The final episode

MARKETS

  • Trade: The U.S. House approved the USMCA trade deal, or Nafta 2.0. It now heads to the Senate for ratification.
  • Markets: We searched for a Popeye emoji to use here, but apparently they haven’t made one of him yet. U.S. equities hit all-time highs...again.
  • Bonds: Companies in developing countries sold a record $118 billion of high-yield dollar bonds in 2019, reports the WSJ. China accounts for about half.

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ENTERTAINMENT

Disney's Battling the Force

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With today’s release of Star Wars: The Rise of Skywalker, Disney is poised to have seven movies gross $1+ billion at the global box office this year. But the film, the ninth and final installment of the Skywalker saga that began in 1977, may be a bittersweet ending.

Try competing with the favorite child

Disney acquired Lucasfilm in 2012 for $4.1 billion. While it’s grossed almost $5 billion in ticket sales off the studio’s movies, another Disney acquisition—Marvel—has brought in more than $18.2 billion since joining the family in 2009 (with far more movies, of course).

  • 2015 and 2016 Star Wars installments were box office winners, but 2017 and 2018 films disappointed.
  • Also around 2017, kids got tired of Chewie toys.

It’s not just the movies. Earlier this year, Disney opened the Star Wars: Galaxy’s Edge attractions in California and Florida. So far, they haven’t gotten the foot traffic the company was expecting.

What happened?

  • Moving too fast, tumultuous leadership, expensive reshoots, and delays, according to The Economist. CEO Bob Iger acknowledged that Disney was hasty and said it’ll hold off on more Star Wars movies for at least three years.
  • Marvel, in comparison, can do nothing wrong. Just one sequel fell short of outperforming its predecessor at the box office, and the franchise has gained far more traction with moviegoers in China.

This is a first-world-company problem

Over the last decade, Disney has made 25 $1 billion films and is the only studio to release not one, but three $2+ billion films.

And for all the disappointments, the latest Star Wars installments offer a new hope with compelling and diverse casts. Plus, the franchise has a hit TV series on Disney’s new streaming platform, Disney+.

  • The platform is expected to have 20 million subscribers by the end of the year, according to Credit Suisse...1 million of which it peeled away from Netflix.

Looking ahead...after a busy year, Disney will ride some well-earned momentum into the 2020s. Then, it’s a few years overdue in finding a successor to 14-year CEO Bob Iger, who arrived in size 11’s and will leave with 16.5 double wides.

AUTO

$420, Here We Come

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Tesla’s stock is soaring to all-time highs this week. Closing at $404.04/share yesterday, it’s within striking distance of $420, the target set by CEO Elon Musk in August 2018, when he tweeted he was considering taking Tesla private.

Everyone laughed at him then, but now they’re secretly wishing they owned Tesla stock. Aside from two shattered truck windows, this quarter has been a huge success for the electric vehicle maker—it’s on track for its best quarterly stock gain in six years.

What’s fueling the rally?

  • Tesla's considering cutting the price of its China-built Model 3 sedans by 20% or more to spur demand, per Bloomberg.
  • Dan Levy of Credit Suisse—a noted Tesla bear—grumpily admitted the company was leading in battery technology.
  • Overall optimism about the company’s prospects in China, where it built a Gigafactory basically overnight.

Zoom out: Tesla shares have increased nearly 60% since it reported a surprise Q3 profit in October. With a market cap of $72.8 billion, Tesla’s far more valuable than other American automakers like GM ($53.2B) and Ford ($37.4B).

PHARMA

Healthcare: Tricky Spelling, Trickier Ethics

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Yesterday, the pharma company Novartis rolled out a lottery program that will provide the world’s most expensive medicine, Zolgensma, for free in countries where it hasn't been approved.

  • Zolgensma is a gene therapy that treats spinal muscular atrophy, an inherited disease that causes loss of muscle control (usually in babies) and is often fatal. The one-time treatment costs $2.1 million.

How it works: Doctors will be able to submit requests for the treatment, and patients will be entered into a drawing every two weeks. AveXis, the Novartis unit handling the program, said it plans to award up to 100 free doses.

Patient groups objected to the move, arguing the ethics of Novartis's lottery are questionable. “They are making patients compete,” said Kacper Rucinski, cofounder of TreatSMA.

  • Critics think Novartis should have a system that prioritizes the neediest patients or countries instead of a lottery.

Looking ahead...doctors can submit requests starting Jan. 2, and drawings will begin Feb. 3.

FINANCE

A Leak in London

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Yesterday, the Bank of England disclosed that a third-party supplier third-party supplied an audio feed of Gov. Mark Carney's press conferences to some investors seconds before it was made available to the general public.

  • The U.K.’s financial regulator, the Financial Conduct Authority (FCA), said it will investigate the situation.

What we know: ^^, plus the BofE said it disconnected the supplier’s access.

What we don’t: The bank didn't reveal the identity of the supplier. And the FCA didn’t say if any trading was done based on the leaked information.

Why it matters: A single word from a central banker's mouth can move global markets. That’s why the finance world is Drake-sensitive to information being released ahead of schedule, even if it's just seconds.

  • In a 2015 case, U.S. prosecutors and regulators claimed that a cadre of traders and hackers swindled $100+ million by sneaking peeks at corporate news releases.

Zoom out: Other central banks are working to prevent similar issues. In September, the European Central Bank came out with an audio feed with less delay. The Fed said yesterday it would stream events directly and through news organizations.

QUIZ

The Last Quiz of the Decade

We never thought this day would come, but...here it is. This is the last news quiz of the decade, since (spoiler alert) next Friday’s newsletter will be a special edition Brew. As always, thanks for playing along.

1. Fill in the blank: Boeing said it will temporarily suspend production of the _____.

2. One country has shut off the internet 134 times in 2018, making it easily the shutoff-happiest government in the world. What’s the country?

3. Which sports team won Sports Business Journal’s “Franchise of the Decade” award?

4. Which Christmas song hit No. 1 on the Billboard Hot 100 after 25 years?

  1. “All I Want for Christmas Is You”
  2. “Jingle Bell Rock”
  3. “Last Christmas”
  4. “Be Claus I Got High”

5. What street in New York City was named the most expensive street in the world? Hint: It’s an odd number.

Answer: 1) 737 Max 2) India 3) Golden State Warriors 4) “All I Want for Christmas Is You” 5) 57th Street aka Billionaires’ Row

WHAT ELSE IS BREWING

  • The New York Times obtained a huge file of location data that’s “by far the largest and most sensitive ever to be reviewed by journalists.”
  • Goldman Sachs has reportedly been discussing a $2 billion fine with the U.S. Department of Justice over its role in Malaysia’s 1MDB scandal.
  • Rite Aid stock surged more than 40% after an earnings surprise.
  • Airbnb isn’t subject to rules covering French real estate agents, the EU’s highest court ruled. Airbnb 1, hotel industry 0.
  • The Senate passed a bill that strengthens enforcement of robocalls. President Trump is expected to sign it.

FRIDAY PUZZLE

Inside each of the following sets of words, there is a pair of smaller words. By putting "&" between them, you'll make a familiar phrase.

Ex. "Thighbone/Swallowtail" = "high & low"

  1. Skyrocketing/Trolleyman
  2. Thermometer/Apoplexy
  3. Delaware/Bordering
  4. Surprised/Trashiness
  5. Throughout/Stumblebum

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FRIDAY PUZZLE ANSWER


1. Rock & Roll
2. Mom & Pop
3. Law & Order
4. Rise & Shine
5. Rough & Tumble

 

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