A Jacked Dollar

Good morning and happy Monday.

Traditional cable had its rope-a-dope moment with overdog streamers this weekend. 

On Friday, as part of a broader push into live programming, Netflix livestreamed a high-profile boxing match between YouTube personality-turned-boxer Jake Paul and the long-retired former undisputed world heavyweight champion Mike Tyson. The match wasn't all that exciting — the 58-year-old Tyson's legs look more like glass than iron, after all — and Paul won by unanimous decision. Still, Netflix announced a record 60 million households watched the event, with nary a mention of outages, buffering, and other technical issues that have been widely reported. If this is the future of TV, bring back rabbit ears. At least we had something to fidget with even if we never could quite catch a clear signal.

For all of today's political currencies, and maybe even because of them, the dollar is growing mightier and mightier. 

The US greenback has appreciated 2.65% against a basket of its developed market peers since the election on November 5 and is at a two-year high. With expected tax cuts and tariffs from the incoming Trump administration set to rewire growth and trade, the tectonic shifts already felt by currency and commodity markets could soon shake up the global economy at large.

"Utmost Urgency"

President-elect Donald Trump wants to extend tax cuts for individuals and reduce levies even more for corporations. That, along with a run of deregulation, could pad profits at American companies and boost the country's economic growth, already outperforming its sluggish peers, according to the IMF.

He also wants tariffs on imports and intends to shrink the labor pool by reducing migration, both of which economists say could have inflationary outcomes, making the Federal Reserve less inclined to reduce interest rates. Higher rates make dollar-denominated securities more attractive, which could further boost the Greenback. Policymakers around the world are already preparing for the consequences:

• The euro has slumped to a one year low of $1.05 and Deutsche Bank and JPMorgan have said dollar parity, a psychological threshold not seen in two years, is in the cards. While a lower euro might be good for German manufacturers, they could still have to contend with US tariffs just as the country teeters on the brink of recession and its governing coalition has collapsed.
• Things still aren't as hectic as in Japan, where the top currency diplomat, Atsushi Mimura, has called the yen's near-10% depreciation against the dollar this year "drastic," adding policymakers are "closely watching developments on the currency market with utmost urgency" and are willing to intervene. A weaker yen would risk eroding purchasing power and, with it, consumer confidence, threatening to push Japan back to the brink of stagflation.

Race to the Bottom: Officials in emerging power India told Bloomberg they're willing to weaken the rupee to remain competitive with a weakened Chinese yuan, if Trump pushes through his planned 60% tariffs on the Middle Kingdom. One thing's for sure, wherever you live, don't count on your purchasing power being the same this time next year.

Written by Sean Craig

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It's got to be at least a yellow flag whenever 2008 — the height of the Great Recession — is your point of reference, no? 

At the end of the third quarter, trading assets at US banks crossed $1 trillion, approaching a record and scoring that ultra-rare fourth comma for the first time since 2008, according to a Financial Times analysis published this weekend. But does that leave Wall Street exposed to 2008-sized risks? That's the trillion dollar question.

Partying Like It's 2008

Wall Street's trading accounts last topped $1 trillion in stocks, bonds, and other assets in the first quarter of 2008. And no one needs a reminder of what happened next. As markets cratered and DC ushered in a new spate of regulations, assets in trading accounts, naturally, fell. By 2017, they reached a bottom of around $550 billion, according to the FT, which viewed data from industry tracker BankRegData.

But assets slowly started accumulating afterward, before taking a big leap this year as banks allowed piles of cash to flow back to their trading accounts and invested mostly in equities and asset-backed securities linked to consumer credit card debt and auto loans. "It is a bet on financial assets, rather than say lending or the economy, because that's where they see the returns," BankRegData's Bill Moreland told the FT.

That's enough to make any taxpayer who remembers Wall Street bailouts queasy. But the industry insists that its risk factor remains far lower than 2008 levels, pointing to a few key figures:

• Trading assets account for just 4% of the industry's total assets, BankRegData show, compared with around 8% in 2008.
• Meanwhile, total value at risk — a.k.a., the estimate of how much a bank could lose in a single day — similarly stands at roughly half the level it did back in 2008. In other words, thanks to the Dodd-Frank Act's banking regulations, the next financial crisis may only be half as painful.

Concentration Nation: Unsurprisingly, the vast, vast, vast majority of the $1 trillion in trading assets is held by just a handful of banks. You know the names: Wells Fargo, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley, the last two of which generate more income from broad investment banking activities than lending. And then there's JPMorgan, which claimed a whopping $506 billion in trading assets at the end of the third-quarter, up from $329 billion at the end of the beginning of the year, according to FDIC data.

Written by Brian Boyle

Consider Warner Bros. Discovery the new Sixth Man of NBA media.

The longtime broadcast partner is set to lose out on rights to air regular season and playoff games on TNT starting next year, but, according to sources that spoke with The Wall Street Journal this weekend, WBD has secured the right to use NBA content to make new shows for the next decade. And all it took was one big breach of contract lawsuit.

Jump Ball

In July, the NBA announced it had secured a spate of media rights deals worth some $80 billion over the next 11 years with three broadcast partners: Disney (to air games on ABC and ESPN), Amazon (to air games on Amazon Prime Video), and Comcast's NBCUniversal (to air games on both the NBC broadcast network and streamer Peacock).

That left WBD, which has been airing NBA games on TNT since 1989, sulking on the sidelines. And illegally so, WBD quickly argued, claiming that the league violated its right to match any competitor offer (WBD claimed it matched Amazon's offer for a package of 66 regular season games per year plus some post-season play). But before the court case kicked off, the two sides opted for compromise:

• In addition to rights to NBA footage to keep making new shows in the US and abroad, WBD scored the rights to keep using NBA content for digital platforms such as Bleacher Report and House of Highlights, per the WSJ.
• NBA content is massively popular on social media. At the end of the 2022-23 season, the league announced that its in-house @NBA accounts drew 18 billion views across platforms, more than any other pro sports league.

The two sides are expected to announce the deal, to last 11 years, early this week, sources told the WSJ.

Inside Scoring: WBD wasted no time charting its game-free NBA future. Separately this weekend, the company reached a deal to license its highly acclaimed "Inside the NBA" studio show to Disney's ESPN, starting next season. (Licensing content is becoming a bit of a trend at the network; it currently licenses The Pat McAfee Show, the multi-hour daytime program from the NFL kicker-turned-media personality). So good news, fans of Chuck, Shaq, Kenny and Ernie: You won't have to bid farewell just yet. In related news: NBC somehow hasn't locked down the rights to bring back John Tesh's "Roundball Rock," the iconic theme song that powered the network's 1990s NBA broadcasts.

Written by Brian Boyle

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