Axios Capital

January 21, 2021
Trust me — you'll like this newsletter. There's lots in it! Including a dive into the question of trust in the media; a look at how the election changed investment strategies; the hot stock-pump of the moment; car stocks and SUV sales; out-of-network ATM fees; and much more.
- All in 1,726 words, which should take you about 7 minutes to read.
1 big thing: The media trust crisis

Photo illustration: Sarah Grillo/Axios. Photo: Star Tribune via Getty Images
Trust in traditional media has declined to an all-time low.
Why it matters: Faith in society's central institutions, especially in government and the media, is the glue that holds society together. That glue was visibly dissolving a decade ago, and has now, for many millions of Americans, disappeared entirely.
By the numbers: For the first time ever, fewer than half of all Americans have trust in traditional media, according to data from Edelman's annual trust barometer shared exclusively with Axios. Trust in social media has hit an all-time low of 27%.
- 56% of Americans agree with the statement that "Journalists and reporters are purposely trying to mislead people by saying things they know are false or gross exaggerations."
- 58% think that "Most news organizations are more concerned with supporting an ideology or political position than with informing the public."
- When Edelman re-polled Americans after the election, the figures had deteriorated even further, with 57% of Democrats trusting the media and only 18% of Republicans.
The big picture: These numbers are echoed across the rest of the world: They're mostly not a function of Donald Trump's war on "fake news."
- As vaccine rumor hunter Heidi Larson puts it, "We don't have a misinformation problem, we have a trust problem."
- News organizations have historically relied mainly on advertising income, and as those dollars flow increasingly to Google and Facebook, that has created institutional weakness that shows up in trust data.
The bottom line: The forces driving increasing mistrust of media are global and systemic. Hopefully those who do still trust the media will constructively engage their skeptical friends and relations with sympathy and patience, and change minds slowly, one at a time.
2. How trust in media can be regained


Reversing the decline of trust in media is a monster task — and one that some journalists and news organizations have taken upon themselves. They're going to need help — perhaps from America's CEOs.
The catch: Mistrust of media is now a central part of many Americans' personal identity — an article of faith that they weren't argued into and can't be argued out of.
What they're saying:
- Former Financial Times editor Lionel Barber talks of factual reporting as a means of "regaining the trust of the reading public."
- Axios has a stated mission to "help restore trust in fact-based news."
- Washington Post media columnist Margaret Sullivan writes that "our goal should go beyond merely putting truthful information in front of the public. We should also do our best to make sure it's widely accepted."
How it works: Media outlets can continue to report reliable facts, but that won't on its own turn the trend around. What's needed is for trusted institutions to visibly embrace the news media.
- CEOs (aka the fourth branch of government) are at or near the top of Edelman's list of trusted institutions.
- By the numbers: 61% of Trump voters say that they trust their employer's CEO. That compares to just 28% who trust government leaders, and a mere 21% who trust journalists.
The bottom line: CEOs have long put themselves forward as the people able to upgrade America's physical infrastructure. Now it's time for them to use the trust they've built up to help rebuild our civic infrastructure.
3. How the election changed investors

Photo illustration: Brendan Lynch/Axios. Photos: David Hume Kennerly, Alex Wong/Getty Images
50% of Americans changed their investing strategy after seeing the result of the presidential election, according to a Harris Poll survey for Empower Retirement and Personal Capital shared exclusively with Axios.
Why it matters: The election and the intense news cycles following it were perceived, correctly, as an inflection point of historical proportions. Doing nothing is hard in such situations, even if sticking to your long-term plan is what most financial advisers would recommend.
What they found: A third wave of the coronavirus, combined with stocks at all-time highs and uncertainty about the actions of the incoming administration, combined to persuade 65% of Americans to put more money into cash savings, says Personal Capital president Jay Shah, even as a smaller minority started "chasing heat" and buying high-flying tech stocks.
- The biggest change after the election was in where new money was put to work. "Pre-election, one out of every five dollars coming to us would go into socially responsible strategies," says Shah. "Post-election, it's one in every three dollars."
- Such investments could be a bet on President Biden's $3 trillion green-infrastructure plan, or they could just represent more optimism from Democrats, who are more likely to invest in those strategies.
The bottom line: The surging markets notwithstanding, most Americans are still more nervous about the economy than they were a year ago. That can make them twitchy, when it comes to their investments, and prone to take quick action when news happens.
4. Scoop: Chime's fee income

Illustration: Aïda Amer/Axios
Chime, a fast-growing online bank most recently valued at $14.5 billion, derives about 21% of its revenue from fees its customers pay for using out-of-network ATMs, according to financial data obtained by Axios' Kia Kokalitcheva.
Why it matters: Banking alternatives like Chime aggressively market themselves to consumers who have been burned too often by bank fees. Chime claims it has "no hidden bank fees," while Varo advertises itself as "online banking with no fees."
By the numbers: Chime's annual gross revenue per user was $208 as of June 2020, according to data Axios obtained. While most of that came from debit card interchange fees, 21% came from charging customers for using out-of-network ATMs.
- Chime charges $2.50 per out-of-network ATM cash withdrawal, on top of any fee charged by the bank operating the ATM — though it waives that fee for the first such transaction.
Between the lines: Varo, which also charges a $2.50 fee for using out-of-network ATMs, said that it charges the fee "because other ATM networks and big banks charge us."
- Yes, but: Those "ATM interchange" fees are normally on the order of 10 cents, not $2.50, according to two industry sources.
- How it works: Most traditional banks charge out-of-network ATM fees as part of their attempt to keep fee income on checking accounts growing.
What they're saying: "A small percentage [of our revenue] comes from fees derived from out-of-network ATMs," Chime told Axios in a statement, adding that its customers can currently access more than 38,000 fee-free ATMs.
- The company did not share any details about which of its customers are incurring the most fees, or why, nor how it priced its fee.
- They added: "This is the only fee on the account and we disclose this on our website." (You might want to see for yourself how far you need to scroll down that page before you find the fee being disclosed.)
The bottom line: Digital banks generally sell themselves as competing on a basis of low costs and no fees, making all their revenue from swipe fees on purchases. But they're still making hundreds of dollars a year from some of their customers by charging them to use out-of-network ATMs.
5. Respect the pump

Illustration: Sarah Grillo/Axios
One of the most high-risk, high-return trading strategies of the moment is also the most democratic: Buying the stocks being pumped up on Reddit and TikTok, and then selling them for a huge short-term profit.
- While most active trading strategies require expensive professional-grade software, this is a strategy that’s accessible to anybody who's Extremely Online.
Driving the news: The hot stock of late has been GameStop, a beleaguered brick-and-mortar videogame store based mostly in shopping malls and struggling in a world where games — like all software these days — are mostly downloaded rather than bought.
- The five-year chart of the company's stock looks exactly like you'd expect — until this summer, when Reddit started getting interested.
How it works: Remember how the TikTok #teens bought up all the tickets to the Trump rally in Tulsa and left it with a sea of empty seats? Imagine that, but for profit.
- The trick is to find a stock like GameStop that has a lot of short interest, and start buying. If enough people do so, then eventually the shorts will be forced to cover their positions by buying back the stock, which in turn sends it even higher — a classic short squeeze.
- GameStop became a game itself, of amateur investors versus the pros. Every time one set of professional short sellers would capitulate and cover, another set would arrive, betting that this time the stock couldn't rise any further.
- The amateurs are winning the game so far, helped by the tailwind of a broad stock-market rally.
Between the lines: The investment strategy here is very simple: "Respect the pump," or "I see a stock going up, and I buy it, and then I watch it until it stops going up, and I sell it." Old-fashioned concepts like valuation are mostly ignored.
- The most respected traders don't even bother buying the stock. Instead they buy out-of-the-money call options for pennies, giving them enormous leverage and maximizing their upside.
- What they're saying: "I'm a believer in the basic momentum strategy," says AQR's Cliff Asness, "but using it and it alone without any idea of value is very dangerous. I would bet a lot of these traders do it way too idiosyncratically (a few positions and not a diversified portfolio), making it much more dangerous, and likely keep adding to it until they eventually blow up."
The bottom line: The TikTok teens might not win in the long term, but their short-term gains can be astonishing.
6. GM's rally
GM stock closed on Wednesday at more than $55 per share — an increase of 390% from the low point in the spring.
- What's happening, per Axios' Joann Muller: Investors are beginning to give credence to the Detroit automaker's electric vehicle strategy — or they're looking for a cheaper way to participate in the Tesla-inspired run-up in electric vehicle stocks.
8. Coming up: Fourth-quarter GDP

Illustration: Sarah Grillo/Axios
One of the last major economic data points of the Trump era — Q4 GDP — is out next Thursday morning, writes Axios' Courtenay Brown.
Why it matters: The economy likely grew at an annualized pace of 4.6%, according to FactSet — though estimates range from a slight contraction to a 6.8% rate of growth. (The eurozone, by contrast, looks like it shrank in the final quarter.)
- At the high end at that range, growth still will have slowed sharply from the Q3 bounceback. GDP will remain well below its pre-pandemic level.
For the full year, the economy is expected to have contracted by 3.5% — a steeper drop than economy's worst year of the Great Recession (2009), when it shrank by 2.5%.
9. Building of the week: 135 Punch Bowl Road

Photo: realestate.com.au
135 Punch Bowl Road, located about 90 minutes south-east of Melbourne, overlooks the Bass Strait between Australia and Tasmania.
- Designed by "king of kitsch" Ermin Smrekar and sitting on roughly 20 acres of prime land, it sold last month for AU$5,589,999 — about $4.3 million.
- The house features five bedrooms, four bathrooms, and enough millennial pink to power a dozen influencer hype houses.
(Via the indispensable Cocaine Decor Twitter account)
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