Bulldozers, nuggets, and AirPods

MARKETS

  • Trade: Secretary of State Mike Pompeo said the U.S. will "deepen engagement" in Asia by upping trade and investment in the region. "We believe in strategic partnerships, not strategic dependency," Pompeo said.
  • Banks: All eyes are on central banks today as the Fed kicks off its fifth Federal Open Market Committee meeting of the year. Ahead of the event, the dollar slipped and Treasury yields rose. The Bank of Japan also met today.

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REGULATION

How to Slow Big Tech’s Roll

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Dumbfounded when it comes to reining in giant tech platforms like Facebook or Google? Senator Mark Warner (a Democrat from Virginia) sure isn't.

Warner's drawn up a policy paper with 20 different ways for Dems to crack down on big tech, per Axios.

  • History break: Warner made a fortune in telecom before taking his talents to D.C. But now, he's a critic of social media platforms—and he's also the top Democrat overseeing the Russian election interference probe (ahem, Facebook).

Here's what's in the paper

The proposal takes a three-pronged approach to regulation: combat disinformation, protect user privacy, and promote healthy competition. Some specific examples?

  • Securing federal funding for media literacy programs
  • Assigning monetary value to users' data
  • Floating a GDPR-like policy stateside
  • Prepping military/intelligence communities to better deal with foreign interference
  • Forcing tech firms to better identify fake accounts or face sanctions from the FTC

Per Warner's office: "The hope is that the ideas enclosed here stir the pot and spark a wider discussion—among policymakers, stakeholders, and civil society groups—on the appropriate trajectory of technology policy in the coming years."

Anything missing? The paper doesn't mention breaking up any of the mega-cap tech companies or introduce a new regulatory body aimed squarely at keeping tech in line (two measures activists have championed).

Also, don't set your timer just yet...it's not very likely the changes happen right away. But, they could gain steam if the tide turns in favor of Warner's Democrats come midterm elections.

  • Countdown to midterms: 98 days

Zoom out: Tech stocks have struggled recently, even before Warner suggested a roadmap for regulation. What's up? Earnings got 'em down.

  • The tech-heavy Nasdaq capped its worst three-day streak since March yesterday.
  • Tech stocks have handed over ~$300 billion since underwhelming Facebook earnings triggered a sector sell-off.
  • The biggest losers: Twitter's down 25.6%, Facebook's down 20.3%, and Netflix's down 6.3% in the last five sessions.

#METOO

Moonves Survives...for Now

The question on every media watcher's lips on Monday: "Will he stay or will he go?"

The "he" we're talking about, of course, is CBS (-5.00%) CEO Les Moonves. One of Hollywood's most powerful execs, he was accused by six different women of unwanted sexual advances over several decades. Yesterday, CBS's board of directors met to discuss a path forward.

And if you thought your meetings were unproductive...CBS might have you beat.

  • Its "Board of Directors is in the process of selecting outside counsel to conduct an independent investigation. No other action was taken on this matter at today's board meeting."

Further reading: Moonves is locked in a vicious battle with Shari Redstone over a potential CBS-Viacom merger. Bloomberg's Tara Lachapelle thinks these accusations give Redstone (who controls both CBS and Viacom) the opening she needs to push the deal past the finish line.

DIVERSITY

Venture Capital’s Adventure with Diversity

Not exactly a hot take: The world of venture capital is dominated by white men (the number is actually 60%).

But a new study by VC Richard Kerby is throwing a little light on just how vanilla the industry actually is.

The conclusion? "While there has been an improvement after 2 years, we still have a long way to go in improving diversity within our industry."

Here's the breakdown by race:
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A few more notes:

  • Here's the breakdown by gender: 82% of VCs in 2018 are male, down from 89% in 2016.
  • And finally, the most shocking stat you'll hear all day: ~40% of VCs attended Stanford or Harvard.

Bottom line, courtesy of Kerby: "The bar to create a more diverse industry is difficult when one looks for folks that most resemble themselves; and while talent is evenly distributed, unfortunately, opportunity is not."

+ Did we pique your curiosity?

TRADE

Tariffs Could Impact Bulldozers, Chicken Nuggets, and AirPods

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If there's one thing we can count on these days, it's news about tariffs. President Trump has put trade at the top of mind for U.S. businesses of all shapes and sizes.

So what're the latest corporate reactions to Trump's tariffs?

Caterpillar (-2.01%) said tariffs will slash $100 million to $200 million from its bottom line this year. So what's a major U.S. industrial exporter to do? Raise prices.

  • Higher tariff costs represent about 3% of Caterpillar's expected profits this year.

Tyson Foods (-7.60%) cut its full-year earnings outlook because of "uncertainty in trade policies and increased tariffs negatively impacting domestic and export prices."

  • Shares fell to a 52-week low on the news.

Apple (-0.56%) could soon face the music, too. Its multi-billion dollar "other products" unit could be exposed to Trump's latest tariff proposals (products like Macs and iPhones have so far been exempt).

Keep an eye on "other products" revenue when Apple reports earnings today.

GAMBLING

MGM and GVC See No Gamble in a Joint Venture

Nothing brings two companies closer together than the opportunity to profit from a previously untapped market.

That's why MGM Resorts International (+0.16%) is teaming up with UK gambling operator GVC Holdings to set up a sports betting platform here in the U.S. The two companies are each putting in $100 million in what one analyst calls the "most comprehensive and solid deal we have seen so far related to U.S. sports betting."

Remember: In a May ruling, the Supreme Court opened the floodgates for states to legalize sports gambling.

Can you identify the pattern?

Like anyone trying something new, U.S. gambling companies are looking for a mentor. And no one's got more expertise in sports gambling than the British, who placed almost $20 billion in bets in the year ending March 2017.

The British (and Irish) are coming:

  • Dublin-based Paddy Power Betfair bought FanDuel in May.
  • UK bookmaker William Hill planted its flag at New Jersey's Monmouth Park racetrack in 2013. It can expect a meaty return.

WHAT ELSE IS BREWING

  • Harley-Davidson (-0.54%) will launch a line of smaller motorcycles as part of its "More Roads to Harley-Davidson" growth plan.
  • Vivendi, a French media conglomerate, said it is considering selling up to 50% of Universal Music Group.
  • Tesla (-2.36%) is exploring a plan to build a factory in Europe, per the WSJ. Remember, it's also set to open one in China.
  • Lawsuits seeking more than $100 million in damages were filed against the owners and operators of a tourist boat that sank and killed 17 earlier this month in Missouri.

BREAKROOM

WHAT WE'RE WATCHING
The Virgin America safety video—If you haven't seen the most entertaining safety video known to aviation (think: if the "The Greatest Showman" had a baby with Destiny's Child) you should definitely check it out now. Because of the $2.6 billion merger between Alaska Airlines and Virgin America, the showstopper is officially taking a final bow this week. This is a really catchy tune.

BRAIN TEASER
In the equation A234+1B34+12C4+123D=12345, each letter represents a digit. Can you figure out each one?

(Answer located at bottom of newsletter)

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Breakroom Answers


Brain Teaser
A=8, B=6, C=4, D=3 (Explanation)

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