“Some people will believe, some people won’t and to tell you the truth I don’t really care” — Craig Steven Wright. Yesterday, the Australian entrepreneur identified himself as the mysterious “Satoshi Nakamoto”—aka the inventor of Bitcoin. Some don’t buy it, but you don’t see Wright getting worked up about it.
MARKET SNAPSHOT
Big Picture
- While U.S. stocks performed well (highlight: the Nasdaq broke a seven-day losing streak), Asian markets continued plummeting after Thursday’s decision from the Bank of Japan to leave interest rates at their current levels
Market Movers
- Baidu (i.e. the Chinese Google) fell 8% after its CEO was summoned by authorities for being tied to the death of a student that used the company’s search engine to look for treatment for his cancer
- Shares of Apple declined for the eighth straight day—something that hasn’t occurred since 1998. The stock has now fallen 13% since April 20 as investors continue struggling with the company’s poor earnings report (more on the aftermath below)
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WORLD MACRO
Puerto Rico Quits While It’s Behind
What happens when you don’t pay your $422 million bill on time? Puerto Rico is about to find out. Yesterday, the cash-strapped U.S. territory officially defaulted on its most recent debt payment (not its first default, but very much its biggest), with the governor releasing a statement that he was putting the basic needs of Puerto Rican citizens first. The payment would have merely scratched the surface of Puerto Rico’s massive $72 billion debt, and remember, Puerto Rico can’t actually declare bankruptcy, which means it’s stuck between a rock and a hard place. And with more debt payments coming up, yesterday’s default could pressure Congress to (finally) take action on the territory’s proposed debt restructuring legislation.
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CORPORATE PRIMER
Two Birds, One Car
Ferrari couldn’t have asked for a better first quarter, and neither could investors. The Italian automaker’s profits jumped nearly 20% as sales skyrocketed. With CEO Amadeo Felisa set to retire, the sports car manufacturer then went on to announce a brand new chief exec: Fiat Chrysler CEO Sergio Marchionne (with an appropriately Italian name, too). He will remain the leader at Fiat as well until he finds a partner to slowly take over. Ferrari is holding its ground in the battle against mass production, but a new CEO could mean switching gears.
AIG: Abysmal Investing Group
Pressure by shareholders was the story of AIG’s first quarter, and the insurance giant knew it had to show out. Well, that showing out never really happened, as the company reported a net loss for the quarter mainly due to poor investment choices in hedge funds and other ventures, a recurring problem over the past few years. What is AIG gonna do about it? Glad you asked—the latest and greatest plan: attempting to mitigate its portfolio woes by bringing on world-class investors John Paulson and Carl Icahn.
Hulu Reinventing the Wheel
More and more Americans are ditching cable boxes in favor of internet services. Yes, we’re talking about Netflix, but this time, we’re also talking about Hulu. Netflix’s little brother has turned the competition up a notch as it is soon to release a cable-style online TV service. Think Sling TV—essentially, you’ll be able to stream broadcast and cable TV online. Due to their ownership stakes in Hulu, Walt Disney and 21st Century Fox’s channels (like ESPN, ABC and all the Fox affiliates) are almost surely going to be offered on the platform, which is estimated to cost $40 per month. Sounds a lot like cable to us.
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OTHER STORIES
- Halliburton, Baker Hughes kill $28 billion merger amid regulator opposition
- It’s now illegal to Airbnb your entire apartment in Berlin
- Oracle agrees to buy energy data firm Opower for $532 million
- Amazon to bring same-day delivery to Bronx, Chicago after outcry
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ECONOMIC CALENDAR
- Monday: AIG (-), Ferrari (+) Earnings; ISM Manufacturing Index (+/-), Construction Spending (+)
- Tuesday: Pfizer, CVS, HSBC, UBS, Estee Lauder, Halliburton, CBS, Sprint, Starwood, Hyatt Hotels, Zillow Earnings; Auto Sales
- Wednesday: Tesla, Kraft, Fitbit, Anheuser-Busch, Whole Foods, Royal Dutch Shell, Priceline, Time Warner, Twenty-First Century Fox, MetLife Earnings; International Trade; Factory Orders, ISM Non-Manufacturing Index; Private Employment Report
- Thursday: Alibaba, GoPro, Merck, Yelp, Time Inc, Kellogg, Activision, MGM Resorts, Square, AMC Networks, SeaWorld Earnings; Weekly Jobless Claims
- Friday: April Jobs Report
WHEN APPLE SUFFERS, YOU SUFFER
By now you’ve probably heard the bad news about Apple’s earnings (and stock price), but Apple isn’t the only one suffering out here—when a massive market presence like Apple falls, it drags others down with it. Here’s what we mean: exchange traded funds (we’ll be calling them ETFs from here on out) are diversified funds consisting of a basket of stocks, which, you guessed it, are traded just like stocks on an exchange. Thanks to its massive market cap, Apple was a big component of many ETFs, and Apple’s fall from grace has shaved off billions of dollars from these ETFs. Read on for the numbers:
- First, for those of you who didn’t hear the bad news: Apple’s disappointing earnings last week led to a 16.3% total share price decline, and subsequently, a $4 billion drop in total ETF assets.
- “SPY,” a fun name for a popular S&P 500 ETF (ironically, also the name for a variety of apple), was hit the hardest, with a decline of $1 billion in mere days.
- To put these numbers in perspective, ETFs alone now own $26 billion of Apple stock, which amounts to roughly 5% of the firm’s shares outstanding. On the flip side, 10% of all ETFs contain Apple stock.
INTERVIEW QUESTION OF THE DAY
If you had 5,623 participants in a single game elimination tournament, how many games would need to be played to determine the winner? (Answer)
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BUSINESS PERSON OF THE DAY
Marc Benioff, Salesforce.com CEO, has made a name for himself as one of the leading promoters of social activism among American execs. Exhibit A: earlier this year, Benioff pushed Georgia’s governor to veto a law that would have enabled faith-based organizations to fire employees or decline services over religious beliefs.
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FOOD FOR THOUGHT
Attention aspiring venture capitalists: don’t give up on this slowing economy just yet. Venture capital firm Founders Fund just cashed out with a record return of $1.7 billion after selling its biotech firm, Stemcentrix. This is Founders Fund’s largest exit, surpassing what the firm made in other deals involving companies such as Facebook and Deep Mind Technologies, just to name a few.
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