SPY•Opening line
“Fast-fashion retailer Shein’s listing looks like it needs to go down a size or three.”
Read more: Shein’s shrinking margins call for IPO in XXS.
Five things I learned from Breakingviews this week
Chart of the week
The new CEOs of mining titans BHP BHP.AX and Rio Tinto RIO.AX face a battle with Beijing. President Xi Jinping is flexing in the latest round of negotiations with iron ore suppliers, aiming to be paid in yuan with prices based on Chinese rates rather than international benchmarks. Antony Currie runs the numbers.
The week in podcasts
China experienced the largest credit boom and bust in recent history. On The Big View, Logan Wright of Rhodium Group explains why debt, deflation, slow growth and industrial overcapacity will be hard to reverse in the world’s second-largest economy.
Fast-fashion retailer Shein released financial details ahead of its long-awaited Hong Kong initial public offering. Aimee Donnellan, Antony Currie and Katrina Hamlin discussed on the Viewsroom why pushback from the West against the company’s business model may have collapsed its valuation to just $10 billion.
Parting shot
With all the M&A taking place, it’s sometimes worth imagining what else could happen. With PayPal PYPL.O boss Enrique Lores saying the company is open to offers even after it rejected a $53 billion takeover bid from rival Stripe, Stephen Gandel invited Elon Musk to have a look at the payments processor that ousted him a quarter century ago. SpaceX SPCX.O would be a better buyer, with financial, strategic and revenge logic to a deal, he concludes.
Want to receive The Week in Breakingviews in your inbox every Saturday? Sign up for the newsletter here.
Follow Jeffrey Goldfarb on X and LinkedIn.
When Wall Street’s money mills churn out profit at a breakneck pace, it bodes well for workers on the financial factory floor. Of course, times can only get so good before outsized pay and moral hazard start to attract unwanted attention.
For now, there are no pitchfork-wielding masses in lower Manhattan akin to those in 2008. Part of it may be that the area is now overshadowed by Silicon Valley. Despite the lavishness of banker bonuses, which are on pace to rise again after LSEG recorded a 52% year-on-year rise in U.S. merger activity through July, they often now pale in comparison to remuneration in tech. No master of the universe could dream of landing a payday like the $1 trillion, 10-year package that Tesla TSLA.O teed up for Elon Musk. JPMorgan JPM.N boss Jamie Dimon and Goldman Sachs GS.N CEO David Solomon combined to earn $100 million, with an “m,” for their 2025 labors.
Another explanation for the relative apathy is the guardrails installed following the global financial crisis. Deeper capital cushions and clawback provisions are among systemic safety features at large institutions like JPMorgan and Citigroup C.N. Nevertheless, number goes up.
Last year’s bonus pool for the New York City securities workforce reached a record $49 billion, or almost $250,000 on average for each of the 198,000 people in it. Three decades ago, the going rate was $64,000, meaning that despite periodically sharp declines, like the 43% fall in 2008, such rewards have grown far faster than inflation. Moreover, the median annual income for U.S. workers in 1996 was roughly $20,000, a third of the typical year-end banker prize. At around $63,000 today, it’s a quarter as much.
Although Wall Street wages garner less scrutiny from Main Street these days, they are not lost on shareholders. The 178-year-old deal-advice shop Lazard, for example, trades at a discount to rivals, in part because it bid adieu to 40% of its 212 managing directors between 2022 and 2025. The amount of upfront money it cost boss Peter Orszag to replace them, and then some, was hefty. He’s confident they’ll start earning their keep by generating $10 million of revenue each by 2028, but the lag has left some doubts about the compensation.
Lazard’s boutique peers also have something to prove. Pay-to-revenue ratios at Evercore EVR.N, Moelis MC.N and PJT Partners PJT.N have swelled to 68% on average in recent years from the 60% tallied between 2016 and 2022. As Liam Proud worked out, this represents $2.3 billion of additional compensation for the foursome, including Lazard. They would need to generate $900 million of extra fees combined to generate a 10% return on their rainmaker investments. Any slack in productivity will warrant its own sort of revolt.
