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➘ SELL: EVs. Lucid and Rivian said they’ll fall short of production goals for 2024, and Rivian is firing 10% of employees. Mercedes, too, said this morning that its EV demand is cooling and cut in half its prediction of 100% electric sales by 2030. One industry CEO sees mergers as the answer.

Nikkei tops 1989 peak… Boeing ousts Max boss… More homeowners shed “golden handcuffs”... Bezos wraps $8.5B Amazon stock sale… Zombie wind farms… Panda diplomacy is back… “DPI is the new IRR.”

The $600 million fight over an off-color joke

THE SCOOP

A former senior trader is still fighting hedge-fund giant D.E. Shaw in a case charged with the politics of the #MeToo movement on Wall Street that could also have repercussions for contracts throughout the industry.

In a Tuesday filing at the New York Supreme Court, lawyers for Daniel Michalow say that D.E. Shaw’s policy, common among big funds, of withholding back pay until soon-to-be-ex-employees sign away their rights to sue the firm or report misconduct is illegal under New York state labor laws.

Michalow was fired by D.E. Shaw in 2018 after telling a former assistant that he was looking for a new assistant whom he could call “sugar tits” — a quip he later said was intended as a Mel Gibson impression. The fund said his behavior violated the firm’s code of conduct.

In 2022, he was awarded $52 million by a Financial Industry Regulatory Authority panel that found D.E. Shaw and four senior executives defamed Michalow when they suggested to a Bloomberg reporter, and internally, that he had been fired for sexual misconduct.

Michalow, who originally sought $600 million in damages and deferred compensation, has been appealing the size of that award, arguing that D.E. Shaw is still holding back millions of dollars of his deferred pay based on a contract that isn’t strictly legal. In May, a New York judge rejected his efforts to get $14 million of that deferred compensation because he had refused to sign a required release.

D.E. Shaw did not return a request for comment.

THORNTON’S VIEW

Michalow might not immediately cut a sympathetic figure. But his case shows how hedge funds’ secrecy can hamstring their employees’ attempts to preserve their own reputations.

Hedge funds are micro-cultures and many of them are very protective of the secret sauce behind how they invest and trade. At quant funds like D.E. Shaw, which rely on proprietary algorithms, that furtiveness can verge on cultishness.

Many funds have tightened their employment contracts to make it harder for traders to take those secrets with them to a competitor, using things like deferred compensation as a cudgel. They often recruit straight out of universities and business schools, offering huge sums of money to young people unfamiliar with employment contracts. (Michalow says he signed on with D.E Shaw as an undergraduate.)

He has an axe to grind, but it’s also clear that the “release-for-pay” issue is not just a D.E. Shaw problem.

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China’s economic problems aren’t staying in China. Yesterday they spoiled otherwise strong earnings from HSBC, one of the world’s largest banks and one with deep roots in Asia (the H and S stand for Hong Kong and Shanghai).

HSBC’s shares fell 9% after it took a $3 billion charge on its stake in a Chinese bank and tried to reassure investors about its commercial-property loans in the country. We wrote a lot about Beijing’s problems on Tuesday and won’t rehash it here. But the news is bad, and a lot hinges on whether a property bubble inflated by Beijing’s own policies pops violently or deflates slowly.

HSBC’s chief executive, Noel Quinn, said in October that he thought China’s real-estate market had bottomed out, a view he reaffirmed yesterday. But his loan portfolio remains the stuff of risk officers’ nightmares: By HSBC’s own estimation, 26% of its commercial real-estate loans in China are unlikely to be repaid in full. In Hong Kong, where the vast majority of its loans aren’t backed by any collateral at all, the bank expects to recoup about 65 cents on the dollar.

— with reporting by Mathias Hammer

Mutual of Omaha: Warren Buffett may reveal the secret stock he bought last year in his annual letter set to drop Saturday. Smoke signals point to a bank: Berkshire spent $1.2 billion on shares in financial companies in the third quarter without disclosing a new position. Buffett may loathe investment bankers, but he loves banks. Saturday’s letter will be Buffett’s first since the death of longtime lieutenant, Charlie Munger.

Mission critical: What does it take to get a meeting with Janet Yellen? Mines full of lithium, copper, and other crucial components of electric-car batteries, among quite a lot else key to the clean energy transition. The U.S. Treasury secretary heads to Chile next week in the kind of economic diplomacy that’s taken on new urgency as China, the world’s biggest producer of rare-earth minerals, starts hoarding.

Swiping left: Shares of Discover are trading 13% below the value of Capital One’s takeover offer, suggesting investors are skeptical the deal will close. (So am I, for reasons I got into on Tuesday.) Amid an already frosty regulatory environment, a new study this morning from the Consumer Financial Protection Bureau found credit-card interest rates are at record highs and rising far faster than baseline borrowing costs.

Sanctions haven’t hobbled Russia, which is continuing to sell oil and gas and finding replacements for Western goods. After Alexei Navalny’s death, calls are growing for the U.S. to seize Russia’s $300 billion in overseas assets and use the money to fund Ukraine’s defense. The arguments against doing so — mainly that it would threaten the dollar’s global dominance — “get worse by the day,” The Wall Street Journal’s editorial board wrote this week.

Bill Browder is a financier and Kremlin critic. He is the CEO of Hermitage Capital and was the driving force behind the Magnitsky Act, which authorizes the U.S. to sanction foreign officials for human-rights violations.

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