Another beleaguered airline has finally swooped in to take the focus off Boeing’s ongoing collapse—at least for a moment.

Shares of Spirit Airlines nosedived 24.55% today after the Wall Street Journal reported that the company was exploring filing for Chapter 11 bankruptcy after its failed merger with JetBlue Airways.

The airline has been hitting turbulence for a while. Spirit hasn’t turned a profit since before the Covid-19 pandemic, and the company is weighed down by about $3.3 billion in debt—including $1.1 billion of secured bonds due within a year.

Its merger with JetBlue was supposed to be a lifeline, but the acquisition was blocked by a federal judge in January.

With today’s drop, the stock has now fallen about 90% year to date. Talk about a hard landing.

How’d Spirit veer off course?

It turns out that being cheap is getting costly.

As larger, mainstream competitors like American Airlines and Delta Air Lines have figured out how to become more affordable by optimizing cabin space and offering more basic, no-frills ticket options, budget airlines like Spirit have lost their edge and bled money.

While Spirit’s signature yellow plane has become synonymous with traveling dirt cheap, the airline was forced to raise prices by offering new premium packages in July after suffering a crippling $193 million loss in Q2 of this year.

And let’s be real: With no in-flight entertainment, no free snacks or drinks, and not even outlets for coach passengers—who’s going to fly Spirit if it's not the lowest-cost option?

According to the WSJ, the airline is exploring a restructuring to help alleviate its burden and potentially pay off debt. A Chapter 11 bankruptcy filing isn’t necessarily a death knell, and the airline could avoid complete closure if it is able to reorganize its debt or raise money. For example, Delta Air Lines was able to survive a 2007 bankruptcy, and Scandinavian Airlines emerged from bankruptcy this year after filing in 2022.

The big picture: After travel spending rebounded post-pandemic, some airlines found business models to send shares flying high, while others crashed and burned. Spirit clearly falls in the latter category: Of the analysts covering Spirit aggregated by the WSJ, seven rate it a “sell,” while two give it a negative “underweight” rating, and three say “hold.”

It looks like it's going to take a miracle the scale of a Lost plotline to steer Spirit back into clear skies. — LB

🟢 What’s up

• Your loss is our gain: Shares of airline stocks popped on the news of Spirit’s problems. Delta Air Lines ascended 3.84%, United Airlines climbed 6.47%, and Frontier Group Holdings soared 16.43%.
• Albemarle popped 8.25% on the rumor that mining behemoth Rio Tinto may try to make an acquisition of the lithium miner. Other potential takeover targets rose as well, including Arcadium (up 10%) and SQM (up 3%).
• Abercrombie & Fitch rose 9.10% thanks to an upgrade from JP Morgan analysts, who are bullish about the fashion retailer’s recent momentum.
• Ubisoft Entertainment skyrocketed 29.87% on the news that the video game maker’s parent company and founders are considering a buyout.

What’s down

• Rivian Automotive tumbled 3.15% after the EV startup cut its 2024 production forecast and missed on Q3 deliveries.
• Homebuilder stocks sank on today’s strong jobs report, which propelled treasury yields higher, which means that mortgage rates aren’t getting any lower. D.R. Horton dropped 2.91%, Lennar fell 2.52%, and Toll Brothers lost 2.57%.
• Transportation stocks fell thanks to an agreement between port owners and longshoremen to put the recent strike on pause. Moller-Maersk lost 5.37%, while Zim Integrated Shipping Services stumbled 12.55%.

Some people don’t really like their alma mater. And some people publicly post a 49-page slideshow detailing exactly why they think their alma mater sucks.

Bill Ackman, founder and CEO of Pershing Square Capital Management, has made plenty of headlines this year for his battle against higher education institutions, including when he helped force Harvard President Claudine Gay out of her position in January. Rather than declare victory, the class of ‘88 Harvard grad posted an investor presentation on the state of Harvard earlier this week, positing that if the university was an investment, he wouldn’t put his money on it.

Setting aside Bill’s crusade against his alma mater, from an investment perspective, he may be on to something. Harvard’s famously large endowment fund isn’t growing as fast as it once was—in fact, the fund’s 8.8% annualized returns over the past two decades rank it seventh out of all eight Ivy League universities, according to Bloomberg. In another blow to Crimson pride, arch rival Yale has enjoyed the highest returns among the Ivys with a 10.9% annualized return over the past 20 years.

One more thing…Harvard’s endowment fund is still the largest in the country, at just over $53 billion as of the end of 2023—but that may be changing soon. The University of Texas, flush with cash from the oil industry, rose to $44.9 billion last year, beating Yale’s measly $40.7 billion.

You may have a hunch about who will win the election in November—but how much would you wager that you’re right?

On popular prediction market sites like Polymarket and Kalshi, users are betting nearly a billion dollars on who will be the next president of the United States of America.

The catch is that, despite the fact that the most popular wagers on these platforms are all US-election focused, American users are banned from betting on elections, leaving most of the political gambling to international users.

However, that all changed this week. Two days ago, a US appeals court un-paused trading on Kalshi on wagers over who will win the two chambers of Congress.

“Today will be remembered as a turning point for financial markets,” remarked Kalshi CEO Tarek Mansour in an emailed comment. “Election markets are back to being legal, safe, and regulated in the U.S., after 100 years.”

Is this…a good idea?

Betting on whether Taylor Swift is going to get engaged is one thing, but in an era where there’s waning trust in the integrity of elections, critics argue that betting on elections could encourage election interference—or at the very least, give voters the impression that dark money is wrapped up in politics.

“The biggest risk here is corruption of the purpose of elections,” said Oregon Senator Jeff Merkley, who opposes the Wednesday ruling, in a recent interview. “It is absolutely like saying, we're going to allow betting on a ball game, but the people who are betting control the umpire.”

But supporters of betting markets point to the fact that election betting is legal in the UK, and hasn’t caused any high-profile election manipulation incidents.

Advocates of legalizing prediction markets also argue that the aggregation of tens of thousands of people wagering money on anything, from an election, to when the Fed will cut interest rates, is valuable information. Dozens of media outlets, including Bloomberg, WSJ, and Fortune, have all cited prediction market odds as a gauge of public sentiment on the election leading up to November. And after all, political polls have a host of their own problems.

One thing is for sure: Regulators and critics are not waving the white flag. While the appeals court denied the CFTC’s pausing of Kalshi’s trading, the matter is still working its way through the courts.

“Who knows how the court will rule. But [if] we lose, I will introduce legislation,” Merkley said when asked what his next steps would be.

Right now, Kalshi gives Harris a 51% chance of winning—only time will tell if that’s a worthwhile gamble. — LB

• Longshoremen and port owners reached a tentative deal that will put the strike on hold until January at least. Workers will receive a $4-per-hour raise every year for the next six years as part of the new agreement.
• Want to make longshoremen money? Here are three other blue-collar jobs that can bring in six figures without requiring a college degree.
• Mark Zuckerberg has overtaken Jeff Bezos as the second richest person in the world, with Zuck’s net worth booming by $78 billion in 2024.
• Millennial, Gen X, and Baby Boomer investors all reduced their tech investments last quarter. But Gen Z and, surprisingly enough, the Silent Generation (aged 79 and older) both doubled down on tech.
• Here’s a weird problem to have: There are now so many single-stock ETFs hitting the market that the US is running out of stock symbols.
• Your favorite snacks, like Cheez-Its, Skittles, and Pop Tarts, will get more expensive if Kellanova and Mars manage to merge.

Next Monday, we’ll get a look at consumer credit, an important breakdown of spending power and debt levels—particularly credit card debt—heading into the key holiday shopping season.

• Earnings: Suncor Energy

Tuesday is the NFIB optimism index, which measures small business’ confidence—and considering small businesses account for 44% of US GDP, their opinion is a big deal.

• Earnings: PepsiCo

Wednesday brings us wholesale inventories, a look at inventory levels for manufacturers across the country and an important element of GDP.

• Earnings: Karooooo (yes, that’s a real company name)

On Thursday, it’s time for the weekly initial jobless claims report, plus the uber-important CPI, which measures inflation at the consumer level and provides a key litmus test for the Federal Reserve’s battle against higher prices.

• Earnings: Delta Air Lines, Domino’s Pizza, Infosys Ltd.

Finally, Friday wraps up with PPI, a wholesale measure of inflation from the perspective of producers and manufacturers.

• Plus, quarterly reports from JP Morgan and Wells Fargo signal the start of a new earnings season.

On top of that already full week we’ll hear from 9 Federal Reserve governors and presidents—even more FedSpeak than this week. While central bankers aren’t known for their lively, vivacious speaking style, expect Wall Street to parse through every syllable of their speeches for hints of the next monetary policy moves.

It’s a busy week ahead, but it ends with a long Columbus Day weekend for many, so hang tight and power through!