Tripping Up The Next Bank Run

Plus: Investors have their heads in the cloud and don’t care about Prime Day. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

July 11, 2023

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TOGETHER WITH

Good morning.

Sovereign wealth funds have bought a piece of everything not nailed down in the international sports world, from car racing and soccer, to golf and e-sports. But they haven’t invested in US sports — until now.

The Qatar Investment Authority acquired a 5% stake in Monumental Sports & Entertainment, the group that owns the NBA’s Washington Wizards, the WNBA’s Washington Mystics, and the NHL’s Washington Capitals, for $200 million, according to the Financial Times. Unfortunately, it’ll take more than oil money to reinvigorate the Wizards and lift them back into the playoffs next season.

Morning Brief

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Prime is officially past its prime.

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The Fed has new plans to prevent the next bank run.

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Massachusetts wants to go off the grid.

E-Commerce

Amazon’s Prime Day Is Growing Increasingly Irrelevant

(Photo Credit: David Ballew/Unsplash)

What if they threw a huge online sale, and nobody came?

Yes, Tuesday marks the beginning of Prime Day, the Amazon-invented discounted shopping event designed as a Black Friday-style feeding frenzy in mid-summer. But shareholders have lost their zeal for the Bezos-invented holiday.

Cut Down In its Prime

Amazon’s first Prime Day took place in 2015, and for five years growth for the event’s 48-hour period swelled sumptuously. Prime Day in 2020 marked 30% growth over the previous year (we’ll let you figure out what prompted that). Since 2020, however, growth has slowed, and data analysis from Bloomberg suggests shareholders were losing interest before Prime Day started losing steam.

Per Bloomberg, Amazon’s share price has fallen on the week of Prime Day every year since 2019. That’s because Amazon may be synonymous with e-retail to consumers, but the company makes most of its money from cloud computing wing AWS:

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In Q1 of this year, AWS posted an operating income of $5.1 billion, more than the rest of the company earned. This, plus the current AI hype-cycle, make AWS look ever more attractive to shareholders, Eric Clark, portfolio manager at Accuvest Global Advisors, told Bloomberg.

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Meanwhile, Amazon’s e-retail business faces fresh competition for startlingly cheap online shopping from Chinese upstarts Shein and Temu. Shein is moving onto Amazon’s patch by layering third-party sellers into its app.

The Highest Form of Flattery…: Not only is Shein overtly imitating Amazon’s e-commerce strategy, but some sellers on Temu also appear to be replicating specific Amazon sellers’ storefronts. Wired spoke to dozens of Amazon sellers in China who found product listings identical to their own on Temu, but selling for a much lower price. One seller told Wired he’s considering pursuing legal action, but the costs would make that difficult. “It would be great if Amazon can help us small sellers,” he said, adding: “They must have more resources.” Even with Prime Day waning, he’s probably right there.

– Isobel Asher Hamilton

Banking

Fed’s Top Regulator Seeks to Beef Up Banking Reform

The Silicon Valley Bank post-mortem is over. Now come the new regulations.

Speaking at a Bipartisan Policy Center event in Washington on Monday, Michael Barr, the Fed’s vice chair of supervision, outlined proposals for additional rules to regulate the banking industry — primarily in the form of beefing up capital requirements to help stave off another wave of agita-inducing banking runs like we saw this spring.

Stressed Out

Sometimes it takes a crisis to inspire change. In this case, it took two. Many of Barr’s proposed rules are merely the final steps of regulations laid out by global policymakers after the 2008 financial crisis — the so-called Basel III reforms, which call for banks to hold a leverage ratio (capital divided by total exposure) above 3%. The new proposals would raise capital requirements even more, and would subject mid-sized banks holding at least $100 billion in assets to as much scrutiny as their too-big-to-fail big brothers on Wall Street. Currently, only banks with at least $250 billion in assets face the most stringent of requirements, a threshold much higher than what SVB, First Republic, and Signature Bank each held just before their implosions.

Barr also proposed an overhaul of annual stress test rules, a change that may feel sorely needed given that the US division of the also-now-defunct bank Credit Suisse passed the Fed’s 2022 stress test with flying colors. The new rules, which could be approved as soon as this month by the Fed and fellow regulators, could reshape compliance in the industry:

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Stress tests would be based on a new standardized system for estimating credit and operational risks, and would gauge banks’ ability to weather hypothetical recessions. “The proposed rules would end the practice of relying on banks’ own individual estimates of their own risk and instead use a more transparent and consistent approach,” Barr said.

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Meanwhile, the new capital requirements would increase by 2 percentage points for large banks, essentially forcing them to hold an extra $2 of capital per each $100 they held in risk-weighted assets.

“In an obvious way, the failures of SVB and other banks this spring were a warning that banks need to be more resilient, and need more of what is the foundation of that resilience, which is capital,” Barr said.

Bank Shot: Critics are already decrying Barr’s proposed rules as an overzealous reaction to what was, at its core, mismanagement at SVB. Barr, however, disagrees: “It is not logical to argue that failings in supervision must mean that SVB was adequately capitalized — it wasn’t,” he said, adding “Capital is and has always been the foundation of a bank’s safety and soundness.”

– Brian Boyle

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Policy

Massachusetts Takes On the Data Brokers

States were just getting warmed up with their TikTok bans.

The Massachusetts Legislature is considering prohibiting the sale of cell phone location data. If passed, it would be a first for the country, and data brokers in a $300 billion-plus industry won’t be happy.

We See You

No matter the app — ride-sharing, dating, social media, and of course, maps — users are constantly tracked. A 2018 investigation from The New York Times found some apps log a user’s location as many as 14,000 times a day. Many apps then sell this information to data brokers, who in turn sell it to various companies, advertisers, and even government agencies.

Location information isn’t anything personal like names and phone numbers, but it’s easy for companies with apps to determine exactly where users live. Massachusetts lawmakers could soon stop the pipeline:

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The data sales industry is huge. According to market researcher Knowledge Sourcing Intelligence, the global data broker market was valued at $320 billion in 2021 and is expected to grow to $545 billion by 2028. That includes all kinds of data, not just location. A ban on selling location data in one state might be a drop in the bucket, but what if other states join in?

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The State Privacy & Security Coalition, a lobbyist group that represents some big names in tech, including Google, Amazon, and Meta, recently had a representative testify to a joint committee of the state legislature. Andrew Kingman said, “The definition of sale is extremely broad,” and that the industry would support giving consumers “the ability to opt-out of sale.”

No other state has gone so far as to ban location data sales, but some have enacted restrictions and required apps to provide consent forms to users before any data is collected.

More than Target Ads: A desire to hobble annoying advertisements only forms part of the motivation behind the new law. The Massachusetts Legislature website described it as also “protecting reproductive health access, LGBTQ lives, religious liberty, and freedom of movement.” Abortion-rights advocates argue location data can be used to track people crossing state lines for a procedure, and The Wall Street Journal reported that the Department of Homeland Security Authorities bought location data to follow people living near the US-Mexico border.

– Griffin Kelly

Extra Upside

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Bogey: Khashoggi killing causes PGA board member to quit amid Saudi deal.

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Drainage problem: Thread users say app burns cell battery crazy fast.

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Just For Fun

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