EARNINGS

Banks Channel Their Inner Annie

Banking titans Citigroup, JPMorgan, and Wells Fargo all reported earnings yesterday and, like Jack Sparrow escaping from the East India Trading company, it went surprisingly well. 

• JPMorgan and Citi solidly beat analyst expectations, and Wells Fargo grew quarterly profits by 5%. 

Zoom out: 2020 was a weird year for banks. The home-buying boom led to a rush of mortgage originations, which are cash cows for the banks that back them. And a crop of mega-successful IPOs like DoorDash and Airbnb helped boost underwriting revenue.

• But banks also set aside record amounts for rainy day funds over the course of the year in case a deluge of loan defaults rolled in from coronavirus-battered businesses.  

The deluge never came

Thanks to economic stimulus from Congress and lots of help from the Federal Reserve, defaults were kept relatively in check. Now, given the arrival of vaccines and Biden’s plans for more aid, banks are starting to stow their umbrellas. 

• JPMorgan and Citi both shaved down their piles of reserve cash, freeing up $2.9 billion and $1.5 billion, respectively.

Still, the general attitude on Wall Street is walk-before-run. “Our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty,” JPMorgan CEO Jamie Dimon said in a statement.   

Wells Fargo and Citi, meanwhile, are still trying to clean up some unforced errors. Wells Fargo paid out another $321 million in customer refunds in Q4 as it tries to put the fake accounts scandal that broke over four years ago in the rearview mirror. Citi is also retooling its internal risk controls after accidentally sending a group of lenders almost $900 million in August 2020.

Bottom line: Banks are feeling especially motivated to get back on track in 2021; the Fed has given the greenlight for the industry to restart stock buybacks in the first quarter. 

RECAP

ICYMI

Think of this as the Director’s Cut of Morning Brew—all the most interesting news stories from the week that never found a home in the newsletter.

The space race is on: Blue Origin, Jeff Bezos’s space company, completed its first mission of the year Thursday to test out a new capsule and booster. The next step to launching a commercial space tourism service? A crewed flight by early April, CNBC reports.

The Yang Gang is back: Andrew Yang, entrepreneur and former Democratic presidential candidate, formally announced his bid to become mayor of NYC on Thursday. It’s no surprise to anyone who’s followed Yang that his platform includes the “largest basic income program in the history of the country.” But Yang also wants to bring TikTok Hype Houses to the Big Apple. 

Mealworms are on the menu: For those of you aching to snack on Tenebrio molitor larvae, we have some good news—the EU’s food safety agency found that the yellow mealworm is safe for human consumption, a ruling that could unleash mass production of mealworm smoothies, pasta, burgers, and more, writes the Guardian. High in protein and low on carbon emissions...what’s not to like? 

ENTREPRENEURS

Keep Your Eye on Marc Lore

Because this guy’s leaving his current job, and he’s always up to something interesting.

The job he’s leaving: US e-commerce boss for Walmart. 

The backstory: Lore started Jet.com, the online shopping startup that was bought by Walmart for $3.3 billion just 15 months after Jet was founded. Walmart has since folded the Jet.com brand in order to streamline its e-commerce operations under the Walmart.com banner. 

What’s next? “I’m writing a book. I’m creating a reality TV show. I’m going to probably buy a sports team…” Lore told the WSJ. If you think he’s joking, then you haven’t heard his other post-Walmart goal.

• Lore is embarking on a multi-decade project to build a futuristic city with an innovative economic framework. “It’s the thing I’m most passionate about,” Lore explained to Recode.

Zoom out: Before you call Lore crazy, you should know he’s what business people call a “serial entrepreneur.” Several years before he sold Jet.com to Walmart, he sold Quidsi, the parent of Diapers.com, to Amazon for $550 million. 

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DATING

Bumble Prepares to Go Public

Ahead of its upcoming public offering, dating app Bumble yesterday dropped its S-1 form. It’s like a dating profile, but companies hold up important financial metrics instead of big fish. Here’s the scoop on Bumble:

• The company had 42 million monthly active users in Q3.
• It generated $377 million in revenue in the year through September, but posted an $84 million loss during that same period. 

Bumble’s claim to fame: Giving women pollice verso

Even if both users swipe right, only women are allowed to make the first move. If they don’t send a message within 24 hours, the match expires. 

This women-first approach to mobile dating is reflected in Bumble’s leadership: Founder Whitney Wolfe Herd will become one of the youngest female tech CEOs to take a company public. Bumble’s corporate board is also made up of more than 70% women.

Zoom out: Among the thousands of publicly traded companies in the US, only about 20 women have founded and led their business through to an IPO, according to a recent analysis by Business Insider.

+ Because we know you’re wondering...here’s where pollice verso comes from.

ADVERTISING

No Disrespect to Chatty Geckos...

But NFL quarterbacks are the gold standard when it comes to insurance spokespeople. Ahead of this weekend’s playoff football games, advertising metrics firm EDO told CNBC that insurance ads featuring a QB who is playing in the game fans are watching “perform two–three times better” than other ads aired in that game.

The outperformers

On Sunday, Browns QB and Progressive Insurance spokesperson Baker Mayfield is taking on Kansas City QB and State Farm rep Patrick Mahomes in their second-round playoff matchup. Ahead of the showdown, Victoria Bussert, the director of musical theatre at Baldwin-Wallace University, critiqued each superstar’s acting chops for Cleveland.com.

• She roasted Mahomes: “He uses unnatural physical gestures that you wouldn’t really use when you’re talking to try and make him look natural.” 
• But stans Mayfield: “He has so much presence, physically, and he’s actually a brilliant comedian.”

Looking ahead...Progressive’s CMO Jeff Charney agrees with Bussert and plans to hand Baker lots of airtime. “We’re going to run heavy this week,” he told CNBC.  

TAXES

This article is part of our ongoing series on taxes and the gig economy.

One of the major challenges of filing taxes as a gig economy worker is figuring out which expenses to deduct.

Deductions are important because you can use them to lower your tax liability with the IRS. Now, deductions can be confusing for the typical worker. But for the self-employed, for whom the line between the “personal” and the “business” is blurry, they can be tougher to crack than a 12-sided Rubik's Cube.

To show the complexities of deductions, let’s discuss two examples: the Uber driver and the Airbnb host. 

• The Uber driver uses the same car to drive their kids to soccer practice and to drive a client to the airport. The driver can claim auto expenses associated with working for Uber as a deduction on their tax form, but it can be complicated/tedious to track.
• The Airbnb host runs into a similar issue, because they may use their house for both personal use and as a rental property.

Bottom line: There is one, new-ish deduction that most gig economy workers can take advantage of—the provision on so-called “pass-through” businesses included in the 2017 tax bill. It allows for a 20% deduction of qualified business income.  

+ Optional homework...read this list on 15 tax deductions and benefits for the self-employed.

WHAT ELSE IS BREWING

• The National Rifle Association filed for Chapter 11 bankruptcy. It’s going to restructure and leave New York to reincorporate in Texas. 
• WhatsApp has delayed the rollout of its new privacy policy, which led to mass confusion among users.
• Total, the French oil giant, is leaving the US trade group American Petroleum Institute because of disagreements over climate change. 
• In more energy news...Exxon Mobil is reportedly being investigated by the SEC for allegedly overvaluing one of its key assets.
• Amazon workers at an Alabama warehouse will vote next month on whether to form a union. It would be the first at a US Amazon facility.
• Major US airlines are banning passengers traveling to Washington, DC, from putting guns in their checked bags ahead of the inauguration. 

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Success story: One entrepreneur’s take on how Israel succeeded with Covid vaccinations.

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GAMES

Brew Crossword

Today's super fun Brew Crossword, written by Zach Halberstam, is called "Look, Ma!" What could it possibly mean? Find out by playing here. 

+ Think you have what it takes to make your own crossword? Spoiler: You do. Check out our tutorial, and then be sure to submit. If we select your crossword, we'll also send you the iconic Brewneck sweatshirt.