One Magic Leap for humankind

Quote of the Day

By the Gods you’ve done it. Somehow you’ve found your way here to me. I offer you my congratulations and my respect.”

Market Snapshot

• U.S. indexes were dragged lower as the tax bill awaits the president’s signature.
• U.S. home sales jumped to an 11-year high.
• Crude inventories fell sending oil to a two-week high.
• Bitcoin Cash started its first day on Coinbase up ~45% to about $3,800.

So You’re Buying a Home? Might Want to Read This First

We’re suckers for that classic fantasy of the American dream. White picket fence, an immaculate lawn that resembles the outfield at Fenway Park…and most of all, a house to call your own.

But the GOP’s tax plan tosses that dream a curveball by decreasing the amount by which you can take the mortgage interest deduction.

“That means nothing to me”—you

Not yet, it doesn’t. But hear us out.

For over a century, the U.S. allowed its citizens to write-off the interest you pay on a mortgage from your taxable income. Let’s take a closer look at how this works (warning—some math lies ahead):

After a down payment, you took out a loan on a stunning 3 BR in Iowa City for $400,000 at a 5% interest rate. So, you’ll be paying *crunches numbers in head* $20,000 a year in interest. Pretty steep, but the neighborhood does have a jivamukti yoga studio.

You’ve also got a solid job writing emails for about $70,000 a year. What this tax break allows you to do is subtract the $20k in interest from that income.

When all is said and done, you save $5,000 a year in taxes just for owning a home.

Enough math for one morning, back to the tax bill

The existing U.S. laws permit you to deduct interest from the first $1 million of your mortgage. Now, that’ll be lowered to $750,000. And since the new bill doubles the standard deduction (a lump sum), you might choose to go that route instead of itemizing each deduction individually (the only way you can take the mortgage interest deduction).

It’s enough of a change that Zillow estimates the deduction makes sense for only 14.4% of U.S. homes, a steep drop from 44% currently.

Which is pretty upsetting to the real estate community. The National Association of Realtors warns that house prices will sag under slack demand for expensive houses, and a study backs them up: under the new policy, home prices will decrease 4% by mid-2019...and up to 10% in the most expensive markets.

After all, convincing someone to buy a house (a big one, in this case) is a lot easier if you can put more cash back into her pocket.

EU Pumps the Brakes on Uber

Uber’s longtime battle cry has been that it’s an app, not a transportation company—despite connecting travelers with drivers. It’s the argument it’s used to avoid pesky things like regulation.

But, if it walks like a truck, and talks like a truck...

The EU’s highest court (the European Court of Justice) called shenanigans and rejected Uber’s view of itself, ruling that it should, in fact, be regulated as a transportation company. It won’t necessarily kneecap Uber’s footing in Europe, but does force the company to bear the weight of regulation, like the rest of us.

“This ruling will not change things in most EU countries where we already operate under transportation law,” Uber said in a statement, sticking to its traditional defense of “who, us?”

The case was originally brought to court by a Barcelona-based taxi association against Uber’s more-inexpensive service, UberPop, which allowed drivers without a taxi license to use their personal vehicles to pick up passengers. Some good news for Uber: the judgement won’t directly domino into the other disputes it’s facing over how it treats its drivers. That’s a whole other can of unregulated worms.

Subaru Shifts Into Apology Mode

Subaru is investigating claims of misrepresenting fuel efficiency ratings for its vehicles, because if you’re not falsifying data reports these days are you really a Japanese manufacturer?

This would be strike two for the country’s 7th largest carmaker, which admitted to fabricating inspection quality data a few months ago. And it’s about strike 30 for a Japanese manufacturing industry that, until this year, had been the cat’s pajamas when it came to quality handiwork.

But cats don’t wear pajamas. And Japanese manufacturing might not be all it was chalked up to be.

Airbag maker Takata was responsible for the largest car safety recall ever, Kobe Steel (guess what they make) falsified quality reports for parts sent to over 500 companies, and don’t forget Nissan and Mitsubishi Materials.

Subaru’s still trying to confirm “whether data was indeed fabricated.” And even if it was, a recall would be unlikely since no safety rules were violated. Unfortunately, that reassurance didn’t stop shares from falling 9%...

One Step for AR, One Magic Leap for All Humankind

It only took six years and nearly $2 billion from the likes of Google and Alibaba, but Magic Leap finally did it: it let us see its augmented-reality smart glasses.

The details for the glasses are a little fuzzy—there’s no concrete ship date outside of “in 2018” or a price—but they have a name! At some point next year, developers will be able to get their hands on the “Magic Leap One: Creator Edition.”

The bundle of mixed reality includes:

* a headset, or Lightwear, equipped with six cameras
* a battery pack, or Lightpack, that can be clipped to a belt
* a controller, or Control, for input (in addition to using voice, gesture, eye tracking, and head-positioning inputs)

Of course, all of this can be augmented as Magic Leap notes the “product is continually advancing and may be different at time of shipment.”

Can’t wait for our _________ to show up next year.

What Else Is Happening…

• AT&T (+1.31%) announced it will give its U.S. employees a $1,000 bonus after the tax bill takes effect. With the DOJ breathing down its neck, it sure is funny timing.
• Juul, the vaping startup on everyone’s lips, raised $150 million.
• Orbitz' ex-CEO joins Uber as COO. Now, the former chiefs of Expedia and Orbitz are leading Uber.
• Google Chrome is coming out with its own ad blocker in 2018, but there are serious antitrust concerns.
• Coinbase is looking at possible insider trading after Bitcoin Cash popped on other exchanges before it was introduced to the app.

Economic Calendar

• Monday     Earnings: No Events

                    Economic Events: Housing Market Index (+)

• Tuesday    Earnings: FedEx (+)

                  Economic Events: No Events

• Wednesday    Earnings: Bed Bath & Beyond (+), General Mills (+/-)

                        Economic Events: Existing Home Sales (+)

• Thursday   Earnings: Accenture, Nike, The Finish Line

                   Economic Events: GDP, Jobless Claims, Corporate Profits

• Friday       Earnings: No Events

                 Economic Events: Durable Goods, New Home Sales, Consumer Sentiment

New Year’s Resolutions

Uber

2017—A year of data breaches, data hacking, board shakeups, lawsuits, etc.
For 2018—Send Travis Kalanick on a one-way trip to Siberia.

SoftBank

2017—The Man, The Myth, The Masayoshi Son invested in anything and everything tech with his $93 billion Vision Fund.
For 2018—Treat himself to whatever he wants on the dollar menu.

Winklevoss Twins

2017—Became the first Bitcoin billionaires (and Ethereum millionaires).
For 2018—Teepee Mark Zuckerberg’s home.

Elon Musk

2017—The Boring Company, the Hyperloop, Mars, Tesla Semis, 30-minute space travel.
For 2018—Take a nap.

US-China

2017—Increasingly tense trade relations despite a Trump visit to China.
For 2018—Recruit LiAngelo Ball to manage foreign diplomacy.

Equifax

2017—A data breach affecting 143 million customers.
For 2018—Literally anything that doesn’t include giving up the information of 143 million customers.

Morning Brew

2017—Watched a company get involved in crypto, which sent its stock up 2,600% in a week.
For 2018—Change name to Morning Blockchain.

The Breakroom

Question of the Day

A painting job can be completed by 7 painters in 17 days. If 7 more painters join the team 7 days after starting work on the job, then how many more days are required to complete the job?

(Answer located at the bottom of newsletter)

Business Trivia

Times are tough for daily newspapers, but in the U.S. their circulation still runs in the tens of millions. Which of the following years had the greatest total U.S. daily newspaper circulation? Can you rank them from greatest to least?

1946, 1962, 1984, 2011

(Answer located at the bottom of newsletter)

Stat of the Day

1 billion—The number of policies Chinese insurer Zhong An sold in its first year of existence. When you’re the child of a Tencent and Alibaba marriage, anything is possible.

Breakroom Answers

Question of the Day: 5 days (Explannation)

Business Trivia: 1984 (63,340,000), 1962 (59,849,000), 1946 (50,928,000), 2011 (45,653,000)