Know someone who would like this newsletter? Forward it to them.
The World
President Biden said he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine. The rare sanctions threat came as NATO places forces on standby and reinforces eastern Europe with more ships and fighter jets in response to Russia's troop build-up near its border with Ukraine. If Russia were to move into Ukraine with the estimated 100,000 soldiers it has massed near the border, Biden said it would be the "largest invasion since World War Two" and would "change the world." (Reuters)
US officials said there was growing “convergence” with the EU on financial sanctions aimed at crippling Russian banks, as western countries sought to settle on a package of economic countermeasures to a possible attack. Meanwhile, Putin will meet CEOs from some of Italy’s largest companies including Pirelli, Generali and UniCredit via video today about ‘expanding ties.’ (Financial Times)
Western efforts to isolate and punish Russia are likely to be undermined by the support of China. When Putin travels to Beijing for the Winter Olympics on February 4, the Russian president will meet the leader who has become his most important ally — Xi Jinping of China. In a phone call between Putin and Xi in December, the Chinese leader supported Russia’s demand that Ukraine must never join NATO. A decade ago, such a relationship seemed unlikely: China and Russia were as much rivals as partners. But after a period when both countries have sparred persistently with the US, Xi’s support for Putin reflects a growing identity between the interests and world views of Moscow and Beijing. According to the Chinese media, Xi told Putin that “certain international forces are arbitrarily interfering in the internal affairs of China and Russia, under the guise of democracy and human rights.” (Financial Times)
U.S. Covid-19 deaths reached the highest level since early last year, eclipsing daily averages from the recent Delta-fueled surge, reaching 2,191 a day, up about 1,000 from daily death counts two months ago, before Omicron was first detected. While emerging evidence shows Omicron is less likely to kill the people it infects, because the variant spreads with unmatched speed the avalanche of cases can overwhelm any mitigating factors. (Wall Street Journal)
Japan’s Covid surge is unlikely to ease until early February, as global data shows omicron waves take on average 27 days to peak. (Nikkei Asia Review)
Hong Kong’s Covid isolation could last to 2024, the European Chamber of Commerce says. (Bloomberg)
Warren Buffett’s Berkshire Hathaway will hosts its annual meeting in person for the first time since 2019. (Wall Street Journal)
Crypto collapse erases more than $1 trillion in wealth, forcing a reckoning for everyday investors: Thousands of Americans who jumped into crypto investing over the past two years in hopes of a rocket ride to instant wealth now face a similar reckoning. Prices for cryptocurrencies — from relative stalwarts such as bitcoin and Ethereum to more exotic tokens — have cratered since reaching all-time highs in early November, wiping out an astonishing $1.35 trillion in value globally, nearly half of the total market. (Washington Post)
The IMF urged El Salvador to stop recognizing bitcoin as a legal tender in the country and expressed concern over its plan to issue bonds linked to the cryptocurrency. (Financial Times)
Economy
The latest Future Forum Pulse, Slack’s quarterly survey of more than 10,000 knowledge workers in the U.S., Australia, France, Germany, Japan, and the U.K., shows that the “remote versus office” debate is over: (Future Forum)
A majority of knowledge workers—58%—are working in hybrid work arrangements, and two-thirds cite hybrid as their preferred working model.
Hybrid and remote employees score higher than in-office workers on all employee experience measures; work-life balance and work-related stress are major pain points for full-time office employees.
Executives, white knowledge workers, men, and non-parents are opting into in-office work at higher rates, raising the risk that proximity bias could entrench existing inequities.
Cash bonuses for interviews a sign of the times in eurozone jobs boom: Website developers are in short supply in Europe’s post-pandemic economy, so Stefan Knoll is using unorthodox tactics to hire them and other staff. The founder of Deutsche Familienversicherung, a fast-growing insurer based in Frankfurt, is offering €500 to anyone who interviews for a vacancy, another €1,000 to those who make it to a second round, and €5,000 more to those who complete a six-month probation. (Financial Times)
It won't just be Fed Chair Jay Powell who's in the hot seat today as he signals the Fed’s latest policy moves. European Central Bank President Christine Lagarde will find herself under fresh pressure from markets to adjust course if the spillover from across the Atlantic starts to threaten the eurozone's nascent recovery. The Fed’s recent hawkish shift — it is expected to see its first post-pandemic rate increase in March — has already left its mark on eurozone borrowing costs. The key German 10-year bond topped zero last week for the first time since May 2019 and is up by more than 30 basis points in the last month. The rise in the eurozone's ultra-safe benchmark is partially reflecting expectations that the ECB will tighten earlier than it has projected. (Politico EU)
Investors set a record for U.S. commercial-property sales last year, betting that the pandemic is reordering how Americans live, work and play. Real-estate buyers loaded up on warehouses, which serve as fulfillment centers for the e-commerce boom. They bought apartment buildings to capitalize on record high rents. They paid up for resorts and vacation-oriented hotels that benefited from the resurgence in travel to leisure destinations. Commercial-property sales totaled a record $809 billion in 2021, nearly double 2020’s total — and it exceeded the previous record of about $600 billion in 2019. (Wall Street Journal)
The Philadelphia Inquirer is negotiating to rent office space that is 60% smaller and $1M/year cheaper, starting Q1 2023, as it expects much work to be remote. (Philadelphia Inquirer)
Goods returned by US consumers surged 78% in 2021: U.S. consumers are handing back huge volumes of unwanted purchases, souring a record-setting holiday season for retailers and deepening a financial, environmental and customer service dilemma for brands. Retail returns surged 78% to $761bn between 2020 and 2021. Last year 16.6% of all retail sales were sent back compared to 10.6% a year earlier, the survey found. For the peak holiday season in November and December, retailers expect returns to have jumped by more than half from $101bn to $158bn, the National Retail Federation reported. That growth far outstrips the estimated 14.5% rise in retailers’ holiday sales last year. (Financial Times)
The red-hot flame under home prices is flickering. Slightly. Price growth slowed in November, as prices were 18.8% higher than in November 2020, a slowdown compared to October's 19% YoY growth. Still, demand continues to outpace the supply of homes despite prices. (Axios)
Technology
Chip inventory held by manufacturers has plummeted to an average of just five days’ supply, as the global semiconductor shortage continues to wreak havoc on industry, the US Department of Commerce warned. According to a survey by the department of roughly 150 companies worldwide, manufacturers’ median chip inventory plunged from 40 days supply in 2019 to about five days late last year. (Financial Times)
Nvidia is planning to abandon its Arm acquisition after making little to no progress with regulators; source says SoftBank is preparing an Arm IPO. (Bloomberg)
Intel announces earnings today. The best write-up on its business came from Ben Thompson, who discussed Intel’s future in light of its decision to become TSMC’s customer: “Intel is obviously not splitting up, but this TSMC investment sure makes it seem like Gelsinger recognizes the straitjacket Intel was in, and is doing everything possible to get out of it. To that end, it seems increasingly clear that the goal is to de-integrate Intel: Intel the design company is basically going fabless, giving its business to the best foundry in the world, whether or not that foundry is Intel; Intel the manufacturing company, meanwhile, has to earn its way (with exclusive access to x86 IP blocks as a carrot for hyperscalers building their own chips), including with Intel’s own CPUs.” (Stratechery)
Panasonic will begin commercial production of batteries for U.S. electric vehicle maker Tesla after struggling to bring a large U.S. battery plant online. The company will mass produce its latest power cells in Japan, where it has a large pool of skilled engineers. (Nikkei Asia Review)
Chinese scientists say they could be a step closer to developing a code-breaking machine, thanks to a recent breakthrough in quantum memory technology based on device made from crystal. A quantum computer can crack an encrypted message in hours, but it needs tens of millions of qubits – the quantum information carried by subatomic particles – to make the calculation. At present, the most powerful quantum computers run with less than 100 qubits, meaning they are limited to simple tasks with little practical value. (South China Morning Post)
Microsoft earnings continued to grow last quarter as its cloud-services business stayed strong, as 4Q21 sales hit $51.7 billion, up 20% from a year earlier. Microsoft’s overall cloud revenue increased 32% from the year-earlier quarter to $22.1 billion. Its cloud-infrastructure service, called Azure, grew by 46%, down slightly from the prior quarter’s 48% growth. (Wall Street Journal)
Verizon revealed that one in three of its wireless customers now uses a 5G phone as its 5G network continues to expand. The largest U.S. carrier got more of its customers to upgrade to 5G phones, which means converting them to pricier Unlimited plans required to access the 5G network that Verizon has recently enlarged. (Cnet)
Smart Links
Microsoft will keep Activision Blizzard agreements for three new Call of Duty games on PlayStation in the next two years, but long-term plans are hazy. (Bloomberg)
NBCUniversal lowering its TV ratings expectations for Winter Olympics. (Reuters)
Tokyo condo prices overtake bubble-era record in 2021. (Nikkei Asia Review)
LG battery division seeks global dominance after blockbuster IPO. (Financial Times)
Automakers shift toward reservations, altering how Americans buy cars. (Axios)