—— Morgan Stanley Staff Poaches JPMorgan Clients; Subway Considers $10 Billion Sale; U.S. Inflation Cools in December; Retail Investor Loses $800K on Tesla; Foster Farm Chickens Starve; U.S. Budget Deficit Rises 12%; U.S. 30-Year Mortgage Rates Drop Significantly
1. Morgan Stanley Staff Poaches JPMorgan Clients
This week, JPMorgan Securities LLC filed a complaint in federal court in Michigan, accusing a former 18-year veteran employee—Joseph A. Michael—of secretly poaching the firm’s clients.
Joseph resigned in December and has since joined Morgan Stanley Smith Barney LLC.
JPMorgan alleged that Joseph had taken 32 client families to Morgan Stanley, transferring a total of up to $28 million in assets.
JPMorgan’s legal counsel stated that these clients claimed Joseph actively contacted and persuaded them to switch firms after his resignation—actions that violated his non-compete and confidentiality agreements.
In the financial industry, departing employees may only inform clients of a job change—not solicit them.
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2. Subway Considers $10 Billion Sale
According to sources, sandwich chain Subway is exploring a potential sale that could value the company at over $10 billion. The process is still in early stages, and the company may ultimately decide not to sell.
In an email, Subway said it is a private company and will not disclose its capital structure or corporate plans. Its primary focus is to help franchisees succeed.
Founded in Connecticut, Subway is one of the world’s largest fast-food chains, operating more than 37,000 locations across 100 countries. Since its founding in 1965, it grew rapidly but has recently slowed due to fierce competition.
Subway’s franchising model enabled rapid expansion, with nearly 40,000 stores worldwide.
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3. U.S. Inflation Cools in December
According to the latest report released today by the U.S. Department of Labor, CPI fell 0.1% month-over-month in December. The 6.5% year-over-year increase marked the slowest pace since October 2021.
Core CPI, which excludes food and energy, rose 0.3% month-over-month and 5.7% year-over-year—also the lowest since December 2021.
The latest figures show that inflation is cooling, giving the Federal Reserve more room to slow interest rate hikes.
The Fed believes that benchmark interest rates need to remain elevated for some time to effectively lower inflation. The next meeting is scheduled for February 1, and the fight against inflation is far from over.
Investors expect the Fed may begin considering 25-basis-point hikes and possibly cut rates by the end of 2023.
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4. Retail Investor Loses $800K on Tesla
Beginning in 2012, 68-year-old landscape designer Doug Coyle gradually purchased $100,000 worth of Tesla stock. By November 2021, his investment had grown to $3 million.
During the 2020 stock surge, Doug’s son urged him to take profits, but Doug believed Tesla had long-term potential. Now, he has lost $1.5 million in market value.
For devoted fans of Tesla and Elon Musk, the reversal within just one year is shocking.
Another fan, Michael Williams, began buying Tesla shares in 2018 and eventually leveraged options and loans to increase his bets. He said $3,000 quickly turned into hundreds of thousands.
Later, he withdrew 90% of his 401(k) and turned $40,000 into $800,000. However, in mid-2021, two bad trades wiped out $600,000 and $200,000. His Robinhood account now holds only $50.
In 2020, Tesla stock soared with barely any pullbacks, leading many retail investors to blindly chase it.
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5. Foster Farm Chickens Starve
Recently, North America’s second-largest railway company, Union Pacific Corp., encountered logistics issues. As a result, millions of chickens and turkeys at Foster Farms were unable to access corn feed in transit, forcing the company to halt feed processing.
Reportedly, if chickens go hungry for too long, they begin attacking each other. To manage the crisis, Foster Farms diverted corn supplies originally intended for other products to keep poultry operations running.
In the past year, Union Pacific’s logistical issues have disrupted Foster Farms twice. Major food suppliers like Foster Farms say they have no viable alternative to rail transport.
Disruptions in rail networks can severely impact supply chains across many industries.
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6. U.S. Budget Deficit Rises 12%
According to data released today by the U.S. Treasury Department, the federal budget deficit rose 12% to $421 billion in Q1 of fiscal year 2023, driven by inflation-related cost increases.
Due to higher benchmark interest rates, interest expenses on public debt rose 37% year-over-year to $210 billion. Republicans recently took control of the House and may soon propose spending cuts.
Meanwhile, Social Security-related spending rose with the cost of living. The Social Security Administration’s total spending rose 7% year-over-year to $328 billion in Q1.
With inflation forcing the Fed to raise rates, spending across multiple categories has risen significantly.
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7. U.S. 30-Year Mortgage Rates Drop Significantly
According to a statement released today by Freddie Mac, the 30-year fixed mortgage rate dropped from 6.48% last week to 6.33%, reversing a two-week upward trend.
Freddie Mac’s Chief Economist Sam Khater stated that mortgage rates are highly volatile, and even small changes can dramatically impact homebuying demand. In recent weeks, buyers have entered and exited the market in response to rate swings.
Based on current numbers, the monthly payment for a $600,000 mortgage over 30 years is $3,726—$1,048 more than a year ago.
Even minor fluctuations in mortgage rates can significantly affect homebuying demand and sales volumes.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.