YOUR QUIVER | February 9, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Neutral Now
Investors cut $300bn of bearish stock positions, and currently they are closer in-line with historical periods. So, folks who were underweight are now weighted closer to the ave of the prior decade, per NOSO. It’s the closest to neutral positions since 2Q22, per JPM and DB data.
Various Earnings
Robinhood beat on earnings, Mattel had a disappointing outlook, Siemens and AstraZeneca were both strong. Pepsi beat but guidance looks soft.
Buybacks Are the New Black
Per BBG, they’s back on…
Time to Regroup
That’s what credit investors are doing after the steep rally. Gains reduced bond premiums, so now they have to think about cashflow, business quality, and all those other pesky fundamental factors.
What the What?
BBG is out with a story that some traders are placing bets that the Fed will hike up to 6%. Better tell investors fueling this current equity rally…
OK, That's Enough
Five activists on Salesforce? Really, Third Point? Maybe this is a new trend.
The Mouse Is In the House
Newly reinstated Iger announced a cost-reduction plan with a 7k job cut (~3% of employees) and an expected $5.5bn is cost reductions, as well as a reorg into 3 divisions: Entertainment, ESPN, and Parks/Experiences. The reductions include $3bn from content ex sports, and since last q they’ve already started on $1bn of total cuts.
CS Drags On
We’ve been watching the five-quarter losses accumulate at Credit Suisse, which suffered large client outflows in 4Q22. Total AUM is down almost -20% y/y, so they’ve been focused on stemming those losses and trying to get clients back in the door. While they’ve raised $4bn in new capital, divested its securitized products group and completed other initiatives, they don’t see profitability until 2024. At some point investors with European benchmarks are going to have to hold their noses here…
Hard to Reconcile
The London Times is out with a story about pressure on chancellor Hunt to create more tax breaks to avoid recession (London Times). At the same time, the BoE’s Bailey is worried that inflation will be persistent in the UK, per BBG (Bloomberg). They should talk. Remember what happens when you put more money/savings into people’s pockets? They spend it, driving up inflation.
Getting Schooled
The DOE published stats showing almost 50% of US public school students are lagging behind benchmarks (which you know aren’t that rigorous). They point to low scores in Math and English as top areas of concern. The pandemic drove further declines in our students’ educations. Bill Bellamy’s most recent stand-up on Netflix joked how his kids said it wasn’t “school school." They were more right than they probably expected.
Bed, Bath & Below
It’s not looking good, folks. Reddit isn’t so interested. One wrote, “Imagine buying shares of a dying company.” Remember 2021, folks?
Bird Flu
I’m not kidding here. 100mm poultry went poof in 4 mo, according to BBG. Losses are 3x the same period y/y. WHO says the risk to humans is low, but the outbreak has to be monitored and contained. The flu occurred from Oct until now. Farms in the Eurozone and North America were hit hard, and cases are increasing in South America. Hence the expensive eggs. The virus seems to be adapting to other animals, like minks in Spain.
Color Coded Costs
MSFT is focused on employee spend, asking AMEX to color code expenses when receipts are uploaded. Green = auto approval recommended. Yellow = hmmm, are you sure you want to submit this? Red = C’mon, man, you KNOW you shouldn’t be putting this in.
Sector Shifts
In Mar, some big names are moving into the GIC Financials sector: $MA, $V, $FISV, $GPN, $FIS, and $PYPL. Also, some big names are moving into Staples: $TGT, $DG, and $DLTR. Lastly, you’ve got new Industrials coming with: $BR, $PAYX, and $ADP.
