Market Scorecard
Yesterday, US markets ebbed and flowed but ended the trading session with modest losses. That was not a bad outcome considering that US consumer-price inflation came in at 9.1%, the highest read for a very long time. The bulls and bears were in a tug-o-war, with some saying that this marks peak inflation, but others convinced the Fed will continue with aggressive tightening.
In company news, Unity Software (NYSE:U) fell 17% after the company agreed to buy app-maker IronSource, which closed up 47% on the news. Elsewhere, Delta Air Lines (NYSE:DAL) shares dropped 4.5% despite the company reporting strong demand and making a decent profit during the second quarter.
After what felt like a long session, the JSE All-share closed down 1.52%, the S&P 500 fell 0.45%, and the Nasdaq slipped by 0.15%.
One Thing, From Paul
Everyone's been going mad about US inflation today, but I'm tired of discussing global macro issues! Here's something nice to look at, to distract you from that dreadful topic.
The chart below was made by a user on Reddit called Genuine Impact. It's on a thread called r/dataisbeautiful. It shows how Microsoft (NASDAQ:MSFT) makes its money, and just how wonderfully profitable it is. If that picture below is not clear enough, click through here to a larger version. Enjoy!
Byron's Beats
Netflix (NASDAQ:NFLX) are launching an ad-supported service and they have picked Microsoft as their partner. You might not have known this, but Microsoft made $10 billion in advertising sales last year, mostly through Xandr, an ad service business they bought from AT&T.
According to Bloomberg, Netflix wants to launch the service as soon as possible which is why they have outsourced the project to Microsoft. There could also be potential synergies with Microsoft's big gaming business; that's another expansion area for Netflix.
Netflix currently uses AWS for streaming content directly to you from the cloud. The algorithms that feed subscribers their shows will be entrenched at AWS so I imagine that relationship will stand strong. If they also used Amazon (NASDAQ:AMZN) for advertising, they would probably become overly reliant on that service provider.
I see Netflix's advertising pivot as a positive, and of course, this is also good news for Microsoft.
Michael's Musings
The technological advancements we enjoy today are the fruits of the hard work done by generations before us. As Sir Isaac Newton said, "If I have seen further it is by standing on the shoulders of giants." The great thing about technological progress is that it's exponential.
An interesting example is Nvidia (NASDAQ:NVDA) using AI to create more efficient chip designs, and then using those chips in AI computers. Effectively it is a self-reinforcing cycle. The better the chips, the more effective the AI, which creates even better chip designs.
Here is a link from Nvidia explaining the process - Designing Arithmetic Circuits with Deep Reinforcement Learning.
Bright's Banter
When the US Supreme Court overturned a ban on sports betting in 2018, the gambling floodgates burst wide open. That year in June, US sports gamblers wagered only $310 million and all of those bets were at on-site casinos, like the ones in Nevada.
Since then, the industry has expanded beyond location-based betting, onto the internet, where growth has exploded! By 2021 sports betting was legalised in many more states, bringing the total to 30, including Washington DC.
In October 2021, sports gamblers placed $7 billion in bets, more than 20 times the amount just three years before, and 84% of those bets were placed online. It's likely that the vast majority are placed by young men. What could go wrong?
Signing Off
Asian markets are edging higher this morning, but not by much. South Korea is steady, while Japan, mainland China, and Hong Kong climbed at the open thanks to a rise in tech stocks.
US futures are down, for now. The Rand is trading at R17 to the US Dollar. That means that it's also trading at R17 to the Euro.
Let's see how it goes, these are uncertain times. We are feeling positive.