Podcast Summary
UAE gambling: The UAE could potentially earn up to $6.6 billion annually from casino developments, despite gambling being prohibited under Islam and illegal in the Gulf Cooperation Council countries, due to potential economic benefits and the establishment of a regulatory framework
The United Arab Emirates (UAE) could potentially become the world's next major gambling destination, with growing confidence in the margin island region for casino developments. This development would significantly impact the global gaming landscape, as gambling is currently prohibited under Islam and illegal in the UAE's Gulf Cooperation Council countries. However, recent efforts to build casinos have gained momentum due to potential economic benefits and the establishment of a regulatory framework. The UAE could earn up to $6.6 billion annually from gambling, surpassing Singapore's annual gaming revenue. In the financial markets, the Dow is outperforming, with financials leading the way, while the bond market remains quiet. Most trading action is in crypto, where Bitcoin is testing $60,000 to the downside after a poor week, which could signal potential risks for other assets if it holds. The European soccer championships are ongoing, and with a relatively empty economic calendar, it's an opportune time to discuss the Palomol Dini rule of soft landings, a concept created by Daira Perkins, managing director for global macro at TS Lombard, which suggests that economic downturns can be mitigated through gradual policy responses.
Maldini rule in economics: Early, parsimonious, and preemptive economic policy management increases the likelihood of a soft landing according to a study on 149 easing cycles in 13 developed market economies
The Maldini rule, which emphasizes the importance of positioning and timing over last-minute interventions, also applies to economic policy and soft landings. A study by Fed researchers confirmed this, analyzing 149 easing cycles in 13 developed market economies. They found that early, parsimonious, and preemptive policy management increases the likelihood of a soft landing. In the stock market, CrowdStrike made history by joining the S&P 500 just five years after its IPO, the shortest time for a cybersecurity firm to achieve this. Additionally, Micron is gaining momentum ahead of its earnings report, with analysts expecting strong results due to improved industry conditions and Micron's increasing exposure to AI memory.
Target, Shopify partnership, non-growth stocks: Target expands Shopify partnership, bringing popular products to Target Plus and physical stores. Non-growth stocks may outperform in future as historically, it's non-growth that lags when growth gap narrows.
Target is expanding its partnership with Shopify to offer a selection of popular merchant products on its digital marketplace, Target Plus, and will be the first mass retailer to bring some of these products into its physical stores. Meanwhile, Disney's "Inside Out 2" continues to break box office records, becoming the highest-grossing film of 2024 so far with over $724 million globally. The EU and China have agreed to hold talks over the EU's anti-subsidy investigation into Chinese electric vehicles and potential tariffs, aiming to avoid trade tensions. In the financial world, Oppenheimer's technical analyst, Ari Wald, discussed the NASDAQ 100 and whether it's in bubble territory. Instead of growth being overvalued, Wald suggested that historically, it's non-growth that lags, and when the gap does narrow, it may be non-growth stocks rallying rather than a collapse in growth prices. Additionally, the bike riders, a motorcycle gang drama, was the biggest new release this weekend, netting $10 million in its opening weekend.
Market bifurcation: The market bifurcation, or difference between growth and non-growth stocks, is wider than in the 1990s due to weakness in non-growth stocks, not strength in growth stocks. The Russell 2000 is projected to have a single-digit reading in Q4-2023, suggesting a potential market low.
The market bifurcation, or the difference between growth and non-growth stocks, is as wide as it has been since the 1990s. According to Wald, this disparity is primarily due to the weakness in non-growth stocks rather than the strength in growth stocks. The NASDAQ 100 and Russell 2000 can be used as proxies for this relationship. Although the ratio has surpassed its year 2000 peak, the five-year rate of change for each index reveals a significant discrepancy between the current situation and the past. Notably, the Russell 2000 is projected to have a single-digit reading of 5% in Q4-2023, which is more consistent with major market lows than market tops. Consequently, Wald anticipates that the convergence will be more likely to be triggered by a catch-up of non-growth stocks over the coming years.