“We have set a clear goal vital to the next chapter of America’s story in space: sending humans to Mars by the 2030s” — President Barack Obama, in an op-ed describing his goal of sending humans to live on Mars. Between SpaceX, Boeing, Jeff Bezos and now the POTUS himself, we’ve got a modern-day space race on our hands.
Market Snapshot
- U.S. markets sank as disappointing earnings marked a tough start to earnings season, with investors focusing specifically on Alcoa (more on that later)
- Genetic testing equipment provider Illumina plummeted 24% after falling short on revenue expectations and giving poor earnings guidance
RIP Galaxy Note 7
…Samsung has permanently “killed off” its latest smartphone. And so the scandal reaches its merciful conclusion that began when Samsung was forced to recall its Note 7 last month after reports surfaced that the phone could—well—explode. The solution? Shipping Note 7 owners new phones with batteries from a different supplier. The problem? Some replacement phones allegedly still caught on fire. Realizing the crisis it faced, Samsung finally had enough, permanently halting production of the phone. Yes, Samsung’s flagship device will be off the shelves until the inevitable Note 8 debuts next year.
Make no mistake: this is a huge blow to the South Korean company, which now has to worry about customers losing trust in the Samsung brand (Chipotle and Volkswagen can relate). One analyst estimated that the total losses could be as high as $2.8 billion over the next three months, and $18 billion has already been wiped off the stock’s market cap—and don’t forget, some of that lost cash could be flowing Apple’s way. And in case you were wondering, Samsung still hasn’t disclosed (or may not even know) what’s causing the defect. How comforting.
Amazon’s At It Again
…But then again, when is it not? This time around, Amazon has its sights set on expanding its Amazon Fresh grocery business by opening convenience stores to sell perishable foods. Amazon is hoping that a brick-and-mortar expansion highlighted by a drive-thru pick-up service to rival Walmart’s same-day grocery pick-up will hit the ground running. The cherry on top is that these services will be available via smartphone, making them quite consumer-friendly.
It Sucks To Bat Leadoff And Strike Out
…Just ask Alcoa. Long story short, metals manufacturer Alcoa didn’t exactly get Q3 earnings off to a good start. It missed earnings, revenue and margin estimates, aka the wrong type of triple threat. To add insult to injury, Alcoa also reported falling revenue for its fastest growing segment, sending shares plummeting over 11%. Why was there no love for Alcoa this quarter? Call it demand softness from the aerospace sector or an oversupply of aluminum in China. Either way, let’s hope this doesn’t set the trend for the rest of earnings season.
From Bad to Worse
…Theranos can’t a catch a break. It was bad enough that the “blood testing” startup—quote usage intentional—shut down all of its labs last week and laid off 40% of its employees. Now it’s got a big, bad and mighty pissed off hedge fund to deal with: Partner Fund Management, which has invested $96.1 million into Theranos since 2014. The fund is suing Theranos for straight-up lying to investors about its supposedly innovative blood testing technology…remember, that tech turned out to be not so innovative after all, and potentially fraudulent. Partner Fund is demanding Theranos return its investment on top of additional damages. For its part, Theranos is vowing to fight the lawsuit, calling the claims “revisionist history”—we’ll see if the courts agree.
Other Stories
- Dating app Hinge ditches flings for relationships
- Comcast hit with FCC’s biggest cable fine ever
- Google acquires FameBit to connect YouTube creators with marketers
- GE to buy wind turbine rotor blades maker for $1.65 billion
Economic Calendar
- Monday: Columbus Day (Banks Closed, Markets Open)
- Tuesday: Alcoa Earnings (-)
- Wednesday: CSX Earnings; Job Openings and Labor Turnover Survey; Fed Minutes Release
- Thursday: Delta, Progressive Earnings; Import/Export Prices; Weekly Jobless Claims
- Friday: JPMorgan Chase, Citigroup, Wells Fargo, PNC Earnings; Producer Price Index; Retail Sales; Consumer Sentiment
Trouble for the CFPB?
The Consumer Finance Protection Bureau has been under political fire since its inception in the wake of the 2008 financial crisis. In the years since, it has repeatedly taken action against financial institutions, returning over $11.7 billion to 27 million consumers. But that’s not why they’re in the headlines today. A DC federal appeals court ruled the organization’s structure to be unconstitutional, with too much power on top. Here’s more:
- Normally, independent federal agencies distribute power between a board of directors that represent a variety of political interests. However, the CFPB has been led by sole director Richard Cordray.
- The ruling U.S. Circuit Judge Brett Kavanaugh wrote that the Bureau’s existing power configuration is unconstitutional, even calling its structure with one person at the top “novel.” By limiting the president’s capacity to remove the director, the CFPB violates a constitutional separation of powers.
- Easy fix? Amend the 2010 Dodd-Frank financial reform law that created the CFPB. Without the “for cause” clause, the president would have the power to remove and/or supervise the director at will.
Interview Question of the Day
Samuel has a 4% chance of winning the jackpot in a lottery. All lined up, the first four people in the line lose. Samuel is fifth in the row. What’s the chance of Samuel winning now? (Answer)
Business Term of the Day
Reaganomics is a popular term used to refer to the economic policies of Ronald Reagan, which called for widespread tax cuts, decreased social spending, increased military spending and the deregulation of domestic markets. Reagan’s approach was introduced in response to a prolonged period of economic stagflation that began under President Gerald Ford in 1976.
Food for Thought
Since Britain voted in June to leave the European Union, the sterling has tumbled over 17%. However, most luxury-goods makers haven’t yet raised their prices (they do have pretty fat margins). And most interestingly, analysts are saying the UK is now the least expensive market in the world for a plethora of luxury goods. Many thanks, Brexit.
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