Three Things (1/10)

Tuesday, Jan 10th 2023

Commentary

"Money never sleeps, pal" - Gordon Gekko


1) Wall Street's Woes: Goldman Sachs is set to cut approximately 3,200 jobs after a review of its expenses. The layoffs will center on Goldman's Investment Banking division which has been battered by a global slowdown in its underwriting businesses as higher interest rates and volatility in capital markets slow the velocity of deal-making. The layoffs will be the largest for Goldman since the 2008 financial crisis.

Titan's Takeaway: The days of sunny skies, large bonuses, and leisurely lunches at the Hamptons appear to be over for now. A regime change in global capital markets is underway, leading to a 57% year-over-year decline in investment banking revenues. Expect many disappointed and grumpy faces in the financial district this spring as bonuses are set to be slashed in the coming weeks. Goldman Sachs' layoffs signal that financial institutions expect this period of downturn not to abate quickly. Rather, a new normal - one without those fat fees from merger activity with asset prices dwindling.

2) SpaceX Shoots For More Launches: Under pressure from other private upstart rocket-makers, SpaceX is planning to increase its output of rocket launches. Elon Musk's satellite and rocket company wants to launch 100 orbital flights in 2023, a 64% increase from 2022. Its Falcon 9 vehicle remains an industry standard as its reusable boosters incentivize multiple flights.  

Titans Takeaway: The increase in launch plans comes after the company raised $750 million valuing the private company at $137 billion, making it the third most valuable Aerospace and defense company, surpassing Lockheed Martin. With some estimating that the global launch market is expected to grow to $35 billion by 2030 alone, the space is ripe for innovation, and SpaceX has a significant headstart over competitors. However, Amazon seems keen on entering the satellite business after acquiring a future launch capacity of up to 83 missions.

3) Rioters Storm Capital in Brazil: Over 1,200 people were arrested in Brazil after rioters in support of former far-right president Jair Bolsonaro stormed the Capital. Bolsonaro lost to leftist Luiz Inácio Lula da Silva in a contentious election in which a portion of the electorate for Bolsonaro claimed election fraud. Countries across the globe condemned the riots, with United Nations Secretary-General Antonio Guterres remarking that it was an "assault on Brazil's democratic institutions." 

Titan's Takeaway: It needs to be clarified how a new leftist reign will impact the Brazilian economy long term. However, Brazilian equities have plummeted, and the Brazilian Real has fallen some ~5% since Bolsonaro lost. Lula da Silva could increase government spending to shore up popular support at the expense of public finances. The Brazilian Real was among the best currency performers last year as its Central Bank moved quickly to combat inflation by raising interest rates. With a new political regime in place and promises of big government spending despite persistent inflation, Brazilian capital markets could continue to be under duress.

As of this writing, AMZN was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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