Monday Morning Reads
- Better Way to Do Stimulus
- Xi’s Expanding Power
- China’s Coal Imports in October Nearly Doubled
- Crypto World Hits $3 Trillion Market Cap
- Pfizer’s Covid Pill Is Shaking Up the Asia Recovery Trade
- Flatlining Participation
- Americans Are Flush With Cash and Jobs
- Winter Heating Bills Loom
- Behind Elon Musk’s Twitter Poll
- Aiming to Raise $2.5 Billion Amid India’s Stock Boom
- Blizzard-hit SoftBank Launches
- Cadillac Thins Out U.S. Dealers
- Disney Offers Streaming Service Discount
- You Don’t Hate Jeff Bezos And Elon Musk
- The Chairman Who Went to War With His Family
Shares of Tesla (NASDAQ:TSLA) are down 6.5% to $1,142 in premarket trade after Elon Musk took to Twitter with a poll about selling 10% of his stake in the electric carmaker. Before the tumble, a tenth of his holdings were valued at $21B, a substantial sum, even for the world's richest person. "Much is made lately of unrealized gains being a means of tax avoidance," Musk wrote in the tweet, adding that he would "abide by the results of this poll, whichever way it goes."
What happened? About 58% of 3.5M voters backed the move, putting Musk on the hook to follow through on his pledge. However, many expressed concern that such a sale would hurt the stock, especially after a new high of $1,229.91 reached last week and a 43% surge in October. Last month, Musk slammed a Democratic proposal to tax billionaires' annual unrealized capital gains, saying, "eventually, they run out of other people's money and then they come for you."
Meanwhile, the current top tax rate on long-term capital gains is 23.8%, but Congress has also considered raising it (changes often take place immediately to prevent gamesmanship). Many have additionally pointed out that Musk would have anyways needed to sell millions of shares this quarter due to a looming tax payment of around $15B. He was awarded TSLA options in 2012 as part of a compensation plan and CNBC noted this could have been the real reason for the sale.
Commentary: "Elon still can't talk the stock down for long. And remember the people voted for him to sell. So what, he sells 1-2 mil shares. It’s peanuts on a $1.5 tril company," tweeted Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management. "It’s extremely rare in fact to have a founder with so much of their worth in their public company. Many like Zuck and Bezos have been extracting billions in cash for years from stock sales." (40 comments)
Today, the U.S. is finally lifting pandemic travel restrictions that have barred many international visitors from visiting America. The measures were first instated by the Trump administration in March 2020 to limit the spread of COVID-19, but were later upheld by President Biden to include more than 30 countries like Brazil, South Africa, the U.K. and much of Europe. The reopening of the border comes with a new set of rules, but is being looked upon as aiding in the economic recovery.
Fine print: International visitors will have to show proof of vaccination by a jab approved by the FDA or listed by the World Health Organization (including Pfizer/BioNTech, Moderna, J&J, AstraZeneca, Covishield, Sinopharm and Sinovac). The U.S. will also require proof of a negative COVID test from within the past three days (rapid antigen and PCR are both accepted). Exceptions include travelers under age 18 and those traveling from countries with low vaccine availability.
Airlines are celebrating the news, with United Airlines (NASDAQ:UAL) saying it expects 50% more international inbound passengers on Monday from a week earlier (when it carried 20K people). Delta (NYSE:DAL) also anticipates strong demand over the next few weeks, while American Airlines (NASDAQ:AAL) forecasts international capacity for November and December to be more than double that of a year ago and down only 28% from 2019. According to airfare-tracking site Hopper, international flight searches to the U.S. have more than quadrupled since the Biden administration announced it would lift the restrictions in September.
Go deeper: The border opening is likely to drive up revenue for hotels, restaurants and retailers. Global visitors contributed more than $43.4B of shopping in 2019 - or 27% of the total shopping driven by travel and tourism. "The return to the service and the experience economy is going to be positive and beneficial for retail and it's going to be enhanced furthermore by these international visitors returning to the U.S.," declared Matt Shay, CEO of the National Retail Federation. (9 comments)
Oral treatments to fight COVID-19 have been sought after since the start of the pandemic. Merck (MRK) announced it would seek U.S. authorization for its pill molnupiravir in October, while Pfizer (PFE) jumped aboard the train on Friday. The company, which already has one of the most popular COVID vaccines in its arsenal, disclosed strong clinical trial results for its anti-COVID pill, sending the stock up 11% and pressuring early-stage developers of rival therapies.
Quote: This is "a game-changer" that "demonstrates the power of science," Pfizer CEO Albert Bourla said in a statement. "I think this medicine will change the way things are happening right now. It will save millions and millions of lives. It has the potential to do it."
The COVID-19 oral antiviral treatment candidate reduced the risk of hospitalization or death by 89% in an interim analysis of the company's Phase 2/3 EPIC-HR study. President Biden also outlined the U.S. has secured millions of doses of the new pill, which would be "another tool in our toolbox to protect people from the worst outcomes of COVID." Pfizer has invested $1.2B to produce the new COVID medicine at scale, meaning it has the capacity to produce 500M pills, or 50M courses of treatment, in 2022.
Outlook: The development of a successful oral pill that can treat severe disease or prevent hospitalization could affect vaccine and testing requirements. On Saturday, a federal appeals court temporarily blocked President Biden's vaccine mandate for private businesses, just a day after they had officially gone into effect. The Biden administration has until tonight to respond, though the Labor Department's top lawyer, Seema Nanda, responded that it is "fully prepared to defend this standard in court." (37 comments)
After months of negotiations and a standoff between progressive and moderate Democrats, the $1T package of road, broadband, and other "hard" infrastructure improvements has passed the U.S. House of Representatives with a 228-to-206 vote. While a signing ceremony wasn't able to come together this weekend, President Biden said one would be scheduled "soon" after he hailed the bill as a “once-in-a-generation investment." The legislation will go a long way for railways, roads and other transportation infrastructure, and is intended to create jobs and increase American competitiveness.
Drama to come: Democrats have yet to bring the larger $1.75T package on social infrastructure and climate change initiatives over the finish line. That would be the largest increase in the social safety net since the 1960s, but moderates Joe Manchin and Kyrsten Sinema had balked at the original $3T price tag and some provisions such as paid family leave and immigration reform.
While Democratic leaders wanted to pass both bills in the House on Friday, the larger bill was delayed after centrists called for a nonpartisan accounting of its costs. The centrists agreed to vote for the bill by Nov. 20 on the condition that the nonpartisan Congressional Budget Office estimate of costs line up with the White House forecast. However, one change the Democrats made to the $1.75T bill would raise the cap on SALT deductions to $80K from its current $10K level; the higher cap would stay in place through 2030, then return to $10K in 2031.
On watch: Stocks that could benefit from the infrastructure bill include Caterpillar (NYSE:CAT), Deere (NYSE:DE), Martin Marietta Materials (NYSE:MLM), Vulcan Materials (NYSE:VMC), Terex (NYSE:TEX), and United Rentals (NYSE:URI). (578 comments)
In Asia, Japan -0.4%. Hong Kong -0.4%. China +0.2%. India +0.8%.
In Europe, at midday, London flat. Paris +0.2%. Frankfurt -0.1%.
Futures at 6:20, Dow +0.2%. S&P +0.1%. Nasdaq flat. Crude +1.5% at $82.52. Gold +0.1% at $1819.40. Bitcoin +6.5% at $65893.
Ten-year Treasury Yield +3 bps to 1.49%
Today's Economic Calendar
9:00 Fed's Clarida Speech
10:00 Fed's Montgomery Speech
10:30 Jerome Powell Speech
12:00 PM Fed’s Harker: Economic Outlook
12:30 PM Investor Movement Index
1:00 PM Results of $56B, 3-Year Note Auction
1:50 PM Fed’s Evan Speech
What else is happening...
Cyclical stocks may be about to turn 'manic' - Sector Watch.
Potential release from U.S. oil reserves seen failing to ease prices.
President's Working Group urges Congress to regulate stablecoins.
Semiconductor ETFs outperformed all other funds last week.