Weekend edition—#Uber’s corrosive sexism, Millennial luxe, where Russian hackers test tactics

Good morning, Quartz readers!

Evidence grows that sexism stands as the gateway drug to the worst of corporate behavior, with Uber and its recently departed chief Travis Kalanick just the most recent egregious example. If the CEO can’t understand that an employee outing to a karaoke bar that alsofeatures escort services is a bad idea, who knows else what he might attempt? Now we do.

When a former Uber engineer told the world about the routine harassment she faced, Kalanick called the details “abhorrent and against everything Uber stands for.” Not true, then or now, it turns out. The ruthless approach to conquering international markets—and any plausible competitor—translated to a workplace where women were regularly demeaned. That’s the problem with corporate cultures that celebrate winning at all costs. It becomes increasingly difficult to tell where the playing field ends and the “locker room” begins.

At Fox News, Roger Ailes unashamedly counted among his cable-TV commandments that blonde newsreaders are best, and most optimally viewed when their bare legs are visible through the glass desks he demanded for the set. The later accusations of his sexually degraded underlings—a scandal that would engulf Ailes and Bill O’Reilly, his most prized on-air acolyte—astonished no one.

Uber’s board did what it must with Kalanick. But shakeups attack a symptom, not the disease. The damage of sexism at Uber may be under control now, but the factors that allowed it to thrive won’t be so easily undone.—John Mancini


The botanist’s last stand. Steve Perlman of Hawaii’s Plant Extinction Prevention Program has helicoptered, hiked, and rappelled his way across the islands to catalogue their most threatened native plant species. Zoë Schlanger explores what goes into preserving biodiversity, and the toll on those charged with its survival.

Is Amazon too big? Oliver Stanley visited John D. Rockefeller’s Kykuit estate to learn about the industrial baron of the 20th century and came home thinking about Jeff Bezos. In every age, ballooning companies have caught the eye of the US government, leaving founders no less wealthy but splintering their influence. Can a modern captain of industry learn from a tycoon’s past?

The new Millennial luxe. Luxury is about the subtle conveyance of good taste, access, and wealth, Marc Bain writes. All but the most exclusive items have lost their value as class signifiers. Brands trying to connect with younger elites are instead touting their products as “organic,” “ethical,” and “sustainable.”

Your ever-shrinking social circle. “The older we get, the person we spend the most time with is the one we see in the mirror,” Corrine Purtill and Dan Kopf report in their fascinating analysis of an existential truth, courtesy of new data from US Bureau of Labor Statistics. Fewer intimates can create lonelier twilight years—or more meaningful ones.

Uber would be nothing without Travis Kalanick. The deposed CEO reveled in pissing people off, writes Allison Griswold, but that’s what it took to disrupt a global industry. Politicians, drivers, customers, Tim Cook—no one was immune. And the company will forever be indebted to him.


Russian hackers are using Ukraine to practice global cyberwar. Power grids, government departments, the railway company, the port authority—all have been temporarily crippled in Ukraine in the last couple of years using methods of rapidly growing sophistication. As Andy Greenberg reports for Wired, security experts suspect these are all test runs by Russian hackers developing cyber-weapons that could take out swathes of Western infrastructure.

How tragedy begets crackdown. In an essay for Harper’s, Masha Gessen eyes the paranoid politics of the Trump era to remind “resisting” Americans that the US took its first tottering steps toward authoritarianism in the wake of 9/11. Rather than wait anxiously for the calamity of a new Reichstag fire, she advises, look long and hard at the security state, put in place by Democrats and Republicans, that has handed so much power to a president so feared.

One big risk in putting Saudis to work. Expats hold half the jobs in the kingdom, and phasing out foreign workers is a goal of the government as it diversifies beyond oil. Yet if more of its subjectsearn their own livings, Bloomberg’s Dana El Baltaji and Glen Carey argue, they may very well insist on a bigger voice in the affairs of state.

The faded promise of The Guardian in America. With its much-reduced staff buffeted by leadership changes, a lost sense of mission and the vagaries of the digital-ad business, Steven Perlberg declares in BuzzFeed News that the once high-flying Guardian US is a news outlet in search of purpose, highlighting a new wrinkle in the unfolding story of media in the digital age.

The opposite of fast fashion. In central Pennsylvania, the Amish have been basically wearing the same outfit for centuries. The academic fashion journal Vestoj explores the incremental and symbolic style iterations of a people who question “change for the sake of change,” traffic in small symbols of difference, and share and reuse clothing. The wisdom the rest of us might find there extends well beyond how we dress.

Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, fancy organic products, and slow-fashion suggestions to hi@qz.com. You can follow us on Twitter here for updates throughout the day, or download our apps for iPhone andAndroid.

#SpaceX’s next trick, no #Trump tapes, #Aussie toddler tablets

Good morning, Quartz readers!


For its next trick, SpaceX will launch two rockets in 48 hours.Elon Musk’s rocket company will show off its ability to carry cargo into space more frequently than its competitors. Meanwhile, India will launch a rocket carrying its 712 kg (1,600 lb) satellite, the Cartostat-2, along with 30 nanosatellites from over a dozen countries.

BlackBerry shares its quarterly results. The Canadian company is morphing from a smartphone maker to a software vendor focused on cybersecurity. Analysts expect a revenue drop of nearly 13% from the previous quarter, but also rapidly rising software sales.

The US releases data on new-home sales. A sharp drop in April suggested possible weakness in the market amid limited inventory and rising prices. But economists expect a rebound for May, with sales increasing about 5.4% (pdf).


Republicans in the US Senate released their health-care bill, finally. The legislation would hit poor voters even harder than the House version that passed in early May, and is particularly harsh on women. Majority leader Mitch McConnell wants a vote next week, but it appears the bill has insufficient support to pass in its current form.

An advisor of South Korea’s ousted president was sentenced to jail. Choi Soon-sil will spend three years behind bars for soliciting university favors for her daughter, a court in Seoul ruled. More convictions will likely follow in the influence-peddling scandal that brought down president Park Geun-hye. Choi also faces charges of accepting bribes for Park, who is on trial.

North Korea tested another rocket engine. US officials said the engine might be intended for use in an intercontinental ballistic missile capable of reaching American cities. Fielding such a missile is one of North Korea’s key goals, though experts believe it could still be years away from having reliable ICBM capability.

Donald Trump said there are no secret White House tapes. The US president ended weeks of speculation about possible tapes of his conversations with former FBI director James Comey by tweeting that he “did not make, and do not have, any such recordings.”


Corinne Purtill and Dan Kopf on the person we spend the most time with across our lifetimes: “Time with friends, colleagues, siblings, and children diminishes over the course of a lifetime. The older we get, the person we spend the most time with is the one we see in the mirror.” Read more here.


All the banks have passed / their stress tests. Clearly, we’re not /grading on a curve.


Robots are gaming human compassion. The push to humanize AI could dehumanize actual people.

Apple’s next big investment could reshape capitalism. Cashing in on Trump’s tax reform laws could fund the largest basic-income trial ever.

Millennials are the cheapest generation. Young people aren’t playing hard to get—they just don’t want your cars or houses.


An ancient Chinese dynasty had foreign slaves. A new studyshows the Shang dynasty exploited non-locals’ labor before beheading them as human sacrifices.

Opioids killed as many Americans last year as the last three US wars combined. Only 10% of addicts get treatment (paywall).

One-third of Australian preschoolers own a smartphone or tablet. Parents distract their kids with screens to get their own work done.

No one in Britain’s royal family wants to rule. Nevertheless, Prince Harry says his family will “carry out our duties at the right time.”

The successor to the fidget-spinner is seriously dangerous.Chinese parents are demanding a ban on the viral “toothpick crossbow.”

Our best wishes for a productive day. Please send any news, comments, humanized AI, and toothpick crossbows to hi@qz.com. You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

CWS Market Review – June 23, 2017

CWS Market Review
​​​​​​​June 23, 2017

“Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed.” – Peter Lynch

The stock market easily survived the Federal Reserve’s recent rate hike. In fact, the S&P 500 touched a new all-time high as recently as Monday. However, aside from the new high, the chief characteristic of the market continues to be its very low volatility.

Simply put, the market ain’t doing a whole lot of moving around lately. This seems at odds with so many of the headlines we see coming from around the world. Here’s a remarkable stat: seven times in the last eleven trading sessions, the S&P 500 has closed up or down by less than 0.1%. That’s a very small move.

If the market were to average daily changes of 0.1%, that would mean the Volatility Index (VIX) should be less than 2. The takeaway is clear—we’re living in a volatile world with extremely chill financial markets.

Frankly, we’re in the midst of a lull period for the stock market. I don’t expect much action from the markets until the second-quarter earnings season begins in another few weeks. While there hasn’t been a great deal of action for the overall market, there have been some growing currents underneath the surface.

As the second quarter wraps up, Wall Street is experiencing a pronounced sector rotation. The tech sector is getting wobbly. Healthcare stocks are finally coming to life, and oil is dropping like a stone. Also, many retail stocks are in full retreat. I’ll tell you what it all means. I’ll also run down several of our Buy List stocks. Plus, I have several new Buy Below prices for you. But first, let’s take a closer look at where the economy and markets stand at the middle of the year.

The Stock Market’s Quiet Sector Rotation

The market continues to be quiet and upward. In the last 43 trading says, the VIX has closed over 11 just four times. The S&P 500 has already set 23 new highs this year, and we’re not even at the midway point yet. By historic standards, that’s a high pace.

But not all stocks are equally calm. Two weeks ago, the Tech Sector got dinged for a 2.5% loss. Actually, the selloff on June 9 wasn’t that big by historic standards, but it was gigantic by 2017 standards. Tech stocks are starting to settle down, but there could be another move down for them. Fortunately, Microsoft (MSFT), our large-cap tech position on the Buy List, is holding up well. I’m going to keep our Buy Below for Microsoft at $70 per share. This has been a very solid performer for us. I’m looking forward to another good earnings report next month.

The healthcare sector badly lagged the overall market from the middle of 2015 until the early part of this year. Since then, healthcare has become increasingly popular. In fact, the Healthcare Sector ETF (XLV) has now beaten the overall market for seven days in a row. A lot of this, naturally, surrounds the debate about healthcare reform. I won’t speculate on the political debate, but the U.S. Senate has moved forward with a bill of its own. The bill in its current form probably won’t go very far, but it could serve as the starting point for a negotiation. In any event, many healthcare stocks are acting much better.

On our Buy List, the healthcare rally has been good news for Express Scripts (ESRX). If you recall, the pharmacy-benefits manager dropped more than 10% after they said they’re losing their largest customer. The shares have gained back more than 8% since then. This week, I’m raising my Buy Below on Express Scripts to $69 per share.

I think it’s interesting that healthcare is improving while retail is falling. Perhaps rising premiums are taking a bite about out of shopping plans.

Perhaps one of the more surprising moves lately has been the downward spiral for oil. Many traders had assumed that OPEC had finally wrested control of oil from the bears. Not so. Since May 23, the price for spot West Texas crude has fallen from $51.47 per barrel to $42.74 per barrel. This week, oil touched a 10-month low. This is especially bad news for OPEC because it took a lot of arm-twisting to get all the members on board for the production cuts. Now prices are lower than when they started.

This has been especially difficult for energy stocks. The Energy Sector ETF (XLE) broke $76 per share late last year. This was part of the Trump Rally. This week, the XLE broke below $64 per share. Fortunately, we don’t have any major energy stocks on our Buy List. This wasn’t a prediction on the macro economy from me. Rather, I just didn’t see any energy stocks I liked at the moment.

Amazon’s (AMZN) surprising move to purchase Whole Foods (WFM) has shaken up many consumer and retail stocks. The market apparently thinks this is bad news for stocks like Hormel Foods (HRL) and JM Smucker (SJM). I don’t see why, but the market doesn’t always think these things though.

Shares of SJM have dropped for the last seven days in a row to reach a new 52-week low. The shares now yield 2.5%. This looks to be a good buying opportunity for SJM. I’m going to lower my Buy Below on Smucker to $131 per share.

The real loser in the retail sector of late has been Ross Stores (ROST). I still like Ross a lot, but the stock has been a dud lately. In the last three weeks, ROST has lost over 12%. The deep discounter has proven itself to be one of the few “Amazon resistant” retailers out there. Let’s also remember that Ross has recently raised its full-year guidance, plus they increased their dividend by more than 18%. I’m going to drop my Buy Below on Ross down to $59 per share this week. The next earnings report is due out in mid-August.

Since the beginning of June, the Consumer Discretionary Sector (XLY) and Consumer Staples (XLP) have both been laggards. I’m not sure if this trend will last. I noticed, for example, that this week, we got a very good existing-home sales report. For May, existing-home sales rose 1.1%. This was the third–highest report in the last 10 years. On a year-over-year basis, housing inventory has dropped for 24 straight months. That’s probably a decent sign for consumer spending. I should also note that initial jobless claims have now been below 300,000 for 120 straight weeks.

Buy List Updates

Shares of Alliance Data Systems (ADS) have drifted higher recently. The stock rallied after its earnings report in April, but lately gave most of it back. ADS has now climbed for the last six days in a row. This week, I’m raising my Buy Below to $264 per share.

Cerner (CERN) has been a big winner for us this year. It’s currently up 42% YTD. This week, I’m going to bump our Buy Below up to $68 per share.

CR Bard (BCR) isn’t slowing down since the acquisition was announced. The stock just touched another 52-week high this week. The merger with Becton, Dickinson seems to be going well, and both stocks are drifting higher. I’m keeping my Buy Below on BCR at $330 per share.

This week, Stryker (SYK) announced that it’s buying Novadaq Technologies for $701 million. Novadaq is a Canadian fluorescence-imaging technology manufacturer. The deal is expected to dilute Stryker’s earnings by three to five cents per share, but it will have no impact of their full-year adjusted earnings. Stryker’s current guidance for this year is $6.35 to $6.45 per share. I’m raising Stryker’s Buy Below to $145 per share.

That’s all for now. Next week is the final week of trading for the first half of the year. It also marks the three-quarters mark for the decade. On Monday, we’ll report on orders for durable goods. Then on Tuesday is consumer confidence. On Thursday, the government will give its second revision for Q2 GDP. Last month, the government revised Q2 growth from 0.7% to 1.2%. That’s not very good. On Friday, we’ll get the personal-income and spending data for May. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 eight times in the last ten years. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

#EU summit, Clooney’s tequila bonanza, orca gangs

Good morning, Quartz readers!


EU leaders convene for a two-day quarterly summit. They’re expected to issue a joint statement on defense and global trade, and reiterate their support of the Paris climate accord. Ahead of the Brussels meeting, Italian prime minister Paolo Gentiloni called Brexita tough wake-up call.

Republicans in the US Senate finally unveil their health-care bill. President Donald Trump wants the Senate to pass a more “generous” bill than the one approved by the House, which he reportedly called “mean.” Majority leader Mitch McConnell has announced there will be just 10 hours of debate on the Obamacare repeal legislation.

The US Fed releases results from its big-bank stress tests.Investors hope it will let large US banks use some of their $150 billion in idle capital for dividends, stock buybacks, and other things. The Fed will release a second set of results on June 28. The tests measure the ability of banks to continue lending even in a serious economic recession.


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George Clooney sold his tequila business. London-based Diageo will pay $700 million for Casamigos, with a potential for $300 million more depending on future performance. The interest from Diageo—owner of Smirnoff, Guinness, and Johnnie Walker—coincides with rising tequila consumption in the US.

ISIL reportedly destroyed one of Iraq’s most iconic monuments. The centuries-old Al-Nuri Mosque, which dates to the 12th century, was where the extremist group declared a caliphate in 2014. ISIL claimed an American airstrike destroyed the mosque and minaret, but the Iraqi military placed the blame on ISIL’s own explosives.

Nike will start selling some items on Amazon. Previously it refused to engage with the e-commerce giant, fearing it would “undermine its brand.” But with traffic at traditional outlets declining, Nike had little alternative. Shares of Foot Locker and other retailersfell on the news.

Top US and Chinese diplomats met to discuss North Korea.The US urged China to use more economic and diplomatic pressureto get Pyongyang to rein in its nuclear missile program. US secretary of state Rex Tillerson said Donald Trump would visit China later this year.


Lina Zeldovich on how waterless toilets will change the world.“The waste is sealed into a biodegradable bag underneath the toilet with not a drop of water being spilled. Once full, the bag is replaced by a service team, and the waste is brought (yes, hand-delivered) to Loowatt’s pilot waste-processing facility, where it’s converted to fertilizer and biogas.” Read more here.


Perhaps it’s time for / an Uber for CEOs / the meter’s running


Amazon is a monopoly in need of regulation. The Whole Foods acquisition puts it on a fast track to dominate yet another platform.

“Woke pop culture writing” isn’t enough. Let’s not confuse artistic critiques with political engagement.

Travis Kalanick could have learned a lot from Jean Liu. The president of China’s Didi Chuxing is known for her collaborative approach to competition.


Orcas are the pirates of the Bering Strait. Gangs of up to 40 killer whales are shaking down Alaskan fishermen and stealing their catch.

NASA’s Mars rover is great at vaporizing rocks with a laser.Without any human involvement, it is analyzing hundreds of samples a day.

Brits born in the 1980s would be twice as wealthy if born just five years earlier. The generational wealth gap has trickled into politics.

Barbie’s friend Ken got a cornrow makeover. Bye-bye blue eyes: Mattel’s latest reboot features several ethnically and physically diverse looks.

North Korea has been Photoshopping Kim Jong-un’s ears.Forensic software reveals tweaks to make the dictator seem “a bit more handsome.”

Our best wishes for a productive day. Please send any news, comments, Ken doll alternatives, and photos of Kim Jong-un’s ears to hi@qz.com. You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

#Queen’s Speech, #Uber takes tips, too hot to fly

Good morning, Quartz readers!


Queen Elizabeth announces the British government’s legislative agenda. It looks to be the first Queen’s Speech delivered by a minority government since 1978, after prime minister Theresa May called a June 8 snap election that hurt rather than helped her Conservative party in Parliament.

The US and China meet to discuss North Korea. The inaugural session of the US-China Diplomatic and Security Dialogue, which presidents Donald Trump and Xi Jinping launched after their April summit, will focus on joint efforts to curb Pyongyang’s nuclear program.

The National Association of Realtors shares existing-homes sales data for the US. In April sales fell 2.3% from the previous month. For May, economists expect a 0.4% decline (paywall), with a shortage of properties keeping prices high and buyers sidelined.


Republicans retained a fiercely contested seat in the US Congress. Karen Handel won the House seat vacated by US health secretary Tom Price. Democrats, sensing voter anger against Donald Trump, had hoped for an upset win in the GOP-leaning district in Atlanta’s suburbs. The two parties combined spent a record $57 million on the contest.

Toshiba picked a preferred bidder for its prized memory-chip unit. It chose a consortium of Japanese, US, and South Korean firms instead of Broadcom or other suitors. Offering $19 billion, the consortium is led by the Japanese government, which is keen to keep the unit under domestic control.

Uber is finally letting its drivers accept tips. To reduce driver turnover and dissatisfaction, the ride-hailing giant began offering an in-app tipping feature in several US cities. The rest of the country will have it by the end of July, and other parts of the world in the near future. CEO Travis Kalanick, who long opposed a tipping option, iscurrently on leave.

Chinese stocks got a big boost from MSCI. The US index giant agreed to add mainland “A” shares to its widely tracked emerging markets index. While the stocks will account for just 0.5% of the index, the decision could lead to hundreds of billions of dollars worth of share purchases.

Saudi Arabia named a new crown prince. Mohammed bin Salman, still in his early 30s, has played a key role in the country’s efforts to expand the economy beyond oil. Now he’s set to inherit the throne occupied by his father, King Salman.


Sarah Kessler on the selective rollout of Facebook’s “Pride” button: “The decision to make pride month reactions more visible in some places than others highlights a common problem for Facebook as it has scaled to nearly 2 billion global active users. In many of the countries where Facebook users said they could not access the pride button feature, such as Egypt and Algeria, homosexual acts are illegal.” Read more here.


There’s a glut of crude / Bad news for cartels, good news / for your Suburban


The “cool tech girl” is a dangerous myth. Casual sexism and toxic bro-culture have created a trope that needs to die.

Brazil may elect its own version of Donald Trump. Jair Bolsonaro is running on a racist, misogynist, and xenophobic platformthat is gaining steam with each new controversy.

Index funds aren’t as passive as you think. The proposedexclusion of dual-class companies (paywall) and recent inclusion of Chinese shares show that “passive” funds make active choices(paywall).


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An ancient Islamic city was discovered under an Ethiopian town. Researchers have found evidence of a giant trading post, including jewelry and massive building stones.

No one knows Nigeria’s true population. Africa’s most populous country hasn’t had a census since 2006, and even that was probably exaggerated.

The neon flying squid is faster than Usain Bolt. It propels itself through the air by expelling water and using its fins as sails.

Old dads tend to have geeky sons. A survey of 8,000 boys found that older fatherhood was linked with higher IQs and social aloofness.

It’s so hot in Phoenix that planes can’t fly. American Airlines was forced to cancel 20 regional flights after the mercury hit 120°F (49℃), above the operational limits of some aircraft.

Our best wishes for a productive day. Please send any news, comments, cool tech-girl tropes, and Nigerian population estimates to hi@qz.com. You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

Weekend edition—#Amazon eats the world, the new markers of wealth, your circle style

Good morning, Quartz readers!

Amazon’s deal to buy Whole Foods may be remembered as the dawn of a new era in business, when an old industry stubbornly resistant to change suddenly gave way to something modern and innovative. But supermarkets were once themselves a cutting-edge concept.

It wasn’t that long ago that shoppers went to the butcher for meat, the baker for bread, and the green grocer for produce. Starting in 1930, the supermarket pulled it all together. The bounty of the American supermarket, with its towers of toilet paper and freezers full of meat, was so arresting to Soviet officials who visited one in 1989 that itshattered their faith in communism and helped end the Cold War.

Modern supermarkets were made possible by a host of changes, from industrial-scale farming to the interstate highway system. But after pioneering a logistics revolution that paved the way for shopping malls and big-box stores, progress pretty much stopped. While virtually every other domain of commerce has changed dramatically with the advent of the internet, online grocers were stymied by the challenge of delivering perishables while operating within the tight margins that make groceries a competitive business.

Why is this time different? Part of it is the track record of Amazon and Jeff Bezos; from books to television shows, there is little, if anything, they haven’t been able to sell online.

Bezos will soon be the richest person in the world. After today, Amazon is headed toward being the biggest company. And just as flip phones became obsolete the day after iPhones were introduced, Amazon-powered food buying could soon make us wonder how we ever managed before.—Oliver Staley


How do you draw a circle? Direction, it turns out, is everything. Thu-Huong and Nikhil Sonnad analyzed 100,000 circle samples from around the world, finding intriguing clues about culture, geography, and upbringing. Draw yours here to learn which way you roll.

Why it’s so hard for women to figure out what to wear to work.Increased freedom of choice makes buying—and selling—more complicated than ever, Marc Bain explains. The big clothing brands are just as flummoxed as customers, but the answer may lie in “capsule wardrobes” customized to match specific office dress codes.

The nearly invisible new markers of the elite. The leisure class no longer trumpets its status with flashy purchases. Low-key is the new high-water mark of arrival, Dan Kopf finds, as Americans of means demonstrate their deepest aspirations with NPR tote bags, yoga classes, and other less conspicuous symbols of cultural capital.

The private-prison industry loves the US Marshals. The agency runs the nation’s largest jail system but owns no buildings to house its thousands of detainees, Hanna Kozlowska reports. Trump’s immigration crackdown means business will only increase foroperators with questionable records on safety and compliance.

Modern medicine makes wellness a women’s issue. At the inaugural summit of Gwyneth Paltrow’s lifestyle brand Goop, Jenni Avins meets seekers on a quest for fulfillment amid markers of the lucrative “transformation economy.” Annaliese Griffin links the boom to the medical establishment’s bias against women, who are now drawn to cozier types of care.


Sign up for the Cannes Daily Brief, Quartz’s pop-up newsletter on Cannes Lions — the world’s premier celebration of creativity in advertising — and sponsored by Undertone. Our journalists will be on the ground in Cannes from June 19 to 23 to report on industry moments, trends, and surprises. Whether or not you’ll be on La Croisette, sign up to stay informed about what’s happening on the ground and what it means for the media business.


The miserable origin story of the iPhone. A decade after its release, Brian Merchant dives into the iPhone’s still-hotly-debated genesis for The Verge, detailing an intense Apple operation that birthed one of the world’s most influential devices—and ruined more than one marriage.

What was easy to miss about bitcoin. Bitcoin’s greatest advantages over legacy payment systems seemed to be low cost and fast speed. But with those gaps closing, American Banker’s Marc Hochstein argues for a more important bitcoin benefit: “censorship resistance,” to counter governments, political-correctness police, or anyone else who might seek to control our transactions and the data trail they leave.

Wealthy countries outsource toxicity to Asia. In the ‘80s, chemicals called EGEs were linked to miscarriages and other problems for women in semiconductor factories. In the US and Europe, the industry stopped using them. IBM, Motorola, HP, and others started relying on chips manufactured in South Korea, where, Bloomberg Businessweek finds, plants are still using EGEs, putting 120,000 women at risk.

Smoking shows inequality is a matter of life and death. The US smoking rate is just 15%. But it remains over 40% for the less educated. As cigarettes become a habit of only the poor in America, William Wan in the Washington Post spotlights how wealthier Americans are increasingly immune (paywall) from their devastating health and financial costs.

Meet the real father of economics. Ibn Khaldun, the 14th-century Islamic scholar, laid down basic economic precepts such as the division of labor four centuries before Adam Smith, and even hinted at the 20th-century ideas of John Maynard Keynes. Daniel Olah in Evonomics celebrates the pioneering—and thoroughly modern-sounding—writings of a thinker often ignored by the West.

Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, circle drawings, and miserable origin stories to hi@qz.com. You can follow us on Twitter here for updates throughout the day, or download our apps for iPhone and Android.

CWS Market Review – June 16, 2017

CWS Market Review

June 16, 2017

“If you’ve followed my forecasts, you’ve probably lost a lot of money.”
– St. Louis Fed President James Bullard

Well…it happened. As expected, the Federal Reserve raised interest rates again this week. I don’t like it, but we can’t always choose the ideal environment to invest in. If you wait for things to be perfect, then you’d never be in the market.

This was an important meeting for the Fed because they also explained what they intend to do with their enormous balance sheet. This has been a big concern on Wall Street. I’ll explain what it all means. Additionally, the central bankers updated their economic projections. I should explain that the Fed has a pretty dismal track record of predicting where things will go, but it’s still useful to look at their outlook for the economy.

Fortunately, the stock market continues to hold up well. The S&P 500 closed at another all-time high on Tuesday. However, there’s been a significant weak link in the market recently, and that’s big-cap tech stocks. Don’t feel too bad for these guys. They’ve been running up the score lately, so I can’t say it’s not wholly surprising to see them face a little pain. Outside of Microsoft, this recent trend hasn’t had a big impact on our Buy List. In fact, our Buy List has been doing quite well of late. Before I get to all that, let’s look at what the Fed did this week.

The Federal Reserve Raises Interest Rates

On Wednesday afternoon, the Federal Reserve released its latest policy statement. The central bank said they raised their range for the Fed funds rate to between 1% and 1.25%. That’s an increase of 0.25%. This was the second rate hike this year, and the fourth of this cycle.

As I’ve said before, I think this move is a mistake, and I won’t belabor the arguments against the increase. It happened, and we have to move on. I’ll note that there was one dissenting voice, Neel Kashkari of the Minneapolis Fed, who agrees with me.

On Wednesday morning, just hours before the Fed’s statement, the government released the inflation report for May. The report again showed that there’s absolutely no threat of inflation on the horizon. If anything, the rate of inflation has fallen off sharply over the last three months. It’s hard to justify rate increases to fight off an inflation threat that doesn’t exist.

During May, the headline rate of inflation fell by 0.1%. Economists had been expecting no change. Some of that was due to falling prices for gasoline. That’s why we also want to look at the “core rate,” which excludes volatile food and energy prices. But the core rate for May only rose by 0.1%. There’s simply not much inflation out there.

You may recall that March was the weakest month for core inflation in over 30 years. As with all stats, we don’t want to be fooled by one-point trends. There are always outliers, so we want to see more evidence. Indeed, that evidence came in the last two months. Core inflation for April and May were the second- and third-weakest of the last three years, trailing only March. So it’s not only that inflation is low: it’s actually going lower.

More troubling is that we’ve seen a swift reaction in the bond market. On Tuesday, the yield on the 10-year Treasury dropped to 2.1%. That’s the lowest point all year. After the election last year, Treasury yields soared on economic optimism, but that’s largely faded in recent weeks. The spread between the two-year and ten-year Treasuries is now less than 80 basis points.

In the Fed’s policy, they acknowledge the recent weakness in the economy, but they seem to feel that it will soon pass. I hope they’re right, but I just don’t see the evidence just yet. In fact, this week’s retail-sales report was another dud. Economists had been expecting a gain of 0.1%. Instead, retail sales fell 0.3% in May. This was the biggest drop in 16 months.

But the Fed thinks they’ve only started raising rates. According to the latest Fed projections, they expect to raise rates one more time this year. After that, the outlook becomes a lot less clear (the blue dots get much more dispersed). The Fed sees three more hikes in 2018, and possibly three more in 2019. That means it’s possible that the 2/10 spread could be negative as early as next year. Still, I don’t want to be too alarmist. By the Fed’s own projections, they see real interest rates staying negative for another 18 months. My point is that we’re not in the danger zone just yet, but we can see it on the horizon.

The Fed also unveiled its plans for what they intend to do with their $4.2 trillion balance sheet, or as the Fed calls it, their “normalization plans.” The Fed said they plan to stop reinvesting the proceeds of their bonds in gradually increasing increments. It will be a long, long time before the balance sheet gets back to normal. But the key point is that the Fed intends to raise rates at the same time they address their balance sheet. That point wasn’t always so clear.

The Great Tech Stock “Crash” of 2017

What’s happening with tech stocks? The tech sector has fallen four times in the last five sessions, and some of those drops have been pretty sharp. The stock market had been so placid for so long that a fairly minor bump in the road for large-cap tech stocks has rattled a lot of investors.

Let’s add some context here: tech stocks had been leading an already powerful rally. In fact, the rally hasn’t even affected the whole sector. A huge part of the gains have fallen on just five major stocks; Facebook, Apple, Amazon, Microsoft and Google. That’s right: the latest acronym hitting Wall Street is FAAMG.

At one point, Facebook, Amazon and Apple were all up over 30% for the year. That was more than three times the rest of the market. Not anymore! In the last week, the Tech Sector ETF (XLK) has dropped from $57.44 to $55.57.

I want to stress that the damage we’re seeing in tech is hardly unprecedented. What’s been unusual is the exceedingly low volatility visible until now. It’s the change from very, very low volatility to normal behavior that’s jarred Wall Street. Frankly, the current losses are very normal.

Our Buy List has largely side-stepped the FAAMG phenomenon, with the exception of Microsoft (MSFT). Shares of MSFT just pulled back below our $70 Buy Below price. Again, that’s following an impressive run-up. Of all the FAAMG stocks, Microsoft is the one I’m least worried about. The last few earnings reports have been quite good. Also, I’m expecting another dividend hike in September. For now, I’m not worried about Microsoft, but I think we’ll see more losses in the tech sector for a few more weeks. Now let’s look at some of our Buy List stocks.

Buy List Updates

There hasn’t been a lot of news impacting our Buy List stocks this week. The good news is that our performance versus the rest of the market continues to be strong.

This week, I want to make a few adjustments to some of our Buy Below prices. As always, please bear in mind that these are not price targets. Instead, they’re guidance for current entry into a stock.

First up is AFLAC (AFL). I’m lifting my Buy Below on the duck stock to $80 per share. AFL has gapped up recently. Paul Amos, the current president and CEO’s son, said he’ll be leaving the company. That probably takes him out of the running to be the next CEO.

I’m also raising our Buy Below on Fiserv (FISV) to $131 per share. This stock is as strong and steady as it’s ever been. I’m looking forward to another good earnings report next month.

I’m dropping my Buy Below on Ross Stores (ROST) to $66 per share. I still like Ross a lot, but the stock has been caught up in a poor environment for retail. I’m not worried about Ross. This will be a real bargain if you can get Ross below $60 per share.

Finally, I’m lowering my Buy Below on Snap-on (SNA) to $168 per share. This is another good stock caught in a downtrend.

That’s all for now. There’s not much in the way of economic news next week. On Wednesday, we’ll get the existing-home sales report for May. Then on Friday will be the new-home sales report. For now, the housing sector is a bright spot in the economy, while consumer spending looks tired. We’ll see how long this can last. Be sure to keep checkingthe blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 eight times in the last ten years. This email was sent by Eddy Elfenbein through Crossing Wall Street.
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