“We are outraged by this completely unacceptable situation” — Kris Charles, a Kellogg Company spokesperson. Yesterday, Kellogg launched a criminal investigation after a 2014 video surfaced apparently showing an unidentified man urinating on a cereal assembly line. Yes, you read that right. And in case you were wondering, it was Rice Krispies Treats.
MARKET SNAPSHOT
Big Picture
- It was a pretty underwhelming start to the week for U.S. stocks, but things are set to heat up in a hurry—the Federal Reserve begins its always-relevant two-day policy meeting today, sure to have investors’ attention
Alternatives to Watch
- Oil fell over 3% to put a damper on its recent rally. But why? OPEC lowered its estimate for 2016 global oil demand (that’s bad) and Iran won’t even think about freezing its production until it produces a hefty four million barrels per day (that’s also bad)
Market Movers
- Tesla jumped nearly 4% after Baird upgraded the stock, seeing the pace of Model X production accelerating
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KING OF THE STREET
Forget the American people—if this year’s presidential election was up to Wall Street, who would be head honcho? Surprise: believe it or not, Governor John Kasich would win in a landslide. You’ve got our attention, Wall Street:
- First, the breakdown: 42% of fund managers and analysts saw Kasich as the best for the economy, while 13% picked Donald Trump and 16% chose Secretary Hillary Clinton. That’s about as liberal as it gets, though…no one was so bold as to choose Senator Bernie Sanders.
- Similar results followed for the best candidate for the stock market—35% chose Kasich, 22% chose Clinton and 14% chose Trump.
- Across party lines, 40% of respondents said a Republican would be best for the economy. Surprisingly, 26% said the party of the president didn’t matter.
- And what about the effects of election season itself? 56% say the ongoing election process is detrimental to the economy. Bottom line: Wall Street just wants everyone to forget about the election and get back to work, please.
WORLD MACRO
Egypt Cuts Down On Its Pound
Let’s be frank here: the world economy is what some might call a mess right now (others might call it a disaster), and countries are doing what they can to shield themselves from the fallout. Add Egypt to the list. In an effort to boost its competitiveness relative to other currencies, the Central Bank of Egypt devalued the Egyptian pound against the dollar by an enormous 13%. FYI, this is the most the bank has lowered the pound in over a decade. While it’s a definite power move for Egypt, the devaluation might lead other countries to abandon their currency pegs too, and that’s a domino effect nobody wants.
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CORPORATE PRIMER
Anbang Strikes Again
Rise and grind, baby: the Chinese insurance group is back at it with more hotel acquisitions. Fresh off a record-shattering purchase of Strategic Hotels (refer to yesterday’s Brew for the digits), Anbang surprised investors by offering $13 billion to buy Starwood Hotels. Apparently, money isn’t an issue for the Chinese giant, but Anbang’s entrance is a surefire way to piss off Marriott, which has been getting rather friendly with Starwood itself. Analysts are baffled by the size and suddenness of Anbang’s one-two acquisition move, but there’s a method to the madness. Some believe the company is simply trying to expand, while others bet it’s an attempt to get more bang per yuan before it tanks. Bottom line: Anbang is full of secrets, and as far as we know, it plans to keep them.
Apollo Strikes a Third Time
The acquisitions don’t end with Anbang: Apollo Global Management just snatched up Fresh Market for $1.4 billion, its third major deal of the year. It’s no $13 billion (Anbang scoffs), but it’s a deal with big-time potential: Fresh Market supposedly turned to the private equity firm over concerns with its sales growth, which began way back during its IPO in 2010. After heading south for the past few years, Fresh Market is a…well, fresh target for a PE firm to turn things around—and with plenty of food industry experience under its belt, this is far from Apollo’s first rodeo. Fresh Market’s shares shot up 24% on the news, its biggest gain since, you guessed it, 2010.
Grass Gets the Green Light
Yeah, that’s right, weed. That “good-good” did good yesterday, both financially for GW Pharmaceuticals and medically for children suffering from epilepsy. The drugmaker announced that the first of its four cannabis-based drugs was a big hit, showing a median reduction of seizures of 39%. The news sent shares of GW (and the hearts of weed enthusiasts) soaring 120% in anticipation of FDA approval and the implication of wider usage of cannabis-based prescription drugs.
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OTHER STORIES
- Airbnb to launch feature for neighbors to file complaints
- Goldman Sachs buys startup that’s challenging the almighty 401(k) plan
- Mashable to make web shows with NBCUniversal’s Bravo network
- Google to urge Congress to help get self-driving cars on roads
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ECONOMIC CALENDAR
- Monday: 3D Systems (+) Earnings
- Tuesday: Oracle Earnings; Fed FOMC Meeting Begins; Retail Sales; Producer Price Index
- Wednesday: FedEx, Progressive Earnings; Fed FOMC Meeting Ends; Consumer Price Index; Industrial Production; Housing Starts
- Thursday: Adobe, Aeropostale Earnings; Job Openings and Labor Turnover Survey; Weekly Jobless Claims
- Friday: Tiffany & Company Earnings; Consumer Sentiment
INTERVIEW QUESTION OF THE DAY
Let’s say you run an LBO analysis and the private equity firm’s return is too low. What drivers to the model will increase the return? (Answer)
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BUSINESS PERSON OF THE DAY
Lloyd Shapley, famed 2012 economics Nobel Prize laureate, passed away yesterday at the age of 92. His work focused on everything from game theory to matching individuals with limited resources, which has been instrumental in studies pertaining to organ donors.
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FOOD FOR THOUGHT
Did you know that a recent survey indicated that nearly a third of Netflix users don’t actively pay for their own subscription? Don’t worry, the Brew won’t judge if you’re one of them—House of Cards won’t watch itself, after all.
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