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Good morning everyone,

Today we’re covering Juul’s bold new strategy and discussing Nike’s woes.

And here’s what we’ve been talking about at Raging Bull HQ …

“Basically the Apple store for people who blow dank ass clouds.” – Jeff explaining Juul’s idea to Jason

Keep raging,
Jeff & Jason


THE MARKETS


THE HEADLINES

With great power comes great responsibility

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Boomers have already blamed millennials for killing off plastic straws, “breastaurants” and cheap domestic beer.

The next target? LaCroix. Shares of LaCroix parent, National Beverage Corp, dropped 2.9% on Thursday after Guggenheim Partners suggested that the company’s sales were in a “free fall.” The fizzy flavored water company’s price target was cut from $45 to $36 dollars.

Guggenheim Analyst Laurent Grandet said that his company doesn’t believe that LaCroix can recover while in the hands of National Beverage, and cites increased competition, lack of innovation, and inexperience in managing a rapidly growing brand, as reasons for the brand’s bleak outlook.

So what are they buying?

E-cigs! While LaCroix struggles to win the hearts and minds of young professionals across the US, Juul is exploring the possibility of opening its own retail locations to counteract the recent crackdown by the FDA. 

Juul plans to use retail locations to gain valuable insight from shoppers that it can’t typically get from convenience store or smoke shop partners, while also giving current users the ability to test new products, and recycle old ones. As of now, rumor has it that Juul is targeting Texas as its testing ground, given the high smoking rate. Clear eyes, full pods, can’t lose. 

Bottom line: “If this trend keeps up … short Chipotle.” – Jeff

 

Just do it

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Shares of Nike have taken a beating on news of the US-China trade talks falling apart. How bad is it? The company resorted to writing a strongly worded letter to POTUS asking him to reconsider tariffs on shoes made in China. 

And when the company isn’t busy adopting your grandmother’s preferred method of relaying dissatisfaction, it’s facing headwinds as US consumers cut back on discretionary spending. Apparently, self-lacing Back to the Future Air Mags aren’t a great investment during a time of economic uncertainty. Who knew?

Exhibit A: Look no further than Foot Locker which relies on Nike for more than ⅔ of its sales. The mall staple missed Q1 earnings and revenue projections. For what it’s worth, Foot Locker’s woes certainly also reflect Nikes direct to consumer push and shift to online sales.

Bottom line: “A tidy resolution to this trade war would prove beneficial to Nike’s stock. Hey, stranger sh*t has happened.” – Jeff


IN OTHER NEWS

  • Okay, we have some good news and some bad news. The good news: Uber’s, um, “earnings,” if they can be called that, came in line with analysts expectations. The bad news: the company lost just over $1B for the quarter, mostly due to the cost of signing up restaurants for the Uber Eats program and onboarding costs associated with new drivers who most certainly aren’t employees
  • Carl Icahn is suing Occidental Petroleum following its $38B deal to acquire Anadarko Petroleum. Ichan has a $1.6B stake in Occidental. The activist investor is upset that the deal was done without a shareholder vote and the fact that his boy Buffett ponied up some cash for funding the effort. Uncle Carl’s fix? Shuffle board seats and force a sale of the combined company should the deal go through.
  • USA Today publisher Gannett is in talks to merge with Gatehouse Media. This deal would bring together the two largest newspaper companies in the US. Gannett isn’t sure if it wants to settle down yet, though, as the company has held similar discussions with Tribune Publishing and McClatchy. 
Author: The Beef

Good morning everyone,

Today we’re covering China going nuclear on the US in the ongoing trade “talks.”

And here’s what we’ve been talking about at Raging Bull HQ …

“Everybody. Remain. Calm.” – Jason after reading about China’s latest threats

Keep raging,
Jeff & Jason


THE MARKETS


THE HEADLINES

Boy that escalated quickly

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Trade talks between the US and China are going about as well as discussions between Elon Musk and anyone caught ordering extra guac when the whole factory orders Chipotle on Tesla’s dime.

State-run media in the People’s Republic reported that Beijing may restrict the export of rare earth metals, the elemental equivalent of the McRib, to the US. The Communist *throws up in mouth a little bit* publication went so far as to say “don’t say I didn’t warn you.”

For context, in the Chinese language, that phrase is typically reserved for officials to warn rivals that they are about to come at them like a spider monkey. Exhibit A: the threat was used in 1978 before China invaded Vietnam.

Why is this a big deal?

Oh, you mean besides China’s not-so-subtle threats? Because the US relies on China for 80% of its rare earth metals which are used to manufacture everything from batteries and smartphones to fighter jets.

And markets noticed

It isn’t lost on the masters of the universe, and a lot of stupid people with Scottrade accounts, that China is about to escalate this trade war to DEFCON 1. Markets got pummelled on the news, recovering slightly over the course of the day, but the Dow still closed down more than 220 points.

And the 10-year Treasury note yield fell to 2.26% while the inversion between the 3-month Treasury bill and the 10-year note widened to its largest gap since the financial crisis. You may remember from ‘Treasury Bills For Dummies’ that a yield curve inversion could be a sign that a recession is on the way. 

Bottom line: “It’s all fun and games until my 401k gets absolutely destroyed.” – Jeff

Meat sweats

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Beyond Meat is the stock people love to hate: its “meat” is gluten-free, the company is socially responsible and its shares are up 300% following its IPO. So it comes as little surprise that market participants piled into BYND shorts like David Einhorn hoovered up bets against TSLA. 

The demand for bets against “The Future of Protein” has sent the cost to borrow shares soaring. BYND shares carry a stock-borrow rate of approximately 68%. That’s good enough to make it the most expensive US stock to short with over $100M in short interest. Eat sh*t, Lyft.

Of course, short sellers are still waiting with bated, albeit, non-GMO, breath for shares to stumble. And with Beyond’s recent success at the BK Lounge and rumors of a Golden Arches partnership, investors could be waiting a while.

Bottom line: “Not sure what makes me sicker to my stomach: watching this stock soar or eating this sh*t.” – Jeff


IN OTHER NEWS

  • “Oh behave” – Austin Powers and Dara Khosrowshahi, probably. As of yesterday, Uber will start to kick riders off of the app if they have a history of misbehaving and have a subpar rating. But fear not, scum of the earth, you’ll receive tips on how to be a better rider and have chances to redeem yourself before getting the boot. Also, we can all agree that “naughty Uber passengers” is definitely going to become a thing on adult entertainment sites, right?
  • Elon Musk emailed his employees stating that demand is strong, but production could use some work. In an effort to catch up on deliveries, he’ll hold a call every other day with American, Asian, and European teams to determine what efforts need to be accelerated. Because nothing screams efficiency like more meetings.
  • Abercrombie’s (yes, it still exists) stock fell 25% yesterday. The preferred clothing brand of teenagers circa 2004 is closing three of its flagship stores (yes, it has flagship stores). In addition to the closures, the company will downsize and redesign 85 locations, as the company has found that all 27 of its remaining customers reportedly enjoy shopping in smaller spaces.
  • Blackstone sold off more than $1B worth of its shares of Invitation Home. The private equity group invested in the home landlord company, which was created in the wake of the financial crisis, betting that people would rent the American dream that they could no longer afford. How heartwarming.
Author: The Beef

Good morning everyone,

Today we’ve got big news out of the Bezos’ (think MacKenzie, not Jeff) camp and a huge merger in the payments space. Thanks alot, Square.

“Flex on ’em MacKenzie” – Jeff after hearing about MacKenzie Bezos’ decision to give up half of her net worth as part of the Giving Pledge

Enjoy the next 4 minutes and 15 seconds.

Keep raging,
Jeff & Jason


THE MARKETS


THE HEADLINES

Jeffrey and the Terrible, Horrible, No Good, Very Bad Day

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Being the richest motherf*cker on earth isn’t all slow-motion montage walking and popping bottles. Apparently, it comes with a lot of hard work and even some really, really crappy days. Days like yesterday for Jeff Bezos.

MacKenzie’s the real MVP

First, news broke that MacKenzie Bezos, Jeff’s ex-wife, and the world’s 22nd richest person would donate at least half of her $36.6B net worth as part of the Giving Pledge, an initiative founded by Bill and Melinda Gates and the Oracle of Omaha. For what it’s worth, Jeffrey Commerce has not signed on to give up any of his $114B fortune to the Pledge. Shots fired.

(Ok, so technically, Jeff isn’t exactly Ebenezer Scrooge …)

You might remember that Jeff and MacKenzie just went through arguably the most amicable divorce of all time. Jeff’s wife of 25 years not only let the Amazon overlord retain 75% of the couple’s AMZN shares but allowed the e-commerce magnate to maintain voting rights for all of the shares.

Jeff applauded Ms. Bezos decision to give up tens of billions of dollars to make the world a better place … and then promptly went back to underpaying his warehouse employees.

These pros ain’t loyal

What’s the only thing worse than seeing your ex rubbing elbows with Warren Buffett and living her best life? That’s right, waking up to a LinkedIn update that one of your former underlings has taken a CTO role at your biggest rival.

Suresh Kumar who spent 15 years at Amazon prior to shorter stints at Microsoft and, most recently, Google is set to become the Chief Technology Officer at Walmart in July. He will replace Jeremy King who recently bolted for Pinterest.

Kumar joins the company at a time when Wally World faces an existential crisis (read: Amazon). It’s already made moves to disrupt itself via e-comm acquisitions, adding grocery delivery options and ramping up its digital ad revs. Still, online sales accounted for just $15.7B of $500B total revenue in 2018.

Bottom line: “Flex on em, MacKenzie.” – Jeff


Squaring up

Global Payments and Total System Services (or Tsys if you’re in the know) are teaming up as part of an all-stock merger worth $21.5Bpresumably aimed at defeating Square and us pesky millennials. But more on that later.

Tsys shareholders will receive just shy of one (0.8101) Global Payments’ share for each Tsys stock. That equates to a 5.7% premium on Tsys’s Friday close. The deal is expected to be final by Q4.

Global Payments says the deal will help expand its e-commerce presence and grow its market share. The combination of the two payment giants will allow the new entity to provide integrated services across issuing, merchant, and consumer segments with a combined portfolio of 3.5M merchants and more than 1.3k financial institutions. Save some for the rest of us.

The companies merger is the latest in a year chock full of payment provider M&A activity. Earlier this year, Fiserv bought First Data in a deal worth $22B, while Fidelity Information Services purchased Worldpay in a cash and stock deal worth $35B back in March.

Why all the dealmaking?

One word: Square. One Nomura analyst called the Global Payments-Tsys tie-up “more defensive than offensive.” Jack Dorsey and his “cool AF” payment app, Square’s Cash App, are eating away at more traditional merchant service payment provider’s market share. Your move, payment OG’s.

Bottom line: “How does it feel to be beat by a dude with a nose ring?” – Jeff


Hard pass

According to sources, Citigroup utilized the preferred birth control method of every Chad and Becky at Figawi this past weekend: Citi pulled out of negotiations with Apple to create the Apple Card over fears that the deal wouldn’t be particularly lucrative.

Other banks including JPMorgan, Barclays, and Synchrony bid on the chance to lose boatloads of money as well.

How bad was the deal?

Bad enough for “big bank” (so not Deutsche) employee to text a Goldmanite “Dude, if that portfolio ever makes money, I’m buying you a beer.” No, we didn’t make that up.

Why is it such a bad deal?

Put simply: because this card is meant to be pro-consumer *banks gasp audibly*. Features like zero fees, software that encourages users to pay down debt quickly, and potentially, even lower interest rates don’t exactly scream “$$$” for banks.

Here’s the thing: banks make money when you pay interest. In fact, Americans paid $113B in credit card interest last year. So a card that promotes paying down debt isn’t exactly playing nice in the financial sector sandbox.

So why does it make sense for Goldman?

Goldman, via its Marcus platform, is attempting to break into the consumer market where Citi and Barclays already have a strong foothold. And a partnership with a brand like Apple will certainly help increase GS’ street cred.

Plus Goldman will be willing to eat sh*t for a while in hopes of onboarding customers to its retail platform.

Bottom line: “And you thought people with a Chase Sapphire Reserve acted like elitist d-bags. You ain’t seen nothing yet.” – Jeff


IN OTHER NEWS

  • POTUS is making a list and checking it twice. And apparently, China avoided the naughty list. During the Treasury’s semi-annual foreign exchange report to Congress, Secretary Mnuchin chose not to label China a currency manipulator. In fact, no countries were labeled manipulators, but 5 nations were added to the watch list.
  • Trying to incentivize fewer customers to cut the cord, cable company Altice is planning to offer mobile phone service for under $30 per month. The new service, called Altice Mobile, will run on the Sprint network and come with unlimited data.
  • Bid adieu to your jobs. GE plans to cut up to 1k jobs in its gas power division in France. This latest attempt to stop the bleeding in its power business and shrink its carbon footprint will likely be met with opposition from union leaders and politicians overseas.
  • Welcome to 2001, kids. Apple inexplicably launched a new iPod touch yesterday, showing some love to a product that’s been collecting dust since its last revamp in 2015. The new $199 model will contain an A10 processor for enhanced gaming and augmented reality experiences. All 14 users will certainly enjoy the product.
  • Amazon is reportedly looking to expand its NYC footprint, just three months after the Long Island City HQ2 debacle. The tech giant already employees roughly 5k employees in the Big Apple and is inquiring about spaces in Brooklyn’s West side of at least 100k square feet.
Author: The Beef