Uh Oh Canada: Trump Starts Up With Our Neighbors to the North; Marissa Mayer Walks Away Golden; Nasdaq Yowza!

Good Tariffs don’t make good neighbors…

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As if things weren’t awkward enough between the President and Mexico, now it’s the U.S.’s relations with Canada that are getting the Trump treatment. This time it’s Canada’s lumber industry that’s getting caught up in the import debate as the President’s plan calls for a tariff of up to 24% on Canada’s lumber products. Canadian lumber companies are pretty ticked off and Canada’s Prime Minister, Justin Trudeau, is itching to fight back. Just how remains to be seen. In case you didn’t know, Canada is the world’s largest soft-wood lumber exporter and the U.S. is its biggest customer, reportedly importing $6 billion worth of the resource just in 2016. But here’s where things get dicey, well for the U.S. anyway – shares of home-building companies took a very unwelcome dive on the soft-lumber dispute, as Wall Street realized raw materials could get a whole a lot pricier. That will likely end up leading to a very unpleasant domino effect on other related industries. If you’re looking to buy a home, take note that this Canada lumber is issue is sending home prices up as well. Incidentally, Canada is going to stop importing U.S. dairy products, as a sort of retaliatory action. Sort of. But basically, this means dairy farmers are getting screwed here too. And don’t you hate when that happens? On the flip side, U.S. lumber producers said that cheap lumber imports from Canada, which are they say are unfairly subsidized by the Canadian government, have put a major crimp in their business and these tariffs will give the domestic lumber industry a much needed reboot.

What color is your parachute?

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Yahoo might have gone bust but Marissa Mayer will be walking away from the entity with $186 million lining her pockets. That’s even after Verizon agreed to buy the  beleaguered company. She’s sitting on 4.5 million shares of the failed internet company and she’ll get that substantial wad of cash once she pays to exercise her options. That $186 million is based on Monday’s closing price, in case you were wondering, and while Mayer may not have had the best run at Yahoo, the stock still tripled during her five-year CEO stint there. And as Verizon plunks down $4.5 billion for Yahoo, Mayer will take in another $3 million as part of her golden parachute. That’s besides the fact that last year she lost out on her bonus following the massive data security breaches that affected one billion Yahoo accounts.

Making a break for it…

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The Nasdaq broke the 6000 mark with a lot of help from big corporate gains and, believe it or not, even President Donald Trump. That’s because the President has big “tax reform and reduction” plans which involve reducing the United States’ onerous corporate tax rate from a whopping 35% to a more corporation-friendly, and globally competitive, 15%. Plans like that could mean a big boost all-around on Wall Street. Companies including Apple, Microsoft and McDonald’s, to name a few, reported impressive gains, sending the Nasdaq all the way up to 6034.74. If you’re finding Trump’s contribution hard to swallow, consider that the result of France’s Presidential election also factored into that 6000 point breakthrough. French Presidential Candidate Emanuel Macron’s first-round victory helped matters, probably because of his centrist politics, which apparently Wall Street digs. It wasn’t since March 7, 2000, that the Nasdaq broke the 5,000 barrier. But alas, that remains nothing but a very distant memory.  The Nasdaq, incidentally, is up over 10% since the beginning of the year and up way over 20% in the last twelve months.

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Trump Does Nothing for Twitter; Take That Trump! Tequila Goes Public; Whole Foods Whole Lotta Trouble

(Sigh…)

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The good news from Twitter’s latest earnings report is that its monthly active users increased by 2 million to 319 million accounts.  Although forecasts were for 319.6 million. Just saying.   Revenue also grew 10% to 717.2 million. However, that’s about all the good news there was, because the company missed estimates for revenues of $740.1 million, as ad revenues were lower, falling about .5% from last year’s $710 million to $638 million. In fact, Twitter experienced its slowest quarterly revenue growth since its IPO in 2013. To make matters infinitely worse, shares fell almost 12% on the news, and Twitter can’t afford to lose any more value from its shares. But CEO Jack Dorsey asked for patience, as the company he heads is making some investments into machine learning and figuring out exactly how to engage its advetisers. Seems like a prudent plan. But the bigger story is that President Trump’s tweeting did absolutely nothing for the company. Zero. Nil. Nada. Sure, the world got to see the kind of havoc that can be wreaked with just 140 characters. Unfortunately, that’s about all it did as his tweeting as Twitter reported that it actually experienced slower growth in the quarter that included the election.  According to Twitter’s Chief Operating Officer, Anthony Noto, you can’t expect a “single person to drive sustained growth.” Meaning, Trump had no effect, President or not. The one bright spot – if you can call it that – is that Twitter earned 16 cents a share when estimates for 12 cents.

 Mas tequila, por favor!

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Mexico had its first IPO since President Trump won the election back in November. The lucky IPO was tequila maker Jose Cuervo. The world’s biggest tequila company raised $900 million, with shares priced toward the top of the range at 34 pesos. That translates to roughly $1.67 per share. It’s pesos. What did you expect? The IPO had actually been put on hold twice, thanks to Trump, because his anti-NAFTA ambitions and wall-building enthusiasm kept weakening the peso. Interestingly enough, unlike other products, demand for tequila is not based on price. However, its price could get higher if Trump gets his way by slapping some major tariffs on the lime-friendly beverage. A move like that could put a major dent into Jose Cuervo, which gets 64% of its’s $1.165 billion in sales from the United States and Canada. At least Jose Cuervo always had the luxury of enjoying strong dollar-base earnings. That’s got to count for something, right? Problem is that the new expected U.S. protectionist measures could end up hurting that $1.165 billion. But maybe not. Because, after all, this is tequila we’re talking about. So maybe Americans will be willing shell out a few extra dollars.

 

A Whole lotta nothing…

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Whole Foods is looking anything but with its announcement that it will be closing nine stores. It’s the first time in almost a decade that the company had to resort to such measures as this quarter saw sales drop 2.4% when analysts only predicted a drop of 1.7%. Yikes. Whole Foods initially had a plan to open over 1,200 stores, but alas it was not meant to be as increasing competition and higher food prices led to the company’s sixth straight quarter of decreasing same store sales. The chain gained 39 cents per share which is was about what analysts expected, but as for its forecast, things aren’t exactly looking up. Whole Foods still operates 440 stores and believe it or not, six new stores are still expected to open, with another 80 stores in the planning stages.

VW Has Some Arresting; Mars Inc. Has Gone to the Dogs; Alibaba Woos Trump

Arrested development…

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The FBI made its second arrest in the Volkswagen Emissions Scandal. Which is sort of reassuring considering that it seemed like the responsible parties were going to skate free. But there is no skating in the future for Volkswagen executive Oliver Schmidt, whose being charged with conspiracy to defraud the United States. His job title, ironically, is “General Manager of the Engineering and Environmental Office for Volkswagen America.”  However, the environment was apparently the last thing on his mind when he allegedly involved himself in the plan to install secret software, known as “defeat devices,” into some 475,000 diesel cars in the United States. If you recall, this naughty software allowed VW automobiles to cheat exhaust emissions tests. The affected vehicles were emitting 40 times the legally allowable amount of pollution levels. VW has yet to comment on the arrests but did say that it was cooperating with the Department of Justice – which seems like a prudent move.  The automobile company is thisclose to settling some of those criminal and civil allegations that has cost it billions so far, not to mention a $15 billion settlement that involves repairing or buying back the compromised vehicles. As for the Detroit Auto show this week, VW executives will be noticeably absent, but presumably, not missed. The first person arrested in the scandal, Robert Liang, already pleaded guilty to a single count of conspiracy to defraud the U.S. government.

Out of this world…

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Mars Inc., maker of the beloved Snickers bar, just announced it’s buying animal hospital VCA Inc, adding 800 pet hospitals to its 900 animal clinics. But don’t go choking on your candy bar just yet if you think pet care and confections don’t mesh to your liking. You needn’t see the logic. Only the math. Last year, $13.7 billion worth of chocolate was sold which was barely more than the previous year. But pet food is projected to grow at an annual rate of 2.5% over the next five years. Mars Inc already had a big 18% chunk of the pet care industry as of 2015 and owns the brands Whiskas and Pedigree, besides the pet hospitals. People spent an estimated $63 billion on pet related goods and services this past  year – a number that has grown 60% over just a decade ago. So VCA fits right into Mars’s lucrative, yet diverse portfolio. Oh, and by the way, Nestle owns Purina. Mars picked up VCA for over $9 billion at approximately $93 per share – more than a 30% premium -and the new company will become Mars Petcare. How’s that Snickers tasting now?

“Big sticks” and stones…

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Everybody’s favorite Chinese e-commerce giant CEO, Jack Ma, had a very interesting meeting with President-elect Donald Trump today. The Chinese billionaire, would like very much to create a million jobs, right here in the United States, particularly in the Midwest. How very gallant of him, especially since there are all these icky growing tensions between China and the United States, courtesy of Donald Trump.  Ma is looking to grow trade so that small businesses and farmers in the U.S. can sell their goods and wares to Chinese consumers. A win-win for everyone, no? But of course there is that one big sticking point – Trump, or rather his plans to slap high tariffs on Chinese imports. An editorial in one of the China’s Communist Party’s newspapers read: “There are flowers around the gate of China’s Ministry of Commerce, but there are also big sticks hidden inside the door — they both await Americans.” I’m guessing China is stocking up on sticks here.

Grocery Disrupt: Amazon’s Latest Venture Good Become a Store Near You; Tyson’s New Add-Venture; Trump’s Taxing Tariff Tweets

Move over, humans…

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Just when you to start to wonder what else Amazon could possibly do to disrupt and reinvent the retail shopping experience, along comes Amazon Go, an actual brick-and-mortar-store brought to you by the e-commerce giant. Talk about irony. The concept, which is still being tested by Amazon employees, allows shoppers to literally grab food and walk out. No lines. No cashiers. Customers just take their cellphones and tap them on a turnstile to get logged into the store’s network, which in turn connects to the Amazon Prime app, already conveniently installed on their phones. Customers pick items off the shelf and put them into their cart while, with the aid of sensors and artificial intelligence, the same items are also placed in virtual shopping cart. If a shopper decides that they don’t want an item, they simply place it back on the shelf and the item also disappears from the virtual cart. Like magic. Should you crave something a bit more immediate, the store also offers up fresh food, prepared on site. Once customers are done, they simply walk out while the app does all the work, which basically involves adding everything up and then charging respective Amazon accounts. The company has been on the hunt to gain a big presence in the food retail industry, an industry which still fiscally eludes it, and also happens to be one of the biggest retail industries. Ever.  Its fresh food delivery is nice and all, but Amazon’s set its sights on competing with the big grocery players like Wal-Mart, Krogers and Target. The food retailer index took a 1% dive on Amazon’s news while shares of Amazon went up. But established grocers can breathe a very brief sigh of relief easy as Amazon still has a few months before it opens up the store to the public. And humans, fear not. One tech investor said that people are still a very big, necessary component of the retail experience and to scrap the notion that jobs will be lost to machines. Phew.

Speaking of food…

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What to do when you’re a $20 billion company whose prime business is chicken, beef and pork, and you keep losing money to the alternative-meat and fresh-food industry? Why, you set up a venture capital firm, of course. And that’s just what Tyson Foods did in an attempt to compete with a burgeoning industry that is literally eating into its business model. Apparently, plant-based protein and food sustainability is where it’s at these days and if you can’t beat ’em then join ’em by investing in their start-ups. Hence we have Tyson New Ventures LLC, a $150 million venture capital firm that Tyson launched to tap into a market that favors more plant-based and fresh food. The venture capital firm will look to companies that are working on making food-related “breakthroughs” and new innovative technology and business models that relate to food. Tyson already announced its first investment a few months ago, when it bought a 5% stake in Beyond Meats, a company that makes meat-like products. Tyson has got nothing to lose either, considering its last earnings report was nothing short of dismal, and the news that its long-time CEO Donnie Smith was stepping down did nothing to instill confidence in investors. Tyson isn’t the only firm to try out this venture capital idea. Other companies like Campbells Soup, Coca Cola, General Mills and Kellogg’s have all established similar firms with pretty much the same objective: to continue to be a prominent player in a shifting market and industry landscape.  So far this year venture firms have already thrown $420 million into various food and agricultural companies. In 2015 that number approached $650 million.

A day without Trump?

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Over the weekend, President-elect Donald Trump mentioned, in a series of tweets of course, that he wants to get back at U.S. companies who dare shift jobs and production overseas. His preferred revenge tactic would be in the form of a 35% tariff and, strangely enough, his fellow Republicans don’t seem to be on board. The top House Republican, House Majority Leader Kevin McCarthy, does not support Trump’s tariff idea and thinks that the best, most effective way to create and keep jobs in the U.S. is via major tax reform. There seem to be a whole bunch of issues at play with Trump’s (overly) ambitious tax-revenge plans, including the fact that such a move goes against the whole spirit of free trade and has the potential to spark trade wars. And nobody likes wars, whether they involve armed conflict or goods and services. Tax specialists and other assorted experts have also said that it’s fairly debatable as to whether or not Trump’s tactics are even legal.  Republicans are, however, partial to over-hauling the corporate tax code in an effort to keep U.S. companies from fleeing to more tax-hospitable countries. They’d like to cut that pesky corporate tax rate to 20% or less which would allow the U.S. to be more competitive globally. House Republicans are also in favor of imposing corporate taxes to all imported goods and services and scrapping them for exports. But leave it to the critics to argue that changes like that might be seen as violations of the World Trade Organization.  In any case,  it remains to be seen how exactly Trump will get his way, if he does. That’s because tariffs aren’t typically applied to specific companies but rather entire classes of goods. Besides, the president doesn’t get to make those kinds of decisions anyway. That’s for Congress to decide and Congress doesn’t seem, shall we say, receptive, to Trump’s tariff talk.

Smackdown: Google, Facebook vs. Fake News; Controversy Over New Balance Seems Unbalanced; Ford Revs Up Tariff Debate with Trump

Just faking it…

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As the Trump controversies keep on pouring in, Google and Facebook have now decided to crusade against fake news, as widely shared, yet wholly fabricated stories about the candidates may (or may not) have adversely influenced the presidential election. Part of the problem began when Google realized that the top results for search phrases such as “final election results” and “who won the popular vote” were directing users to a fake news site. By Monday, Google started pulling AdSense from several sites that “misrepresent, misstate or conceal information” and were profiting off such bogus political news stories. As for Facebook, it plans to put the kibosh on ad money from fake sites, but it’s not entirely clear how it will achieve this objective and identify these sites. However, it seems to be a prudent move considering that, according to a Pew study, 44% of Americans get their news from the social network giant. No matter how you slice it, the internet and social media figured prominently last Tuesday and now everyone’s looking to find out what went wrong – or right.

Unbalanced…

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Privately-held company New Balance has inadvertently, and presumably unwillingly, become the unofficial “official shoes of white people.” Unlike its much more enormous rival, Nike, the 110 year old Boston-based New Balance has always been committed to manufacturing its products in the U.S. across 14 factories where it employs over 1,400 people of various races, ethnicities, genders, religions etc. Hence, the company never cared much for the Trans-Pacific Partnership Trade Agreement that gives companies – like Nike – a very humongous edge because they can manufacture a greater quantity of goods abroad, for a lot lot less money than doing it here. The TPP basically jeopardizes companies who choose to domestically produce goods by making for a very un-level playing field. Because Trump is a huge fan of domestic manufacturing and job creation, his election was welcome news for New Balance. And when New Balance said as much, social media either skewered the company and called for boycotts and mass destruction of the sneakers or had white supremacists proclaiming it as their footwear of choice.  Incidentally, New Balance supported the trade policies of Hillary Clinton and Bernie Sanders too.  A fact that both Trump haters and white supremacists seemed to have overlooked.

Have you manufactured a Ford lately?

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After congratulating Donald Trump on his election last week, Ford Motors CEO Mark Fields shared some thoughts about Trump’s proposed 35% tariffs on imports – he thinks they’re a bad idea. After reporting a 12% decline in car sales for October earlier this month, Fields said in a speech given at the L.A. Auto show, that those tariffs will have a very big bad impact on the U.S economy and trusts (or hopes) that Trump will do what’s in the best interests of the United States. However, Trump, early on in his campaign spoke about how he didn’t appreciate the fact that Fields moved Ford’s small car production to Mexico, where wages are a whopping 80% less than what they are in the U.S. If you recall, Trump thinks NAFTA is “the single worst trade deal ever approved in this country” and he’s licking his chops to put the kibosh on it. Although, to counter that last tidbit, Fields did say that Ford added 25,000 jobs since 2011. In the meantime, experts have said that Trump’s tariffs, which are on this side of punitive, in fact, violate the rules of the World Trade Organization. So it’s anybody’s guess how far those tariffs will actually go.