Cheers To Wall Street For Their New Top Cop In Charge Of The SEC, Plus Puerto Rico Is Bankrupt

by 6 months ago

morning brew

Today’s Brew for May the 4th (be with you… sorry) was written in a totally legit and hacker-free Google Doc (unlike the ones that went around yesterday).

QUOTE OF THE DAY

“The phone is already dead, people just haven’t realized.”—Alex Kipman, inventor of HoloLens, on how his VR technology will surpass cell phones, or already has… if you ask him.

Market Snapshot

  • U.S. stocks closed mostly lower on Wednesday, with the Dow posting a slight gain, as disappointing earnings from Apple (-0.31%) weighed heavy on markets.
  • Treasury yields rose alongside the dollar after the Fed said it would not raise interest rates this time around (which was expected).

Wall Street Has a New Top Cop

Jay Clayton, a former lawyer for Goldman Sachs (+1.19), is officially in charge of the Securities and Exchange Commission. He’ll enter the post with a clear problem to solve: American companies just aren’t going public anymore.

American stock exchanges, which are governed by the SEC, saw their peak of 7,322 public companies back in the ‘90s. Today, that number has fallen to just 3,671.

Going public ain’t easy. Sure, it means easy access to capital and the prestige of ringing that famous bell. But it also means lawyers, scrutiny, red-tape and that little thing called failure (yes, it’s an option—believe it or not).

 

And why should they?

Private companies gobbled up $69 billion in funding last year. With that much cash up for grabs, why wouldn’t a company stay private?

Massive unicorns like Uber are worth tens of billions, despite losing money every year. Going public would mean more money spent on boring things like accounting and compliance—and less on fun things like leather jackets.

Being public also forces a company to be very short-sighted. Anxious investors (and journalists like us!) will be on the conference line every three months. They want immediate returns, not years-long plans for global domination.

 

Clayton’s Waitin’

As an M&A lawyer, Clayton knows the red tape like the back of his hand. Although the SEC is technically a non-partisan agency, having Congress and the President also looking to reduce regulation definitely can’t hurt.

Many of the rules Clayton will be in charge of were implemented decades ago, back when trades were shouted and paper flew. Now, automated trades fire off in less than a second and exchange floors are much quieter.

Bringing markets into the 21st century should be high on his list. IPOs are already hot this year, and with some smart guidance from Big J, public markets could stage their much needed comeback

Puerto Rico Is Bankrupt

It’s been a long time coming, but now it’s official: America’s Caribbean territory will seek debt protection in federal court. And since it’s not officially a state, Puerto Rico won’t get slapped with the nasty b-word. A few U.S. entities have gone bankrupt before, like Detroit. But Puerto Rico is in uncharted water. Congress created a special law last year, called Promesa, that outlines how special cases like this one go down (in case Guam needs help too).

The island nation owes some $123 billion in bonds and pensions to some very angry lenders. An all out brain drain, a 50% poverty rate, and an extremely low labor participation rate have left Puerto Rico in a crippling depression. Now its fate is in the Supreme Court’s hands.

London’s Calling, Verizon’s Answering

Verizon (+0.52) has struck a $21 million deal to stream a single NFL game this fall. When Jacksonville and Baltimore hop the pond for Wembley Stadium (normally for fútbol not football) in September, only Verizon will have streaming rights. You can catch the game on Verizon-owned sites like Complex, AOL and—if the deal closes in time—Yahoo.

It’s pricey for one game, but it’s not the league’s first digital deal. Amazon (-0.62)paid $50 million to stream 10 Thursday night games this season (sorry Twitter). And a steal compared the hundreds of millions major networks pay for NFL games. Beats paying for cable!

The Grey Lady Is Aging Well

The New York Times (+12.59) shrugged off heavy print declines by adding 308,000 digital subscribers last quarter, with digital ad revenue also up 19% from the year before. Multiple newspapers have seen ‘Trump bumps’ from his 140-character tirades against ‘failing’ media—clearly not the case.

Other news organizations are reaping the benefits of a post-fact presidency, too. Jeff Bezos’ Washington Post is now profitable and has hired dozens of journalists since the election to back up its new motto, “democracy dies in darkness.” Sounds more like a metal album to us.

What Else Is Happening…

  • After two days of meetings, the Fed offered no timeline for shrinking its balance sheet or the next rate hike.
  • Facebook (-2.35 after hours) increased revenue and added users last quarter, but investors still weren’t happy
  • SpaceX plans to launch super-fast broadband satellites by 2019
  • The SEC is investigating SolarCity and other companies’ customer cancellation policies

Economic Calendar


Water Cooler

Retail Goes Full Minority Report

Cash is king, as they say. And for those curmudgeons still scared of the web, paying cash at a physical store offers privacy and anonymity, right?

 

Wrong.

Amazon knows almost everything about you: age, sex, shopping habits and even the weather in your town. But, it can’t track your mood. That’s where brick-and-mortars hope to gain some ground.

Saks Fifth Avenue (-7.06) and hundreds of other stores are using facial recognition to track how often you shop, what you look at and even your emotions. So much that the video analytics industry could creep up to $11 billion in five years.

Creepy, right? Well it gets worse. Combine that facial data with your credit card from the register and you’ve got a full profile—and It could be the key to catching Amazon.

But Amazon must have something up its sleeve right?

 

Yea, it does…literally.

Online wardrobe revamps are hard because you can’t try anything on (duh.). Amazon may have found the solution, but it’s just as dystopian as brick-and-mortar’s new tech.

Last week, Amazon launched an AI-powered camera that can take measurements and suggest outfits for you. Sounds cool, but do you really want Jeff Bezos in your bedroom? We don’t.


The Breakroom

Interview Question of the Day

Is it better to submit a project that’s perfect and late, or one that’s good and on time?

This question is a favorite of Obed Louissant, head of HR for IBM Watson. Here’s the answers he likes to hear.

Stat of the Day

29 inches—That’s how much legroom American Airlines’ seats will have when its shiny new Boeing 737 Maxes arrive, just one inch more than the federally-mandated minimum. When it comes to airplanes, a few inches can make a big difference. Here’s a handy chart of legroom on various carriers.


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