The German lender's plan to fire 250 to 500 employees in its trading and investment-banking division just weeks before annual bonuses get paid out resembles the strategy honed for years at Goldman: Fire underperforming employees, or those who aren't generating enough profits to justify keeping them, to save money that can be used to pay top performers bigger bonuses.

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Today's Articles

1)  Court says Amazon could be liable for third-party vendors' products - Engadget

2)  MoviePass Halts Service Over July 4 Weekend - Hollywood Reporter

3)  Deutsche Bank Job Cuts Could Mean Fatter Paychecks for Survivors

4)  Bond yields are falling to record lows as investors pull back from risky assets - CNBC

5)  Interest Rates Just Keep Falling. Economic Orthodoxy Is Falling With Them. - The New York Times

 

Court says Amazon could be liable for third-party vendors' products - Engadget

Article

Now, though, a federal appeals court in Philadelphia has decided that the e-commerce giant can be held liable for products sold by third-party vendors doing business on its website.

As Reuters noted, the decision could lead to an onslaught of lawsuits against Amazon from buyers who end up with defective products from sellers using the platform.

By siding with the plaintiff, the appeals court reversed a lower court's decision over a lawsuit filed by Heather Oberdorf, who was blinded when a retractable dog leash she bought from the website recoiled and hit her face.

None of the parties involved in the lawsuit could get in touch with the vendor, The Furry Gang, which hasn't been actively selling since 2016.

Oberdorf's lawyer, David Wilk, said it feels "gratifying that the 3rd Circuit agreed with [their] argument and recognized that the existing interpretation of product liability law in Pennsylvania was not addressing the reality, the dominance that Amazon has in the marketplace."

We'll likely see a lot more lawsuits against the company, not only because of the Philadelphia appeals court's decision, but also because Amazon is bound to sell more and more independent businesses' products in the future.

That said, Oberdorf's case still has to go back to lower court to determine whether the leash that blinded her was truly defective.

 

MoviePass Halts Service Over July 4 Weekend - Hollywood Reporter

Article

The once high-flying but now embattled theater subscription platform has halted its service just as the July 4 holiday box office weekend gets into swing.

ET on Thursday and may take "several weeks" for it to resume service while it undergoes unspecified "improvements" to its mobile app.

In March, the company had brought back its $9.95 a month plan as a promotional offering, but with many restrictions.

In a filing with the Securities and Exchange Commission that same month, the company noted an "overstatement of subscription revenue" in the third quarter of 2018.

The company stated that the halting of its service was temporary, but moviegoers won't be able to subscribe during the platform's time on hiatus.

The fortunes for MoviePass have declined as the company suffered a cash crunch and pivoted to multiple business strategies in the course of a single year.

MoviePass' subscription app rival, Sinemia, shut down its U.S. service in late April, saying that its effort to "raise the funds required to continue operations have not been sufficient."

 

Deutsche Bank Job Cuts Could Mean Fatter Paychecks for Survivors

Article

The German lender's plan to fire 250 to 500 employees in its trading and investment-banking division just weeks before annual bonuses get paid out resembles the strategy honed for years at Goldman: Fire underperforming employees, or those who aren't generating enough profits to justify keeping them, to save money that can be used to pay top performers bigger bonuses.

The move comes less than a year after CEO John Cryan appointed Marcus Schenck, a former Goldman Sachs executive, to co-head Deutsche Bank's trading, investment-banking and corporate-lending operations.

Earlier this month, Cryan said cost-cutting was a "critical component of improved and sustained profitability," after saying last year that the bank was "investing in people."

The planned job cuts, earlier reported by Bloomberg News, were confirmed by a person familiar with the matter.

On Wall Street, that's a big deal because a substantial portion of compensation for traders and investment bankers comes in the form of annual bonuses.

The dismal environment was the backdrop for Schenck's appointment in March as co-head of the trading and investment banking division alongside Garth Richie.

The bank has acknowledged slow progress in reducing costs in the trading and investment-banking division due to needed increases in compensation for retaining top employees and recruiting new ones.

"This is like the negative downward spiral, where you cut costs, and you don't pay bonuses, so people leave," Viola's Hendler said.

On a Feb. 2 conference call with analysts, Cryan cited the stock-trading business as one that's changed dramatically over the past 10 years, from being dominated by banks to being "commoditized" and more broadly shared among players.

And the business of helping companies and investors hedge interest-rate risk through long-dated derivatives - a type of financial instrument that pays out depending on the direction of markets - has faded as a source of fat profits, he said.

 

Bond yields are falling to record lows as investors pull back from risky assets - CNBC

Article

In times of uncertainty and challenging market environment, investors tend to move their investments from perceived riskier assets into safe havens like gold and government bonds.

The move highlights ongoing uncertainty for the euro zone's economy fueled by a slowdown in Germany, growing unease around Brexit and global trade tensions.

Capital Economics' Chief Markets Economist John Higgins projected in a note Tuesday that even with euro zone bond yields at all time lows, there is still headroom for the rally to continue.

Higgins expects the ECB to cut its deposit rate by 10 basis points to -0.5% in September and announce a continuation of net asset purchases in October, while refusing to rule out further quantitative easing (QE).

Major central banks have taken a U-turn from previously hawkish policy on the back of slow growth, low inflation and political uncertainty, leading investors to steer clear of risky and volatile assets.

The euro zone economy has relied heavily on exports, but with its German engine room showing serious industrial weakness, Italy entering recession and a Brexit stalemate, all compounded by the U.S.-China trade war, investors have grown fearful.

Market volatility peaked in May as the trade war between the world's two largest economies underwent various phases of escalation and tariff impositions, sparking multiple quickfire sell-offs of risk assets.

Interest Rates Just Keep Falling. Economic Orthodoxy Is Falling With Them. - The New York Times

Article

American borrowing costs keep plunging, and that is signaling something important: Some of the basic assumptions of the most influential economic technocrats in the land are, for the time being at least, off base.

This is terrific news if you are a homeowner thinking of refinancing your mortgage or a chief financial officer about to roll over some of your company’s bonds.

Consider some of the assumptions that are embedded in the economic models of the two government agencies most respected for their independence and technical expertise: the Congressional Budget Office and the Federal Reserve.

projects how legislation will affect the economy, it assumes that when the government borrows more, higher deficits will cause interest rates to rise, crowding out investment by the private sector.

Generations of college economics students have been taught that this is simply how things work, and the reason that countries should avoid running large budget deficits.

Global investors find Treasury bonds appealing because they offer better returns than equivalent securities in Europe or Japan, even after the recent drop in rates.

Meanwhile, the Federal Reserve has raised interest rates — albeit in fits and starts — since the end of 2015 based on its own form of economic orthodoxy.

The United States economy has been relatively strong in recent years compared with Europe and Japan, but the slow growth in much of the world has acted on a brake on how much the Fed can raise rates and how much inflation can emerge.

When rates in the United States rise too high relative to other major economies, the dollar strengthens on global currency markets, which then weakens American export industries.

Tighter money in the United States can send ripples to emerging markets where many companies borrow in dollars — meaning that when the Fed raises rates, it can slow the entire global economy, and worsen already powerful deflationary forces.

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