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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Goldman Sachs’ quarterly profits jumped 45 per cent to $3bn in the third quarter, boosted by its equity trading business, even as the investment bank took another hit from its retreat from retail banking.

Goldman’s net income compared with $2.1bn in the third quarter of last year and outstripped analysts’ estimates of about $2.5bn.

In the best quarter for Goldman’s stock trading business since the start of 2021, equity trading revenues reached $3.5bn, up 18 per cent and defying expectations they would be roughly flat compared with a year earlier. Fixed income trading revenues fell 12 per cent to $3bn.

Overall trading revenues were up about 2 per cent from a year earlier despite a warning by chief executive David Solomon last month that trading revenues were likely to drop by close to 10 per cent, largely due to sluggish activity in fixed income.

Goldman’s stock was up more than 2 per cent in pre-market trading on Tuesday.

The year-on-year increase in net profits was also flattered by losses Goldman took a year ago tied to its pullback from consumer banking and writedowns on real estate investments.

In the latest quarter, Goldman took a roughly $415mn pre-tax hit from moving its credit card partnership with General Motors to Barclays, the cost of exiting from small business loans and further writedowns on the GreenSky business that it sold last year.

Goldman benefited from a continuing revival of dealmaking activity in what Wall Street hopes is the start of a sustained recovery.

Fees were up 20 per cent at $1.9bn, slightly ahead of estimates. JPMorgan Chase last week reported a 31 per cent increase in investment banking fees to $2.3bn.

Goldman’s asset and wealth management division, which is central to Solomon’s efforts to make the bank less reliant on investment banking and trading, reported a 16 per cent increase in revenues to about $3.8bn.

Longtime Goldman rival Morgan Stanley will report its results on Wednesday.

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Global public debt is forecast to exceed $100tn by the end of this year, according to the IMF, which has warned that major economies’ plans to stabilise borrowing “fall far short of what is needed”.

The fund said on Tuesday that government debt, which ballooned during the Covid-19 pandemic, had continued to rise as countries embrace higher spending to stimulate economic growth. Debt was set to approach 100 per cent of global GDP by the end of the decade, it added.

“Risks to the debt outlook are heavily tilted to the upside” and there are “good reasons to believe that future debt levels could be higher than currently projected”, it said in a report.

Debt was forecast to continue rising in countries including the US, the UK, Brazil, France, Italy and South Africa, the IMF said.

It added that government spending to fund the transition to greener energy, ageing populations and security concerns was likely to add to fiscal pressures over the coming years.

With inflationary pressures receding and the US Federal Reserve, the Bank of England and the European Central Bank lowering borrowing costs, “now is an opportune time” for economies to start rebuilding fiscal buffers, the IMF said.

It added that “in countries where debt is projected to increase further . . . delaying action will make the required adjustment even larger”. It called for “cumulative fiscal adjustment” — tax rises or spending cuts — of 3 per cent to 4.5 per cent of GDP to bring down debt across the world.

“Advanced economies should reprioritise expenditures, advance entitlement reforms, increase revenues through indirect taxes where taxation is low and remove inefficient tax incentives,” it said.

The IMF’s report comes as China tries to rejuvenate its economy with a huge fiscal stimulus and just weeks before the US presidential election.

The economic plans of both Donald Trump and Kamala Harris are forecast to swell US federal debt by trillions of dollars, according to a recent report by the Committee for a Responsible Federal Budget.

Concerns about rising levels of borrowing have contributed to a sell-off in government bond markets in recent weeks, including in the UK and France.

UK chancellor Rachel Reeves is expected by some economists to use her Budget this month to tweak the definition of public debt used for the UK’s fiscal rules to allow for more borrowing.

The ECB said in a report this year that long-term challenges were “likely to exert pressure on public finances” in the euro area.

Hitting a government debt-to-GDP ratio of 60 per cent by 2070, from today’s debt levels, would require governments to “immediately and permanently” increase their primary balance — the fiscal balance excluding net interest payments on public debt — by 2 per cent of GDP on average, the ECB said.

More than half of homeowners want to ‘improve not move’ – spending big on their current home instead of buying a new one.

A poll of 2,000 adults who own a property, found 41 per cent ‘love’ their home, leaving 53 per cent wanting to adapt it to suit their changing needs.

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And one in six (17 per cent) would be willing to spend more than £20,000 on renovations.

Just 24 per cent would rather move elsewhere and start afresh but 46 per cent admit they will probably look to ‘list’ it within the decade.

The top reason driving people to move was the fact it may not meet their mobility needs as they get older.

While changes in lifestyle and a bigger property were other factors in considering listing it over loving it and making adjustments.

Sam Stannah, CEO of Uplifts, a home lift manufacturer, which commissioned the research, said: “Clearly, many people love the homes they live in – but there’s an acceptance that life can change in a heartbeat.

“We all cherish our homes, the research confirms this – however, what’s truly eye-opening is the level of anxiety that arises when we consider if the home we love today will continue to meet our needs in the future.

“The findings have shown homeowners are very much aware they might have to make a decision to move home or renovate to meet their changing mobility needs.

“But also, there are plenty of owners on the ladder who don’t feel their current property quite matches what they want in terms of space and location, currently.”

The research found the average homeowner has lived at their property for an average of 15 years.

With the comfort and familiarity, location and suitable size and layout the top reasons for 53 per cent considering their current place their ideal homestead. 

While the local community, feeling of security and facilities and amenities nearby among the others.

It also emerged 61 per cent believe their current home was big enough to accommodate any changes should their health requirements change.

And 41 per cent considered such needs when purchasing their property.

According to Checkatrade, the average cost of a house extension can be anywhere between £30,000 to £42,000, more than double the average amount respondents are willing to pay to meet changing needs – £14,000.

Aside from the stress of moving, mortgage lender Halifax estimates the cost of moving house, from stamp duty to conveyancing can cost £12,000.

Ultimately, deteriorating health and downsizing were the top reasons respondents would feel they’d consider selling – if push came to shove.

But those that are keen to make a move said the area they currently live in, having too many things to fix and their current rooms not being big enough were top motivations to list it.

The research, carried out via OnePoll, found 15 per cent of those polled have mobility issues – with climbing the stairs, stepping out of bed and reaching high shelves the top difficulties faced.

Yet only nine per cent of all adults considered a home lift installation a realistic prospect to help with mobility from floor-to-floor.

Sam Stannah, from Uplifts, added: “The research indicates many people believe installation of products to improve their home may feel out of reach.

“And as a result, the heartbreaking decision of having to leave a beloved forever home can become a reality for many.

“However, installing a home lift can be done without disrupting the layout of a home or requiring invasive or costly work.”

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Good morning. AI has played a big role in the research that won the Nobel Prizes for chemistry and physics, and yesterday it was announced that frequent AI commentator Daron Acemoglu won the Nobel Prize for economics. Is this more evidence of an AI halo? Or proof that AI is the real deal? Email me: aiden.reiter@ft.com.

Robotaxis

Last Thursday, Tesla hosted a glitzy showcase of its future offerings. Investors and the press were served drinks by Tesla’s humanoid Optimus robots, while Elon Musk gave the world its first official look at the “Cybercab” and “Robovan”: driverless, pedal-less autonomous vehicles designed for Tesla’s “robotaxi” fleet, which will allow riders to hail self-driving cars.

The market was . . . disappointed. Tesla stocks fell 8.8 per cent on Friday, and only partially recovered yesterday:

The reasons for disappointment varied (and were well documented by our colleagues in Alphaville). Little detail was provided about its cheaper Model 2, which investors had hoped might lift near-term earnings. Some felt the joyrides in the new vehicles were less than thrilling. And, as it turns out, the self-functioning robots were not so self-functioning. 

Others were let down by the robotaxi offering itself. A lot of Tesla’s previous reports and press conferences have focused on Tesla’s full self-driving (FSD) software and the rollout of its robotaxi fleet, particularly the latter’s potential to obviate public transportation and unseat ride-sharing services such as Uber and Lyft — both of which saw their stocks surge as Tesla’s fell on Friday. As noted by our Lex colleagues, estimates for the expected value of the robotaxi market can range, but are very, very high: ARK Investments and Musk put it between $5tn and $8tn, while the more conservative RBC Capital Markets estimates it to be $1.7tn by 2040. In our piece from July, in which we tried to break down Wall Street’s earnings expectations for Tesla, we attributed $32bn of revenues to FSD software sales and robotaxis by 2029.

Tesla is not the only company trying to capture that market, though. It is up against Waymo, the autonomous driving company spun out of Google; Cruise, General Motors’ autonomous ride-hailing service; and Zoox, Amazon’s self-driving subsidiary. Is it possible that Friday’s market reaction was proof of investors feeling that Tesla may be losing the race? Some things that stuck out from Thursday’s presentation and investors’ and analysts’ reactions:

• Timeline: Musk initially promised a robotaxi fleet as early as 2018. During Thursday’s event he wavered: “We expect to be in production for the Cybercab, which is highly optimised for autonomous transport, in . . . well, I tend to be optimistic about timeframes, but in 2026 . . . before 2027, let me put it that way.”

  He committed to having some of the FSD capabilities for newer models available by next year in Texas and California, meaning that car owners or Tesla itself could potentially use FSD for taxi services. But it seems like Tesla’s official fleet of Cybercabs will not be up and running for a couple of years. Meanwhile, Waymo is already operating taxi fleets in four cities; one analyst told us they are “essentially ubiquitous in San Francisco”. It is also licensing its technologies to other companies and manufacturers. Cruise is operational in two cities, though it has hit some compliance and safety snares, and Zoox is testing its fleet in two states.

• Compliance: One of the issues Cruise has run into is its proposal for a car without a steering wheel or pedals. Though the National Highway Traffic Safety Administration allows vehicles without either, Cruise paused production of its own offering after failing to get permission to scale production past 2,500 pedal-less vehicles per year. In a note to investors, TD Cowen states that Tesla’s ability to produce its own pedal-less, wheel-less Cybercabs could be “limited” given NHTSA’s previous production cap.

  The same TD Cowen note also states that Tesla’s technological approach might not meet safety standards. While Waymo and Cruise use Lidar, a remote sensing technology, Tesla prefers to use cameras and machine learning, arguing it is the superior and more cost effective technology. TD Cowen sees Tesla’s refusal to adopt Lidar as “a potential regulatory hurdle longer term” and one that will certainly raise the cost of the vehicle if the NHTSA requires Tesla to adopt Lidar.

• Cost: On Thursday, Musk said the Cybercab would cost about $30,000, approximately the same price as its cheaper Model 3 and Model Y. But he also said that it would not have a charging port, instead using inductive charging — which Tesla does not currently have infrastructure for, raising the cost of the rollout. He also said that running the Cybercab would cost $0.20 per mile and will charge about $0.40 a mile. But the current average cost of owning and operating a vehicle in the US is $0.81 per mile, and $0.40 seems very low. Musk’s cars would have to show significant cost reductions, or Tesla may have to raise the price closer in line with existing ride hailing services.

Unhedged does not pretend to know whether Tesla will win the race for autonomous fleets. As SpaceX’s booster-catching feat showed, Musk’s companies often achieve things that were once thought to be impossible. And while it seem to us that these are pretty steep hurdles and evidence that Tesla may be falling behind, some analysts we spoke with actually saw these as strengths. For instance, Edison Yu of Deutsche Bank told us that although Tesla might need to raise the price of the Cybercab and add Lidar in the short term, its camera-based technology was a long-term edge:

Waymo has taken a very long time to scale because, though it has some AI capabilities, it has to map entire cities and code for driving cases. That is hard, as opposed to running the data through a black box model like Tesla does. This will all come down to who can scale faster. Scaling software [such as Tesla’s] is the more efficient and lucrative approach.

Tesla already has a lot of training data from its semi-autonomous driving function. Once FSD is up and running and Cybercabs are under production, it may prove to be the safer offering and quickly capture market share.

Wall Street’s consensus estimate for Tesla’s 2029 revenue has fallen $10bn since we wrote our piece in July. Though we will not get new estimates based on Thursday’s event for a while, some investors think there will not really be an effect, as they already did not assume that Tesla would deploy its fleet in the next few years. Tom Narayan at RBC Capital Markets said, “2030 is not the bogey when we are dealing with robotaxi. It was disappointing to not get concrete numbers [on Thursday], but I don’t have Optimus or Robotaxi [generating revenue] in my forecasts for a couple of years anyway.”

One good read

Should we just give up?

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