Life

For The Second Straight Year, Wall Street Bonuses Have Fallen, Plus Shake Shack’s Stock Price Falls 9%

#Morning Brew
by Last Updated

“There’s blood in the water and sharks will come” — Liviu Arsene, an e-threat analyst, with a rather morbid metaphor predicting that Apple users will be targeted by more hackers. Yesterday, 6,500 Mac users were hacked after downloading an app called

Transmission. Apple just can’t stay out of the news.

MARKET SNAPSHOT
Big Picture

  • U,S. stocks finished mixed on Monday, with tech declines balanced out by major gains in commodities and energy

Alternatives to Watch

  • Oil spiked above $40 to reach a 2016 high after Ecuador announced a meeting in Latin America to discuss possible production cuts
  • Iron ore posted its biggest one-day gain of all time, leaping an incredible 20% after the Chinese government announced it would work on economic growth—a signal that China will continue to demand a lot more iron

Market Movers

  • Memory chip manufacturer Micron dropped 7% (that’s now a 60% decline in the past year) after Nomura downgraded the stock, citing overproduction concerns in the chip industry
  • Internet analytics company comScore (think Nielson) plummeted 35% after announcing a delay in its annual report and suspending its $125 million stock buyback program, pointing to “potential accounting matters”

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WORLD MACRO

Japan GDP Revised Up…But Still Really Bad

The country’s economy contracted by 1.1% in the fourth quarter of 2015, not 1.4% as previously reported—but unfortunately, negative growth is still negative growth. What’s worse, consumption actually weakened even further, and combined with China’s slowdown and the yen’s continued strength, it’s clear Prime Minister Shinzo Abe and his much-maligned “Abenomics” economic growth plan isn’t quite going according to plan. Japan is pulling out all the stops—including, most recently, negative interest rates—but it simply hasn’t done the trick.

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CORPORATE PRIMER

No Love for the Shack

Shake Shack nearly quadrupled after its IPO in early 2015, but has failed to live up to the hype ever since. The fast-casual chain announced revenue grew an insane 47%—good news, but evidently not good enough, as shares fell nearly 9% in after-hours trading. What’s the issue? Growing pains: Shake Shack is looking to expand to 375 (count ’em) new locations, which comes with a substantial price tag. Investors believe the company will struggle to keep up its revenue momentum, but hey, Americans love their fast food.

Valeant Sets the Date and Holds Its Breath

Looking back, Valeant’s last few months have been a hot mess, with shares down 77% since August and 24% since last week, when it boldly (and worryingly) delayed its earnings report. Fast forward to yesterday: the troubled pharmaceutical company finally set its release date—March 15. It’s a day shareholders are hoping the bad news (accounting restatements and poor 2016 guidance) will be explained and concerns will be addressed, and relieved investors sent the stock higher 8.5% in response.

iConspired to Fix Prices

Apple and the U.S. government can’t seem to get along: the Supreme Court yesterday refused to consider Apple’s appeal of an earlier case that demanded it pay out $450 million to consumers after the company conspired with publishers to raise prices on digital e-books. This all transpired around the time that the first iPad was released in 2010: Apple wanted e-book publishers to sell in its bookstore without losing out to Amazon, which was able to sell bestsellers at a loss to attract customers. Now, about the whole protecting the rights of consumers thing…

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OTHER STORIES

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ECONOMIC CALENDAR

WALL STREET BONUSES HIT BOTTOM

For the second straight year, Wall Street bonuses have fallen. America’s richest bankers might not have our sympathy, but they at least have our attention—what’s going on? Here’s the scoop:

  • The average Wall Street bonus in 2015 was $146,200, down 9% from the previous year, while the overall bonus pool for New York employees fell 6% to $25 billion. And before you point it out, yes, those are still pretty big numbers.
  • But why the drop-off? There’s an easy explanation: profits in the securities industry are also down, to the tune of 10.5%—bringing profits down to $14.3 billion.
  • Unfortunately for Wall Street, things aren’t getting better soon: New York State has already cut its 2016 bonus pool growth forecast for the securities and insurance industries to negative 2.5%.
  • There’s one silver lining: overall Wall Street employment increased 2.7% last year, and is now at its post-financial crisis high. It’s an impressive feat considering Wall Street as an industry is still 8% smaller since 2008.

INTERVIEW QUESTION OF THE DAY

There are two kinds of people on a mysterious island. There are so-called Honestants who speak always the truth, and the others are Swindlecants who always lie.
Three fellows (A, B and C) are having a quarrel at the market. A gringo goes by and asks the A fellow: “are you a Honestant or a Swindlecant?” The answer is incomprehensible so the gringo asks B: “what did A say?” B answers: “A said that he is a Swindlecant.” And to that says the fellow C: “do not believe B, he is lying!” Who is B and C? (Answer)

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BUSINESS TERM OF THE DAY

Risk-Return Tradeoff — The risk-return tradeoff is the principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with low potential returns, whereas high levels of uncertainty (high-risk) are associated with high potential returns.

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FOOD FOR THOUGHT

Did you know that the city of San Francisco owes roughly $6.1 billion in overpaid parking tickets? If you live in SF, check to see if you’re owed a refund!

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