Week InReview
Friday | Apr 1, 2022
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2021 was the most profitable year for American corporations since 1950. |
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PROFITS SURGED 35% last year, according to data published on Wednesday by the Commerce Department, driven by strong household demand, which was underwritten by government cash transfers during the pandemic. In all four quarters of the year, the overall profit margin stayed above 13%, a level reached in just one other three-month period during the past 70 years.
It was a solid year for workers, too – just not in comparison to shareholders. Employee compensation rose 11%, but the so-called labor share of national income – essentially, the portion that’s paid out as wages and salaries – fell back to pre-pandemic levels. That tends to undermine the argument that soaring labor costs are what’s driving the current surge in inflation, a case the Federal Reserve is starting to make as it accelerates interest-rate increases.
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Illustration: Daniel Zender for Bloomberg Businessweek |
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Wall Street doesn’t usually let moral dilemmas get in the way of making money. There’s almost always a bidder for whatever security is on offer, no matter how dodgy the issuer, how funky the structure, or how unpleasant the circumstances. Russian President Vladimir Putin’s invasion of Ukraine is no exception. (Bloomberg Businessweek - Remarks | Mar 30)
Investors’ ability to trade U.S. government debt has deteriorated to its lowest point since the ructions of March 2020, deepening worries about the world’s most important bond market as the Federal Reserve tightens monetary policy. Liquidity, or the ease of buying and selling, in U.S. government securities has dropped since the beginning of this year, reaching levels not seen since the first months of the coronavirus crisis, according to an index compiled by Bloomberg. (Financial Times | Mar 30)
Investors in corporate bonds are bracing for more trouble after getting hammered by rampant inflation and rising yields in the first quarter. The worldwide pool of the safest corporate debt has shrunk by $805 billion this year, while the global junk market lost $236 billion, according to data compiled by Bloomberg. That’s the biggest dollar decline since records began more than 20 years ago, following a borrowing binge propelled by record-low funding costs. (Bloomberg Markets | Mar 30)
The U.S. securities regulator plans to bring high-speed traders in Treasury bonds under direct supervision, ushering in more transparency to one of the world’s most important financial markets. In a unanimous vote, members of the Securities and Exchange Commission on Monday proposed guidance that would require the trading firms to register with the agency. The move would require the traders to be more transparent about their positions and daily trading activity. (Financial Times | Mar 28)
A closely watched recession signal flashed red on Tuesday, as investors fretted that the Federal Reserve’s efforts to tame inflation will bring about a sharp slowdown in U.S. economic activity. Two-year Treasury note yields rose above those of the 10-year for the first time since August 2019, inverting a portion of the yield curve monitored closely by Wall Street and policymakers. (Financial Times | Mar 29) see also An inverted yeld curve need not cause panic (Financial Times | Mar 28)
U.S. home prices shows signs of becoming “unhinged from fundamentals” like they did in the housing bubble that preceded the 2008 crash, according to a blog post by the Dallas Federal Reserve bank, citing data to measure “exuberance” on property markets that they’ve developed with scholars around the world as part of the International Housing Observatory. (Bloomberg Wealth - Real Estate | Mar 29)
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Illustration: Emil Lendof | WSJ |
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Secret world of pro-Russia hacking group exposed in leak
A Ukrainian researcher revealed the operations of Trickbot, one of the most powerful cybercriminal enterprises with its Conti ransomware, after the group defended Russia; chats range from hospital attack plan to hackers grousing about vacation.
A sinister way to beat MFA is on the rise
Some forms of multifactor authentication are stronger than others, and recent events show that these weaker forms aren’t much of a hurdle for some hackers to clear. In the past few months, suspected script kiddies like the Lapsus$ data extortion gang and elite Russian-state threat actors (like Cozy Bear, the group behind the SolarWinds hack) have both successfully defeated the protection.
Cybersecurity among top areas for SEC examiners this year
ESG disclosures, advice on crypto assets, hedge fund fees and cybersecurity are among the top areas of interest for examiners at the Securities and Exchange Commission this year. The SEC on Wednesday released its priorities for its examiners for 2022, a list that largely meshes with policy efforts underway at the regulator under Chair Gary Gensler.
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Illustration by Super Freak | FT |
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The secret to making your brain work better
Tired, unfocused brain in need of a boost? The traditional recourse – coffee – is, it turns out, very pre-pandemic. A stimulant made for 2019’s office-worker world, when we were all just striving to “keep up”, it’s a short-term fix that burns through your adrenal reserves and leaves you, ultimately, depleted. Nowadays, that’s not good enough. Enter the latest nootropics – cognitive enhancers that will take users up and up, and could support brain function and health in the long term.
Why last year's rosés are your best bet for drinking now
Blame it on the supply chain: The rosé vintage we would normally be uncorking now will arrive late. But last year’s excellent vintage has only gotten better, and you can (and should) still find the bottles on wine store shelves.
'Super-immune' people may hold key to better vaccines
More than half of Americans may have never had Covid, according to U.S. government data, leaving scientists wondering whether those who’ve avoided the novel coronavirus might actually be immune to the virus altogether. This could offer new clues into how to attack Covid.
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