“I think the guy who wrote that’s a jerk, OK” — CEO of JPMorgan Jamie Dimon, in response to criticism from Camden Fine, who heads a group that represents small banks. In a back-and-forth spat, the two traded blame for “bank-on-bank violence.” Sounds like a fight overheard in the junior high cafeteria.
MARKET SNAPSHOT
Big Picture
- Anything you can do, I can do better (or worse?): after rocketing higher on Tuesday, U.S. stocks reversed course entirely yesterday due to disappointing earnings and a massive drop in the retail sector (we’re talking 4.5%)—bringing the total drop to 15% in the past year
Alternatives to Watch
- Oil jumped 4% for a second day in a row after U.S. crude inventories fell unexpectedly, leading investors to think the outages in Canada and Nigeria are having a larger impact than originally anticipated
Market Movers
- SeaWorld fell 5% yesterday after being downgraded by Credit Suisse, which cited increased competition from both Disney and Universal Studios
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CORPORATE PRIMER
Chipotle Board Members are Safe
The health concerns that come with eating a Chipotle burrito are almost starting to outweigh its sheer deliciousness. With outbreaks of E. Coli, salmonella and norovirus around the country, Chipotle has had a tough time keeping its customers both happy and healthy. Fortunately (for Chipotle, that is), at its annual meeting yesterday shareholders voted to maintain the burrito giant’s current board members. But not without consolation: Chipotle is hiring two food safety experts to focus on preventative food safety measures—a former member of the FDA and the other experienced in fast food E. coli outbreaks. Chipotle’s board members are safe for now, as long as they don’t eat any burritos.
No Big Spenders at Macy’s
Do you know which company Trump tweeted was the worst in the S&P 500 back in January? Congrats if you said Macy’s. Full disclosure: Macy’s dumped Trump’s clothing line earlier this year, which may or may not have influenced Trump’s opinion (#saltymuch?). Regardless, Trump may have been on to something: the apparel retailer took a serious hit yesterday after overall sales tanked 7% and same store sales fell for a fifth straight quarter. Missed earnings, threat of new competitors (Amazon…duh, but also fast fashion players like H&M and Zara) and the same stale old merchandise was enough to send shares plummeting 15% to a 52-week low.
So…About that Debt…
Linn Energy announced in March that bankruptcy might be “unavoidable”…well, it followed through on its promise yesterday, and the stock appropriately lost half its already-thin value. Here’s how we got here: Linn Energy is one of the largest oil partnerships in the world, which comes with the convenient advantage of no corporate income taxes. And with massive profitability came a massive herd of investors, leading Linn Energy to take on more debt than it could handle to fund acquisition-led growth—which didn’t work out so well when oil prices collapsed. What’s worse, the restructuring process during bankruptcy might nix Linn’s partnership status, leaving a hefty tax bill for investors when the dust clears.
Also About That Debt
Beginning July 13, advertisements on Google’s search engine will no longer include marketing from payday lenders. This controversial segment of the loan industry offers small loans at exorbitantly high interest rates, then forces borrowers to pay them back in short periods of time—as in your loan payment is coming straight out of your next paycheck. And if borrowers are unable to pay up on time? They’ll just have to refinance and sink into even more debt. Lovely. On the heels of this announcement, shares of many payday loan lenders sank, some by as much as 6%.
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OTHER STORIES
- Instagram reinvents itself with clean new design and icon in latest update
- Elon Musk’s Hyperloop dream has its first public demo
- Emma Watson used Panama Papers firm to set up offshore company
- LAPD testing Teslas as ‘high-pursuit’ police cruisers
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ECONOMIC CALENDAR
- Monday: Teva Pharmaceuticals (+), Tyson Foods (+), Hertz (-) Earnings
- Tuesday: Disney (+/-), Allergan (+), Credit Suisse (+/-), Nokia (-), Electronic Arts (+), Sun Life (+) Earnings; Job Openings and Labor Turnover Survey
- Wednesday: Macy’s (-), Wendy’s (+), Jack in the Box (+) Earnings
- Thursday: Nordstrom, Ralph Lauren, Kohl’s, Shake Shack, NVIDIA Earnings; Weekly Jobless Claims
- Friday: Honda, J.C. Penney Earnings; Retail Sales; Producer Price Index; Consumer Sentiment
CLUB GOING UP ON A TUESDAY
Quick—how much is a tequila shot at your favorite bar? We’ll forgive you if your memory is a bit hazy…but it might be more than just the tequila that’s making it hard to remember. The “dynamic pricing” model—charging more or less for the same product depending on current demand—isn’t just limited to airline tickets and Uber rides anymore:
- How it used to work: only in “fixed capacity” industries like airlines and hotels, where rates are hiked up during busy periods.
- But now, software companies have seen a rise in demand for data crunching that tells businesses with more quickly-fluctuating demand when to raise (or lower) prices.
- For example, The Drink Exchange is already used in over 20 restaurants and bars. It quickly calculates the optimal price for an item at any given moment in time, leading to nights where the price of a tequila shot can drop from $7.75 down to $7.25 in the span of a few minutes.
- The takeaway: a visit to the zoo or your local theme park might cost you more if you decide to visit on a Saturday…but possibly less if you go on a Tuesday.
INTERVIEW QUESTION OF THE DAY
There are 25 horses and you need to figure out the three fastest horses by placing them into races. Assume there is no tie in the speed. There are five tracks, so for each race, you can place five horses and figure out the relative rank among those five horses—but you don’t have the exact finishing time (i.e. there is no direct comparison between results from two different races). What’s the minimum number of races you need to arrange in order to figure out the three fastest horses? (Answer)
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BUSINESS PERSON OF THE DAY
Carmelo Anthony — NBA all-star, Olympian and now…tech investor? Yep, Carmelo’s off-the-court activities include founding venture capital firm M7 Tech Partners. This isn’t just fun and games for Anthony: the firm’s portfolio consists of 30 companies, including ride-sharing service Lyft.
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STARTUP OF THE DAY
Moving from one place to another can be both stressful and expensive. Enter Jenny Morrill, who started Move Loot: “the David to Goliaths like IKEA and Target in the low-cost furniture market.” Similar in ideology to Craigslist, sellers list furniture on Move Loot, and the company assists with marketing and merchandising to potential buyers, check out and delivery of pieces. Green for the environment, since less furniture ends up in landfills, and more green in everyone’s pockets—looks like a win-win to us.
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