Issue #37

Traders beat banks on Wall Street, Thai and Saudi investment groups buy Selfridges, sloppy AI ads upset New Yorkers, and more.

News from October 3 - October 10, 2024

Traders Beat Banks on Wall Street  

Non-bank trading firms like Jane Street and Citadel Securities have surpassed traditional banks, including Goldman Sachs, in the high-speed trading world, offering significantly higher pay — Jane Street averages over $900,000 per employee, compared to Goldman’s $340,000. These firms now dominate, with Citadel Securities, a Chicago-based powerhouse run by billionaire Ken Griffin, handling 25% of all US stock trades daily.

Using algorithms and technology, they have outpaced heavily regulated banks. However, regulators are concerned about their growing influence, with some warning that they don't fully understand these secretive firms or the risks they pose to the financial system. 

Dennis Kelleher, head of financial reform advocacy group Better Markets: “If we had a better understanding of what Citadel did, or these other big trading firms . . . you could have an informed discussion about what the regulation tailored to those risks would be. But we just don’t know.”

Source

Thai and Saudi Investment Groups Buy Selfridges 

Thai investor Central Group and Saudi Arabia’s Public Investment Fund (PIF), chaired by Crown Prince Mohammed bin Salman, have teamed up to jointly own the iconic Selfridges Group, a key part of London’s cultural and retail scene. Central holds 60% of Selfridges, while PIF acquired the remaining stake after replacing Austria’s Signa.

Signa, led by billionaire René Benko, who once had a net worth of around $5 billion, collapsed due to rising interest rates and declining luxury property values. 

The new partnership between Central Group and Saudi’s PIF includes stores like De Bijenkorf in the Netherlands and Brown Thomas in Ireland.

Source 

Luxury Retailers Priced Themselves Out

Luxury brands are facing a backlash from aggressive price hikes made by them after the pandemic. Between 2020 and 2023, Dior raised prices 66%, while Hermès increased them by 20%. 

These hikes initially boosted profits, but with consumers tightening their budgets, they are now hurting sales. Many brands have stopped raising prices or introduced cheaper products, leading to a 3% drop in average selling prices and a 6% decline in handbag prices. Burberry has been one of the worst-performing brands in the past year, with a 21% drop in sales volume. 

Investors hoping for a quick recovery in the luxury sector may be disappointed as pricing power declines.

Source

Bulletin Board

• Sloppy AI Ads Upset New Yorkers. AI-generated posters for a New York tattoo chain appeared across Brooklyn and Manhattan, upsetting native New Yorkers with their distorted images, including extra limbs and mangled figures, and a broken website link. Owner Mark Briggs admitted using OpenAI’s ChatGPT to create the posters but said the results were flawed and required heavy Photoshop edits. Despite the backlash, he emphasized that all tattoos in the shop are human-made. The shop’s website also featured stock images in its "Meet our Team" section, raising concerns about transparency. Briggs insisted the AI-generated ads don’t reflect the quality of the shop’s actual work. Source 
• McDonalds Sues Beef Producers. McDonald’s has filed a lawsuit against the four largest US beef producers—Cargill, JBS, National Beef, and Tyson Foods—alleging they conspired to inflate beef prices. The fast-food giant claims these companies colluded to suppress cattle prices while driving up beef prices, boosting their margins. This case pits McDonald’s, the world’s largest burger chain, against major meatpackers controlling most US beef production, which in 2023 slaughtered 32.8 million heads of cattle, producing 27 billion pounds of beef. The lawsuit follows similar actions from cattle ranchers and federal investigations into price-fixing in the meat industry. Source 
• Online Gig Platforms Switch Gears. Fiverr and Upwork are shifting their focus to profitability as post-pandemic growth slows, now trading at less than 20% of their peak values. Fiverr has raised its "take rate" to 33%, and Upwork to 18%, increasing fees for freelancers and clients. Both platforms are emphasizing long-term projects over short-term gigs. Fiverr introduced an hourly-pay option for premium users to attract ongoing work, while Upwork is promoting value-added services and subscriptions. These changes reflect their strategy to drive sustainable growth by focusing on higher-end clients and more substantial projects. Source
• Temu Tries to Attract Amazon Sellers. Temu, a Chinese competitor to Amazon, offers sellers an alternative with no fulfillment fees, resulting in product prices that are often 15-35% cheaper. Now the second-most-visited shopping site globally, Temu is expanding its presence by building U.S. warehouses and recruiting American sellers. In response, Amazon is focusing on low-cost items and creating a new storefront for budget-conscious consumers. While many sellers see Temu as a way to diversify, they remain cautious, often hiding brand names to avoid Amazon penalties. Shopper: “I think Temu shoppers are Dollar General Shoppers. When I need laundry detergent, cleaning products, household items I’m going to Walmart or Amazon.” Source 
• Google Search Gets AI Overhaul. Google is transforming its search experience with generative AI, using its Gemini models to reorganize results into categories, prioritizing videos, forum links, and widgets. Initially created for food recipe searches on mobile, this new layout will expand to other topics. Google is also upgrading its Lens feature, allowing real-time questions about objects while enhancing shopping capabilities with price comparisons and reviews— a significant move considering that 20% of Lens searches are shopping-related. Additionally, Google is incorporating hyperlinks into AI-generated answers to boost traffic to linked sites and introducing ads in AI Search Overviews, further reshaping the search experience. Source 

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