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Your Quiver | Tuesday, March 28, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

Crowd Mentality

There’s been a lot of crowding into tech/digital economy/longer duration lately. BBG even noted that the gap between growth and value indexes is the largest in five decades. The bet is that the banking crisis and the effect of prior tightening/rate hikes will force the Fed to cut rates. An MSCI index of global growth stocks, per BBG, has increased by 3.2% in Mar, versus value down -4%. Plus, ETFs tracking bonds with short maturities had their greatest monthly outflows in 6 years. Be careful piling into crowded positions, though. Any market selloff, confirmation of higher inflation for longer, or rate increases will unwind this trade.

$BABA Bonanza

Chinese tech co $BABA is up, after announcing its split into 6 units in anticipation of potential IPOs: cloud, delivery, Tmall, digital, logistics and entertainment. I guess we’ll see whether $220bn becomes more than that when separated.

Retail Therapy

$PVH is up, after strong rev growth for Tommy Hilfiger and Calvin Klein. Maybe it’s the Quiet Luxury trend from Succession, or the $RL look of the Kooks from Outer Banks. $LULU reports after the close today with low expectations. Our portfolios include high end luxury and off-price retailers, as both tend to do well in tougher economies (and the latter especially when $KSS and $BBBY are in serious pain).

The Saddest Place on Earth

$DIS is starting its 1st of 3 layoffs that will total about 7k in headcount reduction. Iger is focused on cashflow, planning $5.5bn in cost reductions including $3bn in reduced content spend. Unlike Silicon Valley companies plowing cash into the metaverse, Iger is taking the opposite stand—all 50 members of the team are gone, although team leader Mike White will remain at $DIS. That said, even Zuckerberg has toned down the metaverse theatrics of late while he’s chopping heads and reducing bonuses. Maybe he’s realizing that AI/ML may be more valuable than buying virtual clothes to attend virtual concerts.

Nervous Nellie

The Treasury’s top domestic policy official Nellie Liang is hanging out with Congress today, testifying with chief of banking supervision Barr and FDIC head Gruenberg. They’ll be confirming that regulators are prepared to secure the banking system and calm depositors.

Next in Line

Walgreens $WBA beat on the top and bottom line. It’s still filling the pandemic hole from fewer tests and shots. SSS are down -1%, and they’re having a hard time finding pharmacists. About 500 stores are back to normal hours, and 1,900 are not.

Trojan Horse

That’s what Rob Joyce, head of NSA’s cybersecurity arm, called TikTok for China—stating that it is a long-term strategic threat.

Baby Blues

Japan is gearing up to announce measures to stem falling birth rates, from mandatory paternity leave, to cancelling student debt for parents, to payouts for a third child. Reminds me of the one child policy in China and its current disastrous effects….do governments not think that far ahead?

Where's Rodman?

Gotta bring Dennis back to appease the crazies. Kim Jong Un is touting that North Korea is ready to use nuclear weapons “anytime and anywhere.” Maybe he just got jealous when Putin started threatening the use of nuclear weapons this past week.

French Fried

Unions are striking again nationwide today, demanding Macron return to the negotiating table. Also, French banks including SocGen and BNP will be paying fines totaling $1.1bn after 150 regulators raided lenders as part of a probe into tax fraud and money laundering related to dividend payments. Other biggies aren’t off the hook—HSBC and Natixis are being investigated too. The groups executed a dividend arbitrage strategy known as Cum-Cum (no, I didn’t make that up) whereby shareholders transferred stock for a short period to investors based abroad to avoid a dividend tax. Once the dividends were paid out, they sold the securities back to the original owner and the amount saved was split between the two parties.