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.

GE is Not too Big Anymore. To Fail, That is.; Diamonds Need a New Best Friend; Kellogg’s Wants to Make Cereal Great Again;

On your own…

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You can rest easy now as GE no longer poses a systemic threat to the financial stability of the United States. Phew. Three months ago, GE officially requested to unload its “Too Big to Fail” designation and voila! Shedding close to $200 billion in assets helped it achieve that lofty goal. Unfortunately, none of those dollars made their way to me. But I digress. With the Financial Stability Oversight Council voting unanimously to remove the label, officially called “Systemically Important Financial Institution” (or SIFI if you’re nasty), GE no longer requires lots of added, and presumably unwanted, scrutiny from the Federal Reserve. So now, nobody cares if it fails. Well, maybe just its employees and shareholders. And if it does (but why would it?), the government won’t have to throw at it a $182 billion taxpayer-funded bail-out like it did for AIG. Boom.

A girl’s best friend?

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It’s called the Lesedi la Rona and is the second biggest diamond mined. Ever. Clocking in at 1,109 carats, about the size of a tennis ball, so they say, this behemoth of a stone is only second to the Cullinan diamond that was discovered more than one hundred years ago. The 3,106 carat Cullinan, however, was cut cut into several polished stones and now shares a very posh home with the British Crown jewels. The same fate could not be said for this latest find. Last night Sotheby’s tried to auction the darn thing off, but the 3 billion years old diamond couldn’t even clear its $70 million reserve price. The rock was expected, according to some estimates, to fetch about $84 million with the bidding starting at $50 million. The bidding went up – “in strained pauses” – in increments of $1 million. But after fifteen minutes, the highest bid only came in at $61 million. Lucara, the Canadian company that owns the precious rock, saw its stock fall 18%  after the news that it failed to sell. Sadly, for the diamond industry anyway, prices for rough diamonds have fallen 18%, the most its fallen since the fiscal crisis of 2008.

Snap, crackle, pop…

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With cereal sales hitting the skids, falling by 1% this year, Kellogg’s has come up with a way it hopes will make cereal great again – cereal cafes. For about double the price of your average box of Apple Jack’s you can walk into Kellogg’s Cereal Cafe in Times Square (where else?) and order yourself a hearty bowl of Froot Loops accompanied by mini marshmallows and passion fruit jam. Yeah. You read that right. Or how about some Rice Krispies doused in green tea powder, fresh strawberries and ice cream. You didn’t see that one coming did you? Sounds swanky and that’s definitely the idea. Cereal sales have gone down 2.4% in the past four years, getting overshadowed by grab-n-go foods and being shunned by that pesky group we call Millennials. Cereal sales fell to about $10 billion in 2015, which might seem impressive except that way back in 2000, cereal sales came in close to $14 billion. According to research firm Mintel, 40% of Millennials could not be bothered with the clean-up required to eat a bowl of cereal and milk. However, 82% of that group still see cereal as a great snack sans the milk. Go figure. Next time you get the urge for a bowl of Special K mixed with Frosted Flakes, pistachios, lemon zest and thyme at 8:00 at night, then you’re in luck. The cafe, which opens July 4, will serve breakfast from 7:00 am until 11:00 pm.

Standard & Poor’s Overrated Ratings Settlement; Spirited Numbers for Whiskey and Bourbon; Who Will Radio in on RadioShack?

Poor ratings system…

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Image courtesy of suphakit73/FreeDigitalPhotos.net

It’s shaping up to be an expensive week for Standard and Poor’s, the ratings company owned by McGraw Hill Financial Inc. After two years of legal wrangling, where the Department of Justice accused the S&P of defrauding investors, S&P agreed to pay for $1.5 billion in a settlement. According to the lawsuit, S&P made sub-prime mortgages sound way better than they actually were, generously over-rating them during the height of that hard-to-forget financial crisis of 2008. One of the juicy little highlights from the lawsuit, as taken from an excerpt from an instant-messaging exchange between two of its analysts, goes a little something like this: “It could be structured by cows and we would rate it.” So what were they trying to say about our friends in the bovine community? Hmm. While S&P gets to avoid admitting actual wrongdoing, as per the terms of the settlement, it will be shelling out $687.5 million to the DOJ and another $687.5 million to 19 states and the District of Columbia. S&P said the DOJ was only coming down on them because it downgraded the US sovereign debt from AAA all the way down to AA+, but the DOJ says NOT! In a separate lawsuit, S&P  reached a settlement with pension fund, Calpers (California Public Employees Retirement System), also a victim of S&P’s too-generous sub-prime mortgage ratings system.

I’ll drink to that…

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Image courtesy of artur84/FreeDigitalPhotos.net

It’s been a very good year for bourbon and whiskey as exports of these spirited spirits topped the $1 billion mark. Even here in the US, sales for Kentucky bourbon and Tennessee whiskey grew, with revenue for both rising 9.6% to $2.7 billion and 19.4 million cases of the stuff being scooped up. 19.4 million cases? Who are you people drinking all this? But it’s the premium selections that are really hitting it big with drinkers…er, consumers, as revenue in that category is up over 19%. All this while beer seems to be experiencing a decline on the whole by 4% in the last five years, with Budweiser losing 28% for that same time frame, despite those super Superbowl ads. Craft beer, however, tells a different story as that tasty category is experiencing an uptick. Some analysts are even thinking all these increasing numbers come courtesy of millennials, who seem to prefer high-quality spirit versus the stuff their parents enjoy. By the way, it should be duly  – and might I add, fondly – noted, that Kentucky produces 95% of the world’s bourbon supply. Go Kentucky!

Shacked out…

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Image courtesy of cool design/FreeDigitalPhotos.net

Rumors are swirling as to who will emerge and scoop up RadioShack as bankruptcy looms near for the company that was just never able to compete with the behemoth that is e-commerce. The New York Stock Exchange had suspended trading of the 94 year old company on Monday, with shares tanking down to $0.14 a share in after hours trading. So will it be Sprint who decides to take up some of RadioShack’s retail leases? The company has 4,300 stores in the US, alone. Or will Amazon add the chain to its arsenal and increase its brick-and-mortar presence in the world? Word on the street is that Jeff Bezos might do just that as a way to showcase some of the gazillions of products that Amazon has to offer, for the right price, of course.

Electrolux Sucking Up GE Appliance; Soupy Sales; So Long, Boneless Chicken Sandwich Innovator

Suck it up…

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Image courtesy of bplanet/FreeDigitalPhotos.net

AB Electrolux, the parent company of US brands Electrolux and Frigidaire, did a little shopping today when it picked up GE Appliance for the bargain basement price of $3.3 billion. It is the biggest purchase Electrolux ever made. The two companies combined are expected to pull in $23 billion in total sales which is a ridiculous amount of ovens and dishwashers, if you ask me. It’s also expected to save the company a whopping $300 million. What it won’t likely save are a number of jobs that tend to get lost following a business decision such as this.

Not so tasty earnings…

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Image courtesy of tiramisustudio/FreeDigitalPhotos.net

Apparently is soup is not good food, after all. That is, if you ask Millenials whose never-ending quest for tasty adventures and lack of loyalty seem to have allegedly affected Campbell Soup Co.’s less than flattering earnings. Campbell’s, which also owns Pepperidge Farm and V8 (should have had one) came out with fourth quarter earnings and while sales did rise 7%, to $1.85 billion, analysts were expecting $1.87 billion. Is it really all the fault of those Millenials? Hmmm. However, accroding to Campbell’s president and CEO Denise Morrison, the food industry is experiencing profound “change and challenge.” To me that sounds like code for it’s all the Millenials’ fault. But you could also ask more traditional comapnies like Pepsi and McDonald’s who have been losing ground to brands like Chipotle and whatever trendy drink those pesky Millenials favor this week. However, on the bright side, Campbell’s bright side, that is, shares are up almost 3% and its coming out with more than 200 new foods. So clearly there are still quite a few people left who think soup is indeed a good food.

RIP…

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Image courtesy of tiverylucky/FreeDigitalPhotos.net

We bid farewell to yet another revolutionary. This time it’s to Truett Cathy, 93, the founder of Chick-fil-A. Better known these days for its opposition to gay marriage than for its boneless chicken sandwich and classic southern cuisine food that catapulted it to fame. The first Chick-fil-A graced the world back in 1967, in Atlanta and has since grown to more than 1,800 locations. Born into poverty, Cathy built up the chain to more than 1,800 eateries in 39 states, landing himself on the Forbes’ list of billionaires. The chain, also famous for the fact that it is closed on Sundays, posted more than $5 billion in sales in 2013.