I hate college

MARKETS

• Brexit: With deadline day approaching in just over two weeks, Parliament rejected PM Theresa May’s Brexit deal. More votes are scheduled this week to choose the best of several terrible options going forward.
• Inflation: You’ve been waiting all week to hear about February's core consumer price index, so don’t be disappointed when we tell you it only grew 0.1% from a month earlier. The anchor weighing down prices is...of all things...motor vehicle insurance.

EDUCATION

The DOJ Shows No Mercy on Aunt Becky

Yesterday, the Justice Department charged 50 people—including Full House actress Lori Loughlin and Desperate Housewives star Felicity Huffman—for their involvement in a long-running bribery scheme to get their kids into top U.S. colleges. And here we thought the key was being sergeant-at-arms of the National Honor Society.

The claims: From 2011 to 2018, about $25 million in bribes was paid out to officials at schools including Yale, Georgetown, Stanford, UCLA, Wake Forest, and more.

The alleged wrongdoing included cheating on college entrance exams like the SAT and ACT and bribing coaches to say students were being recruited as athletes…“regardless of their athletic abilities, and in some cases, even though they did not play the sport they were purportedly recruited to play.”

• For example, Loughlin and her husband were charged with paying $500,000 in bribes to get their two daughters into USC as recruits for the rowing team...even though neither knew a coxswain from a stroke.

The roster of those charged reads like the Met Gala invite list

We’re talking tiger parents like Huffman and Loughlin, Hercules Capital CEO Manuel Henriquez, ex-Pacific Investment Management CEO Douglas Hodge, and TPG Head of Social Good William McGlashan.

Wondering what this scheme would run you? Prosecutors said parents paid anywhere from $100,000 to $6.5 million in bribes, with most payments totaling about $200,000. Each time a parent wanted to cheat a standardized test, they’d dish out $15,000 to $75,000, but we could've told them for free all you need to do is pick "C."

Bottom line: The alleged fraud was the “largest college admittance scam ever charged by the Department of Justice,” officials said. And it confirms two long-held suspicions: 1) America’s rich hold the country’s elite university system in the palm of their hands, and 2) getting kids into the party school revered higher learning institute of their dreams is big business.

INTERNATIONAL

Europe Does Its Own Thing

The EU’s aviation safety regulator, EASA, joined other countries around the globe in grounding Boeing’s 737 Max jet, the plane involved in two fatal crashes over the past five months.

This is unexpected. EASA and the FAA, the U.S. regulator, have a history of working together. So it’s surprising that the Europeans consider the popular plane a danger to safety while the U.S. has vouched for its "continued airworthiness."

And what about Boeing?

• Shares are falling as quickly as its reputation, down more than 6% yesterday.
• It will make a software update to the stall-prevention system in the 737 Max, although it was working on this change before Sunday’s crash in Ethiopia.

Here's a useful map from Bloomberg.

Europe is brushing off the U.S. in other ways, too
The U.S. warned German officials that it would limit intelligence data sharing if Germany tapped Huawei—the Chinese telecom considered a national security threat by the White House—to build out the country’s next-gen networks.

Chancellor Angela Merkel’s response? “We are defining our [security] standards for ourselves.”

HEALTH CARE

UnitedHealth Takes One and Passes It On

Health insurer UnitedHealth Group (+1.12%) announced yesterday that, starting next year, it’ll expand a program that passes on drug discounts directly to consumers.

• What does that mean? People who’ve struggled with high deductible payments and other out-of-pocket expenses could see their costs come down.

The details: UnitedHealth will require new clients to apply after-the-fact discounts (aka rebates) to consumers’ out-of-pocket expenses. Per the NYT, other companies have offered similar deals to employers, but UnitedHealth looks to be the first major insurer to require it (FYI, existing clients will be permitted to continue under the old system but are “encouraged” to switch).

So why now? Nothing like a little D.C. pressure to move the ball down the field. Lawmakers have blamed rebate programs for pushing up the list price of drugs and burdening consumers.

UnitedHealth said the expanded program will make consumers more likely to fill their prescriptions. As it already exists, the program has lowered drug costs by an average of $130 per eligible prescription.

RETAIL

Dick's Sticks to Its Guns...Kinda

One of the largest firearms sellers in the U.S. is moving further away from...firearms. Dick’s Sporting Goods (-11.17%) announced yesterday it’ll remove guns and other hunting goods from 125 of its stores.

Some background: Just over a year ago, Dick’s CEO Edward Stack learned the Parkland gunman once bought a gun from Dick’s. While that wasn’t the gun he used to kill 17 people last year, Stack was shaken.

• That’s why he’s made it harder to buy guns at Dick’s—and why he’s pressured Congress to pass gun safety measures.

Dick’s tested the fewer-guns approach in 10 stores last year. And if the expansion announced yesterday is successful, Dick’s will move to implement the same changes at more locations next year.

While Stack’s approach has invited both support and criticism...it could potentially hurt Dick’s business. Adjusted same-store sales fell 3.1% annually last year.

But there are larger forces at work: Gun demand (especially in brick-and-mortar stores) has been under pressure—U.S. firearm sales fell 12.4% year-over-year last month, estimates Small Arms Analytics & Forecasting.

TECH

MoviePass: You Can’t Count on Us

MoviePass’s parent company, Helios and Matheson Analytics (-3.57%), admitted to an error objectively worse than us fudging yesterday’s share section.

In a filing with the SEC, it wrote that:

• The board and the audit committee determined “the company's previously issued quarterly and year-to-date unaudited consolidated financial statements for September 30, 2018, should no longer be relied upon.” Our emphasis.
• Similarly, “Related press releases, earnings releases, and investor communications describing the Company’s financial statements for these periods should no longer be relied upon.”

Boil it down: The company overstated subscription revenues in Q3 2018 while understating its net loss by nearly 7%.

MoviePass, the subscription movie service that in summer 2018 had 3.2 million subscribers (who knows how many now?), is hoping its latest business model tweak will be the one that carves a path toward sustainability. The new strategy involves closely integrating the MoviePass subscription with MoviePass Films (film production) and Moviefone (film info).

WHAT ELSE IS BREWING

• Ned Sharpless, the director of the National Cancer Institute, has been named acting commissioner of the FDA.
• Rite Aid (+12% after hours) is cleaning house in its c-suite: The drugstore's CEO, COO, and CFO are all stepping down.
• Wells Fargo (-0.22%) CEO Tim Sloan defended his company’s efforts to reform itself at a congressional hearing.
• Pot stocks rallied yesterday after New Jersey lawmakers outlined plans to legalize weed in the state. We're forecasting more Garden State/pot jokes on the horizon.
• The U.S. cut its oil production forecast for the first time in six months. Still, look for record output from 2019-2020.

BREAKROOM

Math Is a Really Cool Thing

Breakroom Answers