Week of Apr 10, 2021 Weekly Recap & The Week Ahead
“The economy is growing, and the economic reports are positive. Corporate earnings are rising and beating expectations. The media carry only good news. Securities markets strengthen. Investors grow increasingly confident and optimistic. Risk is perceived as being scarce and benign. Investors think of risk-bearing as a sure route to profit. Greed motivates behavior. Demand for investment opportunities exceeds supply. Asset prices rise beyond intrinsic value. Capital markets are wide open, making it easy to raise money or roll over debt. Defaults are few. Skepticism is low and faith is high, meaning risky deals can be done. No one can imagine things going wrong. No favorable development seems improbable. Everyone assumes things will get better forever. Investors ignore the possibility of loss and worry only about missing opportunities, No one can think of a reason to sell, and no one is forced to sell. Buyers outnumber sellers. Investors would be happy to buy if the market dips. Prices reach new highs. Media celebrate this exciting event. Investors become euphoric and carefree. Security holders marvel at their own intelligence; perhaps they buy more. Those who’ve remained on the sidelines feel remorse; thus they capitulate and buy. Prospective returns are low (or negative). Risk is high. Investors should forget about missing opportunity and worry only about losing money. This is the time for caution!” ― Howard Marks
1. Credit Suisse Takes $4.7 Billion Hit on Archegos Meltdown — Credit Suisse reported a $4.7 billion hit from the meltdown of Archegos Capital Management, slashed its dividend and said its investment banking and risk chiefs would leave the bank. The Swiss lender has been the hardest hit by the collapse late last month of Archegos, a U.S. family investment firm, suffering a major loss in its unit that services hedge funds. The Archegos crisis emerged just weeks after Greensill Capital, a U.K. finance firm that was deeply entangled with Credit Suisse, CS 0.92% filed for insolvency and left the bank on the hook for losses.
2. EV Related Stocks for “Green Energy” — below lists EV Stocks for consideration for “Biden Infrastructure Plan”
3. Get Ready for a ‘Golden Age of Travel’ — travel appears to be taking off in a V-shaped recovery. Domestic passenger traffic hit 1.5 million passengers a day in early April versus 108,000 last April. It’s down just 38% from April 2019 levels of around 2.4 million daily passengers. Carriers are now adding back flight capacity and staffing up to handle more bookings for the summer and fall. The industry is also encouraging travel with more lenient cancellation and change-fee policies, along with ongoing efforts to reassure passengers that health safety on planes is relatively strong.
4. G20 Takes Step Toward Agreement on Minimum Corporate Tax Rate — Finance ministers from the world’s most developed economies said they hoped to agree on an overhaul of the way multinationals are taxed as well as on a minimum tax rate by the end of the year. Long-running multilateral talks on the question were given a boost this week when Treasury Secretary Janet Yellen signaled the U.S. support for the idea of a global minimum tax rate that would help end the “thirty-year race to the bottom” on corporate taxation. The U.S. also put forward this week its own proposal on how to tax the world’s largest multinationals, along lines similar to the OECD’s suggestions. It aims to raise the global minimum rate to 21% although the OECD has suggest it could be closer to 15%.
5. GM to Halt Production at Several North American Plants Due to Chip Shortage — GM said that three plants previously unaffected by semiconductor supply problems will be idled or have output reduced for one or two weeks, including a factory in Tennessee and another in Michigan that make popular midsize sport-utility vehicles. Models affected include the Chevrolet Traverse SUV and the Cadillac XT5 and XT6 SUVs.
The moves follow news last week that Ford Motor Co. would deepen production cuts in North America, including idling for two weeks a factory near its headquarters in Dearborn, Mich., that makes the F-150 pickup truck, its biggest moneymaker.
Auto makers since late last year have been grappling with a shortage of semiconductor chips, which go into software modules used to control everything from brakes to dashboard touch screens. The companies have been cutting production for months as they move to line up chip supplies, with executives saying the shortage could last several more months.
The week ahead — Economic data from Econoday.com:
