Thursday Reads

Morning Reads


  • New Claims
  • Tensions Worsen
  • Russia added 7,000 troops along Ukraine's borders for a total of over 150,000 (RSXUSOXLE). CNN
  • Chances of a diplomatic solution to Russia/Ukraine situation have decreased after an unnamed US official said Russia was lying about troop withdrawal announcement earlier this week. NY Times
  • Russia says it is "deeply concerned" about violence in eastern Ukraine (Note: US intelligence previously said that Russia might stage a "false flag" operation to justify an invasion in Ukraine). Guardian
  • Two Honda (HMC) plants will operate at 90% capacity until early March. Reuters
  • Amazon (AMZN) spokesperson says the company reached a deal with Visa (V) to continue accepting credit cards (MA, AXP, COF). FT
  • Some Navient (NAVI) borrowers will still need to repay loans despite settlement. NY Times
  • Roku (ROKU) might produce its on TVs (VZIOSNE). Business Insider









Pandemic fades

Is the COVID pandemic finally coming to an end? It sure looks like it, based on latest guidance from Shopify (SHOP). After posting 86% revenue growth in 2020 and a 57% surge last year, the e-commerce software provider said its pace of growth won't be as strong in 2022. Shares of Shopify slid 16% on Wednesday following the cautious update from the company, which dragged down related online retail stocks like Etsy (ETSY), eBay (EBAY), Wayfair (W) and Chewy (CHWY). Other pandemic favorites, like Roblox (RBLX), tumbled 26% for its worst day ever, as kids dialed back online activity and spent more time out of the house.

Quote: "We believe that the COVID-triggered acceleration of e-commerce that spilled into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022, and there is caution around inflation and consumer spend near term," Shopify CFO Amy Shapero declared. While she noted that "for the full year, we see economic growth supporting the continued penetration of retail by ecommerce," investors seemed entirely focused on the first part of the statement, given the recent lifting of pandemic restrictions and full reopening of the economy.

The sentiment is also being expressed at the highest level of government, with the CDC saying it "wants to give people a break from things like mask-wearing" and "get to a point where COVID-19 is no longer disrupting our daily lives." Many states and localities that have long implemented restrictions have eased them in recent weeks, with Philadelphia and Seattle becoming the latest to rescind vax mandates for restaurants and Disney World (DIS) ditching masks for vaccinated guests. Many were also quick to point out that few attendees at the Super Bowl this year were seen wearing face coverings despite a California mandate and crowd of over 70,000 fans inside SoFi Stadium.

Go deeper: "I have not seen a lot of companies who are prepared for post-pandemic," said CNBC's Mad Money host Jim Cramer. "I've seen a lot of companies that were kind of banking on a little more pandemic. We're not in a world of the pandemic anymore [and just months away from wider availability of antivirals] - that's the key, that's the end."

Avocado ban

Consumers and restaurants alike are facing another supply crunch after the U.S. suspended all avocado imports from Mexico. The action followed a credible death threat issued to a U.S. safety inspector, who denied permission for a shipment from the Mexican state of Michoacán. A warning was previously issued in 2019, stating that export privileges would immediately be revoked following an earlier threat to another safety inspector.

Get your guac in while you can: It's lucky that the Super Bowl just passed, but avocados are still the single largest American fruit import. Over 90% of the nation's avocados came from Mexico, which exports over 80% of its crop to the U.S. The market is even worth more than $2.5B each year, making it a major industry (and a target for crime groups).

Meanwhile, the monthly average price of an avocado has already climbed about 40% since January 2021, and consumers can now expect to pay about $1.36 per avocado, according to Zhengfei Guan, a food and resource economics professor at the University of Florida. If the suspension lasts more than two weeks, it can also weigh on the profit margins of companies that are highly dependent on the fruit as their stock runs out. Truist analyst Jake Bartlett estimates that avocados account for 5%-10% of Chipotle's (NYSE:CMG) cost of goods sold and about 2% of El Pollo Loco's (NASDAQ:LOCO).

Next steps: Staff from the U.S. Department of Agriculture Animal and Plant Health Inspection Service have been dispatched to Michoacán to "collaborate with local officials to get inspections back on track as soon as possible." However, it will "remain in place for as long as necessary to ensure the appropriate actions are taken, to secure the safety of APHIS personnel working in Mexico."

Fight over fees

Relations between Amazon (NASDAQ:AMZN) and Visa (NYSE:V) have been deteriorating for months, but the two companies have just worked out an agreement. At issue was a feud over swipe fees, which Amazon pays to accept the financial giant's cards for e-commerce transactions. During the worst of the crisis, Amazon began adding surcharges to customers who used Visa credit cards on its Singapore and Australia websites, and even threatened to ban Visa cards from

Backdrop: Tensions over transaction fees have been ongoing for some time, but last October, Visa significantly upped the charges it takes for credit card payments made online between the U.K. and the EU. Amazon wasn't taking any of it, especially since Visa oftentimes secures special pricing agreements for its top clients, which encourages them to send more volume over its network. In fact, Visa earmarked $8.4B for those incentives in fiscal 2021, 26% more than the previous year.

Playing some hardball, Amazon considered shifting its popular co-brand credit card - one of the industry's largest co-branded portfolios - to rival Mastercard (NYSE:MA). It also flagged Visa's policy of classifying e-commerce payments as "card not present," which generally means higher fees. That's on top of the surcharges introduced in Australia and Singapore, as well as the potential ban in the U.K., which is Amazon's third largest market after the U.S. and Germany.

Outlook: The whole spat has put a spotlight on credit card transaction fees, and could eventually provide an opening for other payment options, especially upcoming fintech players. Account-to-account payments and 'buy now, pay later' option have been exploding in popularity - compared to the payment rails and traditional systems of Visa and Mastercard - and Amazon has been experimenting in the space, offering BNPL options to U.S. shoppers through third-party provider Affirm (NASDAQ:AFRM).


The Financial Stability Board is shaking up its stance on cryptos, which are "evolving and could reach a point where they represent a threat to global financial stability." That's due to their "scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system," which vary across jurisdictions and may not be in compliance with applicable laws and regulations. The FSB also cited wider public policy concerns, like "low levels of investor and consumer understanding of crypto, money laundering, cyber-crime and ransomware."

Flashback: The report is a big change from its previous stance published in 2018, which concluded that crypto did not "pose a material risk to global financial stability." However, the FSB now sees the market as fast-evolving, underscoring the need for a timely and preemptive evaluation of possible responses. Take for example the recent advertising blitz at Super Bowl LVI, which saw new crypto brands and old-timers throw some skin in the game.

Crypto asset market capitalization even grew by 3.5x in 2021 to $2.6T, according to the Financial Stability Board, which monitors and coordinates financial rules for G20 economies since 2009.

Types of risks: "Increasing linkages between crypto asset markets and the regulated financial system; liquidity mismatch, credit and operational risks that make stablecoins susceptible to sudden and disruptive runs on their reserves, with the potential to spill over to short term funding markets; the increased use of leverage in investment strategies; concentration risk of trading platforms; and the opacity and lack of regulatory oversight of the sector."

Today's Markets

In Asia, Japan -0.8%. Hong Kong +0.3%. China +0.1%. India -0.2%.
In Europe, at midday, London -0.6%. Paris +0.3%. Frankfurt +0.1%.
Futures at 6:20, Dow -0.4%. S&P -0.5%. Nasdaq -0.6%. Crude -4.2% $89.76. Gold +0.9% at $1888. Bitcoin -2.4% to $43,155.
Ten-year Treasury Yield -3 bps to 2.01%

Today's Economic Calendar

8:30 Housing Starts and Permits
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
11:00 Fed's Bullard: U.S. Economy and Monetary Policy
4:30 PM Fed Balance Sheet
5:00 PM Fed's Mester: U.S. Economy and Monetary Policy

Companies reporting earnings today »

What else is happening...

Can Walmart (NYSE:WMT) close 2021 with a strong Q4 performance?

Cisco (NASDAQ:CSCO) posts earnings beat, $15B added to buybacks.

FAA head, who supervised Boeing (NYSE:BA) safety and 5G, steps down.

Russian state media reports Ukrainian armed forces fired on Donbas.

Social media slumps as Google (GOOGLlimits Android tracking.

Hasbro (NASDAQ:HAS) activist seeks 5 board seats, urges Wizards spinoff.

Lumber rallies as 'unprecedented' challenges prompt production cuts.

Higher pricing leads Kraft Heinz (NASDAQ:KHC) to top estimates.

DoorDash (NYSE:DASH) soars in relief rally following earnings topper.

Paramount (PARA) plunges as streaming investments spook investors.

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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