Weekly Market Comment: March 20th
“Before you were born, your parents weren’t as boring as they are now. They got that way from paying your bills, cleaning your clothes and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent’s generation, try delousing the closet in your own room.” – Bill Gates
Just another manic Monday
It’s been a year since, on a fateful Monday, the S&P 500 plummeted 12%, realizing in earnest that a 103 year global pandemic-free streak was over. That was the second worst Monday crash since the infamous Black Monday of October 28th, 1929.
But unlike the Great Depression, monetory authorities didn’t hike taxes and raise borrowing requirements. Instead, they shoveled money into the sputtering system at a rate and size outpacing even the 2008-2009 Credit Crisis. Simply put, the controversial bank and auto bailouts and TARP spending got paid back with interest. And the latest round of social assistance we see today, including to corporations, the unemployed, underemployed and, well, just about everybody directly or indirectly (e.g. investors), help stoke one of the fastest market and economic recoveries on record.
To illustrate, we ran into a lawyer friend this week who specializes in corporate bankruptcies. He said business has never been slower, as government shoved all sorts of wage and loan assistance to companies.
All at a huge financial cost, of course. A cost that may eventually cause major problems at some point in the future.
Government debt is like lice; you clear away some only to discover many more like it
Uncle Sam is plotting tax increases to help pay for all of his recent spending announcements. As expected, higher taxes for earners making over $400,000 and a corporate tax hike to the 28% range, about halfway toward what they used to be. All of this is what Biden campaigned on. But what is news is that his new treasury secretary, Janet Yellen is working with the over 140 OECD member countries to enact a , global minimum corporate tax. As has been well reported, many of the largest global corporations pay nowhere near the marginal tax rate, in part because of creatively taking advantage of tax havens. To illustrate, here is an incomplete list of U.S. companies that paid no Federal income taxes in 2018.
In Canada, one wonders how on earth taxes could be raised any higher. Don’t bet against it.
Lucy, you have a latta ‘splaing to do!
The Shaw family has finally agreed to part ways with the company their late founder built and only he could run properly, selling to their long-time rival Rogers for $40.50 per share, worth a total of $20 billion. Rogers insists it will not increase wireless prices but various government entities will have to come to the same conclusion, including the CRTC, Competition Bureau, the Ministry of Innovation, and Science and Economic Development.
It won’t be an easy sell.
“Big telecom companies are gouging Canadians and continuing to make massive profits in a time where most families are struggling to get by. A merger between two of Canada’s biggest providers will just make it worse,” criticized the NDP’s Jagmeet Singh, who once in a while isn’t wrong.
The Canadian government, starting with Stephen Harper’s Conservative government, has long advocated for a fourth competitor to the Bell, Telus and Rogers oligopoly. Trudeau’s government ' promised to lower cellular phone costs, so this proposed merger is bound to meet some multi-partisan concerns. Shares in Shaw still trade about 20% below the proposed takeover price, a material indication of deal risk.
Canada’s cellular networks work better than most but are more expensive. By one estimate, 15%-40% more than what Americans pay.
Noteworthy links:
- Were the airline bailouts really needed?
- Apple scores legal win in France over app-privacy changes
- After a slow start, Canada’s vaccine rollout is now a race against time
- Are you a car nut? Then you’ve got to check out the rave reviews of the new 2021 BMW M3 and M4 Competition models.
- “Mank” leads the 2021 Oscar nominations
- NCAA March Madness primer: Picks, sleepers, NBA prospects and more
- Woman does plank for 5 minutes per day for a month, reported that her back felt “awesome”
Musings Beyond The Markets
From “A Letter of Justice and Open Debate”, written by a gaggle of writers, journalists, poets and academics tired of excessive displays of ‘cancel culture’, thin-skinned students and academic and journalistic administrators, and overall political correctness among their peers, employers and the general public who consume ideas across all political spectrums:
The free exchange of information and ideas, the lifeblood of a liberal society, is daily becoming more constricted…an intolerance of opposing views, a vogue for public shaming and ostracism, and the tendency to dissolve complex policy issues in a blinding moral certainty. We uphold the value of robust and even caustic counter-speech from all quarters. But it is now all too common to hear calls for swift and severe retribution in response to perceived transgressions of speech and thought. More troubling still, institutional leaders, in a spirit of panicked damage control, are delivering hasty and disproportionate punishments instead of considered reforms. Editors are fired for running controversial pieces; books are withdrawn for alleged inauthenticity; journalists are barred from writing on certain topics; professors are investigated for quoting works of literature in class; a researcher is fired for circulating a peer-reviewed academic study; and the heads of organizations are ousted for what are sometimes just clumsy mistakes. Whatever the arguments around each particular incident, the result has been to steadily narrow the boundaries of what can be said without the threat of reprisal. We are already paying the price in greater risk aversion among writers, artists, and journalists who fear for their livelihoods if they depart from the consensus, or even lack sufficient zeal in agreement.
This stifling atmosphere will ultimately harm the most vital causes of our time. The restriction of debate, whether by a repressive government or an intolerant society, invariably hurts those who lack power and makes everyone less capable of democratic participation. The way to defeat bad ideas is by exposure, argument, and persuasion, not by trying to silence or wish them away. We refuse any false choice between justice and freedom, which cannot exist without each other. As writers we need a culture that leaves us room for experimentation, risk taking, and even mistakes. We need to preserve the possibility of good-faith disagreement without dire professional consequences. If we won’t defend the very thing on which our work depends, we shouldn’t expect the public or the state to defend it for us.
Word of the Week
mRNA vaccines (n.) - a new type of vaccine to protect against infectious diseases. To trigger an immune response, many vaccines put a weakened or inactivated germ into our bodies. Not mRNA vaccines. Instead, they teach our cells how to make a protein—or even just a piece of a protein—that triggers an immune response inside our bodies. That immune response, which produces antibodies, is what protects us from getting infected if the real virus enters our bodies. “Sadly, the vaccine did NOT implant my genius father into my brain – if only mRNA had that power…!” – Jennifer Gates on social media.