Square don't care

MARKETS

• U.S. markets: We know many investors wanted lower rates from the Fed, but Chairman Powell doesn't really care what you want. The S&P suffered its worst day in more than a month.
• Turmoil abroad: In Venezuela, demonstrations continued for a second day following opposition leader Juan Guaidó’s call for a military uprising. And in Paris, protests from anarchists and yellow vest activists disrupted the city’s May Day march.

PAYMENTS

Square vs. PayPal: Who Ya Got?

As if juggling his positions as Twitter CEO and nose ring influencer wasn’t enough pressure, Jack Dorsey also runs Square. And yesterday, he was banking on the payment processor’s first-quarter financials to prove Square deserves its high valuation.

Spoiler alert: They did not. While Square beat analyst estimates on the top and bottom lines (with adjusted revenue of $489 million up 59% annually), the stock dropped as much as 8% after hours, because…

...it missed the mark on gross payments, reported a Q1 loss that widened 58% annually to $38 million, and offered a lower projection for this quarter’s revenue.

What’s piling on the pressure? Increasing competition.

We're talking about PayPal

Right now, Square’s Cash App is both goose and golden egg for Team Dorsey. Gross payment volume on its peer-to-peer money transfer platform, a term you most commonly associate with “Venmo,” grew 150% annually last quarter.

And that’s exactly the problem. Cash App competes with PayPal’s Venmo for the right to handle your bills. And Venmo’s been on a tear.

• Venmo just reported 40 million yearly users—which outnumbers most big banks’ digital fanbases.
• Square’s Cash App had 15 million monthly active users as of December. Different metric, but you get the rivalry.

Venmo’s momentum has given PayPal (-1.62%) the confidence to unleash an all-out spending spree. It’s investing $500 million in Uber ahead of its IPO, and it put $750 million into Argentina’s e-commerce juggernaut MercadoLibre.

• “I don’t think you spend that kind of money unless it’s part of a global strategy to enable these new super-platforms,” Propel Ventures’s Ryan Gilbert told CNBC.

Bottom line: As it struggles to deliver on lofty expectations, Square has counted on the Cash App to keep Wall Street interested. But PayPal’s ruthless when it comes to peer-to-peer payments—and Square will have to keep up if it wants its own super-platforms.

FED

Putting the Duel in Dual Mandate

What would it take for Jerome Powell to loosen that tie a little? Half a Lime-A-Rita and some more inflation.

The Fed voted to leave interest rates unchanged this week, which was...exactly what it was expected to do. But Chairman Powell took a jab at inflation for being “vexingly” low despite signs of a strong economy. Prices increased 1.6% in March, well below the Fed’s 2% target.

And after Powell recently called low inflation “one of the major challenges of our time,” those eager for the easy money of yesteryear began speculating the Fed might consider a rate cut, despite the decade-long economic expansion.

But...no dice. Powell said yesterday, “We don’t see a strong case for moving in either direction.” He added that inflation looks to be “transitory,” and only “persistently” low inflation would make the Fed consider a rate cut.

Looking ahead: While the Fed continued to preach #patience when it comes to rate hikes (and cuts), another month of subpar inflation might just ignite a change in attitude.

HOUSING

The Benioffs Bankroll for Good

Salesforce founder Marc Benioff and his wife, Lynne, are putting some of his $7.1 billion fortune to work. They just donated $30 million to UC San Francisco to investigate causes and potential solutions for homelessness.

Benioff has already put millions behind a (controversial) San Francisco bid to raise corporate taxes to fund anti-homelessness initiatives. This time around, the Benioffs gave what’s believed to be the largest private donation toward homelessness research ever.

And homelessness is a severe problem in Benioff’s hometown, as the LA Times points out:

• 4,000+ people sleep on SF’s streets every night.
• Related: The median price of a two-bedroom home is $1.3 million.
• A family of four making $117,400 a year is considered low-income.

Could Benioff be paying the piper $30 million? Maybe. Some locals are frustrated by the influx of Very Rich People into the city thanks to companies like Salesforce—suggesting those tech firms are a root cause of SF’s income inequality problem.

IPO

The Carnivore’s Dilemma

You don’t have to be a veg fund manager to be intrigued by Beyond Meat’s expected IPO today.

The plant-based meat startup is valued at about $1.5 billion after reporting $88 million in revenue last year, up 170% from 2017. And though it’s not profitable, it’s hitting the public markets with momentum after pricing its shares at the top end of a higher than expected range.

Ingredients for momentum

• Plant-based meat substitutes are becoming popular as more consumers acknowledge the moral and environmental hazards of eating meat.
• Beyond Meat’s also a hit in the key 15-34 omnivore demographic. At Kroger, 93% of people buying its Beyond Burger also purchased animal protein over a 26-week period.

One potential risk you may not have considered: In its filing, Beyond Meat said “We build meat directly from plants.” To the beef industry, that's akin to saying “We build violins directly from refrigerators.”

Feeling the pressure, cattle industry groups are trying to convince lawmakers to prohibit plant-based meat companies from using the word “meat” to describe their products.

INTERNATIONAL

Huawei Shakes Up British Politics

Sometimes, we wish we were London-based so we could write sentences like the Financial Times: “Gavin Williamson has been summarily sacked as the UK’s defence secretary.” But even so, we can provide some colour.

Williamson’s firing by Prime Minister Theresa May is related to Huawei, the Chinese tech company in the eye of the 5G hurricane. The ex-secretary is suspected of leaking sensitive information from a high-level meeting which determined Huawei could build sections of the U.K.’s 5G network.

• This wasn’t just any meeting. With top officers from armed forces and intelligence units (GCHQ, MI6, etc.) in attendance, it’s the kind where someone peers out and closes the blinds before getting started.

Zoom out: The U.S. considers Huawei a national security threat and has warned its allies to shun its telecom equipment. We’ve learned the U.K. doesn’t 100% agree.

Looking ahead...Williamson strongly denies he’s the leaker, but either way he’ll be replaced by Penny Mordaunt. She’ll become the country’s first female defense secretary.

WHAT ELSE IS BREWING

• Hulu has reached 28 million subscribers. It’s no Netflix, but Hulu did announce new ad formats and Marvel shows.
• Qualcomm (-2.77% after hours) said in its earnings report that it’ll book $4.5-4.7 billion in revenue as part of its settlement with Apple in the coming quarter.
• Google CEO Sundar Pichai made $470 million in 2018. Yeah.
• Goldman Sachs (-0.58%) is looking to raise $4 billion for a fund to invest in private equity firms (with some $$ set aside for hedge funds), Bloomberg reports.
• Disney (-0.43%) promoted film division president Alan Bergman to co-chairman. A box office boom does wonders for your LinkedIn.

BREAKROOM

Crossing Words
When we’re not writing newsletters, we’re doing New York Times crossword puzzles. And everyone knows the first rule of doing the NYT crossword: brag about it to as many people as you can. We just told 1.3 million, so...mission accomplished.

See if you can solve some clues from an old Monday puzzle.

1. Bulgarian or Croat: Four letters
2. 1920s car that had its inventor’s initials: Three letters
3. Milan’s La _____ opera house: Five letters
4. Baseball great known as “The Georgia Peach”: Six letters
5. Liberal arts school in Waterville, Me.: 12 letters

Breakroom Answers