My bad
MARKETS
- Trade: China released a white paper attacking the U.S. for not being a reasonable negotiating partner. For its part, the U.S. has blamed China for backing out of promises at the last minute.
- And the good news keeps coming—Morgan Stanley says a recession
could begin in as few as nine months if this trade war jig continues.
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ANTITRUST
The DOJ's Wet Hot Google Summer
The Justice Department is reportedly prepping an antitrust investigation of Google in a move that could set a new standard for U.S. regulation of Big Tech.
Why this is happening
Thanks to a steady regimen of creatine and tech investment, Google (along with Amazon and Facebook) has taken a stranglehold on online ad-buying.
- For example, Facebook and Google made up a combined 60% of the digital ad industry in the U.S. last year.
- That’s put a target on Google’s back, with companies like TripAdvisor and Yelp alleging Google uses its market dominance to unfairly promote its own services.
The case against Google: It’s tough out there for a fledgling internet company hoping to gain traction in any of Google’s many wheelhouses—after all, it takes a perfect concoction of spending, scale, and user data to turn your company into a verb.
Still, Google would be a tough regulatory nut to crack. Its products are immensely popular, and Google has built up a network of friends in D.C.
- Plus, just because you're a verb doesn't mean you're a monopoly. Sen. John Sherman (of 1890’s Sherman Antitrust Act fame) said monopolies were “extortion which makes the people poor.” Last time we checked, it was our collection of rare healing crystals eating our paycheck, not Google.
This wouldn’t be Google’s first regulatory go-round. The FTC (which shares antitrust responsibilities with the DOJ) went Magnum P.I. on Google a few years back but closed the case in 2013 with only minor concessions.
The necessary disclaimers: This DOJ investigation could come to nothing. It’s step one of a long, winding antitrust road. And if you experience a rash, call your doctor.
The bottom line
In the 1990s, the government made a case against Microsoft. While it came out unscathed, Microsoft weathered a decade-long distraction that allowed then-startups like Google to weasel in. Even if Google escapes the grasp of the DOJ, this could represent a meaningful change in its story.
RETAIL
My Bad, Say Retailers
How bleak are things for American retailers? They can’t even blame the trade war for their awful Q1, writes the FT.
Run the numbers: Of the 74 U.S. retailers examined by S&P, 35 missed forecasts for comparable sales last quarter. And apparel retail earnings haven’t been this bad since the recession—the group’s earnings are down 24% for Q1.
Sixty-seven retail conference calls in the last month blamed some sales missteps on bad weather. But in the last week, underperforming retailers did something unheard of on Wall Street: They took responsibility for their own shortcomings.
- The Gap said its product lineup “lacked diversity in silhouette, prints and pattern.”
- J. Jill blamed its own lack of “color and novelty.”
While that’s bad news for the color and novelty of your wardrobe, that’s actually good news for the economy. Following a string of disappointments in retail, experts had gotten concerned over the state of the consumer. But with sellers admitting it’s not you, it’s them, Americans’ financial health looks a little less worrisome.
MUSIC
iTunes Is Going to the Operating System in the Sky
At some point during Apple’s annual developer conference (kicking off today), the company’s expected to axe iTunes, per Bloomberg. The desktop music player and iOS sync-er has outlived its relevance, though it was a revolution for music distribution when it was first released. Gen Z readers: look up “record store,” then continue reading.
It had a good run. iTunes launched as a media player in 2001, but in 2003 Apple introduced the store, which was the real game changer. Suddenly music buyers could have their Sean Paul immediately and for much cheaper than a CD.
But now it seems...out of place. iTunes is a music, podcast, and TV desktop app at a company that already has separate Music, Podcast, and TV apps for iPhones and iPads. So Apple is expected to replace it with three distinct apps like its phones and tablets have.
Bottom line: iTunes bridged the brick-and-mortar era to the Streaming Age, but it’s a little surprising it survived so long, what with its bonanza of confusing features...and that free but not good U2 album.
TOURISM
Venice vs. Tourism, Episode 354
Yesterday morning, a 900-foot cruise ship called the MSC Opera crashed into a dock and another boat in Venice, Italy, injuring at least four people. Some Italians are saying the incident, which was filmed live by onlookers, reflected the negative impact of the huge vessels. They complain the megaboats pollute the water, strain the infrastructure, and utterly ruin the selfies.
There are haters, and then there are haters. Some Italian officials said cruise ships should stop traveling down the Giudecca, the waterway that leads to St. Mark’s Square, a highly popular destination and a key plot point in 2006’s Casino Royale. Other critics said it’s time to ban the ships from coming to Venice at all.
Zoom out: Cruise lines have come, seen, and conquered Venice. The government has tried various measures to limit their dominance, banning certain especially huge ships or marking certain parts of the city off limits...but most of them haven’t come to much. The footage of the MSC Opera’s horns blasting as people run for cover could change that.
CALENDAR
The Week Ahead
This week is marked by anniversaries of two events that changed the course of the world.
Monday: Apple’s Worldwide Developers Conference starts; ISM Manufacturing Index; President Trump arrives in the U.K.
Tuesday: Motor vehicle sales; earnings (Salesforce); 30th anniversary of Tiananmen Square crackdown; Eid al-Fitr marks the end of Ramadan
Wednesday: Fed beige book; earnings (MongoDB, Campbell Soup, Five Below, Stitch Fix); CMT Music Awards
Thursday: Trade balance report; 75th anniversary of D-Day; earnings (Beyond Meat, PagerDuty, Zoom)
Friday: Jobs report
WHAT ELSE IS BREWING
- Blackstone is paying $18.7 billion for a network of U.S. industrial warehouses from Singapore-based GLP. It'll be the largest private real estate transaction ever, per the WSJ.
- Boeing revamped a 737 Max automated system to become “more aggressive and riskier” late in the plane’s development, according to a NYT report.
- A Google Cloud service outage took down YouTube, Snapchat, Gmail, and more in parts of the U.S. yesterday. That explains all the rioting.
- Godzilla: King of the Monsters? More like King of the Box Office (had to). The film took in $49 million in North American ticket sales, topping Aladdin to win the weekend.
- An anonymous bidder paid a record $4.6 million to have lunch with Warren Buffett. The money goes to the Glide Foundation.
BREAKROOM
Greater Than or Less Than
- GDP of South Korea // GDP of Italy
- Weight of bantamweight boxers // weight of featherweight boxers
- Undergrad enrollment at Arizona State University // population of Annapolis, MD
- Number of words in A Storm of Swords by George R. R. Martin // Number of words in Harry Potter and the Order of the Phoenix by J.K. Rowling
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Breakroom Answers
Greater Than or Less Than
South Korea’s GDP is less than Italy’s.
Less than. Bantamweights are lighter than featherweights.
Greater than. There are more ASU undergrads than people who live in Annapolis.
Greater than. A Storm of Swords has more words.
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