Here’s your hand-crafted Brew for April 25th, streaming straight to you.
QUOTE OF THE DAY
“Celebrating 100m members the same way I did 1m: a steak alone at Denny’s. #superstitious”—Netflix CEO Reed Hastings on how he celebrated his company’s milestone number of subscribers in style.
Market Snapshot
- U.S. stocks followed Europe’s lead to close higher Monday following better-than-expected French election results.
- German and British bond yields rose again, while French bonds fell on Emmanuel Macron’s victory over nationalist Marine Le Pen. The Euro closed slightly higher after soaring on initial election news.
Too Big to Repeal?
President Trump’s “major haircut” for Dodd-Frank, a package of laws passed in response to the 2008 financial crisis, has started to take shape. On Friday, the President ordered Treasury Secretary Steven Mnuchin to review two key pieces of the 2010 regulation.
1. Orderly Liquidation Authority (OLA)
- What is it? This part of Dodd-Frank is designed to protect taxpayers from another $12.8 trillion bailout and gives the government power to step in and wind down a failing institution before it implodes.
- What do banks think? Surprisingly, banks actually like OLA, and worry its replacement could be much harsher.
2. Financial Stability Oversight Council (FSOC)
- What is it? Remember ‘too big to fail?’ Now’s your chance dust off that phrase—and learn what it actually means. This part of the law created a panel of regulators who can determine if a bank is so large and important that its failure would cause the entire economy to suffer.
- What do banks think? Banks say the ‘too big to fail’ label—and its associated capital requirements—hamper their ability to do business. Looser reserve rules would mean more room on banks’ balance sheets for lending. Goldman Sachs, Wells Fargo and 27 others have been deemed too big to fail so far.
We may not have answers until Mnuchin delivers his report to the Oval Office, but given his history as a Goldman Sachs executive and his previous comments on regulation, it’s likely he will recommend repealing most—if not all—of Dodd-Frank.
Microsoft Puts LinkedIn to Use
Microsoft (+1.70%) CEO Satya Nadella wants to take on Salesforce’s (+0.45%) domination of the customer relationship management (CRM) software market. Microsoft’s ‘Dynamic 365’ will now analyze data from LinkedIn (which reached 500 million members today) to supplement a salesperson’s email and calendar using AI. It can then recognize at-risk deals and suggest ways to save them. Currently Salesforce controls about one-fifth of the CRM market, but with large customers like Visa, Microsoft could quickly close the gap and prove to investors that its $26 billion investment was worthwhile.
The Ultimate Shoe Sale
Luxury shoe brand Jimmy Choo (+9.79%) is looking for buyers as its majority investor, JAB Holdings, is shifting focus away from luxury retail. Earlier this month, JAB snapped up Panera Bread in order to put more emphasis on its coffee and food sector. Jimmy Choo may be putting itself ahead, but it certainly isn’t the only chain on the chopping block—other luxury brands like Derek Lam and Belstaff are also part of JAB’s retail portfolio. It’s only a matter of time…
Netflix Adds to Its Queue
Only days after Netflix (+0.67%) reached its milestone 100 million subscriber mark, the streaming giant said it would raise $1.09 billion in European bonds to continue its global expansion. As companies like Amazon, Hulu and cable channels enter the streaming competition, California-based Netflix is banking on adding users abroad to maintain its edge. In its last earnings report, Netflix said international growth was more than double its subscriber growth at home. Keep it up, ‘Flix.
What Else Is Happening…
- Amazon
(+0.99%)has quietly formed a team to explore self-driving delivery methods - Square
(+2.06%)is reportedly buying anonymous social network Yik-Yak for less than $3 million - Hasbro
(+5.90%)is beating rival toymaker Mattel(-0.87%)for the first time in 17 years - Tesla
(+0.80%)will double the size of its supercharger network
Economic Calendar
- Monday: Halliburton (+), T-Mobile (+) Earnings
- Tuesday: 3M, Arconic, AT&T, Chipotle, Coca-Cola, JetBlue, Lockheed Martin, McDonalds, Texas Instruments, Xerox Earnings; Consumer Confidence, New Home Sales
- Wednesday: Alaska Air, Boeing, Boston Beer, Hershey’s, Norfolk Southern, PepsiCo, Procter & Gamble, Twitter Earnings
- Thursday: Alphabet, Amazon, American Airlines, Comcast, Domino’s, Dow Chemical, Expedia, GoPro, Microsoft, Southwest Airlines, Starbucks, Under Armour, Union Pacific Earnings; Weekly Jobless Claims
- Friday: Morningstar, Steve Madden Earnings; GDP
Tobacco Companies Smoking Hot—Despite Colder Attitudes
Americans are smoking less and less, but the U.S. tobacco industry is doing just fine, if not better. U.S. cigarette sales outpaced beer and soda—combined—last year, with revenue hitting $93.4 billion in 2016, a 32% increase since 2001. Other highlights from the report:
- Volume of cigarettes sold has actually decreased 37% since 2001, so companies can thank higher prices for the good numbers. The average price of a pack of cigarettes almost doubled, from $3.73 to $6.42 in the same time period.
- Let’s talk regulation: In the U.S., 42% of a pack’s price is tax, which seems like a lot, until you compare that to 82% in the U.K.
- Altria and Reynolds American control over 80% of the cigarette market and are rapidly investing in other smoking alternatives. An Altria spin-off has spent $3 billion to improve vaporizers.
Question of the Day
What is the angle between the hour-hand and minute-hand of a clock at 3:15?
(Answer)
Did You Know
Windows Solitaire, the game we’ve all wasted hours in class or the office with, was created by an intern. Yep, Wes Cherry says he coded the game out of boredom. He also says he never received a cent for it from Microsoft, though Bill Gates reportedly criticized the game for being too hard.
Stat of the Day
46%—the percentage of American agricultural workers that are undocumented immigrants. Mass deportations could have a disastrous effect on U.S. output, new analysis shows.
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