“It’s all getting very real now, folks” — Tobias Davis, an analyst from Western Union International Bank, reacting to UK Prime Minister Theresa May’s comments on Sunday that signaled the Brexit process will begin by the end of March 2017. Better hold tight.
Market Snapshot
- U.S. markets fell as Brexit fears resurfaced, along with continued concerns over the financial health of Deutsche Bank
- On the heels of Theresa May’s Sunday comments on Brexit, the British Pound slumped yesterday
- Shares of Winnebago Industries rallied as much as 29% after the company acquired towable competitor Grand Design for $500 million
Reelin’ It In
…Bass Pro Shops has acquired Cabela’s for $4.5 billion in cold, hard cash. It’s the most masculine deal of the year—if everything goes as planned, the merger would create an outdoor sports gear behemoth, with over 180 stores and control of over 20% of the U.S. hunting, camping and fishing market. But that’s a big “if.” The acquisition has already sparked antitrust concerns since the retailers overlap in three states. The deal comes as the sporting goods industry struggles with weakened sales (you guessed it—Amazon’s poaching customers left and right), but that didn’t stop investors from jumping for joy—Cabela’s shares shot up 15% yesterday.
Put Up or Shut Up
…Just ask Bill Gross. Amidst $62 billion of net outflows since 2009, fund manager Janus Capital Group (famed bond king Bill Gross’ company) finally took a knee and agreed to let UK-based rival Henderson Group take the reins—and it looks like Henderson is getting the better deal, too. In a buyout valued at $2.6 billion, Henderson shareholders will own 57% of the combined company despite only contributing 40% of the total assets. Now that’s some fun math (for Henderson, that is). Why the change of heart for Janus? Well, with passive managers outperforming active managers due to their lower cost structure, it seems that active managers who get defensive together, survive together.
Imagine a Yard Sale With 1.71 Billion People
…Because now, that’s possible. Yesterday, Facebook launched Marketplace, a mobile buy-and-sell platform available to Facebook users. The social media giant took its first shot at Marketplace in 2007, but the service never really took off. Things are looking better this time around, so it’s likely to pose a major threat to secondhand sales companies like eBay and Craigslist. The downside for Facebook? Getting sellers to cooperate could be an uphill battle—items like guns and drugs have been banned from being sold on Marketplace (duh), but that hasn’t stopped them from already making their way onto the platform on day one. Guess it’s not easy to make 1.71 billion people follow the rules.
Is Tesla Finally Figuring Out How to Make Cars?
…Perhaps so. No one can deny Tesla’s innovation, but there’s always been one knock on the company (and the stock): can Tesla ramp up car production enough to meet demand? If last quarter is any indication, Musk and Co. are back on the right track. Tesla delivered 24,500 cars to customers in the third quarter, a whopping 70% more than in the second quarter and its most ever. Investors liked that very much, sending shares up nearly 5% yesterday. It’s a rapid turnaround from the production issues Tesla faced earlier in the year, and a welcome distraction from its recent autopilot controversies. To be sure, Tesla has a long way to go to reach Musk’s ambitious targets of 500,000 deliveries in 2018 and a million by 2020, but hey, it’s a start.
Oh, and bonus Elon Musk news: SpaceX—Musk’s other insanely ambitious company—is apparently investigating sabotage as an explanation for why its Falcon 9 rocket exploded on September 1. Never a dull day for Mr. Musk.
Other Stories
- Google Pixel phone leaked before unveiling today
- Morgan Stanley unit accused of high-pressure sales tactics
- Apple Maps displays nationwide Amtrak train routes
- Toyota is releasing a chatty robot that sits in your car’s cupholder
Economic Calendar
- Monday: ISM Manufacturing Index (-); September Auto Sales (-); Construction Spending (-)
- Tuesday: Micron, Darden Restaurants Earnings
- Wednesday: Monsanto, Yum! Brands Earnings; ISM Non-Manufacturing Index; Factory Orders; Private Employment Report
- Thursday: Weekly Jobless Claims
- Friday; September Jobs Report
Facebook: The Presidential Proving Ground
A lot of commentators and pundits claimed back in 2008 that the Obama v. McCain race was the “Facebook Election.” Eight years later, Facebook is a new animal entirely—still here and bigger than ever. Bottom line: forget 2008. 2016 is the real Facebook Election. Here’s what we mean:
- Analysts from Borrell Associates project over $1 billion to be spent on online/digital ads during this election cycle. Yes, that’s an absurd amount of money—and it’s triple what was spent in 2012.
- And where is this colossal stockpile of money going? Yep, you guessed it: Facebook. Citigroup predicted that spending on political ads on Facebook could even surpass political ad spending on Google this year.
- To be fair, TV is still getting the big bucks: Kantar’s Campaign Media and Analysis Group estimates that spending on TV political ads will reach $4.4 billion in 2016. Good god.
- But why the trend towards Facebook? The main reason: a little thing called “micro-targeting.” This is basically when campaigns use data from Facebook to target narrow segments of Facebook users to sway voter opinions or motivate people to go to the polls. Essentially, Facebook allows campaigns to be even more precise about who sees their ads—and that’s something Clinton and Trump can both get behind.
Interview Question of the Day
What transactions affect the retained earnings statement? (Answer)
Business Term of the Day
Teaser Loan — An adjustable-rate mortgage loan in which the borrower pays a very low initial interest rate, which increases after a few years. Think of it as a trap: teaser loans entice borrowers by offering an artificially low rate and small down payments, letting borrowers believe that they should be able to refinance before the increases occur. Unfortunately, most will see increased monthly payments, which many can’t afford.
Food for Thought
Viewers of this season’s Saturday Night Live premiere might have noticed something quite special: 28% fewer commercials. TV networks are trying to minimize “commercial clutter,” which has driven away viewers. Result? Viewership for Saturday’s episode jumped about 30% from last season’s debut.
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