3 - 9 May Weekly newsletter
A week from hell for Labour in the local council elections, meanwhile Warren Buffet has his say on the gamification of investing
Stock Market review
US
The US stock market rebounded from a poor couple of weeks with 2/3 major indices breaking a two-week losing streak by finishing up higher. The Dow and S&P 500 finished up higher as a weak job reports led investors to believe Quantitative easing will stay in place for longer. However, the Nasdaq however finished down for the week despite big tech stocks rebounding on Friday after last week’s sell-off continued into the early part of this week.
Weekly Returns:
S&P 500: Up 1.2%
Dow: Up 2.7%
Nasdaq: Down 0.3%
Want to know what each index is? You can find out here
Europe
The European stock market closed higher for the week as strong earnings report from blue-chip companies and strong economic data from major European countries in Germany and France.
Weekly Returns:
FTSE 100: Down 1.15%
DAX: Down 1.17%
Stoxx 600: Down 0.78%
Finance
Legendary investor Warren Buffet has called out Trading app Robinhood, claiming that Robinhood is catering to the gambling instincts of investors
What has happened?
In Berkshire Hathaway’’s annual meeting, Buffett and his partner Charlie Munger described Robinhood as being a "casino group" that is "deeply wrong." SEC chair Gary Gensler took Buffett's side of the debate, highlighting that he is concerned that platforms like Robinhood turn stocks into a game, prompting by treating stocks as casino chips.
Robinhood has hit back with a blog post accusing Buffett and Munger of being "the old guard" who have been "driving a deep wedge between the haves and have-nots."
Has investing becoming Gamified?
While Robinhood has democratized investing, opening the door for millions of new investors to get involved, Buffet does have a point. Robinhood makes its money through payment for order flow - a controversial practice of routing trades to market makers in exchange for cash. In order for payment for order flow, there needs to be a consistent amount of trading (buying and selling) which some say Robinhood push by ‘gamifying’ investing.
The figures show Robinhood reportedly earned $331 million from payment for order flow in the most recent quarter. Of that, nearly two-thirds are said to have come from options trading - highlighting this worry of investing becoming more like Gambling as options trading is a highly difficult skill to master where 90% of traders lose money on.
UBS and Nomura (have both reported steep losses linked to the collapse of client Archegos Capital, as the fallout from the New York family office's implosion becomes clearer. UBS last week said it took a $774m (£560m) hit meanwhile Nomura, meanwhile, reported its heaviest quarterly loss since the financial crisis as it booked a $2.3bn loss on its dealings with Archegos.
Tesla posted a record net income of $438 million as its revenue surged by 74%, mainly due to its holdings in Bitcoin.
Lyft has sold itself-driving arm to Toyota in a deal that values it at $550 million. Lyft will receive $200 million cash upfront, with the remaining $350 million paid over five years, according to the companies.
The US stock market has seen better returns in Joe Biden's first 100 days than under any president in the past 75 years.
Buffett has confirmed Greg Abel as his successor at the helm of Berkshire Hathaway when the time eventually comes for him to take a step back. The long-anticipated decision was alluded to in the company’s annual meeting
US economy added only 266,000 Jobs in April, far less than the 1 million payrolls economists were expecting which has raised fresh concerns over a declining pace of economic recovery.
Politics
1. Labour endured a horrible week electorally with a collapse in the local elections and losing the Hartlepool MP seat to the conservatives
What happened?
This week has been a poor week for Labour electorally as Labour lost the by-election for the Hartlepool seat - held by Labour since the constituency was created in 1974 - to the conservative party. This happened alongside a collapse in local elections which saw Labour lose overall control of the county Durham council for the first time since 1925. Labour has also so far lost 7 councils to the conservatives.
What’s been the response?
In response to the Labour’s poor local council election and the loss of what used to be a safe seat in Hartlepool, Labour MP Keir Starmer has started a cabinet reshuffle -sacking his deputy Angela Rayner as Labour's chair and campaigns co-ordinator with many more expected to follow.
What’s the bigger picture?
The bigger picture here is that Labour has started to lose its white working-class base in the heartlands. While the Hartlepool loss can be attributed to Brexit in that Hartlepool was very pro-leave, the fact that Labour - a party which was created for the working class - has lost so many councils in what has historically been safe seats show that the white working-class no longer believe the party represents them.
The Labour party has started to be seen as a middle class, London centric, identity politics-focused party which many working-class up north can not relate with. The fact that most of Starmer’s cabinet are from London constituencies highlight this. Starmer needs to find a way to reconnect with the white working-class up north and change the perception of the party. This can be done first by changing the nature of his cabinet, putting forward actual policies which provide solutions for the white working class, and choosing a side on Brexit.
The Electoral Commission launches inquiry into Boris Johnson flat refurb as the Watchdog says there are ‘reasonable grounds to suspect that an offence or offences may have occurred’
Northern Ireland First Minister Foster to step down after party revolt over discontent at her leadership over Brexit and social issues.
Donald Trump's ban from Facebook and Instagram has been upheld by Facebook's Oversight Board. But it criticised the indefinite nature of the ban as beyond the scope of Facebook's normal penalties and has ordered Facebook to review the decision and "justify a proportionate response" that is applied to everyone, including ordinary users.
Britain and France have both sent naval vessels to the Channel island of Jersey amid an escalating row over fishing rights. The standoff came as France threatened to cut electricity to the self-governing island of Jersey - which is off the coast of France and receives 95% of its electricity from there - as a "retaliatory measure" for restricting fishing boat access.
In a week of mayoral elections, Sadiq Khan has been re-elected as Mayor of London, winning 55.2% of the popular vote meanwhile Andy Burnham has won the greater Manchester election by a landslide, winning 67% of the popular vote.
Prime Minister Boris Johnson has invited the leaders of the devolved nations to a summit on how "Team UK" can recover from the pandemic.
Technology
IBM says it has made a significant breakthrough in computer processors by creating a 2nm chip in its test lab.
Twitter has suspended an account sharing posts from former US President Donald Trump's new communications platform.
Cryptocurrencies “have no intrinsic value” and people who invest in them should be prepared to lose all their money, Bank of England Governor Andrew Bailey said
New laws must be used to make sure online platforms protect their users from scams, the government has been warned.
Blog recommendation
This week’s blog recommendation is one of my own which I wrote a while ago regarding the compatibility of race into our politics. We currently live in a class-based political spectrum however labour’s focus on identity politics has seen it lose its working-class base - underlying the inability for Race to fit into our political spectrum.
Stat of the week
61 Billion - The amount that has been claimed via the furlough scheme so far, which has supported 1.3 million employers and 11.5 million furloughed jobs. It will be interesting to see how this significant government spending will be paid off in the future.
Quote of the week
“Wealth consists not in having great possession, but in having few wants” - Seneca
In an unprecedented year that has tested everyone, one thing we have all learnt is the importance of family and cherishing our loved ones. While materialistic things are nice and good to consume, we must remember that it is not the essence of our happiness! Having a fulfilled life is not based on material possessions but contentment in our hearts and family.