Dec 26, 2018

Axios AM

By Mike Allen
Mike Allen

🎁 Good Wednesday morning. Thanks for the outpouring of Christmas wishes and appreciation for Axios.

  • Best stocking gift in our fam: a night light for the high school guys' toilet. It clips under the rim.

Breaking: U.S. holiday sales were the strongest in six years (up 5% over last year), according to a Mastercard report, with shoppers encouraged by early discounts. (Reuters)

1 big thing: Rise of the American bear

Illustration: Lazaro Gamio/Axios

Raise a glass of Christmas cheer: We’re now, officially, in the best possible kind of bear market, Axios chief financial correspondent Felix Salmon writes.

  • For a few years now, the U.S. economy has been at full employment, which means that most people looking for a job can find one. (There is, of course, some skill mismatching. And some jobs are under-employing.)
  • The next step of the American Dream, after you get a job, is accumulating wealth, often by investing in stocks. Now, for the first time in a decade, stocks are on sale: They can be bought at a 20% discount to where they were trading just a few months ago. 
  • If previous bear markets are any guide, stocks are likely to remain cheap for well over a year. So if you’ve been needing a nudge to sign up for your employer’s 401(k), now’s a very good time to do so. 

The bottom line: When stocks fall because the economy is in a recession and unemployment is rising, that’s a sign of broader misery. When they fall in a growing economy with full employment and record corporate earnings, that might mean a loss for the owners of capital. But it's a rare opportunity for those of us who work for a living. 

P.S. The backdrop, from CNBC: "[A] bear market is a 20 percent or more drop from a recent peak. The S&P 500 hit that milestone on [Christmas Eve], dropping 20 percent from its 52-week high."

  • Japan stocks plunged and other Asian markets fell yesterday, reflecting the U.S. rout.
  • ("The S&P 500 is still 7 points away from completing a full-blown bear market drop," Bloomberg notes.)

This could take a while: "Since World War II, bear markets on average have fallen 30.4 percent and ... lasted 13 months, according to analysis by Goldman Sachs and CNBC. ... [Stocks took] an average of 21.9 months to recover."

  • "Even when stocks enter 'correction' territory, which is defined by at least a 10 percent drop from a recent high, there’s a long road to recovery. History shows corrections last four months, and equities slide 13 percent."
2. Medical checks ordered after second child death

"U.S. Customs and Border Protection ... ordered medical checks on every child in its custody ... after an 8-year-old boy from Guatemala died, marking the second death of an immigrant child in the agency's care this month," AP's Nomaan Merchant reports from Houston.

  • "The boy, identified by Guatemalan authorities as Felipe Gómez Alonzo, had been in CBP's custody with his father, Agustin Gomez, since Dec. 18."
  • "CBP said in a statement [on Christmas] that an agent first noticed the boy had a cough and "glossy eyes" at about 9 a.m. Monday. He was eventually hospitalized twice and died just before midnight."
  • "Oscar Padilla, the Guatemalan consul in Phoenix, said he was told by the boy's father in a telephone interview that the two ... were planning to go to Johnson City, Tenn."

The agency "is considering options for surge medical assistance" from the Coast Guard and may request help from HHS, the Pentagon and FEMA.

  • "CBP processes thousands of children — both alone and with their parents — every month."

"Felipe and his father were detained by CBP for about a week, an unusually long time that the agency did not fully explain."

  • "CBP typically detains immigrants for no more than a few days when they cross the border before either releasing them or turning them over to U.S. Immigration and Customs Enforcement for longer-term detention."
  • "Agency guidelines say immigrants generally shouldn't be detained for more than 72 hours in CBP holding facilities, which are usually smaller and have fewer services than ICE detention centers."
3. Something Congress may actually pass

lllustration: Aïda Amer/Axios

A year ago, the notion of Congress passing a consumer privacy law was laughable. Now Big Tech, which once said regulation could break their business, wants Congress to impose rules, Axios managing editor Kim Hart writes.

  • A broader public recognition of the power of the tech giants' data, coupled with a growing distrust in social media and tech companies, gives policymakers more leverage.
  • Google CEO Sundar Pichai told Congress at a recent hearing that the search giant supports legislation, as do other tech giants.

Democrats who'll soon be in charge of the House are itching to make good on their promise to slap some rules on Big Tech after a year of scandals.

  • 15 Democratic senators have introduced a privacy bill that would require apps, websites and other services that collect data to protect customer information and be subject to fines for misusing data.
  • And now the White House is interested. National Economic Council staffers have recognized the global swirl around data privacy and began meeting with major corporations to get feedback on a potential privacy framework.

Be smart: A key driver is the move by states to take matters into their own hands. California passed a law putting restrictions on Google, Facebook and other companies in the business of gathering data directly from consumers

  • A patchwork makes it tough for internet companies to do business across states — so they'd rather have a national law to pre-empt the states.
Bonus: Score one for Santa
From the Oval Office, President Trump greets members of the military via videoconference on Christmas Day. (Jacquelyn Martin/AP)

"A 7-year-old girl who talked to President Donald Trump on Christmas Eve still left out milk and cookies for Santa despite the president telling her it was 'marginal' for a child of her age to still believe," AP's Darlene Superville writes.

  • "Collman Lloyd of Lexington, S.C., says she had never heard the word "marginal" before."
  • "In an interview with the Post and Courier of Charleston, she said the scientist who answered the NORAD phone asked her if she would like to speak to the president.
  • "Six minutes later, Trump was on the line. 'Are you still a believer in Santa?' Trump asked. When she responded, 'Yes, sir,' the president added, 'Because at 7, that's marginal, right?'"

"Collman didn't know what 'marginal' meant and simply answered, 'Yes, sir.'"

  • "Trump's chat with Collman was initially reported as being with a boy named Coleman. Only Trump's end of the conversation could be heard by reporters, but Collman's family later posted video of the call on YouTube."

"Collman told the Post and Courier that she and her 10-year-old sister and 5-year-old brother left iced sugar cookies and chocolate milk for Santa. She reported that Christmas morning, the food was gone and presents were under the tree."

4. 💰 Stunning stat

"Roughly 85% of all [stock] trading is on autopilot — controlled by machines, models, or passive investing formulas, creating an unprecedented trading herd that moves in unison and is blazingly fast," The Wall Street Journal reports (subscription).

  • Why it matters: Computerized trading grew up "during the long bull run, and hasn’t until now been seriously tested by a prolonged downturn."
5. Top 10 NYC apartment sales

The high point of the New York apartment market this year was $73.8 million for a duplex penthouse in a new tower designed by Robert Stern, Bloomberg's James Tarmy reports.

  • That's down 26% from the record, in 2014, when a penthouse on 57th street with views of Central Park sold for just over $100 million.

Here are the top 10:

  1. $73.8 million for 520 Park Avenue’s Unit DPPH60
  2. $62 million for 520 Park Avenue’s Unit PH52
  3. $59 million for 503 West 24th Street’s penthouse
  4. $56 million for 70 Vestry Street’s PHS
  5. $54 million for 157 West 57th Street’s Unit 85
  6. $50 million for 15 Central Park West’s Unit 16/17B
  7. $43.8 million for 443 Greenwich Street’s Unit PHA
  8. $43.5 million for 160 Leroy Street’s Unit PHN
  9. $42 million for 157 West 57th Street’s Unit 77
  10. $42 million for 432 Park Avenue’s Unit 77B

Be smart: "[E]ight out of the top 10 sales were heavily discounted — one apartment at 157 West 57th street took a $17 million price cut."

6. 🎥 1 film thing
From left, Lin-Manuel Miranda, Pixie Davies, Joel Dawson, Nathanael Saleh and Emily Blunt in "Mary Poppins Returns." (Jay Maidment/Disney via AP)

Banner year at box office ... "Deepening anxiety in Hollywood that the ascendance of Netflix would keep people from going to the movies this year appears to have been overblown," the L.A. Times' Ryan Faughnder reports:

  • "Major hits, including Marvel Studios' 'Black Panther,' Universal Pictures' 'Jurassic World: Fallen Kingdom' and 20th Century Fox's 'Deadpool 2,' drove ticket sales in the U.S. and Canada to a record-breaking $11.8 billion this year, according to preliminary projections from ... Comscore."
  • "That would represent growth of 6% from a year ago and beat the previous record of $11.4 billion in ticket sales set in 2016."

Why it matters: "The surge is welcome news for studios and multiplexes, ... after a steep downturn in attendance in 2017 ... stoked fears that buzzworthy programming on streaming and cable TV had sapped the movie industry of ... cultural clout."

Mike Allen