Headlines about layoffs don"t mean you"re going to lose your job

As we flip the calendar, here's a recap of the key stories and trends that made the biggest ripples in the auto industry this year. It has been nothing short of a roller-coaster ride for the auto industry in 2022. From historically low levels of inventory and record high prices of vehicles to the transformative Climate Bill and e-mobility acceleration, there were stories that made the biggest ripples in the auto industry. As 2022 draws to a close, let's take a much-deserved flashback into the most impactful stories and trends of the auto sector that grabbed headlines this year.Russia-Ukraine War Throws the Industry Into Disarray: After a rocky 2020 amid coronavirus woes, semiconductor supply deficit rattled the auto market in 2021. Just when industry watchdogs and auto giants were predicting the chip deficit to gradually start easing out from mid-2022, the geopolitical conflict between Russia and Ukraine triggered the second round of global microchip shortage.The war created ripple effects in the automotive supply chain and exacerbated the chip deficit as raw materials got difficult to come by. Most auto biggies like General Motors GM, Ford F, Stellantis STLA and Honda HMC among others suspended operations/business in Russia. Apart from gasoline getting expensive, the war also led to a spike in commodity prices, adding to automakers’ woes.Historically Low Inventory Levels, Record High Cars Prices: While the demand for cars remained strong, parts shortage (a byproduct of COVID-19 that got worsened by the Russia-Ukraine war) choked supplies and low stockpiles impacted sales. And it was not just microchip shortage that disrupted the supply chain, other parts and components also ran into short supply. All this adversely impacted inventory levels, especially in the first half of the year when new vehicle inventory in the United States was mostly running below 1 million units. While it started improving in the back half of the year, it’s still way below the pre-pandemic levels. Meanwhile, amid the demand-supply mismatch car prices went off the roof. The average selling price of new vehicles hit a record high of $48,681 last month, beating the previous record high of $48,301 in August. Vehicle Affordability Concerns Amid Hawkish Fed: To rein in the stubborn inflation, Fed became ultra-aggressive, cranking up borrowing rates repeatedly in 2022. Increasing costs of vehicle financing are making monthly payments less affordable for less-affluent and subprime consumers. With borrowing getting expensive and threats of a recession looming large, consumers are gradually starting to get apprehensive on buying cars at a heavy premium. As a result, the demand for vehicles has already begun to cool off. Resultantly, vehicle sales forecasts are getting slashed and automakers’ pressing concern is now shifting from inventory challenges to rising interest rates, which may erode demand with recessionary risks lurking around the corner.The Landmark Climate Bill Supercharges EV Revolution: In August, President Biden signed the Inflation Reduction Act (IRA) — the boldest climate legislation in U.S. history. The bill seeks to transform the U.S. auto industry with incentives that would induce automakers to accelerate the production of electric vehicles (EVs). To encourage the adoption of EVs, the IRA included a $7,500 tax credit till 2032 on the purchase of a new EV. Importantly, the tax credit will be sans the 200,000-car cap. What’s worth noting here is that the new bill has provisions for tax credits only for vehicles manufactured in North America and meet the raw material sourcing requirements.The sweeping climate bill looks like surefire legislation to fast-track the EV industry.Notable EV Rollouts and Massive Battery Investments: Thanks to increasing customer enthusiasm about EVs, automakers rolled out several new models this year. Some of the more notable ones include Ford’s F-150 Lightning Pro and General Motors’ Cadillac Lyric. And as auto giants are fast changing their gears to electric, they are also actively ensuring that the future models don’t get held up amid a shortfall of batteries. To that end, the year 2022 saw major investments related to EV battery production. For instance, Honda and LG Energy Solutions announced their plans to invest $4.4 billion to build a new battery production plant in the United States.Stellantis also joined forces with LG Energy to invest $4.1 billion to build an EV battery plant in Ontario. STLA also inked a deal with Samsung SDI to invest more than $2.5 billion to build a JV battery facility in Indiana. Hyundai broke ground on a $5.5 billion U.S. EV battery facility in October.F Abandons While GM Goes Aggressive on Driverless Car Dreams: While electric dreams gathered steam, the self-driving car revolution seems to be stuck in low lane. In a telling sign that autonomous vehicle (AV) technology is more complicated than once thought to be, Ford-Volkswagen backed AV startup, Argo AI, shut down amid mounting losses. Meanwhile, Tesla TSLA is also under federal investigation for its self-driving tech. While these developments make a self-driving future look more of a distant dream, General Motors continued to make progress on its driverless tech ambitions. GM expanded its ownership stake in self-driving car subsidiary Cruise. The U.S. legacy automaker acquired SoftBank Vision Fund 1's stake in Cruise for $2.1 billion.The Two Mega Acquisitions of the Year: Leading truck engine maker Cummins acquired Meritor in a deal valued at $3.7 billion. The buyout of Meritor positions Cummins as a leading provider of integrated powertrain solutions across internal combustion and electric power applications. The acquisition adds products to Cummins’ components business, offering attractive growth opportunities across the firm’s range of power solutions and applications. Auto equipment provider Tenneco got acquired by Apollo Funds, an affiliate of Apollo Global, for a whopping $7 billion, including debts. EV SPACs Burning Cash: It seemed that the EV SPAC party of the last two years entered the hangover phase in 2022. Many EV startups generating no meaningful sales are now facing a liquidity crunch. Amid surging inflation and the global supply chain crisis, many firms, including Canoo, Lordstown Motors and Faraday Future, face survival concerns unless they manage to raise additional capital. Fresh funds are getting more difficult and costlier to come by.  With the market meltdown and depressed stock prices, smaller startups fear equity dilution.Carvana’s Drastic Crash: Once a Wall Street darling, used vehicle e-retailer Carvana grabbed headlines for all the wrong reasons, with its shares sinking to fresh lows multiple times this year. Shares have tanked 98% year to date, with growing concerns about the company going out of business. Massive layoffs, executives forgoing salaries and rising bankruptcy concerns made several analysts downgrade their ratings on the stock, warning that the company might run out of cash by the end of next year as chances of a potential cash infusion seem less likely.Musk’s Twitter Obsession Makes Way for TSLA’s Worst Year on Record: The world’s EV leader Tesla is headed for its worst month, quarter and full year ever. And while there might be a number of reasons behind that, Musk’s acquisition of Twitter has supposedly played the most consequential role in Tesla’s stock plunge of around 65% year to date. TSLA has lost more than 45% since Musk’s Twitter takeover. The company faced investors’ backlash as they felt Musk would be spread too thin across all his responsibilities and lose focus on Tesla.While Musk is known to juggle several ventures at once, the Twitter acquisition is his most immense undertaking yet. It also doesn’t help that Musk sold nearly $40 billion Tesla shares this year. The billionaire CEO has warned the public consistently about a potential “hard landing” caused by the Federal Reserve’s monetary policy. So far this month, Tesla has tanked 37%, and quarter to date, its shares have plummeted 54%. To put it in perspective, shares of Tesla had not dropped more than 25% and 38% in a single month and quarter, respectively. So, December 2022 and the fourth quarter of 2022 will mark Tesla’s worst monthly and quarterly share price performance.TSLA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here. Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report Honda Motor Co., Ltd. (HMC): Free Stock Analysis Report General Motors Company (GM): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Stellantis N.V. (STLA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Industry experts say the next few weeks are critical: Many tech firms will want to trim payroll, and they're likely to do it before the holidays. Meta is expected to announce big job cuts sometime soon, according to reporting from the Wall Street Journal.Arnd Wiegmann/Reuters Layoffs season is underway, with Meta expected to conduct widespread cuts.  The layoffs are the result of multiple factors, including economic conditions and budget-planning for next year. Industry experts say the next few weeks are critical, as holiday layoffs could hurt morale and future hiring. Layoffs season has arrived. Meta is reportedly planning widespread layoffs. Lyft cut nearly 700 staffers. Fintech giant Stripe laid off 14% of its workforce. Those are just headlines in the last week — and it's likely only the beginning, industry experts say. Earnings across tech are weakening at the same time that companies are beginning to plan for the coming year. And with economic forecasts looking dire, tech firms are starting to tighten the belt — starting with cutting their workforces to shave salary costs.Which means that in the weeks ahead, thousands of tech workers may be out of a job.How did we get hereAs Big Tech companies reported less-then-stellar earnings over the past few weeks, they also also flashed warning signs about the months ahead. The looming threat of a recession was causing customers to scale back spending, companies said — with few signs of a rebound on the horizon. That means in the weeks and months to come, those companies are going to be looking to trim costs where they can, said Dan Wang, an associate professor at the Columbia Business School."When they cut costs, the first thing to go is typically labor costs and also advertising and marketing," Wang told Insider. "So when it comes to forecast what their numbers will look like, it'll depend on how they have seen the trend in advertising spending on their platforms. When that doesn't look good, then they have to accommodate those expectations by adjusting the workforces." Tech companies are coming off a period of outsized growth, spurred on by the pandemic. What's happening now is something of a correction, he said, as the tech world recalibrates to a time when people aren't stuck at home, glued to their devices. And even though in many cases layoffs began earlier this year — both at startups and big tech firms — sometimes, they didn't go far enough, Menlo Ventures partner Matt Murphy previously told Insider. "It always happens in cycles like this that sometimes companies don't do layoffs significantly enough, but rather slow down on hiring and hope that normal churn might rightsize them," Murphy said. "Coming out of Q3, which was much more difficult than Q2, it became much more obvious how many headwinds there were, and startups realized they can't grow out of this with the staff they have and actually have to lay people off."What's happening nowFor some companies, these economic challenges are coming at the same time that they're planning for the next fiscal year.Amazon, Meta, and Google, for example, have fiscal years that end at the end of 2022 or in early 2023. They may be looking to get costs off their balance sheets now — before their fiscal years close. For example, if an employee is laid off now and given six weeks of severance, that reduces costs for the first quarter. Even if workers are given a longer severance, like three months, their salaries would be off the books before the end of the first quarter. While budget-planning doesn't apply to every company — Microsoft, for example, just conducted layoffs and its fiscal year ends in June — there is an element of planning ahead at play, said J.P. Gownder, vice president and principal analyst at Forrester, a market research company."That's sort of unfortunate because it means that a certain number of folks are going to lose their jobs before the holidays and before the turn of the year," he told Insider. But in other ways, some companies may just be playing follow the leader: assessing economic conditions based in part on what other companies are doing, Gownder said. "Watching other firms that are peers, not necessarily competitors, but similar firms to yours in the tech sector, could lead you to say, 'Ah, this is the time,'" he said. "There is a bit of group-think in Silicon Valley." What happens nextWith Thanksgiving just around the corner, the next two weeks are critical. That's because companies may not want to cut jobs during the holidays — it could tank company morale, paralyze the employees who did keep their jobs, and affect future hiring, Gownder said."The best talent don't want to work for the companies that kind of indiscriminately and without any empathy lay people off at the first sign of trouble," he said. Which means that if tech firms want to conduct layoffs, the next two weeks are the time to rip the bandage off or risk not only keeping those costs on their profit and loss statements headed into the next quarter, but piling on these secondary effects.Some planning could mitigate that — severance would help soften the blow, as would helping laid-off workers get new jobs, like Airbnb did back in 2020 — but the timing still comes down to how individual companies are going to make their planning decisions."There is a process at work here, and unfortunately, I don't know that that process is much focused on not disappointing people at Christmas," Gownder said. Read the original article on Business Insider.....»»

Recession fears, layoffs, and hiring freezes may make it seem like navigating your career is harder than ever before, but it's still possible. In 2022 work-from-home became a codified practice for some companies.Morsa Images/Getty Images Some signs point to a recession, while others indicate a stable job market.  These opposing conditions have left job seekers scratching their heads. Insider compiled a collection of career advice from career coaches, economists, and more. In 2022, the world of work has become the Wild West.Technology giants have laid off thousands of employees, inflation has soared, and, in the second quarter, the US gross domestic product decreased 0.9% — all signs that a recession may be coming. At the same time, consultancies, travel businesses, and healthcare companies have continued to hire, and the unemployment rate remained stable at 3.6% in June, according to the latest data from the US Bureau of Labor Statistics.This whirlwind comes on the heels of a chaotic 2021, when employees' heads were spinning from vaccine mandates, work-from-home policies, and mass resignations.To help employees navigate the wacky world of the workplace, Insider compiled a collection of career advice. Whether you're trying to make sense of the job market, fearing layoffs at your company, or hunting for a new gig, here are the pieces of advice career coaches, economists, psychologists, and more have to offer. If you don't understand what's happening in the job market right now ...urbazon/Getty ImagesAmerica has entered a "precession," a phrase Insider coined and previously defined as "an awkward, confusing phase in which some economic indicators seem to portend a recession, while others suggest things could turn out to be OK."While tech companies are being hit hard by the precession, education, consultancy, and nonprofit companies are more likely to boomerang back from this downturn.The social and economic turmoil causing this precession has left many Americans feeling stressed about their physical, emotional, and financial health. This is why Insider spoke with business executives, hiring managers, career coaches, and economists to learn more about the job market and give suggestions to readers on how to navigate it. Read more: Layoffs, inflation, and stock market swings have Americans nervous. Here's a guide to managing your career in an uncertain economy.12 career counselors reveal the industries where hiring is still hot for new college grads — even as layoffs mountThe steps that some companies took to react to the abortion decision could prove useful for crafting other policies If you like your job but want more from it ...Eugene Mymrin/Getty ImagesDespite bleak headlines, not everyone is unhappy in their role or fearing for their job. If you're lucky enough to fall into this category, then you may also be one of the many workers planning on asking for a raise this year.Securing a raise means doing more than coasting — workers need to be mindful of how their colleagues perceive them and communicative with members of their team. This year, remote employees are working while traveling and logging on for nontraditional hours, which means they have to double down on efforts to stay in the loop with work.Here's how managers and career coaches say employees can do this and land a promotion.Read more:Almost 50% of employees work while on vacation. Here's how to take advantage of remote-work policies while being a good employee. 4 tips to landing a raise, even during a recession Don't let your reputation be the reason you don't get the job or promotion. Career experts explain what to do.If you're laid off ...Getty ImagesNearly 62,000 technology workers — including those from companies such as Coinbase and Twitter — have been laid off in 2022, according to the tech-industry-layoffs tracker Layoffs.FYI.Simultaneously, in a survey of 1,004 working US adults in June by the staffing-solutions firm Insight Global, 78% of respondents said they were scared of losing their jobs in the next recession.But rest assured, layoffs do not usually come out of nowhere, Eli Joseph, a professor at the Columbia University School of Professional Studies and the author of "The Perfect Rejection Resume," previously told Insider.And even if they do, Insider has compiled advice from top career experts on how to move forward in your career after being laid off.Read more:Don't underestimate your exit interview. Career experts share the 6 most common questions and how to answer them. 5 steps to take if you lose your job, from leveraging social media connections to building a network 4 ways to overcome the stigma of layoffs and find a new job in today's economy If you decide you want to job hop ...EmirMemedovski/Getty ImagesThis year, the US job market witnessed record quit rates, particularly in the retail, food-services, and hospitality industries. Job seekers are taking advantage of high wages and job openings. In a tightening market, candidates need to put their best foot forward, develop a personal brand, and ace interviews. But in your haste to leave, be wary that you're not overlooking red flags. In a recent survey, 72% of Gen Z respondents who just started a new job said they felt regret because the role or company was not what they believed it would be. Here is how to find a new job in this fluctuating economy. Read more:Should you change jobs with the market and economy in turmoil? Here's how to decide as decades-high inflation makes employers rethink their strategies. Here are 5 tips for job hunting in a slower economic environment — even a recession How to build an unforgettable personal brand that will help you switch careers, land your dream job, or snag a promotion, according to marketing experts Job seekers are accepting offers only to find the reality is nothing like the recruiter sold them. Here's how to make sure it doesn't happen to you.  If you're looking for something new ...Freelance worker working from the van while taking a road trip.MStudioImages/Getty ImagesFor some, a traditional 9-to-5 role will lead to burnout, feelings of discontent, and job insecurity. Last year, 15.5 million Americans took the leap and became digital nomads — working remotely from far-off places in the world. Meanwhile, some Americans have opted to take on two jobs at a time, balancing corporate calendars that increase their earnings and experience. Whether you're looking to work less or more, Insider has advice on how to make the most of your unconventional career.Read more:I worked 2 full-time corporate jobs for 4 months. Here's how I turned them into a promotion and higher salary The digital-nomad lifestyle is more accessible than ever. Here's how to become someone who can work from anywhere. Burned out and want to quit your job? Try being a slacker first, a career expert says.Read the original article on Business Insider.....»»

Global Air Travel Logjam Stumps Airlines, Disrupts Countless Summer Travel Plans By Janice Hisle, of Epoch Times Summertime is supposed to be joyful for travelers heading to vacation destinations—and airlines, too, because that’s when they typically rake in cash by the barrel. But 2022 has ushered in a summer of discontent for passengers and airlines worldwide, as airlines’ plans for rebounding from the COVID-19 pandemic travel slump have hit one logjam after another. Across the globe, especially in Europe, there’s a new epidemic: canceled, overbooked, and delayed flights—and airport storage areas overflowing with lost and misdirected baggage. These once-rare annoyances of air travel are now more commonplace; travelers who took smooth operations for granted now expect snafus—a new mindset that has changed the way they plan trips. To prevent issues, savvy travelers are increasingly entrusting delivery services like FedEx or UPS to transport luggage to their destinations. Some are putting GPS-enabled devices into their luggage, such as Apple’s AirTag or the Tile tracker. And people traveling in groups are sprinkling a few pieces of clothing per person into each checked bag instead of risking having someone lose an entire vacation wardrobe. Airport information screens are showing “ON TIME” less frequently this summer. (Stock photo/Matthew Smith/Unsplash) For now, if an air traveler manages to have a leisurely getaway and hassle-free experience, they might feel like they’ve won the lottery. Chances for bad experiences have increased, a trend likely to continue as the summer progresses, says Jay Ratliff, an aviation expert with more than three decades of experience. “Travel used to be something we enjoyed. But it’s turned into something we endure,” he said. One day last week, Ratliff’s email was brimming with more than 800 new messages, many of them from fed-up airline customers turning to him for help—or to vent. “I’ve never seen it this bad, industry-wide,” said Ratliff. “There are a lot of things contributing to this mess that we’re in, but it comes down to the airlines trying to operate too many flights, and they simply didn’t have enough employees to pull it off,” Ratliff said, noting the situation is “10 times worse in Europe.” Ratliff said that the percentage of flight delays serves as a barometer for how bad the problems are. During average years, he would see single-digit percentages of delayed flights for many airlines across the globe. But one day last week, 54 percent of British Airways flights were behind schedule, for example. He rattles off other recent jaw-dropping statistics at major hubs: In Brussels, Belgium, up to 72 percent of flights were late, and in Frankfurt, Germany, 68 percent of flights were delayed. In many cases, flight delays cause missed connections. When those passengers seek rebooking, the airlines often cannot find seats for them because flights are filled. That can leave passengers stranded at unintended destinations for hours, or even days. Ratliff said that several airports have been “begging airlines to stop selling tickets because terminals are filling up” with travelers waiting for rebooked flights. Adding to the mess: rental cars are scarce, another COVID-created problem. When pandemic was raging, few people were renting cars. That prompted rental companies to sell portions of their fleets. They also halted plans to buy replacements. Now that travelers are back, rental agencies are having problems securing new vehicles, which are selling at inflated prices. So when people try to get a rental car at the last minute, either because they failed to plan or were stranded by flight disruptions, they often rely on Uber or Lyft, or they may roam the airport for a prolonged period. Lufthansa was forced to cancel flights affecting about 130,000 passengers because of a worker strike set for July 27, 2022. (Kai Pfaffenbach/File Photo, 2020/Reuters) This week, Europe’s woes worsened. German-based Lufthansa airlines announced it was canceling “almost all flights to and from Frankfurt and Munich.” The cancellations took effect July 27 because a union representing ground workers was waging a single-day walkout to demand higher pay. In a statement, the airline said the impact was “massive;” cancellations affected more than 130,000 passengers. Ratliff, who worked in management for Northwest Airlines from 1981-2001, explained how the COVID-19 pandemic set the stage for the current crisis. Airlines were forced to cut their workforces through layoffs and early retirements. Those measures were necessary to stay afloat when demand for air travel slowed to a trickle during the pandemic’s worst surges in 2020-21. “What business can survive with 95 percent of their customers no longer knocking on the door?” he asked. Airline executives reasoned that travel demand would eventually come roaring back—and when it did, they’d hire replacements for the former employees. But it wasn’t that simple. “They found they weren’t able to hire as fast as they thought they could,” Ratliff said. Background screenings and training for new workers can be time-consuming, too. As a result, many airlines and airports remain understaffed in many job categories, ranging from pilots to baggage handlers to ticketing agents and customer service reps. Suitcases are seen uncollected at Heathrow’s Terminal Three baggage reclaim, west of London, on July 8, 2022. (Paul Ellis/AFP via Getty Images) Anticipating a staffing shortfall, airlines cut back flights during summer, when they would typically add flights. Those cutbacks surely made airline executives wince, Ratliff said. “They want as many of those ‘silver revenue tubes’ flying as they can during the summer,” he said, “because that’s the time when they make their money.” However, Ratliff said that even the curtailed flight schedules “assumed a perfect scenario” from May-June this year. During the Memorial Day weekend travel rush, it became clear that those ideal projections were unrealistic; systems disintegrated if bad weather rolled in or if a handful of employees called in sick, sometimes suffering from COVID-19. Such unpredictable events are capable of touching off a domino effect of airport problems. That was true even in the pre-pandemic era. But this summer, the airport house-of-cards is so precarious, a major thunderstorm could cause “a coast-to-coast cascading problem” that might persist for weeks, Ratliff said. Still, U.S. airlines are faring better than European ones. Airlines in Europe are having more trouble adjusting because demand for travel in those nations continued to lag while U.S. travel demand gradually picked up. During that ramp-up period, especially in the past year or so, U.S.-based airlines “learned some things,” Ratliff said; executives could see that they would need to curtail flights because they lacked the personnel to keep pace. Meanwhile, Europe faced a 77-percent drop in international traffic—or more—“and then, all of a sudden, here they come,” travelers flocking to Europe to fulfill long-delayed travel itineraries, Ratliff said. Europe’s air-travel landscape is “a crazy, crazy mess,” Ratliff said, blaming it on flight schedules that were even more “aggressive” than many American air carriers’ schedules. “This is a self-inflicted airline problem,” Ratliff said. “They rolled out this summer schedule thinking they could operate more flights than they were able to do. They miscalculated. And who’s paying for it? The poor passengers.” Travelers who expected to follow a nice, curved arc from their point of origin to their destination instead ended up bouncing along a zigzag path. In the worst single travel nightmare that Ratliff had heard of, a family started its journey with seven boarding passes—and ended up with 96 of them. KLM, a Dutch airline, recently suffered a baggage system malfunction. This 2020 file photo was taken in Amsterdam. (Piroschka van de Wouw/Reuters) A synopsis of that family’s odyssey: After leaving Washington’s Dulles Airport, the group ended up missing flights, then being rebooked in multiple international hubs. “And, of course, their bags—did they keep up?” Ratliff asked. “Ha, not a chance!” Additional problems with flights and baggage seem to grab headlines every few days. Last week, a baggage-system malfunction at Amsterdam Airport Schiphol caused KLM (Royal Dutch Airlines) in the Netherlands to take an unusual step. On July 20, the airline could not process luggage for most of the day, the airline said in a statement. As a result, “thousands of suitcases” were left behind while their owners traveled to other places. The next day, July 21, KLM refused to accept checked bags for passengers traveling between European cities. The goal was to “free up as much space as possible” on that day’s flights so that left-behind baggage could be transported. In the U.S., there is a shortage of baggage handlers partly because of uncompetitive wages, Ratliff said. In some places, those jobs pay about $16 an hour, he said, “and you could go work at McDonald’s in that same airport for $20 an hour—so why would you want to go out and work in all kinds of weather when you can be inside and make more money?” Many travelers are putting tracking devices on their luggage—but that doesn’t always help. Even if the tracker reveals the bag’s location, some passengers are reporting that airlines are telling them to travel to distant cities to retrieve their bags. Existing methods for reuniting lost bags with their rightful owners are being stretched to their limits by the current crisis—which affected Joanne Prater and her family in ways they never anticipated. Prater, who is Scottish and lives in the United States, says her 50-day quest to recover a checked bag has made her painfully aware of the inconvenience, stress, and emotional impact that people can experience over checked items that go missing. Longing to visit her family in Scotland, Prater scored a deal for half-price airfare: $500 per person, including checked bags. She, her husband, and their three sons drove from their Cincinnati-area home to Chicago. On June 6, they boarded an Aer Lingus flight and were bound for Dublin, Ireland, and Glasgow, Scotland. But when the family arrived at their destination, one bag belonging to her two youngest sons, ages 12 and 8, was missing. As a result, the boys had only “the clothes on their backs,” Prater said. Worse yet, the bag contained a varsity jacket that holds special meaning for the family, along with team jerseys that the boys wanted to show off to their relatives. “How do you explain to your children that their favorite clothes are missing?” Prater said. After it became clear that the boys’ bag wouldn’t materialize anytime soon, the family purchased several outfits for them, paying the U.S. equivalent of about $500. Prater repeatedly called the airline, sometimes stuck on hold for 45 minutes, only to have the call disconnected or to be in touch with a representative with whom she had communication difficulties. She finally resorted to returning to the Glasgow airport during her vacation, hoping that in-person contact would prove more fruitful than phone calls or electronic messages. At the airport, an Aer Lingus employee did seem sympathetic to her concerns. To Prater’s surprise, the employee escorted her into a corridor that was outside public view. There, a sight took Prater’s breath away: the hallway was lined with hundreds of pieces of luggage and other lost articles, such as strollers, car seats, and golf clubs. “People save all their lives for a dream vacation to come to my country, Scotland, where golf was invented, only to have their golf clubs lost? I mean, men collect clubs, and they’re expensive; you’re not bringing Fisher-Price clubs to Scotland to play golf,” Prater said. “It was just gut-wrenching to me. I’m standing there thinking about all of these poor families without their strollers, without their car seats, without their clothing.” Despite repeated attempts to find the missing suitcase,  the Praters returned home to the United States without it.  Prater continued her attempts to file various complaints with the airline, to no avail. Prater said she feels a kinship with other people who have formed groups on social media to vent their frustrations and to try to help each other locate their lost belongings. As of July 26, there was still no sign of the Praters’ bag, which was last seen in Dublin in early June, Prater said she was told. When The Epoch Times asked Aer Lingus for comment on Prater’s situation, the airline responded via email: “We understand the concern and frustrations felt by our customers whose baggage has been delayed and the impact this has had on their travel plans. Regrettably, our airline is being impacted by widespread disruption and resource challenges.” The airline also said it is taking steps to resolve the issues, including enlisting help from third-party companies to return items to their owners. Prater said she isn’t holding out much hope that the lost bag can be found, yet she still isn’t giving up because, “at this point, it’s about accountability.” It angers her that airlines seem to have offered flights and baggage services that they were ill-equipped to provide. “I’m probably never going to check a bag again because of this experience,” she said. Ratliff, the aviation expert, said he doesn’t see the airline crisis abating quickly. He predicts issues could persist into mid-2023. In his view, “If the airlines have packed airplanes now, treating passengers the way they’re treating them, there’s not really an incentive for them to change how they’re doing things.” Troubleshooting Tips for Travelers Jay Ratliff, an aviation expert, provides these tips for avoiding airline-related hassles: Make your reservations as far in advance as possible, which also protects you from fare increases. Catch the first flight in the morning. “There is no more important flight of the day for an airline than that first flight of the day,” he said because airlines know that if that flight goes out on time, it’s more likely that the rest of that day’s flights will follow suit. “And,” Ratliff said, “it’s going to be the cleanest airplane because no one has been flying in it yet.” Put a copy of your itinerary into your bag before you close it, increasing the chances that an airline employee will be able to return your bag to you if it is lost. Consider purchasing a tracking device such as Apple’s AirTag or a Tile. Take a photograph of your bag as you’re checking in to aid in locating it. Make sure you never put essential items such as medication or car keys into a checked bag. Allow extra time at the airport, reducing the chance you’ll miss your flight and face a nightmare rebooking it. “Let’s not play the game of ‘let’s see how close we can cut it,’” he said. If you have an important event such as a cruise ship departure or a wedding to attend at your destination, build a “buffer” into your travel plans. If your flight is delayed or canceled, use social media to contact airlines because they likely have more people working on social media than they do working the phones, Ratliff said. Be succinct in sharing what’s going on and what you need. If all else fails and you have a horrible experience with your flight or luggage, fill out an airline complaint form with the U.S. Department of Transportation (DOT). “That completely changes the tone of the conversation,” Ratliff said. “The airlines can ignore us (individual passengers), but they can’t ignore the DOT.” Tyler Durden Thu, 07/28/2022 - 23:10.....»»

The past few months haven’t been kind to Better.com. The online mortgage company has had to wrestle with challenges associated with rising mortgage rates, but it’s also had to do so amid a wave of bad press over a duo of botched layoffs. With its last misstep still fresh in the minds of many in […] The post Better.com Grapples With More Staff Cuts and a Leaked Post-Layoff Video appeared first on RISMedia. The past few months haven’t been kind to Better.com. The online mortgage company has had to wrestle with challenges associated with rising mortgage rates, but it’s also had to do so amid a wave of bad press over a duo of botched layoffs. With its last misstep still fresh in the minds of many in the mortgage and real estate industries, the tech company was dealt another blow by a recently leaked video of a town hall meeting that immediately followed the company’s infamous Zoom-Call layoffs. “We should have done what we did today, three months ago,” said Better CEO, Vishal Garg, in the video circulating in media outlets like Fast Company and Tech Crunch on April 7. During the town hall Zoom call, Garg offered a mix of reasons behind his decision to ax 900 people in December, including a shifting mortgage environment that has seen refinance originations—a large portion of Better’s business model—shrink dramatically from its elevated levels during 2020 and 2021. Better was among several mortgage lending companies that benefited from the past two years of hyperactive home buying and refinancing activity under record-low mortgage rates, resulting in a surge in hiring and production. It’s also among the list of companies that have been downsizing its staff after a glut of hiring to account for demand in the pandemic. Garg indicated that Better’s labor cuts were made because of lagging production and underperforming employees—arguably another sign of the shrinking refi market. However, the tech company’s CEO also stated that the cuts weren’t just based on performance. “Make no mistake about it; we did also eliminate redundant roles,” he said. “We also did eliminate folks who might be strong performers but were just in the wrong place at the wrong time and weren’t mission-critical to taking the rocket ship forward. “Some of you might ask why if we’re firing 10% of the workforce we are continuing to hire on campus…it’s because we expect those people to be super productive and to add value, and if they don’t, we will exit them too,” Garg adds. Garg also admitted that he made several mistakes within the past two years, including over-hiring and bringing in “the wrong people.” “I was not disciplined over the past 18 months,” he said. “We made $250 million last year, and we probably pissed away $200 million. We probably could’ve made more money last year and been leaner, meaner and hungrier. Throughout the video, Garg referred to his vision of a “leaner and meaner” company that would spend time “grinding the business forward” in what he characterized as a bloodbath in the mortgage industry. When contacted for a response to the leaked video, a Better spokesperson sent the following statement: “Following a thorough review of our culture by outside experts, we have taken significant steps related to our executive leadership structure, governance and workplace practices to ensure that Better’s culture and operations reflect our values and that we always maintain an environment of fairness, respect, transparency and care for every member of our team.” The company has admitted that “company culture” issues have contributed to its performance and financial decline in previous documents filed with the U.S. Securities and Exchange Commission. In one document, Better estimated on a preliminary basis that its 2021 Q4 revenue dropped between 17% to 22% sequentially versus the previous quarter. The company also forecasted an annual revenue decline of up to 29% compared to 2020. It reported a net loss of $111.1 million for the nine months ending on September 30, 2021 and estimates an annual net loss between $167 million and $182 million based on a preliminary unaudited forecast in the filing. While Better.com hasn’t been the only company in the lending industry to experience attrition, the New York-based start-up has arguably been the most publicized for how it handled its labor cuts. A few months after the Zoom call incident, the company again made headlines for laying off 3,000 people—nearly 35% of its workforce—on March 8 after the online mortgage company accidentally sent severance pay-slips to a handful of employees too soon. After dealing with a fair share of scrutiny over both events, the company recently announced a new approach to its continued “rightsizing” efforts. Better.com announced to employees this month that it was starting a voluntary separation program that it has started offering to eligible employees in the U.S. Better’s Chief People, Performance, and Culture Officer, Richard Benson-Armer, outlined the voluntary separation program in an email sent to employees obtained by RISMedia. “As many of you know, the uncertain mortgage market conditions of the last couple of weeks have created an exceedingly challenging operating environment for many companies in our industry,” Benson-Armer wrote. “This is requiring many of them to make difficult decisions in order to sustain their businesses. Despite ongoing efforts to streamline our operations and ensure a strong path forward for the company, Better is no exception.” Better is offering 60 working days’ worth of severance pay and health insurance coverage for those who leave the company. The program was made available to many of the company’s U.S.-based employees in Corporate and PDE who are Level 10 and below. Employees under 40 years old were given up to seven days from receipt of the agreement to accept the offer, while those over 40 were given up to 21 days. Both would receive their final payment on the date of their given deadlines. The memo also noted that employees who took the buy-out would lose access to Better’s system “shortly after signing the agreement.” “While this voluntary separation exercise is difficult, we remain confident in the strong path ahead for Better,” Benson-Armer wrote.” Given the headwinds facing our industry, collaboration and innovation—the hallmarks on which Better built its success—will be more essential than ever. Jordan Grice is RISMedia’s associate online editor. Email him with your real estate news ideas at jgrice@rismedia.com. The post Better.com Grapples With More Staff Cuts and a Leaked Post-Layoff Video appeared first on RISMedia......»»

The past few months haven’t been kind to Better.com. The online mortgage company has had to wrestle with challenges associated with rising mortgage rates, but it’s also had to do so amid a wave of bad press over a duo of botched layoffs. With its last misstep still fresh in the minds of many in […] The post Better.com Grapples with More Staff Cuts and a Leaked Video of Post-Zoom-Firing Meeting appeared first on RISMedia. The past few months haven’t been kind to Better.com. The online mortgage company has had to wrestle with challenges associated with rising mortgage rates, but it’s also had to do so amid a wave of bad press over a duo of botched layoffs. With its last misstep still fresh in the minds of many in the mortgage and real estate industries, the tech company was dealt another blow by a recently leaked video of a town hall meeting that immediately followed the company’s infamous Zoom-Call layoffs. “We should have done what we did today, three months ago,” said Better CEO, Vishal Garg, in the video circulating in media outlets like Fast Company and Tech Crunch on April 7. During the town hall Zoom call, Garg offered a mix of reasons behind his decision to ax 900 people in December, including a shifting mortgage environment that has seen refinance originations—a large portion of Better’s business model—shrink dramatically from its elevated levels during 2020 and 2021. Better was among several mortgage lending companies that benefited from the past two years of hyperactive home buying and refinancing activity under record-low mortgage rates, resulting in a surge in hiring and production. It’s also among the list of companies that have been downsizing its staff after a glut of hiring to account for demand in the pandemic. Garg indicated that Better’s labor cuts were made because of lagging production and underperforming employees—arguably another sign of the shrinking refi market. However, the tech company’s CEO also stated that the cuts weren’t just based on performance. “Make no mistake about it; we did also eliminate redundant roles,” he said. “We also did eliminate folks who might be strong performers but were just in the wrong place at the wrong time and weren’t mission-critical to taking the rocket ship forward. “Some of you might ask why if we’re firing 10% of the workforce we are continuing to hire on campus…it’s because we expect those people to be super productive and to add value, and if they don’t, we will exit them too,” Garg adds. Garg also admitted that he made several mistakes within the past two years, including over-hiring and bringing in “the wrong people.” “I was not disciplined over the past 18 months,” he said. “We made $250 million last year, and we probably pissed away $200 million. We probably could’ve made more money last year and been leaner, meaner and hungrier. Throughout the video, Garg referred to his vision of a “leaner and meaner” company that would spend time “grinding the business forward” in what he characterized as a bloodbath in the mortgage industry. When contacted for a response to the leaked video, a Better spokesperson sent the following statement: “Following a thorough review of our culture by outside experts, we have taken significant steps related to our executive leadership structure, governance and workplace practices to ensure that Better’s culture and operations reflect our values and that we always maintain an environment of fairness, respect, transparency and care for every member of our team.” The company has admitted that “company culture” issues have contributed to its performance and financial decline in previous documents filed with the U.S. Securities and Exchange Commission. In one document, Better estimated on a preliminary basis that its 2021 Q4 revenue dropped between 17% to 22% sequentially versus the previous quarter. The company also forecasted an annual revenue decline of up to 29% compared to 2020. It reported a net loss of $111.1 million for the nine months ending on September 30, 2021 and estimates an annual net loss between $167 million and $182 million based on a preliminary unaudited forecast in the filing. While Better.com hasn’t been the only company in the lending industry to experience attrition, the New York-based start-up has arguably been the most publicized for how it handled its labor cuts. A few months after the Zoom call incident, the company again made headlines for laying off 3,000 people—nearly 35% of its workforce—on March 8 after the online mortgage company accidentally sent severance pay-slips to a handful of employees too soon. After dealing with a fair share of scrutiny over both events, the company recently announced a new approach to its continued “rightsizing” efforts. Better.com announced to employees this month that it was starting a voluntary separation program that it has started offering to eligible employees in the U.S. Better’s Chief People, Performance, and Culture Officer, Richard Benson-Armer, outlined the voluntary separation program in an email sent to employees obtained by RISMedia. “As many of you know, the uncertain mortgage market conditions of the last couple of weeks have created an exceedingly challenging operating environment for many companies in our industry,” Benson-Armer wrote. “This is requiring many of them to make difficult decisions in order to sustain their businesses. Despite ongoing efforts to streamline our operations and ensure a strong path forward for the company, Better is no exception.” Better is offering 60 working days’ worth of severance pay and health insurance coverage for those who leave the company. The program was made available to many of the company’s U.S.-based employees in Corporate and PDE who are Level 10 and below. Employees under 40 years old were given up to seven days from receipt of the agreement to accept the offer, while those over 40 were given up to 21 days. Both would receive their final payment on the date of their given deadlines. The memo also noted that employees who took the buy-out would lose access to Better’s system “shortly after signing the agreement.” “While this voluntary separation exercise is difficult, we remain confident in the strong path ahead for Better,” Benson-Armer wrote.” Given the headwinds facing our industry, collaboration and innovation—the hallmarks on which Better built its success—will be more essential than ever. Jordan Grice is RISMedia’s associate online editor. Email him with your real estate news ideas at jgrice@rismedia.com. The post Better.com Grapples with More Staff Cuts and a Leaked Video of Post-Zoom-Firing Meeting appeared first on RISMedia......»»

Block (SQ) lost about 15% on Mar 23 as renowned short seller Hindenburg alleged the company for permitting criminal activity with less strict controls and inflating its transacting user base. After India’s Adani Group, renowned short seller Hindenburg attacked U.S.-based technology services firm Block SQ, which lost about 15% on Mar 23. Hindenburg Research said that the company permitted criminal activity with less strict controls and that it  “highly” inflates Cash App’s transacting user base, a key metric of performance, per CNBC.Block provides payment and point-of-sale (POS) services, which include hardware and software to accept payments, streamline operations and analyze business information. Block’s payments and POS services include In-Person Payments, Online Payments, Square Cash, Square Register, Square Analytics, Square Appointments and so on.“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” Hindenburg said in its report. The research firm said Block’s Cash App flourished on serving “unbanked” customers, as quoted on CNBC.Hindenburg’s all-embracing report includes screenshots of internal systems and employee messages. Up to 35% of Cash App’s revenues are derived from interchange fees, Hindenburg suspected. That’s around $892 million in revenues that the short seller believed should be capped by laws levied on large financial institutions. Block dodges that cap by routing those revenues through a small bank, Hindenburg alleged, as reported by a CNBC article.Against this backdrop, below we highlight a few ETF areas that could win amid the Hindenburg-induced crisis in Block shares.ETFs in FocusBlock has solid exposure to crypto-centric ETFs like Global X Blockchain ETF BKCH (Block has 15.60% weight in the fund), Fidelity Crypto Industry and Digital Payments ETF FDIG (weight about 12.60%), First Trust SkyBridge Crypto Industry & Digital Economy ETF CRPT (weight about 12.11%), ARK Fintech Innovation ETF ARKF (weight about 9.79%) and ARK Next Generation Internet ETF ARKW (weight about 7.56%). All these ETFs lost in the range of 1.0% to 3.0% on Mar 23 as Block’s slump hit them.Time to Buy the Dip in Crypto & Payments ETFs?Despite Block’s debacle, the aforementioned ETFs did not lose much as the Fed adopted a less-hawkish tone this week. Investors expect the end of Fed rate hikes soon. This should bolster growth investing in the coming days.Notably, growth investing (like technology, internet, payments, software, and even blockchain and cryptocurrency) has suffered a lot in the past year due to higher rates. Companies have seen their valuations eroding and have cut their cost structure through layoffs.Bitcoin has rallied nearly 70% so far this year. Industry insiders who spoke to CNBC remain bullish, with one saying the world’s biggest cryptocurrency could reach new heights. Bitcoin earlier hit its all-time high of $68,990.90 in November 2021. Now the cryptocurrency is hovering around the 28,300 level. The ongoing rally is even defying regulatory issues. Hence, the latest Block plunge could open up a door for investors to play the above-said ETFs.  Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Block, Inc. (SQ): Free Stock Analysis Report ARK Next Generation Internet ETF (ARKW): ETF Research Reports ARK Fintech Innovation ETF (ARKF): ETF Research Reports Global X Blockchain ETF (BKCH): ETF Research Reports First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT): ETF Research Reports Fidelity Crypto Industry and Digital Payments ETF (FDIG): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Tech has always gone through booms and busts. The companies that have always won are the ones that think ahead and stay focused — from the 60s to today. The valuations of most major tech companies were high — and now they’re not.Malte Mueller/Getty Images Tech's pandemic bubble has finally burst, demonstrated by layoffs and falling share prices. Every previous boom and bust in tech over the decades has resulted in winners and losers. The ones that survived were those that stayed agile, kept focused on innovation, and made sure their foundations were solid. There's been a lot of noise in the tech sector lately. Debates over "fake work," sweeping rounds of layoffs, and the rollback of lavish employee perks, have all raised a single unifying question: is the golden age of American tech over? Call it a downturn or call it a market correction. Whichever way you slice it, one thing is certain, the valuations of most major tech companies were high — and now they're not. Investors have spoken and the tech industry has hit a rough patch. After over a decade where the music never seemed to stop in Silicon Valley, the last song of the night is finally playing.The thing is that the tech industry has been here before, and will likely be here again. While companies like Meta and Google have hit rough patches for sure, there's no reason not to believe that they'll bounce back. They may even be wiser for the experience, experts say."The fundamentals are strong, maybe this is a reminder that austerity is important," said Dr. Vijay Govindarajan, a professor at the Tuck School of Business at Dartmouth College.But while the rest of the world gawks at the current state of tech, experts say that there are lessons to be learned from looking at the winners and losers of the previous booms and busts. Every tech boom and bust has a lesson to teachThe origins of modern-day Big Tech dates back to the 1960's, as computers slowly but surely transitioned from something primarily used by the government and academic sectors and into something that would find their way into the workplace, and later, households. Companies like IBM, Intel, and Hewlett-Packard saw their fortunes rise, as Wall Street began to fall in love with tech stocks, American historian and University of Washington professor Margaret O'Mara told Insider.But when the US government started pulling its tech spending amid the economic recession of the 1970s, the floor fell out from under Silicon Valley. It took the personal computer revolution, which peaked in the 1980s to bring the tech sector back into investors' good graces. That boom lasted well through the advent of the Internet in the 1990s — right up until the notorious dot-com crash of 2000 when the market turned on buzzed-about web startups whose investment capital didn't match their earnings potential . The Nasdaq fell 39%, and a number of companies went under. Some of the remaining dot-com survivors that still exist today are Google, Amazon, eBay, Priceline (now Booking.com), and what's left of Yahoo. Tech historian Micheal Malone told Insider that the successful companies took an important lesson from this difficult period: One product wasn't going to keep them relevant nor afloat. Information technology was evolving too fast for any one idea, no matter how good, to carry a comapny through. Apple shook up its PC business with the introduction of the iPhone and the discontinued iPod. And Microsoft acquired internet companies that could help support the creation of its internet software business."You can't just have a hot product, get rich, and walk away. You had to create follow up products," said Malone.Others suggest the real lesson is the dangers of what can happen when investors get involved with technologies that aren't quite mature yet."If you jump into a disruptive technology, you can really lose a lot of money because nobody knows enough about it," said Dr. Vijay Govindarajan, a professor at the Tuck School of Business at Dartmouth College.Staying agile is a relevant lesson, and so is making sure the foundations are soundIt took years for things to turn around, with the great recession of 2008 slowing down the recovery.When investors finally warmed back up to tech, Malone said the new theme became scalability: "You had to understand the markets, changing trends, and if you have those things, can you grow that company by 10 times every year?"Startups turned to users for help instead of taking on the expensive task of scaling by themselves. So-called Web 2.0 companies like Wikipedia, Facebook, Flickr (now part of SmugMug) and Twitter all relied on user-generated content, rather than creating it by themselves. "Facebook could not have created a billion webpages for people. They let people create them themselves. That's scalability," Malone told Insider.That theme carried companies into the earliest part of the 2020's. But something new is emerging now. While the rounds of layoffs and falling stock prices have been painful, Malone believes its bringing new focus to the lessons of being "financially sound" and having strong "structural underpinnings."For Dr. Govindarajan, the theme is austerity, telling Insider that tech "can't afford to be wasteful" anymore.  Wall Street and tech are betting the next boom will come from ChatGPT or the metaverse. But in this environment, it'll be those who thought ahead and made sure to spend their money wisely. "Ten years from today, there will be players who would've made money. Some people would've lost," said Dr. Govindarajan. "And that's the nature of the tech industry."Read the original article on Business Insider.....»»

Using employees' performance reviews as reasoning for layoffs "creates waves of anxiety," Harvard's Sandra Sucher said. Employers shouldn't use layoffs as a way to cut low-performing workers, a labor expert told Insider.simplehappyart/Getty Images Companies in industries including tech and finance have recently laid off workers. Layoffs shouldn't be used as a way to cut low-performing workers, Harvard's Sandra Sucher said. It's important that performance-management systems are fair, Sucher told Insider. It can be a lot better to tell someone you were laid off than saying you were fired. That's because layoffs are often the result of a slumping economy or missteps by management. But getting fired can mean you somehow didn't cut it. The distinction might seem self-evident. But sometimes, leaders who are eager to sweep away lackluster workers can be tempted to clean house under the guise of layoffs. That's a bad idea, according to Sandra Sucher, a professor of management practice at Harvard Business School who's studied layoffs.She told Insider that cutting underperforming employees while blaming something like soft economic conditions wasn't wise because it risks having workers lose faith in how their employers evaluate them. "You want people trusting that the performance-management system is fair and being managed well," Sucher said. "If you see it being used for mass layoffs — as well as individual performance — that makes workers question, 'What are people thinking when they're actually assessing my performance? Am I being put on some list to be laid off?'"When demand for a company's goods or services dries up, layoffs often become part of the conversation in C-suites. In recent months, employers in tech, finance, retail, and manufacturing have shed workers. Some companies, like Amazon and Meta, the parent company of Facebook, Instagram, and WhatsApp, have made cuts more than once. Layoffs are, of course, often aimed at trimming expenses and achieving efficiency — as well as appeasing shareholders.  Yet letting go of staff this way also risks damaging morale and limiting worker productivity.Even broad job cuts that purport to target only the lowest-ranked workers can harm a company, Sucher said. That's because of how much anxiety the practice, sometimes called stack ranking, creates among employees.This approach was something General Electric, the onetime industrial juggernaut, years ago famously used to cull its lowest-ranked workers. The breadth of such cuts can make them feel a lot like layoffs, though the reductions are tied to employee performance, rather than to help a company push through economic headwinds. Sucher said the "rank-and-yank" approach wasn't an effective way to manage an organization."It creates these waves of anxiety," she said. "All work stops, as people are waiting for the performance-management cycle to close and figure out who gets to keep their jobs."It's reasonable to want cut low performers — but it's hard to get it rightThe decision to do layoffs is perhaps never easy, and the choice of whom to put on the cut list can be even more difficult. One fair way to do it is to prioritize seniority because it enables managers to "treat everyone the same based on how long they've been there," Sucher said, adding that the approach was rarely a popular one. Sucher said that if a company had to conduct layoffs for economic reasons, it's logical to want to focus on those who contributed the least. But deciding who that is can be tougher than it seems."The sausage making here is really hard," she said. One of the most important questions to consider, Sucher said, is: "Is there work that someone's doing that's less important than other people's work?" Setting up a tracking system that flags those workers who might get pushed out in a layoff can help identify whether certain groups are facing a disproportionate share of the planned cuts."Look for why it is that in this organization only women are being let go, only older people, only people on maternity leave," she said. "If there's nobody kind of scouting that out, then you actually are putting yourself at risk."It might sound obvious not to target any particular group, yet Sucher said it could happen if management wasn't deliberate about deploying safeguards."The research suggests that it's much less rational and performance-based than you think," she said. "And that's why it requires some oversight."Read the original article on Business Insider.....»»

Jobless Claims Data Continues To Ignore The Fed Initial jobless claims dropped (again) last week to 191k (fewer than expected) and once again standing in the face of anecdotal evidence of waves of headlines of mass layoffs. Source: Bloomberg Continuing claims remained below 1.7mm. California and Illinois saw the biggest weekly drop in claims while Indiana and Massachusetts saw the largest increase... Assuming a 3mo lag between monetary policy and its effect on the economy, we can comfortably claim that something's broken... Source: Bloomberg Maybe what we really need is a banking crisis to collapse credit? Tyler Durden Thu, 03/23/2023 - 08:38.....»»

In today's edition: Google's leaked engineering plan, the electric vehicles with the largest driving range, and more headlines. I want a free vacation, buds. I'm Diamond Naga Siu, and I'm excited about a bunch of compensated travel opportunities coming up. Taiwan is paying tourists' expenses. A northern region of Italy is paying people to visit.And now, Finland — recently named the world's happiest country — is covering all travel and accommodation expenses for ten lucky visitors. The all-expenses-paid trip comes with a "Masterclass of Happiness," which will take place over four days at a luxury retreat in the country's Lake District.Before I prepare a TikTok proving that I "may secretly be a Finn" — per their application guidelines — let's dive into today's tech.If this was forwarded to you, sign up here. Download Insider's app here.iStock; Robyn Phelps/Insider1. The US is losing tech workers to other countries. Its immigration system, considered by some to be nightmarish and outdated, could be a ticking time bomb for tech. And the layoffs sweeping the industry demonstrated how vulnerable visa-holding workers are. Many needed to find a new job in 60 days or risk deportation.Canada, the United Kingdom, Australia, Japan, Singapore — the list of countries making moves to win over immigrants is pretty long. And so, many tech workers are opting to move and work there instead of the US.America's loss, however, is other countries' gain. Jobs are moving away already. Plus, many of these countries are making their immigration systems easier for tech workers. So the US needs to move fast or it risks falling behind.My teammates Emilia David and Paayal Zaveri break down how the US is on the brink of losing an entire generation of tech workers.Dive into America's loss — and other countries' gain — here.In other news:Robyn Phelps/Insider2. YouTube subscriber counts are just vanity metrics now. The metric was previously a strong success indicator. But YouTube Shorts — the Google-owned platform's answer to TikTok — seem to have watered down the stat's importance. More on the transformation here.3. Bill Gates publishes an AI manifesto: "The Age of AI has Begun." The Microsoft founder has a lot of thoughts about the buzzy tech. He thinks it'll act like a "digital personal assistant" and will enhance employee productivity. Check out his other predictions here.4. The 26 startups transforming real estate. The industry is floundering as the housing market cools. Investors told Insider the startups to keep an eye on, including ones capturing wind energy, selling home building kits, and offering tool rentals. Get the full list of companies to watch here.5. Google's leaked engineering plan. Urs Hölzle, the company's engineering head, is focusing the department on efficiency, per a leaked email. Multiple Googlers are interpreting it as a warning signal for more layoffs. See the full five-point plan here and what it means.6. Microsoft should throw billions at Apple, says former Google exec. He said Microsoft should do as much as it can to get its search engine Bing as the default for iPhones and iPads. Google currently pays $15 billion for that privilege. More on the search gauntlet here.7. Gen Z and Boomers love the same cars. Vehicle registration data revealed the most popular cars among each age group. And it showed that Boomers and Gen Z both love many of the same cars, including the Toyota RAV4. Check out every generation's favorite car here.8. The SEC sued Tron founder Justin Sun in a lawsuit involving Tronix and BitTorrent crypto tokens. It also charged eight celebrities  with promoting the tokens without disclosing they were paid, including the actress Lindsay Lohan, YouTuber Jake Paul, and singer Akon. Read more. Odds and ends:A video from NASA's Solar Dynamics Observatory shows the massive hole in the sun's atmosphere.NASA/Solar Dynamics Observatory9. Solar winds will hit Earth by the end of this week. The sun has a massive hole in it, which is blasting rapid solar winds toward the planet. The winds will cause stunning auroras on Earth. More on the high-speed situation here.10. Scoring $50 off the AirPods Pro 2 is a no-brainer. Insider's senior commerce director Brendan Griffiths refuses to buy an iPhone. But if Apple's top tier earbuds are $50 off, he won't resist the "unstoppable" deal. Check out his argument for the best earbuds he's ever owned.What we're watching today:TikTok's CEO Shou Zi Chew is speaking in Congress today. The topic is "TikTok: How Congress Can Safeguard American Data Privacy and Protect Children from Online Harms."The Start Summit in St. Gallen, Switzerland begins today. It's a student-run startup conference with leaders from SpaceX, Blackrock, Duolingo, and other major companies speaking.Curated by Diamond Naga Siu in Los Angeles. (Feedback or tips? Email dsiu@insider.com or tweet @diamondnagasiu) Edited by Matt Weinberger (tweet @gamoid) in San Francisco and Hallam Bullock (tweet @hallam_bullock) in London.Read the original article on Business Insider.....»»

Silicon Valley Bank implodes… The dreaded chain reaction… This is the end of Silicon Valley as we know it… Silicon Valley Bank Implodes The Fed finally broke something big. In its ongoing effort to cool inflation, the Fed hiked interest rates at its fastest pace in decades over the past year. And now, things are […] Silicon Valley Bank implodes… The dreaded chain reaction… This is the end of Silicon Valley as we know it… Silicon Valley Bank Implodes The Fed finally broke something big. In its ongoing effort to cool inflation, the Fed hiked interest rates at its fastest pace in decades over the past year. And now, things are unraveling quickly… if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   On Friday, Silicon Valley Bank (NASDAQ:SIVB)—America’s 16th-largest bank and a massive player in the venture capital world—went under. It marks the second-biggest bank failure in US history, second only to Washington Mutual in 2008. What happened? Over the last year, surging interest rates eroded the value of banks’ bond portfolios. SVB was especially vulnerable because of 1) poor management and 2) its unique customer base. SVB’s customers were concentrated in venture capital/startup companies—which tend to be deeply cash flow negative. Its customers burned through more and more cash, withdrawing more and more money from the bank. This came to a head last week when SVB was forced to sell billions of dollars’ worth of bonds­—mostly US Treasurys­—at huge losses, triggering panic. Venture capital advisors urged their customers to take their money out of SVB, igniting a bank run. Regulators closed down the bank for good on Friday. There are a lot of important angles to this. In fact, I believe this marks the end of Silicon Valley as we know it. But for today… let’s go over the most urgent implications for your money. FDIC Has Got Your Back Your money in your bank is probably safe. Up until yesterday, the rules were clear. The Federal Deposit Insurance Corporation (FDIC) guaranteed deposits of up to $250,000 per depositor per US bank. If your bank shuts down tomorrow, the FDIC ensures you get your money back, up to $250,000. Above that amount, you might lose money. According to Barron’s, 87% of SVB’s deposits were above $250,000, and therefore at risk. As any corporate treasurer knows, there were ways to extend this coverage. You could spread your money across multiple accounts, for example. If you have $2.5 million and put 1/10th into 10 different banks, it’s all insured. But by the looks of it, there’s no longer a need to do any of that. Because over the weekend, the Feds changed the rules. Here’s Barron’s: In essence, Federal Deposit Insurance Corporation protection—usually limited to $250,000 per account—became unlimited. Additionally, the Federal Reserve created a new program to help protect other banks from depositor flight. This is a HUGE deal. Guaranteeing all deposits should go a long way toward stemming this crisis. It’ll make SVB depositors whole. And it’ll stop most folks from running to their bank to pull out their cash. But a government changing rules on the fly sets a dangerous precedent. Not only does it introduce uncertainty and spur questions about why we have these rules at all... It sows the seeds of an even bigger crisis because it shields the people who made mistakes from their consequences. Worries About Regional Banks Everyone is worried about a chain reaction… The problem with bank runs is they spread. They shatter confidence and make investors wonder: Could this happen to my bank? At the time of writing, the latest news is New York regulators shut down Signature Bank—a crypto-focused bank—due to these concerns. And First Republic, another big bank, looks to be in trouble as well. At one point, its stock went down 60% in pre-market trading. The chart of KRE—a regional bank ETF—looks awful: I wouldn’t be surprised if more regional banks fail. Don't Believe The Media Here’s my rule for highly emotional times like this… Think independently. Remember, the media’s job is to scare you. Of course, they’re saying this is 2008 all over again. Their ratings shot through the roof in 2008. But the reality is, the end-of-the-world narrative is NOT being reflected in asset prices. Outside of regional banks and Silicon Valley, markets are holding up well. The S&P 500 and the Nasdaq are up slightly on the year. Bitcoin and Ethereum—two of the most speculative assets—are holding up fine. And many global stock markets—like the UK, France, Denmark, and Australia—are a hair off all-time highs. Ask yourself: How bad could things really be if the UK’s stock market is near record highs?   A Crash Is Unlikely And the #1 reason I doubt this crisis will crash the stock market is… The weakness in the US dollar. For reasons we’ve discussed many times, the US dollar is the ultimate “canary in the coal mine.” It ALWAYS spikes during big crises... It spiked in 2001, 2008, and even leading up to the difficult year that was 2022. But today? The dollar is down more than 2% since March 8: Bottom line: The failure of SVB is a big deal for the banking sector and Silicon Valley. But there’s a complete lack of evidence that it’s going to crash the stock market. Unless you count media headlines as evidence… which I most definitely do not. Article by Stephen McBride - Chief Analyst, RiskHedge To get more ideas like this sent straight to your inbox every Monday, Wednesday, and Friday, make sure to sign up for The RiskHedge Report, a free investment letter focused on profiting from disruption. Expect smart insights and analysis on the latest breakthrough technologies, the big stories the mainstream media isn't reporting on, and much more... including actionable recommendations. Click here to sign up......»»

Political operatives see a Trump indictment as an opening if the GOP challengers can figure out how to "weaponize" it before the former president. Former U.S. President Donald Trump gestures during his 2024 campaign announcement at his Mar-a-Lago home on November 15, 2022.Joe Raedle/Getty Images. Former President Donald Trump faces possible criminal charges as he's running for president. The case could take him away from the campaign trail and make voters worry about his electability.  It could also supercharge a campaign already expected to turn on grievance and victimization. The Manhattan grand jury's potential criminal charges against former President Donald Trump threaten to send shockwaves into the 2024 Republican nomination contest. An indictment, which would be the first ever of a former president, could become a galvanizing force for Trump's most ardent supporters but also repel independent voters reminded of the reality show-esque drama that surrounds him, political insiders say. Empaneled by District Attorney Alvin Bragg, the grand jury has been investigating Trump's role in a hush-money payment made during his 2016 campaign to adult film actress Stormy Daniels and appears to be nearing a possible historic indictment.Denying any wrongdoing, Trump has repeatedly railed against the probe as a witch hunt — framing that could motivate his base and even bolster his status as the GOP frontrunner if he's charged."If it's a circus, there's only one ringmaster and that's Trump," said GOP pollster B.J. Martino, president and CEO of The Tarrance Group. "And he'll benefit and be able potentially to pull some of those who have a favorable impression of him, but maybe aren't voting for him right now, into the camp because they're gonna have that rally effect."But potential charges and courtroom appearances could also impede Trump's effort to persuade Republican primary voters to give him another shot at the White House after he lost in 2020 and after many of his hand-picked candidates were defeated in 2022. "It will cause more internal chaos, slow the organization down, and scare donors away," John Thomas, who runs the independent super PAC, Ron to the Rescue, that wants Florida Gov. Ron DeSantis to run for president, predicted to Insider. Amid rumors that the grand jury is nearing a decision on whether to charge Trump — a possibility the ex-commander-in-chief himself has stoked in recent days — Republican presidential hopefuls have started jumping into the fray.DeSantis, a rising GOP star widely expected to run for 2024, has become the former president's most contentious rival in the likely field, questioning his character, drawing attention to the "drama" of his administration, and raising doubts about his electability.Meanwhile, Trump's allies in Washington have rushed to defend him, echoing his accusations that Bragg, a Democrat, is politically biased and abusing his prosecutorial authority to destroy the former president. 'They want a winner'Trump has proven to be the ultimate political survivor. Repeated scandals have failed to dent his Republican support in what some experts have viewed as an act of defying political gravity, or even flipping it upside-down: Turning the news into entertainment as he insults his critics and stirs the next controversy. Will an indictment be any different? Operatives thinking of ways to land punches on Trump say GOP primary candidates could argue that he would lose the general election because of his legal troubles. Republican focus groups show that voters can disagree wholeheartedly with an indictment of Trump yet still worry that it might affect his electability, said Gunner Ramer, political director at the anti-Trump Republican Accountability Project. "They want a winner," Ramer said. "They want to beat Joe Biden." The sheer number of Republicans willing to challenge Trump signals that the party views the former president's influence as waning. Former United Nations ambassador Nikki Haley and entrepreneur Vivek Ramaswamy have formally mounted campaigns, but more are expected to enter the race besides DeSantis, including former Vice President Mike Pence, Sen. Tim Scott of South Carolina, and former Secretary of State Mike Pompeo. Political insiders widely concede that a potential indictment — and how Trump responds — could still backfire on GOP challengers and strengthen Trump. Polling shows Trump leads both declared and undeclared challengers by double digits."A candidate running under indictment would seem to be a liability, and if you're running against that candidate, you'd probably want to weaponize that liability," said Kyle Kondik, managing editor of Sabato's Crystal Ball, the University of Virginia Center for Politics' newsletter on US elections. "But the other Republicans have to figure out a way to use that weapon against Trump. I don't know if they're capable of doing it, or doing it in an effective way." Michael Cohen, center, is surrounded by reporters as he arrives for grand jury testimony on March 15, 2023, in New York.AP Photo/Mary Altaffer'This is us versus them'Most aspiring politicians who faced criminal charges had to kiss their election chances goodbye. The late US Republican Sen. Ted Stevens of Alaska, considered a bipartisan icon, lost his 2008 reelection race shortly after he was found guilty of hiding gifts from an oil executive. The case was a distraction that pulled him away from campaigning, Larry Persily, a journalist and former federal official in Alaska, told Insider. Newspaper headlines and broadcasts blared the word "corruption" before voters, rather than reminding them of the work Stevens had done for Alaska."It was a focus of public attention, so he wasn't on the trail as much as he wanted to be," Persily said. Trump could confront similar consequences if he's charged. Images of the former president surrendering himself to the DA's office in Lower Manhattan would be plastered across every news website and broadcast. He would be fingerprinted, swabbed for DNA, and photographed for his mugshot. And if a trial proceeds out a potential indictment, it could happen while the 2024 campaign is in full swing, forcing Trump to appear in court and take time away from the trail. "If it does progress to trial, obviously, that could have geographic consequences on the former president and hinder his ability to campaign, at which point I do think it would be difficult for him to become the president," said Lauren Zelt, a GOP consultant who's the founder and CEO of Zelt Communications, but "there's a situation in which he could already have secured the Republican nomination by that point."If Trump becomes the Republican nominee "and he is facing criminal charges and is being tried in our justice system," Zelt added, "I think it makes it very easy for the Democrats to secure the White House again in 2024." The New York investigation is following a $130,000 payment that Michael Cohen, Trump's former lawyer and fixer, made to Daniels' lawyer days before the 2016 presidential election so she would stay silent about an alleged affair she had with Trump in 2006.  In 2018, Cohen was sentenced to three years in prison after he admitted to wiring the payment, which he swore under oath that Trump had authorized and reimbursed him for through monthly $35,000 checks disguised as legal fees. Prosecutors say the payment was an illegal campaign contribution. Trump has denied having an affair with Daniels and rejected claims that the payment was unlawful.Bragg and his team appear to be considering whether Trump falsified business records in the first degree, a low-level felony in New York that carries a sentence of no jail time or as much as four years in prison. In Trumpworld, however, the hush-money case seems like old news and is unlikely to imperil the former president's campaign, several political analysts said. A Manhattan indictment "is not likely to impact Trump, is somewhat contrived, will be difficult to prove at least in the eyes of an appellate court applying the governing law, and relies too heavily on the Sammy the Bull Gravano of dirty tricksters — convicted felon, perjurer, disgraced lawyer, Michael Cohen," Ty Cobb, a former Trump White House lawyer who's criticized his ex-boss, said. "Why bring it?" Trump's base has rallied behind him amid numerous ongoing legal landmines, including Georgia's Fulton County probe into Trump and his allies' efforts to overturn the state's 2020 election results, and US special counsel Jack Smith's overseeing of the Justice Department's investigations into Trump's interference in the 2020 election results and role in the January 6, 2021 Capitol riot, as well as his potential mishandling of classified documents that the FBI retrieved from his Mar-a-Lago home.Criminal charges brought against Trump in those major cases might concern voters more than potential charges related to a hush-money payment would, especially if new revelations come down that taint his image, according to political insiders.An indictment in the January 6 special counsel probe "is the one case that I believe would impact Trump in connection with 2024," Cobb said. "Once filed, I believe many large Trump donors and some of his supporters abandon him at that point," Cobb continued, adding that those who believe Trump's lies will stick by him.Trump has denied any wrongdoing in each of the criminal inquiries and has repeatedly characterized himself as the victim of political persecution. It's the same line of attack he's mounted in response to a likely Manhattan indictment. "He wants that sense of, put your team jerseys on, this is us versus them," Martino said. "And the more that he can convince voters that this is the Democratic machine coming after him, one way or the other, creates that rally effect around him."Florida Gov. Ron DeSantis speaks to Iowa voters on March 10, 2023.Scott Olson/Getty ImagesRepublicans 'don't want to be collateral damage' The Stevens case from 2008 that led to a guilty verdict for hiding gifts from an oil executive has some parallels with a case against Trump. Days before the election, a federal jury found Stevens guilty of violating federal ethics laws. He lost by just 1%, putting an end to his 41 years in the Senate. Later, his case was dismissed when a Justice Department probe found evidence that the prosecution engaged in misconduct. The difference with Trump, Persily said, is that he relies more on his base and doesn't wield the same support from middle-of-the-road voters as Stevens had. An indictment won't sway Trump's loyal following, he said, but could grow the number of Republican who say the ex-president will drag the party down and cost them the 2024 election. While the circumstances surrounding the 2024 primary are uncharted territory, polling shows a cohort of GOP voters has grown weary of Trump and is seeking an alternative. "Republicans will put up with a lot from Trump, but they themselves don't want to be collateral damage," Persily said. "An indictment would increase the odds of shrapnel hitting them."Still, analysts warn that it's simply too early to gauge the extent that Trump is politically harmed or helped by a potential indictment, though they add that there could be advantageous ways for opponents to talk about it. Candidates could seek to contrast themselves with Trump, while avoiding criticizing the party's leader, with arguments such as: "'We thank Donald Trump for making America great again, but we also have to move forward,'" said Doug Heye, a veteran GOP strategist.GOP rivals could say, "Donald probably didn't do anything wrong, but an indictment is a serious thing," Heye continued, spelling out an approach candidates might take. So far, candidates Haley and Ramaswamy have condemned the Manhattan grand jury probe and a possible indictment of Trump. For his part, DeSantis lit into Bragg over what he called a politically motivated investigation, yet he highlighted Trump's alleged affair with Daniels, signaling a point of contrast between himself — a young father who has made his family a centerpiece of his public image — and Trump, a two-time divorcé with a reputation for being a playboy and who has faced multiple claims of sexual assault. "I don't know what goes into paying hush money to a porn star to secure silence over some type of alleged affair," DeSantis said, doubling down on his remarks in an interview with British TV personality Pierce Morgan. Trump, displaying his willingness to hit at the jugular in real time, swiftly shot back by raising questions about whether DeSantis might face salacious allegations of his own someday. Read the original article on Business Insider.....»»

In today's edition: Google's Bard is finally available for non-employees, how to make $10,000 per month on OnlyFans, and more headlines. It's the middle of the week, 10 Things in Techies. I'm Diamond Naga Siu, and for the first decade or so that I worked, I was always paid in cash. I didn't put much of it into a bank, because I didn't really understand how it worked.So I hid it in different places, keeping a mental tally of my cash stash.I'd be pretty upset if I mistaked one of my decoy reserves for a pot of proverbial gold. But that's almost exactly what happened to JPMorgan Chase.The financial services company thought it had $1.3 million worth of nickel stored in a warehouse. But the London Metal Exchange gave the banking giant a costly wake up call: its horde of bags only contained stones.Before I go check my remaining stash to make sure it's all real, let's dive into today's tech.If this was forwarded to you, sign up here. Download Insider's app here.People walk into the lobby of Amazon offices in New York in February 2019.Mark Lennihan/Associated Press1. Amazon's flawed job posting process. The company had little oversight of the hiring process until last year, Insider learned. Managers recruited and hired way more employees than they were approved to bring on.Amazon Web Services, for example, had 24,988 job openings in 2022. But only 7,798 of them were approved, according to a leaked document. This means the department was hiring for three times the number of roles it was budgeted for.One employee told Insider that leaders tried to "squeeze people in where they could," due to overhiring. In the aftermath, Amazon has seen multiple rounds of mass layoffs. (Also! Check out this leaked, all-hands message about "single-digit" percentage cuts to AWS)My colleague Eugene Kim breaks down Amazon's flawed hiring process. He also highlights the pushback it received while trying to fix the fragmented system.Come behind-the-scenes of Amazon's overhiring spree here.In other news:Arif Qazi / Insider2. "Airbnbust" is actually the market hitting maturity. Many Airbnb hosts are worried about the short-term rental market bubble bursting. But it's not so clear-cut. Booming or busting depends on what city you're in. Dive into Airbnb's breaking point here.3. Revenue-per-employee is making a comeback. This metric was phased out when the tech industry was flourishing. Check out its resurgence now that the industry is on shakier ground. Bonus: Multiple rounds of layoffs show how companies are taking back their power. They're likely not stopping there. 4. A tech worker whose job offer was rescinded shares the red flags they overlooked. It was retracted six days before his start date. He shared the red flags he overlooked during the hiring process, including the hiring of a new chief revenue officer. Get his full list of warning signs here.5. Google's competitor to ChatGPT is finally out. Bard is finally open for non-Googlers to use. Check out the chatbot release details here. Bonus: Bard is already taking digs at its creator. More on how Bard thinks Google has "a monopoly on digital advertising technologies."6. ChatGPT's instructions on how to get rich quick (or not). The prompt: "You have $100, and your goal is to turn that into as much money as possible in the shortest time possible, without doing anything illegal." Check out ChatGPT's first four steps here.7. How to make $10,000 per month on OnlyFans. Direct messages. Personalized videos. Shoutouts. OnlyFans creators share how they make more than $10,000 per month. Some even make more than $100,000 per month. Check out their business models here.8. TikTok's best defense against getting banned — 150M monthly users. This means around half of the US population uses it. And with so many voters regularly using TikTok, politicians are wary of making any big moves. More on its secret weapon here.Odds and ends:iStock; Marianne Ayala/Insider9. Gen Z loves real estate investing. Many young people are turning to real estate to escape a traditional 9-to-5 job. They have unprecedented access to information and new tech. Plus, they're learning from the mistakes of millennials. Dive into how they're reshaping the housing market here.10. Bumper-to-bumper: The two largest electric SUVs. The BMW iX and the Rivian R1S are two of the largest EVs on the market. They're both aesthetically striking and incredibly fast. But they offer distinct strengths. Drive over for the full comparison here.What we're watching today:Ramadan Mubarak! (Depending on moon sightings)Relativity is launching the first 3D-printed rocket. Watch Terran 1's journey here.The Game Developers Choice Awards are today in San Francisco, as part of the Game Developers Conference.Leylah Fernandez, Emma Raducanu, Sloane Stephens, and others are competing in the first round of the Miami Open main draw.Curated by Diamond Naga Siu in Southern California. (Feedback or tips? Email dsiu@insider.com or tweet @diamondnagasiu) Edited by Matt Weinberger (tweet @gamoid) in San Francisco and Hallam Bullock (tweet @hallam_bullock) in London.Read the original article on Business Insider.....»»

     The transcript from this week’s, MiB: Cliff Asness, AQR, is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business… Read More The post Transcript: Cliff Asness appeared first on The Big Picture.      The transcript from this week’s, MiB: Cliff Asness, AQR, is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, this will be my shortest introduction ever, Clifford Asness and I just go over the entire universe of quant factor and value investing. It is a masterclass. And if you don’t believe me, I’m just going to shut up and say, with no further ado, my conversation with AQR’s Cliff Asness. Let’s start out a little bit going over some of your background. You get your PhD at the University of Chicago, where you are the teaching assistant for some obscure prof named Gene Fama. Tell us a little bit about that. CLIFFORD ASNESS, CO-FOUNDER, AQR CAPITAL MANAGEMENT: Yeah, I basically discovered him. I ended up at the University of Chicago. I was an undergrad studying business and engineering. I decided I wanted to be a professor because I did a job just for money, coding up studies for three Wharton professors. I liked what they did. I said, how do I do what you’re doing? And they said, go get a PhD. I said, where should I go? And they said, close the door because we were at Wharton. And Wharton is a great school, but PhD program rankings can be different than — RITHOLTZ: Sure. ASNESS: And they and almost to a man because I went to about 10 professors, they said go to Chicago. RITHOLTZ: Really? ASNESS: I mean, I got in, I went, and Gene Fama was the man. RITHOLTZ: To say the very least. So your doctoral thesis asserted that consistently beating market averages was attainable by exploiting both value and momentum. In other words, you took Fama’s value factor and added your own twist which was momentum, which eventually became a Fama-French factor, right? ASNESS: Yeah. Fama-French still don’t include it in their official five-factor model. RITHOLTZ: Really? ASNESS: A lot of us think they should. I think that’s just a philosophical difference. The way I always describe it is one of the scariest moments of my life was going to Gene’s office. I was already his teaching assistant. He had kind of agreed to be my dissertation chair, even without a particular topic, and going in and saying, I want to write it. I wrote it. It was more than just this, but one of the main things I want to explore is the momentum strategy, and then mumbling. And by the way, it works very well. Because, you know, there’s this constant fight in academia, if you believe something works, does it work because markets are efficient in its compensation for risk, or for behavioral reasons? And momentum, inherently, and I think we all knew this instinctively back then, it’s very hard to come up with a rational story, a risk-based story. And I was nervous because he’s Mister Efficient Markets and rational. And to his credit and my relief, he said, if it’s in the data, write the paper, and he was very supportive of the paper. He works very closely with Dimensional, a firm I admire greatly. They don’t give as much weight to momentum as we do, but they use it in their trading process. So I feel like I’ve won half the battle on that — RITHOLTZ: Right. ASNESS: — over time. The only thing you said that I might take a small disagreement with is consistently. We think value plus momentum has a really good risk-adjusted return, makes money over the long term. But when you’ve gone through two-year periods like the tech bubble, and three-year periods like ‘18 through ‘20, I think myself, my family and some of my clients might take issue with the word consistently. RITHOLTZ: So let’s put a little more meat on those bones. To define what we’re talking about, you want to identify the cheapest value stocks, but only own those that seem to have started on an upswing. ASNESS: Yeah. RITHOLTZ: That seems to make some sense? ASNESS: Yeah. You’re accidentally waiting into yet another quant controversy, whether you need both these characteristics in every stock, or whether you can have some stocks that are great on one and simply average on the other and the portfolio comes out. But the intuition you’re saying is exactly right. Two things, at that point, the literature has advanced. This is like quant finance circa 1990. You may throw in the size effect, and that was about it. RITHOLTZ: Which we’re going to talk about in a little while — ASNESS: Sure. RITHOLTZ: — because I’ve read some papers that suggest — ASNESS: Yeah, we’re — RITHOLTZ: — it may not exist. ASNESS: We’re cynics about it. But value, momentum and size, in the opposite order that I just said, time-wise, size was kind of first and then value, then momentum were the three biggies, and they’re still very big in the literature. Around 1990, value says in the original metrics, and I think they’ve advanced since then, price-to-book was the famous one Fama and French use. RITHOLTZ: Right. ASNESS: They’ll be the first to tell you they do kind of like it, but it has no special standing. It’s basically price divided by any reasonable fundamental. RITHOLTZ: So it can be price-to-sales — RITHOLTZ: Yeah. ASNESS: — price-to-earnings, price to whatever. ASNESS: You’ll get people disagreeing like crazy. At our firm, we don’t think we’re particularly great at saying which one is the exact right way to do this. But if you buy low multiples and sell high multiples, either in a long-only beat the benchmark sense, whether over and underweight, and you did the same thing everyone does and call me a hedge fund manager. It’s about half our assets. RITHOLTZ: Okay. ASNESS: About half our assets are really traditional, where money managers beat, you know, plenty of things, don’t let a short, or lever, or any of those hedge fund kind of things. But the principle is exactly the same. The overweight in a value strategy would be low multiples, the underweight would be high multiples. If you’re running a pure momentum strategy, the overweight, and this is also momentum circa 1990, would be who’s doing better over the last year? It’s that simple. I used to dismissively call it the two newspaper strategy. You needed a newspaper, a recent one and one from a year ago. It’s better to have a computer because it’s a little faster than you, but you look up and you buy what’s going up. It turns out this part is surprising, both make money over any decent time horizon. Probably not surprising is they are in geekspeak negatively correlated. If you are a pure value person or I am a pure momentum person, occasionally we agree. We may get into this later, but right now we’re in more agreement than normal because value stocks kind of have the momentum. But more often than not, the cheap stocks are cheap because one of the reasons they’re cheap is they’ve been losing. So they’re negatively correlated strategies. And this doesn’t create a 10 Sharpe ratio, but a holy grail of quant finance is to try to find two things that, on average, make money that hedge each other. And value and momentum do, whether it’s relative outperformance against a benchmark or absolute performance in a hedge fund. RITHOLTZ: So let’s talk a little bit about how you ended up launching AQR. Following your PhD dissertation, you end up eventually heading out to Goldman Sachs to effectively establish their quantitative research group. ASNESS: That’s it, though, I’m going to amend the story slightly because a few of those things happened more simultaneously. I left the PhD program in late ’91 to take a year off. I’m now on year 32 of that year off — RITHOLTZ: Okay. ASNESS: — so it appears to have taken hold. RITHOLTZ: So you’re a PhD school dropout? ASNESS: No. I did finish the PhD. RITHOLTZ: Oh, okay. ASNESS: I went to Goldman. I had started my dissertation. I think a lot of people leave intending to write a dissertation from a job, and I don’t think anyone, including me, succeeds at that. But if you’ve already produced like a first draft, it can be a couple of years in this process to finish it. RITHOLTZ: Wow. ASNESS: But it’s more Yeoman-like work after the first draft. You’re just responding to things, running in new tests. So I had finished the first draft, went to Goldman I think a year, with the concept that an option can only be worth zero. I intended to be a professor when I started out, but let me see if I like this. After about a year, maybe about a year and a half, I stayed a little longer, I was really feeling like I should get back to some of the academic roots. I was a fixed income portfolio manager and trader, which is a ton of fun. I recommend anyone who does this stuff for a living, trade in OTC market for a while to learn the good, bad and the ugly of what happens there. But it wasn’t like whatever skills they taught me in the PhD. Program didn’t feel right. I then got just very lucky. PIMCO out on the West Coast, read the first thing I wrote in the Journal of Portfolio Management. The exciting title was Option-Adjusted Spreads and a Steep Yield Curve. There’s going to be a TV-movie, at some point. RITHOLTZ: Who’s going to play you in the movie? That’s the big question. ASNESS: I’m not going to be flattered whoever it is, let’s just say that. And they won’t have any hair, which will be annoying because when I wrote that paper, I had hair. RITHOLTZ: Right. ASNESS: They liked the paper. They talked to me. They didn’t even know I was writing a dissertation on quant equities at night. And they basically offered me a job to start a research group from scratch. Ironically, given what happened later, long-term capital helped my life because circa that time, they were doing extremely well. And suddenly, you know, all businesses, not just Wall Street, are something’s doing great there, we need one of those. RITHOLTZ: Right. ASNESS: So the notion that we should have some academics helping us out was greatly aided by them, and I actually think there’s some brilliant people, though, obviously didn’t end well there. So it’s a little bit of irony that they help, but PIMCO is looking to start a group. I went to Goldman Sachs and said, I think this is the perfect combination. I get to do academic work, but in the real world, both in the sense of seeing if it actually works, and you make more money. Anyone who tells you they do money management over being a professor and never considered that is probably not — RITHOLTZ: Never enters your mind for a second. ASNESS: — not telling the full truth. Goldman said, unbeknownst to you, we’re looking to start such a group. To this day, I think that’s probably true, but I don’t know if that was reactive to me. But they did say that and they offered me the job, and I decided the weather in New York City is way better than Laguna Beach Cal — RITHOLTZ: Newport Beach. ASNESS: — or Newport Beach, excuse me, California. I also chose Chicago over Stanford — RITHOLTZ: Right. ASNESS: — for PhD. RITHOLTZ: So you don’t care about weather, obviously. ASNESS: No. Chicago versus Stanford, I got into both. RITHOLTZ: Yeah. ASNESS: They offered a stipend. PhDs are very lucky. They actually pay you to go to school. Everything was the same except, Chicago had in its budget to give me money for airfare to go visit. RITHOLTZ: That was it? ASNESS: Stanford didn’t. And I had no money. So I visited Chicago, and not Stanford, and it was a beautiful spring day. RITHOLTZ: Right. ASNESS: So I’m fond of telling people I’m the world’s only person to choose the University of Chicago over Stanford on the — RITHOLTZ: Based on the weather. I’m more intrigued by the concept of you sort of Bruce Wayne in fixed income during the day, and at night, your equity work is your Batman. ASNESS: Yeah, that was tied for the craziest time in my life. The other time, my wife and I were, you know, more her than me, we had two sets of twins, 18 months apart. RITHOLTZ: Oh, my goodness. ASNESS: And it was a ton of fun, but it was ridiculous. RITHOLTZ: Yeah. ASNESS: Right? So the nocturnal activity was a little different than writing a dissertation. But working at Goldman, with four babies, was very similar to writing a dissertation which is kind of is your baby. RITHOLTZ: I can imagine. So we started talking about AQR. In ‘98, you leave Goldman to launch it. This is your 25th anniversary. ASNESS: Yeah. It’s amazing. RITHOLTZ: So first, congratulations. ASNESS: I like to say a quarter century, it has more ground of thought (ph). RITHOLTZ: Okay. It definitely does. It’s amazing how quickly the quarter century goes by. That’s the truly shocking thing. ASNESS: All the clichés, particularly about children, but about all of life, they’re clichés for a reason. RITHOLTZ: Right. ASNESS: You wake up one day and you go, what did I do for the last 25 years? RITHOLTZ: Right. How did this happen? ASNESS: I remember about three of those years. I’m fond of telling people, I have a really good memory that extends to two periods. RITHOLTZ: Right. ASNESS: The last two weeks in high school. RITHOLTZ: I think that’s probably true for a lot of people. It just depends on where you peaked — ASNESS: Yeah. RITHOLTZ: — personally. If you peak in high school or you peak in college, that’s where all your memories are most vivid. So given AQR has been around for 25 years, how has your investing philosophy evolved over that period, assuming it’s changed at all? ASNESS: Sure. RITHOLTZ: I imagine it has. ASNESS: It has, but more stayed the same than has changed. Adding new factors, measuring factor is better. I don’t think that’s a change in philosophy. That’s just applying the philosophy and digging deeper. Our general belief starting out with value and momentum at Goldman in the very early ‘90s, expanding along with the literature, some of our people have helped create, to other factors, low risk investing, quality investing, fundamental, not just price momentum. RITHOLTZ: So let’s define those. Like, I think we understand what quality investing is, but what is low risk investing? ASNESS: Low risk investing, at its simplest, again, all of these, you get to 10 quants in a room which sounds like the beginning of a bad joke. They’ll all have different ways and different sets of ways to measure this. But at its simplest, it’s a paper by two of my colleagues, Lasse Pedersen and Andre Frazzini, Andrea Frazzini, excuse me, I left out the last syllable of your name, Andrea. I will never do that again, wrote a paper called Betting Against Beta. And I forgot how many years ago. RITHOLTZ: BAB as it’s known. ASNESS: BAB, everything is three letters because Fama and French — RITHOLTZ: Right. ASNESS: — name their factors three letters. RITHOLTZ: Right. ASNESS: So now we all copy them. And there’ll be the first to tell you, they were essentially extending work of Fischer Black’s from, I don’t know, 10, 20 years ago, where he found that in basic theory, the capital asset pricing model, you know, we all kind of learned third week of an MBA finance class. RITHOLTZ: Bill Sharpe. ASNESS: Bill Sharpe. High beta stocks are supposed to return more, on average, than low beta stocks. And in fact, nothing else is supposed to matter at all. So it’s a one-factor model, and it’s admittedly simplistic. Even the people who created it won’t tell you it’s the be all end all, but it’s a very useful way to think of things. It gets you down to a very important concept, that diversifiable risk you shouldn’t get paid for because you don’t have to bear. You get bear for risk you can’t diversify away. Beta, being a risk you can’t diversify away because a lot of your portfolio is already long beta — RITHOLTZ: Right. ASNESS: — should be paid. So the problem, of course, is, in some sense, you can say beta is paid because stocks tend to be bonds over the long term. But within the market, the so-called security markets line is pretty much entirely flat and has been in sample and out of sample for a ridiculously long amount of time, in a ridiculously large amount of places. Meaning, low beta stocks have kept up with high beta stocks, which in the simplest theory, they’re not supposed to. You can use this in a number of ways. You can make your portfolio at a low beta stocks, earn as much money with smaller swings; or if you’re a hedge fund kind of person, and you can use this in long-only portfolios too which is a little more complicated. You can go long low beta, short high beta, but you better apply a hedge ratio. If you’re long a dollar of high beta of low beta, I sometimes get the sign wrong in interviews. I promise in real life, when we’re trading, we get the sign right like 3 out of 4 times. RITHOLTZ: Okay. And that’s a pretty good number. ASNESS: Hopefully everyone knows that 3 out of 4 is a joke. But you go long low beta, short high beta. If you did that on a dollar long and a dollar short, you just massively short the market. Long low beta and short high beta, betas work. RITHOLTZ: Right. ASNESS: So you apply a hedge ratio, you short less than you long, and you try to create something about zero beta. And that has created a very, you know, like all these things, imperfect, that goes through bad periods, but a very attractive risk-adjusted return in and out of sample, long term. And then you can get into theories as to why it works. RITHOLTZ: So what I was going to ask you is if low beta returns just about the same or almost the same as high beta, why the complexity? Why not just own low beta, and it will give you, on a risk-adjusted basis, a better return in high beta? ASNESS: Well, absolutely some do. But if you’re a hedge fund person, trying to create an alternative investment that’s truly uncorrelated, low beta stocks are still highly correlated to the market. RITHOLTZ: Right. ASNESS: So by going long low beta and shorting a smaller amount of high beta, and this depends on your preferences and how aggressive you want to be — RITHOLTZ: But you’re eliminating that correlation. ASNESS: Yes, you can create, I’m always leery in saying uncorrelated worries. I just want to put in — RITHOLTZ: That’s correlated? ASNESS: Well, I was striving for uncorrelated, but then the compliance officer in my head is saying sometimes it doesn’t come out to zero all the time. RITHOLTZ: Right. ASNESS: But it comes out close. So you can create a very diversifying stream of returns, where if you just want low beta stocks, you are creating a more attractive stream of returns but still extremely correlated to perhaps your other holdings. So it can be used in different ways. RITHOLTZ: So I think when most people think of AQR, they think value shop. But as I’m doing my homework to prep for our conversation, and finding all my previous note — ASNESS: You don’t just wing this? RITHOLTZ: No, I try not to. I’ve done it on, you know, Ray Dalio, I just winged it. But with you, I feel like I have to come in loaded for bear. ASNESS: That’s a good accidental Wall Street joke, right? RITHOLTZ: On purpose. Not so as then. ASNESS: Okay, good. RITHOLTZ: You know, I have all this — ASNESS: I got a million of them. RITHOLTZ: Right. I got them all teed up waiting for you. So people tend to think of AQR as a value shop. But really, you’re a deep quantitative shop with a lot of different strategies. Let’s talk a little bit about the various ways you guys invest money. ASNESS: Well, can I back up for a second — RITHOLTZ: Sure. ASNESS: — and talk about why people think of us as a value shop? RITHOLTZ: Absolutely. ASNESS: There are a few reasons. One is there was one point in the very distant past where it was much closer to truth. RITHOLTZ: Okay. ASNESS: Some of the things like betting against beta, quality or profitability, carry strategies were additions over time. So a lot of people follow us, but anyone who’s followed us from the beginning, that they started out thinking that. Also, I just wrote a piece maybe a few months ago on our website, with the highly defensive, worried title, We Are Not Just About Value, in parentheses, (Except Occasionally When We Are). Because you do get these periods and value seems to be the worst culprit, 99 — RITHOLTZ: So even half of your headlines — ASNESS: Yeah. RITHOLTZ: — are hedge. So you’re a half hedge fund? ASNESS: Well, you know, remind me where we work because I’ll go off on tangents like you do, but I do write a lot of hedge statements and I’m kind of famous for my footnotes both because I stick the humor there, but also, I put in all the ways I might be wrong. And it’s really not a compliance reason, I hope it’s more of an intellectual honesty reason. Anyone who’s sure they’re right is very, very dangerous. RITHOLTZ: The footnotes allow you to get past that point. ASNESS: Yeah. RITHOLTZ: I love saying, first of all, we hate to kill our darlings — ASNESS: Yeah. RITHOLTZ: — anybody who writes. But, secondly, you could very easily get stuck somewhere. Let me just throw this in a footnote — ASNESS: Yeah. RITHOLTZ: — be done with it and keep going. And it allows that — ASNESS: Yeah. RITHOLTZ: — okay, I’ve — ASNESS: No. RITHOLTZ: — cleared the road for the rest of my thought. ASNESS: The footnotes have three purposes to me, where I stick the humor. They are the hedges. Here are the ways that what I just said might have been bold blank and I could be wrong. And finally, there are sentences I love that my editor did not love. RITHOLTZ: Right. ASNESS: Where we can mutually agree that it’s worth a footnote. But this — RITHOLTZ: By the way, your editor just yes as you, God, I got to deal with Cliff today. Just throw it in the footnote and keep going. ASNESS: Yeah. It’s helpful to have a wastepaper basket like that. RITHOLTZ: I used to use a separate doc, that I would, whatever it was, something, something, something, edit. So when I would get stuck, let me just move this sentence — ASNESS: Yeah. RITHOLTZ: — this paragraph here because it’s interfering with the narrative. ASNESS: And almost anyone who writes will find, like, they want to make the argument seven different ways. RITHOLTZ: Right. ASNESS: Because you want to both kill the counterargument and then jump on its grave for a while. RITHOLTZ: Anticipate the clutter (ph) of that. ASNESS: A good editor will say pick your one or maybe two best arguments and go with those. RITHOLTZ: Right. ASNESS: And footnotes again are useful. RITHOLTZ: So digression aside, let’s go back to the multiple strategies. ASNESS: No, I’m not done. I got to finish on — RITHOLTZ: More digression. ASNESS: — why we’re not all value. RITHOLTZ: All right, let’s go. ASNESS: This could take the rest of the time. RITHOLTZ: I cleared my schedule through dinner. ASNESS: We are multi-strategy. We go through long periods, almost decade-long periods where we hardly talk about value. It’s a relatively important factor, frankly, but it’s not a majority of what we do. And we go through long periods, a good example would be post GFC through 2017 where values tough. RITHOLTZ: Past decade. Yeah. ASNESS: And we had a great almost a decade, because everything else we do work, profitability one; fundamental, momentum one; low risk one. We don’t need value to work. A lot of that is because value lost over that period for what I will call and Gene Fama will have to forgive me here, rational reasons. RITHOLTZ: Meaning? ASNESS: The expensive companies, by and large, outperformed not on price, which they did also, but they out-executed. They grew more in terms of earnings, sales, cash flows. If you’re a pure value investor in a quant sense, just buying low multiples, you win on average because, on average, the price goes too far. And there’s a risk-based explanation. RITHOLTZ: Sure. ASNESS: Again, I’m pissing off Fama constantly on this. But a big part of why you win, we think, is the expensive stuff is a better company usually, but not that much better, not what’s priced in. That’s on average. Sometimes, thankfully, less often than not, but still quite often, the expensive stuff ends up being worth it or more than worth it. And when that happens, the value factor, the quant value factor, very different than how a Graham and Dodd investor and we can get into this later, we’ll use the term value, that will suffer at those times. But pretty much the rest of the process, we do it all simultaneously. It’s not really like one first then the other. But you can think of it as trying to avoid a value trap. Is this thing high profitability, with things changing in the right direction and low risk, therefore someone should pay a high multiple? And you want to avoid value just shorting that. That works like a charm in a rational market, in a bubble. And here, again, I’ll try to make this the final time. I’m a Gene Fama heretic because I love the man. RITHOLTZ: Right. Who specifically says what’s a bubble. ASNESS: Yeah. I think I’m somewhere in between. I think I’ve seen a few in my career. I think they exist. I think they are far more rare than the way a lot of Wall Street refers to him. A lot of Wall Street will say a stock they think is expensive, is in a bubble. RITHOLTZ: Right. ASNESS: Single stock can’t be in a bubble. RITHOLTZ: Right. ASNESS: Though, I do think the tech bubble and certainly by mid COVID, we were in various kinds of bubbles. In a bubble, value loses. Of course, almost by definition, people want the darlings. But the darlings are not the ones who are outexecuting. They’re the ones with the greatest stories. So the rest of our process doesn’t protect us very much. That is incredibly painful period for our process that both this time, which I think we’re still in the midst of end ’99, 2000, we’ve more than recovered from the roundtrip. It’s been good, but has led to some really tough times to wait out. My Holy Grail would be to come up with something to add to our process that will do really well in bubbles, but not cost us money long term because I don’t think we can time this. RITHOLTZ: That’s interesting. ASNESS: I don’t really think I’ll find that. And by the way, this is self-serving, but if your worst times are going to be when everyone else is partying in a bubble, and your best times are going to be when that bubble is killing everyone because it’s coming down — RITHOLTZ: Yeah. ASNESS: — it’s not a terrible property you have. RITHOLTZ: No. No, it is absolutely not. So we’re going to talk more about value and growth later. But since you brought this up, I want to just throw a couple of ideas at you — ASNESS: Sure. RITHOLTZ: — about that decade that followed the financial crisis, where not only did growth outperform value, but really thoroughly trounced it. ASNESS: Yeah. RITHOLTZ: So there are a couple of theories I’ve heard that I think are worth discussing. First, the decade before, at least the eight, nine years before the financial crisis, value was winning — ASNESS: Yeah. RITHOLTZ: — and growth was getting killed. So you started from a relative uneven place. Maybe some of this was catch-up. But the theme I kind of find more interesting is that prior to the financial crisis, Wall Street and the markets had systematically undervalued intangibles — ASNESS: Yeah. RITHOLTZ: — like patents, copyright — ASNESS: Sure. RITHOLTZ: — algorithms, et cetera. How much of that 2010s rally was a catch-up by intangibles? ASNESS: It certainly could have been some of the early part. A lot of quants added adjustments for that along the way. Most of us are not purists saying we’re not going to change our model since 1990. RITHOLTZ: Right. ASNESS: The notion, for instance, that R&D that’s viewed as an expense, maybe all of it, may be part of it should actually be capitalized — RITHOLTZ: Right. ASNESS: — which would go into book value and make a firm look not as expensive. RITHOLTZ: So a company that spends a lot of money doing R&D is investing in the future. ASNESS: Exactly. So I think that may be part of it I think is overdone in a few ways. One, it applies to more than just price-to-book, but it applies most directly to price-to-book, where you’re not capitalizing things like R&D. It can apply to earnings. But plenty of valuation measures, it has no applicability for price-to-sales. Is — RITHOLTZ: Shouldn’t make any difference. ASNESS: I don’t see where you think about intangibles. RITHOLTZ: Right. ASNESS: What’s the price in that? What revenue is it generating? And those type measures did just about as bad as the ones that were contaminatable. Is that a word? I’m not sure it’s a word. RITHOLTZ: Sure. It is now. ASNESS: But it is now. So I definitely think you want to account for that in places like price-to-book in earnings. And I think collectively, not just AQR, that has been an improvement to how we measure value and the world has changed a bit. And caring about price versus anything, even if it were immune to intangibles, was not a very good thing until late 2020, since the GFC, so about 11 years. You know, the real world is always more complicated. Everyone is always looking for single explanations — RITHOLTZ: Right. It’s not that way. ASNESS: — when a lot of things have multiple explanations. So I think this can definitely be part of it. But I don’t think it’s the main driver. RITHOLTZ: Yeah. Nuance is wildly underrated in finance, to say the least. Let’s talk a little bit about your research and writing. And I want to quote, your favorite publication, the New York Times, who wrote about you, quote, “He built a public reputation for his willingness to write and say what’s on his mind. In academia, he’s known for witty biting papers he writes for such publications as the Financial Analysts Journal.” I know you don’t write to do branding, but what do you personally get out of a fairly steady stream of deep thoughtful academic papers? ASNESS: Well, first, you’re being too kind. Of course, I write to do branding. RITHOLTZ: Okay. ASNESS: I run a real world business and I prefer people to think we’re good at this, and I think that’s legitimate. RITHOLTZ: That’s fair. ASNESS: If I write something that people think is lousy, or they disagree with, or misses the point, it’s going to hurt our business. So I won’t pretend part of it is not a business decision, but it’s really not most of it. A lot of it is the DNA. Three of our four founders met at the PhD program at the University of Chicago. We consider writing, academic or often that kind of area in between academia and applied. You know, we’ve written a lot of papers in the Journal of Finance, the JFE, and that’s true academia. A lot of our work shows up in great places like the Financial Analysts Journal, in The Journal Of Portfolio Management, which is kind of the nexus between those two. This will sound childish, but a fair amount of this is just personal consumption. RITHOLTZ: Meaning what? ASNESS: We enjoy being part of that world. We grew up thinking part of the way you measure success is whether you influence the intellectual debate and how you’re regarded in those circles, and it’s just part of our utility function. I do think a few things. First, I always point out, I don’t know the exact breakdown, but a fair amount of what we do is public. But there’s a fair amount that we think is proprietary. And there are things that I would have AQR researchers hunted down and killed if they publish. RITHOLTZ: Oh, really? ASNESS: Yes. My compliance area would like you to know that I’m speaking in hyperbole, I would like you to know that I’m not. But, you know, even if there are things we think the world will discover, where you think you’re somewhat ahead on, and we do try to walk that line on. But a lot of what we do is, you know, is the value strategy cheap? Someone will write a paper saying the betting against beta strategy is really all only small cap stocks, and we’ll respond to that. So it’s really not giving away some of the stuff, which I think does exist, that is really unique. It does go to our taste. And I do think besides just the advertising aspect, I think one huge benefit to our business is we hire a lot of PhDs, including professors. We hire some full time, and we have very strong relations where they work kind of half time for us. Usually, they get to work full time for their school also to great deal. RITHOLTZ: To say, I can imagine. ASNESS: They get multiple jobs. And that’s because what they’re doing for us is also what they’re researching. It’s actually quite beautiful. I don’t think we get taken nearly as seriously in that world. RITHOLTZ: Meaning it would be a recruitment challenge. ASNESS: Yeah. RITHOLTZ: You can say to a professor, you could write for whatever you’re working on. You can help us. ASNESS: Yeah. RITHOLTZ: And if you ever want to publish with us, we can play with that also. ASNESS: Exactly. It’s absolutely twofold. They’re allowed, again, within the stricture of if it’s staggeringly proprietary, no. But broadly speaking, we’re helping their academic career also because we’re okay with them writing about a lot of this. And that’s very attractive versus a firm that says you can’t say a word. Second, I don’t think we could have even access to these people to the same degree if we weren’t producers as well as consumers of this research. You get a different respect level when you’re publishing, at least occasionally, in some of the same journals they are. RITHOLTZ: And you’ve become enough of an institution, that affiliation with AQR doesn’t look bad on anybody’s resume and vice versa. It allows you to have access to some of the top academics that are out there. ASNESS: Absolutely. There are exceptions. I think, you know, kind of near the end of 2020, maybe people were being quiet about that affiliation for a while. RITHOLTZ: That was a short-term performance. ASNESS: Yeah. No, I’m kidding. I’m kidding. RITHOLTZ: It has nothing to do with your research. ASNESS: I’m kidding. I am proud of the fact that I do think AQR on an academic resume at least doesn’t hurt and maybe even helps. RITHOLTZ: I would say you’re being humble beyond necessary. ASNESS: I can fake that a ton. RITHOLTZ: All right. Well, you know if you can fake sincerity, that’s all you need, right? ASNESS: You got me. RITHOLTZ: That’s right. So let’s talk about a couple of your publications that I was amused by. In late 2019, you wrote, bonds are freaking expensive. How do you invest around that thesis? Because going back to the bull market and bonds that began in 1981, it felt like bonds were expensive throughout the whole 2010s. ASNESS: Sure. RITHOLTZ: What made you finally cry uncle in 2019 and say, all right, no mas? ASNESS: Well, first of all, I’m going to somewhat disappoint you saying we do not take very big bets on views like timing asset classes based on valuation. Antti Ilmanen and I wrote a paper, I forget the exact title, I think one of them was called Sin a Little, where we say, timing the market, and this applies to the bond market as well as the stock market, is an investing sin. And ultimately, we recommend you sin occasionally and a little. RITHOLTZ: Not that I’ve done all my homework, but that was November 7th, 2019. ASNESS: You know so much better than me. RITHOLTZ: Quote, “It’s time to sin.” Well, I’ve researched it recently and you wrote it three years ago. ASNESS: I’m actually bad at keeping the catalogue of my own work. There’s a lot going on here. The one you’re referring to was about value timing. RITHOLTZ: Okay. As opposed to? ASNESS: And it’s really the same concept. We do believe that if you systematically follow a legit, meaning you’re not forward looking, you’re only looking at backward data, try to time the stock market, the bond market or even value based on how cheap or rich it looks, they usually have very, very modest positive, long-term risk-adjusted returns. As you said, you can go through long, long periods — RITHOLTZ: Long. ASNESS: — where they’re overvalued and get more overvalued. RITHOLTZ: Right. ASNESS: We do use valuation in concert with things like momentum and profitability and things where now it starts to be better because it’s negatively correlated to those and all else equal. If you have momentum and you’re not overvalued — RITHOLTZ: Timing is relevant, right? If you’re using momentum, how much does timing really matters — ASNESS: Yeah. RITHOLTZ: — as long as they’re your way. ASNESS: Because it’s been there with momentum. RITHOLTZ: Right. ASNESS: That piece on bonds being freaking expensive, which is going to eventually be a technical term, I’m going to push it. RITHOLTZ: Right. ASNESS: That I stressed in there, I don’t know how to time this. This is a 5 to 10-year view. I tried various methods of looking at bonds. This was well before the yield back up and well before the inflation spike. RITHOLTZ: Right, ASNESS: Compared to any forecast or trailing version of inflation and doing that consistently through time, bonds were about tied with giving you the least they’ve ever given you. And tied for worst is I think expensive. RITHOLTZ: That’s right. ASNESS: How someone reflects that if they are taking a long horizon. Now we can get into the TNA, there is no alternative, equities didn’t look great either. I think a lot of why we publish these long-term forecasts and my colleague, Antti Ilmanen is really the master of this, is both we’re interested in it and our clients really seem to value it. But we don’t trade on a 10-year forecast. RITHOLTZ: Right. ASNESS: Let me give you an example. A 10-year forecast, let’s say value has power and that’s even disputable, but we believe it does, to tell you is this going to be a better or worse than normal 10 years going forward. Very often, the answer will be we predict positive returns but considerably less than history. Okay. What do you do — RITHOLTZ: Are you just hedging, or is that a general projection? ASNESS: No, that’s genuinely often a prediction from a model. RITHOLTZ: So like the 40 percent number, what are the odds of this happening? 40 percent. ASNESS: Yeah. RITHOLTZ: You can’t be wrong when you say that. ASNESS: Yeah. This stuff is always wishy-washy. You know, statisticians never say we know this. They say the chance we’re wrong is small. But it’s also intellectually accurate. You don’t ever no saying. But imagine you have a forecast. Stocks usually make 10 percent a year, and don’t hold me to any of these numbers. We think they’re going to make 5 percent a year, but not negative. You know what? If someone who’s short for the next 10 years, or underweight against a benchmark, you know what happens if you short a positive, but smaller than historical return? RITHOLTZ: You lose money. ASNESS: You lose less than you would over history. And you get to go to your client after 10 years, well, I lost your money for a decade. But the good news is I lost you less than I would have lost over the average decade. And it’s a good example where forecasting the 10-year period can be interesting and can be vital, right? If you’re anywhere from an individual to a pension fund, saying how much do I have to save to retire? What you’re going to earn on that money is an important number. But it’s not necessarily timing actionable number. For years, my dad, it was in spreadsheet. It was a little piece of paper and it was probably calculated all wrong because believe it or not, my dad was innumerate. My mom was a math teacher so — RITHOLTZ: Okay. ASNESS: — I got it from somewhere. But he had that little sheet, what do I need to retire, which I think everyone has in some extent, including institutions. So we think that number is really important. But I do not recommend trading on just valuation, except that sin a little. I like to joke to the 120th percentile. The joke, of course, is there’s no such thing as 120th percentile. RITHOLTZ: Right. Meaning, this is beyond our lifetime experience of — ASNESS: Yeah. It’s beyond anything we’ve seen before. I would have been 20 percent above the prior 100th percentile, the new 100th percentile. And we’ve really tried hard and we can’t find any rational reason for it. A small move, don’t be a hero because again these things can get crazier and crazier. That’s the sin a little. We recommend sinning a little and occasionally. I recommend that, Barry, in your personal life also in a very different context. You can apply that any way you would like. And so, at that point in 2019, with bonds, I think we would have told people we probably want to drop less than normal on a really long horizon. But mostly we’re telling people assume you’re going to make less. Now, the late 2019, it’s time for a sin. I think I tried to use venial, a mild sin. RITHOLTZ: Venial. Veniality. ASNESS: You got two Jews here. RITHOLTZ: Yeah. ASNESS: We need a Catholic. RITHOLTZ: Right. ASNESS: When I basically said it’s time for, I’m going to say, venial value sin, a venial value timing sin, and I was looking at the spread between cheap and expensive. I want to say we created this. That is probably false. You never know who created things privately and didn’t share them. We were the first to publish on this and it was back in the tech bubble, the 24-year-old result from 1999, very similar period to particularly ‘19 and ’20. Value killed we think irrationally so the other parts of the process don’t help, extremely painful, huge recovery afterwards. But during the teeth of the pain, we wanted a measure of how extreme it is. And you can’t always just look at returns. Returns tell you the pain you’re in, but if those returns were, say, justified by massive, you know, earnings growth, if your earnings double, your PE stays the same and your return is a 100 percent. And that didn’t make you more expensive, it just was a great result. And some of that can always be in there, so you want to be prospective. So we built this measure that’s very simple. All the academic and applied work that was published at that time sorted stocks on valuation measures, generally went long or overweight the cheap and short or underweight the expensive, and really never addressed how cheap and how expensive. You always get a spread. I’m fond of saying otherwise your spreadsheet is broken, or every stock is coincidentally selling for the same price-to-sales. RITHOLTZ: Right. ASNESS: But sometimes that spread is huge, and sometimes it’s very tight, and it does correspond to times that would intuitively strike you as frothy. RITHOLTZ: So the wider the spread, the more attractive the valuation. ASNESS: Yeah. RITHOLTZ: The lower value stocks versus the growth stock. ASNESS: Value looks better versus growth on a three to five-year horizon. Also, pure value is never a great timing tool. I think you do put yourself on the right side of so-called catalysts when valuations are that extreme. Bad catalysts for you will hurt a little and good catalyst will help a lot. But still, I wrote this in late 2019 because spreads were approaching something I never thought I’d see again.’ RITHOLTZ: Back to ’99, though. ASNESS: They were approaching the tech bubble peaks. RITHOLTZ: Really? That’s shocking. In ’99, what do we have off the pandemic lows? 68 percent gain in the S&P, and then the next year another 28 percent on top of that. So this is late ‘19. ASNESS: This is late ’19. We were not there yet. RITHOLTZ: Yeah. ASNESS: And I’m talking about the spread between cheap and expensive, not the whole market. The entire market, if you like, a Shiller CAPE or something was much worse in ’99, 2000. It hit about 45, where it hit the low to mid 30s at the peak in 2020. RITHOLTZ: How do you use Shiller CAPE in your work? ASNESS: Same way. RITHOLTZ: Because I know a lot of people are kind of shrug emoji. ASNESS: Some indicator that when the Shiller CAPE is very high, the PE is very high, the 10-year prospective returns are low. We don’t actually go short something because of the Shiller CAPE. RITHOLTZ: Right. It seems like it’s been on the high side for decades. ASNESS: Yeah. That’s one of the main Antti and I look at and saying it’s pretty hard to make your money actively timing based on only the Shiller CAPE. It’s much more reasonable to have a valuable 10-year modification to historical norms, because the Shiller CAPE is high or low. But in late 2019, I wrote this, it’s time for a venial value timing sin. I wrote that I’m ignoring momentum or trend here, which is against a lot of our philosophy and largely because I thought this was epically crazy and it could come back very, very quickly, just because on average, trend and momentum work on average. You want to be able to do something that works on average, many, many times. You only had one shot at this, right? If this came back in a three-month melt-up for value stocks, you could miss a lot of it if you if you didn’t do this. So it turned out, if I listened to trend plus value, it has worked out well for us. It would have been even a little better. So there’s a little bit of a moral story. I give you my fault as well as my — RITHOLTZ: Right. ASNESS: But I wrote this thing. And then about, I don’t know, four or five months later, I wrote a follow-up piece saying no sin has ever been punished this violently and this quickly. RITHOLTZ: I recall that. ASNESS: I will make an excuse. But I think as excuses go, it’s one of the better ones. RITHOLTZ: Yeah. ASNESS: It’s called COVID. RITHOLTZ: Right. ASNESS: Certainly, that was not in my predictive power. Also, I think the market reacted ex-post certainly crazy to COVID. Basically, you remember, all you needed to own was peloton and Tesla, and value stocks were going to cease to exist in the lockdown. RITHOLTZ: Well, Tesla started running up in anticipation of being added to the S&P before COVID, and then just really went next level. ASNESS: Though, value, as we or almost anyone else measures it, was destroyed over the first six months of COVID, and it turned out not to even be directionally true. The value stocks fundamentals, what I call them executing outside of what the market cares about, just executing in their companies — RITHOLTZ: Right. ASNESS: — was actually strong, even including the pandemic. So the fear did not materialize. We thought those spreads got crazy. But as opposed to approaching tech bubble highs, never thought I’d see in my career again after the tech bubble, admit I got that wrong, they blew past it, well past it, when COVID hit. And we stuck to our guns and even added to that tilt a bit. Basically, any explanation that someone from the outside, a strategist, a pundit, a client, a consultant, or internal that we could come up with, for why we might be wrong. You know, the way I think of these is you got to keep a really open mind, consider what you might be wrong, tests that story. And if at the end of the day, there’s something that’s unprecedentedly crazy-looking, and you have, after keeping that open mind, rejected those stories, then you got to plant both feet and say I will not be moved. And I think we’ve gotten pretty good at that over time. I never wanted that. One thing you asked earlier about investment philosophy changing and we went off and 20 other fund tangents. One major way my investment philosophy has changed is at the beginning of my career, 30 years ago really, if you go back to the Goldman days, if you had asked me what will make a great investor, quantitative in my sake, but in general, I would have probably given you an arrogant answer that, oh, just being smarter than other people. You know, being smarter than other investors then the market as a whole. The arrogant part is the implicit assumption that kind of comes along that I’m one of those people. I still think this is a bold statement. Smart is good. I haven’t changed the sign on smart. But I now think long-term success, half the battle is after keeping that open mind, you can’t skip that step. If you decide you’re right, having an extremely ornery stick-to-itiveness to you is an equal partner to being smart. RITHOLTZ: All right. So I’m going to just edit what you just said for a moment because I understand exactly what you’re saying, but I want to rephrase it. So intelligence in the market, those are table stakes. You have to assume everybody you’re trading with and against — ASNESS: Yeah. RITHOLTZ: — is intelligent, even if it’s not true. You have to assume that that’s what’s on the other side, hey, I don’t know who’s on the other side of my trade, but I’m going to assume they know at least what I know, if not more. What you’re also sort of suggesting is you have to learn when your high conviction trades become I stick to my guns and ride this out, even if I’m wrong for a quarter or more or four, this will eventually work out. ASNESS: Or 11. RITHOLTZ: Right. ASNESS: Because I know these numbers precisely. Drawdowns have this amazing subjective, we borrow the term from physics, time dilation, even though we use it differently, where if you look at a back test, or even real life returns and you see a fairly horrible drawdown, but you know it ends well, you look at and go, of course, I’d stick with that. It’s a great process. Look at what it delivers. Two, three years, as some of these can take, they are an eternity. Everyone wants quarterly numbers which means you’ve gone back to people 11 times, 12 times and said, we stink again. It becomes a proof statement and you show a partial anecdote to this. But the financial media does a great job of coming up with stories why whatever is working is the truth and whoever is losing is — RITHOLTZ: Right. That shows what’s working right now. ASNESS: So you’re defending yourself. I do think we’ve done a great job of sticking our guns at these times. But I do worry that some years at the end of my life have been used up. RITHOLTZ: But what’s the quote? There are some days that lasts decades — ASNESS: Yeah. RITHOLTZ: — and some decades that go by in days. ASNESS: When we talk about children, that’s an example of decades that go by in days. Drawdowns are an example of days that go by — RITHOLTZ: Right. Days are long and decades are short. ASNESS: It feels far longer than it really is and what I might call, I don’t think there’s a real term, but statistical time. RITHOLTZ: Right. ASNESS: When can you actually say this is wrong? RITHOLTZ: It’s pain time. When you’re in pain, time goes much more slowly. Time flies when you’re having a good time. And this the inverse. ASNESS: And this is perhaps self-serving, but this raising of a rational, after being open-minded and cynical stick-to-itiveness to half the battle is also why I think some of these things last and don’t get arbitrage the way in the real. This latest 2017 which again was a bad period for value, but a very good period for us and our firm grew. Most common question I get, particularly in public forums, would be, and it’s an intelligent question, if this is as good as it looks like, why isn’t arbitrage the way? And literally, I did not expect or want to be as right as I was over the following three years. But I would say particularly having lived through the tech bubble, you have no idea how hard this can be to stick with at times. It is not that easy. It seems easy now over full cycles. And I am schizophrenic about this, half of me hates it because these times are hell, but half of me realizes that if they didn’t exist — RITHOLTZ: Right. ASNESS: Right? Every value manager on earth and this probably applies to non-value, but this is the people I talk — RITHOLTZ: Every discipline on Earth — ASNESS: Yeah. RITHOLTZ: — in finance. anyway, I’m going to steal your line, you don’t get the full glory of the upside without suffering through the out of favor downside. ASNESS: No. Wes Gray, someone you and I talked about before we started, I think it’s Wes’s term. RITHOLTZ: It is Wes’s. I know exactly where you’re going to go. ASNESS: No pain, no premium. RITHOLTZ: Oh, no, I was going to say even God would get fired as an active manager — ASNESS: Oh, okay. RITHOLTZ: — is a line from Wes. ASNESS: Maybe Corey Hoffstein said no pay, no premium. I’m good at offering attribution. I’m not always good at getting it right. RITHOLTZ: Right. ASNESS: But they’re both awesome so — RITHOLTZ: Yeah. ASNESS: But I do think there’s truth to that. My favorite story which I’m going to make you listen to now. RITHOLTZ: Okay. ASNESS: This is from the tech bubble. I am, probably late ‘99, early 2000, at home at night talking to my new wife, and I’m whining and worse than whining. I’m cursing up a blue streak about how stupid and crazy this world is, none of which I can repeat even with the laxer laws today on George Carlin’s seven words. I still wouldn’t go through — RITHOLTZ: Right. ASNESS: — what I was screaming that night. And she said to me, she only said one sentence, the rest was implied. She said, I thought you make your money because people have some behavioral biases and the rest is implied. She’s saying, but when those biases get really ugly and they make really big mistakes, you whine like a stuck pig. RITHOLTZ: So wait, you’re a quant and your wife is a behaviorist. Is that right? ASNESS: My wife has master’s in social work, so I guess behaviorist is accurate. And anyone who’s been happily married, which I’m going to search she is and she can rebut if you invite her on, to me, for a quarter century, it has to be a bit of a behaviorist. RITHOLTZ: Right. ASNESS: But what we all want, which we’ll never get, is a world where there are opportunities. We’re active investors. We think we make the market a more efficient place. We think we make capital markets better. That’s important for society. But we exist to a large extent to take the other side of errors and correct that. We don’t want a world with no errors because there’s nothing to do. We want a world where there are significant errors. And after barrier Cliff puts the position on, 11 minutes later, the market realizes we were right and hands us our money. RITHOLTZ: That doesn’t work that way. ASNESS: And it doesn’t work that way. RITHOLTZ: Right. ASNESS: It is almost perfectly calibrated and make sure most people can’t do it. RITHOLTZ: I like that phrase. I wouldn’t say it’s almost perfectly calibrated. The countryside is littered with people. By the way, I know you spend time on Twitter. We’ll talk about that. On investment TikTok, which has since shrunk dramatically, I love — ASNESS: I never got on investment TikTok. Thank God. RITHOLTZ: Well, I access it via Twitter. But — ASNESS: Do you, like, wrap your stuff on investment TikTok? RITHOLTZ: No, never. Never. ASNESS: You may put it to a Sinatra melody, it might be more appropriate for you. RITHOLTZ: No. What I love is what TikTok calls investing TikTok, I call it Dunning-Kruger TikTok. And my favorite is the young couple, both good-looking people. ASNESS: But why wouldn’t you choose good-looking people? RITHOLTZ: The way we make money is we only buy stocks that are going up. And once they stop going up, we sell them. And that’s how we subsidize our whole lifestyle. I am not paraphrasing. That is like a verbatim quote. RITHOLTZ: As one of Jagadish and Tippmann are the two academics who really deserve probably to play some momentum, but as one of the very early discoverers of momentum. There’s a little truth to what they’re saying. But they tend to do it in a very disciplined way. And very often, individuals and institutions and professional investors tend to be what I call momentum investors at a value time horizon. They look at something that’s been strong — RITHOLTZ: Okay. ASNESS: — for three, five years, and they go, it’s got to keep going. And at that time horizon, you want to be a contrarian, not a momentum investor. So I feel obligated as a co-author of some of the momentum stuff to defend that a little bit. But this is not adding up well for these people, I promise. One last thing about it, a running joke I’ve had for years, is people in describing this kind of thing, often subtly use the w.....»»

In today's edition: Shopify rescinds intern offers, Americans are getting weight-loss drugs from Canada and Mexico, and more headlines. It's techie Tuesday, buds. I'm Diamond Naga Siu, and I really enjoy cooking and eating food.That's why this Googler is living my dream life. He's a manager at the search giant by day and culinary school student by night. The company even pays a portion of Harrison Hill's tuition for the Institute for Culinary Education in New York.He took Insider behind-the-scenes for a day in his life balancing his day-job responsibilities with his first steps into the world of professional chefs. While I daydream about getting my culinary education partially comped too, let's dive into today's tech.If this was forwarded to you, sign up here. Download Insider's app here.Brandon Wade/Reuters1. Googlers tell CEO Sundar Pichai: "Don't be evil." The catchphrase has long been phased out from the company. But more than 1,400 Googlers asked their CEO to continue the spirit of the adage by handling layoffs better.Their open letter highlighted how worker voices were not considered throughout the layoff process. So they gathered Googlers all over the world to ask Pichai to publicly commit to doing better.Their first request is to freeze all new hires during the layoff process. Under this point, they also asked the company to allow for "voluntary redundancies and voluntary working time reduction before compulsory layoffs."Workers also asked the company to protect Googlers from countries with active conflicts or humanitarian crises. They cited Ukraine as an example and urged Pichai to offer extra support for workers who hold work visas.Read the full, anti-evil letter here.In other news:iStock; Robyn Phelps/Insider2. Romance scams are costing Americans billions. A loneliness epidemic. The rise of online dating. Advances in cryptocurrencies. These have created a perfect storm for online romance scams, Eve Upton-Clark writes for Insider. Dive into the rise of costly relationship ruses here.3. Target "double-tapper" customers are causing chaos. It's the digital equivalent of cutting in line, but unlike real-world queue-hopping, most people would never realize they're doing it. Go inside the daily source of disruption here. 4. Become fluent in talking with ChatGPT. Anna Bernstein trains bots to generate high-quality, accurate writing. She shared three tips on how to get the best results from ChatGPT, including paying attention to your verbs. Get the full list here.5. Inside the demise of Vice. The media company was once on the edge of a $3.5 billion offer from Disney. But then it all went downhill. Today, Vice Media is scrambling for a buyer, and its future will likely be determined in the coming months. Here's how Vice fell so far, so fast. 6. Meet the AI robots that clean, conduct deliveries, and check inventory. Companies like Lowe's and 7-Eleven recently announced that they'll use robots for a variety of tasks. Check them out here.7. Teslas saw an uptick in crashes after changing a safety feature. In 2021, the car company swapped out radars for cameras to detect obstacles. This has caused an uptick in accidents, per a Washington Post report. More on the crash increase here. Bonus: Tesla Model Y batteries have "zero repairability."8. Mark Zuckerberg is shooting himself in the foot with layoffs. The Meta CEO is on round two of layoffs during his self-proclaimed "year of efficiency." But experts say the job cuts will likely have the opposite effect and drag things down. Dive into the layoff damage here.Odds and ends:iStock; Rebecca Zisser/Insider9. Americans getting weight-loss drugs from Canada and Mexico. A prescription diabetes medication has been recently used as a weight-loss drug. But its prices are surging in the US. So many are getting it internationally for cheaper. More on the pricey problem here.10. Spotting a stunt double is all in the ears. Skeptics claim Russian president Vladamir Putin has multiple decoys. They even believe his stand-ins have undergone surgery to look like him. Check out the body-double biology here.What we're watching today:The Adobe Summit starts today in Las Vegas. Top execs from T-Mobile, Verizon, EY, Eli Lilly, and other major companies will speak at the multi-day event.The Wired Health Conference starts today in London. The event highlights changes in how we access and provide healthcare.The Interactive Advertising Bureau Europe is hosting a conference in Hamburg, Germany on the future of digital advertising.Curated by Diamond Naga Siu in San Diego. (Feedback or tips? Email dsiu@insider.com or tweet @diamondnagasiu) Edited by Matt Weinberger (tweet @gamoid) in San Francisco and Hallam Bullock (tweet @hallam_bullock) in London.Read the original article on Business Insider.....»»

Gold Prices Reflect A Shift In Paradigm, Part 2 Authored by Alasdair Macleod via GoldMoney.com, In the first part of this report, we highlighted that observed gold prices have significantly detached from our model-predicted prices. While this has happened in the past, prices always converged eventually. However, the delta between the observed and the model predicted price has now reached a record high of around $400/ozt. We thus ask ourselves whether it is reasonable to expect that model-predicted and observed prices will converge again in the future, or, whether we witness a shift in paradigm and the model no longer works.  In our view, the only reason for gold prices to sustainably detach from the underlying variables in our gold price model is if central banks (particularly the Fed) lose control over the monetary environment. Thus, it seems that the gold market is now pricing in a significant risk that the Fed can’t get inflation back under control. As we highlighted in Part I of this report (Gold prices reflect a shift in paradigm – Part I, 15 March, 2023), this is happening in the most unlikely of all environments. The Fed has aggressively hiked rates at the fastest pace in over 50 years and it is signaling to the market that it will do whatever it takes to get inflation under control. So why is the gold market still concerned about inflation? The issue is that so far, it has been easy for the Fed to raise rates sharply to combat inflation. Despite the sharp move in the Fed Funds rate, one may get the impression that nothing has happened yet that would jeopardize the Fed’s ability to raise rates even higher. For starters, the unemployment rate remains stubbornly low (see Exhibit 8).  Exhibit 8: The US unemployment rate remains stubbornly low despite the sharp rate hikes Source: FRED, Goldmoney Research Equity and bond prices have sharply corrected in the early phases of the Fed’s rate hike cycle, but since then equity markets have partially recovered their losses. While equity prices are not the real economy, large downward corrections can impact the real economy nevertheless due to the wealth effect. When people become less wealthy, they spend less, which in turn has an effect on the economy. The impact of this reduction in wealth might also not be meaningful so far as the correction came from extremely inflated levels. The S&P 500, for example, has corrected almost 20% from its peak, but it is still 14% higher than the pre-pandemic highs in 2019 (see Exhibit 9). Exhibit 9: Even though US equity prices have corrected sharply, they are still well above the pre-pandemic highs…. Source: S&P, Goldmoney Research The real estate market has slowed down significantly, but so far prices haven’t crashed (see Exhibit 10), and even though there are a lot of early warning signs, the Fed historically had only become concerned when a crumbling housing market started to affect the banks. While we certainly saw turmoil in the banking sector over the last few days, it was not related to the mortgage business so far.  Exhibit 10: …and home prices – despite the clear rollover – have not crashed yet Source: S&P, Goldmoney Research Hence, at first sight, it appears there is little reason for the gold market to price in a scenario where the Fed loses control over inflation. However, there are plenty of warning signs that things are about to change. In our view, the correction in the equity market is far from over. When the last two bubbles deflated, equities corrected a lot lower for longer (see Exhibit 11). Exhibit 11: the last two bubbles saw much larger corrections in equity prices Source: S&P, Goldmoney Research This alone will start to put a strain on the disposable income of not just American consumers, but globally. We are seeing signs of this in all kinds of markets. For example, used car prices had skyrocketed until about a year ago on the back of supply chain issues combined with excess disposable income. But since the Fed started raising rates, used car prices have retreated somewhat (see Exhibit 12). Arguably this is good for people wanting to buy a car with cash, and it will also have a dampening effect on inflation numbers, but the reason for it is not that all the sudden a lot more cars are being produced, but that higher rates make it more expensive to finance cars, and thus demand is weakening.  Exhibit 12: Manheim used car index Source: Bloomberg, Goldmoney Research Certain aspects of the housing market also show more signs of stress than the correction in real estate prices alone suggests. For example, lumber prices have completely crashed from their spectacular all-time highs and are now back to pre-pandemic levels (see Exhibit 13).  Exhibit 13: Lumber prices have come back to earth Source: Goldmoney Research Similar to the development in the used car market, while this may be good for people trying to build a new home, it is indicative of the material slowdown in construction activity. This can be directly observed in housing data. New housing starts are 28% lower than in spring 2022 (See Exhibit 14).  Exhibit 14: New Housing Start data shows a material slowdown in construction activity Source: FRED, Goldmoney Research Moreover, mortgage costs have exploded. A 10-year fixed mortgage went from 2.5% a year ago to 6.3% now (see Exhibit 15). This will undoubtedly dampen the appetite for home purchases and strain disposable income as previously fixed mortgages must be rolled over. Given current mortgage rates, it is surprising that the housing market has not yet corrected a lot more. Exhibit 15: Mortgage rates have exploded over the past 12 months Source: Bankrate.com, Goldmoney Research There is a myriad of other indicators, from crashing freight rates (see Exhibit 16) to layoffs in the trucking and technology sector as well as languishing oil prices despite record outages and inventories, that indicate that the Feds (and increasingly other central banks) ultra-hawkish policy is impacting the real economy, both domestic and globally.  Exhibit 16: Freight rates had skyrocketed in the aftermath of the Covid19 Pandemic but are now back to normal Source: Goldmoney Research The result will be a period of global economic contraction. The Fed may view this decline in inflation as confirmation that their policies are working to fight inflation, even though it will only reflect a crashing economy. Importantly, once the recession kicks in, we will soon see rising unemployment. Once unemployment starts rising, the Fed will have to slow down its rate hikes and eventually stop. However, the underlying cause of inflation – over 8 trillion in asset buying by the Fed – will only have reversed a tiny bit by that point. This means that once the fed will have to make a decision, to either fight unemployment or inflation.  We believe that the most likely explanation for the recent rally in gold prices against the underlying drivers of our model is that the market is increasingly pricing in that the Fed, once it is forced to stop hiking, will lose control over inflation. Faced with the choices of years of high unemployment and a crumbling economy or persistent high inflation, the gold market thinks the Fed will opt for the latter. This would mark a true paradigm shift, and from that point on, gold prices may start to price in prolonged high inflation (and our model may not be able to capture this properly). The crash of Silicon Valley Bank (SVB) a few days ago has created significant turmoil in financial markets. While the Fed jumped in and announced a new lending program that effectively bailed out the bank, it also led to a sharp change in market expectations for the Fed. Before the bailout, Fed fund futures implied that the market expected several more Fed hikes this year, and only a gradual easing thereafter. One week later and the market is now pricing in that the Fed will only hike until May, and then pivot and start cutting rates (see Exhibit 17).  Exhibit 17: The crash and subsequent bailout of SBV led to a sharp reassessment of the Fed’s ability to raise rates Source: Goldmoney Research The gold market is still pricing in a much more dire outlook with higher and persistent long-term inflation Only time will tell whether this view is correct. In our opinion, it is quite forward-looking, and gold seems to be the only market that is that forward-looking at the moment. 10-year implied inflation in TIPS, for example, is at a laughably low 2.2%. For the model-predicted prices to match observed gold prices, 10-year implied inflation would have to be around 1.5% higher, at 3.75%. This doesn’t seem to be completely unfeasible. However, even if the gold market turns out to be ultimately correct, it will take a while until the rest of the market agrees with that view, and most likely there will be a period of sharply declining realized inflation in the meantime. That said, as equities look even more fragile in this scenario, and bonds and cash are unpopular asset classes during periods of high inflation, gold may simply be the only game in town until its time as the ultimate inflation hedge is coming.  Tyler Durden Mon, 03/20/2023 - 05:00.....»»

Fed Balance Sheet, Deposits, Hotel California & TINA By Peter Tchir of Academy Securities This is, broadly speaking, a follow-up to yesterday’s Liquency & Solvidity piece, where we took a hard close look at what the U.S., Europe and Switzerland have done so far in response to pressures on banks. No surprise here, but while banks borrowed a record $152 billion from the discount window, they “only” borrowed $11.9 billion from the new Bank Term Lending Program (BTLP). I expect BTLP to get little use, because it is a bit like the Hotel California, you can check out any time you like, but you can never leave. Using that facility means that you are replacing low cost deposits for roughly market priced funding. A strain on NIM that erodes capital – not ideal. It also means that you have long dated, low dollar price bonds, presumably long enough and in big enough size, that this method of funding is preferable to others. Not a winning combination. The discount window, is temporary and a true “stop gap” measure, so it makes sense banks use that, rather than the new BTLP. I could be wrong on BTLP, but if I see that increase, I would be selling bank shares, because that really is a facility of last resort, as it is currently designed, and I believe users will experience a Hotel California type of existence. Which brings us to deposits. A consortium of banks are going to deposit $30 billion with FRC. This is interesting on many levels, and there are a lot of details that I don’t know, but here are the quick takes: FRC, from various reports, didn’t have many assets eligible for BTLP, which is maybe why they needed an alternative source? So it doesn’t prove my point that BTLP takedown will be low, but it doesn’t refute it either. We don’t know the rate FRC is paying on the deposits. If it is a rate typical of deposits, then it might demonstrate how unappealing it is for banks to have to replace deposits with high cost funds. IF it is a rate that low, then the banks providing the deposits are foregoing significant interest (in addition to in theory taking credit risk, as the point was made that these are “unsecured” deposits). If it is a market rate, then that has some different implications. We don’t know if this provides money to buy new assets, or merely covers deposits that have been removed from FRC. New deposits, at low rates, letting them buy more assets to generate NIM would help generate equity capital for the bank and be interesting. Lots we don’t know about the deposits and the details will be important to determining the impact. The deposits, in any case, are a new and interesting twist to this period of banking weakness and are a step towards the “private solution” that I think will be needed to really get us over the hump. Fed Balance Sheet, FOMC and TINA The Fed balance sheet has grown, significantly, even with QT continuing. Rate hike probabilities for the FOMC have dropped from a split between 25 & 50, to a split between 0 and 25. I’m leaning towards zero, but a lot can change between now and then (let’s be honest, with current headlines and low liquidity, things can change between the time I hit send and the time you receive this in your inbox!). There is some discussion that the Fed could suspend the current balance sheet reduction activity (or maybe it is just me musing on it). I doubt this happens, but they could mention it as a tool, during the press conference, which would be “risk-on”. So, is it back to TINA (There Is No Alternative)? Yes, the balance sheet has grown, but using the discount window has nothing like the impact large scale asset purchases had. Yes, the Fed is close to being done hiking, but rates are nowhere near zero, so are not the headwind they were. I think the TINA case is weak at best. Any balance sheet growth is likely to be temporary. There are legitimate concerns that financial conditions will tighten. While the SVB depositors were saved, I’m seeing little evidence of a rush to fund and to spend money (the drumbeat of tech layoffs continues). This is still a trader’s market and it is time to be cautious on risk broadly after the strength of yesterday. Tyler Durden Fri, 03/17/2023 - 09:36.....»»

DeSantis Charms GOP By Condemning 'Leaks' And 'Palace Intrigue' Authored by Philip Wegmann via RealClear Wire, On its face, there wasn’t anything unusual about the email that landed last week in the press office of Florida Gov. Ron DeSantis. “Background interview request from the Washington Post,” read the subject line that summarized the industry-standard process whereby information is shared with reporters under pre-negotiated terms, usually anonymity. When sanctioned by a politician or their team, it is called “going on background” to shape and broaden a story with additional facts and contexts but without direct attribution. When not sanctioned, well, then that is just called leaking. Either way, Jeremy Redfern wasn’t interested. The DeSantis spokesman wrote back one word: “No.” A screenshot of the exchange went viral with the consensus in more conservative corners of Twitter being that a liberal rag, albeit the beltway paper of record, had just been owned. The score in their minds? DeSantis: 1, WaPo: 0. The little episode does underscore a larger, still emerging theme of the expected DeSantis presidential campaign. It isn’t just that the team that didn’t leak in Florida wouldn’t leak in the White House. The implication is that DeSantis would not obsess over what is written about him in news outlets most of his constituents don’t read, because such an obsession is counterproductive to conservative goals. In this way, DeSantis may prove to be the anti-chaos candidate. DeSantis has hinted at all of this during a recent book tour, a closely watched exercise that seems to be a dress rehearsal for a White House run. “There’s no drama in our administration,” he said on stage in Iowa next to Gov. Kim Reynolds. “There’s no palace intrigue.” The juxtaposition with the frontrunner in the GOP primary, former President Donald Trump, was implicit and obvious. “We made very clear to the people working in the administration, you’re not going to be leaking,” DeSantis said, recalling how he told his staff early on that if they had “any other agenda” than “doing business of the people of Florida” then they might as well “pack your bags right now.” With a unified team onboard with that mission, DeSantis continued, “We roll out, and we execute, and we do things, and we get things done. And in the process, we beat the left day after day, week after week, month after month, year after year.” Republicans have made the media their foil for decades now. Newt Gingrich won over South Carolina voters during the 2012 Republican primary when the former House speaker slammed a CNN debate moderator over what he considered “despicable” questioning, arguing that the “destructive, vicious negative nature of much of the news media makes it harder to govern this country.” Gingrich would lose the nomination but leave behind a blueprint that Trump would embody. Conservatives loved how he hated the “fake news.” But few were aware of the strange symbiosis that enveloped his administration. Trump gave as good as he got during press conferences, but his team was set against itself at times, and often consumed by the media at the expense of the administration’s mission. His son-in-law, a senior advisor in the last White House, said as much. The war between Jared Kushner and Steven Bannon was infamous in the West Wing and well-documented in the papers. Albeit almost always “on background.” When Bannon was eventually fired, Kushner later wrote in his autobiography, another senior aide came to him joking that he had “a plan to split up Steve Bannon’s extensive workload. Hope [Hicks], you leak to Jonathan Swan at Axios. Jared, you call Mike Bender from the Wall Street Journal. I’ll call Jeremy Peters from the New York Times, and ... we’re done.” Careers were catapulted and journalism prizes won on the ability to get the president’s inner circle to text back by deadline. Even when the headlines would be negative, Trump often called reporters directly. He still does. “I love being with her,” Trump said of Maggie Haberman during one of his multiple interviews with the star New York Times reporter. As president, he blasted her publicly as “a third-rate reporter.” After leaving the White House, he called her “my psychiatrist.” The Trump cabinet didn’t just jockey for position in the press. Internal divisions were so extreme that officials would gauge their standing with the president by recent headlines or Fox News hits. Former Secretary of State Mike Pompeo even made a joke of the dysfunction, promising that he would stay on in the administration “until he tweets me out of office.” Trump was a bellicose president, and his base adored him for it. Some of his closest advisors still worried that an obsession with settling scores left him off balance. For instance, during the job interview for attorney general, Bill Barr reported that he told Trump that “the problem with immediately counterpunching ... is that you are letting your opponents pick the time and place of the fight.” Trump, Barr later wrote in his memoir, didn’t seem to take the advice. But DeSantis has. The governor can be as pugnacious as the former president, and YouTube is full of clips from DeSantis fans and from the press chronicling his blow-for-blow battles with reporters. He has catapulted himself into the national conversation, in large part, through those fights with the media that he has labeled “the liberal elite’s Praetorian Guard.” But the same reporters who enjoyed unprecedented access to Trump, possibly the most accessible president in modern history, have had a hard time getting ahold of DeSantis outside of his regular news conferences, leaving the New York Times to ask “Can Ron DeSantis Avoid Meeting the Press?” “The old way of looking at it is: ‘I have to do every media hit that I possibly can, from as broad a political spectrum as I can, to reach as many people as possible,’” Nick Iarossi, a longtime DeSantis supporter and a lobbyist in Tallahassee, told the Times. “The new way of looking at it is: ‘I really don’t need to do that anymore. I can control how I want to message to voters through the mediums I choose.’” DeSantis has followed an aggressive but more calculated blueprint, becoming a conservative media darling through frequent appearances on Fox News with Tucker Carlson and the Daily Wire with Ben Shapiro. It has been enough to bring him alongside Trump in the RealClearPolitics Average even though he has not yet declared. Trump remains the clear front runner with a 14.4-point advantage. Mick Mulvaney doesn’t see much unique in the current DeSantis approach. He knows both men well. Mulvaney was a founding member of the House Freedom Caucus with DeSantis before leaving Congress to join the Trump administration, first as director of the Office of Management and Budget and later as his second-to-last chief of staff. If the boast about avoiding “palace intrigue” and the admonishment not to leak become campaign promises, Mulvaney doesn’t see a clear competitive advantage. “I expect all of the challengers,” he told RCP, “to use a variation on the ‘Trump policies without the Trump baggage’ message.” Disdain for the press has indeed become a feature of the right. According to Gallup, just 14% of Republicans say they have “a great deal or fair amount of confidence” in the media. Gripes among conservatives have turned from occasional complaints to the outright belief that a biased press is an enemy to their way of life. Candidates see that, and they will say they don’t trust elite media, Tucker Carlson told the 2022 Family Leadership Summit in Des Moines, Iowa, last year. But figuring out who is play fighting with the press versus those who will shun them altogether, the Fox News host added, was critical to earning their vote. “You need to be really wary of candidates who care what the New York Times thinks. You really, really do,” he said. “And if you say that to Republican voters, they are like, ‘The New York Times is Communist! I don't even read it!’ Really? Because your leaders do. And they really care. They really, really care.” DeSantis was happy to blast the press in Iowa last week. Like many Republicans, he has shown a willingness to punch back. Unlike some others though, he has a demonstrated ability to ignore their calls. “Don’t think that they’re coming to you in good faith,” he said in one broadside against the press. “They’re coming to you to be able to advance their agenda, and if you’re somebody that’s standing for our values, like Kim and me stand for, you are an impediment to their agenda.” “So don’t play into it. Just speak the truth. Do your thing,” he continued before counseling that conservatives should “not give them the satisfaction that they are some type of neutral gatekeepers because they are not.” Tyler Durden Thu, 03/16/2023 - 21:05.....»»

'Time Is Not Our Friend': Solvency & Liquidity Meet Liquency & Solvidity Authored by Peter Tchir via Academy Securities, We are hearing a lot about Liquidity and Solvency right now. Often people talk about them as though they are two different things. That can be true at times, but in many cases, there is a complex relationship between the two. That is particularly true for financial companies and banks, which is where this discussion is centered. Solvency & Liquidity Let’s start with extreme and obvious examples. Liquidity issue. I borrowed $100 to fund a deal with someone to pay me $110 back next week. The person I borrowed from needs their $100 repaid today. I need to borrow from someone for a week to make it through to the $110 payment. That is a liquidity issue, and if for some reason the market won’t lend to me, it is a problem. But, a simple loan, or access to a lending facility from a central bank, solves the problem. Liquidity issue is solved by a liquidity solution. Solvency issue. I borrowed $100 to buy an asset. That asset got destroyed and I have no insurance, so now have nothing. I can borrow as much cheap money as possible but my problem doesn’t even begin to go away. Solvency issue is NOT solved by a liquidity solution. The real world is never so simple. Enough liquidity can mitigate solvency issues, over time.  Liquidity, over time, can help with a solvency issue, but it depends on: The strength of the liquidity solution (we will examine the Swiss solution versus what the U.S. delivered Sunday night – was it really only 4 days ago? It seems much longer) The magnitude of the solvency issue. Balance sheet, or more precisely, equity capital can be rebuilt over time. I think the Long-Term Refinancing Operations (LTRO ) were an interesting example. Basically it allowed European banks to buy new assets (government bonds) and secure financing up to the maturity of those bonds (max 3 years I think) generating positive carry. That helped support European short dated sovereign debt at the time, as a “new” buyer emerged. That helped the bank balance sheets as a whole as there was less fear about sovereigns being able to issue enough debt to cover their maturities. Over time, that small dribble of daily income adds up, shoring up the bank’s balance sheet. Done with enough “umph” up front to help the underlying bond markets and with enough “juice” for the banks to gain extra profit over time, this helped a lot. But it is definitely “threading the needle”. Which brings us to where we are today. Liquency & Solvidity In the U.S. we had Sunday night sessions to deal most directly with Silicon Valley Bank and Signature Bank. The solutions provided were meant to help the entire banking sector, especially regional banks that were feeling the pressure as attention turned from SIVB to other banks that some people thought might be vulnerable. We covered some of this on Saturday in I Like Mid Banks, I Cannot Lie, and What We Know Post Intervention and on Bloomberg TV Monday Morning. Yesterday CS dominated the headlines, ending the day with a plan announced by the Swiss National Bank that we will analyze as well. The analysis tries to balance the solvency and liquidity issues and with the solutions provided so far. The U.S. Actions So Far I’m sticking to a B+ sort of score. They acted boldly and quickly which is good. But the core problem “unrealized bond losses” hasn’t been sufficiently addressed. At least not in my view of where we are on the continuum of solvency and liquidity. Guaranteeing all deposits, of any size, immediately. That was bold and strong and should solve the bulk of the issue linked to depositors pulling money out because they were afraid of the risk of keeping it at XYX bank. Some will still take money out of XYZ bank because of ongoing concerns or the optics of keeping it there. Some customers are cash flow negative and will see their balances decline for reasons other than concerns about the bank. About 90% of the current “bank run” problem should be addressed by this. Hurting bondholders. Bondholders were “primed” in the Silicon Valley Bank and Signature Bank deals. Deposits above the FDIC insured amount, in theory are unsecured creditors and are pari passu with bondholders. Well, the depositors just got preferential treatment, meaning that if there is not enough value to fully pay off all creditors, bondholders will get less of a recovery. Say there was $100 of deposits above the FDIC amount and $100 of bonds. Say recovery of assets was $180. Under the “old” regime (before Sunday), both the depositors and bondholders would have received $90 as they were equal. Now the depositors are getting $100 and the bondholders are only getting $80. Subordinating bondholders to ensure full payment of depositors had many immediate benefits, but likely some longer term costs. Could this have been handled better? Political Soundbites. Whether it is “banker bailout” or “criminal investigations” or some other aggressive political soundbite, they are not helping the situation For the banks in question it makes any potential buyer think about the political backlash. For the rest of us, it makes us wonder about the commitment to the solutions (which is maybe why some will take money out of banks, even after the guarantee). The Lending at par facility. This needs its own section. Borrowing vs Par for “underwater” Bonds This is the liquidity solution provided for banks. For up to 1 year, banks can post a high quality bond as collateral and receive a loan based on the par value of the bonds. Let’s say a bank owned $100 of a Treasury against a $100 deposit they had received. That bond is currently at 80 cents on the dollar. If the depositor withdrew, the bank had to sell that bond to pay back the depositor (super simplified, but good enough for what we are trying to illustrate). The bank would only raise $80 by selling the bond, so would have to sell other assets or effectively take money out of their equity capital to pay the other $20. There are issues with bonds in available for sale, versus held to maturity accounting etc. but the crux of the matter was the assets earmarked for depositors aren’t currently valued high enough to pay back depositors. One “good” thing is that the bonds in question are liquid and are at virtually no risk of not getting paid back fully according to their original terms. That is very different than in 2007 and 2008 when the assets were of dubious and deteriorating quality. So, with the new facility, when the depositor requests $100, the bank doesn’t have to sell the bond at a loss. They can pledge it to the facility and receive $100 for that bond and now, instead of paying interest to the depositor the bank pays interest to the facility for a year. This helps the “liquidity” issue: The bank gets $100 it had earmarked for a depositor even though the assets that were earmarked are not currently worth $100. By pledging the asset as collateral, they don’t “taint” the hold to maturity nature of the asset, making the accounting easier. This compounds the NIM (and solvency) issue: As far as I can tell, the cost of using this facility is more expensive than paying the rate paid on deposits. So, unlike, say LTRO, this causes larger interest margin losses (or reduced profits) to flow through earnings, not stabilizing the capital base. Let’s use one of my “favorite” bonds – the 0.75% Treasury maturing 3/31/26 that was issued on 3/31/21. I like this bond because I could see an institution getting deposits in March of 2021, buying a 5-year treasury with those proceeds (still seems aggressive to me, but at least I’m not embarrassed with that as a scenario, unlike 10-year treasuries which just makes me wonder why they stopped teaching the S&L crisis in business school). But let’s look at this bond. One question that I asked myself, hoping to bolster my case for banks, was if the recent rebound in treasury prices “solved” the problem of unrealized losses on bond portfolios. The answer, is, sadly, as a bull, no. It has done very little. This bond which now only has 3 years to maturity is still wroth only 91 cents on the dollar. Up from recent lows of 89 and well up from the lows of last September when it was only worth 88. (I did, out of curiosity check out the 1.125% Treasury of 2/15/31 (issues 2021) and it is at 84 today, up from 81 earlier in the month, but saw its lows as 79 last October. Why was no one talking about unrealized bond losses in September last year, when in all likelihood they were worse? There may have been people writing about it, but it wasn’t on my radar screen and I don’t remember seeing it as a discussion topic. Maybe deposits weren’t declining back then, but they were (just check out the SIVB deposit charts in Saturday’s report). There will be time for questioning how this wasn’t a problem and then became a problem another day. According to the terms of the program, here’s what would happen. The bank gets $100 for the bond worth 91 cents. The bank pays the one-year overnight index swap rate plus 10 bps (I think this is around 4.7%). But let’s say 4.5% to keep it simple. The bank, assuming this bond is in an not available for sale book (and is using accrual accounting) will earn 0.75% income on the bond for earnings purposes for a year (they should be carrying it at book yield, which if they bought at new issue was 0.75%. The bank will have negative net interest margin of 3.75% (i.e. lose 3.75% on par on this bond over the calendar year it is in the facility). This is a far big hit to NIM than if they were just paying the deposit rate (I haven’t seen a deposit rate near 2% let alone 4.5%). That is better than losing 9% today by selling the bond, but doesn’t help their capital base (or solvency issue). All else being equal, at the end of the year, the bond should be at a higher price (the pull to par effect of going from 3 year to 2 years). This helps a bit, but between the carry and the likelihood that the bond is still significantly below par a year from now, nothing has been done for the solvency concerns. If this was originally a 10-year bond, the pull to par effect of going from 8 to 7, is even less helpful. The lending program buys some time, but does absolutely nothing for the bank’s capital, and if anything, banks will be worse off having to use this program versus retaining deposits. Bottom Line on U.S. “Intervention” The key to any level of success will be if banks can retain deposits. Keeping deposits reduces the negative carry (versus using the facility) and over time, the pull to par effect helps (if they can keep the net interest margin losses to a minimum), but even that is only really helpful for portfolios that didn’t go way out the maturity spectrum. I think it buys the weakest banks time to shore up their capital – either through a capital raise or a merger. If that can occur, then the banks the next wrung up will be fine. As the “fire break” works, you don’t need further protection. The question are: Do the weakest banks know they are the weakest banks? Seems obvious, but probably isn’t to those in the crosshairs. Will they accept capital at valuations the buyers are willing to pay? That is a bigger concern and we saw, certainly with Lehman, the ability to squander time, which turned out to be precious, in search of a better deal. If those questions get answered “correctly”, we should be off to the races. If those questions don’t get answered “correctly” expect more pressure on the weakest banks and for the vortex of weakness to suck more banks into it. I think we have a few weeks (not months, but weeks) before the patience of the markets and the reprieve the Fed/FDIC/Treasury bought us starts to fade. I’m optimistic that we see capital issues addressed, via the private sector and that paves the way for a rebound, but sooner than later is a key, even for me as an outspoken bull. The “European Solution” I’ve run out of time and energy, so will be brief here. Addresses liquidity but not any solvency concerns. Solvency concerns are being downplayed as non-existent, but markets aren’t that kind. Too narrowly focused. It is a very “Swiss” centric solution – Swiss national bank and of course UBS is mentioned, and they seemed to suggest that reassuring talk is an important part of their plan (never forget what Jean-Claude Juncker said). With the CS backdrop, the EU went ahead and hiked 50 bps – highlighting the regional nature of the solution so far – that will likely get tested by markets. Winners and Losers. As soon as discussion starts about good banks and bad banks, about a Swiss Bank versus a Global Bank, the powers that be start picking winners and losers. Equity holders, Tier II capital holders, etc., are unlikely to fare well and may do worse than whatever natural course plays out. Again, these are all background discussions, but don’t seem comforting. I give a C- to the Swiss efforts so far as it is too localized, does nothing for capital, and starts to hint at intervention in ways that your rights as a certain type of investor, might not be given their due course. While I give the U.S. a few weeks before markets will demand action, I expect by early next week, the luster of the Swiss solution will be gone, without something more substantive. Time is Not our Friend! The solutions in the U.S. and in Europe bought time. How much time is yet to be determined, but only some time and it is up to various institutions to use that time to fix the problem – capital concerns. I’m optimistic we get good resolution on that front, but that is what is needed from here! Tyler Durden Thu, 03/16/2023 - 10:25.....»»