Monkey Business

Jul 21, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

The focus this week turned to earnings announcements. Although it is still early, many of the companies reporting this week beat analysts’ expectations and were generally optimistic regarding the remainder of the year. The earnings announcements in the coming weeks will help determine what the second half of the year will look like. Despite an inability to pass legislation to spur the economy, we believe economic growth will continue at a slow but consistent 2% to 2.5% pace.

Outside of earnings announcements, there was a lot of company news this week. Let me highlight a few of the notable stories:

  • Procter & Gamble is perhaps the largest company ever to face a proxy fight. Nelson Peltz’s Trian Fund Management plans to battle for a board seat at P&G in an effort shake up its “slow-moving and insular” culture. Peltz is not seeking a breakup of the company at this time.
  • What not to say as CEO – At the National Governors Association meeting this past weekend, Elon Musk made some news saying (again) that Tesla’s stock price is too high. He realized his mistake when the stock price fell sharply the following day and took to Twitter to say the price is high based on past and present, “but low if you believe in Tesla’s future.” Nice save.
  • Facebook announced it is doubling its investment in New Mexico with plans that include a $500 million data center expansion. The company broke ground on the first building, to cover an area equal to 17 football fields, that should go live in late 2018. Construction on the second building should run through 2020.
  • McCormick announced it is acquiring Reckitt Benckiser’s food business in a deal worth $4 billion. It apparently beat out several competitors including Unilever and Hormel, Financial Times reports. Reckitt’s food business includes French’s mustard and Frank’s RedHot sauce.

In other news, it finally happened this week. It took seventeen years, but the S&P 500 information technology sector has finally recovered from the dramatic collapse of the dotcom bubble. The index closed at 992.99 on Wednesday, breaking the record of 988.49 set on March 27, 2000. The gradual recovery spanned the rise of social media, the revolution in cloud computing, and the invention of smartphones.

Perhaps a little sobering is the news that the number of Americans renting hit a 50-year high. The percentage of households renting rose to just under 37% last year, according to Pew Research. That’s vs 31% in 2006, and just under 37% seen all the way back in 1965. While the groups that have historically tended to rent – young adults, non-whites, and the lesser educated – continue to do so, Pew found rising rates among traditional buyers likes whites and middle-aged adults. Some of the reasons given for the shift include rising home prices, stagnant wages, and overwhelming student loan debt.

For the story of the week, I return to a piece I first mentioned back in 2014. It is the story of a selfie taken by a macaque monkey and the legal question of who owns the photo. The case has bounced through the court system these past three years and now finds itself in Federal court. Here’s a quick recap – a curious monkey with a toothy grin and a knack for pressing a camera button took a particularly good picture of himself. The photo went viral and the photographer, David Slater, asked for the image to be removed on the grounds that the websites didn’t have the right to publish the image without his consent. People for the Ethical Treatment of Animals (PETA) is suing Slater and the self-publishing company Blurb for copyright infringement, on behalf of the macaque monkey who “took” the photo. It seeks to administer all proceeds from the image to a wildlife reserve in Sulawesi, Indonesia. A federal judge ruled against PETA last year, saying it lacked the right to sue because there was no indication that Congress intended to extend copyright protection to animals. The 9th U.S. Circuit Court of Appeals in San Francisco heard the appeal this week. Perhaps the best line is, “Monkey see, monkey sue” is not a good law under any federal act. Blurb’s attorney wondered at the possibilities if they do not prevail. “Where does it end? If a monkey can sue for copyright infringement, what else can a monkey do?” The outcome has not yet been decided, but rest assured we’re on it. You can see the picture the monkey took and read the original story by clicking here. Now you know.

July 21, 2017

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