A BFD for GDP

QUOTE OF THE DAY

Life is too short for long-term grudges.”

A word of advice from Elon Musk.

Market Snapshot

  • U.S. indexes finished up after a strong GDP report.
  • The Nasdaq posted its third-straight day of gains, lifted by chipmakers.
  • European markets ended up as immediate North Korea worries subsided.
  • Gas prices hit two-year highs as Harvey crushed oil refineries.


  • Want Morning Brew Daily Served Fresh to Your Inbox?
    Drop Your Email Below...

We’d Just Like to Say…We’re Sorry

Apple (+0.27%) will now accept App Store purchases through WeChat Pay—a mobile payment platform owned by the ~$400 billion Chinese tech titan, Tencent. And this may come as a surprise given recent tension between Apple and Tencent.

For starters, WeChat (an app available on the iPhone) released a competing app store called "mini-programs," allowing users to download apps within WeChat as opposed to Apple’s store.

Apple got even, placing provisions on WeChat’s "tipping" function, where over 100 million users can donate to their favorite bloggers and content providers (one microblog made $7 million in a year).

The result—WeChat users were forced to buy tipping coins in the app, allowing Apple to take 30% off the top—its standard fee for App Store or in-app purchases.

So why is Apple sucking up?

Because WeChat boasts 938 million monthly users and $500 billion+ in peer-to-peer transactions. Not to mention its growing popularity in a Chinese mobile payments market that is set to hit $6.3 trillion by 2020 (its main competitor, Alipay, started with 80% market share; WeChat has quickly grabbed 40%).

That’s not all. WeChat’s parent, Tencent, is the world’s most popular game developer and produces hits so addictive China actually set time limits for playing.

If Apple can keep WeChat happy and keep the industry’s best gaming developers faithful to iOS, that’s a win.

And finally, the kicker. China is Apple’s second biggest market, generating ~25% of Apple’s profits. Clearly, maintaining relationships with its biggest players is key.

They’re massive, got it. So how will this help Apple?

It all comes back to Apple Pay. Ever waved your phone at the cashier, nothing happened, so you never tried the feature again? Turns out you’re not alone.

Only 13% of the 680 million iPhone users have tried Apple Pay. And adoption in China has been just as poor since Apple released the feature last May.

By teaming up with WeChat Pay to accept payments on the App Store, Apple can flip the script and finally reap the benefits of China’s mainstream, mobile payment frenzy.

It Costs How Much?

The FDA just approved Kymriah, the first gene-altering leukemia treatment. It was created by Swiss pharmaceutical company Novartis and it costs $475,000.

Don’t pull out the picket signs just yet. A closer look at this revolutionary, life-saving treatment might justify the cost. The process, coined "CAR-T," works by extracting a patient's disease-fighting blood-cells and “teaching” them to target and attack cancer cells before injecting them back into the body.

Here’s the thing.

The month-long, individually-tailored procedure requires specialization, and limited access to top-notch facilities. In fact, analysts expected it to cost almost double the $475,000 price.

Still, the price will likely go down with the treatment becoming more readily available. The FDA has 76 applications awaiting approval and U.S. pharmaceutical company Gilead placed an $11 billion bet on the technology by purchasing Kite Pharma earlier this week.

Chips or Dip

Bain Capital—and its $75 billion in AUM—is on the prowl once again.

The house that Romney built (read: he founded Bain Capital in 1984) has called upon Apple to join a consortium of investors including South Korean chipmaker SK Hynix and state-backed Japanese investors (the INCJ and DBJ) in a last-ditch effort to buy Toshiba’s chip business.

The rumored amount? $18.2 billion. Bain and SK would be responsible for over half, Apple for $3.6 billion, and Japanese investors would handle the rest.

This announcement comes at a do-or-die time for Toshiba, which had penciled in August 31st as a self-imposed deadline to close a deal.

Here are the most likely outcomes:

  1. Front-runner Western Digital (and a group including KKR) buys the unit for $17.4 billion. WD is furthest along in deal talks, but tension exists due to an existing joint venture with Toshiba.
  2. The fashionably late Bain buys the unit, leaving the PE shop and Toshiba each with 46% control. Apple, which buys 18% of the world’s NAND chip supply, would now have access to the no. 2 producer of NAND chips.
  3. The deal falls through…Toshiba risks being delisted from the Tokyo Stock Exchange and fails to plug the $6.33 billion hole created by its bankrupt U.S. nuclear business Westinghouse.

Any guesses?

A BFD for GDP

Yesterday we mentioned Consumer Confidence hitting its second highest point since December 2000. Well, it looks like the U.S.’ $18.57 trillion GDP has also upped its street cred. U.S. second-quarter GDP growth rose to 3%—its best in two years. Here’s how:

  • Consumer Spending (the biggest part of the economy) grew 3.3%. You can thank, in part, decade-high consumer confidence levels.
  • Corporate (pre-tax) earnings rose 1.3% with utilities, real estate, and tech sectors leading the pack.
  • Nonresidential fixed investment is up 6.9%—it’s a key measure of how much businesses are spending on real estate, tools, and machinery.

U.S. growth fluctuated around 2% through nine years of economic expansion since the Great Recession. Naturally, economists expect growth to slow towards the end of the expansion cycle, not the opposite.

Let’s tune in Friday for the latest release of jobs data and keep this party going.

What Else Is Happening…

  • Facebook (+1.11%) is partnering with LaVar Ball & family to launch a reality show on its Watch tab.
  • The IMF cut its growth forecast for Qatar as imports fell 40% YoY in June.
  • Uber’s new CEO, Dara Khosrowshahi, calls for the company’s IPO in 18-36 months.
  • LinkedIn posted its 2017 U.S. State of Salary Report. Highest-paying junior level job: investment banking.
Economic Calendar

  • Monday     Earnings: No Events Today
  •                     Economic Events: No Events Today

  • Tuesday    Earnings: Best Buy (+), H&R Block (+/-)
  •                   Economic Events: Consumer Confidence (+)

  • Wednesday    Earnings: Five Below (+)
  •                         Economic Events: MBA Mortgage Applications (-), ADP Employment (+), GDP (+), Corporate Profits (+)

  • Thursday   Earnings: Campbell Soup, Lands’ End
  •                    Economic Events: Chain Store Sales, Jobless Claims, Chicago PMI, Consumer Comfort Index, Pending Home Sales, Money Supply

  • Friday       Earnings: No Events Today
  •                  Economic Events: Motor Vehicle Sales, PMI Manufacturing Index, Construction Spending, Consumer Sentiment, Baker-Hughes Rig Count

The Backburner

Netflix took curation to a new level in LA this past weekend with its new "Netflix Collection"—ten carefully-chosen weed strains to go with your favorite Netflix TV shows.

But this wasn’t Netflix’s first ploy at going green. The marketing tactic was designed to promote Disjointed, its new original show centered around a cannabis dispensary.

They even used Dina Browner, Snoop’s favorite Dr. and the show’s certified cannabis consultant (yes that’s a real thing), to scout out the perfect location.

Dina landed on a partnership with LA’s Alternative Herbal Health Services, turning it into "Ruth’s Alternative Caring"—a weekend-long pop-up shop mimicking the dispensary featured in the show.

And with strains like "Banana Stand Kush" ($65 for an 3.5 grams) to hit during Arrested Development, or “Camp Firewood” for you Wet Hot American Summer fans out there, the move was quick to make a buzz. Too bad it was just for a weekend.

Question of the Day

You are on a boat, and throw out a suitcase. Does the water level increase?

(Give up?)

Who Am I?

I am President and CEO of Fidelity Investments.
I was ranked as the 12th most powerful person in finance by Forbes.
I am a “Bitcoin Viking.”
I joined Fidelity immediately after graduating Harvard Business School.

(Any guesses?)

Stat of the Day

60.4%

The percent increase in global music streaming revenues from 2015 to 2016. Keep this in mind as we approach Apple-palooza and Spotify’s IPO. Streaming accounts for over half of U.S. music industry revenue.

Want Morning Brew Daily Served Fresh to Your Inbox?
Drop Your Email Below...

Career Advancement Opportunities

June 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.9%
  • Perella Weinberg Partners New 98.3%
  • Harris Williams & Co. 24 97.7%
  • Goldman Sachs 16 97.1%

Overall Employee Satisfaction

June 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.9%
  • William Blair 02 98.3%
  • Lazard Freres 07 97.7%
  • Morgan Stanley 03 97.1%

Professional Growth Opportunities

June 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.9%
  • Perella Weinberg Partners 18 98.3%
  • Goldman Sachs 16 97.7%
  • Moelis & Company 05 97.1%

Total Avg Compensation

June 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (23) $378
  • Associates (95) $261
  • 3rd+ Year Analyst (14) $181
  • 2nd Year Analyst (69) $168
  • Intern/Summer Associate (34) $167
  • 1st Year Analyst (209) $159
  • Intern/Summer Analyst (153) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Secyh62's picture
Secyh62
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
kanon's picture
kanon
98.9
6
dosk17's picture
dosk17
98.9
7
GameTheory's picture
GameTheory
98.9
8
CompBanker's picture
CompBanker
98.9
9
Kenny_Powers_CFA's picture
Kenny_Powers_CFA
98.8
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”