Banking Scandal or Ben Affleck Movie?; Airline Ranks and Tanks; Drones to the Rescue

Who gets the movie rights?

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The latest scandal to come out of the banking world has its very own name – “The Panama Papers.” It seems a Panamanian law firm called Mossack Fonseca helped a slew of politicians, celebrities, businessman etc. to create offshore accounts and shell companies for the last forty years. It’s estimated that 500 banks all over the world enlisted the help and resources of Mossack Fonseca to help them set up these shell companies since 1977. Fast forward to a year ago when an anonymous source leaked some 11 million documents to Germany’s biggest newspaper, Suddeutsche Zeitung, which then enlisted the help of the International Consortium of Investigative Journalists. The ICIJ shared information and hunted down leads for over a year in an effort to publicize “The Panama Papers” that contain information on some 214,000 offshore companies. The documents also have plenty of unflattering details about Russian President Vladimir Putin, FIFA officials and over 30 other people and companies that are blacklisted by the U.S. government. These include people indicted for corruption and have ties to drug trafficking and terrorism. Strangely enough, Mossack Fonseco only seems to know the true identities of just over 200 companies out of the over 14,000 that the firm managed to incorporate just in the Seychelles. Now banks across Europe find themselves under the microscope as regulators try to establish if and how those banks found ways to hide assets. The Kremlin, ironically, is calling the allegations “a series of fibs” and thinks its just an attempt to thwart Putins chances in upcoming elections, which are said to be rigged anyway. FIFA, another group that could use a lesson or two on business ethics, called the allegations “ridiculous.” To be fair, it’s not clear to certain people that any actual illegal activity occurred. Of course the banks denied any wrongdoing while Mossack Fonseca calls itself the victim of a data breach.

Bumpy landing…

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Results are in for the Airline Quality Rating and you might just be surprised. Or not. Virgin America took the top spot, even earning the best score in the baggage handling rate category. While Virgin America no doubt takes pride in getting the best ranking, Sir Richard Branson is not exactly celebrating considering Alaska Airlines is buying him out for $2.6 billion. Alaska Airlines, by the way, is paying $57 in cash per share, – a 47% premium over Virgin America’s closing price on Friday. Incidentally, Alaska Airlines came in fifth, though it was ranked highest when it came to fewest customer complaints. But it is anyone’s guess how this buyout will impact Virgin America’s rating next year. In any case, JetBlue came in at number two with Delta, shockingly enough, earning a very respectable third place ranking. Overall industry performance improved slightly. Really slightly. Six carriers actually improved, while another six did not. Spirit came in dead last, but in all fairness, Spirit is new to the list. Also in all fairness, Spirit ranked the highest in customer complaints, which makes sense considering that its culture is best described as “take it or leave it.” Amerian Airlines plunged three spots from last year to number 10. Which sounds about right. American, by the way, is the largest carrier in the world, just not on the United States. United is and yet it doesn’t exactly boast an enthusiastic following. Hawaiian Airlines ranked number one for on-time performance. And that’s really great. Especially if you’re going to Hawaii. Which unfortunately, I am not.

Start-up STAT…

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Bay Area start-up Zipline just scored $18 million in funding  – but not from just any investors.  Microsoft co-founder Paul Allen and Yahoo Founder Jerry Yang saw fit to plunk down tons of cash for the drone company but the question is: what makes this drone company different from all the other drone companies? At least for Paul Allen and Jerry Yang. I suppose it has something to do with the fact that Zipline founder Keller Rinaudo is using his drone technology not for delivering books and groceries, but rather to save lives in third-world countries. Zipline’s drones will be delivering blood and much-needed medical supplies to remote, hard-to-reach areas in Rwanda. Rinaudo, a Harvard-trained scientist said that there is “nothing more precious than blood and medicine” and plans on making those items much more accesible than they have ever been. He also wisely pointed out: “Getting medicine to remote places is both a huge market and a global challenge.” As of now places in Rwanada get resupplied a few times a year. But Rinaudo is planning for his drones to make up to 150 drops a day come July. The government of Rwanda is footing the bill to make that happen. And unlike many other types of drones that can’t operate properly in inclement weather, Zipline’s drones can, are able to carry up to 3.5 lbs. and fly within a 75 mile range. Considering that Rwanda is one of the poorest nations in the world, it will become the first country to employ commercial drone delivery, all while Amazon and other companies continue fighting regulatory battles and FAA hurdles.

 

Latest Lousy Jobs Report; Wendy’s Is Losing its Buns. Sort of; Are Commercial Drones Finally Taking Flight

Book of jobs…

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The private sector added 169,000 new jobs but that’s nothing to celebrate. Well those 169,000 people who will now be collecting paychecks can celebrate but that’s about it. While that number seems significant, and in some ways it is, it is actually the lowest number we’ve seen since January of 2014. Experts expected growth of up to 224,000, as last month’s job growth came in at 175,000. Celebrating occurs only when the numbers go up. Drops like these don’t necessarily mean the economy is about to head south, but it can suggest periods of sluggish growth are on the horizon. This gloomy news is brought to us by ADP, the largest private payrolls processor in the United State and they’ve got the dirt on the digits. But we’re still waiting on the U.S. Labor departments figures, due Friday, which are apparently more detailed and include both the public and private sectors, and may even supply us with better figures. And on the bright side, April’s growth rate wasn’t nearly as abysmal as March’s growth of just 126,000 jobs. So there’s always that heart-warming fact to fall back on.

Where’s the buns? 

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Wendy’s restaurants just came out with its earnings and announced it will be selling 640 restaurants. Taking a page from McDonald’s playbook, Wendy’s is hoping that franchising costs will help the chain take in between $400 million to $475 million. The restaurant plans to sell 380 restaurants in this year alone. So if your lifelong dream is to own a Wendy’s, this might be your chance. Wendy’s is definitely having a better quarter than McDonald’s, as the company, famous for its freckle-faced braided redhead, and I guess its food too, took in first quarter earnings of $27.5 million and 7 cents a share, just barely beating analysts expectations of 5 cents a share. However, revenue was down almost 11%. Oh well. Maybe next quarter. Wendy’s also announced that it’s selling its bakery operation in Zanesville, Ohio, which conveniently supplied the chain’s buns. While the folks in Zanesville might not be thrilled, the folks on Wall Street were and sent shares up over 7%. Shares of the company are up over 30% in the last twelve months so clearly someone over there knows what they’re doing.

Droning on and on…

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Drone enthusiasts, rejoice! FAA Administrator Michael Huerta announced that the FAA is going to figure out how drones and other aircraft can share all that airspace safely. At the Unmanned Systems 2015 Conference, Huerta said, “Integrating unmanned aircraft into our airspace is a big job, but it’s one the FAA is determined to get right.” This exciting mission will be done through the Pathfinder Program, which will study commercial drones and all the great and lucrative ways they can be used. For instance, CNN wants to see how to gather news with drones in heavily populated areas. A company called PrecisionHawk wants to test it out for the agricultural industry to see how drones can help monitor crops. Then there’s Berkshire Hathaway company, BNSF, a railroad company, that wants to use drones to inspect tracks. Such clever usage. Surprisingly mum on these new developments was Amazon, who has long wanted to use drones to make deliveries. Amazon, if you recall, wasn’t too happy about the FAA’s rules that were proposed in February and let the FAA know it. And if you think the use of drones will take jobs away from actual human beings, then check out the reports from the  Association for Unmanned Vehicle Systems International which estimates that thousands of jobs would be created and  generate hundreds of millions of dollars. And judging by last month’s Labor report, this drone “thing” just keeps sounding better and better.

Kraft Ketch-es Up; Amazon Wants FAA to Start Droning Around; Lumber Liquidators’ Slight Rebound

Ketchin’ Up…

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HJ Heinz, as in, ketchup is teaming up with Kraft foods, as in Mac & Cheese and Philadelphia Cream Cheese, to become the world’s fifth largest food and beverage company. And just who is behind this master plan for food domination? None other than everybody’s favorite (and only) Oracle of Omaha, Warren Buffet – well, Berkshire Hathaway really, and Brazilian Venture Capital firm 3G. The two entities are throwing $10 billion at the deal, which seems like a relative bargain since the merger is expected to generate $28 billion in annual revenue.  Of course, federal regulators still need to give their seal of approval, along with Kraft shareholders. But considering that the stock went up a whopping 32% on the news I’m guessing they won’t mind. Plus, if you are one of the lucky shareholders, then look out for a cash dividend of $16.50 per share, not to mention a 49% stake in the new venture.

 Droning on and on…

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Amazon is taking on the FAA, telling them they lack the “impetus” to develop drone policies in a timely manner – said in the nicest possible way, of course. The e-commerce giant wants the agency to move quicker on issuing permits for drone testing. Like a lot quicker. Like before the model drones Amazon plans to use for its Prime Air Delivery Service become obsolete. Oops. Too late. Even Senator Cory Booker agreed with Amazon saying that if the FAA had been around during the time of the Wright Brothers, then commercial flying would have literally never taken flight. Then there are all those restrictions associated with the testing. For instance, drones can’t fly higher than 400 feet, and in some cases 200 feet, and the drones must also always be in view of the pilot. Where’s the fun in that? Amazon, and several other companies are wondering why it takes so long for the U.S., on average, six months longer to issue these permits when in other countries it takes about 1-2 months?  The drone industry is also irritated by it all seeing as how drone delivery is apparently way more economical, faster and cheaper with the added bonus of less traffic and pollution? Who doesn’t like that? But to be fair, the FAA has some not-so-minor concerns about the potential for drones to collide with commercial carriers carrying passengers. Not to mention the potential loss of link between a drone pilot and the drone.

Lumbering on…

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Lumber Liquidators stock went up today by 8%, which actually came as somewhat of a surprise since the stock is down 59% for the year after a scathing “60 Minutes” report that found high levels of formaldehyde in its laminate flooring from China. The reason for its little upswing is presumably because the U.S. Consumer Product Safety Commission has entered the fray by launching a federal investigation into the claims, also involving the EPA, CDC and Federal Trade Commission. Lumber Liquidators is said to be fully cooperating in the investigation. No kidding. But don’t bother holding your breath for results – they won’t be in for several months. Lumber Liquidators, by the way, says “60 Minutes” used a test that is considered unreliable, by Lumber Liquidators standards anyways. The company, which has 350 locations throughout the United States, has graciously offered to come test the flooring in your home. If high levels of formaldehyde are found to be present, then rest assured…Lumber Liquidators will do more testing. If those tests keep coming back positive then yeah, they’ll finally agree to replace the questionable, carcinogenic flooring.