• Hot Convertibles: So far this year US companies have raised $54.3 Billion through the issuance of convertible bonds, the highest year-to-date amount raised on record. Why you might ask? They can issue the bonds at historically low interest rates (the average interest coupon so far in 2021 is 1.41%). Companies get to raise debt at a lower cost (than traditional debt) and if the bonds are ultimately converted to stock, anger of existing investors over any dilution will be muted since the stock clearly performed well (hence the reason for the conversion).

• China Could Pull The Punch Bowl: The Chinese economy is responsible for 70% of global iron ore consumption and 58% of global copper consumption. This is important because 1) the Chinese government is currently tapering its pandemic stimulus efforts 2) 60% of the steel industry in the China is state-owned and the government plans to cut its steel production in the coming years to meet its carbon-reduction targets and 3) last week China released a statement saying they would have “zero tolerance” for price speculation and manipulation in the commodities market. All of these factors may result in a ceiling for the seemingly runaway prices we have seen so far in 2021 commodity prices.

• Judge It By the Budget: Last week President Biden released his $6 trillion proposed budget, which would bring the government’s spending and debt to their highest levels since WWII. One aspect of the budget that caught investors’ attention was the 11% funding increase to the Federal Trade Commission and nearly 9% funding increase to the Justice Department’s Antitrust Division. If this is an indication of the President’s priorities, as most analysts believe it is, it does not bode well for “Big Tech”. Last year the Justice Department filed an antitrust lawsuit against Google and the Federal Trade Commission sued Facebook. 

• A Long Time Coming: Last week Engine No. 1, an activist hedge fund launched only in December 2020 with assets of around $250 million, was able to win two seats on Exxon’s Board after publicly pushing the company to move away from fossil-fuel dependency. This feat, which would have been inconceivable a few years ago, was achieved due to 1) the rapid social movement towards clean energy, encouraging large investment firms like Calstrs and BlackRock to back the upstart hedge fund and 2) the willingness of other investors to try a new strategic direction - Exxon has only returned 0.5% annually over the past decade and had doubled is long-term debt burden in a mere 2 years (from 2018-2020).