Thursday, June 11th, 2020
Welcome to the fifth edition of Nuggies, an email newsletter that aggregates articles and commentary on business, economics, startups, and more, in bite-sized nuggets sent right to your email twice a week. Created by and for college students.
Our quote of the week comes from economist John Maynard Keynes, “markets can stay stay irrational longer than you can stay solvent.” in other news, be careful with your yolo Hertz trades.
This Week’s Articles:
The U.S. Fed Has Stamped All Over Volatility, Bloomberg Opinion
The S&P 500 stock index has returned to pre-COVID levels and is now positive on the year. Who would’ve thought? Probably Jerome Powell and the Fed. This article talks about how the Fed acted quickly to calm markets and, specifically, incentivized people to invest in the stock market again. By providing investors with a sense of security, the Fed successfully incentivized investment in stocks and other riskier assets which has held off a large scale financial crisis, so far.
Read it here
The City That Remade Its Police Department, Bloomberg
The movement to defund police departments has shot to the forefront of the national dialogue recently, and this Bloomberg article is a great introduction to the issue. It covers the story of Camden, New Jersey, which did dissolved their police department. In its place, they signed an agreement to share services with the county and implemented strict rules on force. Incidents of excessive force and homicides are way down, although there was an increase in low-level arrests. While this new system is not free of drawbacks, the early results are promising, and show that community based policing could work.
Read it here
Nikola Stock Doubled Monday. The Surge Continued Today, Barrons
Nikola (NKLA) is the electric vehicle startup that is giving everyone else a run for their money. Early this week they were worth more than Ford despite having sold no cars as of yet. While their stock has since declined, at the close on Wednesday (6/10), they still were worth $23B, compared to Ford’s $27B. This does not seem out of place for a market that continues to defy expectations and common knowledge. (Just look at the recent rallies in shares of bankrupt companies). This article lays out why people are so optimistic about Nikola stock and goes over some reasons for caution as well.
Read it here
America’s Great(er) Recession Will Last for Years, Bloomberg Opinion
We have talked about the stock market and its quick return a lot in this issue, but it is important to remember that the stock market is not the economy. Even with good unemployment numbers in May, there are still many underlying questions about the real strength of the economy. This opinion piece argues that COVID will fundamentally alter core aspects of our economy and society, like permanent unemployment levels and increased pessimism, which may take years and years to return to normal, if it ever does. Policy mistakes and other externalities caused by COVID could mean that the actual economic pain could last a lot longer than the stock market would indicate.
Read it here
This Week’s Tweets:
This Week’s Wildcard (an extra, interesting nugget):
Check out Starthouse: A platform with hundreds of pitch decks that some of your favorite companies used to pitch to venture capitalists for funding. Check out Uber, AirBnB, WeWork, Buzzfeed, and more.
This Week’s Question:
What might compel someone to buy a stock of a bankrupt company? Is doing so a good idea?
Context: Hertz Rent-A-Car declared bankruptcy recently, but their stock surged to highs after declaring bankruptcy, leaving many investors puzzled.
What are we listening to this week?:
How’s this for a classic? Grab your guitar, your walking boots, and your old dog and jump on a freight train heading West because this week we’re listening to Bob Dylan’s classic second album.
Thank you for reading! Nuggies is created by Thomas Pero and Spencer Koehl, two undergraduate students at the University of Notre Dame.
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