Curveball

MARKETS

  • U.S. markets: Just about every single asset class is up for 2019—stocks, bonds, credit markets, commodities, even cryptocurrencies.
  • But just as we were typing that sentence, we realized we completely jinxed it. U.S. stock futures sank last night after President Trump added a major plot twist to U.S.-China trade negotiations.

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TRADE

President Trump Throws a Curveball on Trade

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Baseball, take notes: Nothing adds more excitement to a long, drawn-out affair like a pair of tweets threatening a tariff increase on hundreds of billions in Chinese goods within a week.

Frustrated by the number of video replays slowing down U.S.-China trade negotiations, the president tweeted on Sunday that current tariffs on $200 billion of Chinese goods would jump to 25% from 10% this Friday. Plus, $325 billion in additional Chinese imports would also be taxed at that rate “shortly.”

We’re in the ninth inning

But this game wasn’t supposed to go into extras. Both the U.S. and China seemed optimistic that a deal could be hammered out—some outlets reported that an agreement could be announced as early as this Friday.

Although the meeting is now in doubt, China’s trade policy version of Mariano Rivera is set to arrive in D.C. this Wednesday. And when the world’s two largest economies negotiate terms of enormous business and geopolitical consequence, the major sticking points get saved for last.

The sticking points

  • Current U.S. tariffs on Chinese goods. How/when should they be lifted? The U.S. has also demanded that in some situations going forward it should be able to reimpose tariffs without fear of Chinese retaliation, per the WSJ. That’d be tough for Beijing to swallow.
  • Market access. China’s like a bouncer who even gives grandparents a hard time about their IDs. The U.S. is working on making it easier for companies in industries ranging from cloud computing to agriculture to sell more products in this mega market.

Zoom out: Companies dinged by the trade war were hoping for this dispute to get resolved this week. But with bipartisan support for taking on China and a stock market that had been shooting to record highs, President Trump may not endorse any deal that’s not a home run.

BUFFETT

Welcome to Woodstock for Capitalists

Over the weekend, thousands of investors and Adam Smith stans gathered in Omaha for the Berkshire Hathaway annual shareholders meeting. For them, today kind of feels like the day after Christmas.

What did Warren Buffett say?

He and Charlie Munger, the Robin to his Batman, spent a big chunk of their marathon Q&A session defending Berkshire investments that haven’t exactly panned out.

  • Wells Fargo: “When you find a problem you have to do something about it, and I think that’s where they probably made a mistake at Wells Fargo, and they made it at Salomon,” Buffett said when prodded on Wells Fargo’s continued missteps.
  • Kraft Heinz: Buffett didn’t directly address the company’s shrinking market share, but he did say there is an ongoing battle between brands that belong to retailers (think Whole Foods’s 365) and brands that don’t (like Kraft Heinz’s portfolio).

Looking ahead...Buffett, who copped to being a “card-carrying” capitalist, assured investors Berkshire is on solid ground—and shared the limelight with his eventual successors.

SPORTS

Checking the Police Logs in Kentucky

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LOUISVILLE—A fast-moving vehicle veered into traffic without a blinker Saturday, violating state regulations and costing millions.

That vehicle, of course, was the horse Maximum Security. The colt became the first Kentucky Derby winner to be disqualified for interference, and the reversal caused mayhem in the betting markets.

  • The DQ cost bettors about $9 million, according to TwinSpires.com. The online wagering service is offering a refund of up to $10 on win bets put down on Maximum Security, a 9-2 frontrunner.
  • As for the winner? At 65-1, Country House had the second-longest odds of any Kentucky Derby champion. Only $520,907 was bet on Country House to win, while more than $6.2 million was placed on Maximum Security.

Maximum Security co-owner Gary West, who lost out on the estimated $1.86 million winners prize plus more in stud fees, is seething. He told the AP, “I think this is the most egregious disqualification in the history of horse racing, and not just because it’s our horse.”

UBER IPO

Gather Round, Children

It’s time to hear the story of a little company called Uber. To mark its monumental IPO this week, we’re dissecting a different part of its business each day.

Today we go back to the beginning. The company was started by Garrett Camp and Travis Kalanick in 2009 as “UberCab,” an on-demand black car service for wealthy clients. Camp was inspired by his own difficulties hailing cabs in San Francisco (we feel you on that).

Now that Uber's evolved from a noun to a verb, Camp and Kalanick will both be making a lot of $$$.

  • Kalanick’s stake in Uber will be worth up to $5.6 billion come IPO time, and he’s selling $186 million worth of stock in an offering he may or may not be attending.
  • Meanwhile, Camp claims a $4.1 billion stake and plans to sell $156 million. Per Bloomberg, early investors and employees plan to sell a total of $1.3 billion in shares when Uber lists.

Some early investors? Airbnb CEO Brian Chesky, VC firm Benchmark, Sequoia's Alfred Lin, and AngelList founder Naval Ravikant.

CALENDAR

The Week Ahead

Friday cannot come fast enough. Inflation data will be .

Monday: Met Gala (hmu if you have extra tickets); first day of Ramadan; earnings (Occidental Petroleum, AIG, Tyson Foods)

Tuesday: Job Openings and Labor Turnover Survey (JOLTS); Google I/O kicks off (expect new Pixel phones); Teachers’ Day; earnings (AB Inbev, Allergan, EA, Lyft)

Wednesday: GE annual meeting; earnings (Disney, Honda, Fox Corp., Etsy)

Thursday: International trade; earnings (SoftBank, Booking Holdings)

Friday: Uber’s IPO; CPI inflation data; earnings (JD.com, Marriott, Viacom)

WHAT ELSE IS BREWING

  • At least 41 people were killed in Russia when a passenger plane made a crash landing at a Moscow airport.
  • Total, the French energy giant, agreed to acquire Anadarko’s Africa assets for $8.8 billion...but that’s contingent on Occidental successfully acquiring Anadarko. You will be quizzed on this Friday so write it down.
  • Avengers: Endgame broke another record—it surpassed $2 billion in ticket sales with otherworldly speed this weekend.
  • Boeing disclosed yesterday that it knew months before the recent 737 Max crashes that a cockpit alert wasn’t working the way Boeing had told jet buyers.
  • The U.S. has rejected Tesla’s bid for exemption from China tariffs for its Autopilot “brain,” per Reuters.

BREAKROOM

Stock Market Trivia
Per Koyfin, which company that's IPO'd in 2019 has more revenue than all 2019 IPOs COMBINED?

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Breakroom Answers


Stock Market Trivia
Levi's

 

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