FT : China moves to counter India with arms sales to Pakistan

China moves to counter India with arms sales to Pakistan
Beijing’s first export of J-10C jets marks step-up in decades-old arms relationship with Islamabad

China will deliver 25 J-10C fighter jets to Pakistan within weeks as part of a deal that will bolster Islamabad’s military capabilities against mutual rival India.

Beijing’s first export of the advanced jets marks a big step-up in its decades-old arms relationship with Islamabad and entails providing its ally with some of the latest equipment that China’s own armed forces are using. China will also broaden its support to Pakistan’s navy.

The first batch of the combat aircraft is being tested in Chengdu, the base of its manufacturer Chengdu Aerospace Corporation, according to a journalist at a Chinese military publication.

“They will be transferred to Pakistan once Pakistan air force pilots and technicians have completed an introduction to the aircraft,” he said.

Senior officials in Islamabad said the jets would be delivered before the end of the month.

Last week, Chinese and foreign military watchers posted photos and a video showing several J-10C aircraft flying the colours of the Pakistan air force on social media.

China is also selling Pakistan four Type 054A frigates, the first of which began service in November, and is expected to begin delivery of up to eight Type 041 submarines, its quietest attack submarine, this year.

India, which has been engaged in a stand-off on its Himalayan border with China for nearly two years, believes the arms deliveries to Pakistan are an attempt to amplify the threat from Islamabad. India shares long land borders with both Pakistan and China.

“There’s a clear strategic nexus between China and Pakistan,” said Brahma Chellaney, a professor of strategic studies at the Centre for Policy Research, a New Delhi think-tank. “That nexus is clearly designed to contain India, to pin India down and keep it preoccupied. That’s the Chinese strategic aim.”

He described the latest arms deals as a significant shift, adding that “China is now selling or transferring its top of the line weapons systems to Pakistan”.

The J-10C aircraft will help Pakistan close the air-power gap with India following New Delhi’s acquisition of 36 Rafale fighter jets from France. “This is our response to [India’s] Rafale,” Sheikh Rasheed Ahmed, Pakistan’s interior minister, said when he revealed the J-10C agreement in December.

The new Chinese ships would boost Pakistan’s capabilities in the Indian Ocean, an area of strategic importance for Beijing.

“They want Pakistan to have naval bases ready that China could also use, and to be able to protect them,” said Siemon Wezeman, an arms trade expert at the Stockholm International Peace Research Institute.

“The Chinese have shown that they will sell to Pakistan when others won’t. I suspect that China is very easy to persuade [to sell], not only for commercial but also for political reasons,” he said.

India is also planning a naval expansion. The navy’s deputy chief said late last year that it aimed to increase the size of its fleet from 130 vessels to 170 by 2027, including four frigates being developed in partnership with Russia.

Despite the upgrades, Chellaney said the Himalayan stand-off was draining India’s defence resources. “The Indian navy is supposed to be undergoing modernisation, but the modernisation is happening at a relatively slow pace, largely because of the land military confrontations that India faces,” he said.

Barrons : Junk Bonds Aren’t Predicting the Stock-Market Apocalypse You Think The

Junk Bonds Aren’t Predicting the Stock-Market Apocalypse You Think They Are

Investors need to stop pondering the yield curve for clues as to where stocks are heading next and start watching junk bonds instead.

Ever since it became clear the Federal Reserve would start raising interest rates in March, investors have been fixated on the yield curve—that is, the difference between the rates on short- and long-term Treasuries. And for good reason. When the yield on the two-year note rises above the yield on the 10-year bill—what’s known as an inversion—it usually signals a recession is on its way, and recessions kill bull markets.

Crucially, though, the shape of the yield curve signals recession only when those short-term rates are higher than long-term yields, or inverted, not when it is flattening, “[The] curve is a binary indicator,” writes Michael Darda, chief economist at MKM Partners.

Junk bonds can also signal a recession—but not necessarily the way many investors think. A stock selloff is just a selloff, we’ve often been told, as long as high-yield bonds hold up. That helped during the first four weeks of January, when the S&P 500 SPX-0.72% fell 7% and the iShares iBoxx $ High Yield Corporate Bond HYG+0.14% exchange-traded fund fell just 2.7%. But the S&P 500 has bounced 0.9% since then, and junk bonds have kept falling. As of Tuesday’s close, the S&P 500 was down 6.1% year to date, while the ETF was down 4.5%. That would seem to suggest economic worries are building.

Then again, maybe not. While high-yield bonds have been dropping, the riskiest bonds have been falling less than the safer ones. The price of double-B-rated junk bonds dropped 5.1% in January and another 1.6% this month through Feb. 11. Bonds rated triple-C and lower, however, fell just 4.9% in January and 1.2% this month through Feb 11.

That’s not supposed to happen, according to Martin Fridson, chief investment officer at Lehmann Livian Fridson Advisors. The drop in high-yield bond prices—and the increased amounts investors were demanding to lend money to riskier companies—are a sign that worries about defaults had increased, Fridson explains in a report in Leveraged Commentary & Data. But if investors were really worried about a recession, lower-rated triple-Cs should have fallen more than higher-rated double-Bs.

“Investors will really be serious about the risk of an economic downturn if they start favoring lower-yielding, more default-remote high yield bonds over the higher-yielding ones in more immediate danger of defaulting,” Fridson writes.

Fed Chairman Jerome Powell likely doesn’t care—and the central bank certainly doesn’t—about how much the stock market has dropped, writes Richard Bernstein Advisors’ Michael Contopoulos. Instead, the Fed wants to know that the credit markets are functioning and that even low-rated companies can issue debt when needed. Contopoulos’ preferred metric: The percentage of triple-C-rated issuance over the past 12 months.

When it’s 30% of more of the total junk bond issuance, the Fed can feel comfortable that those who need to borrow money can get it; when it drops below 30%, it’s time to start worrying. It was the drop below this threshold in late 2018, Contopoulos argues—not the stock market’s nearly 20% plunge at the end of that year—that got the Fed to reverse course on rate hikes.

Right now, the percentage is declining, but it’s nowhere near 30%.

“[What] the Fed cares most about is the smooth allocation of credit,” Contopoulos writes. “[If] credit spreads remain anchored and capital markets open, Chair Powell and team will likely turn a blind eye to the woes of momentum players and speculators in the stock market.”

In other words, we’re on our own.

Barrons : The Stock Market’s Next Move Is Lower. It’s Not Just Russia and the Fe

The Stock Market’s Next Move Is Lower. It’s Not Just Russia and the Fed.

The only thing standing between the stock market and a full-blown correction might have been a long weekend.

The S&P 500 index SPX-0.72% fell 1.6% this past week, while the Dow Jones Industrial Average DJIA-0.68% dropped 1.9% and the Nasdaq Composite COMP-1.23% lost 1.8%.

Despite all that, it’s easy to look at this market and consider the losses a victory. The week’s decline was uncomfortable, but the S&P 500 is still 0.5% above its January closing low. It has taken a beating from Ukraine and Russia and from concerns about the Federal Reserve and higher interest rates over the past three weeks, but it hasn’t made a new low. The index even managed to bounce back from a near-correction on Friday, though it still finished the day lower.

But it may be just a matter of time before the ground under the market gives way. For one, it hasn’t been able to rally on days when it looked like it should have. On Thursday, oil prices declined, as did bond yields and the odds of a half-point rate increase. That should have been good news. Instead, the Dow fell 1.8%, its worst one-day decline of the year.

Friday’s cutting of losses after another large drop, however, might be less than it seems if only because of the long Presidents Day weekend—one that, if you’re a trader, you might prefer to enjoy without having to worry about Tuesday’s action. “We continue to recommend caution and want to see a genuine flush before stepping up to buy this market,” says Nicholas Colas, co-founder of DataTrek Research.

That flush has already happened for some parts of the market. Some 20 stocks in the Russell 1000 RUI-0.79% dropped 15% or more this past week, including Roku ROKU-22.29% , Fastly FSLY-2.60% , DraftKings DKNG-21.62% , Albemarle ALB-3.18% , and Paramount Global PARA-3.30% , formerly known as ViacomCBS. The iShares Expanded Tech-Software Sector IGV-2.14% exchange-traded fund, which holds some of the market’s most speculative tech names, dropped 5.4% this past week and has fallen 18% this year.

More selling may be on the way. The decline in U.S. stocks has been driven by a rotation from the U.S. to Europe and from growth stocks to value, according to Citigroup strategist David Groman. But the dollar amounts driving the rotation have been relatively small, he says, which could mean there’s more to come.

“[We] have seen very tentative signs that these trends may be reversing,” Groman writes. “There is still plenty of capital available to drive further rotation.”

Russia is likely to remain an issue, says Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. The problem could be even greater for Europe, where a recession could be in the offing. “We continue to believe that geopolitical risk emanating from Russia/Ukraine is not priced into the U.S. equity market, should conditions worsen, and will be a key issue to watch in the weeks and months ahead,” she writes.

The market, however, will still have to contend with the Fed. Yes, the odds of a half-point rate hike in March have decreased. But if the Fed does hike by just a quarter point, it could mean it has to go faster for the rest of the year if the inflation data don’t let up.

For now, the path of least resistance for the market still seems lower.

Barrons : Nokia Is Remaking Itself Into a 5G Leader. Now Might Be the Time to Pl

Nokia Is Remaking Itself Into a 5G Leader. Now Might Be the Time to PlugIn to the Stock.

Nokia NOKIA-1.32% has had a tough few years, but the Finnish telecom giant has successfully engineered the first part of its turnaround, and now is primed to gain market share in next-generation 5G networks.

After losing ground to Swedish rival Ericsson ERIC.B-4.15% (ticker: ERIC.B.Sweden) and China’s Huawei early in the 5G network battle, Nokia (NOKIA.Finland) hit the reset button.

Shortly after taking charge in August 2020, CEO Pekka Lundmark unveiled a new strategy, streamlining Nokia into four business groups and promising to do “whatever it takes” to lead in the 5G space. Once a big producer of mobile handsets, Nokia now makes routers, network processors, and products for telecom infrastructure, including the 5G network, and also offers cloud services and solutions.

The company’s early struggles in the 5G rollout were partly to blame for profit warnings in 2019 and 2020. It was a tough period for the stock, which fell 49% from a January 2019 peak to 2.81 euros ($3.18) shortly after the strategy shift was announced in October 2020.

The company unveiled a wide-ranging restructuring last March, resetting its cost base to invest in 5G and cloud and digital infrastructure. Since then, Nokia has enjoyed a string of earnings beats, the latest of which came with the resumption of its quarterly dividend and the launch of a share-buyback program.

The stock has jumped 73% to €4.85 since its October 2020 lows but with the turnaround only just entering the growth phase, analysts see the stock having plenty of upside potential. Those covering the stock have an average target price of €6.18, implying a 28% upside to Monday’s closing price, according to FactSet.

“We have created an excellent foundation as we begin to move into the next phase of our strategy to deliver growth and expand profitability,” Lundmark said as the company reported fourth-quarter earnings earlier this month.

J.P. Morgan analysts, led by Sandeep Deshpande, shared those sentiments as they maintained a Buy rating on the stock. “We believe the company can now move to the next stage of taking share and growing more than the market,” the analysts said in a note. They have a price target of €6.50, implying a 27.7% gain from the Feb. 17 closing price, and rate Nokia’s U.S.-listed shares (NOK) Overweight with a price target of $7.80, which would be a 37% upside.

Nokia has set a long-term target to boost revenue faster than the market. Analysts expect the company to post sales of €23.3 billion this year and €23.7 billion in 2023, both beating revenue of €22.2 billion last year. But it’s the company’s new long-term target for operating margins of at least 14%, replacing an earlier 2023 target of 11% to 13%, that has grabbed the attention of analysts. “If one benchmarks the business to Ericsson, it could reach mid- to high-teen margins, in which case Nokia’s 14% operating margin guidance looks too cautious,” Deshpande said.

Société Générale analyst Aleksander Peterc, who rates the stock a Buy with a €6.70 price target, also says the margin guidance “appears conservative.” Peterc says the target was in step with management’s tendency to guide low and beat or upgrade later, which “will ultimately help rebuild Nokia’s credibility with investors.”

That problem of credibility with investors may explain why Nokia trades at 13.1 times future earnings, a 17% discount to its peer average. The substantial discount reflects Nokia’s multiple missed goals and profit warnings, Peterc says, adding that as the group’s turnaround remains solid, the valuation discount should narrow.

With Nokia’s turnaround set to kick in this year, and the opportunity for it to cement itself as a dominant player in the lucrative 5G space, it may be a good time for investors to plug into the stock.

TheInformation: The Bunnies Have Left the Mansion: Inside Playboy’s Quest to Rei

The Bunnies Have Left the Mansion: Inside Playboy’s Quest to Reinvent Itself as a Tech Company
The media brand known for sex, partying and pleasure is betting big on NFTs, Web3 and a creator platform it’s calling “the uncensored Instagram.” Can Playboy survive in the age of OnlyFans?

Mia Khalifa would be an obvious choice for a Playboy Playmate of the Month, if such a thing still existed. Instead, one of the biggest names in adult entertainment just signed up for its digital equivalent.
Khalifa, a social media influencer and former porn star with 27 million Instagram followers, is set to join Playboy’s new subscription content service, Centerfold, later this month. The platform launched in December with the vision to become, according to Playboy Enterprises CEO Ben Kohn, “the uncensored Instagram.” Two months in, the site looks less like a rehash of the old, Hugh Hefner velvet-and-lace aesthetic than a modern mashup of OnlyFans and Patreon. Its home page displays suggestive photographs of adult entertainers both female and male, plus the occasional YouTuber and makeup artist. It features an Instagram-style “following” feed showcasing its current roster, and a tab for messaging creators (for a fee, of course). Its founding creative director, with input on editorial decisions and creator recruiting, is rapper Cardi B.
Since Centerfold’s launch, Playboy has brought on a number of highly followed figures, from YouTuber Amanda Cerny to former adult film star Lana Rhoades to current porn actress Mia Malkova, who collectively boast more than 50 million followers on Instagram. But Khalifa is perhaps the site’s buzziest addition. “I was very excited and very honored,” Khalifa says. “I mean, it’s Playboy.”
The partnership is a change of course for Khalifa, who, despite only working in the porn industry for three months in 2014, has amassed over 1 billion video views on PornHub. When she popped up on a Zoom last week, wearing a purple tie-dyed sweatshirt and little makeup, and contending with a poor internet connection, she seemed more like a remote-working 20-something than a global sensation. But she had strong things to say about her other home on the Internet, OnlyFans, where she charges subscribers $12 per month for content she describes as “Safe for work, but spicy.”
“I feel like where OnlyFans is headed is no longer in support of sex workers. I disagree with a lot of their changes and a lot of their tactics,” she says, referencing the site’s short-lived ban on sexually explicit content and changes to creator payouts. “I would like to be on a platform that can be a place with a fresh start.”
Centerfold is just one piece of an extensive digital portfolio Playboy is in the process of developing. In an effort to revitalize what was a faltering and scandal-shadowed brand, the company is pivoting away from the ubiquitous magazines of yore and going all in on today’s buzziest tech phenomena: subscription platforms and Web3.
Indeed, the trope of “reading Playboy for the articles” no longer applies—the company halted the print publication in March 2020, and laid off 25 remaining web editors and writers two months later. But solving one problem only created another: Playboy’s competition is no longer raunchy reads like Penthouse and Hustler, but tech juggernauts like Meta Platforms and OnlyFans. So the central question remains—will a tech overhaul be enough to keep The Bunny afloat?
The executive behind Playboy’s digital pivot is not the expletive-slinging, cigar-smoking, robe-wearing lothario you might expect. Instead, she’s a former National Geographic vice president who began her career at Rupert Murdoch’s News Corp. Rachel Webber, president of corporate development and chief marketing officer at Playboy Enterprises, joined the company three years ago to help transform what she calls “the original lifestyle brand” into a digital-first business.
Speaking to me on Zoom from their respective homes in Los Angeles, Webber and Anna Ondaatje, vice president of global brand and franchise strategy, reiterated two phrases consistently. First, Playboy is still a “platform that sits at the intersection of culture and sex,” Webber said. And second, its mission is to be a space “where all people can pursue pleasure.” In other words, it’s no longer just “Entertainment for Men,” as the old company tagline went. Aside from the reach toward gender parity, these goals sound fairly consistent with the aims that Hugh Hefner set out at the company’s founding in 1953. But that’s where the comparisons end. The digital offerings, Webber hopes, will set a new course for Playboy that is both more ethical and more profitable than previous iterations.
A Playboy party in the metaverse.
Image courtesy Playboy.
No longer towing around Hefner’s substantial baggage, Playboy is far from the debaucherous bacchanal of years past. Hefner led the company for 35 years, becoming famous for his wild mansion parties and an office environment as leering as the magazine’s content. Following a 1985 stroke, Hefner handed over the titles of chair of the board and CEO to his daughter Christie in 1988. In 2009, Christie retired, and Scott Flanders, a longtime media executive, became the first non-Hefner Playboy chief executive. Hugh Hefner and Flanders took the company private in 2011 in a $207 million transaction.
During his tenure, Flanders focused on Playboy’s licensing business and steered it away from pornography, while Hefner kept his editor in chief title and lived in the Playboy mansion until his death in 2017. More recently, a slew of allegations of sexual misconduct and rampant drug use during Hefner’s tenure has come to light in a 10-part A&E network docuseries, “Secrets of Playboy,” that debuted last month. (“We strongly support the individuals who have come forward to share their experiences,” wrote the current Playboy leadership team in response). After Hefner’s death, Ben Kohn, a financier who helped take the company private, took over as CEO of Playboy’s parent company, Playboy Enterprises Inc., in 2018. The company later rejoined public markets in February 2021 via a SPAC.
In a striking contrast to Hefner’s Playboy, the company now reports that its workforce is 84% women. The audience that comes to Playboy.com, according to the company, is 50% women, with 85% of them under age 44. No longer publishing headline–making interviews with Miles Davis and Steve Jobs, or narrative nonfiction from Norman Mailer and Hunter S. Thompson, Playboy.com is now dominated by e-commerce, advertising lingerie, smoking accessories and printed pants worn by the likes of Bella Hadid. It’s fair to say we aren’t at the mansion anymore.
The new Playboy’s business model is three-pronged: there is the direct-to-consumer business; a licensing operation offering the signature bunny logo to other companies, especially international clients in China and India, as well as businesses in the gaming market; and the aforementioned digital initiatives. According to Kohn, the direct-to-consumer and licensing businesses are driving billions of dollars of consumer spend each year. The hard shift to digital also trades Playboy’s traditional (and expensive) editorial pursuits—gauzy, heavily airbrushed, meticulously art-directed photo and video shoots—for rougher-around-the-edges creator-generated content on Centerfold, plus original non-fungible token collaborations with fine artists. The digital wing is Webber’s domain, and it’s what she hopes will sustain the company for years to come.
“This is not about slapping our brand on a digital asset and having a stunt around that,” she says. “We genuinely believe this is a brand that can be a driving force in moving culture forward.” The digital products emphasize the principles that, in Webber’s mind, make up Playboy’s original DNA, “from owning your own identity to trustless systems to anti-censorship to free expression to supporting creators." (Whether Hefner’s empire was ever “trustless” is a topic for another day.)
The new Playboy audience, in Webber’s mind, is not the old Playboy audience. It skews younger, queerer, and more female. Internally, the changes are even more dramatic: women are now calling most of the shots at the company. The glossy magazine has been replaced by a “platform for creative freedom, artistic expression, and sex positivity.” And NFTs and Web3—well, they’re the new Playboy Club.
Gigi Goode saw her first print Playboy at age 13, in the lower level of a Woodstock, Ill., antique mall. She was struck by the photo shoots in the issue, which she remembered feeling “less like porn and more like art.” After ogling the magazine, she had to leave it behind at the store. “If I had been caught with a Playboy magazine in my house, my mom would have lost her mind,” she says.
Now Goode is one of the founding creators on the Centerfold platform (and her mom is her “biggest supporter”). The 24-year-old gained recognition on “RuPaul’s Drag Race” as a runner-up on the show’s 12th season. She’s now a model and influencer, with 1.3 million Instagram followers. After working with Playboy on a few projects, Goode was asked by the company to produce content for the new platform.
Unlike some of the other Centerfold creators, Goode is not on OnlyFans or any other subscription app. Though she does not have an exclusive agreement with Playboy (“I’m not exclusive to anybody,” she winks), her hair and makeup tutorials are currently only available on Centerfold. Prior to the platform’s launch, Goode noted that she’d been looking for a site “like Patreon, but more sex positive and more for the queers and for just about anybody and everybody on this planet.”
A Playboy that’s “more for the queers” perhaps sounds discordant with the brand’s history. But Webber points out that Playboy magazine published stories advocating for gay rights as early as the 1950s. “The biggest changes we’ve made over the past several years,” she said, “are all centered around being more inclusive.”
Playboy president of corporate development and chief marketing officer Rachel Webber and founding Centerfold creator Gigi Goode.
Photo courtesy Playboy. Art by Mike Sullivan.
On Centerfold as on OnlyFans, creators can choose their own subscription rates, with some selecting monthly fees (Goode’s is $15 per month) and others opting for a pay-per-photo model (Cerny charges $5 to $30 to unlock one post). Also like OnlyFans, the platform takes a 20% cut of creator payments. Though Goode wouldn’t share how much she’s netted on Centerfold over its first few months, she says the platform has been “lucrative so far.” (The company and the creators declined to divulge whether Playboy paid them to appear on the platform in the first place.)
In attracting creators to Centerfold, Webber believes Playboy is responding to a gap in the market left by Instagram’s anti-nudity clauses, as well as OnlyFans’ short-lived decision to ban adult content. Centerfold, though lacking the scale and recognition of its competition, is establishing itself from the get-go as a sex-positive platform, one that will not pull the rug out from under creators unexpectedly. But there are limits—Centerfold’s terms for creators stipulate that all “content with multiple people must be entirely safe-for-work,” whereas OnlyFans’ terms do not include such language.
In many ways, Webber says, Centerfold is the brand’s new version of editorial. “Centerfold is essentially taking a magazine and turning it from the inside out,” she says. Now, it’s the people in front of the camera who have the creative power, rather than the executives and editors.
Though Playboy hopes creators will want to work with Centerfold exclusively, staying on other subscription services is allowed. Khalifa, for one, has her qualms regarding OnlyFans, but she says she will keep posting content there. “I think it’s going to be more of a gradual transition [away from the platform],” she says. But Khalifa wants her Centerfold account to look different from her OnlyFans content. “It’s going to be a little bit more stylized,” she says. “My OnlyFans is strictly me and my iPhone, and I would really love to throw in more professional photo shoots onto my Centerfold because you’ve gotta step it up—it’s Playboy.”
In January 2021, while many people were still wrapping their minds around the concept of NFTs, Webber already had a plan to market them. Ondaatje remembers Webber kicking an NFT project into gear that month, telling skeptical team members that NFTs were soon going to be the biggest story in tech. “Rachel could see where this was going in a way that a lot of us couldn’t,” Ondaatje says.
Playboy is one of countless brands, from Louis Vuitton to the NBA, that are jumping on the NFT bandwagon. But the company has something most others don’t: exclusive access to a vast library of archival images just waiting to be mined into tokens. Crucially, there’s also the internationally famous bunny logo, which can be repurposed into an infinite variety of digitized artworks.
Playboy’s first foray into the NFT world was a May collaboration with blockchain-powered auction service Nifty Gateway, entitled Liquid Summer. The collection consisted of collages by artist Slimesunday, launched with a party (where else?) in the Crypto Valley of the Decentraland metaverse. Playboy’s stock jumped 83% in April after announcing the project (it has since plummeted back to pre-April levels), and when the collection launched on May 4, it sold out in under three minutes.
Next, Liz Suman, Playboy’s vice president of art curation and editorial, reached out to artist Shantell Martin, who has collaborated with everyone from Adidas to Kendrick Lamar, about creating an NFT collection with imagery from Playboy’s 1976 David Bowie interview. Martin found the process “very collaborative” and eventually landed on three images with corresponding Bowie quotes, each relating to sex, drugs or rock-and-roll.
In October, Playboy launched a different sort of NFT project—the Rabbitars—and instantly knew it had a hit on its hands. The company has since sold 11,953 of the cartoon rabbit tokens, costing $900 at minting, with one Rabbitar, Midsummer Night Queen, selling for a record of roughly $47,000 in November. The Rabbitars have different furs, accessories and clothing and each grants its owner access to events and perks. Webber calls the Rabbitars the “new keys to what the Playboy Club of the 21st century can be.”
A selection of Playboy’s Rabbitar NFTs.
Images courtesy Playboy. Art by Mike Sullivan.
So far, the community of Rabbitar owners is highly engaged. Case in point: Moe Faux, the pseudonymous owner of eight cartoon rabbits. A longtime collector of vintage Playboy magazines, Faux was initially drawn to the “freaking adorable” look of the Rabbitars. (“Bored Apes aren’t cute,” she said. “They’re kind of yucky looking.”) She purchased her first two, sight unseen, in October, and her collection has only grown since. Her most expensive one cost $1,400.
“It was a big purchase for me. I don’t have a lot of money to throw around,” says Faux, who makes a living walking dogs and bartending in Los Angeles. “I thought, this is an investment into something I’m going to enjoy that will most likely retain its value or even increase.” Soon Faux also became invested in the Rabbitar community itself, making friends in Playboy’s 84,000-member Discord channel.
Another Rabbitar owner, who goes by the name Fat Doinks (the moniker stems from his penchant for rolling “big blunts”), also purchased his Rabbitar after moving from New York to Miami. He now owns two Rabbitars, each of which he bought for around $800. “My fiancée has a lot of family and friends [in Miami], but I don’t really have anyone. So I wanted to go and find a community, find some like-minded people,” he says. “I’m engaged, but I love sex. I believe sex sells and I believe Playboy just has an illustrious name.”
Doinks became an active member of the Discord channel and eventually was approached by Playboy to become a paid “community moderator,” orienting new members and answering NFT questions. As a Rabbitar owner, Doinks also gets access to events, both in person (attending Playboy’s Miami Art Basel parties) and in the metaverse (where Playboy hosted a Rabbitar Christmas soirée). He was also offered an invitation to Centerfold’s Miami launch party, which he called “bananas”—guests included singer Charli XCX and actress (and Kanye West ex) Julia Fox.
Rich Greenfield, a general partner at LightShed Ventures who has invested in digital-media companies like Cameo and Wondery, noted that in a crowded NFT marketplace, an authentic and engaged community is essential for success. “What the internet is powerful about is it can connect fans around content,” Greenfield says. “And the ability for NFTs to be a way of gating that and making it so that you can really create a community among your most passionate fans—that’s really interesting.”
In Webber’s light-filled office inside Playboy’s Los Angeles headquarters, a stack of Playboy magazines sits on a stool behind her desk. After I ask about them, Webber picks up the December 2019 issue from the top of the pile. One of the magazine’s final print issues, the cover features a vintage-style topless photo of a woman with blond hair, artfully holding playing cards to cover herself. “There’s an article in this one that [Communications Director Megan Jordan] and I were looking at last night. It was by Jamilah Lemieux and it was on the role of the Playmate,” she says. The piece is exemplary of the conversations Webber wants the new Playboy to spark, asking consumers to think about issues of consent and to question established gender roles.
Indeed, much of working on the post-print Playboy involves contending with the brand’s original slogan, “Entertainment for Men.” In other words, it’s cleaning up the mess left by Hefner, unraveling a value system that often objectified rather than empowered its subjects, while maintaining the type of critical thinking that encouraged writers like Margaret Atwood and Gabriel García Márquez to publish their work in the magazine. Playboy’s history is predatory and abusive at its worst, but liberating and brilliant at its best—the challenge for Webber is to discard the bad parts while holding onto the good.
Maybe this new Playboy ends up looking like a cartoony, digital world, populated by animated rabbits. Or maybe it looks like Playboy’s Cardi B–hosted Art Basel party, where “cake and strawberries could be eaten off the nearly naked models in a downstairs dining room,” according to The New York Times, and where “Jaret Leto could be overheard in the garden talking about NFTs with friends.”
But this sharp turn into the metaverse will not come without its challenges. “Legacy media companies generally don’t lead, they follow,” says LightShed’s Greenfield. “They usually wait to see what works and then try to jump on whatever that quote unquote bandwagon is. They generally are not first movers.”
For Centerfold especially, Playboy is exceptionally late to the game. OnlyFans launched in 2016 and Instagram has been churning out “thirst traps” for a decade. Of course, the appeal of a brand that emphasizes sex positivity is not to be undersold, especially when many creators on the platform are themselves sex workers. But scaling this vision will be an uphill battle. “It’s very, very difficult to compete with massive established platforms, whether that’s Instagram, whether that’s TikTok,” Greenfield says. “Launching a consumer app in 2021, you’re fighting just massively scaled companies, and so it’s just very hard and it takes a tremendous amount of capital to be successful.”
Playboy’s CEO, however, seems undeterred. “When you think about this brand and how wide it can go,” Kohn says, referencing Playboy’s offerings from a $900 tequila to gambling properties in India, “I don’t know of another brand that can do that outside of, I would say Disney, that can couple products and experiences together. I can’t think of another one.”
The comparison may be less absurd than it seems. Playboy, like Disney before it, is attempting to jump-start a legacy media brand by combing through valuable intellectual property, updating it for a new audience, and distributing it through new digital channels. Per Kohn, the possible next steps include integrating merchandise into Centerfold, building a Playboy mansion in the metaverse, and expanding blockchain technology “into everything we do.”
After all, on top of the buzzy technology plays and “freaking adorable” rabbit art, there is just something about the pure, unadulterated swagger that the Playboy brand still evokes. Webber sensed it when she donned a Playboy sweatshirt in the office for the first time. “I thought, ‘Why do I feel so badass in this?’” she remembers. “And then I was like, ‘This is it. It works.’”

>>> US Close Dow -0.68% S&P -0.72% Nasdaq -1.23% Russell -0.93% VIX 27.75 -1.28%

Closing Stock Market Summary

The S&P 500 decreased 0.7% on Friday, as risk sentiment remained pressured by geopolitical uncertainty, disappointing growth-stock earnings reactions, and expectations for tighter monetary policy. The benchmark index was down as much as 1.2% intraday and up as much as 0.3%. 

The Dow Jones Industrial Average also declined 0.7% while the Nasdaq Composite (-1.2%) and Russell 2000 (-0.9%) fared slightly worse. 

Ten of the 11 S&P 500 sectors closed lower, with the heavily-weighted information technology sector (-1.1%) exerting influential weakness at the bottom of the standings. The consumer staples sector (+0.1%) was the only sector that closed higher, eking out a 0.1% gain. 

Regarding Russia-Ukraine, the U.S. maintained that a Russian invasion was imminent, even as Russia's foreign minister accepted an invitation to meet with Secretary of State Blinken next week. Mr. Blinken would travel to Europe for the meeting on the condition that there is no invasion of Ukraine. 

With the market closed on Monday for Presidents' Day, buyers preferred to wait and see for what transpires over the long weekend. There was a precautionary trade in the Treasury market, where the 10-yr yield declined four basis points to 1.93%. The U.S. Dollar Index rose 0.3% to 96.09. Oil prices settled lower ($91.21, -0.55, -0.6%). 

The decline in long-term rates provided little relief for the growth stocks, as investors were dismayed to see another round of steep, earnings-driven declines in the space. Roku (ROKU 112.46, -32.25, -22.3%), DraftKings (DKNG 17.29, -4.77, -21.6%), and Redfin (RDFN 22.86, -5.78, -20.2%) each plunged more than 20.0% following their reports. 

The 2-yr yield, meanwhile, held steady at 1.57% as Fed officials continued to prepare the market for rate hikes. 

Briefly, New York Fed President Williams (FOMC voter) said he supports steadily raising rates, starting in March. Cleveland Fed President Mester (FOMC voter) also advocated for a March rate hike, adding it would be appropriate to remove accommodation at a faster pace if inflation doesn't moderate as expected.

Separately, DuPont (DD 78.77, -0.96, -1.2%) agreed to sell the majority of its Mobility & Materials business to Celanese (CE 144.25, -8.00, -5.3%) for $11 billion in cash.

Reviewing Friday's economic data:

  • Existing home sales increased 6.7% m/m in January to a seasonally adjusted annual rate of 6.50 million (consensus 6.08 million). Total sales in January were down 2.3% from a year ago.
    • The key takeaway from the report is the push to buy existing homes in January as mortgage rates increased -- and were expected to increase further. That left unsold inventory at a record low, which is going to keep price pressures elevated and prospective buyers, particularly first-time buyers, facing an affordability pinch in the face of such lean supply for lower-priced homes and higher mortgage rates.
  • The Conference Board's Leading Economic Index decreased 0.3% m/m in January (consensus +0.2%) following a revised 0.7% increase (from 0.8%) in December.

When the market reopens on Tuesday, investors will receive the Consumer Confidence Index for February, the FHFA Housing Price Index for December, the S&P Case-Shiller Home Price Index for December, and the preliminary IHS Markit Manufacturing/Services PMIs for February.

  • Dow Jones Industrial Average -6.2% YTD
  • S&P 500 -8.8% YTD
  • Russell 2000 -10.5% YTD
  • Nasdaq Composite -13.4% YTD