Alphabet Soup: Google Parent Hits a Milestone; Premium Quality: Tesla Could Get Even Pricier; SEC Gets SCOTUS-Smacked

Whoa…

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Google’s parent company, Alphabet, broke the $1000 per share ceiling and yes, that is a vey impressive feat. Even for Google. What’s more impressive, is that this milestone happened on the very same day that shares of Apple, the world’s most expensive company, was downgraded. Not that Google would be experiencing any schadenfreude, or anything of the sort. In any case, Alphabet can pat itself on the back for becoming the third S&P 500 company to break the $1000 barrier, following in the illustrious footsteps of Amazon – who achieved that milestone just last week – and Priceline. Yes, Priceline. Remember them? To be fair, Google had, once upon a time, hit $1,200 a share but then the stock split. And then it became Alphabet, and the rest is S&P history.  Of course Berkshire Hathaway also trades above $1000. Way above $1000. In fact, if you’re inclined to spending $250,156.00, you could pick up a single solitary share of Warren Buffett’s company. But then again, what’re you gonna do with just one share?

Cry me a river…

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A new Tesla was sounding really good, at least up until the weekend when Automotive News reported that AAA is gearing up to raise its insurance rates on the super-shmancy electric automobiles. But that’s just AAA insurance. The verdict is still out on whether other insurers will follow suit. It’s all because of some very unflattering data detailing Tesla’s higher-than-usual and more expensive claims for both the Models S and Model X. In fact, those pricey claims could mean a 30% premium increase on Teslas, which makes you wonder if the fuel savings is even worth it. Tesla seems to be offended by the new data, calling it “severely flawed” and “not reflective of reality.” Apparently, the data had the audacity to compare a Tesla to a Volvo station wagon. I mean, c’mon? A Volvo station wagon? Not that I have anything against Volvo station wagons. Some of my best friends drive Volvos. And station wagons. It’s just that a station wagon is the last thing on my mind when fantasizing about being behind the wheel of a Tesla. Just saying.  In all fairness, however, Tesla boasts some of the most advanced safety features in their automobiles. Yet, none of that seems to help given the car’s expensive collision costs. In fact, claims for the Model S are 46% higher than other cars, and its losses come in at 315% higher. Yikes. Station wagons aside, those are some very un-sleek numbers. Ironically, Tesla’s medical payment claim frequency is below average while its personal injury protection losses are very low. So take that, Volvo!

Can’t touch this!

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Score one for Wall Street because it looks like the SEC won’t get to grab all those ill-gotten gains like it used to. At least according to the U.S. Supreme Court, which just ruled – in a 9-0 decision –  that the SEC’s use of “disgorgement” now has to face the wrong end of a five year statute-of-limitations. Disgorgment is the act of repaying money that was attained illegally, typically by people and firms in the financial industry.  For this latest Wall Street victory, the securities sector can thank Charles Kokesh, a New Mexico-based investment adviser. It all started back in 2009 when the SEC sued Kokesh for misappropriating funds from his investors. He may not be a saint, but he was ordered to pay $2.4 million in penalties plus another $35 million – which was for disgorgement purposes. The problem, Kokesh and his lawyers argued, was that much of that $35 million disgorgment figure had happened outside a five year statute of limitations. Instead of $35 million, the disgorgment should have been closer to $5 million, which is quite a substantial difference. As for the SEC, this new ruling is going to prove to be a real downer for the agency seeing as how it has since collected $3 billion for disgorgment claims.  Oh well. Maybe it’ll discover a new way around that minor, yet pesky obstacle.

 

Lyft and Waymo = Carpool; Bud Spending $2 billion to Up Its Game; AIG Bets Big on Latest CEO

Self-less…

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In case you were having trouble envisioning a world with driverless cars, you might want to check out Alphabet Inc.’s company Waymo. Waymo, a self-driving car company,  has just teamed up with Lyft, and that should be enough to make Uber more than a little nervous. You might be wondering why a company owned by Google even needs a much smaller company like Lyft for a partnership. But believe it or not, there’s a little quid pro quo going on because since Lyft has the dubious distinction of being the second largest ride service company, it will allow Waymo’s technology to reach even more people than without it. Isn’t that just beautiful? Uber, on the other hand, is looking to develop driverless technology on its own. If you recall, Waymo sued Uber back in February, alleging that Uber stole Waymo’s self-driving technology to build its own fleet.  But with the way things are going for Uber lately, it might be more prudent for the embattled ride-sharing company to focus on its current crop of legal and publicity challenges instead of driverless cars. For the time being anyway.  By the way, Lyft’s deal with Waymo is not exclusive. Which is super important considering that GM is a big Lyft investor and already has its own partnership in place to develop self-driving cars. It’s like legit double-dipping and everybody wins. In fact, come 2018, Lyft and GM will be set to deploy and test thousands of self-driving cars. Yikes!

Competitive beer…

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It might be hard to believe but the King of Beers is not looked upon as the royalty it once was. And so, its parent company Anheuser-Busch InBev NV is plunking down $2 billion to try and fix that issue. The plan is to make a substantial, lucrative foray into new categories, while at the same time boosting its flagship brands which have been staring down the wrong end of increased competition.  The money will be spent over the next four years, using approximately $500 million per year. In case you were thinking that $2 billion seems like an awfully bloated  – no pun intended – number to spend on improving a beer brand, consider that beer is a more than $107 billion industry and no self-respecting beer company wants to lose ground in a market like that.  And make no mistake, beer has been losing ground lately with not as much of it being consumed like in years past. Hard to believe. I know, but various types of other alcoholic beverages have been flooding the market in recent years and consumers are digging them. Which leaves companies like Anheuser-Busch scrambling to reclaim its foamy territory.

No pressure or anything…

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Maybe the seventh time’s a charm for AIG, which just announced it’s coughing up $12 million – and then some – to pay its newest CEO, Brain Duperreault. By “then some” I refer to an additional 1.5 million stock options and a $16 million pay package all based on the hope that Duperreault will finally be the one to turn AIG around. Did you catch that? He’s getting all that and he hasn’t sat at his new desk yet. The last CEO, Peter Hancock, left in March because he wasn’t feeling the love, or rather investor support, including from the one and only Carl Icahn. But Brian Deperreault just might have what AIG’s been looking for all these years, well at least since 2005. He’s no stranger to AIG, having worked there as a deputy way back when. He’s coming over from Hamilton Insurance, and before that he was at Marsh & McClennan Cos. earning solid reputations at both firms. As for his first order of business: achieve stability in a company that has seen too many high-level departures, four straight quarters of losses and high claims costs. Good luck with that one, Mr. Duperreault. You’re gonna need it.

France Says Non Vive La Uber; Smuckers Jells Up Some Tasty Earnings; Is Larry Page Channeling George Jetson?

Let them eat cake…

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Uber, the multi-billion dollar company that operates in 60 countries and can’t seem to stay out of legal trouble is making headlines, yet again. The ride-sharing app just got slapped with an almost million dollar fine – half of which was suspended – for running an illegal taxi service in France. But that fine is the least of Uber’s problems considering it just raised another $3.5 billion in funding. The French court took aim at Uber POP, an app that connects riders with nonprofessional drivers who use their own cars to transport passengers. Licensed taxi drivers in France took exception to the app and put pressure on French officials to bid adieu to Uber POP by getting the service suspended there last year. Last week, a German court also gave a big nein to Uber, upholding a previous ruling that banned Uber POP there for violating local transport laws. Besides Uber getting slapped with a big fine, two Uber execs also got hit to the tune of 50,000 euros, which is nothing compared to the five years of jail time and million dollar fine that they could have received. This case marks the first time that actual executives from the company had to stand trial. The employees were found guilty of deceptive commercial practices, acting as accomplices in operating an illegal transportation service and, just for good measure, violating privacy laws. That’s in addition to being held responsible for inciting others to break the law by employing them, causing riots and taxi strikes. However, this latest ruling is far from the company’s first legal tussle since it was founded in 2009. The company continues to grapple with numerous regulatory issues in Europe and Africa and there is a long road ahead. And in case you didn’t see it coming, Uber is appealing the French court’s ruling.

I don’t think you’re ready for this jelly…

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It’s just jelly to you but to its shareholders, it’s a profit of $191 million. I am talking about J.M. Smucker Co., whose latest earnings positively dazzled Wall Street, sending shares jumping 25% today, to a record high of $142.27. Of course, it wasn’t just an increased urge for PB&J’s, with Smucker’s Jif peanut butter, that sent those sales soaring. Dunkin’ Donuts Brand Coffee, Folgers Coffee and…wait for it…pet food figured prominently in Smucker’s epic 39% profit surge. Smucker’s coffee products account for the company’s biggest market and pulled down a 9% increase in the fourth quarter, while its pet foods, that include Meow Mix and Milk-Bone, accounted for a third of all sales. It helped that the company offered up plenty of promotions to drive demand for its K-cup offerings. The company’s acquisition of Big Heart Pet Brands last year also helped a lot to drive up the impressive earnings. Revenue surged 25% to $1.81 billion when analysts only expected $1.75 billion and Smucker’s added $1.44 to its shares when predictions were only for $1.20. Those earnings were especially welcome since last year at this time, the company posted a 41% profit loss.

Just because he can…

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Alphabet CEO, Larry Page is into cars. Especially if they can fly. These days, the Google co-founder is funding two companies that are currently building and tweaking prototypes of small, all electric planes that can take off and land similar to helicopters. Just like the flying saucers you saw on the Jetsons. Page has already plunked down $100 million into Zee.Aero, a start-up launched in 2010, that has been testing two prototypes in Hollister, California. But why fund just one company when you have the means to fund two? That’s why Larry Page has also poured money into Zee.Aero competitor, Kitty Hawk, led by Sebastian Thrun, the Google X founder who is also behind Google’s self-driving car program. Coincidence? I think not. But it’s sure to be a crowded race to the finish as there are at least a dozen other companies around the world that are hoping to churn out a similar prototype, well before Larry Page’s darlings.

 

Apple/Google Fiscal Smackdown; Michael Kors Isn’t Down or Out!; Ya-Who is Suing Tech Giant?

Heel-nipping…

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It was bound to happen. Or was it? In any case, Google’s parent company Alphabet reigned supreme, albeit briefly, as the world’s most highly valued company, just edging out Apple. It happened when shares of Google’s parent company Alphabet jumped, giving it a market valuation of $533.4 billion. That figure narrowly pushed aside Apple’s market cap of $532.7 billion. But Alphabet still deserved that boost, if only for just a moment, seeing as how it nailed its earnings. Revenue for Alphabet jumped almost 20% to $17.3 billion while analysts didn’t even expect Alphabet to get past $16.9 billion. The company also took in a profit of $8.67, once again beating expectations of $8.08. Those earnings were fueled in large part by its mobile ad sales figures. It was news of those fabulous earnings that sent shares of Alphabet up 4.2%, and even hitting an all-time high of $784.77, which then caused its market cap to slip past Apple. And then, just like that, it was over, as shares of Alphabet dipped leaving Apple to once again reclaim its spot as the world’s most highly valued company.

S-Kors!

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Michael Kors had a very good holiday season (in a backhand sort of way) judging by its recently released earnings. So just how good were they? Well, the company’s drop in comparable sales was much smaller than expected. Got that? So yeah, there was still a drop, it’s just that the drop wasn’t that bad. Phew. Those sales, by the way dropped only .9% even though analysts predicted Michael Kors would drop 4.5%. What a way to boost investor confidence. Sort of. But it’s still good, even in that ironic kind of way, because investors were starting to wonder if Michael Kors had the capacity to grow any more, or did it already go as high as it could go way back when? Naturally, shares jumped a whopping 19% on the very exciting, very un-disappointing news and gave those shares their biggest one-day percentage gain in two years. Company revenue also picked up by 6.3% to $1.4 billion, beating predictions of $1.36 billion. Profit, however, fell to $294.6 million, from the $303.7 million it posted at the same time last year. The company  added $1.59 per share, but once again, analysts only expected $1.46 per share.

Ya-who?

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As if Yahoo didn’t have enough problems, now the tech company is facing a nasty lawsuit. The suit claims, among many other things, that Yahoo was biased against men – specifically, the company managers that govern the “Media Org.” The former employee also took issue with the company’s QPR – as in Quality Performance Review charging that the ratings system favored women. But wait – there’s more. The lawsuit then charges that Yahoo didn’t give adequate warning in the wake of mass lay-offs and violated the WARN Act. The WARN Act is a law requiring companies to give 60 days notice prior to mass lay-offs.  The lawsuit is being brought by ex-Yahoo employee Gregory Anderson. Anderson worked at Yahoo for four years and served as an editorial director. Apparently, he was part of a large group of people – 600 at that – who were laid off around the same time as him. So what’s Anderson hoping to get out of this, should he miraculously prevail against an immensely powerful and influential company? Well, the usual unspecified damages, back pay and benefits, plus $500 for every single day where he was entitled to receive warning about impending mass lay-offs. Hmmm, I wonder what the other 11,000 employees who were laid off between 2012 and 2015 will do if Anderson actually wins? Naturally Yahoo did not comment on the lawsuit. But you know what it will comment on? It’s earnings, which came out today and once again, more mass lay-offs are coming down the pike.

Google’d: Big Search Engine News; How Crude: Dow Gets a Pick-me Up From Oil and Omaha; Postally Spent

If you google alphabet…

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Image courtesy of blackzheep/FreeDigitalPhotos.net

In case you missed it, there’s a new head honcho at Google. Okay, maybe not as head honcho-y as Sergey Brin and Larry Page, but Sundar Pichai just became the new CEO of Google and now holds the keys to that very magical kingdom. There is also a little bit of restructuring going on at the almighty tech company. Okay. A lot. You see, Google has now become a subsidiary of a new publicly traded company called Alphabet Inc. – which will soon be trading under that name. Brin and Page are at the top of that executive food chain and, no doubt, always will be. Pichai is no rookie, though. He’s been at Google for well over a decade and his last role was as head of Android. So he’ll probably settle into his new digs quite comfortably. Apparently, Wall Street likes the new arrangements too. Google’s stock surged 6% on the news.

Take a dow…

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

A big shout out goes to Warren Buffet today, who together with rebounding oil prices, got the dow to shake off a fiscally ugly seven day slump. First, crude finally climbed 2% to a respectable $44.74 a barrel after falling below a very unflattering $44 a barrel on Friday. Then the Oracle of Omaha reminded the world why Berkshire Hathaway is, in fact, the happiest place on earth (sorry Mickey) when his company announced a $37 billion deal to buy Precision Castparts. The company was purchased at a 20% premium, but no doubt worth every…billion. Precision Castparts took in $10 billion in sales with a $1.5 billion profit in 2014.

Going postal…

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Image courtesy of cooldesign/FreeDigitalPhotos.net

It used to be that postal workers were unstoppable in their pursuit of mail delivery. As the saying goes: “Neither snow nor rain nor heat nor gloom of night…” Noticeably absent from this list is Congress, which just might be the one thing that could put a crimp in those mail deliveries. You see, the United States Postal Service just announced its quarterly earnings. It lost $586 million. But, that was still a major improvement over last year at this time when the agency took a $1.5 billion hit. Ouch. April-June, however, typically sees lower revenues, so that figure wasn’t totally alarming. Part of the reason why USPS didn’t lose as much is because of how the interest rates that are tied into worker compensation expenses. Go interest rates! Now let’s get back to Congress. Strangely enough, even though the USPS doesn’t receive any tax dollars, the agency is still under congressional control. Under that congressional control we find the Postal Accountability and Enhancement Act. Say that five times fast. The “Act” stipulates that USPS must pay between $5.4 billion and $5.7 billion toward future retiree health benefit costs. Until 2016. Unfortunately for the USPS, there have been a lot of changes in the mail and package delivery industry and the agency is facing stiff competition, including from many start-ups. Congress has yet to acknowledge these shifting postal tides and draft new legislation that would tweak that multi-billion requirement to a more attainable fiscal goal. Until that happens…well, it’s Congress so don’t hold your breath.