Slate Money – The Five-Star Sandwich Edition (June 2, 2018)

Episode Overview

This episode of Slate Money, dubbed "The Five-Star Sandwich Edition," takes a whirlwind tour through the week’s biggest business and finance stories. Hosted by Felix Salmon with co-hosts Emily Peck and Anna Szymanski, the team dives into Europe’s political turmoil—especially in Italy and Spain—the reworking of America’s Volcker Rule for banks, and the economics behind the sandwich shop Pret A Manger’s acquisition. The conversation balances technical financial analysis, lively debate, and signature Slate Money wit.

Key Discussion Points & Insights

1. Market Panic in Italy: Populists, Bonds, and Euro Fears

• Political Backdrop: Italy forms a government with an unlikely coalition of the populist Five Star Movement and far-right League party, causing apprehension across Europe.
  • "The Five Star Movement is not really far left. It's kind of just... anti establishment, neo anarchist... it's not that they're far left, they just hate the politicians."
    — Felix Salmon [02:29]
• Market Reactions: Panic centers on the Italian two-year bond yield, which saw its sharpest spike since 1989 amid fears of anti-Euro sentiment and potential snap elections.
  • "The reason that everyone is talking about the two-year Italian bond yield is because we saw the biggest spike... since 1989... buyer strike."
    — Anna Szymanski [05:12]
• Contagion Fears: Discussion of the possibility of "Quitaly" (Italy leaving the Euro), and how markets respond more to potential euro-exit rhetoric than actual government formation.
  • "If Italy leaves the Euro, that is genuinely catastrophic for Italy and for the world."
    — Felix Salmon [07:46]
• Technical vs Fundamental Issues: The chaos is attributed as much to market mechanics (a lack of buyers, illiquid markets) as to fundamentals.

2. The (Relative) Calm in Spain

• Political Upheaval Without Market Panic: Despite Spain also changing governments (socialist PM with a weak coalition), markets didn’t respond dramatically.
  • "I think if this had been a more liquid market, you wouldn't have seen this type of reaction."
    — Anna Szymanski [09:04]
• Broader Trend: Concerns about fragmented traditional parties and the rise of weak, populist coalitions across Europe.
  • "We're seeing... the breakdown of traditional parties, the fracturing of electorates, which is leading to the development of weak coalition governments."
    — Anna Szymanski [10:12]

3. The Volcker Rule Revision: Deregulation or Clarification?

• Background: The Volcker Rule (part of Dodd-Frank) restricts banks from proprietary trading on their own behalf.
• Regulatory Tweaks: Proposed changes shift supervision from granular trade-by-trade analysis to higher-level, CEO accountability and broad risk limits.
  • "The Volcker Rule is basically moving from a rules-based system to a principles-based system."
    — Felix Salmon [17:59]
  • "There was an assumption of guilt for all short term trading... banks had to justify every trade..."
    — Anna Szymanski [18:30]
• Debate Over Impact: Panelists discuss whether the change is necessary streamlining or a rollback of financial guardrails.
  • "It's just another sign of our federal government’s penchant for bank deregulation lately..."
    — Emily Peck [17:09]
  • "What's happening here isn't even really deregulation, it's just clarifying the rule... because market making is what makes markets liquid."
    — Anna Szymanski [21:05]
• Bank Profitability: While media suggests banks are thriving, Anna notes that return on equity is still below pre-crisis levels, partly due to stricter regulatory capital requirements.

4. Pret A Manger—Billion-Dollar Sandwiches & The JAB Empire

• The Deal: JAB Holdings, a secretive German family firm, acquires the UK’s Pret A Manger for around $2 billion, adding to its sprawling coffee and snack empire.
  • "If it has a French sounding name, they own it... They're becoming this huge global snacking conglomerate."
    — Felix Salmon [26:59]
• Corporate Culture: Discussion on Pret’s praised employee culture and whether it might survive under new ownership.
  • "Pret has sort of this great like employee vibe... all their employees are getting a thousand pound bonuses."
    — Emily Peck [28:02]
• Family Capital vs. Private Equity: JAB can afford longer horizons than private equity or public markets, aiming for sustainable rather than explosive growth.
  • "You can do things if you're a family... you're valuing companies in different ways... If Pret just stays exactly the size that it is right now... the Riemann family will be happy with that."
    — Felix Salmon [29:31]
  • "There's a bit of a prejudice against the idea of growth as though pushing companies to grow is a bad thing."
    — Anna Szymanski [31:12]
• Value of Growth: Spirited discussion on whether “growth” should always be the corporate goal, especially in sectors with slow or zero historic growth, like food.

5. Numbers Round: Cars, Mexican Elections, and Trump’s Tweets

• Auto Loans: Average monthly payment for new cars hits $523—a record high.
  -- $523 “That’s a lot of money to pay for your car every month. And that’s the average.”
  — Felix Salmon [35:45]
• Mexican Elections: López Obrador (“AMLO”) polling at 52%, raising concerns about non-technocratic populists amid ongoing NAFTA negotiations.
  -- “I think that we're going to only have Justin Trudeau as the only sane person in the room.”
  — Anna Szymanski [39:10]
• US Jobs Data & Trump: Unemployment at 3.8%, but Trump breaks protocol by hinting at the report on Twitter, raising fears of market manipulation and insider trading.
  -- "The president moved markets basically by doing this. Now everyone's going to be looking to his tweets to sort of game the system."
  — Emily Peck [40:32]
  -- "Can the President be prosecuted for insider trading?... There’s literally no government employee who could tweet that out, who had access to the numbers, who wouldn’t be fired on the spot."
  — Felix Salmon [41:27]

Notable Quotes & Memorable Moments

• “Torta is a sandwich. A hot dog is not a sandwich. We are having debates about falafels.”
  — Felix Salmon [00:33]
• "Italy has basically always had weak coalition governments. It has had 65 governments, I think, since 1946..."
  — Felix Salmon [10:51]
• "I like having competent governments that can actually enact change."
  — Anna Szymanski [14:07]
• "If I was the Riemann family... we're going to make a dynastic bet on snacks. And I feel that's a good bet, because everyone snacks."
  — Felix Salmon [27:29]
• "If you want to join the Never Tweet party, send us an email... or tweet at us."
  — Felix Salmon [42:28]

Important Segments & Timestamps

• [01:59] – What's happening in Italy: populists, Euro panic & bond yields spike
• [05:12] – Explainer: Why Italian 2-year bond yields mattered so much
• [07:39] – Euro exit fears: "Quitaly" and the market's Brexit flashbacks
• [09:04] – Spain's political chaos vs. market calm
• [10:12] – The fracturing of European politics & rise of nationalists
• [17:09] – Volcker Rule: changes, controversy, and bank regulation philosophy
• [26:05] – Pret A Manger: billion-dollar sandwiches, JAB Holdings & the snacking empire
• [35:45] – Numbers round: $523 average car payment, Mexican elections, jobs report/Trump’s tweet

Tone and Style

Slate Money keeps a spirited, insightful, and occasionally irreverent tone throughout, blending expert financial analysis with pop culture references, personal anecdotes, and dry humor. The hosts encourage debate and aren't afraid to poke fun at themselves, the financial system, or the week's most bizarre business news.

This episode offers a concise yet comprehensive run-through for anyone seeking to understand the business and political cross-currents of early summer 2018, with colorful debate on everything from the future of Europe to what makes a sandwich truly "worth billions."