Good morning. Happy Friday.
The Asian/Pacific markets leaned up. Japan, Hong Kong and India lead while Indonesia posted a loss. Europe, Africa and the Middle East are mostly doing well. Poland, France, Germany, Russia, South Africa, Finland, Spain, Italy, Portugal and Sweden are doing great. Turkey is down. Futures in the States point towards a positive open for the cash market.
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The dollar is down. Oil is up; copper is up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Digital dollar
The crypto world has taken a beating since the FTX disaster, which reverberated through the entire system in recent months, and this week witnessed a solvency crisis at crypto-focused bank Silvergate Capital (SI). However, Bitcoin (BTC-USD) (+34% YTD), Ethereum (ETH-USD) (+29% YTD) and other tokens have managed to shake off the headlines, and talk of a more centralized industry is heating up again. In fact, Nellie Liang, Treasury Undersecretary for Domestic Finance, shed some light on the possible launch of a digital dollar, as she leads a new senior-level working group that will explore central bank digital currencies.
Snapshot: Popularly known as CBDCs, these tokens would represent a nation’s fiat currency, and became notable after President Biden signed an executive order on cryptocurrency policy (see what SA contributor Allard Peng said it would mean for DeFi at the time). Current discussions center around whether a CBDC would preserve the dollar’s global strategic role with regards to the architecture of the international financial system, and benefit U.S. households in terms of lowering transaction and borrowing costs. Other priorities include preserving national security, protecting privacy and preventing illicit financial transactions.
Liang also noted that CBDCs are only one of several options for upgrading the Fed’s legacy capabilities in terms of efficiency and competitiveness. Another one is real time payment systems, like the FedNow Service, which is expected to launch later this year. “There are also risks of a retail CBDC, including the potential for runs into a retail CBDC that could destabilize private sector lending during stress periods,” she added. “The Fed is conducting technology research and experimentation to inform design choices so that it is positioned to issue a CBDC if it were determined to be in the national interest.”
How do CBDCs differ from electronic cash? When money is deposited into a bank account, the commercial entity takes responsibility for the sum. The cash is then held in electronic form and can be used across a variety of platforms, but it’s limited to the bank’s ledger. In the case of CBDCs, the government is the counterparty and takes liability for the money, while the ledger that’s being used (known as the rails) can be a very different structure than a commercial institution. (23 comments)
Seeking rate clarity
Equities gained traction in the middle of session on Thursday following comments from Atlanta Fed President Raphael Bostic, who said the central bank could be in a position to pause rate hikes this summer. Major U.S. equity averages finished higher, allowing the S&P 500 (SP500) and Nasdaq (COMP.IND) to halt a two-session slide. The job market “continues to run unsustainably hot, and that inflation is not coming down as fast as I had thought,” countered Fed Governor Christopher Waller, who added that “wishful thinking is not a substitute for hard evidence in the form of economic data.” Rising interest rates have seen mortgage prices climb this week above their 52-week average, while recent reports suggest that Blackstone (BX) just defaulted on a €531M mortgage-backed bond. (56 comments)
‘Close call’
In the wake of Norfolk Southern’s (NSC) train derailment disaster in East Palestine, Ohio, Transportation Secretary Pete Buttigieg wrote the CEOs of the seven major railroads to ask them to join the Federal Railroad Administration’s Confidential Close Call Reporting System. Despite years of refusing to do so, Association of American Railroads CEO Ian Jefferies just replied to Buttigieg that all seven Class I railroads will join the program. Specifically, AAR wants FRA to improve the quality and speed of reporting, ensure that reports are kept confidential, take steps to prevent employee misuse of the program, and share information in a more timely manner. Earlier this week, Barclays saw upside in rail stocks despite downbeat investor sentiment. (8 comments)
Game on?
Microsoft (NASDAQ:MSFT) is reportedly headed toward European Union antitrust approval of a $69B bid for Activision Blizzard (NASDAQ:ATVI), thanks to its offers to license videogames to its competitors. That suggests what looked like a key hurdle will instead clear the way for Microsoft’s biggest-ever acquisition, and set up a bigger competitive battle with Sony (SONY) and Tencent (OTCPK:TCEHY). SA contributor The Value Analyst called the merger arbitrage opportunity in early February, noting the deal was more likely to go through than not. Microsoft also apparently won’t have to shed assets, which was noted in earlier reports, though it still has a ways to go to allay concerns in the U.S. and the U.K. (16 comments)
Today’s Economic Calendar
9:45 PMI Composite Final
10:00 ISM Service Index
11:00 Fed’s Logan Speech
11:45 Fed’s Bostic Speech
1:00 PM Baker-Hughes Rig Count
3:00 PM Fed’s Bowman Speech
4:15 PM Fed’s Barkin: “What’s Keeping Inflation Elevated?”
What else is happening…
Retail watch: Blowout earnings from Macy’s (M) and Kroger (KR).
Nordstrom (JWN) is winding down its operations in Canada.
Activist hedge fund Third Point said to take stake in AMD (AMD).
Walmart (WMT) plans to double healthcare center footprint in 2024.
Citigroup (C) cuts hundreds of jobs, mainly in investment banking.
Bribery: Ericsson (ERIC) pays millions to resolve breached DOJ deal.
Ford (F) set to restart F-150 Lightning production in mid-March.
EV revolution? ChargePoint (CHPT) powers down after latest earnings.
…SA Marketplace author Stone Fox Capital sees ‘only CHPT pain ahead.’
Save-the-Earth letdown at Tesla (TSLA), but analysts expect trouble with legacy automakers.
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Good morning. Happy Thursday.
The Asian/Pacific markets leaned down. South Korea did well, but Hong Kong, India and Singapore were weak. Europe, Africa and the Middle East also lean down. Saudi Arabia and Norway are up, but Poland, Russia, Greece, South Africa and Hungary are down. Futures in the States point towards a moderate gap down open for the cash market.
————— VIDEO: The Most Important Element of Trading —————
The dollar is up. Oil is flat; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
The master of plans
The jury is out on Tesla’s (NASDAQ:TSLA) Investor Day event at its Gigafactory in Austin, Texas. Elon Musk started off by talking about the clear path to a fully sustainable Earth, highlighting the dirty and wasteful energy economy that is currently in place. His “Master Plan Part 3” would eliminate fossil fuels including repowering the existing grid with renewables and a switch to all-electric vehicles by consumers and businesses (electric planes and boats were also mentioned). In terms of resources, the company is convinced there are enough nickel, lithium, and cobalt sources to power a sustainable economy.
Reaction: Investors were underwhelmed by the presentation, sending the stock down nearly 6% in AH trading on Wednesday. The future of Full Self-Driving, a robotaxi network, and charging infrastructure was discussed in broad strokes, and while a “next generation” electric-vehicle platform was announced, it didn’t include too many details. Note that Tesla shares have been on rip since investors welcomed in 2023 – sending the stock up 90% YTD – and those betting against the volatile stock have, at times, found themselves in the opposite lane facing traffic.
It was another “buy the rumor, sell the news” event, noted Seeking Alpha contributor Bill Maurer. “The presentation was just too long and wordy for the average investor,” which may have “fueled some of the selling in the after-hours session.” SA contributor Long Term Tips has already broken down what Tesla’s new master plan means for competitors.
Other highlights: Tesla disclosed that it broke ground on a lithium refinery plant in Corpus Christi, Texas with output expected within 10 months. The company also confirmed that a new Gigafactory will be built near the northern Mexican city of Monterrey. As for numbers, potential Tesla CEO successor Tom Zhu said Tesla has now produced 4M cars just seven months after passing the 3M vehicle mark for production. (180 comments)
Higher yields
Headlines from the fixed income world are rattling equity investors as the yield on the 10-year Treasury (US10Y) topped 4.00% for the first time since November. The 2-year yield (US2Y) also rose 2 basis points to 4.91% on Wednesday, hitting a new post-2007 high. Looking at the latest comments from policymakers, Atlanta Fed President Raphael Bostic advocated for rates to rise above 5%, while Minneapolis Fed President Neel Kashkari expressed concerns about incoming economic data. “Stocks are in trouble if Treasury yields keep rising,” writes SA contributor Tyson Halsey, CFA, who says to “buy high yields to hedge your portfolio.” See the full article, Is The Federal Reserve Wrong Again In Believing Inflation Is Transitory?
War on ‘woke’ funds
Over in Washington, the Senate just passed an anti-ESG measure that would overturn a Labor Department rule allowing fund managers and retirement plans to consider ESG (environmental, social, and governance) factors when making investment decisions. President Biden has said that he will nix the new bill if it comes to his desk – marking the first veto of his presidency – but the developments could signal further shifts in asset allocation strategies. With trillions of dollars pouring into the ESG space, a fight is brewing over the market narrative, as well as the PR and positioning that managers seek to take advantage of when marketing their funds. Contrarian investors wanting to bet against ESG can buy the God Bless America ETF (NYSEARCA:YALL), which is up 16% since its launch in October 2022. (6 comments)
A force to be reckoned with?
Salesforce (CRM) flexed its muscles in after-hours trading Wednesday, rocketing up 15%, as the cloud-based business-software giant gave a strong sales forecast to go along with upbeat fourth-quarter results. In an accompanying statement, CEO Marc Benioff avoided any comments about Salesforce laying off 10% of its employees, and stuck to the typical earnings-report script, but said, “we hit the hyperspace button since we last spoke a quarter ago. Changes that used to take months are taking weeks.” CFO Amy Weaver added to the sentiment by saying the results and outlook “set us up for a transformational fiscal year.” Will the advances help Salesforce pacify activist investors, like Elliott Management, which has reportedly nominated a slate of directors in preparation for a potential proxy fight? (19 comments)
Today’s Economic Calendar
Auto Sales
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:30 EIA Natural Gas Inventory
4:00 PM Fed’s Waller: Economic Outlook
4:30 PM Fed Balance Sheet
What else is happening…
ECB eyes release of the latest eurozone inflation numbers.
Microsoft (MSFT)-Activision (ATVI) review gets extended in Europe.
TikTok (BDNCE) sets one-hour screen time limit for teens.
Lowe’s (LOW) stock slips as Q4 sales lag expectations.
Department store markdowns: Sharp margin contraction at Kohl’s (KSS).
Despite payout concerns, Petrobras (PBR) to pay $6.9B in dividends.
Cryptoverse: Silvergate (SI) tumbles as annual report filing is delayed.
SpaceX (SPACE) launches latest space station crew into orbit.
Out-of-pocket cap: Lilly (LLY) slashes insulin prices by 70%.
Walgreens (WBA), DoorDash (DASH), Uber (UBER) partner on new delivery effort.
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Good morning. Happy Wednesday.
Several Asian/Pacific markets posted big gains. These include China, Hong Kong, India, Taiwan and the Philippines. Europe, Africa and the Middle East lean up, but are little changed. The UK, Turkey, Russia, South Africa, Hungary and Saudi Arabia are up; Portugal and Austria are down. Futures in the States point towards a negative open for the cash market.
————— VIDEO: The Most Important Element of Trading —————
The dollar is down. Oil is down; copper is up. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
To forgive, or not
SoFi Technologies (NASDAQ:SOFI) rose as much as 4% in afternoon trading on Tuesday following reports that conservative justices were skeptically questioning President Biden’s plan to forgive billions of dollars of student debt. SoFi is a known player for refinancing student loans, with SA contributors like Data Driven Investing recently pointing out that growth at its lending arm should accelerate again when the student loan moratorium expires in the back half of the year. Other related stocks were less affected by the opening arguments at SCOTUS, such as Navient (NASDAQ:NAVI), Nelnet (NYSE:NNI) and SLM Corp. (NASDAQ:SLM), which closed the session around the flatline.
Snapshot: Chief Justice John Roberts led the conservative justices, who comprise a majority of the court, in examining whether the Biden administration has the authority to cancel federal student loans as a result of the COVID-19 emergency. Roberts, in his questioning of the White House’s top Supreme Court lawyer, suggested that the administration had exceeded its authority. Roberts also contended that a program as large as Biden’s student loan forgiveness plan, which is estimated to cost $430B over three decades, should be something that casual observers would expect Congress to take up. “If you’re going to affect the obligations of that many Americans on a subject that’s of great controversy, they would think that’s something for Congress to act on,” he said.
In addition to the debate over whether the Biden administration has the authority to forgive the debt, the court also must decide on whether the states and two individuals suing the government have the legal right, or standing, to sue (parties generally have to prove that they would suffer financial harm from the action). The administration has said it’s acting in accordance with the Heroes Act, a 2003 law that allows the Secretary of Education to waive or modify terms of federal student loans in connection with a national emergency. The law was primarily intended to protect service members from financial harm while they were serving in wars in Afghanistan and Iraq.
Outlook: The concept of student debt cancellation, even if it would pass through Congress, has divided the country. Some say it would benefit borrowers at a time of high inflation, or lead to financial stability and economic security. Others have flagged it as another contributor to higher prices, or an unfair measure for those that chose not to go to college because of the cost, don’t have loans or already paid them off. The Federal Reserve estimated that Americans owed $1.76T in student loans in the fourth quarter of 2022, with the average student loan debt around $40,000 per borrower. (125 comments)
Love ’em or leave ’em?
Hedge funds and mutual funds are warming up to stocks after last year’s selloff, but exposure to equities is still historically low, according to Goldman’s latest analysis. The firm looked at 758 hedge funds with $2.3T of gross equity positions, as well as 543 mutual funds with $2.4T in assets under management at the start of 2023. Among the stocks they saw favored were Fiserv (FISV), Humana (HUM) and Wells Fargo (WFC), and among those out of favor – and even shorted – were Dow components Caterpillar (CAT), Walmart (WMT) and Disney (DIS). See the full list here. Looking at Wall Street market calls this week, J.P. Morgan’s global team remains bearish on U.S. stocks and Nomura recommends getting “back to cash.” (28 comments)
#TeslaInvestorDay
Pay attention to Tesla (TSLA) shares after the bell as the EV leader holds its Investor Day at 4 p.m. ET. The third edition of Tesla’s Master Plan (following Part 1 in 2006 and Part 2 in 2016) will be a major part of the event, which will likely detail the company’s long-term expansion plans and a new Gigafactory in Mexico. Other announcements could touch on Project Juniper, the Cybertruck, autonomous driving, energy storage initiatives, charging network revenue potential and the Tesla Bot. In other recent news, Tesla paused its FSD Beta rollout until a software update is available, though the stock’s monster 90% YTD rally restored Elon Musk’s status as the world’s richest person. (130 comments)
Consumer flop
Another high-profile investor day took place on Tuesday. Goldman Sachs (GS) CEO David Solomon took the podium, but ended up getting some flak over the Wall Street stalwart’s foray into the consumer arena. The business has resulted in billions of dollars in losses over the past few years, and Goldman is now exploring strategic alternatives for its Platform Solutions unit. It’s also in the process of selling some loans in its Marcus consumer bank portfolio, as well as evaluating the sale of installment lending platform GreenSky. Solomon had sought to diversify Goldman’s revenue stream away from traditional businesses like investment banking, but his lack of answers saw the stock dive 4% by the end of his presentation.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
9:00 Fed’s Kashkari Speech
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
What else is happening…
10 trades to get 10%+ yields from S&P 500 stocks without market exposure.
Target (TGT) sets cautious tone as investors eye rocky retail setup.
With earnings on tap, Salesforce (CRM) hears from another activist investor.
Uranium particles enriched to 83.7% found in Iran – IAEA.
China’s factory activity expands at fastest pace in over a decade.
Paramount (PARA) said to turn down $3B offer for Showtime.
Virgin Galactic (SPCE) confirms launch date of commercial spaceflight service.
Widening losses and weak forecast seen at Norwegian Cruise Line (NCLH).
Rivian Automotive (RIVN) slumps after production guidance disappoints.
General Motors (GM) cuts jobs despite pledges to the contrary.
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Good morning. Happy Tuesday.
The Asian/Pacific markets were mixed. China, South Korea and New Zealand did well; Hong Kong and the Philippines were weak. Europe, Africa and the Middle East currently lean up. Poland, Greece, South Africa, Spain, Italy, Portugal, Austria, Saudi Arabia and the Czech Republic are up; the UK is down. Futures in the States point towards a positive open for the cash market.
————— VIDEO: The Most Important Element of Trading —————
The dollar is down slightly. Oil and copper are up. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
A new tone
There’s a fresh chapter trying to be written in the Brexit story that has enveloped the U.K. since an EU membership referendum in 2016. While tensions have lingered around the bloc that Britain once counted itself a part of, things have been further complicated by the Northern Ireland Protocol, which has been in place since 2020. That agreement followed years of negotiations on how to govern trade following Brexit, and sought to prevent a hard border from being erected between the Republic of Ireland (part of the EU) and Northern Ireland (part of the UK).
Backdrop: At the time, the protocol was seen as essential to protect a 1998 peace deal that brought an end to the decades of sectarian violence – often referred to as “The Troubles” – but eventually exposed other divisions by creating a border in the Irish Sea between mainland Britain and Northern Ireland. Communities that strongly identified as British in the latter region despised the arrangement, saying it isolated them from the U.K., while some British companies severed ties with Northern Ireland businesses due to increased paperwork. A trade war also threatened to erupt after the U.K. repudiated and even threatened to override parts of the agreement that left Northern Ireland in the EU’s single markets for goods.
Looking to take a different direction, Rishi Sunak (the third U.K. prime minister within a year) is aiming to heal ties with the EU, while pushing euro-skeptic MPs in his party and the DUP in Northern Ireland to get on board. He just unveiled a new “Windsor Framework” with European Commission President Ursula von der Leyen that would set two classifications of goods that traverse the Irish Sea: a “green lane” for Northern Ireland with minimal checks, and a “red lane” that would be subject to higher scrutiny and documentation for things destined to move into Ireland and the EU. The framework also includes tax policy amendments, provisions for medicines and a sovereignty mechanism called the “Stormont brake.”
Go deeper: The developments come at a time when European unity is threatened by Vladimir Putin’s war in Ukraine. President Biden also applauded the Windsor Framework, calling it an “essential step to ensuring hard-earned peace is preserved and strengthened,” while Sunak further sees the deal as helping out the U.K. economy, which has recently seen fruit and vegetable shortages add another curveball to the inflationary environment. While there have been some signs of a business rebound, Britain remains the only G7 economy still smaller than before the coronavirus pandemic, and the Bank of England doesn’t expect a recovery to its pre-COVID peak until 2026.
Disney vs. DeSantis
“The corporate kingdom finally comes to an end,” Florida Governor Ron DeSantis declared, after signing a bill that gives the state control over Walt Disney World’s (NYSE:DIS) self-governing district. The move was a long time coming, and follows the “Don’t Say Gay” tussle between Disney and Florida’s legislature last year (see more on the controversy here). DeSantis will be able to appoint a five-member board that will have external oversight over the Reedy Creek Improvement District, which has its own tax and bond authority, and it will no longer be exempt from certain state codes and regulations. The “new red tape may dissuade DIS’ new infrastructure investments in Florida for the intermediate term,” SA contributor Juxtaposed Ideas writes in an article that discusses other impacts on the company’s theme parks. (29 comments)
Retail on the radar
Target (TGT) is due to publish its Q4 earnings in the premarket hours, kicking off a session that will also include quarterly reports of Costco (COST), Dollar Tree (DLTR), Macy’s (M) and Kohl’s (KSS). It follows some cautious commentary across the retail sector from the likes of Walmart (WMT) and Home Depot (HD) as well as toy manufacturer Hasbro (HAS) and discount retailer Dollar General (DG). While Target’s stock has marked a double-digit gain since the start of 2023, rebounding from a sharp decline in 2022, shares have faltered slightly amid a spate of less than optimistic commentary from many peers. Today’s guidance could be an issue for Target even if Q4 earnings exceed tempered expectations, but big beats or commentary on the strength of the consumer heading into 2023 will also be pivotal in determining the investor reaction. (6 comments)
Rollable screens
Techies are gathering in Barcelona for the Mobile World Congress, which kicked off yesterday and runs through March 2. The trade show brings together mobile operators, device manufacturers, technology providers and engineers to present their latest work and share their vision of the future. The 2023 theme is “Velocity: Unleashing tomorrow’s technology – today,” with categories spanning the acceleration of 5G to immersive experiences and the metaverse. On the electronics front, Motorola showed off a smartphone concept with a rollable screen that can extend vertically (from 5″ to 6.5″), while parent company Lenovo (OTCPK:LNVGY) unveiled a laptop with similar technology (from 12.7″ to 15.3″) that features a compact design with a bigger display.
Today’s Economic Calendar
8:30 International Trade in Goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
9:45 Chicago PMI
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
1:00 PM Money Supply
2:30 PM Fed’s Goolsbee Speech
3:00 PM Farm Prices
What else is happening…
WSB survey results: SA community split on a four-day trading week.
Meta (META) is building a ‘top-level’ product group focused on AI.
With JUUL up in smoke, Altria (MO) sets sights on vaping brand NJOY.
McDonald’s (MCD) expands Krispy Kreme (DNUT) test to more locations.
Will it last? Zoom (ZM) shows off better-than-expected Q4 results.
Yellen to Ukraine: Another high-profile trip for economic support.
China lithium investigation set to cut ~10% of global supply.
AMC (AMC) jumps as APE conversion injunction hearing set for late April.
White House sets deadline to scrub TikTok from federal devices.
Commerce Department launches first funding opportunity under CHIPS Act.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were mostly weak. China, Hong Kong, South Korea, Australia and the Philippines posted big losses. Europe, Africa and the Middle East are currently up big. The UK, Denmark, France, Turkey, Germany, Russia, South Africa, Finland, Norway, Spain, the Netherlands, Italy, Austria and Sweden are leading. Futures in the States point towards a moderate gap up open for the cash market.
————— Masterclass in Trading —————
The dollar is down. Oil is down; copper is up. Gold is up; silver is down. Bonds are up.
Stories/News from Seeking Alpha…
Four days a week
The world’s largest trial of a four-day workweek has wrapped up, with nearly 3,000 employees in the U.K. taking part in the six-month pilot. Among the findings were better work-life balances, fewer sleep problems, drops in burnout and quitting rates, and even revenues that increased modestly. In fact, of the 61 companies that took part in the trial, 56 are continuing to implement the four-day workweek (18 of which will be permanent), while two firms are extending the trial, and only three are going back to their previous schedules. The program was a major collaboration, spanning nonprofit 4 Day Week Global, the 4 Day Week Campaign in the United Kingdom and the think tank Autonomy.
Some history: In the U.S., Henry Ford is largely credited for standardizing the five-day, 40-hour workweek. In 1926, he shortened the then-prevalent six-day work routine – without reducing employee pay – saying we “can get at least as great production and probably greater.” Later in the 1930s, President Franklin Delano Roosevelt signed the Fair Labor Standards Act, which was subsequently amended to make the 40-hour workweek a standard (after which overtime pay applies). The years went by, and in a 1956 speech, then VP Richard Nixon forecast a four-day work week would happen in the “not too distant future,” but it would take many decades until the topic would start making headlines (California Congressman Mark Takano tried to enshrine it in legislation in 2021).
Over on Wall Street, market participants are also weighing the latest findings and considering whether a four-session trading week would work for the financial markets. This weekend’s Wall Street Breakfast podcast noted that the trading day could be extended to 6 PM ET, which could benefit those on the West Coast who see the regular market day close around lunchtime. Pre-market and after-hours sessions already take place on electronic communication networks, but a move towards amending the 9:30 AM to 4 PM schedule of the New York Stock Exchange (NYSE:ICE) and Nasdaq (NASDAQ:NDAQ) could lead to greater visibility, increased volumes and liquidity, while reducing volatility and risk.
Why not 24/7? Crypto trades around the clock, and futures almost do as well. But when it comes to the U.S. stock market, many feel that better price discovery happens when most Americans are awake. For many market makers, exchanges, brokers, investment houses and even financial professionals, a shift to 24/7 trading would also make their lives more complicated, and in many ways, they dictate the resources in the current trading environment. Upending traditional practices can also be difficult, as can be seen by calls to shift the securities settlement process to T+1 or real-time settlement. (8 comments)
Berkshire annual letter
While many are still debating Berkshire Hathaway’s (BRK.A, BRK.B) operating earnings from 2022, one thing is clear: The Oracle from Omaha is sitting on a record amount of cash. The investment giant led by Warren Buffett held $128.7B of cash and short-term securities at the end of Q4 versus $109B on Sept. 30 (that’s even with the company acquiring Alleghany Corp. in the last quarter of 2022). Buffett also had something to say to those critical of stock buybacks: “When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue,” he wrote in his annual letter to shareholders, while attributing his investment success to ‘a dozen truly good decisions.’ (99 comments)
Brexit bulletin
A post-Brexit trade settlement for Northern Ireland may be within reach as British Prime Minister Rishi Sunak and EU leader Ursula von der Leyen hold talks today in London. At issue is the Northern Ireland Protocol, which has been in place since 2020, but separates portions of the United Kingdom by creating a border in the Irish Sea between mainland Britain and Northern Ireland. A deal could aid trade tensions by easing the physical checks on goods demanded by the EU as per the original agreement. It may also restore a sense of sovereignty to the people of Northern Ireland by giving the province a say over the implementation of EU rules, but could face significant challenges, especially given the stance of the pro-British Democratic Unionist Party.
Merger Monday
Pfizer (PFE) is said to be in negotiations to acquire cancer-focused biotech Seagen (SGEN) after talks fell apart with Merck (MRK) in a deal that would have been worth around $40B. However, the discussions are at an early stage, and a number of hurdles would need to be overcome, including the potential for a stringent antitrust review of any proposal. A transaction would help Pfizer make up for its list of patent expirations that are set to expire at the end of the decade and boost its portfolio after making a fortune from vaccines during the pandemic. Overnight, the U.S. Energy Department embraced China’s lab leak theory as the origin of COVID-19. (23 comments)
Today’s Economic Calendar
8:30 Durable Goods
10:00 Pending Home Sales
10:30 Dallas Fed Manufacturing Survey
What else is happening…
Union Pacific (UNP) looking for new CEO amid activist pressure.
Shifting away from phone business, Nokia (NOK) revamps iconic logo.
Largest U.S. grid operator warns of coming power capacity shortfalls.
Netflix (NFLX) tops streaming viewing again, thanks to You People.
HBO Max (WBD) sues Paramount (PARA) over South Park.
Data suggests discount stores could be big winners in 2023.
Not ideal, but outright crypto bans shouldn’t be ruled out – IMF.
Average apartment size in the U.S. sees largest decline in 2022.
Ford (F) extends production pause of F-150 Lightning amid fire risk.
Tesla (TSLA) Investor Day preview: Are cheaper EVs part of master plan?
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