2020 Vision

QUOTE OF THE DAY

#deleteUber”

Market Snapshot

• U.S. indexes hit records on the one-year anniversary of President Trump’s election
• Bitcoin jumped to record highs after the suspension of Segwit2x.
• Roku topped earnings and shares spiked 26% after hours.
• Square shares fell despite topping earnings estimates.



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Tencent Snaps up Snap

As Snap (-14.62%) recuperates from yesterday’s Q3 beatdown, what better way to bounce back than announcing a major investment from Tencent?

That’s right, the creator of WeChat snapped up a 12% stake in Spiegel's severely misunderstood startup. It’s not the first time the Chinese titan has tangoed with Snap...but that was back in the pre-IPO days.

While everyone was selling, Tencent was buying

The $2 billion investment may date back to October 6th, but Snap was keeping the good news in its back pocket for that rainy day pick-me-up. And with revenue growth missing expectations, user growth slowing, and shares falling 22% after earnings, we’d say now was as good a time as any.

So what exactly caught Tencent’s eye? Well, it certainly wasn’t voting rights. Back in March, Snap issued non-voting stock when it IPO'd...leaving Spiegel and his co-founder, Robert Murphy, with 90% control.

Instead, with $22 billion in annual revenue and nearly 970 million monthly active WeChat users primarily in Asia, Tencent has one goal on its mind:

Make some noise on the western front

While WeChat’s messenger engagement is impressive, it’s still shy of Messenger and WhatsApp’s reach—each host over 1 billion monthly active users. And FYI: Facebook owns both.

A healthy relationship with a U.S. social media giant could give Tencent that All-American, seal of approval it’s looking for. You know, the seal that says “Made in China.” As for Snap? Let’s just say it’s in desperate need of a father figure.

The young company, steered by young leadership, hasn’t quite cracked the code for landing ad revenue. Google and Facebook still capture nearly 60% of digital ad spend, and Snap brings in just $2 per user compared to Facebook’s $17 per user (in North America).

Enter Tencent—a seasoned vet in the digital ad space with a pool of “creativity and entrepreneurship” that CEO Evan Spiegel can’t wait to tap into.

AT&T Enters the Situation Room

This just in...CNN’s out. If AT&T (+1.15%) wants to complete its $85 billion acquisition of Time Warner (+6.51%), that is (h/t FT). The DOJ’s demand to sell the cable network is yet another speed bump for the media mega-deal.

With this news, it’s time for a little Morning Brew self-reflection:

Whoops: Earlier this week we told you to expect a done deal by the “end of the year.” What we really meant was “decade,” as AT&T’s CFO admitted, “the timing of the deal is now uncertain.”

Nailed it: We also wrote that in vertical mergers such as this, regulators often ask the buyer to divest from certain assets. A sale of CNN (a Time Warner staple) or other properties like DirecTV would ease antitrust concerns.

Concerns that AT&T believes are unjustified, considering it doesn’t own any rival TV networks. So you can bet it’ll take the Trump administration to court to make sure CNN remains in the package.

We guarantee it.

2020 Vision

Apple’s shift to AR

With the iPhone X, Apple (+0.82%) reached the pinnacle of smartphone craftsmanship. So what’s left for Tim Cook to conquer? Augmented reality (AR)—tech that projects images and data onto your field of vision. Think Pokemon Go without the phone.

The $900 billion company is planning to ship AR headsets as early as 2020, ditching the conventional smartphone display by running on its own chip and OS (h/t Bloomberg).

Uber takes flight

Uber’s flying taxis will take to the LA skies by 2020 for that perfect aerial view of Dwayne Johnson housing 10 lbs of cod. Or so it hopes. Uber’s asking NASA to draw up an unmanned traffic-control plan for FAA approval, but then again, this is the same agency that has yet to green-light drone delivery.

If NASA succeeds? The plan will move forward in three cities: LA, Dallas, and Dubai. Who said autonomous cars were forward-thinking?

Oh right, we did...

The U.S. Scores W's in China

President Trump’s travel buddies in China—over 20 American business execs—won’t come home empty-handed, announcing a string of business deals that could eventually be worth $250 billion (h/t Bloomberg). Household names like Honeywell, GE, and DowDuPont all got a piece of the action.

But keep these other deals in mind:

• Sinopec, a Chinese petroleum company, is teasing a multibillion dollar investment in Texas and the U.S. Virgin Islands.
• Bell Helicopter sold 50 copters to Reignwood Intl. Investment Group, and Caterpillar will be shipping its yellow trucks to China’s largest mining company.
• Online retailer JD.com will buy $1.2 billion in beef and pork from the Montana Stockgrowers Association and Smithfield Foods, respectively.

These one-off agreements represent progress, but American business leaders won’t be impressed by the failure (thus far) to negotiate better trade terms with China...a signature Trump campaign promise.

Because that $370 billion trade deficit won’t solve itself.

Food for thought: Without a free trade agreement between the U.S. and China, USDA Prime ribeye steak goes for a cool $60/lb in Chinese supermarkets.

What Else Is Happening…

• Panera CEO Ron Shaich will step down.
• The world’s largest luxury conglomerate, LVMH (-0.76%), is shaking up its C-suite.
• The EU set a target for automakers to cut CO2 emissions 30% by 2030.
• Former Yahoo CEO Marissa Mayer testified on Capitol Hill about the internet company's 2013 and 2014 data breaches.

Economic Calendar

• Monday     Earnings: CVS (+)

                    Economic Events: No Events

• Tuesday    Earnings: Snap (-)

                  Economic Events: Small Business Optimism Index (-), JOLTS (+), Consumer Credit (+)

• Wednesday    Earnings: Roku (+), Square (+), 21st Century Fox (+/-)

                        Economic Events: Petroleum Status (+)

• Thursday   Earnings: CalAtlantic, DISH Network, Kohl’s, Macy’s, Nordstrom, NVIDIA, Office Depot, Time Inc., Walt Disney

                   Economic Events: Jobless Claims, Wholesale Trade

• Friday       Earnings: JCPenney

                 Economic Events: Consumer Sentiment, Treasury Budget

The Backburner: The Next Generation of Visionaries

WeWork is officially testing out its first entrepreneurship-focused elementary school, proving once and for all, the best ideas come after nap time.

CEO Adam Neumann and his wife (and co-founder) Rebekah are gathering the next generation of thumb-sucking visionaries to take business classes from WeWork employees in its office-sharing ecosystem. It sounds ridiculous (because it is), but it’s just the latest ploy to grow WeWork’s much larger “We” brand...

...a brand that includes co-living spaces like WeLive and Rise by We —a health and wellness facility that promotes entrepreneurship through physical and spiritual well-being.

But the $20 billion startup might be toying with its grandest idea so far. The WeWork school, WeGrow, could reach 65 students next fall and offer classes to kids as young as three. In fact, Rebekah sees courses continuing all the way to 12th grade and even into higher education.

And wouldn’t you know it, little Timmy is already busy reinventing the next organic batch of mushed applesauce.

The Breakroom

Question of the Day

Look at the following clues to uncover the mystery number:

I am a 4-digit even number, and all of my digits are different. The sum of all my digits is 10. Each of my digits is greater than zero. The sum of the digits in my thousands place and hundreds place equals the sum of the digits in my ones place and tens place. My largest digit is in the thousands place.

What number am I?

(Answer located at the bottom of newsletter)

Who Am I?

Oil companies: BP, ExxonMobil, Royal Dutch Shell, Chevron

(Answer located at the bottom of newsletter)

Stat of the Day

13.2%—Nike’s global tax rate
in 2016...down from 34.9% in 2007. Vacation in Bermuda much?

Breakroom Answers

Question of the Day: 4132 (Explanation)
Rank by Market Cap: ExxonMobil ($354 billion), Royal Dutch Shell ($267 billion), Chevron ($222 billion), BP ($136 billion)