Hedge Fund Billionaire Who Shorted Lehman Brothers Says the Fed and SEC Aren’t Doing Their Jobs

But Einhorn’s harshest words in a letter published Thursday were reserved for the SEC. Its job is to ensure fair trading, but Einhorn writes that it seems to have no interest in investigating spikes in the stock prices of tiny companies or statements from prominent figures such as Tesla’s Elon Musk and Chamath Palihapitiya that he likens to pouring “jet fuel on the GME squeeze.”

“There is no cop on the beat,” Einhorn writes. “Companies and managements that are emboldened enough to engage in malfeasance have little to fear.”

With Greenlight returning just 5.2% in 2020—the S&P 500 returned 18%— Einhorn’s rant could seem like sour grapes if the issues he raises weren’t so serious.

Einhorn calls on Congress to grill absentee regulators instead of interviewing Roaring Kitty.

It would be a start.

—Al Root

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J&J Asks Other Vaccine Makers to Investigate Blood Clots as Lawmakers Spar Over Covid Response

Johnson & Johnson asked Pfizer, Moderna, and AstraZeneca to join a coalition to investigate the risk of blood clotting in recipients of Covid-19 vaccines after health authorities temporarily halted its shot in the U.S., according to a report from The Wall Street Journal.

• Pfizer and Moderna declined, according to the Journal. AstraZeneca, which has encountered similar concerns over rare blood clots, agreed. Citing people familiar with the matter, the Journal said some of the vaccine makers declined because their vaccines appeared safe and their shots could be tarnished by association.
• The news comes as vaccine makers and lawmakers prepare for the next phase of reopening and vaccination. Pfizer CEO Albert Bourla said Thursday that people will likely need a third shot to boost their immunity six to 12 months after getting vaccinated, and that annual Covid-19 inoculations are likely.
• Lawmakers on Thursday debated the federal government’s handling of the pandemic during an often heated Congressional hearing with Dr. Anthony Fauci. “When do Americans get their freedom back?” Rep. Jim Jordan (R, Ohio) asked Dr. Fauci, who replied: “I don’t look at this as a liberty thing, Congressman Jordan, I look at this as a public health thing,” adding, “I disagree with you on that completely.”
• Separately, the Centers for Disease Control and Prevention reported that about 5,800 of the more than 66 million Americans who have been fully vaccinated later got infected with Covid-19, with most breakthrough cases reporting mild and manageable symptoms. Of those infected, 74 died.

What’s Next: Dr. Fauci added that officials expect the pandemic to improve by midsummer and called the Johnson & Johnson vaccine “highly effective,” despite its use being paused after six women experienced severe blood clots within two weeks of receiving it.

—Barron’s staff

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China Posts Record Growth in First Quarter but Recovery Seen Slowing

The Chinese economy grew by a record 18.3% in the first quarter of the year compared to the same period of 2020, when it had shrunk for the first time in decades due to the coronavirus pandemic. That was slightly below analysts expectations of a 19%-plus rebound.

• The economy recovered on the strength of industrial production (+24.5%) as well as retail sales (+34.5%) and household consumption in general, with services lagging. According to the country’s National Bureau of Statistics, output was still 10.3% above its level in the first three months of 2019.
• The economy expanded by 0.6% in the period when compared to the previous quarter ended in Dec. 2020, a significant slowdown compared to the previous quarter-on-quarter growth of 3.2%.
• The Chinese government has set an official growth target of 6% for 2021 but most analysts so far see the economy expanding by more than 8%.
• The NBS saw in the numbers “continued momentum of stable recovery” but cautioned that the pandemic “is still spreading globally and the international landscape is complicated with high uncertainties and instabilities.

What’s Next: The slowdown could be welcomed by the government, who would not have to worry too much about a possible surge of inflation in the months to come. With that, it could retreat to some neutrality of both fiscal and monetary policies for the time being.

—Pierre Briançon

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Dow Hits New High as Retail Sales, Unemployment Claims Point to Growing Recovery

Investors bought into rising hopes for a strong economic recovery this year, sending the Dow Jones Industrial Average to its first close above 34,000 after encouraging retail, unemployment, and industrial production numbers came out earlier in the day.

• Notably, the 9.8% growth in March retail sales came not just from small-ticket purchases at restaurants and bars, but also at car dealers, which saw a 15% bump, and gas stations, where sales rose 11%. Setting aside cars and gas, retail sales rose 8.2%.
• Industrial production, which covers everything from computers and electronics to furniture and clothing, also rose 1.4% in March after falling 2.6% in February, with manufacturing output increasing by 2.7%.
• On the jobs front, initial weekly unemployment claims fell to their lowest level since March of 2020 with 576,000 filing, the Labor Department reported. While still nearly three times pre-pandemic numbers, they are far lower than last spring’s peak of more than 6 million.

What’s Next: Investors are also eyeing upcoming earnings, which have so far beaten Wall Street expectations.

—Janet H. Cho

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Massachusetts Regulator Looks to Revoke Robinhood’s Broker License

A Massachusetts securities regulator’s legal battle with Robinhood escalated this week, but the trading platform fired back.

• William Galvin, the Secretary of the Commonwealth of Massachusetts, sued to revoke Robinhood’s license to act as a broker in the state. Robinhood filed its own suit on Thursday, contending that Massachusetts doesn’t have the authority that Galvin thinks it does.
• Galvin says that Robinhood “has continued a pattern of aggressively inducing and enticing” young investors since he first sued the company in December over its practices. He says Robinhood is angling for a piece of their stimulus checks and offering risky margin loans in ways that harm customers.
• “We don’t believe our customers are as naive as the Massachusetts Securities Division paints them to be,” Robinhood said in a statement. “Creating a list of companies that make apparel is not a recommendation. Giving people information about the performance of the stocks they own or watch is not a recommendation.”

What’s Next: Robinhood has been under intense scrutiny since the GameStop stock saga, when it joined some online brokers in limiting purchases of the meme stock. Robinhood has filed for an initial public offering.

—Connor Smith and Avi Salzman

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Olive Garden Lawsuit Puts Tipped Minimum Wage in Spotlight

Advocacy group One Fair Wage has filed a lawsuit against Olive Garden parent company Darden Restaurants alleging that relying on a lower tipped minimum wage increases sexual harassment and causes “disparate wages for workers across racial groups.” The suit comes amid growing calls to raise the federal minimum wage.

• In the complaint filed in California federal court Thursday, One Fair Wage claims that the policy causes people of color to earn less than their white co-workers because it “does nothing to mitigate customers’ tip choices.” The federal minimum wage is $2.13 for tipped workers, although many states mandate a higher base pay.
• The complaint adds that workers whose base pay is lower than nontipped workers are subject to more sexual harassment, noting that “managers have an incentive to ignore, indulge, or even encourage sexual harassment, including requiring or encouraging employees to flirt or dress suggestively.”
• Darden told Barron’s in a statement, “Their objections are with federal and state wage laws – not with our practices,” adding, “we have zero tolerance for any form of harassment or discrimination in our restaurants.” The company announced in March that workers would earn at least $10 an hour, including tips.

What’s Next: One Fair Wage wants the court to rule that tipping policies used in Darden restaurants—which also include The Capital Grille, LongHorn Steakhouse and Eddie V’s—violate the Civil Rights Act of 1964 and are therefore illegal.

—Anita Hamilton

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Do you remember this week’s news? How well do you know your Wall Street history? Take our quiz below about this week’s news. Tell us how you did in an email to [email protected].

1. Which mega tech has announced it is buying artificial intelligence company Nuance Communications for $19.7 billion including net debt, betting on the growing demand for digital applications in healthcare?

a. Alphabet
b. Facebook
c. Microsoft
d. Amazon.com

2. Last November Ant Group’s highly anticipated IPO was abruptly halted as the company faced regulatory scrutiny by Chinese regulators. This week a “rectification program” was announced that sets stipulations on the company to “cut off” the “improper connections” between its payment platform and its financial products, specifically the company will:

a. Apply to become a financial holding company
b. Fold its two online lending services into a regulated consumer finance company
c. Set up a licensed personal credit reporting company
d. All of the above

3. Coinbase Global, the operator of the largest cryptocurrency exchange in the U.S., went public via a direct listing with shares soaring as high as $429 on its first day of trading briefly valuing it at more than $100 billion. The company did not raise new capital with the listing. Instead, early investors and employees sold shares directly. Which exchange will the shares trade on?

a. New York Stock Exchange
b. Nasdaq
c. London Stock Exchange
d. Euronext

4. The Dow Jones Industrial Average closed above 34,000 for the first time this week marking 20 trading days since its last 1,000 point milestone and the fourth 1,000 point milestone this year. Which Dow component contributed the most points to the latest 1,000 point rise?

a. Home Depot
b. Apple
c. American Express
d. Walmart

5. March retail sales surged handsomely beating expectations of 5.5% growth as federal-stimulus payments made their way to households, warmer weather set in and the economy continued its reopening from the pandemic. How much were March retail sales up?

a. 7.8%
b. 8.8%
c. 9.8%
d. 10.8%

100 Years of Barron’s
6. In 2010, the first commercial Bitcoin transaction was made by Laszlo Hanyecz with which company:

a. GameStop
b. Papa John’s
c. Pizza Hut
d. Tesla

Answers: 1(c); 2(d); 3(b); 4(a); 5(c); 6(b)

—Pauline Yuelys and Kenneth G. Pringle

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