Dad jokes

MARKETS

• Markets: The tech-heavy Nasdaq finished Tuesday at an all-time high after Amazon notched a new record and Netflix rebounded.
• Crypto: Bitcoin rocketed above $7,000 for the first time in more than a month after posting a ~10% gain in just one hour of trading.

RETAIL

For Walmart and Microsoft, the Enemy of My Enemy Is My Friend

The two American titans inked a deal to take on Amazon (+0.18%) and its massive cloud business to effectively change the retail landscape of the future.

Walmart (+0.64%) agreed to a five-year deal to use Microsoft's (+0.99%) cloud technology to power a bunch of functions, from purchasing algorithms to sales-data sharing.

• All we can say is...look out, Amazon. This is a tie-in between your biggest competitor in retail and your biggest competitor in cloud computing.

What it means for Walmart

Walmart's the biggest retailer in the world, and it's recently cozied up to the idea of using technology to ward off Bezos. This deal means Walmart can better challenge Amazon's leadership at the intersection of tech, data, and retail:

• It'll utilize MSFT-designed machine learning and AI to optimize store performance, analyze online trends, or help employees better stock shelves.
• And streamlined cost-cutting operations=cash to offset Walmart's thinning margins.

What it means for Microsoft

Microsoft's Azure is second only to Amazon Web Services (AWS) in cloud infrastructure market share. Azure revenue grew 93% annually two quarters ago. Amazon Web Services revenue grew 48.6% annually two quarters ago. You do the math.

What it means for Amazon

The competitive threat from Amazon "is absolutely core" to the deal, Microsoft CEO Satya Nadella said to the WSJ. No sugar coating there.

Plus, this could be proof some retailers are tired of using AWS—a business unit comfortably cushioning competitor Amazon's top line. Microsoft's become the obvious pick for cloud infrastructure when AWS is off the table.

What it means for you

As retail works to keep pace with cloud tech's rapid growth, your shopping experience could follow suit. Think more personalized offers and shopping suggestions as Microsoft engineers comb through a cache of data on Walmart's 140 million weekly shoppers.

ECONOMY

Translating Fed Chair Jerome Powell’s Testimony

Trying to decipher a central banker's testimony is about as simple as understanding a foreign language. So? Leave the translating of Fed Chair Jerome Powell's hearing yesterday to us.

Wage growth: "You have the tools to ensure stronger wage growth over time. We can move interest rates around."

• Translation: Incomes aren't rising enough right now. But, Congress has the real power to make policy, not the Fed.

Interest rates: "For now—the best way forward is to keep gradually raising the federal funds rates."

• Translation: Okay, this one's not too hard. The Fed is going to slowly raise the cost of borrowing to keep the economy from overheating.

Trade: “In general, countries that have remained open to trade, that haven’t erected barriers including tariffs, have grown faster."

• Translation: This is Powell's special way of saying he disapproves of the administration's protectionist trade policies.

Bottom line: "Our policies reflect the strong performance of the economy and are intended to help make sure that this trend continues." No translation needed.

MANAGEMENT

It’s Official: Goldman Sachs CEO Lloyd Blankfein Will Leave Oct. 1

So what'll he do then? Well, he told the NYT he's looking forward to "unrestrained tweeting."

Not that he's been restrained before. Let's check out some of Lloyd's hot takes... (WARNING: Dad jokes lie ahead).

BIZ POLICY

SF Businesses Could Drop Some (Social) Change in the Coffer

Forget office nap pods and IPAs on tap...the high-earning tech companies populating San Francisco could soon be spending more on helping the city's homeless population.

The city decided this week that it'll vote in November on a proposed half-percent tax increase on companies' revenue that exceeds $50 million. The ~$300 million per year would pay for homeless and housing services.

San Francisco—home to some of America's richest zip codes—has a growing homeless problem as skyrocketing housing prices squeeze out lower-income residents. Not everyone can live like Zuck.

The numbers that matter:

• SF had an average median household income of $96,677 in 2016, up 17.8% over three years. That's also 67.8% higher than the rest of the U.S.
• About 1,000 companies in SF generate upwards of $50 million yearly.
• SF has the third-highest percentage of homelessness in the country.

Bottom line: A $300 million injection from high-earning firms would double what San Fran currently spends on homelessness.

TRADE

Japan and the EU Shake on Free Trade

We hear Kobe beef pairs wonderfully with French Cabernet this time of year. So it's a good thing Japan and the EU signed a deal to eliminate nearly all tariffs on products the two trade.

The pact was signed in Tokyo this week, but it's been in the works since 2013. It'll cover roughly one-third of the global economy and affect more than 600 million people.

• Japanese shoppers will see lower prices for things like wine, cheese, handbags, and pharmaceuticals from Europe.
• EU consumers will pay less for Japanese products from machinery parts to tea and fish.

The major bilateral trade deal is "sending a clear message" to protectionist economies, according to European Council President Donald Tusk. Wonder whose name Tusk is trying not to say with that one...

+ Meanwhile: The trade war on U.S. turf is just getting started. Hope you aren't too attached to your tilapia, Magic: The Gathering cards, or local newspapers.

SOCIAL MEDIA

Happy Belated Emoji Day

WHAT ELSE IS BREWING

• Texas Instruments (-1.40% after hours) CEO Brian Crutcher resigned due to violating the company's code of conduct.
• Mandalay Bay hotel owner MGM Resorts International (+0.42%) says it's not liable in last year's Las Vegas concert shooting that killed 58. MGM asked courts to extend a federal protection that applies to companies providing anti-terrorism procedures.
• Starbucks (+0.67%), McDonald's (+0.62%), and Closed Loop Partners are working on developing sustainable cups.
• J&J (+3.54%) beat earnings on the strength of its pharma sales. But, its consumer business continues to struggle.
• Booking Holdings (+0.52%), formerly known as Priceline, invested $500 million in Chinese ride-hailing leader Didi Chuxing.

BREAKROOM

WHAT WE'RE WATCHING
Hot Ones—Even if you're not a fan of spicy food, you'll be a fan of this spicy interview show on YouTube. It's where top celebrities are challenged to eat increasingly spicy chicken wings...all while answering tough questions.

GUESS THE LOGO

(Answer located at bottom of newsletter)

Breakroom Answers