SPAC markets erase 2021 gains amid possible regulatory headwinds

Business

“There may be advantages to providing greater clarity on the scope of the safe harbor in the PSLRA (Private Securities Litigation Reform Act). Congress could not have predicted the wave of SPACs in which we find ourselves. It may be time to revisit these issues.” – Jon Coates, Acting Director, Division of Corporation Finance (SEC)

Coindesk

The SEC’s Acting Director of Corporation Finance, Jon Coates, has called on Congress to reign in SPACs and tighten regulatory disclosure requirements on the “blank check” companies.

What used to be a niche investment vehicle that served as an alternative for privately-held companies to enter public markets is now regarded as a market craze, a change that has taken place amid the historic, pandemic-induced 2020 market crash. Companies looking to go public partnered with SPACs to take advantage of markets flush with capital but volatile amid the backdrop of the coronavirus pandemic. Unfortunately though, SPAC moguls, like Bill Ackman, who the Collegian covered in its Feb 10 issue, are learning that, like all good things, the SPAC craze must too come to an end.

SPAC markets have taken a sharp downturn in recent months, and even more trouble is on the horizon due, in large part, to heightened regulatory scrutiny for the investment vehicle. John Coates, the SEC’s Acting Director, Division of Corporation Finance, released a statement on the Securities and Exchange Commission’s (SEC) website sounding alarms on the SPAC surge. The SEC’s statement, SPACs, IPOs and Liability Risk under the Securities Laws, contained verbiage that has likely contributed to the recent downturn in SPAC markets. The SEC is now eyeing SPACs for the potential they have to mislead investors as they have significantly less disclosure requirements than a traditional IPO would have.

In the statement, Coates discusses how 25 years ago, the path to public markets for a company was fairly simple and one-tracked and, with the innovations markets have today, there should be regulation to follow along with it. “With all these changes, the appeal of understanding and developing law around economic substance over form may be greater than ever.” Coates talks about how initial public offerings are a “distinct and challenging moment for disclosure” for companies undergoing them for good reason. “An IPO is where the protections of the federal security laws are typically most needed to overcome the information asymmetries between a new investment opportunity and investors in the newly public company,” says Coates.

Coates ends the statement by calling for legislative bodies to consider imposing tighter requirements that would target the second phase of a SPAC transaction, otherwise known as the “de-SPAC,” where a target company is acquired and original investors in the SPAC typically unload their shares into the secondary market. Coates calls on authorities to treat the de-SPAC transaction as the “real IPO.” “It is the de-SPAC as much as any other element of the process on which we should focus the full panoply of federal securities law protections — including those that apply to traditional IPOs.” Heightened regulatory pressures have further depressed SPAC markets that have already been reeling in recent months. The proposed regulation could increase disclosure costs for the blank-check companies which already face tough competition from private equity firms when hunting for target companies.

A SPAC index across 210 different companies, made up of 60 percent public companies derived from SPACs and 40 percent pre-IPO SPACs, “Indxx SPAC & NextGen IPO Index,” has fallen 24.87 percent since the SPAC market’s February highs. New accounting guidelines issued by Jon Coates and Acting Chief Accountant of the SEC, Paul Munter, have helped to grind SPAC markets to a halt as well. The statement, which read, “OCA (Office of the Chief Accountant) staff concluded that – the tender offer provision would require the warrants to be classified as a liability measured at fair value, with changes in fair value reported each period in earnings,” has the potential to impact newly issued SPACs and companies that have already gone public through a SPAC transaction. Proponents of the investment vehicle are eyeing financial regulators to see what moves they will make to tighten regulations around the investment vehicle. Eyes will surely be on the SEC in the coming months to see how they choose to advance their agenda as laid out by John Coates.

Currency of the future or tulip bulb of the past: will crypto continue to boom or will it bust?

Business

Michael D’Angelo, Staff

Pictured above is Tesla CEO, Elon Musk. In late March, Musk announced via Twitter that Tesla cars may be bought with bitcoin and any bitcoin Tesla receives as revenue will not be converted to fiat currency.

All the recent rage in the financial markets is related to cryptocurrency. It appears almost daily one can see a crypto-related news headline. Just two weeks ago a “meme” cryptocurrency known as dogecoin reached an all-time high, netting some traders thousands of dollars. In addition, just yesterday, Tesla announced they sold $272 million worth of bitcoin (BTC) during the first quarter.

Cryptocurrency is defined as an unregulated digital currency that uses an online ledger to track ownership to buy and sell goods. An idea of unregulated digital currency drives the enthusiasm behind crypto and many investors view the currency as digital cash that cannot be traced. The most popular cryptocurrency is Bitcoin. Bitcoin utilizes complex blockchain technology to track ownership and manage trading. Some investors see Bitcoin as a store of value and an alternative to physical gold while others view it solely as currency to buy and sell goods.

Bitcoin has grown tremendously since its inception in 2009 and has experienced widespread interest since last March when the pandemic and stay-at-home orders forced millions into lockdown. Much of Bitcoin’s rise is attributed to retail investors, but institutional investors are involved with the commodity. Big-name financial companies and fintech players like Square and MicroStrategy have used cash to purchase bitcoin. Even asset management fund Fidelity has jumped in and intends to release an ETF to track BTC benchmarks. Bitcoin’s market cap is currently valued at over $1 trillion.

Tesla’s CEO, Elon Musk, has spoken countless times about cryptocurrency and his company’s offer to accept Bitcoin as payment for their cars. In February of 2021, Tesla bought $1.5 billion of Bitcoin. They stated in SEC filings that the purpose of the purchase was to gain a better return on their cash, but they did warn investors of the price volatility involved with the purchase. According to Tesla’s Q1 earnings report, total revenue grew year-over-year by 74 percent. Tesla’s GAAP net income reached $438 million while non-GAAP net income was over $1 billion. Also, Tesla reported more deliveries of their car products. Musk made the Bitcoin purchase to emphasize the liquidity involved with the coin.

As cryptocurrency becomes more widespread, regulators and government officials are left scratching their heads. They must decide how to regulate the crypto market. India had a ban on cryptocurrency which has been reversed in March of this year. Turkey has banned cryptocurrency. Back home in the United States, Bitcoin faces some regulation by organizations like the SEC, the Fed and the CFTC. The IRS taxes Bitcoin and other cryptocurrencies as property. Janet Yellen, the current Treasury Secretary, believes Bitcoin is an “extremely inefficient” way to conduct monetary transactions. Overall, many regulators are going to have to find an agreement and decide how to regulate the coin.

As Bitcoin grows in popularity and many people look to the future, we must be cautious of the recent rapid rise in its price and remember the history of financial booms and busts. Bitcoin and the cryptocurrency market have the potential to fully take over our lives. Bitcoin can be as useful as the American dollar in the next few decades or can be remembered like the tulip bulb of 1637.

CDC to re-evaluate Johnson & Johnson vaccine as halt due to cases of rare blood clots lingers on

Business

Elizabeth McLaughlin, Staff

The administration of the Johnson & Johnson COVID-19 vaccine was paused due to cases of rare blood clots associated with those who received the shot.

On April 20th, Johnson & Johnson announced that the European Medicines Agency’s Pharmacovigilance Risk Assessment Committee (PRAC) reviewed the company’s vaccine and confirmed that the overall benefit-risk profile remains positive.

In recent months, Johnson & Johnson’s vaccine has been linked to a small number of cases of blood clots in combination with low platelet counts. These cases, though small in number, were enough to draw international concern. The EMA made it clear on Tuesday that there is some validity to these links between Johnson & Johnson’s vaccine and blood clots. Moreover, in a press release, the EMA stated “that a warning about unusual blood clots with low blood platelets should be added to the product information for COVID-19 Vaccine Janssen.”

The EMA relied on all available evidence, it said, which included eight U.S. reports of serious blood clot cases. As of April 7th, more than 7 million people had received the J&J vaccine in the United States.

The linkage between the vaccine and blood clots is not unique to Johnson & Johnson. In March, more than a dozen European countries halted the use of the AstraZeneca shot after some people who received the vaccine reported experiences of blood clots. 18 of these cases turned out to be fatal, compared to only one case of fatality linked to the Johnson & Johnson shot. The EMA stated that “unusual blood clots with low platelets” should be listed as “very rare side effects” for the AstraZeneca vaccine.

On Friday, April 23rd, vaccine advisers to the Centers for Disease Control and Prevention will meet to make recommendations regarding the use of the Johnson & Johnson vaccine. They will be meeting less than two weeks after the CDC and US Food and Drug Administration recommended a pause on the use of the Janssen vaccine. The pause gave experts time to work with doctors regarding the identification and treatment of these rare blood clots.

Moreover, ranking members at the CDC project said that “there will likely be more reports of blood clots connected to the vaccine” (Mascarenhas, CNN). Dr. William Schaffner, a non-voting member of the CDC’s Advisory Committee on Immunization Practices, stated that he and his colleagues need to understand the demographics of blood clot cases before they can move forward with a decision. Dr. Schaffner said that on Friday, the ACIP could give the all-clear for the vaccine, or it could recommend that the US stop using the vaccine entirely. Dr. Schaffner thinks it is likely that the ACIP will recommend the use continues with warnings about possible adverse side effects. Additionally, Dr. Schaffner says it is wise for high-risk people to avoid the vaccine altogether.

The chair of the ACIP, Dr. Jose Romero, who is also Arkansas’ secretary of health, says that the committee has reviewed enough data at this point to make a responsible decision. Although more data will be presented on Friday, Dr. Romero believes that the committee will likely affirm the vaccine’s legitimacy after estimating the risk-benefit analysis. However, there are currently so few cases of blood clots that it is hard to assess the entire picture of risk. For example, all but one case were in females; some members of the ACIP are concerned that cases among men or older people might arise in the near future. The ACIP would benefit from more data in the form of blood clot cases, but those looking to receive the vaccine might not benefit.

Dr. Romero stated, “I really hope that the American public will look at this pause and look at what we have done during this pause as an indication of how safe the vaccine system and the vaccine pipeline is in this country.”

mclaughline7@lasalle.edu

Johnson & Johnson vaccine rollout halted amid concerns over rare form of blood clotting

Business

Bill O’Brien, Editor

Cases of blood clotting remain extremely rare among the upwards of 7 million Johnson & Johnson vaccine recipients. To this date, there have only been six reported cases of cerebral venous sinus thrombosis from J&J vaccine recipients, per Centers for Disease Control (CDC).

Johnson & Johnson (NYSE: JNJ) trended downward (-3.04 percent) following regulatory actions on Tuesday, April 13, that halted administration of the medical device giant’s one-dose vaccine. Per the CDC, Johnson & Johnson’s vaccine has been administered to more than 7 million people as of April 14. Since then, aside from common side effects typically caused by vaccines, there have been six reported cases of a rare blood clotting condition known as cerebral venous sinus thrombosis. The condition has been reported in conjunction with low levels of blood platelets, a condition known as thrombocytopenia, per CDC reports.

All six cases were of women between the ages of 18 to 48, and symptoms were reported to have occurred six to thirteen days after receiving the vaccine. The combination of cerebral venous sinus thrombosis and thrombocytopenia is difficult to treat. The conventional remedy for blood clots, an anticoagulant called Heparin, cannot be used as, according to the CDC, “In this setting, administration of Heparin may be dangerous, and alternative treatments need to be given.”

Although regulatory scrutiny poses significant risk to Johnson & Johnson’s vaccine distribution, JNJ shares have stabilized around $159.59, just 1.24 percent lower than its week high of $161.69, as of Wednesday at 12:40 p.m. EST, following Tuesday’s vaccine halt. Investors appear cautious but, surprisingly, largely unbothered by the halting of the vaccine which has an additional 10 million doses in circulation, on top of the more than 7 million already administered.

JNJ’s price resiliency is likely due to regulatory language from FDA officials signaling a swift and optimistic outcome for the vaccine. On an April 13 joint media call with CDC officials, Dr. Janet Woodstock, Acting Director of the FDA, iterated that she expects the pause to be a short one: “Well, the timeframe will depend obviously on what we learn in the next few days, however, we expect it to be a matter of days for this pause.” Signaling from the CDC reinforces this rhetoric, depicting the action as precautionary rather than the result of crisis. Per their website, last updated on April 13, the Centers for Disease Control convened an “Advisory Committee on Immunization Practices (ACIP)” with the goal to “review these cases and assess their potential significance.”

On a broader scale, public health officials do not believe this situation will detract from the Biden Administration’s ambitious vaccination efforts, citing the Johnson & Johnson vaccine to be a minority among COVID-19 vaccines distributed. According to Anne Schuchat, Principal Deputy Director of the CDC, over 121 million Americans have been vaccinated with at least one dose of one of the three vaccines from Pfizer, Moderna and Johnson & Johnson. Johnson & Johnson only represents just over 7 million of those doses. Although a prolonged pause on Johnson & Johnson’s vaccine does not pose a robust threat to the larger mass vaccination effort from a supply standpoint, the negative press associated could have potential drawbacks on an American populace that has already struggled to trust the rapidly developed vaccines that are being distributed under emergency use authorization from the FDA. Continued public confidence in the vaccination effort is a key driver to achieving herd immunity and the reopening of the economy that would subsequently follow.

The overpromising and under-delivering of AstraZeneca

Business

Elizabeth McLaughlin, Staff

Shares in AstraZeneca have dropped 8.1 percent in the last six months as the public loses confidence in the company’s COVID-19 vaccine.

We are now over a year into the COVID-19 pandemic and millions across the world are beginning to feel a little more at ease as countries ramp up their vaccination efforts. Those in the U.S. are familiar with the Pfizer-BioNTech, Moderna and Johnson & Johnson vaccines. On Monday, AstraZeneca released results of a large U.S. trial, claiming that the vaccine was shown to be safe and 79 percent effective in preventing symptomatic disease.

Meanwhile, regulators in Denmark, Germany and Norway identified reports of serious or fatal blood clots among young people who had been administered the AstraZeneca vaccine. Although the number of reported cases is small, regulators argue that it is statistically significant; Germany halted the distribution of AstraZeneca’s vaccine and most other countries soon followed suit. New Zealand decided to donate its supply to countries in need, opting for the Pfizer-BioNTech shot instead. South Africa sold its AstraZeneca doses. Confidence in the company’s vaccine is dropping and so is their stock price.

Angela Merkel, chancellor of Germany, instituted a lockdown that will not be lifted until at least April 18. Germany’s DAX, the blue-chip stock market index comprising the thirty largest actively traded companies on the Frankfurt Stock Exchange, was down 0.1 percent as of Tuesday. On top of that, “yields are falling as investors look to bonds for safety,” according to Al Root via Barron’s. The 10-year U.S. treasury yield dropped to 1.63 percent Tuesday.

Moreover, U.S.-listed shares of AstraZeneca dropped two percent in premarket trading; shares in London fell more than one percent. Overall, AstraZeneca shares have dropped 8.1 percent in the last six months, compared to the Zacks Large Cap Pharmaceuticals industry’s gain of 4.8 percent. Although confidence in AstraZeneca’s vaccine is low, some of the company’s other drugs could pick up the slack. Cancer drugs Lynparza, Tagrisso and Imfinzi, according to the Nasdaq analysts, “should keep driving revenues”.

In December 2020, analyst Jim Crumly wrote on The Motley Fool that AstraZeneca was “one of the most attractive buys in the industry at the moment.” A Morgan Stanley analyst predicted that AstraZeneca’s 2021 profit could increase by 30 percent because of their COVID-19 antibody medicine.

But just last week, the president of the European Commission, Ursula von der Leyen, stated that “AstraZeneca has unfortunately underproduced and underdelivered.” If that weren’t enough, on Tuesday, the National Institute of Allergy and Infectious Disease reported more concerns about AstraZeneca’s efficacy from its vaccine trial. More specifically, the Data and Safety Monitoring Board (DSMB) as an independent expert group, “wrote a rather harsh note to [AstraZeneca]… saying that in fact they felt that the data that was in the press release were somewhat outdated and might in fact be misleading a bit,” according to Dr. Anthony Fauci on Tuesday. Despite this, Fauci maintains that AstraZeneca has likely produced “a very good vaccine.”

Non-fungible tokens: the newest asset class utilizing blockchain technology

Business

Michael D’Angelo, Staff

Twitter’s CEO, Jack Dorsey, recently sold his first ever tweet on the platform as a Non-Fungible-Token (NFT) for more than $2.9 million. Many investors are questioning if the digital assets are worth the buy.

Many people are jumping on the non-fungible token wagon recently and headlines are appearing with regards to art gallery NFTs, NBA highlight NFTs and original tweet NFTs. This NFT fever has even reached several billionaire’s with Mark Cuban planning to build a digital art gallery made up of non-fungible tokens and Elon Musk offering to sell his infamous tweets. With the recent NFT craze, and big names dropping into the NFT scene, many investors are confused at best and are left pondering what exactly is an NFT.

A non-fungible token is a digital asset which includes PDFs, jpegs (Joint Photographic Experts Group) and videos which can be bought and sold like a typical investment vehicle. NFTs first came around in 2017, but their appeal has shot up during the COVID-19 pandemic as many people are stuck at home and have turned their attention to alternative investments.

NFTs are powered by blockchain technology, which is a digital ledger that records transactions and ownership across a network of computers. The NFT owner now has a token with claims to the original digital asset. Others may copy the image or see the video, but they do not own the original work. Essentially, it is the equivalent of holding a physical original. Think of the Mona Lisa and how millions of people have copied the print, but there is one original Mona Lisa. Many believe NFT value is derived simply by owning something others cannot own. They can be bought and sold on the internet at online marketplaces where you either bid on the item or buy at a set price. In addition, you can even use some of these marketplaces to create your own NFTs.

The craze is being fueled by high selling prices. A short video of a meme cat sold for more than $500,000, artist Beeple sold art for $69 million in a Christie’s auction sale, and Twitter’s CEO, Jack Dorsey, sold his first tweet for more than $2.9 million. A digital house even sold for $500,000. The NFT boom is also fueled by the recent rise in popularity of Bitcoin and other cryptocurrencies. Like NFTs, cryptocurrencies also utilize blockchain technology.

Non-fungible tokens have the potential to increase in value. Human nature lends itself to not miss out on things. We all have a fear of missing out and more headlines with million dollar selling prices will only lead to increasing value with the potential of a dangerous NFT bubble.

Although NFTs may sound ludicrous in a sense, as I simply can just Google the image or YouTube search a sports highlight, NFTs have the potential to become an effective means of diversifying one’s art portfolio. People might want to buy the original digital version of the Mona Lisa if they can show it off to friends and family on social media, places our social lives are increasingly dependent on.

How the “Technoking of Tesla” is embracing meme culture

Business

Elizabeth McLaughlin, Staff

Tesla officially changed Elon Musk’s title of CEO to “Technoking of Tesla” in an 8-K filing with the Securities and Exchange Commission. Tesla’s CFO, Zach Kirkhorn, is now effectively “Master of Coin” according to the filing as well.

It’s 2050. An elementary school teacher is asking their students what they want to be when they grow up. Some kids want to be rockstars, others are medical school bound and one child replies, “I want to be Technoking.” Thanks to Elon Musk, that kid’s dreams just might come true some day.

On Monday, Mar. 15, the Tesla Inc. co-founder and CEO took on a new title: “Technoking of Tesla.” In a report filed with the Securities and Exchange Commission, Musk provided little explanation of the name switch; he also formally changed the title of Tesla’s chief financial officer, Zack Kirkhorn, to “Master of Coin.” Kirkhorn’s new title is a reference to a Game of Thrones character.

This apparently inconsequential change to Tesla Inc. has already prompted others to reevaluate their C-suite names. Siqi Chen declared himself the technoking of Runway Financial Inc., a financial startup that provides support and advice to struggling businesses. Runway Financial’s website is ripe with emojis, denoting a marked shift from the traditional stuffy environment of, for example, Charles Schwab. Runway Financial promises to deliver “something that fundamentally rethinks the role of financial data;” their CEO’s — or, rather, technoking’s — decision to change C-suite titles indicates that they are, on some level, fundamentally rethinking the traditional structure and formality of business hierarchy. Mr. Chen told The Wall Street Journal that “all titles are jokes, and it’s tribute to our Technoking Musk for making this clear to the SEC.”

There is no question that Musk is a trendsetter. But his decision to change the traditional C-suite titles to names that embrace meme culture could be reactionary to the rise in importance of retail investors as of late. Recall what happened with GME in late January 2021: Redditors drove the stock price up, causing Wall Street investors to hemorrhage money and re-evaluate their positions. It is clear that retail investors possess the power to influence markets in unprecedented ways. Given the fact that they are making their trades online, largely based on the advice of fellow netizens, perhaps Musk is simply catering to their culture.

Moreover, Tesla purchased $1.5 billion in Bitcoin this year. They are not only embracing the convergence of Internet and finance through trivial name changes, they are also literally investing in this new future of finance. It is clear that Musk is paying attention to the emerging influence of Internet culture on finance; perhaps Tesla will implement some more radical changes than technoking in the near future.

mclaughline7@lasalle.edu

Powell discusses FOMC meeting, forward-guidance and economic recovery

Business

Michael D’Angelo, Staff

Pictured above is Federal Reserve Chairman Jerome Powell. Powell led this week’s FOMC meeting, forward-signaling the Fed’s monetary policy strategy and lending clarification to eager market makers.

Since the Federal Reserve’s inception in 1913, the central bank has made a profound impact on the nation’s commercial banking sector, monetary policy and the world. The Federal Reserve, or the Fed, operates as our nation’s commercial banking regulator, monetary policy interventionist and financial stabilizer. The Fed is made up of 12 member banks which assist an assigned geographic area around the country and help with banking services and compiling data in the area. The Fed’s main goals are price stability, maximum employment and maintaining moderate long-term interest rates.

The Fed meets eight times a year with members from other area banks known as the Federal Open Market Committee (FOMC). The FOMC consists of 12 members, which come from the Board of Governors of the Fed and Reserve Bank presidents. The FOMC is responsible for managing the country’s money supply.

The current chairman of the Fed is Jerome Powell. Powell has served in this role since 2018. An alumnus of Princeton and Georgetown, Powell worked shortly in investment banking in his early career and later went on to start working in public service under Former President George H. W. Bush. Since his time at the Fed, Powell has neither been described as either a dove, which is a policymaker interested in low unemployment and low interest rates, nor a hawk, which is a policymaker more concerned with stifling inflation. Instead, Powell has been described as a major mediator: one to find a consensus in monetary policy and the economy. He has been known to listen to many different members of Congress’ views on the economy.

The FOMC met live today at 2:30 p.m. to discuss the economy’s recovery. With three vaccines in full swing and a new stimulus package passed, many of the challenges induced by the coronavirus pandemic are seeming smaller, and recovery has been top-of-mind among regulators. As a result, speculators are expected to grow more eager to reenter the market after a tumultuous year.

Many investors are concerned with the recent rise in treasury yields and inflation. Powell has discussed inflation a few weeks ago, and he does not believe inflation to be a major concern. As expected, he reiterated this point during today’s FOMC meeting. The Fed’s Summary of Economic Projections in December estimated GDP to be 4.2 percent, unemployment to be at 5 percent, and core inflation to be at 1.8 percent for 2021. Some believe these estimates rely on optimistic outcomes regarding vaccine rollouts and business reopenings.

Market conditions indicated investors were not expecting a change in interest rates announced at the meeting, and there was none. Powell made it clear that the Fed would employ ample forward signaling before implementing any drastic, market-moving changes such as a tapering of treasury yields. In a Q&A with reporters, Powell made it clear that there needs to be significant progress made in economic recovery to consider the action. Currently, the federal funds target rate (the rate commercial banks lend to each other) is set from 0 to 0.25 percent. This was set low by the Fed to stimulate credit markets and encourage lending to businesses afflicted by the economic shutdown that occurred last March in response to spiking COVID-19 transmission rates. As we recover from the pandemic, the economy’s fate will be placed not only in the hands of the FOMC and the Fed but in the average American’s consumer confidence and their ability to spend money. A recovery in consumer confidence followed by an economic recovery will likely prompt the Fed to change course, when that will happen remains an uncertainty.

dangelom2@lasalle.edu

Fiscal policy moves: long-awaited COVID-19 relief bill faces approval

Business

Elizabeth McLaughlin, Staff

President Joe Biden delivered a speech at the White House after the Senate’s passage of the American Rescue Plan on Saturday, March 6.

On Wednesday, March 10, the House plans to finalize the Senate-approved COVID-relief bill, dubbed the American Rescue Plan, after many months of debate. Among other provisions, the bill includes $1,400 checks; in December, President Trump permitted $600 checks and in March, the amount was $1,200. That means Congress has allocated a total of $2,400 in stimulus to the average American throughout the pandemic. Additionally, the relief bill offers $300-a-week federal jobless benefits. On March 5, Senate Democrats spent more than nine hours debating the amount of jobless benefits the government should offer in the bill.

Senator Joe Manchin (D-WV) stated that “we have reached a compromise that enables the economy to rebound quickly while also protecting those receiving unemployment benefits from being hit with [an] unexpected tax bill next year.” The deal allows the first $10,200 of the jobless benefits to be non-taxable for those with incomes of up to $150,000. Tax rules on excess business loss limitations were extended for one year, through 2026. Senator Manchin stated, “those making less than $150,000 and receiving unemployment will be eligible for a $10,200 tax break.”

Under the bill, the Pandemic Unemployment Assistance program (PUA) and the Pandemic Emergency Unemployment Compensation program (PEUC) are extended until Sept. 6. PUA is open to workers who don’t qualify for typical unemployment benefits, such as gig workers, freelancers and independent contractors. The PEUC, on the other hand, provides additional weeks of unemployment insurance once state benefits have been exhausted.

The unemployment benefits were especially crucial because, if Congress does not pass this bill, 11.4 million workers will lose their benefits between March 14 and April 11. Given the fact that more than 80 million people have filed for unemployment benefits since the pandemic began, any sort of assistance that the government can provide is critical to the improvement of the economy.

The relief bill also provides funding for vaccine distribution and testing. Moreover, the bill provides money for K-12 schools and higher education institutions. Democrats have argued that the bill will help alleviate child poverty “and help households afford food and rent while the economy recovers from the pandemic,” according to reporting from CNBC.). Republicans have criticized Democrats for focusing on policies seemingly unrelated to the pandemic.

The bill is poised to make its final passage through the House on Wednesday, March 10; if it does, President Biden can sign it by the weekend. There is a deadline on Sunday, March 15, to renew unemployment aid, so President Biden must sign the bill before then. House Democratic Caucus Chair Hakeem Jeffries (D-NY) said he is “110 percent confident that the votes exist to pass.” There is no telling when stimulus checks will be distributed to individual bank accounts, but the IRS has had a relatively quick turnaround with the two previous stimulus checks. Unfortunately, for many Americans, the aid cannot come soon enough.

mclaughline7@lasalle.edu

The Oracle of Omaha speaks — Financial Commentary

Business

Michael D’Angelo, Staff

Berkshire Hathaway’s CEO, Warren Buffett (right), and Vice Chairman, Charles Munger (left). Buffet is famously referred to as the “Oracle of Omaha.” His value investing strategies have created impressive returns for his company, which he views as a “collection of businesses.”

Warren Buffett is a big name in the financial sector. He is known for his down to earth approach when it comes to investing and his frugal personality despite being worth billions.

Buffett is the definition of the old-school Midwesterner who places his hope and confidence in his fellow Americans. He disdains Wall Street, instead choosing to operate his infamous holding company, Berkshire Hathaway, from Omaha, Nebraska. He is so frugal he chooses to purchase a McDonald’s breakfast sandwich with exact change every day before he goes into the office but chooses the cheaper option if the markets performed poorly the day prior. In addition, he still lives in the same house that he purchased in the early 1950s.

Buffett accumulated his wealth by practicing a value investment strategy he learned from Benjamin Graham. This strategy relies on analyzing a company’s book value to determine if it is worth less than the market price. If this occurs, the stock is considered to be an undervalued and a cheap option. Buffett emphasizes buying cheap companies with value and knowing how the company operates. Buffett and Berkshire Hathaway own shares of major companies like Coca-Cola, Apple, General Motors and Verizon.

In the past week, both Buffett and his company have been popping up over news headlines in many financial publications. This is due to the release of Buffett’s annual letter to shareholders and Berkshire’s 2020 annual report. I had the opportunity to read through Buffett’s letter and despite some criticism regarding the letter to be socially tone-deaf, I believe he is spot on and paves a strong future for Berkshire Hathaway.

In the letter, Buffett begins by detailing Berkshire’s earnings of $42.5 billion, then he jumps to emphasizing Berkshire’s retained earnings which he believes are building “value and lots of value.” Both Buffett and Charlie Munger, Buffett’s Vice Chairman at Berkshire Hathaway, view Berkshire as a collection of businesses in which the firm has invested in the “long-term prosperity” of those businesses’ success. He writes in the letter that Berkshire’s main goal is to own parts of, or all of, a diverse group of businesses with good economic characteristics and good management.

As the letter moves on, Buffett sheds light on a mistake he made in purchasing aerospace company; Precision Castparts. He paid the wrong price for the company and misjudged the average amount of future earnings. Also, Buffett takes a shot at bonds and says that fixed income investors face a bleak future. To increase Berkshire’s profitability, Buffett repurchased back 80,998 A class shares and spent $24.7 billion in the process.

Despite not addressing the pandemic, social justice protests, and other events of the past year, Buffett confidently concludes, “never bet against America.” Also, he ridicules market gurus and says they can find equities to fit their tastes instead of buying Berkshire. He goes on to describe investing as a positive-sum game where even a monkey can randomly toss darts at a board of S&P 500 companies and profit. This is certainly a response to bull market and retail trader enthusiasm since March. Buffet the letter iterating plans to meet with his best friend, Munger, in Los Angeles and to host the annual meeting on May 1.

I enjoyed reading the letter and I agree with the legendary investor, we should have faith in America. We need to look forward to our country’s prosperity, despite so many obstacles in our way. After all, why bet against America? A country which holds a report card of economic success and entrepreneurial prosperity achieved by generations.

dangelom2@lasalle.edu