Bezos feels the Bern

MARKETS

• U.S. economy: Fed chair Jerome Powell has a "remarkably positive outlook." What's so remarkable? That we have both 1) low unemployment and 2) inflation that's under control.
• Brazil: Stocks jumped to their biggest increase in seven months after a poll showed right-wing presidential candidate Jair Bolsonaro extended his lead. Brazilians will cast their votes on Sunday.

LABOR

Why Amazon Boosted Its Minimum Wage

You probably have heard the news: Amazon (-1.65%) is raising its minimum wage to $15/hour for all of its U.S. employees. The new wage will apply to more than 250,000 current employees and 100,000 holiday workers (together, nearly the population of Tampa, FL).

Zoom out: When a company as all-consuming as Amazon makes a move like this, your head could explode trying to piece it all together. Now, we'd rather not have that happen, so let's break down the decision by looking at two reasons why Bezos pulled the trigger.

1. Optics

You could make a convincing argument that attacks from politicians pressured Bezos to pay his workers more.

• Vermont Senator Bernie Sanders, especially, has relentlessly attacked the company for paying low wages and allegedly treating its warehouse workers poorly.
• But now he's singing a different tune: "I want to give credit where credit is due," Sanders said of Amazon's decision.

This move also seems to be part of a broader strategy to improve Bezos's public image (remember last month's announcement of the $2 billion Day One Fund?).

Bottom line, courtesy of Bezos: "We listened to our critics, thought hard about what we wanted to do, and decided we want to lead."

2. Economics

If you've been a regular Brew reader (if not, we still love you), then you know that companies are feeling the hiring crunch with the unemployment rate lounging below 4%. That means Amazon and its fellow retailers are locked in a battle to attract and retain qualified workers...especially ahead of the busy holiday season.

And the ante? It's been upped.

• Target will increase its starting hourly pay to $15/hr by the end of 2020.
• Walmart said its minimum wage is getting a boost to $11/hr.

Looking ahead: Amazon said it'll be lobbying for an increase in the federal minimum wage, too (currently at $7.25). Given the company's scale and influence, this could be a turning point for minimum wage policy.

TAXES

President Trump's Taxes Come Under the Microscope

Three key quotes from the NYT's ridiculously comprehensive investigation into the Trump family's real estate empire:

• "President Trump participated in dubious tax schemes during the 1990s, including instances of outright fraud, that greatly increased the fortune he received from his parents."
• "Much of this money came to Mr. Trump because he helped his parents dodge taxes. He and his siblings set up a sham corporation to disguise millions of dollars in gifts from their parents, records and interviews show."
• A statement from one of Trump's lawyers: "The New York Times's allegations of fraud and tax evasion are 100 percent false, and highly defamatory...There was no fraud or tax evasion by anyone."

The New York State Department of Taxation and Finance is on the case: "The Tax Department is reviewing the allegations in the NYT article and is vigorously pursuing all appropriate avenues of investigation," a spokesperson told CNBC.

E-CIGS

Knock Knock, Juul

It's the feds.

The Food and Drug Administration said yesterday that it collected more than 1,000 pages of documents from e-cig company Juul Labs in an unannounced on-site inspection last week.

The FDA said it was looking for "further documentation related to Juul's sales and marketing practices, among other things."

Remember, the FDA threatened last month to ban flavored e-cigs to combat what it considers to be an "epidemic" of youth use. And in April, it requested company materials related to how Juul might appeal to young people.

• The FDA's fear? Juul and other e-cig firms are cultivating the next generation of nicotine addicts.

Per prelim CDC data, the number of high school students who have used e-cigs in the last 30 days soared ~75% over the past year. That means about 20% of high schoolers, or 3 million kids, are using e-cigs, up from just 11.7% last year.

What's at stake for Juul: Juul is smoking the competition (so, so sorry for that) with a dominant 73% market share.

AUTO

Tesla Meets Q3 Production Goals, but...

Tesla announced yesterday that it made 53,239 all-important Model 3s in Q3, up 86% from the previous quarter and in line with expectations. But it delivered 55,840 Model 3s—coming up shy of analyst estimates of 56k.

Translation? As Musk has put it, Tesla's moved from production hell to delivery logistics hell. Neither sounds particularly appealing.

• Tesla (-3.12%) can only book revenue when the keys wireless Bluetooth fobs are in customers' hands. And with Tesla burning through ~$1 billion in cash almost every quarter, that revenue is pretty key.

Tesla also said yesterday it's accelerating buildout of its Shanghai factory.

• Thanks to the trade war with China, Tesla's operating at a 55%-60% cost disadvantage "compared to the exact same car locally produced in China."

Let's end on a high note (no Joe Rogan pun intended): Musk says Tesla will score positive cash flow and generate a profit in Q3 and Q4. It's only been profitable in two quarters since its 2010 IPO.

STARTUP

Venture This: The Shining Star of Crypto

New to this section? Well here's the gist: We'll introduce you to a startup making waves, discuss the pros and cons, then ask...would you invest?

Coinbase is reportedly ironing out the details of a new investment that would value the cryptocurrency exchange platform at ~$8 billion. And if $8 billion sounds like a lot for a crypto startup...it is—that valuation would make Coinbase worth more than both commission-free trading app Robinhood and AR groundbreaker Magic Leap.

Why it's a name to know

Coinbase is considered the leading marketplace for crypto trading, with 20+ million users who've completed more than $150 billion in transactions. Plus, it has raised funds from big-league investors—like Andreessen Horowitz and Y Combinator.

• And yesterday, Coinbase added Chris Dodds from more traditional brokerage Charles Schwab to its board. Do we smell a possible pre-IPO, good-corporate-governance play?

But it won't be easy

Coinbase's core business has suffered as cryptocurrencies continue to sell off from those glory days of late 2017 (since the start of the year, bitcoin alone is down more than 50%). That means a smaller appetite for buying and selling crypto assets. Not to mention all the regulatory question marks...

So let's hear it—would you invest? Let us know here.

WHAT ELSE IS BREWING

• Tencent Music officially filed to go public in the U.S. It could be the biggest tech IPO...ever.
• Volkswagen fired Audi CEO Rupert Stadler. He's being investigated for his alleged involvement in the company's emissions cheating scandal.
• Walmart (+0.79%) is buying plus-size online retailer Eloquii, which has previously been valued at ~$100 million.
• ExxonMobil (+0.76%) is reportedly considering selling a chunk of its U.S. Gulf of Mexico assets as part of a portfolio review, per Reuters.
• J.C. Penney (+10.26% after hours) announced that Jill Soltau, the former chief of Joann Stores, will take over as CEO.
• Microsoft (-0.40%) introduced a bunch of new Surface-branded products yesterday, including a new Surface Pro 6 convertible laptop and the next version of its Windows 10 OS.

BREAKROOM

Guess the Logo
We were a little too generous last week, so today, we're giving you just a slice of this famous logo. Which one is it?

(Answer located at bottom of newsletter)

Breakroom Answers