Good Morning! Morgan Stanley is launching an index tied to the growing asset class of sports leagues. The AI gold rush is here to stay, with KKR and Energy Capital Partners committing $50 billion to investing in data centers. OpenAI unveiled ChatGPT web search, and Amazon shares popped 6% after-hours on earnings beat and cloud growth. Comcast is exploring a separation of its cable networks business, and Trump Media has had a rough couple of days in the lead-up to the election.

Plus, 7 ways that Starbucks CEO Brian Niccol plans to change the coffee chain, and do wearable sleep trackers cause insomnia?

High returns, recurring monthly income, diversification–private credit is a $1.9 trillion asset class, and everyday investors can invest today with Percent.

_{SQUEEZ OF THE DAY}

Citi To Claw Back Bonuses?

Spooky season might be over for most of us... but not if you’re a banker at Citi.

In a memo reminiscent of a corporate horror story, a group of ex-Citi execs has demanded the board take bold action to accelerate the bank’s sluggish turnaround.

Their “suggestions” include slashing consultant spending—already cut down to $300 million annually from $700 million—and clawing back certain executive bonuses.

Representing ten former Citi managing directors awaiting more than $12 million in deferred compensation, the authors call for the bank to void bonuses tied to Citi’s Transformation Program, which rewards senior managers working on restructuring projects.

They argue that the bonuses are "unwarranted" given regulatory dissatisfaction with Citi’s progress under CEO Jane Fraser’s leadership. According to them, loyalty to Fraser rather than independent thinking and strong execution are undermining Citi’s potential at a critical time.

The authors aren’t asking to take away junior banker bonuses but are targeting performance-based rewards for senior executives involved in the bank’s overhaul. The aim, they claim, is to improve shareholder value—a polite way of saying they want more bang for their deferred bucks.

And Citigroup isn’t taking this criticism lying down. A spokesperson described the letter as containing “a multitude of factual inaccuracies” and reiterated that while they share stakeholders’ desire for progress, transformations of this scale are complex and attract inevitable criticism.

Takeaway: Citi has been trying to “turnaround” for what feels like an eternity, yet its stock still trails most of its peers. Canceling bonuses for managers might look like a quick win for shareholders, but it could set a dangerous precedent in an industry where top talent expects to be well-compensated. Here’s to hoping Citi’s turnaround doesn’t turn into a ghost story.

_{PRESENTED BY PERCENT}

Investing in Private Credit Could Help Hedge Your Portfolio Against the Next Downturn

The stock market is burning red hot these days, which has many investors wondering: If a market correction happens, where can we ride out the storm? 

A Bloomberg survey¹ reveals that many institutions now prefer private credit over bonds to hedge against economic downturns. 

Why? T. Rowe Price data² suggests that allocating 10% to private credit historically reduces volatility and improves risk-adjusted returns. 

But this ‘safe haven’ asset class isn’t just for Blackstone, KKR, and Morgan Stanley–now, everyday investors can diversify with private credit using Percent. 

• Low minimums: Start with $500

• Shorter durations: Maturity in 6-36 months (average ~9 months)

• Monthly cash flow: Most deals offer cash flow through monthly interest payments.

• Return potential: Percent boasts a net return over 14% in the last 12 months as of July 2024

Sign up with Percent and get a bonus of up to $500 with your first investment.

_HEADLINES

Top Reads

• Morgan Stanley is launching an investing index tied to sports leagues (CNBC)

• Private equity giants commit $50 billion to AI infrastructure (Axios)

• Amazon says AI investments will pay off, capital expenditures surge 81% (CNBC)

• Amazon shares pop on earnings beat (CNBC)

• Carvana stock jumping on Q3 earnings beat and record profit (YF)

• Stock market expert says 2024 election could be like 1968 all over again (Fox)

• OpenAI launches ChatGPT search (CNBC)

• U.K. raises private equity tax, but by less than expected (Axios)

• Microsoft’s stock has worst day in two years after disappointing forecast (CNBC)

• A record share of Americans say the stock market boom will continue (Axios)

• Comcast is exploring separation of cable networks business (CNBC)

• Trump Media shares plunge after rally, costing him $1B in net worth (Fox)

• OpenAI's for-profit plan questioned by Delaware Attorney General (Axios)

• Key Fed inflation gauge shows price increases match expectations in September (YF)

• Super Micro’s $50 billion stock collapse underscores risk of AI hype (CNBC)

• Investment bank Lazard's profit surges on dealmaking recovery (YF)

• 7 ways that Starbucks CEO Brian Niccol plans to change the coffee chain (CNBC)

_ELECTIONS

US Election Forecast

• Kamala is steadily gaining ground in the presidential prediction market on Kalshi, closing Trump’s lead to just 12 points

• Get $20 to trade the election when you deposit $100 or more. See live odds and bet now

_{CAPITAL PULSE}

Markets Rundown

Stocks dragged lower by tech weakness: U.S. equity markets fell on Thursday as investors processed a blend of economic data and corporate earnings that came in "good but short of expectations."

The recent U.S. GDP report showed a solid 2.8% growth rate for Q3, just under the 3% anticipated, contributing to a cautious market sentiment. The day’s declines were led by disappointing earnings from Meta and Microsoft, which failed to surpass high expectations.

Bond yields remained stable, with the 10-year Treasury yield near 4.30%, significantly up from 3.75% a month ago. The markets continue to respond to the balance between labor market data, inflation trends, and the Fed’s policy direction, with key events like the upcoming September payrolls report, next week's election, and a Federal Reserve rate decision on the horizon.

Inflation data showing some stickiness: The personal consumption expenditures (PCE) deflator, a key inflation gauge favored by the Fed, revealed that the month-on-month rate increased due to persistent core services prices (excluding housing). This kept the annualized rate steady at 2.7% for the third month.

This data suggests a more uneven path ahead for inflation moderation, with continued consumer spending strength contributing to inflation stickiness. While the Fed isn’t expected to pivot on its easing policy, it may proceed with greater caution, pausing between rate cuts to monitor trends.

Employment trends remain supportive: Initial jobless claims released Thursday dropped to their lowest since May, pointing to a labor market that is gradually softening but still resilient.

This sets the stage for Friday's nonfarm payrolls report, which will offer further insights. Although there could be volatility in upcoming job data due to recent hurricanes, current employment trends are supportive of consumer spending—an encouraging sign as the economy gears up for the holiday season and aims for another quarter of above-trend GDP growth to close out 2024.

Movers & Shakers

• (+) Peloton ($PTON) +28% after announcing strong earnings; appointing a new CEO.

• (+) Carvana ($CVNA) +19% after raising its outlook on strong used-car demand.

• (–) Estee Lauder ($EL) -21% after disappointing guidance; slashing its dividend.

Private Dealmaking

• Siemens bought Altair for $10.6 billion

• Francisco Partners bought AdvancedMD for $1.13 billion

• Airwallex, an Australian fintech, in talks to raise $200 million

• J-Power sold its stake in Tenaska Frontier Partners for $155 million

• Evommune, an immune-focused biotech, raised $115 million

• LuxWall, an insulated windows developer, raised $51 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

_{NEIGHBORHOOD WATCH}

Real Estate Digest

Mortgage rates continued to rise week-over-week as new data shows a flurry of activity for September when rates were hovering right above the 6% mark.

Rates may remain volatile over the next few weeks as major events like the upcoming jobs report, the 2024 election and the next Fed decision on rate cuts following their November meeting.

Although there is still some uncertainty, it does appear that mortgage rates are peaking and not expected to reach near the highs seen earlier this year.

Latest News

• Why Are Mortgage Rates Going Up If the Federal Reserve Cut Rates?

• NYC CO-OP Market Reawakens with Bargains for First-Time Buyers

• Billionaire Stephen Ross Believes in South Florida- and Is Spending Big to Transform It

• Pending Home Sales in US See Biggest Gain Since Summer 2020

• The $2.5 Billion Plan to Transform Six Historic Blocks in South Beach

New Listings

• 285 Lafayette Street Apt: 2B New York, NY: 4 Bed / 3.5 - $10,950,000

• 1418 S Miami Ave Apt: 6204 Miami, FL: 4 Bed / 4.5 Bath - $6,433,900

• 06240 Beausoleil Alpes-Maritimes, France: 4 Bed / 4 Bath - $2,177,280 

• 1467 Deerfield Rd Water Mill, NY: 6 Bed / 7.5 Bath - $6,495,000

• 99 Hudson St, Jersey City, Jersey City, NJ: 2 Bed / 2 Bath - $1,898,000

Fill out this form if you're looking to buy, sell, rent or invest.

_{BOOK OF THE DAY}

Code Dependent

On the surface, a British poet, an UberEats courier in Pittsburgh, an Indian doctor, and a Chinese activist in exile have nothing in common. But they are in fact linked by a profound common experience―unexpected encounters with artificial intelligence.

In Code Dependent, Murgia shows how automated systems are reshaping our lives all over the world, from technology that marks children as future criminals, to an app that is helping to give diagnoses to a remote tribal community.

AI has already infiltrated our day-to-day, through language-generating chatbots like ChatGPT and social media. But it’s also affecting us in more insidious ways. It touches everything from our interpersonal relationships, to our kids’ education, work, finances, public services, and even our human rights.

By highlighting the voices of ordinary people in places far removed from the cozy enclave of Silicon Valley, Code Dependent explores the impact of a set of powerful, flawed, and often-exploitative technologies on individuals, communities, and our wider society. Murgia exposes how AI can strip away our collective and individual sense of agency, and shatter our illusion of free will.

The ways in which algorithms and their effects are governed over the coming years will profoundly impact us all. Yet we can’t agree on a common path forward. We cannot decide what preferences and morals we want to encode in these entities―or what controls we may want to impose on them. And thus, we are collectively relinquishing our moral authority to machines.

In Code Dependent, Murgia not only sheds light on this chilling phenomenon, but also charts a path of resistance. AI is already changing what it means to be human, in ways large and small, and Murgia reveals what could happen if we fail to reclaim our humanity.

“A riveting story of what it means to be human in a world changed by artificial intelligence, revealing the perils and inequities of our growing reliance on automated decision-making.”

_{DAILY VISUAL}

Estée Lauder on Discount

_{PRESENTED BY HEBBIA}

Curious How The World’s Best Investors Are Using AI?

Hebbia is changing the investing game with AI.

Hebbia works with many of the largest investment firms. And they’ve been around for 3 years longer than ChatGPT! 

Hebbia can draft one-pagers based on your team’s investment philosophy (and so much more).

Book a 20-minute demo to see it for yourself.

Where Diversification Meets 11.4% Cash Returns 📈

Our friends at Webstreet are launching their eighth fund. WebStreet buys and operates cash-flowing websites and SaaS businesses for accredited investors to invest in. So far WebsStreet has delivered 11.4% cash returns and is on track for 20%+ IRR.

Want passive income? Join WebStreet’s Waitlist Here.

_{DAILY ACUMEN}

How Habits Shape Your Brain

Our daily behaviors like sleep, exercise, and even mood do more than just influence our day—they leave lasting imprints on how our brain functions.

A recent study found that changes in our environment and habits can affect brain connectivity for up to 15 days.

This means that the effects of a restless night or an intense workout aren't just fleeting—they shape the way different parts of our brain communicate well beyond the moment they occurred.

The study showed two distinct patterns: short-term changes in brain connectivity that last about a week, and more gradual effects extending up to 15 days.

Interestingly, higher heart rate variability, which indicates better stress management, was linked to stronger brain connectivity, particularly in areas related to memory and attention.

Likewise, regular physical activity was associated with improved brain function, while sedentary days showed weaker connections in key cognitive areas.

This underscores how our routines play a significant role in shaping not just our day-to-day well-being, but also the lasting architecture of our brain.

_{ENLIGHTENMENT}

Short Squeez Picks

• Do wearable sleep trackers cause insomnia?

• 8 phrases men use when they lack basic communication skills

• Why you should avoid eating junk food if you’re depressed

• Why having hobbies makes you better at your job

• Lin-Manuel Miranda and Eisa Davis’ favorite NYC spots

_{MEME-A-PALOOZA}

Memes of the Day