The markets: The non-farm payroll jobs report is due at 8.30 a.m. today. Expectations: jobs up by 155,000; unemployment to stay at 4.2%. ... U.S. stocks were broadly flat yesterday with the S&P 500 still under the 6000 threshold. ... US futures called for further declines pre-open. ... Europe and Asia were marginally down this morning.
Today: The Los Angeles fires are not yet under control because LA’s water-supply infrastructure is not capable of generating the sustained pressure necessary to support firefighters at scale, indefinitely, against five separate blazes. Firefighters have made some progress, however. The death toll is now at 10. More than 9,000 buildings have been razed. 130,000 people have been ordered to evacuate areas north of the city. LA Times coverage here.
CEO Daily insight: Climate stability and the insurance market
Good morning. The wildfires in Los Angeles have killed people, destroyed thousands of homes, and are now likely to exceed $50 billion in losses. There are the donations and expressions of sympathy from leaders like Apple CEO Tim Cook and Amazon’s Andy Jassy, surreal trivialities like theme park closures alongside devastated residents posting pictures of their former homes.
We saw this coming.
Insurance carriers have been abandoning wildfire-prone areas for years, leaving some residents with no money to rebuild. State Farm announced last year it was discontinuing 72,000 policies in California, including about 70% of policies in Pacific Palisades, the neighborhood now devastated by fire. It’s one of several major insurers to have pulled back or pulled out of the market in recent years.
I spoke with PG&E CEO Patti Poppe, Edison International CEO Pedro Pizarro, and Sunrun CEO Mary Powell about their efforts to create a more resilient grid that — among other things — would reduce wildfire risk. In my podcast conversation with Poppe about taking the helm in the aftermath of the 2018 Camp Fire (started by a PG&E power line), she talked about the reality that “the risks have changed.”
When I reached out to Pizarro this week, he noted that several hundred of his team members had to be evacuated and at least 15 had lost their homes. Back in the summer, he told me that his team at Edison had reduced the probability of catastrophic fire starting from his infrastructure by 85 to 88% in the prior six years. [Edison covers about 50,000 square miles in California, more than a quarter of which is in a high fire-risk area. “Every sector is going to need to be making investments to adapt its infrastructure for the climate change that’s coming,” Pizarro told me.
When it comes to assessing the business impact of climate change, I’ve long looked to Spencer Glendon of Probable Futures. He’s an economist and former head of research at Wellington Management who argues that 12,000 years of climate stability have made us complacent and illiterate about climate change.
As Glendon noted in a commentary we ran last year, “the end of climate stability signals the end of the insurance market as we know it.” That’s because insurance doesn’t protect you against hazards. It’s a financial contract, based on pooled risk, that reimburses you if you’re among the unlucky ones to face a rare and predictable hazard.
When such hazards become unpredictable or heartbreakingly common, affecting everybody in the pool, the market structure crumbles along with the buildings they’re designed to protect.
Also on the radar:
Global temperatures warmed by more than 1.5C last year for the first time ever. It was the warmest year on record. Global warming is accelerating, Europe’s Copernicus observation agency said today.
President-elect Trump will be sentenced in a New York court today on 34 counts in the Stormy Daniels hush money case.
Trump called U.S. Supreme Court Justice Samuel Alito on the phone on Tuesday, right before the court ruled to allow the sentencing of Trump to proceed. They did not talk about the case, Alito said. Nonetheless, “the fact of the call and its timing flouted any regard for even the appearance of a conflict of interest, according to the NYT.
Blackrock is pulling out of the Net Zero Asset Managers initiative, which committed asset managers to reaching net-zero greenhouse gas emissions by 2050.
Mark Zuckerberg defended his decision to ax censorship rules on Meta. Those who leave Facebook, Instagram, and Threads are “virtue signalling,” he said.
Tipping: It’s not just you. Americans, annoyed by ubiquitous auto-prompts for tips, have reduced the amount they give, data shows.
From the analysts:
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UBS on Trump: Economists are gloomy about Trump’s economic plans while investors are bullish. Why? “I suspect economists are taking a lot of what Trump says he will do as likely to play out,” UBS’s Evan Brown told the FT. “Investors, rightly or wrongly, are betting that Trump won’t follow through to nearly the same extent.”
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HSBC on CATL: Herald van der Linde and his team have an amazing fact about how fast Chinese EV battery maker CATL can produce goods: “CATL can produce one battery cell every second and one battery pack every 2.5 minutes,” he wrote in a note seen by Fortune.
- Goldman Sachs on UK bond sell-off: The gilts sell-off, with yields going up, will be a 0.1% drag on British GDP this year, Sven Jari Stehn and his team said in a note seen by Fortune.
More news below.
Diane Brady
diane.brady@fortune.com
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