Russia.

February 27: Key Russian banks are blocked from SWIFT and sanctions are placed on the central bank’s international reserves.

February 28: Oligarchs are targeted with travel bans and asset freezes.

March 2: U.S. considers barring Russian ships from American ports.

March 8: Ban announced on Russian oil, gas and energy imports.

March 11: Move to strip Russia of its preferential trade status.

March 24: U.S imposes sanctions on dozens of Russian defense companies and the Duma legislative body.

April 5: Treasury stops the Russian government from paying holders of its sovereign via the dollar reserves it holds in American bank accounts. IRS suspends information exchanges with Russia’s tax authorities to hinder Moscow’s ability to collect taxes.

April 6: Sanctions unveiled against Putin’s adult children. All new investments are banned in Russia, while full blocking sanctions were imposed on Russia’s largest banks.

Outlook: Many of the penalties that have been implemented were made in coordination with allies, though other Western governments have imposed additional sanctions of their own. “Sanctions against Russia must be ruinous enough for us to end this terrible war,” declared Andriy Yermak, head of Ukraine’s presidential office. Western corporations have also been quick to suspend or exit their business in Russia, while some have even pledged to stop importing raw materials from – or exporting goods to – the economic and financial pariah. (2 comments)

Today’s Economic Calendar
8:30 Initial Jobless Claims
9:00 Fed’s Bullard: U.S. Economy and Monetary Policy
10:30 EIA Natural Gas Inventory
2:00 PM Fed’s Evans Speech
3:00 PM Consumer Credit
4:05 PM Fed’s Williams Speech
4:30 PM Fed Balance Sheet

What else is happening…

Shell (SHEL) to write off up to $5B in assets from Russian exit.

IEA chips in for strategic petroleum release, bringing total to 240M barrels.

Oil executives testify in ‘Gouged at the Gas Station’ House hearing.

Climate transition: Porsche (OTCPK:POAHY) makes move into e-fuels.

FDA panel considers need for broader use of COVID booster shots.

Visa (V), Mastercard (MA) may be challenged by banks’ Zelle system.

Biden warns Amazon (AMZN) ‘here we come’ after union victory.

Earnings: Levi Strauss (LEVI) gains after strong sales in the Americas. (JD) appoints new CEO to replace founder Richard Liu.

Meta’s (FB) Zuckerberg looks to create virtual currency for metaverse.


Good morning. Happy Wednesday.

The Asian/Pacific markets closed mostly down. Japan, Hong Kong, South Korea, India, Taiwan, Australia, Indonesia, Singapore and the Philippines were weak. The Europe, Africa and the Middle East markets are down big. Denmark, Poland, France, Germany, South Africa, Hungary, Spain, the Netherlands, Italy Portugal, Israel, Austria, Sweden and the Czech Republic are down 1% or more. Futures in the States point towards a relatively big gap down open for the cash market.

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

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

Stories/News from Seeking Alpha…

Treasury turbulence

Investors have been hit with an early surprise before the release of today’s FOMC minutes, which were supposed to give some clues about a reduction of the central bank’s $9T balance sheet following a quarter-point rate hike in March. The clues are no longer needed. Fed Vice Chair Lael Brainard pre-empted the minutes on Tuesday by saying a “rapid” reduction could happen as soon as May, calling the move “of paramount importance” to bring down inflationary forces, while the Fed is “prepared to take stronger action if indicators show such action is warranted.”

Supply and demand: Treasury yields shot up on the news, climbing 14 basis points yesterday to settle at 2.55%. Things kept going overnight, with the yield breaching the 2.6% level after rising 10 bps to 2.65%. When the Fed (the biggest buyer of Treasuries) reduces its balance sheet, the market is flooded with supply, meaning prices go down and yields go up (the two have an inverse relationship). As in most markets, current yields factor in future conditions, and all of those are now pointing to a faster pace of quantitative tightening.

Besides pulling liquidity from the financial system, another catalyst weighing on the bond market was a fresh sanctions package announced by the EU that proposed a ban on coal imports from Russia. The elevated commodity prices that are likely to ensue will drive inflation even higher, weighing further on the Treasury market (which is strongly linked to inflation). There’s also a 78% chance the Fed will raise its key rate by half a percentage point in May – a pace it hasn’t used since 2000 – on top of the median estimate of seven rate increases this year.

Go deeper: The developments saw equities lose some of their steam, with stock valuations ballooning over the last decade alongside Fed balance sheets. There are further fears of slowing growth amid inverted yield curves, while Deutsche Bank has even become the first big bank to forecast a U.S. recession that begins in 2023. “We no longer see the Fed achieving a soft landing,” wrote economists led by Matthew Luzzetti. “It is now clear that price stability… is likely to only be achieved through a restrictive monetary policy stance that meaningfully dents demand.” (6 comments)

30-year fix above 5%

The average rate on the 30-year fixed mortgage just crossed 5%, marking the first time it has passed the threshold since 2011 (save two days in 2018). It wasn’t that long ago that consumers could have refinanced their mortgages below 3%, but the majority of those applications have since dried up. Homebuyers are also facing a pricey housing market, with a report from CoreLogic showing prices in February were up 20% from a year ago, marking the 12th consecutive month of annual increases.

Why are mortgage rates going up? A confluence of factors impacts the market, including a coming rate hike cycle from the Federal Reserve and economic uncertainty linked to the war in Ukraine. Rising inflation that erodes purchasing power, tighter lending regulations and the financial picture of consumers can also send rates higher. The borrowing benchmark does not only affect housing demand, but other significant implications ranging from consumer spending to labor mobility.

“If inflation doesn’t come under control and the Fed’s action needs to be more aggressive, 6% is possible,” said Skylar Olsen, principal economist at digital mortgage company Tomo, though she doesn’t think the long-term outlook for rates will be that high.

Outlook: While it may not filter into mortgage applications for about a week – industry watchers will see that data next Wednesday – higher rates could push more people to the sidelines ahead of the peak spring season for the housing market. Yesterday’s comments from Fed Vice Chair Lael Brainard are not helping the situation as the central bank looks to reduce its mortgage portfolio after propping up the market since the beginning of the pandemic. Paydowns may also slow due to higher rates, which could be troubling for the Fed if it wants to tighten more quickly. (100 comments)

New board seat

Twitter (TWTR) is appointing Elon Musk to its board, bringing the social-media activist (and troll) inside the company fold. The announcement follows weeks of discussions between Musk, Twitter CEO Parag Agrawal and independent board chair Bret Taylor, as top brass learned that the Tesla (TSLA) CEO was accumulating a 9.2% stake in the platform. In fact, Musk began scooping up Twitter shares on Jan. 31, when the stock traded at $36.828, and those purchases continued through April 1, according to a new SEC filing. Twitter shares have soared about 30% to $51 over the last two sessions after his position was first disclosed.

Details: As long as Musk is on the board of directors (his current term is two years), his ownership stake will be capped at 14.9%. Musk currently controls only about 9% of the shareholder vote, meaning he’ll need plenty of support for any future proposals. He also amended paperwork known as a 13D, which is generally associated with activist investors, but said he had “no present plans or intentions which would result in or relate” to a merger or sale, shake up the board or change the company’s dividend or share buyback policy.

“He’s both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term. Welcome Elon!” Agrawal announced by tweet. Twitter additionally confirmed that it has been working on a feature that would permit editing tweets (a contentious feature among its user base) and will test it in the coming months. According to the company, it predates the Monday evening poll from Musk, which saw 70% of respondents take issue with free speech practices on Twitter.

What to expect: Musk has described himself as a “free speech absolutist” in the past and has pushed Twitter to allow a wider range of opinions. “Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!” he wrote in a follow-up tweet. With his new board seat, Musk will be able “to really kick up dirt,” Bernstein analyst Mark Shmulik declared. “He moved from the back seat of the car to the front seat of the car. In fact, he’s probably the driver.” (104 comments)

That’s the spirit

The contest to buy Spirit Airlines (SAVE) is heating up as a drive to consolidate takes off in the budget airline sector. JetBlue (JBLU) just offered $3.6B, or $33/per share, for the Florida-based carrier, which is roughly 40% more than the bid advanced by Frontier Airlines (ULCC) in February. Spirit’s board said it will work with its financial and legal advisors to evaluate the latest deal and pursue what’s in the best interest of Spirit and its holders (shares of the carrier rose 22% on Tuesday).

Quotes: “Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both,” JetBlue CEO Robin Hayes said in a statement. “An acquisition of Spirit by JetBlue, a high-fare carrier, would lead to more expensive travel for consumers,” Frontier responded in an email.

Note that JetBlue has already looked to expand its national footprint to better compete against the big four airlines that dominate the skies: United (UAL), Delta (DAL), American (AAL) and Southwest (LUV). JetBlue also attempted to buy Virgin America in 2016, but lost a contest to Alaska Air Group (ALK).

Antitrust angle: The combination of the two carriers has already drawn some criticism on the antitrust front, with legislators, like Sen. Elizabeth Warren, calling on the Department of Justice to further investigate the deal to see if it harms competition. A combination of JetBlue and Spirit Airlines may also be potentially problematic as far as antitrust concerns, especially in the Florida market due to overlaps in cities such as Orlando and Fort Lauderdale. Lockheed Martin’s (LMT) planned purchase of Aerojet (AJRD) was already blocked in January, while the DOJ is trying to disrupt American Airlines’s domestic alliance with JetBlue. (33 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
9:30 Fed’s Harker: Economic Outlook
10:30 EIA Petroleum Inventories
2:00 PM FOMC Minutes

What else is happening…

Amazon (AMZN) announces up to 83 satellite launches for Project Kuiper.

Lithium names plunge as Manchin hits brakes on Biden EV push.

GM (GM), Honda (HMC) to co-develop affordable electric vehicles.

Carnival (CCL) reports best bookings week in the company’s history.

Fresh round of U.S., EU sanctions to target Russian investments.

White House expected to extend pause on student loan payments again.

Apple (AAPL) says Worldwide Developers Conference will remain online.

Novavax (NVAX) hits new 52-week low ahead of FDA meeting.

Biden looks for ways to increase Canadian oil imports without pipelines.

Quant opinion: 5 cheap stocks under $10 to buy now.


Good morning. Happy Tuesday.

The Asian/Pacific leaned up. New Zealand, Indonesia and Singapore did well; India was weak; China and Hong Kong were closed. Europe, Africa and the Middle East markets are split. Denmark, Turkey, Spain, Portugal and Israel are up; Poland, France, Russia, South Africa, Hungary, Italy and Austria are down. Futures in the States point towards a down open for the cash market.

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

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

Stories/News from Seeking Alpha…

Will it last?

U.S. stock markets have notched an impressive rally since mid-March, with the three major indices sailing out of correction territory in under two weeks. The Nasdaq pushed even higher on Monday, climbing 2% on sentiment surrounding Elon Musk’s big stake in Twitter (TWTR). Bulls argue that companies will continue to deliver bumper profits despite the Fed’s rate-hiking cycle, while so-called meme stocks are recording big increases in options activity. The sharp unanticipated rebound is having analysts rewrite their latest market forecasts, though some are holding strong by comparing it to a bear market trap.

Bank of America: “Over the last two weeks, the S&P has produced one of its sharpest rallies in history, larger than the biggest 10-day rallies in seven of the S&P’s 11 bear markets since 1927,” said analysts led by Gonzalo Asis and Riddhi Prasad. “It has done so despite clearly weaker fundamentals (more hikes, higher inflation, and curve inversion) and the Fed leaning against equity market strength to hike faster. The worsening macro backdrop and market-unfriendly Fed make sustained U.S. equity gains unlikely. In practice, this means lower risk assets.”

Morgan Stanley: “The bear market rally is over,” declared U.S. Equity Strategist Michael Wilson. The economy is headed for a sharp slowdown as a “payback in demand from last year’s fiscal stimulus, demand destruction from high prices, food and energy price spikes from the war that serve as a tax and inventory builds that have now caught up to demand.” Note that Wilson had similar bearish views in 2021, which he later admitted were “wrong” as U.S. benchmark indexes powered to continuous record highs.

J.P. Morgan: “Geopolitics remains a wild card, but we do not see equities fundamental risk-reward to be as bearish as it is currently fashionable to portray,” analysts led by Mislav Matejka wrote in a research note. JPMorgan (JPM) CEO Jamie Dimon also flagged the “strength of the U.S. economy” in his annual letter to shareholders on Monday, citing “plentiful jobs with wage increases and more than $2T in excess savings.” The consumer is in “excellent financial shape (on average),” he added, while leverage is “among the lowest on record.” (8 comments)


Industry-changing technologies can take years or even decades to standardize, and many battles can be waged until a clear victor emerges. One such battle is currently taking place in the EV industry as companies debate the best way to power the cars of the future. NIO (NYSE:NIO), one of China’s leading EV makers, is looking to expand the uptake of battery-swapping as it tries to gain ground on other automakers like Tesla (NASDAQ:TSLA) that have turned to charging stations instead.

Quote: “We are open to selling the platform,” declared Hui Zhang, managing director of NIO Europe, which is looking to win over more drivers on the continent (currently one of the most competitive markets for EVs). It follows the recent opening of NIO’s first European battery swap station in Norway, which was placed alongside superchargers used by Tesla, in part to display how much faster of a system it is. A battery swap by NIO only takes about 5 minutes via a dedicated robot-operated bay, compared to the fastest chargers on the market that give some power quickly, but take up to an hour to fully recharge an empty battery.

More pros of battery swapping include eliminating the costs of the battery, which can account for more than a third of a new vehicle’s price tag. Drivers are also not worried about depreciating capacity or the value of their cars since the battery is not deeply integrated into the vehicle. Others caution that the technology works better in areas with high urban density and a scarcity of driveways, while the costs of building a swap station could be much higher than the infrastructure of a fast-charging network.

Some history: Tesla began conducting battery swapping trials in 2013, but dropped the project a few years later as consumers increasingly expressed interest in its Supercharger network. Three years earlier, Renault (OTCPK:RNLSY) trailblazed the industry by becoming a primary partner for Better Place, an Israeli startup that hoped to revolutionize the e-mobility industry. The company initially set up shop in Israel, Denmark and Hawaii, but was plagued by financial difficulties and mismanagement, and eventually went bankrupt in 2013. (23 comments)

‘mRNA like a piece of software’

While more than 100 viruses impact humans, vaccines only exist right now for 25. Looking to change that, Moderna (MRNA) CEO Stephane Bancel believes the company can employ the same technology it used to quickly create a COVID vaccine in 2020 to develop shots for other viral diseases. He even predicts that many adults will eventually receive annual COVID boosters, which could be combined with variant-specific doses, or other vaccines, like those that target the flu.

Quote: “Our first priority is to get an annual iPhone-like booster for all respiratory diseases,” Bancel said in a speech to the Boston College Chief Executives Club. “You’re going to get your [new] iPhone every year in September, and you’re going to get your ‘Moderna iPhone booster’ every year [as well]. We’re going to keep adding more and more ‘apps’ for viruses, and we’ll refresh all of those and update all of those every year.”

The Moderna CEO spent a decade doing mRNA vaccine research before COVID even emerged, but “once you get all of the pieces of the technology to work, then the next one is [easy].” As such, Bancel expects the firm to have annual COVID boosters available beginning this fall to protect people from new virus variants like Omicron. Moderna’s rivals like Pfizer (PFE), BioNTech (BNTX) and Johnson & Johnson (JNJ) appear likely to develop future COVID booster shots as well.

Go deeper: While many consumers have gotten two-shot initial vaccinations and a third booster shot, Bancel said whether consumers get additional shots will depend on people’s ages and individual risk tolerances to things like “long COVID.” Bancel said he doesn’t think his 19- and 20-year-old daughters will need boosters because “young people have very strong immune systems,” but the 49-year-old CEO said he’ll probably get additional booster shots himself because he’s “petrified” to have symptoms that linger for months or years. (92 comments)

Russian business

The war in Ukraine has been a boon for Chinese companies as Western firms continue to suspend or exit their businesses in Russia. In fact, China’s top envoy to Russia, Zhang Hanhui, has urged businesspeople in Moscow to seize economic opportunities created by the crisis, like adjusting their company structures and filling the “gap” in the Russian market.

Statistics: Telecom equipment supplier Huawei saw phone sales in Russia surge 300% in the first half of March, according to MTS, the country’s largest mobile provider. Brands like Oppo and Vivo also logged triple-digit increases.

Meanwhile, popular Chinese companies such as Alibaba (NYSE:BABA), Tencent (OTCPK:TCEHY) and Xiaomi (OTCPK:XIACY) continue to conduct “business as usual” in Russia, while others that have made a decision to leave have quickly found themselves in hot water. In late February, ride-hailing giant DiDi (NYSE:DIDI) announced it would pull out of the country, only to reverse course five days later. Neither statement mentioned geopolitical factors, but users online pointed to heavy public pressure.

Outlook: If Chinese companies continue to sell in Russia, it could cut off their business in the West. Many of the electronics they export often contain high-end semiconductors – or are made with U.S. tools and machinery – making them subject to sanctions on Moscow. In the meantime, firms like Huawei are walking a tightrope, refraining from calling out Russia while trying to avoid secondary sanctions. “These policies and measures are complex and constantly changing, and Huawei is still in the process of careful evaluation,” rotating chairman Guo Ping said in Shenzhen.

Today’s Economic Calendar
8:30 Goods and Services Trade
9:45 PMI Composite Final
10:00 ISM Service Index
10:00 Fed’s Kashkari Speech
11:05 Fed’s Brainard Speech
2:00 PM Fed’s Williams Speech

Companies reporting earnings today »

What else is happening…

France’s Macron calls for ban on Russian oil and coal imports.

Treasury halts Russian bond payments from U.S. accounts.

Baltic Dry Index down for eighth day as rates sink across the board.

Roku (ROKU) signs multi-year deal extension with Amazon (AMZN).

Citi (C) is said to pause SPAC IPOs due to new SEC rules.

Back to dealmaking: AMD (AMD) to acquire Pensando for $1.9B.

EV adoption: Hertz (HTZ) to buy 65,000 vehicles from Polestar.

U.S. coal prices top $100 for first time since 2008.

Climate change could see the U.S. lose $2T each year – White House.

Exxon (XOM) guides Street to higher Q1 earnings estimates.


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

The Asian/Pacific markets mostly did well. Japan, Hong Kong, South Korea, India and Indonesia led. Europe, Africa and the Middle East are currently split and little changed. Turkey, Switzerland and Saudi Arabia are up; Denmark, Spain and Austria are down. Futures in the States point towards a slight positive open for the cash market.

————— VIDEO: Recent Trades —————

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

Stories/News from Seeking Alpha…

Unions make a splash

Baristas at Starbucks’ (NASDAQ:SBUX) Reserve Roastery in New York City have voted 46-36 in favor of forming a union as labor campaigns intensify across the country. The location is the ninth company-owned Starbucks to unionize, with another 140 stores across 27 states filing for union recognition since the first bombshell victory seen in Buffalo in December. To date, only one location that filed for elections has chosen against unionizing under Workers United, an affiliate of the Service Employees International Union.

How will Howard Schultz handle it? Today, the longtime Starbucks CEO is stepping back into the role for the third time as the company seeks a permanent replacement for departing chief Kevin Johnson. In the past, Schultz has said no employee, whom Starbucks calls “partners,” has ever needed a representative and expressed his disappointment with unionization drives. Companies are often wary of unions as they can interfere with their autonomy and productivity, while Starbucks does have serious cash to keep fighting the initiatives, with annual revenue last year of $29B.

Schultz could also seek to shift the conversation, especially with SBUX shares declining nearly 22% since the start of the year. He already has a town hall planned for today, which will likely focus on take-away-oriented locations, tackling higher costs and the competition, and in a press release this morning, he suspended billions of dollars in share repurchases to free up cash to invest in cafes and employees. “I am returning to the company to work with all of you to design our next Starbucks – an evolution of our company deep with purpose, where we each have agency and where we work together to create a positive impact in the world,” he wrote.

Go deeper: The big wins in the restaurant industry – where there are almost no unions – are heating up organized labor and advocacy movements nationwide. On Friday, Amazon (AMZN) lost efforts to stop unionization at its JFK8 warehouse on Staten Island, marking the first-ever labor foothold at the retail giant’s U.S. operations. President Biden has also promised to be the “most pro-union president in American history,” declaring on many occasions that “unions built the middle class.” (3 comments)

Energy sanctions?

Europe may attempt to take additional steps away from Russian energy following the widely reported civilian atrocities in Bucha, Ukraine. Hundreds of bodies have been found in the city (and others) recaptured from retreating Russian forces – prompting an investigation into possible war crimes – though Moscow has denied the massacre, calling it a “provocation” and a “staged” performance. The EU currently gets about 40% of its natural gas from Russia, which powers everything from household heating to factory production, and makes up around 25% of the bloc’s total energy consumption.

Bigger picture: While immediate steps may include a ban on Russian ships from EU ports and putting more pressure on oligarchs, the big elephant in the room is a ban on Russian oil and gas. Momentum is building in Germany for such a step (the country already announced it would be “virtually independent” by the end of 2022), while Italian Foreign Minister Luigi Di Maio revealed there could soon be “debate on the issue of imports of hydrocarbons from Russia.” Last month, the U.S. pledged to boost LNG supplies to Europe after announcing its own ban on Russian oil, gas and coal imports.

Things were a lot different back in the 1960s and 70s, when Europe supplied itself with nearly all of its natural gas needs. Production then dropped off after North Sea gas fields became depleted, prompting the continent to look for foreign suppliers. Russia’s reserves were larger and cheaper than any other nearby sources, so infrastructure and pipelines were built to easily connect the grids. Generating EU power from coal and nuclear has also been phased out in recent decades due to renewable energy goals and anti-nuclear movements.

Go deeper: In response to the invasion in Ukraine, Lithuania over the weekend became the first EU nation to end imports of Russian gas completely. “From now and so on Lithuania won’t be consuming a cubic cm of toxic Russian gas,” tweeted Prime Minister Ingrida Šimonyte. The country has turned to liquefied natural gas for its energy needs after emphasizing energy security and opening an LNG terminal in the port of Klaipeda in 2014. “If we can do it, the rest of Europe can do it too,” added Lithuanian President Gitanas Nauseda. (50 comments)

Musk still likes Twitter

It was only a week ago that Elon Musk said he was considering building his own social media platform. At the time, he expressed his disappointment with Twitter’s (TWTR) free-speech approach, with more than 2M people responding to a subsequent poll saying the platform does not rigorously adhere to the principle. Well, guess what. The Technoking of Tesla (TSLA) just took a 9% stake in the social media company, sending TWTR shares up 25% in premarket trading.

Snapshot: “Musk could try to take a more aggressive stance here on Twitter,” Wedbush analyst Dan Ives told CNBC. “This eventually could lead to some sort of buyout.” His latest tweet might also rile the SEC, ragging on Twitter before taking a major stake in the network. Recall his infamous tweet in 2018 that he was considering taking Tesla private for $420 per share, as well as a related outstanding battle with the SEC.

Also note that Musk took the stake via his own revocable trust, and it was not made through any entity related to Tesla. With a 9.2% stake, Musk would become the largest shareholder in Twitter (even founder Jack Dorsey only has a 2.25% holding).

Thought bubble: Celebrities have tried to start their own social networks before, like former President Donald Trump, but haven’t seen too much success compared to the mainstream platforms that have dominated the landscape. In fact, Trump’s TRUTH Social has seen a 93% drop in downloads since its launch in late February, while Trump himself has only posted once on the platform. A lot of influencers that have also migrated to newer platforms have continued to tweet or post on Instagram (FB), while a total jump to a new network could cost someone like Elon Musk his 80.1M Twitter followers. (25 comments)

Sounding the alarm

“The confluence of the dramatic stimulus-fueled recovery from the COVID-19 pandemic, the likely need for rapidly raising rates and the required reversal of QE, as well as the war in Ukraine and sanctions on Russia may be unprecedented,” JPMorgan (JPM) CEO Jamie Dimon wrote in his annual letter to shareholders, which is widely read in the business community. “They present completely different circumstances than what we’ve experienced in the past and dramatically increase the risks ahead. While it is possible, and hopeful, that all of these events will have peaceful resolutions, we should prepare for the potential negative outcomes.”

On the bright side: “The U.S. economy is strong… excellent mortgage underwriting (even though we’ve had home price appreciation), plentiful jobs with wage increases, and more than $2T in excess savings, mostly due to government stimulus… the consumer in excellent financial shape (on average) and leverage among the lowest on record. Banks also performed magnificently during the COVID-19 crisis… helping to weather the terrible financial storm while setting aside extensive reserves for potential future loan losses.”

Not all is well: “The war in Ukraine and the sanctions on Russia, at a minimum, will slow the global economy – and it could easily get worse. It is also clear that trade and supply chains, where they affect matters of national security, need to be restructured. You simply cannot rely on countries with different strategic interests for critical goods and services. Such reorganization does not need to be a disaster or decoupling. With thoughtful analysis and execution, it should be rational and orderly. This is in everyone’s best interest.”

Disclaimer: “I should remind the reader that we normally don’t worry about – or even try to predict – normal fluctuations of the economy. In all times, we are prepared for difficult markets and severe recessions, as well as for unpredictable events, not only so we will survive them but also so we can be there for our clients when they need us the most. However, sometimes there are powerful underlying structural trends that we must try to understand since their impact can be so large, with widespread impact on many parts of human existence.” (14 comments)

Today’s Economic Calendar
Auto Sales
10:00 Factory Orders
12:30 PM Investor Movement Index

What else is happening…

China confirms plans to change audit rules on overseas listings.

Stricter standards: NHTSA orders 49 MPG fuel-economy standard by 2026.

Tesla (TSLA) shipped record 310K cars in Q1, slightly trailed forecasts.

Buffett-backed BYD (OTCPK:BYDDF) ends production of combustion engine cars.

Hospitals heading into turbulence as COVID admissions drop – Deutsche Bank.

Intel’s (INTC) new GPUs show promise, but Nvidia (NVDA) still has advantage.

Netflix’s (NFLX) Inventing Anna leads streaming for third week.

U.S. home prices ‘out of step’ with market fundamentals – Dallas Fed.

Petrobras (PBR) chairman nominee turns down job after football team defeat.

Three energy firms that should buy back stock and four that shouldn’t – Barron’s.


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