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CEOs stand athwart the remote work era, yelling ‘stop!’



CEOs stand athwart the remote work era, yelling ‘stop!’

The economy has a case of remote work. That’s the story corporate America told in second-quarter earnings calls.

To some CEOs, any ills their companies face inevitably come down to the fact of people logging on from home. As a result, if their business hinges on a steady hum of commuters, they’ve struggled to adapt to the reality of prolonged telework.

To paraphrase William F. Buckley Jr., the midcentury media mogul behind the conservative National Review, many CEOs are standing athwart the remote work era, yelling for it to stop. Especially the ones whose business relies on foot traffic in core urban centers. 

Bloomberg calls this the “Pret Index“, which tracks transactions at cafe chain Pret a Manger. Known for its omnipresence in the lunch scene of New York and London’s financial districts, but also with a sizeable suburban presence, Pret is an ideal vehicle for measuring remote work’s reshaping of daily commuting habits—and the huge impact on business as a result.

As of July 14th, transactions at Pret locations in business districts were 20% below their pre-pandemic rates; suburban locations were up 120%. Stanford economist and WFH Research founder Nick Bloom summed it up: “WFH Office workers are lunching from home in the suburbs, cutting city center spending and boosting suburban spending.”

Randy Garutti, CEO of Pret rival Shake Shack, told analysts on Thursday that in Midtown Manhattan, “40% of our lunch guests just aren’t here yet … whether it’s subway mobility, tourism, and other things that just haven’t returned to where they were.”

While acknowledging that store traffic trends in midtown—like the future of the workplace itself— is impossible to pin down, Garutti says he’s a “believer in the urban ecosystem.”

“We’re believers in those high-volume shacks that have led the company for so long, that continue to be deeply impacted,” he added. “The upside is going to be more returns to the office—we’ll see where that goes after this summer.”

It’s not just the fast casual space, as Bloomberg reports. Net sales decreased 5% at early-pandemic beneficiary Clorox, which it said was “primarily as the result of reduced demand … due to low office occupancy rates and a tight labor market for cleaning professionals.” 

The message is clear: Remote work hurts the bottom line because too many businesses are still set up for a 2019 world. 

CEOs want to turn back the clock. Workers aren’t on board.

As with previous attempts, comments like those from Shake Shack and Clorox are unlikely to sway happy remote workers. The amount of employees interested in working fully in-person has reached an all-time low, per Slack’s latest Future Forum Pulse survey. Of over 10,000 global knowledge workers polled, only about 1 in 5 were willing to head back in. 

Akbar Al Baker, CEO of Qatar Airways, told Reuters last week that remote work is to blame for a summer of extreme staffing shortages, delayed and canceled flights, and lost luggage. 

“It is actually an epidemic in our industry,” he fumed. “This all happened because people learned to get easy money from working out of their homes, and fewer people now want to come and do the jobs that they were doing.”

New York City Mayor Eric Adams has been a notable voice of opposition to remote work among local politicians, repeatedly saying that remote work is draining the city’s economy.

“It’s time to get back to work,” Adams said in February. “You can’t stay home in your pajamas all day—that’s not who we are as a city. You need to be out, cross-pollinating ideas, interacting with humans.”

Even the president has weighed in; during his State of the Union address in March, Joe Biden said that “it’s time for Americans to get back to work and fill our great downtowns again.” For Garutti, that ideally means getting in line at Shake Shack. 

The recession could end remote work—or lead workers to double down

Despite the enormous tailwinds coworking spaces like WeWork have enjoyed this year, the recession just might bring offices back into the mainstream. 

At least, that’s what folks with skin in the game think. Stephen Ross, the billionaire real estate investor behind New York’s Hudson Yards said an economic slowdown can make people fear losing their job. 

“The employees will recognize as we go into a recession, or as things get a little tighter, that you have to do what it takes to keep your job and to earn a living,” he told Bloomberg in June, suggesting that some workers think in-person communication with their bosses may save them from a layoff.

On the other hand, a recession may only lead remote workers to dig in their heels. “There’s no question that a focus on profits over personal preferences will benefit remote work,” Gleb Tsipursky recently wrote for Fortune. “Rather than trusting their gut, [executives] will need to rely on the hard data of what makes the most financial sense for companies.”

When it comes to productivity, as study after study proves, flexible work wins every time.

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Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter



Coinbase's near-term outlook is 'still grim', JPMorgan says, while BofA is more positive about firm's ability to face crypto winter

Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.

Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.

The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.

The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.

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Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter



Elon Musk sold $6.9B in Tesla stock in case he's forced to buy Twitter

Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings. 

Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”

Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.  

Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October. 

In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance. 

“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.” 

Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.  

Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year. 

With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.    

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The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says



The rent is too d*mn high for Gen Z: Younger generations are 'squeezed the most' by higher rents, BofA says

Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.

But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.

This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday. 

The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June. 

But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows. 
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.

The great rent comeback

Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value. 

Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA. 

It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.

It’s no wonder—the rent really is too high.

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