5/2/2016

Venmo Under Investigation

Venmo (owned by PayPal) is under investigation by the Federal Trade Commission for potentially engaging in “dangerous or unfair practices.” The Attorney General has reason to believe that Venmo has documentation "relevant to a racketeering investigation," and is ordering for the documents to be produced. Money laundering also may be a charge. Venmo may have to pay legal fees and change the way it operates.

The investigation comes as Venmo continues to rocket upward in popularity; in January, the company announced it crossed the incredible milestone of $1 billion in payments in a single month.

Snapchat partnering with NBC

Snapchat and NBC will partner for the upcoming 2016 Olympic games in Rio de Janeiro this summer. Along with live stories from the area, NBC will have a channel where correspondents will bring the Snapchat community an opportunity to dive in and experience the world's largest sporting event right on their phones.

Effect of Cheap Oil on Exxon

With oil and natural gas prices at record lows and refining profit margins weakening, Exxon Mobil on Friday posted its smallest profit for any quarter since 1999, while Chevron reported a large first-quarter loss of $725 million. Weak results were expected, given that oil prices plunged to below $30 a barrel during the first quarter — a 13-year-low — while natural gas prices fell to their lowest level in nearly 17 years. The oil and gas industry has weathered its most severe crisis since the price collapse in the 1980s. There have been at least 62 oil and gas company bankruptcies over the last year and roughly 120,000 American oil and gas workers — nearly one out of four nationwide — have lost their jobs.

Neither Exxon Mobil nor Chevron is going out of business soon, and their large refinery businesses (which benefit from low oil and gas prices) have helped them both survive the downturn better than most of their competitors.  But worldwide, oil companies have debts surpassing half a trillion dollars, which may force the companies to sell assets in order to meet interest payments. Standard & Poor’s this week slashed Exxon Mobil’s coveted AAA rating to AA+, citing the near tripling of the company’s debt to almost $20 billion. But Exxon raised its dividend showing confidence in its future. Exxon, which is the biggest American oil company, reported a quarterly profit of $1.8 billion, down from $4.9 billion in the first quarter of 2015. Revenue in the 2016 quarter dropped 28 percent, although strong results from its chemical production helped keep the company in the afloat. The company said it cut its capital spending by a third to protect its balance sheet. Earnings for Exxon Mobil, Chevron and other oil companies are expected to improve in the second quarter because oil prices have rebounded sharply after collapsing to under $30 a barrel during the early months of the year.

The American benchmark price rose above $45 a barrel this week for the first time since November. Nevertheless, few wells can be economically drilled when prices are below $50 a barrel, according to oil company executives. By the end of the year, we could see a rebalancing of the market. The sharp cuts in investments for exploration by oil companies around the world, leads to a sharp price rebound in a matter of time. The result in three or four years will be a lack of supply.

Melissa Mayer’s Potential Severance Package

If Yahoo’s core business is sold, it is likely Merissa Mayer will be forced out of the company due to a change in control. Her severance package will be $54.88 million. The package includes $3 million in cash and just under $52 million in stock options.

Private Schools Struggle

Private school universities are struggling to make ends meet. Even though their tuitions are through the roof and rising. How is this possible? With tuition rates on the rise, families who might typically go for a small private school are increasingly opting for the cheaper, larger alternative: public universities (best value proposition for their money). These schools also feel pressure to keep tuition high because if rates go down, so might the appeal of an elite private school education. But at the same time, these same schools lure top students in with significant grants and scholarships, cutting their cash flow.

Nike vs. UnderArmour

Nike is trying to stay competitive with UnderArmour by signing 15 NFL rookies in this year’s draft class. UnderArmour only signed one. With UnderArmour doing so well with their endorsements (Steph Curry, Tom Brady, Cam Netwon), Nike doesn’t want to take any chances. As much as Nike's draft-day play may look like a Hail Mary, it's really all about defense.

HTC Starting VR Venture Capital Fund

HTC has announced the launch of Vive X, a $100 million fund designed to foster the growth of VR startups around the world. With offices in San Francisco, Beijing and Taipei, the fund will be devoted to all manner of VR startups, including accessories makers, content creators and, of course, apps. With heavyweight Facebook backing the Oculus Rift, backed by billions and the world's large social network and Sony's PSVR coming later this year, HTC's competition in the space is significant.

Drones to Replace Fireworks

Drones can be used for everything from war to e-commerce deliveries, but it's surprising how seldom they're used for entertainment. One Japanese company hopes to change that with something it calls Sky Magic. It is a choreographed drone performance in the night sky. 20 drones equipped with 16,500 LEDs dance in the air, creating intricate aerial design that rival some of the best fireworks shows.

Bitcoin Creator Unveiled

Australian entrepreneur Craig Wright has publicly identified himself as Bitcoin creator Satoshi Nakamoto. Mr Wright has provided technical proof to back up his claim using coins known to be owned by Bitcoin's creator.

Bitcoin is a crypto currency now accepted as payment for a vast variety of goods and services .There are currently about 15.5 million bitcoins in circulation. Each one is worth about $449 (£306).

Satoshi Nakamoto is believed to have amassed about one million Bitcoins which would give him a net worth, if all were converted to cash, of about $450m.

Unlike traditional currencies, which are issued by central banks, Bitcoin has no central monetary authority. Instead it is underpinned by a peer-to-peer computer network made up of its users’ machines. Bitcoins are mathematically generated as the computers in this network execute difficult number-crunching tasks, a procedure known as Bitcoin “mining”. The mathematics of the Bitcoin system were set up so that it becomes progressively more difficult to “mine” Bitcoins over time, and the total number that can ever be mined is limited to around 21m. There is therefore no way for a central bank to issue a flood of new Bitcoins and devalue those already in circulation.

Bitcoins (or fractions of Bitcoins known as satoshis) can be bought and sold in return for traditional currency on several exchanges, and can also be directly transferred across the internet from one user to another using appropriate software. This makes Bitcoin a potentially attractive currency in which to settle international transactions, without messing around with bank charges or exchange rates. Some internet services (such as web hosting and online gambling) can be paid for using Bitcoin. The complexity and opacity of the system means it also appeals to those with more nefarious purposes

End of a Golden Era?

Mckinsey Global Institute reported that the past 30 years was a golden era for investment returns that is not likely to continue in the next 30 years. Among the “golden era,” trends showed the sharp declines in inflation and interest rates from the high levels of the late 1970s and early 1980s; strong growth in global gross domestic product driven by rapid growth in China, along with overall positive demographic changes and gains in productivity; and also very strong corporate profit growth. Another reason is the historically low stock valuations at the beginning of that time period because of the intention to drive out inflation. It is also noted that profit margins over the past 30 years have kept returns extremely high. What has been driving the increase in margins during that period of time comes from globalization, more U.S. companies getting profits from overseas. Now that valuations are more in line with where they should be, investors still seem to have what might be misplaced optimism that long-term returns will match the past 30 years, when they should likely look at the past 50 or 100 years.

Warren Buffet on Hedge Funds

Warren Buffet was ripping on hedge fund managers saying that an investor can earn more passively investing in an index fund. The reason is that money managers charge exorbitant fees that negate profits. Buffett was building on an argument he’s been making for years about why backing U.S. businesses in aggregate, through low-cost funds, is the more certain way to prosper over the long haul. To make his point, he made a bet that a Vanguard Group Inc. fund that tracks the S&P 500 Index could beat a basket of hedge funds from 2008 through 2017. , he gave an update: The bundle of hedge funds picked by Protege Partners had returned 21.9 percent in the eight years through 2015. The S&P 500 index fund had soared 65.7 percent.  “Supposedly sophisticated people, generally richer people, hire consultants. And no consultant in the world is going to tell you, ‘Just buy an S&P index fund and sit for the next 50 years,’" he said. “You don’t get to be a consultant that way, and you certainly don’t get an annual fee that way.” Last year, 979 funds closed, more than any year since 2009, and the industry saw outflows of $16.6 billion in the last two quarters, according to Hedge Fund Research.

The Sharing/Trust Economy

As we get into cars with complete strangers, sleep in the beds of people we’ve never met and lend money to others on the other side of the world, a powerful new currency is emerging — and it’s based on trust.

What’s striking about the shared economy is not the technology that has made it possible, but the vast changes it has triggered in society. It has brought a renewed sense of community. Today, we are prepared to place our lives in the hands of people we know nothing about. We’ve taken our most visceral fear of the unknown and cast it aside. In the past, companies sparked your trust through extravagant buildings, employees with Ivy League educations, and branding. What’s empowered this shift in trust is the codification of reputation — it’s the five stars next to people’s names that make it possible to trust someone we otherwise know nothing about. And it’s transforming the way we live: From riding in an UberX to staying in an Airbnb; from buying or selling handmade products on Etsy to peer-to-peer loans; from hiring someone on Upwork or TaskRabbit to booking home cleaners on Handy or renting a car on Turo. Similarly, we’re seeing a codification of influence and status, the result of which is also trust. The recommendations you receive on LinkedIn and the connections you share with a potential employer can determine whether you get the job. And your Instagram presence — specifically, earning the “endorsement” of high-profile followers — determines your next date, if what you seek is a membership on Raya, a new dating app that prides itself on fostering an intimate community of celebrities and creative people.

Everything from our influence, social following, work connections, credit worthiness and beyond, could make up the metric of trust. This may end up deciding who gets upgraded on a flight, who can buy products from us or who gets priority customer service.

Today’s Change in Branding

In the pre-digital age, the advertising that helped build brands was expensive, and that was key. Just as banks spent big money on marble columns, anything in TV commercials exuded an aura of quality, stemming from the feeling that advertising had a high production value and air time was limited.

Compare that to today’s decentralized and fragmented media landscape, and we see the challenges for brands. What becomes of brand-driven trust when we read news stories that our friends like and share with us, buy products because of reviews on Amazon and stay at hotels we find tagged on Instagram?

The very notion of branding is rapidly changing.