Happy Monday!

📝 Focus

• Barbenheimer Blowout!

📊 In the Markets

• X Marks the Spot (Twitter)

• Amex Marks the Spot

📖 MoneyFitt Explains

🎓️ The Dow WHO and Nikkei WHAT?

📝 Focus

Barbenheimer Blowout!

Cinema going still lags behind pre-pandemic levels, and Hollywood is grappling with writer and actor strikes. But Warner Brothers' "Barbie" and Universal Pictures' "Oppenheimer," as opposite as two movies can get, debuted simultaneously last weekend and led domestic ticket sales for all movies to top $300 million in the US and Canada for just the fourth time in history, vastly outperforming projections. "Barbie" took in more than half of that (grossing more than Nintendo's hit Super Mario Bros Movie ... and all the Marvel movies this year) while "Oppenheimer" scooped up $80.5 million (a lot for a serious, R-rated movie.) Adding in international sales, “Barbie” earned $337mn, with “Oppenheimer” making $174mn. Universal Pictures is owned by Comcast through its wholly-owned subsidiary NBCUniversal.

..... ▷ Warner Brothers is part of Warner Brothers Discovery, and Barbie remains Mattel's most iconic and important product, generating 49% of the company's net revenues and 53% of the company's operating profits in 2022. Merchandising and collabs for @barbiethemovie have been in overdrive, with Mattel inking more than 100 brand collaborations, including Gap and Bloomingdale’s with Barbie-branded jackets and T-shirts, a 1956 Chevy Corvette for the Xbox, Barbie Land Berry Pink frozen yoghurt from Pinkberry and AirBnB is listing The Barbie Malibu DreamHouse... with the house fully insured, of course. Warner Bros. will likely receive a percentage of the sales of all Barbie movie-related merchandise, including toys, clothing, and accessories.

..... ▷ Mattel will also receive a percentage of the movie-related sales as the owner of the 64-year-old Barbie brand, but its ambitions go beyond just the merch and share of box office from just this one movie. The company's shares are up 17% this year on movie hype but are still down a few per cent from this time last year.

..... ▷ Kreiz is taking a page from Hasbro with its Transformers and Sony with its Super Mario Bros reboot movie. Marvel used to monetise the movies other studios (like Sony and Fox) made using Marvel's characters mainly through merchandising before clawing back most of its IP into the Marvel Cinematic Universe, leading to the successful 2009 sale to Disney for $4bn. With the success of Barbie, movies based on Mattel's Hot Wheels, Rock'Em' Sock' Em Robots and even Polly Pocket could be up next. Until then, take a Barbie AI selfie.

📊 In the Markets

Magnificent Seven Down: After Thursday's sharp fall, the tech-heavy Nasdaq (see below) continued to slide on Friday, led by losses in Nvidia and Meta Platforms. Reflecting the switching to non-tech sectors like healthcare and financials, the Dow Jones Industrial Average🎓 registered its 10th consecutive day of gains, its longest rally in nearly six years. While not a significant index from the perspective of benchmarks, it remains a popular measure for the general public for historical reasons despite its peculiar share price-weighting system.

..... ▷ Unlike Dow Jones Indexes🎓, Nasdaq 100 companies are weighted by market capitalisation (share price X number of shares.) On Monday, July 24th the index will undergo a special rebalance to reduce the weightings of its largest names, "the Magnificent Seven" of Apple, Microsoft, Alphabet, Amazon, Meta Platforms, NVIDIA and Tesla. These companies have risen by an average of 60% this year and now make up 55% of the index. The rebalance will redistribute weights without removing or adding any securities but will result in these stocks making up no more than 40% of the NDX.

..... ▷ ​​The Nasdaq made this change in response to concerns that the weightings of the mega-cap companies were too high and that this was leading to a lack of diversification in the index and to make the index more representative of the broader technology sector. The change will also help funds that benchmark against the index comply with US Securities and Exchange Commission diversification rules which state no more than 50% of a fund's assets can be in stocks that each make up more than 5% of their assets. The stunning rise of The Magnificent Seven was pushing the index very close to those caps, which was a problem for all benchmarked funds (index funds in particular)... and it's the funds who pay the index providers to use their indexes as benchmarks.

X marks the Spot

On Sunday, Elon Musk tweeted that not only would the Twitter name soon be history, its distinctive blue would be replaced by the colour black, and the bird logo will be changed to an Art Deco letter X. "X.com" now redirects to the Twitter website and in typical Musk fashion, he has asked his millions of followers for input on changing the site's colour scheme from blue to black (75% so far have voted in favour) and tweeted: "If a good enough X logo is posted tonight, we’ll make go live worldwide tomorrow." Linda Yaccarino, the new CEO of the company formerly known as Twitter, tweeted a little later about the transformative impact on "the global town square." Unsurprisingly, this was retweeted by Musk.

..... ▷ Back in April, Elon Musk not-very-cryptically tweeted the single letter "X". That same month, Twitter stated in a court document that "Twitter, Inc. has been merged into X Corp. and no longer exists." A few weeks later, it was followed with an official email to business users announcing the corporate name change and the moving of its incorporation from Delaware to the more Musk-friendly Nevada, though it was retaining the name of its flagship service as Twitter (a bit like Google/Alphabet and Facebook/Meta.) It signed off as “X Corp. (formerly, Twitter, Inc.)" in what appeared to be a move toward his long-held vision of using Twitter as "an accelerant to creating X, the everything app” or a super-app similar to Tencent's category-leading WeChat​​ in China.

..... ▷ Musk recently acknowledged the slow (~50%) return of the Twitter advertisers who fled after his October acquisition, resulting in reduced advertising revenue and hence, along with the huge corporate debt incurred during the takeover (and limited takeup of the monthly subscription), continuing negative cash flow. Meta's Threads app, more or less a copy of Twitter, saw 150 million downloads in under two weeks from its July 6th launch and remains a serious threat, even if the hype is dying down, with apps tracking firm Sensor Tower reporting a 20% decrease in active users and a halving of time spent on the app, from 20 minutes to 10 minutes.

AmEx Marks the Spot

American Express somehow managed to disappoint traders by maintaining its annual profit forecast, despite an optimistic outlook from the CEO and net income that beat analysts’ forecasts in the second quarter, reporting an 11% increase from a year ago. The company's shares fell 4% on Friday as investors had been hoping for increased guidance based on consumers' record credit card spending in Q2 on travel and entertainment. Suggesting some clouds ahead, AmEx tripled provisions for credit losses to $1.2bn. Millennials and Gen Z emerged as the fastest-growing customer base, with a 21% surge in their combined spending.

..... ▷ In his 2022 annual letter to Berkshire Hathaway shareholders, Warren Buffett highlighted the best bets of his career, including his stakes in Coca-Cola... and American Express, where Berkshire owns 19%. "Our satisfactory results have been the product of about a dozen truly good decisions," he said, noting that his original $1.3bn AmEx stake 30 years ago was worth $22bn at the end of last year. One of the key reasons for the stake was the superior credit quality of its loan book given the relative affluence of its cardholders, though the emergence of Millennials and Gen Z may put that to the test. As a credit card issuer (and hence lender) in its own right and not just a network operator, AmEx shares have lagged peers Visa and MasterCard (see "For Everything Else...")