WSJ What’s News: "Why Bitcoin Buyer MicroStrategy Is Doing Even Better Than Bitcoin"

Release Date: November 25, 2024
Host/Author: The Wall Street Journal

1. Legal Developments Surrounding Donald Trump

Special Counsel Jack Smith has moved to dismiss two significant federal prosecutions against President-elect Donald Trump. The charges allege that Trump attempted to undermine the 2020 election results and unlawfully retained classified documents post-presidency. Smith stated he was adhering to the Justice Department's policy against prosecuting a sitting president. A Trump spokesperson hailed the decision as a "major victory for the rule of law," emphasizing that state-level prosecutions might also fade.

"Smith's move ends the unconstitutional federal cases against President Trump and is a major victory for the rule of law." – Vicky Huang [00:45]

2. Macy’s Accounting Scandal and Business Revamp

Macy's delayed its quarterly earnings report after uncovering an accounting issue involving $154 million in hidden expenses. The discrepancy was traced back to an accounting employee, now no longer with the company, who deliberately manipulated delivery expenses. Importantly, this maneuver did not affect the company's cash balances or vendor payments, indicating it wasn't for personal gain.

"It was intentional. It was not a mistake." – Vicky Huang [02:08]
Macy's CEO, Tony Spring, is actively working to revitalize the company's operations by closing underperforming stores and enhancing customer experiences. While the financial impact of the accounting issue remains unquantified, the affected $154 million is relatively small compared to Macy's total delivery expenses of $4.36 billion. Stakeholders are anticipating more details in the upcoming December 11 earnings report.

3. NBC’s Thanksgiving Parade Broadcasting Rights

NBC, the longtime broadcaster of Macy's annual Thanksgiving Parade since 1953, faces increased costs to secure the rights for the next decade. Reports indicate that NBC aims to maintain exclusive broadcasting rights on both its network and Peacock streaming service, with proposed payments averaging over $60 million annually, a significant rise from the current $20 million.

4. MicroStrategy's Aggressive Bitcoin Acquisition Strategy

Bitcoin has seen a 40% surge since Election Day, with MicroStrategy outperforming the cryptocurrency itself. The software company, led by CEO Michael Saylor, has transformed into a major Bitcoin purchaser, recently acquiring an additional $5.4 billion in Bitcoin.

Understanding MicroStrategy’s Business Model:
"MicroStrategy started out as a software intelligence company back in the '80s... in 2020, Michael Saylor came up with this idea of buying bitcoin to enhance the value of the company." – Michael Saylor [04:13]
Investment Strategy:
"He issued a lot of stock and sold a lot of convertible bonds... to purchase a lot of bitcoin." – Michael Saylor [04:46]
Potential Rewards and Risks:
"The company used borrowed money from investors to buy bitcoin. This makes it essentially a leveraged strategy... MicroStrategy stock jumped more when bitcoin jumps." – Michael Saylor [05:26]
Critics argue that MicroStrategy's leveraged approach ties the company’s fortunes too closely to Bitcoin's volatility, suggesting that for true Bitcoin exposure, investors might be better off purchasing the cryptocurrency directly.
"If you like Bitcoin, just buy Bitcoin." – Michael Saylor [06:01]

5. Market Reactions to Treasury Secretary Nomination

President-elect Donald Trump's nomination of Scott Besant as Treasury Secretary led to a rally in Treasuries and boosted major U.S. stock indexes. The Dow Jones Industrial Average increased by 1%, while the S&P 500 and Nasdaq each rose by 0.3%.

6. Quikrete’s Acquisition of Summit Materials

Concrete manufacturer Quikrete has announced a $9.2 billion acquisition of Summit Materials, merging two of the largest U.S. cement and concrete producers. This strategic move aligns with increased activity in the building materials sector, spurred by heightened government infrastructure spending.

7. U.S. Mediation Efforts in Lebanon-Israel Ceasefire

Officials from the U.S., Lebanon, and Israel are nearing an agreement to establish a ceasefire, intended to end over a year of conflict between Hezbollah and Israeli forces in Lebanon. U.S. National Security Council spokesman John Kirby emphasized the comprehensive nature of the negotiations:

"Nothing is done until everything is done... we need to keep at the work to see it through." – John Kirby [08:24]

The proposed ceasefire includes a 60-day period for the Israeli military to withdraw, allowing Lebanese armed forces to secure the region and prevent Hezbollah's resurgence.

8. Republican Tax Bill Priorities and Challenges

Republican lawmakers are preparing to present a comprehensive tax bill to President Trump, aiming to combine multiple policy areas including tax cuts, spending reductions, energy policy, and border security. WSJ tax policy reporter Richard Rubin explains that this bundling strategy is designed to navigate the Senate's 60-vote requirement by leveraging the Republican majority.

"The key thing to know is that tax bills, fiscal bills, can get around the 60 vote requirements in the Senate." – Richard Rubin [09:47]

However, negotiating the specifics poses significant challenges, particularly regarding cuts to Medicaid, food stamps, and subsidies for clean energy. Clean energy initiatives, despite being viewed unfavorably by many Republicans, benefit sectors and regions within their constituencies, complicating the potential for substantial reductions without incurring political backlash. Additionally, discussions around the State and Local Tax (SALT) cap—previously introduced in 2017 and allowing limitations on federal tax deductions for high-tax states—remain a contentious point.

"It's totally different. The margins in the House will be potentially as slim as 217, 215 for a while for Republicans." – Richard Rubin [11:25]

The SALT cap issue is particularly sensitive among Republicans representing high-tax regions, making it a pivotal topic in ensuring the bill's passage.

Conclusion

This episode of WSJ What’s News delves into significant developments across political, economic, and business landscapes, highlighting the intricate interplay between corporate strategies, legislative maneuvers, and international diplomacy. From MicroStrategy's bold Bitcoin investments to the complexities of drafting a comprehensive Republican tax bill, the episode provides a thorough overview of events shaping the current and future market dynamics.

Notable Quotes:

• "He issued a lot of stock and sold a lot of convertible bonds... to purchase a lot of bitcoin." – Michael Saylor [04:46]
• "If you like Bitcoin, just buy Bitcoin." – Michael Saylor [06:01]
• "Nothing is done until everything is done... we need to keep at the work to see it through." – John Kirby [08:24]
• "The key thing to know is that tax bills, fiscal bills, can get around the 60 vote requirements in the Senate." – Richard Rubin [09:47]

Speakers:

• Vicky Huang – WSJ Reporter covering Crypto and Retail Investing
• Michael Saylor – CEO of MicroStrategy
• Richard Rubin – WSJ Reporter covering U.S. Tax Policy
• John Kirby – U.S. National Security Council Spokesman
• Tracy Hunt – Host, The Wall Street Journal

This summary is crafted to provide a comprehensive overview of the podcast episode, ensuring that listeners and non-listeners alike can grasp the essential discussions and insights presented.