United States of America

The Exchange: Flint Mayor Karen Weaver

18 January 2019

Before its tainted-water scandal hit in 2014, the Michigan city was already infamous for high crime and poverty rates after a prolonged economic slump. Weaver discusses the fallout from the water crisis – and explains how the birthplace of General Motors is undergoing a revival.

Musk’s rare dose of realism could serve Tesla well

18 January 2019

The electric-car maker’s CEO effectively issued the firm’s first profit warning, saying it needs “luck” to turn a “tiny” profit this quarter and cutting staff. If this is the start of a more pragmatic approach by the firm after years of Musk overpromising, that’s no bad thing.

Market turmoil is last straw for asset managers

18 January 2019

State Street will slash its payroll by 6 percent. Both the selloff in stocks and outflows hit the company’s AUM in the fourth quarter. The investment industry is already reeling from fee pressure and turning to technology as the solution. That will mean plenty more pink slips.

KKR scrapes second-rate return out of First Data

18 January 2019

After a long 12-year investment in the payment processor, a sale to Fiserv sets the stage for a profitable exit. It’s a wonder the $29 bln buyout survived the financial crisis, considering the debt and multiple CEOs. Anything better than breaking even amounts to a win.

Fortnite outplays media titans in a battle royale

18 January 2019

The video game may have raked in as much as $2.4 bln in sales last year, more than any 2018 Hollywood blockbuster. Now Netflix says it is threatened too. Success comes from mass appeal: both young and old gamers are hooked. Streaming giants and movie outfits are right to be alarmed.

Jamie Dimon puts America and himself first

17 January 2019

JPMorgan’s CEO said last year he wanted the U.S. tax cuts “shared broadly.” And he followed through, boosting low-paid workers’ wages and opening branches in poorer areas while also growing the bank’s earnings. But taking a $1.5 mln pay hike himself is unnecessary and tin-eared.

Slack is the tech everybody likes but no one needs

17 January 2019

That’s one problem for the messaging service as it gets ready to go public. It’s popular, but not a must-have for companies. Another issue is its current $7 bln private-market valuation. Based on other high-flying software firms, it’s only worth just over half that amount.

JPMorgan bankers win Wall Street pay game

17 January 2019

Jamie Dimon’s firm is the only one to increase average compensation for investment bankers and traders in 2018, boosting it more than revenue rose. Jefferies still pays the most, but it’s less generous than it was. Goldman and Morgan Stanley have the mix just right.

Viewsroom: China’s slowdown is not created equal

17 January 2019

People in the Middle Kingdom are buying fewer iPhones and cars, but Nike and others are chugging away nicely. Meanwhile, India’s struggling rural farmers are a force too big to ignore in this year’s general election. Plus: The Detroit auto show reflects the industry’s gloom.

Jack Bogle defined value in more ways than one

17 January 2019

The Vanguard founder turned the once-heretical idea of indexing the broad stock market into the dominant form of investing. Instead of pursuing riches, he spread the low-cost ethos, saving investors untold billions and building a $5 trln juggernaut. Talk about wealth creation.

Morgan Stanley takes Wall Street’s wooden spoon

17 January 2019

James Gorman’s bank did worse than rivals last quarter, delivering only a 7.1 pct annualized ROE. Fixed-income revenue slumped and lending losses made things worse. Morgan Stanley’s valuation premium is partly because it’s supposed to be more stable. That logic just took a knock.

Lampert tightens grip in slow strangle of Sears

16 January 2019

The hedge-fund manager’s $5.2 bln bid won the bankruptcy auction for the embattled retailer. That may keep the doors open for now. But in his 13-year tenure atop Sears, Lampert has starved it of cash and sold assets. Unless he changes tack, a slow-motion liquidation looks likely.

Shutdown tests U.S. companies’ stress filters

16 January 2019

Delta Air Lines says it loses $25 mln of revenue every month the government stays closed. Big deal. Like the market plunge that hit bank earnings, the shutdown has high visibility but little lasting impact. There are bigger risks to valuations that are harder to visualize.

Wall Street hunkers down for a D.C. pummeling

16 January 2019

Big banks enjoyed a bit of a reprieve under the Republican-led Congress. Democrats now in charge of the House stress industry accountability. Left-wing additions to the financial-services panel will increase the pressure in the industry and could make it a 2020 election issue.

Last deal for First Data carries late-cycle risk

16 January 2019

Fiserv’s $22 bln all-stock acquisition of the transaction processor at a 30 pct premium comes with plenty of cost savings. Revenue synergies would be icing on the cake. But as with KKR’s toppy leveraged buyout of First Data in 2007, market turns can undermine M&A logic.

Big Tech may face another front in D.C. battle

16 January 2019

William Barr, set to become U.S. attorney general, wonders how Silicon Valley “behemoths” like Amazon got so big. That hasn’t been a DOJ focus. Facebook’s clout was one reason for AT&T’s purchase of Time Warner, on whose board Barr sat. It could make him a new antitrust threat.

Goldman Sachs aims for more predictable excitement

16 January 2019

Its fourth-quarter earnings beat estimates and it navigated rocky markets better than peers. Yet investors value its assets less highly than those of staid Bank of America. Taming Goldman’s volatile revenue is in hand. The shadow of excesses like 1MDB is harder to manage away.

BlackRock earnings dip is more than a blip

16 January 2019

Larry Fink’s manager of $6 trln of assets saw revenue and profit fall in the last quarter from a year earlier. December’s stock rout predictably hit fees, but the shift to cheap ETFs from actively managed funds also accelerated. That’s likely to continue even if markets recover.

Banks tell a U.S. tax tale with three endings

15 January 2019

Wells Fargo, JPMorgan and Citi all started 2018 with the gift of lower taxes. Fourth-quarter earnings show the similarities end there. Treasury largesse propped up Citi and Wells, accounting for most of their underlying growth. JPMorgan gave back most, and needed the help least.

Netflix reaps the dividends of its dominance

15 January 2019

The video streaming service is raising the cost of subscriptions just as AT&T, Disney and NBC ready rival offerings. Hiking prices in the face of growing competition could turn off viewers. Yet Reed Hastings’ firm is so far ahead of peers he can afford to take the risk.