Passive Aggressive

Biden sunsets solar tariffs ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 7, 2022

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TOGETHER WITH

Good morning.

On the first day of Apple's Worldwide Developers Conference (known as WWDC to iHeads), the Cupertino company announced Apple Pay Later, a buy-now, pay-later service that will be integrated directly into Apple Pay on the forthcoming iOS 16. The service will allow users to split purchases into four equal payments with no interest or fees.

Apple is also adding a feature that will allow iPhone users to edit and delete regrettable iMessages — unfortunately, you won't be able to undo any overeager shopping sprees.

Morning Brief

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The White House took a dramatic step to clear a potentially catastrophic backlog in solar panel imports.

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Passive funds for the first time own more US stocks than their active counterparts.

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Thousands of British workers are joining a four-day workweek pilot.

Clean Energy

The US Waives Tariffs and Mobilizes Domestic Production to Turbocharge Solar Industry

(Solar panels; Photo by Kevin Dooley)

This is a story about shady behavior and a plan that ran out of steam.

On Monday, the White House announced it will temporarily waive certain tariffs on solar panel imports to ease a heated conflict between domestic and foreign manufacturers. Hanging in the balance are almost two-thirds of US solar installations this year.

They've Seen Better Rays

The story of solar installations in the US is one of stiff government action and unforeseen consequences. In 2012, the US government slapped aggressive tariffs, as high as 250%, on Chinese solar panels after the Commerce Department found that Chinese manufacturers were flooding the market with subsidized, low-cost panels.

The move was intended to decrease China's dominance in the domestic market, but US solar production has grown only modestly since. Instead, Cambodia, Malaysia, Thailand, and Vietnam have almost entirely filled the void, accounting for 85% of US solar panels in 2021, according to analysts at Rystad Energy.

Or so it seemed. In March, US manufacturer Auxin Solar alleged Chinese companies are clandestinely operating many of the solar factories in southeast Asia to circumvent US tariffs. The fallout of the accusation is threatening to derail much of the present-day solar industry, and has triggered another round of regulatory action and market consequences:

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A Commerce Department investigation into Auxin's claims has spooked importers, now fearful of being on the hook for $3.6 billion in retroactive tariffs. The result: widespread halted orders, with 64% of solar installations planned for 2022 now under threat of cancellation — and thousands of jobs related to those projects at risk.

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In an attempt to blunt the fallout, the White House waived tariffs Monday on panels from Cambodia, Malaysia, Thailand, and Vietnam for two years to grant importers confidence amid the probe. To further stabilize the domestic solar market, the White House also invoked the Defense Production Act to allocate resources to domestic manufacturing.

The White House said it expects domestic solar manufacturing to triple by 2022, allowing 3.3 million homes to switch to solar energy every year.

The Winners Are? US solar companies SunPower, Enphase Energy, Sunrun, NextEra, and Southern Company rose after the news broke and industry group the Solar Energy Industries Association praised the decision. But panel manufacturer First Solar, whose shares fell, complained that Monday's announcement "undermines American solar manufacturing" while Auxin blasted the decision as opening "the door wide for Chinese-funded special interests." No surprise that everyone in the solar industry thinks everything revolves around them.

Investing

Passive Funds Own More US Stocks Than Active Funds for the First Time

For the first time ever, US markets have turned passive-aggressive.

That is to say, for the first time passively managed index funds now account for more ownership of the US stock market than their actively managed counterparts, new data shows.

Reversal of Fortune

This new phenomenon has been over a decade in the making. At the center of the story are exchange-traded funds — most of which are passively managed — and mutual funds — most of which are actively managed. Last year, according to data from the Investment Company Institute (ICI), 88% of ETFs had positive net inflows, while that was only the case for 48% of mutual funds, in line with a ten-year trend.

In fact, actively managed US equity mutual funds have seen net outflows every year since 2005, while the assets held by ETFs quintupled to $7.2 trillion in the last decade (that's grown five times for anyone who failed out of Latin). Part of why ETFs have grown in popularity is they don't require a minimum initial investment, something many actively managed funds do. They also tend to charge lower fees because they're indexed — a "set it and forget it" investment approach — rather than overseen by managers. That appeal has flipped the market upside down:

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Last year, an incredible $935 billion in ETF shares were issued, nearly double the $501 billion in 2020, which was the previous record. Passive funds now account for 16% of US stock market capitalization, compared to 14% by active funds.

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Ten years ago, active funds held 20% of US shares and passive ones a mere 8%. Since then, about $2 trillion has migrated from actively managed domestic equity funds to passive ones, according to the ICI.

Too Much Power? The massive inflows to the funds industry has coincided with tremendous consolidation — the 25 largest mutual fund and exchange-traded fund sponsors (out of 825) control 83% of the industry's total assets, up from 67% in 2005, according to ICI. This has led some analysts and academics to raise the alarm over "potential for oligopolistic collusion between these players," Kenneth Lamont, a Morningstar senior fund analyst for passive strategies, told the Financial Times. BlackRock hedged against this last year by allowing its biggest clients to vote as shareholders, blunting the asset manager's proxy powers. But by and large, passive investors still get to keep their feet up.

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Labor

Largest Four-Day Workweek Pilot Ever Launches in the UK

Workers in the United Kingdom just enjoyed an extended weekend to celebrate the 70-year reign of Queen Elizabeth II. Now, thousands of employees will continue to enjoy long weekends.

On Monday, the largest four-day work week pilot program in history launched in the UK, with 3,300 employees across 70 different companies participating. Researchers from Cambridge, Oxford, and Boston College will assess whether employees truly can operate at 100% productivity in just 80% of the time — while retaining the exact same salary. God speed, test subjects.

On Her Majesty's Secret Service (Monday - Thursday)

Organized by non-profit groups 3 Day Week Global, 4 Day Week UK Campaign, and Autonomy, the six-month-long trial will include workers at companies as diverse as banking, health care, retail, and hospitality, and will assess outcomes far beyond just workplace productivity, including "stress and burnout, job and life satisfaction, health, sleep, energy use, travel, and many other aspects of life," lead researcher and Boston College sociology professor Juliet Schor told The New York Times on Monday.

It's just the latest in a long run of trials and movements to tip the work-life balance scales a touch more in life's favor:

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2,500 workers in Iceland participated in the previous largest trial, which ended in 2019 and saw no drop in productivity, CNN reported; 86% of all workers in the country are now eligible for 36-hour-or-shorter workweeks.

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In Spain and Scotland, the governments even offer companies subsidies for implementing a four-day work week. Meanwhile, companies in Ireland, Australia, Canada, and the US are planning similar trials this Fall.

WorkerGate: Though the trend accelerated as working habits shifted amid the pandemic, the concept is not exactly new. As Vice President in 1956, Richard Nixon even imagined long weekends as the norm in the "not too distant future." The definition of "not too distant" is getting stretched, but a May 2020 survey conducted by GoodHire found 83% of 4,000 full-time employees support lopping off Fridays. Color us shocked.

Extra Upside

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Will he, won't he? Elon Musk is threatening to bail on his proposed Twitter acquisition over his "thwarted" access to information on fake accounts.

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"I hope it bursts soon so that we can stop paying attention to the 'finance bros' who just want to make money." Some NFT makers want the digital tokens bubble to pop.

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