Wall Street Breakfast

Author: bmotrader   |   Latest post: Wed, 16 Jun 2021, 9:25 AM


Wall Street Breakfast: Watch 'Em Dots

Author: bmotrader   |  Publish date: Wed, 16 Jun 2021, 9:25 AM

Today's Federal Reserve meeting may be the most watched in recent years, with famed investor Paul Tudor Jones even calling it "the most important in Chair Jay Powell's career." With inflation gathering speed and the job market tightening, the FOMC will have to weigh the path for the country's monetary policy - chiefly the federal funds rate target range (now at 0.0%-0.25%) and asset purchases that continue at a $120B monthly pace. Again, it's widely expected that no tightening will occur this time around, but investors will be watching closely for any signals that the Fed is setting the stage to become less accommodative.

Dot plot: Investors will be focused on the central bank policymakers' summary of economic projections, specifically the dot-plot charts showing expectations on when Fed officials expect interest rates to start rising. More than half of 51 economists surveyed by Bloomberg forecast the median of 18 officials seeing an interest rate hike during 2023, in contrast to the March dot-plot where the median expectation was for a 2024 liftoff. Fed watchers will also be parsing Powell's comments on whether he softens his insistence that inflation is "transitory."

Perhaps the most vocal critic of the "transitory inflation" theory is Lawrence H. Summers, former Treasury Secretary and ex-director of the National Economic Council. "I do not see how any responsible policymaker can fail to recognize that overheating is now the largest risk in the near term U.S. macro outlook," he said via Twitter on June 10. "If overheating takes place in the U.S. and there is an eventual spike in interest rates driven either by the Fed or the markets, there will be enormous risks to an already fragile and over leveraged global economy." The bond market, however, seems to agree with Fed's narrative of transitory inflation, with the 10-year U.S. Treasury yield remaining below 1.5%.

Taper talk: Looking to avoid the 2013 "taper tantrum," when markets were caught by surprise by the Fed's change in policy, Powell has said the central bank will give advance notice of when it plans to trim its asset purchases. Some 40% of economists in the Bloomberg survey expect the Fed to indicate in late August its intention to start tapering (Jackson Hole?), while some 24% of the economists expect that signal to come in September - with actual reduction of purchases likely to start in early 2023. Recall that many Fed officials have commented that they're willing to let inflation run hot for a period of time after the measure has lagged its 2% target for years.


Little changed

Traders are in wait-and-see mode before the latest Fed meeting, with U.S. equity futures hovering close to the flatline for most of the night. While the central bank is not expected to take any action, there will be plenty of accompanying commentary when Chair Jerome Powell takes the stage at 2:30 p.m. ET.

Bigger picture: Scott Ruesterholz, portfolio manager at Insight Investment, expects the Fed to strike a "patient tone" at the gathering, "wanting to ensure they do not overreact and slow the pace of recovery." "There is a tremendous amount of uncertainty: how much of the inflation is being driven by transitory factors, like supply chain disruptions, and how much of the slower job growth is being driven by temporary measures like enhanced unemployment benefits." Powell's recent balancing act has emphasized the need for a full rebound before the Fed would consider raising rates, but has also highlighted a strong economic revival, which has maintained investor confidence in the economy.

The latest outlook comes as retail sales dropped in May, marking a shift in pandemic spending, while producer prices rose at their fastest annual rate in nearly eleven years, triggering worries about inflation. Others are less concerned. "On a one-year basis, inflation is indeed high," declared Brad McMillan, CIO at Commonwealth Financial Network. "On a two-year basis, which captures the downturn and the upturn, inflation is still in the normal range over the past decade. The one-year numbers are simply misleading. When you dig in, on time frame and components, inflation is not nearly as bad as the headline numbers suggest."

Go deeper: Another area that has been getting a lot of attention is commodities. While everything from lumber to copper and corn have been falling precipitously in recent weeks - denting expectations for a new commodities super cycle - oil continues to hold the line above $70/bbl. That could prompt Chair Powell to say he's monitoring the situation, or shake it off as another "transitory" event. While some of crude's rise may be inflationary, there are signs of stronger demand and tight supplies, with many U.S. companies balking at investment given the transition to a greener economy. Shell is said to be selling holdings in its largest U.S. oil field, the Keystone XL pipeline was recently terminated and activist shareholders last month won a board battle at Exxon.
Regulation - Pressure on Big Tech

Progressive tech critic Lina Khan has been sworn in as chair of the Federal Trade Commission, becoming the youngest commissioner ever confirmed to the FTC. Her 69-28 approval in the Senate also points to some bipartisan agreement among legislators that Big Tech needs some tighter reins. Amazon.com (AMZN), Facebook (FB), Alphabet (GOOG, GOOGL) and Apple (AAPL) are watching closely...

Who is Lina Khan? The 32-year-old is a law professor at Columbia University, specializing in antitrust and anti-monopoly cases, and previously worked as a legal adviser to FTC Commissioner Rohit Chopra. Last year, she served as counsel to a House investigatory panel, conducting a 16-month investigation into large online platforms and recommending action against the companies' anti-competitive behavior. Coming into focus is also a paper she wrote in 2017, called "Amazon's Antitrust Paradox," which made her a well-known figure in antitrust circles.

More on the article: Khan argues that current anti-competition laws are poorly equipped to address e-commerce. This is because the usual framework for evaluating competitive harm is the popular consumer welfare standard, which is often measured based on prices. However, that harm could be discounted in the modern economy, where practices like online predatory pricing lowers costs for consumers in the short term, but equips a company to gobble up market share. Like others, she also flags problems with Amazon owning a marketplace and selling on the same platform.

"Congress created the FTC to safeguard fair competition and protect consumers, workers, and honest businesses from unfair & deceptive practices," Khan said on Twitter after her confirmation. "I look forward to upholding this mission with vigor and serving the American public."
On The Move - RIDE it out

It's been quite a week for Lordstown Motors (RIDE), whose stock has been a rollercoaster ride over the last few days. Shares plunged 19% on Monday, only to rebound 11% on Tuesday, but are again off 3% in premarket trade. Investors and analysts are still figuring out how to size up the company, which was once hyped to take market share from Tesla (TSLA) and Rivian (RIVN), as well as Nikola (NKLA) - which faced its own crisis in September 2020.

Backdrop: Lordstown Motors was founded in 2018 by Steve Burns, former CEO of Workhorse Group (NASDAQ:WKHS), and a year later scooped up a GM (NYSE:GM) plant located in Lordstown, Ohio. Lordstown later inked a deal with Workhorse for the intellectual property rights of its W-15 pickup truck by giving the latter a 10% equity stake in the company. Last October, Lordstown reverse merged with a SPAC named DiamondPeak Holdings and became listed on the NASDAQ at an estimated equity value of $1.6B (roughly around its current market cap).

But... Both Lordstown CEO Steve Burns and the CFO Julio Rodriguez resigned on Monday after a board investigation into claims made by Hindenburg Research. While the internal probe found the short-seller's report "in significant respects, false and misleading," it did flag "issues regarding the accuracy of certain statements regarding" its pre-orders. The news added to a damaging headline from last week, when Lordstown revealed it was almost out of cash, "creating substantial doubt as to our ability to continue as a going concern."

Resetting course? While breaking into a competitive and capital-intensive field like EVs is not easy, Lordstown's new chairwoman feels it can be done. "It's a new day at Lordstown and there are no disruptions, and there will be no disruptions, to our day-to-day operations," Angela Strand said in a statement. She also confirmed that the company remains on track to begin limited production in September and there was enough interest from potential buyers to support factory output through the end of 2022.

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Wall Street Breakfast: Another Infrastructure Proposal

Author: bmotrader   |  Publish date: Mon, 14 Jun 2021, 11:16 AM

At a G7 summit over the weekend, President Biden pressed world leaders to take concrete steps to counter China's rising influence and put a heavy focus on the path toward decarbonization. The result? A global infrastructure project called "Build Back Better for the World" that would kill two birds with one stone. It calls for spending $100B per year to help developing nations' climate change transitions, while sticking to climate standards and labor practices.

Bigger picture: The plan would specifically create a "higher quality" alternative to China's Belt and Road Initiative, which has been criticized for its leverage in creating political goodwill, massive debt and a way to spread Beijing's influence. The new G7 plan, dubbed by some as the "Green Belt and Road" or the "Green Marshall Plan," would be funded by multilateral development banks like the IMF and World Bank, as well as the private sector (think wind farms, railways and other low-carbon projects). The Biden administration also plans to work with Congress to increase U.S. contributions to the G7's Development Financing Toolkit.

Quote: "As the G7, we are united in our vision for a cleaner, greener world. A solution to the problems of climate change," said U.K. Prime Minister Boris Johnson, who chaired the conference. "I think that is what the peoples of our countries now want us to focus on... and that we're building back better together."

Response from China: "Those fanning confrontation are definitely on an ill-advised path... Ganging up, pursuing bloc politics and forming small cliques are unpopular and doomed to fail," Chinese foreign ministry spokesman Wang Wenbin declared. "The days when global decisions were dictated by a small group of countries are long gone," added a spokesman for the Chinese embassy in London. "We always believe that countries, big or small, strong or weak, poor or rich, are equals, and that world affairs should be handled through consultation by all countries."

Other headlines at the G7 summit: Leaders vowed to phase out gas and diesel cars and shut down coal plants that do not apply emissions-capturing technology as soon as possible. They also promised to protect 30% of the planet's land and oceans by 2030. On an interesting note, NATO, which includes many G7 nations, are set to agree on a climate action plan today that would make their armed forces carbon-neutral by 2050.

Stocks - Extending gains

Traders are beginning the week with the Fed on their minds as the FOMC meets Tuesday and Wednesday to discuss policy monetary. An accompanying press conference from Jerome Powell is likely to reiterate that recent price increases will be "transitory," though it will be interesting to watch if the concerns will have any effect on the central bank's forecasts. Another area of note is quantitative easing, and if tapering talk even makes it into the conversation.

Bigger picture: Investors have so far shrugged off inflation concerns, with equities ending at highs last week despite the CPI expanding at a blistering 5% Y/Y in May. Stock futures inched higher overnight, with the Dow and S&P 500 up 0.1%, respectively, and the Nasdaq ahead by 0.3%. "Because the S&P 500 Index reached yet another new record high last week, investors will be watching to see if this signals even higher levels near term," added Jim Paulsen, chief investment strategist at the Leuthold Group.

Another post-pandemic milestone was notched before the weekend, with more than 2M people passing through U.S. airport security checkpoints on Friday. That's the first time screenings hit that figure since March 2020 and represents a big turnaround for the travel industry. While still losing money, airlines are recalling employees from voluntary leave and planning to hire small numbers of pilots later this year.

How will the meme trade fare this week? Usual suspects AMC (NYSE:AMC), BlackBerry (NYSE:BB) and GameStop (NYSE:GME) are all up in premarket trade, as well as newcomers Clover Health (NASDAQ:CLOV), Clean Energy Fuels (NASDAQ:CLNE) and GEO Group (NYSE:GEO). While sentiment changes quickly in the sector, WallStreetBets founder Jaime Rogozinski is defending the trade. "I mean what is market manipulation? You have people that are buying and you have people that are selling, right? If you have a fraudulent intent - if somebody goes up there and lies and says oh, BlackBerry has this new hologram cellphone that does whatever and it's a lie, that is market manipulation. But people coming together and saying let's just push this price to the moon and being really transparent and no defrauding taking place, that is absolutely what the market is."

Cryptocurrency - Elon & Bitcoin

Bitcoin (BTC-USD) is on the move again, soaring 10% above $39,000 over the past 24 hours, after Elon Musk confirmed Tesla (TSLA) would resume transactions using the cryptocurrency. The catch? The automaker will only restart customer payments once the crypto "is greener." According to Musk, that will happen "when there's confirmation of reasonable (~50%) clean energy usage by miners with positive future trend."

Backdrop: Tesla disclosed a purchase of $1.5B worth of Bitcoin in February and announced that it would begin accepting the crypto as a payment method for its products. Fast forward to May... Musk expressed concerns over how crypto mining contributes to climate change. While the topic is controversial and under intense scrutiny, Tesla subsequently stopped car purchases via Bitcoin and sold roughly 10% of its holdings. The move helped Tesla reduce its Q1 operating losses by $101M, though Musk said it was "to confirm BTC could be liquidated easily without moving market."

Musk was responding to a comment made by Magda Wierzycka, a fellow South African billionaire and former CEO of financial services firm Sygnia. On a recent podcast called Money Show with Bruce Whitfield, she highlighted Elon's outsized influence on Bitcoin prices, likening his tweets to "price manipulation." Wierzycka even went as far as saying Musk knowingly pumped up prices, then "sold a big part of his exposure at the peak."

Outlook: Last month, Michael Saylor, who heads up business analytics firm MicroStrategy (MSTR), said he met with Elon Musk and some of America's largest Bitcoin miners to spearhead an effort on promoting "energy usage transparency and accelerate sustainability initiatives worldwide." Dubbed the Bitcoin Mining Council, the effort would require participants to publish their renewable energy usage. Some are skeptical, however, with nearly 92% of Bitcoin mined outside the United States, including in countries like China, Russia, Kazakhstan and Iran.

Covid - 1B vaccines

At the weekend G7 summit, world leaders also pledged 1B vaccines to developing countries over the next year, while backing U.S.-led calls for a probe into the origins of the pandemic and pressing China on human right reforms. The jabs would be distributed directly, or through COVAX, the global vaccine buying system backed by the World Health Organization and Gavi, the Vaccine Alliance. The U.S. will donate nearly half of the shots, with 500M doses of Pfizer's (NYSE:PFE) vaccine set to be distributed internationally.

"Our values call on us to do everything that we can to vaccinate the world against COVID-19," President Biden said of the decision. "It's also in America's self-interest. As long as the virus rages elsewhere, there's a risk of new mutations that could threaten our people."

By the numbers: Digging a little deeper into the vaccine figure, G7 officials included pledges that started back in February. So far, the countries have promised 613M truly new doses, according to Bloomberg, including some funded in part by previously announced aid.

Go deeper: In late May, the WHO urged wealthier countries to contribute more to COVAX and requested at least 1B excess doses by the end of 2021. The facility estimates that it will need 11B doses to vaccinate at least 70% of the world's population, but has only shipped around 85M shots to date. Whether to waive vaccine patents, or whether it would increase production, was also a debate at the G7, and a similar dispute has played out across government and business in the U.S.

Global - Change in Israel

It's the end of an era for Israel's longtime leader, Benjamin Netanyahu, who was replaced on Sunday by Naftali Bennett's "change coalition." Netanyahu has been at the helm for a record 12-year run, as well as a 3-year stint in the late 90s, making him the longest-serving Israeli prime minister in history. Also known by his nickname Bibi, Netanyahu has championed a free market economy, security issues and Israel's diplomacy on the international stage, though many parties have increasingly felt isolated by his grip on power, pointing to divisive rhetoric, underhanded political tactics and ongoing corruption trials.

In order to form a ruling coalition, Israel's parliament, or Knesset, requires a simple majority for the 120 available seats. The current "change government" is the most fragile in the country's history, with 60 in favor and 59 opposed (with one abstention). Members of Knesset, otherwise known as MKs, can break ranks over hot-button issues, so this time around, even losing one seat could bring down the entire government. Making the matter worse, the razor-thin coalition is made up of eight parties that span the political spectrum (including an Arab party for the first time), that agree on little beyond their opposition to Netanyahu and another round of elections.

Who is Naftali Bennett? He heads up the right-wing Yamina party and has served as former Minister of Defense, Minister of Education and Minister of Diaspora Affairs (before a rift with Netanyahu). The 49-year-old also served as a commander in the elite IDF Sayeret Matkal and Maglan units, and comes from the tech sector, where he founded and sold anti-fraud software company Cyota for $145M in 2005. He later helped lead cyber software developer Soluto, which was sold for $130M in 2009, and some economists say the experience will help shape his economic policies.

"It gives him a close understanding of the tech world, which is very important for Israel's economy," said Daphna Aviram-Nitzan, Council Director of the Israeli Economic Association. "That means he understands the nation's economic issues from first-hand experience, and that he has a deep understanding of the world of scientists and engineers. That will give him greater strength to push forward on Israel’s economic development."

Fine print: Due to the fragility of the coalition, the "change government" will attempt to avoid delicate issues such as policy toward the Palestinians, and instead focus on domestic concerns. Those include the education system, lowering housing costs and cutting red tape for businesses, as well as a two-year budget that will help stabilize the country's finances following the coronavirus pandemic. Under a rotational deal (if the coalition lasts that long), Bennett will be replaced by alternate prime minister Yair Lapid in 2023, a former television host who founded the Yesh Atid party ("There Is a Future") a decade ago. "The government will work for all the Israeli public - religious, secular, ultra-Orthodox, Arab - without exception, as one," Bennett said in a statement. "We will work together, out of partnership and national responsibility, and I believe we will succeed."

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Wall Street Breakfast: The Inflation Debate

Author: bmotrader   |  Publish date: Fri, 11 Jun 2021, 10:19 AM

A higher-than-expected inflation print in the U.S. yesterday showed prices soaring by 5% in May compared with a year ago, marking the biggest increase since the Great Recession. While it was somewhat distorted by the pandemic, dueling narratives are taking shape to what this will mean for the economy going forward. The Consumer Price Index also showed a gain of 4.2% back in April, calling into question current fiscal policies and the direction of interest rates.

The bulls: The Fed is sticking to its "transitory" inflation thesis, which maintains that supply shocks and production bottlenecks have led to recent price pressures. Many are also quick to point out that the recent inflation print was once again driven by a jump in the cost of used cars and trucks, which accounted for about a third of the CPI's monthly advance. Meanwhile, the Biden administration argues that rising inflation is not only temporary, but it is also a feature of a rebounding economy. A broad vaccine rollout and lower COVID-19 case counts have seen Americans return to their old habits by spending months of pent-up savings.

The bears: Many Republicans and some economists acknowledge the post-pandemic supply problems and surging demand, but also flag the cost of the $1.9T stimulus package President Biden signed in March. They further point to coming proposals from the White House, like spending $4T on infrastructure, as a possible risk that could trigger a full-blown recession. While a large share of May's CPI came from the auto market, prices are jumping for many other categories like furniture, airfare and apparel, while labor costs, transport and raw materials are also skyrocketing.

Outlook: Will inflation be here for the long haul? It could take months before it's clear whether the current upsurge is temporary. As the economy reopens, both sides predict that rising costs will continue until supply chains and consumer demand recalibrate, but the real question is how prices will fare after that against a backdrop of massive fiscal and monetary policy support.

Stocks - Shrugging it off

Something interesting happened in the stock market on Thursday. Shortly after the release of the Consumer Price Index, which showed sizzling inflation figures for May, the major averages opened higher, with the S&P 500 even setting a new record at the close. In another surprise, Nasdaq had a better day than its cyclical peers as the growth trade outperformed value. Dusting off the old textbooks, rising inflation should weigh on corporate profits, reduce purchasing power and trigger fears of higher interest rates, but that's not being felt this time around.

What happened? Some investors may be following the "transient" camp, especially interest rate watchers that are listening to every word of Jay Powell. There is also a lot of buying power still out there and many traders are looking to ride the momentum. For others, new dynamics may be playing out in equities. Some fearful of government spending and a weaker dollar see risks in converting to cash. That could result in some sort of unconventional hedge in the stock market, especially in one that increasingly appears disconnected from the fundamentals (similar sentiment that's boosted crypto?).

"The technical setup for the broader market remains constructive," said Craig Johnson, technical market strategist at Piper Sandler. "Momentum indicators have improved and the majority of SPX stocks remain above their 200-day MAs and in MACE defined uptrends. We reiterate our year-end SPX price objective of 4,625." Overnight, stock index futures inched up slightly and continue to point green ahead of the open.

From the SA comments section: "Not a surprise. Markets rarely sell off on the same news, especially when the news is well anticipated," points out Charles Agbakwu. "Cash is trash. Park it in something that goes up," writes nothing_lasts. "The stock market is indestructible," adds Investing4FIRE, while calvinfroedge asks "Does anyone still think we have free markets?"

Vertical Aerospace

Autonomous vehicles, supersonic aircraft, point-to-point space voyages... There are many trends in store for the future of travel and companies are sinking big bucks into many of the emerging industries. American Airlines (AAL) is the latest to join the revolution, investing $25M in Vertical Aerospace Group, a U.K.-based electric aircraft startup. The world's largest carrier by traffic also said it would purchase as many as 250 of Vertical's planned flying taxis, pending approval by regulators and other milestones.

Details: Called the VA-X4, the electric vertical takeoff and landing (eVTOL) aircraft can carry four passengers and a pilot. It's also capable of flying at speeds up to 200 mph, with a range of more than 100 miles. The first test flight is planned to be conducted later this year, with certification of the zero-emissions aircraft as early as 2024.

There's bigger news: Vertical Aerospace is combining with SPAC Broadstone Acquisition (BSN) in a transaction that's expected to close in the second half of 2021. It values the combined company at a pro forma equity value of $2.2B and would result in gross proceeds of $394M. Vertical will be listed on the NYSE under the ticker "EVTL", and has also received investments from Avolon, Honeywell (HON) and Rolls-Royce (OTCPK:RYCEY).

Elsewhere in the industry: Vertical Aerospace joins several other flying taxi companies that have announced SPAC deals this year, including Joby Aviation, which is going public through a deal with SPAC Reinvent Technology Partners (RTP), and Archer Aviation, which is hitting the markets via SPAC Atlas Crest Investment Corp. (ACIC).

Trending - Unemployment fraud

A new report from Axios suggests that unemployment fraud rose heavily during the pandemic, with criminals stealing as much as half of the benefits being doled out over the past year. Blake Hall, CEO of fraud-prevention service ID.me, said the U.S. lost $400B to fraudulent claims and as much as 50% of the total claims might have been stolen. At least 70% of pocketed money also left America, with a large chunk ending up with groups in China, Russia, and Nigeria, according to LexisNexis Risk Solutions' Haywood Talcove.

The criminal plot: Data logs were stolen by crooks, or individuals would be fooled into sending their personal information to scammers. Oftentimes, "mules" (a.k.a. low-level criminals) armed with debit cards would withdraw the illicit funds from ATMs. The money was then sent abroad, most commonly via Bitcoin.

"Widespread fraud at the state level in pandemic unemployment insurance during the previous Administration is one of the most serious challenges we inherited," said White House economist Gene Sperling. "President Biden has been clear that this type of activity from criminal syndicates is despicable and unacceptable. It is why we passed $2B for UI modernizations in the American Rescue Plan, instituted a Department of Justice Anti-Fraud Task Force and an all-of-government Identity Theft and Public Benefits Initiative."

Go deeper: States weren't prepared for the tsunami of unemployment claims when the pandemic hit in March 2020. While fraud was likely, many chose to keep the money flowing for those that desperately needed it, rather than spending precious time on checking the veracity of the applications. On May 28, the Office of the Inspector General even found that $39B in unemployment money from the 2020 CARES Act had been misused, partly due to fraud and improper payments. President Biden also said last week that while the temporary boost in unemployment benefits had been effective thus, "it makes sense" for them to expire in September.

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Wall Street Breakfast: Memorable Approval

Author: bmotrader   |  Publish date: Tue, 8 Jun 2021, 10:20 AM

The FDA cleared the first new treatment for Alzheimer's in nearly two decades on Monday, sending shares of maker Biogen (BIIB) up 38% and adding $16.5B in market value. The company claims that Aduhelm, which has the molecular name aducanumab, slows down the memory-robbing disease by breaking up clumps of plaque formed on the brain called amyloid. The approval came just in time for Biogen, which is dealing with declining sales and the loss of patent protection for its top-selling drug, Tecfidera, which is used to treat multiple sclerosis.

Wall Street sees a blockbuster: Despite the drug's questionable efficacy, Biogen said it would charge about $56,000 a year per patient (and wouldn't hike prices for four years). Clinical trials also included people suffering from only mild to moderately severe Alzheimer's, though the drug will be available to anyone that has been diagnosed with the disease. The global Alzheimer's treatment market is meanwhile forecast to grow at a compound annual growth rate of 12.8% between 2020 and 2027, reaching more than $5.6B by 2027, according to Acumen Research and Consulting.

"We ultimately decided to use the Accelerated Approval pathway - a pathway intended to provide earlier access to potentially valuable therapies for patients with serious diseases where there is an unmet need, and where there is an expectation of clinical benefit despite some residual uncertainty regarding that benefit," said Patricia Cavazzoni, Research Director for the FDA Center for Drug Evaluation.

Additional details: Unlike other Alzheimer's drugs that come in pills, Aduhelm requires monthly infusions. Before prescribing the drug, doctors will first make sure their patient's brain has amyloid buildup, which typically requires an imaging scan or spinal tap. Patients will also need to be monitored with MRIs, to guard against small brain bleeds, hemorrhages, or an accumulation of fluid. About 6M people are suffering from Alzheimer's in the U.S., and as many as 1.4M could be eligible to take Aduhelm, per estimates from Cigna.

Memeing around

There wasn't much movement from U.S. stock index futures overnight following a mixed session on Monday that saw heavy volumes once again migrate to meme stocks. Shares of AMC (AMC), BlackBerry (BB) and GameStop (GME) all popped by double-digits, and are edging up again in premarket trade. Meanwhile, the SEC is watching the ongoing volatility in the market for "disruptions, manipulative trading or other misconduct" and "vowed to protect retail investors."

Other traders are staying on the sidelines before the latest inflation figures on Thursday. Economists expect the CPI to surge by another 4.7% Y/Y in May after rising by 4.2% on an annual basis in April. The latter figure marked the fastest expansion in the index since 2008, as analysts debate whether inflation will stick around and its related impacts on the economy.

The good: The current spike is being driven by "the unprecedented role of outliers," wrote Jan Hatzius, chief economist at Goldman Sachs. "All this suggests that Fed officials can stick with their plan to exit only very gradually from the easy current policy stance."

The bad: "In their March forecasts, the Fed projected that, despite clearly achieving all of their long-term economic goals by the end of 2023, they did not foresee any increase in the federal-funds rate before 2024," said David Kelly, chief global strategist at J.P. Morgan Asset Management. "If, after reassessing their forecasts for the economy next week, the Fed maintains this extraordinarily dovish stance, then the risk of a boom-bust recession will have increased to a substantial degree."

The ugly: "Never before have we seen such coordinated expansionary fiscal and monetary policy. This will continue as output moves above potential," added David Folkerts-Landau, Deutsche Bank's chief economist. "It may take a year longer until 2023 but inflation will re-emerge. And while it is admirable that this patience is due to the fact that the Fed's priorities are shifting towards social goals, neglecting inflation leaves global economies sitting on a time bomb. The effects could be devastating, particularly for the most vulnerable in society."

Share your Internet

Amazon's (NASDAQ:AMZN) Sidewalk project goes live today without asking your permission. The "neighborhood network" pools local Internet connections from millions of Amazon Echo smart speakers and Ring devices to let smart devices have a wider range of operation. While users have not been asked to opt-in, they could still turn the capability off, though their devices won't be able to access the network.

How much data will it use? "The maximum bandwidth of a Sidewalk Bridge to the Sidewalk server is 80Kbps, which is about 1/40th of the bandwidth used to stream a typical high definition video," according to Amazon. "When you share your Bridge's connection with Sidewalk, total monthly data used by Sidewalk, per account, is capped at 500MB, which is equivalent to streaming about 10 minutes of high definition video."

How does it work? Signals from all of Amazon's neighborhood devices join together to create what’s called a mesh network. The low-bandwidth wireless grid can stretch half a mile to connect hard-to-reach areas across urban and suburban America. Amazon isn't charging for Sidewalk, though "standard data rates from Internet providers may apply."

Outlook: Plenty of concerns abound, like helping Amazon build a network likened to Big Brother or the potential hacking into private connections. However, Amazon says Sidewalk is built with three layers of encryption to "secure data traveling on the system and keep customers safe and in control." There are also many positive uses for the project. Besides extending the range of connected devices, Amazon Sidewalk is partnering with CareBand to track people with dementia, and is adding smart lock-maker Level and Bluetooth lost-item tracker Tile to the project.

Outlook - Future of work

Many parts of the economy, like consumer-facing industries or trade-related fields, have returned to the workplace long ago. Other companies are re-establishing themselves in the wake of the coronavirus pandemic, which sped up a world that was in the midst of a digital revolution. Employers are weighing two important forces - the need for in-person creativity and connections, as well as the flexibility and efficiency in working from home - and that's creating some interesting dynamics when it comes to the future of the office.

Stay at home: Despite mega real estate investments in recent years, including the 61-floor Salesforce Tower in San Francisco, CEO Marc Benioff feels that there's no return to the pre-COVID days. "The past is gone," he declared. "We've created a whole new world, a new digital future, and you can see it playing out today." Salesforce (NYSE:CRM) expects 50% to 60% of employees will continue to work from home, up from around 20% before the pandemic, and even bet big on the new way to work by shelling out $27.7B for Slack Technologies (NYSE:WORK). As for all the unused office space, Benioff suggested it will be used for training facilities and cultural engagement centers.

Get back to the office: "I'm about to cancel all my Zoom meetings," JPMorgan's (NYSE:JPM) Jamie Dimon said last month. "And everyone is going to be happy with it, and yes, the commute, you know people don't like commuting, but so what." Citing business lost to rivals, the bank is setting a goal of having 50% of workers rotating through offices by July and believes its buildings will be full by the fall. Dimon isn't the only one in financial services to castigate WFH culture. Goldman Sachs (NYSE:GS) CEO David Solomon recently called the arrangements an "aberration" that needs to be quickly corrected.

Hybrid model: Apple (NASDAQ:AAPL) has circulated a memo saying most employees will be asked to come into the office three days a week from early September, with the option of working from home on Wednesdays and Fridays. Staff will also be able to work remotely for up to two weeks a year, though managers will need to approve those requests. Last month, tech rival Alphabet (GOOG, GOOGL) notified employees of its hybrid work plans, with "60% of Googlers coming together in the office a few days a week, another 20% working in new office locations and the last 20% working from home."

Space - Need for speed

What if the military could deliver supplies and equipment across the world in under one hour via quick trips through space? What if that technology could eventually be leveraged to enable point-to-point commercial space travel anywhere on the globe? Those realities may be possible in the future, with the U.S. expanding a small development program that wants to use reusable rockets for a program called Rocket Cargo.

"The Department of the Air Force seeks to leverage the current multi-billion-dollar commercial investment to develop the largest rockets ever, and with full reusability to develop and test the capability to leverage a commercial rocket to deliver AF cargo anywhere on the Earth in less than one hour, with a 100-ton capacity," according to the latest budget proposal from the Pentagon. "The Air Force is not investing in the commercial rocket development, but rather investing in the Science & Technology needed to interface the capability with DoD logistics needs, and extend the commercial capability to DoD-unique missions."

Who would vie for the contract? SpaceX (SPACE) would be the likeliest candidate, but others that competed under NASA's Commercial Lunar Payload Services program may also be looking for some business. Those include Blue Origin (BORGN), Firefly Aerospace, Lockheed Martin (NYSE:LMT), Masten Space Systems and Sierra Nevada Corporation. Nearly $50M was allocated to the Rocket Cargo concept, but it could be years and billions of more dollars until things finally take off. Example: The Commercial Crew program for NASA took almost a decade to come to fruition, and it's currently only launching a handful of astronauts to the International Space Station.

Go deeper: Point-to-point space travel is something out of the science fiction theater, though it's increasingly being looked upon as an emerging industry. The space tourism market, like the one being pursued by Virgin Galactic (NYSE:SPCE), could be a precursor that could bring costs down, though other challenges would need to be overcome. Flying over land masses presents problems, as well as the logistics, infrastructure and last-mile travel to proposed spaceports. Safety concerns would additionally need to be addressed and customers would need to feel that trips through space are routine as aviation transportation.

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Wall Street Breakfast: Musk Keeps Roiling Crypto

Author: bmotrader   |  Publish date: Mon, 17 May 2021, 10:07 AM

Cryptocurrency is still under pressure this morning following tweets from Tesla (NASDAQ:TSLA) CEO Elon Musk that rattled the market over the weekend. Bitcoin (BTC-USD) is down 8% to about $45,000, but it's off its lows today of just below $43,000. Ethereum (ETH-USD) is off 9% to around $3,500, with earlier lows nearing $3,100. Dogecoin (DOGE-USD) is down 5.5% to about $0.59, having hit $0.45 earlier. "To clarify speculation, Tesla has not sold any Bitcoin," Musk tweeted just before 2 a.m. ET. A Twitter war broke out over the weekend between Musk and bitcoin fans, with Musk suggesting Sunday that Tesla has already or intends to unload its $1.5B in bitcoin holdings.

Musk was "taking on all comers on Twitter over the weekend and caused some chunky gyrations across the coins," Chris Weston, head of research at Pepperstone Group, writes in a note, according to Bloomberg. Musk began Sunday afternoon by making fun of MicroStrategy's (NASDAQ:MSTR) Michael Saylor, and things devolved from there. At one point, Musk pointed out that he's the guy behind PayPal (that's arguable), and how dare Bitcoiners try to tell him how money works. That provoked the natural response that Bitcoin is the anti-PayPal (decentralized vs. centralized).

Musk's outsize influence: The Tesla chief executive has found himself, and his huge social media following, as one of the arbiters of cryptocurrency sentiment of late. His mentions of Dogecoin have led to buyers flocking to the meme crypto that was started as a joke and he dubbed himself "Dogefather" in a promo tweet for his appearance hosting Saturday Night Live, which led to intense interest about how the coin would be worked into any sketches. He sent shockwaves through the crypto world last week when he said that Tesla would no longer be accepting bitcoin as payment because of his concerns about the amount of energy used in mining coins. Bitcoiners pointed out the fallacy in Musk's reasoning, noting mining has nothing to do with bitcoin transactions and everything to do with securing the network. He later expressed his confidence, saying "I strongly believe in crypto."

Twitter (NYSE:TWTR) and Square (NYSE:SQ) chief Jack Dorsey has also weighed in, but has had limited impact. Dorsey tweets that Square will "forever work to make bitcoin better" because it changes "everything" for the better in response to a report that Square had halted purchases after a $20M loss.

Frothiness: There is also an argument that Musk has given crypto holders a convenient reason to sell given the lofty heights hit. Riskier assets have faced pullbacks recently, with the Nasdaq falling for the fourth straight week, the first time that has happened since 2019. Tesla lost more than 12% last week. Bitcoin is down nearly 30% from its high in mid-April, but has still quadrupled over the past year.
M&A - AT&T, Discovery look set to combine media assets

AT&T (NYSE:T) is said to be in talks to combine its media business with Discovery (NASDAQ:DISCA). A transaction may be announced as early as this week, according to a Bloomberg report. The companies are still working on the structure of a deal and details may change. The deal will likely combine Discovery with all of AT&T's WarnerMedia, which will become a new publicly traded company, co-owned by AT&T and Discovery, according to a CNBC report.

AT&T is expected to own a "big" stake in the new entity and a transaction could come as soon as tomorrow, according to The Wall Street Journal. The companies are looking to combine Discovery's realty-TV programming with AT&T's media holdings - including HBO, TBS, TNT and the Warner Bros. studio - to be more of a competitor to Netflix (NASDAQ:NFLX) and Walt Disney (NYSE:DIS). Discovery's networks include HGTV, Food Network, TLC and Animal Planet.

Tech - Microsoft investigated Bill Gates relationship

Microsoft's (NASDAQ:MSFT) board reportedly concluded in 2020 that Bill Gates needed to step down from the company's board after looking into a romantic relationship Gates had with an employee 20 years before.

"Microsoft received a concern in the latter half of 2019 that Bill Gates sought to initiate an intimate relationship with a company employee in the year 2000," a Microsoft spokesman told The Wall Street Journal. "A committee of the Board reviewed the concern, aided by an outside law firm to conduct a thorough investigation. Throughout the investigation, Microsoft provided extensive support to the employee who raised the concern."

Gates' spokeswoman acknowledged "an affair almost 20 years ago that ended amicably," but said that Gates stepping down from the board had nothing to do with it.

Financials - Housing market gets sized up as prices skyrocket

Investors will be eyeing several housing market indicators this week, with the real estate sector seeing some of the fastest price growth in more than a decade. The National Association of Home Builders' monthly index will be published on Monday and is expected to hold steady at April's robust figure of 83. Building permits and housing starts figures released Tuesday are also forecast to stay strong, given a significant lift from buyer traffic, vaccinations, stimulus checks and the spring season.

Bigger picture: The numbers are expected to show resilient homebuilder confidence and buyer demand despite a near doubling of lumber prices and logistical supply issues. A lack of residential construction over the past decade, as well as pent-up demand from COVID-19 shutdowns, has unleashed a seller's market nationwide. According to the National Association of Realtors, the median price for a single-family home rose about 18% in March to a record high of nearly $335,000.

It's not only in the U.S.: Among the 37 OECD countries, real house prices climbed almost 7% between the fourth quarter of 2019 and the fourth quarter of 2020, marking the fastest year-on-year growth in the past two decades. "If you lock up the vast majority of the population for months, they [rapidly reassess] what they want from their homes," said Richard Donnell, research director at U.K. property platform Zoopla. It also didn't take long for a "race for space" to take hold as people were forced to transform their houses into offices and classrooms.

Outlook: "Borrowing remains cheap and, once borders reopen, foreign investors will provide even further impetus to property markets, where purchasing activity has been largely driven by domestic buyers," noted Kate Everett-Allen, head of international residential research at real estate consultancy Knight Frank. Economists also say it will take some time for construction to catch up to demand, especially for entry-level homes.

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Wall Street Breakfast: Pipeline Disruption

Author: bmotrader   |  Publish date: Mon, 10 May 2021, 10:37 AM

The U.S. government has declared a state of emergency to keep fuel supply lines open following the shutdown of Colonial Pipeline on Friday. The 5,500-mile conduit, whose owners include Shell Midstream Partners (NYSE:SHLX) and others, carries 2.5M barrels a day to the East Coast, or 45% of its supply of diesel, gasoline and jet fuel. While Colonial is working toward a restart of operations along the key artery, some smaller lateral lines between terminals and delivery points are now operational. In the meantime, the Biden administration is allowing drivers that transport fuel to work extra hours, while oil products could be permitted to be shipped in tankers up to New York.

Recap: Hackers stole almost 100 gigabytes of data from Colonial Pipeline's networks, before locking its computers with ransomware and demanding payment. Multiple sources have confirmed that a cybercriminal gang called DarkSide was behind the attack, and some evidence has emerged linking the group to Russia or elsewhere in Eastern Europe. The White House also formed a task force to probe the pipeline breach, and the Department of Homeland Security's Cybersecurity and Infrastructure Security Agency is coordinating with Colonial Pipeline.

Fear of shortages: U.S. gasoline futures (XB1:COM) jumped more than 3% to $2.217 a gallon as trading reopened for the week, while WTI crude futures (CL1:COM) rose 1.3% to as high as $65.76/bbl. Besides connecting refineries to more than 50M people, the pipeline network serves major U.S. airports, including Atlanta's Hartsfield-Jackson. While the U.S. Department of Energy could tap its reserve of 1M barrels of diesel fuel in the Northeast, it's "little more than a Band-Aid," ClearView Energy Partners said in a research note

Outlook: The attacks are "here to stay and we have to work in partnership with businesses to secure networks, to defend ourselves against these attacks," Commerce Secretary Gina Raimondo told CBS's Face the Nation. The hack could also give renewed impetus for Biden's $2.3T infrastructure plan. In fact, the president this week is hosting top Democratic lawmakers at the White House, as well as a group of Republican senators who have proposed a separate $568B infrastructure plan, though Energy Secretary Jennifer Granholm has previously said Biden is willing to push through the "American Jobs Plan" without bipartisan support.

Stocks - Digesting the jobs report

The new week is starting with some familiar investing trends as cyclicals look poised to notch modest gains this morning with tech on the back foot. Dow futures are ahead by 0.3%, while contracts linked to the Nasdaq are off by 0.3% and the S&P 500 is hugging the flatline. The bet, known as the the reflation trade, would see stocks more sensitive to the economic cycle outperform their peers as businesses reopen following the coronavirus pandemic.

Not everything is rosy on the economic front. Data on Friday showed that U.S. jobs rose by 266,000 in April, trailing estimates for a one million jump, marking a huge miss by economists and raising questions over what data they're using. Despite the blunder, the news could be good for equities, as it may suggest the Fed may hold its accommodative stance for longer. Treasury Secretary Janet Yellen weighed in by saying the report "underscores the long-haul climb back to recovery, but still represents continued progress."

Analyst commentary: "We would not read too much into any one jobs report, and continue to think the labor market remains on track and will be more than enough to underpin consumer confidence and consumption," Wells Fargo's Sameer Samana declared. He thinks cyclical stocks will continue to be favored over defensive shares, and jobs growth still likely to accelerate in the months ahead.

Prices on the rise: Commodities are getting another dose of supercycle today, with gasoline and crude oil rising after a cyberattack forced the closure of the East Coast Colonial Pipeline. Iron ore futures and copper also jumped to fresh records, before a CPI report this week that is forecast to show U.S. prices rising further in April. Meanwhile, a slew of Fed speakers will discuss the recent price trends this week, as well as how inflation could affect monetary policy and economic growth.

Cryptocurrency - To the moon

Dogecoin (DOGE-USD) shed as much as 46% after trading as high as $0.74 before Elon Musk's appearance on Saturday Night Live. The crypto is now changing hands at $0.51, but fell to as low as $0.40 on Sunday. Musk has a history of comments that can influence stocks, markets and crypto, and many were expected similar outsized moves after his role on the late-night comedy sketch. The fun didn't stop overnight, as Musk tweeted SpaceX (SPACE) would launch a satellite name Doge-1 to the moon in 2022 (all funded by Dogecoin).

The skit: Musk was featured in satirical news segment Weekend Update, playing a character called "Lloyd Ostertag, financial expert," who dubbed himself "The Dogefather." At the beginning of the episode, Musk touted the benefits of cryptocurrencies and Dogecoin, saying the latter had started as an "internet meme... but has now taken off in a very real way." However, after cast members Michael Che and Colin Jost repeatedly asked him to explain, "What is Dogecoin?" Musk ended the episode by saying, "yeah, it's a hustle."

Before the highly-publicized appearance, Barry Silbert, a big player in the crypto sector, turned against the cryptocurrency. "Okay $DOGE peeps, it's been fun. Welcome to crypto!" he wrote over Twitter. "But the time has come for you to convert your DOGE to BTC [disclosure: we've gone short DOGE]." Silbert founded Grayscale Investments, which runs the popular Grayscale Bitcoin Trust (OTC:GBTC), as well as the Digital Currency Group, which owns CoinDesk.

Go deeper: Even at $0.51, the market value of Dogecoin is more than $70B, greater than the valuations of many blue-chip companies. The crypto is still up 10,000% in 2021, padding the accounts of some of its "early" investors, though many in the crypto community are debating the path forward. Will Dogecoin eventually make it to $1, or will traders bail on its rising popularity? Click through to join the discussion.

Trending - ARK ETFs

Cathy Wood is in the spotlight over her recent market returns, as well as her dealings with Archegos Capital Management. The flagship ARK Innovation ETF (NYSEARCA:ARKK), which focuses on high-flying growth stocks, is off 12% so far this year and has retreated more than 31% from its mid-February high, as a rise in U.S. Treasury yields and economic reopening plays led investors away from the sector. Just to note, ARKK still remains up nearly 94% over the last 12 months, a move that propelled Wood into an elite club of notable stock pickers.

What she's saying: "I love this setup," she told CNBC, following the sharp selloff in Tesla (TSLA), Shopify (SHOP) and other holdings in ARK's ETFs. "The worst thing that could have happened to us is to have the market narrowly focus on just our ilk of stock - the innovation space." She also reiterated her five-year time horizon, and now expects her strategies to produce a 25% to 30% compounded annual return (up from 15% forecast in February).

Some other details emerged in the conversation. Wood revealed that hedge fund veteran Bill Hwang provided seed capital for ARKs first four ETFs and his help was "crucial given the tough environment of securing funding for ETFs in the early 2010s." She continued to say that "I have not spoken to him" since the demise of Archegos, but did send him a note wishing him well. The hedge fund collapsed in late March, when its debt-laden and concentrated positions on certain media stocks unraveled.

Others are pointing fingers: Chris Irons, who tweets under the handle "Quoth the Raven," or QTRResearch, had what to say over the weekend: "Hwang seeds ARK, ARK buys TSLA, Mysterious OTM call buys in TSLA gamma squeeze the stock by 10x higher for 18 months... Hwang buys GSX, Mysterious OTM call buys in GSX gamma squeeze shorts and 4x the stock, Hwang blows up after gamma squeezes unwind... What's next for ARK?" For her part, Wood said she had "no idea if Hwang had remained a shareholder in ARK ETFs."

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