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April 25, 2022
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Good morning.

Investors are celebrating in Europe today after Emmanuel Macron became the first French president to win reelection in 20 years. The centrist Macron defeated Marine Le Pen, a far-right nationalist who has championed dropping the euro and reestablishing hard borders.

Ludovic Labal, manager of the Strategic Europe Quality Fund at Eric Sturdza Investments, predicted “a Black Monday” with Europe’s Stoxx 600 falling 6% if Le Pen had won. And, if there’s one thing investors hate, it’s Toulouse.
Morning Brief
180 companies will report their quarterly results this week, four of them stand out.
Vladimir Putin claims Russia’s economy is doing just fine… but don’t take his word for it.
The concert industry is making a strong comeback.
Markets
A Third of the S&P 500 Will Report Earnings This Week
It’s put-up-or-shut-up week on Wall Street, also known as earnings season. Just shy of 180 companies on the S&P 500, worth close to half of the blue-chip index’s market value, will report results by the time the closing bell tolls on Friday.

After Netflix’s first-quarter horror show last week, the eyes of investors will be glued to results from Apple, Microsoft, Amazon, and Alphabet — tech titans worth a combined $8 trillion, or a fifth of the S&P 500. They might well make it over a very low bar.
Deflate Expectations
Heading into a crucial earnings week, there is plenty of anxiety already priced into valuations on Wall Street. The S&P 500 is down 11% year-to-date, reflecting the expectation of 10 rate hikes over the next 18 months in what some are calling a too-little-too-late battle against red-hot inflation. But against an ominous macroeconomic backdrop, corporate earnings have actually held in there:
A promising 78% of the 99 S&P 500 companies that have reported first-quarter results so far have beat analysts' expectations.
This year’s average “beat” rate easily eclipses the historical average of 66% of overachievers since 1994. 
This week, big tech is stepping up to the plate with a unique combination of tepid expectations (which some analysts say are begging to be blown away), and regulatory headwinds clouding their long-term outlook. After a 35% jump in global digital advertising revenue in 2021, Alphabet's earnings are expected to fall 0.7%. Analysts see Apple earnings climbing a meager 2%. Brian Belski of BMO Capital Markets explained to the WSJ: “Technology companies have a free pass right now, because the sector’s down.”

Next Hurdle Up: Big Tech firms are also staring down new regulatory pressure that could dole out billions in penalties. European policymakers agreed over the weekend to reforms that will let regulators fine online platforms with 45 million or more EU users up to 6% of their global annual revenues if they fail to crack down on illegal or harmful content. Facebook-owner Meta, based on 2021 revenue, could be fined up to $7 billion.

Stateside, former President Barack Obama last week called on the US to crack down on disinformation by reforming a law that protects online platforms from liability for user content. Should make for lively earnings calls. 
 
Global Economy
Vladimir Putin Says Sanctions Haven’t Hurt; Russia’s Economy Says Otherwise
It’s hardly news that one should take every word out of the mouth of Vladimir Putin with a grain of salt. Thus, last week, when he proclaimed that Western sanctions against Russia — what he called “an economic blitzkrieg” — had failed, most economists reached for a value-size salt shaker.

The latest figures suggest Putin’s bluster is the bluff of a mostly toothless bear.
Nothing to See Here
A few days ago, Russian authorities abruptly suspended the publication of statistics on the country’s debt, trade, and oil production. The Bank of Russia cut the amount of data local banks have to disclose and stopped publishing its foreign-debt payment schedule, a slightly sensitive topic given the country is teetering on the brink of default. The Federal Assembly, controlled by the pro-Putin United Russia party, is fast-tracking a bill to ban lenders from sharing data abroad.

In total, the actions amount to what is essentially a cover-up to mask the increasing toll of unprecedented sanctions levied against the nation:
Russia’s Ministry of Economic Development reported that the 17.5% annual inflation in Russia as of April 8 was the highest since 2002. By comparison, the International Monetary Fund expects consumer prices in developing countries to increase by 8.7% in 2022. 
The Mayor of Moscow said his city alone will face the loss of 200,000 jobs as a result of foreign companies pulling out of Russia. The country's failure to service its dollar bonds — which S&P has already ruled a default — will hamstring its ability to raise debt for years. 
Russia does sport one trump card, at least for the moment. “As long as Russia can continue to sell oil and gas, they will muddle through this,” Michael Alexeev, an economist at Indiana University, told the Associated Press. But even Russia’s oil and gas revenues — which account for 45% of the federal budget — are waning.

Gas Running Out of Steam: Russia still makes $850 million a day from oil and gas sales to Europe, but many countries are now rapidly shifting to other sources. Russian refiners are pumping the brakes on processing all that pumped crude, taking 1.7 million barrels of production per day offline as of the week of April 8, because the country can’t find enough buyers, according to S&P Global Commodity Insights. The International Energy Agency forecasts nearly 3 million barrels in Russian production per day will be turned off starting next month.
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Live Events
Concert Tickets Are in High Demand, and Prices Are Soaring
The Magical Mystery Tour is dying to take you away, Paul McCartney wrote and sang in the title track of The Beatles’ 1967 concert film and LP. If the song were written today, The Magical Mystery Tour would be dying to take away a good chunk of your last paycheck, too.

Whether it's Billie Eilish fans catching the young phenom’s very first show in their hometown arena or Billy Joel fans seeing the Piano Man for the hundredth time, prices for tickets to see the world’s biggest artists are rising much faster than broader inflation.
On the Road Again
To paraphrase folk-rock singer Don McLean, March 13, 2020 — the day the Covid pandemic was declared a national emergency — marked the day the music died. Pandemic restrictions knocked the concert industry clean from its high horse: the average take per show had doubled over the prior decade for the top 100 North American tours, and would have reached just shy of $1 million in 2020, according to concert trade magazine Pollstar.

When Covid restrictions waned in the second half of 2021, fans flooded back to venues. Ticket prices rose as much as 70% compared to 2019, driven by fandom as much as inflation. Feverish demand from music fans and the lucrative (and detested) scalper market that feeds off them have pushed ticket prices to Rocky Mountain highs:
Ticket prices increased 11% in 2021 over 2019, according to Live Nation, as concert promoters raised prices to try and capture revenue that would otherwise go to resellers on sites like Stubhub. Entry to one of the top 10 tours is up over 20%.
Raising prices hasn't deterred fans. Concert ticket sales are up 45% through mid-February of this year, compared with 2019. “The industry is trying to right the ship and get ticket prices more in line with natural supply and demand,” Jay Moss, Wasserman Music’s senior vice president, told The Wall Street Journal.
Bennie and the Debts: The average ticket price of a live show has increased from $131 in 2019 to $168 today for Elton John, from $208 to $227 for The Eagles, and from $70 to $118 for the aforementioned Billie Eilish, according to Pollstar.
Extra Upside
Get them fast: Apple is pulling down tons of old apps from the app store.
Twitter is nearing a deal to sell itself to Elon Musk, according to Reuters.
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Disclaimer
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