Last Week Tonite: Wall Street Edition

Some of the most interesting financial stories of the week:

1. Goldman Sachs analysts want better working conditions: A small of group 1st year IBD analysts who felt overworked and had no time to shower or sleep but, on the other hand, did manage to find the time to put together a professional looking deck (congratulations, you are GS material!) under the guise of a 'survey', bemoaning their lot in life and how GS needs to change or risk losing them. And, of course, posting it on social media to have the desired effect. Hmmm, not sure they will get all that much sympathy from current senior management.

2. Greensill and financial innovation: Greensill Capital was supposedly at the forefront of fintech before it collapsed last week, offering supply chain finance reserved only for blue-chip companies to small (i.e., risky) businesses through great analytics. But Softbank was an investor so, you know, it could always go either way. Turned out it had decidely low tech, but no shortage of risks. 

Greensill's business was financing supply chains. Say, company ABC buys $100 worth of widgets from company XYZ. XYZ allows ABC 90 days to make payment, but would rather get paid today and is willing to offer a discount as incentive (you know..."a bird in hand is better than two in the bush" argument). So Greensill would pay XYZ $95 today and collect $100 from ABC 90 days later. And that's supposedly the whole game. Of course, that alone doesn't get you a check from Softbank. Greensill would do many of these transactions and remove the risk by securitizing the cash flows...specifically, sell them to two Credit Suisse funds. Ok, sounds more interesting.

But Greensill also financed "prospective receiveables" from "prospective buyers." Huh? Basically, XYZ says to Greensill that they think company BBB will buy $100 of widgets from them shortly. So asks Greensill to advance them $95 and collect $100 from BBB in 90 days. Of course, BBB isn't a XYZ client yet and has not purchased anything and may never do so...there's just the dream of doing so. But Greensill was undettered, because what is high-finance but dreams? At the end of 90 days, of course, no sale. But XYZ promises very soon...almost there. So they roll over the loan. Greensill lends XYZ $95 so it can pay Greensill back the original advance plus interest. XYZ wires, I dunno, $99 to Greensill. And they keep doing that...but wiring money back-an- forth incurs fees and that's not high finance. So the parties move to a cashless roll, where XYZ just pays the interest--voila, a high-finance solution! Greensill apparently did a lot of this with its biggest client, Bluestone. So, it was probably risky stuff like this with risky counter parties that got Greensill into trouble, but also stuff like this that probably made them attractive to VCs in the first place.

3. Dow gains 1,000 points in record time to reach 33K: The Dow Jones notched its fastest consecutive, 1,000-point milestones on a closing basis, taking just 5 days after passing 32,000 to close at a record 33,015 on March 17th. Lately, the Dow's been on a tear gaining ~4% MTD and benefiting from the rotation out of growth (i.e., Tech) into cyclicals. The tech-heavy NASDAQ is down 4% MTD.

4. Bitcoin hits $60,000: The crypto juggernought continues. Bitcoin passed the $60K milestone last weekend, about 4 weeks after crossing $50K for the first time. YTD the crypto "currency" is up almost 100%. Here's a revealing chart from BAML that puts Bitcoin's popularity in perspective. Seriously, not a bubble? Bitcoin's meteoric rise makes the prior decade's Tech and U.S. Housing gains look almost rational.

5. Inflation, inflation, inflation: See here.