Quartz Daily Brief—Afghan presidential palace attacked, Obama’s climate plan, Snowden hunting

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Good Morning, Quartz readers!

What to watch for today

Afghanistan’s presidential palace is under attack. Gunmen began an attack in the early hours of Tuesday as reporters gathered for a press conference with President Hamid Karzai. Details are still emerging.

Bankers convene. Over 1,000 of the world’s top bankers and policymakers will meet in Paris on Tuesday and Wednesday at a conference of the Institute of International Finance. Top of the agenda: Fixing Europe and adapting to new regulation.

Will Sprint close the deal? Sprint shareholders will vote on SoftBank’s sweetened offer, worth $21.6 billion. Sprint’s other suitor, Dish Network, abandoned its bid last week after a long bidding war.

Obama’s climate vision. President Barack Obama is expected to announce a slew of measures including limits on carbon emissions from existing power plants, which account for 40% of the annual emissions in the US.

Digital drag for Barnes and Noble. The retailer is expected to report a loss for the fourth straight quarter, while revenues may see a 4% drop. The drag is coming from the Nook division, which includes e-readers, tablets and e-books.

Homebuyers are back. Economists expect new US home sales to increase 2.2% in May. The S&P/Case-Shiller home price index for April and durable goods orders for May are also due.

While you were sleeping

Where in the world is Edward Snowden? US intelligence agencies and a lot of frustrated journalists continued their hunt for the NSA whistleblower after he didn’t board a flight from Moscow to Havana. The US criticized China for letting Snowden leave Hong Kong for Moscow—if in fact he ever went there.

Indonesia apologized for wayward pollution. Taking full responsibility for illegal fires on the island of Sumatra, President Yudhoyono called for an end to the bickering that has soured the relationship between Indonesia and its smoke-choked neighbors, Malaysia and Singapore.

Berlusconi’s Bunga-bunga boo-boo. Italy’s former prime minister was sentenced to seven years in jail and banned from public office for having sex with an underage prostitute. The ruling threatens to destabilize Italy’s ruling coalition, although he is unlikely to ever see the inside of a prison cell.

Dilma Rousseff goes to the people. Brazil’s president responded to days of nationwide protest by offering to hold a referendum on political reform and invest 50 billion reais ($25 billion) in public transport.

Affirmative action goes back to the drawing board. The US Supreme Court sidestepped a sweeping decision on race-conscious admission policies by asking lower courts to take fresh look under more demanding standards. But make no mistake, affirmative action is already dead.

Rivals Microsoft and Oracle team up. Both companies are struggling to preserve their market share in cloud computing in the face of stiff competition from cheaper alternatives. Oracle has been under fire from its shareholders for missing software sales targets for a second quarter running.

Quartz obsession interlude

Matt Phillips on what the US and Chinese central banks have learned about bubbles. “Before the global financial crisis hit, central bankers didn’t try to deflate asset bubbles. Instead, they just waited until they popped and tried to contain the damage and pick up the pieces. But that hand-off approach appears to be no longer in vogue. The evidence? Look no further than the most recent market upheaval, which was sparked by central banks in the world’s two largest economies doing their best to deflate bubblicious conditions in key financial markets.” Read more here.

Matters of debate

China’s opacity makes it a dangerous investment. Beijing has lost control of its Frankenstein economy.

Global warming is making the world un-insurable. Governments are the only ones who can do something about it.

The next merger boom is already here. M&A volumes will rise even though most mergers continue to disappoint.

The coffee critics are wrong. The science shows that caffeine can drive creativity.

Surprising discoveries

Get important people to answer your emails. Six secrets on how to get responses.

Avoiding US extradition treaties is a toughie. This map will help.

Influential statistics. The most persuasive word you can use in a meeting is “yeah.” 

Wine connoisseurs can’t tell the difference. Only 10% knew they were being given the same wine over and over.

Visit the Burj Khalifa for free. Google Street View now takes you into the world’s tallest building.

The 1% of the 1%. 0.01% of the US population contributed 28% of campaign donations in the 2012 elections.

America’s best-loved pets. Dogs are an overwhelming favorite. But tigers are the top exotic pet.

Our best wishes for a productive day. Please send any news, comments, tips for escaping world powers and unidentifiable vintages to hi@qz.com. You can follow us on Twitter here for updates during the day.

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Earlier this week, I wrote the November issue of Cabot Stock of the Month, highlighting a company whose main business is making cardboard and containerboard. It’s a very logical investment thanks to its low valuation and its high prospects for earnings expansion–in part thanks to price hikes. But at the end of the day it’s still a cardboard company, so while I’m enthusiastic about the investment, it’s hard to get excited about the company as a business.

Similarly, this week we published a recommendation for a major soup company in Cabot Top Ten Trader. As an investment it looks great, not least because it yields 3.3%, which beats cash in the bank hands-down. But the soup business, like the cardboard business, leaves me yawning.

What gets me excited are businesses that have a revolutionary factor with the potential to make the world a better place–because that’s where we find some of our greatest investments.

Amazon.com, for example, revolutionized the shopping business. We did very well with that as an investment, notching gains of over 1,000%.

Green Mountain Coffee Roasters, similarly, revolutionized the coffee business with its Keurig brewers and K-cups. We did very well with that as well.

Crocs revolutionized the footwear industry with its plastic (but oh so comfortable) shoes. Here, too, Cabot made nice profits.

And the revolutionary ideas never stop coming!

All you’ve got to do is keep your eyes open, and remember that even though these companies are often ridiculed at first, that’s actually a sign of revolutionary potential. The “experts” said Amazon would be killed by Barnes and Noble and Borders. And the experts said adults would never buy plastic shoes. But they did.

So today I want to run three more revolutionary investment ideas past you. Some you can invest in now; some are not quite ready. But all three excite me because, brought to fruition, they will make the world a better place.

Interestingly, all three are related to automobiles, which tend to excite me a lot more than cardboard and soup!

#1: Dealerless Auto Sales

The first idea is the concept of bypassing your local auto dealer when you purchase a new car. Amazon.com found a way to bypass your local, inventory-heavy merchant–first for books and then for everything else–so why can’t you bypass the franchised dealer (and avoid his markup) when you buy a new car?

A lot of people, obviously, will laugh at this idea. They’ll claim they need to test-drive cars, or they’ll claim they need those franchisees for warrantee service down the road. (Remember, skepticism is a good sign.)

But the dealerless auto sale is already a reality for Tesla (TSLA). The company has no franchised dealers; it sells all its electric cars through outlets that look more like Apple stores than Chevrolet franchises. Every car sells for list price; there’s no haggling. Right now, it has reservations for more cars than it can make.

Now, Tesla is not a big deal yet; it’s sold fewer than 4,000 cars. Yet auto dealers are beginning to notice! And in the grand tradition of American business, dealers in New York and Massachusetts are suing, claiming Tesla is violating state laws. Interestingly, Tesla founder Elon Musk did not get into the car business with the idea of revolutionizing the automobile sales model, but it looks like a great side benefit to me!

#2: Internet-Powered Taxi Industry

The second idea involves replacing the ridiculously outmoded taxicab industry with a new Internet-powered paradigm. Why do we need a central dispatcher on a telephone when the Internet means customers can communicate directly with potential drivers? And why should we limit the number of potential drivers via an expensive medallion system when the market is perfectly capable of doing that itself, just as it does with restaurants and shoe stores and nail salons?

Skeptics will claim that the current structure is safest–that the vehicles and drivers are vetted regularly. But most of us have had cab drivers whose behavior argues otherwise. And it’s clear that a fully informed Internet-centric business would enable even more intelligent allocation of drivers to riders than the current outmoded system.

Now, you can’t invest in this new decentralized (peer-to-peer, some call it) ride-sharing idea yet, but there a number of businesses in operation already, refining the concept while working around the current regulations. Interestingly, all are based in San Francisco, and all make use of apps on smartphones.

Uber offers service in a dozen North American cities, as well as in Paris, France.

Zimride has been in business five years, and branched out from its car-pooling roots to a service named Lyft, which is similar to Uber’s, but is notable for big pink mustaches on its drivers’ cars.

Sidecar is younger, but just last month announced it had received $10 million in funding (Google Ventures was a lead investor), and is looking to expand across the U.S.

Tickengo was started last year, and says 10,000 drivers have already signed up!

I wish them all well as this young industry evolves.

Interestingly, there is a company named Medallion Financial (TAXI) whose main business involves financing traditional taxi businesses, the biggest expense of which is typically the medallion purchase. Medallion came public in 1996, and the stock has made no progress over the long term, though it’s had some big swings. Revenues at the company have shrunk in each of the past three years. But intermediate-term, its stock is clearly in an uptrend, and that plus the impressive 6.7% dividend means it might be worth looking at. Just note that it’s lightly traded, which is a major reason no Cabot publications have recommended it–and if these new-era taxi businesses take off, Medallion’s days may be numbered.

#3: Driverless Automobiles

The third revolutionary idea involves replacing the driver totally, and letting the car drive itself, which is a good idea because it would reduce accidents, it would enable more efficient traffic flows and it would allow ex-drivers to be more productive.

As a guy who likes driving, I don’t relish the thought of giving up the wheel, but I can see the writing on the wall. And so can legislators in California, Florida and Nevada, which have already made driverless cars legal.

Google is the lead dog in this race. Its self-driving cars have already logged more than 300,000 miles, and it’s stated clearly that it doesn’t want to make cars; it wants to make the software that runs the cars. I wish them luck.

Sticking with the vehicle theme, my investment idea today is an all-American company that began life as a maker of snowmobiles, but has expanded to become a major force in off-road vehicles of all sorts, and is slowly moving into on-road vehicles as well.

It’s Polaris Industries (PII), based in Minnesota, and here’s what editor Mike Cintolo wrote about it in a recent edition of Cabot Top Ten Trader.

“Polaris began life in 1954 as a developer and manufacturer of snowmobiles, but that segment of the business accounts for just 11% of revenues today. The bulk of the business (69%) comes from four-wheel and six-wheel ATVs marketed to hunters, farmers, ranchers and outdoorsmen of all stripes, as well as the military, and Polaris is dominant in this industry. But the company is not sitting still; it has a great track record of adapting to the market. Polaris got out of the personal watercraft business in 2004. It created an on-road division in 2009; now 5% of revenues come from its American-made motorcycle brands Indian and Victory. And in 2011 it began moving into the electric vehicle market, buying Global Electric Vehicles (GEM), a maker of neighborhood electric vehicles, from Chrysler, and investing in Brammo, a manufacturer of electric motorcycles. Revenue trends have been steadily positive for years, with the exception of a big dip in 2009–the economy, you know. And last week’s earnings report brought more good news, beating analysts’ estimates for both revenues and earnings. Particularly impressive to us were the fat 10.7% after-tax profit margin (high single-digits are more typical) and the fact that revenues from motorcycles (mainly Indian and Victory) soared 78%.”

Here’s a photo of the Polaris Sportsman 400, which they call “the best value ATV on the market.” You can get a new one for less than $6,000.

Polaris Sportsman 400 Photo

As for the stock’s technical action, the long-term trend is up, and that earnings report brought a high-volume buying spike that is bullish for the intermediate-term. Even better, the stock has pulled back normally since that spike (like the broad market), and I think that presents a decent buying opportunity. Finally, the annual yield is 1.8%, which is nothing to sneeze at today.

If you like the idea–maybe you’re already a Polaris customer–you could simply buy the stock right here and hope for the best.

Yours in pursuit of wisdom and wealth,

Timothy signature

Timothy Lutts
Editor of Cabot Stock of the Month