🍋 Bummer for Banker Bonuses

November 16, 2022

Together With

"Important to admit when I’m wrong & firing them was truly one of my biggest mistakes." — Elon Musk (after "rehiring" Rahul Ligma and Daniel Johnson)

Good Morning! Former President Donald Trump officially announced a White House bid for 2024. Michael Lewis, author of Moneyball, says his next book is about Sam Bankman-Fried. It definitely won’t be a gushing write-up, but SBF once claimed to be skeptical of books so we doubt he’ll read it anyways.

FTX could owe more than 1 million creditors in its upcoming bankruptcy case. SBF is running out of ideas, posting cryptic tweets and attempting to raise fresh cash despite "failing."

A major Google investor called on the company to cut costs. Apollo will buy Credit Suisse’s securitized products group. Prices of coffee futures are plunging, but $10 lattes in NYC probably aren’t going away any time soon.

What to invest in has never been a more difficult question. With stocks, bonds and crypto getting crushed, options can help. Today's sponsor, Olive Invest allows you to search through 150k+ option strategies. Create a free account and see today’s top 20 strategies.

1. Story of the Day: Bummer for Banker Bonuses

A down year for Wall Street is expected to get even worse. Year-end bonuses are expected to be significantly lower than last year’s.

Investment banks haven’t had a great year. With interest rates rising, IPOs and M&A activity have dried up. Last year was a record one, and some banks foresee a 50% decline in investment banking revenue in 2022.

Thanks to the slowing economy, investment bankers can expect drastically smaller bonuses this year. Bonus reductions are expected to reach 40% to 45% for some.

Just last year nearly every bank felt understaffed in light of record deal flow, and many went on hiring sprees. But the pendulum has swung amidst deal-flow drying up. This year, many banks have even started laying off employees.

Investment bankers aren’t thrilled with the low bonuses. Investment banking morale isn’t very high even in lucrative years. Few bankers are likely to be satisfied with the same long hours yet lower pay. But it's not just investment bankers that have seen a decrease in their bonuses - hedge fund and private equity bonuses are down over 10%, too.

Takeaway: Investment banking bonuses have always known to be choppy. We are coming off a decade long bull market so many Wall Street-ers have forgotten what it's like to receive a smaller check than the prior year. Folks at smaller banks will likely face more volatile bonuses than their larger counterparts who can stomach the risk in a bear market. With the Fed poised to keep interest rates high, 2023 could be another rough year for bankers.

2. Markets Rundown

If you want access to Wall Street insider interviews, industry deep-dives, and investment ideas, check out our Insiders newsletter.

Stocks rose on the PPI inflation report and China-U.S. relations data.

Movers & Shakers

  • (+) Taiwan Semiconductor ($TSM) +11% after Warren Buffett's company bought a $4 billion stake in the company.

  • (+) Walmart ($WMT) +7% after the company beat revenue expectations and announced a $20b share buyback.

  • (–) Getty Images ($GETY) -16% because the company missed revenue expectations.

Private Dealmaking

  • Weka, a data platform provider, raised $135 million 

  • Lentra, a loans-as-a-service platform, raised $60 million

  • Brightside, a financial well-being platform, raised $33 million

  • GoFreight, a logistics startup, raised $23 million

  • Berkshire Hathaway disclosed a $4.1 billion stake in Taiwan Semiconductor

  • Bain Capital bought Mash, a Japanese apparel maker, for $1.4 billion

A Message from Olive Invest: It Feels Good to Have Options

There are over 80 million US adults with non-retirement brokerage accounts, but what to invest in has never been a more difficult question.

With stocks, bonds and crypto getting crushed, and volatility likely to be more frequent, options can help.

Unfortunately, investing in options has been an overwhelmingly poor experience with jargon like greeks, complex math, and chains of data making it inaccessible to most investors.

Olive Invest levels the playing field and gives every investor the ability to control their financial outcomes.

Olive Invest leverages machine learning to find optimal option strategies. You can search through 150,000+ optimized option strategies.

Top Reads

  • CEOs and investors reckon with end of cheap money (CNBC)

  • China’s plan to support housing lifts stocks (Axios)

  • Goldman pushing back on notion tech layoffs are recession signal (YF)

  • How to reframe and solve a tricky life problem (Vox)

  • Tech layoffs are soaring this month (Axios)

  • Munger calls Musk’s Tesla success a ‘minor miracle’ in the car business (CNBC)

  • Fed could pivot sooner than what people think (YF)

  • Musk’s all-nighters at Twitter worry Tesla investors (Reuters)

  • The ROI of hiring an investment banker (Forbes)

  • The power of focusing on one task at a time (Ness)

  • Musk, SBF, and the myth of the smug, castle-building nerds (Atlantic)

What Else to Read: TheFutureParty Newsletter

Want to receive the latest in business, entertainment, and internet culture right to your inbox every single morning? Not just the stuff everyone else is covering -- these are the stories that drive the future, all in a quick and witty package. That’s what TheFutureParty newsletter is all about.

With every email you open, every story you read, you’re going to have the jump on the rest of the crowd. Join over 170,000 driven professionals who read the newsletter every day.

4. Book of the Day: You've Been Played

Warehouse workers pack boxes while a virtual dragon races across their screen. If they beat their colleagues, they get an award. If not, they can be fired. Uber presents exhausted drivers with challenges to keep them driving. China scores its citizens so they behave well, and games with in-app purchases use achievements to empty your wallet.

Points, badges, and leaderboards are creeping into every aspect of modern life. In You’ve Been Played, game designer Adrian Hon delivers a blistering takedown of how corporations, schools, and governments use games and gamification as tools for profit and coercion.

These are games that we often have no choice but to play, where losing has heavy penalties. You’ve Been Played is a scathing indictment of a tech-driven world that wants to convince us that misery is fun, and a call to arms for anyone who hopes to preserve their dignity and autonomy.

“Games are being harnessed as instruments of exploitation.”

6. Daily Visual: Tech Layoffs Soaring this Month

US tech employees laid off

Source: Axios

7. Daily Acumen

"Most problems come from our internal state.

When we are internally calm, we reason and then respond; we don’t just react. When someone slights us, we don’t lash out with angry words or angry fists. We turn the other cheek.

When someone cuts us off, we give them the benefit of the doubt. When things go slower than we want, we wait patiently.

When someone is passive-aggressive, we refuse to take the bait. At our best, we put behavior in perspective—both other people’s and our own.

We do the right thing, not the easy thing, regardless of influence or pressure.

A calm mind is not the absence of conflict or stress, but the ability to cope with it."

Source: Farnam Street

8. Crypto Corner

Win A Trip to London

Short Squeez has joined some great partners to put together an unforgettable 4-day getaway to London for one lucky winner!

Enter here or click on the image below.

9. Memes of the Day

 

 

 

*****

What'd you think of today's email?

Login or Subscribe to participate in polls.

Reply

or to participate.