It’s All About the Brexit; Gearing Up for Some Star Spangled Traveling; Chipotle Wants to Reward You

The British are leaving, the British are leaving…

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Image courtesy of Chris Sharp/FreeDigitalPhotos.net

The Brexit vote continues to cause trouble and it probably will be awhile before it stops. Janet Yellen has canceled her appearance at a bank conference in Portugal that was organized by the European Central Bank. The Fed chief was supposed to speak on a panel with the Bank of England’s Governor Mark Carney and ECB president Mario Draghi. Carney now has more pressing matters to attend to, as does Draghi, who is now heading to Brussels for a summit with EU leaders to brief them on the impact of the Brexit vote and hash out a response to the U.K. referendum. The S&P yanked its AAA credit rating on the UK since the index feels that “this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the U.K.” Ouch. On Friday, the pound plunged to its biggest one day drop EVER, as Barclays Plc and the Royal Bank of Scotland Group Plc had their shares halted as a result of the plunge. Meanwhile, Treasury Secretary Jack Lew doesn’t get the feeling that there is a financial crisis brewing. Well, at least he said as much on CNBC recently. And if Jack Lew says it, then it’s good enough for me. I think. However, analysts aren’t as optimistic about the British economy and think the “Brexit” vote just might put the UK in a recession, besides dealing a major blow to European economic growth. Those analysts feel that the U.S. will also take a hit or two as well, but without any recession drama. And in case you were counting on a rate hike anytime soon, don’t. The Brexit vote put the kibosh on it and that’s not necessarily a good thing.

Brake for it…

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Image courtesy of Chris Sharp/FreeDigitalPhotos.net

According to AAA, 43 million Americans are expected to travel this holiday weekend, beginning Thursday, June 30 thru Monday July fourth. That number is 5 million more than the amount of travelers on Memorial Day weekend and 1.2% more than the amount of travelers from last year’s holiday weekend. 84% of those traveling – 36.3 million, if you please – will be doing it by car, and if the the thought of heavy traffic congestion makes your skin crawl, then you can thank low gas prices for the increased congestion. The national average price for a gallon of gas is coming in at just $2.31, its lowest price since 2005 and 17% and 47 cents lower than it was last year at this time. But at least the traveling and the money being spent on those trips is good for economic growth. Americans saved a whopping $20 billion on gas spending this year so what better way to make up for it than by getting out on the road and commuting at least 50 miles from their homes. On a darker note, because of the increased traffic, the National Safety Council is expecting 450 auto-related deaths and 53,600 car-related injuries. But at least airfares will be lower and maybe even a safer way to travel this holiday weekend.

Muy caliente…

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Image courtesy of Piyachok Thawornmat/FreeDigitalPhotos.net

Chipotle is biting the jalapeno-laced bullet and will now be offering up a rewards program. Yeah, that’s news. Before it’s food bore the makings of e. coli, salmonella and norovirus, Chipotle was a veritable rewards program snob, refusing to implement one. But I guess a slew of food-safety scandals and the fact that shares of the company have lost more than a third of their value since October gave the fast-food chain a fresh – no pun intended – perspective on its economics. Hence, we are now introduced to the Chiptopia Summer Rewards Program. It’s not clear if Wall Street feels this move is strategic as Chipotle does as the stock went down today almost 3%, closing at 388.78.The rewards program will begin July 1 and run until September. However, should the rewards program prove rewarding for Chipotle and actually help it reclaim any of the glory it lost last year as a result of its rash of food safety issues, then expect the rewards program to stay put. But diners beware as this loyalty program is not like other loyalty programs that require you to accrue points or spend a certain amount of money. Instead, Chiptopia rewards its customers by the amount of visits that they make in a given month. There are three levels customers can reach: mild, medium and hot. I will spare you the sordid and complicated details. However, in order to get those points customers will always need to purchase an entree with their order. Should they achieve the illustrious “hot,” status having visited Chipotle  eleven times – in one month -, then they get to enjoy three free burritos, which by the way, will count towards more rewards.

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The Labor of LIBOR; Coal Company Not Energized by Obama’s New EPA Policies; Disgraced Bitcoin-er Busted

Don’t bank on it…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

From the most hallowed banking institutions of UBS and Citigroup, disgraced banker Thomas Hayes will now make his way to the halls of a correctional institution, all thanks to his role in the LIBOR scandal. On trial in the UK, Hayes pleaded not guilty, although jurors felt otherwise and now gets to spend the next fourteen years in prison contemplating his misdeeds. The U.S. already charged Hayes back in 2012 for his misdeeds at UBS and the Royal Bank of Scotland and a number of banks already had to cough up $9 billion in penalties over their involvement in rigging the benchmarks. Hayes was found guilty on all 8 counts of conspiracy to defraud. And it’s not everyday a trader gets convicted for rigging rates on the London Interbank Offered Rates. In fact, Hayes has the dubious distinction of becoming the first person to be convicted in the scandal, which makes sense, since he was apparently the ringleader for more than a dozen other brokers and traders who participated in messing with global rates for mortgages, loans and credit cards just so that they could profit. Those misdeeds affected some $350 trillion in global financial markets. Including ours. Talk about rude.

So un-coal…

Image courtesy of dan/FreeDigitalPhotos.net

Image courtesy of dan/FreeDigitalPhotos.net

Battered and broken is just one way to describe the coal industry as President Obama just announced the latest EPA policies which are supposedly going to reduce greenhouse gas emissions 30% by 2030. And of course that is splendid news. Just not for Alpha Natural Resources who made its own announcement today: bankruptcy. The natural gas boom combined with the new EPA rules have dealt quite the blow to the second biggest coal producer. While the company has over $10 billion in assets with around 8,000 employees, it also needs to ditch some $3.3 billion in debt. The once powerful coal supplier had to close more than 80 mines since 2011 as the shale boom began to take effect. And who can blame shale? After all, it is a cheaper, less polluting energy source.

Bit-fraud…

Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Mark Karpeles, the disgraced head of collapsed Tokyo bitcoin exchange, Mt. Gox, has, un-shockingly, been arrested in Japan on suspicion of (gasp) fraud. Who would have thought. Apparently, Karpeles falsified documents and manipulated the computer system over thirty times in an effort to fatten up his bank account by about a million bucks. If the 30 year old Karpeles is found guilty, he might just become pen pals (no pen-pun intended) with Thomas Hayes, except the French-born Karpeles would be idling his incarcerated says in Japan. If you recall, 850,000 bit coins – equal to about $480 million at the time –  went missing under Karpeles’ watch. But wouldn’t ya know it, 200,000 bit coins were subsequently recovered by Karpeles, who must have remembered where he had apparently misplaced them. As for the remaining missing cyber-currency, well, Karpeles conveniently blames the theft on a “bug” from a cyber-attack. You don’t say…

Banks Behaving Badly Get Slapped with Billion Dollar Fines; Target’s Earnings Bullseye; Hormel Ears on All That Spam

Busted…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The fun is over for a group of foreign exchange traders who brazenly dubbed themselves “The Cartel” and went about manipulating the price euros and dollars to score some extra cash. Now, because of them, five major banks have to shell out over $5 billion in settlement fees. Citicorp, J.P. Morgan Chase, Barclays and Royal Bank of Scotland all admitted their fiscal misdeeds that began in December of 2007. UBS pleaded guilty to one count of wire fraud and has to pay over half a billion dollars in fines. But the Swiss bank dodged some other penalties and gained conditional immunity for being the first to report on the criminal activities taking place. These forex traders would share confidential information about their clients’ orders and then plan out trades that would conveniently boost their own profits. Entrance into the group was by invitation only and one participant said at one point, “If you ain’t cheating, you ain’t trying.” Charming, huh? The resourceful plan proved quite profitable until January 2013 when investigators finally honed in on what was going on. Even though no criminal charges were brought, as per the settlement agreement, investigations into other foreign exchange issues are not going away any time soon.  And of course, plenty of traders were given their walking papers. As for the movie rights…well, I suppose you can expect to see this play out in theaters within a few years. No sense in Hollywood not profiting off this, right?

Hit it…

Image courtesy of jscreationzs/FreeDigitalPhotos.net

Image courtesy of jscreationzs/FreeDigitalPhotos.net

Seems like only yesterday when Target was rocked by a data breach that cost the retailer tens of million of dollars. Then there was the fiasco, also known as “Target’s Canadian Expansion,” that saw the retailer pulling the plug on the 133 stores located there. But those not so minor hiccups seem to be water on the fiscal bridge as Target released its latest earnings that hit their mark and saw its third straight quarter of sales growth, especially in home goods and apparel. So how good were these earnings? How does a a 52% increase in profits sound? That’s right, Target scored $635 million in net income, up from $418 million just one year ago, gaining $1.10 per share. Analysts were only predicting $1.02 per share. Clearly, those analysts were not amongst the many consumers lined up at five in the morning hoping to score some limited edition Lilly Pulitzer merchandise. Revenue was also up 2.8% which had everybody on Wall Street marveling at the fact that Target’s great earnings put Wal-Mart’s not great earnings to shame. Especially because sales at Target were up 38%, which is about double what Wal-Mart pulled in.

Talking turkey…

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Image courtesy of vectorolie/FreeDigitalPhotos.net

Hormel, the original Spam maker, long before it was known for crowding our inboxes, just released its earnings and there’s good news. And bad news. The good news is that profit for the company increased 29% to $180.2 million with sales of $2.3 billion. The company pulled in 67 cents per share while analysts expected 62 cents per share. You may not be eating Spam, but somebody out there is. Besides, Hormel, being the largest meat processor in the United States, makes tons of other products including Roast Beef Hash and, I kid you not, Wholly Guacamole. In case you didn’t realize, Hormel’s got big business going in the refrigerated foods industry. The company also has a Jennie-O turkey store business, which brings us to the bad news: bird flu. There is a new bird-flu outbreak and if you want to sound sophisticated you can refer to it as avian influenza. Not only is this expected to take a big bite out of Hormel’s numbers, but it is also predicted that this outbreak is going to wreak havoc on the rest of the turkey industry as well. Forgive me if I just put an extremely early damper on your Thanksgiving.

Not So Wholesome Foods, Is There A Nap For That? Banking On Stress

Whole lotta nothing…

Image courtesy of Africa/FreeDigitalPhotos.net

Image courtesy of Africa/FreeDigitalPhotos.net

Looks like Whole Foods needs to shift its focus from organics to business law now that it was slapped with a very unwholesome $800,000 in penalties and fees for overcharging its customers. Not the best move since the chain is facing increasing competition from other retailers offering organic products for considerably less money. Among the troublesome and illegal practices in which the organic chain engaged include not subtracting the weight of containers and selling prepared food by the item and not by the weight. Yes, those practices are illegal. Who knew? The offending markets are located in California. The Golden State has 74 Whole Foods Markets all of which can now look forward to four random audits a year.  However, it should be duly noted that Whole Foods says its prices were accurate 98% of the time.  And that’s great news as long as you weren’t the one paying the other 2% of the time.

ZZZzzz…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Yahoo CEO Marissa Mayer got caught napping on the job. The Silicon Valley exec was slated to have a very important meeting with ad execs in a very pish posh Cannes restaurant. She was bit late, though. That is, if you think two hours is a bit late. Some of her guests decided to leave before she arrived. She reportedly told someone at the dinner that she was late because she had fallen asleep. That faux pas was followed with a speech at a later point that was supposed to wow people. Except they were wowed by how un-wow the speech actually was. And the media wasted no time in skewering her for it. Some argue she’s getting more slack for her actions because she’s a woman. Still others feel her actions only mirrored her less-than enthusiastic attitude towards client relationships. Either way it’s a problem if only because Yahoo has been having “issues” with advertising and needs all the help it can get.

Still stressed out?

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Citigroup and three other banks just can’t handle the stress…of their inadequate capital plans, anyway. It seems Citigroup, Banco Santander, the US division of HSBC and the Royal Bank of Scotland were supposed to have their affairs in order. Those affairs include internal controls, risk assessment in global operations and other not so minor details to make their inadequate capital plans a lot more adequate. The Feds want banks to make sure they can make it through economic downturns without needing any government handouts, which ultimately come out of taxpayer dollars. The banks were supposed to have all their action plans last week but the effort proved to be a bit too…stressful, so the they were given another six months to get de-stressed.