Buffett vs. Third Grader

MARKETS

  • U.S. markets: Stocks roared into the weekend on the news of April's jobs numbers. After Buffett disclosed he bought 75 million shares of Apple in Q1, the smartphone maker closed at a record high.
  • Speaking of April's jobs numbers: They were solid. Unemployment dropped to 3.9%, its lowest level since December 2000. The economy added 164,000 jobs but wages didn't grow as expected.
  • Earnings today: AMC, Tyson Foods, Zillow.

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INVESTMENT

You Know the Saying: What Happens at the Woodstock of Capitalism...

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More than 42,000 Buffett enthusiasts descended on Omaha, Nebraska Saturday to hear from Warren Buffett (age 87) and his partner in crime, Charlie Munger (age 94). And just like they do every year, Buffett and Munger kicked-back, cracked open a can of Cherry Coke, and answered 8 hours of questions:

On Bitcoin: "It's probably rat poison squared."

On the tax cuts: "It is very helpful to Berkshire...[but] as an individual I don't agree with it."

On President Trump: "I'm not going to rate presidents."

On Elon Musk saying moats are lame: "I don't think he'd want to take us on in candy." Then Musk did what he does best...
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On Wells Fargo's recent troubles: "All the big banks have had troubles of one sort or another...I like it as an investment. I like CEO Tim Sloan as a manager." Munger also quipped, "Harvey Weinstein has done a lot in improving behavior too."

On Amazon and Google: "I made the wrong decisions on Google and Amazon...I think what Jeff Bezos has done is something close to a miracle...The problem is when I think something will be a miracle, I tend not to bet on it."

On Amazon, Berkshire, and JPMorgan's healthcare venture: "I think we will probably have a CEO within a couple months." He called medical costs "hugely noncompetitive" and a "tapeworm." He really likes the word tapeworm...

On the U.S.-China relationship: Remaining optimistic, Buffett predicted, "We will not sacrifice world prosperity based on differences that arise in trade."

On Apple's buyback program: "We very much approve of them." Berkshire recently disclosed it added 75 million more shares of Apple to its portfolio (it now owns $42.5 billion worth).

+ Best question: An 8-year-old girl questioned Buffett on Berkshire's capital efficiency. What were you doing when you were eight?

+ Katy Perry breaks her silence: In a video at the conference, she admitted Warren Buffett was the left shark in her 2015 Super Bowl appearance. Unfortunately, she was joking, but c'mon...Buffett would make a mean left shark.

E-COMMERCE

Walmart vs. Amazon, the Saga Continues

Remember when we told you the Walmart vs. Amazon saga was headed to India? Well, the eagle has landed. After Amazon bid to acquire Flipkart, India's No. 1 e-commerce company, Walmart followed up with a $15 billion bid for 75% of the company.

So who's gonna win? Likely, Walmart. That's because Amazon is the No. 2 e-commerce player in India. And a marriage between the two top dogs would certainly raise regulatory red flags.

What it means:

  • Walmart would jump from 20 B2B stores in India to the e-commerce market leader with 37% market share.
  • The Indian online retail market hit $20 billion last year. It's on pace for $35 billion in 2019.
  • India's population is nearly 1.3 billion.

Acquiring 75% of Flipkart would also be a sigh of relief for Walmart CEO Doug McMillon, who's been scrambling to compete with Amazon in e-commerce (refresher: it's been going decently well).

Bottom line: Amazon is investing $5 billion in India—so if this deal does go through, let the race begin.

INTERNATIONAL

Argentina Has a Currency Problem

Argentina: the land of legendary steak, fútbol, and...40% interest rates?

Actually yes, after the country hiked the benchmark rate for the third time in eight days. The move is intended to prop up the drooping Argentine peso and put scary-high inflation (25% annualized) on ice.

We really depreciate you, peso:

  • Last Thursday, the currency lost more than 8% against the dollar. It's now the worst performer among all emerging market currencies this year.
  • Looks like President Mauricio Macri's slow-and-steady economic reform plan has a long way to go.

At least Argentina isn't alone in its misery

Other emerging markets (like Turkey) are suffering as investors transfer funds into the U.S., where the dollar is surging and bond yields are rising.

OK, one last thing...what is an emerging market? It's a broad term for a country that has a strong economy but doesn't quite have its act together. Besides Argentina and Turkey, think Indonesia, India, and South Africa.

REAL ESTATE

Airbnb and New York City Take the Gloves Off

*Grabs mic.* Making his debut appearance in the Brew, please give a warm welcome to...the...New York City Comptroller, Scott Stringer!

Last week, his office dropped a bombshell report, alleging Airbnb's presence caused citywide rents to jump 9.2% from 2009-2016. In 2016 alone, it cost NYC renters $616 million.

But that's being disputed by Airbnb and AirDNA—the company whose data Stringer's office used to compile the report.

AirDNA's spokeswoman fired back:

  • "At no point did the comptroller contact AirDNA to ask for guidance or our professional expertise on how to read the data, leading to several crucial errors in his interpretation of the numbers."

But Stringer's office isn't backing down, saying they "took an empirical, data-driven approach to assessing this Airbnb effect and shared it with the public."

The Crew's take: As Airbnb continues to grow, expect more backyard brawls between cities and the massive startup on sensitive issues like rent.

+ Read the original report yourself.

WHAT ELSE IS BREWING

  • Avengers: Infinity War topped $1 billion at the box office in just 11 days, setting an all-time record.
  • Businesses have a lot at stake as Trump decides whether or not to pull the U.S. out of the Iran deal.
  • The U.S. trade delegation left China with a long list of demands, including reducing the trade deficit by $200 billion.
  • The unemployment rate is now at 3.9%. That puts employers in a major squeeze (Morning Brew).

WATER COOLER

A CLOSER LOOK

Every Monday we'll start the week with a deeper dive into the hottest trends you need to know about.

Scooters have come a long way since your driveway wheelie glory days (well, minus the bruised ankles).

Now, VC-backed startups like Bird—which recently raised $100 million—offer shared, electric scooters in cities like LA, D.C., and you guessed it, San Francisco. And the competition is heating up: other startups like Spin and LimeBike are all vying to become your go-to choice for scooting around town.

We have to ask: Why would anyone ride an e-scooter?

  • They're cheap: You can rent Bird's scooters for $1 plus $0.15/min each ride.
  • They're convenient: For short distances, you don't have to worry about hailing a cab or getting on the subway.
  • They're green: Zero emissions.
  • They make you look cool.

But e-scooters are also hitting plenty of potholes. Some residents and city officials complain that reckless riders dump their scooters in inconvenient places and pose a threat to pedestrian safety. The fight over regulation will be bitter.

Bottom line: We are in the middle of an urban transportation revolution, all enabled by mobile technology.

BREAKROOM

THE WEEK AHEAD
Monday: Earnings (AMC, Tyson Foods, Zillow)

Tuesday: JOLTS, National Teacher Day, Earnings (DISH, EA, Etsy, Match Group, TripAdvisor, Twilio, Disney, Wendy's)

Wednesday: Earnings (ADT, AB Inbev, Groupon, 21st Century Fox, Wix)

Thursday: Bank of England meets, Earnings (Duke Energy, NVIDIA, Yelp)

Friday: Happy hour (don't be late), Earnings (Thomson Reuters)

Saturday: President Trump decides whether to keep the U.S. in the Iran deal

TRIVIA
As we mentioned, Avengers: Infinity War hit $1 billion at the box office faster than any other movie in history. Which film held the record previously?

(Answer located at bottom of newsletter)

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Breakroom Answer


Business Trivia
Star Wars: The Force Awakens

 

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