TheBRRR’s GM

In uplifting news, Sam Bankman-Fried, the founder of FTX, has been convicted on all seven criminal charges related to the collapse of FTX and Alameda Research, including fraud and money laundering.

He faces up to 115 years in prison at sentencing in March.

The conviction came back after only four hours of jury deliberation, cementing sentiment that SBF’s defense efforts were overwhelmingly unconvincing.

FTX had built a reputation as a crypto exchange that did everything the right way - working closely with regulators at every step. Politicians and bureaucrats (and some celebrities) cozied up to the company and its founder.

Despite the overt compliance and the voluntary microscope they placed themselves under, FTX’s fraud was not discovered by regulators or law enforcement.

Perhaps it had something to do with FTX’s rampant political donations - totaling $100m. SBF still faces charges for campaign financing fraud early next year.

The fraud was ultimately sniffed out by other players in the crypto market, which caused the “bank run” and collapse of FTX’s FTT coin.

Law enforcement only showed up in the aftermath.

Market News

Apple’s Forecast: Less Fruitful Than Expected

Apple’s holiday quarter forecast fell short of Wall Street’s expectations due to weaker iPad and wearables demand, causing a 3% drop in shares after hours. Analysts have lowered price targets, with a new median of $196.5, despite the near 40% rally in Apple shares this year.

Despite a slight decline in China sales, CEO Tim Cook emphasized strong sales of iPhone 15 models and downplayed losing market share. CFO Luca Maestri projected flat sales compared to last year, against analysts' expectations of nearly a 5% increase.

However, Apple beat fiscal fourth-quarter sales and profit expectations with a rise in iPhone sales and a significant increase in services revenue. They also face stiff competition from Huawei's return to the smartphone market.

• iPhone Appeal in China: The iPhone 15 series garners strong market traction with record-breaking sales figures in China, even as Apple navigates a 2.5% decline in Chinese revenue amidst geopolitical tensions.

• Declining Sales in Hardware: Mac computers experience a sales downturn, with revenues plummeting to $7.61 billion, a drop by one-third, while iPad revenues decrease by 10% to $6.44 billion, highlighting struggles in these product lines.

• Growth in Digital Services: Apple's digital services segment (Apple TV+ and the App Store) saw an increase with revenues surging to $22.31 billion—a 16% YoY growth, signaling strong consumer engagement in Apple's ecosystem.

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Macro News

Labor Market Hits a Yellow Light with Job Slowdown

A disconcerting narrative has emerged from the latest U.S. jobs report, revealing an economy teetering on the brink as job growth plummets and unemployment ticks upward. The slowdown was partly attributed to the auto industry strikes and a less optimal leisure and hospitality sector.

Revised data exacerbates the concern, suggesting the labor market’s prior strength may have been overstated. Wage growth stagnation is also evident, signaling potential shifts in Federal Reserve policy as the labor market cools.

The household survey's alarming decline in employment, along with rising unemployment rates and underemployment, paints a picture of an economy possibly entering recession territory.

• Significant Job Growth Decline: The October jobs report shows a stark decline to 150,000 new jobs from September's revised 297,000, a more than 50% decrease, with the last two months combined showing 101,000 fewer jobs than previously reported.

• Revised Historical Data: August and September's job figures were revised down by 62,000 and 39,000 respectively, while the unemployment rate edged up to 3.9% from 3.8%, moving closer to the recession indicator threshold of 4.0%.

• Wage Growth and Labor Force Metrics: October's wage growth was a tepid 0.2%, below the expected 0.3%, with annual growth at 4.1%. Labor force participation held at 62.7%, and the employment-population ratio was at 60.2%. The underemployment rate (U-6) increased to 7.2%, the highest since February 2022.

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