Tuesday Morning Reads

Tuesday Morning Reads

Morning Reads









$3T club

The first trading day of 2022 resulted in a historic day for the U.S. stock market as Apple (AAPL) became the first company in history to reach a valuation of $3T. The tech giant crossed the market cap milestone in afternoon trading, with shares climbing nearly 3% to $182.88 apiece. Lifting investor confidence was the belief that Apple will keep launching best-selling products as it explores new markets like self-driving electric cars, augmented-reality glasses and possibly the Metaverse.

Runners-up: The only other company that is currently in Apple's market cap ballpark is Microsoft (MSFT), which has a valuation of $2.5T. Google (GOOGGOOGL) parent company Alphabet recently slipped out of the $2T valuation club, and was at $1.93T in market cap on Monday. It took Apple just a year and a half to tack on its latest trillion dollars after reaching a $1T valuation in mid-2018 and $2T in value in August 2020.

"Being the first company to join the $3T club is a "flex the muscles moment" for [Apple CEO Tim] Cook and company," said Wedbush analyst Dan Ives, adding that it was a "watershed" event for the iPhone maker. "The company continues to prove the doubters wrong with the renaissance of growth story playing out in Cupertino." Ives also said that Apple is continuing to see strong demand for the iPhone 13, and the company's services business is on track to be worth $1.5T alone.

iEcosystem: Nearly 1.65B people across the globe connect to the internet through an Apple product, like the iPhone, iPad or iMac. That has led to steady revenue growth, cash flow, and key products having a strong long-term outlook. It has also benefited from demand for consumer electronics during the pandemic, while the company has managed to largely avoid disruptions seen elsewhere in the supply chain, as well as regulatory threats from Washington.

New general in town

The Organization of the Petroleum Exporting Countries, otherwise known as OPEC, is getting a new public face, with the election of Haitham al-Ghais as its new secretary general. Al-Ghais, an oil industry veteran and former Kuwaiti governor to OPEC, will take the reins this summer, navigating a somewhat fractious alliance at a time of a volatile crude market. The secretary general is in constant contact with international bodies, and convenes the group's meetings, which used to happen twice a year, but now includes almost monthly extraordinary sessions.

Bigger picture: Al-Ghais will succeed Nigeria's Mohammad Barkindo, who will have served the maximum two three-year terms when he leaves office at the end of July. Holding the position since 2016, Barkindo helped clinch a deal with non-OPEC, which revitalized the group by bringing Russia and other key producers on a board for a series of production cuts since 2017. That helped shore up the market following the supply glut and oil plunge of 2014-16, while the alliance stayed in place through the coronavirus crisis in 2020, when the pandemic crashed the price of oil and saw it even briefly go negative.

As he heads for the exit, OPEC gave a salute to Barkindo as being "instrumental in expanding OPEC's historical efforts to support sustainable oil market stability through enhanced dialogue and cooperation with many energy stakeholders." Others are keeping their hands by their waist. The group has recently come under heavy criticism from the U.S. and other countries for creating "artificial tightness" in global energy markets, with Washington even coordinating a release from the Strategic Petroleum Reserve after OPEC refused to more aggressively boost output.

Today's meeting: OPEC+ will convene for its latest monthly gathering today as WTI crude futures (CL1:COM) near $80 a barrel. The group is expected to continue to stay the course by modestly boosting production by 400K bbl/day from February. "Number one driver [of global oil prices] at the moment is management of the supply side of the market by [producer alliance] OPEC+," said Virendra Chauhan, an analyst at Energy Aspects, adding that demand concerns from Omicron are subsiding and the planned release from national strategic petroleum reserves was smaller than expected.

Celebrity CEO to convicted felon

A federal jury late Monday convicted disgraced former Theranos (THERA) CEO Elizabeth Holmes on four of 11 counts that her once-hot biotech startup swindled investors out of hundreds of millions of dollars. The failed blood-testing firm was worth about $9B at its peak, reportedly giving Holmes a $4.5B net worth at the time, but was dissolved in 2018 after facing regulatory investigations. Among those allegedly duped by the 37-year-old former CEO are media mogul Rupert Murdoch, the DeVos family, Walmart's Walton family and other wealthy investors.

Snapshot: Known for wearing black turtleneck sweaters like late Apple co-founder Steve Jobs, many saw Holmes as Wall Street's next great entrepreneur. She and former Theranos President Ramesh "Sunny" Balwani falsely claimed that the company had developed a device that could test a single drop of human blood for multiple diseases at once, but the product didn't actually work, and "misleading results" were eventually run on conventional equipment. Authorities expect to try Balwani - whom Holmes had a romantic relationship with - later this year.

After 50 hours and over seven days of deliberations, jurors in U.S. District Court in San Jose, Calif. finally convicted Holmes on three counts of wire fraud and one count of conspiracy to commit wire fraud, but acquitted her on four charges related to defrauding patients and remain deadlocked on the last three counts of deceiving investors. Holmes faces up to 20 years and $250,000 of restitution for each count covering her role in the collapse of Theranos, though she'll probably get a lot less than that. Holmes pleaded not guilty to all the charges and she can appeal her conviction to the state appeals court.

Lessons learned? "I don't think a verdict is going to change the way founders and VCs work in the ecosystem," said Angela Lee, a professor who teaches venture capital at Columbia Business School and runs an investment network called 37 Angels. "I can't tell you how many times I hear, 'So-and-so is in this deal, they're a name-brand VC, you have five days - are you in or are you out?' People don't want to miss out. I am not seeing more thoughtful diligence. If anything, I'm actually seeing a sped-up timeline for diligence in the last couple of years."

5G safety dispute

Verizon (VZ) and AT&T (T) have pulled a 180 on their 5G rollout, agreeing to delay the launch of new service following pressure from Transportation Secretary Pete Buttigieg. The wireless firms previously declared that they would forge ahead with their plans despite a warning that it could interfere with aircraft electronics. The latest U-turn came after a flurry of calls from the White House, airlines that threatened legal action, and possible flight restrictions from the FAA that would have disrupted air travel and cargo shipments nationwide.

At issue: A new band of faster 5G wireless service, called the C-Band, is located near frequencies used by aircraft equipment to compute altitude. Aviation groups and the FAA fear it could put safety at risk, especially in low visibility conditions, but wireless companies and the FCC (which approved the service) have said there are no dangers. "We know aviation safety and 5G can co-exist and we are confident further collaboration and technical assessment will allay any issues," AT&T said in the statement.

Under a new deal inked last night, the wireless providers will postpone the debut of their ultrafast wireless networks by an additional two weeks. They also previously agreed not to deploy towers for six months near 50 airports identified as having the greatest impact to the U.S. aviation. In turn, the industry agreed not to escalate its campaign against the new service, and will look at ways of minimizing the potential impact of interference on flight operations over the next two weeks.

Lot at stake: Verizon has the most at stake in the standoff, spending more than $45B last year to acquire C-Band licenses. It also shelled out several more billion on payments to clear away satellite operators that could have created interference with cellphone towers on the ground. Telecom industry groups have further pointed to C-Band frequencies that have already been deployed worldwide, like in France, saying there have been no reported incidents involving 5G and aircraft.

Today's Markets

In Asia, Japan +1.8%. Hong Kong +0.1%. China -0.2%. India +1.1%.
In Europe, at midday, London +1.4%. Paris +1.3%. Frankfurt +0.7%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.3%. Crude +0.8% at $76.66. Gold +0.3% at $1805.90. Bitcoin -1.3% at $46683.
Ten-year Treasury Yield unchanged at 1.63%

Today's Economic Calendar

8:55 Redbook Chain Store Sales
10:00 ISM Manufacturing Index
10:00 Job Openings and Labor Turnover Survey

Companies reporting earnings today »

What else is happening...

White House goes after meat packers in a move to fight inflation.

What could go wrong in the electric vehicle revolution? Not enough lithium.

Vanguard ETFs take two of the top three positions for capital inflows in 2021.

Starbucks (NASDAQ:SBUX) to require COVID vaccine or weekly test for U.S. workforce.

U.S. daily COVID-19 cases top 1 million as Omicron rages.

FDA authorizes Pfizer's (NYSE:PFE) COVID booster for 12- to 15-year-olds.

World's largest coal exporter, Indonesia, bans coal exports.

Big milestone... Lockheed Martin (NYSE:LMT) beats 2021 target for F-35 deliveries.

Blackstone believes China will curb speculative investments in housing.

Investors worry Alibaba (NYSE:BABA) could convert ADRs into Hong Kong shares.

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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