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.

 

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Choo On This: Luxury Shoe Brand Not in Step with Coffee; Jack Ma Isn’t Feeling the Automation Love; Supreme Court to GM: Too Bad For You

Well-heeled…

Jimmy Choo

Luxury shoe brand, Jimmy Choo, will be getting a new owner now that JAB Holding Co. has decided that the company, wants to focus on its more carb/caffeinated brands. And who can blame the billionaire Reimann family that controls Jab. In the last few years, the company spent billions picking up various other food and beverage entities in the form of Krispy Kreme and Panera Bread, and well, 125 millimeter stilettos don’t really go so well with the stuff that carb dreams are made of. But Jimmy Choo may prove to be a very tempting company to a lot of potential buyers. While a pair of Jimmy Choo’s, whose fashion stock soared thanks to Carrie Bradshaw and “Sex and the City”,  may not hold the same appeal as a fresh hot donut – well, to some anyway – the fact is that shares of the luxury goods company are up 44% since the company’s debut back in October of 2014. JAB had the good business sense to pick up the iconic shoe company for 500 million pounds back in 2011. Revenue for 2016 increased over 14% to $465 million with a 43% profit increase to $54.4 million. Wall Street also digs the idea of a sale as shares of Jimmy Choo, which are traded in London, rose over 10% today.

The Jetson’s it ain’t…

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In case you were in the mood for a downer, then turn your attention to Alibaba founder and chairman, Jack Ma. During a conference hosted by the China Entrepreneur Club, Ma suggested that the future will suck. Because of robots.  He’s convinced that in the next thirty years, “the world will see much more pain than happiness.” Ma expects our automated companions to take over the workplace which might mean fewer work days but also fewer positions that require actual human attention. And the watercolor talk will be decidedly less entertaining. In fact, Ma is convinced that within thirty years, a robot will eventually grace a Time Magazine cover for being the “best CEO.” So if you think your boss has no personality now, just wait. And before you go calling Ma overly-dramatic, consider that according to the World economic Forum, it is estimated that there will be a net loss of 5 million jobs across 15 major economies thanks to automation. Sure technology is great, as long as it’s not taking over your paycheck.

Well at least they tried…

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GM tried to get the Supreme Court to block hundreds of lawsuits over its faulty ignition switches that could end up costing the automobile company billions. But the Supreme Court said no dice and the lawsuits can proceed. The reason: The company’s 2009 bankruptcy. If you recall, those faulty ignition switches were responsible for 125 deaths and more than twice as many injuries. More than 2.5 million vehicles were recalled and $2.5 billion worth of settlements dished out. GM knew about the problem before the bankruptcy so technically, it’s on the hook, since it could have just as easily notified all the owners of the vehicles that had the problem. Of course, that decision did not sit well with GM and a spokesperson said as much saying the appeal “was not a decision on the merits…” Amazingly enough, the appeal denial didn’t even freak out Wall Street – this time anyway – as shares actually rose today, albeit slightly.

Supreme Smackdown to Apple; Wall Street Bonuses Shrink, But I’d Still Take One; Amazon Store: The San Diego Sequel

Un-appealing…

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Not everyone has the ability to say no to one of the world’s most valuable companies. But the Supreme Court did just that to Apple when it graciously told its lawyers that it was not interested in hearing its appeal on an earlier ruling from June of 2015. Now, the iPad maker has to pony up some $450 million for its role in conspiring with publishers to increase book prices that apparently violated Federal antitrust laws. Apple feels that this ruling will “chill innovation and risk taking.” Maybe. But consumers still didn’t appreciate the way that Apple caused e-book prices to go from $9.99 to $12.99 and $14.99. Except Apple didn’t act alone, bringing in Hachette Book Group, Harper Collins, Penguin, Simon & Schuster and MacMillan to help fleece e-readers everywhere. Basically, any publisher from whom you’ve ever read a book helped facilitate this antirust breach. Apple wanted to make sure the iPad got a nice little boost when it made its grand debut in 2010. So publishers got to set the price they wanted for e-books on Apple devices and in return Apple would enjoy a 30% cut of sales. This, my friend, is the nefarious practice known as “agency pricing.” Publsihers played along because they didn’t like that the price of e-books on Amazon was going down and this method provided a convenient way to recoup that cash. The publishers started charging Amazon the same prices that it charged Apple, forcing Amazon to raise its prices also. Apple will pay $400 million to e-book customers in the form of credits, in addition to $20 million to the thirty states that sued. Of course, that doesn’t include the $30 million in legal fees that Apple’s lawyers get to collect or the changes that Apple is being forced to make to its business practices.

Whose your daddy…

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New York State Comptroller Thomas DiNapoli released some pricey data for one of New York’s top industries: Securities. Not that this will have you shedding tears, but the average Wall Street bonus fell 9% for 2015, checking in at $146,200. And while most people don’t come close to making that kind of cash in a year, the average Wall Street-er scored that, in addition to his or her salary. While that salary might seem high, consider that in 2006, the average Wall Street bonus was $191,360. And even though a whopping $25 billion worth of bonuses were awarded in 2015, it was 6% less than the previous year, as profit from broker-dealer operations dropped $1.7 billion to $14.3 billion. Profits for the six biggest banks hit $93 billion, by the way, which is more than 35% higher than the previous year. If you can believe it, that figure is still not as high as it should be and signals that the economy is still having a hard time bouncing back from 2008’s fiscal crisis. If you’re thinking about a career in securities, that might not be such a bad idea as the average Wall Street salary rose 14% in 2015 to $404,800. Except that prospects for 2016 look a bit grim and are actually expected to drop. There are approximately 172,400 people employed in the securities industry and 4,500 jobs were added in 2015. That figure, however, is still 8% less than it was pre-2008 fiscal crisis. By the way, these figures, we are warned, are not accurate estimates since they don’t include stock options and other forms of deferred compensation. The numbers also don’t include those for securities employees outside of New York City.

Isn’t it ironic…

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Mega e-commerce site, Amazon, arguably best known for being the largest online marketplace in the U.S. – not to mention some really great television –  is poised to open its second brick-and-mortar store where it will sell books, naturally, in addition to its own comprehensive line of tablets and devices. In fact, there will be nothing in the store that you wouldn’t be able to purchase on the company’s website. Rumors of the brick-and-mortar first surfaced when a big sign went up during the summer over the vacant space in a swanky San Diego mall. Then, last month, job postings for the 7,500 square foot store began appearing. Amazon’s store will be in good company as Tesla and Apple will be its mall neighbors. Meanwhile, the revenue expected from setting up an actual store isn’t expected to leave any meaningful dent in the company’s earnings. I guess it’s just a cute gesture for people who prefer to leave their homes to enjoy an actual physical shopping experience.