📉 The next “Big Short” in the market

Good morning Investor. “Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present.”

— Marcus Aurelius

MARKET UPDATE

TODAY’S BIG HEADLINES

• The next “Big Short” in the market

• Boeing to make flying cars

• China pushing Gold to new Highs

• Netflix is keeping secrets

SUPERINVESTORS

The next “Big Short” in the market📉

Eisman’s Encore: Steve Eisman, the managing director of Neuberger Berman, who was immortalized by Steve Carell in the blockbuster film “The Big Short” where he successfully shorted the housing market during the 08 crash, has been making the rounds on the interview circuit. He’s been spilling the beans on where he sees the dollar signs in today’s market and beyond. And no, he’s not shorting housing this time!

Avoiding a Volker Redux: Eisman is of the opinion that the economy is sitting pretty, at least according to the numbers we’ve seen so far. He’s urging the Fed to keep their hands off the interest rate button unless the economic weather starts to look stormy. Cutting rates now, he warns, would turn the markets into a frothy, “bubble-icious” mess. We don’t want a repeat of the Volker era, do we?

Brick By Brick: Eisman’s hot tip? Infrastructure. The reasons are as numerous as the bricks in the Great Wall of China, but the biggie is the shift from globalism to local manufacturing, thanks to the one-two punch of the pandemic’s impact on supply chains and geopolitical instability. Add to that the surge in electric vehicles and AI, both of which are as power-hungry as a politician. And let’s not forget the extra cooling needed for AI-training GPUs which are three times as demanding as your run-of-the-mill server CPUs. Just consider the moves by Taiwan Semiconductor (TSM) and Samsung (LON: BC94) who are currently spending billions to set up shop in the US.

Golden Opportunities: Eisman’s been name-dropping CRH PLC (CRH), an Irish company that’s doing 95% of its business in the US, building everything from roads to skyscrapers. The company’s CFO recently declared this a “golden age for construction”. Investors seem to agree, with shares up over 12% year-to-date.

sources: (BusinessInsider), (Bloomberg)

MEGA CAPS

Boeing to make flying cars🛫

Four-Wheeled Planes?: In a move that’s got everyone scratching their heads, Boeing (BA), the aircraft manufacturer, is venturing into the automotive business. This all started back in 2022 when they poured $450 million into Wisk, a flying taxi startup.

Sky-High Ambitions: A year after the investment, Boeing swallowed Wisk whole, bringing it under its manufacturing wing. Now, they’re aiming to have Wisk’s autonomous flying taxis zipping around Asia by 2030.

The Million-Dollar Question: But why, oh why, is Boeing getting into the car business? It’s a notoriously capital intensive industry, with razor-thin margins and high sensitivity to economic conditions. Even Elon Musk once quipped, “There are only two automotive manufacturers in US history that haven’t gone bust, Ford and Tesla.” With safety concerns weighing on its share price, can Boeing really pull this off?

The Fine Print: It’s still up in the air whether Boeing plans to manufacture these flying cars and run the taxi service, or just sell the vehicles to other companies which intend to provide the service.

Fierce Competition: Boeing’s got its work cut out for it, with rivals like Joby (JOBY), SkyDrive, and Volocopter all vying for a piece of the pie. Joby’s already got the green light for their flying taxis to take off in 2025, while SkyDrive and Volocopter are planning to start operations in Japan by the same year. And let’s not forget Alef Aeronautics, backed by Tim Draper, an early Tesla and SpaceX investor, which just got FAA approval for its Model A flying car. The race for the skies is on!

sources: (Quartz), (Quartz), (Quartz)

COMMODITIES

China pushing Gold to new Highs🚀

Gold Rush To Remember: The gold market is having a party and everyone’s invited! The guest of honor? The price of gold, which has just smashed through the $2,400 ceiling, reaching a dizzying high of $2,406 per ounce. This shiny rock has seen a year-to-date increase of over 16%, but the life of the party is none other than China.

The Usual Suspects: The prospect of lower US interest rates, geopolitical instability, and conflicts in Ukraine and the Middle-East have all played their part in this gold rush. Investors, like scared kids at a haunted house, have been running towards the safety of gold, the infamous “safe haven” asset.

China’s Golden Appetite: The real firecracker in this gold-infused bonanza has been China. Wearing the dual hats of the world’s largest producer and consumer of the precious metal, China has outshone India to retain its crown as the largest buyer of gold bars, jewelry, and coins in 2023. To put things into perspective, in 2022, China gobbled up a staggering 218.2 tonnes of gold. This figure raced ahead in 2023 to 279.5 tonnes of gold.

Chinese Gold Fever: Chinese investors, finding themselves in a desert of investible opportunities, have been turning to gold like a mirage of water. With the Chinese real estate sector teetering on the brink of collapse, the stock market growling like a bear, and the Yuan losing value faster than a melting ice cream, gold has emerged as the most sensible oasis.

Import Frenzy: Despite being the world’s largest producer of gold, China’s overseas purchases over the past two years of the rare metal totaled over 2,800 tons. That’s more than all the gold backing exchange-traded funds worldwide, or roughly one third of the stockpiles held by the US Fed.

Philip Klapwijk, managing director of Hong Kong-based consultant Precious Metals Insights, quipped, “The weight of money available under these circumstances for an asset like gold – and actually for new buyers to come in is pretty considerable.“ Hinting that the golden goose might still have some eggs to lay.

sources: (Bloomberg), (Mining.com)

MEGA CAPS

Netflix is keeping secrets🤫

The Netflix Enigma: Last week, streaming titan Netflix (NFLX) reported their Q1 earnings, outperforming analyst expectations with $9.37 billion in revenue (up 15% YoY) and earnings per share of $5.28 (up 83% YoY). However, this wasn’t enough to stop a 9% drop in share price after a weaker-than-expected Q2 guidance. It seems Wall Street wanted a blockbuster, but got a B-movie instead.

Subscriber Saga: For eons, the key metric for measuring Netflix’s success has been their subscriber growth. As of the most recent earnings call, Netflix added an impressive 9.33 million new paid subscribers in the quarter, fueled by their account sharing crackdown. But here’s the plot twist: Netflix will stop reporting both average revenue per user (ARPU) and subscriber numbers starting 2025. This change caused a stir, leading many to suggest that Netflix’s growth has hit the pause button. However, this is a common shift in mature companies as they begin to focus on different metrics. We’ve seen a similar move by Meta (META), and yet the social media behemoth continues to dominate the screen years later.

Stock Market Whispers: Shares of Netflix dropped 9% on the release of their quarterly earnings, and continued their downward slide on Monday. Despite this, the stock is still up over 17% year-to-date. Not too shabby, Netflix, not too shabby at all!

sources: (CNBC), (Fortune), (Variety)

MORE NEWS

Additional market-moving events🌎

• French AI: One-Year-Old French-based AI company Mistral, is raising €500 million at a €5 billion valuation, when just last year the company raised €400 million at a €2 billion valuation. (Fortune)

• Tesla Cuts Further: Tesla have announced another price cut up to $2,000 in the US and reduced prices on select models globally. Additionally, Tesla have cut the price of the FSD package from $12,000 down to $8,000. (BBC)

• Keeping It Private: Currently, only 13% of companies in the US with annual revenue of $100 million or more are publicly traded (2,790), with the remaining companies all being private. (Advisorpedia)

• Sell Or Be Banned: The US House or representatives have voted on, and passed a TikTok sale-or-ban bill. We now await the outcome of this bill in the Senate. (WSJ)

• Drone Takeaway Deliveries: Zipline, the Drone startup company has reached the 1 million delivery milestone, now moving onto the next milestone of 1 million daily deliveries, through fostering partnerships with restaurants such as Panera Bread. The big appeal for drone deliveries? zero-emissions. (Verdict)

• UK Mortgage Rates Rise: Barclays, HSBC, NatWest, Accord and Leeds Building Society have announced they are increasing rates on their products by between 10 and 40 basis points. (MSN)

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