☕ Economic prophets

The curse of the video game adaptation could be over...
January 13, 2023 View Online | Sign Up | Shop

Morning Brew

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Good morning. In honor of Friday the 13th, we thought we'd let you in on one of our superstitious rituals.

Right before sending the newsletter to you all, we Slack this fish emoji to indicate it is finalized. Why the fish? No idea. But we just can't imagine NOT posting that fish emoji, and have been using it to ward off evil newsletter spirits every single day for at least three years now.

So, to keep you all safe today, we want to give you this: (say it back).

Neal Freyman, Matty Merritt, Jamie Wilde, Max Knoblauch

MARKETS

Nasdaq

11,001.10

S&P

3,983.17

Dow

34,189.97

10-Year

3.445%

Bitcoin

$18,806.55

BBBY

$5.24

*Stock data as of market close, cryptocurrency data as of 4:00am ET. Here's what these numbers mean.

  • Markets: Investors had been betting on yesterday's inflation report to show that prices continued to cool in December, and…they did, fueling a fifth-straight day of gains for the Nasdaq. While it remains far too high for the Fed's liking, inflation fell to its lowest level in more than a year. Meanwhile, retail traders are still sending Bed Bath & Beyond's stock to the moon—the nearly bankrupt retailer has soared more than 200% this week.
 

BANKING

Where is the economy headed? Ask a banker

Back to the Future scene where the kid is yelling Back to the Future/Universal Pictures via Giphy

Trying to read the economy right now is like peering through the water in Lake Havasu during spring break.

Thankfully, banks are about to give us some snorkeling goggles. Some of the biggest financial institutions in the US—including JPMorgan, Bank of America, and Citigroup—will release their earnings reports for the final quarter of 2022 this morning. And they'll share precious insight into the risk of a recession as an uncertain 2023 kicks into gear.

Why are banks considered economic prophets? Because their tentacles touch so many aspects of the economy (from consumer spending via credit cards to business health via commercial loans), they can see into areas single-sector ponies can't. They're like your one extremely connected friend who chats up everyone at cocktail hour and spills the tea afterward.

So here's what you need to know

Banks themselves are hurting. Goldman Sachs just launched its biggest cost-cutting efforts since the 2008 financial crisis, laying off 3,200 employees (or 6.5% of its entire workforce) this week. And it's not the only one reducing headcount: Morgan Stanley and Citi are among the other global banks that have trimmed their workforce recently as business slowed due to the Fed's rate hikes. Overall, big banks' profits are expected to have dropped 15% in Q4 from the year before.

But it's not the apocalypse. Rising rates can benefit banks—as lenders, they make more money when they can charge higher interest to borrowers. Of course, banks also need to pay out interest to their depositors, too, but the gap between their lending profits and their depositor payouts (known as the "net interest margin") is expected to widen—at least for now.

Consumer watch: Pay attention to how much banks have set aside to cover defaults on mortgage, auto, and credit card loans. That'll give us a peek into how American consumers are dealing with inflation (so far, pretty good, banks have said).

Big picture: Given the tumultuous economic environment, companies reporting earnings will face lower expectations than any college football team playing against Georgia. S&P 500 earnings are projected to have gone negative in Q4 for the first time since summer 2020.—NF

        

TOGETHER WITH SHOPIFY

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WORLD

Tour de headlines

Merrick Garland at the DOJ podium US Attorney General Merrick Garland is joined by US Attorney for the Northern District of Illinois John Lausch at a news conference. Chip Somodevilla/Getty Images

Garland appoints special counsel in Biden documents probe. Attorney General Merrick Garland tapped former senior DOJ official Robert Hur to investigate whether "any person or entity violated the law" in connection with the discovery of classified government documents at President Biden's former office and private home. An initial batch of records was found in early November by President Biden's lawyers in a think tank office he had used as a private citizen. The president announced yesterday, hours before Garland's appointment of a special counsel, that more Obama administration documents were found in the garage of his Delaware home.

SBF has a Substack now. "I didn't steal funds, and I certainly didn't stash billions away," wrote FTX co-founder Sam Bankman-Fried, who stands accused of stealing funds and stashing billions away, in a rare newsletter drop by a US criminal defendant. The 30-year-old decided to waive his right to remain silent and give his perspective on the collapse of FTX and crypto-focused hedge fund Alameda Research in a lengthy Substack post. SBF was released on a $250 million bond last month, and has been living under house arrest at his parents' California home while he awaits a trial set for October.

Study says Exxon knew "precisely" about global warming. Exxon's internal climate research, which began as early as the 1970s, accurately predicted both the speed and gravity of global warming, according to a new study that analyzed dozens of research papers produced by the company's in-house scientists. Between 63% and 83% of Exxon-backed research accurately predicted ensuing climate events and global warming, matching and occasionally even surpassing the accuracy of academic and government projections. Although Exxon dismissed the study's findings, lead author Geoffrey Supran summarized them as "airtight" and "unimpeachable" in an email to Axios.

M&A

JPMorgan thinks it got duped

Chase Tower Joe Mabel/CC BY-SA 3.0

It's only January and we might already have the scam story of the year: JPMorgan is suing Frank CEO Charlie Javice and another exec at the fintech company, which it had bought, accusing them of essentially making up a client roster.

What happened: In 2021, JPMorgan paid $175 million to acquire Frank, a student financial-aid planning platform that boasted 4.25 million users. JPMorgan didn't appear to be very interested in the platform's services, but it did want to build a pipeline to send Frank's young customers directly into the Jamie Dimon banking universe.

There was just one problem: Less than 10% of Frank's user base was real, JPMorgan claims. For example, the bank said it sent a marketing email to 400,000 customers and roughly 70% of the emails bounced back. After conducting internal investigations, JPMorgan said it discovered that Javice (a Forbes "30 Under 30" honoree, btw) had hired a college professor to create a bunch of fake user data to pad Frank's numbers for the merger, and then just bought one really big email list.

What's next? A lengthy legal battle, probably. Javice, who was fired in November, is also suing JPMorgan for millions of dollars to recoup expenses she took on during the aforementioned investigations, and the $28 million she says she's still owed from the merger.—MM

        

ENTERTAINMENT

Finally, a video game adaptation that's not cringe

The two protagonists of The Last of Us Liane Hentscher/HBO

The Last of Us will make the treacherous transition from PlayStation game → HBO series this Sunday, and it may be the first video game adaptation that gamers and critics can agree doesn't suck.

Set down your reishi tea before reading the plot: The beloved 2013 game is about a pandemic, but instead of a virus, a fungus takes root in people's brains and zombifies them. The protagonists are a gruff older man and an immune teen girl (Arya and the Hound vibes).

Is this the end of an industry curse?

Hollywood is salivating over video games' potential for adaptation. But, notoriously, a rave game review from Markiplier does not translate to a Certified Fresh rating on the Tomatometer. Starting with 1993's Super Mario Bros., game adaptations have ranged from mildly entertaining to threw-up-a-little.

Even with low ratings some, like Lara Croft: Tomb Raider and more recently Sonic the Hedgehog (still not over his teeth), were popular enough to warrant sequels and threequels.

So instead of hitting "Quit," Hollywood has ramped up its production schedule. Sony is working on 10 PlayStation adaptations, and even Super Mario Bros. is getting a second chance on the big screen. Hopefully, The Last of Us holds them to a new standard.

P.S. HBO Max is about to cost more—tell your parents, or whoever pays for your account.—JW

        

TOGETHER WITH PRIMAL KITCHEN

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GRAB BAG

Key performance indicators

Prince Harry book Andrew Aitchison/In pictures via Getty Images

Stat: Prince Harry has cracked the code for tell-all autobiographies: telling all. His 410-page memoir, Spare, sold 1.4 million copies in its first day on shelves, setting a first-day nonfiction sales record for publisher Penguin Random House (which claims that only the Harry Potter books have logged larger first-day sales). And if the sales aren't enough to prove that the media blitz around the book has succeeded, judge it like this: How many people don't know where Harry got frostbite?

Quote: "The design of Starry is much more aligned with the Gen Z aesthetic."

In a soda industry shakeup, Sierra Mist is being dumped for a younger, more lemony lemon-lime soda. Pepsi announced it's rolling out a brand-new citrus brand, Starry, to take on the king, Sprite (by rival Coca-Cola), which nabbed 8.3% of the overall market in 2021. By comparison, Sierra Mist scored less than one tenth of 1% of market share. Starry, which is caffeine-free and apparently designed to appeal to Gen Z, is at least the fourth effort by Pepsi to come after Sprite's crown. Slice and Storm were some previous duds.

Read: On Gwen Stefani and cultural appropriation. (Allure)

QUIZ

You're quizzing me, Smalls

Weekly news quiz

The feeling of getting a 5/5 on the Brew's Weekly News Quiz has been compared to guessing the plot twist correctly 15 minutes into the horror movie.

It's that satisfying. Ace the quiz.

WHAT ELSE IS BREWING

  • Crypto firms Genesis and Gemini were charged by the SEC for selling unregistered securities through Gemini's Earn product, which promised yields of up to 8%.
  • Lisa Marie Presley, the singer-songwriter and only child of Elvis Presley, died at 54 after an apparent cardiac arrest.
  • Tornadoes killed six people in Alabama and caused "significant damage" to Selma, the city's mayor said.
  • Nurses at two NYC hospitals returned to work after reaching a tentative agreement that would alleviate staffing shortages and boost pay. They had been on strike for three days.
  • Mark your cal: The tax filing season begins Jan. 23, the IRS said.

BREW'S BETS

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GAMES

The puzzle section

Picdoku: Today's Picdoku will have you feline good. Play it here.

Friday puzzle

Place a three-letter word on the dashes to complete a word on the left and to begin another word with those letters on the right.

Example: e a r _ _ _ m e = e a r T H Y / T H Y m e

1. f e a t _ _ _ o i c = ?

2. c o u r _ _ _ n d a = ?

3. d i s p _ _ _ o v e r = ?

4. k e e _ _ _ s i s t = ?

5. r u n _ _ _ i c e = ?

AROUND THE BREW

Business 101

Business

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Why are hospitals such big ransomware targets? Healthcare Brew dives into health systems' biggest weakness—read more and subscribe here.

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ANSWER

1. featHER / HERoic

2. courAGE / AGEnda

3. dispLAY / LAYover

4. keePER / PERsist

5. runOFF / OFFice

Source

         

Written by Neal Freyman, Matty Merritt, Jamie Wilde, and Max Knoblauch

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