Rates/Tangled – AAPL is a special case but most companies borrow money (even AAPL does) to fund projects because shareholders don't want them using all their cash so of course rates matter – they are going to impact profits and, when your multiple is very high – that matters a lot.

Satori's Dan Niles says tech selling isn't done. Here's what he thinks you should buy instead

FB +4.14%Jan. 06, 2022 12:23 PM ET6 Comments

• Hedge fund manager Dan Niles contended that Wednesday's sharp sell-off in technology stocks doesn't signal the end of the downward pressure, as the market comes to terms with the end of stimulus and a more hawkish Federal Reserve.
• Speaking to CNBC on Thursday, the founder and portfolio manager at Satori Fund said that given the likely further downside risk in the tech sector, investors should look to energy and financials as potential winning bets in 2022.
• On the prospects for the tech space, Niles argued that the dramatic rise in the S&P 500 over the past two years was driven mainly by massive government stimulus packages and by an ultra-accommodative central bank.
• With inflation still at its highest pace in decades and the Fed poised to begin raising interest rates, Niles thinks that valuations for the more speculative parts of the tech sector will contract, meaning that those names will see a further decline.
• "Unless you think inflation is done and unless you think the Fed is done, it's hard to imagine that this [selling] is done," he said.
• Even so, Niles sees some bright spots in the tech space. He cited Meta (NASDAQ:FB) and Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) as stocks that could hold up better than most during a general market downturn.
• On the other side of the spectrum, Niles reported that his fund has shorted electric vehicle startups that don't expect to deliver earnings for "a very long time." He did not name the specific companies that he has shorted.
• "Last year, it was about 'show me the story' and buy that. This year, it's about 'show me the money,'" he said, describing his expectation that 2022 will be dominated by companies that have proven their earnings power.
• Turning to sectors he thinks will outperform during the year, the hedge fund manager asserted that the same conditions that will weigh on other parts of the market will give a boost to energy and financial shares.
• For energy, he pointed to the likelihood for higher oil prices as his source for optimism in the sector. Meanwhile, rising interest rates will give a boost to bank stocks, he predicted.
• Niles was bearish going into 2022. See why he foresaw a dreary investment outlook for the year.

BABA/Jij – I'd give them some time.  2025 puts will be out around July and then you can see what the rolls look like but $200 isn't a terrible 1-year target if this China nonsense blows over.  

Meta Platforms makes biggest gain since July as UBS praises Instagram feed changes

FB +4.14%Jan. 06, 2022 12:27 PM ET

• Facebook/Instagram owner Meta Platforms (NASDAQ:FB) is making its biggest move up since July, now up 4.3%, as UBS boosts its price target with praise for some tech changes at Instagram.
• The bank raised its target to $440 from $425, implying 30% upside – without changing estimates, but with boosted confidence on its near-term and long-term estimates.
• A revamped newsfeed at Instagram has the "potential to provide a meaningful product cycle catalyst for shares," analyst Lloyd Walmsley and team write.
• Two new settings in Instagram's feed has the company increasingly adding new tailored content drawn from beyond users' current follower graphs. And "We think drawing from a wider content base could unlock a meaningful lift in engagement, reminiscent to TikTok." It could improve the experience, unlock ad inventory and revenue, and draw younger users, UBS says.
• Direct impact could be 7-12% of the bank's estimate for 2023 Meta ad revenues – Instagram makes up about 47% of that – and 40% upside to shares, if time spent per user at Instagram converages more toward TikTok-like numbers. And overall, UBS sees the move as a calayst for multiple expansion, similar to Instagram's 2019 checkout announcement that spurred an 8% stock-price boost in two weeks followed by 11% the month after.

Meta now fundamental to 'dark side of the economy' – early Facebook investor

FB +4.04%Jan. 06, 2022 11:43 AM ET25 Comments

• Legendary venture capitalist Roger McNamee said Thursday that Meta Platforms (NASDAQ:FB) has become "fundamental to the dark side of the economy," with the company exploiting data to drive profits whatever the social costs.
• "Without any regulatory interference, that's just a great business and they're going to continue to grow by using data to exploit human weakness," the co-founder of Elevation Partners and an early investor in Facebook (FB) told CNBC.
• McNamee framed Meta's challenge of balancing profits with social good as a general problem that has become more acute lately.
• "We are so dependent on the market to make choices and allocate resources that we've finally run into examples of where the market is no good," the Elevation Partners co-founder argued.
• "[The market] has not done a good job addressing climate change. It's not done a good job of allowing the United States to address a pandemic. And it's done a horrible job of defending democracy," he added.
• On the current market situation, McNamee contended that a more hawkish stance by the Federal Reserve is unlikely to halt the upward momentum of markets. He acknowledged that higher interest rates would curb some speculation but he believes that the dynamics that have driven trading over the past couple of years will continue into the near future.
• "My expectation is that we'll just continue going along like this until eventually all of the speculation that's going on in all of these different sectors runs out of new buyers and then it eventually comes tumbling down," he predicted.
• FB rose 4% in Thursday's intraday action, reversing a sharp decline seen Wednesday amid a general sell-off in tech. At about 11:30 a.m. ET, FB was up $13.91 to $338.08.
• Looking longer-term, FB reached a 52-week high of $384.33 in early September, but shares sold off in response to a whistleblower's revelations about how the company responds to toxic content on the platform. Shares have generally held to a trading range over the past three months.
• Given its recent PR problems, FB has significantly underperformed the market since the beginning of September. The stock is down 15% over that time, compared to a 4% rise in the S&P 500, as you can see in this chart.

Shimao Group defaults on loan in latest sign of China property sector distress

SHMAY -4.20%Now!

• Shimao Group Holdings (OTCPK:SHMAY) ADRs fall 4.2% after the Chinese property developer defaults on a loan after missing a 645M yuan ($101M) payment, the latest in the saga of real estate firms struggling under heavy debt loads after China moved to reduce leverage and risk in the sector.
• China Credit Trust Co. said in a letter that 755M yuan of a trust loan had been repaid, but the remaining amount owed now means the loan is in default, Reuters reports.
• Last October, Shimao Group (OTCPK:SHMAY) (OTCPK:SIOPF) stock was downgraded by J.P. Morgan because an agreement to sell some of its assets to Shimao Services (OTCPK:SHMSY) implied tight liquidity conditions for Shimao Group and raised a "corporate governance red flag."
• Another smaller Chinese real estate firm, Guangzhou R&F Properties (OTCPK:GZUHY), said it didn't have enough money to buy back $725M of notes that it had offered to repurchase. "The Group is continuing to take active measures to shore up its liquidity positions," the company said in a statement.
• The default follows China Evergrande's recent (OTCPK:EGRNF) (OTCPK:EGRNY) defaults on offshore debt payments and Kaisa Group (OTCPK:KKPFF), which has failed to make some dollar bond payments.

Mizuho sees Micron gaining strength in memory, data center chip markets

MU +1.99%Jan. 06, 2022 11:43 AM ET2 Comments

• Memory chipmaking leader Micron Technology (NASDAQ:MU) is set up in a good position this year due to a combination of market factors such as growing product demand and signs of supplies stabilizing across the industry.
• That's the opinion of analyst Mizuho Securities analysts who spoke this week with Micron (MU) Chief Financial Officer David Zinsner and the chipmaker's investor relations director Farhan Ahmad as part of Mizuho's Virtual CES conference series. Mizuho analyst Vijay Rakesh said that after speaking with the Micron (MU) officials, he believes the company is likely to see more strength this year from prices going up for its key DRAM memory chips and gains in the data center market.
• "DRAM spot pricing [was] up 10% month over month," Rakesh said, in a research note. "We believe lower memory inventories will remain a tailwind, [and] memory is one of the few markets where suppliers are not adding supply."
• Rakesh, who left his buy rating and $98-a-share price target on Micron's (MU) stock unchanged, also said that Micron (MU) noted that "the broad data center market is strong, with inventory in a good position and good order visibility."
• Rakesh added that Micron (MU) admitted that its DRAM plant in Xian, China has trimmed some of its production due to recent Covid-related shutdowns in the area. However, Rakesh said that plant production is expected to pick up by February and he estimated that there will "overall be no impact" from Xian plant issues on Micron's (MU) next quarterly report.
• Rakesh's take on the Micron's (MU) Xian plant was in line with similar comments from Wells Fargo analyst Aaron Rakers in late December.

RCL is probably a good short – they just shut down cruises again:

I don't know if this industry can survive another long shut-down.

This is where all the Bitcoin speculation money is going:

NFT market tops $40B in 2021 amid growing interest

HMBL -0.63%Jan. 06, 2022 2:14 PM ET

• The increased interest in non-fungible tokens are driving the flow of cryptos to two types of ethereum (ETH-USD) smart contracts linked to NFT marketplaces from the onset of 2021 through mid-December, according a report from Chainalysis.
• Users sent $40.9B worth of crypto to ERC-721 and ERC-1155 contracts – revised from just $26.9B in a December report that was based on data through mid-October.
• Recall NFT marketplace OpenSea recently raised $300M in a Series C funding round, valuing the company at $13.3B – making it a big player in the space.
• NFT-related stocks are mixed so far on Thursday, including: Vinco Ventures (BBIG +1.1%), Liquid Media Group (YVR), WISeKey International (WKEY -0.2%), Dolphin Entertainment (DLPN +0.6%), Color Star Technology (CSCW +0.8%) and Humbl (OTCPK:HMBL -1.5%).
• Earlier, Polygon's network activity surges amid record high NFT sales.

This still has legs:

Alibaba rises 5% as Munger's buy outweighs J.P. Morgan's skepticism

BABA +4.86%Jan. 06, 2022 2:00 PM ET6 Comments

• Alibaba (NYSE:BABA) got a lift Thursday, with its shares climbing more than 5% as enthusiasm over an endorsement by noted investor Charlie Munger continued, and outweighed any concerns that came from a middling assessment from J.P. Morgan.
• In a research report, J.P. Morgan analyst Alex Yao said he was taking a more cautious view of Alibaba (BABA) due to signs that the company's customer management revenue [CMR] will fail to meet expectation when Alibaba gives its next quarterly earnings report. Yao said he believes Alibaba's CMR will decline by 2% from the same period in 2020, as opposed to a prior forecast for 5% year-over-year growth.
• Yao said Alibaba's (BABA) sales are showing the effects of several factors on the Chinese economy, including downsizing that's been taking place at several Internet companies, and declining property values that have combined to put pressure on consumer spending."
• "[China's] online physical goods sales grew only 5% year-over-year in November," Yao said. "We don't see signs of improvement in the near future."
• Yao said such a revenue situation "will make the stock vulnerable until the market identifies an inflection point in earnings revisions, in our view." Yao said that Alibaba (BABA) cutting its earnings "is, to some extent, anticipated by investors," and that belief will likely keep the company's shares under pressure in the near future.
• However, there were few signs of negativity towards Alibaba (BABA) on Thursday, as Munger's recent stock purchase appeared to work as a sign of support for the company's prospects.
• On Tuesday, Munger, who serves as vice chairman of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) disclosed that his Daily Journal investment firm bought another 300,000 shares of Alibaba stock, to give Daily Journal a $72 million stake in the Chinese Internet giant. Munger's Alibaba (BABA) purchase came on the heels of a rough 2021 for the company, as its shares fell almost 50% during the year.

Fed could start raising rates as soon as March, St. Louis Fed's Bullard says

BTTX +1.43%Jan. 06, 2022 1:59 PM ET1 Comment

• The Federal Reserve's policymaking committee could start increasing its rate as early as its March meeting "in order to be in a better position to control inflation," St. Louis Fed President James Bullard in a speech at the CFA Society on Thursday.
• Separately, San Francisco Fed President Mary C. Daly said via Twitter that shrinking the balance sheet would come after liftoff. The post was clarifying a comment she made at a virtual event sponsored by Ireland's central bank.
• "Right now, it feels very appropriate to begin to taper asset purchases at a faster pace," Daly also commented at the event.
• The comments come as the minutes from the Federal Open Market Committee's December meeting, released on Wednesday, reflected a decidedly more hawkish tone and described discussions about reducing the size of its almost $9T balance sheet.
• Bullard said U.S. inflation "surprised substantially to the upside" against a backdrop of robust real economic activity and labor market performance. "There has been an initial U.S. monetary policy response to the inflation shock, and this response is already reflected in financial market pricing," he said.
• Peeking in on the bond market, the 10-year Treasury yield rises over 2 basis points to 1.73%, after rising 3 bps on Wednesday.
• The CME FedWatch tool now sees a 69.8% probability that the Fed will boost the federal funds rate by 25-50 basis points at the March 16 meeting, up from a 30.5% probability a month ago.
• Previously (Jan. 5), Fed policymakers prefer rate changes vs. balance sheet actions to achieve goals

Recent R.R. Donnelley hack may have led to Fidelity, Vanguard disruptions – report

RRD +0.13%Jan. 06, 2022 1:56 PM ET

• A recent hack of at R.R. Donnelley (NYSE:RRD) may have led to service disruptions at Fidelity and Vanguard's six-day website outage last week.
• Around the time of the RRD hack in late December, Vanguard customers were having issue downloading monthly trade statements and trade confirmations through the brokerage's website, according to an Ignites report.
• RRD disclosed in an 8-K filing on Dec. 27 an intrusion in its technical environment. The firm promptly implemented containment measures, including activating its incident response protocols, shutting down its servers and systems, and starting a forensic probe.
• The Vanguard website issues were resolved before the New Year and the company told Ignites that the website issues involved a “third-party mailing-and-check processing vendor.” Vanguard declined to say which service provide it was describing.
• The RRD hack also impacted Fidelity’s printed communications service, according to Ignites, which cited a service alert posted to Fidelity's website.
• Last week, R.R. Donnelley receives unsolicited $11/share offer from strategic buyer.

We used to love RRD but they split into 3 parts and we forget to get back into them (I wanted to wait until it was clear what each company actually did).

AAPL/Pirate – That's why AAPL only has an 87% market share with the teens – there's always room for you rugged individualists who choose to be different.  Wasn't that AAPL's original marketing campaign against IBM?  

RCL/Kustomz – I like them as a company but they do seem like a no-brainer of a short.  It's going to hit them for about $1Bn per Q being shut down and, since they register in the Bahamas or wherever – there's no Government bailout coming their way.