American Airlines: Going for Great or Going for Racial Insensitivity?; Congress Lets Banks Off the Hook. For Now; Things Aren’t Looking Sunny at Tesla Lately

Something racially insensitive in the air…

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Some say there’s no such thing as bad publicity but I’m skeptical about that. Take for example American Airlines. The NAACP just issued an advisory cautioning African Americans about traveling on American Airlines because the organization found an alarming pattern of “disturbing incidents” by the airline where black passengers were removed from flights. And the NAACP might just be onto something since it listed four distinct incidents where African American passengers were either taken off flights or moved to other sections of the aircraft despite holding tickets for higher class cabins. The NAACP said that the incidents “suggest a corporate culture of racial insensitivity” which I am pretty certain counts as bad publicity no matter how you slice it. Of course, American Airlines is “disappointed” about the advisory, and not just because it looks sooooooo bad. However, it still plans to reach out to the NAACP and invite representatives to its corporate offices in Texas to discuss the situation. Of course, just like with any bad publicity, American Airlines shares are down over 2%. Rightfully so, I suppose.

Don’t bank on it…

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You might not remember when, during President Obama’s presidency, a regulation was passed that allowed consumers to file class-action suits against banks.  But Congress remembered and today duly killed the regulation from the Consumer Financial Protection Bureau that was established back in July. Just. Like. That.  The rule went like so: If a consumer was unhappy with a financial product or service, think of Wells Fargo or Equifax, and wanted action and accountability from the institution, the said financial institutions could not force a consumer into mandatory arbitration. And if a consumer wanted to participate in a class-action lawsuit, they could. Financial institutions had to nix clauses in their contracts that effectively forced consumers into arbitration. Before that rule came about, consumers could not sue. Could. Not. Sue. There was no option to settle lawsuits. Dems are hopping mad because they wanted that rule to stay put arguing that it allowed consumers to hold banks and financial institutions accountable and that arbitration always seemed to go more in favor of the banks. Republicans argued that class-action suits do not benefit the consumers anyway and have the potential to greatly harm businesses that ultimately and adversely affect the economy. Consumers are no better off, they argued, whether they go through arbitration or are part of a class-action lawsuit. Republicans even cited information from a Treasury report supporting those claims.  Of course, the recent scandals at Wells Fargo and Equifax didn’t exactly help the Republicans argument. Yet miraculously, Congress still managed to put the kibosh on the rule. Consumer advocates are all over this and insist that the war is not over. Except that a key battle was just lost.

Rolling heads…

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While the ranks at Tesla continue to get smaller by the hundreds following an ugly recall of 11,000 Model X SUV’s, employees at Tesla-owned SolarCity are starting to smell the stench of unemployment too.  Over 200 employees were dismissed from their jobs at SolarCity with the dismissed being told that they lost their jobs for performance reasons, or lack thereof. However,  that proved to be an awfully strange excuse considering that several of the aforementioned employees said they hadn’t even received performance reviews since Tesla acquired SolarCity last November for $2.6 billion. Things that make you go hmmm.Tesla did announce it would be firing employees from SolarCity’s Roseville, California office. And it did. Except the carnage didn’t stop there. Apparently, SolarCity employees all over the country were also fired.  As for the Roseville office, some say the office will stay open with 50 employees while others insist that the whole office is being shut down.  In any case, I’m guessing the holidays are going to be awkward this year for Elon Musk and his family since SolarCity was founded by his cousins Lyndon and Peter Rive back in 2006. Critics of Musk’s plan to buy the solar company felt that it would distract the CEO from making great cars.  Maybe. Maybe not. But one thing is for sure: A lot of people are wondering how much longer it is going to be until Elon Musk finally rolls out the super-hyped but affordable Model 3.

 

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Coach Gets Quirky With Kate Spade; Warren Buffett’s Latest Thoughts; It’s Kumbaya for Comcast and Charter Communications

Luxury quirk…

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Coach is about to get a whole lot more accessorized now that it announced it will be buying Kate Spade. The $2.4 billion price tag on the deal means Coach will be plunking down $18.50 per share, which ends up being a 9% premium over Kate Spade’s Friday closing price. Analysts are digging the merger, thinking it’s a good fit and news of the deal set Wall Street tongues wagging, subsequently sending shares of both companies up.  In fact, ever since Kate Spade brass decided on a sale back in December, the stock has been on the rise. Which is weird because before that the stock was flagging over increased competition and decreased traffic and sales. Much of the enthusiasm over the sale is because people think Coach will have an opportunity to up its street cred with millennials. After all, Kate Spade’s quirky merchandise tends to resonate with that finicky demographic. And when something actually resonates with millennials, companies want in and are quick to figure out how to make a lot of money in that arena.  In fact, 60% of Kate Spade sales come from millennials while only 15% come from outside the U.S. Go figure.

It’s all about the tapeworm…

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It was that time of year again where one of the wealthiest men in the world imparted his financial wisdom onto his shareholders, and also regular people. Sort of. At the annual Berkshire Hathaway meeting held in Omaha this past weekend, Warren Buffett and his partner, Charlie Munger, shared their isights on several topics including Wells Fargo, Amazon and even the Republican healthcare bill.  On Wells Fargo, Buffett said there were three huge mistakes, but the biggest one was not acting on the problem when they first heard about it. On the Republican healthcare bill, he shared this pearl: “Medical costs are the tapeworm of economic competitiveness.” Got it? Tapeworm. Also,  he messed up royally by not ever owning shares of Amazon.  He admits he never anticipated Jeff Bezos going as far as he did. Apparently Buffett’s oracle skills failed him on that one. On a different note, he said that if he dies tonight, he’s convinced shares of Berkshire Hathaway would go up tomorrow. Warms the heart now, doesn’t it.

Well isn’t this precious…

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Comcast and Charter Communications are joining hands in the spirit of fighting against the dreaded and unflagging power of wireless carriers. Apparently when it comes to fighting wireless carriers, there is an inherent safety in numbers. So together the two companies will join hands and tackle such things as customer billing and device ordering systems. Also, they made a deal with each other that neither one would attempt to buy any other wireless companies and to consult one another before either one would make related deals,. They want to avoid increasing competition between the two companies. A move like this allows them to develop wireless services for their own companies without worrying over competition from each other. So its’s a little kumbaya and a little self-preservation.  And bonus: The two companies have said the plan could have the potential of lowering costs for its customers. However, that remains to be seen so don’t hold your breath.

 

It’s Equal Pay Day! Just Not For Everyone; JP Morgan Chase Chief Urges…Confidence; Wells Fargo Whistleblower Gets Last Laugh. Sort of.

100% Wrong!

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It might be 2017, but in a lot of ways it may as well be 1917. For some inexplicable reason a pay gap still exists between men, women and people of color. So weird, right? Hard to believe, but on average women still make 80 cents for every dollar a man gets. That’s assuming we’re taking about white, straight women. It all goes precipitously downhill from there. It’s a good thing women have an advocate in the form of Facebook COO Sheryl Sandberg.  Her nonprofit LeanIn.org has just whipped out its latest campaign, with a little help from Funny or Die, called #20percentcounts.  Because it absolutely does. One of the more startling facts of data from the Institute for Women’s Policy Research shows how closing that offensive 20% pay gap would actually lift over three million working women out of poverty. Out. Of. Poverty. In honor of Equal Pay Day, look for 20% discounts from several businesses to draw attention to this issue. For the full list, stop on by at LeanIn.Org.

Sauce-d…

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Well, if Jamie Dimon is saying it then it must be so. The JP Morgan Chase & Co. CEO just regaled us with his annual letter and started by saying just how friggin’ awesome the United States is and how it is “stronger than ever before.” But. It’s a big but. More like a BUT. He then goes on to discuss how “…something is wrong” with our country. He does, after all, sit on the President’s business forum, so I guess he would notice a few things that are…amiss.  For instance, he’s not digging the labor market, or rather there aren’t enough laborers in it. Of course, inner-city schools made a brief appearance in the letter, along with destructive anti-trade policies, infrastructure spending, corporate taxation, and those ever-pesky excessive regulatory rules. Dimon really took a lot of issue with all those banking regulations that are apparently marring the business landscape of the country. In all fairness, he would know a thing or two about that. Dimon feels the public should start showing a little more (un)conditional love towards our great big, fiscally-motivated financial institutions. The takeaway, according to Dimon’s letter? “Confidence is the ‘secret sauce’ that, without spending any money, helps the economy grow.” Got that? Confidence = Secret sauce=economic growth .Who knew?

Awkward…

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In all the talk about Wells Fargo’s illegal activities and all-around bad behavior, it seems a very important figure got lost – that being the very brave whistleblower who called out the bank over its fraudulent account opening activities. Said whistle-blower lost his job in 2010 after calling to complain to the bank’s very own ethics hotline, in addition to his supervisors,  about his suspicions that Wells Fargo was engaging in some problematic business practices. Now, not only was the bank ordered to hire him back, but it also has to pay him…wait for it…$5.4 million. Of course, that number pales in comparison to the $185 million worth of settlements that Wells Fargo has had to cough up already. But still, it’s gotta hurt for Wells Fargo. Well, cry me a river. Because after all, that $5.4 million is meant to cover back pay, damages, compensation and, of course, legal fees. This payout also has the dubious distinction of being the largest award ever ordered by OSHA. Naturally, Wells Fargo is not happy with the ruling and plans to fight it. As for the employee’s plans to return to Wells Fargo, well, that remains to be seen.

 

Trump Tweet-Targets Nordstrom; Under Armour CEO Says It All Wrong; Wells Fargo Continues to Anger

Oh no you didn’t…

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Just one week after pulling Ivanka Trump’s fashion line from its stores, Nordstrom has managed to incur some serious Presidential social-media wrath, via Twitter of course. The Tweeter-In-Chief wrote that his daughter was “treated so unfairly” by the department store and “She is a great person — always pushing me to do the right thing! Terrible!” Nordstrom argued that the merchandise’s performance wasn’t up to snuff, and that it regularly evaluates the thousands of brands that it carries to decide which ones get the boot and which ones don’t. And Ivanka’s line got it, though the chain had been carrying the line since 2009. Back in November, Nordstrom co-president Pete Nordstrom sent out a company memo explaining that the turmoil surrounding the election is putting the retailer in a “tight spot.” It risks offending Trump-haters for keeping the line, but also risks alienating shoppers who support him. Nordstrom tried to explain that it makes a “sincere effort not to make business decisions based on politics but on performance and results,” but found itself “in a very difficult position.”  That difficult position probably had to do with calls for boycotts of the merchandise, and even the store.  And it’s not like Nordstrom was the only one who took this sort of action. Neiman Marcus Group also stopped selling her jewelry online and in one of its stores in the northeast. Shares of Nordstrom had dropped a smudge 1% following Trump’s tweet. But they quickly bounced back. So maybe the effect of Trump’s fury only goes so far.

That’s gonna come back to haunt you…

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Speaking of which…Under Armour CEO Kevin Plank played nice with Trump so of course, it’s now going to cost him. Literally. During an interview on CNBC’s “Fast Money Halftime Report,” host Scott Wapner asked the athletic apparel chief executive about his involvement in Trump’s initiative to create manufacturing jobs in the United States. Some of the pearls that escaped Plank’s mouth included, “To have such a pro-business president is something that is a real asset for the country…People can really grab that opportunity.” [cue crickets chirping]. Naturally, Under Armour had to issue a statement to clarify Kevin Plank’s remarks – lest anyone think that he really meant what he said, which would lead to a boycott. Except that sort of already happened as “Boycott Under Armour” hashtag made its way into the Twitter-sphere in no time. In the meantime, UA insisted that it engages in “policy, not politics” and Plank’s statements had to do with job creation.  I shall spare you the details of official company statement – you’re welcome! – but rest assured it included all the usual themes about the beauty of unity, diversity, welcoming immigrants etc. The fact is, UA can’t afford any boycotts, whether Plank meant what he said or not. Its shares have been falling lately and in its most recent earnings report, the company missed expectations and forecasted slower growth for 2017.

And here’s one more reason to hate Wells Fargo…

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In case you weren’t incensed enough by Wells Fargo’s fraudulent account scandal, CEO Tim Sloan said that the bank is committed to helping the Dakota Pipeline project. While it would be nice to focus all rage on Wells Fargo, who loaned $120 million toward this project, the fact is the bank is just one of 17 that gave loans to help fund the $3.8 billion project. Obama had initially halted the project, but President Trump swiftly reversed that action and is looking forward to its completion. Come June, the pipeline is expected to ship half a million barrels of crude every day from North Dakota to Illinois. Unfortunately the 1,200 mile pipeline cuts through an Indian reservation with deep cultural significance, and it’s likely the pipeline will incur damage on the site. The pipeline also poses major environmental hazards where it crosses the Missouri River. The Standing Rock Sioux reservation is downstream from the crossing and the pipeline could end up polluting the Tribe’s drinking water. The Seattle Council is doing its part to combat Wells Fargo’s involvement by pulling about $3 billion in city funds.  Seattle has a contract with the bank that expires in 2018, and it most definitely will not be renewed. In the meantime, the council is on the hunt for a more “socially responsible bank.” Good luck with that one.

Trump’s Been Dealing it to Himself; Volkwagen Wants Your Love Back; Excuses, Excuses: Barnes & Nobles Whips One Out

Even more Trump’d up…

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President-elect Donald Trump’s foundation admitted it “self-dealt.” Self-dealing is when  leaders of non-profit organizations take money from the charities they lead, for themselves, their businesses and/or their families. It’s a big no-no and in case you were wondering where and why Donald Trump admitted such things, then look no further than his 2015 IRS tax filings, available on GuideStar, a website that tracks non-profits. But rest assured an investigation has been opened, brought to us by Attorney General Eric Schneiderman, who declined to comment due to the fact that the investigation is ongoing.  And in case you were wondering about this as well, Team Trump thinks Schneiderman’s investigation is politically motivated. In other Trump news, stocks were rallying and the Dow went above 19,000 points. Plenty of people on Wall Street are crediting Trump for all of this fiscally joyful news – whether they voted for him or not. After all, he did promise to slash taxes, ease regulations and go big on infrastructure spending. Experts see these initiatives as excellent means to boost the economy in a ways that have been lacking for years. Unfortunately, not every economic idea coming from Camp Trump is leaving investors and economists all warm and fuzzy. Take for instance NAFTA, which Trump refers to as “the worst trade deal in history.” Major havoc could be wreaked on the economy if Trump decides to scrap it. Millions of Americans rely on free trade with Mexico and slapping tariffs on it could spell fiscal doom.

You’re gonna love me, I just know it…

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Volkswagen, the Wells Fargo of the auto industry,  is betting – and hoping – that it can reclaim its former fahrvergnügen glory and make you love them all over again. Following its epic diesel-emissions scandal, Volkswagen chief Herbert Diess announced he wants to “fundamentally change Volkswagen” by focusing on on major tech advancements, developing battery operated vehicles and adding some some self-driving cars into the mix. Diess has got big eyes on the year 2025, by which time he hopes to sell a million electric cars. He wants to “massively step up” Volkswagen’s car tech and also introduce a greater variety of SUV’s to the North american market because, after all, Americans apparently love their SUV’s. But with those lofty goals comes a plan to eliminate 23,000 jobs in the more traditional areas of the auto-manufacturing industry. Instead, Volkswagen will take on 9,000 new employees to work on tech, while wisely offering those 23,000 employees the option of early retirement over a certain amount of time, perhaps in an attempt to soften the blow. In the meantime, Volkswagen already coughed up a hefty $15 billion settlement with both U.S. regulatory agencies and Volkswagen owners.

Uh, if you say so…

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Barnes & Noble reported yet another dismal quarter of declining revenue, except this time the bookseller is blaming the election for its poor fiscal performance. How convenient. Sales fell 3.2% and probably would have fallen even more were it not for sales of “Harry Potter and the Cursed Child.” Barnes & Noble also reported that their online sales improved 12.5%, however, that figure might be a bit more convincing if it provided an actual dollar amount in its report. Nook devices, digital content and accessories were down close to 20%. But can all of that really be blamed on the election? Hmmm. On the bright side, operating losses for the Nook this quarter were only $8.2 million. Hey, don’t laugh. Last year at this time that figure was $30 million. All in all, Barnes & Noble still has cause to celebrate as it only lost just over $20 million and 29 cents a share when last year it lost $39 million and 52 cents per share. B&N is hoping the holiday season will help its reverse course and give it a fresh dose of fiscal mojo. CEO Leonard Riggio is hoping the company’s new $50 Nook device, debuting on Black Friday, will be a big hit. In the meantime, he’s banking on some concept stores, including one that just opened in Eastchester, New York, boasting a full-service restaurant.