DHUnplugged #698: Risk Happens

Risk – happens fast!

Costco Selling ALOT of Gold

April 15th – Tax payment withdrawals

Rates spike, oil moves lower

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Warm Up
- Risk Happens FAST
- Costco Selling ALOT of Gold
- April 15th - Tax payment withdrawals
- Fewer students attending 2 0r 4-year college

Market Update
- Banks reporting - mixed results
- Rates UP!
- Earnings Season
- Risk off - Missiles Flying
--- WAR escalations concerning investors

- Rates spiked with all of the recent concern that the Fed will not be cutting rates so fast
- Came on on the Iran retaliation worries
- Spike Monday to 4.64% for the 10Yr - starting to get worrisome that could be technical move and disrupt markets

Rates in Europe
- European Central Bank President Christine Lagarde on Tuesday said the central bank remains on course to cut interest rates in the near term, subject to any major shocks.
- "We just need to build a bit more confidence in this disinflationary process but if it moves according to our expectations, if we don't have a major shock in development, we are heading towards a moment where we have to moderate the restrictive monetary policy," Lagarde said.
--- Also noted that she is very attentive to the price of oil

HA! If you don't like the numbers...
- The Bank of England on Friday announced a “once in a generation” overhaul of its inflation forecasting following a long-awaited review by former Federal Reserve Chair Ben Bernanke.
- The review was initiated in response to criticism over shortcomings in the bank’s recent policymaking.
- It sets out 12 recommendations — including scrapping the bank’s “fan chart” forecasting system — which BOE Governor Andrew Bailey said the bank was committed to implementing.

Inflation Spots

Sticker Shock

And then at 1:30PM Tuesday
- Fed Chairman Jerome Powell at Canadian forum says recent data shows lack of progress on returning to 2% inflation goal; says US economic performance has been quite strong.
- Markets were not pleased -
---- Begs the question: - what is the point of this at a time with such global stress having these types of comments?
---- WSJ's Nick Timiraos says Fed Chairman Jerome Powell "dialed back" rate reduction expectations at Canadian forum amid new inflation uncertainty

- Bitcoin and other cryptos PLUNGE when Iran sent misses and drones
- How is that digital gold or store of value?
- Simply trades like a speculative risk asset and starting to hear that phrase quite a lot.
- Tried to rally on Sunday when Iran said that is all they are doing- but sold off again Monday

Earnings This Week
-  Plenty of banks and financials (BAC, GS etc) also Netflix Thursday after the close
- Proctor and Gamble on Friday
- Problem is that they come right as risk elevated.

Goldman Sachs Earnings
- Goldman Sachs on Monday posted first-quarter profit and revenue that topped analysts’ expectations, fueled by a surge in trading and investment banking revenue.
- The bank said profit jumped 28% to $4.13 billion, or $11.58 per share, from the year earlier period, thanks to a rebound in capital markets activities
- Goldman shares climbed more than 4% in the days trading Monday.

JPM Earnings
- The bank said first-quarter profit rose 6% to $13.42 billion, or $4.44 per share, from a year earlier, boosted by its takeover last year of First Republic during the regional banking crisis.
- But in guidance for 2024, the bank said it expected net interest income of around $90 billion, which is essentially unchanged from its previous forecast.
- That appeared to disappoint investors, some of whom expected JPMorgan to raise its guidance by $2 billion to $3 billion for the year.
- Shares of JPMorgan fell more than 6%.

BAC Earnings
- Bank of America on Tuesday reported first-quarter earnings that topped analysts’ estimates for profit and revenue on better-than-expected interest income and investment banking.
- The bank said profit fell 18% to $6.67 billion, or 76 cents a share; excluding a $700 million FDIC assessment, profit was 83 cents a share.
- Revenue slipped 1.6% to $25.98 billion as net interest income declined from a year earlier. (that should turn a bot as rates increasing)

China - AMD and Intel
- Shares of Advanced Micro Devices and Intel dipped on Friday after The Wall Street Journal reported that China is ordering the country's largest telecommunications carriers to cease use of foreign chips.
- Chinese officials issued the directive earlier this year for the telecom systems to replace non-Chinese core processors by 2027
- Both stocks traded down as much as 4% on Friday morning.
- Why? China accounted for 27% of Intel's revenue in 2023, making it the company's biggest market. AMD generated 15% of sales from China, including Hong Kong, last year.

Salesforce Acquiring
- Salesforce Inc., the top maker of customer relations software, is in advanced talks to acquire Informatica Inc., the Wall Street Journal reported, citing people familiar with the discussions.
- Informatica Inc. is an enterprise cloud data management company. The Company provides artificial intelligence (AI)-powered Intelligent Data Management Cloud (IDMC) platform, which connects, manages and unifies data across any multi-cloud, hybrid system, empowering enterprises to advance their data strategies. The Company’s platform enables enterprises to create a single source of truth for their data, allowing them to create compelling 360-degree customer experiences.

Follow Up
- Chickens and Hot Dogs!
- Now Gold
- Wells Fargo expect revenue "may now be running at" $100 million to $200 million a month, a rapid acceleration since bullion hit the warehouse club late in the summer of 2023.
- Costco is selling one-ounce bars made of nearly pure 24-karat gold. While the price is not disclosed online to nonmembers, it's estimated that the product generally sells for about 2% above the spot price
- There are a few catches: Sales are limited to five per customer (up from two previously)
- Not really profitable - 2% markup, but you get back the 2% for executive members
- BUT adds 3% to general merchandise sales but not much profit.
--- Just looked and not available again - sells out quickly

- Fitch cut its outlook on China's sovereign credit rating to negative on Wednesday, citing risks to public finances as the economy faces increasing uncertainty in its shift to new growth models.
- The outlook downgrade follows a similar move by Moody's in December and comes as Beijing ratchets up efforts to spur a feeble post-COVID recovery in the world's second-largest economy with fiscal and monetary support.

- Japanese workers' real wages fell in February for a 23rd consecutive month, data showed on Monday, suggesting higher prices kept up pressure on consumers' spending appetite.
- How is this possible with little to no inflation????
- Inflation-adjusted real wages, a barometer of consumer purchasing power, fell 1.3% in February from a year earlier, down for 23 straight months, data from the labor ministry showed. It followed a revised decline of 1.1% in January.

- Nelson Pelz looses Disney bid - Lost but won
- 5th largest investor - owns more than $3.5BILLION in Disney Stock
- The outcome has been positive, he added, noting that Disney's stock is up roughly 50% since October, when his firm began to re-engage with Disney, and is the best performer on the Dow Jones Industrial Average this year.

- Chick-fil-A announced it is allowing certain antibiotics in its chicken, overturning a commitment it made in 2014.
- The company said in a recent statement posted on its website that the change will take effect in spring 2024, and is intended "to maintain supply of the high-quality chicken you expect from us."
- The statement, which was also sent as a notification to the chain's app users, said the antibiotics that will be allowed are not important to human health, and are only administered "if the animal and those around it were to become sick."

- For the second year in a row, the number of students earning a bachelor's or associate degree declined, according to a recent report by the National Student Clearinghouse Research Center.
- Overall, undergraduate degree earners fell nearly 3% in the 2022-23 academic year — the steepest decline ever recorded, the report found, while bachelor's degree earners sank to the lowest level in nearly a decade after notching a one-year loss of almost 100,000 graduates.
- Meanwhile, the number of students earning a certificate hit a 10-year high, largely due to the growth in vocational programs.

- Bad news keeps on coming
- Jobs cuts
- Lowering prices on cars
- bad numbers in China
- More Cybertruck issues
- Many now saying they are OUT of the Mag7

Oh Canada!
- Canada will raise capital gains taxes on businesses and wealthy individuals to help pay for tens of billions in new spending aimed at making housing more affordable and improving the lives of young people.
- Finance Minister Chrystia Freeland said the government will tax Canadian companies on two-thirds of their capital gains, up from half currently. That change will also apply to individual taxpayers when they have gains over C$250,000 ($181,000) in a year, though people will still be able to sell the homes they live in tax-free.



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