Good morning everyone,

Today we’re recapping the Fed’s minutes (which were boring even by Fed minutes standards) and mulling over the ramifications of Qualcomm’s big L.

Enjoy the next 4 minutes and 13 seconds.

Keep raging,
Jeff & Jason


THE MARKETS


THE HEADLINES

Qual-ty control

Image result for ice-t karma gif

Qualcomm just got absolutely steamrolled by District Court Judge Lucy Koh. Johnny Law came over the top with a proverbial death blow, calling Qualcomm’s licensing practices illegal.

Sure the world’s largest maker of smartphone chips and modems brings in a boatload of cash via hardware sales, but it makes Scrooge McDuck money by licensing its technology patented back when Zack Morris phones were cool. Mr. Wonderful would be so hot and bothered right now.

What proprietary tech does Qualcomm hold a monopoly over?

Oh you know, just the functionality to place calls and connect to the internet. And don’t for a second think the big swinging d*ck of the cell phone space doesn’t know its worth. It currently charges phone markers a percentage of the total value of each phone, in some cases as much as $400.

And herein lies the issue …

Apparently, the FTC has had it up to here with $900 phones. The Commission filed suit against Qualcomm in 2017 and yesterday a judge ruled that “Qualcomm’s licensing practices have strangled competition … for years.”

Here’s what it means for Qualcomm …

Judge Koh ruled that ‘Comm shouldn’t receive a percentage of the total sales price for each phone a cell maker sells, but rather, a smaller percentage based on how much actual QCOM tech exists in the phone. And that’s not all. Koh ordered Qualcomm to renegotiate current agreements and going forward it must also license its patents to rival chipmakers. Translation: Qualcomm just got put in a body bag.

Of course, Qualcomm has cried foul and will certainly appeal. But not before its share price fell almost 11% on the news. This comes just weeks after Qualcomm scored a decisive antitrust victory over Apple. Karma is a b*tch.

Bottom line: “If being really, really good at what you do is wrong, I don’t want to be right.” – Jason


Patiently waiting

Jerome Powell is out here channeling his inner 50 Cent.

The Chairman seems to be content with not making any hikes in 2019. In fact, Jerry Interest Rates said in his presser following the April 30 to May 1 FOMC meeting that the patient approach to changing interest rates would be appropriate “for some time.”

The minutes from that meeting released today indicated that some officials were worried that the recent dip in inflation would cause the Fed to lower interest rates but most agreed with Powell that it was likely temporary. And while the Fed’s 2019 economic outlook is positive, it doesn’t appear positive enough to move the interest rate needle.

But it isn’t all set it and forget it at the Fed. The defenders of open markets will closely monitor the delicate balance between interest rate levels and inflation. The Fed’s current goal is 2% inflation while its target interest rate remains 2.25% to 2.5%.

Markets were largely unmoved by the minutes that could best be described as “meh.”

Bottom line: “The FOMC minutes were about as useful as Bran Stark’s legs.” – Jeff


Drop it low

Tesla’s stock is performing about as well as Bitcoin circa 2018 (… right after Aunt Kathy’s third husband Kip told you to buy).

Tesla shares hit a 2 ½ year low yesterday following reports that Morgan Stanley analyst Adam Jonas, who, at one point had set his price target for the EV maker at $379, indicated on a conference call that the stock could be worth as little as $10.

Jonas, who was, until recently, a Tesla ride or die, voiced concerns over the lack of growth, burn of cash, and potential oversaturation of EVs outside of China.

Analysts from Bank of America and Citi cited their own concerns. In addition to echoing Jonas’ sentiments, Elon Musk’s leaked memo informing his employees that cost-cutting measures are the only way to become a financially stable company has analysts’ collective panties in a bunch.

It appears that Tesla is losing that new car smell along with its ability to trade well beyond the valuation of a typical car maker. Short sellers have made out like bandits this year, as the stock has dropped 42% YTD, with short interest at a 2 year high. David Einhorn is rock hard right now.

Bottom line: “Can we discuss the real problem here? Sweatshop workers not taking their share of the blame for shoddy workmanship. Kids these days.” – Jason


IN OTHER NEWS

  • Amazon’s shareholders shot down a number of proposals at the company’s annual shareholder meeting on Wednesday. One of the axed proposals included limiting the sale of its facial recognition software, Rekognition. Real original name, guys. Another, submitted by employees and supported by more than 7.6k Amazon worker bees called for the company to disclose its strategy for curbing climate change and reducing its use of fossil fuels. One Amazon employee, Emily Cunningham, even went so far as to ask for the opportunity to speak to her overlord, Jeffrey Commerce himself, and was denied. Bezos ain’t got time for that.
  • Nascar has agreed to buy International Speedway Corp. for $2B cold, hard, cash. Nascar had to raise its price to close the deal for the company that owns famous raceways like Daytona International Speedway and Talladega Superspeedway. Don’t you put that evil on me, Ricky Bobby. The original offer of $42 per share, was upped to $45 per share (and two tins of Skoal) to sweeten the deal.
  • Block.one, the cryptocurrency startup backed by the likes of Peter Thiel, Alan Howard, and Louis Bacon, is returning 6,567% to early investors. For those of you keeping track at home, that means an early investment of $100k yields a return of around $6.6M. Not too shabby. Block.one sets itself apart from the competition with lofty goals, like using blockchain to build a new, private, secure internet. It will also be releasing a social media product in June. And we all know how well new social media platforms do *cough* Google Plus *cough*.
  • Harley-Davidson has a plan to reach new riders: loans. The company, which plans to release 100 new models by 2027, wants to reach younger, less wealthy riders than it is used to, as its current riders age out of the market. Read: trade in their hog for a rascal scooter. As of now, two-thirds of new bike sales in the US are financed by loans, up from half of that in 2012. For reference, financing generated 40% of Harley’s operating income last year.

Be a Better Stock Trader, Starting Today

Get the expert insights, tips and strategies you need to optimize your trading skills and profiles
START NOW