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THE HEADLINES

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FAST AND LOOSE

“What’s the worst that could happen?” – US banking regulators who have successfully recessed any memory of the banking crisis and Great Recession

Yesterday the Fed approved a draft proposal that would split banks into four risk categories and further deregulate the industry.

Financial institutions falling into the $100B to $250B asset range would reap most of the benefits, most notably, exempting the banks from liquidity coverage ratio policies, allowing for more flexibility in how gains/losses affect capital requirements and releasing these “super-regionals” from mandatory stress testing.

Other tiers will be granted leniency in the form of a relaxed liquidity-coverage-ratio. So who is still too big to fail? Banks with greater than $700B in assets (think: JPMorgan) will still be handcuffed by the fun police despite the Trump administration’s best efforts to let the Dick Fulds of the world leverage sh*t up like its 2007.

Water Cooler Talking Point: “President Trump and Fed Chair Jerome Powell might not agree on much, but apparently, they do agree that banking regulators should have less authority than a fraternity risk management committee at a Sigma Chi party.”

 

AN OFFER YOU CAN REFUSE

Don’t call it a comeback. General Motors announced beats on top and bottom line estimates for the most recent quarter … by selling fewer vehicles at higher prices. Shares were up nearly 10% on the news.

So it came as a surprise when the company announced that it is looking to slim down via a “voluntary severance” program. Approximately 18k salaried employees with more than 12 years of experience were offered a buyout that could cost GM $130M … per 1.8k workers. If corporate history serves as any indication, a company offering this type of deal can usually count on 10% of employees to take the bait.

According to CEO Mary Barra, this is a small price to pay as GM struggles to get lean and refocus on more profitable businesses … like self-driving cars.

The GM Cruise division is hot off a $2.5B investment from Honda and is making up ground on self-driving leader Waymo. Barra made it clear that GM is still investing in tech personnel as it tries to perfect “not being Uber.”

Water Cooler Talking Point: “This is what we call in the business ‘writing on the wall.'”

 

FRESH AIR

Tech stocks were anything but calm, cool, and collected in the month of October. The turmoil caused the Nasdaq to fall 9.2% during the first month of Q3, marking its lowest point since 2008, during the throes of the financial crisis. 

Even stock market darlings saw a red October. Amazon was down 20% and Alphabet fell 9.7% during the month of pumpkin spice everything.

And tech wasn’t the only under performer. Eight of ten subgroups of the S&P 500 fell, led by consumer and discretionary stocks, who suffered even worse fates than tech. As a whole, the S&P 500 saw a 7% drop in the month after Wednesday’s gains.

Water Cooler Talking Point: “Cry me a river, guys. Go have a look at October 1929’s numbers.”

 

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IN OTHER NEWS

• Slow your roll. Coca-Cola is reversing course, or at the very least, pumping the brakes on dabbling in CBD infused drinks. CEO James Quincey made it clear that the company will not try its hand in the “green” drink business until there is a scientific consensus that cannabidiol is safe. They do know that there is a scientific consensus that sugar is unsafe … right?

 

• ADP and Moody’s Analytics reported that the US job market added another 227k private payrolls in October. This report is a precursor to the Labor Department’s statistics which are typically released two days after ADP/Moody’s drops.

 

• Handshake, aka LinkedIn for current and recent college grads whose souls haven’t been totally decimated by a meaningless existence in corporate America, raised a $40M Series C. The site boasts 14M million users across 700 universities, with over 300k employers recruiting on the site. The latest round of funding, which valued the company at roughly $245M, was led by EQT Ventures.

 

• HBD, BTC. Ten years ago yesterday Satoshi Nakamoto unleashed bitcoin’s whitepapers out into the world … and no one really cared. Since then there have been more than 2k cryptocurrencies created and entire industries built around the tech. But it isn’t exactly a happy birthday as bitcoin is facing its first year on year loss.

 

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