Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify
Catalyst watch for the week of June 18. Seeking Alpha Managing News Editor Kim Khan gives investors a wrapup of the FOMC meeting. (00:28) Seeking Alpha Associate News Editor Kevin Curran previews what to expect when FedEx Corporation (NYSE:FDX) reports earnings. (03:10) Hot topic: PGA Tour, LIV Golf and Manchester United (MANU) have something in common (06:04). What is it?
Julie Morgan: Kim, It’s not like it was a busy week or anything, right?
Kim Khan: Oh, jeez. Yeah. Mashed potatoes and gravy for us Fed heads, it was crazy. We had the CPI and then we had the Fed decision. We had everybody deciphering what’s going on with a hawkish dot plot versus a Fed pause. And then Chief J. Powell gave us a wonderful press conference of, yeah, I’m kind of dovish, but no, I’m kind of hawkish. So it was really interesting.
A lot of things stood out for me when J Powell said that we are a couple of years out from cutting rates that the market reacted to. But he also said that the labor market strength might actually help us off landing, which is something that he hasn’t said. He’s always been worried about labor market strength. So we got a lot of push and pull going on.
But what we do know is that rates are on hold right now and the market expecting a hiking next month. And so we’re next week going to need to hear from all the Fed heads. They’re going to have to say what they’re thinking. They’re going to have to massage the message of whatever the press conference was. Either somebody’s going to come out and say, look, we really didn’t think it was a skip, or we really think that we have time to watch the data come in.
It was funny because Powell actually called it a skip and then corrected himself. So it was kind of a nice oops moment.
JM: It’s funny that you say that because I was actually going to ask you about that. I know this is something that you talked about with Chaim Siegel. He is the investing group leader of Fed Trader on seeking Alpha. So if you haven’t listened to what was basically a wrap up of the Fed decision and also Chairman Powell’s press conference, I encourage you to do that. Go back and listen to that episode of Wall Street Breakfast. It’s available the same place you downloaded this episode of the podcast. So Kim, was it a skip?
KK: I think it was definitely a skip considering that they really are going to probably hike one more time. They penciled in two with the dot plot, so it went terminal rate went up to 5.6% from 5.1%. It’s mainly what people think that the pre SVB predictions were. So now they think that they can hike maybe once, maybe again if ECE inflation really pushes up. But they are giving themselves some wiggle room. But he’s saying a skip. It kind of convinces me it is a skip. I mean, it’s a tell.
JM: Kevin, let’s talk to you about earnings. I know it’s not that busy, but we do have a couple of big names, right?
Kevin Curran: Yeah, I would say that it’s kind of a tale of two work schedules at the moment for him and I because with all of the economic data that the earnings calendar is pretty slow. So I’m sure that he’s envying my workload at the moment. But we do have a holiday shortened week. Obviously, June 19 is a market holiday. Then we have FedEx, KB Home and Accenture. Probably the three major reports with a smattering of other ones. But as we said, we’re late into earnings season with not exactly a heavy schedule.
JM: What are you expecting to hear from FedEx? Maybe possibly an update on the changes that they made.
KC: Yeah, so as many people will recall, they made some pretty significant changes to the business, even reorienting the entire structure. They have a CEO in place less than a year into his role, Raj Subramanium, and he’s really taking on cost cuts. They’re targeting billions in cost cuts.
This is not an easy thing to do. So we’ll be looking to see how they’re able to trim these types of costs and maintain the business when it’s not exactly the easiest sledding for a transportation focused business. And volumes have been falling pretty steadily over the past, well, let’s say almost a year at this point. So, yeah, the updates on how he’s trimming the costs and what type of cost savings this reorganization of the business overall is providing will be really important not only for FedEx, but also ups and more broadly giving the economic implications of FedEx’s business.
JM: Another company that I was thinking about and of course they’re not reporting earnings or anything, but you can’t help but think about Tesla. Tesla seems to be on a winning streak.
KC: Yeah. It’s not foreign to Tesla investors that have enjoyed a pretty good run for themselves, but it’s a reversal of fortunes. From last year, it was down about 60%, I believe, in 2022. Now we’re a little over halfway through 2023 and it’s up almost 140% with a 13 day winning streak going. I don’t expect anything approaching Joe DiMaggio type numbers here, but it’s pretty impressive to see a stock go up in a straight line for half a month, basically.
JM: Are there any other companies or any other stocks that are on that same winning streak?
KC: There are, and well, I mean, one is to say that the auto companies and EV companies in general are up pretty steadily. Maybe that’s the gravitational pull of Tesla. Maybe Tesla is riding the secular wave of EV adoption. It’s kind of a chicken or the egg situation there.
The other thing that I’ve been watching a lot recently is the move in heavily shorted stocks, which is always kind of interesting to look at. And we’ve seen a really rapid run in a number of those, of course in the sort of auto sector.
Again, one that’s been interesting is Nikola which is up 100% almost in actually now, it’s over 100% now that I look at the chart in the past, last month. So the winning streaks in a lot of these heavily shorted stocks is interesting to me. And I kind of want to dig into what the dynamics are at play. There that people are covering or squeezing at this particular moment in time.
JM: So now for something different. Kim, Kevin, tell me, what do PGA, LIV golf and Manchester United have in common?
KC: Yeah, so, Julie, good to steal a page from Monty Python there. And now for something completely different. We’re looking at a lot of Middle Eastern money. Oil flows, and so does Middle Eastern money towards sporting events as of late, it seems. Saudi Arabia is, of course, backing LIV. And we saw a lot of spending on soccer as of late with the Qataris spending lavishly on their World Cup. That was certainly anything but controversial. And then now more Qatari money heading towards Manchester United and their American owners departing, and now more oil rich owners in the Premier League. And I’m sure that Kim, being a bigger soccer fan than I, has more commentary on that in particular.
KK: Well, yeah, we just saw Manchester City win this treble. As a Man United fan, I’m going to say that it is, of course, the second treble, not the first ever one with their petro dollars. But petrodollars are a big thing in sports right now. I mean, LIV golf merging with PGA was a huge surprise, not just to everybody who watches a sport, but also to the players. You read some of the stuff that players were surprised and angry. They’d given up a lot of money to keep the PGA intact.
Political reasons. There’s always with the Middle East concerns about human rights records and they passed on it. And now all of a sudden, there’s just one big global golf organization that is probably an idea of what Saudi Arabia is looking to do. I mean, there’s a lot of reasons why they want to do this.
There is the prestige idea of it. They have tried to woo some of the best players. They got Ronaldo in soccer. They didn’t get messy. He went over to Inter Miami, so he’s going to be playing in the US. It’s competing money for the global game.
But also to put a bit of a wonky perspective on it, it’s also a way for all these oil rich countries to get rid of their dollar reserves that they have and put it into something else. They’ve got a lot of they sell all their oil in dollars, and they’ve got all these dollars. Where do they put them?
KC: Yeah. And if anybody wants to feel better about trades they didn’t make and the types of looking back at things that could have been tiger woods apparently gave up over $700 million to sign with LIV in order to stay loyal to the PGA, and then they ended up merging anyway. So what could have been, I guess.
JM: But do you think that this is a good route to take?
KC: For whom?
JM: I asked that question, and I kind of want to say for everyone all around, but there’s just been so much backlash. But then that’s also going the political route.
KC: Yeah, I think that it’s a tough question, because if there’s one golf league and it has a huge investment from the Saudis, it’s going to attract more attention. There might be some political wrangling over the status of the PGA and certain tax implications, et cetera, maybe even an antitrust action. Who knows? There’s different ways that regulators could lashout at the PGA if they choose to do so, and that’s not out of the question for the Saudis. I think that Kim laid out a pretty good idea of how it benefits them and also a good perspective on perhaps differing motivations for them investing in sports.
As far as the Premier League, there’s already a ton of owners that are from different backgrounds, and the only controversy we’ve seen recently is Roman Abramovich having to sell Chelsea because of the Russia’s invasion of Ukraine. But as long as Saudi Arabia isn’t looking to invade anybody soon, I don’t see much risk there.
JM: Got it. So, again, we will not have a Wall Street breakfast podcast or our Wall Street breakfast newsletter, our daily one page news summary on Monday because it is a market holiday. Anything else either one of you would like to add?
KK: Well, this is Kevin’s last podcast, so I would like to say goodbye to him and wish him best luck in his future endeavors.
KC: Thank you very much. Yeah, I’ve been bought out by the Saudis, and I’ll be moving on to form my own publication that will be backed by Petrodollars, in accordance with our conversation earlier.
KK: And I applaud you for taking the oil money rather than committing yourself to the US League.
JM: Oh, my goodness, yes. And I would like to say goodbye to Kevin as well and wish him well.
KC: Thank you very much, Julie. It’s been pleasure. And of course, I was kidding about the Petro dollars. I’m not worth that much.
Read the full article here