Money‚ Markets & Macroeconomics

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.

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.

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.

Markets point to way out of Brexit impasse

16 January 2019

Sterling rose and stocks were steady after Theresa May’s defeat in parliament, defying fears of a crash. Assuming the prime minister survives a confidence vote, a softer Brexit or second referendum become more likely. British politics looks messy, but investors’ message is clear.

German growth near-miss delays overdue self-help

16 January 2019

Normally, signs that Europe’s largest economy avoided a recession in the final quarter would be good news. But to avoid a slow decline Germany needs to invest its healthy budget surplus. Without a proper slump, the fuel to speed up its misfiring output will remain untapped.

Brexit defeat will begin process of elimination

15 January 2019

Britain’s parliament is set to reject Prime Minister Theresa May’s deal to leave the European Union. The vote will offer few pointers about which alternatives they prefer, but will force politicians to test other ideas. With 73 days to go, their options are rapidly shrinking.

Markets dump coal in U.S. banks’ stockings

15 January 2019

JPMorgan missed the mark with quarterly earnings as it, like Citi, posted a steep drop in fixed-income revenue. Trading is always volatile, and JPMorgan’s valuation was already higher than its peers’. But peep behind the reported numbers and the drop looks particularly brutal.

China can give stock buying idea a wide berth

15 January 2019

Beijing’s financiers are abuzz with debate about whether the central bank should buy equities as part of official efforts to help a slowing economy. Drawbacks would outweigh limited benefits. Luckily there is a better way to channel money to where it would do growth more good.

Trump’s Fed pressure is a paper tiger, so far

14 January 2019

The U.S. president often bashes the central bank’s rate increases on Twitter. It’s unhelpful but transparent – which makes it easier for the Fed to resist. The real danger is if Trump bullies Jerome Powell behind closed doors, or changes his tactics for the two open board seats.

Zimbabwe currency plan is doomed before delivery

14 January 2019

Robert Mugabe’s successor wants to ditch the U.S. dollar and introduce a new national money. Its value is bound to dive but any benefits will be fleeting unless Harare can also slash a bloated civil service and break its serial addiction to printing cash. That is unlikely.

GM’s good cheer is likely to run out of gas

11 January 2019

Mary Barra juiced the $50 bln automaker’s shares by forecasting 10 pct earnings growth. That pierced the gloom that tariffs, slowing sales and self-driving skepticism have cast over Detroit’s annual show. But relying on cost cuts and new trucks makes profit gains hard to sustain.