“I think he knows this is toast” — Hedge fund manager Bill Ackman, commenting on rival Carl Icahn, who allegedly wanted to sell his long-held (and highly profitable) investment in Herbalife. Ackman, of course, has been short Herbalife for years. Icahn responded in classic Icahn fashion, calling Ackman a liar and claiming that not only does he not want to sell, but that he had in fact increased his investment. And so the wheel turns.
MARKET SNAPSHOT
Big Picture
- U.S. markets finished mixed on Friday as investors reacted to hawkish remarks from Fed Chairwoman Janet Yellen, who said rates could go up as soon as next month
Market Movers
- Shares of beauty store chain Ulta Salon dropped 6% despite posting anoutstanding quarter as many investors cash out on this high-performing stock
CORPORATE PRIMER
The Future of Fairness
…No humans allowed. Well, kind of: Facebook will now rely almost exclusively on algorithms, rather than humans, to select its trending news stories. To jog your memory: Zuck and Co. have been under a lot of heat after the social network was accused of bias against conservative media in its “trending topics” section, which highlights popular articles that are being discussed that day. The solution? Facebook announced on Friday that human editors will no longer play a role in curating the trending topics, and will instead rely on computer algorithms. Computers really are taking over the world.
The Future of AB InBev
…Is 5,500 employees smaller. Yep, the beverage giant will soon be cutting around3% of its massive workforce. But why? In case you’ve been living under a rock, AB InBev is acquiring SABMiller in a $100 billion-plus mega-merger. The combined company will own over a quarter of the entire global beer market. Nice. While any company (or college student) would love to have that, AB’s employees probably aren’t too happy. Mergers are often undertaken for the cost-saving synergies from combining operations, which is a fancy way of saying layoffs are a natural part of M&A.
Cloud Computing is the Future
…Just ask Apollo Global Management. The private equity giant just dropped $4.3 billion to acquire Rackspace—you guessed it, it’s a cloud computing company. What’s special about the deal? For starters, Apollo is buying Rackspace at a 32% premium—oh, and the deal is entirely in cold, hard cash. Talk about a signal of confidence. Cloud computing is nothing new, but the way that the space been performing (and selling for sizable premiums), it might as well be. All aboard the bandwagon.
U.S. MACRO
…Interest rates. Bet you haven’t heard that one before. On Friday, the Commerce Department revised first quarter GDP down, from 1.2% to 1.1%. However, economists expect that a strong labor market in the third quarter could propel growth to a higher rate. Meanwhile, at the Fed retreat in Jackson Hole on Friday, Janet Yellen laid out her support for a rise in interest rates in the near future. Markets now pin the chances of a December rate hike at 65%—as high as it’s been in the past few months. Not bad.
OTHER STORIES
- Alphabet puts serious pressure on Google Fiber to cut costs
- Amazon is piloting teams with a 30-hour workweek
- Uber suspends services in Abu Dhabi
- Impeachment trial begins for suspended Brazilian president Dilma Rousseff
ECONOMIC CALENDAR
- Monday: Personal Income and Outlays
- Tuesday: H&R Block, Abercrombie & Fitch Earnings; Consumer Confidence; S&P Case-Shiller Home Price Index
- Wednesday: Salesforce, Box Earnings; Private Employment Report; Pending Home Sales Index
- Thursday: Broadcom, Campbell Soup, Lululemon, Smith & Wesson Earnings; Weekly Jobless Claims; ISM Manufacturing Index; Construction Spending; PMI Manufacturing Index; Productivity Growth
- Friday: August Jobs Report; International Trade; Factory Orders
WHAT DOES THE FUTURE OF TRAVEL LOOK LIKE?
It looks like a train, because it is a train. Here in America, if you want to get to the other side of the country, you either have to spend a ton of time driving or a ton of money on a plane ticket. Even though Obama’s vision of a national high-speed rail network hasn’t come to fruition just yet, we are making progress: last week, Joe Biden announced plans for the U.S. government to invest $2.5 billion in Amtrak. Here’s more on the deal:
- The cash injection is intended to upgrade stations along an Amtrak route that runs along Boston, New York, Philly and DC. Oh, and let’s not forget the new high-speed trains.
- So who’s making the new trains? France’s Alstom has plans to create 28 new ones to replace the current 20 for the route (which dates back to 1999).
- These aren’t your ordinary trains either—they’ll have a third more seats, and these suckers are over a third faster, too. By fast, we’re talking a top speed of 220 mph—faster than the current 165 mph.
- But don’t get too excited: due to infrastructure restrictions, the new trains are expected to reach only 160 mph, and won’t be delivered until 2019. An Obama can dream.
INTERVIEW QUESTION OF THE DAY
You start in the top left corner of a 6×6 grid, and your goal is to get to the bottom right corner. You can only move to the right or down. You can’t move diagonally and you can’t move backwards. How many different ways are there to get from the start to the finish? (Answer)
BUSINESS PERSON OF THE DAY
Shaun Stewart — The new director of Google X’s driverless car initiative—and the former global head of vacation rentals for Airbnb. What does the travel industry have to do with driverless cars? Apparently, Google sees the connection.
FOOD FOR THOUGHT
As we reported a few weeks ago, the nation’s first “soda tax” on sugar-sweetened beverages, which went into effect in Berkeley, California last year, seems to be working. According to a new study, sugary drink consumption is down by 20%. Who said all taxes were bad?
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