Hey Influence Traders,
It’s the weekend!
We’ve got flying billionaires, digital news, global taxes, and executive orders.
But first …
- Ashleigh Barty won the Women’s Wimbleton singles championship
- Novak Djokovic won the men’s championship giving him his 20th Grand Slam title and a tie with Roger Federer and Rafael Nadal
- Argentina beat Brazil to win the Copa America tournament and gave Lionel Messi his first championship with the national team
- Richard Branson made it to space … kinda.
- An overheated economy gets more stimulus
- Tax havens take a hit
- Anti-competitive practices are on the run
Starman Waiting in the Sky
Billionaire Richard Branson became the first billionaire to go to space when he launched on one of his Virgin Galactic ships this morning.
Weather at Virgin Galactic’s Spaceport America in New Mexico caused a slight delay for SpaceShipTwo Unity, but it eventually carried Branson and a few others to an altitude of 50 miles, which the Federal Aviation Administration recognizes as the edge of space.
The Billionaire Space Race has begun.
Tom Farley, the ex-President of the New York Stock Exchange, announced that he will bring the crypto exchange Bullish public through a reverse merger with his SPAC, Far Peak Acquisition Corp. (Ticker: FPAC).
This is an interesting merger of traditional regulated finance, venture, and crypto.
Bullish, which plans to launch a cryptocurrency exchange later this year, is backed by venture capitalist Peter Thiel.
Farley, who will serve as the CEO of Bullish when the deal closes, stated that “Digital assets are here to stay. The smartest engineering talent is going into digital assets; digital assets are solving very important problems. Anybody who tells you they know exactly how it’s going to turn out is lying or delusional, but in general, you’re going to see more and more interesting use cases, more and more dollars go into the space.”
This could also mean that crypto regulation could go mainstream with Farley’s experience with financial regulators.
The Power Moves Digi-View
We like the crypto exchanges, and remain long Coinbase (Ticker: COIN).
Many armchair QBs argue that recent moves by China are helping to drive the volatility in Bitcoin (BTC).
Some are even arguing that Chinese bans and the impending launch of the digi-Yuan will lead to BTC’s demise.
#Truthbomb – China has previously banned Google, Facebook, Twitter, Reddit and Netflix.
BTC will be just fine.
The exchanges just might be better.
Anti-Competitive Practices Lose
President Biden signed a broad executive order on Friday promoting competition through 72 initiatives cracking down on anti-competitive practices across multiple industries. Some of the provision aim to:
- Bolster competition
- Make broadband services affordable
- Encourage innovation and competition among tech companies
- Address prescription drug pricing
- Allow hearing aids to be sold over the counter at drug stores
- Ban or limit noncompete agreements for workers
- Make it easier for people to get refunds from airlines
The executive order will direct over a dozen federal agencies to implement the initiatives.
The impact of these policies are not clear. For example, one plan is to promote competition in the health care sector to lower drug prices by making the importation of prescription drugs from Canada easier. But history shows that will have a negative impact on R&D efforts at home.
Biden also wants to restrict mergers between “dominant internet platforms, with particular attention to the acquisition of nascent competitors, serial mergers, the accumulation of data, competition by ‘free’ products, and the effect on user privacy.”
This order comes as several lawsuits have been brought against big tech companies such as Google (Ticker: GOOG) and Facebook (Ticker: FB) alleging violations of antitrust laws.
There are a couple of rules that I can get behind. The order will make it easier for Americans to switch banks by requiring the institutions to allow customers to take their financial transaction data with them. Also, airlines will be required to refund baggage costs when a flight is delayed and clearly disclose cancellation fees.
The administration also wants to make it easier for employees to switch jobs by limiting the use of noncompete agreements, particularly for non-executive level jobs.
Banning non-competes puts more leverage in workers‘ hands as it provides more freedom to move to competitor firms. Today, one in three U.S. businesses require non-competes.
Unions approved of this measure; the Chamber of Commerce did not.
I do not like when employee control is taken from business owners. There are valid reasons for employers to seek non-compete agreements, particularly in tech-driven jobs. Moreover, courts have been highly reluctant to enforce overreaching non-competes, with terms of more than one year (or even six months) viewed as suspect. So this is an unnecessary overreach by the executive office.
The order creates a White House Competition Council, led by Brian Deese, the director of the National Economic Council, which will “coordinate the federal government’s response to the rising power of large corporations in the economy.”
Lina Khan, the F.T.C. chair, and Richard A. Powers, who is serving as the acting assistant attorney general for antitrust, said that their agencies would review the current guidelines “with the goal of updating them to reflect a rigorous” approach toward mergers because “we must ensure that the merger guidelines reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands.”
That’s clear and unambiguous. Again, such hyperbole leaves open the possibility for massive overreach.
Tax Haven Take a Hit
As the G20 group pushes 130 nations to adopt a 15% global minimum tax, Ireland, Estonia and other tax havens’ days in the sun might be coming to an end.
Ireland has an official corporate tax rate of 12.5%, and fears that a 15% minimum rate will ruin a competitive advantage that puts billions of euros into Ireland’s tax coffers and creates hundreds of thousands of jobs.
Ireland was one of only nine countries to forgo signing onto the tax proposal.
In addition to setting a 15% minimum rate, the proposal would force technology and retail multinationals to pay taxes where their goods or services are sold, rather than where the company has its headquarters.
Ireland and other countries are trying to force subsidies for the loss of revenue that they will suffer, which Ireland anticipates to be €2 billion to €3 billion annually.
In securing the 15% minimum rate, Treasury Secretary Janet Yellen declared a victory, but she still has to sell it to the Hill where it faces an uphill battle to have it become law in the U.S.
A global minimum tax is a key element of the Biden administration’s plans to raise taxes on U.S. companies to help finance new spending on infrastructure, education and antipoverty programs, and it is believed the international tax changes could generate nearly $1 trillion of revenue over a decade.
More Stimulus Hitting the Overheated Economy
On July 15th, the US Treasury will start sending out Child Tax Credit payments.
The amount will depend on household income and the number of children in the household.
The IRS will pay $3,600 total per child to parents of children up to five years old. That changes to $3,000 for each child ages six through 17.
Half of the total owed will be paid in six monthly installments and half as a 2021 tax credit.
The IRS will make a one-time payment of $500 for dependents age 18 or full-time college students up through age 24.
If you don’t want the money, the IRS provides families the ability to opt out of receiving the payments (No, this is not The Onion!).
Some Democrats are fighting to make the expanded child tax credit permanent … and, no, they’ve not explained how they’d pay for it because … federal money grows on trees.
The Power Moves Portfolio
We closed the Taiwan Semiconductor Mfg. (Ticker: TSM) July 23 116-strike puts at $2.23 average price and have a couple of weeks to run with the calls. This put sale gives us the calls for less than $1.
Buy to open 2 TSM July 23/July 09 116-strike put calendars, pay $1.36. Buy to open 2 TSM July 23 124-strike calls pay $1.80 – filled $1.35 and $1.75.
We do own some Cleveland Cliffs (Ticker: CLF) puts in case the market melts down.
And BIG news coming soon for the #PowerMoves portfolio.
Cutting Through the Noise for You.