Breakfast

Wall Street Breakfast: Texas Horror

Wall Street Breakfast: Texas Horror

Texas Horror

A mass shooting at Robb Elementary School in Uvalde, Texas rocked the country, with at least 19 children and two adults shot dead in the attack. 18-year-old gunman Salvador Ramos shot his grandmother before going to school with a handgun and possibly a rifle he had bought on her birthday, hinting at the social networks that “children should be careful” before the attack . Debate over gun control revived after the massacre, with efforts to change US gun policy rising and falling in Congress in the years following Sandy Hook.

Statement: “As a nation we must ask when in the name of God are we going to stand up to the gun lobby. When in the name of God we do what we all know in our guts needs to be done,” said President Biden in a televised address. . “I’m sick of it. We have to act. And don’t tell me we can’t have an impact on this carnage. I’ve spent my career as a senator and vice president pushing through common sense laws about guns. We can’t prevent all tragedies, but we know they work and have a positive impact. Gun manufacturers have spent two decades aggressively marketing assault weapons, what brings them the most and the biggest profit. For God’s sake, we must have the courage to stand up to the industry. It’s time to turn this pain into action.

While Democrats have repeatedly tried to pass new gun control measures, like universal background checks and a new ban on assault weapons, the restrictions have failed to creep in. in legislation. Last year, the House passed a pair of bills aimed at expanding background checks on gun purchases and closing the loophole for private and online sales, though it won’t was unable to clear the 60-vote filibuster threshold in the equally divided Senate. Strong Republican opposition derailed the measures, saying the laws would do little to prevent most of these tragedies and would undermine Americans’ constitutional right to bear arms. Instead, they’re advocating for safer school grounds and better tools to deal with a growing mental health crisis, as well as arming more law-abiding citizens and stopping guns from falling between kids. hands of criminals.

Moving : Fear of gun control drove gun shares higher in Tuesday’s post-trade session as some cut their gains. Associated stocks include Smith & Wesson (NASDAQ:SWBI), Sturm, Ruger (NYSE:RGR), Vista Outdoor (NYSE:VSTO), Sportsman’s Warehouse (NASDAQ:SPWH), AMMO (POWW) and Olin Corporation (OLN). (156 comments)

Fed Minutes

Any talk from the Fed these days has gone under the microscope as the central bank embarks on a tightening cycle in its fight against inflation. Just three weeks ago, the FOMC raised rates by 50 basis points for the first time since 2000, meaning May meeting minutes will be released later today at 2:00 p.m. ET. Investors will be watching especially for new details and talk from officials, who have pledged to raise borrowing costs until they have fully brought inflation under control.

On guard: References to “financial conditions” and change in language surrounding the projected path of inflation and risks in the Fed forecast. The speed and extent of monetary policy tightening, as well as potential sales of mortgage-backed securities and central bank balance sheet shrinkage. Meanwhile, Fed Chairman Jerome Powell once used the words “soft landing” and “soft landing” when referring to engineering the way out of the current inflation situation, but last week he referred to a “bumpy landing” which could lead to “some pain”. “

A series of 50 basis point rate hikes are now expected over the next few months, raising fears that the increases could push the world’s largest economy into recession. The signals of cooling came on Tuesday as new home sales fell nearly 17% M/M in April due to rising mortgage rates and house prices. It also makes markets much more volatile, with uncertainty translating into outsized losses and attempted rallies on Wall Street.

Remark: “A slowing economy doesn’t mean the Fed should shift from hawkish to dovish mode, but it does raise the question of how much a given level of rates slows activity,” noted Steve Englander. , Standard Chartered strategist. “If the economy is already below potential and reacting to rates from three to six months ago, the slowdown needs to go deeper. The path of rate hikes could be flattened while putting downward pressure on demand.” (2 comments)

Where’s the beef?

Wendy’s Stock (WEN) jumped 15% in after-hours trading on Tuesday after its largest shareholder Trian offered a potential acquisition of the fast-food chain. Trian Partners, which is led by famed billionaire investor Nelson Peltz, owns a total of 41.6 million shares in the company, or a 19.4% stake. Other potential strategic moves could include a business combination (such as a merger, consolidation, takeover bid, etc.) or a transaction that would result in the acquisition of control of the business.

Quotation: “Wendy’s was one of America’s most beloved brands, but the company lost its way after founder Dave Thomas passed away,” according to a listing on Trian’s portfolio page. “Now the largest shareholder with three seats on the board, Trian helped implement an operational turnaround focused on improving and growing the flagship Wendy’s brand.”

Wendy’s will “carefully” consider any proposal submitted by Trian, with the aim of “maximizing value for all shareholders”. The company’s worldwide same-store sales rose 2.4% in the first quarter, but net income fell 10% to $37.4 million, or $0.17 per share. It has also recently tried to drive traffic by improving its breakfast menu offerings and increasing its number of locations, but the actions have stumbled 32% this year, rivals McDonald’s (MCD) and Burger King (QSR).

Long story: Trian and Peltz have been Wendy’s investors since 2005 and pushed the company to spin off the Tim Hortons brand in 2008. Shortly after, Triarc Cos., Peltz’s investment arm, bought Wendy’s for $2.2 billion. dollars, combining the burger chain with Arby’s. In 2011, Wendy’s sold the majority of Arby’s to a private equity firm for $130 million, and since then Trian and Peltz have attempted to implement several operational turnarounds of the core Wendy’s brand. (8 comments)

Russian default

The US Treasury Department does not plan to renew a license that allows Russia to pay its creditors through US banks, nearly guaranteeing Russia’s first foreign debt default since the Bolshevik Revolution. Until now, the Kremlin has used JPMorgan (JPM) and Citigroup (C) as channels to pay its bonds, but the provision that allows it to do so will expire at midnight. Note that Russia defaulted on its domestic debts in 1998, which led to a wave of inflation and a devaluation of the rouble, but the economy was able to recover quickly thanks to rising oil prices and the international aid.

Instantaneous: Institutional investors holding Russian debt likely sold their holdings ahead of tonight’s deadline, according to attorney Jay Auslander, who has previously litigated similar crises like the one in Argentina. The entities still holding the bonds are either distressed debt investors or people poised to take legal action in the next few years. Russia has also prepaid its two bonds which are due this month, so expect a default towards the end of July when the grace period for the bonds expires.

Some don’t understand the strategy here because sanctions already prevent Russia from borrowing in international markets. Moreover, much of the economic pain that a default can bring to a country’s financial sector has already happened in Russia and it seems that the only ones to be affected in this situation would be the holders of US bonds. Others point out that a sovereign default could increase Moscow’s borrowing costs, put pressure on its banking system and hurt long-term economic growth.

Treasury Secretary Janet Yellen: “If Russia is unable to find a way to make those payments and technically defaults on its debt, I don’t think that really represents a significant change in Russia’s situation,” she said. told reporters last week at a meeting of G7 finance ministers. “They are already cut off from global capital markets, and that would continue.”