💸 Apple is a profit-gushing behemoth, and it’s no wonder why. I have four of their (not-so-cheap) devices within reach while typing this, including my computer.
I’ll seemingly be paying $2.99 monthly forever for iCloud storage to, well, store photos I’ve taken over the last decade with Apple products. America’s corporate gem relies heavily on one thing, though: iPhones.
And now Apple is unveiling a major new gadget, the Vision Pro headset 🥽
We’ll find out in 2024, when the headsets go on sale, whether augmented reality is worth the hype. It’ll either be a huge flop or a diversifier for Apple’s revenues & incomes, which we break down in the Chart(s) of the Day below.
If $3,500 is burning a hole in your pocket, please do buy it and let us know your thoughts.
— Shawn
Here’s the rundown:
Today, we'll discuss the three biggest stories in markets:
Golf’s “Civil War” comes to an end
The SEC takes on Coinbase and Binance
Geopolitical pressures push Sequoia Capital to split up
All this, and more, in just 5 minutes to read.
POP QUIZ
BROUGHT TO YOU BY
Have an opinion on an event? Trade directly on its outcome with Kalshi - a federally regulated exchange that’s backed by Sequoia Capital, Y Combinator, Charles Schwab, and other top investors.
Kalshi enables users to trade directly on the outcome of events through a new asset class: event contracts.
Event contracts allow investors to take Yes/No positions on events such as whether the U.S. will default on its debt, whether the Fed will hike rates in June, what Biden’s approval rating will be next month, and much more.
We Study Markets readers who sign up here will get $15 in credit.
CHART(S) OF THE DAY
IN THE NEWS
⛳️ PGA Tour Announces Surprise Merger With Saudi-Backed Rival LIV (CNBC)
We seldom cover golf (maybe the first time?), so when we do, it’s big news: The renowned PGA Tour and its up-and-coming rival, LIV Golf — started in 2021 and backed by Saudi Arabia — are combining in a “shocking” merger.
One Bloomberg reporter called it the “end of the Civil War in golf.”
What happened? The Middle East kingdom has thrown big money behind its golfing league amid other efforts to diversify its economy away from oil and change its reputation for human rights abuses, what some see as “sports washing.”
The result was an epic feud that captivated fans and divided players. LIV laid out lucrative contracts for players, prompting the PGA to ban those who participated in LIV tournaments.
Still, the LIV attracted big names, notably Dustin Johnson, Phil Mickelson, and Bubba Watson. But the PGA Tour has billions of dollars in broadcast deals with numerous corporate sponsors ranging from Rolex to FedEx.
The deal combines the PGA Tour and LIV Golf’s businesses and rights into a yet-to-be-named company, including DP World Tour (aka the European PGA Tour). Saudia Arabia’s sovereign wealth fund is reportedly prepared to invest billions into the new entity.
Why it matters:
LIV sued the PGA tour last year over “monopolistic behavior” in restricting players from participating in rival leagues. At the same time, the PGA countersued, alleging that LIV illegally pressured players to break existing contracts. Now, the deal would end all pending litigation, which put fortunes on the line for golf leagues, TV networks, advertisers, and athletes.
PGA Tour Commissioner Jay Monahan, who would be the chief executive of the new organization, commented: “After two years of disruption and distraction, this is a historic day for the game we all know and love.”
The merger faces challenges, though. The Justice Department has been investigating the PGA Tour over its clashes with LIV, leaving the door open for an antitrust review.
Monahan added, “There’s much work to do to get us from a framework agreement to a definition agreement,” but one thing is clear: The PGA Tour “is supercharged for the future.”
⚖️ SEC Sues Coinbase for Breaking Market Rules (NYT)
On Monday, the Securities and Exchange Commission (SEC) came down hard on Binance and CEO Changpeng Zhao for U.S. securities violations. On Tuesday, the regulator came after its next big player in the crypto space: Coinbase, one of the largest and most well-known cryptocurrency trading platforms. It was formed in 2012 and went public in 2021.
The SEC alleges that Coinbase violated rules requiring it to register as an exchange and be overseen by the federal agency. It also alleges Coinbase traded at least 13 crypto assets that are securities and should have been registered with regulators before they were issued.
Usually, registration involves providing investors with financial statements and detailed risk disclosures reviewed by regulators. The list of assets includes tokens called Solana, Cardano, and Polygon. The SEC also says Coinbase made those tokens available for trading as securities, so they must register as an exchange, brokerage, and clearing agency.
“Coinbase has elevated its interest in increasing its profits over investors’ interests, and over compliance with the law and the regulatory framework that governs the securities markets and was created to protect investors and the U.S. capital markets,” per a Manhattan federal court filing.
Tuesday’s lawsuit marks the end of a two-year effort by SEC Chair Gary Gensler to shift his agency’s focus in crypto toward the online platforms where assets are traded. While thousands of cryptocurrencies exist at any given time, just a handful of exchanges serve as access points to the crypto market for most investors.
Why it matters:
The country’s top securities regulators filed the lawsuit after suing Binance, the world’s biggest cryptocurrency trading exchange, for mishandling customer funds and lying to American regulators and investors about its operations.
On CNBC Tuesday, Gensler said: “These trading platforms, they call themselves exchanges, are commingling a number of functions. We don’t see the New York Stock Exchange operating a hedge fund.”
In a statement earlier, Gensler said: “We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions.”
In response, Coinbase’s chief legal officer said: “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance.”
Adding further, “The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual.”
🧨 Geopolitical Tension Pushes Sequoia Capital to Split up (Bloomberg)
Score one point for team “deglobalization” — those arguing that the world economy is becoming more and more fragmented. Put differently, companies are finding it difficult to navigate geopolitical tensions between the U.S. and China, and some are opting out.
The venture capital titan Sequoia Capital is dividing itself into three parts, splitting up its U.S. and China operations.
In a press release, the firm said, “It has become increasingly complex to run a decentralized global investment business. This has made using centralized back-office functions more of a hindrance than an advantage.”
Sequoia expects to operate its spun-off firms under independent brands within the next year. One will focus on China, another on the U.S. and Europe, and the third on India and Southeast Asia.
Sequoia’s China division is unique, garnering access to the country’s markets years before its competition, and now manages about $56 billion. It invested early in Bytedance, TikTok’s parent company, and JD.com, China’s largest retailer.
Neil Shen, the founder of Sequoia China, told the Financial Times that conversations about splitting the businesses “have been evolving over the last two to three years” as the firm’s geographically-focused entities have “much less in common now.”
Why it matters:
Regulatory scrutiny is heating up. President Biden intends to sign an executive order limiting investment in key parts of China’s economy by American businesses, with National Security Advisor Jake Sullivan calling it “no secret” that the government is devising rules restricting investment flows into China.
Known for its early-stage investments into Apple, Google, Airbnb, Instagram, and several of China’s own big internet companies, limits on investments into sensitive, emerging tech is quite troublesome for Sequoia’s business model.
Earlier this year, Sequoia began allowing independent U.S. national-security experts to vet its China division’s potential investments in areas like artificial intelligence and quantum computing — just one illustration of how geopolitical tensions crept into investment decisions.
The split ends one of the most successful U.S.-China investing alliances, where billions of dollars worth of capital, raised largely from U.S. endowments and pension funds like California’s Public Employees’ Retirement System (CalPERS), seeded China’s blossoming tech industry while redirecting profits to Sequoia’s American home base. That dynamic, involving Sequoia at least, will no longer exist.
MORE HEADLINES
🏦 World Bank projects weak global growth amid rising interest rates
🛬 Airlines expect to make $10 billion this year despite economic slowdown
💊 Merck challenges U.S. government’s new powers to negotiate drug prices
TRIVIA ANSWER
See you next time!
That's it for today on We Study Markets!
Enjoy reading this newsletter? Forward it to a friend.
Was this newsletter forwarded to you? Sign up here.
Keep an eye on your inbox for our newsletters on weekdays around 6pm EST and on weekends. If you have any feedback for us, simply respond to this email.
You can also leave your comments/suggestions/feedback anonymously here.
How would you rate today's newsletter?
All the best,
P.S. The Investor's Podcast Network is excited to launch a subreddit devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more!
Join our subreddit r/TheInvestorsPodcast today!
© The Investor's Podcast Network content is for educational purposes only. The calculators, videos, recommendations, and general investment ideas are not to be actioned with real money. Contact a professional and certified financial advisor before making any financial decisions. No one at The Investor's Podcast Network are professional money managers or financial advisors. The Investor’s Podcast Network and parent companies that own The Investor’s Podcast Network are not responsible for financial decisions made from using the materials provided in this email or on the websit/
