“Too lazy and fat” — British international trade secretary Liam Fox, describing—who else?—Great Britain. Gotta love a self-loathing Brit.
- So that happened: after a relatively calm last two months, the silence was broken with a bang on Friday after central banks finally began to question the benefits of further monetary easing on the economy. The result: markets across the globe went in freefall, tumbling over 2%
- On the same day markets plummeted, oil prices followed suit, dropping 4% after traders realized that the surprise drop in inventories was caused by a tropical storm (i.e. a temporary disruption)
- A lack of expected stimulus from the European Central Bank pushed the German 10-year bond yield back into positive territory for the first time since July
If Kroger Had Done Better
…It would have done well. Although your friendly grocery store chain reportedprofits sliding by 11.5%, if you remove non-recurring expenses (i.e. one-time stuff), Kroger actually increased earnings by around 5% and beat analyst expectations. The third-largest grocery store chain lowered its earnings guidance for the year, though, citing falling prices on eggs and meats from the deflationary macro environment. From a financial analysis standpoint, this means sales dollars are falling while fixed costs stay the same, putting pressure on Kroger’s precious margins.
Cars
…It’s complicated. Let’s go around the horn: first off, a Volkswagen engineer, James Liang, came clean and pled guilty to helping the automotive giant produce the now-infamous “defeat devices” in the emissions-rigging debacle you’re surely sick of hearing about by now. Liang’s cooperation with authorities suggests that the Justice Department will utilize Liang to pursue others involved. And as if that wasn’t enough bad news for the auto industry, GM recalled 4.3 million vehicles affected by a software bug that prevented airbag deployment. Fun times to be an automaker.
The Dreaded Strategy Shift
…Apple has reportedly fired dozens of Project Titan employees. First, some context: Apple’s secretive Project Titan—its self-driving car initiative—is shifting its strategy. It’s believed that instead of creating a full-fledged self-driving car, Apple will narrow its gaze to just the autonomous vehicle technology itself. A little late in the game for such a big change, no? People familiar with the matter believe that the initiative has struggled to make much progress, and earlier this year the original head of Titan stepped down, delaying the project. Better late than never, but at a serious cost. After all the hype with the release of the iPhone 7, Titan is providing a bit of a buzzkill for everyone’s favorite fruit.
Note:
…The Galaxy Note 7 has major issues. Last week, Samsung announced a recall for its newly-released smartphone, already owned by 2.5 million people worldwide. The reason? Numerous reports of the smartphone spontaneously combusting and bursting into flames—probably the last thing that you’d want to happen to your phone. On Friday, the U.S. Consumer Product Safety Commission issued a stern warning telling Note 7 owners to cease use immediately, and airlines are warning passengers not to use the phones on planes. Samsung shares tanked over 5% on Friday following the news, and were down an additional 7% in early Monday trading—that’s well over $20 billion of market value that’s gone up in flames.
Other Stories
- Facebook co-founder pledging $20 million to defeat Trump
- Texas mattress shop closes over ’tasteless’ 9/11 ad
- Chipotle settles consumer food safety claims
- Teva says aims to launch EpiPen-like device by 2018 in U.S.
Economic Calendar
- Monday: Manchester United Earnings: T-Bill Auctions
- Tuesday: Treasury Budget
- Wednesday: Cracker Barrel Earnings; Import/Export Prices
- Thursday: Oracle Earnings; Producer Price Index; August Retail Sales; Weekly Jobless Claims
- Friday: Consumer Price Index; Consumer Sentiment
Clubs Get Hit…Hard
Those of you well-acquainted with the European clubbing scene (looking at you, returning study abroad students) may have heard the news: Fabric, one of London’s most famous clubs and known for its EDM scene, has permanently closed after two drug-related deaths this summer. Not only is the fall of Fabric part of a larger trend in London (half of London’s clubs and 40% of its live music venues have closed due to gentrification and a real estate boom), but it’s also part of a larger trend in Europe:
- According to the Economist, between 2001 and 2011, the number of “discotheken” in the Netherlands fell by 38%. And in Britain? Back in 2005 there were 3,144 clubs. But by 2015, only 1,733 remained standing.
- So how does this translate into dollars (or pounds, in this case)? Revenues fell by 300 million pounds down to £1.2 billion between 2010 and 2015 in Britain.
- What’s going on? One theory: people are more sober these days. In Britain, between 2005 and 2013, the number of 15-24 year olds who were frequent drinkers dropped from 7% to 2%. A similar phenomenon has occurred with MDMA usage, which has declined in Britain, Germany, Denmark and Spain.
- It also seems that the youths of today are choosing music festivals (think Coachella) over clubbing: take Amsterdam, where 130 such festivals took place in 2014. And in Britain, around 250 take place per year, compared to 80 back in 2004. Better hit the club while you still can, Europe.
Interview Question of the Day
Why is zero unemployment not desirable nor practical? (Answer)
Business Term of the Day
Five Hundred Dollar Rule — A regulation that prevents a bank or firm from liquidating a client’s account to cover a margin call, if the amount of the margin call is equal to or less than $500. This rule is mandated by the Fed and is used to keep relatively small financial deficiencies from resulting in the automatic sale of an investment position.
Food for Thought
More choices for U.S. airline passengers or more headaches? In an effort to compete with budget airlines and to nab every customer, Delta will be the first to adopt what they call a “segmentation” strategy. Coach seats will be divvied up like your choice of car wash: good, better, best.