Inside this Issue:
- Bubble Trouble? Stock Markets Rise Yet Again
- The Crypt Script Flipped: Digital Currencies Inching Toward Mainstream
- General Motors: Billions for Batteries
- Disney: With Theme Parks Dark, Profits Frozen
- Startup Nation: Americans Opening New Businesses in Record Numbers
- Toys and Boats: Why Can’t Every Year Be Like 2020?
- Free Trade: Good or Bad?
- World-Changing Technologies: The Much-Talked-About ARK Gives its Picks
- Fees For Cons: An Unfair Means of Plumping the Public Purse?
- Remembering Bad Times: The Panic of 1837
- And This Week’s Featured Place: Silicon Valley, How it Came to Be
Quote of the Week
“Extended periods of unemployment can inflict persistent damage on lives and livelihoods while also eroding the productive capacity of the economy. And we know from the previous expansion that it can take many years to reverse the damage.”
–Federal Reserve chair Jerome Powell
Bubble Trouble? Stock prices rose again last week. So did oil prices. Bitcoin jumped again. Housing prices are way up. Does this portend a coming bust? It’s the question everyone is asking.
Ironically, the most widely followed measure of price movements—the Department of Labor’s index of consumer prices (CPI)—once again showed almost no signs of sustained increase. One of the items it measures—energy—did show a January spike. But the cost of food, cars, clothing and health care showed no meaningful increase. The reading even showed negligible inflation for housing, mostly because of the outsized influence of falling rents (the index typically captures rising house prices over longer periods). In any case, the theme is clear: Prices for everyday household purchases are stable. Prices for financial assets are off to the moon.
How about wages? Are they rising? Certainly not for the millions of people still unemployed, nor in many cases for lower-income Americans still working. A still-frail job market, indeed, is front and center in the mind of Fed chair Jerome Powell, who stressed again last week that inflation concerns are overblown. His counterparts on Capitol Hill, meanwhile, with President Biden’s backing, are moving closer to enacting another round of fiscal stimulus. They too worry less about inflation than they do the job market. Keep in mind though, Congress has already injected the economy with roughly $4 trillion worth of fiscal support, in parallel with the Fed’s $3 trillion-plus increase in asset purchases.
Speaking of injections, roughly a tenth of all Americans have now received at least one shot of a Covid vaccine. Some states like West Virginia and Connecticut are winning praise for their efforts. Others are having a harder time. But everywhere, the pace of vaccinations is picking up. And thankfully, case counts, hospitalizations and deaths continue to drop. The big risk, of course, are those troublesome mutant versions of the virus. But for the moment, it does seem like the worst might be over.
Fourth-quarter earnings season isn’t quite over. This week brings some heavy hitters like Walmart, CVS and AIG, the latter a leading actor of the 2008/09 downturn. In last week’s earnings news, General Motors played down concerns about the industry’s shortage of semiconductors. Even with the help of Baby Yoda, Disney won’t be back to normal until its theme parks fully reopen. Twitter saw its ad-based business model flourish in 2020. Money-losing Uber, by contrast, saw much of its core ride-hailing business disappear in 2020, partially offset by a boom in food deliveries.
Will batteries deliver on their potential to transform the economy? Will cryptocurrencies? They’re creeping closer to the mainstream as big institutions eye a piece of the action. Never mind Elon Musk. Now, even BNY Mellon, founded by Alexander Hamilton, feels sufficiently young, scrappy and hungry to get involved.