🍋 Budget Airlines Gettin' Crowded
Good Morning! Elon Musk says he would reverse Donald Trump's Twitter ban calling it a "morally bad decision." Jack Dorsey, who was the CEO of Twitter when the ban was implemented agreed with Musk, and said the ban was a mistake of a "business decision." Also coming to an end, is the era of the iPod. Apple will discontinue the last model, the iPod touch, which changed the music game when it was introduced in 2007. President Joe Biden may cut some US tariffs on foreign imports in an effort to fight inflation. Tom Brady cut something too... a deal with Fox Sports to join as its lead NFL analyst whenever he retires. The deal is apparently for $375 million over 10 years, so he is making more money off the field after his playing career than he made on the field during it.
1. Story of the Day: Budget Airlines Gettin' Crowded
Move over Spirit, there are some new kids in town. Startup budget airlines are aiming to cause some turbulence in the airline space. How could Spirit, Allegiant, and Frontier let this happen? Adam Gordon, MD and Partner at BCG said, "it's a play we've seen before." When those airlines mature, "their labor costs tend to rise, the aircraft need more maintenance, and it all gets more complex. That creates space for new players to come in beneath them."
The pandemic provided a unique opportunity for new airlines to take flight in smaller markets that had been abandoned by the major carriers in recent years. Breeze Airways and Avelo Airlines are among the startups that are trying to disrupt the market like Jet Blue and Southwest did decades ago. Of course, as all startups do these days, they're saying tech is their differentiator.
That tech is helping them keep costs low apparently. Breeze has been around for a year, mostly on the East Coast, and offers $99 one way tickets to LA, SF, and Vegas. You can catch one of their flights from Westchester County Airport if you're in the NYC area. Their West Coast counterpart, Avelo, is adding routes like New Haven and Orlando. The Vikings are in on it too with PLAY, an Icelandic airline that'll get you from DC, Boston, New York, or Orlando to mainland Europe (after a stop in Reykjavik).
David Neelman, founder of JetBlue and other airlines, started Breeze and is bringing the "tech-first" approach to airline customer service. All booking and flight management goes through an app. You can't call a toll-free number, because there isn't one. Not that those are ever good anyway. You could drive from NYC to LA before getting off hold. Instead, you'll have to communicate through texts, chats, or Facebook messenger.
Short Squeez Takeaway: A lot of people say this newfound messaging doesn't work so well, according to complaints on the company's Facebook page. I mean if your customer service rep is handling multiple texting conversations like the captain of the football team, lines are bound to get crossed. Cut them some slack though, they were started in a pandemic and have a lot to figure out.
2. Markets Rundown
Markets found some footing and eeked out some gains after a brutal string of sell-offs as the UST 10 yr yield dropped back below 3% and oil dipped below $100/barrel.
Movers & Shakers
(+) Vroom ($VRM) +32% after having a narrower-than-expected quarterly loss and beating revenue expectations.
(+) BioHaven Pharmaceutical ($BHVN) +68% on news that Pfizer will buy them.
(–) Peloton ($PTON) -9% because they disclosed their massive excess inventory and are burning through cash.
MOMA Therapeutics, a Cambridge, MA prediction medicines startup, raised $150 million in Series B funding
Paddle raised $200 million in Series D equity and debt funding at a $1.4 billion valuation.
Plant nutrient tech startup Brightseed raised $68 million in Series B funding
Carlyle will buy NSM Insurance Group from White Mountains Insurance for $1.78 billion
Investcorp India Acquisition, an Indian SPAC, raised $225 million in its IPO
Salesforce will buy Troops, a NY based Slackbot for sales teams
3. Top Reads
How the rate of inflation is measured (WSJ)
A potential solution to airport security troubles? (Axios)
JPMorgan's "uninvestable" call on China published in error (BB)
EA Sports and FIFA say farewell to partnership (Axios)
Apollo plans to lead $1 billion financing for Musk's Twitter bid (BB)
Don't count on the Fed bailing out the stock market this time (Axios)
Money managers coming in to fill Manhattan's empty offices (BB)
Phillip Morris may start a megamerger for smokeless tobacco products (Axios)
Lisa Cook is first Black woman ever to be confirmed as a Fed governor (NYT)
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4. Book of the Day: Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction
On a rainy Sunday in 2014, a senior executive at Deutsche Bank was found hanging in his London apartment. Bill Broeksmit had helped build the 150-year-old financial institution into a global colossus, and his sudden death was a mystery, made more so by the bank’s efforts to deter investigation. Broeksmit, it turned out, was a man who knew too much.
In Dark Towers, award-winning journalist David Enrich reveals the truth about Deutsche Bank and its epic path of devastation. Tracing the bank’s history back to its propping up of a default-prone American developer in the 1880s, helping the Nazis build Auschwitz, and wooing Eastern Bloc authoritarians, he shows how in the 1990s, via a succession of hard-charging executives, Deutsche made a fateful decision to pursue Wall Street riches, often at the expense of ethics and the law.
Soon, the bank was manipulating markets, violating international sanctions to aid terrorist regimes, scamming investors, defrauding regulators, and laundering money for Russian oligarchs. Ever desperate for an American foothold, Deutsche also started doing business with a self-promoting real estate magnate nearly every other bank in the world deemed too dangerous to touch: Donald Trump. Over the next twenty years, Deutsche executives loaned billions to Trump, the Kushner family, and an array of scandal-tarred clients, including convicted sex offender Jeffrey Epstein.
Dark Towers is the never-before-told saga of how Deutsche Bank became the global face of financial recklessness and criminality—the corporate equivalent of a weapon of mass destruction. It is also the story of a man who was consumed by fear of what he’d seen at the bank—and his son’s obsessive search for the secrets he kept.
“He stood out in an industry brimming with socially maladroit math whizzes and slightly sociopathic type A personalities.”
5. Short Squeez Picks
6. Daily Visual: Inflation Only "Asset Class"
Average price change of select Tyson Foods products
7. Daily Acumen: Ideas
Fluency Heuristic: Ideas that can be explained simply are more likely to be believed than those that are complex, even if the simple-sounding ideas are nonsense. It occurs because ideas that are easy to grasp are hard to distinguish from ideas you’re familiar with.
Luxury Paradox: The more expensive something is the less likely you are to use it, so the relationship between price and utility is an inverted U. Ferraris sit in garages; Hondas get driven.
Ostrich Effect: Avoiding negative information that might challenge views that you desperately want to be right.
The Middle Ground Fallacy: Falsely assuming that splitting the difference between two polar opposite views is a healthy compromise. If one person says vaccines cause autism and another person says they don’t, it’s not right to compromise and say vaccines sometimes cause autism.
Dunning-Kruger Effect: Knowing the limits of your intelligence requires a certain level of intelligence, so some people are too stupid to know how stupid they are.
Woozle Effect: A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth.
Nonlinearity: Outputs aren’t always proportional to inputs, so the world is a barrage of massive wins and horrible losses that surprise people.
8. Crypto Corner
NYC and Miami battle for "crypto capital" crown
The Fed is worried about stablecoins
Compound Treasury gets a trailb rating from S&P
Luna Foundation Guard looking for $1 billion to shore up UST stablecoin
Bitcoin miners aim for carbon neutrality
Nigeria upgrades CBDC as restrictions hit fintech industry
9. Memes of the Day