February 6, 2023

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0. Data and calendar

All values as of 3 AM PT / 6 AM ET, other than S&P500 close (1 PM PT / 4 PM ET).

All times are ET.

1. China wants to move on from balloon incident

  • The U.S. accused China, with Defense Secretary Lloyd Austin saying it was an "attempt to surveil strategic sites in the continental United States.”

  • The U.S. is analyzing debris, which fell in water about 47 feet deep and over at least 7 miles. - WSJ

  • China is being much softer now, versus, say, its comments regarding Taiwan, signaling it wants to move on from this incident. Still, they called it an "unacceptable and irresponsible action." - AP

  • 4x already in recent years. According to U.S. officials, similar balloons transited the U.S. recently, 3 times during the Trump administration and one earlier in the Biden administration. - AP

  • A 2nd balloon was spotted over Latin America. - Wikipedia

  • Is TikTok a bigger threat than balloons? Some, like Jason Calacanis, are already making this point on Twitter. The main difference is that spy balloons are military in nature and a breach of international law, while TikTok is civilian and voluntary. Even assuming TikTok has a Chinese bias, the First Amendment protects people from reading pro-China news, just as it protects websites like RT.com.

Hang Seng futures are down 1.6%

  • Continuing the negative reversal? In January, the Hang Seng index rose 10%, and active foreign funds invested $1.4B into Mainland China and $2.2B in Hong Kong stocks. The balloon incident could catalyze foreign investors to rethink China. - CNBC

2. FTX asks back $93M in political donations

Press release.

  • $93 million: the number of political contributions made between March 2020 and November 2022, according to previous court filings. - The Block

  • February 28, 2023 deadline: FTX says that it might start legal actions if the funds are not returned by then - Press release

  • We don't expect them to budge voluntarily. Political groups will likely wait on comments from FTX bankruptcy Judge John T. Dorsey.

3. Today: FTX bankruptcy hearing on the appointment of an examiner

  • FTX and the U.S. Trustee will battle it out in Delaware on the matter of whether or not to appoint an independent examiner to oversee the bankruptcy proceedings.

    • FTX claims $100M+ cost: "If history is a guide, the cost could near or exceed $100 million."

    • 1% lower recovery: $100M cost would translate into around a 1% gross hit, assuming $9 billion in liabilities. Of course, an examiner could also lead to higher recoveries, making up for its cost.

    • The U.S. Trustee's original reasoning: "An examiner may also allow for a faster and more cost-effective resolution of these cases by allowing Mr. Ray to focus on his primary duty of stabilizing the Debtors’ businesses while allowing the examiner to conduct the investigation." - Cointelegraph

  • Follow it on Twitter: we will live-tweet the hearing on our Twitter page starting at 6:30 AM PT / 9:30 AM ET.

  • Emergent bankrupt: In related news, SBF's Emergent company, which owns 56 million shares of Robinhood ($604M) and $21M in cash, filed for bankruptcy. - Coindesk

4. After market close: Activision earnings; UK regulator expected to criticize Microsoft deal

  • Exp.: $1.51 EPS, $3.19B in revenue.

  • UK regulator to release decision in Feb: the Competition and Markets Authority (CMA) is expected to release its provisional findings in the coming days, which could include a block to the deal. This will happen much before decisions from the EU and the U.S. FTC, whose lawsuit could take years to conclude. - Bloomberg

  • UK courts rarely overturn a CMA decision. And the FTC and EU could use the CMA decision as a base.

5. JPMorgan: Investors worried about recession and inflation; bullish on AI

According to their e-Trading Edit Insights research:

JPMorgan research.

JPMorgan research.

6. Iran and China continue to help Russia

  • Iran's 6K drone factory: Tehran is moving forward with plans to build a drone factory in Russia, which could produce 6,000 drones in the coming years. - WSJ

  • China is increasing military exports to Russia: Custom records show that China is shipping navigation equipment, jamming tech, and airplane parts to sanctioned Russian state companies. For example, Russian chip imports have almost normalized to pre-war levels, with a majority of them coming from China:

7. Bennett: Putin assured me he would not kill Zelensky

  • "Do you intend to kill Zelensky? He said, I won’t kill Zelensky."

  • The full quote from former Israeli Prime Minister Naftali Bennett, speaking about his March 2022 meeting with Putin: "I knew that Zelensky was under threat. He was in a secret bunker, so 3-4 hours into the meeting, [I] asked: 'are you going to kill Zelensky?' He said, 'I won't kill Zelensky.' Then I said, 'I have to understand that you're giving your word that you won't kill Zelensky.' 'I won't kill Zelensky.'"

  • "After the meeting, [I] call Zelensky and say, 'I came out of a meeting, he's not going to kill you.' He asks, 'are you sure?' '100%, he won't kill you.' Two hours later, Zelensky went to his office and filmed himself there on his phone, 'I'm not afraid...'" - Times of Israel

  • Zoom out: tragic war still ongoing. Nothing good has come from this war -- up to a million dead, millions more displaced, and the whole world affected economically and militarily, with the possibility of WW3 now a reality.

8. Individual investor volume down post-Covid

  • From 24% to 18%, comparing the 2021 high to the most recent quarter.

  • In line with the trend away from meme towards value. Many signs point to markets returning to rewarding cash flow rather than revenue growth. Individual investors likely contributed to the momentum tilt during the Covid years, which is now fading away.

9. Elon Musk found not guilty over "funding secured" tweet; working 120 hours/week

  • 2-hour verdict: that is how long the 9-person San Francisco-based jury took to reach a not guilty verdict. - WSJ, WSJ analysis

  • Only 0.2% of similar cases go to a verdict: Taking into account all non-M&A federal securities class-action cases, according to Cornerstone Research. It shows how much Elon Musk is willing to fight in court for what he believes.

  • Also, Elon is not sleeping properly and has increased his work week from 80 to 120 hours per week. - WSJ

10. Friday recap: U.S. gained 517K jobs in January across all sectors

  • 3.4%Β unemployment rate (steady, lowest since 1969)

  • Layoffs in tech did not appear to spread to other sectors. Even in professional and business services, which includes many tech and other white-collar jobs, there was an 82K increase in employment. - BLS

Markets still price in 1 or 2 more 25 bps hikes

11. Other headlines

  • 7.8 magnitude earthquake hit Turkey, Syria, Lebanon, and Israel; 1,200+ dead.

  • iPhone Ultra is expected in 2024.

  • Dell to cut 5% of workforce, 6.7K jobs.

  • Elon says Twitter will provide a free API for "bots providing good content that is free."

  • John Carmack predicts 60% of AGI by 2030 with his new startup Keen.

  • The UK wants to pass friendly crypto regulation bill by Easter.

  • Genesis Global's bankruptcy case gets 7-member unsecured creditors committee.

  • Twitter considers charging $1000 per month for brands to stay verified.

  • Tesla slightly increased ($1-2K) the price of the Tesla Y after lowering it previously.

  • Former prosecutor Mark Pomerantz's new book says that Trump grew his business "through a pattern of criminal activity."

  • George Santos accused of touching groin of staffer.

  • Mr. Beast continues to be criticized for curing 1,000 blind people.

  • Federal law prohibiting marijuana users from having firearms is found unconstitutional.

12. Interesting memes and images

Top 100 U.S. tech companies founded after 1960, by market cap

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