Know someone who would like this newsletter? Forward it to them.
The World
A sober Jay Powell delivered a message that spooked markets while serving an important purpose. The chairman of the Federal Reserve said the US recovery from the deep downturn inflicted by the pandemic had slowed due to a resurgence of the virus and a return to normal was still far away for the world’s largest economy. But his gloomy stance reinforced the Fed’s dogged determination to keep pumping massive amounts of monetary stimulus into the economy, stamping out suggestions that the US central bank might start removing, or “tapering”, support by reducing the scale of its asset purchases any time soon. (Financial Times)
The EU said AstraZeneca must take coronavirus vaccines from UK factories to make up supply shortfalls, a demand that could unleash an explosive post-Brexit political fight. The demands marked a further escalation in a bitter dispute since AstraZeneca last week said its 1Q21 deliveries would fall more than 50% short of the bloc’s expectations. UK Prime Minister Boris Johnson believes his government secured a watertight deal with AstraZeneca — signed three months before the EU — to supply 100m doses. His allies said he wants to stop “vaccine nationalism.” (Financial Times)
Vaccine passports are divisive and politically tricky; they’re also probably inevitable. Meanwhile, in Texas, National Guard teams will vaccinate residents in five rural counties. In California, Blue Shield will oversee the state’s troubled vaccination effort. (Economist, Texas Tribune, Los Angeles Times)
The University of Michigan is urging students living on or near the campus to stay home through Feb. 7 to stem the spread of Covid-19. The announcement comes days after a more transmissible variant of the virus was detected in the university’s athletics department. (Chronicle of Higher Ed, Univ. of Michigan)
President Biden signed a sweeping series of executive actions — ranging from pausing new federal oil leases to electrifying the government’s vehicles — while casting the moves as much about job creation as the climate crisis. Biden said his directives would reserve 30% of federal land and water for conservation purposes, make climate policy central to national security decisions and build a network of electric-car charging stations nationwide. (New York Times)
The Biden administration imposed a temporary freeze on U.S. arms sales to Saudi Arabia and is scrutinizing purchases by the UAE as it reviews billions of dollars in weapons transactions approved by former President Trump. The review includes the sale of precision-guided munitions to Riyadh, as well as top-line F-35 fighters to Abu Dhabi, a deal that Washington approved as part of the Abraham Accords, in which the Emirates established diplomatic relations with Israel. (Wall Street Journal)
Police raided Alexei Navalny’s apartment and the headquarters of his Anti-Corruption Foundation in Moscow,while Russia’s FSB security agency has confirmed it enforced a no-fly zone over the £1bn seaside palace that Vladimir Putin has assured the public he does not own. (The Guardian, The Guardian-2)
In India, leaders of a protest movement sought to distance themselves from a day of violence when thousands of farmers stormed India’s historic Red Fort, the most dramatic moment in two months of demonstrations that have grown into a major challenge of Prime Minister Narendra Modi’s government. (Associated Press)
80% of U.S. mayors do not support sweeping changes to the funding of their police departments, and most say last year's racial justice protests were a force for good in their cities. (NPR, Boston University)
28% of Americans report stronger personal faith because of the pandemic, and the same share think the religious faith of Americans overall has strengthened. Far smaller shares in other parts of the world say religious faith has been affected by the coronavirus. For example, just 10% of British adults report that their own faith is stronger, and 14% think the faith of Britons overall has increased due to COVID-19. In Japan, 5% of people say religion now plays a stronger role in both their own lives and the lives of their fellow citizens. (Pew Research Center)
Economy
Rosalind Brewer, now Starbucks Corp.’s No. 2 executive, is set to become the only Black woman to lead a Fortune 500 company as she takes over as chief executive of Walgreens Boots Alliance Inc. amid a national debate about systemic racism. (Wall Street Journal)
Health insurer Anthem's profits fell 41% in 4Q20, due to a resurgence in care that patients put off earlier in 2020 amid the pandemic. (Healthcare Dive)
Consumer confidence increased this month, with the rise signaling stronger consumer spending through the end of 1Q21. This week’s increase is the second-largest gain over the past three years, and so far this month, the ICS shows a 1.5% increase from December. (Morning Consult)
What’s happening with GameStop, or what is also being called “Nerds vs. Wall St.”? (Wall Street Journal)
Overview: The power dynamics are shifting on Wall Street. Individual investors are winning big—at least for now—and relishing it. An eye-popping rally in shares of companies that were once left for dead including GameStop Corp, AMC Entertainment Holdings Inc., and BlackBerry Ltd. has upended the natural order between hedge-fund investors and those trying their hand at trading from their sofas. While the individuals are rejoicing at newfound riches, the pros are reeling from their losses. Long-held strategies such as evaluating company fundamentals have gone out the window in favor of momentum. War has broken out between professionals losing billions and the individual investors jeering at them on social media. (Wall Street Journal)
How it started: A Fight Over GameStop’s Soaring Stock Turns Ugly. The denizens of the WallStreetBets subreddit helped push the flailing stock to dizzying heights—while a short seller alleged an accompanying harassment campaign. (Wired)
The target: An army of amateur traders has launched a siege on Wall Street that has shaken up markets and left seasoned hedge funds reeling. One enemy was Andrew Left of Citron Research, who was a loud and large bettor against GameStop. Squeezing him — forcing him to buy more shares to cover his short position as the price went up, which then by itself would drive the price up — became goal No. 1 for WSB members. That worked, which got other people on board, which caused larger investors to get in, which drove up the price, which made those first investors look like geniuses, which made more people pay attention and round and round things went. (Financial Times, Protocol)
Trading platforms: A wide range of online brokerage services, including Robinhood, E*Trade, and Fidelity, experienced service outages on Wednesday during GameStop trading frenzy. (Bloomberg)
Government response: White House press secretary Jen Psaki said Treasury Secretary Janet Yellen and others in the Biden administration are keeping an eye on the huge moves being made by GameStop and some other stocks. So is the SEC. (MarketWatch, Wall Street Journal)
Tech response: The r/WallStreetBets subreddit’s own moderators made it private for a little less than an hour on Wednesday evening, Reddit confirmed to The Verge — but now, it’s back, with a new post from the moderators themselves that doesn’t quite explain why it vanished in the first place. For a period, Discord banned the r/WallStreetBets server. (The Verge)
Question 1: Is GameStop a content moderation issue for Reddit? Experts on social media manipulation argue the model WallStreetBets has created could morph into a bigger long-term problem for Reddit. "The WallStreetBets manipulation of [GameStop] is now the best template for how one could monetize an influence operation," tweeted Stanford researcher Alex Stamos who, as Facebook's former chief security officer, worked on detecting and rooting out foreign influence operations after the 2016 election. "I don't know if any laws were broken this time, but Reddit now has a problem: it is the home for a community of hundreds of thousands of people who have demonstrated the ability to move billions of dollars based upon the urging of, at most, a couple dozen anonymous accounts." (Protocol)
Question 2: Is it a bubble? GameStop Is a Bubble in Its Purest Form
It is tempting to see GameStop’s soaring stock as merely the result of clownish behavior in a chat room. That would be a mistake. (Wall Street Journal)Question 3: How will it end? No one knows how this ends. Some analysts say the intense activity could eventually prompt a wider sell-off in the market by forcing hedge funds on the losing side of these trades to sell parts of their portfolios to raise cash to cover their losses. Said the chief strategist at Interactive Brokers in Greenwich, CT: “How does it end? Badly. Eventually, the bigger the balloon, the louder the pop. When does it end? I don’t know.” (New York Times)
Technology
Apple finished 2020 with its most profitable quarter ever, fueled by an uptick in higher-end iPhone sales and a pandemic-induced surge in demand for its laptops and tablets. All together, it generated $111.4 billion in quarterly sales, an all-time high. Profit rose 29% to $28.76 billion in the three months ended Dec. 31. (Wall Street Journal)
Mark Zuckerberg says Apple is now one of Facebook’s biggest competitors. Facebook said privacy changes in Apple’s latest operating system would cripple its ability to place personalized ads and deal a financial blow to app-makers, highlighting a high-stakes clash between the tech titans over the rules of the road in the mobile-internet economy. Under Apple’s changes, which will go into effect this fall in its iOS14 operating system, Facebook and other companies that facilitate online advertising will no longer be able to collect a person’s advertising identifier without the user’s permission. Many apps will begin asking users whether or not they want their behavior on the web to be tracked for the purposes of personalized ads. Facebook fears many users will reject tracking, if given the choice, affecting not only its business but also any app that uses its services to sell ads. (CNBC, Wall Street Journal)
Google pledged to expand its research and development team in Taiwan, making it the American tech giant's biggest hardware engineering hub outside the U.S., in a sign of the democratically ruled island's growing significance in the global supply chain. (Nikkei Asian Review)
Tesla topped Wall Street’s expectations for revenue growth in 4Q20, but failed to hit forecasts for earnings. Tesla also retreated from its usual practice of forecasting full-year vehicle delivery volumes. The pullback in guidance follows several years in which chief executive Elon Musk has promised higher volumes than Tesla has achieved. (Financial Times)
Smart Links
Apple says there are now over 1 billion active iPhones. (The Verge)
Number of listed firms being taken private accelerated in the UK last year. (Private Equity News)
Amazon plans to create 3,000 jobs in Boston with new office expansion. (CNBC)
Southwest ranks as top U.S. airline in 2020. (Wall Street Journal)
TSA records lowest passenger numbers in six months. (Washington Post)
Amanda Gorman will be the first poet to ever perform during a Super Bowl. (BuzzFeed News)
Learn More (Today, 12 pm): Critical Public Health Questions for 2021: Closing (and Reopening) Schools and Workplaces. (Harvard Radcliffe Institute)