Here’s your hand-crafted Brew for May 2nd, coming in hot.
QUOTE OF THE DAY
“No bad loans, please.”—President Donald Trump joking after meeting with bankers at the White House. More in today’s issue:
Market Snapshot
- Stocks closed mostly higher on Monday after a last-minute deal to avoid a government shutdown. Tech stocks like Apple
(+2.04%), Netflix(+3.15%)and Amazon(+2.51%)led the Nasdaq to yet another record high. - European markets were closed, but a primary election victory by Italian Prime Minister Matteo Renzi helped quell investor fears of a changing status quo. Meanwhile, France’s second round of voting this weekend should keep the nation on edge through the week.
Make Community Banking Great Again
Yes, it’s early in the morning. No, you didn’t read that wrong. This is exactly what dozens of blazing red hats read (we tried saying that 20x fast…no chance) at the White House Monday morning.
Speaking to a group of community bankers, President Trump promised to “roll back burdensome regulations” by trimming Dodd-Frank requirements.
Main street financiers say the law, passed in 2010 to prevent another economic meltdown, has a more harmful effect on their community banks, with tidal waves of compliance work drowning their limited staff.
What even is a community bank, anyway?
Exactly what it sounds like: a bank focused on a single geographic area. Technically, community banks must have less than $1 billion in assets, and focus mostly on taking deposits from local individuals and giving loans to local businesses.
No fancy securities or derivatives swaps here, just good ol’ savings and loans (and maybe, y’know, some credit).
And here’s the kicker: 94% of all banks in the U.S. are community banks, yet they control just under 15% of all assets. So yes, you could say a lot of folks are pretty bitter about all the rules.
Back to the wild west
In a separate interview Monday, the President called for a “21st century version” of the Depression-era Glass-Steagall Act. It would basically ‘break up’ Wall Street banks, evening the playing field.
Glass-Steagall (aka the U.S. Banking Act of 1933… way less zing to it) separated commercial banking from investment banking. Under it, a firm like JPMorgan could no longer take deposits, while Bank of America could no longer trade fixed income securities. Mr. and Mrs. community bank could once again compete with the big boys.
Now it comes down to working with Congress, something that didn’t tip in the White House’s favor when trying to replace the Affordable Care Act. All that, and it’s only Tuesday. It’s going to be a big week…
Former UFC Co-Owners Make Moves
After selling mixed martial arts giant UFC last year for $4 billion, the Fertitta brothers are onto their next venture: a direct investment firm. Using $500 million of their own cash, the pair will focus on investments in the $20 to $75 million range for tech, media and entertainment companies. Talk about paying it forward.
Facing the Books
Facebook (+1.47%) is set to report first quarter earnings tomorrow. After a flashy, VR-filled press conference and a solid fourth quarter, the world’s largest social network is looking to continue its streak. Here’s what will be on investors’ minds:
- Ads: Facebook warned last quarter that it will run out of places to show you ads by the middle of this year. Ads = revenue. With no more ad spots, Facebook will need to keep people on the site longer. More engagement = more ads seen = more revenue. Math, baby.
- Growth: With 1.8 billion monthly active users, Facebook blows all competition out of the water. But, with a finite number of people in the world, a slowdown is inevitable. With full saturation in North America and Europe on the horizon, investors will want answers when it comes to Operation World.
- Trust: If you didn’t know, now you know: Zuck and Co. were accused of not doing enough to fight “fake news” in recent months, and this month FB launched a fact-checking feature to clamp down on the problem. At the same time, publishers will also be looking for trustworthiness in the network’s ad metrics. Last year, Facebook owned-up to artificially inflating some numbers.
Tribune Serves as Tribute
21st Century Fox (-0.49%) and Blackstone Group (-0.02%) are reportedly bidding for Tribune Media (+5.99%), a TV conglomerate originating with the Chicago Tribune. The company, and its 42 stations, many of them Fox News affiliates (see the connection here?), boasted a market cap of $3.34 billion at yesterday’s close.
Last year, Tribune strategically spun off its namesake newspaper holdings into a separate, and interestingly-named, company called Tronc (-3.14%). Given the diverging stock prices, we’re not sure of exactly what that strategy might be yet.
What Else Is Happening…
- Google may be launching a job search feature that could rival LinkedIn
- UPS
(-0.86%)will experiment with a form of surge pricing - Urban Outfitters’
(-0.26%)board is under fire from a major investor for disappointing results - Twitter
(+6.43%)and Bloomberg are teaming up to bring streaming news to the social network
Economic Calendar
- Monday: DISH Networks (-) Earnings
- Tuesday: Aetna, Apple, Coach, Etsy, Mondelez Earnings; Consumer Confidence, New Home Sales
- Wednesday: Blackrock, Facebook, Fitbit, Sprint, Tesla, Time Warner, Yum! Brands Earnings
- Thursday: LendingClub, Motorola, ShakeShack, Viacom Earnings; Initial Jobless Claims
- Friday: Berkshire Hathaway, Moody’s Earnings; GDP
Millennials Pivot From Their Parents’ Interior Design
When’s the last time you bought furniture? Or, a better question: how did you get rid of a half-broken bed frame? If your living room’s turnover rate is obscene, you aren’t alone. Our entire generation lives—and decorates—differently than our parents. Here’s why:
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- Renting: Young people (Millennials between 20 and 34) aren’t buying houses like previous generations. No surprises there. Two-thirds of them are renters, and moving heavy, expensive couches isn’t fun (or cheap). Why spend $3,000 on a couch only to toss it to the curb in six months?
- Moving: Almost half of all Millennials plan to move within the next two years, and 30% will spend time abroad at some point. Storage units…those aren’t cheap either.
- Identity: Sure, you could have taken Grandma Ethel’s 40-year-old sofa from your parents’ garage, but it just doesn’t have that boho-chic aesthetic you’re going for. And retailers know it.
Take West Elm, the hipster arm of Williams-Sonoma’s (-3.31%) empire. The Brooklyn-based chain’s “share your style” campaign turned customer Instagram posts into highly-successful Facebook ads.
Casper, an online mattress-delivery startup, made mattress cool again (to the tune of $200 million) by cutting out the middle-man and delivering straight to bedrooms.
- Bottom line: Millennials won’t spring for furnishings unless they’re irresistibly hip (or irresistibly cheap). Time to get a move on, furniture-makers.
Stat of the Day
$6.87 million—that’s how much a Canadian man was fined (in addition to 8 years prison) for stealing $13.66 million worth of maple syrup and selling it on the black market.
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