Madoff: 10 years later

MARKETS

• U.S. markets: The Dow managed to claw back a 500-point drop to close in the green. Leading the charge? Mostly technology stocks, including Facebook, Apple, Netflix, Alphabet, and Amazon.
• Jobs: Looking for your next line of work? Factories are hiring in huge numbers—the job opening rate in the durable-goods manufacturing industry climbed to its highest level on record in October.

BIZ HISTORY

Madoff: A Decade Later

Today marks exactly ten years since the feds arrested Bernie Madoff in a financial fraud case that rocked Wall Street to its core.

And since the fraud occured in ‘08 (before email was cool and the Brew ever graced your inbox), let's revisit what made the Madoff scandal so...well, fit for Hollywood.

You don't see fraud this size every day

Madoff orchestrated a $65 billion Ponzi scheme (aka fraud in which someone pays early investors using funds obtained from more recent investors instead of actual profit). It was the largest-ever financial fraud in U.S. history.

Want a comparison? Madoff's scheme eclipses not only Zuck's net worth but also the GDP of Croatia.

So...what's come of the close to 4,800 client accounts affected when Madoff's company went belly up a decade ago? So far, about $13.3 billion—or 70% of approved claims—has been recouped.

• That's a lot. Ponzi scheme recoveries typically only range from about 5% to 30%...and many victims never see a penny, per Bloomberg.
• FYI, victims included nonprofits (Hadassah), pension funds (the Massachusetts Pension Reserve), and celebrities (Steven Spielberg, Kyra Sedgwick, and Kevin Bacon), just to name a few.

What does it mean today?

Madoff turned 80 in a North Carolina correctional facility in 2018 while serving year 10 of a 150-year sentence. But his legacy extends beyond just his prison time.

It's paved a new path for whistleblowers. Before Madoff's arrest, forensic accountant Harry Markopolos had been alerting authorities for years about the fraud...but no one listened.

Now, the SEC has a cash-for-tips program designed to keep history from repeating itself. The Office of the Whistleblower has paid upwards of $326 million to 59 whistleblowers in seven years.

Bottom line: Neither Wall Street nor the world has seen anything in the last decade come close to Madoff's astounding deceit. And if the SEC's crew follows through, Madoff's scheme will be the only one of its kind in your kids' business history books.

TECH

Qualcomm—1, Apple—0

One way huge chipmakers are like people: When they get good news, they're going to share it online and tag their friends.

Qualcomm (+2.23%) was quick to boast about its victory against longtime legal jousting partner Apple (+0.66%) yesterday. It said a Chinese court has banned the smartphone maker from selling and importing older iPhone models (including the iPhone 8 and iPhone X) in the country.

The details: The court says Apple is infringing on two Qualcomm patents that allow you to adjust and reformat photos and manage applications using a touch screen.

Apple's response? Well, its appeal to overturn the ban isn't exactly a concession speech.

• "Qualcomm's effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world."
• The ban also may not make Apple sweat too much. The patents don't cover its most recent operating system (iOS 12) that comes preloaded on phones sold currently.

Zoom out: This is just one front of a multibillion dollar Apple/Qualcomm legal battle being fought in courtrooms across the globe.

INTERNATIONAL

Three Global Leaders in the Hot Seat

For one, it got too hot to handle. For the other two? They escaped...but with second-degree burns.

May hits pause

Facing the prospect of what the NYT called a "humiliating defeat," British PM Theresa May decided to postpone a parliamentary vote on her Brexit deal that had been scheduled for today.

May's decision to kick the can down the road adds another level of uncertainty for businesses wondering what the UK's exit from the EU will look like. Now, the final deadline for the vote is Jan. 21.

Macron blinks first

After weeks of "yellow vest" protests over his economic policies, French President Emmanuel Macron issued his response: Starting Jan. 1, he's 1) increasing the minimum wage by 100 euros/month 2) exempting overtime work from taxes and 3) encouraging employers "who can" to offer year-end tax-free bonuses.

India's top central banker bows out

Urjit Patel resigned after a monthslong tiff with PM Narendra Modi's administration (sound familiar?). Modi's camp wants to control central bank regulations/increase government spending, while Patel...is now out of a job.

RIDE-HAILING

What If...Uber and Lyft Aren’t Racing Each Other to IPO?

No need to recreate the Thunder Road scene from Grease. Evidence suggests Uber and Lyft may not be racing each other to public markets, despite the proximity of their preliminary IPO filings.

Exhibit 1: Uber and Lyft have different value props. Lyft's attractive for what it is (a ride-hailing firm that's got it figured out in North America), while Uber's attractive for what it could be (an all-encompassing transportation giant with moonshots like flying cars), per Bloomberg's Shira Ovide.

Exhibit 2: It's not as if two deep-ocean shipwreck discovery startups are competing for investment. This is Lyft and Uber—there will be demand pretty much whenever they're ready.

• "There might be an enthusiasm premium for being the first...but it's unlikely to last very long," Ovide writes.

So what happens next? Well...keep in mind, Snap filed confidential IPO paperwork in mid-November 2016—but didn't hit the public markets ‘til March 2017.

What filing now does mean, though? Uber and Lyft will be at the front of the line come January, when Wall Street emerges from under a pile of gift receipts.

MEDIA

Brewception: A News Story About a News Story

According to a study from Pew Research, more U.S. adults often get their news via social media (20%) than print newspapers (16%). Last year? They were roughly equal.

Younger readers, if you're wondering where print newspapers come from, it might be time to have "the talk" with your parents.

Other takeaways from the study?

• Age is a major factor: Adults 65+ are 5x more likely to get news from TV than the 18-29 bracket. And only 2% of that younger age group gets news from print newspapers.
• TV still rules: It's the No. 1 source for news, with 49% of U.S. adults saying they get their updates from TV. And among TV options, local TV is the most popular.
• Email newsletters didn't make the cut (there's always next year), but news websites and radio came in No. 2 and No. 3, respectively, as news sources.

Questions for your lunch table: What are the pros/cons of getting news from a print newspaper vs. social media? What are the implications of more people getting news from social media?

WHAT ELSE IS BREWING

• Google+ will be shut down earlier than first expected after a security bug made it possible for developers to access millions of users' private info. Meanwhile, Google CEO Sundar Pichai is set to testify before Congress today.
• Carlos Ghosn, the former chairman of Nissan, was formally indicted in Japan over allegations that he underreported his income.
• Verizon (+1.02%) said about 10,000 employees—or 7% of its workforce—have accepted a buyout offer as part of its cost-cutting plans announced back in September.
• Instagram is launching its own walkie-talkie feature.
• GoPro (-1.01%) is moving most production of its U.S.-bound cameras out of China by next summer to avoid tariffs.

BREAKROOM

Language Riddle
Punctuate the following so it makes sense (you can use all punctuation marks available, such as periods, commas, parentheses, question marks, etc.)

"That that is is that that is not is not is not that it it is."

Did you get the answer in less than 2 minutes? Apply to become a Morning Brew editor. Just joking. Kinda.

(Answer located at bottom of newsletter)

Breakroom Answers