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MARKETS

• Housing: The U.S. homeownership rate fell for the first time in more than two years last quarter. Could the housing recovery be slowing down? Maybe.
• GDP: We’ll get a first look at the Q1 number this morning. Place your bets now—loser has to buy everyone Milk Duds at Avengers tonight.

TECH

Microsoft: The 44-Year-Old Version

Amazon and Apple may have gotten there first, but Microsoft proved playing the long game also gets you to home plate...even if it did take nearly half a century.

Yesterday, Microsoft (+3.31%) briefly topped a $1 trillion market cap after Wednesday’s earnings report drove its stock price to a new intraday high. Microsoft became only the third company to reach that valuation.

The slow burn can work. They joined the club first, but precocious Apple (now worth about $970 billion) and Amazon (about $935 billion) both tumbled in the tech stock rout of late 2018. In contrast, Microsoft reached its climax as the most valuable public company in the world by earning Wall Street’s respect with slow and steady sales growth.

About those sales

We know saying Microsoft “has its head in the clouds” makes us all want to ...but it’s true. Microsoft’s Azure infrastructure has become the de facto public cloud service for big companies looking to offload their servers and data storage.

Looking at the numbers from Microsoft’s Q1:

• Azure sales climbed 73% annually.
• Net income jumped nearly 19% to $8.8 billion. That’s an average of about $733 million a week for anyone feeling like they may not make rent this month.
• “This is a press release [CEO Satya Nadella] should print out and frame in his office,” said Dan Ives at Wedbush Securities.

Why Microsoft is different

The OG tech giant has avoided Big Tech’s big mistakes by approaching issues like data privacy, inequality, and AI ethics with a tortoise-wins-the-race mentality, Axios points out.

• That has given it a huge advantage in weathering the so-called “techlash,” the adversarial response to tech’s sometimes iffy business practices and outsized societal impacts.

And that’s good for business. When Nadella pledged millions for affordable housing or petitioned Congress for more regulation, it wasn’t just because he wanted to play nice. It’s all about getting ahead of problems to win a competitive advantage.

INTERNATIONAL

Argentina Is Teetering

The economic situation in Argentina is looking...bleak.

What’s going on: Argentina has become the world’s second-riskiest sovereign borrower, behind only Venezuela, the FT reports.

• There’s the inflation thing. Consumer prices jumped 4.7% month-over-month in March. On an annualized basis, that puts headline inflation in the country at about 55%.
• And the bonds thing. The yield on Argentina’s two-year bond soared to nearly 18%, while the country’s century bond hit a record low.
• And the peso thing. It fell almost 4% against the dollar.

Zoom out: There’s an important election coming in October. President Mauricio Macri was elected in 2015 on the promise of market reforms to boost Argentina’s economy. But Macri’s approach to steering the economic ship hasn’t worked as promised, and investors are stumbling over themselves to board the lifeboats.

That’s raised doubts over the likelihood of the pro-markets president getting re-elected. Soaring inflation and a deepening recession don’t exactly poll well.

E-COMMERCE

Bezos Builds a Profit Machine

In the first quarter, Jeff Bezos experienced high-profile splits—with New York City for HQ2 and with his ex-wife, MacKenzie. But that didn’t stop Amazon from posting record profits that destroyed analyst expectations.*

• *Revenue growth is slowing, though. The 17% increase to $59.7 billion marked the first time quarterly sales growth ticked under 20% since 2015.

Zoom out: Amazon (+0.83% after hours) had been known as a company that didn’t make profitability a priority, instead relying on hockey stick growth made possible by groundbreaking investments. But as it’s moved into higher-margin businesses like advertising (sales up 34% in Q1) and the cloud (41%), Amazon’s shareholders are expecting the profits to match.

Still, you can’t teach an old Bezos completely new tricks. Amazon will spend $800 million in Q2 to make Prime a free one-day shipping program.

Bottom line: With Amazon shares up 27% so far in 2019, we’ll be surprised if Russell Wilson gets sacked at all this season.

SOCIAL MEDIA

Is Twitter a Bubble? Kinda.

Nobody:

Pew Research Center: U.S. Twitter users mirror the rest of the population in some ways, but there are significant differences in age, education, and political leanings.

The center released a report on Wednesday analyzing Twitter users in the U.S. and comparing them to the general public. A few of its findings...

• Same same but different: Twitter users are largely younger, more educated, and more likely to be Democrats than the overall population. But the gender and racial or ethnic makeup is similar to the rest of the country.
• There’s a small group of Twitter all-stars, while the rest of us are just scrollin' down the stream: The most prolific 10% of tweeters post about 80% of all tweets.

Bottom line: While we wouldn’t go as far as saying Twitter works like a “collective hallucination,” as The Atlantic’s Alexis Madrigal puts it...it’s clear from this report that Twitter attracts a different user than other platforms.

For those of you who know about standard deviations and p-values, take a look at Pew’s methodology here.

QUIZ

Stop, Drop, and Quiz

Faster on the buzzer than James Holzhauer. Shows up later than Joe Biden. More loyal to Netflix than The Office. It’s the Brew’s weekly news quiz.

1. Including Avengers: Endgame, how many movies comprise the Marvel Cinematic Universe?

2. We grabbed this screenshot from Amazon’s best seller page. Then we whited it out because, well, we need something to quiz you on. What’s the title of the best-selling book?

3. Fill in the blank: On Monday, we discussed the potential housing crunch in San Francisco following the burst of IPOs. According to analysis from Deniz Kahramaner, 51% of home purchasers his firm could identify in 2018 worked in _______.

4. SoftBank CEO Masayoshi Son reportedly lost $130 million last year as a result of what?

1. Tax code changes
2. Failed bitcoin investment
3. Losing a wager with Warren Buffett
4. Falling for a phishing scam

5. Which Democratic presidential candidate proposed a student loan cancellation policy this week?

Answers: 1) 22 2) The Mueller Report 3) Software 4) Failed bitcoin investment 5) Sen. Elizabeth Warren

WHAT ELSE IS BREWING

• Uber will reportedly aim to price its shares at a range of $44 to $50 apiece when it IPOs. That would value it at $80-90 billion.
• Intel's earnings report, the first for new "permanent" CEO Bob Swan, was a bit of a downer. Shares sank more than 7% after hours when it cut its revenue forecast for the year.
• Chipotle (-4.51%) divulged that it received another subpoena from federal prosecutors re: last year’s foodborne illness outbreak in Ohio.
• Comcast (+2.58%) is reportedly considering selling its 30% stake in Hulu to Disney (+1.57%), per CNBC.
• 3M (-13.04%) said Q1 was a “disappointing start to the year.” We’d say so...investors sank 3M shares the most in a single day since Black Monday in 1987.

BREAKROOM

Real Estate Appraiser
There are authentic places to stay when traveling...and then there’s the Big Idaho Potato Hotel on Airbnb. The host is not Mr. Potato Head, but Kristie Wolfe, a tiny-house developer who saved the "potato" from the compost pile following its nationwide tour with the Idaho Potato Commission.

The specs:

• 6 tons (skin on)
• Indoor fireplace, air conditioning, and heating
• No TV, wi-fi, or kitchen
• Considering it’s surrounded by 400 acres of farmland, you should be able to find parking

So how much does it cost per night?

Breakroom Answers