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MARKETS

  • U.S. markets: Wipe off that bead of sweat. Consumer prices rose less than expected in April, alleviating some investors' fears of inflation rising too fast. Markets crept up after the news. The Dow is riding a six-day win streak.
  • Facebook: Cambridge who? The tech giant's stock has erased all of its losses since its data privacy scandal in March.
  • Earnings today: Thomson Reuters.

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MANAGEMENT

Anbang's Ambitious Leader Caught in His Web of Lies

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Former Anbang Insurance Group CEO Wu Xiaohui received his sentence yesterday: 18 years of cold, hard time. And make no mistake, his swift rise and fall might only be topped by the one-and-only, Ken Bone.

The crime: Defrauding investors to the tune of $10 billion (we'll get to how).

But first, who in the world is Wu Xiaohui?
Great question. Wu is the Chinese insurance mogul who turned a small car insurance business into the country's third-largest insurer by assets in just two decades.

  • More recently, he shimmied his way into the global spotlight with a massive acquisition spree, including paying $2 billion for New York's Waldorf Astoria--that hotel Zack and Cody wish they lived in.
  • And even more recently, the Chinese government seized control of Anbang Insurance Group over concerns of financial instability and fraud, which embarrassingly makes it the world's second AIG to require government intervention. Mic drop.

But fraud is a vague word. So tell us, what exactly did Wu do?

Well, it's complicated. Like, web-of-lies, modern day-Enron complicated. Just look at this:
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Don't squint too hard, just know that big red dot is Anbang, and all of those intersecting lines are affiliated parties of Anbang. With a wave of Wu's wand (try saying that a few times fast), he'd funnel financials, equity, and cash from one company to the next to create the Anbang that looked best in the eyes of its shareholders.

Translation: Fraudulent financials helped Wu justify big-ticket acquisitions, raise money from investors, and give off the impression that Anbang had a healthy balance sheet.

Bottom line: This 18-year sentence is one of China's longest-ever for a business mogul. And by taking control of Anbang after illegal activity and excessive foreign investments, the country showed it's deadly serious about keeping Chinese business at home.

INVESTING

Robinhood Gives the E*TRADE Baby a Run for His Money

For a company that got rejected 75 times trying to secure its first round of funding, Robinhood doesn't seem to be having that issue anymore. It just raised $363 million in a Series D, cementing a valuation of $5.6 billion.

Let's digest:

  • Sorry E*TRADE, but Robinhood just blew past your 3.7 million accounts to hit 4 million.
  • That's double the user headcount from a year ago and $5.6 billion is quadruple its last valuation.
  • Free crypto (now available in 10 states) and options trading may have had something to do with it.

And that's caught some eyeballs: Valley hotshots like Sequoia, Kleiner Perkins, and Google's CapitalG joined the round, despite Robinhood hardly making money (its premium account Robinhood Gold is the big exception).

So where does it go from here? CNBC got the inside scoop from co-CEO Baiju Bhatt: "In the next couple of years, I think you'll see Robinhood looking like a full-service consumer finance company."

BIZ IN D.C.

House Dems Release All the Russian FB Ads

Have nothing better to do on your Friday? Here's one potential activity: flip through more than 3,500 Facebook and Instagram ads used by bad Russian actors to cause division in the U.S. Trust us, it's a blast.

Didn't we already know about this?

  • Well, we did know that a Russian troll farm called the Internet Research Agency (IRA) bought these ads to disrupt the 2016 election.
  • But we only had access to ~50 of the ads. That is until yesterday, when Democrats on the House Intelligence Committee decided, 'Heck, we'll just release the whole thing.'

Here's one example:
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Bottom line: The ads show that from June 2015 to August 2017, the IRA became increasingly skilled at gaming Facebook's platform to manipulate people, even using popular memes like SpongeBob. Why you gotta bring SpongeBob into it?

COMMODITIES

Bank of America: Oil Could Hit $100 Next Year

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Here's why, in a nutshell: Rising global demand, Venezuela turmoil, Iran sanctions, and declining inventories.

FINTECH

Apple, Goldman Want a Piece of Your Wallet

Nothing quite brightens up a gloomy day like this headline: "Goldman Sachs, Apple Team Up on New Credit Card." But that's exactly what the WSJ is reporting, with the card possibly debuting early next year.

No word yet on the terms or benefits, but we're hoping for no annual fee, 5% cash back, and a lifetime supply of Lloyd Blankfein bobblehead dolls.

But seriously, this is a strategic move for each of these corporate chameleons as they try wiggling into new revenue streams.

For Apple...

It's all about Apple Pay, a critical ingredient of its Services business. The new card will feature the Apple Pay brand and (hopefully) leverage Goldman to increase user adoption.

And FWIW, this'll help push Apple (+1.43%) closer to that $1 trillion market cap.

For Goldman...

It's all about meeting consumers where they are. Goldman (+0.71%) has never been a consumer-facing firm, but with the drought in securities trading revenue, it's seeing $$$ in a push into retail banking.

And what's a little plastic surgery to help it get there?

RETAIL

Happy Mother's Day

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You can't put a price on love. But if we had to, we'd say it's $23.1 billion. That's how much the National Retail Federation estimates we'll spend to celebrate our mothers this Sunday. So how does that break down?

  • $4.6 billion on jewelry
  • $2.6 billion on flowers
  • The rest: Gift cards, consumer electronics, spa days, greeting cards, housewares, and more.

That's a lot of money...but who are we kidding? Moms are worth every penny.
WHAT ELSE IS BREWING

  • President Trump will meet with North Korean leader Kim Jong Un in Singapore on June 12.
  • Spotify (+5.39%) has removed R. Kelly's music from its playlists due to a laundry list of sexual abuse allegations.
  • Dropbox (-4.22% after hours) topped expectations in its first earnings report.
  • Net neutrality regulation will officially end June 11.
  • Nvidia revealed that 9% of its $3.2 billion in Q1 revenue came from chips used for crypto mining.

BREAKROOM

CAPTION THIS
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Our caption: "Balls back."

Got a better one?
WHAT THE CREW IS READING
Enlightenment Now: The Case for Reason, Science, Humanism, and Progress by Steven Pinker. Well...whoever wrote that subtitle did a pretty good job of summing up this deep and optimistic read about the current state of human civilization. Bill Gates called it, "My new favorite book of all time." And it could be yours, too.

And don't forget, we're giving away $1,000 worth of amazing startup books for free.

GUESS THE COMPANY
Recent accolades: The U.S.' second-largest residential real estate brokerage in 2017

Holdings: Dairy Queen, Lubrizol, Fruit of the Loom

Stock price (as of yesterday's close): $301,630

Last seen: Buying 75 million more shares in Apple in Q1

(Answer located at bottom of newsletter)

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Breakroom Answers


Guess the Company
Berkshire Hathaway

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May 11, 2018
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