More questions than answers
The bull market is now a year old, with the S&P 500 up nearly 75 percent from its low point at this time last year. That recovery, The Times’s Matt Phillips writes, is “a testament to the unbridled enthusiasm that let investors shrug off the economic carnage of the pandemic and buy stocks — and pretty much anything else.” The factors that have stoked the rally also raise questions about whether it can last.
Is this a bubble?
Analysts are wary of using the B-word to describe the market as a whole, despite the best 12-month stretch for stocks since the 1930s. But John D. Turner, a finance professor who wrote “Boom and Bust: A Global History of Financial Bubbles,” is convinced: “If I had to put money on it, it looks like a bubble,” he told The Times. A bubble has three key ingredients, he said: ease of trading, access to credit and mass speculation — all of which are in ready supply. All that’s missing is a spark. What could it be?
Can retail traders keep this up?
A surge in individual traders — who have access to commission-free online trading apps, government “stimmy” checks and lots of downtime — has become one of the biggest forces in stock markets. A big test of this trend’s durability will come if and when Robinhood, which filed confidentially to go public yesterday, begins trading itself. Can the brokerage — whose C.E.O. faced tough questions from lawmakers and several lawsuits over its halting of trades — endure the scrutiny of public market investors when it opens its books?
What’s going on at GameStop?
Few investors beyond true believers think that the surge in the video game retailer’s stock — which was up 1,700 percent at one point in January — is justified by the fundamentals of its business. That’s why the company’s first earnings release since the frenzy was a hotly anticipated event on Tuesday. Attendees left with plenty of unanswered questions, mainly because GameStop executives provided no financial guidance and, unexpectedly, skipped a Q.&A. Here are a few:
Continue reading the main story
ADVERTISEMENT
The company said it would consider selling stock “to fund the acceleration of our future transformation initiatives.” With shares up some 900 percent from a year ago, there is scope to raise a huge amount. How ambitious will it be?
There has been a lot of executive turnover at the company. Is that also happening lower in the ranks, perhaps in part because employees can cash out their suddenly more valuable shares?
The Chewy co-founder Ryan Cohen, who joined GameStop’s board along with two other former Chewy executives just before the frenzy, said he aimed to turn the retailer into the “Chewy of gaming.” What do pet supplies have in common with video games?
If you have answers — or more pertinent questions about this moment in the markets — let us know: dealbook@nytimes.***.
HERE’S WHAT’S HAPPENING
The E.U. plans to curb vaccine exports for six weeks. The bloc has drafted emergency rules to ease its supply shortages, a move that could badly affect Britain and other countries. Separately, AstraZeneca said it planned to disclose more recent trial data about its vaccine to assuage U.S. officials’ concerns.
Jay Powell plays down the risk of inflation. The Fed chair told the House Financial Services Committee yesterday that he expected the $1.9 trillion stimulus to have a “neither particularly large nor persistent” effect on inflation. Treasury Secretary Janet Yellen defended the rescue package at the hearing, and said the next bill needed to address income inequality. (They are likely to reiterate these messages at a Senate hearing today.)
Speaking of inequality … The combined wealth of American billionaires grew $1.3 trillion during the pandemic, up 44 percent from the previous year, according to a new study. During that time, 80 million Americans lost their jobs.
Continue reading the main story
ADVERTISEMENT
The Fed creates committees to study climate risks. One will identify and address the financial risks posed by climate change, while another will consider “the potential for complex interactions across the financial system,” Lael Brainard, a Fed governor, said in a speech.
Citigroup pledges more flexibility for workers. Employees can spend up to two days per week working remotely when the bank’s offices reopen, the C.E.O., Jane Fraser, wrote in a memo. As complaints by junior analysts at Goldman Sachs have generated debates about working conditions on Wall Street, Ms. Fraser also banned internal video meetings on Fridays and announced a holiday called “Citi Reset Day.”
Two shootings, and a new push for gun control
As America grieves over two mass shootings in a week — in Atlanta and Boulder, Colo. — the inevitable question arises again: Will Washington pass new gun restrictions this time?
Continue reading the main story
ADVERTISEMENT
“This is not and should not be a partisan issue — it is an American issue,” President Biden said yesterday, adding that he was “devastated” by the killings. He urged lawmakers not to “wait another minute” in approving legislation to ban assault-style weapons and high-capacity magazines.
It’s an issue that Mr. Biden knows well: He helped pass an assault weapons ban in the Senate in the 1990s. And President Barack Obama charged him with devising gun control proposals after the 2012 Sandy Hook shootings, though those failed to gain traction.
Republicans appear opposed to sweeping new restrictions. Senator Chuck Grassley of Iowa noted that two bills proposing a modest tightening of background checks for sales — which four in five Americans support — passed the House mostly along party lines. A narrower proposal sponsored by Senator Joe Manchin, Democrat of West Virginia, and Senator Pat Toomey, Republican of Pennsylvania, is unlikely to gain a filibuster-proof majority in the Senate.
High winds and poor visibility caused the 1,300-foot cargo ship to run aground in the Suez Canal on Wednesday.Suez Canal Authority, via Associated Press
A stuck container ship could roil energy markets. The ship ran aground in the Suez Canal, blocking traffic in one of the world’s most important shipping arteries. It may take days to move the vessel, potentially forcing customers to seek alternatives to oil from the Middle East.
Exclusive: Fanatics is now a $12.8 billion company
The sports apparel retailer Fanatics has raised $320 million at a $12.8 billion valuation, more than double its valuation this summer, DealBook hears. The round was led by Silver Lake with participation by Fidelity, Neuberger Berman, Franklin Templeton, Blackstone, Thrive Capital and M.L.B. — all existing investors.
Fanatics brings instant gratification to sports swag. Rather than purchasing jerseys in advance through a third party and guessing which team or player will be hot, Fanatics owns the rights to fan gear for the major U.S. sports teams (and some Nike merchandise). That allows it to produce hot items on demand, like LeBron James jerseys immediately after he joined the Lakers. The major sports leagues have invested in Fanatics because they want ownership — not just royalties — in a business that benefits from their brands. (Michael Rubin, the founder and executive chairman of Fanatics, is also a part-owner of the N.B.A.’s Philadelphia 76ers.)
The pandemic has been good for business. Sports came to a temporary halt, but people shopped online. Fanatics, which is profitable, generates about 80 percent of its more than $3 billion in sales online. Its e-commerce sales jumped more than 20 percent last year.
An I.P.O. is still in sight. Fanatics is considering going public via a SPAC or traditional I.P.O. this year or next. (Nothing is definite, and no formal talks are underway.) Since its last fund-raising effort, Fanatics has expanded into new product lines like hats through its acquisition of Top of the World and it started Fanatics China through a joint venture with Hillhouse Capital. It is using the money from this latest round to expand its geographic footprint and product lines, potentially through more deals.
“While an I.P.O. is clearly an available option to us, there is no update on any timeline,” Fanatics told DealBook.
This bridge can be yours for $69 million.Open Sea
John Cleese’s blockchain-based satire
The comedian John Cleese is selling an NFT, or nonfungible token. It’s a joke — sort of. Evoking a classic con, the sale of the Brooklyn Bridge, the Monty Python actor is auctioning an authenticated digital sketch of the bridge by “The Unnamed Artist John Cleese,” with bidding running through April Fools’ Day. “I don’t make the jokes,” Mr. Cleese told DealBook. “I just point them out.”
The project highlights the hyper-commodification of art in a frenzied market. Christie’s recently held its first NFT auction, selling the work of an artist known as Beeple for $69,346,250. That’s how much Mr. Cleese is asking for the sketch if a bidder wants to “buy it now.” He’ll split the proceeds evenly with his partners: a comedy writer, an animator and a law professor doubling as crypto consultant. The highest bid is now about $36,000. “I think it’s very funny,” Mr. Cleese said. “At the same time, we might make some money.”
“Some things are worth pointing out, and some are not,” Mr. Cleese said. He said the Beeple sale was notable because it revealed a “mad world,” with people disconnected from meaningful emotional experiences, like seeing a painting at a gallery. Yet the 81-year-old also conceded that someone younger, for whom the line between the physical and digital worlds is more blurred, could have feelings about an NFT.
The art world can’t afford to dismiss NFTs, Mr. Cleese said. Nor can he. By mocking the craze, he is now implicated in the thing he finds absurd — just how he’s made a living as a comedian.
Andrew Ross Sorkin