Uber Has A New Plan To Satisfy Its Drivers, Plus Is Passive Investing Actually Bad For The Economy?

“Why Passive Investing is Worse Than Marxism” — The eye-popping title of a Sanford Bernstein research note. The argument: an economy dominated by passive investing (think index funds) is a worse allocator of capital than a Marxist economy. Oh, and it undermines the entire system of capitalism. Well then.

MARKET SNAPSHOT

Big Picture

  • U.S. markets closed lower—dragged down by the healthcare sector—after a low-volume day of trading left investors eagerly awaiting Janet Yellen’s speech later this week

Market Movers

  • Why was the healthcare sector so hampered? Yesterday, Hillary Clinton chimed in on the controversy surrounding Mylan’s EpiPen, which has seen a 400% price increase in the last few years and could soon be subject to a Congressional investigation

CORPORATE PRIMER

Pfizer 3, 2, 1

…Time to make that money. Pfizer was back in the news yesterday after agreeing to spend $1.575 billion to purchase three approved drugs and two more currently in clinical trials, all made by pharmaceutical multinational AstraZeneca. These drugs all have one thing in common: they’re part of AstraZeneca’s antibiotics business. The deal gets sweeter for Pfizer too, since the acquired drugs are shared with Allergan, which is reported to be next on the docket for Pfizer’s M&A dream team. This addition caps off a huge month for Pfizer, which already agreed to a $14 billion acquisition of Medivation earlier this week.

People Aren’t Buying Printers Like They Used To

…And that dented HP Inc.’s earnings. Refresher course: last year, HP split into two companies. The company that reported yesterday was the legacy PC and printer business that you know and love (or hate). Despite struggling to grow, the stock’s been up 21% in 2016 because it still generates plenty of cold, hard cash. Growth is still important though, and with HP’s printing revenue falling 14% last quarter(seriously, who prints anything anymore?) and management lowering its profit forecast due to less-than-expected demand, shares fell over 5% after-hours. HP Chairwoman Meg Whitman can only hope her other half—HP Enterprise—has better luck when it reports in a few weeks.

Better(ment) Treatment of Workers?

…Uber drivers hope so. Uber’s had an often…let’s call it tenuous relationship with its drivers (the key debate over whether drivers are employees or independent contractors may ultimately be decided by the Supreme Court). In the meantime, yesterday Uber announced a partnership with Betterment—one of those so-called “robo-advisors”—to help drivers manage their investments. The deal is simple: drivers will receive one free year of Betterment’s financial planning services. As the ridesharing market continues to become saturated with highly-funded competitors (some that directly attack the shaky Uber/driver relationship), Uber hopes this partnership will keep its drivers happy…and out of court.

U.S. MACRO

Dip, Fall or Plummet?

…Whatever you call it, July existing home sales weren’t great. Although the markets weren’t all hot and bothered by the dip, the predicted loss of 0.5% ended up as a 3.2% fall. Why? Low supply, of course. Let’s go back to basic economics: with increasing demand and decreasing supply, prices soar while the incomes of consumers don’t keep pace, so a mismatched market develops. When new homebuyers can’t afford or find a home, and second-time buyers lack supply, this logjam is only natural.

OTHER STORIES

ECONOMIC CALENDAR

TAXES = THE DEATH OF SODA?

If taxes on sugary drinks go up, you’d probably expect a decline in soda consumption, right? There’s no twist here—back in March of 2015, the city of Berkeley, California became the first American city to implement a special tax of a penny-per-ounce for soda and other sugar-sweetened beverages. Let’s crack open the effects of the tax:

  • Since the tax was implemented, consumption of soda and other sugary drinks fell 21% in observed neighborhoods.
  • The main substitute of choice? Water. In fact, so many people made the switch that consumption of bottled and tap water rose 63%.
  • Surprisingly, sports drinks took the hardest hit, declining 36%, while regular soda dropped only 26%. Sorry, Gatorade—hopefully G2 fared better.
  • What’s next? Other cities are taking note, with penny-per-ounce taxes on the ballots in San Francisco, Oakland and Boulder. This summer, Philadelphia became the second city to implement the tax, one-upping Berkeley with a one and a half cents-per-ounce tax. Can you match that, Berkeley?

INTERVIEW QUESTION OF THE DAY

Pretend 1% of the population has a disease. You have a test that determines if you have that disease, but it’s only 80% accurate and 20% of the time you get a false positive. How likely is it you have the disease? (Answer)

BUSINESS PERSON OF THE DAY

Tom Moore — Say hello to the new leader of Project Loon. Wait, what’s that again? Project Loon is the division of Alphabet’s Google X research platform that’s focused on providing internet access through literal high-flying balloons. With Moore’s extensive background in the broadband industry, it looks like Google’s ready to take Project Loon to the next (dare we say highest?) level.

FOOD FOR THOUGHT

Hedge funds have had a rough year, and things aren’t turning around: according to a new eVestment Hedge Fund Asset Flows report, investors withdrew $25.2 billion from hedge funds in July. If the trend keeps up, 2016 will mark the first year of net outflows since the financial crisis.

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