What Happened The Week of March 29th, 2021?
Airlines & Voter Laws
The past Wednesday, companies that had previously remained silent as Georgia Republicans rushed to pass a law to restrict voting access reversed course. The decision to condemn the Republican led legislation came in the face of mounting outrage from activists, customers and a coalition of powerful Black executives.
Delta Air Lines, Georgia’s largest employer, had made only general statements in support of voting rights last week and had declined to take a position on the legislation. That muted response drew fierce criticism, as well as protests at Hartsfield-Jackson Atlanta International Airport and calls for a boycott.
This week, Ed Bastian, Delta’s chief executive, made a stark reversal. “I need to make it crystal clear that the final bill is unacceptable and does not match Delta’s values,” he wrote in an internal memo that was reviewed by The New York Times. Coca-Cola, another of Georgia’s largest companies, which had also declined to take a position on the legislation before it passed, made a similarly worded statement.
“I want to be crystal clear,” said James Quincey, Coca-Cola’s chief executive. “The Coca-Cola Company does not support this legislation, as it makes it harder for people to vote, not easier.”
US Spending Turns Toward Infrastructure
As the US economy continues to show signs of recovery and vaccination rollouts are exceeding expectations, Democrats have started to look at new legislation; specifically an infrastructure bill.
Mr. Biden’s plan, which he unveiled on Wednesday in Pittsburgh, is the first step in a two-part agenda to remake the American economy. The president and his advisers have pitched that agenda — whose total cost could reach $4 trillion — in the grand terms of economic competitiveness and the granular language of shortened commute times.
Phase I of the plan includes a $2 trillion budget to rebuild aging roads, bridges, rail lines and other foundations of the economy. Unlike previous infrastructure bills which have come to pass, Biden’s comes with a new twist: hundreds of billions of dollars that administration officials say will help reverse long-running racial disparities in how the government builds, repairs and locates a wide range of physical infrastructure.
The administration says this focus will assist with combatting gentrification and disparities that emerge across our public infrastructure as a result of the funding process with property taxes. A part of that $2 trillion includes $20 billion to “reconnect” communities of color to economic opportunity, like the Black residents still living in the interstate’s shadow along Claiborne, which advocates say will help improve the economic prospects of those communities.
Nomura Writes Off Billions
Nomura Holdings Inc.’s chief executive officer was probably having a good inaugural year in charge of the company — that is of course until a U.S. family office spoiled the party. Just days before the head of Japan’s biggest brokerage celebrated 1 year as the CEO, the company issued a warning of a “significant” loss from an unnamed U.S. client. Enter into the story, Achegos.
Bill Hwang’s Archegos Capital Management, faced margin calls on billions of dollars of stock — including the two worst-performing companies in the S&P 500 in a move which was attempting to generate alpha. Some analysts have reported that for every $1 in Archegos fund, they had $9 invested in the markets, creating enormous leverage susceptible to even the slightest of market dips.
These margin calls forced Nomura to liquidate Archegos positions. They simultaneously triggered a record 16% drop in Nomura’s shares on Monday, wiping $3.5 billion from its market value and threatening a turnaround. According to Jefferies analysts, the loss will result in a $2 billion write down that erases all of Nomura’s pretax profits for 2020.
“Nomura may still have a lot to learn from other companies about how to control loss limits,” said Hideyasu Ban, an analyst at Jefferies in Tokyo. “It’s hard to deny that their top management has responsibility for what’s happened.”
“The unexpected loss may end the relative honeymoon” for Okuda, said Michael Makdad, an analyst at Morningstar Inc. “Okuda’s term so far had shown a remarkable turnaround from losses in 2019 to very strong earnings in 2020, thanks to its U.S. operation.”
Unfortunately for Japan’s largest brokerage firm, that remarkable turnaround is in peril. Although other firms such as Goldman Sachs also took write-down’s related to Archegos margin call, no firm was so exposed to the companies leverage. That could spell disaster for the new CEO and the hopes of a turnaround.
