🚨 2024’s Banking Crisis is Here

MARKET UPDATE

Good Morning Investor! On Wednesday, shares of Dave & Buster’s ($PLAY) shot up 9% after beating Q2 earnings estimates on improvements in its special events business.

Meanwhile, shares of specialty chemicals manufacturing company Albemarle Corp ($ALB) surged a whopping 10%, leading the rest of the lithium mining stocks higher for the day after China announced it will be halting lithium operations in Jiangxi, creating a unbalanced supply-demand.

Additionally, US CPI inflation came in hotter than expected for the month of August, sending markets plummetting sharply. CPI increased 0.2% in August, inline with consensus estimates. Core CPI, which excludes volatile food and energy prices, increased 0.3% for the month, slightly higher than the 0.2% estimate.

TODAY’S BIG HEADLINES

Apple & Google Face Colossal EU Fines

US Election Betting Secures a Big Win, Prediction Markets Surge

2024’s Banking Crisis is Here

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BIG TECH & ANTITRUST

Apple & Google Face Colossal EU Fines🧾

Slap on the Wrist? More like Kick in the Teeth: Silicon Valley’s tech giants Apple ($AAPL) and Google ($GOOG) just got served a financial feast they can't swipe left on. The European Union's highest court, playing the role of a stern headmaster, has ruled against these naughty tech giants, leaving them with wallets lighter than a model's lunch. The court ruled against Apple in a tax evasion case and dismissed Google’s appeal in an antitrust case, upholding decisions that will require both companies to pay significant fines.

• Apple ($AAPL), the company that's been more creative with its taxes than its product names lately, now owes Ireland $14.4 billion in back taxes. Meanwhile, Google ($GOOG), caught with its hand in the monopoly cookie jar, faces a $2.65 billion antitrust fine.

• This double-whammy is a victory lap for EU regulators in their quest to tame the wild beasts of Big Tech. And let's not forget, Apple is still squaring up to EU regulators over its monopolistic app store practices, and could end up facing further fines.

No More Tax Gymnastics: The court, clearly not impressed by Apple's financial acrobatics, ruled that Apple’s tax deal with Ireland, which allowed the company to pay less than 1% in taxes on European profits for nearly twenty years, was unlawful. Google’s fine stems from a 2017 ruling that found the company had abused its market position by favoring its own shopping comparison service in search results. Apparently, "Don't be evil" doesn't apply to a little self-promotion.

A Bitter Pill to Swallow (With a Side of Humble Pie): Apple and Google have been playing cat and mouse with EU penalties for nearly a decade, but it seems the jig is up. While these rulings might leave a dent in their piggy banks, EU Competition Commissioner Margrethe Vestager called them “a big win for European citizens and for tax justice.” One can almost hear the world's smallest violin playing for these poor, misunderstood multi-billion dollar corporations.

• Apple, still clinging to its reality distortion field, insists that “has never been about how much tax we pay, but which government we are required to pay it to.” Disappointed by the decision, Google believes the ruling was based on “a very specific set of facts.” You know, like evidence and stuff.

BETTING MARKETS

US Election Betting Secures a Big Win, Prediction Markets Surge🎰

Court Rolls the Dice in Gamblers' Favor: In a stunning turn of events that left regulators clutching their pearls, a federal judge has sided with a New York prediction market in its high-stakes battle against the powers that be. Kalshi, the cheeky upstart regulated by the Commodity Futures Trading Commission, just hit the jackpot - getting the green light to list bets on congressional elections. Talk about a royal flush!

• Prediction markets like Kalshi allow users to put their money where their mouth is on real-world events. From Fed rate cuts to whether Justin Bieber will release a new song this year.

Lady Luck Smiles on Gamblers Everywhere: Kalshi, grinning like a Cheshire cat, trumpeted its victory over the CFTC. "Election markets are now legal in the US for the first time in 100 years," they crowed, promising that election bets were coming soon. One can almost hear the collective gulp from political consultants nationwide. Meanwhile, the CFTC, not ready to fold just yet, sought and received a pause on the ruling until a hearing set for Wednesday. The prediction markets industry is on a hot streak, with PredictIt and crypto-based Polymarket overseeing hundreds of millions in bets. Polymarket, which coyly bars US residents from its digital casino, saw half a billion dollars in trading last month alone. Seems like Lady Liberty isn't the only one holding a torch these days.

• As of yesterday, Polymarket had over $850 million wagered on the US presidential election. Before last night's debate, punters could buy event contracts on everything from whether The Donald would utter "bitcoin" to whether VP Kamala Harris and Trump would shake hands (bettors gave it a 27% chance, presumably factoring in the risk of static electricity from all that hair product).

Crypto Betting Goes All In: Polymarket has seen a staggering $1.1 billion in bets since June, with 88% of those on US elections. It seems predicting the political future is more addictive than doomscrolling through Twitter. Kalshi's court win could set a legal precedent for election betting in America, potentially opening the floodgates to a tsunami of political gambling. However, regulators and lawmakers continue to argue that election betting could compromise the integrity of the democratic process. Because clearly, that's the biggest threat to democracy these days - not the circus we call debates or the endless parade of scandals.

FINANCE & BANKING

2024’s Banking Crisis is Here🚨

When Bankers Cry, Investors Sigh: It's raining bad news on Wall Street, and not even the fattest cats are staying dry. Goldman Sachs ($GS) CEO David Solomon decided to play the role of party pooper and feeling the need to tamper expectations a whole month before their quarterly earnings report. This financial faux pas coincided with Ally Financial ($ALLY) having an absolute meltdown, watching its share price plummet 18% faster than a trader's hopes on Black Monday. The culprit? Skyrocketing default rates that have consumer trends looking about as stable as a Jenga tower in an earthquake. This coincided with JP Morgan Chase ($JPM) dropping over 7% — its largest single-day drop since 2020.

When Midas Turns to Mud: Goldman’s CEO warned investors of a $400 million pretax hit to Q3 results, all thanks to their troubled consumer business unwind, sending shares down 4.4%. The losses stem from the bank's messy exit from the credit card business, particularly the GM credit card deal, which is turning out to be more "Nightmare on Wall Street" than "The Wolf of Wall Street." Accusations of loose lending standards and reliance on third-party platforms like Credit Karma brought in low-credit borrowers, worsening the situation.

• Goldman’s plan to offload the GM portfolio to Barclays is moving slower than a sloth on Valium. Negotiations are dragging, charge-off rates are climbing, borrowers are treating their debt like it's optional, and the deal is reportedly on thin ice.

• To add insult to injury, Solomon admitted trading revenues are expected to drop by 10%, adding more pressure to the bank’s bottom line. Despite the challenges, Goldman’s stock is up 27% this year, with the bank refocusing on deal-making and wealth management for growth.

Misery Loves Company: Not to be outdone in the bad news Olympics, JP Morgan COO Daniel Pinto decided to join the pity party. He warned investors that forecasts for the bank's net interest income (NII), or the difference between what the bank makes on loans and pays out on deposits, were more optimistic than a motivational speaker on ecstasy. Fortunately, with the Fed expected to begin cutting rates as of September 17th, this will kick off a monetary easing cycle which might just be the financial equivalent of aloe vera on a sunburn - soothing, but you still wish you'd avoided the problem in the first place.

MORE NEWS

Additional market-moving events🌎

Amazon's European Expansion: Amazon ($AMZN) will invest $10.45 billion over 5 years to expand its UK data centers, boosting its cloud and AI infrastructure in Europe. (Fortune)

Real Estate Buyout Rejected: Real estate portal Rightmove ($RTMVY) has rejected a $7.32B cash-and-stock takeover offer from Australia's REA Group (ASX:REA), which is 62% owned by News Corp ($NWSA). The offer represented a 27% premium on Rightmove’s share price but was declined without explanation. (BBC)

Bond Market Turmoil: Two years into the Federal Reserve’s battle against inflation, bond investors are seeing a new risk: Consumer price growth is slowing too much. The bond market is now pricing in the risk of inflation falling below the Fed’s target. (YF)

Racing Debts: Formula 1 sold a $2.55 billion loan package to refinance debt and help fund owner Liberty Media's acquisition of MotoGP. (Edge)

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