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Are Trump-Related Media SPAC Investors in for More Surprises?

Posted on by phoffman@channelchek.com
Image Credit: Trump White House Archive (Public Domain)

The Wild Ride of Digital World Acquisition Corp. Has Mostly Been Positive

You never know what kind of surprise you may eventually end up with when purchasing a Special Purpose Acquisition Corp (SPAC). Digital World Acquisition Corp. (DWAC) is the perfect example of how a SPAC can provide a wild ride for those that were originally involved in the IPO and those that have since been involved in the stock of the “blank check company.”  Before plans to merge with Truth Media, a subsidiary of Trump Media Group, it started out as most SPACs do, with a $10 a share price and a description of what an appropriate target would look like, and credentials of managing a financial company.

Most Recent

News impacting social media competitors to Truth Social and information involving the former President’s stature have historically driven prices of the acquiring company in a sporadic fashion. On Monday, DWAC took off by 66.5% to $29.10 during the trading day. On the prior trading day it had already risen 7% to $17.48. The impetus for this was news that Donald J. Trump was making plans to announce his candidacy as a Republican hopeful in the 2024 election.

The strong updraft of the DWAC price came the day before the US Election Day when political power struggles are at the forefront of most investors’ minds. It also occurred on the same day the former President announced plans to make a “Big” announcement next week.

Last week the SPAC shares rose after management delayed a shareholder vote — for the sixth time — on whether to approve a year extension to complete its merger with Trump Media and Technology Group. The shareholders meeting is now set for Nov. 22. DWAC’s deadline to complete its merger with Trump’s company had originally been in early September. However, the SPAC has said an SEC investigation of the merger deal delayed progress.

Source: Koyfin

Highlights of DWAC Price Action

October 2021 –  The chart above shows the upward SPAC spike (1,650%) as it became known in late October of its intent to merge with Trump’s fledgling social media venture. A retail trading frenzy had sent prices of the Trump media-linked SPAC, Digital World Acquisition Corp., ripping up an incredible 1,650% in just two days.

The stock reached a peak of $175, within two days and closed the week up 845% from an unusual amount of enthusiasm from retail interest.

News reports at the time highlighted the company had no fundamentals to speak of and te action was purely speculation and momentum.

Digital World Acquisition Corp. ended on the Friday at $94.20 after closing Wednesday at $9.96.

December 2021 –The stock traded off after the initial enthusiasm, especially after the media company fell short of its plan to have a beta version of Truth Social in November. It then caught fire later during the first week of December 2021. The impetus here was an announcement that the former President was raising $1 billion (mostly from family offices and hedge funds) to support the company’s projects.      

Federal regulators cast a dark cloud over the deal, beginning the second week of December. The SEC was overall looking at tax and accounting of all SPACs, this had the potential to impact DWAC. Additionally, FINRA requested information to investigate whether than were any improper communications between Trump Media and Digital World.

Image Credit: Trump White House Archive (Public Domain)

Moving forward that December, a new CEO of Truth Social was appointed. This was a former representative to the House, Devin Nunes from California.

January 2022 – On the 7th of January, the stock rose 20%, up 505% from the day the plans to merge was announced. The stock’s market cap was also up by the same percentage at $2.24 billion.

Plans were made to launch the social platform on February 21st. The company had been still sitting at lofty heights on faith, not an actual product.

In late January, the SPAC experienced its largest one-day jump of the year (to date), a 21% increase on no new information. There was, however speculation that the stock’s rally may have been connected to a Trump rally the still politically active Trump held in his home state.

As shown on the chart above, momentum for the stock was again building after a January 6 announcement of the launch date, the stock climbed 71%. Phunware (PHUN), the designer of the platform, was up 25%.

February 2022 – The Trump social media platform becomes available in the app store in late February and the price of DWAC increases 28% pre-market open. Institutional investors gain a new respect for the power of self-directed retail investors and the power they hold. Prices in February are sitting at a 750% increase from the day the SPAC merger was announced.

April 2022 – Two private investors bail on Truth Social, and shares of Digital World drop following a negative (30%) March. The share value has now declined 70% from its all-time high. Adding to the drag on values, new SPAC rules from the SEC cast even more doubt on the ability to bring the deal to a close.

June 2022 – Since the beginning of the year, the stock’s value dropped 47%. The SEC began expanding its inquiry into the proposed merger, having subpoenaed the company for more information on the deal. Investors think the deal will likely be delayed, perhaps even torpedoed.

July 2022 – Elon Musk made good on a Tweet to offer to buy Twitter. His intent was to “free the bird” and allow open discourse, in other words, turn it into what Trump envisioned for Truth Social. Both Trump and Musk have fans and foes, so the drama picked up when Elon suggested openly Trump ought to “hang up his hat and sail into the sunset.”

Prices of DWAC originally declined but then found their footing as expectations of Elon Musk successfully buying the huge competitor of Truth Social waned.

August 2022 –Digital World says it isn’t sure whether they are the right vehicle to take Truth Social public. And it wants to keep financials under wraps until it can decide. The SEC allows an automatic five-day extension.

It’s the regulatory and legal obstacles DWAC’s been faced with since announcing the merger that could have caused them to look for the surrender flag. The two entities were subjected to a federal criminal probe that caused every single one of the SPAC’s board members to receive a subpoena after already warning that any investigations would jeopardize the deal. Shares were down 73% since October.

November 2022 – The momentum that may have been responsible for the original run-up over a year earlier again surfaces as it is rumored that the ex-President with a massive amount of loyal followers will be running to be re-elected. “In a very, very, very short period of time, you’re going to be very happy,” former president Donald Trump told attendees at a rally on November 5.

Trump Media’s merger with DWAC still faces many legal and financial hurdles that have resulted in at least $138m in investment being pulled. Trump will post on Truth Social exclusively for 8 hours before posting elsewhere. He has been widely followed on the social platforms he has been part of, so whether investors support the potential candidacy, they’re almost certain it’ll drive traffic to the app.

Take Away           

One never knows what target companies a SPAC may unearth, if any, as a suitor for its acquisition plans. For investors that jump into the unknown early, before a SPAC announces any plans, their downside is somewhat limited as their investments are held in escrow as the target is procured. Should a deal be struck, they get to decide if they wish to stay involved. If, after two years, the SPAC fails to close on a target, investors still holding shares receive the original purchase price (usually $10), fewer expenses, plus interest. Considering how volatile other investments have been, this effectively puts a floor in to protect against the downside for investors near the $10 level.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.theverge.com/2021/12/6/22821450/devin-nunes-ceo-tmtg-spac-dwac-truth-social-media

https://www.cbsnews.com/news/trump-announcement-november-15-mar-a-lago/

https://www.tradingview.com/symbols/NASDAQ-DWAC/history-timeline/#trump-spac-goes-soaring-2021-10-15

https://www.reuters.com/markets/us/exclusive-trumps-social-media-venture-seeks-1-billion-raise-sources-2021-12-01/

www.investors.com/dwac

Inflammation as a Cause of Disease

Posted on by phoffman@channelchek.com
Image Credit: Marco Verch (Flickr)

What is Inflammation? Two Immunologists Explain How the Body Responds to Everything from Stings to Vaccination and Why it Sometimes Goes Wrong

When your body fights off an infection, you develop a fever. If you have arthritis, your joints will hurt. If a bee stings your hand, your hand will swell up and become stiff. These are all manifestations of inflammation occurring in the body.

We are two immunologists who study how the immune system reacts during infections, vaccination and autoimmune diseases where the body starts attacking itself.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Prakash Nagarkatti, Professor of Pathology, Microbiology and Immunology, University of South Carolina and Mitzi Nagarkatti Professor of Pathology, Microbiology and Immunology, University of South Carolina

While inflammation is commonly associated with the pain of an injury or the many diseases it can cause, it is an important part of the normal immune response. The problems arise when this normally helpful function overreacts or overstays its welcome.

What is Inflammation?

Generally speaking, the term inflammation refers to all activities of the immune system that occur where the body is trying to fight off potential or real infections, clear toxic molecules or recover from physical injury. There are five classic physical signs of acute inflammation: heat, pain, redness, swelling and loss of function. Low-grade inflammation might not even produce noticeable symptoms, but the underlying cellular process is the same.

Take a bee sting, for example. The immune system is like a military unit with a wide range of tools in its arsenal. After sensing the toxins, bacteria and physical damage from the sting, the immune system deploys various types of immune cells to the site of the sting. These include T cells, B cells, macrophages and neutrophils, among other cells.

The B cells produce antibodies. Those antibodies can kill any bacteria in the wound and neutralize toxins from the sting. Macrophages and neutrophils engulf bacteria and destroy them. T cells don’t produce antibodies, but kill any virus-infected cell to prevent viral spread.

Additionally, these immune cells produce hundreds of types of molecules called cytokines – otherwise known as mediators – that help fight threats and repair harm to the body. But just like in a military attack, inflammation comes with collateral damage.

The mediators that help kill bacteria also kill some healthy cells. Other similar mediating molecules cause blood vessels to leak, leading to accumulation of fluid and influx of more immune cells.

This collateral damage is the reason you develop swelling, redness and pain around a bee sting or after getting a flu shot. Once the immune system clears an infection or foreign invader – whether the toxin in a bee sting or a chemical from the environment – different parts of the inflammatory response take over and help repair the damaged tissue.

After a few days, your body will neutralize the poison from the sting, eliminate any bacteria that got inside and heal any tissue that was harmed.

Asthma is caused by inflammation that leads to swelling and a narrowing of airways in the lungs, as seen in the right cutaway in this image. BruceBlaus/Wikimedia Commons, CC BY-SA

Inflammation as a Cause of Disease

Inflammation is a double-edged sword. It is critical for fighting infections and repairing damaged tissue, but when inflammation occurs for the wrong reasons or becomes chronic, the damage it causes can be harmful.

Allergies, for example, develop when the immune system mistakenly recognizes innocuous substances – like peanuts or pollen – as dangerous. The harm can be minor, like itchy skin, or dangerous if someone’s throat closes up.

Chronic inflammation damages tissues over time and can lead to many noninfectious clinical disorders, including cardiovascular diseases, neurodegenerative disorders, obesity, diabetes and some types of cancers.

The immune system can sometimes mistake one’s own organs and tissues for invaders, leading to inflammation throughout the body or in specific areas. This self-targeted inflammation is what causes the symptoms of autoimmune diseases such as lupus and arthritis.

Another cause of chronic inflammation that researchers like us are currently studying is defects in the mechanisms that curtail inflammation after the body clears an infection.

While inflammation mostly plays out at a cellular level in the body, it is far from a simple mechanism that happens in isolation. Stress, diet and nutrition, as well as genetic and environmental factors, have all been shown to regulate inflammation in some way.

There is still a lot to be learned about what leads to harmful forms of inflammation, but a healthy diet and avoiding stress can go a long way toward helping maintain the delicate balance between a strong immune response and harmful chronic inflammation.

Powerball Growing Prize Money is Linked to Fed Tightening

Posted on by phoffman@channelchek.com

Why the Future Value of the Lottery’s Grand Prize is Significantly Higher than Last Year

There is a link between the current $1.9 billion Powerball prize money and Federal Reserve Chair Jerome Powell – and it is inflating the prize money.

A new billionaire was not minted over the weekend, at least not because of winning the enormous Powerball jackpot prize. So the weekend prize money, plus a small fortune more, is up for grabs at 10:59 PM Monday, November 7. The headline prize money, in this case, $1.9 billion, is the future value of the cash award, which, according to Powerball.com, is $929.1 million. The larger, almost two billion amount, would not have been nearly as large last year. Its sum is much bigger because the Fed has been jacking up interest rates.

To drill down a bit more, the prize calculation uses the 30-year U.S. Treasury bond interest rate to determine the annuity paid to the winner based on the cash lump sum award. The present value of that number, even if on par with a cash award a year ago, would pay a substantially larger annuity. And it is the annuity that is the advertised prize, which draws more and more players as it grows. The more players, the higher the present value or cash prize.

A year ago (November 8, 2021), the 30-year US Treasury bond had a yield of 1.90%. This was used to calculate the headline prize amount. Today, the same term Treasury is yielding 4.27%. This yield impact is roughly reflected in the average prizes over the years.

The Numbers Boiled Down Further

Of all ticket sales, 34% of Powerball ticket sales fund the grand prize. Another 16% fund the lower-tier prizes. (The remaining 50% goes to various state programs, operating costs, and retailer commissions.) If a winner chooses the lump sum payout, they receive the 34%. If instead, the winner chooses the jackpot in annual payments over 30 years, the prize money is invested in a portfolio of bonds.

The last time a winner chose an annuity was in 2014.

Economists who have researched lotteries have learned that once jackpots near the $500 million mark, non-regular lottery players are more likely to take a chance. The $500 million or more mark is where the media begins to make “lottery fever” a news event worth reporting on. The added publicity then feeds more money into the pot.  

The prize pools are also growing because the games of chance have become statistically more difficult to take the top prize. In 2015, Powerball increased the cost of the ticket and altered the game to make it easier for players to win smaller prizes while reducing the odds of winning the headline prize.

Only 3.8% of drawings so far this year had had a winner, down from roughly 11% in 2014, the last full year before the change went into effect.

This is why the five times in the U.S. where $1 billion has been surpassed have all been recent. They include the biggest one, a $1.58 billion prize from Powerball in 2016, followed by a $1.53 billion Mega Millions jackpot in 2018 and this week’s $1.5 billion Powerball prize.

Lottery tickets also tend to become more popular during economic downturns and when people become more money conscious.

Even though the odds of winning Powerball are 1 in 292.2 million, players will take a shot and buy a ticket to have the fantasy.  If the prize money continues to reach over $500 million on a regular basis, it may work against the program as those who don’t normally play won’t feel it is a special event.

Good luck to those of you holding a ticket.

Paul Hoffman

Managing Editor, Channelchek

Sources:

www.powerball.com

https://www.wsj.com/articles/powerball-jackpot-lottery-federal-reserve-interest-rates-ticket-sales-11667479535?mod=hp_lead_pos12

The Week Ahead – Inflation Data Worries and Election Outcome

Posted on by phoffman@channelchek.com

Federal Reserve President Speeches With Elections and CPI to Shape the Week’s Trading

Yes, the stock markets are open on Veterans Day (Friday). But bond trading, which the stock market has been more keenly focused on this year, will be taking the day off along with other U.S. government services. Equity traders can get a sense of interest rate sentiment on Friday by turning to the Chicago Board of Options and viewing tickers ZF=F (5 yr. USTN), ZN=F (10 yr. USTN), ZB=F (30 yr. USTB).

All markets are open on Election Day, and the outcome, as measured by House seats and Senate seats distributed among the major political parties, has the potential to be market-moving.

It’s a quiet week for economic numbers, except for Thursday, when the CPI report is released. This has the potential of changing those calling for a 50 bp hike at the next meeting to up their expectations or those still forecasting 75bp to lower their call. Certainly, the Fed governors will be watching this and all measures of inflation up to the December 14-15 meeting. There are a number of Fed governors speaking this week; this could alter the tone; however, the next meeting is far out into the future.

Election Day.

Monday 11/7

  • 3:00 PM ET the amount of consumer installment credit for September, including credit cards, auto loan, and student loans outstanding, indicate current consumer spending and borrowing patterns. The markets tend to ignore this number as we are already in November and this report measures September
  • 3:40  PM ET, the Federal Reserve Bank Presidents Mester (Cleveland) and Collins (Boston), will be speaking. Both are considered fairly hawkish.
  • 6:00 PM ET, the Federal Reserve Bank President Harkey (Philadelphia) will be speaking.

Tuesday 11/8

  • Election Day.
  • Meet the Management; Noble Capital Markets hosts Management of Entravision Communications (EVC) in West Palm Beach, FL. This is a no-cost-to-attend, in-person breakfast meeting with investors. If interested, click here.
  • Meet the Management, Noble Capital Markets hosts Management of Entravision Communications (EVC) in Boca Raton, FL. This is a no-cost-to-attend, in-person lunch meeting with investors. If interested, click here.

Wednesday 11/9

  • It can be expected that the newswires will be filled with Election Day outcomes and market-moving conjecture.
  • 7:00 AM ET Mortgage Applications. The Mortgage Bankers Association (MBA) creates a statistic from several mortgage loan indexes. The Mortgage Applications index measures applications at mortgage lenders. It’s considered a leading indicator and is especially important for single-family home sales and housing construction. Both are considered foundational in a strong economy.
  • 10 Year Treasury Note Auction is held in the middle of each month and settles on or around the 15th (depending on weekends). The yield is a benchmark for 30-year mortgages and has recently been noted by investment markets because it has been trading at a yield lower than shorter maturities. This inversion of the yield curve has some market players suggesting a recession is expected in the future. Any surprises at the auction will reverberate through the stock market.
  • 10:30 AM ET, EIA Petroleum Status Report.
  • 11:00 AM ET, Federal Reserve President Barkin  (Philadelphia) speaks.
  • Meet the Management; Noble Capital Markets hosts Management of Entravision Communications (EVC) in Winter Park, FL. This is a no-cost-to-attend, in-person breakfast meeting with investors. If interested, click here.
  • Meet the Management; Noble Capital Markets hosts Management of Entravision Communications (EVC) in Orlando, FL. This is a no-cost-to-attend, in-person lunch meeting with investors. If interested, click here.

Thursday 11/10

  • 8:30 AM ET, U.S. Consumer Price Index (CPI) is the inflation indicator most widely broadcast. With inflation being a primary focus, this will be the big number coming out this week. The number represents a basket of goods considered typical for an urban consumer and is taken as the change in the cost of that basket of goods. A percentage is derived from the change. CPI is also reported with food and energy removed as it is considered that other non-economic factors influence these prices. The September report indicated CPI rose 0.4% for the month and 8.2% YOY. Expectations are for an increase to 0.7% for October and a YOY rate of 8.0%.
  • 8:30 AM ET U.S. Jobless Claims which represent the prior week’s employment are expected to have increased to 221,000 from 217,000. From jobless claims, investors can gain a sense of how tight or how loose the job market is. If wage inflation takes hold, interest rates will likely rise, and bond and stock prices will fall. Remember, the lower the number of unemployment claims, the stronger the job market, and vice versa.
  • 10:30 AM ET, EIA Natural Gas Status Report.

Friday 11/11

  • Veterans Day, the stock market is one, the futures markets are open, and the bond market and other U.S. government-related offices are closed.
  • 10 AM ET Consumer Sentiment, November (preliminary). This barometer, reported by the University of Michigan,  questions households each month on their assessment of current conditions and expectations of future conditions. This “preliminary” release is for the month of November and is expected to have fallen to 59.6 versus 59.9 last month.

What Else

It is a light week for economic releases and Fed governor addresses, but the election outcome and CPI have the potential to whip markets around.

We’re entering the holiday shopping season when there will be a number of measures that investors focus on that will give a hint as to how strong the consumer is in the current economy.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/newsevents/calendar.htm

http://global-premium.econoday.com/byweek.asp?cust=global-premium

https://www.channelchek.com/news-channel/noble_on_the_road___noble_capital_markets_in_person_roadshow_series

https://www.econoday.com

How the Fed’s Balance Sheet Trimming Impacts You

Posted on by phoffman@channelchek.com
Image: Press conference following November 2022 FOMC meeting – Federal Reserve (Flickr)

Fed Faces Twin Threats of Recession and Financial Crisis as its Inflation Fight Raises Risks of Both

The Fed raising the overnight rate is only half the reason the economy may be driven into a recession and create a financial crisis according to a Mississippi Professor of Finance. He believes the Fed’s interest rate approach, which is most talked about, may create problems, but Professor Blank also points out and defines the Fed’s balance sheet changes and what they could mean for markets, the economy, and the world of finance.

There is wide agreement among economists and market observers that the Federal Reserve’s aggressive interest rate hikes will cause economic growth to grind to a halt, leading to a recession. Less talked about is the risk of a financial crisis as the U.S. central bank simultaneously tries to shrink its massive balance sheet.

As expected, the Fed on Nov. 2, 2022, lifted borrowing costs by 0.75 percentage point – its fourth straight hike of that size, which brings its benchmark rate to as high as 4%.

At the same time as it’s been raising rates, the Fed has been quietly trimming down its balance sheet, which swelled after the COVID-19 pandemic began in 2020. It reached a high of US$9 trillion in April 2022 and has since declined by about $240 billion as the Fed reduces its holdings of Treasury securities and other debt that it bought to avoid an economic meltdown early in the pandemic.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of D. Brian Blank, Assistant Professor of Finance, Mississippi State University.

As a finance expert, I have been studying financial decisions and markets for over a decade. I’m already seeing signs of distress that could snowball into a financial crisis, compounding the Fed’s woes as it struggles to contain soaring inflation.

Fed Balance Sheet Basics

As part of its mandate, the Federal Reserve maintains a balance sheet, which includes securities, such as bonds, as well as other instruments it uses to pump money into the economy and support financial institutions.

The balance sheet has grown substantially over the last two decades as the Fed began experimenting in 2008 with a policy known as quantitative easing – in essence, printing money – to buy debt to help support financial markets that were in turmoil. The Fed again expanded its balance sheet drastically in 2020 to provide support, or liquidity, to banks and other financial institutions so the financial system didn’t run short on cash. Liquidity refers to the efficiency with which a security can be converted into cash without affecting the price.

But in March 2022, the Fed switched gears. It stopped purchasing new securities and began reducing its holdings of debt in a policy known as quantitative tightening. The current balance is $8.7 trillion, two-thirds of which are Treasury securities issued by the U.S. government.

The result is that there is one less buyer in the $24 trillion treasury market, one of the largest and most important markets in the world. And that means less liquidity.

Loss of Liquidity

Markets work best when there’s plenty of liquidity. But when it dries up, that’s when financial crises happen, with investors having trouble selling securities or other assets. This can lead to a fire sale of financial assets and plunging prices.

Treasury markets have been unusually volatile this year – resulting in the biggest losses in decades – as prices drop and yields shoot up. This is partly due to the Fed rate hikes, but another factor is the sharp loss of liquidity as the central bank pares its balance sheet. A drop in liquidity increases risks for investors, who then demand higher returns for financial assets. This leads to lower prices.

The loss of liquidity not only adds additional uncertainty into markets but could also destabilize financial markets. For example, the most recent quantitative tightening cycle, in 2019, led to a crisis in overnight lending markets, which are used by banks and other financial institutions to lend each other money for very short periods.

Given the sheer size of the Treasury market, problems there are likely to leak into virtually every other market in the world. This could start with money market funds, which are held as low-risk investments for individuals. Since these investments are considered risk-free, any possible risk has substantial consequences – as happened in 2008 and 2020.

Other markets are also directly affected since the Fed holds more than just Treasuries. It also holds mortgages, which means its balance sheet reduction could hurt liquidity in that market too. Quantitative tightening also decreases bank reserves in the financial system, which is another manner in which financial stability could be threatened and increase the risk of a crisis.

The last time the Fed tried to reduce its balance sheet, it caused what was known as a “taper tantrum” as debt investors reacted by selling bonds, causing bond yields to rise sharply, and forced the central bank to reverse course. The long and short of it is that if the Fed continues to reduce its holdings, it could stack a financial crisis on top of a recession, which could lead to unforeseen problems for the U.S. economy – and economies around the globe.

A Two-Front War

For the moment, Fed Chair Jerome Powell has said he believes markets are handling its balance sheet rundown effectively. And on Nov. 2, the Fed said it would continue reducing its balance sheet – to the tune of about $1.1 trillion a year.

Obviously, not everyone agrees, including the U.S. Treasury, which said that the lower liquidity is raising government borrowing costs.

The risks of a major crisis will only grow as the U.S. economy continues to slow as a result of the rate hikes. While the fight against inflation is hard enough, the Fed may soon have a two-front war on its hands.

Will Equity Investors Return Back to the Future?

Posted on by phoffman@channelchek.com
Image: Statue of Liberty Torch, Circa 1882 – Ron Cogswell (Flickr)

Current Technology May Be Leading the Next Shift in Stock Market Investing

Investor exposure to the stock market has grown and evolved through different iterations over the years. There is no reason to believe that it isn’t evolving still. The main drivers of change have been the cost of ownership, technology, and convenience, which are related to the other two drivers. There seems to be a new transformation that has been happening over the past few years. And with each change, there will be those that benefit and those that fall short. So it’s important for an investor to be aware of changes that may be taking place around them.

Recent History

Your grandfather probably didn’t own stocks. If he did, he bought shares in companies his broker researched, and he then speculated they would out-earn alternative uses of his capital – this was expensive. Mutual funds later grew in popularity as computer power expanded, and an increased number of investors flocked to these managed funds – the price of entry was less than buying individual stocks. Charles Schwab and other discount brokers sprang up – they offered lower commissions than traditional brokers. Mutual funds were able to further reduce fees charged by offering easier to manage indexed funds or funds linked to a market index like the Dow 30 or S&P 500. Indexed exchange-traded funds (ETF) took the indexed fund idea one step further – they have a much lower cost of entry than either mutual funds or even discount brokerage accounts. An added benefit to indexed ETFs is they can be traded at intraday prices and provide tax benefits.

Just as Schwab ushered in an era of low-commission trades, Robinhood busted the doors open to no-commission trades, and most large online brokers followed. This change allows for almost imperceptible costs in most stock market transactions. It also changed the concept of a round-lot, or transacting in increments of 100 shares. In fact, the most popular brokers all offer fractional share ownership now.

Are Index ETFs Becoming Dinosaurs?

Funds made sense for those seeking diversification of holdings, it used to take a large sum of money to do that; investors with a $10,000 account or more can easily achieve acceptable diversification with odd-lots and fractional shares ability.

Today investors can create their own index-like “fund,” or as they called it in your grandparent’s day, “portfolio management.”

One big advantage to creating your own portfolio, even if you rely heavily on stocks from a specific index to choose from, is that you can adapt it more toward your sector or company expectations. Indexed funds are stuck with their index holdings, they have no ability to change. One may increase or decrease risk by leaving out stocks or even whole industry groups. Also, it can be managed with greater tax efficiency than an index fund tailored to your situation.

There is also the DIY thrill that one gets from creating anything themselves rather than to just buying one off the shelf. There have been a number of renowned investors like Peter Lynch and Michael Burry warning that indexed funds no longer provide expected diversification and that many of the stocks are valued higher because so many dollars are on “auto-invest” into indexes that the bad has been pushed up with the good.  

An example of what added demand does to the valuation of a company when being added to an index can be seen over the last month when it became clear that Twitter would be leaving an empty slot that would be filled by Arch Capital (ACGL). The added demand for ACGL pushed up the value by an estimated 25%. Was it undervalued before (when stand-alone), or is it over-valued now? Some stocks that are getting more attention because they are in an index could, as Michael Burry warned, be in bubble territory.

Source: Koyfin

Setting Up a Portfolio

The more you do to ensure your portfolio weightings mimic an index, the closer your performance is likely to be to that index. You may want to limit your holdings to names that are actually in the index and shift the weightings for return enhancement. Another concern often cited with indexes is the way that they weight holdings; you may choose to weight your portfolio using the market capitalization of each company to own the same percentage of the company’s value or use another method like pure cost measures or cost per P/E.

Picking Stocks

While studies suggest that market diversification can be achieved by owning as few as five stocks and doesn’t improve much after 30 holdings, the more you own, providing they aren’t overweighted in a sector, it stands to reason the more diversification protection you can achieve.

As a DIY, self-directed investor, it makes sense not to chase after whatever YouTube influencer, loud-mouthed-TV analyst, or Stocktwit tells you. This is your baby, and the results, good or bad, are yours. Do what you can to make informed decisions, even if some turn out unexpected. The benefit of this is you can lean away from stocks that are still in indexes that don’t have good future prospects and lean into more companies that do.

I’m hearing from more of my self-directed investor friends and investment advisors that more people are looking to own companies that have non-financial objectives they, as an investor, support. And for some of them, there is no standard ESG framework that they support. They have decided, because they do care, to do more portfolio management with individual stocks than before. This is so they can individually look under the hood at employee policies, or environmental stature, etc. While ESG funds exist, the investor or client of the investment advisor would prefer not to own anything they oppose if they can avoid it. What better way than being able to say no to $XYZ company because they do this, this, and this that is against my own fabric?

Channelchek is a great resource for any percentage of your personally managed fund that includes stocks in the small-cap or microcap categories. These stocks could add a bit more potential for return but could also change your risk characteristics. Sign-up to get research from FINRA-licensed analysts.

Take Away

Stock investing has evolved and become more inclusive. But the future may be more like the past, with individuals creating portfolios of stocks for themselves. You don’t have to be rich anymore to buy stocks, and you don’t have to own a fund to get affordable diversification on nearly any size account. There’s a trend toward building one’s own personalized, diversified, low-transaction portfolio. Channelchek is helping investors find possible fits with its free research platform.

Paul Hoffman

Managing Editor, Channelchek

The Week Ahead – Rate Hike, Unemployment, and Election Anxiety

Posted on by phoffman@channelchek.com

What Other Than a Large Rate Hike Can Investors Expect this Week?

Another 75 basis point hike is expected on Wednesday after the November 1-2 FOMC meeting. The discussion that is expected to immediately follow is will the Federal Reserve slow or pause its tightening from there. Those answers can’t be certain as even the Fed hasn’t seen the economic numbers unfold that will lead to the next meeting and play a part in the decision.

Since March, the FOMC has raised rates a cumulative 300 basis points. If they move .75 percent this week, the fed funds target range will be 3.75%-4.00%. This range was last experienced after the January 2008 meeting.

In September’s  Summary of Economic Projections, the FOMC forecast for the fed funds rate was 1.25 percent above the current level or .50 percent above what most expect we will have by the end of the week. The statement and remarks following the next FOMC meeting by Chairman Powell may suggest that the FOMC is going to slow down the upward movement in rates while they see if previous rate hikes have begun to have a slowing impact on the economic pace.

The second scheduled event with the most potential to impact markets is the October Employment Situation on Thursday.  

From there, all attention and talk may be on the elections next week, as they can have a powerful impact on market moves.

Monday 10/31

  • 9:45 am US Chicago Purchasing Managers Report (PMI). The consensus is 47.3. For September, this survey of business conditions in the Chicago area showed a collapse to 45.7. A small improvement is expected from the October Survey
  • 10:30 am Dallas Fed Manufacturing Survey is expected to come in at -18.0. This would be the sixth straight negative reading. This survey tracks manufacturing in Texas; for September, the results were -17.2.
  • 3:00 pm US Farm Prices are expected to have come down during October by -1.8%, showing a year-over-year rate of 20% increase in farm prices. This is an important inflationary gauge as farm prices are a leading indicator of food price changes Consumer Price Index (CPI). There is a direct relationship between inflation and interest rates; markets can be influenced as interest rate expectations rise and fall.  

Tuesday 11/1

  • The Federal Open Market Committee meets eight times a year in order to determine the near-term direction of monetary policy. The November meeting extends through November 2. After the meeting, typically at 2 pm, any change in monetary policy is announced.
  • 10:00 am US Construction Spending is expected to have fallen by -.5%. Construction spending fell 0.7 percent in August, which was the seventh straight lower-than-expected result, showing lower activity in this important economic sector.
  • 10:00 am JOLTS report consensus is 9.875 million. These reported job openings have been falling over several months; the previous month’s (August) openings reported were 10.05 million. The acronym JOLTS stands for Job Openings and Labor Turnover Survey.

Wednesday 11/2

  • Motor Vehicle Sales (US) are expected to have increased to 14.2 million from 13.5 million in September. The pattern of consumption is a direct influencer on company earnings and stock prices. Strong economic growth translates to healthy corporate profits and higher stock prices.
  • 10:30 am EIA Petroleum Report shows crude inventory changes, as well as gasoline and other petroleum products. The Energy Information Administration provides this report weekly. During periods when inflation and fuel prices are a concern, the data in these reports can play a wider-than-normal role in influencing stock, bond, and of course, commodity price levels.
  • FOMC Announcement usually comes at 2:00 pm. The expectations had not changed since the last meeting when it became widely expected that the Federal Reserve would raise overnight lending rates at this meeting by 0.75%. A big focus will be on the policy statement following the meeting to sense at what pace removing accommodation will continue in the US.

Thursday 11/3

  • 8:30 am US Jobless Clams are expected to be 222,000 for the week ending October 29. The prior week they had been 217,000. Employment is one of the Feds’ primary concerns as it fights inflation which also tops the list.
  • 10:00 am US Factory orders are expected to have risen in September by 0.3%. The prior month this leading indicator of future economic activity was flat.
  • 10:30 am EIA Natural Gas weekly report will update the current stocks and storage as well as production information from five regions within the US.

Friday 11/4

  • 8:30 am, the Employment Situation report is released. It is expected to show an unemployment rate of 3.6%, or 210,000. The results of this survey have the potential to jar markets late in the week as one of the more important measures of a healthy economy (weak or overheated) is employment levels.

What Else

If the week brings more clarity from the Federal Reserve and likely next moves, investors may begin to focus on retail numbers as the calendar moves toward the shopping season.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/newsevents/calendar.htm

http://global-premium.econoday.com/byweek.asp?cust=global-premium

https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

Halloween Investment Strategy Recent Results

Posted on by phoffman@channelchek.com
Image Credit: Pixabay (Pexels)

Is the Halloween Investment Strategy a Trick or a Treat?

What Is the Halloween Strategy? Is it statistically reliable? What have the results been?

The directive, “Always remember to buy in November,” has a few different names; the Halloween effect, the Halloween indicator, are among the more common. It answers the question, If I sell in May and walk away, when do I come back? This is because the “Halloween Strategy” and the “Sell in May” strategies are related — they are different ways of suggesting the same action. The results should be identical.

What Is It?

The Halloween strategy is over a century old. Buying when October ends is essentially a market-timing strategy based on the thought that the overall stock market performs better between Oct. 31st (Halloween) and May 1st than it performs from May through the end of October. The directive suggests first that market timing yields better results than buy and hold. Secondly, it says the probability of better results compared to buying and holding is increased, over this period. Those who subscribe to this approach recommend not investing at all during the summer months.

Evidence suggests this strategy does perform well over time, but despite many theories, there is no clear or agreed-upon reason. A famous study was done by Sven Bouman (AEGON Asset Mgmt.) and Ben Jacobsen (Erasmus University Rotterdam) and published in the American Economic Review December 2002. The study documents the existence of a strong seasonal effect in stock returns based on the Halloween indicator. They found the “inherited wisdom” to be true globally and useful in 36 of the 37 developed and emerging markets they studied. They reported the Sell in May effect tends to be particularly strong in European countries and is robust over time. Their sample evidence shows that in the UK the effect has been noticeable since 1694. They also reported, “While we have examined a number of possible explanations, none of these appears to explain the puzzle convincingly.”

Is it Reliable?

I didn’t go back as far as 1694 the way Sven and Ben did. And I didn’t collect data from emerging and developed markets around the globe. More pertinent to Channelchek readers is whether this strategy used on the U.S. markets has been worthwhile.

Data Source: Koyfin

The above chart is a compilation of average results for two six-month periods, May through October and November through April. It also looks at two different indexes, the largest stocks in the S&P 500 (blue shades) index and small-cap stocks of the Russell 2000 (orange shades).

What was discovered is that during the period, investors in either of these indexes would have had positive earnings during either “season.” So it supports “buy and hold” wisdom or, at least, staying invested. During the Halloween through May period, the smallcap Russell returned 8.60%, while during the other six months, performance was a weaker 2.92%. The S&P 500 maintained consistent averages in the low 5% area for either period.

What Have the Results Been?

Since the turn of the century, investors would have fared better if they bought stocks represented in the small-cap average after Halloween, then moved to S&P 500 stocks in May. Below are the results of the 21 periods. The highest returns of either index occurred during the latest Halloween to May cycle. It was the small-cap index that measured a 45.76% gain. The index also measured the second-highest gain during the Sell in May 2004 measurement period. The Sell in May small-cap index also can claim the two lowest performance numbers.

Data Source: Koyfin

Take-Away

The Halloween strategy says that investors should be fully invested in stocks from November through April, and out of stocks from May through October. Variations of this strategy and its accompanying axioms have been around for over a century. Looking at the last 21 years, a deviation that would have paid off would have been moving to small-caps after Halloween.

Both “seasons,” for both measured indexes had positive average earnings. So the notion of staying fully invested is supported using recent data.

Paul Hoffman

Managing Editor, Channelchek

Leadership and Embracing Existing Technology May Get Us to Net-Zero Quicker

Posted on by phoffman@channelchek.com
Image Credit: Mussi Katz (Flickr)

Getting to ‘Net-Zero’ Emissions: How Energy Leaders Envision Countering Climate Change in the Future

What’s behind this view, energy leaders say, is their deep degree of skepticism that renewable energy technologies alone can meet the nation’s future energy demands at a reasonable cost.

With the federal government promising over US$360 billion in clean energy incentives under the Inflation Reduction Act, energy companies are already lining up investments. It’s a huge opportunity, and analysts project that it could help slash U.S. greenhouse gas emissions by about 40% within the decade.

But in conversations with energy industry leaders in recent months, we have heard that financial incentives alone aren’t enough to meet the nation’s goal of reaching net-zero emissions by 2050.

In the view of some energy sector leaders, reaching net zero emissions will require more pressure from regulators and investors and accepting technologies that aren’t usually thought of as the best solutions to the climate crisis.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Seth Blumsack, Professor of Energy and Environmental Economics and International Affairs, Penn State and Lara B. Fowler Interim Chief Sustainability Officer, Penn State; Interim Director, Penn State Sustainability Institute; Profess of Teaching, Penn State Law, Penn State.

‘Net-Zero,’ With Natural Gas

In spring 2022, we facilitated a series of conversations at Penn State University around energy and climate with leaders at several major energy companies – including Shell USA, and electric utilities American Electric Power and Xcel Energy – as well as with leaders at the Department of Energy and other public-sector agencies.

We asked them about the technologies they see the U.S. leaning on to develop an energy system with zero net greenhouse gases by 2050.

Their answers provide some insight into how energy companies are thinking about a net-zero future that will require extraordinary changes in how the world produces and manages energy.

We heard a lot of agreement among energy leaders that getting to net-zero emissions is not a matter of finding some future magic bullet. They point out that many effective technologies are available to reduce emissions and to capture those emissions that can’t be avoided. What is not an option, in their view, is to leave existing technologies in the rearview mirror.

They expect natural gas in particular to play a large, and possibly growing, role in the U.S. energy sector for many years to come.

What’s behind this view, energy leaders say, is their deep degree of skepticism that renewable energy technologies alone can meet the nation’s future energy demands at a reasonable cost.

Costs for wind and solar power and for energy storage have declined rapidly in recent years. But dependence on these technologies has some grid operators worried that they can’t count on the wind blowing or sun shining at the right time – especially as more electric vehicles and other new users connect to the power grid.

Energy companies are rightly nervous about energy grid failures – no one wants a repeat of the outages in Texas in the winter of 2021. But some energy companies, even those with lofty climate goals, also profit handsomely from traditional energy technologies and have extensive investments in fossil fuels. Some have resisted clean energy mandates.

In the view of many of these energy companies, a net-zero energy transition is not necessarily a renewable energy transition.

Instead, they see a net-zero energy transition requiring massive deployment of other technologies, including advanced nuclear power and carbon capture and sequestration technologies that capture carbon dioxide, either before it’s released or from the air, and then store it in nature or pump it underground. So far, however, attempts to deploy some of these technologies at scale have been plagued with high costs, public opposition and serious questions about their environmental impacts.

Think Globally, Act Regionally

Another key takeaway from our roundtable discussions with energy leaders is that how clean energy is deployed and what net-zero looks like will vary by region.

What sells in Appalachia, with its natural-resource-driven economy and manufacturing base, may not sell or even be effective in other regions. Heavy industries like steel require tremendous heat as well as chemical reactions that electricity just can’t replace. The economic displacement from abandoning coal and natural gas production in these regions raises questions about who bears the burden and who benefits from shifting sources of energy.

Opportunities also vary by region. Waste from Appalachian mines could boost domestic supplies of materials critical to a cleaner energy grid. Some coastal regions, on the other hand, could drive decarbonization efforts with offshore wind power.

At a regional scale, industry leaders said, it can be easier to identify shared goals. The Midcontinent Independent System Operator, known as MISO, which manages the power grid in the upper Midwest and parts of the South, is a good example.

Among the major power grid operators, MISO has a broad, varied territory, which also extends into Canada, which can make management decisions more difficult. FERC

When its coverage area was predominantly in the upper Midwest, MISO could bring regional parties together with a shared vision of more opportunities for wind energy development and higher electric reliability. It was able to produce an effective multistate power grid plan to integrate renewables.

However, as utilities from more far-flung (and less windy) states joined MISO, they challenged these initiatives as not bringing benefits to their local grids. The challenges were not successful but have raised questions about how widely costs and benefits can be shared.

Waiting for the Right Kind of Pressure

Energy leaders also said that companies are not enthusiastic about taking on risks that low-carbon energy projects will increase costs or degrade grid reliability without some kind of financial or regulatory pressure.

For example, tax credits for electric vehicles are great, but powering these vehicles could require a lot more zero-carbon electricity, not to mention a major national transmission grid upgrade to move that clean electricity around.

That could be fixed with “smart charging” – technologies that can charge vehicles during times of surplus electricity or even use electric cars to supply some of the grid’s needs on hot days. However, state utility regulators often dissuade companies from investing in power grid upgrades to meet these needs out of fear that customers will wind up footing large bills or technologies will not work as promised.

Energy companies do not yet seem to be feeling major pressure from investors to move away from fossil fuels, either.

For all the talk about environmental, social and governance concerns that industry leaders need to prioritize – known as ESG – we heard during the roundtable that investors are not moving much money out of energy companies whose responses to ESG concerns are not satisfactory. With little pressure from investors, energy companies themselves have few good reasons to take risks on clean energy or to push for changes in regulations.

Leadership Needed

These conversations reinforced the need for more leadership on climate issues from lawmakers, regulators, energy companies and shareholders.

If the energy industry is stuck because of antiquated regulations, then we believe it’s up to the public and forward-looking leaders in business and government and investors to push for change.

Michael Burry Wonders Aloud if Facebook Knows What It Wants to Be

Posted on by phoffman@channelchek.com
Image Credit: Marco Verch (Flickr)  

Is Meta the Wrong Path for Facebook, or is it Just Ahead of its Time?

Not all ideas are good ideas, even when they come from billionaire tech start-up founders like Mark Zuckerberg.

Michael Burry, the legendary investor of “Big Short” fame, has been criticizing the social media giant’s metaverse strategy. Burry joins others in questioning why Zuck would change the Facebook formula and spend billions embracing something that is far from real. Many of Zuckerberg’s critics are other successful billionaires like Elon Musk and Mark Cuban. Other critics are investors that have endured Meta share’s 62.3% ($570 billion) decline since January.  

Burry founded and manages the hedge fund Scion Asset Management. Burry tweeted a message that seems to say Meta management blew it – and suggests they have blown it by historic proportions by taking a deep dive into something that may or may not have legs – the metaverse.

Image: @BurryDeleted (Twitter)

You don’t have to have been alive in the mid-1980s to know what Burry was saying when he posted, “Seems Meta has a New Coke problem.” Any business school textbook lists Coca-Cola’s changing the formula of its best-selling product as the #1 lesson in corporate blunders. It was an expensive change that failed miserably and caused the company to revert back to its original product or risk losing a lot more ground against rivals.

A Sweet Refresher

New Coke was a much sweeter version of the Coca-Cola people had become accustomed to using to wash down their pizza slices, or a burger and fries. It was introduced by Coca-Cola in April 1985 during the cola war Pepsi was waging.

At the time Coca Cola was perhaps one of the most recognized brands in the world. But, Pepsi stole customers after it ran a few Michael Jackson commercials suggesting its sugar water was the “choice of a new generation,” and also backed it up with ads showing blind taste test preferences. Between the taste test science and everyone wanting to be more like Michael Jackson, Coke lost market share. Coke reacted by reformulating its product and did its own blind side-by-side tests that indicated that consumers seemed to prefer the new sweeter taste, similar to Pepsi. The company then decided to market the reformulated recipe – New Coke was born.

Max Headroom was the spokesman for New Coke, Like the Grand Canyon (Flickr)

New Coke was introduced in April 1985, and within weeks they were receiving 5,000 angry calls a day. The number grew from there. Seventy-nine days after their initial announcement, Coca-Cola held a press conference in July 1985 to offer a mea culpa and announce the return of the original Coca-Cola “classic” formula.

Will Zuckerberg Relent?

So far, Facebook, I mean Meta, still wants to identify as a metaverse company, despite there being very few metaverse customers. The company is making sure users have accessories available and just unveiled a new virtual reality headset selling for $1,500 called the Meta Quest Pro. Zuckerberg says lower priced, presumably not “pro,” will follow ($300-$500 zone).

When one has built a business from a college dorm, a garage, or their mother’s basement, and it attains the kind of growth that Facebook, Apple, Amazon, or others have, it’s hard to keep growing at the pace investors and other onlookers have become accustomed to. This leads to a scenario where investors are exposed to a risk best described as the bigger they are, the farther they have to fall.  

And Facebook has fallen, not just in dollar value, but in ranking among its peers. Does this mean Zuckerberg is not right? The game isn’t over, and there aren’t many of us that can say, with honesty, that we are more forward-looking or have more luck than Zuck.

Is Michael Burry Right?

There is a whole universe of stocks beyond metaverse investments. Huge successful companies like Facebook or even Coca-Cola have ample resources to build and grow but lose nimbleness and growth potential, unlike the potential smaller companies enjoy. Huge companies are also more likely to have a “say yes to the boss, and you’ll be rewarded” culture, rather than a small company culture which is more “show the boss you can make them money, and you’ll be rewarded” culture.

Zuckerberg and Meta may very well be moving forward with a mistake that could be enshrined in textbooks years from now. However, like Coke, they may find that if it’s a lemon, they can make lemonade. Coca-Cola emerged from the brief departure from their main product strengthened as consumers discovered what life was like without their favorite soft drink.

Take Away

Michael Burry is worth paying attention to. He thinks differently and has been correct enough to always listen. The metaverse is new; does this mean it won’t grow and become something only a visionary like Mark Zuckerberg can imagine? It has been an expensive and slow start. I suspect Facebook was much less expensive to get off the ground, and adoption also required ancillary products to be useable by the masses.

A lesson investors should remember from this is how difficult it is for large companies to grow from their current offerings and huge corporate base.

Channelchek is a platform created to help investors uncover the next Apple, the next Moderna, or the next Facebook. It’s a resource to dig deeper into these less celebrated fledgling opportunities and to leave investors with enough understanding to decide whether they should take their own action by buying stock and becoming an owner of something with greater than average potential.

Paul Hoffman

Managing Editor, Channelchek  

Sources

https://www.history.com/news/why-coca-cola-new-coke-flopped

https://www.thestreet.com/technology/big-short-burry-says-facebook-and-zuckerberg-are-in-big-trouble

https://www.nytimes.com/2022/10/09/technology/meta-zuckerberg-metaverse.html

Does BNY Mellon’s Crypto Plans Have Hamilton Rolling Over in His Grave?

Posted on by phoffman@channelchek.com
Image Credit: Todd Martin (Flickr)

The United States Oldest Bank Embraces Safekeeping Cryptocurrency Alongside Other Assets

The nation’s oldest bank, founded in 1784, began taking deposits of cryptocurrency today. BNY Mellon, with roots in the Bank of New York and Alexander Hamilton, is now the first large U.S. bank to custody client’s bitcoin and ether.

The bank will store the keys required to access and transfer crypto and provide the same bookkeeping services on digital currencies it offers for stocks, bonds, commodities, and other assets. BNY Mellon is one of the largest and most trusted in the business of traditional safekeeping; they now have made history by adding this additional service for investment managers to clear, service and safe keep digital assets.

As America’s oldest bank, BNY Mellon has a 238-year legacy on which to build. As a company it provided the first loan to the U.S. to fund the Revolutionary War and has weathered as many different financial eras as the country that it has helped build. Back in February 2021, BNY Mellon formed its enterprise Digital Assets Unit to develop services for digital asset technology. The goal was to launch the industry’s first multi-asset platform that provides safekeeping for digital and traditional assets.

“Touching more than 20% of the world’s investable assets, BNY Mellon has the scale to reimagine financial markets through blockchain technology and digital assets,” said Robin Vince, Chief Executive Officer and President at BNY Mellon. “We are excited to help drive the financial industry forward as we begin the next chapter in our innovation journey.”

Image Credit: Mark Holler (Flickr)

BNY Mellon recognizes the significant institutional demand for a resilient, scalable financial infrastructure designed to accommodate digital assets alongside traditional ones. The bank had previously surveyed money managers that use their safekeeping services and found almost all institutional investors (91%) are interested in investing in tokenized products. Additionally, 41% of institutional investors hold cryptocurrency in their portfolios today, with an additional 15% planning to hold digital assets in their portfolios within the next two to five years. Safekeeping them all under one system will benefit clients.

BNY Mellon has been working closely with market-leading fintech firms. The firm tapped digital asset technology specialists Fireblocks and Chainalysis to integrate their technology in order to meet the present and future security and compliance needs of clients across the digital asset space.

 BNY Mellon is a global investment company helping its clients manage and service their financial assets throughout the investment lifecycle. Clients include institutions, corporations, and individual investors. It delivers investment management, wealth management, and investment services in 35 countries. As of June 30, 2022, BNY Mellon had $43.0 trillion in assets under custody and/or administration and $1.9 trillion in assets under management. BNY BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).

“As the world’s largest custodian, BNY Mellon is the natural provider to create a safe and secure Digital Asset Custody Platform for institutional clients,” said Caroline Butler, CEO of Custody Services at BNY Mellon. “We will continue to innovate, embrace new technology and work closely with clients to address their evolving needs.”

“With Digital Asset Custody, we continue our journey of trust and innovation into the evolving digital assets space, while embracing leading technology and collaborating with fintechs,” said Roman Regelman, CEO of Securities Services & Digital at BNY Mellon.

Take Away

The world is changing, and even the oldest bank in the U.S. is getting on board with the changes. The addition of BNY Mellon as a holder of cryptocurrency keys is a big nod to the crypto management industry. Portfolio managers of all sizes are now able to provide statements with a wider variety of asset classes held. Does this mean the newcomers that now transact and hold cryptocurrency will either be bought or lose potential large customers? That remains to be seen.

 Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.bnymellon.com/us/en/about-us/newsroom/press-release/bny-mellon-launches-new-digital-asset-custody-platform-130305.html

https://www.wsj.com/articles/crypto-could-threaten-financial-system-federal-risk-panel-warns-11664826496?mod=article_inline

https://www.wsj.com/articles/americas-oldest-bank-bny-mellon-will-hold-that-crypto-now-11665460354?mod=djemalertNEWS

The Week Ahead – FOMC Minutes and CPI Late Week

Posted on by phoffman@channelchek.com

Potential for a Change in Sentiment if Suprised by this Week’s FOMC Minutes, Jobs, and Inflation

When the world’s trading partners move interest rates in concert with each other, their actions are much smoother, this is because currency flows, which influence exchange rates, are less inclined to reprice dramatically. The U.S. has been comparatively aggressive in raising rates. This is part of why the Bank of England (BOE) shoring up its bond market, and the Japanese hawkish hesitancy has created disruptions and a historically strong U.S. dollar.

This week begins with Columbus Day; the bond markets are closed, and so are the banks. Stock market participants shouldn’t expect guidance from interest rate moves related to bond trading. The futures market will be active; moves from Interest rate futures from tickers such as ZB=F can be helpful while bonds are silent.  

Monday 10/10

  • 1:30 PM ET Federal Reserve Vice Chair Lael Brainard discusses restoring price stability at the National Association of Business Economics (NABE). Attend via Zoom.
  • Columbus Day, the potential for thin trading and big price swings.

Tuesday 10/11

  • NY Fed 5-year inflation expectations for one- and three-year-ahead inflation expectations had posted steep declines in August, from 6.2 percent and 3.2 percent in July to 5.7 percent and 2.8 percent, respectively. Investors will be watching to see if the declining expectations continue.
  • NFIB Small Business Optimism Index (NFIB), is a monthly survey that asks small businesses if they have plans to increase employment, plans to expand capital spending, increase inventories, expect economic improvement, expect higher retail sales, is now a good time to expand, current job openings, and earnings trends in their business. Health in small businesses can be an indicator of overall economic health and stock market strength. This report is released at 6 am last month, the index was 91.8, and the consensus is 91.5.
  • The Labor Department’s JOLTS has, in recent years, been referred to as the “Quits” report. The report tracks monthly changes in job openings and contains rates of hiring and quitting. The word JOLTS stands for Job Openings and Labor Turnover Survey.

Wednesday 10/12

  • The Producer Price Index (PPI) from the Bureau of Labor Statistics (BLS) is an inflation gauge that measures the average change over time in the prices received by U.S. producers of goods and services. The prices are typically considered input costs for final products and can impact CPI, it may also impact company costs of production and, therefore, profits. The trend has been lower, YOY PPI has been running at 8,7%, the consensus is for 8.4%.
  • The Mortgage Bankers Association (MBA) creates a statistic from several mortgage loan indexes. The Mortgage Applications index measures applications at mortgage lenders. It’s considered a leading indicator and is especially important for single-family home sales and housing construction. Both are considered foundational in a strong economy. L
  • ast week, the Purchase Index was -12.6%.
  • 10 Year Treasury Note Auction is held in the middle of each month and settles on or around the 15th (depending on weekends). The yield is a benchmark for 30-year mortgages and has recently been noted by investment markets because it has been trading at a yield lower than shorter maturities; this inversion of the yield curve has some market players suggesting a recession is expected in the future. Any surprises at the auction will reverberate through the stock market.
  • FOMC minutes (September meeting) – We’d all love to be a fly on the wall at the Fed’s meetings. The minutes detail the issues debated and the consensus among policymakers. This, of course, has ramifications if the contents of the minutes demonstrate an above-average hawkish or dovish change in tone. The Federal Open Market Committee issues minutes of its latest meeting three weeks after the meeting.

Thursday 10/13

  • US Consumer Price Index (CPI) is the inflation indicator most widely broadcast. With inflation being a primary focus, this will be the big number coming out this week. The number represents a basket of goods considered typical for an urban consumer and is taken as the change in the cost of that basket of goods. A percentage is derived from the change. CPI is also reported with food and energy removed as it is considered that other non-economic factors influence these prices. The August report indicated CPI rose 0.6% for the month and 8.3% YOY. Expectations are for a slowing to 0.4% for September and a YOY rate of 8.1%.
  • U.S. Jobless Claims, which represent the prior weeks of employment are expected to have increased to 225,000 from 219,000. From jobless claims, investors can gain a sense of how tight or how loose the job market is. If wage inflation takes hold, interest rates will likely rise, and bond and stock prices will fall.  Remember, the lower the number of unemployment claims, the stronger the job market, and vice versa.

Friday 10/14

  • U.S. retail sales have been lackluster, neither rising nor falling. As we head toward Thanksgiving and Black Friday sales levels, the market will be taking more and more interest in how strong the consumer is. Expectations for September are a rise of 0.2 percent overall, down 0.1 percent when excluding vehicles and up 0.4 when also excluding gasoline. The number is released at 8:30 am.
  • Business inventories are expressed in dollar value held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity. Rising inventories can be an indication of business optimism that sales will be growing in the coming months. However, if unintended inventory accumulation occurs, then production will probably have to slow while those inventories. The consensus is for a 0.9% increase after only increasing 0.6% for August.
  • U.S. Baker Hughes Rig Count tracks weekly changes in the number of active operating oil & gas rigs. Rigs that are not active are not counted. Components in the data are the United States and Canada, with a separate count for the Gulf of Mexico (which is a subset of the U.S. total). A significant increase or decrease could have ramifications on energy costs in North America. The rig count for the prior period in North America was 977, with 762 of those being from the U.S.

What Else

It is a light week for economic releases and Fed governor addresses, but late week could see a dramatic change in market sentiment as the Fed Minutes, CI, and even employment has the potential to impact thinking.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/newsevents/calendar.htm

http://global-premium.econoday.com/byweek.asp?cust=global-premium

https://www.channelchek.com/news-channel/noble_on_the_road___noble_capital_markets_in_person_roadshow_series

Release – Tonix Pharmaceuticals Announces Oral Presentations Involving TNX-1500 (Fc-Modified Anti-CD40L mAb) at the International Congress of The Transplantation Society (TTS 2022)

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CHATHAM, N.J., Sept. 06, 2022 (GLOBE NEWSWIRE) — Tonix Pharmaceuticals Holding Corp. (Nasdaq: TNXP) (Tonix or the Company), a clinical-stage biopharmaceutical company, today announced three oral presentations by academic collaborators at the 29th International Congress of The Transplantation Society (TTS 2022) being held September 10-14, 2022 in Buenos Aires, Argentina, and virtually. Copies of the presentations will be available under the Scientific Presentations tab of the Tonix website at www.tonixpharma.com following the conference.

Oral Presentation Details

Title:Long-term rejection free renal allograft survival with Fc-modified anti-CD154 antibody monotherapy in nonhuman primates
Date:Monday, September 12, 2022
Time:4:35 p.m. EDT (17:35 ART)
Session:Campfire Session: Models, mechanisms & therapies
PresenterGrace Lassiter, M.D., Research Fellow of the Kawai Lab
  
Title:Monotherapy with TNX-1500, a Fc-modified anti-CD154mAb, prolongs cardiac allograft survival in cynomolgus monkeys
Date:Tuesday, September 13, 2022
Time:3:25 p.m. EDT (16:25 ART)
Session:Mini-Oral Abstracts Session: Snap-shots of thoracic transplantation
PresenterKohei Kinoshita, M.D., Research Fellow of the Pierson Lab
  
Title:Long-term (>1 year) rejection/TMA free survival of kidney xenografts with triple xenoantigen knockout and multiple human transgenes in nonhuman primates
Date:Wednesday, September 14, 2022
Time:10:00 a.m EDT (11:00 ART)
Session:Mini-Oral Abstracts Session: Xenotransplantation
PresenterGrace Lassiter, M.D., Research Fellow of the Kawai Lab

Tonix Pharmaceuticals Holding Corp.*

Tonix is a clinical-stage biopharmaceutical company focused on discovering, licensing, acquiring and developing therapeutics to treat and prevent human disease and alleviate suffering. Tonix’s portfolio is composed of central nervous system (CNS), rare disease, immunology and infectious disease product candidates. Tonix’s CNS portfolio includes both small molecules and biologics to treat pain, neurologic, psychiatric and addiction conditions. Tonix’s lead CNS candidate, TNX-102 SL (cyclobenzaprine HCl sublingual tablet), is in mid-Phase 3 development for the management of fibromyalgia with a new Phase 3 study launched in the second quarter of 2022 and interim data expected in the second quarter of 2023. TNX-102 SL is also being developed to treat Long COVID, a chronic post-acute COVID-19 condition. Tonix initiated a Phase 2 study in Long COVID in the third quarter of 2022 and expects interim data in the first half of 2023. TNX-1300 (cocaine esterase) is a biologic designed to treat cocaine intoxication and has been granted Breakthrough Therapy designation by the FDA. A Phase 2 study of TNX-1300 is expected to be initiated in the first quarter of 2023. TNX-1900 (intranasal potentiated oxytocin), a small molecule in development for chronic migraine, is expected to enter the clinic with a Phase 2 study in the fourth quarter of 2022. Tonix’s rare disease portfolio includes TNX-2900 (intranasal potentiated oxytocin) for the treatment of Prader-Willi syndrome. TNX-2900 has been granted Orphan Drug designation by the FDA. Tonix’s immunology portfolio includes biologics to address organ transplant rejection, autoimmunity and cancer, including TNX-1500, which is a humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft and xenograft rejection and for the treatment of autoimmune diseases. A Phase 1 study of TNX-1500 is expected to be initiated in the first half of 2023. Tonix’s infectious disease pipeline consists of a vaccine in development to prevent smallpox and monkeypox, next-generation vaccines to prevent COVID-19, and a platform to make fully human monoclonal antibodies to treat COVID-19. TNX-801, Tonix’s vaccine in development to prevent smallpox and monkeypox, also serves as the live virus vaccine platform or recombinant pox vaccine (RPV) platform for other infectious diseases. A Phase 1 study of TNX-801 is expected to be initiated in Kenya in the first half of 2023. Tonix’s lead vaccine candidate for COVID-19 is TNX-1850, a live virus vaccines based on Tonix’s recombinant pox live virus vector vaccine platform. A Phase 1 study of the COVID-19 vaccine is expected to be initiated in the second half of 2023.

*All of Tonix’s product candidates are investigational new drugs or biologics and have not been approved for any indication.

This press release and further information about Tonix can be found at www.tonixpharma.com.

Forward Looking Statements

Certain statements in this press release are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “forecast,” “estimate,” “expect,” and “intend,” among others. These forward-looking statements are based on Tonix’s current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks related to the failure to obtain FDA clearances or approvals and noncompliance with FDA regulations; delays and uncertainties caused by the global COVID-19 pandemic; risks related to the timing and progress of clinical development of our product candidates; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payor reimbursement; limited research and development efforts and dependence upon third parties; and substantial competition. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. Tonix does not undertake an obligation to update or revise any forward-looking statement. Investors should read the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2022, and periodic reports filed with the SEC on or after the date thereof. All of Tonix’s forward-looking statements are expressly qualified by all such risk factors and other cautionary statements. The information set forth herein speaks only as of the date thereof.

Contacts

Jessica Morris (corporate)
Tonix Pharmaceuticals
investor.relations@tonixpharma.com 
(862) 904-8182

Olipriya Das, Ph.D. (media)
Russo Partners
Olipriya.Das@russopartnersllc.com 
(646) 942-5588

Peter Vozzo (investors)
ICR Westwicke
peter.vozzo@westwicke.com 
(443) 213-0505

Source: Tonix Pharmaceuticals Holding Corp.Released September 6, 2022