“Only heard about this today. Sounds like the wrong thing happened on many levels. Will investigate and make it right” — Tesla CEO Elon Musk, tweeting after a Monday report alleged that Tesla workers were receiving as little as $5 an hour by a German subcontractor. Musk is learning that creating an electric car company has plenty of bumps in the road.
MARKET SNAPSHOT
Big Picture
- U.S. markets finished higher across the board yesterday, with the energy sector leading the way as oil jumped to six-month highs—Goldman Sachs, a longtime oil bear, changed its tune and said the oil oversupply has ended
Market Movers
- Andrew Left, the activist short seller who kick-started Valeant Pharmaceutical’s 90% plummet, announced yesterday that he’s now long the stock after Valeant’s appointment of a new CEO and discounts on the company’s biggest products
- Publishing company Gannett raised its offer to acquire Tribune Publishing (owners of the LA Times and Chicago Tribune) to $15 a share after being rejected at $12.50 a share, sending Tribune shares soaring 23%
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CORPORATE PRIMER
Hello…It’s-A Me
What could be better than playing Super Mario? A Super Mario movie, at least according to Nintendo president Tatsumi Kimishima. Yes, the gaming legend is considering sending its classic characters to the big screen. Nintendo made its first (largely unsuccessful) attempt at a Super Mario movie over 20 years ago, but this time the company plans to use animation to give its films a Pixar-esque feel. Why the reboot? After seeing profits fall a monstrous 61% year-over-year as console sales tanked (Nintendo was unfashionably-late to the mobile gaming craze), it’s no wonder Nintendo is looking for growth opportunities outside of traditional video games.
Apple’s New Friend
You’ve been hearing a lot about Warren Buffett (heavily-publicized annual shareholders meeting, teaming up to buy Yahoo) and Apple (stock in freefall, investing $1 billion in Uber’s archrival) these days. So why not combine the two? Yesterday, the legendary investor disclosed a $1 billion stake in Apple stock. This is big news, especially since Berkshire Hathaway (Buffett’s investment company) normally isn’t too hot on tech companies. What does the investment mean? Apple has taken some hits lately with slower iPhone sales and that pesky stock drop, but the Oracle of Omaha believes it’s a great opportunity to buy a mature business at a cheaper price with steady upside—remember, this isn’t the high-flying Apple of old. Apple, for its part, is trying to turn things around: CEO Tim Cook visited China yesterday in hopes of enhancing declining business in Apple’s second-largest market. Plus, Buffett’s investment sure won’t hurt.
Amazon Keeps Making Moves
No, it’s not the unveiling of a drone delivery service…it’s a line of snacks (we didn’t see that one coming either). Taste it, believe it: the Seattle-based e-commerce giant is reportedly going full-scale into private-label offerings, most notably with perishable food. Private-label products are those manufactured by one company (aka not Amazon) and sold under another company’s brand (aka Amazon). Looking for an example? You know Walmart isn’t making all those cheap laundry baskets and disaster-prone lamps itself. Back to Amazon: private-label offerings will not only provide Amazon with an edge in new product development (by providing more tailored data on what consumers are buying), but will also boost its Amazon Prime subscription service. You guessed it, these goodies will be members-only.
Pfizer’s Baby Steps
Remember when Pfizer tried to buy Allergan for a whopping $160 billion? That mega-pharmaceutical combo didn’t go too well with regulators (they didn’t want sneaky Pfizer to get away with a tax inversion by moving to Ireland) and the deal fell through. So this time, Pfizer set its sights on a smaller, more unassuming purchase: pharmaceutical firm Anacor…which Pfizer is acquiring for a relatively measly $5.2 billion. Pfizer has been on the hunt for a company to acquire, and Anacor’s focus on skin treatment (specifically eczema gel) will help diversify Pfizer’s product portfolio. This time around, Pfizer is hoping to fly under the radar.
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OTHER STORIES
- Burger King just opened a spa at one of its restaurants
- 76ers become first NBA team with uniform sponsorship
- Twitter will stop counting photos and links as part of 140-character limit
- Mark Zuckerberg will meet Glenn Beck and other conservatives to talk about Facebook bias
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ECONOMIC CALENDAR
- Monday: Housing Market Index (+/-)
- Tuesday: Home Depot Earnings; Consumer Price Index; Housing Starts; Industrial Production
- Wednesday: Cisco, Lowe’s, Target, L Brands, Salesforce, Staples, American Eagle Earnings; Fed Meeting Minutes
- Thursday: Wal-Mart, Ross Stores, Gap, Dick’s Sporting Goods Earnings; Weekly Jobless Claims
- Friday: Deere, Foot Locker, Campbell Soup Earnings; Existing Home Sales
BIG PHARMA VS. LITTLE KIDS
If households consume less, then total spending should go down, right? It seems like a basic principle of economics. Unfortunately, things in the real world can get a bit more complex than Econ 101. Here’s what we mean: in the healthcare industry, despite children going to the doctor and visiting the ER less (and even using less prescription medicine), overall healthcare spending on kids is rising. But how?
- Price hikes on health services and brand name prescriptions are the biggest drivers of this increase in spending.
- In fact, per capita spending on children’s health services covered by job-based insurance increased by 5.1% each year from 2010 to 2014.
- Comparably, out-of-pocket spending on children increased by 5.5% over the same time frame, to a total of $472 per child.
- Brand name drugs have also more than doubled in price, from an average of $7 to $16, despite overall usage of brand name prescriptions by children falling by 50%. It’s a balancing act, but pharmaceutical companies have been winning out so far. Unfortunately, the healthier kids get, the more expensive it’ll be for them to stay that way.
INTERVIEW QUESTION OF THE DAY
You have 17 red balls and 17 blue balls, and you remove two at a time. If the two balls are the same color, add in one extra blue ball. If they are different colors, add in an extra red ball. What color is the final ball removed? (Answer #7)
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HISTORY-MAKING STATISTIC
Yesterday, Colombian authorities confiscated a record 8.8 tons of cocaine worth $240 million. 278 tons of cocaine were seized altogether by Colombia in 2015, while the country produces almost twice that amount every year. Rest assured, Narcos fans.
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FOOD FOR THOUGHT
Who doesn’t enjoy tax-exempt accounts like retirement accounts? The government, mainly. And the government probably isn’t happy to hear that according to the nonpartisan Tax Policy Center, the percentage of U.S. stocks owned by people who pay taxes on their gains has decreased from 84% in 1965 to just 24.2% in 2015.
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