Simon Mugo

JPMorgan Chase (NYSE:JPM) last week emailed its credit card customers notifying them that it was reviving the forced arbitration clause that it had dropped back in 2009. However, the notification was hidden in the fine print of the email, where it also included a way for the bank’s clients to opt out of the new clause. The notice read that customers who were bound by the new clause could not pursue court cases against the bank or join class-action lawsuits if they felt aggrieved. Instead, the aggrieved parties would have to resort to an arbitration process as the only option for them to seek redress or compensation. Statistics indicate that forced arbitration has historically led to lower settlements by financial institutions as opposed to court cases, especially class-action lawsuits. This is the main reason why JPMorgan wants to bind most of its credit card customers with the new clause. However, savvy customers can opt out of the clause by sending a written notice to the bank’s postal address in Wilmington, Delaware. The bank stated that any requests submitted via email or by phone would not be valid.

The recent resignation of the CEOs of South African Airways and the power company Eskom has jeopardized the recovery of these two state corporations. The two bosses cited similar reasons for their departures, which was the crippling government bureaucracy as well as the acute lack of funding for the state corporations. Most investors believe that the two resignations are a major setback for President Cyril Ramaphosa’s reform agenda and that it will be much harder to turnaround the two firms going forward. Many believe that it will be very hard for the two companies to hire new CEOs, but even if they do, the government has to take an entirely new approach to revive the firms. Eskom is currently struggling with a debt burden of 440 billion rand ($30.3 billion), which is equivalent to 9% of South Africa’s GDP, while SAA has not made a profit since 2011. The government is facing several challenges in reviving the two firms mainly due to the massive amount of funds needed to turn the companies around. This is a monumental task that the government has to fund and back with political goodwill, which it is currently lacking.

Walmart Inc. (NYSE:WMT) recently unveiled a scholarship program for high school students and other individuals without any college credits. The new initiative will sponsor the studies of high school students who pursue technology-related courses such as cybersecurity, computer science and programming. Walmart’s SVP in charge of the retailer’s U.S. people division said that the company is now focused on recruiting high school students because they currently make up a tiny percentage of its overall workforce. The firm said that out of its 1.5 million U.S. workers, it only had 25,000 high school students on its roster. The retailer is the largest private employer in the United States, and the new initiative is likely to attract a lot of attention from high-school graduates who want to pursue a career in technology. This is also a very strategic move given that this crop of young employees is likely to work for the retailer for a longer period than most mature employees.

Tesla Inc. (NASDAQ: TSLA) today started accepting pre-orders for its Model 3 Standard Plus sedans set to be produced at its Chinese Gigafactory located in Shanghai. The cars will start at 328,000 yuan ($47,510), which is a 13% discount to the price of a similar Model 3 imported from the U.S. The company said that the lower price point was meant to make the Model 3 more accessible to Chinese consumers given that the US-China trade war has seen American imports hit with high tariffs. The factory also helps ease the massive headache that Tesla used to face when it came to shipping its products across the world from its other Gigafactory located in Nevada. Tesla promised to start shipping the pre-ordered cars in the next 6 to 10 months as the new factory, which has been under construction since January, becomes fully operational. The company could also use the factory as a manufacturing base for cars meant for other international markets apart from the Americas.

The Turkish economy contracted 2.6% in Q1 2019 as the country sunk deeper into a recession driven by political tensions, a currency crisis and rising inflation. However, many are wondering whether the Middle Eastern country can survive and embark on a path to recovery, but this solely depends on the government’s actions. President Tayyip Erdogan’s government is likely to attract punitive U.S sanctions as from next week given President Trump’s ultimatum regarding the purchase of Russian S-400s missile defense systems. The sanctions threat has not dissuaded Turkey from going ahead with the purchase and it is highly likely that the punitive measures will come into effect next month. Many analysts do not believe that President Erdogan will cancel the missile purchase, largely because of the 2016 coup attempt. The main reason why President Erdogan wants the Russian missile systems is because he wants a defense system that is not made by a NATO country, which could attack rogue air force jets in case they attempt another coup. Unfortunately, Turkey is on the precipice of a major crisis starting with the U.S. sanctions and possible exclusion from the global financial system.

According to a Reuters exclusive, Amazon.com (NASDAQ: AMZN) is interested in acquiring T-Mobile’s Boost Mobile wireless brand as the new entity looks to dispose of some of its assets in order to meet FCC requirements. New T-Mobile is the name of the combined entity that will be formed once T-Mobile (NASDAQ: TMUS) and Sprint Corp (NYSE: S) complete their merger, if it is approved by the Department of Justice. Sources familiar with the matter said that Amazon was interested in purchasing Boost Mobile as this would give it full access to New T-Mobile’s wireless network for approximately six years. They believe that Amazon could easily use the above network to enhance its phone call service currently offered via its Echo Connect device. However, Amazon did not confirm the reports, which means that all we can do for the moment is speculate on the matter. Regardless, we cannot dismiss the rumor given that Amazon has been known to venture into completely new industries and launch products and services that dominate such industries. For example, Amazon Web Services is now a major player in the cloud services industry.

Qualcomm plans to appeal the latest antitrust ruling by U.S. District Judge Lucy Koh because the judge did not consider some of the evidence submitted by the firm as well as some material facts. Although Qualcomm is yet to file the appeal, it has filed a motion seeking to postpone the implementation of the court’s ruling. The company says that it is planning to file an appeal that could take up to a year to be decided. By which time, they would have been forced to change its license agreements in a substantial manner. According to the firm, the license changes necessitated by the ruling would be impossible to undo if it wins the appeal. Therefore, its application has a stay of execution. The chip manufacturer says that the judge ignored evidence submitted after March 2018, which showed that Apple cancelled its supply contract and chose Intel as its main chip supplier. Qualcomm claims that this proves that it did not have a stranglehold on the smartphone chips market.

A crypto user with the handle “09E282” paid over $113,000 in ether tokens for a virtual crypto car secured by a non-fungible token. This shocked many people who have been asking whether a virtual car is worth such a huge sum. Well, to answer this question, we have to go back to the basic principles of economics. The demand and supply of a product largely determine its price. This is why some physical cars cost way more than $100,000 and are regarded as luxury cars, while some used cars cost as low as $2,000. The reason some buyers are willing to pay over $1,000,000 in order to acquire some high-performance cars is because they believe that such cars are valuable. Using this example, it is evident that the pseudonymous user paid the $113,000 for the virtual crypto car because he believes that it is probably worth more than that. The reason many people were shocked is because there are no other examples of a similar purchase in society. However, I believe that over time we’ll see other virtual crypto collectables being bought for more.

Netflix is the first media production company to come out and publicly criticise the new abortion laws by Georgia’s Republican-dominated legislature. The new law prohibits most abortions once the heartbeat of a fetus can be felt, which could be as early as six weeks into the pregnancy. The company has said that it would reconsider its entire Georgian operation given that it films two of its popular series “Stranger Things” and “Ozark,” in the state. The announcement came after some actors and producers said that they would not film shows in the state if the law is implemented next year. The state risks losing out on billions in revenues generated by the film industry given that the state is a popular filming location. The film industry added $9.5 billion to Georgia’s economy during the 2018 financial year and directly spent $2.7 billion within the state’s borders. It is highly likely that other production companies will follow suit given the backlash from actors and producers following the bill’s signing by Governor Brian Kemp.

After two aborted attempts, SpaceX finally launched its first batch of 60 satellites, which are part of its planned Starlink network of satellites that will beam the internet to Earth from space. This is a massive step for the company, which is in a race against other companies such as Facebook and Amazon’s Blue Origins to beam high-speed internet to earth. Elon Musk explained that the company would have to launch another 6 batches in order to get the minimum number of satellites needed to activate the internet-beaming service. SpaceX is currently leading the other companies in the race and closely guards its technology to ensure that other companies have to develop their own technology if they want to launch a similar service. Space did not give a timetable as to when to expect the next launches in order to reach activation capacity, but the launch puts it ahead of its competitors for now. It remains to be seen whether the service shall be successful given that many other projects launched by Elon Musk have experienced massive delays in execution and mass adoption.

According to official data from India’s Election Commission, Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) is set to claim a second landslide victory in as many general elections. Many analysts believe that Narendra Modi’s candidacy was the main reason why his BJP party scooped up so many elective seats to give it a majority in the country’s parliamentary elections. Many analysts equate Prime Minister Modi’s popularity to that of Indira Gandhi's many decades ago when the Congress party also commanded a comfortable majority in India’s parliament. Modi’s election mirror’s President Trump’s election win, as well as Vladimir Putin’s and Tayyip Erdogan’s, as all these men are right-wing populists. According to surveys done by political think tanks in countries that have elected ‘strongman leaders’, most respondents say that they would rather have a strong President or Prime Minister, instead of relying on Parliament and the justice systems. This points to a strong preference in such societies for strongman leaders who act on their policies while disregarding other government structures such as parliament and the justice department.

A win by Narendra Modi is likely to be good for the Indian economy given that he is the current leader and has just served is first five years in office. The Prime Minister had pledged to fight the country’s massive unemployment rate as well as the rural distress that has plagued his first term. While we will not know his exact impact on the country’s economy until well into his second term, we do know that investors appear pleased that PM Modi is likely to win the election. This was reflected in today’s rally by Indian stocks to record highs following a preliminary announcement by the country’s electoral commission that Modi was ahead of his competitors. In most cases, investors are usually pleased when a sitting leader retains his position as this usually means that he is unlikely to introduce new policies that may not be in their favor. However, the impact of a leader on a country’s economy is most felt by its citizen’s, which is why it is hard to determine PM Modi’s impact on the Indian economy until well into his second term.

The fact that Moody’s downgraded Equifax Inc.’s (NYSE: EFX) rating from stable to negative was not surprising to many given the impact of the 2017 data breach on the company. However, both investors and analysts were surprised at the reason given by Moody’s for the downgrade, which cited the impact of the cyber-attack as the main reason behind the downgrade. This was the first time in history that a ratings agency has downgraded a company based on the impact of an online data breach. The moves sets a new precedence for future cyber breaches as other firms will try to avoid any major data breaches that could cost them millions in class action settlements. Other firms such as Facebook and Yahoo have also admitted to massive data breaches in the past and depending on whether the victims file class action lawsuits, such firms could be forced to pay large sums to the affected clients. Moody’s downgrade will make other companies that store customer data, especially financial and personal data, to invest heavily in their online security systems to avoid such damaging cyber-attacks.

The latest trade war headlines have been a significant drag on Chinese markets, which trailed their Asian peers during today’s session. Chinese markets headed lower even as other Asian markets rallied on Monday morning as investors reacted to Friday’s blacklisting of Huawei by President Trump’s administration. The fact that the Chinese government seems to have no interest in resuming trade talks with the US created an uncertain feeling among investors given the high likelihood of China’s economy declining substantially as the trade war continues. Investors are waiting to see if the Chinese government will announce new stimulus measures to boost the country’s economy given the major uncertainties facing the country due to the trade tensions. The lack of interest by Chinese officials in making a trade deal may indicate that the government has different plans for the country’s businesses and their trade ties with the U.S., which is their biggest market. It remains to be seen whether China’s government shall unveil appropriate measures to deal with the fallout from the escalating trade war with the United States.

According to a recent report published by the New York Times, five former and current Deutsche Bank employees stated that the bank’s executives overlooked suspicious transactions by entities controlled by President Trump and his son-in-law Jared Kushner. The report claims that employees within the bank’s compliance department noticed some transactions by the said entities had triggered anti-money laundering alerts and reported the same to the bank’s executives who did not pursue the matter. The employees claim that the executives should have filed an investigation report with the Treasury Department, which could have launched an investigation into the transactions to verify the source of funds. The German bank issued a statement denying the entire report including knowledge of any such transactions, but questions are being raised because President Trump sued the bank last month to prevent it from providing his financial records to prosecutors. Well, while we cannot verify that the report was true or not, it is clear that President Trump does not want his financial transactions through the bank being made public for unknown reasons and that is suspicious.

Pinterest Inc. (NYSE: PINS) shares fell 15% after-hours following the release of its first quarterly earnings report since its April IPO. The slump was driven by the higher losses reported by the company, which came in at 33 cents per share, versus analysts’ expectations of a per share loss of 11 cents. Despite the significant losses reported, the social media company grew its revenues to $201.9 million as compared to last year’s $131 million, hence, beating analysts’ revenue estimates of $200.7 million. The company is still trading way above its IPO price of $19 and continued to grow its monthly active users metric, which is very important for social media companies that generate revenues from advertising. Most analysts remained confident about the company’s future with many saying that the social media company was a victim of unrealistically high analysts’ estimates. This is a vote of confidence in the social media company and is likely to result in higher stock prices going forward for the company’s shareholders.

Luckin Coffee yesterday priced its U.S. IPO at $17 per America Depository Share (ADS) and sold 33 million shares to raise $561 million from investors to mark the largest U.S. IPO by a Chinese company this year. The coffee chain has a $2.2 billion valuation and is backed by U.S. asset manager BlackRock as well as Singapore’s sovereign wealth fund and currently has 2,370 stores across China. Luckin plans to open up to 2,500 new stores this year and plans to use the funds raised from its IPO to fund this massive expansion plan as well as for research and marketing purposes. The company’s management has clearly stated that its main goal is to overtake Starbucks as China’s leading coffee chain. The question on most investors’ minds is whether this goal is achievable and the short answer is maybe. If Luckin manages to open the additional 2,500 stores this year, it would have effectively overtaken Starbucks’ current network of 3,789 stores. However, the two coffee chains have different business models with Starbucks favoring large sit-in stores and Lucking going for tiny pick-up and delivery stores. Starbucks still dwarfs Lucking with Q1 revenues of $702.8 million as compared to Luckin’s $71.3 million Q1 revenues.

Australians are scheduled to vote in a general election on Sunday where the two major parties will be competing to win the election for a 3-year leadership term. The ruling minority Liberal/National coalition hopes to retain its position against fierce opposition from the Labor Party. Opinion polls indicate that the Labor party has a slight lead over the ruling coalition, but this could change as the country votes on Saturday. The two parties have outlined different fiscal policies with the National-Liberal coalition set to lower personal taxes, while the Labor Party wants to raise the living wage and close tax loopholes. It remains to be seen which set of policies will appeal to Australians as they vote on Saturday, but Labor’s policies seem more centered on the general population, which increases its chances of winning. However, the party that wins tomorrow’s election faces the uphill task of reviving Australia’s economy, which has significantly slowed down as evidenced by recent housing and employment data.

The short answer to this is that the travel company is yet to sell its airline business, but it recently announced that it has received multiple bids for the business. The company is still reviewing its airline business hoping to unlock more value for shareholders in case it is acquired given that it is currently a loss-making operation. Thomas Cook Group PLC (LON: TCG) today reported a full-year loss of £1.45 billion ($1.86 billion) for the 2019 financial year ended March 31. The company blamed the ongoing Brexit negotiations for the loss as its U.K. customers postpone their trips in anticipation of Brexit day. The travel Group has so far closed 21 branches in the U.K. and has slashed the number of holiday destinations and packages on offer as demand for its holiday packages plummets. The company was also negatively affected by the higher fuel and hotel costs, which ate into its margins during the 2019 fiscal year. The company’s latest financial results may derail the sale of its airline business given the massive losses reported.

Tesla Inc. (NASDAQ: TSLA) launched its ‘Solar Roof’ project in October 2016 with the promise of a roofing tile that generated solar energy, looked better and was stronger than traditional roofing tiles, all at a lower cost. The project was supposed to revolutionize the energy industry as home owners could generate and store their solar energy at home via a roof that was much cheaper than traditional roofs and with a 30-year warranty. However, Tesla has missed most of its original deadlines and has so far done fraction of the installations from its first customers as it works to improve the roofing tiles. However, Elon Musk said that the company had finished developing version 3 of the tile and would ramp up production at its Buffalo Gigafactory. We are not sure if this project shall reach mass scale given the production bottlenecks that the company has faced with most of its products including its cars. However, recent news reports indicates that Tesla plans to hire more people at its Buffalo facility to work on its electric vehicle Supercharger cabinets and other energy storage products, maybe even the solar roof project.

Well, according to a recent report by the Wall Street Journal, Gannett Co Inc. (NYSE: GCI) is going to win the proxy fight with MNG and retain all 8 board seats at the company. This is good news for Gannett’s management, which has worked extremely hard to fend off MNG’s cash offer for the company. The WSJ reported that according to unofficial voting results, Gannett would win the unwanted proxy fight launched by MNG/Digital First as shareholders vote in favor on the company’s current management. MNG had tabled a $12 per share cash offer for Gannett’s share despite widespread skepticism as to whether the company had secured the necessary funds to complete the deal. The news report marks the end of the hostile proxy fight and is a vote of confidence in Gannett’s management from shareholders despite the issues raised by MNG. It remains to be seen whether Gannett’s management shall successfully execute its digital transformation plan and grow the mass media company’s profits.

This is a good question given that the U.K. Competition and Markets Authority recently blocked Asda’s merger with British retail giant Sainsbury citing the risk of higher consumer prices. Walmart Inc. (NYSE: WMT), which bought Asda 20 years ago is considering the option of listing Asda in the U.K. in order to create more value for stakeholders. Walmart’s CEO, Judith McKenna told Asda’s managers that the U.S. retailer is considering the possible listing of Asda as part of its long-term plans for the U.K. retailer. However, she cautioned employees that an IPO could take years to materialize as the company looks for ways to grow its UK subsidiary. I think Walmart should list Asda in the U.K., its primary market, which would allow both employees and managers to own a part of the company. By owning a part of the company, both managers and employees would be quite motivated to see the U.K. retailer grow and become more profitable as they stand to benefit if this happens.

Nelson Peltz, the CEO of Trian Fund Management is likely to initiate a proxy war at US asset manager Legg Mason Inc. (NYSE: LM) as he tries to steer the company in a new direction. Trian has already held talks with Legg Mason’s management team where it urged them to cut costs and figure out ways to increase the firm’s profitability. Trian was a majority shareholder in Legg Mason from 2009-2016 and Nelson Peltz had a board seat at LM up to 2014 when he voluntarily stepped down. Given that Peltz is an activist investors, the probability of Trian launching a proxy war at Legg Mason is quite high, but there is also a chance that he might strike a deal with LM’s management. To answer the question as to whether Nelson Peltz should start a proxy war at LM, it all depends on whether the firm’s management shall reject his ideas forcing him to start a proxy war. However, most corporate leaders know that in most cases a proxy war with Nelson Peltz is futile as always gets what he wants.

Beyond Meat Inc. (NASDAQ: BYND) stock has exceed most investors and analysts expectations given that it is trading at $79.68 a share today, up 216%. The meatless burger maker has enjoyed a massive rally since its May 2 IPO as investors bid up its shares based largely on its unique product lineup. The company’s performance has made other recent IPOs such as Uber Technologies Inc. (NYSE: UBER) in the dust with its massive rally. The vegan food manufacturer is riding on a wave of conscious investors who are looking to back companies that challenge the status quo in traditional sectors. The question on most investors’ minds is whether the company shall continue to outperform in the medium to long-term, or if it will pull back given its massive rally. The answer to this question is that the stock is likely to pullback as bears try to push the stock lower, which could create an excellent buying opportunity for long-term investors. However, the company is likely to continue outperforming its peers over the medium to long-term.

It appears that Bayer AG (ETR: BAYN) may have made a mistake buying Monsanto last year given that it just lost its third Roundup-related lawsuit. The German company was ordered to pay $2 billion to a couple who claim to have developed cancer after using its Roundup herbicide, which contains glyphosate. This is the third lawsuit that the company has lost, but its problems are far from over given that there are over 13,400 similar lawsuits pending in various US courts. The company termed the jury’s verdict as being excessive citing the EPA’s assessment that glyphosate does not pose any public health risk. Bayer might have bit off more than it can handle if it loses the over 13,400 cases at trial, which could easily drive the company to insolvency. The company said it would appeal the decision and it is highly likely that the amount awarded will be significantly reduced, but the chemical company has to figure out a way to settle these cases or go broke.