Enjoy your February 15th hand-crafted Brew!
BOOK OF THE DAY
The Hard Thing About Hard Things (Ben Horowitz)
In this must-read for any entrepreneur, Horowitz takes you through his journey and the lessons learned from growing up in a communist household to selling a company to HP for $1.6 billion, while also creating one of the most successful venture capital firms on the planet.
- U.S. markets continued climbing to record highs, and once again the charge was led by banks, which were held at bay for most of the day until Federal Reserve Chair Janet Yellen told a Senate Committee that the next interest rate hike could happen as soon as next month
…Two major health insurer mergers fall apart. Quite ironically, Valentine’s Day 2k17 proved to be the day of breakups. First, Aetna (+3.08%) and Humana (-0.35%) announced that they won’t be appealing a judge’s prior decision, which blocked the merger due to—you guessed it—antitrust concerns. The failed merger is a pretty big deal, considering the agreement was valued at $34 billion. If that wasn’t enough for you, Cigna (+0.57%) quickly followed suit, announcing that it was terminating its merger agreement with Anthem (-0.12%). This breakup was pretty ugly: Cigna is now pursuing a $1.85 billion breakup fee + more than $13 billion in damages from Anthem. Where’s the love? Everywhere but the health insurance industry, apparently.
From Bad To Worse
…Toshiba’s (-8.01%) in a tough spot. First, the Japanese conglomerate delayed its earnings report yesterday, stating that it was “not ready,” which alone sent investors into an absolute frenzy. To make matters worse, the delay is likely linked to Toshiba’s previously announced $6.3 billion writedown in its struggling nuclear business, which has been a bigger-than-expected hit (not the good kind). And as if all that weren’t enough, the company’s chairman is stepping down, so he won’t even be around to help pick up the pieces of this mess. Talk about riding the struggle bus.
GM Goes Where the Money Is
…And there ain’t much in Europe. Yesterday, GM (+4.84%) announced that it’s looking into shedding European brand Opel, which has hemorrhaged about $15 billion in losses over the last 15 years. The idea? Hand it over to Parisian auto-giant Peugeot (+4.32%) and let them deal with it. Here’s the good: by offloading the struggling brand, GM could improve its margins and more efficiently invest capital. On the other side, Peugeot would leapfrog into the European market’s #2 automaker spot, an aggressive move that coincides quite nicely with Volkswagen’s never-ending emissions scandal. On to the bad, GM would lose 10% of its current sales volume…and a shot at being the top global car producer.
…For Credit Suisse (+1.69%). Switzerland’s second-largest bank reported a $2.4 billion loss in 2016, as the bank felt the impact of a $5.28 billion fine from the DOJ. The fine stems from the bank’s sale of toxic mortgage-backed securities leading up to the 2008 financial crisis (which, yes, banks are still being punished for). Since taking over 18 months ago, CEO Tidjane Thiam has been cutting costs while simultaneously shifting the bank’s emphasis towards wealth management from the more volatile investment banking business. His latest play? Cutting 6,500 jobs over the next year. Looks like 2017 is going to be a heavy year for CS.
- Goldman Sachs denies bonuses to nearly 100 investment bankers
- Playboy returns to nudity after one-year sabbatical
- Facebook will soon roll out connected television app
- SoftBank acquiring Fortress Investment Group for $3.3 billion
- Monday: Teva (+) Earnings
- Tuesday: AIG (-), T-Mobile (+), Credit Suisse (+/-), Dr. Pepper Snapple (-) Earnings; Producer Price Index (+)
- Wednesday: Cisco, Pepsi, Kraft Heinz, CBS, Marriott, Hilton, GoDaddy, Groupon Earnings; Consumer Price Index; Retail Sales; Industrial Production
- Thursday: Charter Communications, MGM Resorts, Hyatt Hotels, Wendy’s Earnings; Weekly Jobless Claims; Housing Starts
- Friday: Deere, J.M. Smucker Earnings
San Fran, New York…Lisbon?
The 2008 global recession dealt a blow to Portugal. However, unlike similarly ravaged Italy and Greece, Portugal has bounced back in a creative way. Unemployment has dropped from 17% in 2012 to 12% this year, and the EU named Lisbon (Portugal’s capital) the “European Entrepreneurial Region of the Year” in 2015. The turnaround won’t be credited to the EU bailout in 2011. Rather, Lisbon can thank its thriving startup scene:
- Unlike many other places in Europe, Lisbon has the magical balance of high quality of life and low cost of living…and also pretty awesome weather.
- The population is well educated, and a high proportion of people know English. This encourages international trade and enables social mobility domestically.
- Above all, exploration is in the Portuguese DNA. Whether setting out to sea or repurposing an old building into a startup hub, the entrepreneurial spirit is alive and well in Lisbon.
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Interview Question of the Day
What do the S&P, Dow and Nasdaq futures contracts represent? (Answer)
Business Term of the Day
Antitrust laws — Antitrust laws apply to virtually all industries and prohibit a variety of practices that restrain trade. Examples of illegal practices are price-fixing, corporate mergers likely to reduce the competitive vigor of particular markets (see the failed health insurance mergers above) and predatory acts designed to achieve or maintain monopoly power.
Food for Thought
PewDiePie, the YouTube star who was recently dropped by Disney for anti-Semitic videos, has attracted nearly 14.7 billion views combined on his videos. YouTube can be big business…but with big business comes big responsibility, and PewDiePie’s best days may now be behind him after this scandal.