Take a Hike


The economy is doing very well, [and] is showing resilience." –– Fed Chairwoman Janet Yellen. Mark it in the win category, folks.



Market Snapshot

  • The Nasdaq and S&P both fell after the Fed announced it was raising rates, while the Dow seemed unfazed, ending at a record high.
  • Oil prices fell to a seven-month low in reaction to higher-than-expected inventories.
  • The 10-year treasury yield dropped to 2.128%, its lowest point since last November.
  • Want Morning Brew Daily Served Fresh to Your Inbox?
    Drop Your Email Below...

In Janet We Trust

Yesterday, the Federal Reserve raised its main interest rate from 1% to 1.25%-the second rate hike in 2017.

The move signals Janet Yellen and Co.'s optimism on the U.S. economy-we'll ignore the one lonely dissenter-while keeping a close eye on our old friend, inflation.

But that's not all-the Fed will also gradually wind down its hefty $4.2 trillion balance sheet, which swelled during the recession, by selling treasuries and mortgage-backed securities.

Come again?

Let's back up. The Fed has two goals: 1) Reach full employment. 2) Keep inflation at 2%.

Unemployment hit 4.3% in May, its lowest level since 2001.

Goal #1: accomplished.

Goal #2: eh, not quite yet.

But that's not deterring the Fed from winding down nearly a decade of economic stimulus.

To do this, the Fed has two options:

Option A: Raise interest rates

Option B: Sell bonds

And they're going with both-let's take it a step further…

Raise interest rates:

Even though a 0.25% increase might not seem like a lot…when banks borrow millions to billions (to bajillions) of dollars overnight from each other, it adds up fast.

Therefore, by raising the rate just a smidge, there will be less borrowing, and in turn, less spending.

Sell bonds:

When the Fed winds down its $4.2 trillion balance sheet, that money is taken straight out of the economy, meaning-once again-less money for consumers to spend.

But isn't spending a good thing?

Sometimes. But as inflation continues its creep towards that fabled 2% target, the Fed looks to proactively use monetary policy as the guiding hand that keeps it under control.

As for those mortgage and auto loans, they might cost you a prettier penny. But hey, at least Janet and friends like what they see. Let's keep the good times rollin'.

Growing Pains

General Motors (+0.26%) will put a wrench in its Kansas-based Chevy Malibu factory, shutting it down for five weeks this summer.

The all-too-familiar auto industry practice allows automakers to update factory tooling ahead of new model production. So what feels off about this? It usually only takes two weeks.

The No. one U.S. automaker got a little too confident and boosted production 2.9% in the early days of 2017-just in time for auto sales to post its worst quarter in seven years.

Now, GM hopes three more weeks can help them shed some of the one million vehicles sitting on dealer lots and 101 days of backed up inventory. About 2,850+ pissed off employees are counting on it.

Why Can't We Be Friends

Fresh off a $400 million round of funding, grocery-delivery startup Instacart is pairing up with Wegmans, its east coast compadre.

And if you live in the DMV area, it's coming to a suburb near you.

Instacart's $149 annual membership fee and $14.99 monthly fee combined with its growing network of hungry-yet-lazy grocers has made them a killing. But with everyone from FreshDirect to Amazon (-0.44%) looking for shelf space, Instacart needs to keep the momentum going.

And it's hoping Wegmans' 92 stores and $8.4 billion in annual revenue will be enough to do the trick.

Either way, next time someone asks how you like your move to the suburbs, just look at them and say: "well, I get groceries delivered now, so there's that…"

Zara, So Hot Right Now

The fast-fashion retailer reported an 18% jump in profit (compared with last year) on $6.16 billion in sales in the first quarter.

Remember, most retailers are sitting at a crippling crossroads, whereby online is hot and brick-and-mortar's not. Yet Inditex (-1.80%), Zara's 7,400-store parent, appears unfazed.

Amancio Ortega's (4th richest person in the world...casual) brainchild continues to outperform its peers by capitalizing on a freaky-fast, sketch-to-shelf strategy.

By combining a 600-person design team with real-time feedback and Spanish-based suppliers, the company has perfected the art of less merchandise and quick product cycles.

Tack on its deliberate push online (next stop: India) and Zara is quite literally a case study for the future of retail.

What Else Is Happening…

  • Nike and Universal Studios to face EU investigation into online sales practices.
  • GE is merging its power and energy units to create a $41.9 billion business.
  • Avon Products (+4.72%) CEO Sheri McCoy will likely step down.
  • The FTC has raised concerns over very real fantasy-sports proposed merger of FanDuel and DraftKings.
Economic Calendar

  • Monday: No events today
  • Tuesday: Producer Price Index (+/-)
  • Wednesday: Fed Rate Announcement (+), May Retail Sales (-), Consumer Price Index (-), Crude Inventories (+)
  • Thursday: Kroger Earnings; Industrial Production
  • Friday: Michigan Consumer Sentiment Index


The Backstory: John Pemberton

Welcome back to The Backstory, the Brew Crew's segment that highlights the journeys of innovators and disruptors!

In perfect Brew fashion, we'll segue from last week's segment on Warren Buffett to the man who invented Buffett's favorite drink (Coca-Cola). And you'll be surprised to find out what we learned...

Ahhh, John Pemberton. A name so few know, but so many have to thank.

Pemberton was a lieutenant colonel who fought in the Civil War-a service that was short-lived when he received a chest wound in the Battle of Columbus.

The Georgia native took morphine for his wound, putting him on the fast track to a world-class addiction. And it might have been the best decision he never meant to make.

In an effort to cleanse his opioid-addicted body, Pemberton began experimenting with the Peruvian coca plant and an extract from kola nuts (see what we're getting at...).

Pemberton's Fresh Wine Cola was alcohol-based and marketed as a remedy for addicted Civil War vets, like himself.

But when alcohol began putting a stain on society, Pemberton swapped the wine component of the beverage to the sugary base and spun it as the perfect "temperance" drink.

He coined the name Coca-Cola and sold nine servings a day in that first year. Now? Coca-Cola sells as many as 1.9 billion servings a day.


Interview Question of the Day

If two painters can complete two rooms in two hours, how many painters would it take to do 18 rooms in 6 hours?

(Give up?)

Who Am I?

  1. I was named Fortune's Businessperson of the Year in 2015.
  2. I ran cross country and track as a student at Penn State.
  3. I am an avid art collector, known for having one of a kind collectables in my office.
  4. My wife once held the world record in the 5,000 meters.

(Do you know who I am?)

Stat of the Day


That's the number of cows one Qatari businessman flew to the Gulf desert. It took over 60 flights, but hey, gotta get that vitamin D somehow.

Want Morning Brew Daily Served Fresh to Your Inbox?
Drop Your Email Below...

Start Discussion

Popular Content See all

Student-run private equity funds?
+36IBby Prospective Monkey in Investment Banking - Mergers and Acquisitions">Prospect in IB-M&A
I wish I was an airline pilot
+23OFFby Vice President in Investment Banking - Mergers and Acquisitions">VP in IB-M&A
BMO fired all of its Houston Bankers (~60 people)
+21IBby Intern in Investment Banking - Mergers and Acquisitions">Intern in IB-M&A
Do I quit IB for YouTube
+18IBby 3rd+ Year Analyst in Investment Banking - Industry/Coverage">Analyst 3+ in IB - Ind
Zoom events are cringe as hell
+17OFFby Prospective Monkey in Investment Banking - Mergers and Acquisitions">Prospect in IB-M&A
Mistake to join a Distressed HF now?
+10HFby 1st Year Analyst in Investment Banking - Mergers and Acquisitions">Analyst 1 in IB-M&A

Total Avg Compensation

December 2020 Investment Banking

  • Director/MD (18) $713
  • Vice President (53) $337
  • Associates (275) $227
  • 3rd+ Year Analyst (39) $161
  • 2nd Year Analyst (153) $153
  • Intern/Summer Associate (141) $139
  • 1st Year Analyst (595) $130
  • Intern/Summer Analyst (568) $82

Leaderboard See all

LonLonMilk's picture
Jamoldo's picture
Secyh62's picture
CompBanker's picture
redever's picture
bolo up's picture
bolo up
frgna's picture
NuckFuts's picture
Edifice's picture
Ricky Rosay's picture
Ricky Rosay