How dare you, sir

MARKETS

• Bears look here: How low can bond yields go? U.S. 30-year Treasury yields ducked below 2% for the first time ever, and yields on the 10-year note also fell to a three-year low. Yields fall when bond prices rise, which means investors are piling into safe government debt as trade worries swirl.
• Bulls look here: E-commerce led a retail sales boom in July. Not surprised, considering 40,000 of you clicked on the Amazon Prime Day sales link we put in the newsletter last month.

ACCOUNTING

Episode 1: GE Accounting Scandal

Shonda Rhimes appears to have directed yesterday’s biz news, because a bombshell whistleblower report targeted GE’s (-11.30%) accounting practices.

Adding to the intrigue: The report was released by Harry Markopolos, a forensic accountant who also raised the alarm about Bernie Madoff’s Ponzi scheme.

The allegations

Markopolos alleged that GE’s flawed accounting practices…

• Are “a bigger fraud than Enron”
• Add up to $38 billion in fraud, or around 40% of GE's market value
• Mean GE’s debt-to-equity ratio would go from the 3:1 it reported at the end of Q2 to a whopping 17:1 if reported properly

Markopolos also said the industrial conglomerate would need to boost its insurance reserves by $18.5 billion in cash and might have to file for bankruptcy.

The “how dare you, sir”

GE denied all of it, saying the company has a “strong liquidity position, committed credit lines, and several executable options to monetize assets," plus it takes vitamins every morning.

• GE is currently being investigated by the SEC and DOJ over potential accounting issues related to its insurance and power divisions. It has denied any accounting fraud and says it is working with investigators.

Here’s where it really reminds us of Scandal

Markopolos said he and his colleagues are working with an unnamed hedge fund that’s shorting GE stock, leading CEO Larry Culp to accuse Markopolos of trying to profit off the accusations.

• The WSJ points out that if that’s the angle, Markopolos’s timing could have been better. GE stock dropped from $30 to $7 from early 2017 to the end of 2018 as the company tried to streamline a bloated business.

Looking ahead...Markopolos said his group is planning to take its findings to the SEC. Meanwhile, Culp bought $2 million of GE stock yesterday to demonstrate his confidence in the company.

SELF-DRIVING

What Can TuSimple Do for You?

UPS said yesterday its venture arm acquired a minority stake in TuSimple, an autonomous trucking startup. The two also revealed they’ve been testing cargo routes between Tucson and Phoenix, most of which was hate mail between ASU and UA students.

Refresher: TuSimple, HQ’d in San Diego and Beijing, was last valued at $1.1 billion. Chief Product Officer Chuck Price did his best to convince Ryan Duffy, our emerging tech writer, that his company’s the leader in the industry. Price said...

• UPS (-0.15%) is the first investment by a major shipping company into a self-driving startup
• TuSimple has the largest self-driving truck fleet “by far.”
• A recent two-week pilot with USPS on one of the U.S.’ busiest freight corridors was successful.

Next steps: UPS plans to use this partnership to figure out how it will plug autonomous trucks into its massive logistics network. By “late 2020, early 2021,” TuSimple expects to remove the safety driver and engineer currently riding in each truck, Price said.

Want more stories on self-driving vehicles? Sign up for Emerging Tech Brew with one click here.

INTERNATIONAL

Blackout Brings Kashmir to a Halt

Earlier this month, the Indian government revoked a key provision of its constitution which set the terms of its relationship with Kashmir, the disputed Himalayan territory north of India. It also deployed troops and shut down phone and internet service in Kashmir.

The blackout is causing serious trouble for the Kashmiri business community. Businesses have scarce access to cash and can’t get products they'd normally order online, including insulin and baby food. That’s brought operations to a screeching halt.

The backstory: The Kashmir region has been contested pretty much ever since the British Empire divided up the province it called Bengal in 1947. Both Pakistan and India have claimed sovereignty and split administration of the area.

More recently, Prime Minister Narendra Modi’s Hindu nationalist government has been using internet shutdowns to tamp down dissent all over the country. Now his government aims to divide up Kashmir and tighten its control more than the old provision allowed. BBC reporter Aamir Peerzada described the mood in the Kashmiri city of Srinagar as “an atmosphere of fear.”

HEALTHCARE

For the FDA, a Picture’s Worth 1,000 Lives

Yesterday, the FDA proposed new health warnings for cigarette packs and advertisements, including graphic images portraying some lesser-known side effects of smoking.

Despite the best efforts of D.A.R.E. instructors, 34 million adults and 1.4 million youths in the U.S. smoke. It’s an expensive and deadly habit that annually costs 480,000 lives and $300 billion in healthcare and lost productivity.

The FDA tried this tactic in 2011, but Big Tobacco sued and got the courts to throw out the rule. That means tobacco warnings have looked the same since the Reagan administration.

• The rest of the world’s not waiting. More than 91 countries have adopted labels that cover at least half the package.
• The World Health Organization says graphic images are the most effective deterrent to smoking, but some studies found these labels could inadvertently offend people's beliefs in consumer freedom.

This is awkward. There have been a few instances of individuals not knowing about or consenting to photos of them used in graphic anti-smoking campaigns.

QUIZ

I Quizzed a Girl and I Liked It

Inverted before it was cool. More complex than WeWork’s financials. Still ties shoes using bunny ears. It’s the Brew’s Weekly News Quiz.

1. Scientists announced they sequenced the genome of which fruit?

2. This product was announced on Tuesday...what is it? And for 32 points of extra credit, what is she looking at?

3. CBS and Viacom finally agreed to merge this week. Which of the following is not a Viacom property: Paramount Pictures, HGTV, Nickelodeon, or MTV?

4. Fill in the blank: ___________ account for roughly 40%–50% of the world’s solid waste, per Reuters.

5. Name the company: I am the world’s largest oil producer and I claim to generate one in every eight barrels of the world's crude.

Answers: 1) Avocado 2) Snap’s Spectacles 3, extra credit = Snap stock 3) HGTV 4) Construction materials 5) Saudi Aramco

WHAT ELSE IS BREWING

• Walmart’s (+6.11%) strong quarterly earnings show that not even a looming yield curve inversion can stop American consumers from buying mini basketball hoops.
• Alibaba’s (+2.97%) strong quarterly earnings show that not even a looming trade war can stop Chinese consumers from buying mini basketball hoops.
• Cloudflare, a cybersecurity company, filed to go public. Cloudflare was in the news recently for cutting off services to message board 8chan.
• Russia might’ve just anointed its own “Sully” when a pilot safely landed a passenger jet in a cornfield following a bird collision that knocked out the plane’s engines.
• Nvidia (+5.80% after hours), the maker of graphics cards that fuel video game addictions, beat expectations for fiscal Q2. It’s hoping to kickstart sluggish demand for its chips and processors.
• President Trump has floated the idea of the U.S. buying Greenland, according to the WSJ.

BREAKROOM

Friday Puzzle
What is the smallest whole number that, when written out, uses all the vowels, A, E, I, O, U and even Y, one and one time only each in its spelling?

Breakroom Answers