5/14/2016

China’s Economic Recovery Not Looking Good

China April trade data, released on Sunday, doused investor hopes of a sustainable economic recovery, with both exports and imports falling more than expected.

Recovery hopes were further dimmed by an article on Monday in the People's Daily, the Communist Party's mouthpiece. It cited an "authoritative source" saying China's economic trend will be "L-shaped", rather than "U-shaped", and definitely not "V-shaped", but the government will not use excessive investment or rapid credit expansion to stimulate growth. China stocks fell sharply again on Monday, reaching eight-month lows, as investors saw hopes for a strong economic recovery fade. They are also worried about fresh regulatory curbs on speculation. China's securities regulator urged commodity futures exchanges to curb excessive speculation following a surge in prices that has sparked fears markets were heading for a dangerous boom-and-bust cycle.

Brazil’s President Dilma Rousseff Impeachment Decision

Brazil's currency weakened as much as 5 percent and stocks tumbled on Monday after the acting Lower House Speaker annulled an impeachment vote, a move seen as decreasing the likelihood of a more market-friendly government taking power. The impeachment proceedings were over Rousseff's alleged manipulation of public accounts and not over a sweeping kickbacks scandal focused on state oil company Petroleo Brasileiro SA, commonly known as Petrobras.

Greece’s Austerity Measures

Greece passed new austerity measures to unlock an additional portion of their bailout money... The results of an emergency meeting by the Eurogroup will determine whether or not Greece earns this new round of relief.

Athens wants to boost tax revenues and slash pension spending to reduce the drain on the budget, hoping impressed creditors will unlock aid. But Germany and the International Monetary Fund remain deadlocked over the terms of country’s bailout plan. Prime Minister Alexis Tsipras’ government drew fire from the political opposition during the debate on grounds the pension cuts and tax hikes will prove recessionary, dealing another blow to a population fatigued by years of austerity. Tsipras’ government was re-elected in September on promises to ease the pain of austerity for the poor and protect pensions after he was forced to sign up to a new bailout in July to keep the country in the euro zone. It increases a so-called ‘solidarity tax’–which goes straight into state coffers–and introduces a national pension of 384 euros a month after 20 years of work, phases out a benefit for poor pensioners and recalculates pensions.

Krispy Cream Buyout

Krispy Kreme Doughnuts has agreed to a $1.35 billion takeover by a subsidiary of JAB, a private holding company owned and operated by four billionaire siblings who have cobbled together the world’s largest coffee conglomerate.

Krispy Kreme adds to a list of JAB purchases that includes the Peet’s, Caribou Coffee, Intelligentsia, and Stumptown coffee businesses, along with Keurig Green Mountain (JAB led the investor group that acquired the capsule coffee maker in March for $13.9 billion). The holding company is run by members of Austria’s billionaire Reimann family, who built their wealth running a German chemicals concern.

Krispy Kreme had long been a staple in the southern US, and was expanding beyond it at breakneck speed a decade ago. But the aggressive expansion took a toll on quality control, and on the brand’s cult status.

In recent years, the North Carolina-based chain, which has more than 1,100 locations, tried pushing its way into Starbucks territory, in an attempt to align its low-key donut concept with higher-brow coffee culture. In late 2015, several Krispy Kreme locations even began referring to their staff as “baristas,” who would take customer names as they ordered. But growth remained stubbornly slow, and an international push didn’t do much to help turn the tide.

“JAB’s experience and industry knowledge make them the ideal partner to help grow the iconic Krispy Kreme brand throughout the world,”

Spotify introducing video

Spotify, the most prominent on-demand music streaming service, is diving into TV-style shows by making 12 of its own. These shows will feature the likes of rap mogul Russell Simmons and Oscar-winner Tim Robbins, and will be available to all of Spotify's 75 million users.

Spotify hopes to use video both to grab new customers and make users spend more time with the product, according to Bloomberg. The shows will stick close to Spotify's DNA, and center on music — though this could span live performance, history, or seep more into general pop culture.

But the company is facing competition on more fronts than just Apple, from players such as Pandora and newer rivals such as SoundCloud and Jay Z's Tidal. Meanwhile Google is competing with both YouTube and Google Play Music.

Asked whether Spotify could be an acquisition target for a larger technology company like Google or Facebook, Forster said: "I've always felt Spotify likes being Spotify. We have fought to get to where we are today and we are quite happy and it would be emotionally hard not to be us, but who knows?"

"I think that people have really woken up to the opportunity of streaming. We can see that it is just the beginning. We've never grown quicker than we have."

LendingClub CEO Resigned

Marketplace lenders like Lending Club have created easy-to-use websites that match consumers and small businesses, hoping to borrow a few thousand dollars, with individuals or Wall Street investors looking to lend money.

Freed from the costs of brick-and-mortar branches and federal regulations requiring that they reserve money against their loans, marketplace lenders have been able to grow quickly and with fewer expenses.

The process is almost entirely online, with loans approved in days rather than the weeks a traditional bank might take.

While marketplace loans account for less than 1 percent of the consumer loans in the United States, a recent report by the investment bank Jefferies said that in some segments — like installment loans — the new lending companies account for more than 10 percent of the market.

Laplanche came up with the idea to start Lending Club in 2006 after seeing how little banks paid people to deposit their money and how much those same banks charged to lend. “We wanted to lower the spread.”

Wall Street’s waning demand for loans exposed the Achilles’ heel of marketplace lending. Unlike traditional banks that use their deposits to fund loans, the marketplace companies discovered how fleeting their funding sources can be.

Since the start of the year, Lending Club has raised interest rates on its loans three times to sweeten their appeal to investors.

As the pressure to sell loans mounted across the industry, the problems began to surface at Lending Club, according to two people briefed on the company’s internal investigation, who spoke on the condition of anonymity.

They said that in early April, a Lending Club employee discovered that the dates on about $3 million of loan applications appeared to have been altered in some way. Basically, he made loans look safer than they were

That inquiry led to the discovery of more irregularities, these two people said. This time, it appeared that about $22 million in loans that had been sold to Jefferies did not meet the investment bank’s criteria.

While the discrepancy was fairly minor, they said the Lending Club board considered it a serious issue. The company bought back all of the loans.

And on Monday, Lending Club announced that Mr. Laplanche had resigned after an internal investigation found improprieties in its lending process, including the altering of millions of dollars’ worth of loans. The company’s stock price, already reeling in recent months, fell 34 percent.

Facebook Suppressing Conservative News

Facebook is being accused of fiddling with its formulas to suppress conservative news. Facebook relies on computer algorithms to determine what is “trending,” an influential designation that inevitably boosts traffic for what are deemed the hottest topics. But unbeknownst to much of the public, Facebook hires journalists to tweak these formulas, and this is where the question of political bias has erupted.

Gizmodo reports that Facebook “routinely suppressed news stories of interest to conservative readers,” according to a former journalist who worked on the trending designations. And several former Facebook “news curators” told the website that they were told to “inject” certain topics into the trending list, even if they weren’t popular enough to warrant making the crucial list.

With more than 1 billion users worldwide, Facebook wields tremendous influence. The controversy over trending topics could cause some users to question whether the social site is subtly tampering with people’s news feeds to promote or minimize certain political stories or viewpoints.

Snapchat Coming Out On Top

As of the end of April, Snapchat was installed on 22.7 percent of U.S. Android devices, just above Twitter, which was installed on 21.8 percent of the devices. (Twitter didn't immediately return our request for comment.)

Analysts see Snapchat as a rising risk to both Twitter and Facebook, as more and more people spend time within its app.

Snapchat users spent an average of 20 minutes and 20 seconds using the app daily. The average daily time spent using Twitter among its daily users is just 12 minutes and 21 seconds, the report found.

By comparison, the average daily time spent using Facebook's app was more than double: 46 minutes and 20 seconds. WhatsApp and Instagram are next at 29 minutes and 24 seconds, and 20 minutes and 29 seconds, respectively.

Facebook's suite of apps were the most popular social media apps: Facebook (68.4 percent), Messenger (59.4 percent), Instagram (41.8 percent) and WhatsApp (20.9 percent). LinkedIn's app was found on 5.9 percent of U.S. Android devices.

Snapchat reports it has more than 100 million daily active users globally and those users view more than 10 billion videos daily. More than 60 percent of daily active users create content every day, the company recently reported. Snapchat reaches 41 percent of adults between the ages of 18 and 34 years old in the U.S.

Uber Battle Continues

Uber and smaller rival Lyft are attempting to settle legal actions by drivers who contend they should be classified as employees and therefore entitled to reimbursement for expenses, including gasoline and vehicle maintenance. Drivers currently pay those costs themselves.

Drivers who worked for ride-hailing service Uber in California and Massachusetts over the past seven years would have been entitled to an estimated $730 million in expense reimbursements had they been employees rather than contractors.

The figure was calculated by attorneys for drivers in a class action against the company, based on a standard rate for mileage reimbursement set by the U.S. government, and on data provided by Uber. Uber disputes the idea that drivers would ever be entitled to that reimbursement rate. And beyond the money, Uber also agreed to a new policy governing driver termination, including an appeals process for drivers terminated by Uber. The privately held company will also clarify that drivers do not automatically receive gratuities from their fares and will allow them to solicit tips.

Disney Floundering

Disney reported subpar revenue due to large declines in its cable TV and consumer product divisions, sending shares down a not-so-magical 5% after hours. The cable TV culprit: ESPN. Younger TV viewers have been dropping cable channels in favor of streaming services like Netflix, and it's taken a toll on subscription revenue. Other costs due to the pre-opening of Disney’s $5.5 billion Shanghai resort also dragged down profits.

Staples/Office Depot Merger Rejected

Staples and Office Depot were supposed to join forces in a $6 billion deal...until yesterday. A federal judge swatted the deal away over antitrust concerns. Translation: the merger would have eliminated competition for pens, paper and printer ink (making it even more expensive). Shares tumbled 10% (Staples) and 26% (Office Depot) on the news of the blocked merger. What was the reason for it in the first place? Mostly due to the rise of e-commerce (Amazon)...which motivated the two to try joining forces. But that’s when the government stepped in, and not for the first time either: the exact same merger was blocked in 1997.

Amazon to take on Youtube

Amazon first let the world know it meant business when it unveiled its own month-by-month streaming video service that undercut Netflix’s pricing...by a dollar.

But yesterday, Amazon got even bolder, announcing its own YouTube-like video service.

Amazon Video Direct allows creators to upload their own videos for "tens of millions" of members of Amazon's Prime Video service to watch.

Amazon says it wants "professional produced videos," whether is movies, TV series, web series, digital shorts and the like, with the idea that your video would join polished product in the Prime Video offering.  Content creators are paid $0.15 an hour for US viewers of their fare, or 55% of the sale price for a short-term rental.

But it'll be an uphill battle eroding YouTube’s decades worth of market share. Investors are optimistic, at least: Amazon's stock broke through $700 to close at a record high, and Bernstein analysts slapped a $1,000 price target.

NYC Uber Drivers to form a Fellowship

Uber has agreed to start a guild for 35,000 drivers in New York that will give members new protections and benefits but not create a full-fledged union.

All current and future Uber drivers will be represented by the Independent Drivers Guild, a new affiliate of the International Association of Machinists District 15, according to a statement from the union. Under terms of the five-year contract with Uber, drivers will have a higher standard of protections and support than other independent contractors.

According to the agreement, Uber’s management will hold monthly meetings with drivers to discuss problems and solutions. The workers also will have access to benefits including life and disability insurance, roadside assistance and education courses. Drivers in the city who are banned by Uber, a procedure known as “deactivation,” will have the ability to appeal and can request guild representation.

Uber has faced pushback from parties including regulators and drivers and has dealt with lawsuits and challenges for workers to organize. Seattle in December became the first U.S. city to allow drivers for ride-hailing services to form unions.

RecMed (Startup) – And its Unique Management

RecMed is a first aid kit vending machine. Users pick from two options: prepackaged first-aid kits for dealing with issues like sun burns, cuts, blisters and bee stings (they run from $5.99 to $15.95). You can also buy individual supplies like band-aids, rubber gloves, hydrocortisone wipes and gauze pads, which cost $6 to $20. RecMed will make money by selling the machines, which cost $5,500 apiece, and through restocking fees for the supplies. Rosenthal said he's also open to putting advertising on the machines. Rosenthal's (14 year old entrepreneur) startup RecMed, which he launched in 2015, has already been generating buzz. He's raised $100,000 in angel investments and has already rejected a $30 million offer to buy his idea.

Macy’s Decline

Macy's reported sales for the first quarter on Wednesday that fell more than 7% from a year ago and missed forecasts. The company also lowered its sales and earnings outlook for the year.

Same-store sales have now fallen for five consecutive quarters.

Macy's stock plunged nearly 15% to a 52-week low on the news, wiping out the stock's year-to-date gains in the process.

Macy's -- like many traditional retailers -- faces a difficult challenge. Fast fashion upstarts like H&M and Zara are eating into its apparel sales.

Macy's CEO Terry Lundgren said in a statement that international shoppers are not spending as much at some of the flagship Macy's and Bloomingdale's stores in New York and other big tourist spots in the United States.

Macy's is trying to fight back with its own discount stores called Backstage. It's a strategy that has worked for Nordstrom, which has its own discount outlets called Nordstrom Rack.

Macy's is also focusing more on cosmetics -- it bought Bluemercury last year -- as well as jewelry.

Macy's said it planned to invest more in enhanced online customer support and increased digital and mobile shopping functionality. And it's doing that while it continues to shut down some underperforming brick and mortar stores. This is to compete this Amazon

Macy's also has an activist shareholder -- Jeff Smith of Starboard -- pushing the company to do more with its real estate holdings to try and increase the stock price.

Google to Ban Payday Loans

Google said it would ban advertisements for payday loans as these "deceptive or harmful financial products" take advantage of vulnerable customers.

Google, which joins Facebook in blocking ads by payday lenders, announced its decision a day after the U.S. Treasury suggested that online lenders support more transparency in their transactions.

Payday lenders, which offer small loans at high interest rates that have to be repaid in a short period of time, have come under criticism as borrowers often fail to pay the loans or tend to refinance them, increasing their debt.

"Research has shown these loans can result in unaffordable payment and high default rates for users,"

Google will ban advertisements for loans where repayment is due within 60 days of the date of issue. In the United States, the company will also ban advertisements for loans with annual percentage rates (APRs) of 36 percent or more.

"To make an advertising rule that contravenes state and federal law is not only disturbing, but it's discriminatory," Lisa McGreevy, CEO of the Online Lenders Alliance, told Reuters.

"It's disappointing that a site created to help give users full access to information is making arbitrary choices on the advertisements users are allowed to see from legal businesses," Kirk Chartier, Enova's chief marketing officer, said in a statement.

"A certain class of people who wouldn't otherwise qualify for regular credit now can't get credit ... It's them (Google) deciding who can and cannot have information about credit."

Advertisements that appear on the top and right side of a Google search results page will no longer show marketing from the payday lending industry beginning July 13.