The Market, Shaken, Not Stirred ...
Am I worried about Thursday's selloff? Also, Bond's now in Amazon territory, sports media update, the obvious inflation, and my trades, including Palantir and SoFi.
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The James Bond franchise had more or less released a new thriller every two years or so, since "Dr. No" had hit movie houses in 1962. There had been some longer gaps, especially when the lead role would change hands, but the series had been remarkably consistent. That is until the latest couple of installments in the series. After "Skyfall" was released in 2012, "Spectre" hit theaters in 2015 and then "No Time to Die" had been delayed until 2021 due to the pandemic. Nothing since.
In March of 2022, Amazon AMZN closed its $6.5 billion acquisition of MGM or Metro-Goldwyn-Mayer Studio, which had typically controlled the release schedule for the Bond series, but the family of Albert "Cubby" Broccoli retained control over when a new Bond film could go into production. On Thursday, Barbara Broccoli and her stepbrother, Michael Wilson, in a statement made with Amazon MGM, announced that they had reached an agreement to hand over creative control of the franchise to a new joint venture with said studio.
In short, Amazon is now in control of James Bond, when the next film goes into production -- who writes the scripts, and who will play the role, replacing Daniel Craig as Agent 007. Amazon founder and executive chair Jeff Bezos took to the social media platform formerly known as Twitter and posted, "Who'd you pick as the next Bond?" Is this a major score for Amazon? Probably not such a big deal, but it sure is interesting. There. I said it. "Score." I can almost hear the music. By the way, I thought all of the actors who played Bond did a good job, even George Lazenby and Timothy Dalton.
In Other Entertainment News....
Major League Baseball and Walt Disney's DIS ESPN are ending their media rights partnership at the end of the 2025 season after about 35 years. No more Sunday Night Baseball? SNB has been a weekly tradition in my home since my children were young and the invention of the internet allowed me to watch and trade futures as well as Asian markets from home, as those on Wall Street know all too well, Monday morning moved to Sunday night.
ESPN had apparently made an "aggressive effort to reduce rights fees" according to MLB Commissioner Rob Manfred. The Commissioner also said the Major League Baseball has "not been pleased with the minimal coverage that MLB has received on ESPN's platforms over the past several years outside of the actual live game coverage."
For Walt Disney's part, ESPN was looking to do something along the lines of the weekly deals that Amazon Prime and Apple AAPL TV have with Major League Baseball and remains open to finding "new ways" to stay involved with baseball fans. For now, it looks as if the way fans follow sports will continue to fracture as streaming takes both audience share and broadcast opportunity away from legacy cable.
Along Those Lines...
The NHL's new all-star format absolutely dominated the sports scene over the past few days as the NFL is in hibernation, MLB has barely woken up and the NBA has for the most part, simply been forgotten about. Very well played by NHL Commissioner Gary Bettman who needed to do something to spark mid-season interest. The fact that the fans in Montreal booed the US national anthem earlier this week turned the event that lasted several days into the sports story of (post-Super Bowl) February.
Inflationary Warnings
Like a flare hanging over a darkened field illuminating everything that had been invisible, it would appear that our central bankers have finally awoken from their stupor and are now concerned about the rebirth and renewed acceleration of consumer-level inflation. It's not like we did not warn them that inflation would bottom last September in writing as well as on the air, as inflation most assuredly did.
With the notable exception of Fed Governor Michelle Bowman, who kept a level head and an open mind, the rest of our nation's central bankers were too busy patting themselves on the back after their "victory" over inflation and cut short-term interest rates ahead of the election last fall. We had warned them not to cut rates that early. They now most likely wish they hadn't. Who are we, but real-world economists who must interpret global macroeconomic conditions and their impacts upon financial markets in order to produce a living, as these academic "amateurs" end up in positions where they actually mold policy?
Well, these knuckleheads are indeed catching up. St. Louis Fed Pres. Alberto Musalem, who holds 2025 policy voting rights, spoke before the Economic Club of New York on Thursday. Musalem said in current conditions: "This baseline scenario requires that monetary policy remains modestly restrictive until inflation convergence is assured, at which point the policy rate can be gradually reduced toward the neutral level as convergence progresses." In plain English that means that Musalem thinks inflation is running a bit too hot. Musalem then forgot he was a PhD. economist and added something folks could understand: "The risks of inflation stalking above 2% or moving higher seem skewed to the upside."
Elsewhere, Fed Gov. Adriana Kugler said, "Readings show there is still some way to go before achieving the FOMC's 2% (inflation) objective."
Atlanta Fed Pres. Raphael Bostic added, "The economy faces heightened uncertainty. Unusual macroeconomic dynamics that have led us to this happy place might not last."
Thank you for the obvious. Funny thing is that inflation will show a deceleration for the February and these dingbats haven't figured it out yet. Watch them claim victory prematurely yet again in a few weeks when that data is released.
Bank of Japan in a Tough Spot ...
Japan's Statistics Bureau released that nation's inflation data for January on Thursday evening. The headline print hit the tape at year-over-year growth of 4%, as the core rate moved up to 3.2% from 3%. This puts the Bank of Japan in a rather tough spot. Japanese gross domestic product printed at growth of just 0.1% in 2024 after growth of 1.5% for 2023.
What does that central bank do now? Tighten policy to fight inflation and force the economy into recession? Keep policy loose to keep the economy out of recession and just let inflation run amok? BOJ Governor Kazuo Ueda commented, "We will purchase government bonds nimbly to foster the stable formation of yields in exceptional cases where long-term yields rise sharply."
Sounds like Ueda is closer to easing policy than he is to getting hawkish. Oh, thought I might mention... Japan's public debt stands at a rough 233% of this year's GDP and the BOJ already holds (as of September) 52.6% of all Japanese government bonds. This creates an environment where the Japanese economy is more or less trapped in a very tough spot. The likely result for us? A weaker yen, that equates to a stronger dollar and increased demand for U.S. Treasuries by Japanese accounts. That to at least a mild degree would depress U.S. interest rates, while helping to mildly suppress inflation here.
Worried About Thursday's Selloff?
Not really. It's true that the S&P 500 and Nasdaq Composite ended the Thursday session 0.43% and 0.47% lower respectively and the small- and mid-cap indexes were hit even harder, but there was not a lot of conviction in the risk-off trade. It's also true that eight of the 11 S&P sector SPDR exchange-traded funds closed the session in the red, led lower by the Financials XLF. It's true as well that defensive sectors outperformed cyclical sectors for a second straight day.
That all said, losers beat winners by a 4-to-3 margin at the NYSE and by about 5 to 4 at the Nasdaq, but advancing volume took a 48% share of composite NYSE-listed trade and an impressive 60% of composite Nasdaq-listed activity. On top of that, aggregate trade ebbed again on a down day, across the listings of both the NYSE and the Nasdaq. In short, the professional money was not scared on Thursday.
Trading Notes
- On the way down, I added to my long position in Palantir Technologies PLTR with a $106 handle, a $102 handle and then made a stand with a $96 handle. I am now long considerably more shares than I had been when I sold shares with a $111 handle on Wednesday.
- I also added to my long positions in Rocket Lab USA RKLB, SoFi Technology SOFI and BlackSky Technology BKSY on weakness.
Economics (All Times Eastern)
09:45 - S&P Global Manufacturing PMI (Feb-Flash): Expecting 51.3, Last 51.2.
09:45 - S&P Global Services PMI (Feb-Flash): Expecting 53.1, Last 52.9.
10:00 - Existing Home Sales (Jan): Expecting 4.13M, Last 4.24M SAAR.
10:00 - U of M Consumer Sentiment (Feb-F): Flashed 67.8.
10:00 - U of M One Year Out Inflation (Feb-F): Flashed 4.3%.
10:00 - U of M Five Year Out Inflation (Feb-F): Flashed 3.3%.
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 588.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 481.
The Fed (All Times Eastern)
11:30 - Speaker: Federal Reserve Vice Chair Philip Jefferson
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: USM (1.70), VIPS (5.39)
After the Close: HE (.40)
At the time of publication, Guilfoyle was long AMZN, PLTR, SOFI, RKLB, BKSY equity.
