Who's up for a hike

MARKET

• U.S. stocks slid following hawkish comments from Fed Chair Jerome Powell, while the dollar climbed.
• Bitcoin hovered just under $11,000.

ECONOMY

New Fed Chair Jerome Powell Sees Strong Economy Continuing

Most of our questions were answered during Jerome Powell’s first congressional testimony yesterday, including: “How many times do a bunch of old men in a room need to clear their throats?” About 500.

Lawmakers want to know: Is the economy still growing? Will the Fed continue to unwind its balance sheet after a decade of quantitative easing? Will the Fed stick to its gradual rate hike program?

Powell sat back and calmly answered, “Yes” to all three.

Powell on the economy

“We’ve seen continuing strength in the labor market,” and “My personal outlook for the economy has strengthened since December.”

Continued strength is right: The unemployment rate remains at 4.1% (a 17-year low) and January took home the gold for “Strongest Monthly Wage Growth Since the Recession.”

Tack on a $1.5 trillion tax cut, and the good times should keep on rollin’: “I would expect the next two years to be good years for the economy.”

How does that affect the Fed’s balance sheet and interest rates?

The Fed will need to slow economic growth so the economy doesn’t overheat and head for a recession.

To do so it’ll…

* Gradually decrease the Fed’s $4.5 trillion balance sheet, effectively pulling money out of the economy.
* Gradually increase interest rates—higher borrowing costs result in less economic growth.

Economists and investors have been skittish about hikes, knowing they could very well derail the markets. We got a glimpse of that anxiety earlier this month.

And with Powell’s glass-half-full picture of the economy, the Fed looks to be on pace to raise rates not three, but four times in 2018.

Reader’s digest: It’s easy to write off a bunch of bankers and economists discussing monetary policy as “unrelatable.” But these policies affect everything from the loan on the car you buy to the credit card you do or do not get accepted for.

TECH

Amazon Buys Smart Doorbell Maker Ring

Amazon (-0.66%) is once again breaking into your home… security market. The company purchased smart doorbell startup Ring for ~$1 billion—the same company that has raised $209 million from sharks like Richard Branson and lists products in over 100 countries.

This reach will come in handy for Amazon as it looks to (what else?) control the home security industry.

* It announced Cloud Cam—a smart security camera for your home and a competitor to Nest.
* It also released Amazon Key—a security lock that (ironically) lets Amazon delivery workers into your home.
* It acquired another security camera startup, Blink, just two months ago.

It’s no secret why Amazon keeps banging on home security’s door. It’s to ensure Alexa remains a house guest…forever.

Bottom line: Internet of Things (IoT) is here. The home assistant (Alexa, Siri, Cortana, Google, etc.) that integrates best with your home’s smart tech could win the market. And home security seems like the perfect place to start.

MEDIA

Comcast Disrupts Fox and Disney’s Merger, Vying for Broadcaster Sky

Comcast (-7.38%) has joined Rupert Murdoch’s 21st Century Fox (-3.04%) in the race to acquire British broadcaster Sky.

Fox and Sky were just about to walk down the aisle after Murdoch proposed a $16 billion takeover offer in 2016. Remember, Disney’s $52 billion bid for the majority of Fox’s assets relies on Fox and Sky tying the knot. But yesterday, Comcast threw a curveball and wooed Sky with a $31 billion counter-offer.

Another hurdle that’s been holding up the Fox-Sky deal? British regulators ruled it would give the Murdoch family “too much influence over public opinion and the political agenda.”

For better or for worse: Fox has only one option—outbid Comcast or risk losing its potential sale to Disney.

Comcast’s offer: $17.50 a share for all of Sky.

Fox’s offer: $14.97 a share for the remaining 61% of Sky it doesn’t own.

What’s at stake: Streaming=survival. Access to Sky’s international market (particularly Sky Sports) is key to competing with Netflix, Amazon, and other video giants.

RETAIL

Macy’s (Finally) Returns to Comparable Store Sales Growth

“Here lies Macy’s: devoted retailer, balloon enthusiast, and frien”—what’s that? Macy’s is alive?

You bet. For the first time since 2014, the struggling retail chain reported same-store quarterly sales growth (1.3%), and it expects more of the same in 2018.

What’s working for Macy’s (+3.54%)? It rode a strong wave of holiday-season momentum into January, when wintry weather drove shoppers to pillage the outerwear section.

At the same time, proceeds from the tax cut give Macy’s the “flexibility” to experiment with new schemes, which include:

* Expanding Backstage, an off-price section meant to lure bargain hunters away from the TJ Maxx’s of the world.
* Expanding Bluemercury, a beauty and spa chain Macy’s bought for $210 million in 2015.
* Offloading more of its real estate. Macy’s plans to close ~100 unprofitable stores.

You couldn’t pay us to be a legacy brick-and-mortar retailer in 2018, but Macy’s is showing resilience in the face of Amazon and declining mall traffic.

WHAT ELSE IS HAPPENING

• Netflix (-1.21%) aims to have ~700 original shows and movies on its platform in 2018.
• More bad news for Wells Fargo (-1.27%). The bank is now facing accusations of discriminating against black and Latino homebuyers in California.
• Newspapers are ganging up to fight back against Google and Facebook.
• Who’s in? Former Google and Square exec, Francoise Brougher, as Pinterest’s first COO. Who’s out? SeaWorld CEO Joel Manby.
• Reporting earnings today: Lowe’s, Box, TJX, Salesforce

FROM THE CREW

From our office, to your inbox. We’ll keep you in-the-know about all the latest happenings from our perspective.

Well, the Pyeongchang Olympics might be over, but the Olympic spirit will linger forever…on our phones. That’s because we’ve followed all our favorite athletes on Instagram.

Turns out, we’re not alone. According to an analysis by the FT, U.S. Olympic athletes gained 3.6 million Instagram followers during the games. The biggest winners? Half-pipe stars Shaun White and Chloe Kim, who each picked up more than 500k new followers.

Let’s take a closer look at Kim, whose engaging personality and gnarly snowboarding skills made her a household name, especially online. Before the Olympics, she had 15,000 Twitter followers. Yesterday, Kim tallied 336,000, not to mention sponsorship deals with powerful brands like Toyota, Visa, and Samsung. She’s even got her face on a cereal box—our lifelong dream.

Bottom line: Building a personal brand on social media is one of the best ways for young, outgoing athletes to monetize their success in niche sports.

THE BREAKROOM

MENTAL STRETCH

BRAIN TEASER
Joe Schmo has an appointment in Kalamazoo at 2:00 pm. If he leaves home and travels at 15 miles per hour, he will arrive at 1:00 pm; if he travels at 10 miles per hour, he will not arrive until 3:00 pm. How far is it from his home to his appointment in Kalamazoo?(Answer at the bottom of the newsletter)

Breakroom Answers

Brain Teaser
60 miles (See explannation)