A trip to Bali
- U.S. markets: If all the red above didn't get the message across...well, stocks continued their major slide Thursday. The Dow is down over 1,300 points in the last two days, and the S&P notched its sixth straight day of losses.
- A few theories that could help explain the sell-off: Rising borrowing costs, the fallout from the trade war with China, slowing global economic growth, and a buyback "blackout" period.
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The Mysterious Week That Was
And we don't mean a Kanye-monologue-in-the-Oval-Office kind of strange. International mysteries from China to Belgium to Turkey to the U.S. all conspired to put a dark cloud over the business world.
The case of Jamal Khashoggi
The journalist and political dissident went inside the Saudi Arabian consulate in Istanbul on Oct. 2...and reportedly never came out. Turkey's blamed Saudi Arabia for killing him, but Saudi Arabia's denied wrongdoing.
Why it matters: Saudi crown prince Mohammed bin Salman could find it tough to attract foreign investors when the latest U.S. intelligence suggests he ordered Khashoggi's abduction, per WaPo.
- Sponsors and speakers are pulling out of the kingdom's Future Investment Initiative (aka "Davos in the Desert"). The New York Times said it won't be a media sponsor, and Arianna Huffington no longer plans to attend.
- Ex-Energy Secretary Ernest Moniz and former European Commission VP Neelie Kroes both pulled out from advising Saudi Arabia's $500 billion Neom megacity project until more is known.
The case of a forged memo
The backstory: Broadcom (-1.26%), the chipmaker of thwarted Qualcomm-takeover fame, is trying to complete its $19 billion acquisition of CA Technologies (+1.49%), an enterprise software company.
The mystery: On Wednesday, a memo supposedly written by a Defense Department official was circulated suggesting the need for a national security review of the deal. The only problem? A DoD spokeswoman said it was "likely" a fraud.
Why it matters, per Axios's Dan Primack: "Assuming the memo was indeed fraudulent, then we might have just entered a new phase of short-seller espionage." Still, Sen. Rand Paul called for a national security review (while denying the memo played a factor).
The case of Yanjun Xu
He was a Chinese spy who was charged by the U.S. for helping himself to trade secrets.
How'd they catch him? This NY Times description deserves to be quoted in full:
- "A 16-page indictment details what appears to be a dramatic international sting operation to lure Mr. Xu to what he believed was a meeting in Belgium to obtain proprietary information about jet fan blade designs from a GE Aviation employee, only to be met by Belgian authorities and put on a plane to the United States."
Why it matters: It shows the U.S. is taking its crackdown of Chinese industrial espionage to a new level.
What to Expect From Big Bank Earnings
This morning, we'll see Q3 numbers from the two biggest U.S. trading banks, JPMorgan (-3.15%) and Citigroup (-2.24%)...and then add Wells Fargo (-1.89%) to the mix? Should be an intriguing start to earnings season.
The backdrop: Wall Street is prepping for its most profitable third quarter since the financial crisis. But that doesn't mean they're climbing the light poles down in FiDi.
- The Fed has raised interest rates three times this year, which should offer a boost to banks, now able to charge more on loans...but lending activity has grown at a slower clip than expected.
- And-given the late-summer slowdown in volatility-fixed income trading is expected to be lackluster. That could overshadow any Q3 lift banks got in equities trading c/o a possible trade war and a laundry list of macro trends that tripped up stock markets.
- Major windfalls from last year's tax cut earned banks beefy profits in the first half of 2018. Now, those cuts are business as usual.
Down, Set, Ratings Hike
Five weeks into the NFL season...the average television audience for a game is 15.6 million. That's up 3% compared to the first five weeks of last season, per Nielsen.
- FWIW, ratings are still 16% lower than in the first five weeks of the 2015 season. But after NFL viewership fell 8% in 2016 and 9.7% in 2017, this year's increase is a welcome change. Kind of like Baker Mayfield for the Browns.
So what's driving ratings? "There is so much unpleasantness out there today...that the refuge of NFL football is probably more appealing now than it's been in a long time," said CBS Sports's Sean McManus to the WSJ.
Sure, but also take into account that this is the NFL's highest-ever scoring season so far. And watching breakout stars including the Chiefs' Patrick Mahomes and the Rams' Jared Goff tear up defenses is also another reason to tune in.
As for off-field news stories (i.e. kneeling during the anthem), those "were conversations that were polarizing...now we're talking about the sport," the NFL's Troy Vincent said.
Come for the Pictures of Bali...
But hear us out. We throw around the terms "IMF" and "World Bank" like they're Halloween candy, so why not use a little bit of newsletter real estate to actually explain what these organizations...you know...do?
First of all, these institutions were created at a UN conference in New Hampshire of all places. The conference's name? Bretton Woods. The year? 1944. And while their job descriptions have changed over the years, right now...
- The IMF tries to keep exchange rates stabilized and provides loans to struggling countries (like the current situation in Argentina).
- The World Bank focuses on longer-term economic development and reducing global poverty.
Some context for this year's meeting: The IMF just released its big "World Economic Outlook" report. And? It cut economic growth projections amid rising trade tensions (you should have this memorized by now). Here's a breakdown by country...
The Brew's Weekly News Quiz
Non-Brew readers: "It's Friday...just gonna turn my brain off and coast into the weekend."
Brew readers: "It's Friday...let's see how much I learned this week by acing the Brew's quiz."
1. Fill in the blank: Per Google, "90 percent of Google+ user sessions are ______."
2. Which company am I? My goal is to use behavioral economics and AI to make insurance more transparent. I announced a partnership with WeLive this week. I've raised ~$180 million, much of it from SoftBank.
3. The longest nonstop commercial flight in the world took off for the first time in five years yesterday. Which two locations does it connect?
4. Which of the following products was not released this week?
a) Facebook Portal b) Google Pixel 3 c) Google Pixel Slate d) Facebook Data Vacuum
5. In this chart of music industry sales over the last 40 years, we blacked out one revenue source in the bottom right-hand corner. Do you know what it is?
6. The CEO of which business said this about hitting a milestone: "The next 10 million will focus on turning our advanced technology into a service that people will use and love"?
7. Speed round. In honor of Paul Romer and William Nordhaus winning the Nobel Prize in Economics, we're asking you to name all the Nobel Prize winners in any category (peace, chemistry, lit., etc.) you can think of. You get two minutes this time...
Answers: 1) Less than five seconds 2) Lemonade 3) Singapore and Newark 4) Facebook Data Vacuum 5) Ringtone 6) Waymo 7) Here's a list
WHAT ELSE IS BREWING
- Tencent Music will postpone its IPO until at least November, per the WSJ. It wants to ride out the global markets' sell-off.
- Walmart (-1.93%) has tapped movie studio MGM and video startup Eko to help it make original shows for its own streaming service.
- Allbirds, Silicon Valley's favorite sneaker company, is now worth $1.4 billion following a $50 million fundraise from T. Rowe, Fidelity, and Tiger Global.
- Facebook (+1.30%) has removed 559 pages and 251 accounts from its platform due to "coordinated inauthentic behavior" ahead of midterm elections.
- The anonymous buyer of the Banksy painting that shredded itself just after being auctioned at Sotheby's last week has...decided to keep the work.
- Billy McFarland, the man behind the disastrous Fyre Festival fraud last year, has been sentenced to six years in prison.
From the Crew
A few shoutouts are in order...
- Survey winners: Congrats to Kyaira M. and Lana S. for winning $50 Amazon gift cards. Thanks so much to everyone who
- All-star ambassadors: Aimée C. Marquez, Anshuman Nemali, Alejandro Mendez, Sarah Daugherty. You're all killing it.
The objective: Arrange three 9s to make 20. There is no trick involved. Simply arrange three 9s, using any standard arithmetic signs and symbols, to total 20.
(Answer located at bottom of newsletter)
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(9 + 9) / .9 = 20.