Wall Street’s done trying to time the Fed. 

With no interest-rate cuts by the Federal Reserve until maybe the end of the year — if at all — US companies and financial institutions are just getting on with life, The Wall Street Journal reported, with dealmaking-related revenue at a handful of major investment banks collectively rising 27% year-over-year in the first quarter.

What’s Behind Door Number 1?

Last year, global dealmaking volumes fell 18% to roughly $3 trillion, their lowest level in 10 years. The main culprits were geopolitical tensions, economic uncertainty, and high interest rates that made popular leveraged finance deals more expensive. The dearth in deals in turn made life difficult for private equity firms and hedge funds.

But high rates don’t always mean dealmaking takes a hit. Back in 2007, the federal funds effective rate stood at 5.25% — similar to today — but mergers and acquisitions volume amounted to $1.57 trillion, a US record at the time. 

Perhaps 2024 can do the same as dealmakers appear to have finally absorbed higher rates — and are tired of waiting for cuts:

• The total value of US and Canadian deals amounted to $378 billion in the first quarter of 2024, S&P Global reported this week. That’s down from $434 billion in the previous quarter but better than all other quarters going back to the second quarter of 2022. 
• Some of the biggest deals so far this year include Diamondback Energy purchasing shale oil rival Endeavor for $26 billion; BlackRock taking over Global Infrastructure Partners for $12.5 billion; and Capital One acquiring Discover for $35.3 billion, which if approved by regulators would be the largest bank deal in a decade and a half.

Of Wall Street’s five biggest banks, the two most closely associated with dealmaking, Goldman Sachs and Morgan Stanley, have seen their share prices perform the best since reporting earnings, a hint investors see more deals on the way, the WSJ noted.

Another School of Thought: Not everyone is a believer. In an interview with the Financial Times on Wednesday, outgoing Princeton University Investment Co. CIO Andrew Golden said this is the “worst ever” private equity climate and that recent signs of improving liquidity might be “just a blip.” The school’s endowment suffered a 1.7% loss last year, mainly due to private equity underperformance. Unfortunately for private equity firms, this might not be a case where a refresher course in investing will be enough to turn things around.

Boeing is entering even unfriendlier airspace now. 

On Wednesday, the airplane manufacturer’s crisis took center stage in Washington in the form of two separate Senate hearings, with one featuring testimony from a new high-profile whistleblower. Neither meeting exactly inspired confidence in the embattled firm.

Mr. Whistleblower Goes to Washington

While Boeing has faced a plethora of terrible headlines ever since a door plug blew out on an Alaska Airlines flight in early January, the company’s woes predate that — including a pair of deadly crashes in 2018 and 2019 that resulted in 346 deaths. Experts testified in front of the Senate Commerce Committee to discuss a report, published in February, exploring whether the company had sufficiently improved its safety and compliance procedures since the twin crashes. The skinny: It did not.

“[Boeing employees] hear, ‘Safety is our No. 1 priority.’ What they see is that’s only true as long as your production milestones are met, and at that point, it’s ‘Push it out the door as fast as you can,’” MIT aeronautics lecturer Javier de Luis told the committee. De Luis’s sister was a victim in the 2019 737 MAX crash in Ethiopia. The witnesses also detailed a culture of fear and retribution for employees who spoke out against lax safety procedures.

And in another room in the Capitol, whistleblower and longtime Boeing quality engineer Sam Salehpour confirmed such allegations:

• Ahead of his testimony, Salehpour raised massive red flags about “potentially catastrophic safety risks” involved in the production processes for the fuselage of Boeing’s 787 Dreamliner, and alleged that the company attempted to silence him and moved him to a different department in a possible act of retaliation.
• Salehpour’s allegations have been supported by Roy Irvin, a former Boeing quality manager whose written testimony to Congress also said employees were discouraged from flagging safety problems in 787 Dreamliner production.

Of course, Wednesday’s testimony by both men mirrors those of previous whistleblower John Barnett, a longtime Boeing quality manager who was found dead in March of an apparent self-inflicted gunshot wound in Charleston, South Carolina, where he was giving a deposition in a lawsuit against the company. Irvin’s lawyer had also been representing Barnett.

United We Fall: Boeing’s woes do have one silver lining — for United Airlines at least. Boeing’s cascading crises pushed expectations so low for the airline, that it wowed Wall Street with its earnings report late Tuesday, boosting its shares by more than 17% on Wednesday. Boeing is the wind beneath United’s wings, except when it’s clipping those wings.

Think of the yachting industry as Rose in “Titanic” and Russian oligarchs as Jack — a tragic romance cut short.

Pulling together stats from the SuperYacht Times’ State of Yachting report (what, you don’t subscribe?), CNBC reported Wednesday that a combination of bottlenecked supply problems and a dearth of Russian oligarch buyers resulted in 2023 sales of superyachts falling 35% since 2021. 

My Yacht Will Go On

Western sanctions against Russia over its invasion of Ukraine meant billions of dollars worth of oligarch assets were frozen, including their beloved superyachts. While states generally can’t seize ownership of superyachts, they can effectively impound them — although this comes with a price tag. Just one seized yacht docked in San Diego has cost the US government $20 million in upkeep so far, CNN reported.

The sanctions have led to a crunch for the yacht-making industry, as the report said that a backlog stemming from pandemic supply-chain delays is just starting to unlock, and completions of new superyachts rose 31% last year. For the makers of the very biggest superyachts (those over 200 feet), it’s particularly galling because Russians are among their best customers, according to the report:

• Russian yacht owners buy yachts that average 200 feet long, just behind Saudi Arabian owners, who weigh in at an average of 202 feet. American buyers are practically humble by comparison, buying boats only 177 feet long.
• While completions for yachts are rising, there’s still a backlog when it comes to getting boats to new owners, with waiting lists of up to four years that raise the costs of labor and materials.

Russia Can’t Get its Nickel Back: While the yachting industry may be missing its usual ruble injection, that doesn’t mean Russian spending is down overall. The International Monetary Fund predicts Russia’s economy will grow faster than every other advanced economy this year, so patching up holes in sanctions against the Kremlin is an ongoing process. The US and UK added a new sanction on Monday, banning future trade of Russian nickel and copper. A considerable amount of Russian metals is already sitting in warehouses, and, according to Bloomberg, metals traders are already figuring out ways to game the system. Sanctions: the most elite game of whack-a-mole there is.