Finance

A FEW YEARS ago a stranger sidled up to me at a conference. I had been introduced as an equity salesman with over 30 years of experience. “Success or failure?” he asked impishly. I laughed. When I started in stockbroking, anyone older than 50 carried an air of defeat. If they hadn’t made enough money to retire early, they were seen as losers. Well, I’m still here and I’m not the only one. There is a lot more grey hair on the sales desks these days.That is not the only change. Trading revenue is slimmer, because of regulation and new technology. The way sell-side analysts and salespeople are paid has changed. But the biggest difference is in the kinds of conversation I have and who I have them with. Twenty years ago, I hardly spoke to the fast-money crowd. Now most of my day is taken up with them. Share prices are set at the margin. And the marginal buyer and seller is a hedge-fund manager.Hedge funds are behind much of the recent market drama. The minutes of the Federal Reserve’s rate-setting meeting last week were a trigger. The immediate prospect of tighter monetary policy spurred hedge funds to sell expensive “growth” shares, notably those of technology companies, the profits of which are expected to last long into the future. Those distant earnings must now be discounted at a higher rate. So tech shares fell. At the same time, a lot of the funds bought cheap “value” stocks.I specialise in a sector that is seeing selling pressure. But most of my hedge-fund clients trade at a more granular level. They want to bet on the most resilient stocks on my patch and against those that will falter. What matters to such “long-short” traders is that their longs do better than their shorts. Their investment horizon is days and weeks, not months and years. There are lots of these hedge funds trading lots of stocks. That is why beneath the surface, the stockmarket is so noisy.Clients want to talk to me. I know my industry well. I have a good team of analysts behind me that is in regular contact with companies. And I talk to a lot of other investors. Everyone has the same hard data—the stock price, the financial statements, the consensus forecasts for earnings and the firm’s “guidance” around those numbers. But the hedge funds are trying to anticipate short-term shifts. They come to me for soft data.I get asked all sorts of questions. How confident does the finance director of firm X seem about making the numbers? How steely are the investors in the stock—are they committed holders or would they dump it on bad news? Is anyone thinking of buying burnt-out stock Y? Would firm X be open to acquiring firm Y or is it still digesting its latest purchase? No one asks about valuation anymore. When I hear a hedge-fund manager say a stock is cheap or dear, alarm bells ring. He is usually trying to “reverse-broke” me, ie, influence the market by swaying me.The buy-side used to reward us with fat commissions. Now the biggest brokers allow clients to use their systems to trade directly on the stock exchange at very low cost. Regulators insist that the buy-side pays directly for our advice. These clients agree to pay a fixed sum every year. My performance is measured by “interactions”: the phone calls I make, the meetings I arrange and the requests I respond to. The hedge funds are especially hungry for information. So they pay well.The buy-side was once a gentler place. Before passive investing put pressure on fees and performance, a dolt could make money in fund management. If you got the dolt drunk regularly, he would allocate you some commission. I still talk to clients whose investment horizon is five years and not five days. But the conversations are more serious. Boozy lunches have been regulated away. No one has the time for them anyway. The sell-side trader is a marker of cultural change. The old-school version was a red-faced bruiser called Fat Matt or Cardiac Kev. The new model is a triathlete.Improved health might explain why there are more near-sexagenarians like me around. It’s mainly a cohort effect, though. The City grew quickly in the 1990s. Anyone who read “Liar’s Poker” figured they’d get rich in sales. But the broking of listed stocks has since lost its mystique. Finance graduates now opt for jobs in private equity—or at hedge funds. My generation has stuck around. Success or failure? I’ve survived several rounds of cuts. I have a job that I enjoy. I am still pretty well-paid. I think that counts as success, don’t you?For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Sexagenarians and the City” More

BOSTON IS NOT the most popular of winter travel destinations. But many economists were nonetheless disappointed by the news that their profession’s grand annual meetings, scheduled to take place in the city in early January, would again be virtual. Greater experience with remote-conferencing technologies meant that events unfolded more smoothly than they did a year ago. That seemed appropriate for a conference dominated by speculation about how covid-19 might permanently alter the economy.Many sessions were devoted to sketching out the probable features of the post-pandemic world. New habits are sticking—and economists have gathered the data to prove it. Take remote work. Jose Maria Barrero of the Instituto Tecnológico Autónomo de México presented results from research with Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago. Since May 2020 the economists have conducted a monthly survey that, among other things, asks Americans about their plans to work remotely. A year ago, the results suggested that remote work would account for 20% of full-time hours after the pandemic.Over the past year, however, remote work has gained favour. Based on the survey results from December, the researchers reckon that 28% of hours might ultimately be worked from home. Employees who were once undecided now say they might sometimes work from home, said Mr Barrero. And respondents who had always said they would toil remotely now plan to spend more time doing so. In all, about 15% of full-time workers are expected to be fully remote in future, and just under a third to work in a “hybrid” fashion—a dramatic change from before the pandemic, when just 5% of people laboured at home.Remote work will persist because the experience of it has been better than expected, and because workers and firms have invested time and money (together estimated by Mr Barrero to be worth about 0.7% of America’s GDP) in improving it further. But new arrangements will also be driven by employees’ preferences. Though many workers look forward to returning to the office, a sizeable chunk—about 15%—say they would definitely or probably leave employers who do not offer remote options. This has created an opportunity for young firms to attract talent by hiring remotely, said Adam Ozimek of Upwork, a freelance-work platform.As the opportunities to toil remotely have grown, people have become happier to move away from big, expensive cities. Mr Ozimek noted that research published early in the pandemic suggested that the most significant geographical impact of new working arrangements would be on the distribution of population within cities. Reductions in commuting time as a result of hybrid arrangements would produce a “doughnut effect” as people left city centres for distant suburbs. But analysis of more recent data suggests that moves between cities are increasingly significant. Places with high housing costs and a large share of workers in jobs that can be done remotely have experienced slower growth in house prices and rents than other areas. Whereas data from 2020 sent an ambiguous message about migration trends, figures for 2021 show clear outflows from high-cost places, like California.Some parts of the world may face uncomfortable adjustments as a result, rather as deindustrialisation placed severe strains on parts of America and Europe in the 1970s and 1980s. Research presented at the conference by Conor Walsh of Columbia University noted that the economic burden of the pandemic fell hardest on less-skilled service workers in dense and expensive cities, who previously catered to the needs of skilled workers. A permanent exodus of white-collar professionals could leave some less-skilled workers trapped in places with declining job prospects.A more remote future could yield some offsetting benefits, though. Studies of pockets of the economy suggest that pandemic-related shifts hold the potential for productivity gains. Emma Harrington of Princeton University discussed research showing that the productivity of workers at call-centres rose by 7.6% when work went remote, without a detectable decline in customer satisfaction. Dan Zeltzer of Tel Aviv University presented analysis of the shift to telemedicine in Israel, which showed that the utilisation of resources tended to rise and costs to decline, with little sign of more missed diagnoses or other negative health outcomes.Virtually unrecognisableWhether such gains will translate into a stronger macroeconomy is less clear. Janice Eberly of Northwestern University credited remote work with reducing the decline in GDP in early 2020 by nearly half relative to what it might otherwise have been. Yet although remote work might boost companies’ profits by lowering the costs of office space, and improve welfare by reducing commuting, she doubted that it was a fundamental enough shift to lead to enduring productivity gains. That chimed with other, more general fears about the post-pandemic economy. Catherine Mann of the Bank of England worried that business investment might prove insufficient, held back by uncertainty about growth prospects and uncompetitive markets. Though investment was strong in 2021, recent surveys show diminished appetite for capital spending, she noted, compared with share buybacks and mergers.Larry Summers of Harvard University observed that, although central banks may struggle to control inflation in the short term, long-run growth is likely still to be restrained by the same headwinds, such as demographic change, that blew before covid-19. The upshot of the conference often seemed to be that although economies have done better during the pandemic than many people dared hope, they are likely to disappoint in its aftermath. But as participants from around the globe zoomed seamlessly from session to session, without having to visit an airport or queue up for coffee, one had to wonder whether such conclusions were not a touch too pessimistic. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Remote prospects” More

Check out the companies making headlines before the bell:
Delta Air Lines (DAL) – Delta shares rose 2.2% in the premarket after the airline beat top and bottom-line estimates for the fourth quarter. Delta earned an adjusted 22 cents per share, 8 cents above estimates, and said it expected a strong spring and summer travel season.

Boeing (BA) – Boeing’s 737 MAX jet could resume service in China as soon as this month, according to a Bloomberg report. Boeing added 2.6% in the premarket.
Moderna (MRNA) – Moderna expects to report data by March from its Covid-19 vaccine trials involving children aged 2 to 5 years old. If the data is supportive, the company will file for approval to vaccinate that age group. Moderna fell 1.1% in premarket action.
Virgin Orbit (VORB) – Later today, Virgin is scheduled to launch its first commercial satellite since going public. Its stock added 2.1% in the premarket after falling 5.8% in Wednesday trading.
Taiwan Semiconductor (TSM) – Taiwan Semiconductor reported record quarterly profit, with the chipmaker beating analyst forecasts while also issuing an upbeat outlook amid surging demand for semiconductors. The stock rallied 3.8% in the premarket.
KB Home (KBH) – KB Home reported quarterly earnings of $1.91 per share, 14 cents above estimates, although the home builder’s revenue was slightly below analyst forecasts. KB Home also issued a positive outlook for 2022, and its stock surged 7.7% in premarket trading.

Lennar (LEN) – Lennar increased its dividend by 50%, raising its annual payout to $1.50 per share from $1.00. The home builder’s next quarterly dividend of 37.5 cents per share will be paid on February 10 to shareholders of record as of January 27. The stock added 2.4% in the premarket.
SolarEdge Technologies (SEDG), Enphase Energy (ENPH) – SolarEdge gained 2.3% in premarket trading while Enphase rallied 3.2% after both alternative energy companies were upgraded to “buy” from “neutral” at Guggenheim. The firm said the potential negatives it highlighted last year – such as high valuations and optimistic forecasts – had largely dissipated.
Sunrun (RUN) – The solar equipment company added 2.1% in the premarket after being named a top 2022 stock pick at Morgan Stanley, which said Sunrun is among companies with strong barriers to entry and little growth priced in.
Match Group (MTCH), Bumble (BMBL) – Goldman Sachs upgraded the dating service operators to “buy” from “neutral,” saying both would benefit from “structural industry tailwinds” in the years ahead. Match rose 3.2% in premarket trading and Bumble gained 3.1%.

WATCH LIVEWATCH IN THE APP More

Traders work on the floor of the New York Stock Exchange (NYSE) on January 07, 2022 in New York City.
Spencer Platt | Getty Images

U.S. stock futures were steady in overnight trading on Wednesday after the Nasdaq Composite rose for the third session despite a red-hot consumer price index report.
Dow futures rose just 20 points. S&P 500 futures gained 0.05% and Nasdaq 100 futures rose 0.04%.

Shares of homebuilder KB Home rallied more than 6% in after hours trading after reporting better-than-expected earnings.
On Wednesday, the major averages rose despite the hefty print from the CPI inflation report. The Dow Jones Industrial Average jumped about 38 points and the S&P 500 added 0.3%. The Nasdaq Composite rose for the third straight day, climbing 0.2%.
The December consumer price index, a key inflation measure, increased 7%, according to the department’s Bureau of Labor Statistics. On a monthly basis, CPI increased 0.5%. Economists expected the consumer price index to rise 0.4% in December, and 7% on a year-over-year basis, according to Dow Jones. 
The annual move was the fastest increase since June 1982.
“Stocks shook off the sticker shock of the historically high inflation number, but that was also widely expected and incredibly a non-event today really,” said Ryan Detrick of LPL Financial. “What we are excited about is earnings season is right around the corner. We expect another solid showing by corporate America, while it will also be a chance to stop focusing so much on the Fed and policy, but instead get under the hood and see how the economy is really doing.”

The December producer price index, another measure of inflation, is then set to come out on Thursday morning.
Also on the data front, initial jobless claims for the week ending Jan. 8 will be released at 8:30 a.m. Economists polled by Dow Jones forecast 200,000 people filed for unemployment, down from the previous week’s 207,000.
Fourth quarter earnings season kicks off this week with several major banks reporting on Friday before the bell.
Delta Air Lines will report on Thursday morning. Wall Street expects Delta to put up a per-share profit and revenue that’s more than double year-ago levels.
“The stock market is of course still vulnerable near-term to a bad PPI inflation report, but earnings season is about to begin and given how strong economic growth was in the fourth quarter, expect more evidence of ongoing solid company earnings to help soothe contemporary Fed tightening and inflation fears,” said Jim Paulsen, chief investment strategist for the Leuthold Group.
For the week, the S&P 500 and Nasdaq are up 1.1% and 1.7%, respectively. The Dow is up slightly since Monday.

WATCH LIVEWATCH IN THE APP More

A person skateboards past Biogen Inc. headquarters in Cambridge, Massachusetts, on Monday, June 7, 2021.
Adam Glanzman | Bloomberg | Getty Images

Check out the companies making headlines in midday trading Wednesday.
Biogen — Shares of Biogen fell 6.7% after Medicare said it would only cover the company’s controversial Alzheimer’s drug for patients who are willing to enroll in qualifying clinical trials. The company also got a downgrade from Piper Sandler to neutral from overweight.

DoorDash — Shares of the food delivery company fell 2% even after Evercore raised its rating on the stock to outperform from in line. The firm cited DoorDash’s strong growth fundamentals and reasonably impressive profitability. Also on Wednesday, Meta Platforms named DoorDash CEO Tony Xu to its board of directors.
Ally Financial — Shares of the digital bank gained 2.9% after the company announced a 20% dividend increase, raising its quarterly payout to 30 cents per share. Ally also authorized a $2 billion share repurchase program.
Dish Network — The satellite TV company saw its shares climb 2.8% following a New York Post report that its in merger talks with DirecTV. The two have had periodic conversations about a potential deal for about 20 years, and the latest round is said to be pushed forward by TPG Capital, DirecTV’s minority owner.
Quest Diagnostics — Shares of Quest Diagnostics fell 6.8% even after the company reported preliminary fourth-quarter adjusted earnings of $3.33 per share. That beat a FactSet estimate of $3.07 per share. However, the company also reported that Covid testing volumes in the fourth quarter declined compared with the prior year.
T Rowe Price — T. Rowe Price shares fell 6.6% after the company reported a modest increase in preliminary assets under management, which totaled $1.69 trillion at the end of December, compared to $1.63 trillion at the end of November.

Crocs — Shares of the shoe company ticked 6.8% higher in midday trading after Piper Sandler named the stock a top 2022 pick. The Wall Street firm said it sees “impressive consumer growth” for Crocs for years to come.
Take-Two Interactive — Shares of the online gaming company added 5.1% after BMO Capital Markets lifted its rating on the stock to outperform. The basis for the firm’s bullish bet is Take-Two’s pending deal to acquire of Zynga, worth $12.7 billion. BMO said will “help smooth earnings variability while offering compelling synergy opportunities.”
PayPal — The digital payments stock fell 2.2% after Jefferies downgraded PayPal to a hold rating from buy and cut its price target. “We are incrementally more cautious on the fundamental backdrop in 2022 and believe multiple expansion potential is limited until investors can restore confidence in PYPL achieving its medium-term targets,” the firm said.
Ambarella — Shares of Ambarella shares gained 2.3% after Wells Fargo upgraded the stock to overweight, saying the chipmaker has an attractive valuation and is a good artificial intelligence market play.
— CNBC’s Hannah Miao, Maggie Fitzgerald, Pippa Stevens and Yun Li contributed reporting

WATCH LIVEWATCH IN THE APP More

The newly public brokerage is headquartered in Melo Park, California; however, for a large segment of Robinhood employees there will be no location or in-office requirement, the company said.
Robinhood’s move follows tech companies like Coinbase, Okta and Shopify going fully remote.

Baiju Bhatt and Vlad Tenev attend Robinhood Markets IPO Listing Day on July 29, 2021 in New York City.
Cindy Ord | Getty Images

Stock trading app Robinhood said Wednesday will let most of its 3,400 person workforce work remotely on a permanent basis.
The newly public brokerage is headquartered in Melo Park, California; however, for a large segment of Robinhood employees there will be no location or in-office requirement, the company said.

“Our teams have done amazing work and built a strong workplace community during these uncertain and challenging times, and we’re excited to continue to offer them the flexibility they’ve asked for by staying primarily remote,” Robinhood said in a blog post. The plans were announced to Robinhood employees in December.
Robinhood considers itself a technology company, and its move follows tech companies like Coinbase, Okta and Shopify going fully remote. Other megacap tech giants like Meta Platforms and Microsoft have created flexible work programs in response to the pandemic.
The post said Robinhood is building out its technological capabilities to support this change. The firm is also creating programs to address the challenges that work-for-home poses for certain underrepresented groups.
Shares of Robinhood have been punished in recent months and are 80% of their most recent high. The stock sits around $16 per share after opening at $38 per share in it’s public debut in July.

Loading chart…

Shares of Robinhood fell 1% on Wednesday.

WATCH LIVEWATCH IN THE APP More

Inflation grew 7% in December from a year earlier, the U.S. Department of Labor said Wednesday. Average hourly wages also increased by 4.7%.
That amounts to a pay cut of more than 2%, on average.
However, the experience for workers will differ widely based on their job and what they buy.

A San Francisco grocery store.
David Paul Morris/Bloomberg via Getty Images

Inflation is taking a big bite out of workers’ paychecks, eroding many of the raises businesses have offered to attract and keep employees in a hot job market.
But strong wage growth in certain sectors, such as hotels and restaurants, has eclipsed those consumer price leaps — at least for now.

The biggest raises have come in some of the country’s lowest-paying jobs, helping insulate cash-strapped households from rising prices for staples like food.
More from Personal Finance:Rising inflation may affect your 2021 tax billTax filers should expect delaysBank of America is cutting overdraft fees
The Consumer Price Index, a key inflation measure, jumped 7% in December from a year ago, the fastest rate since June 1982, the U.S. Department of Labor said Wednesday.
The index accounts for costs across many goods and services, from alcohol to fruit, airfare, firewood, hospital services and musical instruments. On average, a consumer who paid $100 a year ago would pay $107 today.
Average pay also jumped significantly in 2021 — to more than $31 an hour, a 4.7% annual increase, the Labor Department reported Friday.

Despite that pay bump, higher consumer prices ate into household budgets. In effect, the average worker got a 2.4% pay cut last year, according to seasonally adjusted data published by the Labor Department.
“In what was the best year for wage growth that we have seen in many, many years, it still comes up as a loss for many households,” said Greg McBride, chief financial analyst for Bankrate. “Their expenses increased even faster and chewed up all of the benefit of whatever pay raise they had seen.”

Who’s outpacing inflation?

So-called real earnings (wages minus inflation) fluctuate widely from household to household. The experience will differ based on consumers’ jobs and what they buy.
For example, rank-and-file workers in leisure and hospitality — the lowest-paying sector of the U.S. economy — got a nearly 16% raise in 2021, to $16.97 an hour. That means the average employee at a bar, restaurants and hotel saw pay rise more than two times faster than inflation, amounting to a net 9% increase in annual pay.
Similarly, rank-and-file workers in transportation and warehousing saw their annual pay rise 8.4%, to $25.04 an hour in December. Retail workers got a 7% increase to $19.20. These either exceeded or matched inflation.

The typical experience is [that] inflation has likely taken a significant bite out of workers’ paychecks.

Daniel Zhao
senior economist at Glassdoor

Employers have had difficulty finding workers to fill jobs in these sectors, according to Daniel Zhao, a senior economist at Glassdoor, a career site.
High demand for labor (amid a near-record number of job openings) has pushed businesses to raise pay. The wages also reflect realities of the pandemic — workers may want a bigger paycheck to compensate for the higher risk accompanying these front-line roles, Zhao said.
While wage gains have outstripped inflation for some lower earners, that doesn’t seem to be the experience for most households, Zhao added.
“The typical experience is [that] inflation has likely taken a significant bite out of workers’ paychecks,” he said.

Jason Furman, an economist at Harvard University and former economic advisor to President Barack Obama, found that wage growth among the bottom 25% of earners outpaced consumer prices in the two years through November 2021. The remainder of workers have gotten a new pay cut, he said.
While average pay at the lower end has outpaced inflation, that doesn’t necessarily mean the jobs are paying a living wage, according to a Brookings Institution analysis of recent pay raises.
“Headlines about rising wages for frontline workers — even rising real wages — often obscure the reality that wage levels are still low,” the analysis said. “In today’s inflationary environment, even as wages rise, so does the minimal threshold for an acceptable wage level.”

Consumer buying

d3sign | Moment | Getty Images

Prices gains have occurred across a broad swath of goods, but the increases aren’t equally distributed.
Americans who use public transit may have dodged some of the year’s biggest jump in costs — in gasoline and used cars and trucks, for example. (They jumped 50% and 37%, respectively.)
Staples like rent and groceries are harder to avoid. (Their costs were up 3.3% and 6.5% on the year, respectively.) Consumers may change buying behavior to reduce the budget sting, perhaps substituting chicken or fish for beef (which jumped 19%), for instance.
An increase in annual rent may prove longer-lasting than in other areas, according to economists. Even a small increase in percentage terms can quickly erode any paycheck gains for lower-earning renters, McBride said.
It’s unclear how long inflation or wage gains will last. Many economists believe both will start to taper in 2022, if supply bottlenecks ease (helping to reduce prices) and virus cases wane (increasing the supply of workers).

WATCH LIVEWATCH IN THE APP More

Check out the companies making headlines before the bell:
DoorDash (DASH) – The stock added 2.6% in the premarket after Evercore upgraded it to “outperform” from “in line.” Evercore said the delivery service has strong fundamentals and the stock is at an attractive valuation. Separately, Meta Platforms (FB) named DoorDash CEO Tony Xu to its board of directors, the first new appointment to the Facebook parent’s board in nearly two years.

Didi Global (DIDI) – The ride-hailing company’s shares rallied 5.9% in premarket trading on reports that it is in talks for a second-quarter Hong Kong IPO as it continues the process of delisting from the New York Stock Exchange.
Philips (PHG) – Philips shares tumbled 15.6% in premarket action after predicting a roughly 40% drop in core profit for the fourth quarter. The Dutch health technology company’s results are being impacted by component shortages, its ventilator recall and other factors.
Ocugen (OCGN) – The biopharmaceutical company’s stock jumped 5.5% in premarket trading after a booster dose of its vaccine candidate Covaxin was shown to neutralize the Covid-19 omicron and delta variants.
Aerojet Rocketdyne (AJRD) – The FTC has postponed a vote on Lockheed Martin’s (LMT) proposed takeover of the aerospace systems maker for at least two weeks, according to people briefed on the matter who spoke to Reuters. Opponents of the deal say it would give Lockheed a dominant share of the market for rocket motors. Aerojet Rocketdyne shares added 3% in the premarket.
Biogen (BIIB) – Biogen shares sank 9.1% in premarket trading after Medicare agreed to only partially cover the Alzheimer’s drug Aduhelm. Medicare will cover the treatment only if patients are enrolled in clinical trials and have early-stage symptoms.

Dish Network (DISH) – Dish and DirecTV are once again in merger talks, according to sources who spoke to the New York Post. The satellite TV companies have held on-and-off talks periodically over the past 20 years, with the latest round said to be pushed forward by DirecTV’s minority owner TPG Capital. Dish Network surged 7.4% in the premarket.
Just Eat Takeaway (GRUB) – The Grubhub parent rallied 4.3% in the premarket after the company maintained its 2022 forecast and said it was seeing a rise in order volume.
Ally Financial (ALLY) – The bank announced a 20% dividend increase, raising its quarterly payout to 30 cents per share, and also authorized a $2 billion share repurchase program. Ally Financial gained 2.9% in premarket trading.
Crocs (CROX) – The casual shoe maker’s stock rose 1.5% in premarket action after Piper Sandler named it a “top pick” for 2022, calling it one of the most impressive consumer growth stories for several years to come.
Ambarella (AMBA) – Ambarella shares gained 2.7% in the premarket after Wells Fargo upgraded the chipmaker to “overweight” from “equal weight.” Wells Fargo said Ambarella has an attractive valuation after a recent pullback and called it one of the best ways to play the artificial intelligence market.

WATCH LIVEWATCH IN THE APP More