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In our age of social media and competitive punditry, this could be what a market bottom sounds like. On Tuesday, CNBC grabbed Bridgewater founder Ray Dalio in Davos and asked him whether his belief that “cash is trash” remains true, given, you know, inflation, bear markets, and recession. “Of course cash is still trash,” Dalio shot back. “Do you know how fast you’re losing buying power in cash?” And equities, he added, “are even trashier.” He suggested that investors try real estate.
Pessimism is contagious. Also on Tuesday,
Pershing Square
’s
Bill Ackman, in a tweet, said markets are so bad because “nobody” believes the Fed has the guts to take on inflation. Nobody. “Inflation is out of control. Inflation expectations are out of control.” Ackman has a history of alarming predictions: “Hell is coming,” he said in 2020 as Covid took hold.
Another inflation hawk, former Treasury Secretary Larry Summers, was similarly definitive. “There’s never been a moment when we had inflation over 4{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} and unemployment below 4{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, when we didn’t have a recession within the next two years.”
That’s all tame compared with what hedge fund legend George Soros, 91, said over a cheerful Davos dinner: “The [Ukraine] invasion may have been the beginning of the Third World War, and our civilization may not survive.” China is in free fall from its zero-Covid policy and bad real estate, he added, and it’s nearly impossible Xi Jinping will change his mind. His conclusion: “With the disruption of supply chains, global inflation is liable to turn into depression.” Maybe forget real estate.
Last Week
Higher Ground
The dollar, stocks, and bond yields fell as the week began. Stocks then rallied, driven by big banks led by
JPMorgan Chase
,
until an earnings warning from
Snap
sent ad-driven social media stocks reeling; Snap fell 43{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}. But Fed meeting minutes reflected no major policy changes, retail earnings were good, and April inflation actually slowed. The
S&P 500
and
Nasdaq
broke seven-week losing streaks before the holiday weekend. On the week, the
Dow Jones Industrial Average
rose 6.24{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, to 33,212.96; the S&P was up a brawny 6.58{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, to 4158.24; and the Nasdaq sailed ahead 6.84{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, to 12,131.13
The Earnings Beat
Earnings season neared its end as both home builder
Toll Brothers
and a raft of retailers, including Nordstrom and Macy’s, beat.
Nvidia
’s
profits also topped expectations, but the company reduced its outlook.
The Asia Front
President Biden pledged to defend Taiwan in the event of a Chinese invasion, meaning, the White House clarified, through weapons, not troops. The U.S. is organizing a 12-nation Indo-Pacific economic group that includes Japan, Australia, New Zealand, India, Malaysia, and Vietnam. Chinese and Russian long-range bombers buzzed Japan as a summit of the Quad, a security group of the U.S., Japan, Australia, and India, met in Tokyo. North Korea fired three missiles after Biden left.
The Donbas Front
Fighting intensified around Severodonetsk in the Donbas as a Russian assault intensified. In Ukraine, a Russian soldier was convicted on war-crimes charges, and a diplomat in Geneva resigned, saying he was “ashamed” of Russian actions in Ukraine. The U.S. blocked Russian debt payments to American investors. Saudi Arabia’s oil minister, Abdulaziz bin Salman, said his country stands by Russia, despite Western sanctions. Russia cut rates for the third time as the ruble spiked.
Getting Tougher on ESG
The Securities and Exchange Commission fined BNY Mellon $1.5 million for alleged “greenwashing,” misstating and omitting environmental, social, and governance data for some of its funds. The SEC is readying new ESG rules.
Texas School Shooting
Nineteen elementary school students and two teachers were murdered in a mass shooting in Texas. Police shot the alleged shooter, an 18-year-old man, though controversy over how long it took officers to respond has emerged.
Annals of Deal Making
Chip maker
Broadcom
announced a $61 billion cash-and-stock deal for cloud software developer
VMware
.
Michael Dell and Silver Lake are major VMware investors…The U.K. approved the $5.3 billion sale of London soccer club Chelsea to a group led by American billionaire Todd Boehly…Nelson Peltz’s Trian is considering an offer to buy Wendy’s for $2.2 billion. Trian already holds a 19.4{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} stake…Elon Musk raised the equity portion of his $44 billion
Twitter
buyout to $33.5 billion, eliminating the need to use his
Tesla
shares to back a margin loan.
Write to Robert Teitelman at [email protected]
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