Puck | July 23rd, 2024

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GOOD MORNING

Here's everything you need to know today:

Were you afraid that this week couldn’t get weirder? Well, good news: Elon Musk is finally prepared to unveil a private production army of humanoid robots next year. 

As is his wont of always dabbling in the next big thing, Musk has been working on these robots for several years and has already developed a prototype named “Optimus” (cool cool cool). Apparently, this is part of his grand plan to dive Tesla headfirst into robotics and artificial intelligence and will debut the not-built-for-world-domination-cyborgs in 2025. 

Also, Tesla is scheduled to report earnings under pressure from investors to give concrete updates on how the car company plans to return to growth and what is happening with the long-delayed Robotaxi project, but we’re talking about humanoid robots.

Wait a second…

Let’s dive into more detail below.

Everybody on Wall Street reads Bill Cohan’s private newsletter, Dry Powder, religiously.

As a former investment banker, Bill has unparalleled access. Recent correspondences include Warren Buffett, David Solomon, and Leon Black. If you’re even loosely connected to the capital markets, Bill is essential reading.

Read Dry Powder at no cost with a 14-day trial to Puck.

BREAKING NEWS
That sound you heard yesterday afternoon was President Joe Biden throwing a massive wrench into the already mostly broken, and messy hot drama infected, machine that governs the tenuous relationship between politics and finance.

And while the major indices have moved in compact parabolas throughout morning trading, most of the market is showing evidence that investors expected to wake up this morning with a new Democratic presidential nominee.

But, then again, it’s only Monday, and we get key Fed data on Thursday and Friday. And isn’t that what really matters?

WHAT HAPPENED
In a normal world, Biden’s historic decision to hand his reelection campaign over to Vice President Kamala Harris would have sent investors scrambling to recalibrate their strategies as the political landscape shifts under their feet.

But that’s not what’s happening because nothing is normal anymore.

The DXY dollar index opened about 0.1% lower in Asia today on the back of the bombshell news but quickly reversed course, ticking higher along with U.S. yields. Both the Dow Jones Industrial Average and S&P 500 spiked in premarket and early trading before giving back those gains before noon. The Nasdaq, which needed an excuse to reignite tech stocks, held onto its early morning surge.

Yield on 10-year treasuries did not catch any wind until just before midday, but then soared over 4.25%.  That late and subtle flight to safety might have less to do with Biden’s decision than what’s coming from another part of Capitol Hill this week where upcoming U.S. economic data might just give the Democrats a bit of a boost they’re not seeing this morning.

Thursday’s second-quarter GDP numbers are projected to rebound above 2% on a quarter-on-quarter annualized basis. Meanwhile, Friday’s core PCE inflation data, the Fed’s preferred inflation measure, is expected to hit the mark at 0.2% month-on-month.

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BREAKING NEWS
Lights, cameras...panic.

According to the latest report from FilmLA, a partner film office for the City and County of Los Angeles, the hottest script in Hollywood right now is the existential one about Hollywood being in big trouble.

The report, broken down into on-location filming during the second quarter of 2024 and stage-based production during the first half of 2023, showcases a "sustained pattern of production decline evident even before the strikes began."

The ripple effects are evident, as Netflix, despite a relatively solid earnings report for Q2, saw its stock drop Thursday and continue into Friday. Major studios like Skydance and Paramount are also merging, allowing for much-needed cost-cutting measures to reduce debt and streamline operations.

FilmLA's Philip Sokoloski states the industry is still "reeling from post-strike paralysis," but bigger things may be at play.

WHAT HAPPENED
Anyone who has ever dreamed of being an actor, director, or at least working behind the scenes in a movie usually imagines white golf carts whizzing around backlots with people dressed up like cowboys, spacemen, or whatever superhero Marvel is trying to make a buck on now. There is a mystique of being "on location" where the magic of the lights and cameras is mixed with reality. Unfortunately, the enchantment of on-location filming costs too much, resulting in a decline of -12.4% year-over-year from April through June 2024, amounting to 5,749 Shoot Days in the second quarter.

And this isn't happening all at once. WGA and SAG-AFTRA labor actions in 2023 continued to reduce industry output because of these issues, though the decline in production was already evident before the strikes (the decline is in the house!). All top production categories have experienced a gradual decrease over time. On a rolling five-year basis, overall on-location filming levels are down 33.4% below their five-year seasonal average heading into summer.

Sound stage occupancy was the same. Due to uncertainty surrounding industry contract talks (lack of clarity and unpredictability about the outcomes of negotiations between industry unions and production), occupancy levels dropped dramatically, reaching a low of 74% in the second quarter—the lowest since 2016. During the study period, 706 projects were filmed on stages, with the proportions of feature film, television, and commercial projects remaining consistent. Non-film use of stage properties increased to about 17% of total activity.

Now, if you're a fan of reality television, brace yourself for more bad news and get the Kleenex. Filming of reality TV dropped by 56.9% to 868 shoot days, significantly dragging down the broader television category, which fell by 27.7% to 1,901 shoot days.

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BREAKING NEWS
Unless you live under a rock (the comfort of a boulder might be a better place given current conditions), you likely heard President Biden bowed out of the 2024 presidential race.

President Biden, who served the United States for over five decades, naturally stuck to tradition, endorsing Vice President Kamala Harris to take on his campaign.

The public, more specifically the Bitcoin and crypto space, instinctively had many questions about the candidate whose chances of winning are now polling on Polymarket betting markets at 29% (Trump is at 65%) with bets totaling $22,836,374 at the time of writing.

But while everyone knows where Trump stands on crypto (at least this week), interestingly enough—and strange for X frequenters—little information is out there about Harris's Bitcoin stance.

WHAT HAPPENED
Harris has shown little to no interest in Bitcoin and crypto. But while she is known for her tech-friendly stance and obvious connections to California and Silicon Valley (we'll get to that in a bit), she has not made any definitive statements about the burgeoning and, at times, volatile asset class.

Financial disclosures from Quiver Quantitative and Capitol Trades reveal that neither she nor her husband owns any digital assets, unlike Trump and J.D. Vance, who own everything from Bitcoin, Ethereum, and even NFTs (non-fungible tokens). In fact, Harris's portfolio is boring, revealing zero trading history with disclosed holdings ranging from mutual funds like Vanguard Growth ETF ($250,000 - $500,000) to San Francisco Employees Retirement System (SFERS) Plan ($250,000 - $500,000). In contrast to some of her associates on the Hill split-screening emails from donors and their Robinhood account, Harris is squeaky clean with little to no interest in the stock market.

The digital asset fake-out by President Biden and his administration in September had every Bitcoin and crypto-lover in an uproar. The proposed comprehensive framework for the "responsible development of digital assets" outlined recommendations to protect consumers, investors, and businesses, promote financial stability, counter illicit finance, and foster responsible innovation. It sounded great for those passionate about the industry, but then Biden threw everyone for a loop, vetoing a crypto-related bill in 2024. Specifically, the bill aimed to overturn the SEC's Staff Accounting Bulletin 121 (SAB 121), which requires public companies, including banks, to hold customers' crypto assets on their balance sheets.

The veto was based on the belief that overturning SAB 121 would inappropriately constrain Gary Gensler and the SEC's ability to set necessary regulatory guardrails and address future issues, emphasizing the need for consumer and investor protections.

For Trump and the Republicans, this goes in direct opposition to Trump's recent stance (and Jamie Dimon strangely enough), who has vowed to "stop Joe Biden's crusade to crush crypto" and end what he calls the "Democrats' unlawful and unAmerican Crypto crackdown."

Given her position, Harris likely did not have a direct say in Biden's decisions, but the association alone will likely stick with her in voters' minds if Bitcoin and crypto continue to be a deciding factor at the polls in November.

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1. Delta Cancels Hundreds of Flights Following Tech Outage

Delta Air Lines is still facing significant operational challenges after a major tech outage caused by a faulty software update. The airline has canceled over 600 flights on Monday, while other airlines have mostly recovered from the disruption.

2. China Cuts Lending Benchmarks Following Surprise Rate Cut

China has reduced its benchmark lending rates after the central bank unexpectedly lowered a key short-term policy rate. This move aims to support the slowing economy and stimulate growth.

3. Nvidia to Develop AI Chips for China to Comply with US Regulations

Nvidia is preparing a version of its new flagship AI chips for the Chinese market that complies with current US export controls. This strategic move aims to maintain its market presence in China despite stringent US regulations.

4. Verizon Reports Mixed Q2 Results, Stock Declines

Verizon reported mixed financial results for Q2 2024, with earnings meeting expectations but revenue falling short. The company’s stock has dipped in response to these results, highlighting concerns about its growth prospects.

5. Woodside Energy to Acquire Tellurian for $1.2 Billion

Woodside Energy has announced a definitive agreement to acquire US-based Tellurian, including its Driftwood LNG project, for $1.2 billion. This acquisition is expected to expand Woodside’s global LNG footprint.

6. Byju’s Faces Major Challenges as Ed-Tech Company Implodes

Indian ed-tech giant Byju’s is facing significant challenges as the company struggles with financial instability. Founder Byju Raveendran is under intense scrutiny as the startup’s future hangs in the balance.

7. Ryanair Profits Plunge Amid Lower Summer Fares

Ryanair has reported a 46% drop in quarterly profits, attributing the decline to lower-than-expected summer fares. The budget airline anticipates continued fare reductions in the coming months.

8. S&P 500 Futures Rise Following Worst Week Since April

S&P 500 futures showed slight gains on Sunday night after experiencing the worst weekly loss since April. Investors are cautiously optimistic as they assess the market’s direction.

9. AMC Entertainment to Restructure Debt Using Theaters

AMC Entertainment has reached an agreement to restructure its debt load by using its theaters to support the deal. This move is part of the company’s strategy to improve its financial stability.

10. Goodyear Sells Off-The-Road Tire Business to Yokohama for $905 Million

Goodyear has announced the sale of its Off-The-Road tire business to Yokohama for $905 million. The sale is part of Goodyear’s strategy to streamline operations and focus on core businesses.

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Today's insights are provided by Puck. Smart, Engaging Journalism Owned and Operated by the Journalists Themselves

Learn More ➔