business blog

Markets shot downward on Monday, but there’s reason NOT to be worried

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Via: Forbes

Within minutes of the market’s opening yesterday (Monday) morning, the Dow Jones plunged nearly 1000 points, creating the pained hashtags (#BlackMonday), and anguished GIFs that accompany a market slide in 2015. It was the type of correction that is usually seen anywhere from 1-3 times per year, and although it was indeed painful while it lasted, it was not necessarily outside of the norm. Markets are already back up today, negating all but about 195 points of that drop, and none of the usual indicators that would precede an imminent bear market seem to be in place.

And while single day shocks like that are exactly that; shocking, of course long term trends are really what supplies the fundamentals of both investing, and the stock market in general. Despite some criticisms that the past six years’ gains are more due to Fed policy than real economic strength, the market has gained substantially in value over that time, only a tiny fraction which was erased yesterday. The graph below does a good job of illustrating this point.

See? Not so bad in context. (Via Forbes, YCharts)

There is no shortage of sources of possible instability in the markets heading forward, including China, a possible interest rate hike in September (although that looks slightly less likely on the heels of this instability), and more; but for now at least, there seems to be at least a bit of hopeful optimism.

Jeff Bezos responds to NYT article on Amazon work culture

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For those who missed it in the Sunday Times, the New York newspaper posted a pretty scathing article on the front page of the Business Section, which profiled the intense work culture at internet-giant Amazon. Today, CEO of that company, Jeff Bezos, (among many others) has responded.

In rather candid remarks, the generally well-liked and respected CEO said that he would personally quit any company that operated in the way described in the article, and that ‘anyone working in a company that is really like the one described in the NYT article would be crazy to stay’.

Jeff Bezos. (Via: Business Insider)

Indeed, there were some pretty colorful quotes included in the article, stories that did push the boundaries of believability, but certainly did seem harsh. One ex-‘Amazonian’ said a lasting image in his mind was a grown man crying at his desk after giving a doomed presentation, and one HR rep supposed that when Amazon employees ‘hit the wall’, their only choice is to climb over it. Other, slightly more normal-seeming examples of the intense work environment at the company included late-night emails and texts, and an internal system where employees can report each other anonymously via email to HR for any number of transgressions.

However, after a number of passionate articles were published today from Amazon employees on all spectrums of the hierarchy defending the company and its culture, it’s very clear that not everyone dislikes working at Amazon, and some people seem to truly be thriving.

Price targets for Tesla raised hugely; analysts saying stock could double

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Via: Source

While there are some pretty vocal skeptics of the company, it is ultimately tough to argue against the seemingly very bright future of Tesla, the luxury-electric automaker.

Every year, emissions regulations are tightened even further by governments around the world, squeezing automakers to create more and more efficient models. And while gas prices have remained low and stagnant through most of 2015, gasoline is ultimately a limited resource, with a price that is always subject to change, for higher, or lower. However, the public’s appetite for beautiful looking, and highly performing vehicles is unlikely to wane as quickly. Thus, the writing is pretty blatantly on the wall that the fully electric automaker is poised to be leader in a potentially massive market.

A number of new reports out of Wall Street this week echo that sentiment, as well. To say Morgan Stanley analyst Adam Jonas is bullish on Tesla would be an understatement. In a new note from Monday morning, Jonas writes that he has increased his price hike on the company’s stock from $280 to $465, citing a number of reasons, the key one of which being an as yet untapped aspect of the business called Tesla Mobility, which is deemed an ‘on-demand, app-based mobility service’, similar perhaps to Uber which itself is valued at over $1 billion.

Also, the automaker is well-positioned to be a leader in not only the electric car industry, but also the self-driving industry as well, an area which many tech giants, and automakers are now exploring. What do you think? Is the sky the limit for Tesla? Or will their growth be limited somehow?

*Insert search ranking joke here*; Google announces massive reorganization, new CEO

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Google dropped a massive bomb on the tech and business communities late Monday night, as they announced that they will be reorganizing their entire operation, bringing all of their subsidiary companies and side projects under one label, now known as Alphabet.

There are a number of rumors circulating around the web as to the timing of this move, namely that Twitter was preparing a CEO offer for newly-minted Google Chief Exec. Sundar Pichai. But no matter the motivations, or how long the move had been in the works at Google, it is a truly massive one.

Also, while the move is a surprising one, it is a logical one as well. Google, through acquisitions mainly, now owns or helps operate no less than seven separate ventures, not even including their core search, images, maps, etc. business. As previously noted, the company will retain Mr. Pichai as CEO of the core Google business, of which he was already second in command, and in charge of massive sections of the business like Android/mobile.

In terms of leadership of the new umbrella company, Alphabet, Google founders Sergey Brin and Larry Page will run as co-heads. This new organization will over not only the core Google business, but also Calico (health), Google Ventures, Google Capital, Nest (internet-connected home goods), Google X, and their Fiber business as well. In a blog post, it was noted that the purpose of this move was to make their separate businesses easier to organize and run independently. How this all evolves, will certainly be interesting to see.

China surprises everyone and devalues the yuan

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As has previously been reported both on this site, and elsewhere, it has been an interesting summer for the Chinese economy. And with an announcement coming today out of Hong Kong that seems to have surprised truly everyone, that trend continues.

Indeed, as is being reported by CNN Money and other sources, the Chinese government has moved to devalue the yuan, as the People’s Bank of China is allowing the currency to depreciate close to 2% against the US dollar they announced Tuesday. The purpose for doing this, of course, is to keep export prices attractive, as that sector of the Chinese economy composes about 19% of total GDP.

But of course, the concern here, as alluded to in the embedded video, is a currency war. If China, the largest exporter in their region, has now devalued their currency close to 2%, will other exporters like Viet Nam and Japan be forced to as well? Mr. Woo, in the video, alludes that the effects might be felt as far as European countries like Germany, who’s exports to China account for around 3% of their respective GDP.

China has announced though, that this is a one-time-only move, necessitated by a recent policy change that stipulated that the PBOC will no longer set a daily midpoint value on the yuan, instead setting the price according the previous day’s closing value.

Warren Buffett executes huge, cash deal for Precision Castparts

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Warren Buffett is known as a brilliant investor, not a flashy one. And his latest deal, the second largest in the history of Berkshire Hathaway, follows not only that one, but many of the legendary investors principles.

As first reported by Bloomberg, and other sources, the investment company, headed up by Buffett, will acquire a leading aerospace hardware supplier, Precision Castparts, for $37.2 billion; almost half of Berkshire Hathaway’s cash.

But although the investment is a substantial one, it appears to be a relatively safe one as well. Precision Castparts pulls in close to $3 billion in pre-tax profits per year, so from a cash flow perspective, this is right in line with where it should be. Furthermore, the company is in an industry with little competition, and has actually moved to successfully acquire many of the competitors they do have, so their marketshare is solid as well. They serve the biggest companies in the aerospace field, including Airbus and Boeing, and obviously, the aerospace hardware industry obviously has some pretty high barriers to entry. Analysts don’t expect Buffet to make many major changes to the operations of his newly acquired company, and his history would support those claims.

The move is indicative of a major change for Berkshire Hathaway though, as the company continues to pivot away from picking stocks, to fully acquiring entire companies. What do you think of the new move? Another savvy one by Buffett, it appears to be.

Philanthropic new start up model begins to take hold

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Via: Source

In recent years, start up companies like Tom’s Shoes and Warby Parker glasses have taken off, not only because they provide stylish goods at affordable price points, but also because they offer a unique bonus for each purchase their customers make.

Both companies have a huge charitable aspect to them; for each pair of shoes Tom’s sells, a child in need gets a pair as well. Same for Warby Parker, except with their glasses. Truly a win-win-win situation.

Now another company is joining the ranks of these philanthropically-minded start ups, a backpack company called Just Porter. Started in 2006 by Chris Bahr, the company was inspired by a humantarian trip Bahr took to the Philippines. While there, he had the idea one day to buy some school supplies for the local children.

(Via LinkedIn)

How happy the children were to receive his donations stuck with Bahr, and now 9 years later, whenever one of his backpacks is sold, the company donates one, filled with school supplies to a child in need. And, business is good.

As we said before, it truly is a win-win-win situation.

1st Apple Watch sales metrics start to accumulate

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Via: Source

For well over a decade now Apple has seemed to be able to do now wrong. Preceding even the iPod was the legendary series of colorful iMac computers which really put the company back on the map following Steve Jobs’ return after his previous ousting.

Remember these? (Via Creative Review UK)

Then, in 2001, began the reign of ‘i’ products, a reign which continues to this day as the iPhone continues to absorb an ever-increasing share of the smartphone market. The traditional iPod is actually now out of production, but other versions of the product like the Touch continue to be a solid revenue stream for the tech giant.

However, one of Apple’s most recent products may not be joining the legendary ranks of these products that became so successful and popular that they have quite literally changed the way we live our lives everyday. And that entry is the Apple Watch.

While Apple has released no official sales numbers on their watch as of this writing, their suppliers have been releasing data, and it’s not painting the prettiest of pictures for the success of the watch thus far.

Advanced Semiconductor Engineering, a Taiwan-based company that packages and produces semiconductors for Apple products, has recently announced that they did not hit their break-even mark of 2 million units per month in the second quarter, and that it also did not expect to hit that mark during the holiday-laden third quarter, either.

In terms of what this means for Apple, there are a few theories. Perhaps wearable technology is still a year or two away from true market integration? Perhaps the functions of the device have not been made impactful enough? Would calling the device an ‘iWatch’ have helped with branding? Either way, the success of any one Apple product does not make or break the company. Not even close.