Markets Get Into Tizzy Over Fed Limiting Cookie Jar Access
The Federal Reserve gave asset prices one cookie yesterday in lowering the overnight federal funds rate by 25 basis points, but asset prices proceeded to dive anyway because in its language, the Federal Open Market Committee signaled that the rate cut was essentially a one-night cookie stand. One and done. The diet starts now. The dollar index (NYSEARCA:UUP) jumped up to two-year highs, nearing a 99 handle. The yield curve, meanwhile, steepened, with long term rates climbing and short term rates falling. 10-year minus 3-month rates though is still in negative territory, but that could change back to positive any day now. The S&P 500 tanked on the news, and gold initially climbed but then fell.
All Fed chair Jerome “Jay” Powell said to trigger all this was that the rate cut was a “mid-cycle adjustment to policy” but traders interpreted that to mean that in the Fed’s view, the current credit cycle is only in its mid-life crisis rather than its deathbed, which means that the Fed does not intend, for now at least, to keep cutting rates as a matter of policy. That could change any second if economic data really turns south, so bad news is good news again. And good news is bad news.
London Stock Exchange Makes Pre Brexit Deal to Buy Refinitiv
In a revolutionary development not seen since 2016, there is news out of the United Kingdom that doesn’t have to do with Brexit. Refinitiv, a market data firm, has agreed to be acquired by the London Stock Exchange (OTCMKTS:LNSTY), which trades over the counter on US exchanges, for $27 billion. The idea is to transform the LSE into a competitor to Bloomberg. “This transaction is a defining moment for LSE in terms of its strategic importance,” LSE chairman Don Robert said. Blackstone (NYSE:BX) had earlier bought Refinitiv from Thomson Reuters, for about half the money it is selling it for. Blackstone share are now at an all time high.
GE Burns $1B, But Says It is Turning Around
The shift to renewable energies has decimated General Electric (NYSE:GE) by crippling the GE Power segment, but higher-ups at the company believe that it is turning a corner. Orders at GE Power, which makes turbines for fossil fuel powered power plants, were down 22% last quarter, but per share earnings topped expectations. “We will continue to take planned actions to improve our businesses and monitor some market headwinds,” CEO Larry Culp said in a statement. GE stock is up by more than 40% this year after it almost died last year. Another little problem is that GE is a big supplier for the Boeing 737 MAX series of airplanes, which are all still grounded and could be for a while yet.
Beyond Meat Prices Offering at 6x Beyond IPO Price
Beyond Meat (NASDAQ:BYND) is going way beyond its early IPO days, which were just months ago. A secondary offering of shares are going for $160 a pop, 6x what the stock was selling for during its initial public offering. The artificial meat company plans to raise over half a billion dollars, which it will use to grow more meat that tastes better, so people stop eating animals and such. Meanwhile, insiders and early investors are getting out of the stock fast, in what looks similar to a pump and dump at least structurally, though more legal. The company has a market cap nearly $12 billion for consistently losing money and taking in about $89 million in revenues last year. It appears priced for the assumption that it will take over the entire meat industry and cows can be released back into the wild, though they’re so domesticated that they can’t even reproduce without the help of humans anymore, so that should go well.
University of California Santa Barbara Sues On Behalf of Thomas Edison
Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), and Bed Bath and Beyond (NASDAQ:BBBY), not to be confused with Bed Bath and Beyond Meat, which is what would happen if the two companies merged, are getting sued by the University of California Santa Barbara over filament patent infringements on Edison-branded light bulbs. The bulbs are LED, which is much more efficient than the original filament Edison bulbs invented by the famed inventor, but UCSB has a patent on LEDs that are meant to look like filaments. Edison’s middle name, by the way, was Alva, which in the Viking countries means a female elf. On that thought, have a good day.