Construction workers replace and improve a busy highway intersection in Miami.
Photo by Joe Raedle/Getty Images
President Joe Biden is set to unveil his $2 trillion infrastructure plan in the steel town of Pittsburgh today. For the market, there will be winners and losers, but it’s mostly winners when this much money is at stake.
The biggest beneficiaries should be electric-vehicle makers and clean-energy providers. Biden’s plan includes additional incentives to buy electric vehicles in the form of tax credits and rebates.
Those will matter. A new all-electric Volkswagen ID.4 starts at about $40,000 but qualifies for a $7,500 tax credit, effectively wiping almost 20% off its purchase price.
Tesla, however, no longer qualifies for the current federal tax credit because it has sold too many vehicles. Wall Street expects Biden’s plan to eliminate that cap. Tesla stock rose 4% Tuesday in anticipation of those changes.
Other stocks rose Tuesday on hopes for the new infrastructure plans. Clean-energy stocks First Solar and Plug Power rose 6% and 10%, respectively. Old economy stocks such as Caterpillar, Eaton, and construction aggregate maker Martin Marietta Materials climbed too. More spending on roads, power lines, and bridges means more profit.
To pay for some of it, Biden plans to increase the corporate tax rate to 28% from 21%.
The overall impact of a tax hike, however, isn’t as bad as it sounds. The hike might wipe out about 5% of the S&P 500’s $1.8 trillion in profits reported in 2020, which would raise the effective tax rate to roughly 23% when money made in foreign countries is taken into account.
—Al Root
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Democratic Senators Propose a ‘Fourth Stimulus’
A day before President Joe Biden is set to reveal the first part of his economic recovery plan in Pittsburgh on Wednesday, a group of 21 Democratic senators sent him a letter Tuesday urging him to include recurring payments and jobless benefits as part of the plan.
- “Families should not be at the mercy of constantly-shifting legislative timelines and ad hoc solutions,” reads the letter, which first surfaced in draft form earlier in March and is led by Finance Committee Chair Ron Wyden (D.,Ore.).
- The letter was initially signed by 10 Democrats, including Cory Booker (D., N.J.), Bernie Sanders (D., Vt.), and Elizabeth Warren (D., Mass.). Since then, it has gained support from 11 additional senators, including Majority Whip Dick Durbin (D., Ill.) and moderates like Debbie Stabenow (D., Mich.).
- The letter does not specify the amount of the payments or which economic conditions would trigger the additional payments.
What’s Next: Concerns are already growing over how to pay for what is expected to be a $3 to $4 trillion price tag for Biden’s forthcoming recovery plan. The senators who signed the letter want to tie the aid to that plan in order to ensure that existing benefits don’t lapse prematurely.
—Anita Hamilton
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Deliveroo in Free-fall London Debut
Shares of food delivery company Deliveroo tumbled 30% in the first hours of their first day of trading in London despite having been priced at the lowest end of the range, underlining investors’ worries about the profitability of gig-economy companies.
- The company, founded in 2013 by London-based American businessman William Shu, had struggled in the first months of the coronavirus pandemic last year before Amazon bought a 15.8% stake in the company for £575 million ($793 million).
- Several institutional investors had declined to take part in the IPO, citing concerns about the company’s governance or the way its self-employed drivers or cyclists are compensated.
- Deliveroo has a major presence in the U.K. and throughout continental Europe, as well as operations in Hong Kong and Taiwan.
- The fall of the stock on the biggest-ever tech IPO on the London Stock Exchange is a blow to the U.K. government’s ambitions to draw more U.S.-style tech listings to the city.
What’s Next: Deliveroo was valued at £7.6 billion at the reduced initial price, then lost £2 billion of market capitalization in the IPO’s first hours. Even at this now-deflated price, Amazon, which is selling almost a third of its shares, sees the value of its investment jump 60% in less than a year.
—Pierre Briançon
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Amazon Union Vote Could Reverberate Across the Tech Sector
Thousands of Amazon workers at a warehouse in Bessemer, Ala., will soon find out if they can form a union, a move that could motivate the rest of Amazon’s 800,000 workers across the U.S. to do the same and lead those at other tech firms to follow suit.
- The National Labor Relations Board started counting mail-in ballots cast by as many as 5,800 eligible workers, most of whom are Black, on Tuesday. Results are not expected for about a week. If workers vote to unionize, they will be represented by the Retail, Wholesale and Department Store Union.
- “This is lighting a fuse, which I believe is going to spark an explosion of union organizing across the country, regardless of the results,” RWDSU president Stuart Appelbaum said.
- An Amazon spokeswoman told Barron’s, “Our employees know the truth—starting wages of $15 or more, health care from day one, and a safe and inclusive workplace. We encouraged all of our employees to vote, and their voices will be heard in the days ahead.”
- Noting that there has not been much unionization to date in the tech sector, Alex Colvin, the dean of Cornell’s School of Industrial and Labor Relations, told ABC News, “It could be a real shift if we started to see organizing at Amazon.”
What’s Next: Amazon on Tuesday lost its bid to keep a video camera on the Alabama ballot boxes to prevent tampering, but could still contest results. Even if the majority of Bessemer’s workers vote to unionize, drawing up a contract could take years of bargaining.
—Janet H. Cho
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Universal Studios Hollywood Is the Latest Theme Park to Announce Its Reopening
With California theme parks set to start reopening on April 1, Universal Studios Hollywood announced its official reopening date later this month, along with a new ride called “The Secret Life of Pets.”
- The Southern California theme park will open its gates on April 16 at an expected reduced capacity of 25% of its 40,000 person maximum. It will require visitors to wear face coverings and prohibit anyone with a temperature above 100.4 degrees from entering. Tickets go on sale April 8.
- The restrictions are part of California’s new health guidelines, issued over the weekend, which also limit park visitors to in-state residents only.
- Theme park closures last spring led to huge losses and layoffs across the industry. Revenue at Universal Studios theme parks, which are owned by Comcast, fell $4 billion in 2020 as a result of park closures.
What’s Next: Several other California theme parks have put dates on their reopenings as well, including Six Flags Magic Mountain on April 1, Legoland on April 15, Disneyland and California Adventure on April 30, and Knott’s Berry Farm in May.
—Janet H. Cho
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ARK’s Space ETF Finally Launches
Cathie Wood’s ARK Space Exploration & Innovation exchange-traded fund finally launched on Tuesday. The ETF dipped about 1% in its first day of trading.
- The ETF is the eighth fund from Wood’s ARK Investment Management. The firm’s flagship ARK Innovation ETF was a standout in 2020, returning 153% and trouncing the S&P 500 index.
- The space ETF’s top holdings include Trimble, which specializes in things like geospatial, laser, and optical technologies; defense and aerospace names like Kratos Defense & Security Solutions and L3Harris Technologies ; and Komatsu, a multinational company from Japan that manufactures construction and mining equipment.
- The fund isn’t limited to companies directly involved in space. It also includes names like Alphabet, Amazon.com, and Netflix that could benefit from space exploration. “There are three billion people who do not have access to internet. Satellite connectivity opens up the market,” Ren Leggi, ARK’s client portfolio manager tells Barron’s.
What’s Next: The fund doesn’t own SPACs set to merge with pure-play space companies—yet. Leggi says they fit the theme but the firm needs more financial data than is provided in merger presentations. “If we get an opportunity, we will leg into it. A lot of them are very interesting,” he says.
—Evie Liu, Al Root, and Connor Smith
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Dear Moneyist,
My husband and I are both on our second marriage, and we have been married for 41 years. He has 3 sons from his previous marriage, and I have a son and a daughter. He inherited the property where we built our house 40 years ago. He set up a Charitable Remainder Trust and currently has $6 million in it.
He is in the process of selling the additional 50 acres for about $2 million, which he intends to put in the trust. He has set it up for our children and me to get a percentage after he dies. He is 90 years old, and is in excellent health. I am 76, and I am having some health problems. I think that he will outlive me.
The problem is that I need some of the money now. My son (his stepson) was in a car wreck and needs help. He has had 7 surgeries over the past two years, and is going to have a hip replacement this week. When that heals, he has to have a shoulder replacement.
His wife had brain surgery a couple of years ago to stop her epileptic seizures, but she has lost her short-term memory. She also started having seizures again, and her doctor told her she could never go back to work as a registered nurse. They are clearly in need of financial help.
My husband has helped them this past year, but he resents it, and does not continue to help them. I called a divorce attorney about possibly taking him to court to dissolve our marriage, and he said that I would be entitled to half of my husband’s assets. However, I’m not even on the deed of our house.
I would not be able to live with him, even if I just filed for separate maintenance. He’s hard enough to live with to begin with, but this will break my heart. I have taken care of him for 41 years. He just gives me barely enough to pay our bills. I cut his hair because he won’t pay for a haircut.
His sons won’t let him live with them. They would put him in a nursing home, but he’s too healthy to end up in a nursing home, and has all of his mental faculties. I don’t know what to do and would like your advice. I bet that you have never heard from anyone who has too much money.
—Wife & Mother
Read The Moneyist’s response here.
—Quentin Fottrell
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—Newsletter edited by Anita Hamilton, Stacy Ozol, Matt Bemer
