“Two sides to every HR story so Twitter army please put down the pitchforks” — Jeremy Stoppelman, CEO of Yelp. The tweet was in response to Yelp’s firing of an employee, who two hours before her termination criticized Yelp’s low wages in a social media post.
MARKET SNAPSHOT
Big Picture
- Even though U.S. stocks ended mixed on Friday, they concluded their best week since November, as gains in the consumer discretionary and tech sectors balanced out heavy drops in the materials sector
Alternatives to Watch
- Although oil slipped on Friday as a record buildup in U.S. crude left investors convinced the supply overload was far from over, this was the first week in February that the price of oil was up, mainly thanks to a supply freeze agreement between Russia and Saudi Arabia earlier in the week (Iran’s involvement is still TBD)
Market Movers
- Weight Watchers, aka the company Oprah has almost single-handedly rebooted, saw shares skyrocket 18% after a study found that its special diabetes prevention program is actually extremely effective
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U.S. MACRO
CPI Plays to the Fed’s Hand
0.3% may seem like a small number, but don’t be deceived: the January Consumer Price Index recorded its largest single-month gain since August…of 2011. The core CPI has now increased 2.2% over the last 12 months, beating the Federal Reserve’s 2% inflation target. Yes, that should certainly make the Fed a very happy camper: the CPI rebound, coupled with a strengthening labor market, are good omens for an interest rate hike—but still not anytime soon. With all the volatility in the stock markets, as well as continued lagging growth abroad, economists agree that any hike won’t occur until late 2016 at the earliest.
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CORPORATE PRIMER
Facebook Messenger Ready to Make that Money
Ah, good ol’ Facebook Messenger. We’ve seen it grow from its humble beginnings as a standard messaging app in 2011 to the video calling, mobile banking and transportation-requesting power app used by 800 million people around the world. The cherry on top? Facebook finally found a way to monetize the app. You guessed it: companies will now be chatting up users through direct ad messages, and Facebook will be raking in the dough.
Volkswagen Does (More) Penance
Quick flashback: in an automotive scandal for the ages, Volkswagen rigged about 600,000 vehicles to emit 40 times the legal pollution limits. VW’s stock plummeted, lawsuits ensued and Volkswagen suffered. Now fast-forward to this weekend: the U.S. EPA is requesting that VW produce electric cars to make up for its sins against the environment. Long story short, what would be easy on the environment might be tough on Volkswagen’s checkbook moving forward…but can you put a price tag on redemption?
Yahoo’s Big Step
Change is hard. Just ask Yahoo: after multiple attempts to revive revenues, the struggling internet giant has formed a committee to jumpstart the auction process of its core business: search, mail and news sites. Unfortunately, the big announcement wasn’t enough to get activist investors off Yahoo’s back, and Jeffrey Smith of hedge fund Starboard Value is still pushing to nominate his own group of investors to Yahoo’s board. It’s anyone’s game, but for Yahoo, change of any kind is a good thing.
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OTHER STORIES
- McDonald’s has unveiled a new Chicken McGriddle sandwich
- Feds say there isn’t a single safe “hoverboard“
- Volvo recalls 59,000 cars over software fault
- Top Chinese securities regulator steps down
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ECONOMIC CALENDAR
- Monday: Fitbit, Jarden, Dillard’s Earnings
- Tuesday: Macy’s, Office Depot, Papa John’s, Dollar Tree, Home Depot, DreamWorks, First Solar Earnings; Existing Home Sales; Consumer Confidence; S&P Case-Shiller Home Price Index
- Wednesday: Hewlett-Packard, Target, Chesapeake Energy, Etsy Earnings; New Home Sales
- Thursday: Best Buy, Domino’s, Gap, Baidu, Weight Watchers, Campbell Soup, Herbalife, Kohl’s, SeaWorld Earnings; Durable Goods Orders; Weekly Jobless Claims
- Friday: U.S. Q4 GDP (2nd Estimate); Foot Locker, JC Penney Earnings; Personal Income and Outlays
A GERMAN EDUCATION
Student loans: no one wants them. But with the cost of higher education today, they’re a necessary evil for most…but not all. The loophole: currently, 10,000 American students are studying in Germany, and not as abroad students, but full-time. Why? Well, it’s simply a whole lot cheaper:
- The number of U.S. students in Germany has increased 9% this year, and over 25% since 2008.
- German schools aren’t completely free: they come with a “fee” of usually around just $250 per semester. Compare that to the $30,000 in tuition fees at some universities back in America.
- So how exactly do the Germans manage this? Nearly 1% of Germany’s GDP is spent on education. So even though enrollment is virtually free for students, each bachelor’s degree ends up costing the government over $30,000.
- If you’re wondering what’s in it for Germany, this expense on foreign students doesn’t go to waste: over 50% of foreign students end up sticking around after graduation.
INTERVIEW QUESTION OF THE DAY
Three people check into a hotel. They pay $30 to the manager and go to their room. The manager finds out that the room rate is $25 and gives $5 to the bellboy to return. On the way to the room, the bellboy reasons that $5 would be difficult to share among three people, so he pockets $2 and gives $1 to each person. Now, each person paid $10 and got back $1. So they paid $9 each, totaling $27. The bellboy has $2, totaling $29. Where is the remaining dollar? (Answer)
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BUSINESS TERM OF THE DAY
Natural Hedge — A natural hedge is a method of reducing financial risk by investing in two different financial instruments whose performance tends to cancel each other out. A natural hedge is unlike other types of hedges in that it does not require the use of sophisticated financial products such as forwards or derivatives. However, most hedges (natural or otherwise) are imperfect, and do not eliminate risk completely.
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FOOD FOR THOUGHT
You might think that established Swiss watchmakers have been going head to head against smartwatches, and you’d be right. But did you know that they might be losing the market share war? In the fourth quarter of 2015, Swiss watch shipments were down 5% from last year. Is the smartwatch revolution upon us?
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