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“OPEC is finished, OPEC is over” — Oppenheimer senior energy analyst Fadel Gheit after last Thursday’s meeting, during which the Organization of Petroleum Exporting Countries failed to agree on price ceilings or output changes. OPEC couldn’t seem to agree on a comeback.
MARKET SNAPSHOT
Big Picture
- Friday saw U.S. stocks fall after a weak jobs report (more on that in a bit). Important to note: financial companies were hit especially hard
Market Movers
- Shares of Gogo, an in-flight internet service provider, sank 15% after American Airlines left it unclear as to whether the service would be picked to install WiFi on a group of 400 new planes
CORPORATE PRIMER
Trouble in Paradise
If you look past Alphabet’s unrivaled core internet search and advertising business, the picture starts to look a bit less, well, perfect. Over the weekend, Tony Fadell, the founder of Alphabet-owned Nest (which makes Internet-connected devices at home like thermostats), left the company under mysterious circumstances. In other words, nobody knows why. Some cry mutiny since other employees have jumped ship, citing an intense conflict due to management style. Others cite Google’s oversight in holding Nest’s projects on a tight leash, clashing with Fadell’s vision. Regardless, this is another rocky encounter for Alphabet’s non-core branches, which might call into question the worthiness of some of these “side-bet” projects, as they continue to bleed cash.
Walmart Does It All
An avid Brewer knows that the retail giant has been developing drones, but get this: Walmart is now partnering with Uber and Lyft in Denver and Phoenix to test a grocery-delivery service available later this month. How’s that going to work? It’s real simple: a customer will place a grocery order online, a Walmart employee will prepare the order and then hail Uber or Lyft to deliver it right to your door. The average delivery cost will be $7 to $10. Only in America, folks.
Three Heads Better Than One
Over the weekend, the notion that two heads are better than one was tested by three separate business entities that merged to create one giant real estate investment trust (REIT) called Colony NorthStar Inc. Let’s back up a bit: a REIT is a special security that basically lets individual investors get in on real estate ventures, much like how much mutual funds provide access to baskets of stocks. This deal was an all-stock transaction, with each side reported to receive around 1/3 of the total pie — and that’s a huge slice. Altogether, the trust is worth a whopping $58 billion. For you synergy junkies out there, analysts estimate $115 million in cost savings annually coupled with lower leverage and a larger balance sheet.
U.S. MACRO
May Was a Strange Month Indeed
Good news, America: the unemployment rate fell in May from 5% to 4.7%. Unfortunately, that’s actually quite misleading—it only fell so much because a big chunk of people exited the workforce entirely, which lowers the unemployment rate since the metric only takes into account people looking for work. In reality, the U.S. economy added a feeble 38,000 jobs, a far cry from the 162,000 expected and the worst monthly performance in nearly six years. Yeah, it was that bad. For some context, that’s the worst monthly gain since 2010—and don’t even get us started on 2010. The dismal figure presents an obstacle to the Fed’s desire to raise interest rates later this month, and many analysts believe the data is enough to postpone a hike altogether. Sounds like Janet Yellen has a speech to make.
OTHER STORIES
- Facebook disables messaging in mobile web app to push people to Messenger
- Martin Shkreli faces new conspiracy charge
- Google teaches its self-driving cars to honk
- No more suits at J.P. Morgan
ECONOMIC CALENDAR
- Monday: Janet Yellen Speech
- Tuesday: Valeant Earnings; Productivity and Costs
- Wednesday: Lululemon Earnings; Job Openings and Labor Turnover Survey
- Thursday: H&R Block Earnings; Weekly Jobless Claims
- Friday: Consumer Sentiment
I TRIED IT ONCE IN COLLEGE
Cheating: We all know what it is. It’s a violation of academic integrity, it’s plain dishonest, and most of us have done it a handful of times. Here’s the unsavory reality of it: 60% of U.S. college students admitted to cheating at least once in the past year. But let’s break this one down a bit further. It’s not just American students driving these numbers, but foreign students as well. Here are the dirty details:
- Out of the available data, 5.1 out of 100 foreign students at U.S. universities have done the dastardly deed (or have been caught in the act). Compare this to just one per 100 domestic students.
- As of last year, there were nearly 530,000 foreign students attending undergraduate U.S. universities. A plurality of these students—165,000—come from China.
- What’s causing these students to cheat? Faculty interviewed have speculated that language and cultural barriers prevent foreign students from fully understanding the expectations of academic integrity.
- Yep—In a new country, with a new language, and with high expectations for success coming from home, the pressures are there for foreign students to cheat. Sounds to us like American universities might be the ones to blame—by not giving foreign students the support they need.
INTERVIEW QUESTION OF THE DAY
You’ve got a 10 x 10 x 10 cube made up of 1 x 1 x 1 smaller cubes. The outside of the larger cube is completely painted red. On how many of the smaller cubes is there any red paint? (Answer)
BUSINESS TERM OF THE DAY
Inflation Hawk — This hawk is typically a policymaker or advisor who is focused on interest rates as it relates to fiscal policy. They usually favor high interest rates to curb inflation. These hawks are less concerned with economic growth than recessionary pressure from high inflation rates.
FOOD FOR THOUGHT
If you’re a fan of free electricity, you might want to consider moving to Chile. Thanks to huge investments into solar energy, the price of electricity costs absolutely nothing — exclusive only to residents in Chile’s northern grid.
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