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SIX things you need to know this week in <5 minutes:
No breathing room for the Fed in the labor market
Disney finally find a suitor for ESPN
Cash is king
Massive bet on carbon offsets
Crypto is growing up
Found: Flawless recession indicator
1. MACRO
No breathing room for the Fed in the labor market
Whereas last month's JOLTs and ADP employment data turned in mixed signals, both appeared to be in sync this month.
Expected to decline, job openings bounced to 10.7 million in September, largely reclaiming all the vacancies eliminated in last month's report (for August).
Meanwhile, ADP numbers topped estimates by +22%, with private businesses creating 239k new jobs in October led entirely by the services industries.
Also noteworthy in the latter set of data were 8,000 jobs lost in goods-producing sectors, which shows early signs of Fed-driven demand destruction.
GRIT'S TAKE: As strong as these numbers are (in the sense that nobody wants to root for unemployment…unless they're J-Pow), they support the Fed's higher-for-longer mentality which we saw in the presser this week.
GRIT'S ACTION: Forget about that pivot.
Under the Radar
FOUR NEW ICONIC BRANDS ACQUIRED. People don't just want to drive from point A to point B – they want to have fun driving. EV Technology Group acquires beloved brands—like it did the iconic MOKE—and electrifies them. It now has its next set of brands to electrify: Brewster & Co. Fantuzzi, Marazzi, and Office Stampaggi Industriali.*
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2. DEALS
Disney finally finds a suitor for ESPN
After searching for more than a year (and seeking as much as $3 billion), Disney looks to have finally found a major betting partner to help it capitalize on the growing gambling industry.
Though the (unofficial) deal terms are unknown, the company will license the ESPN brand to DraftKings' sports book and integrate betting odds in its broadcasts.
Already hosting betting-related shows and engaged in marketing deals in the space, Disney was deeply invested in gambling before this partnership, though as in this deal, it's always stayed away from facilitating action (bets).
With this move, it's looking to "eliminate friction" for sports bettors by creating a better online digital sports experience…without taking any bets, of course.
GRIT'S TAKE: Want more on the business of sports? Check out this week's GritALTS 👇
GRIT'S ACTION: Private Equity is coming for your hometeam
3. STOCK MARKET
Cash is king
In every corner of the market, investors are raising cash.
Large-cap mutual funds' cash holdings as a percentage of assets under management (AUM) has increased to the highest level since 2016.
Meanwhile, individual investors have brought their cash levels up to around 25% of their portfolios, which is the highest since March 2020 (Covid crash).
Holding more or less steady are wealthy investors (read: BofA's private clients) whose cash levels are around 12%, which is right around the long-term average, but that number has been trending upward.
GRIT'S TAKE: When you consider the returns above, you can't really blame investors. On the other hand, the time to buy is when assets are on sale.
GRIT'S ACTION: Dollar-cost averaging into S&P.
4. COMMODITIES
Massive bet on carbon offsets
A leading alternative investment firm best known as a corporate debt investor is looking to cash in on a carbon credit market expected to potentially 5x by 2035 by…buying trees?
Oak Hill Advisors (part of T. Rowe Price) has committed 1.8 of its $56 billion AUM to buying forest land to produce carbon offsets by reducing logging.
So how much tree does $1.8 billion get you? +1.7 million acres worth.
The property will be managed by Anew Climate, which is one of the top 10 largest timberland owners in the US, and the only one of that group to be going against the grain (which is to say not cutting down trees and instead focusing on carbon markets).
GRIT'S TAKE: While Anew still plans to generate 10-20% of its revenue from logging (vs. 80-90% under previous owner), the business plan is effectively get paid to not chop.
GRIT'S ACTION: We might be called GritALTS now but we still cover carbon—if you haven't already, subscribe here!
5. CRYPTO
Crypto is growing up
The crypto industry is getting a makeover courtesy of the world's second-largest investment bank.
Goldman Sachs has partnered with MSCI (the global index provider) and data firm Coin Metrics to create a new, sophisticated classification service to help its institutional clients better understand digital assets.
Datonomy is a new framework for cryptocurrencies that, similar to equities, sorts tokens into classes, sectors, and subsectors, based on the use case.
The subscription-based service will allow for analyzing and researching digital assets, benchmarking performance, and even creating sector-specific investment vehicles.
GRIT'S TAKE: As Coin Metric's CEO put it: crypto is getting an "adult framework".
GRIT'S ACTION: Check out our crypto outlook.
6. ENTERTAINMENT
Found: Flawless recession indicator
The National Bureau of Economic Research (NBER)—the "authority" on the subject—has nine different indicators it uses to determine whether or not we're in a recession. (Handy FRED tool here).
As investors, we ourselves use tons of signals—not the least of which is the 2/10 Treasury yields which are currently at their most inverted since the early 1980s—but all of these signals have holes.
Except one.
The last three times the Philadelphia Phillies won the MLB World Series preceded the following events:
1929 stock crash & Great Depression
1980 recession (which ended when they lost in the 1983 World Series)
2008 Great Financial Crisis
GRIT'S TAKE: Literally the only thing we have going for us is that Jim Cramer is a Phillies fan:
GRIT'S ACTION: With the series at 3-2 Houston, we're all Astros fans tomorrow night.
*SOURCES
1. Bloomberg, CNBC, @zerohedge
4. WSJ, CarbonCredits
5. CNBC
6. @exec_sum
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