—— Morgan Stanley Staff Fined Millions; U.S. GDP Growth a Mixed Bag; Chipotle to Hire 15,000; IBM Lays Off 3,900 With $300M Payout; Blackstone Misses $1 Trillion AUM Goal; Vanguard Net Inflows Halved; Amazon to Sell Bay Area Offices
1. Morgan Stanley Staff Fined Millions
According to sources, several Morgan Stanley employees were fined up to $1 million each by the company for discussing business projects over WhatsApp and other unauthorized social platforms.
The specific fine amount depends on the employee’s seniority, prior infractions, and the volume of messages. The penalties will be deducted from employees’ bonuses and future salaries.
In recent years, regulators have strengthened information security requirements, mandating that bank employees use approved platforms for business communications.
Last year, Morgan Stanley paid a total of $200 million in fines to the SEC and CFTC. Over a dozen banks, including Barclays, Goldman Sachs, and UBS, were fined more than $2 billion collectively.
To bolster information security, the SEC prohibits bank employees from discussing projects on social media.
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2. U.S. GDP Growth a Mixed Bag
Preliminary data released today by the U.S. Department of Commerce showed that GDP grew at an annualized rate of 2.9% in the final quarter of 2022, beating economists’ median estimate of 2.6%.
However, personal consumption, the biggest driver of the economy, grew at an annualized rate of only 2.1%, falling short of expectations.
The report also showed that wage growth failed to keep up with inflation, forcing many Americans to dip into savings and government subsidies.
According to Bloomberg’s latest monthly report, economists now expect the economy to contract in Q2 and Q3, with a 65% chance of a recession within the next year.
Despite a strong Q4 GDP reading, the Fed has not stopped raising rates, and the outlook for the full year remains uncertain.
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3. Chipotle to Hire 15,000 Employees
Today, publicly traded restaurant chain Chipotle Mexican Grill announced that it plans to hire 15,000 new employees across North America to ensure smooth operations at over 3,000 U.S. restaurants during the company’s busiest second quarter.
Currently, Chipotle has more than 100,000 restaurant staff in the U.S. The company stated it has long-term plans to expand to 7,000 locations.
During the pandemic, Chipotle maintained strong operations and profitability—its revenue rose 26% in 2021 and grew another 15% cumulatively in the first three quarters of 2022.
Chipotle said the average hourly wage for its employees now exceeds $16.
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4. IBM Lays Off 3,900 With $300M Payout
Today, IBM CFO James Kavanaugh revealed in an interview that the company expects to generate $10.5 billion in free cash flow this year, with revenue growth around 5%, both beating analyst forecasts.
However, the company plans to lay off approximately 3,900 employees, with severance costs estimated at $300 million.
For 2023, IBM expects a weaker U.S. dollar will boost revenue. Exchange rate volatility is expected to be milder than in prior years, with a bumpy first half and potentially smoother second half.
After Wednesday’s market close, IBM’s share price fell 2% to $140.76. Still, the stock gained 5.4% in 2022, making it a rare “winner” among tech giants.
This round of layoffs primarily affects remaining employees from the acquired Watson Health and Kyndryl businesses.
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5. Blackstone Misses $1 Trillion AUM Goal
According to its latest quarterly report, global alternative asset giant Blackstone reported $975 billion in assets under management (AUM) as of the end of 2022, up from $951 billion in the previous quarter but short of CEO Steve Schwarzman’s $1 trillion target.
Originally, the company aimed to reach $1 trillion AUM by 2026. However, due to a boom in alternative investments, Schwarzman moved the goal up to 2022.
Blackstone President Jon Gray said he wasn’t disappointed by the shortfall and remains confident that solid investment performance will continue to attract capital.
In the final quarter of last year, Blackstone’s distributable earnings dropped 41% to $1.3 billion due to the challenging economic environment.
Due to worsening economic conditions, Blackstone’s Q4 distributable earnings fell 41%.
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6. Vanguard Net Inflows Halved
According to the latest data released by Vanguard Group, the firm received $151 billion in net inflows in 2022, a 49.6% decline from the previous year.
Nearly half of Vanguard’s assets under management (AUM) are invested in ETFs tracking large indices like the S&P 500 and FTSE 100. In 2022, both stock and bond markets performed poorly, delivering disappointing returns to investors.
A Vanguard spokesperson said the firm did not shy away from market volatility over the past year, instead making timely and prudent adjustments to its strategy.
By the end of December, Vanguard’s AUM had dropped by $1.2 trillion to $7.2 trillion.
Founded in 1975, Vanguard is one of the industry’s lowest-fee asset managers, currently serving 30 million clients.
Vanguard launched the world’s first index fund tracking the S&P 500.
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7. Amazon to Sell Bay Area Office Complex
In October 2021, Amazon purchased a 29-acre office complex in Milpitas, California, for $123 million, planning to convert it into a logistics facility to support future growth.
However, due to challenging economic conditions and a shift to remote work, the property has remained vacant. Amazon now plans to sell the site and is currently in talks with several developers.
The Bay Area office market has suffered major setbacks over the past two years. According to CBRE, current vacancy rates remain close to 20%.
Bloomberg reported that Amazon spent last year quietly acquiring buildings and undeveloped land across the U.S. But with its business slowing, the company is no longer aggressively expanding.
Amazon’s explosive pandemic-era growth led to over-investment in real estate.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.