Morning Reads

Morning Reads







Military might

The phrase "the best defense is a good offense" is alive and well as countries continue to boost military spending to record levels. Ahead of the pack is the U.S., which has allocated $825B in defense expenditures for FY 2024. That's an amount equivalent to the military expenses of the next 10 countries combined, and if factoring in non-discretionary spending on defense, such as veterans benefits, that number would already be well north of $1T on an annual basis.

Snapshot: Taking notice of the spiraling conflicts taking place across the globe, many Western countries have been warning that "the era of the peace dividend is over." France, which has been leading the defense spending charge across Europe under Emmanuel Macron, is raising military expenditures by more than one-third in the coming years. Another boost for NATO has come from founding member Norway, which just presented plans to double the size of its defense budget, while the U.S. Congress is debating the best path forward for a vote on aid to Ukraine, Israel and Taiwan following Iran's attack over the weekend.

The call for increases in defense spending comes at a time when the West is struggling with diminished military recruitment, as well as pressure from giant debt loads and higher interest rates. Some have looked to defense stocks as a flight-to-arms trade, but returns there haven't always been exemplary, and only 4.4% of WSB subscribers see the sector as an effective hedging mechanism. In fact, defense giants like Raytheon (RTX) and Lockheed Martin (LMT) are trading at roughly the same levels seen before the COVID pandemic in March 2020 despite huge new contracts like the recently announced $17B ICBM interceptor program.

What to watch: Existing backlogs and production capacity don't carry over to immediate new order revenues, which may be reflected in share prices. It also takes a long time for Western militaries to procure advanced weapons, while contractors have to ensure their margins, especially for hefty projects that may be subject to political or strategic reviews in the future. It's also important to note that some defense stocks are looked at more for their dividends, though there have been many share price winners in the sector. Check out the top quant-ranked aerospace and defense stocks on Seeking Alpha.

Antitrust binge

Shares of Live Nation (LYV) are under pressure amid reports that the DOJ is preparing to file an antitrust lawsuit against the concert promoter and its Ticketmaster unit as soon as next month. The stock is off nearly 8% in premarket trading, falling closer to the $90-level. Regulators will likely allege that Live Nation used its dominance to undermine competition for ticketing live events, although the specific charges aren't known. A DOJ decree forbidding Live Nation from threatening venues with loss of access to tours was extended to 2025 on account of repeated violations. (13 comments)

Semiconductor seriousness

Soon after Samsung (OTCPK:SSNLF) was awarded up to $6.4B in grants to boost its U.S. chip production, Commerce Secretary Gina Raimondo said she expects all the $39B in CHIPS Act grant money to be allocated by the end of the year. "We're on a roll," she said on the sidelines of the event announcing Samsung's grant. "We've done three of these in the past month. We'll be doing more in the coming weeks." The awards so far have focused on advanced chips, with the largest grants going to Intel (INTC) and Taiwan Semiconductor Manufacturing (TSM). The remaining grants will focus on memory chips and investments in suppliers, wafers, and chemicals. (2 comments)

Conversion conundrum

Less than a year after its launch, Peloton (PTON) has quietly pulled the plug on the unlimited free-membership option. The fitness app tier was introduced to draw customers who didn't want to spend too much on Peloton equipment, with the expectation that they would eventually switch to paid memberships to access more classes, but it looks like that never materialized. PTON shares slid 7.3% on Monday following the news, and have declined 46% YTD, wiping nearly $1B off the company's market cap. SA analyst Ahmed Abdelazim is bearish on Peloton, as it appears to have higher odds of going bankrupt.

Today's Markets

In Asia, Japan -1.9%. Hong Kong -2.1%. China -1.7%. India -0.6%.
In Europe, at midday, London -1.4%. Paris -1.2%. Frankfurt -1.2%.
Futures at 7:00, Dow +0.3%. S&P -0.1%. Nasdaq -0.1%. Crude -0.5% to $84.99. Gold +0.1% to $2,386.20. Bitcoin -6.2% to $62,541.
Ten-year Treasury Yield +4 bps to 4.65%.

Today's Economic Calendar

8:30 Housing Starts and Permits
9:00 Fed’s Jefferson Speech
9:15 Industrial Production
12:30 PM Fed's Williams Speech
1:00 PM Fed's Barkin Speech
1:15 PM Jerome Powell Speech

Companies reporting earnings today »

What else is happening...

WSB survey results: Half aren't hedging, but see what others are doing.

Another record: Gold extends safe-haven rise despite a strong dollar.

Goldman Sachs (GS) earnings beat as global banking, markets revive.

Reddit (RDDT) slips despite Street coverage weighed to the upside.

Microsoft invests $1.5B in UAE AI firm G42; Brad Smith to join board.

Tim Cook in Hanoi: Apple vows more spending on Vietnam suppliers.

China's GDP growth tops estimates, helped by support measures.

Strong results from UnitedHealth (UNH) despite cyberattack impact.

Meta (META) to temporarily shutter Twitter rival Threads in Turkey.

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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