A Wave of Redemptions | Animal Spirits 454
Speakers
Summary
- Geopolitical Shock: A significant escalation involving US/Israel strikes on Iran ("Operation Epic Fury") has caused a sharp risk-off event. Brent oil is up ~8%, European natural gas is up 35%, and global equities are selling off (S&P down ~2%, Emerging Markets down ~5-8%).
- Private Credit Crack: The long-awaited stress in private credit is materializing. Blackstone’s flagship fund saw $1.7B in redemptions, and the sector (BX, KKR, ARES) is down 40-60% from highs.
- AI & Efficiency: Companies like Block (SQ) are using AI as cover for massive workforce reductions (40% cuts), which the market is rewarding with higher stock prices.
- Media Divergence: Netflix is viewed as the winner for walking away from the Paramount deal, while legacy media (Paramount/Warner Bros) faces a "catastrophe" of debt and layoffs.
Trade Ideas
Jack Dorsey announced a 40% staff cut citing AI efficiency. The stock jumped 25% in after-hours trading. Whether the AI narrative is true or just an excuse for "pandemic rightsizing," the market loves the margin expansion. Investors are rewarding companies that rip the band-aid off to fix their cost structures. Bullish reaction to cost-cutting and efficiency. Morale destruction and potential operational issues from cutting too deep.
"Brent oil... was up 8% yesterday... Natural gas prices [in Europe] up 35%." A geopolitical supply shock (Iran strikes/Hormuz concerns) is driving input prices higher. While the US is energy independent, global pricing mechanisms (Brent/Nat Gas) are spiking, acting as an inflationary tax and boosting energy commodities. Long energy commodities as a hedge against the geopolitical flare-up. AI/Deflationary forces eventually trumping inflation narratives (as they have historically).
Blackstone's flagship private credit fund was hit with $1.7B of net outflows in a month. The stock is down significantly (approx. 40% from highs) and Michael explicitly states, "I own the stock and I will be selling it today." The thesis for private credit is breaking due to floating rates no longer being attractive as rates peak, combined with fears of underlying portfolio weakness (software exposure). When a "crowded trade" faces redemption waves, you do not wait for the dust to settle. Michael is taking a 13% loss to exit. He refuses to "fight the tape" amidst a crash in the asset class. The firm injected capital to cover redemptions, which could stabilize confidence temporarily.
Netflix backed out of the Paramount merger. Michael states, "Netflix is so much better off because of this." By avoiding the "media merger" trap—which typically involves taking on massive debt and integrating dying legacy assets—Netflix preserves its balance sheet and dominance. Michael views this as a "buy and hold." Bullish on Netflix's discipline and standalone dominance. Valuation concerns if subscriber growth slows.
IMAX releases earned 58 Academy Award nominations and delivered 20% of the domestic opening for major films (up from 10% pre-COVID). The "Premium Experience" thesis is validating. As people go to fewer movies, they choose high-quality formats (IMAX) when they do go. The company is gaining market share despite a shrinking overall theater industry. Long via the "flight to quality" in entertainment. General decline in box office attendance.
Paramount is proceeding with a merger that involves massive debt and $16B in cost cuts. Michael notes, "These mergers never ever work." The deal is driven by necessity (survival) rather than growth. The integration will result in a "catastrophe" of layoffs and debt servicing, likely leading to years of underperformance before potentially being spun out again. Avoid legacy media entangled in debt-heavy consolidation. Aggressive cost-cutting could temporarily boost free cash flow.
Michael explicitly mentions, "Last week I bought Microsoft on the air... wasn't a bad buy." Buying high-quality software/tech during "blood in the streets" moments (like the recent software selloff) is a core strategy. Long high-quality mega-cap tech on pullbacks. Continued broad market sell-off dragging down all equities.
Michael Batnick
Managing Partner, Ritholtz Wealth Management
Intuit was up 17% over the last 5 days following fears that "software is dead." The market overreacted to the "AI will replace software" narrative. Intuit's recovery signals a "bottom" for essential software companies that are actually integrating AI rather than being replaced by it. Long/Recovery play on oversold software. Long-term AI disruption to tax/accounting models.
Up Next
This The Compound News video, published March 04, 2026, features Michael Batnick, Ben Carlson discussing SQ, UNG, USO, BX, NFLX, IMAX, PARA, WBD, MSFT, INTU. 8 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Michael Batnick, Ben Carlson · Tickers: SQ, UNG, USO, BX, NFLX, IMAX, PARA, WBD, MSFT, INTU