DeMarco is a federal prosecutor who supports the Justice Department in its encryption conflict with Apple. The Justice Department canceled its hearing set for today as it believes an outside party can unlock the iPhone used by one of the San Bernardino shooters.
MARKET SNAPSHOT
Big Picture
- Though U.S. markets moved very little on a tame Monday, the barely-positive finish marked the longest Dow winning streak since October
Alternatives to Watch
- Oil also nudged higher on Monday after a delivery hub posted decreases in inventory for the first time since January, possibly marking the beginning of the end of the supply glut
Market Movers
- Diamond International, the company that may or may not have convinced you to buy a timeshare, saw its stock nosedive 16% after probes were launched into its competitor for shady selling tactics, meaning the entire industry may soon come under scrutiny
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U.S. MACRO
The Housing Market Breaks Our Hearts
Sad and true: the housing market finally gave in to peer pressure (negative markets are tough to resist). The results? The National Association of Realtors announced yesterday that existing home sales in the U.S. were down a substantial 7.1% in February, which is troubling news for investors and homebuyers alike. With fewer homes up for grabs as the popular spring buying season approaches, the imbalance between supply and demand…well, you know. Bottom line: if you’re in the market for a house, ready your wallet—things might get pricey.
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CORPORATE PRIMER
Just Checking In
With Valeant Pharmaceutical’s catastrophic decline splattered across the headlines, here’s the latest: the search for a successor to Michael Pearson, Valeant’s former CEO, has begun. Bonus: yesterday, the Board of Directors found itself a new member: the one and only Bill Ackman, famed (or is it infamous?) hedge fund manager with a huge—and deeply underwater—stake in the company. The goal? To mend the tarnished relationships Valeant has (or doesn’t) with doctors and insurers—and let’s not forget about those shareholders, who surely aren’t happy with a share price down 90% from its peak. Addressing a change in leadership is a decent start, but it’s only the first in a long road to recovery.
Marriott’s Buzzer-Beater Brings Us Into OT
Just when you thought Anbang had it in the bag, Marriott went all in with a last second, last ditch bid of $13.6 billion to acquire fellow hotel operator Starwood. This offer slightly beats out Anbang’s previous bid (a solid $13.2 billion), leaving the Chinese company with its mouth agape, staring at its hands that once so firmly held the game ball. Lesson learned? If you want Starwood, you’d better bring your wallet. A bidding war has ensued, and you won’t see Starwood complaining about that—but analysts believe Marriott has reached its max. If accepted (and Starwood already has, while leaving the door open for an Anbang rebuttal), the combination of Starwood and Marriott would create the largest hotel chain on the planet, totaling one million rooms globally.
The Great Giant Slows
Chinese e-commerce giant Alibaba is beginning to acknowledge some growth challenges after announcing it has reached $463 billion in GMV (gross merchandise value, or a measure of the dollar amount of transactions on its platforms). While you ponder that ridiculous number, here’s two more: this GMV value represents a 23% growth year-over-year, compared to last year’s growth of 46%. Few companies would complain of 23% growth, but hey, a slowdown is a slowdown. But why is it happening? The quick answer: counterfeit goods. Yep, knockoffs are a huge issue for Alibaba, and with $463 billion in GMV for fakes to hide in, they’re pretty tricky to catch.
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OTHER STORIES
- Chipotle gives away free chips and guacamole with new game
- FanDuel, DraftKings shut down daily fantasy sports games in New York
- IHS and Markit to merge, creating data heavyweight
- Carnival gets approval to start cruising from Miami to Cuba in May
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ECONOMIC CALENDAR
- Monday: Existing Home Sales (-)
- Tuesday: Nike, Krispy Kreme Doughnuts Earnings; PMI Manufacturing Index
- Wednesday: General Mills Earnings; New Home Sales
- Thursday: GameStop Earnings; Durable Goods Orders; Weekly Jobless Claims
- Friday: U.S. Markets Closed (Good Friday); U.S. Q4 GDP (3rd Estimate)
TIME IS MONEY
Last week, a ruling from the FCC came into effect that few may know about, despite the fact that it directly affects over two million people in the U.S.—all of them inmates. The FCC placed caps on rates charged for prison phone calls. Why does this matter? Well, it turns out these rates comprise a $1.2 billion industry. Here’s the rest:
- Nobody values a phone call more than an inmate, and prison phone companies know this all too well: they charge fees for everything, including adding funds, making calls, etc.
- That’s why the FCC has capped these rates, since these fees could add up to 40% to the cost of a call (this can mean $13 for a 20 minute call).
- So how did phone companies prepare for the ruling? Well, one company, Securus, acquired JPay, a prison financial services provider.
- JPay deals with 70% of prison inmate transactions (think Venmo for prisons), and its fees, which total up to 45% of the money being sent, aren’t capped by the FCC ruling.
INTERVIEW QUESTION OF THE DAY
My bath has two taps and a plug hole—and a leak! The cold tap on its own fills the bath in 20 minutes, the hot one in 30 minutes. The plug hole can drain the bath in 16 minutes with the taps off. The leak would empty a full bath in two hours. How long will the bath take to fill if I leave both taps on with the plug left out? (Answer)
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BUSINESS TERM OF THE DAY
Illiquid — Illiquid is the state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets also cannot be sold quickly because of a lack of ready and willing investors or speculators to purchase the asset.
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FOOD FOR THOUGHT
You might recall that Warren Buffett announced he was giving any Berkshire Hathaway employee who picked the first two rounds of the NCAA Tournament correctly $1 million a year for the rest of their life. Surprise, surprise: that prize went unclaimed this year. No matter: the two closest winners still split a $100,000 consolation prize.
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