The Man Who Inspired ‘Billions’ Is About To Be Unshackled Again, Plus Amazon Hits $1,000

By 05.31.17

morning brew
Enjoy your May 31st hand-crafted Brew!

QUOTE OF THE DAY

“Amazon is worth far more than $1,000 a share” — Mark Cuban, gives the e-tail giant his stamp of approval…not that it needed it.

Market Snapshot

  • Amazon touched $1,000 for the first time, but the S&P still finished lower on falling crude prices
  • The British Pound dropped on worrying poll results for Prime Minister May’s Conservative Party
  • U.S. Treasury yields fell (prices rose) as investors digested fresh personal income and consumer spending data (both in line with expectations)

Showtime Presents: Billions

How do you rebound from the biggest insider trading scandal in U.S. history? Easy. Round up $20 billion and launch the biggest U.S. hedge fund. Ever. At least, that’s what Steve Cohen does.

Who is Steve Cohen?

The guy you stole lunch money from when you were in high school that went on to be one of the wealthiest billionaires in the U.S. and inspire the Showtime drama, Billions.

Cohen’s story started when he scraped $7,000 from his Wharton tuition to start trading. The rest was history.

The fresh-faced grad was quickly making Gruntal & Co. $100,000 a day and managing a $75 million portfolio. By 1992, Cohen started SAC Capital Advisors with $20 million

of his own money.

The Rise and Fall of SAC

Under Cohen’s guidance, SAC grew to be a $16 billion fund with a 30% annualized return. A nice compliment to his $1 billion personal art collection, pickled shark and all.

But the party was short-lived thanks to Matthew Martoma. Cohen’s right-hand man made $276 million in avoided losses and combined profits in drug makers Wyeth and Elan.

One small issue––Martoma acted on inside information about preliminary drug trials for the companies’ new Alzheimer’s medication.

Martoma got nine years in the penalty box for insider trading, while SAC forked over $1.8 billion to the SEC and changed its name to Point72 Asset Management.

As for our pal Stevie, he can now only manage his own funds.

At least for 1 more year, that is.

Shackled to his 1,000-person family office since 2013, Cohen has managed $11 billion of his OWN money. But when the chains come off in 2018, he might just be looking for $9 billion more in funding.

A move that might not be so easy. Investors shifted $106 billion away from hedge funds in 2016, allocating much of it to passively-managed low-cost index funds.

And with an industry now returning just 5.34%, let’s hope Wall Street’s bad boy still has what it takes.

Another Day, Another Saga

As if Uber isn’t in hot water already. Amidst ongoing legal drama with Alphabet (+0.29%), Uber’s lead self-driving engineer Anthony Levandowski just got the ax.

Here’s the breakdown: Levandowski worked on Google’s self-driving car project Waymo, but ultimately left when he founded Otto, a self-driving truck start-up that Uber acquired for $680 million in August.

Fast-forward, and now Alphabet’s accusing Levandowski of stealing trade secrets to use at Otto—and later at Uber.

Since the February lawsuit began, Levandowski has Plead the Fifth. His failure to comply with the investigation left Uber with no choice but to fire him, leaving the company without the star of its autonomous team.

Bye Bye, Bill

Two years after leaving ESPN and six months removed from his unsuccessful stint at HBO, sports commentator Bill Simmons is onto the next one. Yesterday, he struck a deal with Vox Media to “host” The Ringer, his sports and culture site.

Quick Q & A

    1. What exactly does “host” mean?

Simple. Simmons maintains ownership of The Ringer, while Vox sells its ads, and the two collect their pre-negotiated slice of revenue.

    1. Why is this important?

It’s a big blow for an already-struggling Medium (Simmons’ current host), while a big opportunity for Vox, who is new to hosting.

Hopefully for Bill, third time’s a charm.

How’s Housing? Boomin’

In March, home prices rose at their fastest clip in nearly three years. Case-Shiller Home Price Index, an industry gold standard, pegged growth at 5.9% YoY.

Seattle floated to the top (at 12.3%), while NYC sunk to the bottom (at 4.1%).

Time to find a rooftop and break out the champagne, amirite? Not quite…

As Mr. and Mrs. hopeful homebuyer search for that cozy 3 bed, 2.5 bath, they are quickly realizing “it was all a dream“.

Rock-bottom inventory, price appreciation twice as fast as income growth and rising mortgage rates, truly are the Mr. and Mrs’ worst nightmare.

 

What Else Is Happening…

  • Attention cord-cutters: YouTube TV hits 1 million downloads since launch two months ago
  • Creator of the Android releases $699 anti-iPhone, dubbed the “Essential Phone
  • Jeb Bush abandons plan to buy MLB’s Miami Marlins for $1.3 billion after negotiations break down with partner, Derek Jeter
  • Audiobook giant, Audible created a $5 million fund for emerging playwrights to create works for the ears, not for the eyes

Economic Calendar

  • Monday: Memorial Day (Markets Closed)
  • Tuesday: Consumer Confidence (-), Dallas Fed Manufacturing (+)
  • Wednesday: Hewlett-Packard Enterprise, Michael-Kors Earnings; Farm Prices
  • Thursday: Dollar General, Mobileye, Lululemon, Express Earnings; Weekly Jobless Claims, Motor Vehicle Sales
  • Friday: May Jobs Report

Water Cooler

Gimme 5…Amazon

On the follow of two momentous occasions (hitting $1,000 stock price and just over 20 years since IPOing) for e-tail giant, Amazon, Brew Crew thought it only right to kick off the Gimme series with little-known facts about Bezos and his brainchild.

  1. Jeff Bezos incorporated the company as “Cadabra” on July 5th, 1994, but quickly changed it after a lawyer misheard the name as “Cadaver”. The name Relentless.com was also in the mix, until Bezos’ friends said it sounded sinister. That URL still redirects to Amazon, though.
  2. Originating as a book e-tailer, Amazon’s first sale was Fluid Concepts and Creative Analogies (sounds just riveting) on April 3rd, 1995.
  3. In an effort to drive thriftiness, Amazon constructed desks from cheap doors (and four two-by-fours) in the early days. And as of 2013, the company still gave away “Door Desk Awards” to employees with the thriftiest ideas.
  4. Bezos, in all of his free time, reportedly responds to questions and concerns from the public at jeff@amazon.com. He then forwards the emails he reviews to the necessary team member with a dreaded “?” in the body.
  5. Considered a frontrunner in the race to become the first $1 trillion company, Amazon and its investors have enjoyed hockey stick-like stock trajectory since the IPO. Get this: a $14,000 investment in AMZN in 2001 (with all of the subsequent stock splits), would now be worth $1 million.

The Breakroom

Interview Question of the Day

A Larry Page favorite…

Teach me something I don’t know in five minutes.

(One Possible Answer)

Who am I?

I founded my first business at the age of 16. It was a magazine called Student.

I bought an island in 1978 for $180,000, which is now worth upwards of $200 million. I’ve been known to entertain very, very “distinguished” guests.

I founded a company in 1970 that now employs over 71,000 people and contains over 400 different companies.

It all started as a record business.

Who am I?

(I am…)

Stat of the Day

$1 billion.

That’s what state-owned Swedish mining company, LKAB, will be spending to transport the town of Kiruna 3 km (or 1.86411 mi) to the east.

Why in god’s name would a company do this?

It kind of doesn’t have a choice.

LKAB will either totally rebuild the community’s homes or dismantle and reassemble commonplaces (like the church) to stop Kiruna from falling into a possible sinkhole created by its iron ore mine.


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