Pot Stocks Are the Next GameStop. It Won’t End Well.

Now marijuana companies are surging, or getting squeezed, or becoming Reddit-fied, or whatever. Canadian grower Tilray is up 148% this week after jumping more than 50% Wednesday, while Sundial Growers has gained 161% this week after an 80% Wednesday climb. The stocks are rising again on Thursday morning.

A Reddit fueled frenzy is part of the story. Tilray, for instance, is a heavily shorted stock and has ended up on message boards.

But there was plenty of positive news as well. Tilray and Aphria are merging, bringing consolidation to the industry. More U.S. lawmakers are willing to legalize weed, another positive. And Canopy Growth stock popped 12% after reporting earnings and predicting profitability by 2022.

That’s all good news to be sure, but it probably doesn’t justify weekly doublings. Ultimately, the wild trading in pot stocks will end in pain for someone. Just like it did with GameStop.

—Al Root

*** Barron’s senior managing editor Lauren R. Rublin and deputy editor Alex Eule discuss the outlook for tech companies and individual stocks today at 12 p.m. EDT. Sign up here.

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Democrats Make Case Against Trump During Second Day of Impeachment Trial

House managers began laying out their case for convicting former President Donald Trump for inciting insurrection with a minute-by-minute rundown of the events of Jan. 6, using never-seen-before video, along with Trump’s tweets and various audio clips as evidence.

• Previously unreleased security camera footage shows Secret Service officers rushing former Vice President Mike Pence to safety and members of House Speaker Nancy Pelosi’s staff barricading themselves in an office to evade rioters. A man who was photographed sitting at Pelosi’s desk is seen with a 950,000-volt stun gun.
• Delegate Stacey Plaskett (D., Virgin Islands) cited an FBI agent’s affidavit describing rioters saying they would have killed anyone they could have captured, including Pelosi and Pence. “They were talking about assassinating the vice president of the United States,” Del. Plaskett said.
• Capitol Hill Police Officer Eugene Goodman, who has been lauded for leading rioters away from the unprotected entrance to the Senate floor, is seen approaching Sen. Mitt Romney (R., Utah) and warning him of the approaching mob. Romney then runs away.
• “This was a dereliction of duty plain and simple,” Rep. Joaquin Castro (D., Texas) said as he gave detailed accounts of the violence, that left two people dead and 140 officers injured. He added, “on January 6 President Trump left everyone in this Capitol for dead.”
• Reacting to Democrat’s evidence, Sen. Ted Cruz (R., Texas) said, “today’s presentation was powerful and emotional reliving a terrorist attack on our nation’s capital, but there was very little said about how specific conduct of the president satisfies the legal standard.”

What’s Next: Democrats will continue their opening statement Thursday, before the former president’s attorneys start defending their client Friday. Trump’s legal team has so far focused on the figurative nature of his speech before the riot and argued that his actions were free speech.

—Ben Walsh

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CDC Touts Benefit of Double-Masking as Fauci Warns of Variants

A better mask or layering two masks on top of each other can have a big impact on controlling the transmission of the coronavirus disease, the Centers for Disease Control and Prevention said Wednesday.

• The spread of Covid-19 by can be reduced by 96.5% if both an infected and uninfected person are wearing a tightfitting, three-ply surgical mask or a surgical mask with a cloth mask on top of it, according to a CDC study.
• “With cases, hospitalizations and deaths still very high, now is not the time to roll back mask requirements,” CDC Director Dr. Rochelle Walensky said. “The bottom line is this: masks work and they work when they have a good fit and are worn correctly.”
• Dr. Anthony Fauci, the nation’s top infectious disease expert, said Wednesday that recently-identified variants that appear to be more transmissible are “likely more prevalent” than the current reported number of cases shows. He added that the FDA-approved vaccines from Moderna and Pfizer protect against them.
• World Health Organization investigators said they are asking China to do wider tests on blood samples collected in the fall of 2019 to find out if the virus was circulating in Hubei province as early as October 2019.

What’s Next: The CDC is still expected to roll out new guidance this week on how and when to safely open schools. That guidance will likely focus on strategies like mask-wearing, cleaning and ventilation, rather than making teacher vaccinations a precondition for reopening.

—Ben Walsh

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GM Is the Latest Car Maker Squeezed by Global Chip Shortage

General Motors warned that the global shortage of semiconductor chips could decrease its 2021 earnings by up to $2 billion, nearly a third of the $6.4 billion profit it made in 2020. It’s not the only one to do so.

• Cars typically have dozens of chips in them, which are used for things like driver assistance systems that help prevent collisions, navigation and entertainment systems, and battery management in hybrid and electric vehicles.
• Earlier in the week, the auto maker said it was extending a shutdown of three North American plants until the middle of March due to the chip shortage and will try to partially build some models without scarce parts, then fully assemble them later.
• Ford Motor said last week its earnings for 2021 could be $1 billion to $2.5 billion lower as it is forced to trim production of its profitable F-150 line and VW said in December it will trim production by 100,000 cars in the first quarter of 2021 as a result of the scarcity.
• GM’s fourth quarter earnings themselves handily beat Wall Street expectations. CEO Mary Barra said that currently the company thinks it will be able to meet production targets, but GM stock fell 2.1% Wednesday on its pessimistic earnings guidance.

What’s Next: The semiconductor industry is ramping up production to ease the shortage, with industry giant Taiwan Semi set to invest $28 billion to boost capacity. Demand looks only to increase: By 2022, every car will have about $600 worth of chips, roughly double the $312 in 2013, according to an estimate by Deloitte.

—Ben Walsh

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What to Expect From Disney’s Earnings Report Today

Walt Disney’s fiscal first quarter earnings report is sure to be colored by the impact of Covid-19 on its theme parks and film segments. But investors are fixed on the future.

• Disney stock has managed to gain 33% in the past 12 months—a move that’s staggering given the company reported an adjusted net loss of 20 cents a share during its most recently reported quarter.
• Investors have cheered progress in the company’s streaming strategy, which includes Disney+, Hulu, ESPN+, and Hotstar. In early December, the company said Disney+ had 87 million subscribers, Hulu had about 39 million, and ESPN+ had 11.5 million.
• Analysts estimate a net loss of 71 cents a share in the quarter that ended in December. They expect the company’s parks and experiences segment to report an operating loss of $1.14 billion.

What’s Next: Because the focus, for now, is on growth in streaming, Disney’s results may not be what moves the stock immediately after the report. Bullish investors are betting heavy investment now will pay off in profits down the road.

—Connor Smith

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Biden Raises Human Rights, Taiwan Issues in First Call With China’s Xi

President Joe Biden and his Chinese counterpart Xi Jinping held their first telephone call on Wednesday night, for a wide-ranging conversation during which Biden said he had raised the question of “human rights abuse” by Beijing.

• Biden shared his “fundamental concerns about Beijing’s coercive and unfair practices, its crackdown in Hong Kong, reported human rights abuses in Xinjiang, and increasingly assertive actions in the region, including toward Taiwan,” according to a summary of the call published by the White House.
• Xi in turn told Biden that Taiwan, Hong Kong and Xinjiang were “domestic issues concerning the nation’s sovereignty and territorial integrity,” according to an account of the call in state-run China Daily.
• The Taiwanese government on Thursday expressed its “admiration and gratitude” for Biden, spokesman Xavier Chang said in a statement.
• Separately, The Wall Street Journal reported Wednesday that Zhang Feng, an executive at Tencent Holdings, the parent of WeChat, had been detained by Chinese authorities as part of an investigation into a corruption case.
• The Journal reports that as the probe unfolds, Pony Ma, Tencent’s billionaire founder and chief executive, hasn’t been seen publicly in mainland China or in person at major public events. Ma hasn’t been accused of any wrongdoing.

What’s Next: Biden continues to confirm the U.S. policy toward China is likely to remain on the hard-line side on most issues at hand. Xi told Biden during the call that confrontation between the U.S. would be a “disaster for both countries.”

—Pierre Briançon

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How does going into forbearance on your mortgage (temporarily pausing payments because of financial distress) affect your ability to claim the mortgage interest tax deduction?

Amid the economic turmoil caused by the coronavirus pandemic, millions of Americans opted to pause their monthly mortgage payments. That choice could have implications for their taxes this year—and in years to come.

In March, as Covid-19 began to wreak havoc on the job market and caused millions of Americans to lose their jobs as businesses shuttered, federal lawmakers and regulators took the extraordinary step of extending forbearance to mortgage borrowers. Being in forbearance allowed homeowners to pause making their monthly mortgage payments—originally, borrowers could request up to 12 months of forbearance, though that was recently extended to 15 months.

The measure was taken to prevent homeowners from going into default and foreclosure. So far the effort has been successful. In June, the number of borrowers in forbearance reached its peak, at more than 4 million. Nowadays, 2.7 million borrowers are still in forbearance, according to data from the Mortgage Bankers Association.

Whether you’re still in forbearance now or resumed making monthly payments at some point in the past year, there could be implications for your taxes, especially if you plan to claim the mortgage interest deduction.

Read more here.

—Jacob Passy

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—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Mary Romano, Stacy Ozol