The bull market is one year old. Can it last?
More questions than answers
The bull market is now a year old, with the S&P 500 up nearly 75 percent from its low point at this time last year. That recovery, The Times’s Matt Phillips writes, is “a testament to the unbridled enthusiasm that let investors shrug off the economic carnage of the pandemic and buy stocks — and pretty much anything else.” The factors that have stoked the rally also raise questions about whether it can last.
Is this a bubble?
Analysts are wary of using the B-word to describe the market as a whole, despite the best 12-month stretch for stocks since the 1930s. But John D. Turner, a finance professor who wrote “Boom and Bust: A Global History of Financial Bubbles,” is convinced: “If I had to put money on it, it looks like a bubble,” he told The Times. A bubble has three key ingredients, he said: ease of trading, access to credit and mass speculation — all of which are in ready supply. All that’s missing is a spark. What could it be?
Can retail traders keep this up?
A surge in individual traders — who have access to commission-free online trading apps, government “stimmy” checks and lots of downtime — has become one of the biggest forces in stock markets. A big test of this trend’s durability will come if and when Robinhood, which filed confidentially to go public yesterday, begins trading itself. Can the brokerage — whose C.E.O. faced tough questions from lawmakers and several lawsuits over its halting of trades — endure the scrutiny of public market investors when it opens its books?
What’s going on at GameStop?
Few investors beyond true believers think that the surge in the video game retailer’s stock — which was up 1,700 percent at one point in January — is justified by the fundamentals of its business. That’s why the company’s first earnings release since the frenzy was a hotly anticipated event on Tuesday. Attendees left with plenty of unanswered questions, mainly because GameStop executives provided no financial guidance and, unexpectedly, skipped a Q.&A. Here are a few:
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The company said it would consider selling stock “to fund the acceleration of our future transformation initiatives.” With shares up some 900 percent from a year ago, there is scope to raise a huge amount. How ambitious will it be?
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There has been a lot of executive turnover at the company. Is that also happening lower in the ranks, perhaps in part because employees can cash out their suddenly more valuable shares?
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The Chewy co-founder Ryan Cohen, who joined GameStop’s board along with two other former Chewy executives just before the frenzy, said he aimed to turn the retailer into the “Chewy of gaming.” What do pet supplies have in common with video games?
If you have answers — or more pertinent questions about this moment in the markets — let us know: dealbook@nytimes.com.
HERE’S WHAT’S HAPPENING
The E.U. plans to curb vaccine exports for six weeks. The bloc has drafted emergency rules to ease its supply shortages, a move that could badly affect Britain and other countries. Separately, AstraZeneca said it planned to disclose more recent trial data about its vaccine to assuage U.S. officials’ concerns.
Jay Powell plays down the risk of inflation. The Fed chair told the House Financial Services Committee yesterday that he expected the $1.9 trillion stimulus to have a “neither particularly large nor persistent” effect on inflation. Treasury Secretary Janet Yellen defended the rescue package at the hearing, and said the next bill needed to address income inequality. (They are likely to reiterate these messages at a Senate hearing today.)
Speaking of inequality … The combined wealth of American billionaires grew $1.3 trillion during the pandemic, up 44 percent from the previous year, according to a new study. During that time, 80 million Americans lost their jobs.
The Fed creates committees to study climate risks. One will identify and address the financial risks posed by climate change, while another will consider “the potential for complex interactions across the financial system,” Lael Brainard, a Fed governor, said in a speech.
Citigroup pledges more flexibility for workers. Employees can spend up to two days per week working remotely when the bank’s offices reopen, the C.E.O., Jane Fraser, wrote in a memo. As complaints by junior analysts at Goldman Sachs have generated debates about working conditions on Wall Street, Ms. Fraser also banned internal video meetings on Fridays and announced a holiday called “Citi Reset Day.”
Two shootings, and a new push for gun control
As America grieves over two mass shootings in a week — in Atlanta and Boulder, Colo. — the inevitable question arises again: Will Washington pass new gun restrictions this time?
“This is not and should not be a partisan issue — it is an American issue,” President Biden said yesterday, adding that he was “devastated” by the killings. He urged lawmakers not to “wait another minute” in approving legislation to ban assault-style weapons and high-capacity magazines.
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It’s an issue that Mr. Biden knows well: He helped pass an assault weapons ban in the Senate in the 1990s. And President Barack Obama charged him with devising gun control proposals after the 2012 Sandy Hook shootings, though those failed to gain traction.
Republicans appear opposed to sweeping new restrictions. Senator Chuck Grassley of Iowa noted that two bills proposing a modest tightening of background checks for sales — which four in five Americans support — passed the House mostly along party lines. A narrower proposal sponsored by Senator Joe Manchin, Democrat of West Virginia, and Senator Pat Toomey, Republican of Pennsylvania, is unlikely to gain a filibuster-proof majority in the Senate.
A stuck container ship could roil energy markets. The ship ran aground in the Suez Canal, blocking traffic in one of the world’s most important shipping arteries. It may take days to move the vessel, potentially forcing customers to seek alternatives to oil from the Middle East.
Exclusive: Fanatics is now a $12.8 billion company
The sports apparel retailer Fanatics has raised $320 million at a $12.8 billion valuation, more than double its valuation this summer, DealBook hears. The round was led by Silver Lake with participation by Fidelity, Neuberger Berman, Franklin Templeton, Blackstone, Thrive Capital and M.L.B. — all existing investors.
Frequently Asked Questions About the New Stimulus Package
The stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more.
Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read more
This credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.
There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.
The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.
Fanatics brings instant gratification to sports swag. Rather than purchasing jerseys in advance through a third party and guessing which team or player will be hot, Fanatics owns the rights to fan gear for the major U.S. sports teams (and some Nike merchandise). That allows it to produce hot items on demand, like LeBron James jerseys immediately after he joined the Lakers. The major sports leagues have invested in Fanatics because they want ownership — not just royalties — in a business that benefits from their brands. (Michael Rubin, the founder and executive chairman of Fanatics, is also a part-owner of the N.B.A.’s Philadelphia 76ers.)
The pandemic has been good for business. Sports came to a temporary halt, but people shopped online. Fanatics, which is profitable, generates about 80 percent of its more than $3 billion in sales online. Its e-commerce sales jumped more than 20 percent last year.
An I.P.O. is still in sight. Fanatics is considering going public via a SPAC or traditional I.P.O. this year or next. (Nothing is definite, and no formal talks are underway.) Since its last fund-raising effort, Fanatics has expanded into new product lines like hats through its acquisition of Top of the World and it started Fanatics China through a joint venture with Hillhouse Capital. It is using the money from this latest round to expand its geographic footprint and product lines, potentially through more deals.
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“While an I.P.O. is clearly an available option to us, there is no update on any timeline,” Fanatics told DealBook.
John Cleese’s blockchain-based satire
The comedian John Cleese is selling an NFT, or nonfungible token. It’s a joke — sort of. Evoking a classic con, the sale of the Brooklyn Bridge, the Monty Python actor is auctioning an authenticated digital sketch of the bridge by “The Unnamed Artist John Cleese,” with bidding running through April Fools’ Day. “I don’t make the jokes,” Mr. Cleese told DealBook. “I just point them out.”
The project highlights the hyper-commodification of art in a frenzied market. Christie’s recently held its first NFT auction, selling the work of an artist known as Beeple for $69,346,250. That’s how much Mr. Cleese is asking for the sketch if a bidder wants to “buy it now.” He’ll split the proceeds evenly with his partners: a comedy writer, an animator and a law professor doubling as crypto consultant. The highest bid is now about $36,000. “I think it’s very funny,” Mr. Cleese said. “At the same time, we might make some money.”
“Some things are worth pointing out, and some are not,” Mr. Cleese said. He said the Beeple sale was notable because it revealed a “mad world,” with people disconnected from meaningful emotional experiences, like seeing a painting at a gallery. Yet the 81-year-old also conceded that someone younger, for whom the line between the physical and digital worlds is more blurred, could have feelings about an NFT.
The art world can’t afford to dismiss NFTs, Mr. Cleese said. Nor can he. By mocking the craze, he is now implicated in the thing he finds absurd — just how he’s made a living as a comedian.
THE SPEED READ
Deals
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The insurer Hartford rejected a $23 billion takeover bid by its rival Chubb, potentially setting off a takeover battle. (Reuters)
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Compass, the online real estate brokerage backed by SoftBank’s Vision Fund, hopes to be valued at as much as $10 billion in its I.P.O. (Bloomberg)
Politics and policy
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Charles Schwab said it was quitting the U.S. Chamber of Commerce, weeks after announcing it was shutting down its political action committee. (CNBC)
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Is Tom Steyer, the billionaire Democratic presidential candidate, weighing a run for California governor? (Politico)
Tech
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Intel said it planned to spend $20 billion building two chip factories in Arizona, and pledged to build more processors for other companies. (NYT)
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Tesla will accept payment in Bitcoin, Elon Musk says. (Bloomberg)
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Customers of Coinbase have complained that the cryptocurrency exchange failed to help them when they were locked out of accounts or had their holdings stolen. (NYT)
Best of the rest
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The C.E.O. of Levi Strauss urged Congress to pass a bill giving U.S. workers 12 weeks of paid time off for health care: “Not mandating paid leave is inexcusable.” (CNN)
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Prince Harry has a new job: “chief impact officer” at the Silicon Valley coaching start-up BetterUp. (WSJ)
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General Mills demonstrates how not to respond to a customer complaint about shrimp tails in a box of cereal. (NYT)
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