Stocks finished with modest gains Friday, but the main U.S. indexes still ended with weekly losses as doubts rose about the staying power of the recent rally sparked by signs of easing U.S. inflation. Stocks turned lower earlier in the week after St. Louis Federal Reserve President James Bullard said the central bank’s appropriate target for the federal funds rate could end up as high as 7%, well above the current 3.75%-4% range. The Boston Fed’s Susan Collins followed up on Friday that she was not ruling out a 75-basis point rate hike in December. For the week, the Dow Jones average ended flat, while the S&P 500 dropped 0.7% and the Nasdaq Composite slid 1.6%.
#RIPTwitter?
The problems of a post-Elon Musk Twitter (TWTR) could be reaching an existential level as speculation that the company will not continue in its current form grew following another employee exodus.
Hundreds of workers, including many key software developers and engineers, decided to quit on Thursday rather than sign up for Musk’s “extremely hardcore” culture at the company, according to published reports citing sources and employee Slack messages.
The new Twitter chief set a 5 p.m. ET deadline Thursday for employees to click a link and commit to Twitter 2.0 and “working long hours at high intensity.” Instead, many employees decided to take the three months’ severance alternative. In response to the exodus, Twitter is closing offices, as it did after the initial big wave of layoffs, as it determines who is still with the company.
“Effective immediately, we are temporarily closing our office buildings and all badge access will be suspended. Offices will reopen on Monday, November 21st,” the company said in a memo obtained by Bloomberg. “Thank you for your flexibility. Please continue to comply with company policy by refraining from discussing confidential company information on social media, with the press or elsewhere.”
Tweeting goodbyes: On Twitter Friday morning, the hashtags #RIPTwitter, Apparently Twitter and #TwitterMigration were trending.
Accounts posted information on what other social media networks they could be found on, such as Mastodon, asked whether work accounts on Meta’s (META) Instagram should be created, and tweeted gallows humor farewells such as the “It has been a privilege” meme of the band playing in the movie Titanic. Twitter employees also said their goodbyes and sent messages of support on the platform. Still, there is little sign of a meaningful decline in Twitter posts.
The inflection point?: The latest exodus comes after Musk initially fired half of the Twitter staff as he looked to make the company leaner and slash costs. A departure of top executives followed, then Musk reportedly fired a number of employees who had been critical of him in the company Slack. Yesterday’s decisions were enough for Musk to make moves to retain some staff.
As the “hardcore” deadline approached, Musk’s team held an in-person and videoconference meeting with key undecided employees, but as the deadline passed some began hanging up while the Tesla (TSLA) founder was still speaking, The New York Times reported.
He also appeared to soften his stance on remote work, saying in an e-mail he would no longer make the final decision personally on who could work remotely. But that may have backfired as he put manager jobs on the line for an employee’s remote performance, adding another level of job insecurity.
“Any manager who falsely claims that someone reporting to them is doing excellent work or that a given role is essential, whether remote or not, will be exited from the company,” he said. (227 comments)
Worse than Enron
The fallout from FTX in the crypto space continued. Crypto broker Genesis paused withdrawals, raising concrns among the many companies that user it to provide their crypto customers with yield.
John J. Ray III, the new boss of bankrupt cryptocurrency exchange FTX, criticized the “unprecedented” management of ex-CEO and founder Sam Bankman-Fried that ultimately led to the once-mighty firm’s demise, according to a court filing.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” said Ray, who has more than 40 years of legal and restructuring experience, including overseeing Enron’s high-profile bankruptcy in 2001.
“From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” he added.
Ray mapped out a number of poor management practices that took place within Bankman-Fried’s crypto empire, including FTX’s failure to “keep appropriate books and records, or security controls, with respect to its digital assets.” It also used unsecured group email accounts to access private keys, Ray noted, and used software to hide the misuse of customer funds.
U.S. Senators Elizabeth Warren (D-MA) and Dick Durbin (D-IL) have demanded the now-bankrupt cryptocurrency exchange FTX provide information to shed light on its practices and finances from 2019 to present.
“New revelations continue to shed light on what now appears to be an appalling case of greed and deception,” the lawmakers wrote in a letter. “The public is owed a complete and transparent accounting of the business practices and financial activities leading up to and following FTX’s collapse and the loss of billions of dollars of customer funds.” (13 comments)
Trump declares
Former President Donald Trump formally filed a notice of a third run for the White House Tuesday night – setting up a two-year fight for the heart of the Republican Party, following a midterm election that largely went the Democrats’ way. He may be in for a rough fight after last Tuesday’s runaway re-election of Florida Gov. Ron DeSantis, one of the few Republican high points from the midterm elections – and amid an increasing groundswell over the past few days of key GOP leadership urging a break with the party’s recent past (namely Trump), and a look toward DeSantis as the future.
“Ladies and gentlemen, distinguished guests and my fellow citizens, America’s comeback starts right now,” Trump told a crowd at his Mar-a-Lago home.
“Two years ago, we were a great nation, and soon we will be a great nation again,” Trump said.
Trump is launching a campaign that, depending on whom you talk to, either significantly boosts or seriously hampers the GOP’s chances for reclaiming the U.S. presidency in ’24 – and with that, improving prospects for industries often benefiting from Republican leadership, such as coal and energy stocks including Exxon Mobil (XOM), Chevron (CVX), Peabody Energy (BTU), Arch Resources (ARCH), Alliance Resource Partners (ARLP) and Consol Energy (CEIX); large employers that would benefit from minimum wage limits, such as Walmart (WMT), McDonald’s (MCD), Kroger (KR) and Target (TGT); and defense stocks including Lockheed Martin (LMT), Raytheon Technologies (RTX), Northrop Grumman (NOC) and General Dynamics (GD).
That’s not to mention the so-called “Trump SPAC” Digital World Acquisition Corp. (DWAC), the special-purpose acquisition company linked with efforts to take the Trump Media and Technology Group public. Phunware (PHUN) stock might move on the latest news; the company was hired by Trump’s 2020 campaign to create a smartphone application, and the stock has made volatile Trump-related moves along the way (it also jumped 38% on Nov. 7). Trump’s media efforts are also connected to conservative-focused video site Rumble (RUM), and his page on the site was one of many live-streaming his announcement. Rumble provides cloud hosting for Trump’s Truth Social media platform.
It would be remiss to skip over Rupert Murdoch’s media empire, including Fox News (FOX) (FOXA) and Wall Street Journal owner News Corp. (NWS) (NWSA). Trump and Murdoch’s media were closely intertwined during the Trump presidency, and Trump made frequent call-in appearances to shows including Fox & Friends and Hannity. Recently, Murdoch’s papers and stations have demonstrated that turn away from Trump after the midterm disappointment – the New York Post ran a post-election cartoon cover of “Trumpty Dumpty” – but having a Trump race to cover again could be a difference-maker for newspapers and programs that often made Trump their No. 1 story. (317 comments)
Pass the chips
It’s 13F season, where hedge funds with at least $100M in assets under management reveal their holdings. The flurry of filings gives investors a chance to see what they bought and sold during the quarter, including long positions, as well as call and put options, and generally detail where the “smart money” is being put to work. While shorts aren’t disclosed on the statements, some may still seek out vulnerabilities they can profit from (like heavy put-based short squeezes).
Snapshot: With the form required to be filed within 45 days of the end of a calendar quarter, hedge funds usually wait until the last minute to publish their holdings so as not to let the public know what they are doing. Check out some of the top headlines on Seeking Alpha:
Elliott Management adds Triple Flag Precious Metals, exits Diamond Offshore
Steve Cohen’s Point72 enters Dell, EOG, exits Nike, McDonald’s, Coca-Cola
Carl Icahn takes stakes in Crown Holdings, Twitter in Q3
Saudi Arabia sovereign wealth fund ups stakes in Meta, Alphabet
Nelson Peltz’s Trian Fund pares stakes in Ferguson, Sysco
Tepper’s Appaloosa closes positions in Kohl’s, Micron, Occidental, Netflix
Druckenmiller’s Duquesne adds Amazon, exits Westlake, lowers Microsoft stake
Soros Fund Management invests in Sierra Wireless, Booking, Agree Realty
Tiger Global scoops up HubSpot, PayPal in Q3, exits XPeng, Samsara
Dan Loeb’s Third Point opens bet in Range Resources, gets rid of Cenovus
ValueAct exits Bausch Health, SLM, boosts NYT stake, trims Rocket Cos.
While the transactions can be helpful, it’s important to remember that 13Fs don’t tell the whole story about what funds are doing. As noted above, bearish bets like short-selling are not included in the statements, so visible long core holdings could actually be hedges against those positions. In some instances, the reports can also reflect investment decisions made months ago, since they are only filed up to 45 days after the quarter is complete.
The Oracle: Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) took a new position in Taiwan Semiconductor Manufacturing (TSM), sending the chip giant’s stock up 11% in premarket trading. The stake of 60M shares follows a two-year low notched last month amid a sharp slowdown in global chip demand, but the firm apparently believes that the world cannot do without silicon. Buffett doesn’t typically make big technology bets, but has done some in the past with mixed success. While a six-year wager on IBM (IBM) did not pan out, Berkshire is sitting on massive unrealized gains with its $126B stake in Apple (AAPL). (78 comments)
Holiday blues?
The retail sector took a hit this past week on a warning from Target (TGT) following its earnings report. Target cast doubt on the all-important holiday shopping season, especially when it comes to sales of electronics, which had little impact on the strong October retail sales figures.
Target’s EPS, EBITDA, and operating margin all came in short of expectations for Q3. Target also rattled investors by warning that softening sales and profit trends that emerged late in Q3 and have persisted into November. Guidance is now for a wide range of sales outcomes for the holiday quarter, centered around a low-single-digit decline in comparable sales.
Looking further ahead, TGT is undertaking an enterprise-wide effort to simplify and gain efficiencies across its business, with a focus on reducing complexities and lowering costs. The aim is to save $2B to $3B over the next three years. Layoffs are not expected to be part of the efficiency push. (47 comments)
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