CFTC Rejection of Kalshi Election Betting Markets Encourages Pet Rock Trading

#hedgersgunnahhedge

Trump Fuels Meme-Like Rallies in Stocks Tied to 2024 Bid. Donald Trump’s charge toward the Republican presidential nomination is fueling a speculative frenzy in a corner of the US equity market, setting off rallies in obscure stocks seen as tied to his candidacy. https://www.bloomberg.com/news/articles/2024-01-23/trump-fuels-meme-like-rallies-in-stocks-tied-to-white-house-bid

[Blackdawg is back by popular demand although with a reduced publishing schedule due to stealth mode business engagements].

An institutional investor subscriber asked about Blackdawg’s outlook on China. While Blackdawg fancies himself a contrarian and recognizes there may be value amongst the malaise that is the Chinese stock market, he remains wary. A reversion to the mean (of an economic growth engine) is not a given. The Chinese population is shrinking and the uncertain regulatory regime is literally driving capital out of China and Hong Kong. This week’s announcement of a $278 billion support package for stocks and lower bank reserve requirements are neither novel nor substantial enough to change sentiment. Do you want to invest in an economy that needs emergency support?

I would note that Alibaba Chairman and Brooklyn Nets owner Joe Tsai and former Alibaba Chairman Jack Ma recently bought $200 million worth of Alibaba shares. Whether that was to curry favor, make money, or both, its not an insignificant amount of money even for billionaires. $BABA shares have been under pressure from shareholder Softbank’s forward sales derivatives and market share loss to Pinduoduo’s Temu.

Disappointed United Air CEO Drops Largest 737 Max From Plan After Boeing Missteps

The bad news for Boeing keeps mounting following the Alaska Air incident where a window blew out mid-flight. The airline found more maintenance issues while inspecting its Boeing fleet while a nose wheel fell off a Delta Boeing 757. United Airlines apparently has seen enough. Boeing’s reputation is in a tailspin. https://www.bloomberg.com/news/articles/2024-01-23/united-ceo-blames-boeing-for-max-missteps-wants-faster-fix

If you are into pairs trading (long one stock, short an industry peer), this seems like an obvious choice. Airbus should outperform Boeing for the forseeable future.

Congrats to the Blackdawg subscriber still holding IBM from the IPO! What a long strange trip it’s been. IBM rocketed 10% higher today on 7x average volume as the company forecasted strong demand for its AI related business.

Iran-backed narco-terrorists are making billions and widening the war in the Middle East according to Blackdawg subscriber’s NY Post Op-Ed. https://nypost.com/2024/01/22/opinion/iran-backed-narco-terrorists-are-making-billions-and-widening-the-war-in-the-middle-east/

Toyota Motor Corp. Chairman Akio Toyoda says he believes battery electric vehicles will reach at most 30% market share, with the rest taken up by hybrids, hydrogen fuel cell and fuel-burning cars. This is a much less optimistic view on EV adoption than the consensus although, at least for now, Toyota’s big bet on hybrids seems to be paying off.

Speaking of Japan and the bullish thesis for the land of the rising sun, Blackrock says Japan has top-tier companies that solve significant global challenges. Japanese companies are now world leaders in robotics, automation, and medical technology. In addition, low-carbon transition benefits Japanese companies with energy efficiency and electrification expertise, including cutting-edge semiconductor and battery companies.

This Week in History

1870 – In Montana, U.S. cavalrymen led by Major Eugen Baker kill 215 Blackfeet Native Americans, mostly women, children, and elderly in what becomes known as the Marias Massacre.

The massacre was touched off by the revenge killing of a white trader by a young warrior named Little Owl after the trader had attacked him and raped his wife.

Under the orders of General Phillip Sheridan who said to “hit them hard”, a regiment under Major Eugene Baker began pursuit of Little Owl’s crew, which had joined up with a group under Mountain Chief, who was believed to be camped along the Marias River.

As temperatures reached 30 below zero, the soldiers came upon a camp of 32 lodges along the river. Major Baker had mistaken the riverside camp for the wanted Mountain Chief’s camp which was actually a few miles downriver. Instead he was overlooking a camp led by the friendly Heavy Runner who had a letter of safe passage issued by the War Dept. Baker, a drunkard, was told by his scout of the mixup but attacked anyway saying that “[the Blackfeet} were all the same.” Heavy Runner was shot and killed while approaching the soldiers and waving his safe passage papers in the air.

In addition to the 215 Blackfeet killed, soldiers took about 100 prisoners, but when they realized many of them had small pox they cut them loose in frigid temperatures with no clothing, food or shelter, causing many to freeze to death.

The adult men were out hunting Buffalo so there was zero resistance. Only one casualty was sustained by the US Army. An attempt to cover up the incident by describing it as a battle failed and the actual details made it to the front page of the New York Times.

In response to the atrocity, President U.S. Grant instituted a policy of peace and permanently wrested control of Indian policy from the War Department (instead putting it under Interior). For the Blackfeet, it was considered a turning point in their war with the government, seeing it as the penultimate “crushing blow”. The Dawes Act would later strip the tribe of 15 million acres of land. Blackfeet members, including descendants of survivors, gather at the massacre site every year to commemorate the tragedy. For more info...

In 1995 - The Japanese Nikkei index falls more than 1,000 points from 19,241 to 17,785 as traders panic from the devastation of the Kobe Earthquake. In total, the Nikkei had fallen 7.6% since the earthquake on January 17th.

Unbeknownst at the time, an obscure Barings Bank operations clerk turned trader at Britain’s oldest bank had been hiding snowballing futures trading losses in an error account. At the time the massive earthquake hit, he was short a straddle betting that the Nikkei would be rangebound. Then in an attempt to recover significant mounting losses he made a ginormous bet (60,000 contracts) on a quick rebound which did not materialize. Before disappearing he left a $1.4 billion hole in the bank’s balance sheet causing the 232 year old institution to fail.

If you like trading movies, this was a good one: Rogue Trader.

Behavioral Economics Principle of the Day

Bystander Effect: The tendency for individuals to be less likely to offer help or take action in the presence of others. It can lead to irrational behavior by causing individuals to assume that someone else will intervene or take responsibility, resulting in inaction or the diffusion of responsibility.