Monday Morning Reads

Monday  Reads

Morning Reads










Apple (AAPL) broke a Hollywood barrier over the weekend at the 94th Academy Awards. An original drama it made for Apple TV+, CODA, became the first streaming-originated Best Picture winner ever. That trumped its bigger-membership streaming rival, Netflix (NFLX), which had led all studios in Oscar nominations for the third straight year - and whose The Power of the Dog was considered a favorite for the top prize. CODA won three awards in all, taking all of the categories for which it was nominated (including Best Supporting Actor and Best Adapted Screenplay).

Quote: "On behalf of everyone at Apple, we are so grateful to the Academy for the honors bestowed on CODA this evening," said Zack Van Amburg, Apple's head of Worldwide Video. "We join our teams all over the world in celebrating Siân, Troy, the producers, and the entire cast and crew for bringing such a powerful representation of the Deaf community to audiences, and breaking so many barriers in the process. It has been so rewarding to share this life-affirming, vibrant story, which reminds us of the power of film to bring the world together."

The three Oscars for CODA were Apple's first ever as it comes a long way in the movie business, with the company prioritizing prestige over profits, according to CEO Tim Cook. "We don’t make purely financial decisions about the content [on Apple TV+]. We try to find great content that has a reason for being," he told analysts on a Jan. 27 earnings call. The stock might take that into consideration, with AAPL shares falling 1.7% premarket despite the achievement. Apple is also estimated to have spent more than $10M on the Oscars campaign for CODA, which is more than the film's sub-$10M production budget.

Another big moment: Will Smith won Best Actor for Warner Bros (TKing Richard, after shocking the audience earlier by going on stage to slap Chris Rock, following a joke the presenter made about Smith's wife Jada Pinkett Smith. "Richard Williams was a fierce defender of his family," Smith said following the incident, while apologizing to the academy (but not Rock). "I'm being called on in my life to love people and to protect people and to be a river to my people. Art imitates life. I look like the crazy father, but love will make you do crazy things." (15 comments)

Shanghai lockdown

The latest round of restrictions in China could have a profound impact on world markets as the country continues to pursue a zero-COVID strategy to combat a spiraling outbreak. Shanghai just launched a two-stage lockdown that will close down bridges and tunnels, and restrict highway traffic in China's largest city. Residents will also be barred from leaving their homes, while many production plants will go offline, like Tesla's (TSLA) factory in Shanghai.

Bigger picture: As of 5:00 a.m. on Monday, the city will lock down areas east of the Huangpu River for four days, including the financial district and industrial parks. The lockdown will then move to the other half of the city, in the west, for an additional four days. During that time, the Shanghai Stock Exchange will shift many services online, and extend the time window for listed companies to release statements or earnings.

Besides another round of supply chain disruptions, the latest curbs hammered oil prices overnight, sending a barrel of WTI (CL1:COM) crude down 4% to under $110. Meanwhile, Brent crude futures (CO1:COM) tumbled by the same amount to as low as the $112-level. Both benchmark contracts are coming off their first weekly gain in three weeks, while there are reports that the U.S. could release more oil from the Strategic Petroleum Reserve.

Go deeper: In an attempt to control the outbreak, Chinese authorities recently locked down the tech hub of Shenzhen, which is the most economically strategic city to come under such restrictions since the pandemic began. "The failure of the targeted lockdown model is a big setback, as Shanghai has been the testbed for China to explore alternative models to minimize the social costs," wrote Oversea-Chinese Banking analysts Tommy Xie and Herbert Wong. "This may delay China's plan to ease its dynamic zero-COVID policy." (21 comments)

Return to domestic priorities

Top White House officials, as well as President Biden himself, are clarifying comments he made during a trip to Europe, which could have been construed as a U.S. policy of regime change in Russia. "Ukraine will never be a victory for Russia. For free people refuse to live in a world of hopelessness and darkness," Biden announced on Saturday. "We will have a different future, a brighter future, rooted in democracy and principle, hope and light, of decency and dignity, of freedom and possibilities. For God's sake, this man cannot remain in power."

Snapshot: Biden has previously called Vladimir Putin a "butcher," as well as a "war criminal," as the West braces for a rocky road ahead in a "new battle for freedom." However, the administration was adamant the new remarks were not a sign of a policy change, but simply meant Putin should not be "empowered to wage war" against Ukraine or elsewhere. U.K., French and NATO officials also sought to distance themselves from the remarks, which capped a highly-televised speech in Warsaw to rally support for Ukraine.

"It's not up to the president of the U.S. and not up to the Americans to decide who will remain in power in Russia," responded Kremlin spokesman Dmitry Peskov. "The president of Russia is elected by Russians." Many in the West feel differently, citing rampant electoral fraud under Putin's rule, while independent media and political opponents are suppressed. Moreover, Biden's statement will almost certainly be used as part of Russia's latest propaganda.

On the home front: While the war in Russia has consumed much of the White House's bandwidth, Biden will turn a spotlight onto some domestic priorities this week. A new budget proposal will be unveiled today that would level a 20% minimum tax rate on American households worth more than $100M. The added revenue could help trim the federal deficit and/or finance some safety-net programs, though it is far from certain the measure will be approved by Congress. (5 comments)

Trailing the S&P 500

S&P Dow Jones Indices has released its latest SPIVA report card, which sizes up the annual performance of "S&P Indices versus Active" managers (hence the name SPIVA). Some of the findings are startling, like one showing that 79% of active mutual fund managers underperformed the S&P last year. It also revealed that 86% of fund managers even lagged the benchmark index over the past decade.

Commentary: "It's no surprise that in the last two calendar years a combined $400B flowed out of U.S. equity mutual funds, with the vast majority going into ETFs that are tied to the S&P 500," said Todd Rosenbluth, CFRA senior director of ETF and mutual fund research. "It just shows you that it's hard to outperform, and it's hard to outperform because it costs more for active managers to compete with the S&P 500 which is essentially free through the ETF wrapper."

Costs eat into whatever success active managers have, with the average active mutual fund charging 100 basis points, compared to as low as 3 bps seen by ETF rivals. That means the average active fund needs to earn an extra 1%, and that's beside the tough competition. They may also be overconfident in their ability to pick winners, while market timing is impossible to get exactly right on a consistent basis.

More on the subject: Whether a fund is actively-managed or passively-managed, it's still an investment fund where the manager uses pooled money from investors to buy and sell investment securities, such as stocks, bonds, or other assets, to be held in the fund. The investors then share in any returns that the fund generates. See Active Vs. Passive Funds: Benefits & Differences.

Today's Markets

In Asia, Japan -0.7%. Hong Kong +1.3%. China +0.1%. India +0.4%.
In Europe, at midday, London +0.5%. Paris +1.5%. Frankfurt +1.7%.
Futures at 6:20, Dow +0.1%. S&P -0.1%. Nasdaq -0.3%. Crude -4.2% to $109.20. Gold -1.2% to $1930.10. Bitcoin +5.8% to $47,193.
Ten-year Treasury Yield unchanged at 2.49%

Today's Economic Calendar

8:30 International Trade in Goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:30 Dallas Fed Manufacturing Survey
11:30 Results of $50B, 2-Year Note Auction
1:00 PM Results of $51B, 5-Year Note Auction

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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