JC Weekly Brief – 8th March, 2021

by Jefferson Capital
March 8, 2021

Global Overview

The Great Divide

Pandemic containment and relief are Biden’s leading priority. This bill is really a “test of the ability to combine Democrats in the Senate… and risks lasting harm to his sway if he fails“. Much like their House colleagues, Senate Republicans will likely unanimously oppose the bill. Together with the chamber divided 50–50, Democrats can’t lose one vote. Now the wage increase is outside, a handful of moderate Democrats that were doubtful of that are more likely to support the bill. If it passes, the House will need to vote on a matching edition. A $15 national minimum wage continues to divide lawmakers.

This past weekend, the House handed President Biden’s $1.9 trillion stimulation package, which included a minimum wage increase. As soon as Wednesday, the Senate will vote on its own version. It also includes $1,400 immediate payments, $400/week in earnings benefits, $350 billion to local and state authorities, and funding for vaccine distribution and colleges.

New Tax Proposal

When many politicians agree that the ultra-wealthy must pay more, some disagree about whether wealth taxes are the thing to do. One penny more and you’d be facing an additional 2% tax beneath a new proposition from Dems including Sen. Elizabeth Warren. Billionaires would be struck with 3 percent.

Warren’s riches tax proposition, a carryover in the run for president would impact ~100,000 families and raise an estimated $2.8 trillion over a decade, cash its patrons say could support child care, early education, and infrastructure.

Capital Markets


PX Last 1 Week YTD
United States
S&P 3 842.51 0.82% 2.30%
NASDAQ 12 920.15 -2.06% 0.25%
Euro Stoxx 50 3 669.54 0.91% 3.29%
FTSE 100 6 630.52 2.27% 1.97%
DAX 13 920.69 0.97% 1.47%

Buffet’s Buybacks

Berkshire reported a net income of $35.8 billion for its fourth quarter, which reflects the booming pandemic-era stock industry. Berkshire also purchased back nearly $25 billion of its own stock last year, decreasing the entire number of outstanding stocks and raising present investors’ possession.

Berkshire is a conglomerate that wholly owns firms in industries like insurance, railroads, and retail stores. But note what isn’t there: the pandemic, racial justice protests, the election, GameStop, and crypto. Buffett steered clear of these supercharged topics, which frustrated some observers.

Irrationality is a new Normality

Too much of a great thing could fend off the recovery, but we are not really there yet. Tech shares are down. Interest rates are upward. The U.S. buck is flying. And oil is higher. In terms of the technology wreck, it’s happening partly because investors simply don’t like change. This time around nobody knows exactly what to expect.

The macroeconomic background, the one which matters a lot for stocks, is appearing quite different as the worldwide market emerges from Covid-19 lockdowns. Typically, petroleum prices, that were topped $65 Friday morning, wouldn’t go higher with the buck. However, the economy is improving faster than output is rising, so oil prices can continue to grow. Higher yields might be a blessing for the dollar since they imply U.S. assets earn more money than others around the world, driving demand for the greenback.

Private Equity & Venture Capital

BNPL Dilemma

Klarna, the Swedish fintech giant that offers customers buy-now-pay-later (BNPL) shopping alternatives, announced yesterday it had raised another $1 billion in a $31 billion valuation. It is fine in moderation. In Britain, where BNPL usage almost quadrupled last year, regulators are scrambling to draft rules to cover this exceptional kind of credit lending. The target of their angst? Late fees. Among the earliest companies to the BNPL game, Klarna offers users the option to pay for a product on the internet in instalments rather than all simultaneously. Klarna’s closest American equivalent is Affirm, which went public in January and is presently worth $24 billion.

Klarna’s BNPL business is currently active in 17 states and has over 250,000 retail partners, but the company is looking to evolve into an all-in-one banking program. The startup offers a range of licensed banking providers and recently rolled out consumer bank accounts in Germany. Klarna’s style of financing is particularly popular with younger consumers who do not possess a credit card and enjoy the opportunity to distribute their spending. Roughly 20% of millennials utilized a BNPL service in 2020, nearly double the speed of Gen X.

Insurance startup to go public

Home insurance startup Hippo has agreed to go public by teaming up with a blank-check company in a deal that will value the combined entity at $5 billion. Hippo will merge with Reinvent Technology Partners Z, which counts LinkedIn co-founder Reid Hoffman and Zynga founder Mark Pincus as its lead directors.

Hippo, led by CEO Assaf Wand, has raised over $700 million from investors including Comcast Ventures and Fifth Wall, according to PitchBook data. Last November, the company secured a $350 million investment, valuing it at $2 billion, according to a PitchBook.

Commodities & Digital Assets

PX Last 1 Week YTD
Brent Crude 69.36 7.67% 33.90%
Gold 1 698.20 -2.01% -10.89%
XBT/USD 49 142.06 5.01% 67.66%

Bitcoin Trading Desk

Goldman Sachs Group Inc has restarted its cryptocurrency trading desk and will begin dealing bitcoin futures and non-deliverable forwards for clients from next week. The trading desk reboot comes amid rising interest by institutions from bitcoin, which has jumped more than 470% within the last year. The largest cryptocurrency is observed by shareholders and a few firms as a hedge against inflation as authorities and central banks flip on the stimulus taps. As part of the work, the lender is also exploring the possibility of a bitcoin market traded fund, and it has issued a request for information to research digital asset prosecution, the source said.

While its cost has risen significantly over the past calendar year, bitcoin remains highly explosive. The virtual currency crushed $58,000 on February 21 then dropped back by as much as 25 percent but has regained some lost ground. This creates the coin and associated derivatives attractive for investors keen to take riskier long or short positions because they hunt for yield in a record-low interest rate environment.