Here’s your hand-crafted Brew for May 23rd.
QUOTE OF THE DAY
“This is like a coup we think, a coup from an outsider” — analyst Paul Moran on the shakeup at Ford.
Market Snapshot
- Stocks extended their three-day winning streak on Monday as President Trump arrived in Israel, the second stop of his international tour.
- Treasury yields continued to slip after last week’s steep loss. Crude is still hovering just above $50 a barrel as OPEC meets this week in Europe.
Ford Fields a New Driver
After losing 40% of its stock value in three years, Ford (+2.12%) is revving up for a change—and a quick one at that.
Chairman Bill Ford (does that name sound familiar?) officially announced Mondaythat Jim Hackett is replacing Mark Fields as CEO.
Out with the old
Fields, a 28-year veteran of America’s #2 carmaker, took over the driver seat at a pivotal point, and for the most part, gave it nothing but gas.
Ford’s traditional business has continued to thrive: the F-150 was and is still the most popular car in the country, and pre-tax profits have grown 65% (from $6.3 to $10.4 billion) since he assumed the role.
But Wall Street isn’t here for the same ol’ song and dance.
Investors watch as Uber (and Tesla (-0.15%) and Lyft and Waymo) zoom through the HOV, while worrying about being left in the dust with their old pal Ford. And Tesla passing Ford’s market cap in April…probably not the confidence booster that your portfolio manager was looking for.
In with the new
Hackett is a new face for Ford, but he’s no stranger to turnarounds. When the University of Michigan needed an interim athletic director, the ex-football player took the reigns.
Before joining Ford’s self-driving arm, Ford Smart Mobility, last year, Hackett oversaw a similar shift at Steelcase (+1.22%), an office furniture maker. Over three decades, he eliminated 12,000 jobs and halved the Michigan company’s physical footprint to cut costs.
Now, he’s bringing this knack for innovation from the research lab to the c-suite.
Ford’s already planning to sell fully-autonomous cars by 2025 thanks to a $1 billion investment in Argo AI, and those same cars will shuttle Dearborn employees around the office by next year.
Shares didn’t move much on the news this morning, but Ford is hoping anything is better than the current trend.
Netflix Takes a Eurotrip
Netflix (+0.09%) is pressing play on its European expansion by hiring a new VP of global policy at its new 400-employee Amsterdam call center to replace outgoing policy chief Christopher Libertelli.
And ICYMI, ‘Flix means business––all of this is part of a $1.75 billion investment on the continent.
Most of the company’s growth is coming from outside the U.S. right now (tends to happen when you have almost 1/6th of the U.S. population), and international customers are expected to pass those at home very soon.
But new turf comes with new rules. So, as the streaming giant rolls out across dozens of new countries, they’ll look to bring in a big leaguer to deal with everything from net neutrality to the EU’s 20% production rule. And, that’s a wrap.
Supreme Court v. Patent Trolls
Kraft Heinz’s (+1.00%) flavored-water suit against TC Heartland is finally over—and with it, a 27-year-old ruling that fueled a practice known as “patent trolling,” is dead.
For years, revenue bloodsuckers have bought or acquired patents, with zero intention of using them. Instead, they file patent suits against companies big and small in obscure districts with favorable judges and easy juries. One east Texas court heard over half of all cases nationwide.
In 2015 alone, Google fought off 100 patent suits at the same time. In the same year, leeches sucked up a whopping $29 billion in settlements.
The Supreme Court’s new ruling forces would-be trolls to meet companies on their home turf to level the playing field. And as we all know, road wins aren’t easy to come by.
Call It Good Chemistry
American chemical giant Huntsman (-2.10%) and its Swiss pal Clariant (+3.32%) agreed on a $14 billion merger Monday, creating a chemical industry giant that will now be known as—wait for it––HunstmanClariant.
Huntsman sells chemicals ranging from polyurethane and pigments to plastics and auto fluids. It might be the only thing more boring than Clariant, which makes plastics and coatings used EVERYWHERE. Really. Everything from skin cream to bike lanes.
That’s why, in an industry plagued by slower growth that has resorted to consolidation, this move is crucial. It expands the duo’s global footprint to 100 countries, 32,000 employees and $13 billion in revenue.
What Else Is Happening…
- Pittsburgh and Uber are breaking up after a six-month affair that left the city dissatisfied
- TaskRabbit CEO Stacy Brown-Philpot is joining Nordstrom’s
(+3.12%)board of directors - Arconic
(+0.18%)and Elliot Management reached a last-minute deal after five months of fighting - The failed Fyre Festival is now facing a federal inquiry
Economic Calendar
- Monday: Booz Allen Hamilton (+) Earnings; National Activity Index (+)
- Tuesday: Autozone, Toll Brothers, DSW, Container Store Earnings; New Home Sales, Manufacturing Index
- Wednesday: Lowe’s, Tiffany & Co., Advance Auto Parts, Williams-Sonoma Earnings; FOMC Minutes
- Thursday: Best Buy, Abercrombie & Fitch, TD Bank, Gamestop, Nutanix Earnings; Weekly Jobless Claims, Consumer Comfort, Fed Balance Sheet, Money Supply
- Friday: Big Lots Earnings; GDP, Consumer Sentiment
The Employment Paradox
Contrary to what you might be hearing, the economy is in great shape (relatively speaking). Unemployment is down to 4.4%, a record low we haven’t seen in a decade; stocks are reaching record highs almost every week; and the Chicago Fed’s economic activity index just hit its highest point since 2014.
But there’s one sticky situation that doesn’t quite follow—wages aren’t growing like they should. Here are some theories as to why:
- The Phillips Curve is broken. That handy ol’ graph you learned back in AP Macro works well in theory, but as the numbers show, it’s anything but smooth.
- Workers just don’t have the power they used to. This isn’t the post-war economic upswing anymore, when over a third of American workers were unionized. Last year that percentage was a measly 10%.
- Slack in the labor market. As critics are quick to point out, unemployment only measures those who are actively seeking a job—not 37% of Americans who have given up on looking for work. If workers are demanding more pay, employers can simply pull from this pool, which is close to a record high.
The Fed is well aware of this problem, too. Minutes of the bank’s Open Market Committee will come out Wednesday. Could another rate hike be the fix?
Interview Question of the Day
A train leaves Unionville at 6:00 pm and is traveling towards Stonesboro at 15 mph. Another train leaves Stonesboro at the same time towards Unionville at 85 mph. Unionville and Stonesboro are 200 miles apart. When will they meet?
(Answer)
Speakers of the Day
It’s commencement season. If you haven’t already, chances are you’ll be subjected to a polished, well-rehearsed speech that is supposed to make you feel optimistic and invigorated for the future.
Toastmasters International, a 345,000-member organization promoting leadership and public speaking, outlined what makes a graduation speech memorable. (With examples, of course.)
Stat of the Day
21,300 — That’s how many stock trades 34 members of congress made in the past two years. It’s not illegal, but it does raise conflict-of-interest questions, especially when the companies involved have something to win or lose when it comes to federal laws.
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