Life

Now Microsoft Is Butting Heads With U.S. Government Over Privacy Vs. Security, Plus BP Is On Thin Ice

#Morning Brew
by Last Updated

Wanna win an exclusive Brew shout-out and some awesome swag? All you have to do is ace this week’s Brew quiz (it’s only five questions, and cheating is encouraged—but you can only fill it out once) and you could be the big winner. Good luck!

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“Let them sell their summer homes” — Letitia James, New York City’s Public Advocate, after New York’s largest public pension fund voted to exit all hedge fund investments due to poor performance and high fees. It’s a tough time to be a hedge fund manager—good thing they have their “summer homes” to retreat to.

 

MARKET SNAPSHOT
Big Picture

  • U.S. stocks meandered around without doing much yesterday, following the lead of most other asset classes. But, the financials index (the worst performer in 2016) rose for a fifth straight day as bank earnings continue to stream in (more on that in a bit)

Market Movers

  • Chipotle rose 2.5% after JP Morgan upgraded the stock, citing the chain’s “highly meaningful brand.” Come to think of it, we could go for a burrito right now
  • Disk-drive maker Seagate plunged 20%—its worst day in seven years—after cutting its revenue and margin forecasts

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CORPORATE PRIMER

BP On Thin Ice

BP has been feeling the heat from investors all year, and deservedly so: the petroleum giant failed to hit its targets, and announcing a reduction in dividends along with an unheard of salary increase for CEO Bob Dudley didn’t help its cause. Investors went berserk, with 59% voting against the compensation increase, and all the energy conglomerate was able to produce in response was to note that if necessary, “we will revisit our financial framework.” BP is running out of chances here, and if it doesn’t respond quickly, the pressure of investors might be enough to make the first crack in the ice.

Big Banks: The Sequel

Expectations have been set for big banks after JPMorgan Chase smashed earnings yesterday—let’s see how Wells Fargo and Bank of America measured up. Verdict? Underwhelming, to say the least. Wells Fargo was hurt by the poor performance of the energy industry, with a number of energy company loans having been written off and contributing to Wells Fargo’s 5.9% decline in profit. Bank of America fared even worse, with profits down 13% due to very low interest revenue. However, BofA investors remain optimistic as consumer loans grew significantly. Unfortunately, optimism and profits are two different things.

Can’t Stop Won’t Stop

If there’s one thing Wall Street loves, it’s breaking records—and this year has seen plenty of record-breaking activity, both good and bad. Yesterday, Delta Air Lines absolutely destroyed earnings estimates—but that’s not the half of it. This marks Delta’s twelfth consecutive record quarterly profit. In other words, Delta has broken its own profits record…for the twelfth time in a row. What’s Delta’s secret? Oil, of course. Delta spent 40% less on fuel costs compared to last year. If you’re waiting for the bad news, here it is (spoiler: it’s pretty underwhelming). Delta’s revenues fell 1.5% in large part due to foreign-currency pressures and a decline in passenger revenue in the wake of the attacks in Brussels. Not bad at all for what incoming CEO Ed Bastian said “is typically our seasonally weakest quarter of the year.”

U.S. vs. Your Emails

Microsoft and the U.S. government aren’t exactly on great terms. Microsoft wants to be able to tell their customers if and when the government is looking at their emails. Its argument? The U.S. government is violating the fourth amendment rights of Americans by surveilling their search data. Regardless, the U.S. government remains firm in its response: “not gonna happen.” Déjà vu, anyone? The privacy vs. security controversy didn’t leave the spotlight when the Apple vs. FBI case did. Let’s see how this one pans out.

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OTHER STORIES

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ECONOMIC CALENDAR

BEGINNER HACKERS START WITH THE U.S. GOVERNMENT

Criticizing the U.S. government might be all the rage these days, but most believe it’s at least secure. Unfortunately, according to security risk benchmarking startup SecurityScorecard, the U.S. federal, state and local governments ranked dead last in cyber security when compared to 17 other private industries.

  • From April 2015 to April 2016, SecurityScorecard tracked 35 major data breaches within the government—including one when the Office of Personnel Management was hacked, and more than 21 million people had their sensitive data breached.
  • President Obama has made improving cyber defense a top priority by asking Congress to allocate $19 billion toward cybersecurity in its fiscal 2017 budget proposal, with an additional $3.1 billion to be put towards technological modernization. Unfortunately, Congress isn’t known for doing what it’s told. In other words, don’t hold your breath on that one.
  • To be fair, some government agencies did better than others. And the worst? Sorry to the space geeks out there, but NASA brought up the rear. Most notably, the report cited NASA’s vulnerability to email spoofing and malware intrusions. In other words, if you’re a fan of what NASA does, just send them an email—they’ll respond.

INTERVIEW QUESTION OF THE DAY

A man lives on the 28th floor of a high-rise building. Every day he gets the lift down to the ground floor to leave the building to go to work. Upon returning from work, he always gets off at the 26th floor and has to climb the other two floors—unless it’s raining! Why? (Answer)

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HISTORY-MAKING STATISTIC

$1.2 million — Otherwise known as the record-breaking amount fans spent on Wednesday during Kobe Bryant’s final NBA contest…just on Kobe gear alone. The previous record was $1 million at a Led Zeppelin concert in 2007.

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FOOD FOR THOUGHT

Did you ever mess up so badly that you accidently deleted your entire company? Marco Marsala is a victim of the command “rm -rf”: a “basic piece of code that will delete everything it is told to.” The notorious code deleted everything on Marsala’s computer, including customers’ websites and all of the backups he made in case of, well, something like this happening.

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