ECONOMY

Inflation Is Rising Because the Economy Is Weird

How do you know when your economy is emerging from a pandemic? When goodbye hugs make a comeback and the rate of inflation hits its highest level in almost 13 years.

US consumer prices rose 4.2% in April from a year ago, up from the 2.6% gain in March and more than economists expected.

What’s going on? 

Things are just very weird right now.

• Supply chains are broken: From chicken wings to diapers to, most recently, gasoline, supply is not meeting demand. Even our local semiconductor store has been cleaned out.
• The pandemic is ending: 35% of the US population is fully vaccinated, and they’re making up for lost time by traveling, buying clothes that aren’t sweatpants, and dining out.
• Stimulus abounds: The government has rained payments on Americans to help them through the last year of high unemployment levels.

Which brings us to the question raging among economists.

Is this rapid inflation growth temporary? 

Some officials, like Fed Chair Jerome Powell, think the run-up in prices is directly related to the winding down of the pandemic. They argue that the quirks of the 2021 economy, like the fact that uber-expensive lumber is adding nearly $36,000 to the price of a new home, is mainly what’s driving inflation.

• Take used cars, for example. Used car prices jumped 10% in April and accounted for more than a third of the monthly increase in consumer prices. 

So, many officials are betting that once the economy irons out the wrinkles, price growth will settle down to more typical levels.

Still…“I was surprised,” the Fed’s vice chairman Richard Clarida said once he saw the inflation numbers. “This number was well above what I and outside forecasters expected.”

Bottom line: The only CPI reading that matters is the next one. Future readings will better help policymakers understand whether inflation is less “transitory” than it appears to be. 

CRYPTO

TFW You Realize Bitcoin Uses a Lot of Energy

In February, Tesla shocked the business world when it said it would invest $1.5 billion in bitcoin and made plans to accept bitcoin as payment for its cars.

But in a tweet yesterday, CEO Elon Musk said he was suspending vehicle purchases with bitcoin due to environmental concerns. The cryptocurrency, which had been falling throughout the day, dropped dramatically in the hours following the tweet.

Commentators found it odd that Musk, who runs an electric vehicle company with the mission of reducing fossil fuel emissions, wasn’t aware of the vast amounts of energy used to mine bitcoin when he announced Tesla’s full-on embrace of the crypto. Maybe he was too busy rehearsing for SNL? 

Zoom out: Tesla still has more than $1 billion in bitcoin holdings and Musk said he wouldn't sell any more.  

RESTAURANT

Domino’s Is Worth a Lot More Than $5.99

You may put Domino’s in the category of “4am indulgences,” but billionaire investor Bill Ackman deems it one of the “super-durable growth companies.” He announced at the WSJ Future of Everything Festival that his hedge fund, Pershing Square, recently acquired a 6% stake in the pizza chain. 

Ackman said that he’s had his eye on Domino’s for a while, specifically watching how the company does its own delivery in the DoorDash-era. 

• “That is an important competitive advantage in a world where you want to deliver pizza for $7.99. It’s hard to do that with a delivery service taking a massive cut of the proceeds,” Ackman explained.

Pershing is known for its investments in profitable food chains, including Restaurant Brands International (the owner of Burger King), McDonald’s, Chipotle, and Starbucks—where Ackman made a venti-sized 73% return in just 19 months.  

Zoom out: This pizza party has been rocking for years. Domino’s stock has risen 13% so far in 2021 and 249% in the past five years.

SPONSORED BY MUGSY

Denim to Make Your Squad Proud

The weather is warming up. The world is reopening. And your friends are counting on you to look fly.

Good thing we’re here to talk to you about Mugsy Jeans. With the perfect amount of stretch, style, and fit, these babies are equally ready for a lazy morning on the couch or a night out on the town. 

And with your squad rearing to finally take that vacation, it’s time to look and feel your best.

These jeans are outrageously comfortable, outrageously versatile, and outrageously appropriate for waltzing through the gates of a tropical hotel cracking hilarious jokes with your three best friends.

While you’re at it, how about throwing in a pair of shorts, chinos, or swim trunks that come with the same, famous, Mugsy proprietary stretch?

Reader, the hunt for your ideal summer 2021 outfit ends with Mugsy Jeans.

GRAB BAG

Key Performance Indicators

Stat: The Japanese conglomerate SoftBank brought in $45.8 billion in net income in the fiscal year ended March 31, 2021, the largest annual profit for any Japanese company ever. It’s also more than Berkshire Hathaway’s net income of $42.5 billion last year. Is it time to crown Masayoshi Son the Oracle of Tokyo? 

Quote: “Those who are uberly engaged with the company want to go to the office two-thirds of the time, at least. Those who are least engaged are very comfortable working from home.”

That piping hot take about remote work came from none other than the CEO of WeWork, Sandeep Mathrani. It’s not like he has anything riding on the office market…

Read: How the personal computer broke the human body. (Vice)

SPACE

The Get-Out-Of-Space Race

Some of Virgin Galactic’s biggest boosters are looking for an escape pod.

Ark Invest, a firm known for its bets on futuristic companies, has dumped most of its stake in Virgin from its space exploration ETF. And just two months ago, Chamath Palihapitiya, the company's chairman, sold his remaining shares, worth about $213 million.

Virgin Galactic was once Lord of the SPACs. In 2019, Palihapitya took Richard Branson’s space flight company public in a SPAC deal before they were cool. But the space tourism biz is hard—and the company’s been struggling with technical setbacks and delays. In its most recent earnings report, released this week, it announced its second consecutive quarter of $0 in revenue.

• Is it a deeper problem? Luke Colby, an engineer who has consulted for multiple space companies, told the NYT that Virgin Galactic’s mission is driven by nostalgia for space travel, whereas rivals Blue Origin and SpaceX are “driven by the physics of spaceflight.”

Zoom out: Virgin Galactic stock hit an all time high of ~$63 in February. As of Wednesday's close, it had fallen to $16.

TAX

Four More Days! Four More Days!

Morning Brew is teaming up with H&R Block to give you the facts, the context, and the tips you need to make sure you're prepared for the most complex tax filing season we can all remember.

And with just four days to spare before filing day, we’re unveiling a final piece about everyone’s favorite subject: crypto taxes. Because if you sold all your dogecoin before Elon’s SNL appearance, a) great timing but b) prepare to pay some taxes on it.

Bottom line: Crypto taxes aren’t as complicated as crypto itself, but you should know the basics if you are an investor. Get up to speed here.

WHAT ELSE IS BREWING

• Facebook is relaunching its crypto project, but with smaller ambitions.
• Ellen DeGeneres is ending her talk show in 2022 after 19 seasons. “It’s just not a challenge anymore,” she told the Hollywood Reporter.
• Vitalik Buterin, the founder of Ethereum, donated more than $1 billion worth of crypto to the India Covid-Crypto Relief Fund.
• Jay-Z, Tina Turner, and the Foo Fighters were among the newly announced inductees to the Rock & Roll Hall of Fame.

SPONSORED BY THE MOTLEY FOOL

A dream of a list. This list of 10 stocks that The Motley Fool has put together could potentially help you turn a dream home (or motor scooter or fancy steak dinner) into a reality. The investing experts at TMF think this group could have a big 2021, meaning potentially big gains. The list is only available to the 1.1 million members of Motley Fool Stock Advisor, so sign up today.

BREW'S BETS

Meet the Brew’s founders: Austin Rief and Alex Lieberman, the two guys who started this company back at the University of Michigan in 2015, will be hosting a Twitter Spaces event at 5:15pm ET today. They’ll talk all things entrepreneurship, so make sure you tune in. 

An odd bit of trivia: When the conversation gets a little stale at your dinner party, just whip out your knowledge of the official vehicles of 45 world leaders. 

Pump it: This 10-minute chest workout is perfect for getting your muscles feeling all jiggly in between Zoom meetings.

GAMES

Three Headlines and a Lie

The most important thing about Three Headlines and a Lie is that you don’t get shown up by a little newsletter try your best. We’ll give you four headlines and you try to guess which one is a pure malarky.

1. “Jeff Bezos' superyacht is so big it needs its own yacht”
2. “Anti-maskers ready to start masking—to protect themselves from the vaccinated”
3. “IHOP turned away Adam Sandler. Now it's trying to make it up to him”
4. “LinkedIn pushes to increase users in Florida because residents click most ads”

ANSWER

Floridians don't click more LinkedIn ads than the rest of us.