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Quote of the Day

[It’s not] a hangout for globalists.”

Market Snapshot

• The S&P is already up 3.5% in 2018.
• Just like last year, Boeing led the charge for the Dow.
• Brent crude hit a 4-year high.
• Treasury yields fell back after hitting record highs this week.

Nodding to Tax Cuts, Walmart Bumps Up Its Minimum Wage

Walmart (+0.35%), the world’s largest private employer and our favorite Friday night hangout, is raising the minimum wage for its 1.5 million U.S. employees to $11/hour (from $9-10). It’s also expanding benefits and doling out one-time bonuses based on tenure at the company.

And we can’t believe our luck. Because if you’re looking for the story that perfectly ties together two major U.S. economic trends...This. Is. It.

Starting with the tax bill

Walmart pegged the pay increase to the recent cut in the corporate tax rate (from 35% to 21%). And for a company that brings in almost $500 billion in annual revenue...that massive tax bill just got a whole lot smaller. So even though the retailer expects the wage bump to cost an extra $300 million every year—and the one-time bonuses another $400 million—that’s affordable considering the billions Walmart will save.

Of course, Walmart isn’t the first (nor the last) to celebrate tax reform by padding workers’ bank accounts. Bank of America, AT&T, Wells Fargo, and others gave out employee bonuses in the past month.

But Walmart’s case is different.

And that’s because of a shrinking job pool

Unemployment sits at 4.1%, its lowest point in 17 years. And with the labor market as tight as it is, instead of workers competing for jobs, employers like Walmart are competing for workers.

Case in point: Target, Walmart’s favorite punching bag. Big Red (we’re rollin’ with it) raised its minimum wage to $11/hr last year and committed to $15/hr by the end of 2020. Other retailers like Costco and TJX also boosted hourly rates recently.

Why? Because here’s the question keeping big-box store execs up at night: what’s going to get potential customers off the couch and off Amazon? The (partial) answer is: a positive in-store experience serviced by high-quality, professional, and helpful employees.

But as Walmart realizes, to get them on your team...you’ve got to pay more than the next guy.

Reality check: For all the hoopla, $11/hr is barely a livable wage, amounting to $22,000 a year for a 40-hour week.

Reality check #2: In a move that blindsided employees, Walmart said it’s closing 63 Sam’s Clubs, its underperforming wholesale club.

South Korea Targets Bitcoin, Sending the Crypto Down 14%

“Ileon jenjang, biteu koin modu pal-ala!”

Which in Korean roughly translates to, “Holy crypto, sell all the Bitcoin!” At least that’s what investors might’ve said when the country’s justice minister announced this:

“There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.”

And all signs point to Mr. Sang-Ki making good on his word. Police raided the country’s two largest exchanges, Bithumb and Coinone, the same day. Not to mention, the government banned Bitcoin futures and ICOs, and is currently investigating six banks for digital currency money laundering.

Here’s why a trading ban is a big deal: South Korea—a country that at one point accounted for ~20% of global Bitcoin trading volume—would follow China as the second country to ban exchanges. In China, trading volume (which represented ~90% of total trades in December 2016) came to a halt after exchanges shut down.

If demand remains strong for Bitcoin, trading volume should shift from one currency to the next—here’s what the global breakdown looks like now:

With a Deal, Fujifilm May Fix Xerox's Paper Jam

Xerox (+4.98%) is discussing a possible deal with Japanese camera maker Fujifilm. And it makes sense: the two have a long history as successful partners in a 55-year-long joint-venture, aptly called Fuji Xerox, that focuses on the Asia-Pac region.

Like many legacy businesses, Xerox is a carbon-copy of its former self. One of the oldest names in photocopiers, the 111-year-old company is struggling to grow in a desert of shrinking demand. And in an increasingly digital office landscape, neither company should be banking on a future of printers and copiers.

But one is better prepared for the future than the other

Currently worth $7.7 billion (or one-sixth of its peak value in 1999), Xerox may need to borrow a page out of Fujifilm's $22 billion playbook. Having already survived one analog death sentence—film photography—Fujifilm knows a thing or two about corporate renaissance. It repurposed its existing technology for making cosmetics, manufacturing medical systems, and catering to Generation Instagram with instant cameras.

Copy that, Xerox?

YouTube Censors Jake Paul

What’s the quickest way to go from social media influencer to internet reject? Ask YouTube vlogger Jake Paul, who watched the video-sharing company sever (most) ties with him this week.

It all started when the 20-year-old released a video of a dead woman on the ground in Japan’s notorious suicide forest. And if Paul was going for shock value...well...he certainly got it. The YouTube comment section—the cesspool of the internet—filled with all the backlash you’d expect after a video of that nature.

But for Paul, an influencer on track to be the first social media billionaire, the reality is just sinking in. YouTube dropped him from its Preferred Program—which granted Paul gold-star status and allowed him to command premium ad dollars. To make matters worse, YouTube Red’s Foursome (an original web series) will no longer feature him in the fourth season.

Paul took the hint, and announced a brief hiatus from entertaining his 15 million subscribers. As for YouTube, it’s still answering to a higher authority...Twitter.

What Else Is Happening…

• Facebook is changing its algorithm, allowing you to see more content from friends and family.
• Peter Thiel is placing a bid to buy Gawker.
• Goldman Sachs’ private wealth clients are investing $250 million in the Kushner bros’ real estate startup, Cadre.
• Dropbox, the file sharing unicorn, has confidentially filed for an IPO.
• Reminiscing about CES 2018.

Economic Calendar

• Monday     Earnings: No Events

                    Economic Events: Consumer Credit (+)

• Tuesday    Earnings: No Events

                  Economic Events: Small Business Optimism Index (-)

• Wednesday    Earnings: No Events

                        Economic Events: MBA Mortgage Applications (+), Wholesale

• Thursday   Earnings: No Events

                   Economic Events: Jobless Claims (+), PPI (-)

• Friday       Earnings: BlackRock, JPMorgan, Wells Fargo

                 Economic Events: CPI, Retail Sales

Taking Inventory: CES Superlatives

We were really hoping for a robot that can write newsletters, but no luck this year. Here are some of our favorite picks from the Consumer Electronics Show:

Most Likely to Disrupt Your Living Room

Samsung’s “The Wall”—146” MircoLED TV. It also acts as a smart hub to connect your home.

Most Likely to Disrupt Your Commute

Intel’s “Volocopter”—Intel is partnering with a 50-member team in Germany to make the life-size drone a reality. It flew for the first time in North America at CES.

Most Likely to Not Disrupt Your Sleep

Philips “SmartSleep”—A headband you can wear at night to track what stage of sleep you’re in. White noise will play strategically to keep you lights out.

The Breakroom

Question of the Day

Each group of words has one four letter prefix that fits in front of them to form another word or phrase. Can you figure out which word it is for each group?

Nail, man, out, ten
Sick, work, room, plate
Do, up, shift, believe
Range, shot, horn, bow
Back, baked, way, hour
(Answer located at the bottom of newsletter)

Business Trivia

Prior to 1953, what product was advertised with the slogan, "Just what the doctor ordered”?

1. Wayford Wines Co.
2. Anheuser Busch Beer
3. L&M Cigarettes
4. General Mills

(Answer located at the bottom of newsletter)

Stat of the Day

$76 billion—Spending in 2017 on newspaper circulars, coupons, direct mail, and catalogs. Don’t expect retailers to stop piling papers on your doorstep anytime soon.

Breakroom Answers

Question of the Day: 1. Hang 2. Home 3. Make 4. Long 5. Half (Explannation)

Business Trivia: L&M Cigarettes