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OVERPROMISE AND UNDERDELIVER
After a brutal week, markets got some good news when US jobs numbers dropped on Friday. The economy added 136k jobs and although the figure was below estimates of 144k, it was enough to drop the unemployment rate to 3.5% and salvage market losses earlier in the week. See? Your work does have meaning.
Markets had been getting crushed thanks to a poor manufacturing report earlier this week and concerns that a piss poor job reports would follow. Enter the “Goldilocks” effect (WTF does this mean?) …
The jobs number wasn’t too low that it caused a real concern and it wasn’t too high that it would cause the Fed to reconsider dropping interest rates. In essence, it was just right. Hence the reference to the girl who got away with a slap on the wrist after breaking and entering.
Bad news bears
Despite having the lowest unemployment rate in 50 years, the economy just isn’t growing as quickly. Word from the Fed is that the economy is growing at a rate of 1.8%. While that number is lower than a typical 3%, Jerome Powell considers it to be healthy. Let’s see what DJT has to say about that.
And while stocks rose on the day, US Treasuries remain volatile with the 10-year rates hovering below 2%.
The bottom line …
From a market standpoint, it’s been a tough Autumn. Despite the gains on Friday, last week marked the third straight week of declines for the market. Things don’t seem to be getting much better as most market analysts are calling for a volatile October. Looks like investors may have more to worry about this month than drunk teens TP-ing their houses.
PAYPAL IS PULLING OUT
PayPal is hoping to come away with more than just store credit after the firm announced it would be pulling out of Facebook’s Libra payment network. Backlash has been building from government officials in the US and Europe, as countries are worried that Facebook won’t be able to protect user privacy. Gee, I wonder why?
While user privacy is a key component to the hesitations surrounding Libra, another issue that regulators are worried about is the ability for terrorist organizations to launder money through the crypto platform.
PayPal has received criticisms in the past for its inability to regulate illegal activity on its platforms. So it sounds like a perfect fit, right? In 2015 it agreed to pay out $7.7M for allegedly processing payments for users and organizations that had been sanctioned by the US. In 2017, the company received subpoenas from the US Justice Department regarding a program surrounding its anti-money-laundering compliance.
PayPal isn’t the only group getting cold feet. Just last week, Visa, Mastercard, and others said they were unsure of their involvement with building out Libra’s network and were leaning towards removing themselves from the situation. Many executives have refused Facebook’s request to support the project publicly over worries that they’d be exposing themselves to prying regulatory eyes.
The bottom line …
While starting a cryptocurrency is risky business to begin with, having world financial leaders express their displeasure with your platform before it even launches is a Herculean hurdle to overcome.
On Oct 14th, Libra leadership is getting together in DC to appoint a board of directors, which will help assuage some government concerns and put some compliance stop gaps in place. Worst case scenario? Facebook just gets back to its roots selling personal data to advertisers.
IN OTHER NEWS
- Juul and the Terrible, Horrible, No Good, Very Bad Month. Let’s recap, shall we? Just last month, the White House proposed a ban on most vaping flavors, with some retailers such as Walmart following suit. Then, reports emerged that centered around a mysterious lung illness, which has caused 18 deaths that have been linked to vaping and e-cigarette use. And now, a week after Juul’s CEO stepped down, hedge fund Darsana Capital cut Juul’s valuation by a third, from $38B to $24B.
- Weekend at Barneys. Trade show executive Sam Ben-Avraham is leading a $220M bid to buy Barneys New York. Just last Thursday a judge extended the deadline for bankruptcy bids until October 11th, as the retailer was still in negotiations with a single buyer, now alleged to be Sam. Mr. Ben-Avraham founded retail store Atrium, streetwear brand Kith, and has operated fashion trade shows. Which are just as boring as regular trade shows, but much better dressed.
- Oil and water. BP’s chief executive Bob Dudley has announced his retirement. Note: this is not the “sorry” guy. He will step down in February, replaced by 49-year-old Bernard Looney, who is the current chief executive of BP’s upstream operations (WTF does this mean?). Dudley helped clean up the aftermath of the BP Deepwater Horizon oil spill, presumably working with Mark Wahlberg to order 87k gallons of Dawn to dump into the Gulf. Looney will likely face pressures of his own, such as turning a profit from cleaner energy sources while decreasing dependence on fossil fuels.
- The streaming war is heating up and Disney is firing some warning shots. Disney will ban Netflix and other streaming services from advertising on its TV networks as it prepares for the launch of Disney+ next month. Disney will spend hundreds of millions of dollars in advertising over the next year to bring customers on to its new service, looking to compete with the likes of the ‘flix and Hulu. Netflix, in comparison, spent $1.8B on ads last year.
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