What we’re reading (11/24)
Janet Yellen edition:
“What The Yellen Choice Means For The Economy” (Politico). “In picking former Federal Reserve Chair Janet Yellen to serve as his first Treasury Secretary, Joe Biden is leaning on a well-known figure who is trusted and beloved by most Democrats, respected by many Republicans, acceptable to Wall Street and aligned with the no-surprises approach expected to be a hallmark of the incoming president’s tenure.”
“Yellen Will Confront A Cooling Economic Recovery, Uncertain Stimulus Prospects” (Wall Street Journal). “Janet Yellen, President-elect Joe Biden’s nominee to be Treasury secretary, will confront an economic recovery that appears to be losing momentum and uncertain prospects for additional stimulus from Congress. If confirmed by the Senate, Ms. Yellen would play a key role pushing for more aid for an economy battered by the coronavirus pandemic and related shutdowns, especially if Congress is unable to reach an agreement on a relief package before Mr. Biden takes office on Jan. 20.”
“Janet Yellen Has Excelled At Big Jobs. This Will Be The Hardest One Yet.” (New York Times). “If confirmed by the Senate as Treasury secretary, Janet Yellen will be among the most accomplished people to take over the big office at 1500 Pennsylvania Avenue in the 231-year history of the department. Few people in any era have served at the highest levels of economic policymaking for as long, and with as much distinction. Among other things, she will be the first person to have been the chief White House economist and head of both the Treasury and the Federal Reserve. At the Fed, she played a major role in engineering the longest economic expansion in American history, cut short only by the pandemic.”
“Who Is Janet Yellen, Biden’s Pioneering Pick To Lead The Treasury Amidst A Deep Crisis?” (Washington Post). “President-elect Joe Biden has picked economist Janet L. Yellen, a battle-tested leader who helped the nation recover from the Great Recession, to be U.S. treasury secretary. More recently, Yellen has become a leading voice urging Congress to pass more stimulus to prevent lasting damage from the pandemic. Yellen, 74, has had a long career of breaking glass ceilings for women and handling big crises. If confirmed by the Senate, she would be the first woman to lead the Treasury Department since the institution was founded in 1789.”
“Markets Cheer Yellen Pick For Treasury, Seeing Her Focus On Fixing The Economy And Not Politics” (CNBC). “The first woman Fed chief would also be the first woman Treasury Secretary and faces unprecedented challenges of massive unemployment and a record level of debt, as the government spends even more to reverse the impact of the pandemic during the Biden administration. ‘To me it shows Biden is taking stuff pretty seriously and definitely not pandering to the left. She’s a very serious economic thinker, and they have some very serious problems to deal with,’ said Barry Knapp, director research for Ironsides Macroeconomics.”
What we’re reading (11/23)
“How Venture Capitalists Are Deforming Capitalism” (The New Yorker). “Most professional V.C.s fit a narrow mold: according to surveys, just under half of them attended either Harvard or Stanford, and eighty per cent are male. Although V.C.s depict themselves as perpetually on the hunt for radical business ideas, they often seem to be hyping the same Silicon Valley trends—and their managerial oversight has dwindled, making their investments look more like trading-floor bets.”
“Student Loan Losses Seen Costing U.S. More Than $400 Billion” (Wall Street Journal). “The U.S. government stands to lose more than $400 billion from the federal student loan program, an internal analysis shows, approaching the size of losses incurred by banks during the subprime-mortgage crisis. The Education Department, with the help of two private consultants, looked at $1.37 trillion in student loans held by the government at the start of the year. Their conclusion: Borrowers will pay back $935 billion in principal and interest. That would leave taxpayers on the hook for $435 billion, according to documents reviewed by The Wall Street Journal.”
“Congress Is Eyeing Face Recognition, And Companies Want A Say” (Wired). “Microsoft and IBM sent congratulatory public messages to president-elect Joe Biden this month. Both expressed hope that his administration would ease the nation’s political divisions, and suggested it consider crafting the first federal rules governing face recognition. ‘When it comes to issues such as safeguards for facial recognition, we have no national law at all,’ Microsoft president Brad Smith wrote. ‘We need new laws fit for the future.’ IBM CEO Arvind Krishna told Biden his company was ‘ready to work with you’ on prohibiting use of the technology for ‘mass surveillance, racial profiling, or violations of basic human rights and freedoms.’”
“Snap Is Launching A Competitor To TikTok And Instagram Reels” (CNBC). “Snap on Monday announced the launch of Spotlight, a Snapchat feature that functions like TikTok and Instagram Reels. Spotlight will show users the top snaps that have been submitted for consideration by the app’s more than 249 million daily users in a feed that they can swipe or tap through. Spotlight snaps will play in a continuous loop until users swipe to the next one.”
“‘I’m Hungry’: In-N-Out Fans Clog Traffic, Camp Out For Days As First Colorado Locations Open” (USA Today). “The iconic California-based fast food chain In-N-Out opened its first restaurants in Colorado on Friday, and police say the line at one location led to highway backups as people waited in an hours-long line for their chance to order. ‘Right now we estimate the line to be 1.5-2 miles long & the wait is now 14 hours,’ the Aurora Police Department tweeted Friday afternoon, although police acknowledged the line was so long it was difficult to estimate.”
What we’re reading (11/22)
“Guitar Center Is Filing For Bankruptcy” (CNN Business). “Guitar Center is filing for Chapter 11 bankruptcy, the latest company to go bankrupt during the pandemic that has decimated America's retail sector. The 61-year-old company -- the biggest musical instrument retailer in the United States -- had tried to stay afloat during the coronavirus pandemic by offering virtual music lessons. But Guitar Center was forced to close many of its stores in March during nationwide lockdowns, and it struggled to get customers to buy instruments as the economy headed south.”
“Just In Case The Base Case Goes Bad” (Briefing). “At this point, the stock market has maintained a resolve that one could say is downright heartless, trading up to all-time highs at the same time daily coronavirus cases hit new all-time highs and media reports highlight stressed hospital systems, stressed-out health care workers, and waning capacity in ICUs. That's a potential problem in the making and we don't just mean the coronavirus situation. Investor sentiment is running at high levels and is starting to ring some alarm bells as a contrarian warning sign.”
“Why Some Tech Workers Leaving Silicon Valley Are Changing Jobs” (Wall Street Journal). “For years, high-talent tech workers have been drawn to Silicon Valley, willing to put up with exorbitant housing prices and long commutes to benefit from the skill and experience of their colleagues, and the largess of employers and investors. The result, a culture of entrepreneurialism and inspiration, has been hard to match elsewhere. But the remote-work era ushered in by the coronavirus pandemic is upending not only where tech workers want to live and how much money they can make, but also what kinds of opportunities they are willing to consider.”
“Gap And A Bunch Of Other Retailers Report Earnings This Week. What It Means For Their Stocks.” (Barron’s). “This past week brought earnings from retail heavy hitters, and a slew of reports are due out next week as well. Those results could show how specialty stores are faring even as the big essential stores continue to gobble up market share. Urban Outfitters (URBN) will kick off the week with earnings on Monday, but most reports are due out on Tuesday, including Abercrombie & Fitch (ANF), Best Buy (BBY), Burlington Stores (BURL), Dollar Tree (DLTR), Gap (GPS), and Nordstrom (JWN).”
“Hot Holiday Toys: Baby Yoda, L.O.L. Remix and Nostalgic Favorites” (Washington Post). “Americans may be cutting back on clothing, electronics and travel during the coronavirus recession, but they are spending handsomely on toys. Toy sales have surged 18 percent so far this year, with parents spending more on games, outdoor activities, building sets and crafts to keep children entertained at home, according to NPD Group. Analysts expect that growth to continue into the holidays.”
What we’re reading (11/21)
“‘They Do Not Want To See Him Go’: After Remaking CNN And Antagonizing Trump, Jeff Zucker Eyes The Exits” (Vanity Fair). “The timetable still hasn’t been confirmed, but there’s talk in the upper ranks of WarnerMedia that Zucker is expected to leave CNN in the first quarter of 2021, according to someone familiar with the matter…Zucker’s departure would bring the curtain down on an exhilarating eight-year run that not only revived the network but turned CNN into one of the central characters in the Trump saga.”
“Four Reasons The Stay-At-Home Economy Is Here To Stay” (Wall Street Journal). “Technology has helped make life tolerable in the pandemic. And whenever it becomes normal again to leave the house for work, school and shopping, we won’t be going back to the way it was. What were conveniences before the pandemic now seem necessities that we’re unlikely to give up even after there’s widespread immunity to the coronavirus. And there are a number of reasons this new stay-at-home economy will likely be an important part of the new normal.”
“Investors Finally Reward General Motors’ Shift To EVs Even As It Cut Emerging Mobility Plans” (CNBC). “GM’s stock hit an all-time low on March 18 after confirming plans to temporarily close all U.S. factories due to the coronavirus. The shares have since rallied as the automaker easily beat Wall Street’s earnings expectations in the second and third quarters. Announcements around increasing and accelerating its EV efforts, including the GMC Hummer EV, have boosted the share price as well.”
“The Best Inventions Of 2020” (Time). Unsurprisingly (and deservedly), mRNA vaccines and the Johns Hopkins Coronavirus Resource Center made the list. But lots in categories ranging from “beauty” to “transportation” and everything in between.
“How One Airline’s Pandemic Hurt Becomes Everyone’s Pain” (New York Times). “From check-in through takeoff and landing, travelers with Virgin Atlantic end up interacting with hundreds of other companies the airline has hired to provide the services and goods that make up a smooth flying experience. It is the same with most big airlines. Virgin doesn’t cook the in-flight food, or print the menus, or build the business-class seats, or de-ice the wings, or unload the baggage at the airport, or return your luggage when it gets lost; it hires companies to do these and many more tasks. But eight months after governments closed their borders and imposed travel restrictions to stop the spread of the coronavirus, lockdown restrictions have only partially eased and a second wave of the pandemic has besieged Europe, stamping out tourism.”
What we’re reading (11/20)
“Dividends Are Down, But They Are Vastly Better Than Expected” (New York Times). “There were predictions by Goldman Sachs, among others, that dividends would fall by more than 20 percent, cutting payouts to investors by hundreds of millions of dollars. Well, it hasn’t turned out that way. Dividends are down, yes, after years of steady and substantial gains. But with little more than a month to go in 2020, the total decline for dividends in the benchmark S&P 500 stock index is likely to have amounted to less than 1 percent — 0.67 percent, more precisely.”
“Mnuchin Decision Cuts Fed Lending Power, But Sources Say Emergency Programs Can Be Revived” (CNBC). “Treasury Secretary Steve Mnuchin’s decision to allow several of the Fed’s emergency lending programs to expire on Dec. 31 will dramatically reduce the central bank’s ability to backstop the financial system….Mnuchin announced Thursday he will not extend the Fed’s programs that used Congress’ CARES Act funds. Created in response to the financial panic that accompanied the lockdowns in the spring, those programs gave the Fed the ability to lend up to $4.5 trillion into various financial markets. Mnuchin argued it was the intent of Congress for the funds to expire.”
“Goldman Sachs Says Commodities Poised For Bull Market” (Reuters). “Goldman Sachs on Wednesday maintained its ‘overweight’ recommendations for commodities in 2021, reasoning the sector was possibly the best hedge against likely inflation and poised for another bull market. The bank forecast a return of about 27% over a 12-month period on the S&P/Goldman Sachs Commodity Index (GSCI), with a 19.2% return for precious metals, 40.1% for energy, 3% for industrial metals and a negative 1% return on agriculture.”
“If You Think Only E-Retailers Use Your Data, Think Again” (Real Clear Markets). “Major retailers and grocers all use data to determine which products to carry when, which generics to sell, and how to sell more or particular items. Aldi partners with Nielsen to gather customer data, while Kroger partners with Microsoft. Walmart was the third largest spender on information technology in the United States in 2018, and Amazon provides data to their sellers. All of this data provided to these companies is used for growth, to determine trends and shifting needs of a customer base.”
“Lumber Prices Rise Again, Defying the Normal Seasonal Slowdown” (Wall Street Journal). “Lumber prices are making an unusual late-season climb, thanks to builder-friendly autumn weather and suppliers stocking up for what they expect to be another big year for home construction. Lumber futures have shot up 24% so far in November, closing Thursday at $616.90 per thousand board feet. That’s a lot lower than the record $1,000 hit this summer during America’s pandemic-induced lumber binge. But it is nearly 90% more than the typical price for boards delivered in January.”
What we’re reading (11/19)
“6 Reasons Bitcoin Is Trading At Its Highest Level Since 2017 — and 1 Warning” (MarketWatch). “The popular digital currency, which is arguably one of the most polarizing in financial markets, is approaching heights not seen since the frenzied rush into cryptocurrencies three years ago. Bitcoin’s price on Wednesday briefly hit an intraday peak at 18,358.98, and was pulling back in recent trade but still on pace for the fourth-highest finish in its history since December 2017, when the asset briefly flirted with $20,000 before collapsing in dazzling fashion, according to Dow Jones Market Data, based on a 7 p.m. Eastern close.”
“Jobless Claims Filings Pick Up Amid Continued Struggles For Labor Market” (CNBC). “The pace of workers filing for unemployment claims picked up last week and was a bit higher than Wall Street had been expecting. Jobless claims totaled 742,000 for the week, the Labor Department reported Thursday, ahead of the 710,000 estimate from economists surveyed by Dow Jones.”
“China Borrows At Negative Rates For The First Times” (Wall Street Journal). “Superlow interest rates in Europe helped China to sell its first negative-yielding debt, as it raised about $4.7 billion in a three-part deal in euros. The debt sale drew robust demand, aided by China’s rapid return to economic growth after tackling the coronavirus and the relative scarcity of Chinese bonds denominated in the common currency.”
“SEC Enforcement Against Public Cos. Hits 6-Year Low In 2020” (Law360). “The number of SEC enforcement actions filed against public companies declined to a six-year low in fiscal year 2020, with a significant slowdown in new filings during the early phases of the COVID-19 pandemic. The U.S. Securities and Exchange Commission launched 61 actions against public companies and subsidiaries during the fiscal year that ended on Sept. 30, down from a record 95 cases filed in 2019 and marking the lowest level since 2014, according to a report released Wednesday by Cornerstone Research and New York University's Pollack Center for Law & Business.”
“AQR To Liquidate Some Funds After ‘Persistent Outflows’” (Institutional Investor). “AQR Capital Management is slimming down, this time in the mutual fund world. Next month, the alternative investment firm plans to shut down several liquid alternative mutual funds, including a multi-strategy alternative fund, high- and low-volatility funds, and a volatility risk premium strategy, and according to Securities and Exchange Commission filings.”
What we’re reading (11/18)
“What We Must Do To Rebuild” (Deutsche Bank Research). In a new report, Deutsche Bank proffers that governments should tax employees that work from home: “People who can WFH and disconnect themselves from face-to-face society have gained many benefits during the pandemic. A five per cent tax for each WFH day would leave the average person no worse off than if they worked in the office. It could raise $49bn per year in the US, €20bn in Germany, and £7bn in the UK. That can fund subsidies for the lowest-paid workers who usually cannot work from home.”
“Americans’ Mortgage Debt Soars To A Record $10 Trillion” (CNN Business). “Low interest rates have helped fuel a boom in the US housing market: Last quarter Americans' mortgage debt climbed to a record high of nearly $10 trillion, the Federal Reserve Bank of New York reported Tuesday. Homebuyers are leveraging the near-constant new lows in rates. At the beginning of this month mortgage rates fell to a record low -- the 12th record low in 2020.”
“Boeing 737 Max Is Cleared By F.A.A. To Fly Again” (New York Times). “The Federal Aviation Administration on Wednesday cleared the way for Boeing’s 737 Max to resume flying, 20 months after it was grounded following two fatal crashes blamed on faulty software and a host of company and government failures.”
“Tesla To Join S&P 500, Spark Epic Index Fund Trade” (Reuters). “Tesla Inc is set to join the S&P 500 in December, a major win for Chief Executive Elon Musk that boosted the electric car maker’s shares 14% on Monday in anticipation of a $51 billion trade by index funds adjusting their holdings. S&P Dow Jones Indices announced that the company would join the S&P 500 index prior to the opening of trading on Dec. 21, potentially in two tranches making it easier for investment funds to digest. ‘(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,’ S&P Dow Jones Indices said.”
“If Congress Doesn’t Act, 12 Million Americans Could Lose Unemployment Aid By The End Of The Year” (Washington Post). “Deadlines set by Congress early in the pandemic will result in about 12 million Americans losing unemployment insurance by the year’s end, according to a report released Wednesday — a warning about the sharp toll that inaction in Washington could exact on the economic health of both individual households and the economy at large.”
What we’re reading (11/17)
“Amazon Launches Online Pharmacy” (Wall Street Journal). “Amazon.com Inc. said Tuesday customers can buy prescription medications through a new store on its platform, a move that comes as more people grow increasingly accustomed to shopping online. The news weighed on shares of other drugstore companies Tuesday before the market opened. Shares of CVS Health Corp. were down 8.5% premarket, while shares of Walgreens Boots Alliance Inc. were off 11.2%. Shares of Amazon were up 2.4%.”
“Walmart Earnings Top Expectations As Customers’ New Shopping Habits Send E-Commerce Sales Soaring 79%” (CNBC). “Walmart reported third-quarter earnings on Tuesday that topped Wall Street’s expectations as customers continued to shop online and sent U.S. e-commerce sales soaring by 79%. The discounter said customers are embracing the new ways of shopping they adopted during the global health crisis. As the holiday shopping season begins, instead of browsing store aisles, more of them are shipping purchases to their homes, getting groceries dropped off at their doors or picking up online purchases by the curbside.”
“Recession With A Difference: Women Face Special Burden” (New York Times). “For millions of working women, the coronavirus pandemic has delivered a rare and ruinous one-two-three punch. First, the parts of the economy that were smacked hardest and earliest by job losses were ones where women dominate — restaurants, retail businesses and health care. Then a second wave began taking out local and state government jobs, another area where women outnumber men. The third blow has, for many, been the knockout: the closing of child care centers and the shift to remote schooling. That has saddled working mothers, much more than fathers, with overwhelming household responsibilities. ‘We’ve never seen this before,’ said Betsey Stevenson, a professor of economics and public policy at the University of Michigan and the mother of a second grader and a sixth grader. Recessions usually start by gutting the manufacturing and construction industries, where men hold most of the jobs, she said.”
“Fund Managers Have Hopped On The Rotation-To-Value Trade, Latest Bank Of America Survey Shows” (MarketWatch). “News that two coronavirus vaccines have been effective — as well as a relatively smoothly run U.S. election — have sparked a big switch into energy financial and travel stocks…[a] total of 216 panelists running $573 billion in assets under management participated in the survey, which ended on Nov. 12, which was after drugmaker Pfizer announced its vaccine effectiveness but before biotech Moderna did.”
“How Copart Is Making A Billion Dollars From A Junkyard” (Forbes). “‘We took a relatively unsophisticated business where they were selling cars over an oral auction, and turned that into a business that receives a hundred billion dollars a year in bids and is doing 100% of it online,’ says Copart’s 51-year-old CEO, Aaron ‘Jay’ Adair, in a Zoom call with the company’s founder — and his father-in-law — Willis J. Johnson, 73. ‘Nobody has to be at our yard,’ adds Johnson. ‘When we're having an auction online, it doesn't matter if Florida is having a tornado; we’re selling cars.’”
What we’re reading (11/16)
“Moderna’s COVID-19 Vaccine Shines In Clinal Trial” (NPR). “A second COVID-19 vaccine now also appears highly effective in preventing illness following exposure to the virus that causes the disease. The biotech company Moderna, Inc., said Monday that its experimental vaccine was 94.5% effective in preventing disease, according to an analysis of its clinical trial. The news comes a week after Pfizer and BioNTech said their vaccine was more than 90% effective.”
“SEC Chairman Jay Clayton To Leave Agency At End Of 2020” (Wall Street Journal). “The head of the Securities and Exchange Commission will step down at the end of the year, the agency said Monday, the latest in a wave of planned departures as power changes hands in Washington. SEC Chairman Jay Clayton, a political independent nominated by President Trump, plans to leave the agency after 3½ years.”
“PNC To Buy U.S. Operations of Spanish Bank BBVA For $11.6 Billion” (CNBC). Spanish financial group BBVA has agreed to sell its U.S. business, BBVA USA Bancshares, to PNC Financial Services Group for $11.6 billion, the American firm announced Monday…[t]he new company will have a coast-to-coast presence in 29 of the 30 largest markets in the U.S., PNC said Monday. The all-cash deal is the second-largest U.S. banking acquisition since the 2008 financial crisis, according to Reuters, and values the American business at 19.7 times its 2019 earnings and 1.34 times its book value as of September 2020.”
“Walmart Retreats From Japan By Selling Most Of Its Stake In Seiyu Supermarkets” (CNN Business). “Walmart is retreating from Japan, giving up on a near 20-year attempt to crack the grocery market in the world's third largest economy. Walmart (WMT) is selling most of its stake in Japanese supermarket chain Seiyu to KKR and Rakuten (RKUNF) in a deal that values Seiyu at 172.5 billion yen ($1.6 billion). The deal will give private equity fund KKR majority ownership of Seiyu with a 65% stake, Japanese e-commerce leader Rakuten will own 20% and Walmart will hold on to 15%, the companies said in a statement on Monday.”
“SpaceX Launches Four Astronauts To International Space Station” (NBC News). “SpaceX launched four astronauts to the International Space Station on Sunday on the first full-fledged taxi flight for NASA by a private company. The Falcon rocket thundered into the night from Kennedy Space Center with three Americans and one Japanese, the second crew to be launched by SpaceX.”
What we’re reading (11/15)
“The Meaning Of RCEP, The World’s Biggest Trade Agreement” (The Economist). “The process has been as agonising as the name is clunky. But the 15 Asian countries that on November 15th signed the Regional Comprehensive Economic Partnership (RCEP) in a virtual ceremony in Hanoi can at least congratulate themselves on breaking some records. RCEP is the world’s largest plurilateral trade agreement. It would have been bigger still had India not withdrawn a year ago. After eight years of what Malaysia’s trade minister, Mohamed Azmin Ali, called ‘negotiating with blood, sweat and tears,’ the remaining countries have achieved a victory for regional co-operation at a time when covid-19 has ravaged the global economy.”
“Bond Investors Win Big Betting On U.S. Consumer” (Wall Street Journal). “Investors who bet U.S. consumers would keep paying debts this year are reaping a windfall as households spend less and save more against the backdrop of a still-ailing national economy. Bonds backed by consumer loans returned about 10% through October, according to data from Citigroup Inc., making them one of the top-performing investments of 2020. Prices for the so-called asset-backed securities have soared as consumers bucked expectations and responded to the coronavirus pandemic by paying down debt at a rapid clip.”
“Waiting For The Next Big Trade With Jeffrey Gundlach” (Real Clear Markets). “Jeffrey Gundlach, CEO of DoubleLine Capital, has evolved his investment style over the years, and although he is still the ‘bond king,’ increasingly he has become multi-asset with a focus on getting the macro right. In this interview with Real Vision CEO Raoul Pal, Gundlach explains how he thinks about time frames, position sizing based on asset class, and how his style changes based on whether the market is alpha or beta driven.”
“A Better Model For Economic Forecasting During The Pandemic” (Harvard Business Review). “There is a monumental need for timely and reliable economic forecasts. In lieu of them, policymakers and businesses are increasingly turning to real time alternative data sources, like mobility data from Apple and Google, or credit card transaction data. While valuable, these data sources lack important context and connectivity to larger economic trends….[e]ven so, reliable forecasting is possible right now. The missing ingredient is an enhanced understanding of consumers’ changing needs, attitudes, and behaviors. With this in mind, we’ve developed an approach that renders consistently accurate forecasts, even in uncertain times, by combining forward-looking consumer sentiment with real time transaction data.”
“Belgian Racing Pigeon Fetches Record Price of $1.9 Million” (U.S. News & World Report). “A wealthy Chinese pigeon racing fan put down a record price of 1.6 million euros ($1.9 million) for the Belgian-bred bird, saying a lot more than merely what kind of money can be made in the once-quaint sport, which seemed destined to decline only a few years back.”
What we’re reading (11/14)
“Home Prices Are Rising Everywhere In The U.S.” (Wall Street Journal). “Home prices rose in every corner of the U.S. during the third quarter, as the pandemic boosted activity in a way not seen in recent history….[t]his broad-based rally for single-family homes marked the first time since 1980 that every metro area tracked by NAR posted an annual price increase in the same quarter, NAR said. Back then, the association tracked 19 metro areas. ‘Americans are viewing their home as something more than what it was before,’ as they spend more time at home due to the pandemic, said Lawrence Yun, NAR’s chief economist. ‘Right now there is a greater interest for larger-size homes, and naturally they are more expensive.’”
“Morgan Stanley Says Housing Discrimination Has Taken A Huge Toll On The Economy” (CNBC). “In addition to its human toll, racial housing inequality is exacting an economic price that has cost nearly 800,000 jobs, $400 billion in tax revenue and prevented about five million from owning homes, according to a Morgan Stanley analysis. Disparities in home ownership are a root cause of wealth disparities across society, the Wall Street firm said in research that also looked at the rising unaffordability of rental housing and how that fits into the broader issue.”
“Disney+ Passes 73 Million Subscribers As Streaming Takes Center Stage” (New York Times). “Disney on Thursday reported an 82 percent decline in quarterly operating income, the result of steep losses at its coronavirus-devastated theme park division and the postponement of major movie releases. But Wall Street had already decided that Disney’s overall results for the quarter, the fourth in the company’s fiscal year, would be “apropos of nothing,” as Todd Juenger, an analyst at Sanford C. Bernstein, wrote in a Nov. 2 research report. Investors are confident that Disney’s theme park empire will come roaring back when a vaccine is deployed — and all they really care about, at least for the moment, is streaming, streaming, streaming.”
“This Company Conquered The Ice Cream Market. Home Delivery Is The Final Frontier” (CNN Business). “The Anglo-Dutch firm has gone on to acquire some two dozen other major ice cream brands, including Klondike and Ben & Jerry's, while pioneering its own Magnum line. It sells ice cream in 63 countries around the world and commands almost a fifth of global ice cream sales, a bigger share than its next four competitors combined, according to market research firm Euromonitor. Unilever is now the undisputed king of ice cream. But as the coronavirus pandemic rages on, and lockdowns persist, the company is taking inspiration from the delivery tricycles of its early years to conquer one final frontier: ice cream delivered to your home, on demand.”
“Many Boomers Still Own Too Much Stock: Fidelity” (Yahoo!Finance). “Fidelity released an update on its retirement trends for the third quarter, a snapshot of the activity in the company’s 30 million retirement accounts. Due to the market’s upswing over the spring and summer since the initial coronavirus crash in March, the company reported a record-number of 401(k) millionaires. But the company found a worrisome trend continuing: there are many baby boomers who own too much stock. The company said that 38% of its boomer cohort, now age 56 to 74, had more stock than recommended for their age group…[s]even percent of boomers with retirement accounts at Fidelity actually have 100% stock in their retirement account. Around a third of boomers have moved savings into “more conservative investments,” the company said.”
What we’re reading (11/13)
“ECB’s Lagarde Has ‘Hunch’ Digital Europe Will Launch In 2-4 Years” (CoinDesk). “‘We might well go in that direction,’ Lagarde said Thursday on a virtual panel with Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey. ‘My hunch is that it will come.’ ECB officials have previously disclosed they are conducting research into a central bank digital currency, and Bank of Finland Governor Olli Rehn told Reuters last month he believes a digital euro is “very likely” to debut in the next decade.
“More High-Yield Muni Borrowers Are Defaulting But Investors Still Want In” (Wall Street Journal). “Covid-19 is wreaking havoc on the market for risky municipal bonds. Investors desperate for tax-exempt yield are still piling in. Fixed-income returns that come with a tax break have become so precious to affluent American households that they are willing to overlook a spike in defaults, growing reports of repayment trouble and contagion risks of communal living projects. The S&P Municipal Bond High Yield Index is now only about 1% lower than its pre-coronavirus pandemic level, despite falling 15% in March as global shutdowns roiled the market.”
“DoorDash Release Filing To Go Public, Reports $149 Million In Losses On Revenue Of $1.9 Billion Through September” (CNBC). “DoorDash, the leading food delivery app in the U.S., filed its IPO prospectus with the Securities and Exchange Commission on Friday. The company will list its shares on the New York Stock Exchange under the symbol ‘DASH.’ DoorDash reported $1.9 billion in revenue for the nine months ended September 30. That’s up from $587 million during the same period last year. As its revenue grew, DoorDash also narrowed its net loss to $149 million over the same nine month period in 2020. In 2019, DoorDash had a net loss of $533 million over the nine month period.”
“Miami Hedge Fund Manager (Allegedly) Used Investor Funds In Vey Miami Way” (Dealbreaker). “From the sound of it, Coral Cables Asset Management chief David Coggins wasn’t much of a hedge fund manager. This might have proven a surprise to his investors, what with the ‘Performance Sheets’ trumpeting’“37 months of positive monthly performance’ and a ‘perfect 2017,’ both of which are hard to reconcile with an account overdrawn to the tune of $1,180, according to the SEC. It would not have been a surprise to the accountant who Coggins allegedly asked to simply ‘put your company logo on it and sign off on it that’s it.’”
“The Oracle of Britney” (Vanity Fair). “In 2008, following a very public mental health crisis whose shaved head is burned into the psyche of many millennials and Gen Z’ers, Spears, then 26, had control of her welfare handed over to her father (depending on the state, it’s a conservatorship or a guardianship). Jamie Spears was authorized by the California Superior Court to control his daughter’s finances, health care, and aspects of her daily routine. The conservatorship was initially temporary. Twelve years later, it’s still in place.”
What we’re reading (11/12)
“Pfizer’s CEO Sold $5.6 Million In Stock The Day He Announced Promising Vaccine News” (CNN Business). Here’s a possible example of a basic idea that goes back a long time in finance: if you believe a company’s executives have better information than the market about the company’s prospects, then their trading behavior may be informative of value. In other words, when managers are selling (or companies are issuing), that could be because the stock is in fact overvalued. A counterpoint is that they could just be monetizing their stock awards to get some liquidity.
“Deposit Rates Are Taking A Pandemic Nosedive” (Wall Street Journal). “Banks are paying a pittance on deposits, but customers don’t seem to care. Some banks are slashing deposit rates. Others are keeping already-low rates at next to nothing, sometimes 0.01%. But customers keep stashing cash at banks anyway. Big banks can afford to be stingy because they already are awash in deposits. Total deposits at U.S. commercial banks have swelled to about $15.9 trillion, up from about $13.2 trillion at the start of the year, according to the Federal Reserve.”
“DoorDash, Roblox, Wish And Airbnb All Expected To Go Public Before Year’s End, Sources Say” (CNBC). “Between early and mid-December, public investors will likely get their first crack at buying stock in food delivery provider DoorDash, e-retailer Wish and kids gaming company Roblox, according to people familiar with the matter. Airbnb is also expected to file its prospectus by early next week, putting the room-sharing company in position to hold its market debut after Thanksgiving, said two of the people. Filings are expected by next week, though the timing could change based on market conditions, said the people who asked not to be named because their plans are private.”
“After A Long Ride, Harley-Davidson Is Leaving India” (New York Times). “Harley-Davidson, the proudly American company, is giving up on India because of weak sales, after more than a decade of pursuing a huge but ultimately frustrating place to do business…[t]he closure has dealt a blow to India’s ambitions to lure manufacturers, a campaign modeled on China’s success called ‘Make in India.’ It has set back Harley-Davidson’s efforts to expand its popularity overseas. And it strands a small but devoted group of Harley devotees who are wondering how they will keep their prized rides rumbling.”
“Straight Talk With Hank Paulson: Ray Dalio” (Paulson Institute). A 42-minute conversation between former U.S. Treasury Secretary Hank Paulson and Bridgewater Associates founder Ray Dalio.
What we’re reading (11/11)
“U.S. Prepares For Worst Four Months Of The Pandemic As It Stares Down The ‘Darkest’ Days Yet” (CNBC). “There’s been an ‘unprecedented spike’ in Covid-19 hospital admissions in Ohio. ICU beds in Tulsa, Oklahoma, are full. North Dakota’s hospitals don’t have enough doctors and nurses. And hospital administrators in Iowa are warning that they are approaching their limits.”
“ExxonMobil’s Failure To Go Green Could Worsen Its Financial Future” (TexasMonthly). “In 1999, Enron CEO Jeff Skilling mocked ExxonMobil, the largest U.S. oil and gas company, calling it a ‘dinosaur.’ Yet Exxon lumbered on, churning out steady profits, even after Enron collapsed in bankruptcy two years later and Skilling went to prison for fraud. But now, as the planet continues to heat up, COVID-19 has blasted into Exxon’s finances like some giant asteroid.”
“First-Time Homebuyers Hit Lowest Level Since 1987” (Yahoo!Finance). “Economists predicted that 2020 would be the year of the millennial homebuyer. But with record-high home prices, first-time homebuyers actually comprised less of the market in 2020 than they did last year. Only 31% of homes bought this year were purchased by first-time buyers, compared to 33% last year. It’s the lowest share since 1987, according to a new study by the National Association of Realtors (NAR).”
“$250 Billion Wiped Off Chinese Tech Stocks As Beijing Signals Crackdown” (CNN Business). “Fears that Beijing could tighten the screw on China's biggest tech companies have wiped hundreds of billions of dollars off their stock market value in just two days. Shares in Alibaba (BABA) and JD.com (JD) have plunged more than 10% each in Hong Kong trading since Tuesday, putting both stocks on track for their worst week ever.”
“Elon Musk’s Totally Awful, Batshit-Crazy, Completely Bonkers, Most Excellent Year” (Vanity Fair). “In 2020, the COVID-doubting, media-hating Twitterholic CEO became the third-richest man alive, SpaceX launched two astronauts into orbit, and Tesla became the most valuable car company on the planet. Inside the mind of Silicon Valley’s most vainglorious villain.”
What we’re reading (11/10)
“In The Race For A Covid-19 Vaccine, Pfizer Turns To A Scientist With A History Of Defying Skeptics—And Getting Results” (STAT News). Great article (from August) about Kathrin Jansen, the scientist leading the charge for Pfizer on the coronavirus vaccine front—an effort we (and markets) learned yesterday has been a massive success.
“A Dodgy Deal Helped Make Him A Billionaire. It Worked, Until Now” (Washington Post). “Over the past five years, Robert F. Smith became one of the nation’s most prominent billionaire philanthropists….[t]hroughout this munificence, though, Smith had a secret: He’d played a role in what federal prosecutors allege was the biggest tax evasion scheme in U.S. history, an effort by his longtime associate, Texas billionaire Robert Brockman, to hide $2 billion from tax authorities in an offshore scheme featuring a computer program called Evidence Eliminator and code names such as ‘Redfish’ and ‘Snapper.’”
“GM Plans To Hire 3,000 New Workers To Deepen Tech Expertise” (Wall Street Journal). “General Motors Co. plans to hire 3,000 new workers to bolster its engineering and software-development expertise, the latest auto maker to bulk up on tech talent as competition with Silicon Valley intensifies for the future automobile. GM said Monday the hiring will start now and continue through the first quarter of next year, focusing mostly on filling positions in engineering, IT and design, where the company is trying to operate more virtually in its development of vehicles.”
“Why The S&P 500’s Return Over The Next 10 Years Will Be Nothing Like The Last 10” (MarketWatch). “Kevin Lansing, a research advisor at the Federal Reserve Bank of San Francisco…developed a model that predicts where the Cyclically Adjusted Price Earnings Ratio (CAPE) will be at any given time. While this model historically has been impressively accurate, a big divergence has emerged over the past few months between the actual CAPE ratio and the model’s prediction. If the model is right, then the U.S. market is due for a sizeable drop.”
“The European Union Wants One More Tussle With Trump” (Dealbreaker). “Imagine the cost to purchase a jumbo jet and ship it across the Atlantic. Now add 15%. The European Union announced yesterday it will proceed with $4 billion of annual tariffs on Boeing aircraft and other U.S. goods, the latest retaliation in a protracted trade battle.”
What we’re reading (11/9)
“Pfizer's COVID Vaccine Candidate Shown To Be 90% Effective In Early Findings” (USA Today). “In a major boost to vaccine development, Pfizer and its collaborator BioNTech released early study results Monday indicating that their vaccine, BNT162b2, prevented more than 90% of infections with the virus that causes COVID-19. In the newly released data on the first 94 trial participants to come down with COVID-19, the vaccine was found to be more than 90% effective in preventing the disease. Half the participants received a placebo and half the vaccine, so the new data shows that more people who received the placebo than the vaccine came down with COVID-19.”
“Zoom And Other ‘Stay-At-Home’ Stocks Are Getting Crushed On The Positive Vaccine News” (CNBC). “Shares of Zoom Video fell sharply on Monday morning as names benefitting from people staying at home due to the coronavirus pandemic lost their appeal following the release of positive coronavirus vaccine data. Zoom Video traded more than 15% lower in the premarket. Fellow “stay-at-home” stocks Amazon and Netflix dropped 3.4% and 5.4%, respectively. Teladoc Health slid 6.4% and Shopify declined by 5.1%.”
“While the Pandemic Wrecked Some Businesses, Others Did Fine. Even Great.” (New York Times). “Perhaps most surprising: Some companies that had feared for their lives in the spring, among them some rental car businesses, restaurant chains and financial firms, are now doing fine — or even excelling. Wall Street analysts expect earnings to rebound to a record high next year. And, over all, 80 percent of companies in the S&P 500 stock index that have reported third-quarter earnings so far have exceeded analysts’ expectations, said Howard Silverblatt, senior index analyst for S&P Dow Jones Indices.”
“Affordable Care Act’s Fate Goes Before A Reconstituted Supreme Court on Tuesday” (MarketWatch). “Republican attorneys general in 18 states, backed by the Trump administration, are arguing that the whole law should be struck down because of a change made by the Republican-controlled Congress in 2017 that reduced the penalty for not having health insurance to zero. A court ruling invalidating the entire law would threaten coverage for more than 23 million people. It would wipe away protections for people with preexisting medical conditions, subsidized insurance premiums that make coverage affordable for millions of Americans and an expansion of the Medicaid program that is available to low-income people in most states.”
“With Pick For Treasury Secretary, Biden Will Tip Hand About His Economic Agenda” (Washington Post). “President-elect Joe Biden faces a crucial decision in the coming weeks that could dictate how he plans to run his administration and shepherd the nation’s economy: whom to nominate as treasury secretary. A leading candidate for the post is Federal Reserve governor Lael Brainard, who served as a senior Treasury Department official in the Obama administration. Brainard has broad policymaking experience, particularly during economic crises, as well as wide respect among international foreign ministries and central banks from her time as the department’s top diplomat.”
What we’re reading (11/8)
“This Election’s Winners And Losers” (Bloomberg). Interesting opinion from GMU economics prof. Tyler Cowen. Among the winners: “American Democracy.” As Cowen writes, “[m]aybe this one is premature, but so far the U.S. has held a closely contested election under pandemic conditions. Turnout was much higher than usual, and so far there hasn’t been much election-related violence. Could it be that the system really works?”
“Jeff Bezos, Bill Gates and Other Tech Luminaries React To Biden’s Victory” (CNBC). “Tech CEOs and Silicon Valley luminaries congratulated President-elect Joe Biden and Vice President-elect Kamala Harris after their victory in the U.S. presidential election Saturday. Amazon CEO Jeff Bezos celebrated Biden and Harris’ win in an Instagram post. Bezos said their victory signifies that ‘unity, empathy and decency are not characteristics of a bygone era.’ […] Microsoft founder Bill Gates, who has been a vocal critic of Trump’s coronavirus response, said he looked forward to ‘working with the new administration and leaders on both sides in Congress on getting the surging pandemic under control.’”
“Prospering In The Pandemic, Some Feel Financial Guilt And Gratitude” (Wall Street Journal). “Feelings of financial guilt have plagued many prospering in the uneven economic recovery. In some cases, those emotions along with gratitude are changing spending behavior. ‘Some of my clients have expressed feelings of survivor’s guilt, wondering why they are doing so well when others aren’t,’ said Sue Peck, a financial planner in Madison, Wis. As Friday’s jobs report showed, the labor market is healing but the recovery still has a ways to go. The unemployment rate and the 11 million people out of work are still double pre-pandemic levels.”
“The Digital Nomads Did Not Prepare For This” (New York Times). “Americans have never been especially good at vacation. Before Covid-19, they were leaving unused hundreds of millions of paid days off. They even created a work-vacation hybrid — the workation. The idea: Travel to a nice place, work during the day and then, in theory, enjoy the scenery in the off hours. In pandemic times, the digital nomads have simply made workation a permanent state. The bad news is it’s the worst of both worlds. They should be enjoying themselves in their new, beautiful surroundings. But they can’t enjoy themselves, because work beckons. The anxious self-optimization pingpongs between ‘Why aren’t I living my best life?’ and ‘Why aren’t I killing it at work?’”
“Secularization And The Tribulations Of the American Working-Class” (Brian Wheaton, Harvard). Potentially fascinating working paper by a Ph.D. candidate at Harvard. From the abstract: “[o]ver the past several decades, working-class America has been plagued by multiple adverse trends: a sharp increase in social isolation, an even sharper increase in single parenthood, a decline in male labor force participation rates, and a decline in generational economic mobility – amongst other things. Material economic factors have been unable to fully explain these phenomena, often yielding mixed results or – in some cases, such as that of single parenthood – lacking explanatory power altogether. I study the decline in religiosity and…find that religious decline has a strong adverse effect on the aforementioned variables. […] I find that, for most outcomes, the bulk of the effect is driven by religious attendance.”
What we’re reading (11/7)
Biden wins!
“Joe Biden Wins 2020 Presidential Election” (Wall Street Journal). “Joe Biden will be the next president of the United States after crossing 270 electoral votes, the Associated Press said, following a campaign in which he focused on tackling the coronavirus pandemic and pledged to unite a deeply divided nation that voted in record numbers on each side. The AP declared Mr. Biden the 46th president after saying he had won Pennsylvania four days after Election Day polls closed.”
“Biden Wins Presidency, Ending Four Tumultuous Years Under Trump” (New York Times). “Joseph Robinette Biden Jr. was elected the 46th president of the United States on Saturday, promising to restore political normalcy and a spirit of national unity to confront raging health and economic crises, and making Donald J. Trump a one-term president after four years of tumult in the White House.”
“Joe Biden Triumphs Over Trump As Voters Repudiate Divisive, Bullying President” (Washington Post). “Joseph Robinette Biden Jr. was elected the nation’s 46th president Saturday in a repudiation of President Trump powered by legions of women and minority voters who rejected his handling of the coronavirus pandemic and his divisive, bullying conduct in office.”
“Joe Biden Will Be 46th President Of The United States, AP Projects; Trump Disputes Results” (Chicago Tribune). “Democrat Joe Biden defeated President Donald Trump to become the 46th president of the United States on Saturday, positioning himself to lead a nation gripped by a historic pandemic and a confluence of economic and social turmoil. His victory came after more than three days of uncertainty as election officials sorted through a surge of mail-in votes that delayed the processing of some ballots. Biden crossed 270 Electoral College votes with a win in Pennsylvania.”
“Joe Biden Elected President, Trump First Incumbent Defeated In Nearly 30 Years” (Los Angeles Times). “Joe Biden was elected the 46th president of the United States on Saturday when Pennsylvania delivered the electoral votes he needed to claim the White House, ending a vitriolic campaign that sorely tested the nation amid a pandemic and deep partisan divisions. In a brief statement, Biden said he and running mate Kamala Harris were “honored and humbled” by their victory and renewed a call for unity.”
What we’re reading (11/6)
“Wall Street Went From Fear To FOMO In A Week Everything Rallied” (Bloomberg). “No wonder stock bulls are taking a breather in Friday trading: An everything rally has taken over Wall Street this week even as the market action defies expectations heading into the U.S. election. More than $4 trillion has been added to global equity markets since Monday, putting it on track for the third-biggest week of 2020.”
“Drop In Jobless Rate Shows Healing U.S. Labor Market” (Wall Street Journal). “The U.S. labor market continued to rebound in October, as employers added 638,000 jobs and sent unemployment down sharply amid signs the economy is healing from the pandemic-induced downturn. Jobs grew for the sixth straight month, the workforce expanded and the unemployment rate fell a percentage point to 6.9%, the Labor Department said Friday.”
“An Iowa Airport Has A Plan To Screen Passengers For The Coronavirus. It’s Being Held Up By The FAA.” (Washington Post). “The Federal Aviation Administration has for months been weighing whether to allow the nation’s more than 500 federally subsidized airports to spend their money on screening passengers for the coronavirus, an issue teed up by a plan developed by a fairly small airport in Iowa. Marty Lenss, director of Eastern Iowa Airport in Cedar Rapids, began working on the plan in the spring, when the spread of the virus and lockdown orders brought air travel to a near standstill…But months after Lenss started work, no passengers have been screened. Airport funds are tightly controlled by federal rules, so Lenss started asking the Federal Aviation Administration (FAA) in May if his plan qualified. He’s still waiting for an answer.”
“U.S. Wholesale Inventories Revised Higher In September” (Reuters). “U.S. wholesale inventories were higher than initially estimated in September as sales barely rose, government data showed on Friday. The Commerce Department said wholesale inventories gained 0.4% in September, instead of dipping 0.1% as estimated last month. Stocks at wholesalers increased 0.5% in August. The component of wholesale inventories that goes into the calculation of gross domestic product rose 0.4% in September. Inventories were down 3.9% in September from a year earlier.”
“The Average Millennial Has $27,251 In Non-Mortgage Consumer Debt—Here’s How They Compare To Other Generations” (CNBC). “Millennials are the generation with the fastest growing debt load, which isn’t surprising when you consider this cohort is increasingly having children, buying homes and continuing to pay off their student loans. According to the Experian 2020 State of Credit report, the average millennial consumer has about $27,251 in non-mortgage debt…Experian reports that the $27,251 in non-mortgage consumer debt includes any revolving credit or installment loans, including credit cards, student loans, car loans and/or personal loans.”
What we’re reading (11/5)
“Americans Were Given The Coronavirus Option To Raid Their 401(k). Most Didn’t” (Wall Street Journal). “Despite the financial toll of the coronavirus pandemic, few American households have raided their retirement accounts to make ends meet. Faced with the prospect of surging unemployment and a declining economy, Congress in March passed a law that temporarily allows Americans to use their retirement money today. But so far, there hasn’t been a rush of funds out of accounts. Fidelity Investments, the largest 401(k) provider in the country, has seen 4.6% of eligible people take some money out through Sept. 30 due to the virus.”
“Here’s Why The Stock Market Is Rallying Even Though The Election Outcome Is Still Uncertain” (CNBC). “The lack of a blue wave makes higher taxes and more regulation less likely, and that’s enough to rally stocks for now…traders are betting on a split Congress with a Republican Senate and Democratic House. Some Senate races were still uncalled Wednesday, and several key states were still counting votes and too close to call. Stocks bounced higher Wednesday, led by the Nasdaq which rose 3.9% as big tech, like Amazon and Apple surged.”
“As ‘Blue Wave’ Chances Crash, Wall Street Warms To Divided Government” (New York Times). “After weeks of buying and selling stocks on the expectation that Democrats would sweep both the White House and Congress in a ‘blue wave,’ Wall Street investors lost little time in returning to their traditional political posture: Gridlock is good. On Wednesday, bleary-eyed investors, traders, executives and analysts who had stayed up until the wee hours tracking election results predicted that Joseph R. Biden Jr. was likely to eke out a presidential victory while Republicans maintained their grip on the Senate and Democrats continued to hold the House. The resultant divided government seemed like it could be good for business: Stock and bond prices went sharply higher, with the S&P 500 closing up 2.2 percent.”
“Stocks Build On Post-Election Rally As Presidential Race Inches To A Finish” (Washington Post). “Stock indexes pointed Thursday to a third straight day of gains for Wall Street as the U.S. presidential election inched closer to conclusion. Moments after the opening bell, the Dow Jones industrial average was up nearly 400 points, or 1.5 percent, at 28,282. The S&P 500 index leaped 1.6 percent, to 3,499, and the tech-heavy Nasdaq rose nearly 1.8 percent, to 11,793, as investors flocked back to tech after recent sell-offs. The S&P and Nasdaq both notched their best post-election day performance on Wednesday.”
“Jeff Bezos Dumped $3 Billion Worth Of Amazon Stock” (CNN Business). “Jeff Bezos sold more than $3 billion worth of his Amazon stock this week, taking advantage of a 75% surge in his company's value this year. The Amazon CEO didn't explain why he sold so many shares, but he regularly sells off his stock, often using it to fund his Blue Origin space company and other ventures.”