Puck News | August 8th, 2024

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GOOD MORNING

Here's everything you need to know today: America’s Banker is still betting on a recession. 

JPMorgan Chase CEO Jamie Dimon is putting the odds of a "soft landing" for the U.S. economy at a bleak 35% to 40%. In a chat with CNBC on Wednesday, Dimon reiterated his earlier stance that the markets are way too optimistic about sidestepping a downturn. The longtime chief of the U.S.’s largest bank by assets is also skeptical that the Federal Reserve can nail its 2% inflation target, thanks to future spending on the green economy and military

“There’s a lot of uncertainty out there,” Dimon said, listing off his usual suspects when he predicts economic doom (he does this a lot, you guys): geopolitics, housing, deficits, spending, quantitative tightening, and elections. Basically, everything Jamie sees makes him jittery, but rising credit card defaults are definitely his latest anxiety trigger. According to Fed data, the delinquency rate on America’s “plastic” is now back to pre-pandemic levels.

“There’s always a large range of outcomes,” Dimon shrugged after clarifying that we’re not in a recession at the moment. “I’m fully optimistic that if we have a mild recession, even a harder one, we would be okay. Of course, I’m very sympathetic to people who lose their jobs. You don’t want a hard landing.”

Hard to argue with that, not that Dimon would really let you.

Let’s dive into more detail below.

BREAKING NEWS
Disney’s latest earnings report is out, and we’re left to wonder if Mickey Mouse might be sweating under those shorts.

The entertainment giant’s Q3 results are a very mixed bag, with seemingly every bright spot overshadowed by significant struggles going forward. Streaming is growing, but not fast enough. Traditional media is in decline, parks are a bright spot but showing cracks, and The Magic Kingdom’s legal and political battles are an ongoing headache.

In his second go-around as Disney’s CEO, Bob Iger sure has his work cut out for him.

WHAT HAPPENED
Let’s start with the good news: Disney+ is growing… but not as quickly as Wall Street hoped (hey, we tried). The streaming service added a modest 800,000 subscribers last quarter, bringing the total to 146.7 million. That’s up from the previous quarter, but still short of the 1.1 million analysts expected and it now seems that even Baby Yoda can't save Disney from being brutalized in the streaming wars.

To combat the malaise, Disney is raising subscription prices and cracking down on password sharing, hoping to squeeze more dollars from a stagnant user base. Iger, back at the helm like a captain trying to steer the Titanic away from the iceberg (or James Cameron away from five more “Avatar” sequels), insists that Disney+ is "on the right path" but even he acknowledges the streaming landscape is more competitive than ever.

Then there are Disney's traditional media networks, which definitely still, like, exist. Revenue in this segment fell by 7%, with advertising dollars drying up faster than The Little Mermaid at Burning Man and cable subscribers continuing to cut the cord. ESPN, once the crown jewel of Disney’s media empire, is feeling the pinch as sports viewership declines. Iger's grand plan to transform ESPN into a direct-to-consumer streaming service is still in the works, but it’s getting pretty late on this one, Bob. The company's ad revenue dropped by 4% as advertisers are not exactly famous for lining up to throw money at a sinking ship.

On the brighter side, there are the ”Happiest Place(s) On Earth.” Disney's parks, experiences, and products division had a stellar quarter, raking in $8.3 billion, marking a 13% increase year-over-year. Post-pandemic revenge travel is still a thing, and families are flocking to Disneyland and Disney Worlds in droves. But even here, the magic is fading slightly. Attendance in Florida’s parks is down, thanks to sweltering heat and economic jitters. The international parks are doing better, but it's a small consolation when you can’t stuff your domestic cash cows full of spend-happy tourists.

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BREAKING NEWS
In his famous farewell address on January 17, 1961, President Dwight D. Eisenhower warned about the dangers of the military-industrial complex—a fancy term for the bottomless pit of taxpayer money funneled into defense contractors. Fast forward to today, and that cozy relationship is alive and well, with politicians exploiting it like never before.

As the U.S. stock market tanked on Monday, two stocks stayed green: Lockheed Martin (LMT), up 23%, and Raytheon Technologies (RTX), up 35% year-to-date. Legislators like Representative Kevin Hern, holding $300,000 in LMT and $550,000 in RTX stock, are making bank. And don’t forget Representative Jared Moskowitz, whose transactions we’ll dive into next.

This is exactly what Ike warned about: power players with insider knowledge, voting for and funding defense giants like Lockheed Martin, then cashing in on the side.

WHAT HAPPENED
Representative Jared Moskowitz of Florida might need to take a “Florida bath” after possibly violating the STOCK Act by buying Lockheed Martin shares on July 1st. That purchase has since jumped 16% while the overall market declined. He also sold Northrop Grumman shares valued between $1,000 - $5,000. Though filed under his children’s names, these trades raise eyebrows given his access to sensitive information.

This isn't Moskowitz's first rodeo. In March 2024, his children's investment account sold Seacoast Banking Corp. shares worth $65,000 to $150,000 just as banking crisis fears peaked. Moskowitz claimed his financial adviser suggested the sale for diversification, but it happened right before he attended a congressional briefing on the banking turmoil.

Moskowitz's trades are particularly noteworthy as a member of the House Committee on Foreign Affairs, which handles U.S. military engagements and defense partnerships. Given his access to sensitive information and history of questionable trades, it’s not hard to connect the dots.

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BREAKING NEWS
Is a $10 billion quarterly loss… bad? We’re asking for an embattled studio CEO.

Warner Bros. Discovery just dropped their latest financials, and let’s just say it was pretty, pretty, prettay bad. The media giant behind CNN, TNT, HBO, and streaming platforms Max and Discovery+, disclosed a mind-numbingly large $9.1 billion non-cash goodwill impairment charge. For those not fluent in corporate jargon, this basically means Warners had to admit that the book value of their TV networks segment was a bit... overhyped.

Why you might be asking? Well, their linear networks, like Turner and Discovery were dragged down by the imploding U.S. TV ad market and dicey prospects for affiliate deals and sports rights renewals, including its hot mess of an attempt to retain the NBA. All in all, CEO David Zaslav, who is not famously popular nor quick to embrace streaming, might be experiencing the sensation of his chair getting warmer.

WHAT HAPPENED
Here’s the grisly breakdown: WBD posted a loss per share of $4.07, which makes the 22-cent loss expected by analysts look like a pipe dream. Revenue came in at $9.7 billion, missing the $10.071 billion target. The big hit came from the aforementioned colossal $9.1 billion charge that’s a balance sheet’s way of admitting viewers are fleeing, and advertisers are spending their dollars on digital and streaming.

Speaking of which, the streaming business centered around Max. Warner Bros. Discovery

added 3.6 million subscribers in the quarter ending June 30, bumping its total global streaming customer base to 103.3 million. This growth coincided with Max's launch in new international markets, proving that there are still some areas where the company isn’t sinking.

But like we said, some are. Revenue from the TV networks was down 8% to $5.272 billion in Q2, with both distribution and advertising revenue dropping. And direct-to-consumer streaming revenue took a 5% hit, dropping to $2.568 billion. This was primarily due to a massive 70% decline in content revenue from fewer third-party licensing deals.

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1. Disney Reports Earnings with Mixed Results

Disney (DIS) reported its third-quarter earnings, revealing a profit in its streaming business for the first time. However, its theme parks division experienced a slowdown in revenue, highlighting potential challenges ahead. The company raised its earnings forecast despite the mixed results.

2. Super Micro Computer Misses Earnings, Announces Stock Split

Super Micro Computer (SMCI) missed analysts' earnings estimates for the fiscal fourth quarter and announced a 10-for-1 stock split. This is the first stock split for the AI-focused server manufacturer, which saw its shares drop significantly following the earnings report.

3. Google Faces Antitrust Ruling

A federal judge ruled that Google (GOOGL) has illegally monopolized the search market. The decision could have significant implications for the tech giant and the broader industry, potentially leading to major changes in how Google operates.

4. CVS Health Lowers 2024 Forecast Amid Insurance Struggles

CVS Health (CVS) cut its 2024 earnings forecast for the third time, citing ongoing difficulties in its health insurance business. The company announced a $2 billion cost-cutting plan and a leadership change at its Aetna division to address these challenges.

5. Microsoft Responds to Delta's Tech Outage Claims

Microsoft (MSFT) responded to Delta Air Lines' (DAL) claims that last month's tech outage, attributed to Microsoft's services, cost the airline $500 million. Microsoft, along with CrowdStrike, is defending its position against the criticisms.

6. JPMorgan Faces Probe Over Zelle Scams

Major US banks, including JPMorgan (JPM), Bank of America (BAC), and Wells Fargo (WFC), are under investigation by the Consumer Financial Protection Bureau (CFPB) for their handling of Zelle transactions. The probe focuses on potential fraudulent activities and consumer protection issues.

7. Elon Musk's X Sues Advertisers for Boycott

Elon Musk's social media company, X (formerly Twitter), has filed a lawsuit against several advertisers, accusing them of unlawfully conspiring to boycott the platform. The lawsuit claims that this boycott has led to significant financial losses for X.

8. Tesla Loses Major European Customer Over Musk's Trump Endorsement

Tesla (TSLA) has lost a major European customer, German drugstore chain Rossmann, following Elon Musk's public endorsement of Donald Trump. Rossmann cited Musk's support for Trump as contradictory to Tesla's environmental mission.

9. Mortgage Rates Drop to 15-Month Low, Boosting Refinance Demand

Mortgage rates in the US have dropped to their lowest level in 15 months, spurring a significant increase in refinance demand. The decline in rates is expected to continue influencing the housing market.

10. Asian Markets Rally After Bank of Japan Eases Rate Concerns

Asian markets made substantial gains following the Bank of Japan's decision to ease concerns about an imminent interest rate hike. This move provided relief to investors and contributed to a global market rebound.

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

Learn More Now ➔