La La Land


  • U.S. markets: While the S&P 500 is off to its best start to a year since 1998, it's not all flipping cars and singing "Old Town Road" on Wall Street. Earnings season is just about here, and analysts predict S&P profits in Q1 will decline from a year ago.
  • Trade: It's now been more than six months since the U.S., Canada, and Mexico shook hands on a NAFTA rewrite known as USMCA. But the chances of it getting ratified this year are "receding," according to Reuters.

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Hollywood Writers Flip the Script on Their Agents

The roughly 13,000 members affiliated with the Writers Guild of America (WGA) have threatened to fire their agents en masse by next weekend. Welcome to Hollywood, where even labor disputes amount to Scorsesean dramas.

The background

Writers are demanding an end to two agency practices they say reflect fundamental conflicts of interest.

1) Packaging: when an agent pitches studios on an entire creative team, including, say, a showrunner, director, and star.

  • Agencies say packaging improves the odds of getting a show financed.
  • Writers say there's no incentive for an agent to negotiate on behalf of their financial interests. David Simon, the creator of The Wire, wrote, "Packaging is a lie. It is theft. It is fraud. In the hands of the right U.S. Attorney, it might even be prima facie evidence of decades of racketeering."

2) Affiliate production: Big agencies are starting to produce their own content through affiliated companies, leading to a situation in which agencies play conflicting roles.

Demands for agencies to eliminate these practices were written up in a new code of conduct, which over 95% of WGA members support. It was then put to the WGA's dueling partner, the Association of Talent Agents.

How did negotiations play out? Well, they've been compared to Brexit, get the idea. Late Saturday, the two sides agreed to an extension, giving another week of breathing room before WGA members might fire their agents.

In La La Land

This is a bizarre situation. Writers and agents have typically gone to war with each other, not against each other. Some are good friends (for you Californication fans, think Hank and Charlie).

Zoom out: The dispute shows how both agencies and writers are rethinking their relationship as they adjust to structural changes in the industry. Yes, we're talking about streaming.


President Trump Is the Ultimate Fed Influencer

Two potential Trump nominees for the Fed board of governors would add some partisan flavor to an institution that's designed to be completely vanilla.

Let's meet the candidates:

  • Stephen Moore: a conservative economist and commentator who advised the Trump campaign.
  • Herman Cain: a former GOP presidential candidate, pizza exec, and board member of the Kansas City Fed in the '90s.

The names were enough to catch the attention of Barclays's chief U.S. economist, who said the potential picks "seem to be valued more for their political contributions than their economic gravitas."

Is there any precedent? The NYT's Neil Irwin reminds us that Richard Nixon used aggressive tactics (including leaking a false story) to pressure Fed chair Arthur Burns to keep interest rates low before the 1972 election.

Looking ahead...If confirmed by the Senate, Moore and Cain would invite more questions over the Fed's independence from politics. Still, they're not expected to influence policy in the near-term.


Tesla and FCA Hop in a Car Pool

File this one under couples that make you go, "hmmmm...never saw them together": Tesla and Fiat Chrysler Automobiles (FCA). FCA will pay Tesla a reported "hundreds of millions of euros" to allow Tesla cars to be counted in FCA's fleet, per the FT.

It's called an open pool. With Tesla's electric vehicles counted as part of its fleet, FCA can bring down its average emissions to a permissible level and avoid EU fines...which has been top of its to-do list.

  • FCA cars emitted an above-average 123g of CO2 per kilometer last year.
  • And starting next year, the EU's target for CO2 emissions will drop to 95g per kilometer.

Which is why for FCA this marriage is more an act of desperation than lust. Jefferies analysts said FCA could face fines of more than 2 billion euros in 2021 once the new, stricter target has set in.

On the other hand, Tesla has made more than $1 billion selling emissions credits in the U.S. in the last three years.


For Facebook, Life Is the Bubbles Under the Sea

In a project dubbed Simba, Facebook is reportedly developing an underwater data cable to encircle the African continent, according to the WSJ. Admittedly less cute than a CGI lion cub, but interesting nonetheless.

The goal: cut bandwidth costs. Simba will also give FB's European and Asian data centers a better connection to African markets, where apps like FB's WhatsApp are gaining steam. We're short on details, but some estimates put a $1 billion price tag on the project.

Undersea cables are #trending. Already, close to 750,000 miles of underwater cables connect continents.

  • Facebook has undersea cable projects linking North American, European, and East Asian markets.
    Huawei is launching subsea cable links to Africa.
  • Alphabet is also reportedly in talks to build its own cable system down Africa's western coast. That project is called Equiano, because Nala was already taken.

Zoom out: On their never-ending quest for more bandwidth, tech giants are rapidly building out their undersea networks, which serve as the fiber optic highways for most of the world's internet traffic.


The Week Ahead

We are less than one week away from Game of Thrones, which means this week will feel like the longest of the year.

Monday: Factory orders

Tuesday: JOLTS; Israeli election; North Pole Marathon

Wednesday: CPI inflation data; FOMC minutes; earnings (Delta Air Lines, Bed Bath & Beyond); National Siblings Day; bank CEOs testify before the House Financial Services Committee

Thursday: Disney will give a first look at its streaming service, Disney Plus; the Masters tees off; first phase of India's elections begins

Friday: Consumer sentiment; earnings (JPMorgan, Wells Fargo, PNC); Brexit deadline (expect another delay)


  • Warren Buffett is advising Wells Fargo to look beyond Wall Street to find its new CEO, per a FT interview. Buffett is the bank's largest shareholder.
  • American Airlines is extending its cancellations of 90 flights a day to June 5, as the Boeing 737 Max remains grounded.
  • Shazam!, the DC superhero flick from Warner Bros., won the box office this weekend with an opening of more than $53 million in North America.
  • Amazon is working on Project Kuiper, a plan to launch more than 3,000 satellites to offer high-speed internet access to underserved communities globally.
  • Rent the Runway will expand its clothing rental services to kids starting next week.


Greater Than, Less Than, or Equal to
NCAA championship edition: Texas Tech vs. Virginia. Tonight. 9:20pm ET tipoff.

  1. Undergrad enrollment of UVA // Undergrad enrollment of Texas Tech
  2. Median household income in Charlottesville, VA (home to Virginia) // Median household income in Lubbock, TX (home to Texas Tech)
  3. Number of U.S. presidents who graduated from Virginia // 1
  4. All-time Texas Tech win percentage in college football // All-time Virginia win percentage in college football

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Breakroom Answers

Greater Than, Less Than, or Equal to
1. Undergrad enrollment at Virginia is less than that at Texas Tech (16,655 2. Charlottesville's median household income is greater than that in Lubbock: $54,739 to $47,326
3. Less than. Thomas Jefferson founded the institution, but no president ever graduated from there.
4. Texas Tech's got the edge when it comes to football win percentage (.557 to .522)

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