—— Google Parent Cuts 12,000 Jobs; Real Estate Sector Faces $100 Billion Debt Crisis; Dollar Falls Sharply to July Low; Hong Kong Hedge Fund Buys Into Restaurant Group; Netflix Founder Steps Down as CEO; U.S. Existing Home Sales May Recover; Deutsche Bank Raises Trader Bonuses
1. Google Parent Cuts 12,000 Jobs
Today, Alphabet CEO Sundar Pichai stated in an email to employees that the company will lay off 12,000 employees, accounting for 6% of its global workforce. He said that the company has now been forced into layoffs, and he is willing to take full responsibility.
The laid-off employees will receive severance equivalent to four months’ salary, as well as six months of medical benefits.
Recently, tech giants such as Meta, Twitter, Microsoft, and Amazon have all laid off tens of thousands of employees. However, due to stable business demand, Google held off until now before making cuts.
Currently, the growth in demand for Google’s digital advertising business has slowed, and its cloud computing division continues to lag behind Amazon and Microsoft.
Sundar stated that the company now needs to focus its best talent and resources on the most critical projects.
So far, multiple leading U.S. tech companies have cut tens of thousands of jobs, while Apple has not yet made staffing adjustments.
______
2. Real Estate Sector Faces $100 Billion Debt Crisis
According to data compiled by Bloomberg, the global real estate sector currently holds $175 billion in distressed debt, which is four times higher than that of the second-place software sector.
As interest rates continue to rise and capital becomes increasingly scarce, creditors in many global markets are pushing property owners to sell assets quickly.
For example, in November of last year, Brookfield faced refinancing difficulties for several buildings in downtown Los Angeles and risked foreclosure. In South Korea, the developer of a LEGOLAND theme park failed to pay interest on time, sparking a nationwide debt crisis.
Currently, the European real estate market is experiencing its most severe debt crisis in a decade, mainly due to declining liquidity. According to MSCI data, commercial property values in the UK fell more than 20% in the second half of 2022, while U.S. values dropped by 9%.
As transactions and development of commercial and residential properties slow, the real economy and employment in countries around the world will be affected.
The total amount of distressed bonds and loans in the global real estate industry far exceeds that of the second-place SaaS sector.
______
3. Dollar Falls Sharply to July Low
Recently, U.S. CPI data indicated that inflation is easing, leading observers to believe that the Federal Reserve may raise interest rates more moderately than previously expected. As a result,
Additionally, because U.S. retail sales fell 1.1% year-over-year in December, investors are worried about the direction of the U.S. economy. On Wednesday, the dollar fell to its lowest level in seven months.
Since September last year, the dollar has dropped 10.7% against major global currencies, marking the fastest decline since 2009.
Last year, as the Fed continuously raised rates, the dollar—with higher yields—became the world’s most sought-after currency.
Most commodities are priced in U.S. dollars. As the dollar weakens, the cost of importing goods from the U.S. decreases for other countries, and dollar-denominated debts also become cheaper.
Dollar depreciation is beneficial for countries that need to import from or borrow from the United States.
______
4. Hong Kong Hedge Fund Buys Into Restaurant Group
According to filings, active Hong Kong hedge fund Oasis Management purchased a 5% stake in British dining chain The Restaurant Group at the end of November last year. The group operates 423 restaurants in the UK, including the Chiquito and Frankie & Benny’s chains.
During the pandemic, The Restaurant Group was forced to close 125 of its worst-performing restaurants. In the six months ending last July, the company generated £423 million in revenue, nearly double the amount from the prior year.
However, due to surging costs for energy, labor, and beverages across Europe, the entire restaurant sector has come under immense pressure.
Oasis was founded by former JPMorgan investment manager Seth Fischer and focuses mainly on investments in Asia.
______
5. Netflix Founder Steps Down as CEO
Today, Netflix co-founder Reed Hastings wrote in a blog post that the company has been searching for his successor in recent years, and now the time is right for him to fully step aside. He said he is honored to have worked at Netflix for 25 years.
COO Greg Peters will be promoted to co-CEO and will jointly manage the company with Ted Sarandos.
Following the announcement, Netflix stock rose over 6%, though the stock is still down by more than one-third over the past year.
It is reported that Reed will remain as Executive Chairman of the company, similar to Jeff Bezos and Bill Gates. With a net worth of over $100 million, Reed said he will focus on philanthropy but will still follow Netflix’s stock performance.
In recent years, Netflix has been helping Reed transition leadership, and now the timing is right.
______
6. U.S. Existing Home Sales May Recover
According to new data released today by the National Association of Realtors (NAR), U.S. existing home sales in December fell 1.5% to an annualized rate of 4.02 million units, marking the slowest sales pace since 2010 but slightly better than economists’ forecast of 3.95 million units.
December’s figures closed out 2022 on a weak note, as existing home sales declined for 11 consecutive months last year. More than 5 million homes were sold in 2022, down 17.8% from 2021, the largest drop since 2008.
Recently, mortgage rates have started to retreat, and builders’ confidence is expected to improve, but the overall industry outlook remains uncertain.
NAR’s chief economist Lawrence Yun said that buyers in December still faced limited supply and relatively high mortgage rates. However, last year’s rates appear to have peaked, and future sales may improve.
In December, three of the four major U.S. regions saw a decline in existing home sales.
______
7. Deutsche Bank Raises Trader Bonuses
According to informed sources, Deutsche Bank AG is considering significantly cutting bonuses for investment banking employees while raising bonuses for traders.
Deutsche Bank is reportedly planning to increase bonuses for fixed-income and foreign exchange traders by an average of 10%, thanks to the strong performance of that division last year.
The bank stated that investment banking revenues may fall as much as 40%, and total bonus pools for the investment banking unit may decline by around 10%. The bank does not want to offer below-market bonuses, as that would make it harder to recruit and retain talent. On the other hand, it also wants to avoid overpaying.
Bonus amounts are tied to departmental performance, and last year all major investment banking businesses declined sharply.
______
This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.