“The first step to economic growth is recognizing the Federal Reserve is a god that has failed” — Author George Gilder, arguing that the Fed has failed to trigger growth or distribute wealth throughout the economy. Janet Yellen has a lot to prove with this next rate hike…whenever it happens, that is.
MARKET SNAPSHOT
Big Picture
- U.S. stocks finished lower again yesterday, sending the S&P negative for 2016. They were hit hard by the government’s move against tax inversion (stay tuned) and weak overseas data, along with a decline in oil
- European markets were dragged down by Germany, which was blindsided by data showing a decline in factory manufacturing orders
Alternatives to Watch
- With markets in turmoil yesterday, investors flocked to safe haven assets, sending bond yields down and the price of gold up. Gold has tacked on 16.5% since the start of 2016
Market Movers
- After finishing an internal review of its accounting practices and raising its debt offering to investors, shares of Valeant Pharmaceuticals rose 10% (yes, you read that right), showing debt holders it’s on track to report its SEC filings on time
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U.S. MACRO
Obama Lays Down the Law
In a statement on the economy given yesterday, President Obama backed up the Treasury Department’s strict move to prevent tax inversions. A quick recap on tax evasion: U.S. companies can avoid high U.S. tax rates by acquiring foreign companies and moving their headquarters abroad. Well, not anymore. Pfizer’s $150 billion takeover of Allergan, a Dublin-based drugmaker, was in the works for that very reason. Key word: was. The two companies will mutually terminate the deal as a result of the Treasury Department’s new rules. While the White House denied that Obama’s announcement specifically targeted the Pfizer merger, the timing (and ultimate result) would suggest otherwise.
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CORPORATE PRIMER
Twitter x NFL
In a win-win deal, Twitter has won the rights to stream Thursday night NFL games this coming season. Uh, what? Why is Twitter entering the cutthroat live sports space during a time of serious turmoil for the company? Well, as it happens, sports fanatics and Twitter fanatics are one in the same. If you’re watching the NFL, there’s a good chance you’re also on Twitter, so why not combine the two and provide an immersive experience in the process? More than the synergistic goodness, there’s also the fact that Twitter can rake in some much-needed dough through selling ads during the games. And let’s not forget about the NFL, which will be able to reach viewers without cable access, a plan it set in motion last season when Yahoo streamed a Bills-Jags game.
Starboard Quits While Ahead
Investors are struggling with some mixed feelings today after Darden Restaurants, operator of fan favorites Olive Garden and LongHorn Steakhouse, beat Street estimates on earnings and revenue. Here’s the good: same store sales jumped 6.2% (lots of breadsticks, lots of steak). Here’s the bad: activist investor Jeffrey Smith, CEO of hedge fund Starboard Value, stepped down from the board of directors. Apparently, investors didn’t quite feel ready for the training wheels to come off, and shares fell 4% after hours. TBT to when Smith led a revolt that replaced Darden’s entire board in 2014. Ah, good times.
Walgreens Loves The Flu
With significantly fewer cases than expected, this flu season has been a breeze so far (knock on wood). For Walgreens, not so much. In general, fewer sick people is quite the opposite of what pharmacies hope for. As disturbing as that is, it’s the truth: a light flu season resulted in lower medicine sales, which resulted in sub-par quarterly revenue growth. Despite the slight bump in the road, the future looks bright for the drugstore giant. CEO Stefano Pessina has optimistic long-term plans for cost-cutting consolidation in light of Walgreens’ recent merger with Rite-Aid. Plus, fingers crossed for a worse flu season next time.
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OTHER STORIES
- Patriots fans sue to get draft pick back, cite “emotional distress”
- Iceland’s prime minister steps down amid Panama Papers scandal
- Trump blasts Ford over plans for new Mexican plant
- PayPal withdraws planned N.C. expansion due to anti-gay law
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ECONOMIC CALENDAR
- Monday: Factory Orders (-)
- Tuesday: Walgreens (+/-), Darden Restaurants (+) Earnings; International Trade; ISM Non-Manufacturing Index (+); Job Openings and Labor Turnover Survey (+)
- Wednesday: Bed Bath & Beyond, Monsanto, Constellation Brands Earnings; Fed FOMC Minutes
- Thursday: Rite Aid, Ruby Tuesday; Weekly Jobless Claims
- Friday: Wholesale Trade Data
THE TENDER TRAP
Thinking about tying the knot soon? Well, we hope you won Warren Buffett’s March Madness Bracket Challenge, because it’s going to cost you an arm and a leg. These days, some couples are spending half their annual incomes on weddings. Here’s the damage on what’s supposed to be the best day of your life:
- According to The Knot’s Real Weddings Study (what a fun name), released yesterday, the average cost of a wedding rose 4.6% in 2015 to an all-time high of $32,641. Goodness gracious.
- Just for fun, here are some other things that cost around $33,000: the Tesla Model 3, a year of in-state college tuition or treating 60 of your friends to tickets to this past Monday’s NCAA tourney championship game.
- Back to the weddings: why so expensive? Some believe the increase in wedding costs is due to rising popularity in the personalization of weddings—it has to be special.
- Of course, Manhattan topped the list as the most expensive place to get married, with the average wedding costing $82,299. Alaska, on the other hand, is the most affordable at $17,361. Looks like Anchorage might be as good a place to get tied down as any.
INTERVIEW QUESTION OF THE DAY
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BUSINESS TERM OF THE DAY
Valuation Clause — A provision in certain insurance policies that specifies the amount of money that the policy holder will receive from the insurer if an insured event occurs. The valuation clause stipulates a fixed amount of money that will be paid for insured property in the event of a loss. Several types of valuation clauses can be written, including replacement cost, actual cash value, stated amount and agreed value.
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FOOD FOR THOUGHT
Did you know that Governor Jerry Brown of California and Governor Andrew Cuomo of New York recently signed legislation to push the minimum wage to $15 per hour?
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