Wall Street Breakfast
UAE gets ready to roll the dice on casinos
United Arab Emirates' Marjan Island could rival Macau. (0:16) What can Paolo Maldini tell us about soft landings? (1:49) Disney's 'Inside Out 2' on the way to $1 billion. (4:23)
Show Notes
Gap between growth and small-cap is huge, but don't call it a bubble
Micron sees price target raised at Citi, Wolfe ahead of earnings
CrowdStrike reaches S&P 500 Index five years after IPO
Episode transcripts seekingalpha.com/wsb
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- Duration:
- 7m
- Broadcast on:
- 24 Jun 2024
- Audio Format:
- mp3
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news and analysis. Good afternoon today is Monday, June 24th, and I'm your host, Kim Khan, our top story so far. There is growing confidence that the margin island region of the United Arab Emirates could be the world's next big gambling region. That would be a big shake-up in the gaming landscape, especially taking into consideration gambling is prohibited under Islam and is still illegal in the UAE, while no casinos currently exist in the six Gulf Cooperation Council countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE that are casinos operating in Lebanon and Egypt. Efforts to build casinos in the UAE have gained significant momentum recently, driven by the potential economic benefits and the establishment of a regulatory framework. Raaz al-Kaman and Abu Dhabi are at the far front of these developments. Meanwhile Abu Dhabi is exploring potential sites for similar projects with Yaz Island being a prime candidate due to its existing entertainment offerings. Dubai, despite being a major tourism hub, has currently opted out of pursuing casino developments, focusing instead on its established attractions. Last year, the UAE established the General Commercial Gaming Regulatory Authority to oversee the potential legalization and regulation of gambling activities. Bloomberg Intelligence estimated that the country could earn up to $6.6 billion annually, a tally that is higher than Singapore's annual gaming revenue. In today's trading, the Dow is outperforming with some strength and financials, and the bond market is pretty quiet. Most of the action is in crypto, where Bitcoin is testing $60,000 to the downside. The slide comes after one of its worst weeks this year, and it could be a warning sign for risk assets if it can't hold $60k. With a relatively empty economic calendar, and the European soccer or football championships in full swing, it seems like an opportune time to talk about the Palomaldini rule of soft landings. Created by Daira Perkins, managing director for global macro at TS Lombard, and named for one of the greatest defenders ever to play the game, the rule is based on Maldini's philosophy that "if I have to make a tackle, then I've already made a mistake." He meant it's all about positioning and timing, not last-ditch interventions, Perkins explained. If you get those things right, you don't need to tackle. A few years ago, I said the same rule applies to soft landings. The textbook example was 1995, when Alan Greenspan preemptively stopped inflation and delivered the perfect soft landing. A comprehensive study from Fed officials has now confirmed that the Maldini rule is a real thing. It looked at data from 13 developed market economies, covering 149 easing cycles, 25 of those easing cycles were in response to better inflation rather than on set of a recession. Of those, 14 resulted in the second wave, central banks had to cut prematurely, 6 ended in an unexpected recession, central banks' ease too late, and 5 ended in a soft landing. Although rare, soft landings do happen, Perkins said, and after reviewing all the cross-country historical evidence, the Fed researchers conclude that successful policy management is more likely when policy makers act early, more parsimoniously, and preemptively. Among active stocks in today's session, CrowdStrike was added to the S&P 500 index today, almost exactly five years after the cybersecurity company went public. CrowdStrike made its initial public offering on June 12, 2019. The company said it is the shortest amount of time the cybersecurity firm has achieved this listing. Micron is getting some mojo ahead of its earnings report this week. While research maintained its outperform rating and raised its price target to $200 from 150, we'll cite its stronger industry conditions and optimism regarding high bandwidth memory. City also reiterated its buy and top pick rating and raised its price target to 175 from 150. Analysts expect the company to post results and guidance above consensus given the DRAM upturn and Micron's increasing AI memory exposure. One target announced a new partnership with e-commerce giant Shopify to offer a selection of its popular merchants and their products on Target Plus, the retailer's third-party highly curated digital marketplace. Target will be the first mass retailer to work with Shopify to bring select merchants' products into its physical stores in the months to come. In other news of note, Disney's Inside Out 2 raked in $100 million in its second weekend, setting a record for an animated movie according to data compiled by ComScore. The previous record for a second weekend haul was $92 million for the Super Mario Bros. movie. Since opening a week and a half ago, Inside Out 2 has become the highest grossing film so far in 2024 with $724.4 million globally, including $355.2 million in US and Canadian theaters. The Pixar sequel surpassed the $711.8 million global total of Dune Part 2. Inside Out 2 is on track to exceed $1 million in box office sales. The first movie to hit that milestone since Barbie was in theaters last year. The biggest new release this weekend was The Bike Riders, a motorcycle gang drama whose release was postponed with last year's strike by Hollywood actors. The focus features release starring Jody Comer, Austin Butler and Tom Hardy, netted $10 million from 2,642 venues in its opening weekend. Meanwhile, China and the European Union have agreed to hold talks over the block's anti-subsidy investigation into and planned tariffs on Chinese electric vehicles as the two sides seek to avoid escalating trade tensions. Both sides agreed to discussions after a video call between Chinese Commerce Minister Wang Wen Tao and EU Trade Commissioner Valdis Dombrowski's. Beijing wants the EU to scrap its tariff decision before July 4th, Chinese observers told state-controlled newspaper Global Times. And in the Wall Street Research Corner, we're talking bubbles. "It's an uptrend if you participate, it's a bubble if your neighbor participates. That's the old adage Oppenheimer technical analyst Ari Wald referenced when looking at whether the Nasdaq 100 is in bubble territory. But he noted that rather than growth being overvalued currently, it's non-growth that is historically lagging. When the gap does narrow, it may be non-growth rallying as the driver rather than a collapse in growth prices." Wald said, "We still agree that market bifurcation, and specifically the spread between growth and non-growth, is perhaps as wide as it's been since the 1990s. Our differentiated take remains that the driver of this spread has been weakness in non-growth more than it's been strength in growth." Consider the Nasdaq 100 and Russell 2000 as proxies for this relationship. While the ratio has broken through its year 2000 peak, the five-year rate of change for the individual parts shows a significant discrepancy between now and then. The outlier from our vantage point is that the Russell is coming off a single-digit reading of 5% in Q4-2023 that has been more consistent with major market lows than market tops. That is why we believe the convergence is more likely to be catalyzed by catch-up over the coming years. That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at seekingoffa.com/wsp. And join the highest-level discussion of any stock or ETF in our community of serious investors like you. Find us at seekingoffa.com/subscriptions. [MUSIC PLAYING]