Wall Street Breakfast: No Guarantee

No warranty

Check out Seeking Alpha’s original show, The Weekend Bite! This week we discuss a big stock idea for the year, why the ARKK fund is a sell (or maybe even a short), and Russell’s next replenishment. With Chris DeMuth Jr., Founder of Sifting the World, a Seeking Alpha Marketplace service.

The Senate finally confirmed Fed Chairman Jerome Powell for a second four-year term following delays over other candidates the Biden administration had proposed to the central bank. During his first term, Powell had to battle two major crises, including the COVID pandemic and 40-year high inflation, recently turning to tighter monetary policy to combat price pressures. “Chair Powell chaired the Fed during some of the most difficult times in modern American history,” Senate Majority Leader Chuck Schumer said after the 80-19 bipartisan vote, which also saw the vice’s confirmations. -Fed Chairman Lael Brainard and Governors Lisa Cook and Philippe Jefferson.

Instantaneous: A delicate economic environment has been in place since the start of the coronavirus pandemic. When consumer price inflation began to climb shortly after the deflationary shock of March 2020, the Fed assured the United States that inflation was “transitional” as extraordinary accommodative monetary policy took hold. was installing. Since then, the term “transitional” has quickly become unpopular as inflation has risen to levels not seen since the 1980s, forcing the central bank to move quickly to more hawkish actions. At the previous FOMC meeting in early May, the Fed’s decision-making arm even raised the benchmark target range to its highest level in 22 years.

“Inflation is just too high here in the United States,” Powell later said. in an interview on US Public Radio’s Marketplace. The central bank’s tools for tackling this inflation only focus on demand, and “supply is a big part of the story here.” There are additional factors such as the war in Ukraine and new lockdowns in China to limit the spread of COVID-19, so there is no guarantee “whether we can execute a soft landing or not…this may actually depend on factors beyond our control.”

Outlook: If the economy behaves as the Fed expects, the central bank will raise the interest rate an additional 50 basis points at each of the next two meetings. “If things turn out better than expected, we’re ready to do less. If things turn out worse than expected, we’re ready to do more,” Powell continued. “I will also say that the process of bringing inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we failed to deal with it and inflation had to s ‘rooting in the economy at high levels, and we know what that is.’ (15 comments)

Twitter deal suspended

“The Twitter agreement is temporarily suspended pending details supporting the calculation that spam/fake accounts indeed represent less than 5% of users,” Elon Musk wrote in a tweet early this morning. The stock sent Twitter (TWTR) shares into a tailspin, collapse 25% at around $34, with the stock still trading hard at the time of writing. In a somewhat inverse relationship, Tesla (TSLA) is trading higher this morning, up 6% at $770, with the electric vehicle maker likely to attract more of Musk’s attention if the Twitter deal falls apart.

What happened? Musk referenced Twitter’s May 2 10-Q filing – which noted that spam and fake accounts account for less than 5% of monetizable daily active users – although it’s unclear why this would have such an impact. that it would end its takeover bid of $54.20 per share. . Even if 5% of DAUs were bots, Twitter would still have 217 million users in Q1 who received advertising. Prior to the latest announcement, Twitter shares were trading near the $45 level – well below the $54.20 premium – on fears the deal could fall apart.

New reports further suggest that Twitter is freezing hiring amid uncertainty over the company’s takeover. CEO Parag Agrawal announced the decision this week and will rescind some job offers that have already been made, according to an internal memo leaked by Bloomberg. The measures will come on top of other cost reductions in travel, consulting and marketing, while uncertainty reigns as employees wonder whether their teams or projects will survive a change in management.

Two senior executives are leaving: Head of Consumer Products Kayvon Beykpour is leaving the company after seven years with the company and Chief Revenue Officer Bruce Falck is also leaving. Jay Sullivan will take over as Chief Product Officer and Interim Chief Revenue Officer. “The truth is, it’s not how or when I imagined leaving Twitter, and it wasn’t my decision,” Beykpour said. “Parag asked me to leave after letting me know he wanted to take the team in a different direction.” (125 comments)

Shortage of formulas

The White House announced a series of measures to ease the current shortage of infant formula, which has worsened in recent weeks due to a major product recall and supply chain issues. In fact, in the first week of May, 43% of infant formula supplies were out of stock nationwide, up from 31% two weeks earlier, according to retail price data website Datasembly. Many stores also have quotas in place on how much formula a person can buy at a time, while pediatricians recommend not diluting formula (which could be harmful to the kidneys) or switching to other brands.

Rollback: Abbott Nutrition (ABT), the nation’s largest infant formula maker, closed its production plant in Sturgis, Michigan in February following reports of contaminated formula linked to the deaths of at least two infants. A voluntary recall has been issued for Similac, Alimentum, EleCare and other products as the company implements “corrective actions and improvements” to resume operations. Following FDA approval, Abbott can resume production at the site within two weeks and have the product available in approximately six to eight weeks.

Responding to the public outcry, President Biden spoke yesterday with the CEOs of Walmart (WMT), Target (TGT), Reckitt (OTCPK:RBGLY) and Gerber (OTCPK:NSRGY) to explore ways to combat the worsening of the crisis. Among the solutions discussed were cutting red tape to get more formulas to stock shelves faster and urging states to offer consumers flexibility on the types of formulas they can buy with WIC dollars. Biden also called on the FTC and state attorneys general to crack down on price gouging, as well as increase supply via increased exports (about 98% of U.S. supply is produced domestically).

Defense Production Act? “There are a range of options, including this one, under consideration, but I would note that the issue here is that one manufacturer has been taken offline for not producing baby formula safe,” said publicist Jen Psaki. during a briefing at the White House. “So what we’re doing here right now is working with other manufacturers who can produce safe infant formula. We’ve been able to increase our productivity – their productivity over the last four weeks, and we’re going to keep working on it.” (72 comments)

And after?

It’s been quite an interesting week in cryptoland, with stablecoin TerraUSD (UST-USD) losing its dollar peg (now worth 10 cents) and sister token Luna (LUNA-USD) crashing to $0. Bitcoin (BTC-USD) also dipped to $26,292, lose 32% of its value since the beginning of the month, before bounce up to 12% overnight to $30,947. The crypto sector has been carried away by the large-scale selling off of risky assets like tech stocks, as well as worries about the industry as a whole and fears of further selloffs.

Remark: “More than half of all Bitcoin and Ether traded on exchanges are against a stablecoin, with USDT or Tether taking the largest share,” Morgan Stanley analysts wrote in a research note. “For these types of stablecoins, the market needs to be satisfied that the issuer holds sufficient liquid assets that it would be able to sell during times of market stress.”

As mentioned earlier this week, another long-term incentive was that crypto could provide a store of value through anonymous transactions and wallets, but not only have governments gotten better at tracking assets, they are on the not to regulate them en masse. While early investors are still likely to be in comfortable positions, traders who bought cryptos as prices surged last year find themselves in a tough spot. For example, someone who bought Bitcoin after Matt Damon’s viral virus Fortune favors the brave commercial – which first aired on October 28, 2021 (and was replayed during the Super Bowl) would sit on losses north of 50%.

Stronger together: All the industry concerns are prompting some big players to consider combining their resources. Sam Bankman-Fried, the billionaire founder of crypto exchange FTX, just disclosed a 7.6% stake in Robinhood (HOOD), sending the popular retail broker’s battered stock up to 20% in AH trade on Thursday. Although Bankman-Fried has “no intention of taking any action to alter or influence the control of [Robinhood]”, he could call on the company to consider “strategic alternatives or operational or management initiatives. February (3 comments)

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