What we’re reading (2/11)
“AQR Continues To Shine” (Institutional Investor). “AQR continued to roll in January, fresh of its best year ever for several of its strategies. The quant-driven firm’s Absolute Return strategy — AQR’s broadest and longest-running multistrategy offering, launched in 1998 — gained a net 2.2 percent in January[.]”
“Beat It (Or Don’t): An Update To A Chilly Earnings Season” (Charles Schwab). “With fourth-quarter earnings season now in full swing (half of S&P 500 members have reported results at the time of this report's publishing), it's worth taking stock of the outcome thus far. Overall, results continue to skew less impressive, with downward momentum building for the blended growth rate, beat rate, and percentage by which companies are beating estimates. Profits haven't been apocalyptic by any means, but it's worth noting that the bar has been lowered significantly of late—thus making ‘beats’ seem less severe and ‘misses’ that much gloomier.”
“Louis Vuitton’s Formula For World Domination” (Wall Street Journal). “Even as it took steps to broaden its appeal, the brand put in place measures to manage the risks associated with becoming too widespread and easy to get. Its number of stores has changed little over the past 10 years, closing some as it opens others. Vuitton doesn’t sell through wholesalers and it doesn’t license its designs. There are no end-of-season sales.”
“The S.E.C. Signals A Crackdown On Another Crypto Practice” (New York Times). “The S.E.C.’s decision to charge the crypto exchange Kraken with securities violations over a popular way for the industry to make money sent more chills down the spines of executives across the sector. At 7:40 a.m. Eastern, the price of Bitcoin traded at $21,757, down nearly 3.9 percent in the past 24 hours. Crypto companies — and skeptics of the agency’s approach to regulation — now worry what new limits the agency will seek to impose on the industry.”
“Google Just Told Laid Off Workers That It Miscalculated The Amount Of Stock They’ll Get In Their Severance. And Some Employees Will Get Less Than Expected.” (Insider). “‘First we want to apologize for an inaccurate calculation that appeared in the initial notification email. The severance package that we explained in the support site, detailed documentation and publicly was correct, but it was inaccurately reflected in the email we sent,’ the email, which Insider obtained a copy of, reads.”
What we’re reading (2/10)
“Why Investors Are Piling Into Funds That Promise Not To Beat The Stock Market” (Wall Street Journal). “The prospect of getting most of the market’s upside, less of the downside and big steady dividends along the way sounds like an investing paradise. No wonder the JPMorgan fund took in $12.9 billion in new money last year—the biggest annual haul for any actively managed ETF ever. Three covered-call funds from Global X, linked to the Nasdaq-100, S&P 500 and Russell 2000 indexes respectively, attracted a combined $5.2 billion in 2022. So far in 2023, approximately $3 billion more has flowed into these four funds alone.”
“Risk And Regret” (Morgan Housel). “Daniel Kahneman once said an important part of becoming a good investor is having a well-calibrated sense of your future regret. You need to accurately understand how you’ll feel if things turn out differently than you hoped. Maybe regret is the best definition of risk.”
“For More Certainty In Your Retirement Portfolio, Consider Annuities” (New York Times). “With interest rates on the rise, many annuities have become even more attractive. Consumers poured money into both simple annuities that work much like bank certificates of deposit, as well as more complicated products that offer a cushion against stock market losses. Paycheck annuities — which provide a guaranteed stream of income for life — also made something of a comeback.”
“Is It Risk-On Again?” (The Capital Spectator). “This year’s rebound in asset prices around the world suggests that investor sentiment is shifting to risk-on after a year of playing defense. Trying to divine the future for pricing is always precarious, especially in the near term. But there’s no charge for looking at proxies of key market trends through various ETF pairs. As we’ll see, certain slices of markets are predicting a new bull run, but it’s still early to ring the all-clear signal, according to a broad measure of US stocks relative to US bonds, which is arguably a more reliable indicator. But let’s start with the sizzle.”
“Stock buybacks Don’t Really Matter” (Noahpinion). “[I]n practice, making repurchases more expensive likely won’t do much to increase hiring or wages. But there’s another reason lots of people want to tax or even ban buybacks; they think buybacks pump up the price of a company’s shares, giving an untaxed windfall to shareholders. Interestingly, this is also wrong; as I’ll explain, a stock buyback should have only a small effect on the price of the stock, and it’s not clear whether the effect will be positive or negative.”
What we’re reading (2/9)
“Utopia Or Bust” (Bradford Delong, Project Syndicate). “The grand narrative of 1870-2010 was about technological triumph, coupled with social-organizational failure. The post-2010 grand narrative has yet to be written, mainly because humanity has been taking hesitant steps in at least four directions.”
“What Recession? Some Economists See Chances Of A Growth Rebound.” (New York Times). “Many economists and investors had a clear narrative coming into 2023: The Federal Reserve had spent months pushing borrowing costs rapidly higher in a bid to tame inflation, and those moves were expected to slow growth and the labor market so much that the economy would be at risk of plunging into a downturn. But the recession calls are now getting a rethink.”
“Yahoo To Lay Off 20% Of Its Workforce” (CNN Business). “A Yahoo spokesperson told CNN that the company’s legacy ad tech division, Yahoo for Business, will be overhauled and transformed into a new division called Yahoo Advertising. As part of that change, Yahoo plans to cut nearly 50% of the division this year, ‘including nearly 1,000 employees this week,’ the spokesperson said.”
“Layoffs Watch ’23: JPMorgan Chase” (Dealbreaker). “Mortgage rates are dropping. The housing market is showing signs of life. Refinancings are up. Manhattan rents are higher than ever. All too late, apparently, for some hundreds of JPMorgan mortgage employees about to join the thousand or so of their former colleagues (and 6,000 other new layoff victims) in the tightest job market in a half-century.”
“Mass Layoffs Or Hiring Boom? What’s Actually Happening In The Jobs Market” (Wall Street Journal). “The U.S. added 1.1 million jobs over the past three months and ramped up hiring in January. That appears puzzling, given last year’s economic cool down, signs that consumers are pulling back on spending as their savings dwindle, and a stream of corporate layoff announcements, particularly in technology. Driving the jobs boom are large but often overlooked sectors of the economy. Restaurants, hospitals, nursing homes and child-care centers are finally staffing up as they enter the last stage of the pandemic recovery. Those new jobs are more than offsetting cuts announced by huge employers such as Amazon.com Inc. and Microsoft Corp.”
What we’re reading (2/8)
“Third Point Has A Stake In Salesforce” (Wall Street Journal). “Third Point is known for taking stakes and pushing for change at blue-chip companies including Campbell Soup Co., Shell PLC and Walt Disney Co., with which it reached a settlement agreement last year. The size of the position and what Third Point’s plans are couldn’t be learned. It is possible the firm will stay quiet and not launch a campaign.”
“Microsoft Will Let Companies Create Their Own Custom Versions Of ChatGPT, Source Says” (CNBC). “Microsoft is seeking to capitalize on the attention in multiple ways. The company provides the cloud-computing back end for ChatGPT, and in January Microsoft said it had invested billions of dollars in OpenAI. Microsoft has also been working to incorporate OpenAI technologies into its own products. On Tuesday, Microsoft announced that it is augmenting Bing, its search engine, and Edge, its internet browser, with ChatGPT-like technology.”
“Google Chatbot Blunders As AI Battle With Microsoft Heats Up” (AFP). “Google on Wednesday announced a slew of features powered by Artificial Intelligence (AI), but a mistake in an ad caused its share price to tank. The search engine giant is rushing into the space after the bot ChatGPT caught the imagination of web users around the world with its ability to generate essays, speeches and even exam papers in seconds.”
“Revisiting The Summer Of Stagflation” (Paul Krugman, New York Times). “What is clear, however, is that until a few months ago many if not most economic prognosticators were far too negative about America’s prospects. In particular, we went through what I think of as the summer of stagflation — a period, actually extending some way into fall, when many influential economists were making extremely grim pronouncements about what it would take to bring inflation under control.”
“The Core Principles Of Momentum Investing” (Validea). “There is some debate as to why momentum works in public companies, but the most popular reason relates to the fact that public companies have prices that are regularly quoted and many investors buying and selling them. This introduces all the biases we all suffer from as human beings into the process. I won’t get into all the details here, but the end result is that we often tend to underestimate the good news with companies that have performed well in the intermediate term. That obviously won’t be true for every company, but it is true for a group of them. By investing in a basket of these companies, an investor can benefit from this mispricing and generate an excess return. This is what is often referred to as the behavioral explanation for momentum.”
What we’re reading (2/7)
“Holding Our Breadth” (AQR Capital Management). “Of all the correlations in the world, the one between stocks and bonds is undoubtedly of greatest interest to investors. This important number was generally negative for the first two decades of the 2000s, but that wasn’t the case in the preceding decades, and might not be the case going forward. Why does this matter? If stocks and bonds (and stock- and bond-related asset classes) become more correlated to each other, then investors’ overall portfolios become riskier.”
“Fed Chair Powell Says Inflation Is Starting To Ease, But Interest Rates Still Likely To Rise” (CNBC). “Federal Reserve Chairman Jerome Powell said Tuesday that inflation is beginning to ease, though he expects it to be a long process and cautioned that interest rates could rise more than markets anticipate if the economic data doesn’t cooperate.”
“Stocks Close Higher After Powell Remarks” (Wall Street Journal). “Stocks started Tuesday morning lower, but gained ground shortly after Mr. Powell began speaking in a broadcast conversation with Carlyle co-founder David Rubenstein. A flurry of selling then sent indexes back into the red, but stocks regained positive territory later in the afternoon.”
“Disney Has Bigger Problems Than Ron DeSantis” (CNN Business). “Disney has found itself in the middle of a culture war battle that could end up transferring Disney World’s governance to a board appointed by Florida Gov. Ron DeSantis. And that may be the least of Disney’s problems. The company faces a media industry in turmoil, plunging cable subscriptions, a still-recovering box office, massive streaming losses, activist shareholders, possible reorganization and layoffs and growing labor disputes with employees. That’s a lot for CEO Bob Iger to handle.”
“How Gen Z And The Great Resignation Created A Wave Of Pverinflated Job Titles” (Insider). “Since 2019, employers have tripled their use of the word ‘lead’ in early-career tech jobs, upped their use of "principal" by 57%, and cut their use of the word ‘junior’ by half. ‘It was shocking to me how dramatic it's been,’ says Maryam Jahanshahi, the head of R&D at Datapeople. ‘It’s rampant in lots of different types of jobs.’”
What we’re reading (2/6)
“Housing Market Shows Signs Of Thawing” (Wall Street Journal). “Falling mortgage rates are beginning to stir demand in the housing market. The average 30-year home loan rate has come down by just about a full percentage point from a 20-year high above 7% in November, largely in response to signs that the Federal Reserve is nearly finished lifting rates. That has brought some new buyers into the market.”
“Musk’s Twitter Has Just 180,000 U.S. Subscribers, Two Months After Launch” (The Information). “Around 180,000 people in the U.S. were paying for subscriptions to Twitter, including Twitter Blue, as of mid-January, or less than 0.2% of monthly active users, according to a document viewed by The Information. The tiny number signals the challenge Elon Musk faces in turning the subscription product into a major source of revenue.”
“Is The Economy Kind Of Good Now?” (Vox). “It might be time to open up a perhaps surprising possibility here, at least if you’ve been paying attention to the chatter around high-profile layoffs and a potential recession. The economy seems like it’s … kind of in a pretty decent spot.”
“Hot January Jobs Report Presents Puzzle for Investors” (Morningstar). “The January jobs report showed the opposite of what many investors and economists had expected: Instead of an economy heading toward a recession, the job market carried on at a confoundingly strong pace.”
“Google Unveils Its ChatGPT Rival” (CNN Business). “Sundar Pichai, CEO of Google and parent company Alphabet, said in a blog post that Bard will be opened up to ‘trusted testers’ starting Monday, with plans to make it available to the public “in the coming weeks.’ Like ChatGPT, which was released publicly in late November by AI research company OpenAI, Bard is built on a large language model. These models are trained on vast troves of data online in order to generate compelling responses to user prompts.”
What we’re reading (2/3)
“Value Stocks? Growth Stocks? Markets Last Year Turned Everything Topsy-Turvy.” (New York Times). “The new growth stocks, in the estimation of S&P Dow Jones Indices, an influential market analysis firm, now include fossil-fuel energy companies. The world has changed radically in the last year or two, and traditional categories, like growth and value, are topsy-turvy.”
“Unemployment Falls To 3.4%, Lowest In 53 Years, Jobs Report Shows” (Wall Street Journal). “The unexpectedly strong hiring gains raise questions about whether the economy, which had been losing momentum over the past several months, is starting to pick up steam again. If so, that could prompt a more aggressive response by the Federal Reserve as it raises interest rates in an attempt to temper economic growth and bring down inflation.”
“In Boost For Ford And Tesla, Treasury Changes EV Tax Rules Making It Easier To Qualify As An SUV” (CNN Business). “With new rules now in effect for electric vehicle tax credits, that answer could mean thousands of dollars to some car buyers and lots of money to automaker profits. Under the new regulations, car buyers can’t claim tax credits for cars costing more than $55,000. But, for SUVs, the sticker price can be as high as $80,000. Until now, the Treasury Department considered the Mustang Mach-E a car, not an SUV, for purposes of tax credits. Same with the Tesla Model Y, unless it was equipped with a third row of seats.”
“NSA Wooing Thousands Of Laid-Off Big Tech Workers For Spy Agency’s Hiring Spree” (The Washington Times). “The National Security Agency is doggedly courting laid-off Big Tech workers as the spy agency undertakes one of its largest hiring surges in the last 30 years. The NSA began privately reaching out to Big Tech employees over LinkedIn last fall, as word spread that major American companies such as Meta and Amazon were bleeding tens of thousands of skilled workers.”
“Is Meta Actually Making A Comeback?” (Gizmodo). “Zuckerberg made clear he isn’t retreating from the Metaverse, but during the most recent earnings call with investors he appeared to reorient his focus towards solving more near-term business challenges. 2023, Zuckerberg said, would be the ‘Year of Efficiency.’ The CEO jumpstarted that “nimble” efficiency in November by axing around 11,000 of its workers, the largest round of layoffs in Facebook history. Cold-hearted investors clapped.”
What we’re reading (2/1)
“Fed Slows Its Tightening With Quarter-Point Interest Rate Rise” (Wall Street Journal). “The Federal Reserve nudged up short-term interest rates by a quarter-percentage point and signaled it was on track to do so again at its meeting next month while officials consider whether and when to pause increases late this spring. The decision Wednesday to raise the Fed’s benchmark federal-funds rate followed six larger, consecutive increases to combat inflation, which hit a 40-year high last year. Officials raised rates by a half point in December and by 0.75 point in November.”
“Americans Are In For More Economic Pain This Year As The Fed Signals Its War On Inflation Will Continue” (Insider). “On Wednesday, the Federal Reserve announced it's raising interest rates 25 basis points — a slowdown from December's 50 basis point increase. It's a sign the Fed is responding to recent data showing the country is recovering from the pandemic, with inflation slowing (now at a level of 6.5% year-over-year in December) and the economy growing, and it's the bank's latest effort to get the country to the pre-pandemic 2% level of inflation.”
“Bond King Jeffrey Gundlach Says He Expects One More Fed Rate Hike” (CNBC). “DoubleLine Capital CEO Jeffrey Gundlach said he sees one additional rate hike from the Federal Reserve before the central bank ends its tightening cycle. ‘I think one more,” Gundlach said Wednesday on CNBC’s ‘Closing Bell: Overtime.’ ‘I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.’”
“The Private Markets Valuation Debate Isn’t Settled Yet” (Institutional Investor). “Private equity and venture capital firms mark, or assign value to, their portfolios on a quarterly basis. Their limited partners receive that data a few weeks after the quarter ends. Audited on an annual basis, these numbers can be adjusted by managers based on certain metrics. At present, private investment valuations lag the public markets, although that could soon change as the valuations, audited in December, begin to trickle in.”
“Are NFTs Actually... Interesting? This Suit Could Be Precedent Setting” (Dealbreaker). “If you were hearing about this story at the watercooler or company-compelled Zoom socializing effort, you’d expect copyright infringement to be at the top of the list, no? You learn something everyday. This case spins on if RC/BAYC has any merit-bearing defenses rooted in artistic value or free speech. The US District Court for Central District of California held a resounding ‘Nah’.”
February picks available now
The new Prime and Select picks for January are available starting now, based on a model run put through today (January 30). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Wednesday, February 1, 2023 (at the mid-spread open price) through the last trading day of the month, Tuesday, February 28, 2023 (at the mid-spread closing price).
What we’re reading (1/29)
“Breakup Of Google’s Ad Business Would Reshape $500 Billion Sector” (Wall Street Journal). “Google spent the better part of two decades building the world’s most powerful digital advertising machine. Breaking it up would send shock waves through the $500 billion online-ad market.”
“‘Buy Now, Pay Later’ Is The Victim Of Its Own Success” (DealBook). “Last Tuesday was a rough day for Goldman Sachs. The share price fell 6 percent after the Wall Street giant reported its worst earnings miss in a decade. On a call that morning, analysts peppered David Solomon, the bank’s C.E.O., with questions about its consumer banking strategy, and about one unit in particular, GreenSky. Goldman closed its $2.2 billion acquisition of GreenSky, a pioneer in the “buy now, pay later” (B.N.P.L.) lending sector, in March, calling it a key piece in its strategy to build “the consumer banking platform of the future.” It flew under the radar until last quarter, the first in which Goldman broke out earnings for its “platform solutions” business unit, which includes GreenSky. The picture wasn’t pretty. Revenues were up, but the division lost $1.66 billion in 2022.”
“What’s Passive Income? It’s Not What Influencers Say It Is.” (New York Times). “Search ‘passive income’ on YouTube, TikTok or Reddit and you’ll find a wealth of videos by people claiming they make thousands of dollars each month this way — whether they sell courses, e-books or other products online; offer property on short-term rental platforms like Airbnb and VRBO; or even buy and maintain vending machines in high-traffic buildings. The allure: Theoretically, it’s easier than a traditional 9-to-5 ‘job.’”
“When You Can’t Speak To The Manager — Or Anyone” (Vox). “There’s been a breach of the Jonny Boston’s International Facebook page. Jonathan Kiper, the New Hampshire restaurant’s owner, is no longer able to access his personal Facebook account or, in turn, the page for his business, where he once kept customers updated about specials and deals. He’s tried to get back in, going through the online process to report his account as compromised multiple times and sending in a picture of his driver’s license to prove he’s, well, himself. But thus far, his efforts have been to no avail. He always gets tripped up at the last verification step — the one where Facebook sends a test code — because it appears the hacker has changed the account’s phone number. It’s actually two phone numbers that are at the heart of Kiper’s problem: the hacker’s and Facebook’s, or rather, Facebook’s lack thereof.”
“In Texas Oil Country, An Unfamiliar Threat: Earthquakes” (New York Times). “The West Texas earth shook one day in November, shuddering through the two-story city hall in downtown Pecos, swaying the ceiling fans at an old railroad station, rattling the walls at a popular taqueria. The tremor registered as a 5.4-magnitude earthquake, among the largest ever recorded in the state. Then, a month later, another of similar magnitude struck not far away, near Odessa and Midland, twin oil country cities with relatively tall office buildings, some of them visible for miles around.”
February picks available soon
We’ll be publishing our Prime and Select picks for the month of February before Wednesday, February 1 (the first trading day of the month). As always, we’ll be measuring SPC’s performance for the month of January, as well as SPC’s cumulative performance, assuming the sale of the January picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Tuesday, January 31). Performance tracking for the month of February will assume the February picks are bought at the open price (at the mid-point of the opening bid and ask prices) on the first trading day of the month (Wednesday, February 1).
What we’re reading (1/27)
“Stocks Close Higher Friday, Nasdaq Posts Fourth Week Of Gains” (CNBC). “All the major averages posted a positive week and are on pace for a month of gains. The tech-heavy index rose 4.32% and closed out its fourth week of gains. It’s on pace for its best monthly performance since July. The S&P and Dow added 2.47% and 1.81%, respectively, this week.”
“Consumer Spending Fell 0.2% In December As Inflation Cooled” (Wall Street Journal). “Consumer spending fell a seasonally adjusted 0.2% in December from the prior month, the Commerce Department said Friday, the second straight monthly drop following solid spending increases during several months last year. Adjusted for inflation, spending fell 0.3% last month.”
“How Much Does Aging Really Hurt A Country?” (Noahpinion). “[I]f aging demographics are a source of national weakness, then the developed democracies are in much the same boat as China. Median ages have actually converged, and all the industrialized countries are expected to age substantially in the decades ahead[.]”
“Microsoft Is Beating Google At Its Own Game” (Vox). “Microsoft appears to be on the cusp of being something it hasn’t been in a long time: cutting-edge. It’s a label the company lost a long time ago after a series of small startups grew to become Microsoft’s biggest competitors. Google, for example, started out as a nimble, innovative upstart and eventually bested Microsoft in browsers, email, and mobile operating systems. But now Microsoft might be the nimble, innovative company that bests Google in artificial intelligence. And it’s all thanks to OpenAI.”
“Mark Zuckerberg Reportedly Said He Doesn't Like Seeing ‘Managers Managing Managers,’ Fueling Speculation Of More Layoffs” (Insider). “Meta is among the slew of tech giants that have been drastically downsizing their workforces over the past several months, like Twitter, Amazon, Microsoft, and Google. The mass layoffs have left many in the tech industry panicked uncertain about the future of the industry.”
What we’re reading (1/25)
“Hedge Funds Lost More Than $200 Billion Last Year” (Institutional Investor). “In the market’s worst year since the financial crisis of 2008, hedge funds lost $208.4 billion, according to an annual report by LCH Investments Chairman Rick Sophers. Almost 9 percent of those losses are attributable to one hedge fund firm — Chase Coleman’s Tiger Global.”
“IBM To Cut 3,900 Jobs Amid Broader Tech Slowdown” (Wall Street Journal). “International Business Machines Corp. on Wednesday joined the wave of companies making layoffs, saying it would cut about 3,900 jobs. The cuts will stem from Kyndryl Holdings Inc., the IT services business that IBM spun off last year, and its healthcare divestiture, from which the company will incur about a $300 million charge, a spokesman confirmed.”
“A Short Seller Takes Aim At An Indian Corporate Giant” (DealBook). “Hindenburg Research, the short seller that rose to prominence by going after unprofitable blank-check firms and crypto companies, is pursuing its biggest targets yet: the Indian conglomerate Adani Group and its billionaire founder, Gautam Adani, whom Forbes ranks as the world’s third-richest person. Just as India’s stock market opened this morning, Hindenburg issued a lengthy report which claims that Adani pulled off ‘the largest con in corporate history.’"
“Does America Have Too Much Debt?” (New York Times). “[M]y view is that we’ll probably be headed back to an era of low interest rates. Markets also expect the Fed to unwind many of its recent rate hikes, although not all of them. This could all be wrong, but if we find ourselves back in a low-interest-rate world, that will also be a world in which trying to reduce the debt would cause a lot of economic problems at a time when the Fed lacked its best tool for dealing with them.”
“The Psychedelic Industrial Complex Is Evil” (UnHerd). “The faith we once put in transcendent states has been swiftly industrialised. A scan of the current psychedelic market reveals a strange mix of Big Pharma and young start-ups, such as ATAI, a Peter Thiel-funded firm. Its founder, Christian Angermayer, has been accused of manoeuvring to dominate the psychedelic market through zealous patenting strategies. He envisions his trials as perpetuations of mystical traditions from Ancient Greece. More than 2,000 years later, though, ‘profane illumination’ is now under the microscope, dissected, refashioned as a tool. Only when validated in scientific, psychiatric discourse is it taken seriously. The industrial boom has happened in tandem with an enormous amount of research, much of it funded (with likely biasing effects) by profit-driven entities.”
What we’re reading (1/24)
“Microsoft Earnings Fell Last Quarter Amid Economic Concerns” (Wall Street Journal). “Microsoft Corp. recorded its slowest sales growth in more than six years last quarter as demand for its software and cloud services cooled on concerns about the health of the global economy.”
“U.S. Accuses Google Of Abusing Monopoly In Ad Technology” (New York Times). “The Justice Department and a group of eight states sued Google on Tuesday, accusing it of illegally abusing a monopoly over the technology that powers online advertising, in the agency’s first antitrust lawsuit against a tech giant under President Biden and an escalation in legal pressure on one of the world’s biggest internet companies.”
“Netflix’s New Chapter” (Stratechery). “The simplified story of Netflix’s founding starts with Reed Hastings grumbling over a $40 late charge from Blockbuster, and ends with the brick-and-mortar giant going bankrupt as customers came to prefer online rentals from Netflix, with streaming providing the final coup de grâce. Neither are quite right.”
“A Married Couple With A 4-Month-Old Baby Were Both Laid Off By Google, While One Of Them Was On Parental Leave” (Insider). “A husband and wife with a 4-month-old baby said they were both hit Friday by Google's mass layoffs. Allie and Steve, who asked to go by their first names only but whose identities are known to Insider, had both relocated to California when Allie started working for the tech giant six years ago. Steve began working at the company about two years later.”
“How These Dog Walkers Make Over $100,000 A Year” (New York Times). “Dressed in black leggings and a puffer jacket, Bethany Lane, 35, was walking down Bleecker Street in Manhattan last Friday afternoon with a pack of three goldendoodles and one bernedoodle named Tinkerbelle. They poked their noses into the Whalebone store to collect some treats, before trotting along the Hudson River Park and having their photos taken by several tourists.”
What we’re reading (1/23)
“Market Recovery Hinges On Quick Inflation Drop” (Wall Street Journal). “Behind this year’s improved start for markets lies a broad wager that inflation will soon post a once-in-a-generation decline. Market-based gauges of inflation expectations project the annual pace of rising prices will tumble in the months ahead roughly as fast as during the recession that followed the 2008 financial crisis—or when Fed Chairman Paul Volcker used double-digit interest rates to crush the soaring inflation of the late 1970s.”
“Billionaires At Davos Don’t Think COVID Is a Cold” (Slate). “In photos of 2023’s World Economic Forum—or Davos as it is commonly called, after the Swiss resort town where it annually occurs—you might not notice the HEPA filters. They’re in the background, unobtrusive and unremarked upon, quietly cleansing the air of viruses and bacteria. You wouldn’t know—not unless you asked—that every attendee was PCR tested before entering the forum, or that in the case of a positive test, access was automatically, electronically, revoked. The folks on stage aren’t sporting masks (mostly), so unless you looked at the official Davos Health & Safety protocol, you wouldn’t be aware that their on-site drivers are required to wear them. You also might be surprised to learn that if, at any point, you start to feel ill at Davos, you can go collect a free rapid test, or even call their dedicated COVID hotline.”
“In Their 20s, Struggling to Save and Tired of Being Lectured About It” (New York Times). “Young people who are just starting to get their footing as they enter adulthood are grappling with how to balance their incomes and spending priorities so they have money left over to save for emergencies and retirement. Worrying about saving has always been hard for 20-somethings who begin their careers at the bottom of their earning potential. But saving is especially difficult right now because on top of student debt, housing and food costs remain high even as inflation has started to cool.”
“Inside Google’s All-Hands Meeting: Layoffs Shatter The Company’s Aura Of Stability And Abundance.” (Insider). “The internet giant is still wildly profitable and has more than $100 billion cash, along with a reputation for high pay, lavish perks, and job security. So the news, which arrived internally via an abrupt email on Friday, hit many employees hard.”
“Microsoft Announces New Multibillion-Dollar Investment In ChatGPT-Maker OpenAI” (CNBC). “Microsoft declined to provide a specific dollar amount, but Semafor reported earlier this month that Microsoft was in talks to invest as much as $10 billion. The deal marks the third phase of the partnership between the two companies, following Microsoft’s previous investments in 2019 and 2021. Microsoft said the renewed partnership will accelerate breakthroughs in AI and help both companies commercialize advanced technologies in the future.”
What we’re reading (1/22)
“Elliott Management Takes Big Stake In Salesforce” (Wall Street Journal). “While details of the campaign couldn’t be learned, Elliott, one of the biggest and most prolific activists, often seeks board representation and pushes for companies to make operational improvements and other changes.”
“The ‘Greatest Tragedy’ Would Be If Central Banks Don’t Finish The Job On Inflation, Larry Summers Says” (CNBC). “Speaking on a CNBC-moderated panel at the conclusion of the World Economic Forum in Davos, Switzerland, on Friday, Summers said economists and business leaders at the summit were experiencing an ‘exhilaration of relief’ but cautioned policymakers against resting on their laurels.”
“Inside The Battle For The Future Of Amazon” (Vox). “[I]n early 2021, the tech and retail giant reported its largest quarterly profit ever. But a lot can change in just two years: Since then, founder Jeff Bezos stepped down and named a new CEO, the online shopping boom slowed, and Amazon had to dig itself out of a costly and overly aggressive warehouse and staffing expansion. The past two months have been a strange, even frightening, time inside the company, current and former employees told Recode: Amazon announced unprecedented layoffs of more than 18,000 corporate employees and began culling areas of the business, like its Alexa voice assistant division, that Bezos had long championed.”
“Bad News For Millennials: Things Have Never Looked Bleaker For First-Time Homebuyers” (Insider). “For first-time homebuyers like Talej, the outlook has never been bleaker. The double whammy of skyrocketing home prices and surging interest rates has pushed homeownership further out of reach, while a decade of underbuilding has left the latest generation of hopeful owners with fewer options and stiffer competition for listings.”
“Home Prices Hit A Record High Last Year” (CNN Business). “The real estate market took a downward turn in 2022, as rising interest rates rapidly slowed the frenzied sales activity seen the year before — but home prices still hit a record high. The median home sale price in 2022 was $386,300, up 10.2% from 2021 and the highest on record, according to data from the National Association of Realtors released Friday.”
What we’re reading (1/21)
“Google Employees Scramble For Answers After Layoffs Hit Long-Tenured And Recently Promoted Employees” (CNBC). “On Friday, Alphabet-owned Google announced it was cutting 12,000 employees, roughly 6% of the full-time workforce. While employees had been bracing for a potential layoff, they are questioning leadership about the criteria for layoffs which surprised some employees, who woke up to find their access to company properties cut off. Some of the laid-off employees had been long-tenured or recently promoted, raising questions about the criteria used to decide whose jobs were cut.”
“Google, Amazon, And Microsoft Layoffs Will Result In A ‘Bloodbath’ Of 40,000 Jobs Lost. Inside The Tech Industry's Week From Hell.” (Insider). “As employees reel from the anxiety of layoffs that have reached a new peak, many predict an industry that will be irrevocably changed: On the other end is emerging an industry less focused on hyper growth, with more stable share prices, trimmer headcounts, and for employees, much leaner compensation.”
“SBF, Bored Ape Yacht Club, And The Spectacular Hangover After The Art World’s NFT Gold Rush” (Vanity Fair). “In September 2021, Sotheby’s offered up for auction a cache of 101 Bored Ape NFTs as a lot in a special sale called Ape In! The digital art revolution had seemingly remade the art market in the months prior, and this was the finest collection of non-fungible tokens ever assembled by one of the world’s oldest auction houses, founded in 1744. Scrolling through the catalog of cartoon monkeys in funny hats and jackets, one could see one rare Bored Ape with solid gold fur and holographic eyes, but also rarer yet, the Ape with an unshaven face eating a piece of pizza. For digital-art enthusiasts who aspired to membership in the Bored Ape Yacht Club, this was a huge deal.”
“Crypto Banks Borrow Billions From Home-Loan Banks To Plug Shortfalls” (Wall Street Journal). “Two of the biggest banks to cryptocurrency companies are rushing to stem a flood of customer withdrawals by borrowing billions of dollars from Federal Home Loan Banks, the system originally designed to support mortgage lending in the 1930s.”
“Elizabeth Holmes Made An ‘Attempt To Flee The Country’ After Her Conviction, Prosecutors Say” (CNN Business). “Elizabeth Holmes made an “attempt to flee the country” by booking a one-way ticket to Mexico departing in January 2022, shortly after the Theranos founder was convicted of fraud, prosecutors alleged in a new court filing Friday.”
What we’re reading (1/19)
“Netflix’s Reed Hastings Will Cede Co-Chief Executive Role” (New York Times). “Reed Hastings, one of the founders of Netflix, has helmed the company since before it was a streaming service, when its business model revolved around sending DVDs through the mail. Now, after spending a quarter-century building Netflix into the world’s first major streaming company — and dragging the rest of the media industry with him — Mr. Hastings said Thursday that he was ceding his co-chief executive title and becoming the company’s executive chairman.”
“U.S. Nears Debt Ceiling, Begins Extraordinary Measures To Avoid Default” (Wall Street Journal). “The Treasury Department began taking special measures to keep paying the government’s bills on Thursday as the U.S. bumped up against its borrowing limit, kicking off a potentially lengthy and difficult debate in Congress over raising the debt ceiling.”
“The Clock Is Ticking On A TikTok Ban” (Vox). “TikTok is grappling with an increasingly real prospect of being banned in the United States. This wouldn’t just be a mostly performative prohibition of installing the app on federal or state government-owned devices. It could also be more impactful than the legally questionable ban that former President Donald Trump tried and failed to enact in 2020. The ban TikTok is now facing would forbid its China-based parent company, ByteDance, from doing business in the United States, which would block Apple and Google from hosting the TikTok app in their app stores. It wouldn’t make it illegal for you, the consumer, to use TikTok. It would just make it much harder to do so.”
“U.S. Cities Where Homebuyers Are Most Impacted By Rising Interest Rates” (Construction Coverage). “To determine the locations where homebuyers are most impacted by rising interest rates, researchers at Construction Coverage analyzed the latest data from Zillow and Freddie Mac. The researchers ranked metros according to the percentage change in the monthly mortgage payment for a median-priced home from 2021 to 2022. Researchers also calculated the total change in mortgage payment from 2021 to 2022, the mortgage payment for a median-priced home, and median home price.”
“December Consumer Price Index: Curious Acceleration In Rent Clouds The Message” (Regions). “The total CPI fell by 0.1 percent in December with the core CPI rising by 0.3 percent, in each case matching the consensus forecast but a tenth of a point higher than our forecast. As anticipated, lower energy prices were a significant drag on the headline CPI. Our forecast misses mainly reflect rent growth coming in meaningfully higher than we had anticipated, with the CPI measures of rents still more than a little bit out of alignment with market rents and house prices.”
What we’re reading (1/18)
“The Disney Executive Who Made $119,505 A Day” (Wall Street Journal). “Even by show-business standards, former Walt Disney Co. executive Geoff Morrell netted a massive payday from his brief time in Hollywood. Mr. Morrell started working at Disney on Jan. 24, 2022, as the company’s chief corporate-affairs officer. He left less than four months later following a public-relations implosion that led to employee protests and pitted the company and then-CEO Bob Chapek against Florida Gov. Ron DeSantis. For those 70 weekdays, Mr. Morrell made $8,365,403 in total compensation—or about $119,505 a day, according to calculations based on a proxy statement that Disney filed Tuesday.”
“Larry Summers Is Warming Up To The Idea That The Federal Reserve Can Stick A Soft Landing After Previously Warning A Hard Recession Is Imminent” (Insider). “Former Treasury Secretary Larry Summers is starting to grow more optimistic about the US economy and the Federal Reserve's ability to stick a soft landing, according to a recent interview. He told Bloomberg on Wednesday that it’s a good sign inflation is starting to cool down even as the job market remains resilient. ‘I’m still cautious, but with a little bit more hope than I had before. Soft landings are the triumph of hope over experience, but sometimes hope does triumph over experience,’ Summers said.”
“Will It Be Morning In Joe Biden’s America?” (New York Times). “[W]hile consumer expectations haven’t caught up with financial markets, which appear to believe that inflation will stay low for the foreseeable future, consumer expectations of inflation are back down to their levels of a year and a half ago.”
“ChatGPT Has Investors Drooling, But Can It Bring Home The Bacon?” (Ars Technica). “[James] Cham [of Bloomberg Beta] compares the current situation to the early days of the Internet, when some obscure but evocative demos turned out to precede a sea change in the workings of software, tech companies, and wider society. ‘We’ve had decades of great AI demos, but this is the first one where you give it to someone and they are really excited about the possibilities,’ Cham says of ChatGPT.”
“Comparing Your Client To The Mafia Isn’t The Flex MSG's Lawyer Thinks It Is” (Dealbreaker). “Madison Square Garden already enjoys the sort of public approval you’d expect from an organization that kicks a mom escorting a Girl Scout troop out of a Christmas show. The woman worked at a law firm involved in a suit against a restaurant that MSG owns a stake in, and despite this having nothing to do with Radio City Music Hall, MSG pays for advanced facial recognition software to deliver some bush league bullying upon anyone on a firm website. After the Girl Scout story, most companies would launch a public relations campaign to salvage its reputation, but MSG is not most companies.”
What we’re reading (1/17)
“The Crypto Collapse And The End Of The Magical Thinking That Infected Capitalism” (Mihir Desai, New York Times). “The unwinding of magical thinking will dominate this decade in painful but ultimately restorative ways — and that unwinding will be most painful to the generation conditioned to believe these fantasies.”
“Goldman Sachs, Morgan Stanley Profits Dented By Deal Slump” (Wall Street Journal). “Investors have been looking for more clarity about where Goldman is going and what it is trying to be. The bank has pulled back on its ambitions to build a large consumer-facing business, and it has reshuffled its businesses. It continues to focus on steadier units like wealth management and less on the high-risk, high-reward units that were its traditional powerhouses, like investment banking.”
“Hedge Fund Manager Boaz Weinstein Bets Market Is Wrong On Credit Suisse” (Reuters). “Speculators increased bearish bets on the Swiss bank last year on concern about how much capital it would need to bolster its balance sheet in a confidence crisis deepened by unsubstantiated social media reports on the bank's financial health.”
“Sam Bankman-Fried Is Still Filibustering” (Slate). “Sam Bankman-Fried is still desperate to convince the world that he didn’t defraud customers of his bankrupt cryptocurrency exchange, FTX. The disgraced mogul, out on bail as he awaits a federal trial later this year, launched a new Substack on Thursday to make his case.
“I didn’t steal funds, and I certainly didn’t stash billions away,” Bankman-Fried wrote in the newsletter’s first post.”“Commodities Have Largely Erased Last Year’s Spike.” (Fisher Investments). “Amid all the mixed economic data and recession forecasts, some actual good news hit the wires Wednesday: UK gasoline prices have now erased the spike that followed Russia’s invasion of Ukraine. That adds to the growing list of commodity prices that have settled near or below pre-invasion levels—a big disinflationary force.”