“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:

“The Market Can Remain Irrational Longer Than You Can Remain Solvent” — John Maynard Keynes

1. Gene-Editing Stocks Are Biotech’s New Cutting Edge — In October, two scientists won the Nobel Prize for their 2012 discovery and development of Crispr-Cas9. Now, the promise of that technology—effectively molecular scissors that can find and edit almost any part of a cell’s DNA—is causing shares of companies looking to commercialize gene-editing therapies to surge. Crispr-Cas9 is the second generation Crispr technology, which has the potential to alter specific portions of the genetic code in ways that could provide treatments for a number of inherited genetic disorders and many kinds of cancer. New Crispr technology is being commercialized at an incredibly rapid pace. Beam Therapeutics, which is developing a next-generation gene-editing tool called base editing, has seen its shares rise sixfold since its initial public offering in February 2020.
2. Biden Takes Office as 46th President & Issues First Round of Executive Orders — President Joe Biden signed 15 executive orders and two executive actions early last week on issues ranging from a mask mandate to rejoining the Paris climate accord. “I thought there’s no time to wait. To immediately address the pandemic, Biden signed an order mandating masks on federal property as well as on all planes, trains, and other transit systems between states. He also created a new office of White House Covid-19 response that reports directly to him.
As promised during the campaign, Biden lifted the controversial ban on travel from several majority-Muslim countries that had been put in place by the Trump administration. He also ordered an end to construction of the Mexico-U.S. border wall and a moratorium on deportations.
He is also calling for an extension of the federal eviction moratorium through March 31 and freezing student loan payments on direct federal loans through Sept. 30.
In addition to rejoining the Paris climate accord, Biden took executive action to stop the U.S. withdrawal from the World Health Organization, reinstate rules limiting methane emissions, and revoke a permit for construction of the Keystone XL oil pipeline.
3. Europe Mulling Stringent New Travel Bans as Virus Variants Keep Spreading — European Union leaders convene in a video summit to discuss ways to restrict travels into the region, as new, aggressive variants of the coronavirus threaten to overwhelm many countries’ health care systems. Most governments already require a recent negative test before allowing in foreign visitors, and France or the U.K. then require a second test within days of arrival. Countries such as France or the Netherlands have banned all incoming visitors from the U.K., save for essential travel, on account of the highly infectious new virus variant fast spreading in Britain.
4. Bitcoin Price Plunges — The world’s biggest cryptocurrency by market value dropped about 12% over the past day to just over $31,000 as of Friday morning. Janet Yellen, the nominee for Treasury Secretary in the Biden administration, did mention the risks of crime and fraud that Bitcoin poses in a hearing, but the selling pressure didn’t really coincide with her comments.

On a related note, Bank of America noted that the market has reached bubble territory ….

The week ahead — Economic data from Econoday.com:

“Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on. . . . Look around the next time there’s a crisis; you’ll probably find a lender.” ― Howard Marks

1. Corporate America Reacts to Capitol Hill Riot With Donation Pause — a growing list of U.S. companies are suspending or re-evaluating how they choose to make contributions to political candidates as pressure grows on them to distance themselves from the mob that stormed Capitol Hill. Among the companies that paused political giving was America’s largest bank by assets, JPMorgan Chase, which gave $5.3 million to candidates over the course of the 2020 election cycle, according to federal filings.
Marriott and Dow said that they will stop donations to Republicans who objected to President-elect Joe Biden’s victory being certified. Hallmark is asking Senators Josh Hawley of Missouri and Roger Marshall of Kansas, both of whom objected to Biden’s certification, to return the $7,000 and $5,000 the company donated to their respective campaigns.
2. Europe Steps Up Defenses Against New Covid Variants — new, aggressive mutations of the coronavirus first discovered in the U.K. and South Africa are forcing governments to increase the severity of lockdowns and other restrictions, and prompt a clampdown on rulebreakers. The new variant has already been detected in countries such as Germany, France, Spain, Ireland and Denmark, with some requiring negative Covid tests from inbound travelers. The French prime minister refused to rule out the possibility of a third national lockdown. The government has so far stopped short or such a step, contrary to most other EU countries. But a national curfew is already in place, along with the closure of bars, restaurants and public venues.
3. President Trump Impeached for the Second Time — the House voted 232 to 197 to impeach President Donald Trump for “incitement of insurrection” in connection with the Capitol riot that left five people dead. The vote was largely along party lines, with 10 Republicans joining House Democrats in support of the resolution.
This is the first time in American history that a president has been impeached twice. Trump was impeached on Dec. 19, 2019, for abuse of power and obstruction of justice related to his actions to pressure Ukraine to investigate the business dealings of Hunter Biden, the son of now President-elect Joseph Biden. The Senate will wait until after Joe Biden is inaugurated to begin its trial. “There is simply no chance that a fair or serious trial could conclude before President-elect Biden is sworn in next week,” Senate Majority Leader Mitch McConnell said in a statement.
4. Biden Set to Announce 100 Million Shot Plan — President-elect Joe Biden on Thursday will unveil details of his plan to deliver 100 million Covid-19 vaccine shots during the first 100 days of his term Thursday, as the U.S. remains far behind its rollout plan. Over 10 million Covid-19 vaccine doses have been administered to Americans so far, putting the U.S. on track to fall well below the 50 million doses by the end of January that the Trump administration had aimed for. To increase the pace, Biden has said that he wants to invoke the Defense Production Act to boost vaccine production, establish mass vaccine sites run by the federal government, and increase the funding being sent to state and local governments to help pay for their rollout efforts.
5. Biden Outlines $1.9 Trillion Stimulus and Vaccine Program — President-elect Joe Biden unveiled a $1.9 trillion stimulus and vaccine distribution plan in a Thursday night address from Wilmington, Del. “A crisis of deep human suffering is in plain sight,” said Biden, who drew attention to the growing divide between the wealthiest Americans and everyone else. “We have to act and we have to act now.” To that end, his American Rescue Plan includes direct payments of $1,400 sent to most Americans, bringing the total delivered in a second round of checks to $2,000 including the $600 payments passed in December. It also extends federal unemployment insurance through September, increases them to $400 a week and raises the federal minimum wage to $15 an hour. Biden is also calling for $350 billion in aid for state and local governments, $170 billion for schools, and $70 billion to fund Covid-19 testing and vaccination. To support small business, he is proposing a new $15 billion grant program plus $35 billion for low-interest loans and early-stage capital for entrepreneurs.
6. Taiwan Semi Is Betting Chip Demand Will Keep Rising — chip maker Taiwan Semiconductor said it would spend $28 billion to boost production capacity to meet the growing demand for its chips. 5G smartphone launches and Taiwan Semi’s next-generation processor technology, which Apple uses in several of its computers, helped the company report fourth-quarter net income of $5.01 billion with sales rising 22% to $12.7 billion. Executives’ comments on an earnings call suggest that the company would increase capacity investments by about 50% compared with 2020. A weak 2019 saw low levels of production investment in the industry last year that, combined with Covid-19 shutdowns and surging demand from videogame consoles to cars, led to global shortages.

The week ahead — Economic data from Econoday.com:

1. Europe Braces for Another Fiscal Push to Support Economy Through New Lockdowns — British Chancellor of the Exchequer Rishi Sunak announced on Tuesday a £4.6 billion ($6.2 billion) package of “top-up grants” for some 600,000 businesses in the retail and hospitality industries. The announcement comes after several government-financed measures since the beginning of the pandemic in March 2020, including a “furlough” job support scheme due to expire at the end of March.
The U.K. government spent the equivalent of more than 8% of GDP in immediate direct fiscal spending in 2020 to counter the pandemic’s consequences. That’s roughly the same amount as Germany, and significantly more than France, Italy or Spain. Other European governments are now considering other rounds of fiscal stimulus to take into account the unexpected severity of the pandemic’s second wave. German Finance Minister Olaf Scholz last month announced a doubling of Germany’s borrowing plans for 2021 and has stated that he would be ready to spend more if needed.
2. Congress Certify Biden’s Win — after a day of turmoil, when a violent mob halted the ratification of President-elect Joe Biden’s electoral college victory, the joint session completed the count and affirmed Biden’s defeat of President Trump, with 306 electors to the incumbent’s 232. See more below. Trump commits to orderly transition of power. The president issued a statement early this morning committing to an orderly transition of power to Biden on Jan. 20, but said he continued to “totally disagree with the outcome of the election.”
3. Democrat Jon Ossoff Wins Georgia Senate Runoff — Democrats Jon Ossoff and Raphael Warnock won both Senate runoff races in Georgia, giving Democrats control of the U.S. Senate and easing the path for President-elect Joe Biden’s appointments and legislative agenda. Mr. Warnock defeated Republican Sen. Kelly Loeffler, while Mr. Ossoff took the seat held by former Republican Sen. David Perdue, whose term expired over the weekend. The new Senate will be evenly split between the two parties at 50-50, with Vice President-elect Kamala Harris serving as the tiebreaker vote, if it comes to that.
4. Pelosi Lays Out Plan for Impeachment of President Trump — Speaker Pelosi said Democrats will bring a resolution on Monday calling on Vice President Mike Pence and cabinet members to remove the president using the 25th Amendment under unanimous consent. If that fails, it will be brought for a full vote Tuesday. Pence would then have until Wednesday to respond or “we will proceed with bringing impeachment legislation to the Floor,” Pelosi said in a letter to Democratic lawmakers. So far only one Republican, Sen. Pat Toomey of Pennsylvania, has explicitly said that Trump “committed impeachable offenses.” Both Toomey and Sen. Lisa Murkowski (R., Ak.) have called President Trump to resign and Sen. Ben Sasse (R., Neb.) has said he would consider voting to remove the president from office.

Below is the Year End poem that recap the major Events of 2020

The week ahead — Economic data from Econoday.com:

“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological. Investor” ― Howard Marks
HAPPY NEW YEAR