Brad’s Note: Before we get to today’s issue, I wanted to share something that readers might find interesting.
Keith Kaplan is the CEO of TradeSmith, a research technology firm and corporate affiliate of Wide Moat Research. And last week, he released a presentation that caught my attention.
Keith unveiled what he believes could be the biggest breakthrough his firm has seen in 20 years. It’s a software tool that predicts the largest moves on 5,000 stocks – to the day. And Keith reports they’ve seen an 83% accuracy rate with backtesting.
I wouldn’t blame you if you’re skeptical. But I also know that TradeSmith has a reputation for producing some of the best research tools on the market. And TradeSmith is now accepting new members to beta test this tool, and Keith is offering a new market prediction for 2025 that readers will want to hear. If you’re at all interested, you can learn more right here.
Welcome to day 13 of the new year and day seven of the L.A. wildfires.
I know the words “thoughts and prayers” have gotten a bad rap these last few years… but I can’t help but use them anyway. Because, like the rest of the country, I am horrified by the ongoing devastation.
There have now been 24 officially recorded deaths with over 10,000 structures either damaged or outright destroyed by the various blazes. People have lost their livelihoods, their homes, their possessions, and their sense of security.
And while the brave firefighters working in and around L.A. have apparently made progress containing the especially destructive Eaton and Palisades fires, we’re now hearing there could be several windy days ahead that could shift this battle once again.
So, yes, my thoughts and prayers really do go out to the city and everyone affected by the tragedy. Setting aside all the politics and even the justified anger, I can only say that I truly hope the chaos ends soon.
Like I’m sure you are, I’ll keep monitoring the situation this week. In the meantime, here’s what else I was watching as of late…
TikTok Sees Its Day in the Highest Court of the Land
For one, the Supreme Court heard oral arguments on Friday concerning the fate of ByteDance’s TikTok.
Last spring, Biden signed a bill mandating that ByteDance either sell the social-media platform to an American entity… or be banned nationwide. The decision deadline is January 19, right before Donald Trump takes office.
But does the U.S. government have the right to ban an entire platform like this? That’s the question up for debate. And, frankly, it’s a huge one.
On the one hand, TikTok says, this is about free speech, one of our most sacred rights here in the U.S. In fact, considering how it’s the first Amendment to the Constitution, the company – that’s admittedly created, owned, and operated by the Chinese – has users and proponents that understandably argue it’s the most important.
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or of the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
Seems pretty clear, right?
Not so fast though, lawmakers say. And, problem is, they have a point, too.
Article One, Section Eight of the Constitution requires the government to “provide for the common defense and general welfare of the United States.” If allegations of ByteDance sharing American users’ data with the Chinese Communist Party is true – and they probably are – then doesn’t that give the U.S. every legal and moral right to act?
This intensely complicated debate is now up to the Supreme Court to decide. But, one way or the other, it’s bound to have enormous effects on U.S. operations, both personal and professional, from here on in.
Mark Zuckerberg Doesn’t Like Tim Cook (Good to Know)
There might be a new Big Tech rivalry brewing. This story might be far less impactful than the TikTok drama, but something tells me it’s still worth reporting.
Seemingly gone are the days of Jeff Bezos and Elon Musk tussling on the platform previously known as Twitter. Either I’m missing the dirt, or they’re just not attacking each other the way they used to.
But that doesn’t mean it’s all peace, love, and harmony among Big Tech CEOs. Not after what Mark Zuckerberg just said about Apple (AAPL).
Zuckerberg was featured on Friday’s episode of the Joe Rogan Experience, the world’s biggest podcast. Since I didn’t watch it, I don’t know who brought up Tim Cook first. All I know is Zuckerberg didn’t hold back once the topic was broached, making comments like:
[Apple has used its iPhone] platform to put in place a lot of rules that I think feel arbitrary. And [I] feel like they haven’t really invented anything great in a while. It’s like Steve Jobs invented the iPhone, and now they’re just kind of sitting on it 20 years later.
And:
So how are they making more money as a company? Well, they do it by basically… squeezing people and… having this 30% tax on developers by getting you to buy more peripherals and things that plug into it. You know, they build stuff like Air Pods, which are cool, but they’ve just thoroughly hamstrung the ability for anyone else to build something that can connect to the iPhone in the same way.
Cook and Co. haven’t issued any official statements on this commentary, last I looked. But as a loyal Apple product owner…
I have to say I love my iPhone. However, I can’t completely disagree with Zuckerberg.
Corporate Political Lines Are Being Drawn
So why do I think some billionaire squabbles are worth writing about? Well, one of the reasons Zuckerberg might have been so willing to trash talk Apple is purely political.
Meta Platforms (META), you see, is going all-in on Trump’s vision for America, from ending its diversity, inclusion, and equity (“DEI”) programs to bringing Trump ally and UFC CEO Dana White onto its board of directors. Zuckerberg also told Rogan – and his millions of viewers – that Facebook’s years of censoring conservative opinion was all the Biden administration’s fault, not his.
Tim Cook, meanwhile… and despite donating $1 million to Trump’s inaugural fund… is sticking with DEI. Like Costco Wholesale (COST), the company recently advised shareholders to vote against ending such corporate initiatives. So perhaps Zuckerberg thinks he can gain extra brownie points with the incoming administration by being about as staunch on Trump’s stances as possible.
Then again, there’s also a professional reason or two why he’d have it out for Apple, as he all but admitted on Rogan. According to him, Tim Cook’s corporate practices are costing META quite a lot. In fact, he says, if Apple would just stop applying “random rules” to how users and other companies interact with its products, Meta’s profits would double.
If true, then that’s quite the incentive to tear down a fellow CEO.
Plus, of course, there are some markets where the two tech giants compete, including with virtual headsets. Meta’s is called the Meta Quest, whereas Apple’s is the Vision Pro. Obviously, Zuckerberg is partial when he says:
I think the Vision Pro is… one of the bigger swings at doing a new thing that they’ve tried in a while. And I don’t want to give them too hard of a time on it, because we do a lot of things where the first version isn’t that good, and you want to kind of judge the third version of it. But, I mean, the V1, it definitely did not hit it out of the park.
Could this push Apple to invest differently? Will there be anything that changes politically to benefit one company over the other?
We shall just have to wait and see.
BlackRock Backs Down on ESG
Speaking of politics, BlackRock, the world’s biggest asset manager at about $11.5 trillion, made a huge announcement on Thursday.
After years of promoting ESG policies – and even stating in 2017 that he wants to “force” other companies to accept them – Blackrock says it will be leaving the Net Zero Asset Managers Initiative, or NZAMI.
NZAMI’s purpose is to eliminate greenhouse gas emissions by 2050, specifically through corporate-level business initiatives. With over 325 big-money organizations on board managing more than $57.5 trillion, it’s no small fry in the political and societal spheres. So BlackRock pulling out of it is a significant sign of the times.
The asset manager released a statement Thursday saying that this move:
… does not change the way we develop products and solutions for clients or how we manage their portfolios. BlackRock’s active portfolio managers continue to assess material climate-related risks, alongside other investment risks, in delivering for clients.
It’s just that:
… our memberships in some of these organizations have caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials.
Like I said, the times are a’changing.
The Jobs Numbers Take Jerome Powell to Task Again
Last but not least on my list, I wouldn’t expect more interest rate cuts anytime soon.
The December jobs report came out on Friday, showing the economy added 256,000 positions instead of the expected 165,000. It was also the highest amount recorded since March 2023.
Plus, the unemployment rate fell to 4.1%. So more to file under the “good news is bad news” category.
On Friday, U.S. indexes closed down 1.54% for the S&P 500, 1.63% for both the Dow and Nasdaq, and 2.22% for the Russell 2000. That was enough to take them all down for the full week as well… not to mention the year.
After digesting the jobs data, markets now seem to be pricing in no cuts until July. And some Wall Street analysts are openly wondering if that’s too optimistic.
Krishna Guha, vice chairman of Evercore ISI, wrote on Friday that this latest news “will raise concerns at an edgy Fed that the labor market might be reaccelerating after the election in ways that could lead to renewed tightening in labor market conditions.”
He sees the possibility of rates staying steady through June or longer. But even that might be overly optimistic.
Bank of America Securities U.S. Economist Aditya Bhave told her clients, “Our base case has the Fed on an extended hold. But we think the risks for the next move are skewed toward a hike.”
Something tells me that we need to be more cautious. My spidey sense tells me that we could be moving into recession territory soon.
Stay tuned for tomorrow’s Wide Moat Daily in which I will tell you why I believe a recession is imminent and how you must plan.
Regards,
Brad Thomas
Editor, Wide Moat Daily