Morning Brew: Groupon To Have Massive Layoffs, Disney Bets On Virtual Reality And U.S. Stocks Look To Rebound

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“I am endlessly sorry.” Volkswagen CEO Martin Wint. And in case you haven’t gotten the picture, from Volkswagen U.S. head Michael Horn: “we have totally screwed up.” The Brew agreesVolkswagen is in justifiably hot water after it was caught cheating on U.S. emissions tests to make 11 million of its diesel vehicles look way more environmentally friendly than they were. VW’s stock has lost a cool $26 billion in market value this week alone.

MARKET SNAPSHOT 

Too Much on the Markets’ Mind

  • U.S. stocks took a tumble yesterday, falling over a percent on fears of lagging global growth, fears that the Fed will raise interest rates later this year and fears that further turmoil is ahead for oil, which had a rough day itself (yes, lots of fears).
  • With such volatility in the markets, even minor bad news can snowball into sell signals across the markets. Yesterday, that signal came from an Asian Development Bank lowering its growth figures for China, which is not exactly the vote of confidence the struggling economy needed.
  • Commodities fell as well, dropping across the board. We bet you didn’t guess that copper led the decline, falling 3.8 percent, its largest one-day drop in months. Emerging market shares came under pressure due to the selloff since they’re more vulnerable to commodities prices than developed markets.
  • Europe also joined the doom and gloom party, dragged down by that pesky Volkswagen debacle and some downgrades in the mining sector.
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WORLD MACRO 

Brazil Faces Real-ity

Simply put, Brazil is in big trouble. The real (Brazilian currency) is in real trouble after hitting rock bottom yesterday—it’s at a two decade low thanks to a 25 percent fall since mid-June. What does this mean for everyone’s favorite developing country?

  • When the U.S. Federal Reserve decided not to raise interest rates last week, emerging markets around the world jumped for joy—except for Brazil. Economist Societe Generale called Brazil “the foreign exchange’s least favored country.”
  • However, Brazil may be able to utilize its currency catastrophe in a positive way. A handful of optimistic economists believe it can balance out its economy by investing more and turning consumption into production within the country.
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CORPORATE PRIMER

Grim News for Groupon

Bad news for bargain hunters everywhere: Groupon, owner of daily deal site groupon.com, is cutting 1,100 jobs—10 percent of the company’s workforce. Since Groupon’s IPO in 2011, the company has passed on a multibillion dollar buyout offer from Google, faced stiff competition from online marketplaces like Amazon and seen its stock plummet 79 percent. Groupon has finally taken a hint from itself by looking to cut costs—it also plans to shrink overseas operations.

Busy Day for Wall Street Bank CEOs

Yesterday, Goldman Sachs CEO Lloyd Blankfein was diagnosed with lymphoma. He’s not alone: 760,000 people around the nation battle the same form of cancer. Thankfully, it’s highly curable, and Goldman’s operations should continue with Blankfein at the helm. Across the street, Bank of America CEO Brian Moynihan just emerged from a highly contested election that will allow him to remain both CEO and Chairman of the Board. Trying times for all (some more than others).

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TODAY IN TECH

Microsoft Office Fights Back

Microsoft is striking back at Google with Office 2016, which released to the public yesterday. Google Docs and Sheets were arguably a step ahead of Word and Excel with real-time collaboration and web apps. It’s no surprise that Word 2016 will offer similar functionality—plus Skype, now fully integrated with Office apps to keep with the theme of real-time collaboration. Clippy hasn’t returned yet though.

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OTHER STORIES

  • Instagram hits 400 million users
  • Hillary Clinton opposes Keystone XL pipeline
  • Harvard endowment grows record 5.8 percent
  • The case against Dropbox
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ECONOMIC CALENDAR

  • Monday: Existing Home Sales
  • Tuesday: AutoZone/Carnival/General Mills Earnings
  • Wednesday: Manufacturing Index
  • Thursday: Durable Goods, New Home Sales, Weekly Jobless Claims, Janet Yellen Speech, Nike/Bed Bath Earnings
  • Friday: Consumer Confidence, 2Q GDP Revision #3

THE FUTURE OF ENTERTAINMENT…?

Is your 50 inch HD TV just not cutting it? Disney feels your pain—$65 million worth of it, in fact. Disney just invested that hefty sum into virtual reality company Jaunt. Here’s more on the deal:

  • Jaunt is now the most-funded independent virtual reality company ever after raising around $100 million.
  • What’s all the fuss about? Jaunt CEO Jens Christensen claims watching “intimate” sports such as basketball or tennis through virtual reality allows you to view the game in a unique way.
  • Many disagree: live broadcasting via VR hasn’t been great so far, but new technology continues rolling out to improve the experience.
  • Some critics have compared VR to the flop that was 3D televisions, but at the end of the day, it’s up to the people. Will you see the value in watching a concert from the stage or a sports game from the ground? Might as well give it a try.

INTERVIEW QUESTION OF THE DAY

You are faced with two doors. One door leads to your job offer (that’s the one you want), and the other leads to the exit. In front of each door is a guard. One guard always tells the truth. The other always lies. You can ask one question to decide which door is the correct one. What will you ask? (Answer)

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BUSINESS TERM OF THE DAY

Coverage Ratio — A measure of safety of a bond issue, based on how many times earnings (revenue) will cover debt service (principal/interest) payments as well as operating and maintenance expenses.

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FOOD FOR THOUGHT

5,000 percent: the amount U.S. drugmaker Turing is rolling back the price of one of its AIDS medication drugs, after the company and its CEO was virally harpooned on social media for shamelessly jacking up the price of the drug earlier this week.

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