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Swamponomics: Netflix and Sell: Nasdaq Implodes

Netflix shares plummet, the Fed’s digital dollar report, and bears at the IMF.

Wall Street has a new motto in 2022 so far: Netflix and sell. The streaming titan cratered as much as 24% during the Jan. 21 trading session, falling below $400 per share. The security suffered its worst day since July 2012 as investors turned off their smart televisions and logged out of their Netflix accounts. But why has the market turned bearish on the entertainment-technology hybrid behemoth?

Netflix confirmed it attracted 8.3 million net new paid subscribers in the fourth quarter, falling short of its estimate of 8.5 million. However, that number did match the average analyst forecast, increasing the total number of subscribers to just below 222 million at the end of 2021. Investors are not upset by the figure, but instead, they are fearful of the immediate future.

GettyImages-1083969108 Netflix

(Photo by Alexander Pohl/NurPhoto via Getty Images)

Executives are anticipating a tepid gain of 2.5 million net new subscribers in the first quarter, less than half of the 5.8 million analysts are predicting in the January-to-March period. While there is not a consensus on the reasons for the waning interest, Netflix Chief Financial Officer Spencer Neumann noted during a video call that there could be a “COVID overhang” after two years and a “marginal impact from competition.” Other Netflix heads say a paucity of new original shows and movies are not expected until later next year.

Whatever the case may be, Netflix contributed to the Nasdaq’s overall decline. The benchmark stock index recorded a weekly loss of more than 5%, enduring its worst weekly performance since October 2020. Year-to-date, the tech-heavy index has slumped more than 10% and entered into correction territory. So far this year, the Dow Jones Industrial Average has tumbled nearly 5%, while the S&P 500 has erased 6.5%.

Many financial institutions have been slashing their price targets in recent days amid the selloff:

  • Barclays: $675 to $425
  • Credit Suisse: $740 to $450
  • Evercore ISI: $710 to $525
  • Macquarie Research: $615 to $395
  • Morgan Stanley: $700 to $450

Now that the Federal Reserve is tapering its easy-money endeavors, the bubble in growth equities is beginning to deflate. So, has the index reached a bottom? Will the Netflix stock just chill? It should be a riveting period in the financial colosseum this year! Hey, speaking of the United States central bank…

Fed on the Digital Dollar Fence

The Eccles Building published its much-anticipated 40-page report on a potential central bank digital currency (CBDC). The document explored a wide array of issues, adding that it will seek public comment regarding the pros and cons of a digital dollar. So, what did the world’s most powerful institution find?

Study authors concluded that the idea of “a CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank.” Researchers purported that a CBDC would help speed up transactions on an electronic payments system, but the drawbacks would be financial stability threats and safeguarding privacy.

While incoming Fed Vice Chair Lael Brainard has been a proponent of the endeavor, many skeptics within the institution are worried about a plethora of legal problems and a CBDC turning into a Fed liability rather than a commercial bank liability. Although the monetary body is not taking a position, the paper averred that its “initial analysis suggests that a potential U.S. CBDC, if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified.”

IMF Chief Warns Against Monetary Easing

The Federal Reserve and other central banks are unwinding their quantitative easing endeavors by tapering asset purchases and raising interest rates. But will this threaten the global economic recovery? The International Monetary Fund (IMF) seems to think so, according to recent comments at the globalist gathering Davos Agenda virtual event.

Kristalina Georgieva, the IMF managing director, stated during a videoconference that rate hikes could “throw cold water” on sluggish economic recoveries throughout the globe. Georgieva says the biggest impact would be higher rates on dollar-denominated debt, making it more expensive to service obligations. In 2020, global debt soared to $226 trillion, the most significant single-year hike since the Second World War.

Georgieva had a message for indebted countries: “Act now. If you can extend maturities, please do it. If you have currency mismatches, now is the moment to address them.” It would be critical for policymakers in advanced countries to consider “policy flexibility,” she said, adding that measures, whether to fight inflation or support growth, need to be tailored to the nation’s needs rather than for the global collective. This is the second time in a few months that the IMF has warned about a financial crisis stemming from central banks no longer firing off guns and bazookas.

IMF chief economist Gita Gopinath conceded at an event organized by the World Health Organization (WHO) that central banks do not have room to sustain easy money policies. At the same time, she highlighted stagflation concerns, particularly if the Omicron variant – or other variants – threaten the recovery. With this prevalent attitude, the bears have extinguished the bulls in this environment.

~ Read more from Andrew Moran.

Read More From Andrew Moran

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