| To: pak73 who wrote (10245) | 1/23/2023 1:01:41 AM | | From: elmatador | | | | The Second Wave of innocence is ending. The First Wave ended in 2001 when young people thought that daytrading and the Tech Bubble would last forever.
The Second Wave now is ending when young people, who thought Big Tech's sky was the limit, discover what Business Cycle is all about.
In all cases, compensation goes up as companies compete with each other to grab market share. NOTE: Companies do not fight for "talent" they fight for market share. In this competition young people are attracted to the new sector and then they are shocked when the business cycle ends.
Do not blame you, personally, if you were caught in a Tech Unwinding. It is not you. It is the market. Do not blame the companies. Had you been the CFO you would have looked at the cold numbers and told the CEO what to tell the board. And they have decided exactly the same course of action.
And an advice to the youth (I never thought one day I would be advising the youth): DO NOT SEEK SECURITY IN AN INSECURE WORLD.
https://www.linkedin.com/posts/osvaldo-coelho-6b61425_the-second-wave-of-innocence-is-ending-the-activity-7023167288430239744-IiSV?utm_source=share&utm_medium=member_desktop |
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| From: Elroy Jetson | 1/23/2023 1:01:56 AM | | | | | | Ballroom dancing proves gateway activity to mass murder.
Man who shot 20 in Monterey Park ballroom dance hall, killing 10, was 72 year old Chinese immigrant, Huu Can Tran who taught dance lessons there almost every night. He shot himself after police surrounded his van in Torrance.
His ex-wife, who asked not to be named, said he was an occasional truck driver until 2004 and the pair met at the same dance studio he shot up after he offered to teach her how to dance.
He wasn’t violent, she said, though he “was quick to anger.” If she took a wrong step while dancing, he would occasionally blow up saying she was embarrassing him, she claimed.
Huu Can Tran filed for a divorce from her in 2005, which became final a year later.
A “long-time acquaintance,” who also wished to remain anonymous, said Tran would make the 5-minute drive to the dance hall “almost every night.” But described how he was “hostile to a lot of people” at the dance studio and that he believed other instructors said “evil things about him.”
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| From: elmatador | 1/23/2023 2:30:12 AM | | | | | | Expect the Fed to increase rates 0.25 percentage-points on February 1, and more than likely on March 22 too. However, it’s the discussion of plans for the May 4 meeting that have the greatest potential to move markets.
The Fed holding rates below 5% might confirm recent bullish trends in markets, but if the Fed does decide to continue to raise rates in May, that would be a little more bearish.
Still, current consensus is that we’re just a few months away from peak interest rates for this cycle and the debate is mostly finessing peak rates to within 0.25 percentage-points.
What To Expect From The Fed’s February Meeting
imon Moore
Senior Contributor
Jan 22, 2023,11:29am EST
The U.S. Federal Reserve (Fed) is all but certain to raise rates 0.25 percentage-points when it announces interest rates on at 2pm ET on Wednesday, February 1, according to interest rate futures. Following that, the March 22, meeting should be a similar story, where the Fed is likely to once again raise rates 0.25 percentage-points, though there’s some chance the Fed holds rates steady.
If these forecasts are accurate, it means that the main informational value from the Fed’s next meeting will be insight into the Fed’s plans for interest rates for the meetings of May, June and beyond.
Here the market anticipates that the Fed will hold rates steady, or even begin to cut them later in 2023. Still, many Fed policymakers continue to comment that rates are likely to rise over to over 5%. That’s in contrast to what the market is expecting.
Rates over 5%On January 19, 2023 Susan Collins of the Boston Fed said that she sees rates “just above” 5%. James Bullard of the St Louis Fed has made similar comments recently, and this is also consistent with the Fed’s projections from December 2022 when the majority of policymakers saw rates exceeding 5% in 2023.
This puts the market’s focus on the Fed’s May meeting. If the Fed is going to move rates over 5%, this is likely the meeting when it would happen given their expected usage of 0.25% rate increments for upcoming meetings.
The Fed manages expectations for interest rates tightly as meetings near. This suggests that we are unlikely to see a surprise for the Fed’s February meeting, or even March. In contrast, the May meeting is far enough away to offer some flexibility. If the Fed is pushing for rates over 5% as recent statements signal, then the Fed will want to underline this with the announcement of the February decision and Jerome Powell’s accompanying press conference. Equally, if the Fed decides to back away from rates exceeding 5% in 2023, they have time to do that too.
The Gap Between Markets And The Fed
Still the Fed and markets are not too far apart. Various Fed policymakers have commented that rates should peak at 5% to 5.25%, whereas markets see peak rates at 4.75% to 5%. That’s a gap of 0.25% in interest rate expectations currently. It’s possible incoming data alter the Fed’s plans, such as more encouraging inflation numbers.
Expect the Fed to increase rates 0.25 percentage-points on February 1, and more than likely on March 22 too. However, it’s the discussion of plans for the May 4 meeting that have the greatest potential to move markets. The Fed holding rates below 5% might confirm recent bullish trends in markets, but if the Fed does decide to continue to raise rates in May, that would be a little more bearish. Still, current consensus is that we’re just a few months away from peak interest rates for this cycle and the debate is mostly finessing peak rates to within 0.25 percentage-points.
Follow me on Twitter or LinkedIn. Check out my website or some of my other work here.
Simon Moore
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Simon provides an outsourced Chief Investment Officer service to institutional investors |
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| From: elmatador | 1/23/2023 3:27:17 AM | | | | | | The narrative is to use end of Covid in China to increase prices: But "The rapid dismantling of COVID restrictions in China is further diminishing its attractiveness as the world’s factory"
and wages in the country have more than tripled over the last decade, making it far less competitive than cheaper locations in Mexico and elsewhere
The end of ‘made in China’?
Five ways to cut supply chain risks by Carlos Cordon
Published 23 January 2023 in Supply chain • 5 min read
Outbreaks of COVID-19 and geopolitical tensions underscore the urgent need to look beyond costs and diversify production to alternative locations to lower the risk of disruption
Multinationals including Apple and Tesla are facing severe disruption to their supply chains in China after Beijing eased its stringent COVID-19 rules and infections swept across the country, underscoring the risk of concentrating production in one location.
With China’s relative advantages as a cheap manufacturing hub waning, more international groups will be looking at diversifying production to alternative locations.
A wider geopolitical decoupling also threatens global trade, so executives should be finding ways to improve the resilience of the supply chain – not just lower costs – to ensure it does not snarl. Global organizations can consider these five ways to cut supply chain risks in the wake of China’s nationwide outbreak of COVID. ?
Spread sourcing and production to improve resilience The rapid dismantling of COVID restrictions in China is further diminishing its attractiveness as the world’s factory, coming on top of escalating tensions with the US.
Companies from Meta to Google had already made plans to move at least some production and sourcing out of the country following the trade war that kicked off under Donald Trump’s presidency, as it increased tariffs.
Dell plans to stop using computer chips made in China by 2024 and reduce other “made in China” components in its products.
The Biden administration is now trying to reduce US firms’ supply chain dependency on China. For example, the US has launched controls that restrict exports of technology to Chinese semiconductor manufacturers. The controls even hit some companies in Europe, underlining the unpredictable nature of geopolitical risk.
China’s COVID surge adds to the concerns facing multinationals.
After outsourcing production to cheaper offshore locations, fueling a three-decade era of globalization, many companies are looking at bringing production back closer to home in a nearshoring push.
This also reflects the fading advantages of China as a manufacturing base, as wages in the country have more than tripled over the last decade, making it far less competitive than cheaper locations in Mexico and elsewhere. Supply chain risks have also increased.
China’s exports plunged 9.9% in December, the sharpest fall in nearly three years, as global demand slackened and COVID spread.
In response, companies should be preparing alternatives for assembly and production beyond China – ideally in multiple countries such as India, Vietnam, and Taiwan to improve the resilience of sourcing and production.
Localized production in China, for China Multinationals are not advised to pull out of China entirely, because it remains a huge market in which to sell as well as produce goods.
In the short term, economic activity has slowed because of COVID, with retail sales and factory output falling in December.
Carmakers including Tesla and Mercedes-Benz have slashed vehicle prices in China – a further sign that demand is softening.
But the lifting of curbs has raised hopes for a rebound in China’s consumer activity, which was muffled by recurrent lockdowns.?That optimism strengthens the case for localized production in China,?with multinationals producing goods that are only used in the world’s second-largest economy.
 Time for change: Apple is starting to take greater control of its own supply chain
“China for China” has now become a common phrase in corporate circles,?as it reduces dependency on Chinese factories for exports while keeping a stable local supply chain to service the Chinese market.?For example, the pharma giant AstraZeneca has opened an inhaler manufacturing facility in the city of Qingdao. Schneider Electric, the energy management company, has R&D hubs in China where it makes a product that controls energy usage, designed for the Chinese market and exported elsewhere in Asia.
Locate savings to protect margins Nearshoring can be a more expensive option than offshoring, pushing up the costs of both labor and material.?This means companies need to find savings elsewhere to preserve their margins. With consumer confidence low around the world, they are unlikely to pass on the full costs to customers without suffering a fall in volume.
Manufacturers have been hit by soaring energy prices, even as milder temperatures in the northern hemisphere have eased worries about power shortages in Europe.?Finding ways to further lower energy costs should be a priority; expanding use of renewable power to meet climate targets and cut dependence on Russian energy, for example, even as rising component prices limit renewable capacity. ?
?Companies are also switching to cheaper or more widely available components to make their products. For example, some companies are avoiding alloys that are difficult to find and using relatively standard steel. While it is not the same performance, it is good enough.
Take greater control over the supply chain However, as well as looking for immediate cost savings, firms should be focused on the resilience of their supply chains to ensure stability of production. That can involve trade-offs that drive up costs today but promise greater returns in the longer term. ?
Many companies have, for instance, been using more flexible and short-term contracts with suppliers to adjust to changes in customer demand. But I recommend signing longer-term contracts with their key suppliers to build additional resilience in the supply chain. ?
Companies should be preparing alternatives for assembly and production beyond China – ideally in multiple countries such as India, Vietnam, and Taiwan to improve the resilience of sourcing and production
On top of that, “in-sourcing” is becoming a wider trend as companies including Apple begin to take greater control over their supply chain. The tech giant is planning to use its own screens for the iPhone and Apple Watch,?Bloomberg?has reported. It currently uses displays from suppliers including Samsung and LG. The move would streamline production and make Apple less dependent on external companies to make key products that drive the group’s sales.
Corporate standards to protect employees As China reverses its zero-COVID policy, the medium-term risk is that of worker shortages at factories and warehouse, distribution, logistic and transportation facilities, wreaking havoc on supply chains.?Modeling suggests that a million Chinese people are at risk of dying from COVID as the pandemic controls are eased.?The worker shortages are being compounded by the lunar new year, with many migrant workers heading home for the holiday this weekend.?
The COVID outbreaks at Chinese factories underline the importance of good corporate standards to protect employees in order to keep production humming.?Apple’s manufacturing partner Foxconn suffered an outflow of workers attempting to escape a COVID outbreak and avoid being locked down, hitting production and limiting supply of Apple’s newest high-end iPhones.
Companies wishing to avoid a similar fate should be keeping employees safe while taking steps to control more of their supply chain, on top of finding savings and diversifying production bases to avoid the supply chain breaking down. Those steps will ultimately lessen the reliance on China as the world’s factory. Given that it takes time to switch sourcing and production to another country, and it could prove expensive, the supply chain shake-up is likely to prove permanent.
Authors
Carlos CordonProfessor of Strategy and Supply Chain Management
Carlos Cordon is a Professor of Strategy and Supply Chain Management. Professor Cordon’s areas of interest are digital value chains, supply and demand chain management, digital lean, and process management. |
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| From: elmatador | 1/23/2023 3:29:40 AM | | | | | | China may prove not to be the threat we have come to assume
BY BRUCE STOKES, OPINION CONTRIBUTOR - 01/22/23 10:00 AM ET
For a generation, American expectations and policy responses to China have been based on the implicit assumption of perpetually strong Chinese economic growth.
Fear of China’s ascension has led to unprecedented public antipathy toward China. Both the Trump and Biden administrations have imposed tough trade measures and export controls on China.
The House of Representatives has created a select committee on China as a means of pressuring the White House to be even tougher.
But expectations of the inevitability of China’s growing power need to be tempered by underlying economic and demographic trends. China’s prospects are constrained by its debt overhang, aging population, and productivity shortcomings that will restrict its future growth prospects.
Even as Congress and the Biden administration gear up for a prolonged confrontation with Beijing, China’s economic trajectory and the trade, investment, security and environmental implications of that slowdown need to be reassessed.
A slowing China
The Chinese government claims its economy grew 3 percent in 2022. The International Monetary Fund (IMF) projects China’s economy will grow by 4.4 percent in 2023, roughly half its growth rate in 2021. But such expectations will be realized only if everything goes right. Rhodium Group estimates China’s growth could be as low as 0.5 percent. This would be a far cry from the 8-10 percent growth the world had come to expect from China.
China no longer seems destined to overtake the United States as the world’s leading economy any time soon. Goldman Sachs, which formerly projected that China would become the world’s largest economy by the mid-2020s, has pushed that date back to 2035. Some analysts think it will never happen.
Every nation’s economic growth is largely a product of productivity and demography. Neither of these is on China’s side.
A 2022 IMF study concluded that while China’s total factor productivity, which measures both labor and capital inputs, rose 22 percent between 2003 and 2011, it expanded a mere 5 percent between 2011 and 2019.
Meanwhile, China’s population is aging and shrinking, down 850,000 in 2022. The United Nations estimates that the nation’s population will decline by 113 million people by 2050. In 2020, 17.8 percent of China’s population was over age 60. By 2050, that portion is expected to more than double to 38.8 percent. Fewer able-bodied, less-productive workers will only accelerate the economic slowdown.
And China’s future economic prospects may be crippled by debt. The IMF reports that China’s total public, private and corporate debt has grown from 172 percent in 2010 to 265 percent in 2021, an increase of 54 percent. The U.S. debt ratio is higher, but it is growing more slowly.
The knock-on effects
China is the third-largest export market for the United States. About 3 percent of German jobs depend on exports to China. And China is the top export market for Japan, Indonesia and Malaysia. Slower Chinese growth means less demand for those exports.
American, European and Japanese companies have invested billions of dollars in China, on the presumption that it is the consumer market of the future. Annual U.S. investment has averaged about $13 billion over the past decade. This capital inflow was predicated on now-questionable expectations. No wonder a 2022 survey of members of the European Chamber of Commerce in China found that 23 percent of European companies, the highest share in the past decade, are considering shifting current or planned investments in China to other markets. More broadly, if manufacturing in China is not as profitable as expected, it changes the calculus on the costs of decoupling and “friend-shoring” supply chains, accelerating that trend.
Recent Chinese economic growth has fueled a dramatic increase in Chinese military spending: a 7.1 percent expansion in 2022 alone. Such spending is a major reason why the U.S. is growing the Pentagon budget. If Beijing continues its military expansion amid a slowing economy, it will have to forego social and economic investments, slowing improvements in the Chinese standard of living. Or it will have to further add to its debt, imperiling future economic prospects. If Beijing curbs defense spending, China’s ability to attack Taiwan, as it has threatened, may be delayed.
Beijing has pledged to reach net-zero carbon emissions by 2060. To achieve that ambition, the World Bank estimates China needs up to $17 trillion in additional investments in green infrastructure, renewable power and electric transport. Slower economic growth will help reduce emissions — a plus. But prolonged anemic growth will make funding China’s energy transition exceedingly difficult. And Beijing’s need to preserve employment in a slow-growing economy will impede the closing of job-intensive coal mines and other polluting industries, compounding the difficulty of cutting emissions.
Xi Jinping’s ever-tightening grip on power stands in stark contrast to the recent outbreaks of civil unrest against China’s COVID lockdowns. And the COVID unrest is a reminder that the Chinese population has risen up before. In 2010, there were an estimated 180,000 public protests in China. Beijing eventually regained control. But with the unemployment rate for those ages 16-24 already at 17 percent, a prolonged economic slowdown raises the specter of even more widespread domestic unrest when the promise of a better life proves illusory.
A beleaguered Xi might be too weak and preoccupied to mount the increasingly feared action against Taiwan. Or he may accelerate such a confrontation to distract and unify the Chinese people.
What to do
An entire generation of China analysts, business leaders, diplomats and domestic politicians has a worldview shaped by assumptions of looming Chinese preeminence. Careers and fortunes have been built on expectations of China’s inevitable rise. It has taken years to better understand Chinese economic and military competition. It will not and should not change overnight.
Venezuela’s dictator loves dollars but lashes out at democracy Fifty years after Roe, it’s up to states to enshrine abortion rightsBut Washington should not ignore the possibility that China may not prove to be the powerhouse we once thought. Congress and the administration should assemble a “team B”: a group of economists, climate experts, military and foreign policy officials charged with rigorously challenging existing assumptions, plans and policies regarding current and future relations with China. Such an approach has been used successfully in the past to rethink America’s approach to the Soviet Union. This effort could be coordinated by the newly formed “ China House” within the State Department.
In the end, such a reassessment will provide no simple answers. China’s trajectory is too uncertain. But while we prepare for a more challenging China, we also must not be blind to the consequences of a weaker China that will pose its own set of problems for the United States and the world.
Bruce Stokes is a visiting senior fellow at the German Marshall Fund of the United States in Washington. |
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| From: elmatador | 1/23/2023 7:12:59 AM | | | | | | China tech talent eager to work in Japan, Tokyo entrepreneur says
Digital signage startup's founder sees opportunity amid Beijing tech crackdown
Luo Youhong, an entrepreneur based in Japan, founded a startup that projects video ads inside elevators. (Photo by Shuhei Yamada)
SHUHEI YAMADA, Nikkei Asia Tech chief editorDecember 31, 2022 13:31 JST
TOKYO -- With China continuing to crack down on internet-based businesses, one Japan-based entrepreneur sees a golden opportunity to recruit Chinese tech engineers frustrated by dimming prospects at home.
Luo Youhong, founder of the digital advertising startup Tokyo Inc., spent eight months in China this year raising funds from potential investors in Beijing, Shenzhen and other cities. He said around 30 of them simply refused to hear him out.
"The conversation died as soon as I mentioned that our business was internet-based," Luo said.
Luo, who is of Chinese descent, founded his startup in 2017 as a graduate student at the University of Tokyo. The company offers video advertisements inside elevators, including by projecting them on the doors, through a joint venture with property developer Mitsubishi Estate.
The system has been installed in around 1,800 locations so far. The company booked its first operating profit for the fiscal year that ended in November.
With the business gaining momentum, Luo embarked on a lengthy trip to China to source projector parts, study technological trends there and, most importantly, raise money to diversify into online business.
But the venture capital firms and other investors he met "were only interested in 'deep tech' like semiconductors and new materials," Luo said. China has cracked down on internet-based businesses in recent years and pushed to increase domestic production of semiconductors -- a focus of its growing tech rivalry with the U.S.
As he scrambled for new topics of conversation, Luo realized that everybody he met jumped at the topic of Japanese visas for highly skilled workers.
"Talented engineers can no longer move to the U.S. because of bilateral tensions, so they are turning their sights to Japan instead," Luo said.
The Japanese government has been expanding the visa program, which is designed for professionals with an expertise in technology, management and other fields, as a way to bring more foreign talent to the country.
Anecdotal evidence suggests many Chinese tech entrepreneurs and engineers are looking to move abroad, discouraged by China's increased regulations in the field, a maturing home market and harsh zero-COVID restrictions. Japan is considered one of the most popular destinations, after Singapore, where Chinese is more widely spoken.
Luo said he is preparing to bring Chinese engineers to Japan to lead his startup's new internet businesses. He will be seeking funds mainly from Japanese investors. |
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| From: elmatador | 1/23/2023 11:04:41 AM | | | | | | South Africa plans to hold joint training exercises off its coast next month with Russia and China on the one-year anniversary of the start of Russia’s invasion of Ukraine on Feb 24
South Africa to Hold Naval Drill With Russia and China Amid Ukraine War
The 10-day naval exercises are a show of diplomatic independence for South Africa, which is part of an alliance with Brazil, Russia, India and China — known as BRICS.
A sanctioned Russian container ship, center left, docked in South Africa’s naval port outside Cape Town, last month.Credit...Nic Bothma/EPA, via Shutterstock
 
By Lynsey Chutel and John Eligon
Jan. 19, 2023
JOHANNESBURG — South Africa’s military announced on Thursday that it plans to hold joint training exercises off its coast next month with Russia and China, a move criticized by the United States, which has been trying to rally other countries to isolate Russia over the war in Ukraine.
The exercises will coincide with the one-year anniversary of the start of Russia’s invasion of Ukraine on Feb 24. South Africa was among three dozen countries that abstained last year in a vote in the United Nations to condemn Russia for its claim to have annexed several regions of Ukraine.
South Africa has conducted military exercises with Russia and China before, as well as with the United States and NATO countries. The South African National Defense Force said that the upcoming drills, to be held from Feb. 17 to 27 near the coastal towns of Durban and Richards Bay, are a “means to strengthen the already flourishing relations between South Africa, Russia and China.”
The United States, which has fostered a decades-long strategic partnership with South Africa, immediately expressed disapproval. David Feldmann, a spokesman for the United States Embassy in Pretoria, South Africa, said in a statement, “We note with concern” the plan by South Africa to move ahead with the joint exercises “even as Moscow continues its brutal and unlawful invasion of Ukraine.”
He added, “We encourage South Africa to cooperate militarily with fellow democracies that share our mutual commitment to human rights and the rule of law.”
The naval drill is a show of diplomatic independence for South Africa, analysts said. South Africa is part of an alliance with Brazil, Russia, India and China — known by the acronym BRICS — and this naval exercise reasserts South Africa’s position that it will not allow the conflict between Russia and Ukraine to dictate its diplomatic relations.
“It is seen as a war that is happening in Europe, and as far as South Africa is concerned, it’s not part of this war,” said Denys Reva, a maritime researcher with the Institute for Security Studies in South Africa.
Although the European Union is South Africa’s largest trading partner, South Africa’s governing party, the African National Congress, has held deep historical ties to Russia and China because of the help those countries provided in the fight against apartheid.
Many South Africans who led the efforts to overthrow the apartheid regime studied and received military training in the Soviet Union. China also provided military training to members of the A.N.C., the liberation party that would eventually come to govern South Africa.
For Russia, which has faced international sanctions since starting the war, the joint naval exercise is a welcome display of friendship from a diplomatic partner, several analysts said.
For China, while the stakes are lower, February’s drill will be a reminder that the BRICS alliance is still a global player, said Elizabeth Sidiropoulos, head of the South African Institute of International Affairs. BRICS may not be a military alliance like NATO, but it is still presenting itself as a “countervailing force to the West.”
While South Africa’s military is among the most powerful on the African continent, a declining defense budget has eroded its capabilities.
South Africa, China and Russia first held such a naval drill in 2019, running antipiracy drills and rescue exercises. Darren Olivier, director of the African Defense Review, a security consultancy, said that at the time, he and other security experts did not attach much diplomatic significance to the cooperation.
Now, against the backdrop of the Russia-Ukraine war, the exercise has taken on “a stronger ideological importance at a political level,” Mr. Olivier said. He added that it would have been more “sensible and pragmatic” if South Africa had postponed the exercise.
But South Africa has also worked with the armed forces of its Western partners. Since 2011, South Africa has conducted joint military drills with the United States four times, most recently last July.
South Africa’s navy has also previously conducted similar exercises with NATO, as well as its member states like France and Germany, said Mr. Reva, the maritime researcher.
The European Union ambassador to South Africa declined to comment on Thursday.
While many South Africans have said they support their country’s refusal to condemn Russia for the war in Ukraine, the military exercises provoked some domestic criticism.
Kobus Marais, a member of the Democratic Alliance, South Africa’s main opposition party, who serves on Parliament’s joint committee on defense, said that the military exercise will bring little benefit to South Africa’s ailing and underfunded naval fleet. South Africa’s government should have prioritized relations with larger trading partners, like the European Union and the U.S., he said. Instead, it has repeatedly shown favor to Russia.
“Clearly what they are showing now is a lack of neutrality,” Mr. Marais said.
Last month, the Lady R, a Russian container ship that had been sanctioned by the United States, was allowed to dock in South Africa’s naval port outside Cape Town. The ship’s mysterious nighttime arrival raised speculation among South Africans, as well as some concern because a commercial ship under sanctions had been permitted to use a naval facility. Only after the ship departed did South Africa’s defense minister, Thandi Modise, offer an explanation, saying that it had delivered “an old outstanding order for ammunition.”
More than 350 members of various branches of South Africa’s military will participate in the drills, named Exercise MOSI.
The announcement of the exercises comes a few days before Russia’s foreign minister, Sergey V. Lavrov, is scheduled to visit South Africa for bilateral talks with his South African counterpart, Naledi Pandor.
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| From: elmatador | 1/24/2023 11:44:05 AM | | | | | | A top tech analyst just warned another 15% to 20% of big tech employees could be laid off over the next 6 months
Will Daniel
Mon, January 23, 2023 at 8:32 PM GMT+3·4 min read
Big tech giants have laid off tens of thousands of employees over the past few months as recession fears, persistent inflation, and rising interest rates continue to weigh on earnings results. The likes of Google, Amazon, and Meta have let go of nearly 40,000 employees combined.
But Gene Munster, managing partner at the tech-focused investment and venture capital firm Deepwater Asset Management (formerly Loup Ventures), believes the worst is yet to come.
“There’s still another 15% to 20% of headcount reductions for these big tech companies in the next three to six months,” he told CNBC on Monday.
Munster, who has worked for decades as a tech analyst on Wall Street, said that employee headcounts at big tech firms grew at the same pace as their revenues did between 2019 and the end of last year—and that’s not a sustainable pattern.
“Ultimately, it keeps coming back to, simply, these companies added too many people too fast,” he explained.
The analyst pointed to Apple as the one “standout” firm that didn’t grow its employee headcount as dramatically over the past three years—and Apple has yet to begin layoffs. Apple grew its revenues by 52% since 2019, but its headcount rose just 19%, according to Munster.
“I bring that up as a case study for what I think will be a guidebook for other tech companies,” he said.
In order to get their employee headcounts in line with the current economic environment, one by one, Apple’s big tech peers have begun slashing jobs. The cost-cutting began when Meta let go of 11,000 employees in November of last year, citing its falling revenue and mounting losses. Then in early January, Amazon slashed 18,000 positions. CEO Andy Jassy said in a note to employees that the move would help Amazon “pursue our long-term opportunities with a stronger cost structure.”
Google’s parent company, Alphabet, joined in the carnage last week, slashing 12,000 jobs as CEO Sundar Pichai ??told investors the company needed to “reengineer” its cost base and direct talent and capital to the “highest priorities.” And Microsoft’s management revealed on Wednesday—the night after execs hosted a lavish private concert with the rock legend Sting—that it was cutting around 10,000 jobs due to difficult “macroeconomic conditions and changing customer priorities”
Despite the big layoff numbers, Munster said that the latest cuts to big tech employee headcounts may not be enough.
“Just to put Google’s recent cuts into perspective: their operating margin goes up by 1% because of these cuts,” he noted. “So these cuts, even though they catch a lot of headlines, but that really doesn’t move the needle.”
The analyst went on to argue that big tech companies will likely continue layoffs now due in large part to two recent developments that have given them the “cover” to do so.
First, after Elliot Management’s latest investment into Salesforce, Munster said that the activist investor will likely push for further cuts to the software giant’s workforce. Salesforce already laid off 10% of staff earlier this month, but if Elliott Management is successful in provoking increased headcount reduction, that could help other tech CEOs do the same.
“I think it gives them cover, probably enough cover to take a step in the right direction,” Munster said.
Second, Elon Musk has shown that making far more “significant” headcount cuts is a “plausible approach” after his $44 billion Twitter acquisition, Munster said. Twitter has already laid off more than half of its workforce and plans to continue cutting positions in coming months, eventually reducing the company’s headcount to under 2,000, Insider reported last week. While critics have argued that the company’s cost-cutting strategy could end in disaster, Munster believes it’s evidence that major platforms and tech businesses can operate with a much leaner labor force.
But while more layoffs will likely come, Munster said that most big tech firms won’t slash as many jobs as they should—and definitely not as many as Twitter has—because it would be politically and reputationally challenging.
“You can’t go and take that full measure that you need to do,” he argued. “Twitter took more than a full measure, but these other companies haven’t taken enough.”
This story was originally featured on Fortune.com |
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| To: elmatador who wrote (10248) | 1/24/2023 1:15:33 PM | | From: John Vosilla | | | | Pure stupidity monetary and fiscal policy especially in the COVID era.
Looking at when yield curve inversion started around July 2022 (16 months prior to last recession)
the rate of the inversion unprecedented ever is projected at 1.38 after two more .25% raises
(4.83 Fed Funds / 3.48 10 yr treasury)
homebuilders topped second half of 2021 (last time May 2005 or 29 months before recession)
oil prices post Biden's 40% strategic petroleum reserve drawdown should be going back up to cycle highs this summer/fall
NASDAQ asset bubble bursting also shakeout from remote work, overstaffing with much more layoffs to come
if you take out the top market cap stocks apparently most public companies record debt to equity so even higher default risk in coming recession
commercial RE especially urban office and 2nd and 3rd tier retail vacancy levels not seen since RTC days (check VNO stock chart)
inability to fund option ARM type products low start teaser rates this cycle quickly took huge percentage of buyers out of the market
spread between so many locked in at 3% fixed versus trading up or to a different area at over 6% makes very low transaction volume for the foreseeable future perhaps 7-10 years likely with tons of job losses multiple industries tied heavily to housing activity
record new construction either recently CO'd or soon to be completed to flood the residential markets already seeing price drops 20% in some cases basically half the COVID bump already
did I mention the federal debt approaching $32T with interest rate reset adding hundreds of billion a year to interest this year with many ramifications
we had a recession 1990 oversupplied commercial RE and high all prices main drivers
we had a recession 2001 NASDAQ bubble burst
we had a near depression 2008 over leveraged overbuilt overvalued residential RE, high oil prices, banking crisis
this time is combination of all the above except banks for now in somewhat better shape than 1990 and 2008, rents very high, government involvement all incentivizes people to stay rather than lose the house to foreclosure.
playing out more and more like Biden 2021-24 = GWB 2005-08 ????? Will be interesting to see if recession hits late 2023 and it stock market indexes still go up most of this year like 2007??? |
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| To: John Vosilla who wrote (10254) | 1/24/2023 2:12:49 PM | | From: Broken_Clock | | | | John
The Senate is on it. With the entire world political system "mostly peacefully crashing", this is the answer from the mighty USA Senate
finance.yahoo.com
Yahoo Finance's Allie Canal reports on the Senate hearing looking into Ticketmaster after Taylor Swift concert ticket sales crashed the site. |
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