More Tech Layoffs; Ongoing Bank Drama

© The Motley Fool More technical cuts; The banking drama continues

In this podcast, Motley Fool Senior Analyst Jason Moser discusses:

• Buys UBS Credit Suisse for $3.2 billion.
• Double exposure for every person who checks their bank.
• Why Amazon's latest layoff announcement focuses on earnings per employee

In addition, Ricky Mulvey, producer of The Motley Fool, meets Jacob Goldstein, host of What's Your Problem? Let's talk about bank runs, why they happen and how companies can prepare for them.

To watch full episodes of all free The Motley Fool podcasts, visit our podcast hub. Read our short guide to investing in stocks to get started. Full text follows the video.

Sponsors:

10 Stocks We Like More Than Walmart

When our team of award-winning analysts offer investment advice, it's worth listening to. After all, The Motley Fool Stock Advisor , a newsletter that has been around for over a decade, tripled the market. *

They just revealed what they think are the ten biggest stocks investors can buy right now... and Walmart wasn't one of them. That's right, they think these 10 stocks are a better buy.

View 10 posts

Equity advisor payment as of March 8, 2023

SVB Financial provides credit and banking services to The Motley Fool. John McKee, former CEO of Amazon Whole Foods Market, is on the board of directors of The Motley Fool. Chris Hill has held positions at Amazon.com and Microsoft. Jason Moser holds positions at Amazon.com. Ricky Mulvey holds positions at Redfin. Motley Fool owns and recommends positions at Amazon.com, Microsoft, Redfin and SVB Financial. The Motley Fool recommends the following options: May 2023 short $16 call on Redfin. Motley Fool has a disclosure policy.

This video was recorded on March 20, 2023.

Chris Hill. We have tech cuts and, of course, the latest banking drama. Motley Fool Money Starts Now! I'm Chris Hill. Joining me today is Jason Moser, Senior Analyst at The Motley Fool. How are you

Jason Moser. Today is Monday. I'm fine. How are you

Chris Hill. I'm fine: I'm just smiling because today we're back to where we were a week ago, which means the overall landscape is in disarray and investment headlines are still dominated by banks. And this time the big story is there. UBS acquires Credit Suisse for $3.2 billion. The deal was reportedly arranged by Swiss central banks with regulators. There are many reasons for this. These two banks do not interest us. But because of the size of the deal, because of the impact, because many investors didn't get the news until Monday morning. One question, of course, is what those cascading effects, if any, are. When you look at this, what comes to your mind?

Jason Moser . I wonder if this applies only to our banking system? This is something that was reserved for just a few banks that might be overly interested in a certain asset class, they didn't want to look at certain macro conditions, and now we're seeing it go global, I don't want that. it also talks about infection, but I think we're seeing a clear worldwide spread. It cannot be said that this is the beginning of the end. But it's like we're watching a train wreck in slow motion, and it's frustrating for investors because you never know when it's going to end. They don't really know what the final decision is.

There are many external forces that ultimately affect him. All the steps taken by banking regulators over the past two weeks are aimed at strengthening balance sheets and, ultimately, instilling confidence. However, the more they try to help, the less confidence investors have that they are right, because it is a tacit admission that something is wrong. We did something wrong, and now we're dealing with unforeseen consequences. Again, this clarifies what we talked about earlier about the psychology of investing. I mean, over the last couple of weeks, we've really seen psychology come into play here, because business fundamentals are one thing.

We only look at key metrics and general business fundamentals. But when you talk about the markets, psychology comes into play. There are times when you can open Pandora's box and not return the product. I am not sure that the regulators will be able to take steps that will fully restore confidence in the industry. I appreciate the fact that they seem to support him. I like the fact that they are trying to work in the industry, so it's an industry decision, not a government decision. Although I think it's fair to say that the government is really pushing for it, because looks do matter. But it looks like I'm listening, it's Monday and we'll have to wait for another new headline tomorrow to tell us something new.

Chris Hill. You just brought something like this. Look, over the years we've been doing podcasts, we've talked a lot about company X and what's going on with company X, regardless of the industry. Part of our conversation is that it's a big risk. It's not something that happens, whatever the reason, it's more of a headline than an impact on the core business. It's kind of a relief. But we also talked about it, but it's something that the CEO and his leadership team should be spending their time on. As an investor, you don't want to see this. They want the management team to focus on the business, business development, etc. You just touched on what I think Jason is a cousin of, which is that every company in America has timed their banks in the last couple of weeks. . speak

Although up to this point they were absolutely sure of what they were doing, all the companies in America were negotiating. Wait, let's wait a few minutes. We are good, is this our money? let's have an emergency board meeting, for example, or if it's a small company and it doesn't have a board, let's have an emergency management meeting. Can we just waste time talking about it? I think this is part of the problem. Like I said, there won't be a call at the end to say it's over. It's just that at some point in the future, we as investors will look back and say that we haven't talked much about the banking industry in the last few months. We didn't really talk about banks, liquidity and balance sheets. It looks like efficiency has returned to its previous level. We only recognize it in the rear view mirror.

Jason Moser. I think you are right. If you look at the situation between Credit Suisse and USB, you will find two different cultures. Clearly, USB seemed to be the more conservative of the two. Meanwhile, Credit Suisse has some experience with mismanagement and crises, so to speak. Perhaps bringing the two together will create a better unity in the future. But I think it's true. I hope that every financial institution will eventually meet here to do what I have said. are we okay, is our balance okay? Let's look at our investment portfolio.

Because I can imagine that over the past few years it has set the tone for many institutions, not only banking but in general, investing in the past few years has been very easy. You can shoot darts and win big money. This will not happen again. I mean, of course, we should focus a little more on the basics. I think that's your point of view. No, there will be no end. Even look for signs that things are as good or even better than we think. You are looking at this line of credit that was recently created by banking regulators so that banks can use this line of credit to strengthen balance sheets if depositors have concerns, if there are certain questions about their risk to depositors, to protect them from fleeing. At least there is evidence that this object is being used. I read last night that the big money coming from this property has a lot to do with the situation on the west coast. Banks like Silicon Valley Bank have been overly exposed to this growing demographic and venture capital. So perhaps this is a sign that things are not as common as they could be. But then again, this is not the end, after all, we just have to look for signs that things are either getting better, or maybe not as bad as reported today. But it looks like we still have a long way to go before we know for sure.

Chris Hill. Before I move on to the next topic, I just want to correct what you said because I think you were wrong when you said that the merchant bank was UBS.

Jason Moser. Did you say USB?

Chris Hill. You said USB. At least a few dozen US Bancorp shareholders in the room are going crazy, I just want to calm them down.

Jason Moser. I was wrong and thanks for the correction, it happened.

Chris Hill. Before I let you go, Amazon announced the layoffs of another 9,000 people. This is more than 18 thousand. We talked about this in January when Amazon , Microsoft and other big tech companies announced layoffs. I think Amazon is what we said, I'm sure there will be more rounds. It depended a lot on how many employees they had because I think it was around 1% at the time, or maybe less. But, as expected, it is clearly another difficult phase for people losing their jobs in terms of core business and future. Andy Jassi and I would say that this is a longtime shareholder of Amazon. I think it's fair to ask, how many of these things are you going to do before you feel satisfied? Because it's like the opposite of not giving first aid.

Jason Moser. I understand that as a manager you want to move forward more slowly and methodically. You must believe that contraction is unpleasant to any degree. As a manager, you don't want this, you hate being small. The only people who really appreciate it are the investors. Only if the business really needs it. I think that what we see more and more often, in most cases, is what many companies really need. We're just seeing a certain level of bloat as many of these companies start to collapse. Of course, this makes sense from an investment point of view. I think most managers would like to let as few people go as possible.

Maybe that's why we see it only in stages. If you look at a company like Amazon, you will see that they have many different lines of business. It's not just Amazon, it's an online store. They have all these different dynamics, and these cuts seem to be more focused on AWS, ads, and Twitch in the Amazon business. Whether we will see a further drop in the peaks or not is still under discussion. I bet we could. But if you look at Amazon today in terms of employees and revenue compared to 2019, one metric we'd like to look at, just to give you an idea, is revenue per employee. This can tell you a lot. Do they do more with the little ones or less with the big ones? If you look at Amazon in their 2019 10-K, they say they had about 798,000 full-time and part-time employees.

This was at the end of 2019. Revenue that year was $281 billion. They generated $352,000 in revenue per employee. Today, at the end of this year, at the end of 2022, they employed 1.5 million people, in fact 1,541,000 full-time and part-time people. Sales also rose to $514 billion a year. But that comes out to $334,000 in revenue per employee, which is less. It's just a metric that companies want to track. Ideally, you want to increase revenue per employee. This suggests that in some cases more can be done with less. Perhaps this is the only thing they will continue to control. But I think it stood out. If you look back and forth at Amazon's employee base, that's 1,541,000 full-time and part-time employees, up from 798,000 three years ago. We see how quickly this workforce is growing. Business is also growing, but not as fast, and we want to change that.

Chris Hill. Jason Moser, always a pleasure to talk to you. Thank you for being here.

Jason Moser. Thank you.

Chris Hill. Have banking events changed the definition of money in the last two weeks? If yes, does it matter? Jacob Goldstein "st. is the author of The True Story of a Fictional Thing . Ricky Mulvey met with Goldstein to discuss bank leaks, why they happen and how companies can prepare for them.

Ricky Mulvey. Right now, the Federal Reserve can send billions of dollars digitally to banks wherever they want to or not, back in the days of the gold standard. Why do we need bank accounts?

Jacob Goldstein. Well, we have bank branches because not all US bank deposits are insured or guaranteed. This is important this month because, for example, the vast majority of bank deposits in Silicon Valley were not insured. The Federal Reserve can bail out depositors at any bank, and they have an endless supply of dollars at their disposal. The question is when is it appropriate or desirable for the Fed? Guys last week seems like a long time ago but it was only last week at a Silicon Valley bank that had uninsured deposits knew their deposits were uninsured knew that by law if a Silicon Valley bank has their own, they didn't. The government did not want to make them full depositors, so it made sense for them to go to the bank.

Ricky Mulvey. I studied the history of banking. I think there are some criticisms that these deposits should not be subsidized or that subsidized bank deposits are not bought by the FDIC. And if there is banking, but the deposits are not protected?

Jacob Goldstein. Sounds like your classic perennial bench. Deposit insurance appeared relatively recently. Our banks have existed for hundreds of years. Until the 1930s, we did not have deposit insurance on a large scale in our country. In the past, people worried about their bank would often withdraw their money for a good reason. The people who won the Nobel Prize in Economics last year created this formal mathematical model that shows why when you're worried about the bank, it makes sense to run to the bank because the bank doesn't have enough money to offer. all depositors get their money back. So if you are afraid to run, you must run first, you must beat all the fools to get your money before the pot runs out. This is exactly what we saw at Silicon Valley Bank last week.

Ricky Mulvey. But I remember what you wrote in Dengi about the era of banking. Or, if you don't guarantee deposits, your two options are basically doing what the government of Venice, Italy did in the 14th century, beheading bankers who couldn't guarantee deposits. Or you just create a system where there are so many banks making so much money that there is constant chaos.

Jacob Goldstein. Yes. There are compromises here. Technically, a bank deposit is a loan to a bank. The argument against deposit insurance is that the depositors, the people who lend to the bank, should care about how safe the bank is. You want them to look at the jar and say, "Wow, this jar is so patchy." I wouldn't put my deposits there because it creates market power that makes banks take less risk. It is driven by market forces. We have now decided that ordinary people should have checking accounts, whether someone has $1,000 in a checking account or $5,000 to pay a mortgage and buy groceries that their bank can't arrange.

But we decided that if you have more than $250,000 in the bank, you should be smart enough to take care of your bank's risk to know that the Silicon Valley bank is insolvent because of this long-term bond debt they made. Now, I think the big problem is that RAD DHE-FACTA STRAHUE all teachers. I don't know what happened to the sword problem. And if you're right, you won't lose weight, but you won't lose weight. You will officially receive a $250,000 FDIC State Insurance Instrument. Ale ° Kryzіs 2008, իսկ մեն, մեն օրը փ է է որ սիրելիները հով:

Ինչ վեր նր, որ յն է, և ես չեմ կ պ լինել, և ես միշտ պ եմ եմ, ինչ ուզում եմ կ ինչ եմ ուզում, բ ոչ տուն, կ եվ ձեզ մոտ: These are bad ways to cheat insurance markets. Պադոբնա է այն, ինչ չարաշահում է այն, ինչն ավելի շատ է, քան ավելի շատ, ինչ դժբախտություն է, ինչ է 250 000 օգտատերը, ինչն է այսքանը, չի կարող լինել: Ուրադ պավինեն վալոդացն է, իսկ սկյամ, մի փոքր ավելի շատ գաղտնազերծում է կամ բիզնես-դեպազիտաў է օգտվում այն ​​գաղտնազերծելուց, որը տարածում է FFDIC ֆոնդը: Այսպիսով, դուք լավ աշխատանք կունենաք: Դա այդպես չէ:

Ыыкове малві . 2008 թվականի հուլիս, ինչը նշանակում է, որ իմ կյանքը նույնն է, ինչ քաղաքը, քանի որ կառավարությունը ծնվել է Bear Stearns-ի հետ: Հոր սիրտը, ինչպես Ռուզվոլթարը, այնքան ուժեղ է, որ նա այնքան հպարտ է, որ այնքան հարուստ է, որ շատ փող չի աշխատում։

Ikab Гольдшейн: POTSEM высветлилася, што ён змяніў даляравы кошет золата. Я згодзен. Я маю на ўвазе, што ў нядаўніх абставінах ёсць адна асабліва крыўдная рэч: калі вы вернецеся ў 2018 год, то пасля фінансавага крызісу ў нарматыўныя акты былі ўнесены змены, калі парог сістэмна важнага банка быў зніжаны. ՌԱՆԻՆ, որն ապրում է 50 տարվա մեծագույն գործունեությունից հետո, շատ կյանք ունի։ «Выбух аднаго банко не мае значення, Bierbank, які выбухае і разбурае кучу эканоміki, - гэта дренна: Es gibt keine Tage zwischen 50 Meilen und 250 Meilen:

Banc Siliconavay Dalyinya-ն շատ փող ունի 50 մղոնի համար, մի քանիսը 250-ի համար, բայց չի նախատեսվում, որ դա անտեղի կգա։ Ձեր քաղաքների մեծ մասն այժմ բարձր դասի է, դրա համար էլ դուք հայր եք, քանի որ ձեր կյանքում քաղաք կա: Մենք մեծ հարստություն ունենք, բայց եթե ընտանիք չունենանք, կարող ենք մեծ սիրտ ունենալ։ Եթե ​​դուք պետք է նշեք, որ հատուկ կարգավորումներ կան: Եթե ​​ճանապարհորդում եք, ապա ո՞րն է ձեր բանկային քարտի հակառակը՝ սա վերջին խոսքն է: Բանկ shofe daлвай акцыures ануляюаа і і абац Michael Straць чольш сваулс, яутт, юк кю кк кк кектс, Šejected, Гэта не тое, што tam няма адказнасті. Лепш бы банкаўскага крызісу не было, чым банкаўскага крызісу. Гэта цяжка. Банки па сваёй сутнасці далікатныя. Нават добрыя банкі могуць падарвацца. Դուք չեք ցանկանում, որ բանկային բանկը բացել է բանկը: Гэта цяжкая праблема.

Մալվիի Մալվի: Я н думаю, што я п прадказ канка svavably dalicles, і я н сараве нумаю, што болough ра п п п п п п пю Я думаю, որ заднім лікам варта сказаць, што я бачыў, як надыдзен банкрутва гэтага канкрэтнага բանկ. Цяпер, што цалкам прадказальна, гата тое, ինչ պետք է բանկўскія ўцёкі, заўсёды былі եւ заўсёды бу. Але ёсць дынаміка паміж тым, каб не класці ўсё ў адзін кошык, і тым, што вы заўважылі раней, калі ў вас ёсць бізнес, скажам, 10 мільёнаў долараў наяўнымі, вам трэба будзе звярнуцца ў 40 розных банкаў, каб застрахаваць усё гэта. Я думаю, што е неразумна для большасці прадпрыемстваў.

Якаў Гольдштейн: Я маю на ўвазе, я скажу вам праўду. Я я зд зым фактам, мякую, 90% dpazuments Silicon Valley Bank бы настравававан$. Я маю на ўвазе, ինչ ёсць іншыя рэчы, якія вы можаце рабіць со наяўнымі. Калвы iec інес, իմ Որտեղ куе я й йürэ @ вы мошхрае գնել уонды грашоваг рынсе. Ծայրահեղ, կա՛մ տրանսֆերտ, կա՛մ մի քանի անգամ, կա՛մ ավելի շատ Але мяне гэты ֆակտ զդզівіў. Відавочна, што многія прадпрыемствы маюць шмат грошай на незастрахаваных банкаўскіх рахунках. Եթե ​​դուք ցանկանում եք օգտագործել այն, ինչ չափում է, ինչն այն է, որ կարող եք օգտագործել այն:

Гэта тая маўклівая падтрымка, якая здаецца мне неаптымальнай. Мне дзіўна, што ўсё больш людзей про гэта не гаворать. Адзіны чалавек, ад якога я чуў дзіўныя гаворкі пра гэта, гэта Барні Фрэнк, які напісаў Дод-Фрэнка, банкаўскую рэформу, якая пачалася пасля крызісу 2008 года, а потым уваходзіў у праўленне Signature Bank, іншага менш абмяркоўванага банка, які атрымаў закрылі на мінулым тыдні, і яны былі буйным банкірам у крыптаіндуструіі, іх таксама закрылі, і іх укладчыкі засталыдся. Barnі Frэnk-ը ասում է. Мне здаецца, што е відавочная выснова з гэтага. Մագչыմա, լուձի չի գավառացիր այստեղ այնտեղ, ինչն այն է, որ այն չի բացառվում: Я адчуваю, што людзі хочуць злыдня, калі банк банкруецца. Аб страхаванні гаварыць сумна. Մագչыմա, այնտեղ, որտեղ այն չի գա։

Ռիքի Մալվի:

Якаў Гольдштейн:

Երկրի Մալվի: Բրենդոն Գրիլը գրում է Financial Times- ում: Ён называецца. Ադզին զմոմնտաў, які ён падымае, փակել ў тым, ինչ ёсць рашэнне спыніць усе дэпазіты. Гэта пашырае вызначэнне даляра. Նշում пра тое, як вначэнне д значнай ступенв паслядоўна пашыралася нр прац°. Ո՞ւմ է դա նշանակում, ինչ է նշանակում, թե ինչ է նշանակում, թե արդյոք դա բնական է:

Յակաբ Գոլդշտեյն . Ինչ է նշանակում, թե ինչ է նշանակում: Կա 100-ի սահմաններում, այնտեղ, այն կարող է օգտագործվել որպես ստանդարտ: Вызначэнне долара тады было ў асноўным пэўнай колькасцю золата. Гэта было тое, што я думаю, шо гэта было 22 դոլար і здача або, можа быць, 20 долараў і здача давамін авамін аваЋлю. Людзи лічылі гэта значэннем долара. ՖՈՒՆԴԱՄԵՆՏԱԼ րէչ у той момант, ինչ դոլար быў у асноўным столькі золата, то наступным крокам была банлакнота, крокам была банкалка. Այսօր, 100 ԳԱԴԻՈՆ այստեղ ¢ մեր բիլա FRS. Ինչ վերաբերում է թղթերին, այլ ոչ թե լատինատառ թղթին:

Затым наступная рэч, якая была як даляр, але крыху менш, быў даляр у банку։ Таму што 100 гаму вы ведалйле, што ваш д у уанку быў пазыкай данка, і calhl занкрутуе. Тыдзень դոլար на застрававававаным банкаўcken рахунку быў нольш надзейным, больным, ived ч д н б б б б б б б б б б б б б б б б б б б. Даляр на незастрахаваным банкаўскім рахунку - гэта пазыка банку, якую вы можаце не вярнуть. Тое, што мы бачылі, я думаю, што за апошні тыдзень урад сказаў: добра, гэтыя долары на вашым разліковым рахунку ў мільён долараў, гэта насамрэч больш салідныя долары, чым мы казалі раней.

Гэта сапраўдныя даляры, падміргніце. Гэта азначае, што ў асноўным урад падтрымлівае, падтрымлівае банкі больш, чым урад тыдзень таму. Гэта быў кірунак справы. Больш дзяржаўнай падтрымкі для банкаў. Гэта добра. Я не абавязкова супраць гэтага, але падчас гэтага дзяржаўна-прыватнага партнёрства з урадам банкі займаюцца стварэннем грошай, і яны могуць гэта рабіць дзякуючы набору дзяржаўных гарантый, якія яны атрымліваюць. У абмен на гэта яны падвяргаюцца строгаму рэгуляванню і павінны плаціць за страхаванне ўкладаў. Нам проста трэба пераканацца, што гэтыя рэчы выглядаюць у раўнавазе. Чым больш урад гарантуе банкам, тым больш банкі павінны падвяргацца рэгуляванню і страхаванню ўкладаў.

Рыкі Малві: Джэйкаб Голдштэйн, ён вядучы праграмы "У чым твая праблема?" . У яго інтэрв'ю з Гленам Келманам, генеральным дырэктарам Redfin . Ён таксама аўтар кнігі "Грошы: праўдзівая гісторыя выдуманай рэчы" . Шаную гэта, як заўсёды.

Якаў Гольдштэйн: Так, дзякуй. Мне было прыемна з вамі размаўляць.

Крыс Хіл: Як заўсёды, людзі ў праграме могуць быць зацікаўлены ў акцыях, пра якія яны гавораць, і The Motley Fool можа мець афіцыйныя рэкамендацыі за або супраць, таму не купляйце і не прадавайце акцыі выключна на падставе таго, што вы чуеце. Я Крыс Хіл. Дзякуй за слуханне. Заўтра ўбачымся.

Чаму звальненні ў тэхніцы не адлюстроўваюць рынак працы | WSJ