Axios Markets: The Reddit revolt

1 big thing: Wall Street's populist revolt | Wednesday, January 27, 2021

Open in app View in browser   Presented By NetJets   Axios Markets By Courtenay Brown ·Jan 27, 2021 ☕️ Happy Wednesday (and Fed day!). If this was forwarded to you, sign up here. (Today's newsletter is 814 words, or a 3-minute read.) 💭 "Sometimes I've believed as many as six impossible things before breakfast." — See who said it and why it matters at the bottom of the newsletter.     1 big thing: Wall Street's populist revolt Data: FactSet; Chart: Axios Visuals A populist rebellion, organized by the powerless against the powerful, might have failed in Washington, but it certainly seems to be working on Wall Street, Axios Felix Salmon and I write. Driving the news: The market value of GameStop closed at more than $10 billion on Tuesday, on record volume of more than $26 billion. The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself "Roaring Kitty." The losers: Hedge-fund short sellers who are learning John Maynard Keynes' lesson the hard way — "The market can remain irrational longer than you can remain solvent." How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries an irresistible commission of exactly $0. Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate their buying attacks. Melvin Capital — called out by name on Reddit boards — told CNBC this morning that it closed out of its GameStop short position yesterday. It's unclear how big of a loss it took. The bottom line: Short selling, or betting that a company's stock is going to fall, is a crucial element of efficient markets. But, thanks to Reddit, it has also never been more dangerous. Wall Street veterans say the newbies' lack of experience and diversification mean they'll eventually get crushed by their trades. So far, however, the small guys are laughing all the way to the bank.     2. Catch up quick Walgreens will tap outgoing Starbucks COO Rosalind Brewer as its new CEO. (CNBC) Brewer would be the only Black woman leading a Fortune 500 company. The Conference Board's consumer confidence index rose slightly to 89.3 from 87.1 in December. (MarketWatch) Separately, Morning Consult's consumer confidence index saw the 2nd biggest weekly jump in three years, with a wide divergence among Democrats and Republicans.     3. New PPP loan data The SBA said last night that it approved 400,000 Paycheck Protection Program loans worth $35 billion — out of the $284 billion of total available funding. These are the first figures on the status of the forgivable loan program since it relaunched on Jan. 11. Why it matters: The program is intended to keep small businesses (and jobs) afloat, but the latest tranche is off to a slower start. Protocols put in place to tamp down on fraud are preventing legitimate second-time borrowers from applying. How it breaks down: Roughly 66% of loans were for $60,000 or less, with the average loan size at $87,000. The food and accommodations sector is getting the biggest share (19%) of loan dollars.     A message from NetJets Multiple ways to fly with NetJets     The NetJets Card Program™ offers all-inclusive pricing and guaranteed access to the largest fleet in private aviation. Choose from multiple jet card options with the ultimate convenience of NetJets. Discover ways to fly with all-inclusive pricing.     4. How corporations yanking GOP cash could backfire Illustration: Aïda Amer/Axios   Companies pulling back on political donations, particularly to members of Congress who voted against certifying President Biden's election win, could inadvertently push Republicans to embrace their party's far-right fringe, Axios' Lachlan Markey writes. Why it matters: Scores of corporate PACs have paused, scaled back or entirely abandoned their political-giving programs. While designed to distance those companies from events that coincided with this month's deadly siege on the U.S. Capitol, research suggests the moves could actually empower the far-right. A 2016 study by Brigham Young University political scientist Michael Barber, which examined fundraising data and voting patterns in the 50 state legislatures, found that reductions in corporate PAC contributions resulted in more political polarization. What it found: Limits on donations from corporations, which are largely non-ideological access seekers, pushed candidates to rely more heavily on contributions from individual donors more likely to back stridently ideological candidates. What they're saying: "It's not as though they're going to stop fundraising," Barber said of lawmakers who voted against certification. "They're just going to turn to other sources of money, and they're going to turn to individual contributors who are motivated by that exact type of behavior." The latest: Google was the most recent company to announce a major change in its political-giving policies on Tuesday, joining nearly 200 other companies that are rethinking their political giving in the wake of the Capitol attack.     5. What to watch: Tesla's profit streak Data: FactSet; Chart: Danielle Alberti/Axios Tesla will report Q4 2020 earnings this afternoon, with analysts expecting a sixth consecutive quarterly profit for the electric vehicle maker that was reeling just a few years ago, Axios' Ben Geman writes. Why it matters: Tesla is the country's dominant EV company, and its trajectory affects overall adoption of the tech, even as more and more models from other companies are hitting the market. Tesla's stock has skyrocketed almost 700% in the last year. It's the fifth biggest company in the S&P 500, edging ahead of Facebook. It's worth more than several legacy automakers combined. What to watch: 1) Deliveries: One question is how much growth Tesla expects after 2020's record of nearly 500,000 deliveries. 2) Product updates: "Wall Street is looking for more commentary on the Model Y, the newest addition to the Tesla lineup, and on upcoming models, such as the Cybertruck and a cheaper vehicle that has been only hinted at and that has been dubbed the 'Model 2,'" MarketWatch reports. Plus, also set to report earnings: Apple and Facebook.     A message from NetJets NetJets' most popular aircraft model     NetJets' Cessna® Citation Latitude® is designed with your optimum comfort in mind. A new opportunity: This midsize favorite has a generous amount of cabin space and is now available through the NetJets Card Program™. Explore the world's finest fleet.   🙏 Thanks for reading. Got tips or questions? Hit reply. Quote: "Sometimes I've believed as many as six impossible things before breakfast." Who wrote it: Author Lewis Carroll, most famously known for "Alice's Adventures in Wonderland" and "Through the Looking-Glass." Carroll, which is the pen name for Charles Lutwidge Dodgson, was born on this day in 1832.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Suite 1300, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. Change your preferences or unsubscribe here.   Was this email forwarded to you? Sign up now to get Axios in your inbox.   Follow Axios on social media: