Wall Street Scrooges

Imagine a weather forecast you can actually trust ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 12, 2022

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Good morning.

If you can’t get your hands on a commercial jet anytime soon, blame Air India, which is about to buy them all.

India’s flag carrier airline is nearing a purchase of roughly 500 jetliners from both Airbus and Boeing at a total cost of over $100 billion, according to Reuters. Such a splurge would be a huge boost for plane manufacturers, eclipsing American Airlines’ shopaholic record $38 billion purchase of 460 jets in 2011.

Looks like Air India is the Santa Claus of the airline industry this year.

Morning Brief

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Economic headwinds have Blackstone spooked.

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Europe will beef up with weather predicting tech.

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EVs sound great, except when it comes to AM radio.

Private Equity

Blackstone May Delay Private Equity Fund for Wealthy Investors

Maybe the timing wasn’t so hot.

Blackstone may delay its long-planned and soon-to-launch private equity fund designed to attract wealthy individual investor clientele, according to a report this weekend from the Financial Times. The possible move comes as investors pour out of its real estate and credit funds, casting a long shadow of doubt on investor appetite for a new fund.

Retail Retreat

At Blackstone, the fear of future pain is already causing present headaches. While the asset manager is typically associated with pension funds, university endowments, and other no-frills institutional investor types, it does a fair bit of business with wealthy individual investors as well. Now that class of clientele is growing increasingly anxious over finding a safe place to stash their cash, leading a bunch of them to back out of Blackstone’s credit and real estate funds at alarming rates. The widespread withdrawals spooked the firm into imposing a limit on redemption requests from its private real estate investment fund (BREIT), which in turn triggered a selloff among Blackstone shareholders that sent its stock price down around 10% in the days following the withdrawal cap.

The Blackstone Private Equity Strategies Fund (BXPE), which had been set to launch early next year, would be especially vulnerable to jumpy clients given its unique structure:

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BXPE will invest in corporate buyouts and equity-oriented plays, such as late-stage venture investments. Unlike similar previous funds, which typically had a 10-year lifecycle with annual fundraising rounds and regular dividends paid to investors, BXPE will be a perpetual vehicle that only pays out returns upon unpredictable asset sales.

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That means the value of its assets is complex, and will likely be based on subjective mark-ups or write-downs — perhaps a fine strategy if its investors can be convinced to stand pat for the long term, but opens it to the risk to illiquid firesales if enough clients decide to split at the same time.

Christmas is Canceled: Blackstone isn’t the only one on Wall Street fearing the stormy clouds on the horizon. Among those blaming the headwinds is Ernst & Young, which canceled holiday bonuses this weekend. Meanwhile, Semafor reported late last week that Goldman Sachs would be slashing its year-end bonuses for senior staff by as much as half.

Stay on Target: Thankfully, it’s not all gloom and doom on Wall Street. Blackstone’s problems are mostly due to the wealthy being picky about where they place their money while EY and Goldman’s dour predictions may just be a pretext for routine cost-cutting. Their gloom stands in contrast to a growing crowd of mutual funds and hedge funds managing roughly $4.8 trillion. Their moves signal increased confidence in The Fed pulling off a soft landing, according to analysis from none other than Goldman Sachs. At long last: optimism.

– Brian Boyle

Science

Europe set to Launch New Forecasting Satellites

Can satellites save your local weatherman?

On Tuesday, Europe will launch the first part of its new $4.5 billion weather tracking system, marking a dramatic shift in space-based forecasting technology.

The Day After Tomorrow

The Meteosat Third Generation, which was funded through a partnership between the European Space Agency and Eumetsat, expects to make Europe better prepared for increasingly common intense storms. The system will capture images of Europe every two and a half minutes, including thoroughly detailed depictions of lightning from space. It will be capable of providing 50 times the amount of data currently attainable.

Poor forecasting’s impact goes beyond keeping commuters from packing an umbrella on an iffy spring day. It can also end up causing billions of dollars in destruction by not accurately forecasting storms. Last year, Hurricane Ida wracked up roughly $75 billion worth of damages as it made its way up the east coast. Ravi Bhalla, mayor of Hoboken, New Jersey, called for more spending on private weather forecasting and has since partnered with Tomorrow.io to receive hyperlocal predictions. Across the pond, climate change and super weather events have cost countries nearly $500 billion between 1980 and 2020. Phil Evans of Eumetsat told the Financial Times, the new satellites will provide crucial data to help “protect lives, property, and infrastructure.”:

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The MTG system will consist of three satellites positioned 36,000km above the equator over Africa – two for imaging and a third for measuring atmospheric readings like temperature and humidity. The system is expected to be fully deployed by 2026.

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Meteorologists told the FT they are most excited by MTG’s ability to forecast the immediate future – two hours ahead – which will aid in evacuations before floods.

“Local detail of storms is incredibly hard to predict even with the best computer modeling,” said Simon Keogh of the UK Met Office.

Ground Support: Like any problem worth solving, weather needs to be addressed on multiple fronts. A 2021 study from Met UK and the World Meteorological Organization said an up-to-date network of surface-based forecasting equipment can deliver additional socio-economic benefits worth more than US $5 billion a year. The report noted severe gaps in basic weather and climate observation systems in regions like Africa, Latin America, the Pacific, and Caribbean Islands – areas often the most impacted by severe storms.

– Griffin Kelly

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Electric Vehicles

Electric Vehicle Makers are Dropping AM Radio Access

(Photo credit: Dominik Garbera/Unsplash)

Video ended up not killing the radio star, but electric vehicles are positively destroying AM Radio.

With manufacturers, drivers, and the federal government turning more and more to electric vehicles, the end of AM radio as we know it might be upon us, The New York Times reported Sunday.

Distorted Broadcasts

There’s an interesting technical reason for the fall of AM, which typically broadcasts talk and religious shows as well as local news and weather. Carmakers say electromagnetic interference from EVs disrupts signal reception, causing static, noise, and a high-frequency hum – kinda like the olden days when you had to make a phone call while someone in the house was using the internet. FM signals are less likely to get scrambled.

Some experts say the audio problems should be simple to fix. Xperi engineer Pooja Nair told the NYT that shielding cables, filters, and careful placement of electrical components in the vehicle, should keep the interference to a minimum. But all that costs money and it’s easier to just drop the wavelength altogether, much to the chagrin of the talk radio stars who make millions broadcasting to millions of listeners suck in their cars:

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Tesla, Audi, Porsche, Volvo, and Volkswagen have already removed AM from their EVs. Ford’s popular F-150 Lightning pickup truck will also drop the signal for its 2023 model.

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Though not as popular as FM radio, manufacturers might be forgetting just how many people tune into AM regularly. For at least two hours a day, about 47 million Americans listen to AM radio, representing about 20 percent of the radio-listening public, according to the Nielsen Company.

We’ve Got a Wave in the Air: Needless to say, radio hosts are more than perturbed. “It’s a killer for us because most of our listening audience is in the morning drive and afternoon drive, when people are going to work and coming from work — and if we’re not there in their car, we’re nonexistent,” Ron January of WATV-AM in Birmingham, Alabama, told the NYT. In a letter to 20 car manufacturers, Massachusetts Sen. Edward Markey said access to AM radio is an issue of public safety, especially in areas where Wi-Fi and broadband are scarce. If car makers don’t change their tune, AM radio might just go the way of dial-up.

– Griffin Kelly

Extra Upside

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Sad Ape Yacht Club: A-list celebrities like Jimmy Fallon and Gwenyth Paltrow are being sued for peddling NFTs.

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Twitter is relaunching its subscription service — and charging iPhone users a premium.

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When it comes to sports news, you don’t need hyperbolic talking heads or mind-numbing statistics. All you really need is The GIST 一 a funny, digestible newsletter that gives you “the gist” of what’s happening across the sports world. Sign up at no cost here.*

Just For Fun

Is this safe?

The long and winding road.

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