🍋 Flight Delay Comp Grounded

Author

Short Squeez
October 24, 2022

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"Someone with half your IQ is making 10x more than you because they aren't smart enough to doubt themselves." — Ed Latimore

Good Morning! A few German climate change protesters got a head start on Thanksgiving season when they threw mashed potatoes at a $110 million Monet painting. The Fed is set to raise interest rates by 75bps next week. IRS boosted the 401(k) contribution limit by $2,000 - you can start saving up to $22,500 next year. Pfizer says it will charge $110 to $130 per dose for its COVID-19 vaccine after the US government stops buying them at the end of the year.

Netflix might start asking for fingerprints to crack down on password sharing, and Pinterest will partner with Headspace to provide free mental health resources for content creators. ‘Black Adam’ topped $67 million during its opening weekend box and Taylor Swift broke Spotify’s single-day streaming record after releasing her new album.

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1. Story of the Day: Flight Delay Comp Grounded

If you ask any of your coworkers about their weekend highlights, you probably won’t hear anyone rave about air travel. Post-pandemic air travel has been nothing short of a nightmare. Americans are flying more than ever, but long delays and cancellations have soured many travelers.

During the first six months of 2022, one-fifth of all flights in the U.S. were delayed, and another 100k were outright canceled. A chaotic start to the year got the Department of Transportation’s attention. The agency proposed new rules the airlines are now contesting. 

The DOT wants airlines to compensate travelers for flight delays. The agency asked airlines to voluntarily offer $100 to customers delayed more than three hours. There’s a catch, though - The DOT plans to publish a list next month of the airlines who agreed to compensate delays.

Major airlines have all pushed back on these plans. Some of the largest airlines warn the compensation program would raise the cost of travel for everyone. Airlines are low-margin businesses as is, and they’d have to raise ticket prices to offset compensating delayed passengers.

This wouldn’t be the first time the airline had been at a crossroads with the government. Airlines are one of the most highly-regulated industries in the U.S. The DOT also investigated ‘oversold’ flights, which airlines argue is usually a win-win for consumers in keeping costs down.

During Covid, the airline industry took a $54 billion bailout from the federal government. Proponents of delayed travelers' compensation argue it’s time for the airlines to pay their fair share. Airlines say that the bailout has nothing to do with compensating delays and regulators misunderstand the many external factors contributing to delays and cancellations.

Takeaway: Compensating delayed passengers revisits the age-old debate on the role of government in business. The DOT believes the government should protect consumers and, if that leads to increased costs passed onto travelers, so be it.

The airlines, on the other hand, argue they can reduce costs and improve operations without government intervention. The airline industry wants to leave it to the market to drive the product consumers want. We’ll have to see how the industry evolves but one thing’s for sure - as delays worsen, TikTokers and Gen Zers will have no choice but to settle for their airport crushes.

2. Markets Rundown

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

Stocks rallied to close last week after Fed will reportedly shift to smaller rate hikes next week.

Movers & Shakers

  • (+) Schlumberger ($SLB) +10% after international oil drilling carried the company's earnings.

  • (+) Pfizer ($PFE) +5% after changing its pricing model for Covid-19 vaccines.

  • (–) Snap ($SNAP) -28% after revenue hit and shrinking advertiser budgets.

Private Dealmaking

  • Cohere, a Toronto-based AI startup, in talks to receive $200 million Google-backed investment

  • LogiNext, a logistics software startup, raised $100 million

  • Acko, an insurtech startup, raised $100 million

  • Viome Life Sciences, a digital health company, raised $67 million

  • RisingWave, a streaming data processing platform, raised $36 million

  • Eyenuk, an AI eye screening company, raised $26 million

Top Reads

  • Yellen says inflation not yet ‘embedded’ in economy (Reuters)

  • Here’s what’s really hurting the economy (YF)

  • Musk thinks global recession could last until spring 2024 (Axios)

  • The space race to connect satellites with smart phones (CNBC)

  • The president can’t do much to bring down gas prices - but a recession can (CNN)

  • Venture SPACs slump with market in turmoil (Axios)

  • Banks forced to hold on to Twitter deal debt (Reuters)

  • U.S. budget deficit cut in half, pandemic spending slowing down (Fox)

  • The stock market just passed a recession test (Forbes)

  • How emoji can divide the workplace (Axios)

  • Serena Williams on winning as a VC (YF)

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4. Book of the Day: Permanent Distortion

It is abundantly clear that our world is divided into two very different economies. The real one, for the average worker, is based on productivity and results. It behaves according to traditional rules of money and economics.

The other doesn’t. It is the product of years of loose money, poured by central banks into a system dominated by financial titans. It is powerful enough to send stock markets higher even in the face of a global pandemic and threats of nuclear war.

This parting from reality has its roots in an emergency response to the financial crisis of 2008. “Quantitative Easing” injected a vast amount of cash into the economy—especially if you were a major Wall Street bank. What began as a short-term dependency became a habit, then a compulsion, and finally an addiction.

Nomi Prins relentlessly exposes a world fractured by policies crafted by the largest financial institutions, led by the Federal Reserve, that have supercharged the financial system while selling out regular citizens and leading to social and political reckonings.

She uncovers a newly polarized world of the mega rich versus the never rich, the winners and losers of an unprecedented distortion that can never return to “normal.”

“A riveting exposĂ© of a permanent financial dystopia, its causes, and real-world consequences.”

5. Short Squeez Picks

6. Daily Visual: Change in Halloween Candy Prices

2021 to 2022

Source: Axios

7. Daily Acumen

"Sitting still feels reckless in a fast-moving world, even in situations where it offers the best odds of long-term compounding. It’s like being told that you should play dead if a grizzly charges you – running for your life just feels more practical.

The bias towards action is one of the strongest forces in business investing for three reasons: It can be the only signal to yourself and others that you’re not oblivious to risks.

It can be the only signal to others that you’re worth your salary. And it can provide the illusion of control in a world where so much is out of your hands."

Source: Morgan Housel

8. Crypto Corner

9. Memes of the Day

 

 

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