“The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing—these factors are near universal. Thus they have a profound collective impact on most investors and most markets. This is especially true at the market extremes. The result is mistakes—frequent, widespread, recurring, expensive mistakes.” ― Howard Marks

1. Elon Musk Announced that Tesla had bought $1.5 billion in Bitcoin — Tesla, which announced that it bought $1.5 billion worth of Bitcoin to hold on its balance sheet, and that it plans to allow car buyers to pay in Bitcoin. For Tesla, one big reason for the investment appears to be the enthusiasm of its chief executive, Elon Musk. Alsok, Mastercard said Wednesday it will start allowing businesses to accept some crypto payments, though they’ll be converted into standard currencies before they hit the register. On Thursday, BNY Mellon, founded by Alexander Hamilton, said it will hold and transfer cryptocurrencies for customers, just like it does with other assets.
2. U.S., France Flex Muscles in South China Sea — Two U.S. carrier groups are conducting exercises in the waters disputed by China, raising Beijing’s ire as France announced one of its attack submarines had sailed through the zone. French Defense Minister Florence Parly said that a French attack submarine and its support vessel had just sailed through the South China Sea to reaffirm, together with Australia, Japan and the U.S., that “international law is the only rule that matters.”
International powers have contested China’s ambitions on most of the resource-rich area, after Beijing built military outposts on reefs and sandbars transformed into man-made islands in order to claim sovereignty on the 12-miles zone of territorial waters.
3. Bitcoin to Come to America’s Oldest Bank, BNY Mellon — the custody bank said late last week that it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. Custodians like BNY Mellon keep track of money managers’ assets—whether they are physical things like real estate or cash housed in an account with another bank—storing some themselves while attesting to the existence of others. BNY Mellon said it would allow digital assets to pass through the same plumbing used by managers’ other, more traditional holdings—from Treasurys to technology stocks—using a platform that is now in prototype. The bank is already discussing plans with clients to bri Tesla, which announced on Monday that it bought $1.5 billion worth of Bitcoin to hold on its balance sheet, and that it plans to allow car buyers to pay in Bitcoin. For Tesla, one big reason for the investment appears to be the enthusiasm of its chief executive, Elon Muskng their digital currencies into the fold.
4. Biden, China’s Xi Hold Talks Over Human Rights, Trade, Climate — President Biden spoke with Chinese President Xi Jinping for the first time since taking office in a call in which he said he raised issues of human rights, trade policy and international security that divide the two countries while also holding open the possibility of working together on climate change and nuclear proliferation. Mr. Biden in recent days spoke with a host of allies in Europe and Asia, signaling that he seeks to deal with China as the leader of the world’s democracies rather than solely an American president. The U.S. needs to “join together with others to hold China accountable for its abuses and to shape China’s choices going forward,” said a senior administration official.
5. Trump Acquitted of Inciting Insurrection, Even as Bipartisan Majority Votes ‘Guilty’ — the 57-to-43 tally fell 10 votes short of the two-thirds majority needed to convict, and allow the Senate to move to disqualify him from holding future office. Among the Republicans breaking ranks to find guilty the man who led their party for four tumultuous years, demanding absolute loyalty, were Senators Richard Burr of North Carolina, Bill Cassidy of Louisiana, Susan Collins of Maine, Lisa Murkowski of Alaska, Mitt Romney of Utah, Ben Sasse of Nebraska and Patrick J. Toomey of Pennsylvania.

The week ahead — Economic data from Econoday.com:

“What the wise man does in the beginning, the fool does in the end.” ― Howard Marks

1. AWS Chief Andy Jassy Named New Amazon CEO — CEO Jeff Bezos will be succeeded by Andy Jassy, who heads Amazon Web Services, the cloud-computing business. The company said Jassy will take over as CEO in the third quarter of this year. Bezos will stay with the company he founded as the board’s executive chair. Bezos said in a letter to employees that following the transition, he will focus on new products and early initiatives. He will also have more time with his personal endeavors, such as the nonprofit Day 1 Fund, the Bezos Earth Fund, his aerospace firm Blue Origin, and The Washington Post.
2. Democrats Set Stage to Move Forward on Stimulus Package Without GOP — Congressional Democrats took the first step toward passing their $1.9 trillion plan after President Joe Biden made it clear that he won’t settle for what he views as an insufficient Covid-19 stimulus package proposed by a group of 10 Senate Republicans earlier in the week. Democrats are moving forward with plans to pass their stimulus package using a budgetary process called reconciliation. The Senate passed a budget resolution on morning for President Joe Biden’s $1.9 trillion aid package, setting up the bill to be passed by a simple majority in the upper chamber. The votes to advance the resolution were split along party lines, with Vice President Kamala Harris breaking the tie. The resolution now goes to the Democrat-controlled House. Separately, a group of Congressional Democrats, including Senate Majority Leader Chuck Schumer, on Thursday called on President Biden to cancel up to $50,000 in student loan debt by executive order. Biden has said he does not support an executive order canceling student debt. Instead, the White House reiterated Thursday that the president supports eliminating up to $10,000 per borrower in student debt through legislation passed by Congress.
3. Johnson & Johnson Seeks Emergency Authorization for Covid Vaccine — Johnson & Johnson said Thursday it submitted its vaccine to the U.S. Food and Drug Administration for emergency use authorization. J&J said it plans to distribute the vaccine to the U.S. government following authorization. It expects to supply 100 million doses to the U.S. in the first half of the year. Paul Stoffels, the company’s chief scientist, said in a news release that the company is prepared to begin shipping upon authorization. Last week, the company said its single-dose vaccine was 66% effective in preventing moderate to severe Covid-19. A Phase 3 trial of more than 43,000 participants showed it was 85% effective at preventing severe disease. It also prevented hospitalization and death from Covid-19 completely at 28 days following vaccination.
The 85% effective rate was consistent even in South Africa, where a new strain of Covid-19 has worried experts.
4. Europe Moving Toward Vaccine Passport Scheme — a few European Union countries have taken steps to distribute special passes to allow citizens inoculated against the coronavirus to travel freely. Others, such as the U.K., are considering such a measure. Denmark said Wednesday it would go ahead and develop by the end of the month a digital Covid passport that would help its citizens travel to countries requiring a vaccination, and also allow them to visit restaurants or attend mass events. Sweden also announced this week that it would launch such a pass in time for the summer season, if some form of international standard is in place by then. According to the Times of London, the U.K.’s Foreign Office and the ministries of Transport and Health are preparing a certification system that would allow vaccinated British tourists to travel abroad this summer.
Other European countries such as France and Germany have voiced their concerns about the so-called vaccine passport, on the grounds that it would mean special treatment for a privileged class of citizens—notably to the detriment of the younger population.

The week ahead — Economic data from Econoday.com:

“Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity. At that point, all favorable facts and opinions are already factored into its price, and no new buyers are left to emerge.” ― Howard Marks,

1. Merck Ends Covid-19 Vaccine Programs as U.S. Cases Top 25 Million — Merck announced that it will stop the development of its Covid-19 vaccines after early trial data showed the experimental shots did not boost immunity to the virus when compared with natural infection. The company will instead focus on two therapeutic candidates.
Merck’s news comes as the total number of reported Covid-19 cases in the U.S. tops 25 million and the Biden administration and U.S. health officials ratchet up their criticism of President Trump’s handling of the vaccine rollout.
2. Millions of Americans Face Tough Choices as Mortgage Protections May End — since early November, about 2.7 million, or 5.5%, of American mortgage holders have been putting off payments, according to weekly data released by the Mortgage Bankers Association. That’s down from a peak of just over 8.5% in early June. The ability of homeowners to pause mortgage payments was itself a product of the CARES Act signed into law last March. It allowed borrowers with federally-backed mortgages, which account for about three-quarters of U.S. home loans, to postpone payments for up to a year. President Biden has signed an executive order extending a federal moratorium on evictions and foreclosures through March 31. He has also asked federal agencies to extend the deadline for accepting new applications for forbearance at least until then.
3. Xi Warns U.S. as Biden Pushes Ahead With Buy American Initiative — Biden is expected to continue some of the work done by his predecessor to blunt China’s rise, marking a continued departure from several decades of U.S. policy that favored increased ties and an overall friendly relationship with Beijing. President Biden has pointedly said he would not remove tariffs on Chinese goods put in place by his predecessor. He also signed an executive order Monday aimed at strengthening American manufacturing. While not a direct blow to China, the implication of a preference for American goods over Chinese ones is clear. The order tightens the rules for federal government procurement to increase purchases of American-made products. Meanwhile, Chinese President Xi Jinping sent an indirect but clear warning to the Biden administration, which is preparing to enlist allies in efforts to contain China’s economic and diplomatic influence.
4. Biden’s Climate Policies Could Hit the U.S. Oil Industry— the U.S. oil industry is likely to be an early target of President Joe Biden’s policies to fight climate change, beginning with a ban on new drilling leases on federal land. Biden is set to sign an executive order Wednesday halting new oil and gas leases on federal lands, The Wall Street Journal reports. While drilling on those lands accounts for just under 10% of U.S. onshore oil and gas production, fossil fuel companies want to maximize their access to those reserves. The president has also proposed spending several trillions of dollars investing in U.S. infrastructure, with an eye to pushing clear energy items, and has vowed to spend $20 billion replacing the entire fleet of federal government vehicles with electric cars.
4. U.S. Economy Shrank in 2020 Despite Fourth-Quarter Growth — despite a strong rebound in the second half of last year, the economy contracted 3.5% in 2020, measured year over year, the first decline since the financial crisis and the largest since 1946. U.S. gross domestic product rose at a 4.0% seasonally and inflation adjusted annual rate in the final quarter of last year
5. Johnson & Johnson Vaccine Shown Effective as South African Variant Emerges in U.S. — Johnson & Johnson reported its vaccine was 66% effective against moderate to severe cases. the company said that the Phase 3 trial, involving more than 43,000 participants, had shown that the vaccine is 85% effective at preventing severe disease, and completely prevented hospitalization and death from Covid-19 at 28 days after vaccination. The company will seek authorization from U.S. regulators in early February. Novavax said that early trials of its vaccine candidate indicate it is 90% effective overall and 50% effective against the South African strain. Moderna has said its vaccine would likely produce a weaker immune response against the South African strain and that it’s working on a booster shot. Pfizer reported more promising findings, saying that results from a study that has yet to be peer-reviewed found its Covid-19 vaccine is effective against both the South African and U.K. strain and “do not indicate the need for a new vaccine to address the emerging variants.”

The week ahead — Economic data from Econoday.com: