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Illustration: Aïda Amer/Axios
Yields on 10-year U.S. Treasury notes fell below 3-month Treasury bills on Friday for the first time since 2007, triggering a major recession indicator.
But market analysts have tripped over one another telling us not to worry. This time is different, they insist. And while strategists with high S&P 500 targets are notorious for balking at clear and longstanding recession indicators, they do have a point. Things are different now.
What's happening: Since Friday's yield curve inversion, the market further positioned for a recession or at least something much worse than the slowdown to 2.1% growth the Fed is predicting.
The big picture: While investors have implored anxious Americans to look to the strong U.S. labor market and solid 2018 GDP numbers, what's really changed is the impact of central banks.
Background: After the financial crisis, the Fed's quantitative easing program saw the central bank tack around $4.5 trillion worth of bonds onto its balance sheet — much of it longer-dated U.S. Treasuries — in an effort to depress yields and support financial institutions.
Fed Chair Jay Powell announced earlier this month that the Fed would stop reducing those holdings once the balance sheet gets to around $3.5 trillion.
And it's not just the Fed. The ECB and BOJ both have negative interest rates for some deposits. German and Japanese 10-year government bonds now have negative yields. That's driving a flurry of investors to U.S. Treasuries, which pay significantly more.
Don't forget: There's also the $1 trillion annual U.S. deficit and unprecedented $22 trillion national debt. The deficit is being funded by issuing more short-dated Treasury bills than longer-dated notes, helping invert the curve, Baumohl says.
The bottom line: The yield curve has inverted before the last 7 U.S. recessions, making it impossible to ignore. But the Fed's quantitative easing programs and subsequent stimulus efforts by governments and central banks around the world have distorted markets. It's hard to rely on historical correlations, positive or negative, because we've never seen this before.
Apple looks to be at a crossroads. Axios' Scott Rosenberg writes, "Apple's reputation for launching products that transform entire markets could become a casualty of its transition from selling gadgets to peddling 'services' — the company's catch-all label for the grab-bag of TV, news media and gaming bundles it announced Monday."
Why it matters: "Apple's genius under Steve Jobs lay in focusing on a very small number of unique products, but its new offerings are scattershot additions to already crowded media marketplaces," Scott writes. "Some may prove hits, others may flounder — but none of them looks poised to 'change the world,' no matter how many times Apple and its partners repeat that phrase."
It's "a gorgeous minimalist card — so minimalist, in fact, that it comes without normally-standard features like a card number or an expiration date. Instead, you can generate one-off numbers on your phone," Axios' Felix Salmon writes.
Why it matters: "This is an ambitious attempt by both Goldman and Apple to break into the world of consumer finance, Felix writes. But gaining significant market share from the giants in the space will not be easy."
Timing: "The card won't be available till summer. Apple didn't announce interest rates and other key details."
Over the past few years the fire beneath Apple's red-hot stock price has largely been stock buybacks. The company has dwarfed other companies in terms of the number and amount of buybacks last year and for the past decade.
Driving the news: S&P Dow Jones Indices announced Monday that companies bought back $806.4 billion worth of their own shares, including $223 billion in just the fourth quarter in 2018. It was short of the $1 trillion Goldman Sachs predicted in August, but still an all-time record.
Of that record total, Apple bought back $10.1 billion worth of its own stock in Q4 and $74.2 billion for the year, more than a third of the entire S&P 500 total. The closest company to that total was Oracle, which spent $29.3 billion.
Between the lines: Companies have shown a very clear preference for buybacks over dividends so far this decade, with a major uptick in this trend in 2018 after the passage of the Tax Cut and Jobs Act.
Further buyback numbers announced by S&P Dow Jones on Monday:
WeWork doubled its revenue, net loss and membership between 2017 and 2018, Axios' Dan Primack reports, citing an investor presentation provided by the company.
Why it matters: The co-working space operator continues to push toward an IPO, but has plenty of cash if it wants to wait longer.
Revenue: 2018 revenue was $1.82 billion, up 105% from 2017. Of that, 88% is considered membership revenue — down from 93% in 2017.
Losses: Net loss was $1.9 billion for 2018, larger than the revenue figure and up 103% from 2017.
Alt measure: WeWork prefers investors focus on a novel metric called "community-adjusted EBITDA," which more than doubled to $467.1 million in 2018.
Total memberships climbed 116% in 2018 to 401,000. It now has a presence in 425 facilities in 100 cities in 27 countries.
WeWork had $2.2 billion of cash on hand at year-end, which is the same amount it had at the time of its public bond offering last April. This does not include $400 million of committed capital from SoftBank, nor $4 billion of convertible note warrants from SoftBank ($1.5 billion of which was received in January).