Big banks' boom time

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1:31Big banks doing great, small businesses not so optimistic, and we'll add a little romance to the show. From American Public Media, this is Marketplace.

1:51In Washington, I'm Kimberly Adams in for Kai Rizdahl. It's Tuesday, October 14th. Good to have you along. We got a bunch of earnings reports this morning from big banks, and things are looking pretty good from the perspective of America's titans of finance. Citibank reported revenue was up 9 % in just the third quarter, up 15 % in a year. J.P. Morgan's investment banking revenue was up 16 % in the quarter. Revenue from trading was up 25%. Goldman Sachs, Wells Fargo also did very well. One question, though, why is this happening, especially at a time when consumers and small businesses are feeling so anxious?

2:33Marketplace's Sabree Beneshore asked around. It's not just one bank here or there. It is all the banks, all the big ones anyway. They are doing great. Goliath is winning. Mike Mayo is a managing director at Wells Fargo Securities. Wall Street banking is concentrated among the largest players, Citigroup, Bank America, J.P. Morgan, a few others, and they continue to gain share. But the big banks' bigness is not the only thing they've got going for them right now. Art Hogan is chief market strategist at B. Reilly Wealth. The universal thread is the increase in activity in things like mergers and acquisitions, investment banking, IPOs.

3:14Deals. Banks get paid to set them up, and corporations and investors are aching to do them. You've got investors that have put money in private companies for a decade. They desperately want to get bought out or have an IPO. There are mergers that companies have been too afraid to do, but this year they saw their chance. It seems to be a more favorable regulatory environment for actually getting mergers approved. Things got kind of put on hold in the spring with the trade war, but in summer, it felt like maybe, that situation was calming down. So some of that pent up demand for dealmaking started to flood out.

3:49Gabriel Hack is a senior analyst with Moody's Ratings. As we got resolution on some of those, you know, geopolitical issues, that backlog ended up coming back to the banks. But the same chaos that caused a lot of deals to be put on hold temporarily also pushed more companies to change their investments to buy or to sell or find creative ways to hedge. You need banks to do that. Looking broadly across asset classes, we've seen significant increases in trading volumes. And whether it is from economic joy or economic anxiety, trading is trading and banks make money off of it. And the very fact that stocks are so high right now makes companies feel like they can handle a little more debt.

4:34You need banks for that, too. Amitosh Purnanandam is professor of finance at the University of Texas, Austin. Once you have both more equity and more debt, you have more money, then you can put a lot in your shopping cart. And banks are more than happy to ring them out at the cashier. In New York, I'm Sabri Beneshour for Marketplace. Wall Street today, President Trump's back and forth on trade made for a day of ups and downs in the markets. We'll have the details when we do the numbers.

5:34Microsoft Mechanics The company wants users to upgrade to Windows 11, warning that failing to keep your computer up to date could pose security risks. Consumer advocates say the end of 10 could result in millions of computers getting junked, and they're calling on Microsoft to reverse course. KQED's Azul Dostrom-Eckman has more. Earlier this year, Peter Volan logged onto his computer at his home in Albany, California, and got an email from Microsoft. That Windows 10 was going to be not supported anymore. I was annoyed, to say the least. He learned that Windows 10 would no longer be receiving free automatic updates.

6:19Microsoft said he needed to upgrade to Windows 11. Volan isn't very tech-savvy and is in his 70s, so he turned to his computer guy. And he looked at it and he said, you're not going to be able to use this computer past a certain point in the fall of 2025. His computer didn't meet the technical requirements to make the upgrade. So he ended up spending$1 ,500 on a new one. This was certainly an expense that I could have put off for another two, three years. Windows 10 first booted up over a decade ago, and it's still widely popular, with around 40 % of all Windows users worldwide running it. But in 2023, Microsoft announced that the end of 10 was coming.

7:08That means computers running Windows 10 will still function, but Microsoft will no longer offer technical support, software updates, or security fixes. We estimated that 400 million computers that are currently in use won't be able to make that switch. Jen Engstrom is with CalPIRG, the California branch of a nonpartisan consumer advocacy organization. We think that when people buy a device, they should be able to use it as long as they possibly can. The nonprofit petitioned Microsoft to continue supporting Windows 10, in part to prevent an estimated 1.6 billion tons of e-waste. It's bad for consumers, it's bad for security, and it's bad for the environment.

7:49Microsoft declined a request for comment. The company has changed policies in the past after pressure from consumer advocates. Last year, Microsoft announced it would offer Windows 10 security updates for schools in the United States until 2027. And just last month, it announced a year of free extended support for Windows 10 users in parts of Europe. While the end of 10 might be unwelcome for everyday users, some IT specialists say it's actually a good thing. Vladimir Gallant says for cybersecurity, it's better for businesses to just make the upgrade to Windows 11. It's like you run a restaurant and your gas stove started to leak a gas, so it's old.

8:29Are you going to keep repairing or are you going to replace it for the sake of your business? He's the owner of 911 PC Help in San Francisco, an outsourced IT department for local small businesses. If something happens security-wise, they can go down for a long time, and that's what we're trying to avoid. Windows 10 users can switch to Windows 11 for free if their computer meets the requirements. And Microsoft is offering the option to buy a year of extended security protection for folks who aren't ready to upgrade. But that won't include troubleshooting or technical support. I'm Azul Dahlstrom-Ekman for Marketplace.

9:30In more corporate news, General Motors says it will take a$1.6 billion hit in earnings this quarter due to slowing electric vehicle sales, according to a filing with the Securities and Exchange Commission today. EV sales in the U.S. have fallen short of some ambitious targets, and a$7 ,500 federal tax credit that incentivized many buyers expired at the end of September. Other automakers have also scaled back their EV goals after years of investment in domestic supply chains. It's left some battery manufacturers in the U.S. with extra capacity that's now helping to power up the market for grid storage.

10:11Marketplace's Megan McCarty Carino has more. What to do? You've got this nice new battery supply chain all charged up with not enough electric cars to power. If you set up these factories, you want to keep them producing. Jay Whitaker is a professor of energy engineering and policy at Carnegie Mellon University. He says battery producers and suppliers that were focused on cars can fairly easily switch to making batteries that hold electricity for the grid. They can use the same production line typically to make these cells. Stationary batteries are needed to store renewable energy from wind and solar that's generated intermittently.

10:50But they're also increasingly in demand for data centers, says analyst Sam Abu-El-Samid at Telemetry Market Research. They want these plants to be reliable. And so regardless of where the power is coming from, whether it's coming from renewables or coming from burning coal, they're all installing energy storage systems, provide backup power. He points to EV battery maker LG, which already converted one of its major U.S. production facilities to grid storage. I wouldn't be surprised to see some other plants that have excess capacity follow a similar path. Even the annual battery show held in Detroit last week had a different flavor, according to Mikhail Havel at battery materials supplier Arkema, where in the past, car batteries were the bell of the ball.

11:41This year, we saw like energy storage used for data centers and AI for sure. That was an emphasis. Arkema sells specialized coatings and binders for lithium-ion batteries, whether they're in cars or stationary. So for us, we are kind of agnostic. As long as someone is still buying batteries. I'm Megan McCarty-Corino for Marketplace.

12:27We talked at the top of the show about how big banks are doing pretty well in this economy. U.S. small business owners, on the other hand, are not feeling so great. We learned today that the National Federation of Independent Business Optimism Index fell to a three-month low in September. Independent businesses come in all shapes and sizes. And a few years ago, we told you about Seattle resident Bonnie Ruff, who bought her next-door neighbor's house and turned it into a short-term rental business that she advertises on Airbnb. She calls it Peach Street Farm and sent us this update. Peach Street Farm is kind of a little urban farmlet, I guess.

13:09We have four bunnies and we keep quail. We grow food and flowers. We have a big, fluffy old English sheepdog and some elusive cats. And this is my way of supporting myself as a writer. We are pretty full year-round, and I would say year over year right now we're pretty consistent. But I'm just kind of watching a little bit, kind of always curious, because what's happening out there in society and culture and politics affects how people feel about coming and how much they're willing to spend.

13:49something that i have absolutely noticed this year is that out of about 60 stays that we host every year usually around two or three are canadian visitors often from our neighbors to the north and british columbia this year we have had one guest from canada and that was way back in january and I don't have a single additional upcoming Canadian guest reservation on the books. And beyond that, I'm seeing noticeably fewer international bookings overall. Usually we have more visitors from Asia, for example.

14:28One thing that can really change when people are pulling back on spending is that I have to make bookings more attractive. In other words, they have to be less expensive. So the ways of doing that are to lower the nightly rate. Another way of doing that is to lower my minimum stay. I can still make ends meet. I can pay the bills. But a lot more of my time that would otherwise be going to my writing ends up, you know, in laundry and cleaning and those kinds of things, doing more frequent turnovers for shorter, more affordable stays. So there are sacrifices there. There's never a perfectly balanced day.

15:03But over time, I'm able to do it all and it feels like exactly the right blend of things for me. We bought the property by the skin of our teeth and we knew we had to start making money right away as hosts in order to pay the mortgage that very first month. So I'm super proud that we've been able to hold on to it. If the worst should come to pass, we can sell.

15:36Bonnie Ruff there at Peach Street Farm in Seattle, Washington. You can tell us about your adventure in housing at Marketplace.org.

16:09Coming up. The popularity of romance has been around for a really long time. Because who doesn't love love, right? But first, let's do the numbers. Just before the close, President Trump threatened China with further trade penalties, this time on cooking oil, which added a final swing to an up and down day in the markets. The Dow Jones Industrial Average rose 202 points, four-tenths of a percent, to close at 46 ,270. The Nasdaq fell off 172 points, three-quarters of a percent, to close at 22 ,521. And the S &P 500 slid 10 points, two-tenths percent, to end at 6644. Sabree was talking about those positive bank earnings out this morning.

16:56JPMorgan Chase gave up one and nine-tenths percent. Goldman Sachs dipped 2%. Wells Fargo soared 7 and one-tenth percent. Bonds rose. The yield on the 10-year T-note fell to 4.03%. And you're listening to Marketplace.

17:14This is Marketplace. I'm Kimberly Adams. I mentioned earlier about the numbers out today from the National Federation of Independent Business, or NFIB, which revealed small business optimism declined for the first time in three months. Most owners in the survey say their businesses are okay for now, but a growing share are concerned about the future, especially when it comes to inflation. The survey found nearly a quarter of small businesses raised prices last month, and nearly one-third plan to do so in the next three months. Daniel Ackerman has this one. This time of year in Keene, New Hampshire, the changing leaves mean money for some small businesses.

17:55Beth Wood owns the 21 Bar and Grill. It had been a little rough at the beginning of September, but I think as foliage season is happening, we're seeing a little bit more foot traffic. But Wood says it's getting more expensive to feed those hungry leaf peepers. I will say food cost has been one of our biggest struggles. It's just watching them rise and not seeing an end in sight to it. And small businesses often have to pass those costs on to customers, says Aniban Basu, CEO of Sage Policy Group. In economics, we talk about price makers and price takers. Basu says the big businesses are the price makers.

18:32For instance, Netflix has tremendous pricing power. If they were to raise their monthly subscription charge a bit, they wouldn't lose many customers because they don't have many competitors. But small businesses, including restaurants, tend to have a lot of competitors. They're price takers. They look at the market price and that's what they're going to charge by and large. And right now? Many of them have to raise prices, even though they don't want to. Often because of tariffs. Then there's the challenge of finding qualified workers and just general uncertainty. And overall, David Audrich, an economist at Indiana University, says small businesses They're probably on the defensive more than they've been since the end of the Cold War.

19:14And that jibes with the fresh survey results, says NFIB chief economist Bill Dunkelberg. Our uncertainty index is at the fourth highest level in 50 years of collecting data. He noted another ominous sign in today's data, a sharp rise in small businesses reporting excess inventory. It's building up in the back room, and that's not good. Not good, he says, because it means consumer demand might be cooling off. I'm Daniel Ackerman for Marketplace.

20:10With business owners and many consumers feeling a bit down on the economy, some folks are choosing to escape into a good book. Particularly popular right now, romance novels. According to Publishers Weekly, print book sales were up slightly in 2024, driven in large part by the romance genre. Rebecca Ackerman wrote about the genre's staying power in The Atlantic. Her piece is called The Publishing Industry's Most Swoonworthy Genre. Rebecca, good to talk to you. So nice to chat with you. So what exactly is it that makes romance as a genre so enduring? Like at one point in your story, you quoted a source that described it as recession proof because it did really well during the Great Recession.

20:55Yes. The popularity of romance has been around for a really long time. But I think more recently, one of the big reasons that romance is so popular and so profitable, I should also say, is because of the community. You mentioned that fans came up with a term called Romancelandia. What does that mean? So that is the term for this group of readers and writers, both who are really supportive and excited about romance as a genre. Every romance author I talked to for this story started out as a reader, remembered the first romance novel they read, and then decided that they wanted to write it too. And the reason that there's a term like Romancelandia is because a lot of people who are involved in romance, both the fans and the writers, feel that it's a place that people can participate in with each other, with the books, in this really kind of open and exciting way.

21:58One slice of this is that romance writers were pretty early adopters of things like self-publishing, including on the platforms like Kindle Direct Publishing. How did that contribute to sort of the growth of the genre? So I think partially because they're outside of this sort of gatekeeping institutions around publishing, romance writers have traditionally been really excited about new platforms. They've been able to take control of the publishing and meet the needs of their fans directly and also publish a lot faster than they would if they went through traditional methods. Romance readers read a lot of romance and they want more and more and more all the time.

22:41About half of romance readers read one book a week and about half of Americans read one book a month. So it's a real difference. And the publishing schedule is matching that need. What kind of romance is popular right now? Like, I'm not super deep into the genre, but I've definitely heard about things like dark romance and fantasy romance. Yes. So I think another differentiator of romance as a genre is that it contains so many separate genres inside of it. So yes, dark romance is having a moment. but also things like sports romances. So hockey romance is a big one. What's so fascinating about romance is that it can contain both of those things.

23:26The tone would be different, the characters would be different, but the theme of love and connection would be the same. You know, you talked about the volume of books that are coming out in this space and how much people are consuming them. When you look at the stats, how important has the romance genre been to book publishing? Well, romance print sales last year actually pulled the entire industry into the black. I think that we've heard a lot about the woes of the publishing industry at large. People are reading less. People are buying less. But from this time to this time last year, romance print sales have increased by 24%.

24:08So it's still growing. And it's really keeping the lights on for a lot of publishing houses. Hmm. You're a fiction writer yourself. What went through your head when you were working on this story and saw the way that romance writers are sort of structuring themselves as a business? Yeah, I think there's been a lot of talk recently about author brand and being a social media and having a platform. And I think some writers, myself included, feel a little wary and almost sort of resentful, I think, in some ways that we will have to then not just create the work, but then create the work around the work to sell.

24:50But I think what's interesting about so many of the romance writers I talk to is that they think of themselves as business people also, and they enjoy the way that they are able to both write the creative work that they create and then talk to the people who are reading it and learn from them and vice versa. Rebecca Ackerman is writing about the enduring strength of romance in The Atlantic. Thanks so much, Rebecca. Thank you so much.

25:31This final note on the way out today, in case you're losing track of where we stand in the trade war, starting today, new tariffs kicked in on imported wood, timber, lumber, along with new taxes on bathroom vanities, kitchen cabinets, and upholstered furniture. They range from 10 to 25 percent now, but some tariffs will go as high as 50 percent at the start of the new year. So expect those home renovation projects to get more expensive. Meanwhile, the additional 100 percent tariff Trump threatened for Chinese goods the other day is supposedly going to kick in November 1st. But the administration said today that all depends on China's next move.

26:11And just for some context here, a report out from Goldman Sachs the other day found American consumers are already paying about 55 percent of the cost of the tariffs we have so far. Jordan Mangi, Zonil Maharaj, Janet Nguyen, Olga Oxman, Virginia Kay Smith and Tony Wagner are the digital team. I'm Kimberly Adams. We'll be back tomorrow.

26:53This is APM.

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