Dollar on back foot as market optimism lifts riskier currencies - Financial Post

Dollar on back foot as market optimism lifts riskier currencies - Financial Post
Billions in new Tesla stock options make Elon Musk even richer - WRAL Tech Wire
Why raising the minimum wage to $15 is good for the US - Business Insider
Stocks End Higher as Yellen Tells Congress to 'Act Big' on Stimulus - TheStreet

Posted: 15 Feb 2021 01:52 AM PST

LONDON — The safe haven dollar started the week pinned near two-week lows on Monday, as optimism about COVID-19 vaccine rollouts and a planned $1.9 trillion U.S. stimulus package drove up riskier currencies and stock markets across Europe and Asia.

Among the gainers versus the weaker greenback, the British pound broke $1.39 for the first time in nearly three years while commodity currencies strengthened, including the South African rand which hit a fresh one-year high.

The improved risk appetite was also reflected in equities, with European indexes rising after Japanese stocks surged to a more than 30-year high earlier in the day.

Many financial markets in Asia remained closed on Monday for Lunar New Year, while U.S. stock markets will be shut for Presidents Day.

The dollar index slipped 0.1%, close to last week's low of 90.249 – a level unseen since Jan. 27.

Analysts at MUFG said the dollar could weaken further if market optimism held.

"We believe there is plenty yet to go in the so-called 'reflation trade' with market participants under-estimating the willingness of global policymakers to let the economy run hot and fuel stronger than expected global growth through the remainder of the year," the analysts said in a note.

Bitcoin remained volatile, retreating to as low as $45,914.75 a day after reaching a record $49,714.66.

The world's most popular cryptocurrency had rallied 25% last week, boosted by endorsements from Tesla and BNY Mellon .

The Chinese yuan reached its strongest level since June 2018 at 6.4010 per dollar in the offshore market.

The euro edged 0.2% higher to $1.21410, extending last week's 0.6% advance.

The dollar rose a third of a percent to 105.28 yen , recovering some of the previous week's losses.

(Reporting by Iain Withers, Additional reporting by Kevin Buckland in Tokyo; Editing by Kirsten Donovan)

Billions in new Tesla stock options make Elon Musk even richer - WRAL Tech Wire

Posted: 11 Feb 2021 06:30 AM PST

For a CEO who receives no salary, Elon Musk's 2020 payday reached sky-high levels.

He received four grants of 8.4 million Tesla stock options Wednesday. After paying the exercise price, those options were each worth nearly $6.2 billion. The combined $24.8 billion value of those options alone is more than Musk was worth a year ago when Forbes calculated its billionaire's list, when he was ranked as the world's 31st richest person.

2021 and 2022 could be nearly as lucrative for him.

The company's annual financial filing this week disclosed that Musk will probably receive three additional options grants this year, each as large and as lucrative as those he received in 2020.

At current values, those three options tranches would be worth $18.6 billion.

Analysts are now forecasting that Tesla's 2022 financial results will likewise reach heights that would bring Musk three additional blocks of options. Tesla could hit one of those profit targets in 2021, which would mean Musk could match the four tranches of options he received last year.

Few investors are complaining about Musk's pay.

Shock! Elon Musk acknowledges quality issues in talk with Tesla's harshest critic

The stock's 743% rise in 2020 made it the stock market's biggest winner, as well as one of the most valuable companies in the world. That has quieted most of the criticism he might have faced.

"The cachet of Tesla is Musk," said Daniel Ives, tech analyst for Wedbush Securities. "The reason investors have not batted an eyelash is that due to Musk's strategic direction, Tesla is on top of the EV [electric vehicles] mountain going to the golden age of EVs. And he's put Tesla on the cusp of being a trillion-dollar market cap company."

The rise in Tesla's stock price, and his options to buy new shares, has made Musk the richest person on the planet, according to Bloomberg, surpassing Amazon founder Jeff Bezos.

Did Musk really need any more options?

Unlike Musk, Bezos doesn't receive stock options from Amazon, and he collected relatively modest salary of $81,840 in 2019, plus security services valued at $1.6 million a year. But rather than benefit from stock options or grants as do most CEOs, he benefits primarily from the rise of his Amazon shares.

Musk similarly owns 170 million Tesla shares outright, worth about $137.2 billion, in addition to those existing shares he has options to buy new ones. In fact, the nearly $123 billion gain in 2020 in the value of shares Musk already owns dwarfs the value of the additional options he received.

Pssst! Did you know Tesla's profits don't come from car sales? Here's the source

Musk, who bought a controlling stake in Tesla in 2004 when it was an upstart private company years from building its first car, takes no salary. Before his current lucrative compensation package he had an earlier version that paid him with options to buy 22.9 million split-adjusted Tesla shares for a price of $6.24 each. Those options are worth $18.3 billion today.

The options he received last year came from a second compensation package that was overwhelmingly approved by Tesla shareholders in 2018. It allows him to receive options to buy as many as 101 million split-adjusted shares of stock for $70 each. Those options can come in 12 separate, equally sized tranches.

If Tesla's share price keeps climbing, so will the value of the options. In late May, when Tesla confirmed Musk received the first block of options for 2020, they were valued at "only" $770 million after the exercise price. Today they're worth $6.2 billion.

Musk has not exercised any of his options. Executives typically exercise them when they are due to expire, or to free up cash. Musk has never sold Tesla shares.

Cost to Tesla of the options

Those options come at a cost to Tesla, although it's a non-cash expense.

Stock-based compensation accounted for a $1.7 billion hit to Tesla's bottom line last year. The company doesn't break out how much of that was Musk's or how much was stock for its other 70,750 employees.

But Tesla did say that Musk got so many options, so much sooner than expected, that it caused the spike in stock-based compensation expense. In 2019, stock-based compensation was about $900 million.

Musk received no options in 2019, but some of that $900 million was an expense Tesla booked because it believed that Musk would receive options in early 2020.

While the stock-based compensation doesn't drain cash from Tesla's coffers, it does change the company's profit picture.

The company reported positive net income for the first time in 2020, earning $721 million. Critics point out that its profit was far less than the $1.6 billion Tesla received from the sale of regulatory credits to other automakers. They claim the company actually lost money on car sales, and it can't depend on the revenue from the sale of those credits in the long term.

Without the $1.7 billion in stock based compensation, Tesla's net income would exceed the gains from the sale of those regulatory credits. And Telsa critics would not have been able to claim it lost money selling cars.

Why raising the minimum wage to $15 is good for the US - Business Insider

Posted: 13 Feb 2021 05:57 AM PST

Annie Fadely is the senior policy and programs associate at Civic Ventures and a producer of the "Pitchfork Economics" podcast.
She says the Congressional Budget Office's report that a $15 minimum wage will kill jobs should be more nuanced.
Fadely cites research indicating that any decrease in employment would be negligible, and well worth it to increase wages.
Visit the Business section of Insider for more stories.

This week the Congressional Budget Office released an analysis of the Raise the Wage Act, which would raise the federal minimum wage to $15 an hour by 2025. The report found raising the wage would have many positive effects, but the email notifications that landed in my inbox focused on the same finding they always do: A minimum wage hike to $15 an hour would result in 1.4 million lost jobs. Sounds scary — especially to minimum-wage workers who lost their jobs in the pandemic.

But the actual facts are not so scary. The CBO report shows a $15 minimum wage would have massive benefits, and there's good reason to be skeptical about the report's scariest, most headline-grabbing findings.

According to the report, increasing the federal minimum wage to $15 by 2025 will do a lot of good:

Lift 900,000 people out of poverty
Raise income for 17 million people (one in 10 workers), to the tune of $509 billion over 10 years
Potentially increase wages for another 10 million people who currently make close to $15

And they predict, as they have in the past about any minimum wage increase, that it will also have some side effects:

Reduce employment by 1.4 million jobs
Increase the federal deficit by $54 billion over 10 years
Increase prices for goods and services

These estimates are based on CBO's most recent economic forecast, which has faced its own criticism for being, at different times, "overly optimistic," "needlessly pessimistic," and "disturbingly complacent." And unlike academic minimum wage studies, we can't replicate CBO's findings. As Slate's senior business and economics correspondent Jordan Weissman tweeted, "From a wonk perspective, one frustrating thing about this CBO report is that it doesn't actually include all of the information you'd need to figure out exactly how they reached their conclusions."

Bloomberg economy reporter Katia Dmitreva agrees the "the stuff under the hood" is strange. She points to a CBO report from last year that also covered the effects of a $15 minimum wage, but found a smaller employment impact. That's because, she says, "CBO changed methods" to highlight the average instead of the median, which "skews the number higher, because they're likely including studies that show a much bigger job loss impact."

Okay, no problem — we'll work with what we've got.

Job loss and the minimum wage

Let's start with job loss, which CBO said will be 1.4 million jobs. Who knows what methods they used to get there, but it doesn't really matter. There is plenty of existing rigorous research showing the employment impact of raising the minimum wage is negligible, if anything.

A number of recent studies back this up. A 2019 survey of 138 state-level minimum wage changes over four decades found wages and job numbers stayed mostly level. Another sweeping 2018 study from UC Berkeley found that raising the minimum wage is good for everyone, and did not detect significant negative employment effects.

Also, a recent international review by UMass economist Arin Dube found that for every 1% increase in wages, there is an associated 0.04% decrease in employment. That's one-tenth the size of CBO's estimate, or as Dube puts it, "quantitatively close to zero." Even David Nuemark, an economist whose research is reliably favored by conservative politicians, recently estimated job loss one-quarter the size of CBO's.

So with economists like Dube and Neumark finding relative agreement, how did CBO end up with an outlier almost four times as high as conservative estimates?

Economic Policy Institute (EPI) Senior Economist Heidi Shierholz, who was Chief Economist at the Department of Labor under President Obama, called CBO's employment effects of the minimum wage "really out there," saying "CBO's employment impacts of the minimum wage from today's report are about 25% higher than they would have been if they had simply used the methods they themselves used two years ago. What is going ON."

A cadre of EPI economists and analysts also wrote that they believe "the CBO's assumptions on the scale of job-loss are just wrong and inappropriately inflated relative to what cutting-edge economics literature would indicate."

Minimum wage and federal debt

Regarding CBO's suggestion that a $15 minimum wage would increase the federal deficit by $54 billion over the next 10 years, recent research directly disputes this claim. A team at UC Berkeley recently found a $15 minimum wage would have a positive effect on the federal budget by $65.4 billion per year, mostly based on safety net program savings and increased payroll tax revenues.

Finally, CBO says generally that $15 will raise prices, but doesn't say by how much. Last month, a study from Princeton looked at minimum wage price pass-through at McDonald's restaurants that saw nearly 300 minimum wage increases over five years, and found a 10% minimum wage increase led to a 1.4% increase in the price of a Big Mac — an unnoticeable increase. And a 2019 study found that, two years into implementation, grocery store prices were not affected by Seattle's minimum wage policy.

The CBO doesn't even fully take into account all the society-wide benefits of a higher minimum wage, which are extensive — the Washington Post has a good summary. And other studies on the benefits of $15 have estimated it would actually lift pay for closer to 40 million workers, which is 26.6% of the workforce.

Believing the CBO

The question this discussion naturally brings us to now is this: Should we believe the CBO? I think, generally and for the good of the order, that we should — but we shouldn't forget that beneath that impressive government entity title are economists and researchers working with imperfect data and imperfect models. They do the public and Congress a great service, but they're only human. And they've been wrong before.

Even if CBO's estimates are spot-on, a $15 minimum wage is still well worth it. As Reverend Dr. William J. Barber II, co-chair of the Poor People's Campaign, wrote: "The CBO report makes clear that raising the minimum wage to $15/hr is key to lifting people out of poverty and the COVID recession. When combined with healthcare, infrastructure investment, and affordable housing, it can reconstruct an economy that works for all of us. The question isn't how much it will cost, but what it costs us not to."

The minimum wage is the lowest it's been in decades right now, adjusted for inflation — and two-thirds of Americans support increasing it to $15. The good news is the Progressive Caucus announced on Monday that they had secured the inclusion of a $15 minimum wage in the House's pandemic reconciliation package, so even after taking the CBO report under advisement, the House came to the conclusion — supported by the majority of recent studies — that raising the minimum wage is a net good for everyone.

Stocks End Higher as Yellen Tells Congress to 'Act Big' on Stimulus - TheStreet

Posted: 19 Jan 2021 12:00 AM PST

Stocks finished higher Tuesday as Janet Yellen, President-elect Joe Biden's nominee for treasury secretary, told Congress that lawmakers must do more to lift the U.S. economy out of the recession brought on by the coronavirus pandemic.

Bank earnings also began to roll in, with Goldman Sachs (GS) - Get Report and Bank of America (BAC) - Get Report finishing down 2.3% and 0.7% respectively after they issued their fourth-quarter reports.

The Dow Jones Industrial Average finished up 116 points, or 0.38%, to 30,930. At its high Tuesday, the Dow was up 272 points, or 0.9%. The Dow came off a losing streak of three sessions, its longest since October.

The S&P 500 gained 0.81% on Tuesday and the Nasdaq rose 1.53%.

Yellen, who served as chair of the Federal Reserve from 2014 to 2018, told the Senate Finance Committee that Congress must "act big" on the next coronavirus relief package with borrowing costs so low.

"Economists don't always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now -- and long-term scarring of the economy later," Yellen said Tuesday, according to her prepared remarks.

"Over the next few months, we are going to need more aid to distribute the vaccine; to reopen schools; to help states keep firefighters and teachers on the job."

Yellen said she'd focus on America's workers as treasury secretary.

"I will be focused on day one on providing support to America's workers and to small businesses, putting into effect as quickly and efficiently as I can, the relief in the bill that was recently passed, and then over time working for a second package that I think we need to get through these dark times," Yellen said.

Biden last week unveiled a $1.9 trillion Covid-19 relief package that includes $1,400 direct stimulus payments, extended and enhanced jobless benefits, a moratorium on evictions and foreclosures through September, and funds for vaccine deployment. The coronavirus has killed more than 400,000 Americans.

Biden will be sworn in as the 46th president of the U.S. on Wednesday.

Goldman Sachs earned $12.08 a share in the fourth quarter, smashing Wall Street expectations of $7.39 on a surge in investment banking revenue and lower provisions for bad loans.

Bank of America reported fourth-quarter earnings of 59 cents a share vs. 74 cents a share a year earlier.

The bank said it would release around $828 million in reserves, allowing it to pay a dividend of 18 cents a share for the fourth quarter, and unveiled a $2.9 billion share buyback plan.

Revenue from the bank's fixed income and commodities unit fell 5% in the quarter to $1.7 billion,

Goldman Sachs is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells the stock? Learn more now.

General Motors (GM) - Get Report shares set a record after Microsoft (MSFT) - Get Report said it was a part of a group of companies that will invest more than $2 billion into the automaker's self-driving car startup Cruise. The stock finished up 9.8% at $54.84.

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