Ups and Downs and All Arounds

Jamie Adams
Aug 16 · 6 min read

Catch up with this week’s Five on Friday!

#YieldCurve

It was a volatile week for U.S. markets with all major indices falling heavily on Wednesday after the yield curve inverted.

What does this mean?

So what the hell is a yield curve? Essentially, when short-term investments in U.S. Treasury bonds start to pay (or yield) more than long-term ones, it’s known as a yield curve inversion. This is widely considered as a bad sign for the economy as it hints that investors are losing faith in the long-term prospects of the market and are shifting their money to short-term investments. Historically, an inverted yield curve has preceded every recession since 1956, though it is by no means a sure sign of one either as it can often be just a brief event. Markets reacted with typical panic, however, with the Dow Jones Industrial Average falling 3.1%, the S&P 500 dropping 2.9%, and the Nasdaq sinking 3% on Wednesday — the worst day for stocks so far in 2019. Some of these losses were recovered on Thursday, but it’s fair to say that this mid-week drop has really spooked a market already rattled by the ongoing trade war.

Bet you didn’t know

There have been as many as 47 recessions in the United States dating back to the Articles of Confederation.

#ElectricShock

General Electric’s stock price tanked this week following shocking accusations of fraud by the man who exposed the Madoff Ponzi scheme.

What does this mean?

General Electric’s future has been thrown up in the air this week as the U.S. based conglomerate was accused by Harry Markopolos of engaging in an accounting fraud scheme to the tune of $38 billion, leading its share price to drop 15%. The accusations were made following his year-long investigation for an unnamed hedge fund and claim that the company is heading for bankruptcy and hiding $29 billion in long-term care losses. That $38 billion figure amounts to over 40% of GE’s market capitalization, which would make the alleged fraud far more serious than other high profile cases like Enron and WorldCom, according to Markopolos. However, GE has said it “stands behind its financials” and operates to the “highest level of integrity” in its financial reporting. GE was once the world’s most valuable company but has struggled in recent years, resulting in a turnover of executive positions and disarray regarding the company’s direction. If these reports are found to be true, it is hard to see the global giant staying afloat for too long.

Bet you didn’t know

General Electric was once the majority shareholder in NBC Universal, owning 51% of the media company until its purchase by Comcast in 2013.

#UberBites

Uber stock is sitting at its lowest price since its IPO this week following staggering losses in the last quarter.

What does this mean?

It has not been a fairytale start to Uber’s public life, with the ride-sharing giant suffering a whopping $5.2 billion loss in its second quarter report. With analysts expecting Uber to book $3.3 billion in revenue for the quarter, there was more disappointment as revenue came in at just $3.2 billion, causing its stock value to drop nearly 10%. Investors are becoming skeptical as to how exactly ride-sharing is to become profitable, especially with the dramatic slowdown in growth from Uber and year-over-year revenue waning in each of the past six quarters. Much of this quarterly loss can be attributed to stock-based compensation related to its IPO worth $3.9 billion, while the company still has issues with over-hiring and the rise of tax and restrictions on ride-sharing in many countries. However, one positive for the company comes in the form of their food courier service UberEats, which is already servicing 47 countries and growing and saw user growth of 140% in the last quarter.

Bet you didn’t know

Uber once had a very unusual (yet cute) service known as UberKITTENS, which allows users to enjoy some hug time with our furry friends.

#NikeAdventure

Nike is dipping its toes into the world of apparel subscription services for the first time with the Nike Adventure Club.

What does this mean?

Announced earlier this week, this new subscription service will allow parents to order shoes for their children on a quarterly, bimonthly, or monthly basis for fees of $20, $30 or $50, respectively. The company said it will have about 100 shoe varieties to choose from, including ones made by Converse. The company also hinted there could be more types of subscription boxes to come in the future, like one for competitive runners. Though this is Nike’s first attempt at an apparel-based subscription box, the company has been quietly testing the platform for the last two years using Facebook ads, according to the general manager of Nike Adventure Club Dave Cobban. Indeed, the subscription e-commerce market has been growing rapidly in the past few years based on the popularity of services like StitchFix, while other apparel companies like Nordstrom and Under Armour have tried out similar approaches in the past, albeit with limited success.

Bet you didn’t know

Original Nike designer Bill Bowerman drew inspiration for the soles of his trainers from a waffle maker.

#AndFinally

Snap Inc is hoping not to make a ‘Spectacle’ of itself again with the launch of a new version of its much-maligned sunglasses. This third version of the company’s only hardware product might come as a surprise to many people considering Snap reported $40 million worth of unsold Spectacle inventory in 2017. However, this new version will reportedly allow users to play with augmented reality in their snaps, uploading pictures taken through the glasses straight to the company’s flagship Snapchat app where they can add new lighting, landscapes and three-dimensional effects to the images. Snap Inc had a difficult start to life in the public market but its stock has had somewhat of a comeback in 2019, rising almost 200% since the start of the year. With 13 million new customers reported in the second quarter of this year, Snap attributes over three-quarters of these to the new AR lenses that have become a viral hit on over the past few months. The company will be hoping that these new Spectacles will be a similar success, but at a price tag of $380, the company better start finding some deep-pocketed snappers.

What does this mean?

With Snap raising $1.1 billion in debt to fund further investments, it will be interesting to see if a third crack at the Spectacle line brings results, or if it will be just another gimmick.

Bet you didn’t know

Snapchat was originally called Picaboo until being renamed in 2012.

The Week In Numbers

20%

is how much of a stake Diageo purchased in non-alcoholic spirit maker Seedlip.

$900 million

is how much net loss WeWork reported for the first 6 months of 2019.

$70,000

is how much money the Walton family (Owners of Walmart) earn every minute.

The Takeaway

It has been a week of ups and downs all across the board, primarily with the volatility of the stock market which had its worst day of 2019 on Wednesday. It’s (hopefully) ups for Nike and Snap Inc as they prepare to launch their new apparel subscription and Spectacles range respectively, while it was certainly downs for Uber following the drop of their stock price to its lowest ever point. That’s not as bad as General Electric, however, as it could be in some serious hot water following allegations of fraud. But you know what they say: what goes down must come up! Right?

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in some of the companies mentioned above.

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Jamie Adams

Written by

Jamie is our content marketer at MyWallSt. If he’s not chasing down the quirkiest market stories of the week, he’s usually writing about them.

The MyWallSt Blog

Investing is for everyone, we show you how. MyWallSt is a multi-award winning company that helps you to become a confident and successful investor.

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