Intersting thoughts

[Bozzie]

Global Market Comments August 2, 2021 Fiat Lux Featured Trade: (MARKET OUTLOOK FOR THE WEEK AHEAD, or TAKING A BREAK) (AAPL), (AMZN), (FB), (MSFT), (TSLA), (JPM), (TLT), (SPY)

​ The Market Outlook for the Week Ahead, or Taking a BreakWhen things can’t be better, they really can’t get any better, and there is no upside left. As I expected, big tech companies announced earnings for the ages, the top four totaling a staggering $56.6 billion in profits in Q2, or $226.4 billion annualized. That compares to total US Q1 profits of $2.347 trillion. Then their stocks fell apart, with Amazon leading the charge to the downside. To say tech earnings were impressive would be a vast understatement, with Apple (AAPL) coming in at $21.7 billion, Amazon (AMZN) at $7.8 billion, Facebook (FB) at $10.4 billion, and Microsoft (MSFT) at $16.7 billion. However, since we are in the “What have you done for me lately” business, what do we have to look forward in August? Covid cases are soaring nationally tripling off the 15,000 a day lows of a month ago. The delta variant is twice as contagious and twice as fatal as earlier ones. Mask mandates are back in the big cities, pushing back economic growth and a jobs recovery out into 2022. The least vaccinated stated are seeing hospital systems overwhelmed once again. School reopenings are now an unknown, and if they do, it will be with masks. I sent my kids to a Boy Scout camp this week. On the second day, two unvaccinated staff members tested positive for delta and the county immediately shut the place down, sending home 500 disappointed scouts and parents. Dreams of long sought merit badges went up in smoke. The same thing is happening across the entire economy. The next three months are historically the worst performing of the year, generating an average 0.03% over the last 100 years. Inflation reports are going to remain high for the rest of the year. The Fed has a new reason to keep interest rates a zero for longer, bad for banks, brokers, commodities, and industrials. Oh, and the next round of spectacular tech earnings are three months away. There is another factor in play. Investors have made the most money in their lives over the last 16 months, including me. The temptation to take the money and run is strong and irresistible. Traders have visions of Ferraris dancing in their eyes. This alone would bring on an overdue 5%-10% pull back. So what is the smart thing to do here? Sell all your short-term positions but keep all your long-term positions and LEAPS. The market isn’t going down enough to justify the round-trip expenses and capital gains taxes. If you have new cash flows keep it in money market funds. People will be shocked by the speed and viciousness of the coming selloff. But when it occurs, the best buying opportunity in a year will be on its knees begging for your attention. It may feel cataclysmic, another Armageddon, and like the end of the world, but it won’t be. After all, we have seen no less than 36 10% corrections in my lifetime. The investors who hung in made the most money every single time. I’ll tell you when we hit bottom with a raft of new LEAPS recommendations, provided I can get them out fast enough. The Fed stands pat, keeping overnight rates at 0%-0.25%. The delta variant has pushed the taper off three months, but Jay Powell gave the barest of hints that it is the next step to take. We have 9 million unemployed and 9 million job openings but there is a massive skills gap, with jobless waitresses and retails in over supply and coders and artificial intelligence specialist sought after. It’s all the result of 40 years of under investment in our education system. US Q2 GDP comes in at 6.5%, one of the strongest in economic history, but less than forecasts that were as high as 10%. Supply chain restraints we the main explanation for the shortfall. All that does is push growth into 2022, when people CAN get parts and labor. In the meantime, personal consumption soared by 11.8%, the hottest report since 1952, proving the demand is there. Covid Cases triple from recent lows to 43,700 a day. Blame the delta variant, which originated in India, and now accounts for 86% of new cases. Twice as contiguous, with a greater fatality rate and more long-term effect, delta is prompting the return of mask mandates in several cities. Only the unvaccinated are affected. This could be the trigger for the next correction. Smart phones will deliver the next big chip shortage, even if the chip shortage for cars abates. The bad news? There are 22 times more phones produced each year than cars, 1.4 billion versus only 64 million in 2020. Out of the frying pan and into the fire. S&P Case Shiller smashes all records, up 17% YOY for national home prices. Phoenix (25.9%), San Diego (24.7%), and Seattle (23.4%) lead. These numbers are past “extraordinary.” Expect it to continue. New Homes Sales plunge to 676,000, down 6.6% on a signed contract basis, but prices are up 6%. Inventories are up from 5 months to a still low 6.5 months. Shortages of land, labor, and materials are still the big issue. Pending Home Sales drop 1.9% in June on a signed contract bases. High prices are curing high prices, with the Case-Shiller National Home Price Index up 17% YOY. The south and west posted the biggest declines. Single family homes have dropped for three months in a row to a one year low. China meltdown continues, with the Beijing government apparently withdrawing from western capital markets. It’s all about showing the world who is in charge and punishing the billionaires by destroying their stocks. They are wiping out $1 trillion in equity per day and don’t care if you get hit as well. Cathy Wood’s Ark Innovation ETF (ARKK) is dumping everything they have. Avoid China at all cost. Tesla announces first $1 billion profit in Q2, despite losing $23 million in Bitcoin. That is 10X the year ago report. They could have made a lot more if they had more chip supplies. The energy business brought in a rapidly growing $800 million in revenues. The Austin and Berlin Gigafactory’s are coming online at the end of the year, allowing them to scale globally. The Cybertruck is on hold and production of Powerwall’s cut back until they can get more chip supplies, creating extreme shortages. Buy (TSLA) on dips. There’s a 10X from here. Tesla claims No.2 auto sales spot in Europe in June, just behind Volkswagen’s Golf, and beathing Daimler Benz, Audi, Fiat, and Renault. The company shipped 25,697 Model 3’s, which is perfect for the continent’s tight spaces, short distances, and green preferences. Big government subsidies to switch from internal combustion engines helped too. Tesla Profits​ Bitcoin tops $40,000 in a massive short covering rally. Tesla may start taking the crypto currency as payment for new vehicles and Amazon (AMZN) may get into the game as well. While China is studying way to make a digital yuan (CYB) and Europe a digital Euro (FXE), the US congress sees such a move as pointless. Robinhood IPO (HOOD) Bombs, trading down as much as 12% from its $38.00 IPO price. That leaves it with a still impressive $29 billion market capitalization, a fifth the size of Morgan Stanley. What happens when individuals get their allocations? No “diamond hands” here. It looks like a “BUY” after it drops by half opportunity, just like Tesla after its IPO. The facilitator of meme stock frenzies has best ever year is behind it, or until we get another pandemic. The company has already paid $127 million in fines and almost went under in January. Avoid (HOOD) for now. My Ten Year View When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come! My Mad Hedge Global Trading Dispatch saw a modest +0.61% in July. My 2021 year-to-date performance appreciated to 69.21%. The Dow Average was up 14.16% so far in 2021. I stuck with my four positions, a long in (JPM) and a short in the (TLT) and a double short in the (SPY). I bled all the way until Friday, when big hits to tech stocks took the (SPY) down and edging me up to a positive return for July. That leaves me 60% in cash. I’m keeping positions small as long as we are at extreme overbought conditions. That brings my 11-year total return to 491.76%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 12.15%, easily the highest in the industry. My trailing one-year return retreated to positively eye-popping 107.72%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives. We need to keep an eye on the number of US Corona virus cases at 34.9 million and rising quickly and deaths topping 613,000, which you can find here. The coming week will bring our monthly blockbuster jobs reports on the data front. On Monday, August 2 at 7:00 AM, the Manufacturing PMI for July is published. NXP Semiconductor (NXP) reports. On Tuesday, August 3, at 7:30 AM, Factory Orders for June are released. Amgen (AMGN), Eli Lily (LLY), and Alibaba (BABA) report. On Wednesday, August 4 at 5:30 AM, the ADP Private Employment Report is published. Uber (UBER) and General Motors (GM) report. On Thursday, August 5 at 8:30 AM, Weekly Jobless Claims are announced. Square (SQ) reports. On Friday, August 6 at 8:30 AM, we get the Nonfarm Payroll Report for July. Berkshire Hathaway (BRKB) reports. As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie. My family summer vacation that year was on the slopes of Mount Rainier in Washington state. Since it was raining every day, the other kids wanted to go home early. So my parents left me and my younger brother in the hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for his story). The deal was for us to hitch hike back to Los Angeles when we got off the mountain. In those days, it wasn’t such an unreasonable plan. The Vietnam war was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself. When we got off the mountain, I looked at the map and saw there was this fascinating country called “Canada” just to the north. So, it was off to Vancouver. Once there, I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east. We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, inseminating cows, and eating steak three times a day. I made friends with the cowboys by reading them their mail, which they were unable to do. There were lots of bills due, child support owed, and alimony demands. In Saskatchewan, the roads ran out of cars, so we hopped a freight train in Manitoba, narrowly missing getting mugged in the rail yard. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards ad, the wind blowing through your hair! When the engineer spotted us on a curve, he stopped the train and invited us to up the engine. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth. Our last ride into Montreal offered to let us stay in his boat house as long as we wanted so there we stayed. Thank you, WWII RAF bomber pilot Group Captain John Chenier! Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion. The pay was $1 an hour and all we could eat. At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answer 20, and my brother answered 21. “Well, there’s my inventory problem” she replied. And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her? I had to allow two weeks to hitch hike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t. We developed a system where my parents could keep track of us. Long distance calls were then enormously expensive. So, I called home collect and when my dad answered he asked what city the call was coming from. When the operator gave him the answer, he said he would not accept the call. I remember lots of surprised operators. But the calls were free, and dad always knew where we were. We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far has Seattle with only three days left until school started. Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment. I haven’t stopped traveling since, my tally now topping all 50 states and 135 countries. And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night, our last ride of the day took us home and provided us with an extra bedroom or a garage to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride. It was the adventure of a lifetime and am a better man for it. Stay healthy. John Thomas CEO & Publisher The Diary of a Mad Hedge Fund Trader Summit of Mt. Rainier 1967​ McKinnon Ranch Bassano Alberta 1967​ American Pavilion Expo 67​ Hamburger Stand at Expo 67​ Picking Cherries in Michigan 1967​ ​ ​ ​ ​ ​ ​ ​

Quote of the Day“There are no great men, only great challenges that ordinary men are forced by circumstances to meet,” said WWII Admiral “Bull Halsey. [FONT=Arial, Helvetica, sans-serif][/FONT][FONT=Arial, Helvetica, sans-serif] [/FONT]

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[Bozzie]

August 3, 2021

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Chuck Schumer, the Senate majority leader, is preparing for a long week.Jim Lo Scalzo/EPA, via Shutterstock

[h=2]The $1 trillion infrastructure bill, in short[/h]

The bipartisan infrastructure plan, drafted during a marathon weekend session in the Senate, may go to a vote in the chamber this week. It is just over 2,700 pages long, with allocations for everything from broadband and bridges to ports and pedestrian crossings, plus proposals for how to pay for it all.

You can read the entire bill here (before amendments), or get the gist from our handy top-line summary and links:

About $110 billion will go on roads, bridges and transportation programs. Pedestrian commuting, projects that reduce collisions between cars and wildlife, and a federal program intended to encourage children to walk or bike to school all get funding. But it adds up to a small fraction of what’s needed to address a $786 billion backlog of repairs for roads and bridges alone, according to the American Society of Civil Engineers.

There’s $73 billion for a clean-energy makeover of the electric grid. That is much less than what President Biden sought for projects like electric-vehicle charging stations and green public transport. There are also billions of dollars for climate resilience programs, such as flood control, and funding for investment in new technologies, including carbon capture.

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Some $65 billion is budgeted for broadband in rural areas and programs to help low-income city dwellers who can’t afford high-speed internet. Biden initially proposed $100 billion to close that so-called digital divide.

Amtrak gets $66 billion and a new mandate. The bill will address rail’s significant repair backlog. Also, Amtrak’s mission would change to “meet the intercity passenger rail needs of the United States” rather than achieving “a performance level sufficient to justify expending public money.” That implies that profit is no longer the top priority.

The bill repurposes more than $200 billion in pandemic relief. The package redirects money once dedicated to expanded jobless benefits, small-business loans and other emergency aid. Some fiscal watchdogs say the supposed savings are budgetary gimmicks. As aid expires or is redirected, the economic challenges from a surge in the Delta variant of the coronavirus cloud the economic outlook for the months ahead.

Cryptocurrency advocates are fretting. A provision intended to raise about $28 billion in taxes from crypto transactions sent lobbyists scrambling. Despite already winning some concessions, crypto supporters said the language in the bill would define most participants in the sector as brokers, including Bitcoin miners, prompting onerous tax disclosures.

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The coronavirus could delay the bill’s passage. Senator Lindsey Graham, Republican of South Carolina, announced yesterday that he had tested positive for the coronavirus. (His symptoms are mild, which he attributed to being vaccinated.) He has gone into a 10-day quarantine, and if infections spread to other supporters of the bill, it may cost the votes required to pass the legislation, delaying a vote into the Senate’s planned August recess.

[h=3]HERE’S WHAT’S HAPPENING[/h]

The White House is trying to slow evictions after a federal moratorium expired. Key to the effort is encouraging states to speed up rental assistance: So far, $3 billion has been dispersed from a $47 billion fund authorized by Congress in March.

New York urges businesses to require vaccines, while other cities and states reimpose mask mandates. As the Delta variant of the coronavirus surges, Gov. Andrew Cuomo said it was in the “best interest” of bars and restaurants to mandate inoculations for admission. Elsewhere, Louisiana and San Francisco reintroduced indoor mask mandates.

An official at the National Labor Relations Board recommends a redo of the Amazon union vote. Workers at an Amazon plant in Alabama voted two-to-one not to form a union, but if the board follows the hearing officer’s recommendation, the union could restart the effort. Amazon said it would defend the original result, which the union said was marred by company interference.

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Bill Gates and Melinda French Gates make their divorce official. Details of the couple’s separation agreement were not made public, unlike in the recent divorce of Jeff Bezos and MacKenzie Scott. Questions remain over how, or indeed whether, Mr. Gates and Ms. French Gates can continue to work together at their giant charitable organization, the Gates Foundation.

The I.M.F. approves its biggest-ever aid injection to fight the pandemic’s economic effects. Much of the $650 billion allocation will go to nations long helped by the institution, but as much as $275 billion was earmarked for the world’s poorest countries. The move was rejected by the Trump administration, but it gained U.S. support after President Biden took office.

[h=2]What C.E.O.s talk about when they talk about inflation[/h]

It’s peak earnings season on Wall Street. Nearly 300 companies in the S&P 500 have reported their latest quarterly profits, with the rest set to open their books in the next two weeks. Bottom lines are way up from a year ago, but the hottest topic is inflation.

Analysts at Bank of America said that the word “inflation” was getting an average of two mentions per earnings conference call — unlike in previous quarters, when rising prices rarely came up. Inflation in labor costs was the most common concern, the analysts said.

Here’s what some executives have been saying:

“We know what happens in an inflationary environment, don’t we?” said Carol Tomé, the C.E.O. of UPS. “Price increases get passed along all the way to the end to the consumer until the consumer says, ‘Ouch, I’m not going to buy any more.’”

“The wage increase that we normally would do in October we pulled forward into May,” said Brian Olsavsky, the C.F.O. of Amazon. “We’re spending a lot of money on signing and incentives. And while we have very good staffing levels, it’s not without cost.”

“We’ve seen unprecedented increases in commodities, particularly lumber, over the last 12 to 18 months. Our anticipation and our plan was that that would decelerate throughout the back half of this year,” said David Denton, the C.F.O. of Lowe’s. “Is it going to happen over a six-week time frame, over a five-month time frame? Hard to predict that.”

Inflation, for now, is more of a drag on executives’ moods than on the bottom line. Second-quarter earnings are up 85 percent from last year for S&P 500 companies, and profit margins are at record highs, according to FactSet. That means, for now, that talk of inflation is rising faster than prices themselves.

[h=2]“While I’m neutral on the technology, even intrigued — I spent three years teaching it, leaning into it — I’m not neutral about investor protection.”[/h]

— Gary Gensler, the S.E.C. chairman who previously taught a course about blockchain technology at M.I.T., in an interview with Bloomberg Businessweek about his plans for regulating cryptocurrencies. “Gensler signaled that his deep interest in the subject doesn’t mean he’s simpatico with the hands-off oversight approach that many enthusiasts would like to see,” Robert Schmidt and Benjamin Bain write.

Penguin Random House​

[h=2]Three takeaways from a new history of Tesla[/h]

A new book, “Power Play: Tesla, Elon Musk and the Bet of the Century” by Tim Higgins of The Wall Street Journal, chronicles Tesla’s journey from near financial ruin to seller of the most popular electric car in the world. Musk has already called the book, out today, “false and boring,” but Walter Isaacson had a more positive take in The Times’s review. Here are three things in the book that caught our eye:

The book claims that Musk (maybe) asked Tim Cook to make him C.E.O. of Apple. At the time, Tesla was struggling with quality problems in the Model X and Apple with its own electric-car program. Cook tested the waters about an acquisition. Musk said he would only consider a deal in which he’d be C.E.O. — not of Tesla, but of Apple. Cook responded with an expletive, and hung up the phone. On Twitter, Musk said he had never spoken with Cook. The book itself is cautious in relaying the exchange, recounting it as a story that Musk told others. “Whether or not this was an accurate recounting, it’s hard to imagine Musk was serious about wanting to be C.E.O. of Apple,” Higgins writes. “Rather, the story played into Musk’s vision of Tesla becoming on par with Apple.”

Musk often clashed with executives. In one of the book’s most vivid examples, Musk fired Tesla’s deputy head of manufacturing, Josh Ensign, after a worker demonstrated how to fix an irritating screeching sound made by the Model X’s windows. The factory had yet to make a Model X flawlessly, and was under enormous pressure because of optimistic production goals Musk had shared with investors. “Musk erupted at Ensign: How the [expletive] do you have somebody in your organization that knows the solution?” Higgins writes. Ensign did not want to embarrass the worker by telling Musk that engineers had already tested the solution and found it to be only a temporary fix.

Tesla has tried to get Musk to stop tweeting. “Power Play” vividly recounts Musk’s 2018 public meltdown beginning with his attempt to intervene in the rescue of a boy’s soccer team trapped in a flooded cave in Thailand and ending with him smoking weed on Joe Rogan’s podcast. (Here’s the excerpt in Vanity Fair.) An internal memo fretted that investors saw Musk’s tweets as proof that he was “distracted from Tesla’s main business,” and staff suggested a break from Twitter. Shortly thereafter, Musk tweeted that he was considering taking Tesla private, setting off an S.E.C. investigation. “A less brash executive might have been chastened,” Higgins writes. “But amid all of this, Musk returned to Twitter.”

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[h=3]THE SPEED READ[/h]

Deals

The actor Reese Witherspoon sold her production company, Hello Sunshine, to a Blackstone-backed firm for $900 million. (WSJ) PepsiCo plans to sell Tropicana and other juice brands to the private equity firm PAI Partners in a deal reportedly valued at $4.5 billion. (WSJ) Google is dropping Qualcomm to build its own smartphone processors. (CNBC) A SPAC-on-SPAC deal (it’s complicated) involving the pharma firms Immunovant and Roivant fell apart. (Bloomberg)

Policy

Shares of Chinese companies like Tencent plunged after state media called video games “opium for the mind,” signaling that the sector could be next in a widening regulatory crackdown. (WSJ) A new online database will make it easier to track what stocks politicians and their family members are buying and selling. (Business Insider) Germany is testing electrified highways in a bid to reduce emissions from trucks. (NYT) “Don’t Want a Vaccine? Be Prepared to Pay More for Insurance.” (Times Opinion)

Best of the rest

New animal welfare rules could cause a bacon shortage in California. (NBC News) “Clean crypto” is being pitched by a growing group of entrepreneurs who say they have an answer for the industry’s outsize energy use. (Forbes) Trying to address an imbalance between creators and brands, a new app (with an unprintable name) serves as a kind of Glassdoor for online influencers. (NYT)

Thanks for reading! We’ll see you tomorrow.

 

[Bozzie]

Opinon on China...BABA earnings won't satisfied the Street..See Apple.

[h=2]VIEs[/h] You can get a good sense of the differences between American and Chinese financial regulation from the recent troubles of Chinese tech companies listed in the U.S. Some Chinese companies in the internet, ride-sharing, education-technology, etc. sectors have listed in New York, and Chinese regulators have become unhappy about these companies and have reacted by doing things like restricting downloads of those companies’ apps, or forbidding them from making profits. This has been bad for the companies’ stock prices, for what I hope are obvious discounted-cash-flow-related reasons. I do not have any special insight into why Chinese regulators are doing these things, though there are stated reasons — China worries about data security at tech companies, it worries about the social downsides of expensive high-stakes tutoring, etc. — that are plausible enough. And here’s Ray Dalio: In this case the policy makers signaled to DiDi that it might not be best to go ahead with the listing and they understandably want to deal with the data privacy issue. In the case of the educational tutoring companies they want to reduce the educational inequality and the financial burden on those who are desperate to have their children have these services but can’t afford them by making them broadly available. They believe that these things are better for the country even if the shareholders don’t like it. … To understand what’s going on you need to understand that China is a state capitalist system which means that the state runs capitalism to serve the interests of most people and that policy makers won’t let the sensitivities of those in the capital markets and rich capitalists stand in the way of doing what they believe is best for the most people of the country. Rather, those in the capital markets and capitalists have to understand their subordinate places in the system or they will suffer the consequences of their mistakes. For example, they need to not mistake their having riches for having power for determining how things will go. ​ U.S. securities regulators, meanwhile, are in the investor-protection business, and they are unhappy that these Chinese stocks (1) were sold to U.S. investors and (2) went down. But their main, almost only, regulatory tool is disclosure. So when they see a broad swath of Chinese companies’ stocks go down for reasons like “a whole sector is not allowed to make profits anymore,” they naturally think “well this is a risk that should be disclosed.” On the one hand that is a natural thing for them to think. On the other hand it is awkward because … that was a risk that was pretty well disclosed? Like a notable fact about Chinese tech companies listing in the U.S. is that they all disclose pretty clear risk factors to the effect of “we are a Chinese tech company, we are not actually allowed to be owned by foreign investors, we’ve got this rickety structure to get around the rules, we think it works but no one is really sure, and if it doesn’t work all sorts of terrible things can happen and you’ll never get your profits.” The rickety structure is called a “variable interest entity,” we talked about it last month, and it is all pretty well understood and disclosed. Obviously those risks are (were) ignored a lot, but that is not really a failure of disclosure. But the Securities and Exchange Commission does what it does, so here is a “Statement on Investor Protection Related to Recent Developments in China” that SEC Chair Gary Gensler put out last week: In a number of sectors in China, companies are not allowed to have foreign ownership and cannot directly list on exchanges outside of China. To raise money on such exchanges, many China-based operating companies are structured as Variable Interest Entities (VIEs). … For U.S. investors, this arrangement creates “exposure” to the China-based operating company, though only through a series of service contracts and other contracts. To be clear, though, neither the investors in the shell company’s stock, nor the offshore shell company itself, has stock ownership in the China-based operating company. I worry that average investors may not realize that they hold stock in a shell company rather than a China-based operating company. In light of the recent developments in China and the overall risks with the China-based VIE structure, I have asked staff to seek certain disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective. In particular, I have asked staff to ensure that these issuers prominently and clearly disclose: That investors are not buying shares of a China-based operating company but instead are buying shares of a shell company issuer that maintains service agreements with the associated operating company. Thus, the business description of the issuer should clearly distinguish the description of the shell company’s management services from the description of the China-based operating company; That the China-based operating company, the shell company issuer, and investors face uncertainty about future actions by the government of China that could significantly affect the operating company’s financial performance and the enforceability of the contractual arrangements; and Detailed financial information, including quantitative metrics, so that investors can understand the financial relationship between the VIE and the issuer. ​ But those disclosures already exist in every Chinese VIE offering. I quoted some of them last month when we talked about the initial public offering of Didi Global Inc., which ran into trouble with Chinese regulators almost immediately after it went public in New York. “There are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations,” said Didi’s prospectus, about the VIE structure. And if anything changed, it said, “the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation: … revoking the business licenses and/or operating licenses of our PRC entities; … [or] requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIEs.” Now, I suppose tweaks are still possible. For instance Gensler says that “the business description of the issuer should clearly distinguish the description of the shell company’s management services from the description of the China-based operating company,” and most Chinese VIE prospectuses arguably do not do that. “Our journey started on the streets of Beijing,” begins the founders’ letter at the start of Didi’s prospectus. The business section begins, “Our mission is to make life better by transforming mobility.” The prospectus says those things because it is describing a large Chinese ride-sharing company, and ride-sharing companies like to make grandiose claims about changing the world by letting you call a car with an app. But technically the prospectus was not selling shares of that ride-sharing startup to U.S. investors; it was selling shares of a shell company with certain management contracts with that startup. “Our journey started in a Cayman Islands law firm,” a Gensler-approved founders’ letter might start. “We were united by a single dream: Being able to sell shares in a U.S.-listed company that has economic exposure to the Chinese ride-sharing business that we also happen to have founded, while complying with our lawyers’ current interpretation of Chinese laws limiting foreign ownership of certain technology businesses.” And then the whole prospectus would be like that, constantly emphasizing that you are buying shares of a Cayman Islands shell company rather than the underlying Chinese business. And it would be more jarring to read than the actual Didi prospectus, which understandably focuses on the operating business rather than the legal structure. And I suppose that is Gensler’s goal, to make the prospectus more jarring, so that people who read it would be less likely to invest in the Chinese companies in the first place. I do not know if that's a good goal; my assumption is that the people who bother to read prospectuses already knew all of this and decided that Chinese VIE risk was acceptable, while the people who didn’t know all this are not going to read a prospectus anyway. But it might have an effect. If the first sentence of the prospectus was “we are a Cayman Islands shell company providing certain miscellaneous services to a Chinese tech company,” you could imagine journalists saying “a Cayman Islands shell company that provides certain miscellaneous services to a Chinese tech company is going public today,” and you could imagine retail investors hearing that and saying “oh that doesn’t sound very interesting” and passing. You could imagine a stronger approach of, for instance, banning U.S. listings by Chinese VIE companies. (The SEC does seem to have paused them until the disclosure is better.) That would keep U.S. institutional investors out, too, so they couldn’t lose money if China changes its rules. But that has obvious downsides (they can’t make money either, etc.) and is not really how the SEC operates. It’s just going to keep cranking up the disclosure requirements to make its displeasure clearer and clearer. But what you do with that displeasure is up to you. The Chinese approach is rather more drastic. Elsewhere, I guess a lot of investors who lobbied index providers to increase the weighting of China in emerging-market indexes are sad now: An indexing boom that’s gone on for over a decade has coincided with China’s emergence as the world’s second-biggest economy, a confluence that’s driven trillions of dollars into its burgeoning equity market -- often via passive funds. These products track gauges like the MSCI Emerging Markets Index, where the weighting for mainland- and Hong Kong-based stocks has doubled in 10 years to about 35%. Or the MSCI Asia Pacific Index, where their shares account for over a quarter of the market value of all members. In other words, the passive era has put untold billions at the mercy of Beijing’s zeal for reform. ​ But that’s the point of indexing, really; you get exposure to the world’s markets, and everything that they (and their regulators, etc.) do. It would be good to have an index that included only stocks from markets that go up, and not ones that go down, but that’s hard to get. [h=2]Short ARK[/h] Let’s say that you think celebrity stock-picker Cathie Wood is bad at picking stocks, and you want to bet against her. Specifically you think that her flagship actively managed exchange-traded fund, the ARK Innovation ETF (ticker ARKK), will go down, and you would like to make money when it does. How would you do that? One thing you could do is short all the stocks that she buys. You could do that reasonably effectively: ARK is an actively managed ETF, meaning that it changes its holdings unpredictably from time to time, but it does seem to do a pretty good job of disclosing its trading in something like real time. And it’s not like she’s in a high-frequency trading business; she’s betting on broad economic themes rather than minute-by-minute trading dynamics. You could probably get a reasonable inverse of her fund by just watching what she trades and doing the opposite. Still it is more work than the obvious trade. The obvious trade is: ARKK is an exchange-traded fund, which means you can buy and sell shares of the fund on the stock exchange, so you should just sell the fund short. Instead of betting against her by shorting the stocks she buys, just short the shares of her fund. Then every time her fund goes down you will make money, and you never need to adjust your trades or pay attention to her trades. You are automatically betting against whatever she does. This is a standard nice feature of ETFs: If you want to bet on the ETF’s theme or index or manager, you can buy the ETF, but if you want to bet against it you can sell the ETF short. The ETF as a product appeals to both sets of people, people who likesome theme and people who want to bet against it. (The ETF only gets management fees from the former group though.) And in fact Bloomberg tells me that there are about 19.3 million shares of short interest on ARKK, or about $2.3 billion worth of shorts. (Versus about $22.8 billion of longs.) So lots of people do want to bet against Cathie Wood’s portfolio and stock-picking skills, and do, in a straightforward way. Still some ETFs come in two flavors, regular and inverse, where the inverse one generally goes up X% whenever the regular one goes down X%. And if you want to bet against the theme of the regular one you can short it, or you can buy the inverse one. I suppose this is more convenient or less scary for some investors than short selling is. There are also some nice weird synergies for the company offering the ETFs. For one thing, the longs and shorts both pay management fees. Also I suppose you can write a swap on the underlying thing between the long and short funds, reducing the need to actually hold (and short) the underlying thing. You don’t really see inverse funds with actively managed stock-picker ETFs, for what I think are kind of obvious reasons. (If you’re offering that sort of ETF it’s because you think you're a good stock-picker; you’re not indifferently looking to give people exposure either way.) But that doesn’t mean that someone else can’t do it: Those who think Cathie Wood’s hot hand is cooling may soon be able to express that view via an exchange-traded fund. The Short ARKK ETF would seek to track the inverse performance of the $23 billion Ark Innovation ETF (ticker ARKK) -- the largest fund in Ark Investment Management’s lineup -- through swaps contracts, according to a filing Friday with the U.S. Securities and Exchange Commission. The fund would trade under the ticker SARK and charge a 0.75% operating expense, in line with ARKK’s fee. ... SARK would be managed by Matt Tuttle, chief executive officer at Tuttle Capital Management LLC, an issuer of thematic and actively-managed ETFs. “In sum, as ARKK already represents a long exposure to a basket of unprofitable tech stocks, we thought that investors should have access to the short side as well,” Tuttle wrote in an email. “Keep in mind there are a lot of non institutional investors, that cannot short stocks or ETFs or they may have trouble finding a borrow to put on the short.” ​ Rude! Mostly this strikes me as a clever marketing move; surely there are some people who think “Cathie Wood is over-hyped” but who would not go so far as to short her fund, but maybe if someone pitches them an anti-Cathie Wood fund they’ll bite? I dunno. Anyway here's how that will work: The Fund will enter into one or more swap agreements with major global financial institutions for a specified period ranging from a day to more than one year whereby the Fund and the global financial institution will agree to exchange the return (or differentials in rates of return) earned or realized on the ETF. ​ If you are an ETF arbitrageur, it is nice to be able to get long ARKK in many different ways. You can buy the underlying portfolio, or you can buy shares of the ETF, or, now, you can write a swap to SARK and get long ARKK that way. And then your job is to get long the cheapest way and short the most expensive way, so that you are perfectly hedged and make a little profit; Cathie Wood and Matt Tuttle can argue who’s right about stocks, but the arbs make money either way. Elsewhere: “Cathie Wood Is Just a Start as Stock Pickers Storm the ETF World.” Sponsored Content 84% of ultra-high-net-worth individuals collect art. It makes sense —contemporary art appreciated 13.6% per year over the last 25 years vs. 8.9% returns for the S&P 500. Masterworks has fractionalized investments in masterpieces by Basquiat and Banksy. If you're looking for a tangible, non-correlated asset class, check out Masterworks today. (See Disclaimer) Masterworks [h=2]Goldman pay[/h] I dunno man: Goldman Sachs Group Inc. raised pay for its junior investment bankers, among the last of the big Wall Street banks to do so following a presentation by the lender’s own analysts revealing their crushing workloads. First-year analysts at Goldman Sachs will now earn at least $110,000, according to people familiar with the matter. Their second-year counterparts will be paid $125,000, the people said, asking not to be identified discussing a private matter. Pay for first year associates will go to $150,000, they said. ​ Goldman held out so long on the theory that, as one Goldman person put it last month, “If you behave like that [raising salaries] you simply end up with mercenaries.” Goldman’s thing was, we are Goldman, we are special, you don’t come here to maximize your first-year-analyst’s salary, but if you come here and perform well you’ll have special opportunities and get especially rich in due time. We don’t want the people who want to maximize their first-year salaries; we want the special people. “Long-term greedy.” That is, in the abstract, a perfectly plausible theory to have, and it works pretty well for lots of tech startups. But if you are going to have that theory you have to be sure it’ll work for you too? Otherwise you just end up sheepishly raising salaries a month later, and the clear implication is that you couldn’t attract enough of the special people with the lower salaries, because they don’t think you’re special enough. Now you’re just looking for mercenaries. Disclosure, I used to work at Goldman, back when it was special I guess. [h=2]Bored(om) market hypothesis[/h] Last spring I proposed what I usually called the “boredom markets hypothesis.” As I once put it: “a lot of individual investors buy stocks mainly because it’s fun, and ... the more fun stocks are, and the less fun everything else is, the more they’ll buy stocks. In a pandemic, when people can’t really leave their house and sports are canceled, there is a lot less fun to be had elsewhere, so trading stocks seems relatively more fun, so people buy more stocks.” This was not especially rigorous or anything but, you know, look around. The stock market didn’t seem especially rigorous. Stocks were rallying because they went bankrupt. Much of that worked out fine actually, and the bored retail investors often did pretty well, but at the time it felt really weird. It didn’t seem like they were doing rigorous fundamental analysis, a lot of the time. It seemed like they would rather have been watching sports, but there were no sports, so they got their entertainment by trading stocks. Anyway Richard Thaler won a whole Nobel Prize for analyzing why stock markets do dumb things, and he agrees. Here’s an interview that he gave to a Swiss journalist published last week: Professor Thaler, what do you make of current events in the stock markets? As a pioneer in the field of behavioral finance, these must be pretty exciting times. I sometimes play golf with my colleague Gene Fama, and if we were keeping score by what’s going on in the market rather than strokes made, I think I would be winning. Part of what seems to be going on I call the “bored market hypothesis,” because during the pandemic when people were working at home, especially in the beginning, they just had nothing to do. There weren’t even sports on television because all the games were cancelled. So there was nothing to bet on, and many people started individual investing. ​ “As a pioneer in the field of behavioral finance, these must be pretty exciting times” is a very tactful way to say “everything is pretty dumb now isn’t it?” [h=2]NFT opportunity[/h] Here’s a story about a woman who made the only existing audio recording of J.D. Salinger, but who feels bad about it: The author’s memorabilia has proved to be a profitable market: In 1999 author Joyce Maynard sold 14 letters Salinger wrote to the software entrepreneur Peter Norton for $156,500; five years later, 41 letters Salinger had signed sold at Christie’s for $185,000.. But Eppes has refused to sell the tape out of guilt over how she went about getting it. “In the years after I did that, I came to regret it, terribly, terribly. I have spent many, many, many, many hours a day thinking about this. And, of course, it means an awful lot to me,” she says. “Sometimes, I wake up in the middle of the night and I think, ‘I stole that. I stole his voice.’ You know that’s like stealing somebody’s soul, right? That tape is not mine to give or sell.” Not long after our conversation, Eppes called me to let me know she’d updated her will. The tape now will be placed, along with her body, in the crematorium. ​ Burning a unique cultural artifact? You know what that means! It’s the “object-fire-token-money” NFT cycle: You can light a cultural object on fire, and then sell a non-fungible token “of” the former object on the blockchain. You can raise money off the twin demand for (1) Salinger memorabilia and (2) blockchain nonsense, and you don’t even have to let anyone hear his voice. If nobody mints a non-fungible token of this recording then you’ll know the NFT boom is truly over. [h=2]Good succession planning[/h] Here is a story of, not so much a succession battle as a succession surprise, at $1.2 billion family business Scholastic Corp., the kids’ book publisher that was an important part of my and many other people’s childhoods and that publishes “Harry Potter.” Its longtime chief executive officer, M. Richard Robinson Jr., died in June and left control of the company to its chief strategy officer, Iole Lucchese. She has worked there for 30 years, ran the business in Canada and the entertainment division, pushed the company to expand its digital initiatives, and was a close adviser and strategic sparring partner for Robinson. She was also in a longtime romantic relationship with him. He left the company to her. Seems like a reasonable choice, putting the company in the hands of a person who knows it well and who has a good vision for its future? On the other hand this means he did not leave the company to his two sons. The Wall Street Journal gives them some space to make their case for why they should run the company instead of the 30-year veteran chief strategy officer, and it is everything you could hope for: [Younger son] Reece Robinson, [a 25-year-old filmmaker] who has done documentary work, said he tried to be involved with Scholastic but hasn’t worked there full time. “I saw myself as an adviser,” he said. “I didn’t want to sacrifice my early 20s to work at a corporation.” His brother Ben said he operates a sawmill and workshop that produces lumber, flooring and furniture from trees in Martha’s Vineyard and lives off the land, noting in an email, “I fish the fish and cull the deer.” He also describes himself as a writer and “the poet laureate who hasn’t told his story yet.” He roamed the Scholastic headquarters in New York City’s SoHo neighborhood as a child, worked at the Scholastic store as a teenager and dressed up as “Clifford” the dog for a parade. In response to emailed questions, the elder son said his father “valued my perspective in all matters, particularly regarding the trajectory of the company.” He said he told his father in recent years he wanted to be more involved in the company, including “most explicitly my desire to be a member of the Board.” ​ The younger one didn’t want to sacrifice his early 20s working at a corporation, but now that he’s 25 he’d like to run one. The older one lives off the land, but he could also use a board seat if one is available. I love them but I’m glad Scholastic will be run by a grown-up. [h=2]Things happen[/h] Tech Startup Financing Hits Records as Giant Funds Dwarf Venture Capitalists. Hedge funds enter private equity turf with deals for unlisted companies. Square to Buy Afterpay for $29 Billion to Tap Younger Users. Allianz Says U.S. Probe Into Funds Could Hurt Its Results. Fired Executive Says Deutsche Bank’s DWS Overstated Sustainable-Investing Efforts. This 19-year-old earns $54,000 a year mining bitcoin as a full-time job — here’s what it’s like. “A representative for Penguin Random House said the publisher was unable to locate an employee who felt they had ‘the proper insight’ to answer questions about this instance of bar code confusion.” Hamptons homeowners buying second houses for ‘weekend getaways.’ Goose flying upside down is simply showing off, say experts.

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[Bozzie]

Global Market Comments
August 4, 2021
Fiat LuxFeatured Trade:(WHERE THE ECONOMIST “BIG MAC” INDEX FINDS CURRENCY VALUE TODAY),
(UUP), (FXE), (FXY), (CYB)

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Where the Economist “Big Mac” Index Finds Currency Value TodayMy former employer, The Economist, once the ever-tolerant editor of my flabby, disjointed, and juvenile prose (Thanks Peter and Marjorie!), has just released its "Big Mac" index of relative international currency valuations.

Although initially launched as a joke four decade es ago, I have followed it religiously and found it an amazingly accurate predictor of future economic success.

The index counts the cost of McDonald's (MCD) premium two beef patty sandwiches around the world, ranging from $8.35 in Venezuela to $1.68 in Lebanon, and comes up with a measure of currency under and overvaluation.

What are its conclusions today?

The Venezuelan Bolivar is wildly expensive, with 235 years of annual per capita income needed to buy a single Big Mac in local currency terms if you can find one. There are currently 4 million Bolivars to the US Dollar in this sadly bankrupt country.

The Norwegian Kroner, Swiss franc (FXF), and the US Dollar (UUP) are also dear, with the average cost of an American Big Mac at $5.35. Every year, I make a ritual visit to what is often the most expensive McDonald’s in the world at Zermatt Switzerland (see pictures below). There the Big Macs taste slightly acidic.

The cheapest currencies are the South African Rand, the Russian Ruble, and the Lebanese Pound, a Big Mac coming in at $1.68 in Beirut.

I couldn't agree more with many of these conclusions. It's as if the august weekly publication was tapping The Diary of a Mad Hedge Fund Traderfor ideas.

I am no longer the frequent consumer of Big Macs that I once was, as my metabolism has slowed to such an extent that in eating one, you might as well tape it to my ass. Better to use it as an economic forecasting tool than a speedy lunch.

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The Big Mac is a Steal Here in Turkey​

No Bargain Here in Italy Either​

And Costs a King’s Ransome Here in Zermatt​

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Quote of the Day“I’ve drunk to your health in company. I drunk to your health alone. I’ve drunk to your health so many times that I’ve damn near ruined my own, said WWII Admiral “Bull” Halsey.

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[Bozzie]

	Read in Browser
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Top News Rising COVID restrictions Shutterstock​ Companies are taking the lead in adopting mask and vaccine requirements as COVID Delta cases grow and equities remain resilient. A host of headlines about new policies and restrictions hit yesterday, including New York City requiring proof of vaccination for entry to restaurants, gyms and leisure events. But again, most moves came from private companies. Tyson Foods will require its workforce to be vaccinated, JPMorgan (JPM) is re-evaluating its back-to-the-office policies and Microsoft (MSFT) is requiring vaccinations for its returning workforce. In addition, Google parent Alphabet (GOOG, GOOGL) has approved 85% of employee requests to work from home or relocate once its offices open, Bloomberg reports. Amid all those moves, Wall Street put together a rally from midday into the close, with recovery sectors leading the way. All the major averages ended higher, with the S&P 500 (NYSEARCA:SPY), Dow (NYSEARCA:DIA) leading the Nasdaq (NASDAQ:COMP.IND). Strength in cyclicals, which would be the hardest hit on worries about a stalled economic reopening, could indicate that investors feel the economy can weather moves to stem the spread of the Delta variant. That would be in contrast to last month, when the Delta spread was a major reason for sell-side strategists to hesitate on new allocations, according to BofA. Looking for the peak: Thomas Lee of Fundstrat Global Advisors argues the company and locality moves will help by driving up vaccination rates. “Policymaker panic about Delta variant is triggering a vaccination resurgence = good,” Lee writes in a note. “The positive upshot of a panic by policymakers is that more Americans are getting vaccinated. The rise in vaccinations is most evident in states hit hardest by this recent Delta variant. Policymakers panic = good, businesses respond by pushing/mandating masks = good, businesses respond by pushing/requiring vaccinations = good, Americans witness COVID-19 severe illness and get vaccinated = good.” Fundstrat's base case is that the Delta variant surge in the U.S. will peak in August, which it says should encourage investors. “Given August is already a poor liquidity month, a buyers' strike makes markets more turbulent,” Lee says. “But if our base case plays out, August will ultimately be a 'risk on' month and we will chop higher. Thus, the July chop will continue into August, but with an upward bias.” If “the Delta variant does not peak in the next few weeks (as is somewhat expected) then the chances of lockdowns will rise, and that will potentially impact earnings,” Kinsale Trading writes. They point investors to today's ISM Services numbers, out at 10 a.m. ET, where the index is expected to tick up slightly in July from June. If “the Delta variant is causing any sort of headwind on the economy, it’ll show up in the service sector PMI first, as people pullback on eating out, etc,” Kinsale says. Wells Fargo says it does not think the Delta variant will be a “game changer” for the U.S. economy and sticks with its portfolio recommendation to favor cyclicals, especially Industrials (NYSEARCA:XLI) and Materials (NYSEARCA:XLB). (13 comments) Stocks Best beats ever Analysts now expect earnings for S&P 500 (SP500) (NYSEARCA:SPY) companies to be up 90%, up from 65.4% at the start of July, Reuters reports, citing Refinitiv data. And 89% of reports have beaten profit forecasts, the highest ever based on data going back to 1994. "As we enter the second half of the year, we believe companies will continue to build on the earnings recovery displayed in recent quarters, as more areas of the economy adapt and get closer to normal levels of activity throughout the year," BMO strategist Brian Belski says. Six weeks ago, analysts were predicting Q2 S&P 500 earnings of $44.59 per share, but they are now up to $50 and on track to hit $51, according to DataTrek Research. That leaves room for more upside revisions, as analysts are "still being overly cautious" as revenue will continue to grow in the second half of this year and 2022 barring an "exogenous shock," DataTrek says. Softlines Strength: An expert call on U.S. softlines retailers is giving UBS some confidence that the back-to-school shopping season is reading out "very strong," offering a bullish catalyst for several stocks. A call with a former chief merchant from a large department store suggests that with some parts of the country ramping up for the school year, sales growth rates are robust and margins are likely to surprise to the upside as well. For most of the retailers, Q2 has been strong, and they've been able to maintain growth rates (vs. 2019) very close to what they saw in the first quarter. And July sales give a good back-to-school read for the earliest school starters (and sales have been good in those areas). Signs suggest back-to-school shopping started early as well. "With inventory levels low, shoppers have realized they need to buy sooner in order to get the goods they want," analysts Jay Sole and Mauricio Serna write. "Categories such as athletic footwear, apparel, backpacks, and dorm items are all selling very well." (14 comments) Financials Robinhood rally Robinhood Markets (NASDAQ:HOOD) soared nearly 25% to a post-IPO record high Tuesday as the popular investing app’s shares rose for a third straight session following their weak premiere last week on Wall Street. HOOD rose to as high as $48.59 a share Tuesday before pulling back to end at $46.80, up 24.2% on the day. The rally took shares above their $38 IPO price for the first time since a brief pop on the stock’s first trading day last week. Robinhood rose on heavy volume of 86.9M shares, exceeding the 55M shares the stock sold through its initial public offering. HOOD was rallying on little apparent news other than positive comments Monday night from CNBC’s Jim Cramer on his widely watched Mad Money show. “I’m telling you that Robinhood can be bought here,” the market maven said. HOOD has been rebounding ever since the stock fell 8.4% in its first trading session last Thursday. The decline represented a big disappointment for the company, whose IPO was priced at the bottom of its expected $38-$42/share range even though it had been expected to take Wall Street by storm. Lyft: The reopening of the economy proved to be a boon for Lyft (NASDAQ:LYFT), as the company reported second-quarter revenue that topped expectations as consumers flocked back to its ride-sharing services. The company also said it reached another milestone in the quarter by reporting adjusted earnings for the first time, and ahead of schedule. Lyft said EBITDA came in at $23.8 million, compared to a loss of $280.3 million a year ago. Lyft said revenue for the three months ending June 30 reached $765 million - more than double the $339 million the company reported in the year-ago period - and above analysts' forecasts of almost $701 million. Another sign of the company's recovery could be found in its revenue-per-active rider, which came in at $44.63, compared with $39.06 a year ago, suggesting that riders were taking more and longer rides. Active riders also reached 17.1 million, or nearly twice that in last year's second quarter, and up from the 13.5 million active riders Lyft reported for the first three months of 2021. (45 comments) Sponsored By Yieldstreet Put Your Money to Work with Alternatives Give yourself access to alternative investment opportunities once reserved for the ultra-wealthy. Along with investments across art, real estate, legal finance and more, Yieldstreet membership provides you with access to Q&A sessions with asset class professionals, thought leadership on the emerging alt space, and a dedicated investor relations team to help you along your investing journey. Build your portfolio with alternatives bearing typically low stock market correlation, short durations, and low minimums—investments start at $1,000. Join over 270k members who've gained their access to alternatives with Yieldstreet today. Consumer Tutor stocks rebound Chinese tutoring stocks including TAL Education (NYSE:TAL) gained, possibly on reports that China is ordering mass testing in Wuhan due to a COVID outbreak. China suspended flights and trains, canceled professional basketball and announced coronavirus testing in Wuhan earlier on widening outbreak of the Delta variant, according to an AP report. The online tutoring companies may potentially benefit if there are coronavirus-related school closures that force students to go online, a topic that posters were discussing on Stocktwits. The positive moves for the stocks come after the shares have plummeted in recent weeks after China said it would ban for-profit after-school tutoring companies. Earlier this week, TAL and New Oriental announced they would cancel their earnings releases amid the regulatory developments. (7 comments) ​ Today's Markets In Asia, Japan -0.2%. Hong Kong +0.8%. China +0.8%. India +0.9%. In Europe, at midday, London +0.3%. Paris +0.5%. Frankfurt +0.6%. Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq +0.04%. Crude +0.18% at $70.69. Gold +0.18% at $1817.35. Bitcoin -2.1% to $37740. Ten-year Treasury Yield +8 bps to 1.182% Today's Economic Calendar Auto Sales 7:00 MBA Mortgage Applications 8:15 ADP Jobs Report 9:45 PMI Composite Final 10:00 ISM Service Index 10:00 Fed's Clarida: U.S. Economic Outlook and Monetary Policy 10:30 EIA Petroleum Inventories Companies reporting earnings today » What else is happening... Occidental (NYSE:OXY) crushes adjusted earnings estimates as oil prices, volumes rise. Toyota Motor (NYSE:TM) Q1 revenue and earnings beat estimates. Activision Blizzard (NASDAQ:ATVI) rises 3% on Q2 beat-and-raise. Amgen (NASDAQ:AMGN) lowers 2021 earnings guidance despite revenue beat. Lockheed (NYSE:LMT) cuts $4.9B in pension liabilities; CFO Possenriede to retire. Honda Motor (NYSE:HMC) beats on revenue and earnings, FY22 outlook raised. Alteryx (NYSE:AYX) stock slumps after lower than expected guidance. Molson Coors (NYSE:TAP) discontinues Milwaukee's Best Premium and ten other beer brands in streamlining push.

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[Bozzie]

Global Market Comments
August 5, 2021
Fiat LuxFeatured Trade:(THE NEW AI BOOK THAT INVESTORS ARE SCRAMBLING FOR),
(GOOG), (FB), (AMZN), MSFT), (BABA), (BIDU),
(TENCENT), (TSLA), (NVDA), (AMD), (MU), (LRCX)

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The New AI Book that Investors are Scrambling ForA better headline for this piece would be “The Future of You,” as artificial intelligence is about to become so integral to your work, your investment portfolio, and even your very existence that you won’t be able to live without it, quite literally.

Well, do I have some great news for you. A blockbuster book about the state of play on all things AI will be released on September 25, and I managed to obtain and read an advanced copy. It is entitled: AI Superpowers: China, Silicon Valley, and the New World Order by Dr. Kai-Fu Lee.

The bottom line: The future is even more unbelievable than you remotely imagined. We are at the very early days of this giant megatrend, and the investment opportunities will be nothing less than spectacular.

And here is a barn burner. The price of AI is dropping fast as hundreds of thousands of new programmers pour into the field. Those $10 million signing bonuses are about to become a thing of the past.

Dr. Lee is certainly someone to take seriously. He obtained one of the first Ph.D.’s in AI from Carnegie Mellon University. He was the president of Google (GOOG) China and put in stints at Microsoft (MSFT) and Apple (AAPL). Today, he is the CEO of Sinovation Ventures, the largest AI venture capital firm in China, and is a board director of Alibaba (BABA).

AI is nothing more than deep learning, or super pattern recognition. Dr. Lee dates the onset of artificial intelligence to 1952, when an IBM mainframe computer learned to play checkers and beat human opponents. By 1955, it learned to develop strategies on its own.

Dr. Lee sees the AI field ultimately divided into two spheres of dominance, the U.S. and China. No one else is devoting a fraction of the resources needed to become a serious player. The good news is that Russia and Iran are nowhere in the game.

While the U.S. dominates in the original theory and algorithms that founded AI, China is about to take the lead in applications. It can do this because it has access to mountains of data that dwarf those available in America. China processes three times more mobile phones, five times more Internet customers, 10 times more eat-out orders, and 50 times more mobile transactions. In a future where data is currency, this is huge.

The wake-up call for China in applications took place two years ago when U.S. and Korean AI programs beat grandmasters in the traditional Chinese game of Go. Long a goal of AI programmers, this great leap forward took place 20 years earlier than had been anticipated. This created an AI stampede in the Middle Kingdom that led to the current bubble.

The result has been applications that are still in the realm of science fiction in the U.S. The Chinese equivalent of eBay (EBAY), Taobao, doesn’t charge fees because its customer base is so big it can remain profitable on ad revenues only. Want to be more beautiful in your selfies sent to friends? A Chinese app will do that for you, Beauty Plus.

The Chinese equivalent of Yelp, Dianping, has 600,000 deliverymen on mopeds. The number of takeout meals is so vast that it has been able to drop delivery costs from $6 a meal to 60 cents. As a result, traditional restaurants are dying out in China.

Teachers in Chinese schools no longer take attendance. Students are checked off when they enter the classroom by facial recognition software. And heaven help you if you jaywalk in a Chinese city. Similar software will automatically issue you a citation with a fine and send it to your home.

Credit card fraud is actually on the decline in China as dubious transactions are blocked by facial matching software. The bank simply calls you, asks you to look into your phone, takes your picture, and then matches it with the image they have on file.

Dr. Lee sees AI unfolding in four waves, and there are currently companies operating in every one of these (see graph below):

1) Internet AI

The creation of black boxes and specialized algorithms opened the door to monetizing code. This was the path for today’s giants that dominate online commerce today, Google (GOOG), Amazon (AMZN), JD.com (JD), and Facebook (FB). Alibaba (BABA), Baidu (BIDU), and Tencent followed.

2) Business AI

Think big data. This is the era we just entered, where massive data from online customers, financial transactions, and health care led to the writing of new algorithms that maximize profitability. Suddenly, companies can turn magic knobs to achieve desired goals, such as stepping up penetration or monetization.

3) Perception AI

Using trillions of sensors worldwide, analog data on any movement, facial expression, sound, and image are converted into digital data, and then mined for conclusions by more advanced algorithms. Cameras are suddenly everywhere. Amazon’s Alexa is the first step in this process, where your conversations are recorded and then mined for keywords about your every want and desire.

Think of autonomous fast food where you walk in your local joint and it immediately recognizes you, offers you your preferred dishes, and then auto bills your online account for your purchase. Amazon has already done this with a Whole Foods store in Seattle.

4) Autonomous AI

Think every kind of motion. AI will get applied to autonomous driving, local shuttles, factory forklifts, assembly lines, and inspections of every kind. Again, data and processing demand take an enormous leap upward. Tesla (TSLA), Waymo (GOOG), and Uber are already very active in this field.

The book focuses a lot on the future of work. Dr. Lee creates a four-part scatter chart predicting the viability of several types of skills based on optimization, compassion, creativity, and strategy (see below).

If you are a truck driver, in customer support, or a dishwasher, or engage in any other repetitive and redundant profession your outlook is grim. If you can supplement AI, such as a CEO, economist, or marketing head you’ll do fine. People who can do what AI can’t, such as teachers and artists, will prosper.

The Investment Angle

There have been only two ways to invest in AI until now. You can buy shares in any of the seven giants above, whose shares have already risen for 100- or 1,000-fold.

You can invest in the nets and bolts parts providers, such as NVIDIA (NVDA), Advanced Micro Devices (AMD), Micron Technology (MU), and Lam Research (LRCX), which provide the basic building blocks for the Internet infrastructure.

Fortunately for our paid subscribers, the Mad Hedge Trade Alert Servicecaught all of these very early.

What’s missing is the “in-between companies,” which are out of your reach because they are locked up in university labs or venture capital funds. Many of these never see the light of day as public companies because they get taken over by the tech giants above. It’s effectively a closed club that won’t let outsiders in. It’s a dilemma that vexes any serious technology investor.

When quantum computing arrives in a decade, you can take all the functionality above and multiply it by a trillion-fold, while costs drop a similar amount. That’s when things really get interesting. But then, I’ve seen trillion-fold increases in technology before.

I hope I live to see another.

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[h=2]Personally, I Prefer the Original[/h]​

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Quote of the Day“We do have a lot of momentum players in the market that are riding trends. As long as those trends are up it may be painful to be short,” said Jeremy Siegel of the Wharton School of Business.

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[CoachCB]

Man, I got the covid. It came on Monday, and by Tuesday morning I felt like shit - body aches, bad headache, chills, congestion - the last two days hasn't been as bad, but I can't sleep due to a dry cough. I took an at-home test on Tuesday and it was positive. I got the Pfizer vax in April (two doses) too. Fuck China!

 

[Bozzie]

Man, I got the covid. It came on Monday, and by Tuesday morning I felt like shit - body aches, bad headache, chills, congestion - the last two days hasn't been as bad, but I can't sleep due to a dry cough. I took an at-home test on Tuesday and it was positive. I got the Pfizer vax in April (two doses) too. Fuck China!

sorry man...that sucks.
I'm no fan of china but I like money.

feel better CB.

August 6, 2021

Good morning. (Was this newsletter forwarded to you? Sign up here.)

Where are the workers?Nam Y. Huh/Associated Press

[h=2]The labor market’s message[/h]

This morning, the government will report how many workers U.S. employers added to their payrolls in July. Economists expect a big number — as many as 850,000 — in another sign that the economic recovery continues.

The stakes are higher than usual, as various emergency stimulus measures are about to expire, the infrastructure bill is nearing passage, and the Fed is contemplating how and when to taper its extraordinary efforts to support the economy during the pandemic. Economists have their eyes on both the number of jobs created as well as wages, which were up a relatively high 3.6 percent in June versus a year ago. Here’s how to interpret the results.

Weak job gains and little growth in wages: This is bad. The Delta variant of the coronavirus is causing more economic damage than thought. Congress could speed forward the infrastructure bill, and President Biden may emerge with more leverage to push through a bigger budget. As for the Fed? The urgency to taper bond purchases, and to eventually raise interest rates, fades away.

Weak job gains, but a big jump in wages: This is OK. Vincent Reinhart, the chief economist for BNY Mellon Asset Management, points to a growing mismatch between employers and job seekers, and notes that the economy isn’t weakening yet. That’s not a roadblock for an infrastructure bill, but it makes passing a big budget tougher. The Fed, meanwhile, needs to thread the needle between rising inflation and a job market that isn’t growing as fast as it could.

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[h=3]ADVERTISEMENT[/h]

Strong job growth with muted wage gains: This is good, at least for businesses. The economy is strong, workers are returning to the job market and the supply and labor issues that have pushed up prices are receding. Biden would no longer have to fight arguments that government spending is causing inflation. The Fed can let the economy run with fewer fears of overheating.

Strong job growth and hefty wage gains: This is great, for now. The post-pandemic economy is in full swing, with workers reaping the rewards. But the recovery is likely closer to the end than the beginning. That puts ambitious government spending plans in jeopardy. The Fed may taper its support sooner, possibly leading to market tantrums.

[h=3]HERE’S WHAT’S HAPPENING[/h]

The infrastructure bill will add $256 billion to the deficit over 10 years. The Congressional Budget Office analysis could complicate plans to vote on the bill this weekend. But the C.B.O.’s report didn’t include tens of billions in projected additional revenue, nor billions saved from redirecting unused stimulus funds.

Amazon, BlackRock and Wells Fargo push back their returns to the office. Amazon said corporate employees did not need to return until January, and BlackRock said only vaccinated workers would be allowed in offices starting in October. CNN fired three employees who violated its policy by going to the office unvaccinated, one of the first known examples of enforcement of a workplace mandate.

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[h=3]ADVERTISEMENT[/h]

Robinhood loses its meme momentum. The stock of the trading app plunged 27 percent yesterday as early investors registered to sell shares after a red-hot run. Venture capital firms collecting big paydays as Robinhood’s shares sink (although they remain well above the I.P.O. price) could challenge the company’s image as a champion of small investors.

Exxon Mobil may pledge to go carbon neutral by 2050. Executives have previously called such pronouncements meaningless, and pushed back against government climate policy, but The Wall Street Journal reports that the company is now considering a “net zero” pledge.

Families of 115 U.S. service members killed overseas sue big banks. The lawsuit says that Deutsche Bank, Standard Charter and others helped to finance terrorist attacks by not policing its accounts. It is broader than past actions brought under a 2016 antiterrorism law, which had mixed results.

[h=2]The green road trip of tomorrow[/h]

Biden signed an executive order yesterday calling for half of all new vehicles sold in the U.S. by 2030 to be electric. “They’re a vision of the future that is now beginning to happen, a future of the automobile industry that is electric,” he said at the White House, standing before an array of electric vehicles.

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[h=3]ADVERTISEMENT[/h]

The shift to electric cars won’t be easy. Manufacturers and suppliers need to transform factories, charging stations need to be built and consumers need to be persuaded to buy. In June, less than 4 percent of new cars sold in the U.S. were pure electric vehicles or plug-in hybrids, a quarter of the share of electric sales in Europe. Biden’s order envisions building a nationwide network of charging stations, providing financial incentives and instituting new fuel-efficiency rules, moves akin to those made in Europe and China.

Policymakers have framed the push as part of a geopolitical competition, overhauling a major industry to compete with China, which makes about 70 percent of all electric-vehicle batteries, in an effort that blends environmental, economic and foreign policy. “This is the first example of how Biden’s administration would do industrial policy in the climate change context,” said Michael Oppenheimer of Princeton.

The auto industry is mostly on board. Ford’s C.E.O., Jim Farley, said in a statement that his company was “counting on strong cooperation” between the administration, Congress and state and local governments. Ford, G.M., Volkswagen and other auto giants have already begun selling tens of thousands of electric cars. Biden’s announcement is unequivocally good for Tesla, and could also help electric vehicle start-ups like Rivian and Lucid Motors get a jump on more established competition.

But automakers’ current preoccupation is shortages. New car production, of all kinds, is hampered by scarcity in key componentslike semiconductors, meaning that supply can’t keep up with demand as people get out again but are wary of crowds. That has led to “insane” market conditions for new and used cars alike, somewhat thwarting the efforts to push car buyers away from internal combustion engines. For now, most road trips are happening in gas guzzlers.

[h=2]“It’s like if somebody is running the 100 meters and they have a weight around their ankles. That is not a fair judge of their speed.”[/h]

— Bob Costas, who spent 24 years as NBC’s prime-time Olympics host before leaving the network in 2017, on the Tokyo Olympics’ relatively low television ratings.

[h=2]Surveillance, safety and privacy at Apple[/h]

Apple launched a sophisticated system yesterday to detect whether an iPhone user is storing images of child sexual abuse, or if a child under 13 is sending or receiving sexual imagery by text. The Times and others have shown that tech companies have failed to police their platforms for child exploitation.

Some are concerned about Apple’s methods, writes The Times’s Jack Nicas. Cybersecurity experts say that the tools Apple is using to monitor sexual abuse images tips its hand that the company has more powerful surveillance tech than it has previously claimed. In the future, law enforcement and governments might compel Apple to use those tools in other ways.

Apple says that it has put in guardrails to protect privacy, and that the tech allows it only to see images flagged as child pornography. Apple’s attempt to police what few would defend highlights the thin line that tech companies walk between public safety and customer privacy concerns.

“I don’t particularly want to be on the side of child porn and I’m not a terrorist,” said Matthew Green, who teaches cryptography at Johns Hopkins. “But the problem is that encryption is a powerful tool that provides privacy, and you can’t really have strong privacy while also surveilling every image anyone sends.”

[h=2]Crypto shows its growing clout[/h]

The S.E.C.’s Gary Gensler, Senator Elizabeth Warren and others sounded off this week on the need for stricter regulation of crypto, giving an impression of an industry under siege.

Cracking down on crypto also came up in negotiations over the infrastructure bill, which included a provision to raise $30 billion in taxes on crypto transactions. But on that front, the industry’s nascent lobby rallied to press senators for an amendment to clarify the tax provision, showing the lobby’s growing power.

Heavyweights chimed in. The venture capitalists at Andreessen Horowitz wrote to Senate leaders, calling the tax provision “overly broad” and suggesting a lawsuit looms if the language isn’t changed. Brian Armstrong, the C.E.O. of the crypto exchange Coinbase protested in a Twitter thread. Lobbyists worked behind the scenes with a bipartisan group of senators on an amendment set to be considered before the bill goes to a vote.

This is a preview of bigger battles. In addition to Gensler and Warren, the leaders of the House Financial Services Committee and the Senate Banking Committee have called for sweeping new rules and tougher enforcement. Representative Donald Beyer, Democrat of Virginia, recently introduced a comprehensive bill on digital assets that industry groups told DealBook they haven’t had time to analyze yet because the infrastructure fight is more pressing. After mounting a resistance to one provision in a 2,700-page bill, more serious battles await, and the true strength of the crypto lobby will be tested.

In other news, officials at the Fed seem increasingly divided over whether to issue a digital dollar.

Want to share The New York Times with your friends and family? Invite them to enjoy unlimited digital access to our journalism with this special offer.

[h=3]THE SPEED READ[/h]

Deals

The state-run China Telecom is selling $8.4 billion in stock on the Shanghai exchange, months after being forced to delist in the U.S. (Nikkei Asia) Levi Strauss is stretching its product line with the acquisition of the active-wear brand Beyond Yoga. (CNBC) Moody’s is bolstering its climate-risk business with the $2 billion takeover of the catastrophe modeling firm RMS. (WSJ) A SPAC sponsored by Tidjane Thiam, the former Credit Suisse chief, is nearing a deal with two Latin American credit firms. (FT)

Policy

Even if it gets tens of billions of dollars in the infrastructure bill, Amtrak’s expansion faces major challenges. (NYT) Joi Ito, the former M.I.T. Media Lab director who resigned in 2019 because of ties to Jeffrey Epstein, will lead the Japanese government’s new Digital Agency. (Tokyo Reporter) Richard Trumka, a former coal miner who led the influential A.F.L.-C.I.O. labor union for the past 12 years, died at 72. (NYT)

Best of the rest

“Back to office” shopping trends are bedeviling retailers. (Bloomberg Opinion) The Daily podcast speaks with some of the 90 million Americans who are eligible for the coronavirus vaccine, but choose not to get it. (NYT) What happened when a Times reporter created a hopeless crypto token called “Idiot Coin.” (NYT) Everybody loves Dave Raymond, who pioneered the role of the goofball sports mascot and is sought after by teams looking to capture their identities in furry form. (NYT)

Correction: In yesterday’s newsletter, we incorrectly described the purview of the Office of the Comptroller of the Currency. In addition to nationally chartered banks, the agency oversees federal savings associations, not credit unions.

Thanks for reading! We’ll see you tomorrow.

We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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Andrew Ross Sorkin, Founder/Editor-at-Large, New York @andrewrsorkin

Jason Karaian, Editor, London @jkaraian

Sarah Kessler, Deputy Editor, Chicago @sarahfkessler

Stephen Gandel, News Editor, New York @stephengandel

Michael J. de la Merced, Reporter, London @m_delamerced

Lauren Hirsch, Reporter, New York @LaurenSHirsch

Ephrat Livni, Reporter, Washington D.C. @el72champs

 

[Bozzie]

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LISTEN TO TODAY'S PODCAST AVAILABLE AT 8AM ON:

Welcome to Wall Street Breakfast, our preview of stock market events for investors to watch during the upcoming week. You can also catch this article a day early by subscribing to the Stocks to Watch account for Saturday morning delivery. Outlook Economic reports in the week ahead Inflation watchers are in line for a feast next week with the consumer price index and producer price index reports both due in. The bipartisan infrastructure bill is also making incremental progress toward a Senate vote. Some of the more interesting earnings reports on the schedule include AMC Entertainment (AMC), Coinbase Globla (COIN), Lordstown Motors (RIDE) and Baidu (BIDU). The corporate calendar features Samsung's (SSNLF) Galaxy Unpacked event and a fireside chat by Ford (F) execs on the automaker's growth plans. Earnings Earnings spotlight: Monday, August 9th: Tyson Foods (TSN), US Foods (USFD), AMC Entertainment (AMC) and Nutrien (NTR). Earnings spotlight: Tuesday, August 10th: Sysco (SYY), ChipMOS Technologies (IMOS), Coinbase Global (COIN) and fuboTV (FUBO). Earnings spotlight: Wednesday, August 11th:Perrigo (PRGO), Wendy's (WEN), Lordstown Motors (RIDE), Nio (NIO), Coupang (CPNG), eBay (EBAY) and Bumble (BMBL). Earnings spotlight: Thursday, August 12th:Baidu (BIDU), TAL Education (TAL), GoodRX (GDRX), CyberArk (CYBR), Disney (DIS), Airbnb (ABNB), DoorDash (DASH) and ContextLogic (WISH). Earnings spotlight: Friday, August 13th:Embraer (ERJ) and AMMO (POWW). Sponsored By CRE Income Fund Investors are Earning a 10% Dividend Yield on Supply Chain Distribution Centers As rents rise and companies vie for industrial space, demand for industrial properties is strong. Rents rose 9.7% in the first five months of the year, above the 7.1% increase in asking rents, according to CBRE. "It's creating a situation similar to the housing market, where there's limited supply and multiple bidders," says CBRE's James Breeze. A recent Prologis report indicated that the amount of land close to urban centers available for new warehouses has decreased during the last decade. The average annual return of commercial real estate over 20 years is roughly 9.5%, nearly 1% greater than the S&P 500's average annual return of 8.6%. Learn more today. IPOs IPO watch: Veterinary biotech company PetVivo (PETV) is expected to start trading on August 11. Quiet periods expire on F45 Training (FXLV), Membership Collective Group (MCG), Phillips Edison & Co (PECO), Rapid Micro Biosystems (RPID), Sight Sciences (SGHT), Blend Labs (BLND), Erasca (ERAS), Imago Biosciences (IMGO), Stevanato (STVN) Blue Foundry (BLFY) and more. IPO lockups expire on Signify Health (SGFY), Viant Technology (DSP), Apria (APR), Bumble (BMBL), Bioventus (BVS), LoanDepot (LDI), Decibel Therapeutics (DBTX), NexImmune (NEXI) and Talis Biomedical (TLIS). M&A M&A tidbits: Cadence Bancorporation (CADE) shareholders are scheduled to vote on August 9 the merger with BancorpSouth Bank (BXS). Realty Income (O) and Vereit (VER) are also due to vote on their merger on August 10. The foreign antitrust deadline on the Welbilt (WBT)-Ali Group deal is August 13. Dividends Projected dividend increases: Marten Transport (MRTN) to $0.05 from $0.04, Bonanza Creek (BCEI) to $0.40 from $0.35, Nordson (NDSN) to $0.43 from $0.39, Cable One (CABO) to $2.75 from $2.50, Steris (STE) to $0.43 from $0.40, Broadridge Financial Solutions (BR) to $0.61 from $0.575, Tyson Foods (TSN) to $0.47 from $0.445 and Martin Marietta (MLM) to $0.60 from $0.57. Go Deeper Check out Seeking Alpha's Catalyst Watch for a detailed list of specific events to watch. Analysis EV watch: The electric vehicle sector is more than likely to have another bouncy week as analysts and investors dig into the implications of President Biden's executive order that sets a target for zero-emission vehicles to account for half of all automobiles sold in the U.S. by 2030. The pressure on EV startups has increased with huge investments and commitments by legacy players like General Motors (GM), Ford (F) and Volkswagen (VWAGY) to their electrification programs. Electric Mile Solutions (ELMS) and Hyzon Motors (HYZN) are two zero-emission stocks that investors are starting to latch on to. Space watch: Another busy week is setting up the space sector. Northrop Grumman (NGC) is scheduled to launch a cargo shipment to the International Space Station. In South Texas, SpaceX (SPACE) has the Starship spacecraft stacked on top of a prototype of its Super Heavy booster, which itself is loaded up with 29 Raptor rocket engines. The stacked spacecraft is reportedly the tallest assembled rocket ever developed in history. Meanwhile, the hard-luck Boeing (BA) Starliner will be looking to get back to the launch pad after a valve issued is resolved. Traders will also be watching Astra Space (ASTR) after the stock soared more than 20% when a window for the company's first commercial orbital launch with the United States Space Force was announced. In the SPAC world, Stable Road Acquisition Corp. (SRAC) shareholders are scheduled to vote on the business combination with space infrastructure player Momentus Inc. Events Corporate events: ARK Invest holds its monthly webinar on August 10. Cathie Wood and team have recently picked up shares of Robinhood Markets (HOOD), Zymergen (ZY) and Pinterest (PINS), while dumping positions in China-based JD.Com(JD) and Tencent Holdings (OTCEHY). The firm has also become increasingly bullish on the online sports betting marketplace and DraftKings (DKNG). Ford (F) Chief Product Platform and Operations Officer Hau Thai-Tang holds a fireside chat on August 11 with JPMorgan analysts to discuss key elements of the Ford+ plan for growth and value creation. Also on August 11, Samsung (SSNLF) holds its annual Galaxy Unpacked event with expectations that a folding phone of some sort will be introduced, along with new smartwatches and new wireless earbuds. Check out Seeking Alpha's Catalyst Watch for a detailed list of specific events to watch. Conference schedule: Conferences scheduled to run during the week include KeyBanc Technology Leadership Virtual Forum, Northcoast Research Industrial and Business Services Management Virtual Forum, Guggenheim MedTech Disruptors Summit 2021, UBS Annual Financial Services Virtual Conference 2021, JPMorgan Auto Conference, UBS Genomics 2.0 and Medtech Innovations Summit, Susquehanna Financial Group Energy, Industrials & Airlines Conference and Wedbush PacGrow Healthcare Conference and Canaccord Genuity 41st Annual Growth Conference. ​ Stocks Barron's mentions: A big week for infrastructure could be on tap, which has Barron's digging for bargains. Filtering for companies that tend to get hired at the start of infrastructure projects and still look cheap yields a list of Atlas Technical Consultants (ATCX), Jacobs Engineering Group (J), Montrose Environmental Group (MEG), Parsons (PSN) and Tetra Tech (TTEK). In the consumer sector, Spectrum Brands Holdings (SPB) is called one of the few companies that lets investors play multiple COVID-era trends at once, and at a discount. Meanwhile, Royal Dutch Shell (RDS.A) is named the top pick among Big Oil stocks due to its peer-beating profitability, strong business mix and rich payout. The cover story this week dives into what stocks investors should play when the "return to the office" arrives. The delayed back-to-work basket includes exposure to real estate, consumer spending and corporate tech spending - with Ross Stores (ROST), Hudson Pacific Properties (HPP), Cisco Systems (CSCO), Microsoft (MSFT), WW International (WW), Starbucks (SBUX), Ruth's Hospitality Group (RUTH) and Boston Properties (BXP) all making the list. Sources: EDGAR, Bloomberg, CNBC, The Verge, Renaissance Capital

​

 

[Bozzie]

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Top News Shutterstock​ The stock market closed out the week higher, with the S&P (SP500) and Dow (DJI) ending at record highs as the strong jobs report buoyed reflation plays. Better-than-expected July payrolls and a bigger-than-anticipated drop in the jobless rate pushed rates sharply higher, with the 10-year Treasury yield jumping more than 8 basis points Friday to 1.3%. That’s 15 basis points higher than the low hit Monday as yields tumbled on concerns about the spread of the Delta variant. The payrolls gain also put pressure on metals, with gold futures settling with their worst daily drop since mid-June. For the week, the Nasdaq (COMP.IND) rose 1.1% to lead the major averages, despite a Friday decline. The S&P rose 0.9% and the Dow gained 0.8%. Economy Job gains jolt yields, but could stifle stocks All things being equal, recovery in the labor market toward pre-pandemic levels should be bullish for equities, further boosting the potential for earnings growth. But with the historic amount of Fed easing involved, the stock market could be back to a good-news-is-bad-news scenario. Fed speakers this week have floated the idea that the FOMC could be ready to start tapering in September. "There's no reason you'd want to go slow on the tapering to prolong this. You want to get it done and get it over with," Fed Governor Christopher Waller says. Tapering would likely push Treasury yields higher, removing a key reason for the path of least resistance for stocks still being up and to the right, even at record levels. This week, Citi downgraded U.S. equities to Neutral, calling for the 10-year Treasury yield (TBT) to rise to 2%, with a 70 basis-point rise in real yields, which are now at record lows. Global equity strategist Robert Buckland writes that Citi's rate strategists "attribute much of the move to technical factors. Most notably, US treasury issuance has dropped over the summer, but will rise again later in the year. They think that this, along with ongoing economic recovery and likely QE tapering, will push 10-year bond yields back towards 2.0%." Goldman Sachs just boosted its 2021 target for the S&P 500 (SP500) to 4,700 from 4,300 in part due the lower-than-expected rates. But strategist David Kostin says that rates above 1.6% would cut fair value back down to 4,350, below current levels. Sponsored By VantagePoint Are You Sabotaging Your Trading? Would you prevent that early exit if knew for a fact there were more gains in your future? You could finally stop leaving too soon and get out at the most opportune time. But…how do you know what’s going to happen next for the markets? A.I. forecasting predicts the behavior of your stocks up to 72 hours in advance, which no other tool can offer. You need to be ready for rapid market changes, and it’s our job to help you avoid potential losses. Save a seat at our exclusive LIVE training session, where we will demo this top-of-the-line A.I. for free. Registrations close after 200 guests. Financials Robinhood becomes a meme stock Have you heard the latest joke on Wall Street? "Would investors buy Robinhood shares after a disastrous IPO? Yes, they Sherwood." Robinhood Markets (HOOD) had a wild week of trading, including a 50% jump in a single day, to finish the week up nearly 50%. In a storyline worthy of Mary Shelley, the creator has become the target of its creation, although its doubtful insiders are complaining. HOOD has been the most-mentioned stock on WallStreetBets, according to Quiver Quantitative. The rally is reminiscent of moves in GameStop and AMC), both of which are on losing streaks since HOOD came to market, leading to some speculation that retail investors are rotating cash from those names. But options experts say the trade in Robinhood stock is different from other meme rallies. Puts outweighing calls: Like previous retail-driven rallies, the surge in HOOD has been supported by deep-out-of-the-money call buying. The biggest volume of any option was for $70 calls. But that doesn't necessarily mean a gamma squeeze is in effect, like the original GameStop move. Gamma squeezes occur as the writers, or sellers, of call options buy the underlying stock as a hedge, increasing demand for shares and pushing the price higher. While the $70 call was the most popular single option, bearish puts overall had more volume, Christopher Murphy, co-head of derivatives strategy at Susquehanna, said. The biggest plays were August 20 $30 and $20 puts, Murphy said. “All of it appears to be small lots, but that doesn’t necessarily mean it’s all retail,” he wrote, according to Barron's. “Because the options are so thin and the volatility is so high, it makes sense all the trading (whether institutional or retail) would be in small lots.” Another sign the rally may stall is that the 10-day moving average of call volume is on a downward trend, according to Bloomberg. And the 10-day average of shares traded on all exchanges is at its lowest level since November. What next for the stock? Two big names have stepped to the sidelines after yesterday's big run-up in HOOD. Cathie Wood's ARK Investment Management was an early fan of Robinhood and bought on the dip as it went public and steadily increased holdings to more than 3M shares for three funds, including the flagship ARK Innovation ETF (ARKK). But ARK didn't accumulate any shares during Wednesday's trading, according to its daily trading statement. Jim Cramer said the stock could be "bought here" on his "Mad Money" show Monday night. But he's advising locking in some gains. “Meme stocks are easy money on the way up. But as we’ve seen with GameStop and AMC of late, you have to take profits while you still have them by selling gradually on the way up,” Cramer said. "It doesn’t matter how much you love (Robinhood), discipline always trumps conviction, and discipline says you need to take something off the table when you’ve got an 80% gain in two days." What could separate Robinhood from GameStop, AMC and other WallStreetBets favorites is that it can be a proxy for retail trading for the broader market. If funds believe that retail enthusiasm is here to stay, they will likely be bullish on HOOD and the potential for higher trading volumes. Covid Rising COVID Restrictions Companies are taking the lead in adopting mask and vaccine requirements as COVID Delta cases grow and equities remain resilient. A host of headlines about new policies and restrictions hit Tuesday, including New York City requiring proof of vaccination for entry to restaurants, gyms and leisure events. But again, most moves came from private companies. Tyson Foods (TSN) will require its workforce to be vaccinated, J.P. Morgan (JPM) is re-evaluating its back-to-the-office policies and Microsoft is requiring vaccinations for its returning workforce. In addition, Google parent Alphabet (GOOGL) has approved 85% of employee requests to work from home or relocate once its offices open, Bloomberg reports. Amid all those moves, Wall Street put together a rally from midday into the close, with recovery sectors leading the way. Strength in cyclicals, which would be the hardest hit on worries about a stalled economic reopening, could indicate that investors feel the economy can weather moves to stem the spread of the Delta variant. That would be in contrast to last month, when the Delta spread was a major reason for sell-side strategists to hesitate on new allocations, according to BofA. Looking for the peak. Thomas Lee of Fundstrat Global Advisors argues the company and locality moves will help by driving up vaccination rates. "Policymaker panic about Delta variant is triggering a vaccination resurgence = good," Lee writes in a note. "The positive upshot of a panic by policymakers is that more Americans are getting vaccinated. The rise in vaccinations is most evident in states hit hardest by this recent Delta variant." "Policymakers panic = good, businesses respond by pushing/mandating masks = good, businesses respond by pushing/requiring vaccinations = good, Americans witness COVID-19 severe illness and get vaccinated = good." Fundstrat's base case is that the Delta variant surge in the U.S. will peak in August, which it says should encourage investors. "Given August is already a poor liquidity month, a buyers strike makes markets more turbulent," Lee says. "But if our base case plays out, August will ultimately be a 'risk on' month and we will chop higher. Thus, the July chop will continue into August, but with an upward bias." If "the Delta variant does not peak in the next few weeks (as is somewhat expected) then the chances of lockdowns will rise, and that will potentially impact earnings," Kinsale Trading writes. If "the Delta variant is causing any sort of headwind on the economy, it’ll show up in the service sector PMI first, as people pullback on eating out, etc," Kinsale says. Wells Fargo says it does not think the Delta variant will be a "game changer" for the U.S. economy and sticks with its portfolio recommendation to favor cyclicals, especially Industrials (XLI) and Materials (XLB). Aviation Ready for Takeoff Air travel continues to return with a vengeance as many look to take a long due summer vacation or see family for the first time in more than a year. Another high mark was set on Sunday despite a renewed threat from rising coronavirus case numbers fueled by the Delta variant. More than 2.2M people went though airport checkpoints nationwide, according to the Transportation Security Administration, notching the highest number since Feb. 28, 2020. Thought bubble: Not only does the U.S. have a strong vaccination rate (it just reached 70% of all adults), but the country also has a strong domestic market. Contrast that to nations that rely more on international travel, or require digital health passes or negative PCR tests to board a plane. For the broader market, airline industry executives are relying on the easing of travel restrictions for things to snap back and some say consolidation may be in the cards post-pandemic as carriers look to shore up their balance sheets. Meanwhile, the resurgence of travel, coupled with bad weather, has led to delays and flight cancellations. Airlines are struggling to rebuild networks and have been caught short-staffed after urging employees to take buyouts or leaves of absence to cut labor costs during the pandemic (they still received $54B in taxpayer money). Sen. Maria Cantwell (D-Wash), chair of the Senate Commerce Committee, is even questioning airlines to explain the high numbers of flight delays and cancellations. Case in point: American Airlines (AAL) scrapped hundreds of flights on Monday following disruptions caused by severe thunderstorms that swept through its Dallas/Fort Worth International hub. Florida-based discount carrier Spirit Airlines (SAVE) additionally canceled about one-third of its flights and is "working around the clock to get back on track." At least 40% of Southwest (NYSE:LUV) and Spirit flights were also delayed on Sunday, which created long lines at ticket counters at Orlando International Airport. Legislation Infrastructure Week Senators were back on Capitol Hill on Sunday as a bipartisan group of lawmakers put the finishing touches on a $1T infrastructure package. Touting the long-term economic benefits of the bill, key Democratic Senator Joe Manchin said the 2,702-page measure was likely to pass before the end of the week and would "keep us going for five to 10 years." The plan is one of President Biden's top legislative priorities and would be the largest investment in U.S. roads, bridges, ports and transit in decades. What's in it? The Infrastructure Investment and Jobs Act includes $550B in new spending over five years, on top of $450B in previously approved funds. $110B would be allocated for roads and bridges, $66B for rail, $55B for water and wastewater infrastructure and $39B for public transit. There's also money for ports, high-speed broadband internet, replacing lead water pipes and building a network of electric vehicle charging stations. Senators have clashed over how to pay for the package after ideas like raising revenue from a new gas tax were rejected. Current thought is to finance some of the bill through $205B in untapped COVID-19 relief aid, as well as unemployment assistance that was turned back by some states, but those sources might not pass muster with deficit hawks. The Senate could also impose changes that potentially complicate its chances of becoming law, like paying for the bill via tax hikes on corporations and wealthy Americans earning more than $400K per year. Outlook: GOP Senator Susan Collins believes that at least 10 Republican senators will support the measure, enabling it to clear a 60-vote procedural hurdle. However, the bill would still need to get through the House of Representatives, where some Democratic progressives have suggested that the $1T price tag is inadequate. Democrats also aim to pass the bill alongside a second multi-trillion dollar package on "human infrastructure," though Biden has confirmed that the "physical infrastructure" proposal would not be dependent on that initiative. ​ U.S. Indices Dow +0.8% to 35,209. S&P 500 +0.9% to 4,437. Nasdaq +1.1% to 14,836. Russell 2000 +0.9% to 2,246. CBOE Volatility Index -11.5% to 16.15. S&P 500 Sectors Consumer Staples -0.6%. Utilities +2.3%. Financials +3.6%. Telecom +0.8%. Healthcare +0.7%. Industrials +0.2%. Information Technology +0.9%. Materials +0.2%. Energy +0.3%. Consumer Discretionary +0.4%. World Indices London +1.3% to 7,123. France +3.1% to 6,817. Germany +1.4% to 15,761. Japan +2.% to 27,820. China +1.8% to 3,458. Hong Kong +0.8% to 26,179. India +3.2% to 54,278. Commodities and Bonds Crude Oil WTI -8.2% to $67.89/bbl. Gold -3.% to $1,763.5/oz. Natural Gas +5.7% to 4.135. Ten-Year Treasury Yield -0.4% to 133.95. Forex and Cryptos EUR/USD -0.92%. USD/JPY +0.49%. GBP/USD -0.22%. Bitcoin +4.3%. Litecoin +6.1%. Ethereum +15.6%. Ripple +2.1%. Top Stock Gainers BeyondSpring (NASDAQ:BYSI) +182%. Score Media and Gaming (NASDAQ:SCR) +113%. Bit Digital (NASDAQ:BTBT) +95%. AeroCentury Corp. (NYSE:ACY) +83%. Kaixin Auto Holdings (NASDAQ:KXIN) +66%. Top Stock Losers E-Home Household Service Holdings (NASDAQ:EJH) -81%. Zymergen (NASDAQ:ZY)-65%. Live Ventures (NASDAQ:LIVE) -52%. Moxian (NASDAQ:MOXC) -50%. Sprague Resources (NYSE:SRLP) -48%. Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

​

 

[Bozzie]

August 7, 2021

Good morning. Shares of Robinhood spiked this week as retail traders banded together to bid up the price, much as they have with other meme stocks that the app has helped enable. Today, we look at the company’s many unresolved legal issues — and how they could hurt Robinhood’s promise to “democratize finance.”

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Illustration by The New York Times

[h=2]Robinhood’s unfinished business[/h]

By Ephrat Livni Reporter, DealBook

Robinhood is now a party to the phenomenon it helped create. This week, the newly public company became a so-called meme stock, riding retail trader glee to riches after a disappointing market debut. The investing app was worth $46 billion at the close of trading on Friday, up around 60 percent from its valuation a week before.

It is perhaps the inevitable evolution of a market driven by forces unleashed by the popular, commission-free trading app. It is also a striking turnaround from six months ago, when Robinhood was the tool of choice for traders in the original meme stocks, like GameStop and AMC Entertainment. That role prompted congressional hearings, regulatory interest and a major federal lawsuit in Florida consolidating 50 class actions from thousands of aggrieved investors nationwide.

In complaints filed just before Robinhood’s initial public offering on July 29, the investors echoed the concerns raised by officials that the company’s business model is fundamentally problematic. Robinhood may be riding high now, but its legal troubles cast a shadow on its success, and threaten its grand ambition to “democratize finance for all.”

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In Robinhood’s I.P.O. registration document, a description of the legal proceedings pending against the company filled seven pages.

Some of the issues relate to Robinhood’s actions in late January, when it abruptly limited trading for customers clamoring for meme stocks that were soaring as groups of small investors united on social media and squeezed the institutional players betting against the shares. Robinhood’s curb on trading during the frenzy hurt its customers and benefited its business associates, according to investors in the class action. They accuse the company of gross negligence and violations of antitrust and securities laws.

Robinhood’s counsel did not respond to a request for comment.

Robinhood said it had restricted trading in meme stocks to protect itself and customers, citing regulatory obligations to monitor and maintain capital requirements. The class action could reveal more about what motivated the company’s decisions. That may challenge Robinhood’s pitch that it’s a platform for “everything that you use your money for,” as Vlad Tenev, its chief executive, told The Associated Press last month.

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Building customer trust is key to Robinhood’s expansion beyond fee-free trading into new business lines, muscling in on more established rivals’ turf and justifying its heady market capitalization.

Though the class action names many other financial businesses, like Citadel Securities, Charles Schwab, Melvin Capital Management and SoFi Securities, Robinhood is the main antagonist. It is a defendant in nearly all of the dozens of original actions, is facing almost all the claims and appears on nearly every page of the filings. The complaint calls Robinhood “a true amateur among institutional brokers.”

Investors taking part in the class action argue that Robinhood’s business model has a built-in conflict of interest. The company generates about 80 percent of its revenue from payment for order flow, which allows it to offer commission-free trading to users. In this arrangement, the broker sells customer orders to market-making firms (primarily Citadel Securities in Robinhood’s case) that execute the trades. Robinhood makes more from this practice than other brokers because its traders are more active.

Critics of payment for order flow, who include some lawmakers and regulators, say it presents a conflict for brokers who are paid by market makers but owe a fiduciary duty to customers. And because brokers make more money if customers trade more, the incentive is to “gamify” trading, which could be against the investors’ interests. (In March, Robinhood removed the digital confetti that celebrated trades in the app.)

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There is “no question” the decision to limit trading during the January chaos harmed retail traders and cast doubt on Robinhood’s claims of leveling the playing field for the small investor against big institutions, said Marc Steinberg of Southern Methodist University’s law school, the author of “Rethinking Securities Law.” “The question is to what degree we are going to hold parties liable.”

These sorts of lawsuits are an important enforcement mechanism, forcing more transparency from companies, Mr. Steinberg said. The class action will take at least 18 months to resolve if it goes to trial, said Maurice Pessah, one of the lead lawyers for the plaintiffs. Robinhood has told the court that it will seek a dismissal.

The plaintiffs have not yet determined how much they are seeking in damages if they succeed. Regardless, Robinhood is accustomed to paying up and moving on.

In July, it was hit with the Financial Industry Regulatory Authority’s largest-ever penalty, $70 million, for service outages and the misleading of customers. Late last year, the Securities and Exchange Commission imposed a $65 million fine on the company for its failure to disclose “true costs” to customers. The S.E.C. has promised a report on January’s trading frenzy this summer, and warned that changes to how brokerage apps operate might follow.

Does it matter? So far, Robinhood’s enthused users don’t seem fazed. In the year to June, Robinhood more than doubled its funded user accounts, to 22.5 million, and tripled its assets under custody, to more than $100 billion.

On the day Robinhood’s shares began trading, Mr. Tenev told CNBCthat “we’re optimizing for happy customers, and we’re optimizing for the long term.” Given the company’s unresolved legal issues, even the status that comes from being a meme stock may not be enough to put the past behind it.

What do you think? Let us know: dealbook@nytimes.com.

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Andrew Ross Sorkin, Founder/Editor-at-Large, New York @andrewrsorkin

Jason Karaian, Editor, London @jkaraian

Sarah Kessler, Deputy Editor, Chicago @sarahfkessler

Stephen Gandel, News Editor, New York @stephengandel

Michael J. de la Merced, Reporter, London @m_delamerced

Lauren Hirsch, Reporter, New York @LaurenSHirsch

Ephrat Livni, Reporter, Washington D.C. @el72champs

 

[Bozzie]

August 9, 2021

Good morning. (Was this newsletter forwarded to you? Sign up here.)

Still in session.Sarah Silbiger/Reuters

[h=2]The infrastructure endgame[/h]

Senators spent a second weekend in a row wrangling over the detailsof a $1 trillion bipartisan infrastructure proposal, putting off a planned summer break. “We’re doing it the old-fashioned way,” Senator Mitt Romney, Republican of Utah, told reporters yesterday about the many days of debate.

Slow rolling to votes, the proposal survived. Republicans joined Democrats on Saturday and Sunday in two procedural votes supporting the plan to fund repairs of roads, bridges, ports and more, and to make American commutes more green with projects related to electric vehicles, biking and pedestrian access. Last night, they cleared the last hurdle before a final vote in the chamber, possibly late today or tomorrow.

What’s the holdup? About a dozen proposed amendments were bandied about. Some senators want states to have more leeway over how to repurpose coronavirus relief funds. Others are demanding more money for public transit, which has been allotted about $40 billion, less than originally envisioned. In a rare moment of unity, the chamber broke out into spontaneous applause when Ted Cruz, a staunchly conservative Republican from Texas, and Raphael Warnock, a progressive Democrat from Georgia, made a joint highway proposal that got unanimous support. ​​

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Cryptocurrency threatened to derail the process. Two competing crypto amendments have caused an unexpected stir, with lawmakers advancing dueling changes to how the bill defines a “broker” in a provision intended to raise more tax revenue from crypto transactions. There is no agreement over whether the amendments will get considered for inclusion before a final vote is called, with a 30-hour deadline set to expire in the wee hours of Tuesday morning.

Some Republicans spot an opportunity. Former President Donald Trump threatened senators supporting the infrastructure proposal, saying they will pay in primaries. But few appear moved and many perceive a chance to distance themselves from Trump. The minority leader Mitch McConnell said the legislation has “an excellent chance” of becoming “a bipartisan success story for the country.” But Senator Todd Young, the Republican from Indiana who was part of the group that crafted the bill, said yesterday he won’t vote to pass it because of concerns about its cost.

[h=3]HERE’S WHAT’S HAPPENING[/h]

Global warming is unavoidable, according to a major new report. The U.N.’s Intergovernmental Panel on Climate Change concluded today that even if nations started sharply cutting emissions, temperatures are likely to rise around 1.5 degrees Celsius within the next two decades, heralding more extreme weather. There is still a chance to prevent the most harrowing outcomes, but it requires a coordinated global effort to stop adding carbon dioxide to the atmosphere.

As back to school approaches, vaccine mandates stir controversy. Randi Weingarten, the president of the American Federation of Teachers, said the union should drop its opposition to mandates for educators, telling NBC, “we need to be working with our employers, not opposing them.” Meanwhile, students at Indiana University asked the Supreme Court to overturn the school’s vaccine mandate.

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Alibaba will fire an employee accused of sexual assault. A woman at the Chinese e-commerce giant wrote an essay accusing her male boss of raping her, which was shared widely on social media. Alibaba’s chief executive said that the company would fire the man accused, two senior managers had resigned for failing to respond appropriately to the report and that the company would expedite the formation of an anti-sexual harassment policy.

Berkshire Hathaway shakes off the effects of the pandemic. On Saturday, Warren Buffett’s conglomerate reported a rise in its latest quarterly profit, with the biggest gains in economically sensitive sectors like its railroad, energy and utility businesses. In other weekend earnings news, Saudi Aramco’s quarterly profit nearly quadrupled, bolstered by higher oil prices and increased demand.

The S.E.C. closes its first case against a “DeFi” company. Short for decentralized finance, DeFi is one of the hottest areas in cryptocurrency, with companies aiming to eliminate financial intermediaries via blockchain technology. Executives at a DeFi lender, Blockchain Credit Partners, settled charges that they sold more than $30 million in unregistered securities via digital tokens.

[h=2]Nasdaq’s diversity rule gets the go-ahead[/h]

The S.E.C. on Friday approved Nasdaq’s proposal to require that every company on its exchange have at least two diverse board members as a condition of listing, or explain why it does not. Nasdaq first submitted the proposal, intended to encourage more diversity of gender, race and sexual orientation in boardrooms, in December and revised it in February. Among the changes: reducing the requirements for companies with five or fewer board members from two diverse members to one.

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The S.E.C.’s role in E.S.G. issues is a point of debate. The commission’s chair, Gary Gensler, has made clear that disclosure of environmental, social and governance measures are a priority, riling Republicans who dub those efforts as overreach. The Trump-appointed S.E.C. commissioners Hester Peirce and Elad Roisman dissented on the agency’s Nasdaq ruling, consistent with their previous concerns about the S.E.C.’s mixing social action and policy.

Senator Patrick Toomey, the ranking Republican on the Senate Banking Committee, said Nasdaq’s mandate would “pressure companies to subordinate crucial factors such as knowledge, experience and expertise when selecting board members.” Arthur Levitt Jr., the S.E.C. chairman during the Clinton administration, has called Nasdaq’s proposals “political at their core.”

Corporate boardrooms are increasingly focused on diversity, with initiatives that extend to investment banks, recruiting firms and law firms. Nasdaq’s proposal has received support from Microsoft, Carlyle, Sheryl Sandberg of Facebook and Dan Deese, the co-head of investment banking at Goldman Sachs. The Alliance for Board Diversity has estimated that at the current pace it will take until 2074 for board seats held by racial and ethnic minorities to reach the research group’s goal of 40 percent.

[h=2]“It’s the same people doing deals with each other and sharing in the wealth, and I’m thinking, how do I break into that?”[/h]

— Ashley Flucas, a real estate lawyer in Florida, who began investing in start-ups three years ago. The once-clubby world on angel investing has seen a major influx of new participants, The Times’s Erin Griffith writes.

[h=2]The week ahead[/h]

▶︎ The economy gets a price check. The government on Wednesday will report how much prices rose in July. The Consumer Price Index spiked in June, climbing at the fastest pace in 13 years as prices for things as diverse as restaurant meals and used cars surged. The debate is whether those rising prices are temporary or the start of a bigger problem. So far, the Fed has not responded to the price increases by raising interest rates or dialing back government-backed bond purchases, but it has signaled that it will in the near future.

▶︎ Automakers catch up to new pollution guidelines. President Biden last week announced that he would restore and slightly strengthen auto mileage standards. He also plans to draft pollution rules that would encourage automakers to ramp up the sales of electric vehicles. Three of the country’s largest automakers pledged that 40 to 50 percent of their new car sales would be electric vehicles by 2030 (up from 2 percent this year), but only on the condition that Congress pass a spending bill that includes billions of dollars for a national network of charging stations.

▶︎ Memes, crypto and SPACs make appearances in earnings reports. Companies opening their books include the meme-stock darling AMC Entertainment (today), the crypto exchange Coinbase (tomorrow) and the embattled electric vehicle maker Lordstown (Wednesday), which went public via a blank-check firm before it hit the skids.

[h=2]Is business travel coming back?[/h]

Despite the spread of the Delta variant, some experts say that business travel will pick up later this year, reports The Times’s Jane Levere. But the prospects for a full recovery remain mixed, and seem to grow more uncertain by the day.

Airlines to hotels to convention centers are reporting a rise in corporate bookings:

Delta Air Lines says it’s seeing higher volumes in traditional business-heavy markets, while American says it expects a full business recovery in 2022. Hilton’s C.E.O., Christopher Nassetta, recently predicted a “gargantuan” return for business travelers, though said that the rebound might take longer than expected. New York’s Javits Convention Center said bookings were up, and that the Fancy Food Show, which is not a mask-friendly event, is on the schedule for later this year.

But there are also signs that things might not recover for a while (if ever):

The San Diego Convention Center said it expects conference attendance to remain at about 50 percent from prepandemic levels this year, and 70 percent next year. Industry experts said more cancellations are likely to be announced in the coming months. (Yesterday, organizers canceled New Orleans Jazz Fest, which was set for October.) A late July survey of business travelers found that 25 percent expect the coronavirus to get worse before it gets better, up from around 14 percent a few weeks earlier. Even if demand jumps, the travel industry, like others, is facing a labor shortage that could make it hard to ramp up. Anthony Capuano, the head of Marriott, recently told a group of hotel industry executives that finding workers was the most significant challenge his company faced.

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[h=3]THE SPEED READ[/h]

Deals

Sanderson Farms is selling itself to Cargill and Continental Grain for about $4.5 billion, further consolidating the chicken processing industry. (Reuters) Virgin Atlantic, Richard Branson’s airline part-owned by Delta, is considering an I.P.O. in London. (Bloomberg) Philip Morris International raised its bid for the inhaler maker Vectura, to more than $1.4 billion, above an offer from Carlyle. The Marlboro maker said it’s trying to diversify “beyond nicotine.” (FT) China’s second-largest music streaming service pulled its planned $1 billion I.P.O. in Hong Kong, amid fears of a regulatory crackdown. (FT) The shareholder advisory firm ISS came out against the industrial real estate firm Monmouth’s proposed takeover by EQC, given the higher, all-cash alternative put forward by Starwood Capital. (Business Wire)

Policy

What’s next for the labor movement after the death of Richard Trumka, the longtime head of the A.F.L.-C.I.O. (NYT) Millions of renters are behind on payments and could face eviction — a stubborn blot on renters’ history. (NYT) “How Cuomo Took Advantage of #MeToo” (NYT) Why President Biden will (probably) reappoint the Fed chair Jay Powell for a second term next year. (Times Opinion)

Best of the rest

Unvaccinated workers increasingly feel like pariahs as companies reopen their offices. (NYT) TikTok has overtaken Facebook as the world’s most downloaded app. (Nikkei Asia) Goldman Sachs slashed its forecast for economic growth in China, citing the spread of the Delta variant. (MarketWatch) The venture capitalist Shervin Pishevar said the firm behind the Steele dossier led a smear campaign against him. (Insider) The Tokyo Olympics ended as strangely as they began. (NYT)

Thanks for reading! We’ll see you tomorrow.

We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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[Bozzie]

Global Market Comments August 9, 2021 Fiat Lux9 Featured Trade: (MARKET OUTLOOK FOR THE WEEK AHEAD, or THE WALL OF MONEY CONTINUES) (INDU), (TLT), (SPY), (FCX), (JPM), (V), (GS)

​ The Market Outlook for the Week Ahead, or The Wall of Money ContinuesThe wall of money continues. According to the legendary economist John Maynard Keynes: “Markets can remain irrational longer than you can remain liquid.” Keynes should know. After making a fortune trading foreign currency, he was almost wiped out by the 1929 crash when markets fell 90%. I keep that quote taped to my monitor to instill humility, discipline, self-control, and to avoid hubris. It works most of the time. It is the father of my aggressive stop-loss strategy. However large the wall of money was before; it is getting bigger. People are making more money, their home values have soared, more are working, the Fed’s quantitative easing continues unabated, and Washington deficit spending is breaking all records, and federal benefits continue to pour through the system. A very large part of this new money has gone into the stock market, and it will continue to do so. August usually presents the best buying opportunity of the year with a frightful, gut-churning selloff. It’s not happening this time, baby. If we get another hot payroll report for August, then happy days are here again and it’s off to the races for the rest of 2021. A 100% trading profit for the year comes into range for me, as well as you. It gets better. The delta variant has taken new Covid cases from 15,000 a day to 100,000, pushing back the reopening and slowing the economy. ALL of that growth gets pushed back into 2022, making it another hot year. We won’t see the current historic 12% growth rate, but 5% could be doable. Stocks will love it. Could 2022 be another 100% return year? Maybe. One thing is for sure. The market could care less about Covid, closing at an all-time high on Friday. Covid is now a known quantity. A year ago, it looked like the end of the world. If you are vaccinated, it’s now just an inconvenience. It’s currently only killing unvaccinated Republicans and sadly, children. The next big thing to happen will be for new cases to peak out and begin a sharp decline, causing stocks to rocket. That’s how traders are positioning themselves now. July Nonfarm Payroll Report explodes to 943,000, taking the Headline Unemployment Rate down an amazing half-point to 5.4%. Leisure & Hospitality was up a staggering 380,000. Bonds (TLT) were crushed, down two full points and yields up 19 basis points from the low to 1.29%, gold (GLD) was destroyed, and the US dollar (UUP) popped. The hot number could bring forward a Fed tapper and interest rate rise. Certainly, makes this month’s Jackson Hole meeting interesting. New Covid Cases hit 100,000 daily, 86% of which are the delta variant, 1,000 times more powerful than the original strain. That’s still a fraction of the 2.5 million cases a day seen in January. The vaccines seem powerless against the onslaught, although they eliminate the possibility of death. The unvaccinated are the walking dead. Companies like Wells Fargo, Amazon, and JP Morgan have delayed reopening. We’re all helpless until a new booster shot comes out in months. Infrastructure Deal to be signed, at $550 billion worth of road, bridge, water, and power projects. It should generate 2.75 million jobs, if you can find the workers. Expect your local freeways to start getting tied up in a few months when the projects begin in all 50 states. Per capital, Alaska and Hawaii will get the most money. Copper Unions Vote to strike in Chile, cutting off 33% of the global supply. This is just when the green economy, especially electric cars, is driving demand through the roof. Great news for Freeport McMoRan, which predominantly mines in the US. By (FCX) on dips. US Treasury to sell $126 billion in bonds this week. It also sees rising demand for Treasury Inflation-Protected Securities (TIPS). Am I the only one seeing the contradiction? Fed governor Clarida said the taper could start in November. Don’t buy bonds here on pain of death. ADP disappoints in its monthly read of private job openings, coming in at only 330,000 instead of an expected 690,000. Leisure & Hospitality saw the biggest decline, with only 139,000. Could Friday’s July Nonfarm Payroll report be a bust? Weekly Jobless Claims come in at 385,000, taking another run at post-pandemic lows. This number should really collapse once kids go back to school for the first time in 17 months. Most large companies are now requiring proof of vaccination to return to the office. The same will soon be true for airlines. Think the market is expensive now? After the last pandemic ended in 1919, price earnings multiple for the S&P 500 soared 3.09 times from 5.74X to 17.77X. So, today’s 34.39X looks rich indeed but is only half of the 70.91 peak seen at the bottom of the 2009 Great Recession, back when investors were throwing stocks out the window with both hands. The Index started at a lowly 11.1X back when America was still an emerging market. Could we get the 3X move up seen in the last pandemic? One can only hope. My Ten Year View When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come! My Mad Hedge Global Trading Dispatch saw a healthy gain of +3.36%so far in August. My 2021 year-to-date performance appreciated to 72.57%. The Dow Average is up 15.06% so far in 2021. I stuck with my four positions, a long in (JPM) and a short in the (TLT) and a short in the (SPY). Since stocks refused to go down, I added longs in Goldman Sachs (GS) and Visa (V). I doubled up my short in the (TLT) after it spiked to a 1.10% yield. The market surge off the back of the July Nonfarm Payroll report also forced me to stop out of my second (SPY) short for a loss. That brings my 11-year total return to 495.12%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 42.43%, easily the highest in the industry. My trailing one-year return retreated to positively eye-popping 110.12%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives. We need to keep an eye on the number of US Coronavirus cases at 35.8 million and rising quickly and deaths topping 617,000, which you can find here. The coming week will be slow one on the data front. On Monday, August 9 at 8:00 AM, US Consumer Inflation Expectationsare out. AMC (AMC) reports. On Tuesday, August 10 at 7:30 AM, the NFIB Business Optimism Indexfor July is printed. Coinbase (COIN) and Softbank (SFTBY) report. On Wednesday, August 11 at 5:30 AM, the US Core Inflation Rate is released. eBay (EBAY) reports. On Thursday, August 12 at 8:30 AM, Weekly Jobless Claims are announced. Disney (DIS) and Airbnb (ABNB) report. On Friday, August 13 at 7:00 AM, we get the University of Michigan Consumer Expectations. As for me, with the 34[SUP]th[/SUP] anniversary of the 1987 crash coming up, when shares dove 20% in one day, I thought I’d part with a few memories. I was in Paris visiting Morgan Stanley’s top banking clients, who then were making a major splash in Japanese equity warrants, my particular area of expertise. When we walked into our last appointment, I casually asked how the market was doing (Paris is six hours ahead of New York). We were told the Dow Average was down a record 300 points. Stunned, I immediately asked for a private conference room so I could call the equity trading desk in New York to buy some stock. A woman answered the phone, and when I said I wanted to buy, she burst into tears and threw the handset down on the floor. Redialing found all transatlantic lines jammed. I never bought my stock, nor found out who picked up the phone. I grabbed a taxi to Charles de Gaulle airport and flew my twin Cessna as fast as the turbocharged engines take me back to London, breaking every known air traffic control rule. By the time I got back, the Dow had closed down 512 points. Then I learned that George Soros asked us to bid on a $250 million blind portfolio of US stocks after the close. He said he had also solicited bids from Goldman Sachs, Merrill Lynch, JP Morgan, and Solomon Brothers, and would call us back if we won. We bid 10% below the final closing prices for the lot. Ten minutes later, he called us back and told us we won the auction. How much did the others bid? He told us that we were the only ones who bid at all! Then you heard that great sucking sound. Oops! What has never been disclosed to the public is that after the close, Morgan Stanley received a margin call from the exchange for $100 million, as volatility had gone through the roof, as did every firm on Wall Street. We ordered JP Morgan to send the money from our account immediately. Then they lost it! After some harsh words at the top, it was found. That’s when I discovered the wonderful world of Fed wire numbers. The next morning, the Dow continued its plunge but, after an hour, managed a U-turn and launched on a monster rally that lasted for the rest of the year. We made $75 million on that one trade from Soros. It was the worst investment decision I have seen in the markets in 53 years, executed by its most brilliant player. Go figure. Maybe it was George’s risk control discipline kicking in? At the end of the month, we then took a $75 million hit on our share of the British Petroleum privatization, because Prime Minister Margaret Thatcher refused to postpone the issue, believing that the banks had already made too much money. That gave Morgan Stanley’s equity division a break-even P&L for the month of October 1987, the worst in market history. Even now, I refuse to gas up at a BP station on the very rare occasions I am driving an internal combustion engine. Good Luck and Good Trading. John Thomas CEO & Publisher The Diary of a Mad Hedge Fund Trader ​ ​ ​ ​ ​ ​ ​ ​ ​

Quote of the Day“I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes,” said the legendary economist John Maynard Keynes in 1934.

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[Bozzie]

August 10, 2021 Continue reading the main story SUPPORTED BY

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Wall Street hopes more money will make life easier for junior bankers.Jeenah Moon for The New York Times

[h=2]The junior ranks[/h]

Hardly a day goes by without a big bank announcing a significant rise in starting salaries for its youngest employees. JPMorgan Chase, Citigroup, UBS and Morgan Stanley are now paying first-year bankers $100,000, while Evercore, Jefferies and Goldman Sachs will pay $110,000. In most cases, base salaries for first-year analysts were previously $85,000 to $95,000.

The raises come as the heavy workloads caused by high deal flow have led to complaints about burnout in the junior ranks. A notoriously grueling job has become even more challenging during the pandemic, junior bankers say, given the lack of camaraderie and networking when working in isolation from home. The surge in coronavirus cases as a result of the Delta variant has made return-to-office plans less certain, complicating many banks’ aggressive push to bring people back in the office, in part for the sake of morale.

More money could help attract and retain junior bankers, but now that most of the major players have landed at about the same rate, it isn’t necessarily a competitive advantage. Flexible working schedules for those back at the office, Zoom-free Fridays and other non-monetary perks could help. More immediately, it’s worth watching to see if pandemic precautions at the office become a differentiator in Wall Street’s war for talent.

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Jefferies said yesterday it will mandate vaccines for those returning to the office, a decision made partly in response to the Delta variant. The bank’s executives said in a letter last month that while “the vast preponderance” of workers at the bank were vaccinated, it recorded 40 new cases of Covid, mostly mild but including two “short hospitalizations.” Morgan Stanley also has a vaccine mandate for staff and visitors to its New York offices, while other banks, like Goldman Sachs, require employees to log their vaccination status before coming to the office but don’t mandate vaccination. Bank of America has said it is focused on bringing back vaccinated employees first to to corporate headquarters next month.

It’s a different calculation for the biggest banks, with universal policies hard to impose on operations across the country, from Wall Street offices to Middle America retail branches. As some banks, like Wells Fargo, have recently delayed their planned office returns, JPMorgan Chase announced only that it was reinstating mask requirements for all U.S. employees, many of whom are back in offices on rotations. But a memo to staff from the bank’s operating committee flagged a potential change to its workplace policy down the road: “We deeply appreciate your efforts and will continue with our previously stated return to the office schedule as we learn more about how hybrid working may work for our company.”

[h=3]HERE’S WHAT’S HAPPENING[/h]

The Tokyo Olympics draw the lowest Summer Games audience ever for NBCUniversal, which began covering them in 1988. The network averaged 15.5 million prime-time viewers, a 42 percent decline from the Rio Olympics in 2016. Still, NBCUniversal said the broadcast was profitable, bringing in about $1.2 billion in ad revenue.

SoftBank’s earnings slip. The Japanese tech conglomerate said that its latest quarterly profit fell nearly 40 percent from last year, dragged down by a fall in the value of investments like the Korean e-commerce company Coupang. SoftBank’s portfolio is also heavily exposed to Chinese tech companies like Alibaba, which may dampen future results given Beijing’s crackdown on the sector.

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Jeffrey Epstein’s victims get a big payout, as court cases continue. A fund created to compensate victims of sexual assault by the late financier has paid out just over $121 million to more than 135 people. A new legal filing against the billionaire private equity investor Leon Black claims he once flew a Russian model to Florida against her will to meet Epstein, while a lawsuit filed by Virginia Giuffre, a prominent Epstein accuser, sued Prince Andrew in New York, accusing the British royal of sexually abusing her when she was 17.

New Jersey can compel Smith & Wesson to turn over documents in a key gun case. The state’s highest court ruled in favor of the attorney general, who is trying to obtain internal information from the gun maker in a case that accuses the company of false advertising. As we have written, the novel move has the potential to reveal what gun industry executives say behind closed doors about their products, which could provide material for broader gun-control actions.

Barstool Sports and M.L.B. are reportedly in talks about a broadcast deal. Sources told the New York Post the deal had a “50-50” shot of going through, which would focus on in-game gambling during games. The irreverent Barstool site, founded by Dave Portnoy, attracts both a younger-skewing audience and controversy over its attitudes toward gender and race, which some say could push away a key source of growth for baseball broadcasts: women.

[h=2]Paying for social change[/h]

The $1 trillion bipartisan infrastructure bill is expected to pass a final vote in the Senate this morning and move on to the House. Democrats there say passage is contingent on approval of a $3.5 trillion budget package, setting the stage for lots more horse-trading, ultimatums and disputes.

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The proposed budget, more than the narrower infrastructure bill, advances the Biden administration’s social policy priorities by expanding investment in health care, child care, education, climate change and more. The budget is unlikely to garner support from Republicans, so it would require a united front from Democrats to pass, given their narrow control of both chambers.

The question now, and for weeks to come, is how to pay for things. One way is through a minimum tax on corporations, proposed yesterday by senators Elizabeth Warren, Democrat of Massachusetts, and Angus King, Independent of Maine. (It’s similar to a proposalfloated by Warren when she was running for president.) They want businesses reporting profits of $100 million or more to investors to pay a minimum 7 percent tax, saying it will affect at least 1,300 public companies and raise $700 billion over a decade.

“Like every other proposal, we have a ways to go,” King said. The senators haven’t tested the tax on centrist colleagues Kyrsten Sinema of Arizona and Joe Manchin of West Virginia, whose support is key to the Democratic budget bypassing a Republican filibuster. But Warren famously brings previously unthinkable progressive ideas into the mainstream, like student loan forgiveness. Can she do the same for a major change to the way corporate taxes are collected?

Warren said that she believes, based on discussion in the Democratic caucus, that her colleagues support taxing big corporations to fund social programs. And when President Biden was campaigning, he also supported a corporate minimum tax, she noted, but her plan raises more revenue.

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The sky isn’t quite the limit. A potential snag to the Democrats’ budget blueprint is that it doesn’t address the approaching federal debt limit. Treasury Secretary Janet Yellen wrote to lawmakers yesterday urging them to raise it for the sake of existing needs, not only future goals. (It was her third such warning in recent weeks.) “Failure to meet those obligations would cause irreparable harm to the U.S. economy,” she wrote.

[h=2]“While there are no guarantees as to what the future will bring in a still infection-impacted world, one can look ahead and envision a happy Hollywood ending to this story.”[/h]

— Adam Aron, the C.E.O. of AMC Entertainment, on reporting a smaller-than-expected loss at the theater chain, whose market fortunes were transformed when it became a meme stock earlier this year. Aron also said that the company would accept Bitcoin for ticket purchases by the end of the year.

[h=2]Charting the job market mismatch[/h]

Employers in the U.S. had 10.1 million open jobs at the end of June, the Department of Labor reported yesterday. It’s the first time that measure has reached eight figures. A high number of available positions typically signals economic strength, but that might not necessarily be the case in the pandemic-altered labor market.

In late 2018, there were 1.5 million more available jobs than there were Americans looking for work. Right now, with 9.5 million Americans out of work, that difference is 600,000. But as Elise Gould of the Economic Policy Institute pointed out, if you consider people without jobs not actively looking for work, who are not counted as part of the official unemployed, the ranks of the jobless far out number open positions.

Some economists think the job market, which is supposed to match workers with employers, is broken. It may not be quite as dire as that, judging by these latest numbers, because many of the excess job openings are concentrated in a few industries, including hotels, restaurants and hospitals. Nearly 3.9 million employees also quit their jobs voluntarily in June, close to a record, which suggests that workers are shopping around for better opportunities. And for the second month in a row, employers overall added more workers than open positions, a benchmark that took years to reach after the last recession, and a step in the right direction for repairing the damage wrought by the pandemic.

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[h=3]THE SPEED READ[/h]

Deals

Canadian Pacific upped its bid for the Kansas City Southern railroad to $31 billion, another twist in its takeover battle with Canadian National. (Canadian Pacific) The real estate firm Cushman & Wakefield is lining up a $150 million investment in WeWork’s SPAC merger. (WSJ) The fantasy sports betting company DraftKings is acquiring Golden Nugget Online Gaming for $1.56 billion. (FT) GreenLight Biosciences, a health tech firm backed by James Murdoch that is working on RNA vaccines, is going public by merging with a SPAC at a valuation of $1.5 billion (WSJ)

Policy

Inside the fight over Covid disinformation that soured the relationship between the Biden administration and Facebook. (NYT) India’s top court said that antitrust investigations into Amazon and Flipkart will go ahead. (Reuters) Biden’s push to switch to electric vehicles won’t work for everyone. (NYT) Will Lina Khan’s “fundamental revamp” of the F.T.C. succeed? (FT) “Outgunned” crypto lobbyists failed to alter a tax provision in the infrastructure bill set to pass the Senate, but they can try again with the House. (Bloomberg)

Best of the rest

Lee Jae-yong, Samsung’s de facto leader who was imprisoned for bribery, will be released on parole. (NYT) Average pay for supermarket and restaurant workers has risen above $15 an hour for the first time. (WaPo) Emojis mean very different things to different generations. (WSJ) Bill Gates is dropping down the rankings of the richest people as he transfers stock to his ex-wife, Melinda French Gates. (Forbes) “Life loves on” is the motto for a family that is still struggling to process their grief from losing their son on 9/11. (The Atlantic)

Thanks for reading! We’ll see you tomorrow.

We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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[Bozzie]

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Top News Climate code red Shutterstock​ The United Nations issued a stark warning on climate change yesterday with a call for immediate large-scale action on cutting emissions. The Intergovernmental Panel on Climate Change's report put the blame "unequivocally" on human activity and U.N. Secretary-General António Guterres said the findings were a "code red for humanity." Some changes are already locked in, with Greenland's land-ice sheet expected to keep melting, leading to rising sea levels. Heat waves that occurred once in 50 years are now happening every 10 years. Currently, the Dixie Fire in California is now the second-largest wildfire in the state's history and could take weeks to contain. And the harshest heat wave in 30 years is leading to damaging wildfires across Greece and Italy. There's a general acknowledgment on Wall Street that moving away from fossil fuels, the biggest cause of carbon emissions, will happen. Just look at the performance of Tesla and the EV sector, but environmentally friendly investing hasn't paid off so far in 2021. Green stocks in the red: Bloomberg's Cormac Mullen notes today the weak performance of the S&P Global Clean Energy Index (NASDAQ:ICLN), which is down nearly 18% year to date and more than 30% since its peak in early January as President Joe Biden's inauguration approached. The MSCI World Index is up nearly 16% year to date and up more than 13% from ICLN's peak. Among other clean energy ETFs, the Invesco MSCI Sustainable Future ETF (NYSEARCA:ERTH) is down more than 10% year to date and nearly 20% off from the post-Biden election peak. The VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG) and First Trust NASDAQ Clean Edge Green Energy Index ETF (NASDAQ:QCLN) are down more than 2% year to date and about 16% off January highs. Wall Street opportunities: Biden's recent executive order for 50% of cars to be EV by 2030 has received the support of Detroit. And UBS notes that more than 50 large investors with $14T in investments have come together to call on companies to outline "net zero" commitments for 2050. "The U.S. SEC may propose by year-end that listed firms report climate data and will also look at the criteria for investment funds claiming the sustainability or ESG label," UBS says. UBS says it sees carbon-neutral opportunities in autos, auto parts, batteries, electric and electronic components and green tech. "With the global race to win the EV market well underway, we expect growth to be exponential rather than linear," it adds. "By 2025, we think around 25% of new cars may be electrified. By 2030, the share may reach 60–70%." Morgan Stanley says the bipartisan infrastructure bill "could set the stage for a potentially more substantive reconciliation bill - the Administration's first opportunity for meaningful climate legislation." Yesterday it refreshed its "Decarbonization Playbook" of stocks rated Overweight or Equal Weight with "more direct exposure to legislative support," analyst Devin McDermott writes. Those stocks and themes include: "Air Products (NYSE:APD) (OW; hydrogen & carbon capture), Archer Daniels Midland (NYSE:ADM) (EW; carbon capture), Bloom Energy (NYSE:BE) (EW; hydrogen and potentially carbon capture), CF Industries (NYSE:CF)(EW; green/blue ammonia/hydrogen & carbon capture), Exelon (NASDAQ:EXC) (OW; nuclear), Exxon (NYSE:XOM) & Chevron (NYSE:CVX) (OW; carbon capture, renewable fuels and/or hydrogen), Linde (NYSE:LIN) (OW; hydrogen & carbon capture), New Fortress Energy (NASDAQ:NFE) (OW; hydrogen), NextDecade (NASDAQ:NEXT) (OW; carbon capture), Nutrien (NYSE:NTR) (EW; green/blue ammonia/hydrogen & carbon capture), Occidental Petroleum (NYSE:OXY) (OW; carbon capture), Plug Power (NASDAQ:PLUG) (EW; hydrogen), Sunrun (NASDAQ:RUN) (OW; solar), and Tesla (NASDAQ:TSLA)(OW; EVs)." (7 comments) Consumer AMC on offense Meme stock AMC (NYSE:AMC) is rallying premarket after handily beating quarterly estimates, reporting $2B in liquidity and saying that it will accept bitcoin (BTC-USD) by year-end. CEO Adam Aron broke a bit of news on the earnings call by disclosing that after the ArcLight and Pacific shutdowns, AMC is executing leases to add two of Los Angeles' highest-grossing theaters to its stable. "It's high time for AMC to start playing on offense again," Aron said. And it's not just two new theaters, it might be 10, he says. There are six new pickups under lease or letter of intent, and they're in advanced talks to add four more. Aron had started by paying tribute and playing to the "AMC Army" of retail holders, offering a "warm welcome" to the thousands of stockholders listening, and the many more who would listen to replays. And citing all the ideas he's gotten from the retail investor army, Aron says by year-end AMC will have the information technology systems in place to accept bitcoin as payment for tickets and concessions (if bought online) at all U.S. theaters. And since they're doing that, he says they're adding the ability to accept Apple Pay and Google Pay. (86 comments) Victoria’s Secret surge Victoria's Secret (NYSE:VSCO) jumped 20% after catching another bull rating from Wall Street. J.P. Morgan is constructive on the new standalone retail stock with an Overweight rating and December 2022 price target of $100. The firm points to a compelling entry point on what it notes is the top market share player in U.S. lingerie with +25% share across ~65% of its revenue base (women’s mass fragrance, nightwear, and underwear). J.P. Morgan also points to a +$300M category recapture opportunity in women’s swimwear. (4 comments) Sponsored By Fidelity Considering Fractional Shares in Your Portfolio Mix? Fractional shares allow you to purchase a portion of a stock or ETF based on the dollar amount you want to invest versus buying full shares. Fractional shares can be appealing to investors who want to play a more active role in their portfolio approach while keeping costs low. Fidelity’s Stocks by the Slice SM make dollar-based investing easier. Trade fractional shares with Fidelity and own a slice of your favorite companies with as little as $1. Learn more about Stocks by the Slice SM at Fidelity. Healthcare Moderna rallies As the FDA evaluates the option of introducing COVID-19 booster shots, Moderna (NASDAQ:MRNA) is continuing its upward trend, with a 17% gain yesterday, its biggest one-day gain since November 2020. In late November, Moderna shares climbed in reaction to the company’s announcement of filing for the Emergency Use Authorization (EUA) for the COVID-19 vaccine in the U.S. Highlighting the investor interest in COVID-19 vaccine makers, CNBC contributor Stephen Weiss noted the support for booster shots extended by the White House chief medical adviser, Dr. Anthony Fauci. (58 comments) Roundup appeal Bayer (OTCPK:BAYRY) has lost another appeal of a jury verdict finding its Roundup weedkiller causes cancer, its third-straight appeals court defeat among the cases that have gone to trial. A California state court of appeals today refused to overturn the 2019 jury verdict that awarded more than $2B to a couple who claimed they were sick after using Roundup for more than 30 years; the court also left intact the trial judge's decision to reduce the award to $86.7M. Bayer recently said it set aside an additional $4.5B to handle Roundup lawsuits, bringing its reserves for the cases to more than $16B. (37 comments) Tech Amazon departure Charlie Bell, a 23-year veteran of Amazon Web Services (NASDAQ:AMZN), is said to be leaving the company, according to a report from The Information. Bell's departure was confirmed by Amazon, the report said, though the company declined to comment further. Bell oversaw the development of AWS services, from computing to storage to databases, The Information said. Bell, a senior vice president, reported directly to AWS CEO Adam Selipsky. (9 comments) ​ Today's Markets In Asia, Japan +0.24%. Hong Kong +1.23%. China +1.01%. India +0.1%. In Europe, at midday, London -0.1%. Paris +0.03%. Frankfurt +0.06%. Futures at 6:20, Dow -0.03%. S&P -0.01%. Nasdaq +0.07%. Crude +2.1% to $67.88. Gold +0.3% to $1731.85. Bitcoin +2.6% to $46031. Ten-year Treasury Yield +2 bps 1.319% Today's Economic Calendar 6:00 NFIB Small Business Optimism Index 8:30 Productivity and Costs 8:55 Redbook Chain Store Sales 1:00 PM Results of $58B, 3-Year Note Auction 2:30 PM Fed's Evans Speech Companies reporting earnings today » What else is happening... Moderna (NASDAQ:MRNA) COVID-19 vaccine may be better than Pfizer (NYSE:PFE)against Delta variant. SoftBank Group (OTCPK:SFTBY) reports results. Chinese education tech stocks mount comeback. Amazon (NASDAQ:AMZN) reportedly willing to bail out Future Retail. Cloudflare (NYSE:NET) plans $1B convertible note offering. Apple (NASDAQ:AAPL) reportedly talking to Korean manufacturers for Apple Car. Gold sinks below $1,700 before bouncing; miners broadly in the red. Sony (NASDAQ:SONY) closes on $1.175 billion Crunchyroll purchase from AT&T (NYSE:T).

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[Bozzie]

Global Market Comments August 10, 2021 Fiat Lux9 (DECODING THE GREENBACK), (THE TECHNOLOGY NIGHTMARE COMING TO YOUR CITY)

​ Decoding the GreenbackIf you want to impress your friends with your vast knowledge of financial matters, then here are the Latin translations of the script on the backside of a US dollar bill. “ANNUIT COEPTIS” means “God has favored our undertaking.” “NOVUS ORDO SECLORUM” translates to “A new order has begun.” The Roman numerals at the base of the pyramid are “1776.” The better known “E PLURIBUS UNUM” is “One nation from many people.” The basic design for the cotton and linen currency with red and blue silk fibers, which has been in circulation since 1957, carries enough symbolism to drive conspiracy theorists to distraction. An all-seeing eye? The darkened Western face of the pyramid? And of course, the number “13” abounds. Thank freemason Benjamin Franklin for these cryptic symbols, and watch Nicholas Cage’s historical adventure movie “National Treasure.” The balanced scales in the seal are certainly wishful thinking and a bit quaint if they refer to the Federal budget. Study the buck closely because there soon will be to be a lot more of them around, thanks to the borrowing history of the new president. And no, don’t print this page and expect to get a cup of coffee at Starbucks in exchange. ​ ​ [h=2]What Did You Really Mean, Franklin?[/h]​ ​

​ The Technology Nightmare Coming to Your CityI tell people at my strategy luncheons that living in the San Francisco Bay area is like living in the future. There is an explosion of high tech innovation going on here, and we locals often find ourselves the guinea pigs for the latest hot products. However, sometimes the future is not such a great place to be. I learned this the other day when I received a parking ticket in the mail. I didn't recall finding a notice of violation tucked under my windshield wiper in the recent past, so I looked into it. To my chagrin, I learned that the city is now outfitting its buses with video cameras pointing forward and sideways. The digital recordings are then transmitted to parking control officers sitting behind computer screens for review. They issue tickets, which are mailed to the registered owner of the vehicles. San Francisco suffers from one of the worst parking nightmares in the country. The streets were never planned, they just sort of happened on their own during the frenzy of the 1849 gold rush. They were built to handle the traffic of horses and carriages, and later cable cars, not the crush of traffic we get today. Sky-high real estate prices have driven millions into the suburbs across the bridges over which they must commute. So parking has always been in short supply and it is very expensive. When I drive into the city for a Saturday night dinner, sometimes the parking tab is more expensive than the meal. Newly minted millionaires from tech IPOs are now buying vintage Victorian homes, and then retrofitting garages underneath them. Every time this is done, it eliminates another parking spot on the street to make room for the driveway. So while the traffic is increasing, the number of parking spots is actually declining. The city originally installed the cameras to catch offenders driving in bus lanes during rush hour. When they discovered that the cameras also captured the license plates of illegally parked cars, they expanded the program. Last year 3,000 such tickets were issued. The program has been so successful that the cash-strapped city will greatly expand it this year. And with a great San Francisco track record to point to, the firm selling the system is planning on going nationwide. Soon it will come to a city near you. Like I said, sometimes the future is not such a great place to be. [h=2]Parking in San Francisco Can Be Tight[/h]​ ​

Quote of the Day[FONT=Arial, Helvetica, sans-serif]“Everything needs more data. The day is not far when you’ll need a gigabyte of flash in a smartphone,” said Sanjay Mehrotra, the CEO of Micron Technology.[/FONT] [FONT=Arial, Helvetica, sans-serif][/FONT][FONT=Arial, Helvetica, sans-serif] [/FONT]

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[Bozzie]

August 11, 2021 Continue reading the main story SUPPORTED BY

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On the way out.Caitlin Ochs/Reuters

[h=2]New York after Cuomo[/h]

Gov. Andrew Cuomo’s bombshell resignation yesterday, under a barrage of sexual harassment allegations, has upended politics in New York.

The news was notable for many reasons, not least that Cuomo was a purported supporter of the #MeToo movement. (In his resignation speech, the governor took responsibility for his actions but denied ever touching anyone inappropriately.) For more on how “the Cuomo story demonstrates the durability of the movement,” read The Times’s Jodi Kantor in our sister newsletter The Morning.

When Cuomo steps down in two weeks, the lieutenant governor, Kathy Hochul, will step up, becoming the first woman to occupy New York State’s top office. For the state with the country’s financial capital, a new leader has implications for business, too.

On the pandemic. Amid a resurgence of coronavirus cases, up nearly 90 percent in the state over the past two weeks, how Hochul addresses vaccine mandates, mask rules, testing and related measures will be closely watched by companies rethinking their own policies, in New York and the country as a whole. Cuomo left broad mask and vaccine mandates up to city and local governments to decide, but Hochul hasn’t said whether she would do the same. She has backed keeping schools open and in person.

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On big business and Wall Street. Cuomo had his enemies on Wall Street, some dating back to his time as attorney general after the financial crisis. “Ding, dong, the witch is dead,” tweeted Steve Rattner, one of those foes. But Cuomo’s focus on financial support for ambitious real estate projects, charter schools and other initiatives won support from business leaders. Before becoming lieutenant governor, Hochul did a stint in government relations at M&T Bank.

On taxes. Hochul has generally positioned herself as a small-tax Democrat, campaigning to cap property taxes and saying that the federal government’s removal of the state and local tax deduction is unfair to New York.

The unanswered questions. There are pending infrastructure projects, like a controversial plan to build an AirTrain to La Guardia Airport, that Hochul may manage differently than her predecessor. But the biggest question circulating last night among some big Democratic donors was about who will run for governor in 2022. Hochul? Bill de Blasio? Letitia James? Hakeem Jeffries? Hillary Clinton? For the business lobby, there isn’t a clear choice yet, but the suddenly open race is set to dominate discussion.

Read more: “Inside Cuomo’s Final Days”

[h=3]HERE’S WHAT’S HAPPENING[/h]

The Senate passes a $1 trillion infrastructure bill. The bipartisan bill, which passed with 69 votes yesterday, would be the biggest allocation of federal fundsto roads and bridges and other projects in more than a decade. Then, around 4 this morning, the chamber passed a $3.5 trillion budget blueprint along party lines. Both measures now go to the House.

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Inflation is set to come in hot. A report due today is expected to show another big gain in prices in July, probably around 5.3 percent, complicating Fed policy and posing a political liability for the Biden administration’s expansive spending plans.

Coinbase rides cryptomania to a $1.6 billion quarterly profit. The nearly 4,900 percent year-on-year rise in profit shows that building a large — and profitable — cryptocurrency exchange is possible. “Crypto has arrived,” Coinbase wrote to shareholders, in its second earnings report as a publicly traded company.

Dominion wages war on far-right news media over disinformation. The voting machine company that became a target of baseless conspiracy theories about the 2020 presidential vote is seeking $1.6 billion in damages in each defamation lawsuit filed against Newsmax, One America News and Patrick Byrne, the former C.E.O. of Overstock. The company previously started proceedings against Fox News, Rudy Giuliani, the MyPillow chief executive Mike Lindell and the pro-Trump lawyer Sidney Powell.

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Instagram rolls out new features to combat racism, as Facebook faces criticism for inaction. English soccer officials waged a two-year campaign to pressure Facebook and other social media companies to do more to prevent online abuse of players, with insufficient results, according to sources and internal documents obtained by The Times. The changes to Instagram, introduced today, makes racist material harder to view.

[h=2]Robinhood’s push to ‘democratize finance’ takes shape[/h]

Robinhood, the popular trading app for small investors, is acquiring Say Technologies, which specializes in digitizing shareholder votes, for $140 million.

Many retail shareholders don’t vote, buying shares but then not exercising their power to have a say on things like executive pay packages and who sits on a company’s board. Nell Minow, a shareholder rights and corporate governance expert, said that making it easier for Robinhood’s users to vote their shares could shake up corporate boardrooms just like when millions of traders used the app to send meme stocks soaring this year.

“Robinhood was at the kindergarten stage when it came to democratizing Wall Street, and this moves it up to at least the first year of high school,” Minow said. Individuals acting together could compel companies to take the lead on environmental and social justice issues, she said.

But small investors tend to side with management more than institutional investors do, said Jonathon Zytnick, a research fellow at the Institute of Corporate Governance and Finance at N.Y.U. Law School. “Voting methods matter a ton getting retailer shareholders to vote,” Zytnick said. “And retail investors can perform a monitoring role, but at least right now, it is almost certainly wrong to think of this as a means of environment and social change.”

But if there’s anything that the past few months have taught us, the behavior of big crowds of small investors is hard to predict.

[h=2]Vaccine mandates, four ways[/h]

Companies are increasingly mandating coronavirus vaccines for their employees. This is legally allowed, and has been held up in court challenges. But for various reasons, not all employers have applied blanket mandates. Here are four of the common approaches that have emerged:

Microsoft requires vaccines for all U.S. employees. The tech company, which employs roughly 100,000 people in the U.S., said in early August that it would require proof of vaccination for all staff, vendors and guests to enter its offices.

Walmart requires vaccinations for some, but not all, of its employees. The country’s largest private employer mandates vaccines for office workers at its headquarters and for managers who travel in the U.S., but not for the majority of its employees, who work in its stores and warehouses.

Delta Air Lines requires vaccinations for new hires. It is unclear how many workers this policy will ultimately affect. The airline industry, like others, is facing a labor shortage.

JPMorgan Chase encourages, but does not require, vaccinations. Until recently, this approach was the default, with companies offering incentives for vaccination, such as cash bonuses, instead of mandates. On Friday, JPMorgan announced that unvaccinated employees would be required to complete coronavirus tests twice a week.

[h=2]Lawmakers laser-eye the crypto crowd[/h]

The $1 trillion infrastructure bill passed in the Senate yesterday includes a tax-reporting provision that cryptocurrency supporters fought to remove, generating multiple amendments and lots of headlines. But those changes got blocked, and the original language in the bill survived, which defines “broker” for the purposes of crypto transactions in an overly broad way, according to detractors.

The crypto lobby, having mounted a spirited but unsuccessful campaign, vowed to use its power to fight another day, on the tax provision as well as other challenges to its industry, like increased scrutiny from the S.E.C.

“In my view, the legislative priority should center on crypto trading, lending and DeFi platforms,” Gary Gensler, the S.E.C. chair, said in a letter released today by Senator Elizabeth Warren, Democrat of Massachusetts. She had asked him about the risks of decentralized finance, or DeFi, a booming, $80 billion sector that eliminates middlemen from financial transactions through automation. Gensler echoed the remarks he made in a straight-talking speechthis month laying out his priorities for regulating the “Wild West” crypto industry.

The S.E.C. chief is also worried about “stablecoins.” The market in these tokens pegged to the dollar or other currencies is worth about $115 billion, Gensler noted, and last month, nearly three-quarters of all trading on crypto platforms involved stablecoins. This “may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions and the like,” he wrote.

The fight over the tax provision in the infrastructure bill was an “amuse-bouche,” said Miller Whitehouse-Levine, the policy director of the DeFi Education Fund, a new nonprofit initiative dedicated to this sector. Crypto supporters realize that they will have to “educate” officials in Washington and beyond, Whitehouse-Levine said.

The infrastructure bill is now with the House, where there is another chance to change the tax provision, though there’s no path to an amendment yet, said Perianne Boring of the Chamber of Digital Commerce. Assuming passage, the I.R.S. would write detailed guidance before the law goes into effect in 2023, and the crypto industry’s arguments reflected in the legislative record could influence the agency’s interpretation. In the meantime, as Gensler’s letter suggests, the industry’s growing might will invite additional scrutiny.

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[h=3]THE SPEED READ[/h]

Deals

SpaceX is acquiring the satellite data start-up Swarm, hinting that Elon Musk’s private rocket company is expanding its Starlink internet service. (CNBC) AT&T is reportedly in talks to sell TMZ to Fox, another step in quitting the content business. (The Information) Reservations.com and HotelPlanner announced a deal to merge and go public through a SPAC. (WSJ)

Policy

The F.T.C. is reportedly investigating Uber’s partnership with the delivery service Gopuff on competition concerns. (The Information) Eric Adams, the Democratic nominee for mayor of New York City, has privately signaled he’s open to strengthening the city’s ties to tech giants. (CNBC) Germany will stop paying for coronavirus tests for people choosing to remain unvaccinated. (NYT)

Crypto

More than $600 million was stolen from the decentralized financial platform Poly Network, one of the largest crypto hacks to date. (The Block) The crypto exchange BitMEX agreed to pay $100 million to settle a regulatory lawsuit over failing to prevent Americans from using its services, but co-founders of the company still face criminal charges. (WSJ) The Bank of Jamaica minted its first batch of central bank digital currencies. (CoinDesk)

Best of the rest

Morgan Stanley’s interns are pushing for better working conditions. (Bloomberg) In a survey, roughly the same share of workers said they would quit if their employer imposed a vaccine mandate as said they’d quit if the company didn’t require vaccines. (Quartz) Midtown Manhattan, once emptied out by the pandemic, is making a shaky recovery. (NYT) The pop star Beyoncé is expanding into agriculture with a hemp and a honey farm. (Vanity Fair)

 

[Bozzie]

Read in Browser

Top News Meme stock stumble Shutterstock​ AMC (NYSE:AMC) looked to hit all the right notes for its devoted retail investors on the earnings call, but an early pop in shares fizzled, wiping out the gains heading into the report. The stock closed down 6% yesterday and nearly 14% from where shares opened when it looked like another push from the "Ape Army" was on its way. CEO Adam Aron, known to the Army as Silverback, played to that crowd in the earnings call, floating ideas for a retail audience that cares much more about wild innovation than classic valuation. Yes, AMC would consider partnering with GameStop (NYSE:GME). Sure, you will be able to pay for tickets and concessions with bitcoin (BTC-USD) by the end of the year. But Aron did balk at the idea of making a gorilla the official AMC mascot and dismissed a return of drive-in theaters as simply a bad economic idea. You can read the full transcript of the earnings call on Seeking Alpha. From a more fundamental perspective AMC's results looked good at first blush, beating estimates and noting $2B in liquidity. That led to the initial extended-hours pop in shares. But big concerns about the business model remain. SA contributor ASB Capital is says that attendance is simply not improving enough. Another SA contributor The Asian Investor notes that the "size of AMC’s losses and the deeply negative cash flow in Q2'21 show that AMC faces numerous business challenges that are so far unaddressed, especially the high cash burn." Aron is "telling you that the industry will not be back to normal in 2021, probably will not be back to normal in 2022, and the company only 'maybe' has enough cash to survive anything much less than a full recovery in two years." Unsurprisingly, short-seller Jim Chanos, who is betting on AMC to fall, blasted the Apes for trading for "misguided reasons" and not seeing the risks in the company model or the high valuation. "If you keep doing dumb things, if you keep saying, 'I'm a nihilist, I eat crayons, I don't care about this, I don't care about that,' well if you end up losing money, you only have yourself to blame," he said. Retail interest rising: As AMC devotees prepare to make another stand for the stock at the $30 level, there are few signs of a new big meme name on the cusp of unprecedented gains. EV battery company Microvast (NASDAQ:MVST) has recently topped the mentions list for the WallStreetBets subreddit, according to Quiver Quantitative. But its moves, while big, have been choppy rather than straight up. However, Morgan Stanley notes that retail investing interest is picking up recently, with a bias towards more buying. "Retail participation is currently at 9.4% of the total market volume, which is in the 76th percentile relative to the last 5 years," Morgan Stanley's Quantitative Equity Strategy team writes. "Order imbalance has remained slightly positive. It currently sits at 0.6% or 62nd percentile relative to the last 5 years." Real Estate (NYSEARCA:XLRE) and Health Care (NYSEARCA:XLV) have the biggest positive buy/sell imbalances among retail traders, so the next meme favorite could come from those sectors. Materials (NYSEARCA:XLB) and Consumer Staples (NYSEARCA:XLP), also not readily associated with the retail crowd, have positive imbalances as well. Only Energy (NYSEARCA:XLE) and Industrials (NYSEARCA:XLI) are negative. (3 comments) Trending Is China ‘uninvestable?’ ARK Investment Management CEO Cathie Wood dumped her Chinese tech holdings in the wake of the country's regulatory crackdown, but she's not closing the door completely. In ARK's monthly webinar yesterday, Wood, whose flagship ARK Innovation ETF (NYSEARCA:ARKK) is down 3% in the past month, raised the question of whether China is "uninvestable" herself. “Well, I would say in any of the areas we are looking right now the multiples structure, the valuation structure of those companies is down and probably not going to come back quickly and may even go down more.” But she later said: "I'm sure we’re going to find some very interesting companies in the innovation space, and so we’re going to keep an open mind there.” ARK also noted Tuesday that there are opportunities in Chinese healthcare for two critical reasons: overwhelmed physicians and underfunding. China's long-term goals: UBS came out with a note this week arguing that the "uninvestable" concerns are overstated. "First, these (listing) actions do not change China’s long-term priority to develop strategically important industries and technologies, which offer compelling growth opportunities to investors," emerging market strategists wrote. "Second, China has engaged in a multi-year process of opening up its financial markets to global investors, and there is no indication of a reversal of that process. Any changes to the VIE structure or other measures that would deter foreign investor interest would be at odds with this policy objective. Third, the markets are already pricing a sizable policy risk premium into Chinese equities, and while that doesn’t preclude further downside in the near term, we see long-term value being created as a result of the recent market declines. Fourth, potential delistings do create possible disruptions for U.S. investors that own, either directly or indirectly, the ADRs, but these should be temporary and can be managed." UBS does expect more regulatory moves, so is staying neutral on China stocks for the next 6-12 months, leaning to sectors with less policy headwinds like green tech, consumer durables and energy and away from healthcare, property and Internet. (8 comments) ViacomCBS courts suitors ViacomCBS (VIAC, VIACA) is halting any potential talks with Comcast (NASDAQ:CMCSA)as Chairman Shari Redstone puts an eye toward lining up more suitors for the company, the New York Post reports. Redstone reportedly is pushing any more talks (about a merger, or joint venture on streaming) with Comcast chief Brian Roberts into next year, according to the report. Board members are reportedly telling Redstone that there are multiple suitors for the business if she shops around and doesn't give in to consolidation panic. (99 comments) Sponsored By Invesco How Invesco QQQ Can Fit into Your Portfolio For Investors looking for unique and differentiated options, consider becoming an agent of innovation with Invesco QQQ. Learn more. Cryptocurrency $600M crypto hack Cross-chain protocol Poly Network was hacked for $611M, the largest DeFi hack to date, The Block reports. The Poly Network is a protocol used to trade tokens among a variety of blockchains. Apparently, the root cause of the hack was a cryptography issue, which is not usually the case. Assets that were stolen in the hack include $273M of Ethereum (ETH-USD) tokens, $253M of Binance Smart Chain tokens, and $85M in USCoin (USDC-USD) on the Polygon Network. (58 comments) Covid Final COVID wave? Dr. Scott Gottlieb, the former commissioner of the FDA, has told CNBC that the current surge in COVID-19 cases in the U.S. may be the “final wave” of the pandemic in the U.S. “I don’t think COVID is going to be epidemic all through the fall and the winter. I think that this is the final wave, the final act, assuming we don’t have a variant emerge that pierces the immunity offered by prior infection or vaccination,” he said. Dr. Gottlieb thinks that the high transmissibility of the Delta variant combined with the rising vaccination rates could transform the course of future infections. (197 comments) M&A TMZ for sale AT&T's (NYSE:T) WarnerMedia is in discussions to sell its tabloid entertainment brand TMZ to Fox (FOX, FOXA), The Information reports. It's the latest move from AT&T to sell off its businesses in order to focus on connectivity - moves that will find their nexus in the planned spinoff and merger of WarnerMedia itself to merge with Discovery (NASDAQ:DISCA). (74 comments) ​ Today's Markets In Asia, Japan +0.65%. Hong Kong -0.22%. China +0.1%. India -0.3%. In Europe, at midday, London +0.38%. Paris +0.23%. Frankfurt +0.1%. Futures at 6:20, Dow -0.02%. S&P -0.13%. Nasdaq -0.25%. Crude -0.01% at $68.28. Gold +0.14% at $1734. Bitcoin +0.16% at $46229. Ten-year Treasury Yield +3.1 bps to 1.374% Today's Economic Calendar 7:00 MBA Mortgage Applications 8:30 Consumer Price Index 10:00 Atlanta Fed's Business Inflation Expectations 10:30 EIA Petroleum Inventories 10:30 Fed's Bostic: "The Federal Reserve's Role in Making This an Economy That Works for Everyone" 12:00 PM Fed's George: "A View from the Federal Reserve Bank of Kansas City" 1:00 PM Results of $41B, 10-Year Note Auction 2:00 PM Treasury Budget Companies reporting earnings today » What else is happening... AT&T (NYSE:T) update: Expecting higher service revenue growth, $17B in 2021 capex. Upstart (NASDAQ:UPST) stock surges 15% after strong guidance, solid earnings beat. Coinbase (NASDAQ:COIN) EPS beats by $3.84, beats on revenue. Lenovo Group (OTCPK:LNVGY) ADR beats on revenue. Micron (NASDAQ:MU) CFO discusses continuing supply chain shortages. Electric vehicle stocks get another look from investors after infrastructure bill passes the Senate. Alight (NYSE:ALIT) gains after report Voya Financial (NYSE:VOYA) is considering acquisition.

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[Bozzie]

Global Market Comments August 11, 2021 Fiat Lux (FLYING THE 1929 TRAVEL AIR D4D, or WHY YOU NEVER WANT TO FLY WITH JOHN THOMAS)

​ Flying the 1929 Travel Air D4D, or Why You Never Want to Fly with John ThomasWhen you make millions of dollars for your clients, you get a lot of pretty interesting invitations. $5,000 cases of wine, lunches on superyachts, free tickets to the Olympics, and dates with movie stars (Hi, Cybil!). So it was in that spirit that I made my way down to the beachside community of Oxnard, California just north of famed Malibu to meet long-term Mad Hedge follower, Richard Zeiler. Richard is a man after my own heart, plowing his investment profits into vintage aircraft, specifically a 1929 Travel Air D-4-D. At the height of the Roaring Twenties (which by the way we are now repeating), flappers danced the night away doing the Charleston and the bathtub gin flowed like water. Anything was possible, and the stock market soared. In 1925, Clyde Cessna, Lloyd Strearman, and Walter Beech got together and founded the Travel Air Manufacturing Company in Wichita, Kansas. Their first order was to build ten biplanes to carry the US mail for $125,000. The plane proved hugely successful, and Travel Air eventually manufactured 1,800 planes, making it the first large-scale general aviation plane built in the US. Then, in 1929, the stock market crashed, the Great Depression ensued, aircraft orders collapsed, and Travel Air disappeared in the waves of mergers and bankruptcies that followed. A decade later, WWII broke out and Wichita produced the tens of thousands of the small planes used to train the pilots who won the war. They flew B-17 and B-25 bombers and P51 Mustangs, all of which I’ve flown myself. The name Travel Air was consigned to the history books. Enter my friend Richard Zeiler. Richard started flying support missions during the Vietnam War and retired 20 years later as an Army Lieutenant Colonel. A successful investor, he was able to pursue his first love, restoring vintage aircraft. Starting with a broken down 1929 Travel Air D4D wreck, he spent years begging, borrowing, and trading parts he found on the Internet and at air shows. Eventually, he bought 20 Travel Air airframes just to make one whole airplane, including the one used in the 1930 Academy Award-winning WWI movie “Hells Angels.” By 2018, he returned it to pristine flying condition. The modernized plane has a 300 hp engine, carries 62 gallons of fuel, and can fly 550 miles in five hours, which is far longer than my own bladder range. Richard then spent years attending air shows, producing movies, and even scattering the ashes of loved ones over the Pacific Ocean. He also made the 50-hour round trip to the annual air show in Oshkosh, Wisconsin. I have volunteered to copilot on a future trip. Richard now claims over 5,000 hours flying tailwheel aircraft, probably more than anyone else in the world. Believe it or not, I am also one of the few living tailwheel-qualified pilots in the country left. Yes, antiques are flying antiques! As for me, my flying career goes back to the Vietnam era as well. As a war correspondent in Laos and Cambodia, I used to hold Swiss-made Pilatus Porter airplanes straight and level while my Air America pilot friend was looking for drop zones on the map, dodging bullets all the way. I later obtained a proper British commercial pilot license over the bucolic English countryside, trained by a retired Battle of Britain Spitfire pilot. His favorite trick was to turn off the fuel and tell me that a German Messerschmidt had just shot out my engine and that I had to land immediately. He only turned the gas back on at 200 feet when my approach looked good. We did this more than 200 times. By the time I moved back to the states and converted to a US commercial license, the FAA examiner was amazed at how well I could do emergency landings. Later, I added on additional licenses for instrument flying, night flying, and aerobatics. Thanks to the largesse of Morgan Stanley during the 1980s, I had my own private twin-engine Cessna 421 in Europe for ten years at their expense where I clocked another 2,000 hours of flying time. That job had me landing on private golf courses so I could sell stocks to the Arab Prince owners. By 1990, I knew every landing strip in Europe and the Persian Gulf like the back of my hand. So, when the first Gulf War broke out the following year, the US Marine Corps came calling at my London home. They asked if I wanted to serve my country and I answered, “Hell, yes!” So, they drafted me as a combat pilot to fly support missions in Saudi Arabia. I only got shot down once and escaped with a crushed L5 disk. It turns out that I crash better than anyone else I know. That’s important because they don’t let you practice crashing in flight school. It’s too expensive. My last few flying years have been more sedentary, flying as a volunteer spotter pilot in a Cessna-172 for Cal Fire during the state’s runaway wildfires. As long as you stay upwind there’s no smoke. The problem is that these days, there is almost nowhere in California that isn’t smokey. By the way, there are 2,000 other pilots on the volunteer list. Eventually, I flew over 50 prewar and vintage aircraft, everything from a 1932 De Havilland Tiger Moth to a Russian MiG 29 fighter. It was clear, balmy day when I was escorted to the Travel Air’s hanger at Oxnard Airport. I carefully prechecked the aircraft and rotated the prop to circulate oil through the engine before firing it up. That reduced the wear and tear on the moving parts. As they teach you in flight school, better to be on the ground wishing you could fly than being in the air wishing you were on the ground! I donned my leather flying helmet, plugged in my headphones, received a clearance from the tower, and was good to go. I put on max power and was airborne in less than 100 yards. How do you tell if a pilot is happy? He has engine oil all over his teeth. After all, these are open-cockpit planes. I made for the Malibu coast and thought it would be fun to buzz the local surfers at wave top level. I got a lot of cheers in return from my fellow thrill-seekers. After a half-hour of low flying over elegant sailboats and looking for whales, I flew over the cornfields and flower farms of remote Ventura County and returned to Oxnard. I haven’t flown in a biplane in a while and that second wings really put up some drag. So, I had to give a burst of power on short finals to make the numbers. A taxi back to the hanger and my work there was done. There are old pilots and there are bold pilots, but there are no old, bold pilots. I can attest to that. Richard’s goal is to establish a new Southern California aviation museum at Oxnard airport. He created a non-profit 501 (3)(c), the Travel Air Aircraft Company, Inc. to achieve that goal, which has a very responsible and well-known board of directors. He has already assembled three other 1929 and 1930 Travel Air biplanes as part of the display. The museum’s goal is to provide education, job training, restoration, maintenance, sightseeing rides, film production, and special events. All donations are tax-deductible. To make a donation, please email the president of the museum, my friend Richard Conrad at RConrad6110@gmail.com Who knows, you might even get a ride in a nearly 100-year-old aircraft as part of a donation? To watch the video of my joyride, please click here. ​ ​ Where I Go My Kids Go​ ​ ​

Quote of the Day“There are old pilots and there are bold pilots, but there are no old, bold pilots,” according to the US Marine Corps flight school.

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[CoachCB]

Boz, not sure if you like reading books. I'm a non-fiction fan. Anyhow, there's an author, Eric Larson, who has written maybe 8 books. His last book, came out about a year and a half ago, called The Splendid & the Vile - is about the Battle of Britain, written from the perspective of Winston Churchill during the one year leading to and during the battle (when Germany was bombing England). His books are fantastic, thoroughly researched, and take a different view than most books written on a certain subject.