What we’re reading (11/6)
“SoftBank Stares At Over $50 Billion In Weekly Losses After Stock Drops 8% As Investors Sour On AI Plays” (CNBC). “This comes after SoftBank gained nearly 3% in the previous session, having plunged 10% on Wednesday to clock its worst day since April. It stares at about $53 billion market cap wipeout this week and its worst weekly loss since March 2020, if Friday’s losses hold. ‘SoftBank Group’s shares are falling as many bought it as the only listed proxy for OpenAI,’ said David Gibson, senior research analyst at financial services firm MST Financial.”
“The Performance Fee Puzzle” (Behavioral Investment). “Performance fees are one of the more puzzling aspects of the fund industry. They are often hailed as a way of best aligning the incentives of fund manager and client yet, in reality, frequently benefit the former at the expense of the latter. Often in an egregious manner. If we developed our own high conviction investment strategy and sought to make it as lucrative as possible (for ourselves), we would want access to a large pot of assets (ideally somebody else’s) and to participate directly in its performance. Getting paid a healthy annual retainer would be the cherry on the cake. Is it unreasonable to suggest that fund managers levying performance fees should actually be paying clients for gaining access to sizeable asset pools? Perhaps, or maybe it is just unrealistic (the lights need to stay on). Clients are, however, providing the necessary capital, bearing the vast majority of downside risk and often paying out fees for volatility. Hardly a textbook example of incentive alignment.”
“Tesla Shareholders Approve Elon Musk’s $1 Trillion Pay Package” (Wall Street Journal). “Tesla shareholders approved a record-setting pay package for Chief Executive Elon Musk, a plan designed to motivate the world’s richest man with as much as $1 trillion in additional stock. Flanked by dancing humanoid robots on a stage bathed in pink and blue light at Tesla’s Austin, Texas, headquarters, Musk thanked the crowd of shareholders who supported the pay package with more than 75% of the votes cast.”
“Fed’s Hammack: ‘It’s Not Obvious’ The Central Bank Should Cut Rates Further” (Yahoo! Finance). “Cleveland Fed president Beth Hammack doubled down Thursday on her concerns about inflation, saying that it’s not obvious the central bank should cut rates further. ‘I remain concerned about high inflation and believe policy should be leaning against it,’ Hammack said at the Economic Club of New York. ‘After last week’s meeting, I see monetary policy as barely restrictive, if at all, and it’s not obvious to me that monetary policy should do more at this time. But the future is inherently uncertain, and I’m watching developments closely.’”
“American Suburbs Have A Financial Secret” (The Atlantic). “Municipal debt is a secret American pastime, defining—and dividing—suburbs across the United States. In his new book, Cracked Foundations: Debt and Inequality in Suburban America, the urban historian Michael Glass looks behind the marketing that attracted flocks of Americans to places like Levittown and uses debt as a lens through which to understand suburban disparities. The U.S. is one of the only countries in the world where municipalities raise money primarily through bonds, and their differential treatment on the private market has quietly driven inequality across the nation. Saddled with higher interest rates on their bonds, people in poor cities and towns today pay double the amount in property taxes, often suffer higher home-foreclosure rates, and wield paltrier education budgets compared with their wealthier counterparts.”
