News: Robinhood's time in the barrel — Climate goes nuts (again)

Thursday, February 18, 2021

Robinhood's time in the barrel — Climate goes nuts (again) — Mnuchin goes buck raking

Feb 18, 2021

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Quick Fix

Robinhood's time in the barrel — The world has moved on a bit from the "meme stock" craze that most prominently featured a giant run-up in the shares of fading retailer GameStop alongside other troubled stocks like that of movie theater chain AMC.

But Robinhood, the online trading platform favored by chatroom stock jockeys, will still get its moment in the Congressional hot seat at noon today with a remote hearing before the House Financial Services Committee. You can stream it here.

Panelists will include Robinhood CEO Vlad Tenev, Citadel CEO Ken Griffin, Melvin Capital CEO Gabriel Plotkin, Reddit CEO and co-founder Steve Huffman and investor Keith Gill. The hearing — competing with Covid issues and the deep freeze down south — might not generate the heat it could have a few weeks ago. But there are still major issues to explore and potentially embarrassing moments for all the panelists.

What to watch for — Via George Mason law school's J.W. Verret: "My hope for the hearing is detailed questions with follow up about how Robinhood decided to halt trading and whether they coordinated with Citadel.

"My worry is that it will be partisanship and sound bites. Expect Citadel to emphasize the difference between Citadel hedge fund and Citadel Securities (the latter pays Robinhood millions in payment for order flow). Given that Ken Griffin owns and controls both, it should be treated as a distinction without a difference.

"Citadel will say that payment for order flow leads to price improvement for retail shareholders, but they are judging that relative to the slow public feed… Reminds me of how everyone gets a trophy in my son's t-ball league. It's a low bar to measure best execution to say the least."

Robinhood CEO flatly rejects allegations — From Tenev's opening statement: "I want to be clear at the outset: any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric."

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Driving the Day

Robinhood hearing begins at noon … Treasury Secretary Janet Yellen this afternoon will participate in a virtual conversation at the winter meeting of The Business Council and will push President Biden's Covid relief plan … Jobless claims at 8:30 a.m. expected to dip slightly to 760K from 779K

Warren wants more answers — Via our Victoria Guida: "Sen. Elizabeth Warren (D-Mass.) … said she wants more information about Robinhood's ties to hedge funds and other Wall Street firms …

"The senator published a Feb. 12 response from Robinhood in which the online brokerage reiterated that it blocked customers from buying the stocks of GameStop and other struggling companies because it needed to meet financial margin requirements it owed to clear the trades."

More fintech regulation? —Via new Morning Consult data out this morning: "39% of all U.S. adults say fintech companies should face increased regulation; 16% say the opposite. Nearly half of Democrats (45%) say the U.S. government should protect consumers from fintech companies by increasing regulation. At 35%, Republicans are 10 points less likely than Democrats to say they wanted fintechs to be more regulated.

"Older generations are more likely to say there should be more regulation of the industry, including 44% of Baby Boomers. At 25%, Millennials are the most likely group to say the government should decrease regulation to encourage fintech innovation."

GLOBAL WEIRDING — Via our Mike Grunwald in POLITICO Nightly on the Texas weather nightmare: "The real problem in Texas is the freaky weather, and unfortunately, climate change is delivering a lot more freaky weather. It may seem counterintuitive that global warming would create a record cold wave, but that's why Texas Tech climate scientist Katharine Hayhoe calls it 'global weirding.'

"It's not just about heat, although 19 of the 20 hottest years in the Earth's recorded history have occurred in the last 20 years. It's about the discombobulation of the atmosphere — hotter hots, colder colds, bigger and wetter and stronger storms, odd toggles in the polar vortex and Gulf Stream and other natural forces we take for granted. Today, only a fool expects a hundred-year drought or flood or snowfall event to happen once every hundred years."

MNUCHIN GOES BUCK-RAKING — Bloomberg's Saleha Mohsin and Robert Schmidt: "Steven Mnuchin has joined the likes of Prince Harry and Meghan Markle, Bono, Henry Kissinger and Barack Obama, offering himself for speaking engagements for tens of thousands of dollars in fees.

"Mnuchin, who was Donald Trump's Treasury secretary, has hired the Harry Walker Agency to manage such engagements. Mnuchin said he would charge about $250,000 to speak in person. An advertisement obtained by Bloomberg News noted a $75,000 fee for a virtual address, although Mnuchin said that figure could be closer to $100,000."

BIDEN DIALS IT DOWN ON STUDENT DEBT RELIEF — Our Michael Stratford: "In the starkest terms he's used to date … Biden made explicit … that he favors modest student loan debt relief over the ambitious proposal his progressive base — and party leader in the Senate — is demanding.

"Then, on Wednesday, his White House suggested that even that modest package may not happen. Speaking to reporters at the daily briefing … White House press secretary Jen Psaki said Biden planned to hold off on making any decisions on student loan debt executive action until his appointees at the Justice Department have a chance to review the issue."

STOCK MARKET DRIVES TREASURY BOON — Our Brian Faler: "The stock market is booming — and the U.S. Treasury is cashing in. Taxes on capital gains are surging, pouring into government coffers much faster than analysts had expected and propping up federal revenues despite the economic crisis caused by the coronavirus.

"The nonpartisan Congressional Budget Office says it now expects 'realizations' — that is, sales of assets — to jump by 45 percent, topping $1 trillion, compared to what it had expected just six months ago. That is 10 times the rebound it predicts this year in wages and salaries."

Markets

NASDAQ ENDS LOWER AS TECH SLIDES — Reuters' April Joyner: "The Nasdaq closed lower while the S&P 500 was little changed on Wednesday as investors rotated out of technology shares and concerns about inflation added some pressure on stocks.

"The Dow Jones Industrial Average rose, however, aided in part by gains in shares of Verizon Communications Inc and Chevron Corp. Those stocks gained after Warren Buffett's Berkshire Hathaway Inc disclosed major investments in the companies on Tuesday. Verizon shares climbed 5.2 percent, and Chevron shares advanced 3 percent."

GAMESTOP FRENZY PROMPTS SEC TO WEIGH MORE SHORT SALE TRANSPARENCY — WSJ's Dave Michaels and Dawn Lim: "Wall Street's main regulator is weighing whether to require more transparency of short selling and the opaque network of stock lending and borrowing that facilitates it, according to people familiar with the matter.

"The Securities and Exchange Commission was ordered 11 years ago to impose such rules but never did it. Now, dealing with the fallout from frenetic trading in GameStop Corp. shares, the agency under new leadership is considering using its authority to shine more light on the mechanics of the bearish trades.

LAWMAKERS READY TO FACE OFF WITH GAMESTOP SAGA'S KEY PLAYERS — AP's Marcy Gordon: "The GameStop saga has been portrayed as a victory of the little guy over Wall Street giants but not everyone agrees, including some lawmakers in Washington."

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Fly Around

FED OFFICIALS SEE EASY-MONEY POLICIES STAYING IN PLACE — WSJ's Paul Kiernan: "Federal Reserve officials agreed at their most recent policy meeting that they would need to hold interest rates very low and continue central bank bond purchases to help spur the economy's recovery from the effects of the coronavirus pandemic.

"Most of them thought that the $900 billion federal stimulus package approved in December, the likelihood of more fiscal support and continued distribution of Covid-19 vaccines 'would lead to a sizable boost in economic activity' this year, according to minutes of the Fed's Jan. 26-27 meeting."

They also expressed concerns over the slowing economy — AP's Martin Crutsinger: "Federal Reserve officials were convinced last month that the U.S. economy and job growth had slowed as coronavirus cases surged across the country, noting that the outlook is heavily dependent on the course of the virus. The minutes of the Fed's January discussions show officials believed that the ongoing public health crisis is still posing 'considerable risks' to the economy."

COVID RESPONSE DRIVES $24T SURGE IN GLOBAL DEBT — Reuters' Marc Jones: "The COVID pandemic has added $24 trillion to the global debt mountain over the last year a new study has shown, leaving it at a record $281 trillion and the worldwide debt-to-GDP ratio at over 355 percent.

"The Institute of International Finance's global debt monitor estimated government support programmes had accounted for half of the rise, while global firms, banks and households added $5.4 trillion, 3.9 trillion and $2.6 trillion respectively."

EUROPE'S PANDEMIC DEBT IS DIZZYING, BUT WHO WILL PAY? — NYT's Liz Alderman: "For households trying to balance their budget each month, the fact that European countries are incurring trillion-euro debts is dizzying. In France alone, the national debt has topped 2.7 trillion euros ($3.2 trillion) and will soon exceed 120 percent of the economy.

"But governments are far from worried about piling up debt right now, as rock-bottom interest rates empower them to spare no expense to shield their economies from the pandemic. And spend they do."

WELLS FARGO LOOKS TO SLASH COSTS WITHOUT ANGERING REGULATORS — WSJ's Ben Eisen: "Plenty of companies are cutting costs to weather the pandemic recession. Few are trying to do so while also spending billions of dollars to satisfy their regulators. These are the tasks facing Wells Fargo & Co. Chief Executive Charles Scharf, who is attempting to slash at least $8 billion from the San Francisco bank's annual budget. The bank's expenses last year were $57.63 billion."

U.S. ECONOMY SURGES INTO 2021 AS SALES, OUTPUT TOP FORECASTS — Bloomberg's Reade Pickert: "The U.S. economy started 2021 with a bang as retail sales and factory output accelerated and expectations continue to build for another jolt of government stimulus, setting the stage for what could be the best year of economic growth in nearly four decades.

"Retail sales rose in January by the most in seven months, increasing 5.3 percent after a disappointing December and beating all forecasts, Commerce Department figures showed. Meanwhile, factory output rose by more than expected last month and a measure of producer prices advanced by the most in records back to 2009."

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