Thursday, 27 October 2022
Tourists Pay With Wads of Cash as Argentina Inflation Nears 100%
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Here's why Goldman Sachs is warning about a stock market crash and recession.
Welcome back market watchers, Phil Rosen here. Dust off your dictionaries because today's GDP release might reignite the recession debate that's proved as semantic as it is economic.
The year kicked off with back-to-back negative GDP readings, but the headline today should look more upbeat, with growth of 2.4% expected.
But no matter what politicians may tell you (midterms are less than two weeks away), a positive print doesn't mean all's fine and dandy.
Forecasters have penciled in bleak housing data, for example, among other downbeat numbers. Look out for the report at 8:30 AM ET.
One more thing to help you sound smarter during your water cooler chats today: Tech earnings have so far fallen flat this week, with names like Alphabet and Microsoft pointing to troubles in digital advertising.
And speaking of troubles, below I'm breaking down why the biggest name on Wall Street is expecting an extended run of bad news on the horizon.
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Brendan McDermid/File Photo/Reuters
1. There are a couple things on Goldman Sachs' radar at the moment, and neither are particularly upbeat. We can look first to the bank's top exec.
Speaking at the Future Investment Initiative summit in Saudi Arabia, CEO David Solomon not only warned that a prolonged recession is approaching, but that the Fed will likely raise interest rates above 4.5%.
"There is no question that economic conditions are going to tighten meaningfully from here," the exec said, adding that even if policymakers hike rates to 4.5%, they may push them even higher depending on how the labor market reacts.
"If they don't see real changes in behavior, my guess is they'll go further," he maintained. "Generally, when you find yourself in an economic scenario like this, where inflation is embedded, it's very hard to get out of it without a real economic slowdown."
Goldman's analysts got in on the gloom, too. The bank's strategists said the S&P 500 could plunge to 2,888 in the event of a severe recession, which would mark a roughly 25% crash.
"The broader case for US equities does not look very strong and the normal conditions for an equity trough are not clearly visible yet," according to a research note published earlier this week.
While the bank acknowledged that markets have priced in additional Fed rate hikes in November and December, it said investors have yet to account that aggressive policy could carry on well into next year.
And why wouldn't policymakers stay aggressive? The last Consumer Price Index showed inflation running at a four-decade high of 8.2% — which means the Fed is struggling to get it anywhere close to its 2% target. Other commentators have predicted even 3% in two years is a longshot, and that inflation could hover around 6% for another five years.
Remember, the Fed is raising interest rates in an effort to cool the economy. Higher rates mean borrowing is more expensive.
- If borrowing for mortgages or credit cards cost more money, people have less disposable income.
- When people spend less money, there's less demand and prices can fall back to earth.
- But the less people spend, the slower the economy grows, which raises the odds of a recession.
What's your recession take?
A) We're already in one
B) Recession in the next 6 months
C) Recession in the next 12-18 months
D) The US will avoid a recession
Let me know on Twitter (@philrosenn) or email me (prosen@insider.com).
Bloomberg TV
2. European stocks and US futures struggle for direction early Thursday, as investors brace for today's European Central Bank meeting, which is expected to deliver a 75 basis point rate hike. Here are the latest market moves.
3. On the docket: Apple, Amazon, and MasterCard, all reporting.
4. Experts are getting bullish on small cap stocks, even though those are the companies that usually struggle when the US economy is weakening. Here's the case for the surprise pre-recession call and what to buy right now.
5. The most popular US mortgage now costs Americans more than it has in 21 years. The housing market continues to struggle against the Fed's policy path, and with the latest data showing rates on a 30-year fixed mortgage hit 7.16%, borrowing hasn't been this expensive since 2001.
6. Morgan Stanley's top strategist said investors should look for the bear market to end in the first quarter of 2023. Mike Wilson said the current rally in stocks has room to run. Notably, he expects indexes to hold up despite the outlook for weaker spending around the holiday season.
7. The housing market has a big disconnect that can't last and prices for new homes have a long way to fall. The chief economist at Pantheon Macroeconomics said new home sales aren't quite aligned with mortgage demand, and the market is far from a sustainable equilibrium. Now, he said homebuyers are scrambling to sell before prices plunge.
8. This 27-year-old real estate investor who owns nine properties in Alabama said you shouldn't sleep on the Birmingham market. "It's a great place where you're going to see steady growth over time," the property pro said. He shared his top reasons why to capitalize on the money-making opportunity.
9. A market-crushing fund manager broke down his investing strategy and how to avoid landmines in international markets. Even as Europe barrels toward a recession, there's still a way to approach foreign stocks and make gains. Get the full scoop from this top 3% money manager.
Markets Insider
10. Meta stock cratered 20% after the company missed on earnings. This week's slate of tech earnings have seen Facebook's parent company as well as Alphabet, Microsoft, and others stumble. Companies are dealing with a slowdown in digital ad growth, a closely watched barometer of health of the broader economy.
Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.
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Jan. 6 defendant spared prison after judge finds his Asperger's Syndrome played a part in him joining the riot
Department of Justice
- A January 6 defendant who broke two windows in the Capitol was spared prison on Wednesday.
- A federal judge sentenced Nicholas Rodean to home confinement instead, Politico reported.
- The judge said that Rodean's Asperger's Syndrome influenced him to join other rioters that day.
A January 6 defendant was spared prison time on Wednesday after a federal judge found that his Asperger's Syndrome influenced him to join the riot, Politico reported.
Nicholas Rodean, from Frederick, Maryland, was among the first people to enter the Capitol on January 6, 2021, using a flagpole and another object to break two window panes, opening an entrypoint used by many other rioters, The Department of Justice said.
Prosecutors sought 57 months of prison for Rodean. But on Wednesday, US District Court Judge Trevor McFadden sentenced him to 240 days of home confinement instead, saying that his Asperger's Syndrome made him "particularly susceptible" to the influences that day, Politico reported.
"I'm giving you a real break here," McFadden told Rodean, said NBC News reporter Ryan J. Reilly, in a tweet from the courtroom.
"Please understand that this is your only chance though," McFadden added, saying that he was aware that prison would be difficult for Rodean. He was also ordered to pay $2,048 in restitution.
In July, Rodean was found guilty of one felony offense of destruction of government property and six misdemeanor offenses, including engaging in physical violence in a restricted building or grounds, per court records seen by Insider.
Before his sentencing, Rodean apologized for his actions and said he followed people to the Capitol because that's where everyone was going, and he liked to be in front, per Politico. The outlet said he struggled to express himself at the hearing.
His lawyer later said that Rodean likes to be in front because he doesn't like to be left out, Reilly tweeted.
"I am really sorry about breaking the window," Rodean told McFadden, according to Politico. "I am really sorry about other crimes that I did."
His lawyer also said that the pandemic caused Rodean to become obsessed with online political discussion and that he was easily influenced by "assertive male figures" like former President Donald Trump, Politico reported.
Rodean's sister also spoke during the sentencing proceedings, telling McFadden that "autistic people do not fare well in prison" and that incarceration would hurt his dog-walking business, the publication said.
More than 900 people have been charged in connection with the attack on the Capitol last year, according to Insider's database.
Read the original article on Business Insider
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Boeing 737 Max Set for First China Passenger Flight Since 2019
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Facebook's identity crisis is costing Zuckerberg billions, and he's ok with it
Facebook/Meta
- Meta expects "significantly" higher losses for the Reality Labs unit handling the development of the metaverse.
- CEO Mark Zuckerberg said Wednesday that investors who are patient will "end up being rewarded."
- Meta's share price slumped nearly 20% to $104.30 in after-hours trade, following its earnings announcement.
Meta's pursuit of the metaverse could see further pain ahead, with the company projecting "significantly" higher losses in 2023 for the unit overseeing its development — but CEO Mark Zuckerberg seems ok with playing the long game.
He even urged investors to be patient, saying those who invest in Meta will "end up being rewarded."
But that didn't assuage Wall Street. Meta's share price slumped nearly 20% in after-hours trade on Wednesday to $104.30, following the company's earnings announcement. They are now down almost 70% so far this year.
Reality Lab, Meta's unit overseeing the metaverse activities, reported $3.67 billion in losses for the third quarter of 2022, which ended on September 30. This brought the division's total losses since the start of 2021 to just under $20 billion.
"We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year," David Wehner, the CFO of Meta, said in a press release announcing the company's third-quarter earnings on Wednesday.
Despite this, Zuckerberg said on an earnings call Wednesday that, "people are going to look back decades from now" and talk about the importance of the project.
"I get that a lot of people might disagree with this investment. But from what I can tell, I think that this is going to be a very important thing, and I think it would be a mistake for us to not focus on any of these areas, which I think are going to be fundamentally important to the future," Zuckerberg said during a call with analysts, per a transcript.
Zuckerberg backed his commitment to the metaverse on the call, saying it's not just about VR headsets, which most people associate with the project, as it was first thing Meta launched. But it's a "pretty wide portfolio" with other initiatives, such as a social metaverse platform, Zuckerberg added.
Right now though, it's still an early version of the final product that still has a long way to go before it comes "what we aspire for it to be," he added.
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Wednesday, 26 October 2022
Twitter employees are leaving for tech rivals ahead of Elon Musk's planned takeover
We're halfway through the week, readers. Writing to you on this gloomy Wednesday in New York, I'm Avery Hartmans.
Today, we're looking at a major side-effect of the drama surrounding Elon Musk's Twitter takeover: the employee exodus. Hundreds of workers have left in 2022, about 530 in the last three months alone. They've moved on to some of Twitter's top rivals, Meta and Google chief among them.
Of course, these departures may be just what Musk is hoping for, and since he's reportedly on track to close the deal in three days, we may find out sooner than later.
There's a whole bunch of news today, including celebs' latest attempts to duck private jet trackers. Let's get to it.
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Associated Press
1. Meta and Google snap up Twitter employees. Amid the months-long saga between Twitter and Elon Musk, employees have been leaving in droves.
- Almost 30% of workers who have left Twitter in the past three months headed to Meta and Google, new analysis of LinkedIn data shows. Other popular destinations include top social platforms like Pinterest and Snap.
- Over 1,100 employees have left Twitter since Musk started buying up the company's stock in January.
- "The bottom line here is that the uncertainty being generated by the fight between Elon Musk and Twitter is driving a lot of their top talent to other social media platforms," Greg Larkin from Punks & Pinstripes, the firm who conducted the analysis, told Insider.
Take a closer look at the Twitter exodus.
In other news:
Scott Olson/Getty Images
2. Elon Musk pledges to close Twitter deal on time. In a video call with the banks helping to finance the deal, Musk reportedly promised his $44 billion purchase of Twitter will close on Friday. In the meantime, those banks are working on one of the last steps to close the deal. Here's the latest.
3. TikTok vs. Amazon. TikTok is starting to dabble in the US e-commerce game, testing shopping features and looking to hire fulfillment and supply-chain staff. The moves have led to speculation that TikTok wants to take on Amazon, but experts say that would be a huge mistake. This is what TikTok should do instead.
4. Elon Musk and Donald Trump try to dodge jet-tracking accounts. Billionaires, celebrities, and businesspeople have started looking for ways to evade trackers that keep tabs on their private jet travel. While there is a program that blocks certain tracking websites, even the FAA admitted that it's not a perfect solution. Here's how jet-tracking Twitter accounts are getting around it.
5. Which of Amazon's top-secret moonshot projects got the ax. Cost-cutting has come for Amazon's Grand Challenge, a moonshot lab working on stealth projects in areas like healthcare and augmented reality. An uncertain economic outlook is leading Amazon to trim expenses in areas like hiring and warehouse expansion, and now, moonshots. Find out the projects that were shuttered — and those that survived.
6. Netflix makes it easier to kick free-loaders off your account. Netflix recently added a new tool that lets users move their history and preferences to a membership they pay for. It's basically a polite way of getting moochers off your account, and it's part of a bigger effort from Netflix to crack down on password-sharing. More on that here.
7. YouTube creators share the platform's best and worst features. YouTube is constantly evolving creator tools and features to help it stand out from rivals like TikTok and Instagram, but not all those tools are beloved by users. Seven YouTubers share their favorite and least favorite features, plus the tools on their wish lists.
8. Amazon is forcing some logistics employees to relocate to Phoenix — or lose their jobs. According to emails seen by Insider, Amazon instructed as many as 200 employees at its central freight logistics hub to return to the office by January. However, many of those employees were hired as remote workers, meaning some will be forced to relocate to the hub's Phoenix offices, or face termination.
Odds and ends:
Tim Levin/Insider
9. Testing the Tesla Model Y. Insider's resident EV expert Tim Levin has tested 14 different electric vehicles, but never a Tesla — until now. He found plenty to love about the Model Y, from its easy charging to its stylish interior, but some clear downsides, too. What it's like to drive a Model Y for the first time.
10. The top MacBook accessories. Your MacBook works great on its own, sure, but what if you could do more? These accessories, from a standout wireless mouse to a backup battery, will help maximize your laptop's functionality and your productivity. Check out our 15 top choices right this way.
What we're watching today:
- Meta and Samsung are reporting earnings today
- Apple's latest iPads are now available to buy in stores.
Keep updated with the latest tech news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Avery Hartmans in New York. (Feedback or tips? Email ahartmans@insider.com or tweet @averyhartmans.) Edited by Hallam Bullock (tweet @hallam_bullock) in London.
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