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Good Morning. The reflation trade is alive and well and the US economic talks are boosting global stocks. This and a host of M&A activity have put investors in a risky mood. Elsewhere, crude oil and bitcoin continue to rise, and GameStop is up 10% in pre-market trading.
I wouldn’t be sure if I didn’t mention a little exercise this morning. Your correspondent saw the biggest sporting event in the world yesterday. Yes, I am referring to that Alpine Ski World Championships in (sigh) Cortina, Italy. When you have 50 seconds check The men’s Super G runs on the infamous Vertigine – that’s “hoax” in English. Let’s hope I don’t have to fish for downhill metaphors to describe the markets this week.
In other sports news, a guy in his forties won the Super Bowl last night.
Let’s see if we can get a G.O.A.T. in honor of Tom Brady. or two – the largest of all trades.
- The mayor Asia indices are firmly in the green in afternoon trading with Japan Nikkei above 2.1%.
- Hyundai and Kia Motors both made unusual regulatory statements that said they did Not in conversations with Apple help develop an electric vehicle. Shares in both bombed on the newswith Hyundai 5.8% and Kia’s almost down fifteen% lower.
- Key to Global economic recovery is a successful effort to vaccinate everyone everywhere. capitalDavid Meyer digs into the enormous cost from Vaccine nationalism for everyone, everywhere.
- The European stock exchanges won with the one out of the gates Stoxx Europe 600 above 0.4% two hours after the start of trading.
- Shares in Dialog semiconductors were at 16% on news it had agreed 6 billion dollars Takeover by Japan Renesas Electronics.
- Elsewhere in the world of M & A., Birkenstock it is said that Siding with French private equity firm, L Cattertonwith a value of 4.5 billion euros ($ 5.4 billion).
- US futures slide higher this morning. That’s after the S&P 500 closed at a new all-time high on Friday. The Dow is on his too longest winning streak since August.
- US Treasury Secretary Janet Yellen Hit the Sunday talk shows Discuss Stimulus Package # 3, and the markets like what they hear. We’ll get more details about the size of the $ 1.9 trillion Proposal this week – and who will not qualify to the $ 1,400 Tuning checks.
- The earnings season continues this week with reports from Twitter (Tomorrow), Coke, Uber and General Motors (Wednesday) and Walt Disney on Thursday.
- gold is up and trading around $ 1,820 / ounce. The shiny yellow metal has a tough 2021.
- The dollar is up on Friday after a big drop.
- Raw is up again, with Brent Trading at a 12 month high, above $ 60 / barrel.
- Bitcoin crowned $ 40,000 this weekend before retiring after $ 39,200 this morning. Meanwhile Dogecoin set a record overnight after Elon Musk tweeted, “Who let the doge out?”
Riding on satire, stonks and savages
They know things are not quite right with the markets when Wall Street analysts quote Oscar Wilde in their investor notes.
Looking for a metaphor to sum up the frenzied trade in meme stonks like GameStop, the crack Goldman Sachs The equity team went straight to Wilde’s pages Lady Windermeres fan. You may remember this classic comic book that Wilde explained the difference between a cynic – “A man who knows the price of everything and the value of nothing“- and a sentimentalist -“a man who sees an absurd value in everything and does not know the market price of a single thing. ”
In this market, the cynics would probably be your shorts. You see foam and even wrongdoingand believe asset prices are grossly inflated. The sentimentalists are your YOLO day traders. You see tendies, brother! Your stonks go to the moon.
Sure enough, at its peak, GameStop Goldman notes that it was estimated 250 times in 2022. To put that in perspective: Amazon Trades at 50 times estimated profit (still high) in 2022. Hold your top hat, Algernon.
In Wilde’s time, the cynical and sentimental characters made for good theater. In 2021, they’ll make for some good drama on Capitol Hill.
Next week, the House Financial Services Committee will hold a hearing to find out how social media, gamification, commission exemption, and the rise of retail investment are affecting the markets.
In the case of GameStop, both the cynics and the sentimentalists misbehaved. The YOLO crowd is pumping out a stock that will burn the next guy who piles up in the trade. Your tactic feels like a textbook greater fool theory at work. The cynics have brought GME to levels seldom reached in the past decade – far north of 100% of total stock price. It may or may not be legal.
When the two forces collide, you get graphs that look like this:
Judging by the chatter on investor message boards, Reddit and Twitter, day traders are already looking for the next GameStop. You may not see “absurd value” in absolutely everything, but you do see plenty of underdogs who have what it takes to move on next time to the moon.
Too often, the rocket fuel for these recent wildlife drives is alternative facts and misinformation. This will be a fascinating area of study at next week’s hearings.
Let’s call it the importance of being honest.
On my very first trip to Italy in the fall of 1998, the Italian government collapsed. I was on vacation and found out almost a full day later on the pages of International Herald Tribune. (I probably just bought the paper to check baseball box results and check the exchange rate.)
Late when I got to a story that was playing out under my nose, I was disappointed that the whole ordeal was not lacking in immediate drama. There would be no marches in Florence’s Piazza della Signoria this day or the next. But I was also relieved vacanza italiana wouldn’t be the least bit uncomfortable. There would still be cappuccino and Cornetto Plentiful at the bar for breakfast and lunch pappardelle al ragù di cinghiale.
Che vuoi di piú? (What more do you want?)
Italians are remarkably untouched by government collapse. They happen a lot. In 75 years since the end of World War II, there have been 66 governments – one shiny new government every 14 months on average. The most recent government collapse – that of the Giuseppe Conte government – happened just last week.
This is what it usually looks like:
When the prime minister loses his majority (this is Italy, the prime minister is always a “he”), he resigns and then tries to cobble together the support of a staggering number of parties, all of which have big-tent seats in the Italian government. It’s a popular competition in high school as Hamilton versus Burr.
If the Prime Minister cannot find enough willing dance partners, he informs the President of the Republic of his helpless improbability. The president, always a serious classic, then rings an alarm clock to form a janitorial government. (To avoid the tedious parts, I skipped a few steps.)
Italy has had a surprising number of janitorial governments over the years. You can gasp at the idea of an unelected man to take over government for an indefinite period of time, but Italians have gotten pretty used to it. (And if you think about it, having a janitor instead of the U.S. Senate might not be the worst option every now and then.)
This time around, Italy’s appointed caretaker is Mario Draghi, a character better known to the outside world than anyone else in the Italian government not named Silvio Berlusconi. That caretaker is Super Mario. Signor Whatever is necessary. The Mario Draghi.
Over the weekend, Draghi garnered crucial support from the left, center and right of Italian politics. That means he could officially take over the keys to the government in the coming days. His rise to power is a story full of intrigues. Draghi is a skilled economist who has been asked to get this bel paese out of all kinds of crises over the years, usually through the sale of assets to get the country out of a financial hole. But this time, Job One is supposed to find out how best output Money, namely EUR 200 billion in EU recovery funds.
In this way, it is a very different Italian crisis, completely unknown to many of us here.
Whatever happens, Italians can still find a fabulous cappuccino and cornetto for breakfast. Whether or not your favorite local bar is still in business is a whole other question.
I wish everyone a pleasant day. I’ll see you here tomorrow … Until then, there’s more news below.
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Correction: An earlier version of Bull Sheet incorrectly stated the size of the latest US stimulus package. It’s $ 1.9 trillion.