Viacom Pulls Merger Plug; Trump’s Next Tweet Tackle Goes After Lockheed Martin; JetSmarter Channels Uber for Air Travel


On second thought…

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Today father-daughter Redstone team, Shari and Sumner, announced that they are no longer interested in a merger with sister company CBS. It was Shari Redstone who said as much in a letter from the family’s privately-held company National Amusements Inc.  She gets to do that sort of thing since, after all, she controls the voting shares of both Viacom and her dad, which altogether adds up to 80% of the voting stock. Wall Street wasn’t too happy about Viacom finding its own way sans CBS and not only sent the stock down 7%, it also took Viacom to a 52 week low. The two companies were actually merged once upon a time, but back in 2006 went into splitsville. Initially, the merger was meant to give Viacom a much needed boost. But the father-daughter duo decided to put the kibosh on the merger because they apparently developed renewed confidence in Viacom’s prospects under the leadership of its new CEO Bob Bakish. At least that’s how team Redstone spun it. However, rumor has it that it was because CBS chief Les Moonves wasn’t on board for a number of reasons. For one, Viacom was looking to get a premium on its shares and CBS wasn’t willing to pay for it. Also, Moonves wanted control of both companies along with increased equity and the Redstones weren’t too keen on giving him all that. Other sources say that Moonves wasn’t even interested in trying to fix Viacom. Had the merger gone through it would have resulted in a massive media giant.

F-35 you!

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President-elect Donald Trump’s latest Tweet target is Lockheed Martin’s F-35 program. Naturally, his Tweet dumping on Lockheed Martin sent the stock south along with several other defense contractors. Trump said that come January 20th, he plans to save billions of dollars on the aircraft that he described as being “not very good” according to his very expert opinion. Lockheed Martin said that it already spent millions to reduce costs on the 5th generation fighter aircraft by more than 60% and  I am pretty sure there is a joke somewhere in there.  But it’s not just Trump who thinks the program’s costs are bananas. A voice of reason who we know as John McCain, and who also serves as the Senate Armed Services Chairman is critical of the program. He wrote a letter to the Pentagon challenging the $1 billion cost overrun for the program. But Lockheed Martin said that it creates 146,000 jobs in the U.S. and Puerto Rico, besides the fact that analysts also feel the aircraft is necessary since Russia and China have highly advanced competitive fighter aircraft. We wouldn’t want to let them have the upper hand as far as our defense goes, now would we? There are six other countries who also use the jets and 3,000 planes are supposed to be built for the U.S. and other countries. The estimated cost of the program is about $400 billion and has the dubious distinction of being described as the most expensive weapons system in history. The fact that other countries participate in the program is supposed to help spread out the costs a little more. However, it’s not clear exactly how much their participation has helped the U.S.

Coffee, tea or Jay-Z?

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JetSmarter, a company that is basically Uber for flying privately can now count Jay-Z and the Saudi Royal family among its investors. The company has so far raised $157 million with $105 million raised just in its latest round.  JetSmarter founder and CEO Sergey Petrossov discovered a very lucrative opportunity when he realized that 35% of private planes have no passengers. With 50 routes in 30 cities around the world, JetSmarter wants to take its latest cash-infusion to expand into Asia, South America and Africa.  Plenty of other similar start-ups have failed so how come JetSMarter hasn’t? Apparently because seat prices on Jet Smarter change based on predictions about the popularity of certain routes and flight times. JetSmarter allows its members to buy empty plane seats from private jet companies and sell them through its app.  The company boasts 6,700 members and currently, a membership will set you back about $15,000 for the first year and $11,500 per year after that. But hey, that gets you an average of 12-15 flights per year. However, if you decide to create a charter flight or want to take a member created flight, that costs extra. And while the company does not own any of its own planes, it does have about 32,000 aircraft in its network with a $1.6 billion valuation.

Trump Getting Carrier’d Away with Employment Numbers; Get Ready to Rumble with Trump’s Latest Pick; Unemployment Lows Give Economists a High

Adios…

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Just when you thought he’d Tweeted it all…It’s Trump vs. the union boss in the next installment of the President-elect’s Tweet-drama. This time Trump took on union boss Chuck Jones, who serves as president of United Steelworkers 1999 over at Carrier.  Trump tweeted that Jones has “done a terrible job representing workers.” That’s just one of the many pearls that escaped Trump’s social media account. “Spend more time working-less time talking. Reduce dues,” was another gem he tweeted about his current dispute. Look for this exchange to come back and haunt him when it’s time for re-election. In any case, Jones said Trump was giving people false hope about the job situation at Carrier, and told the Washington Post, “…for whatever reason, he lied his a– off.” What Trump allegedly lied his a– off about was the 1,100 jobs he is taking credit for saving. He might have temporarily and theoretically – depending on whom you ask – sort of saved closer to 730 jobs and the problem with Trump’s math is that the 1,100 number might have included 300 jobs that weren’t even in danger of heading across the border. Come mid-2017 and another 600 Carrier jobs are gone as well, whether Trump is involved or not. And after all those lay-offs, Carrier will have a grand total of 800 manufacturing workers and another 300 engineers on its roster. Carrier was offered $7 million worth of tax incentives and credits to stay put. Jones said $23 million worth of concessions were offered up in order to entice Carrier not to head off to Mexico. But Carrier still stands to save $65 million by moving south and well…you see where this is headed. If Carrier decided to remain in the U.S., employees would have to agree to ditch benefits and earn $5 per hour below minimum wage.  Let’s see Trump fix that one.

Let’s get ready to rumble…

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In other Trump drama, the President-elect just picked WWE co-founder Linda McMahon to head the Small Business Administration. Which seems only fair considering she gave a whopping $6 million to a pro-Trump super PAC. Although, she did call Trump’s comments about women deplorable, so that’s something in her favor. The Senate still needs to approve the pick, but all signs point to her getting the gig. With offices in every state, the SBA helps small businesses and entrepreneurs get financing and training. McMahon, like Trump, supports a lower corporate tax rate and less government regulation. She founded WWE thirty years ago with her husband Vince McMahon. McMahon made two previous attempts to get into Washington DC when she ran for Senate seats twice in Connecticut. Both times she lost and the cost of the campaigns set her back about $100 million.  Not that it put much of a dent in her bank account. WWE is a publicly traded company with a market value of $1.5 billion. McMahon herself owns $84 million in company stock. And by the way, Trump is a member of the WWE Hall of Fame.

Nothing to do with Trump…

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The number of Americans filing for unemployment fell from its five month high last week.    That should leave you feeling positively giddy as it signals a very healthy strong labor market. With this bit of news you can expect the Federal Reserve to hike those rates next week. The number of people who filed for first time benefits dropped by 10,000 to 258,000 applicants. It also marks the 92nd straight week that claims fell below 300,000  – a fiscally remarkable feat which hasn’t been seen since 1970. And again, that points to another good sign of a healthy labor market. In case you were curious about what economists were predicting – and it’s okay if you weren’t – the numbers were as expected. With the labor market seen as near full-employment, the government also released data showing that unemployment hit a four year low of 4.6% back in November. And bonus: the number of Americans who receive unemployment benefits fell a glorious 79,000 to 2.01 million.

Starbucks Betting on $10 Coffee; Trump Ready to Dump on Pharmaceuticals; Trump’s June Stock Dump

Jolted…

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Starbucks CEO Howard Schultz is stepping down from his post in April with plans to build a Starbucks’ prestige brand where he will serve as its Executive Chairman. The idea is that by going upscale Starbucks will be able to raise its profile with those pesky millennials. Besides that, the company needs to compete with a number of other upscale rivals that keep rearing their gourmet heads all over the place. One thousand “Reserve” brand stores are slated to set up shop with another 30 large Reserve Roastery (expect to find that word added to a dictionary near you) and Tasting Rooms expected to open up all over the globe. In case you were wondering what one orders from this new prestige brand, you might consider purchasing a $10 cup of coffee that you can sip daintily from a glass siphon.  Or perhaps you’re up for paying $50 for an 8 oz. bag of an exotic, small-lot coffee? I’m sure you’ll find something worth depleting your funds.  In any case, Starbucks also announced plans to open another 12,000 stores –  that’s in addition to its already existing 25,000 stores –  in the next five years.  Five thousand stores are slated just for China. The company also plans to annually boost revenue by 10% while adding between 15% – 20% to its shares, and increase its focus on its food offerings since the coffee giant is convinced it can double its growth in that area.

What a pill…

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Donald Trump’s latest executive plans involve bringing down drug prices and the pharmaceutical companies that keep increasing them with seemingly reckless abandon. Which is kind of ironic since pharmaceutical stocks saw a huge surge following Trump’s election. And here they thought they had an ally. Hah! A Kaiser Family Foundation survey leading up to the election found that people felt drug prices were the number one healthcare issue for the next President. Well, I guess the President-elect is ready for it then. Sort of. Trump has yet to outline any concrete plans on how he is going to achieve this goal. But during his campaign, Trump did say that he is all in favor of consumers having their meds re-imported. He also wants Medicare for the elderly to renegotiate drug prices directly with pharmaceutical manufacturers. That should be fun to watch, especially because both the industry and many many Republicans are vehemently against that idea. Stay tuned for that drama. Just today, Pfizer Inc. and Flynn Pharmaceutical Ltd. were slapped with some massive record fines in the UK after raising drug prices by…wait for it…2,600%. Now, Pfizer will cough up about $106 million, while Flynn will fork over approximately $6.5 million. I guess they should be happy that they were busted in the U.K. and still have time to clean up their act in the United States before Trump-dom takes effect. In the meantime, Allergan Plc. CEO Brett Saunders is bracing himself for the new president’s impact and said Trump could end up being more “vicious” on pharmaceuticals and their drug pricing than Hillary Clinton might have been. But he also pledged to limit price increases to less than 10% per year. Or perhaps he did that lest Trump unleash his Twitter wrath on Allergan, just like he’s done to several other individual companies including Carrier Corp., Ford and Boeing.

Under-stocked…

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Yesterday, President-elect Donald Trump’s team announced, with no explicable reason as to the timing, that he sold off all of his stocks back in June. Don’t hold your breath for proof of that sell-off as none was provided. While being interviewed today on the “Today” show by host Matt Later after being named Time Magazine’s “Person of the Year,” Trump explained that he decided to unload his stock holdings in order to avoid any conflicts of interest. How very gallant of Mr. Trump.  And even though the press was not made aware of it until yesterday, Donald Trump insisted that everybody already knew. We just don’t know who “everybody” is. Mr. Trump went on to say that he sold off his stocks since he knew he would win the election and would be making deals for the United States that could affect various companies in all sorts of different ways. That was indeed very thoughtful of him. He also said he didn’t even own that much stock.  Which is debatable at best since a recent filing from December of 2015 valued his holdings at $40 million. But in all fairness, his stock market holdings pale in comparison to his real estate holdings which apparently make up the bulk of his net worth.  Ethics experts, however, are suggesting those real-estate holdings might also be a conflict-of-interest as well. Just saying. It’s worth noting that since his sell-off, the S&P 500 went up over 10% while the Dow Jones Industrial Average hit some very impressive all-time highs. Since Trump’s victory, many stocks have also hit all-time highs and, of course, he’s taking credit for it.

Trump Tweets Out Boeing’s Air Force One; Lego’s Brick-By-Brick Expansion Plans; SeaWorld Sees Layoffs

Boeing going gone…

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President-elect Donald Trump was on Twitter. Again. This time he was telling Boeing to cancel the order for the new Air Force One that’s in the works.  In his usual eloquent manner he said that the cost to build the plane “is totally out of control.”  And just what exactly does “out of control” look like when you’re building a fleet of aircraft for the Commander-In-Chief? Well, it depends on who you ask but Trump has that figure pegged at $4 billion, though it’s not entirely clear where he got it. Another report has the Air Force budgeting the new planes at about $1.6 billion. However, it’s expected that the fleet of planes will cost $102 million this fiscal year, and another $3 billion over the next five years. So maybe Trump’s got his ducks in a row on this one. His tweets went on to say: “I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money, but not that much money.” He probably would prefer if Boeing weren’t making that money off taxpayers’ backs. The Pentagon wants to replace the current fleet as it will have reached its 30 year service life in 2017. It has been around since 1990, has flown over one million miles and, in all fairness, could use  more than few upgrades – whether Trump’s on board or not. Which he won’t be because the aircraft is not scheduled to be ready for another ten years or so. Naturally, shares of Boeing fell on the news of Trump’s sentiments. In the meantime, 56% of Americans think Donald Trump uses Twitter way too much. Perhaps the time has come for his cabinet members and advisers to take away his phone.

Lego to stand on…

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Lego CEO Jorgen Vig Knudstorp is stepping down from his position and that’s actually good news. Knudstorp is leaving his post in order to move on to greener pastures as Chairman of  the Lego Brand Group. The toy company is on a mission to restructure itself to keep up with its growth momentum. By creating the Lego Brand Group, the company plans to explore new business ventures, opportunities and ideas that will help expand the brand in new, exciting and highly profitable ways. For the first half of the year the company posted an unwelcome surprise drop in profit of $499 million though its revenue still went up. The company blamed Americans, or rather, the fact that sales in the United States were flat. But, that’s probably the same thing. In any case, as part of his new gig, Knudstorp will be overseeing the family’s 75% stake in the company which is currently run by fourth generation Lego owner Thomas Kirk Kristiansen. Chief Operations Officer Bali Padda will take over for Knudstorp, officially becoming the first non-Dane to hold the post. The privately held company is headquartered in Denmark and employs over 18,000 people. Knudstorp, who said he plans to stay at Lego for the rest of his career, joined the company back in 2001, when the company was losing about $1 million a day. Lego just couldn’t compete with an exponentially-increasing digital toy industry. But it turns out it didn’t need to when it made Knudstorp CEO in 2004. Under his leadership, he made changes, booted people, brought in new folks and saw Lego’s revenue jump fivefold. Last year the company fiscally surpassed both Mattel and Hasbro, even with all their Barbie/ My Little Pony/Hot Wheels/electronic toys, to become the number one toy company in the world. No small feat considering that unlike Mattel and Hasbro, Lego pretty much makes just one product with assorted variations: a plastic brick.

Under water?

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With shrinking attendance, decreasing revenue and dwindling profits, SeaWorld announced plans to say a not so warm goodbye to 320 of its employees, both salaried and hourly. It was only back in 2014 that SeaWorld said goodbye to another unlucky 300 employees. The  soon-to-be-former employees will be receiving “enhanced severance benefits” which is fancy talk for some cash and maybe health insurance to tide them over for a little while. SeaWorld has even offered to help them find work elsewhere. How moving. The entertainment company is on a mission to restructure itself in any way possible to keep it from losing any more money than it already has. Of course, cost-cutting always factors in, along with examining how best to improve and streamline the rest of the business. Back in March SeaWorld made the decision to stop breeding Orca whales and also scrapped the shows in which the whales starred. SeaWorld is also blaming Disney and Universal for their disappointing digits, unable to woo away visitors from their PETA-friendlier attractions. Also, there seemed to be a drop in Brazilian visitors, presumably because they remained in Brazil for the Olympics, one might suspect, which apparently affected SeaWorld’s earnings.  Who knew SeaWorld relies on a Brazilian contingent to patronize its parks to help churn out a buck or two?

Grocery Disrupt: Amazon’s Latest Venture Good Become a Store Near You; Tyson’s New Add-Venture; Trump’s Taxing Tariff Tweets

Move over, humans…

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Just when you to start to wonder what else Amazon could possibly do to disrupt and reinvent the retail shopping experience, along comes Amazon Go, an actual brick-and-mortar-store brought to you by the e-commerce giant. Talk about irony. The concept, which is still being tested by Amazon employees, allows shoppers to literally grab food and walk out. No lines. No cashiers. Customers just take their cellphones and tap them on a turnstile to get logged into the store’s network, which in turn connects to the Amazon Prime app, already conveniently installed on their phones. Customers pick items off the shelf and put them into their cart while, with the aid of sensors and artificial intelligence, the same items are also placed in virtual shopping cart. If a shopper decides that they don’t want an item, they simply place it back on the shelf and the item also disappears from the virtual cart. Like magic. Should you crave something a bit more immediate, the store also offers up fresh food, prepared on site. Once customers are done, they simply walk out while the app does all the work, which basically involves adding everything up and then charging respective Amazon accounts. The company has been on the hunt to gain a big presence in the food retail industry, an industry which still fiscally eludes it, and also happens to be one of the biggest retail industries. Ever.  Its fresh food delivery is nice and all, but Amazon’s set its sights on competing with the big grocery players like Wal-Mart, Krogers and Target. The food retailer index took a 1% dive on Amazon’s news while shares of Amazon went up. But established grocers can breathe a very brief sigh of relief easy as Amazon still has a few months before it opens up the store to the public. And humans, fear not. One tech investor said that people are still a very big, necessary component of the retail experience and to scrap the notion that jobs will be lost to machines. Phew.

Speaking of food…

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What to do when you’re a $20 billion company whose prime business is chicken, beef and pork, and you keep losing money to the alternative-meat and fresh-food industry? Why, you set up a venture capital firm, of course. And that’s just what Tyson Foods did in an attempt to compete with a burgeoning industry that is literally eating into its business model. Apparently, plant-based protein and food sustainability is where it’s at these days and if you can’t beat ’em then join ’em by investing in their start-ups. Hence we have Tyson New Ventures LLC, a $150 million venture capital firm that Tyson launched to tap into a market that favors more plant-based and fresh food. The venture capital firm will look to companies that are working on making food-related “breakthroughs” and new innovative technology and business models that relate to food. Tyson already announced its first investment a few months ago, when it bought a 5% stake in Beyond Meats, a company that makes meat-like products. Tyson has got nothing to lose either, considering its last earnings report was nothing short of dismal, and the news that its long-time CEO Donnie Smith was stepping down did nothing to instill confidence in investors. Tyson isn’t the only firm to try out this venture capital idea. Other companies like Campbells Soup, Coca Cola, General Mills and Kellogg’s have all established similar firms with pretty much the same objective: to continue to be a prominent player in a shifting market and industry landscape.  So far this year venture firms have already thrown $420 million into various food and agricultural companies. In 2015 that number approached $650 million.

A day without Trump?

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Over the weekend, President-elect Donald Trump mentioned, in a series of tweets of course, that he wants to get back at U.S. companies who dare shift jobs and production overseas. His preferred revenge tactic would be in the form of a 35% tariff and, strangely enough, his fellow Republicans don’t seem to be on board. The top House Republican, House Majority Leader Kevin McCarthy, does not support Trump’s tariff idea and thinks that the best, most effective way to create and keep jobs in the U.S. is via major tax reform. There seem to be a whole bunch of issues at play with Trump’s (overly) ambitious tax-revenge plans, including the fact that such a move goes against the whole spirit of free trade and has the potential to spark trade wars. And nobody likes wars, whether they involve armed conflict or goods and services. Tax specialists and other assorted experts have also said that it’s fairly debatable as to whether or not Trump’s tactics are even legal.  Republicans are, however, partial to over-hauling the corporate tax code in an effort to keep U.S. companies from fleeing to more tax-hospitable countries. They’d like to cut that pesky corporate tax rate to 20% or less which would allow the U.S. to be more competitive globally. House Republicans are also in favor of imposing corporate taxes to all imported goods and services and scrapping them for exports. But leave it to the critics to argue that changes like that might be seen as violations of the World Trade Organization.  In any case,  it remains to be seen how exactly Trump will get his way, if he does. That’s because tariffs aren’t typically applied to specific companies but rather entire classes of goods. Besides, the president doesn’t get to make those kinds of decisions anyway. That’s for Congress to decide and Congress doesn’t seem, shall we say, receptive, to Trump’s tariff talk.