Wall Street Lunch: UAE To Bring Gambling To Gulf?

Listen below or on the go on Apple Podcasts and Spotify

United Arab Emirates’ Marjan Island could rival Macau. (0:16) What can Paolo Maldini tell us about soft landings? (1:49) Disney’s ‘Inside Out 2’ on the way to $1 billion. (4:23)

The following is an abridged transcript:

Our top story so far. There is growing confidence that the Marjan Island region in the United Arab Emirates could be the world’s next big gambling region.

That would be a big shakeup in the gaming landscape, especially taking into account that gambling is prohibited under Islam and is still illegal in the UAE. While no casinos currently exist in the six Gulf Cooperation Council countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, there are casinos operating in Lebanon and Egypt.

Efforts to build casinos in the UAE have gained significant momentum recently, driven by the potential economic benefits and the establishment of a regulatory framework. Ras al-Khaimah and Abu Dhabi are at the forefront of these developments.

Meanwhile, Abu Dhabi is exploring potential sites for similar projects, with Yas Island being a prime candidate due to its existing entertainment offerings. Dubai, despite being a major tourism hub, has currently opted out of pursuing casino developments, focusing instead on its established attractions.

Last year, the UAE established the General Commercial Gaming Regulatory Authority to oversee the potential legalization and regulation of gambling activities. Bloomberg Intelligence estimated that the country could earn up to $6.6 billion annually, a tally that is higher than Singapore’s annual gaming revenue.

In today’s trading, TKTKTK

With a relatively empty economic calendar and the European soccer (or football) championships in full swing, it seems like an opportune time to talk about the “Paolo Maldini rule of soft landings.”

Created by Dario Perkins, managing director for global macro at TS Lombard, and named for one of the greatest defenders ever to play the game, the rule is based on Maldini’s philosophy that “if I have to make a tackle, then I’ve already made a mistake.”

“He meant its all about positioning and timing, not last-ditch interventions,” Perkins explained. “If you get those things right, you don’t need to tackle. A few years ago, I said the same rule applies to soft landings. The textbook example was 1995, when Alan Greenspan preemptively stopped inflation and delivered the perfect soft landing.”

A “comprehensive study from Fed officials has now confirmed that the Maldini rule is a real thing. It looked at data from 13 DM economies, covering 149 easing cycles. 25 of those easing cycles were in response to better inflation (rather than the onset of a recession). Of those, 14 resulted in a second wave (i.e., CBs had cut prematurely), 6 ended in an unexpected recession (i.e., CBs had eased too late), and 5 ended in a soft landing.”

“Although rare, soft landings do happen,” Perkins said. And after reviewing all the cross-country historical evidence, the Fed researchers conclude that “successful policy management is more likely when policymakers act early, more parsimoniously, and pre-emptively.’

Among active stocks in today’s session

CrowdStrike (CRWD) was added to the S&P 500 Index today, almost exactly five years after the cybersecurity company went public. CrowdStrike made its initial public offering on June 12, 2019. The company said it is the shortest amount of time a cybersecurity firm has achieved this listing.

Micron (MU) is getting some mojo ahead of its earnings report this week. Wolfe Research maintained its Outperform rating and raised its price target to $200 from $150. Wolfe cited stronger industry conditions and optimism regarding high-bandwidth memory.

Citi also reiterated its Buy and top pick rating and raised its price target to $175 from $150. Analysts expect the company to post results and guidance above consensus, given the DRAM upturn and Micron’s increasing AI memory exposure.

And Target (TGT) announced a new partnership with e-commerce giant Shopify (SHOP) to offer a selection of its popular merchants and their products on Target Plus, the retailer’s third-party, highly curated digital marketplace.

Target will be the first mass retailer to work with Shopify to bring select merchants’ products into its physical stores in the months to come.

In other news of note. Disney’s (DIS) “Inside Out 2” raked in $100 million in its second weekend, setting a record for an animated movie, according to data compiled by Comscore. The previous record for a second-weekend haul was $92 million for “The Super Mario Bros. Movie.”

Since opening a week and a half ago, “Inside Out 2” has become the highest-grossing film so far in 2024, with $724.4 million globally, including $355.2 million in U.S. and Canadian theaters. The Pixar sequel surpassed the $711.8 million global total of “Dune: Part Two.” “Inside Out 2” is on track to exceed $1 billion in box-office sales, the first movie to hit that milestone since “Barbie” was in theaters last year.

The biggest new release this weekend was “The Bikeriders,” a motorcycle gang drama whose release was postponed with last year’s strike by Hollywood actors. The Focus Features release, starring Jodie Comer, Austin Butler, and Tom Hardy, netted $10 million from 2,642 venues in its opening weekend.

Meanwhile, China and the European Union have agreed to hold talks over the bloc’s anti-subsidy investigation into and planned tariffs on Chinese electric vehicles as the two sides seek to avoid escalating trade tensions.

Both sides agreed to discussions after a video call between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Valdis Dombrovskis. Beijing wants the EU to scrap its tariff decision before July 4, Chinese observers told the state-controlled newspaper Global Times.

And in the Wall Street Research Corner. “It’s an uptrend if you participate; it’s a bubble if your neighbor participates.”

That’s the old adage Oppenheimer technical analyst Ari Wald referenced when looking at whether the Nasdaq 100 (NASDAQ:QQQ) is in bubble territory. But he noted that rather than growth being overvalued currently, it’s non-growth that is historically lagging, and when the gap does narrow, it may be non-growth rallying as the driver rather than a collapse in growth prices.

“We still agree that market bifurcation, and specifically, the spread between growth and non-growth, is perhaps as wide as it’s been since the 1990s,” Wald wrote in a note. “Our differentiated take remains that the driver of this spread has been weakness in non-growth more than it’s been strength in growth.”

“Consider the NASDAQ-100 and Russell 2000 (NYSEARCA:IWM) as proxies for this relationship,” he said. “While the ratio has broken through its year-2000 peak, the five-year rate-of-change for the individual parts shows a significant discrepancy between now and then.”

“The outlier, from our vantage point, is that the Russell is coming off a single-digit reading (5%, Q4’23) that has been more consistent with major market lows than market tops. This is why we believe convergence is more likely to be catalyzed by catch-up over the coming years.”