Zuckerberg takes the stand

MARKETS

• U.S. markets: Stocks jumped after Chinese President Xi Jinping eased trade war tensions and promised to open China's economy to more U.S. business. His quote to note: "In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place."
• The big winners: Boeing pushed the Dow forward, rising nearly 4% on the news. Tesla surged 5%, regaining some of last month's losses.

FINANCE

Everything Jack Ma and Alibaba Touch Turns to Gold

Whoever said less is Ma has never met Alibaba (+4.26%). Its affiliate, Ant Financial, is looking to raise $9 billion at a...wait for it...$150 billion valuation. That would make it the world's largest startup.

But wait, there's Ma (seriously, last one). If this new round closes, Ant Financial would be valued higher than major financial institutions like Goldman Sachs ($96 billion) and BlackRock ($86 billion).

So what's driving this record valuation?

Ever since 2011—when Alibaba spun off the company—Ant marched its way to market domination:

1) Its app Alipay is the world's largest mobile payments platform.

2) It runs the world's largest money market fund.

3) It covers asset management, consumer lending, and credit scoring.

Of course, there have been setbacks

Earlier this year, the Committee on Foreign Investment in the United States (CFIUS) squashed Ant's $1.2 billion bid for U.S. payments company MoneyGram. That's because CFIUS is cracking down on Chinese acquisitions of U.S. tech companies over national security concerns. The Broadcom-Qualcomm deal was the latest victim.

The other problem: Tencent's WeChat has 900 million monthly active users, 33% of which use the app more than four hours a day. That's led to WeChat's WeChat Pay feature rapidly stealing market share from Alipay.

But Ant's not watching its back, it's looking ahead

...to a (potential) 2018 IPO. And this $10 billion boost could be the energy drink Ant needs heading into the public markets.

Its strategy moving forward? Utilize (what some call) its superior data and technology to win more market share in mobile payments. Then, convert users to its higher-margin offerings like lending and asset management.

It's called getting Ma bang for your buck. Sorry, that's actually the last one.

BIZ IN D.C.

All the News from Zuckerberg's Big Day on the Hill

In a Senate testimony, a smooth-talking Mark Zuckerberg (not a typo) answered senators' questions about Facebook's data privacy issues, its role in Russian election interference, and the sustainability of its ad-based business model...and that was just the first half hour.

Forget the noise, here's the actual news that came out of the hearing:

• Facebook (+4.50%) did not alert the FTC when it first learned Cambridge Analytica accessed the data of 87 million users, calling it a "closed case." Zuck said not following up was a mistake.
• He promised there would always be a free version of Facebook (leaving the door open for a paid service).
• He said he'll work with lawmakers to help craft the "right regulation."
• Facebook is cooperating with Robert Mueller's investigation, and at least one employee was interviewed.

Bottom line: The narrative going into the hearing was that lawmakers would look to drop the regulatory hammer on Facebook. And while that could be on the horizon, Zuckerberg's performance calmed those fears...for now. Investors sent Facebook shares to their best day in two years.

The line everyone is talking about: Senator Orrin Hatch asked how Facebook makes money while keeping its service free. Zuckerberg paused and replied with a smile, "Senator, we run ads."

M&A

Sprint and T-Mobile Say ‘Let’s Give This Another Shot’

Like exes with amnesia, Sprint and T-Mobile are giving this merger another shot—their third try in four years and only five months after their last fling ended.

Why haven't things worked out? Disagreements over who's running the show. SoftBank (which controls 85% of Sprint) has been reluctant to hand over the reins to T-Mobile's parent, Deutsche Telekom. That's been a sticking point for Deutsche, considering T-Mobile has more subscribers and a higher market cap than Sprint.

But it might be worth setting differences aside. A combined firm would leapfrog AT&T (93 million U.S. subscribers) and land it just shy of Verizon (116 million).

The roadblocks: Even if the two agree to sync up, the FTC might have something to say about it. Consolidation would transform the industry from four to three major players, potentially decreasing competition and raising prices.

After all, look at how things are going for AT&T and Time Warner—the antitrust trial just entered its fourth week.

MANAGEMENT

Hop Aboard the German C-Suite Carousel

You're not the CEO of an iconic German company, right? Okay good, you still might have your job.

Let's start with Volkswagen

The largest carmaker in the world is reportedly dethroning CEO Matthias Müller.

When Müller was handed the keys to his corner office in 2015...he was also handed the baggage of the automaker's mega-scandal, when it duped diesel emissions tests in 11 million cars. By all accounts, Müller navigated the stormy waters admirably.

But hotshot and VW brand chief Herbert Diess is on the rise. Look for him to replace Müller and lean in to VW's pursuit of an electric vehicle paradise.

And don't forget about Deutsche Bank's problems
On Sunday, the famous German lender replaced CEO John Cryan with Christian Sewing (its third chief exec in six years). Sewing won't have it easy: he'll have to make tough decisions around Deutsche's flailing investment banking division and could even explore a merger.

WHAT ELSE IS BREWING

• Kroger (-0.46%) is calling for reinforcements in the grocery wars, hiring 11,000 new employees in its supermarket division.
• Spotify (+3.25%) is launching another version of its free music service.
• Instagram is introducing its new Focus feature.
• Goldman Sachs (+1.74%) predicts Tesla will once again not meet upcoming production estimates for its Model 3. Really going out on a limb, there.
• PE shop Francisco Partners is buying payments technology company Verifone (+51.87%) for $3.4 billion and taking it private.

WATER COOLER

FROM THE CREW

From our office, to your inbox. We’ll keep you in-the-know about all the latest happenings from our perspective.

Dust off your TI-89 and pull up your macro tables, Friday is the unofficial "Opening Day" for earnings season. These next few weeks are sacred to us business fanatics, as we get to learn how public corporations performed this past quarter.

And expectations are riding high. Like...record high....

Earnings growth in the S&P is expected to top 17% YoY. If it hits that mark, it'll be the best quarter since Q1 2011 (19.5%). For the bullish outlook, thank strong economic fundamentals and the recent corporate tax cut.

• Keep your eye on the Energy sector. Earnings are expected to grow a whopping 78% for two main reasons: 1) increasing oil prices and 2) gloomy earnings last year.
• One thing's for sure: This quarter's reports will be easier to interpret compared to the last, when one-time charges related to the tax cut created a messy picture.

Bottom line: Earnings season could lift a stock market that's been dragged through the mud in recent months. But, if corporations don't stick the landing, neither will the markets.

BREAKROOM

VENTURE THIS RESPONSES
Yesterday, we asked whether you were IN or OUT on 82 Labs, maker of hangover drink Morning Recovery. 66% said "Hell no, just pop Advil," while 34% are bullish on the brand. Here's what you had to say:

"As Mr. Wonderful says, there is nothing proprietary about the product, so there's no moat around the company to keep competitors from mimicking it."

"This product doesn't differentiate itself from the rest. Find me a company that cures my hangover AND reverses all the other bad decisions I made in the night and I'll give you my wallet."

NUMBERS TO KNOW
93% —The YoY increase in viewership for the four golf tournaments in which Tiger Woods has finished in the top 25 this season. In related news, the NFL has reached out to Tiger to fill an open spot on the Browns.

(Answer located at bottom of newsletter)

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