Trust the process

Quote of the Day

Trian strongly urges P&G to accept the Inspector’s tabulation and not waste further time and shareholder money contesting the outcome of the Annual Meeting.”

Market Snapshot

• The Dow and S&P posted their worst day in two months.
• SendGrid finished up 12% after its IPO.
• The Nikkei fell 1.6% only a month after rallying to its highest point in 20 years.
• European markets closed lower after energy stocks continued to fall.



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Cordray Paves the Way

Five-time Jeopardy winner and Obama-confidant Richard Cordray will be stepping down as head of the Consumer Financial Protection Bureau (CFPB).

That’s about eight months earlier than his planned July 2018 departure, as he seeks to become the next governor of Ohio...or so they say. Here’s what we do know: Cordray’s post will most certainly be filled by a conservative, Wall Street-friendly leader looking to reverse the work the Ohio native left behind.

Work that has shaped financial regulation in the U.S. since the 2008 meltdown.

But first, what in the world is the CFPB?

First dreamt up in a Harvard classroom by Democrat Elizabeth “A bank’s worst nightmare” Warren, the CFPB was tacked onto Dodd-Frank (the financial regulation act of 2010).

And since inception, its working principle has been to protect the American consumer from the greed of big banks, like...oh, you know...when Wells Fargo decided to open 3.5 million fake accounts.

So Cordray spent no time messing around

Since Obama appointed him in 2012, Cordray has been on a corporate witch hunt, collecting up to $12 billion from financial institutions and returning it to over 29 million disgruntled consumers.

He’s cracked the whip on debt collectors and made mortgage lending consumer-friendly, all while bobbing and weaving through the Trump administration's attempts to take him down (along with Dodd-Frank).

So why were they after him?

Well, since the CFPB is independent of the White House and Congress, deregulating Wall Street has been a bigger headache than President Trump signed up for. In fact, the CFPB might have too much control, with critics in both parties suggesting, “it is the single most unaccountable and powerful agency in the history of our republic.”

The jury’s still out on that, but one thing’s for sure: with Cordray stepping down, the door has swung wide open for pro-deregulation politicians to do as they please.

Airbus Sends Boeing to Coach

Airbus (+2.35%) and Boeing (+0.42%) made a splash at the Dubai Airshow, announcing sales of more than 650 planes listed at over $75 billion.

Boeing, the No. 1 global aircraft manufacturer, agreed to sell up to 225 planes to budget Mideast carrier flydubai. But No. 2 Airbus won this round, dealing 430 planes to Indigo, an investment firm with stakes in Frontier (U.S.), Wizz Air (Hungary), JetSmart (Chile), and Volaris (Mexico). It’s the industry’s largest deal ever.

And it’s no coincidence that Indigo’s airlines are all low-cost carriers, the fastest-growing segment in commercial aviation. You know, those airlines that treat you like cattle but it’s fine because you can get to Helsinki for the price of a burrito.

To meet demand, engineers are working in the hangar ‘round the clock to make the small but mighty airplanes these budget airlines rely on. Boeing is aiming to pump out almost two per day in 2018.

That should fill a backlog that stretches at least five years.

Ten Stars for Tencent

We took the red-eye to China to watch Tencent blow past earnings (luckily, President Trump gave us the hottest dim sum spots in Shenzhen). The $466 billion tech giant has been on a video game-induced high in 2017:

• Earnings grew 70%, driven primarily by games so addictive the country literally had to institute a playing limit.
• Revenue climbed 61% thanks in large part to video games and the company’s video streaming service. Tencent doubled its paid subscribers to 43 million.
• Messenger app WeChat’s monthly active users jumped 16% to 980 million—that still puts it behind Messenger and WhatsApp’s 1 billion+ monthly active users (both owned by Facebook).

Tencent has doubled its market cap since 2015, meeting Amazon near the $500 billion mark. And incredibly, it’s not the only Chinese company to do so (heard of Alibaba?). So what’s next for Tencent? Putting Baba in its place by strengthening its 37% grip on the $5 trillion mobile payments market.

Target Plays the Long Game

“Trust the process.” —Target CEO Brian Cornell...probably.

Target’s putting long-term solvency ahead of short-term success, reporting a 21% loss in quarterly profits and forecasting a worse-than-expected holiday season. Investors seized (up) on the news and sent Target shares spiraling almost 10%.

But don’t let that overshadow what was otherwise an upbeat quarter. Online revenue surged 24%, same-store sales topped expectations, and foot traffic was up 1.4%.

So far, so good for Cornell, who's putting $7 billion on the line to remodel Target in the cutthroat world of retail. The plan includes hiking the minimum wage to $11, putting some muscle into e-commerce, and introducing new brands with a little help from HGTV’s “Fixer Upper”...because who can resist Chip and Jo’s eye for rustic-chic?

And with holiday sales expected to rise at least 3.6% this season, new-look Target’s hoping to grab a larger slice of the pie.

What Else Is Happening…

• Amazon (-0.89%) is chopping prices on even more products at Whole Foods.
• Good news for the economy, as inflation picked up and retail sales beat estimates.
• Time Inc. (+1.20%) is launching Sports Illustrated TV. Guess they don't know about the curse...
• Tesla (+0.84%) will fight a class-action lawsuit alleging racial discrimination.

Economic Calendar

• Monday     Earnings: Tyson Foods (+)

                    Economic Events: Treasury Budget (-)

• Tuesday    Earnings: Dick’s Sporting Goods (+), Home Depot (+)

                  Economic Events: PPI (+)

• Wednesday    Economic Events: PPI (+)

                        Economic Events: CPI (+), Retail Sales (+/-)

• Thursday   Earnings: Best Buy, Gap, Walmart

                   Economic Events: Jobless Claims, Industrial Production, Housing Market

• Friday       Earnings: Abercrombie & Fitch, Foot Locker

                 Economic Events: No Events

The Backburner: Startup Roundup

SendGrid: An email service provider that navigates companies through the dangerous world of email marketing. And all we have to say is…any company that sends emails for a living has a special place in our hearts. Welcome to the public circuit, SendGrid. Altogether, the email service provider raised $131 million at a $16 share price.

GreenRush: Think of it like the Amazon of pot...because that’s exactly what it is. GreenRush raised $3.6 million in a Series A with former AB InBev execs in its corner.

PoshMark: The eBay for all things fashion raised $87.5 million led by Singapore-based Temasek. It’s raised $160 million to date. Now, if it could just figure out how to turn left.

Bumble: Who says you can’t put a price on love? Match Group is in talks to purchase swipe-to-date app Bumble for over $1 billion. We’d say CEO Whitney Wolfe (also a founder of Tinder) has this dating app thing figured out.

The Breakroom

Question of the Day

The letters A through H below each represent a number from 1 to 9. Each letter represents the same number throughout and no number is used twice. If C=3 what is H?

A - C = D
G x E = F
B + G = H
D/C = E

(Answer located at the bottom of newsletter)

Rank by Market Cap

Big banks: Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America.

(Answer located at the bottom of newsletter)

Stat of the Day

43%—Percentage of the world’s millionaires that live in the U.S. How many of them work at an email company? Asking for a friend…

Breakroom Answers

Question of the Day: H = 5

Rank by Market cap: JPMorgan ($337 billion), Bank of America ($273 billion), Wells Fargo ($266 billion), Goldman Sachs ($89 billion)