Teen Trends to Watch

Oct 20, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

The markets advanced this week pushing the averages higher again.  In fact, the Dow Jones Industrial Average (DJIA) closed above 23,000 for the first time.  It is also worth noting that this week marked the thirtieth anniversary of Black Monday.  For those of you who are too young to remember, the 1987 stock market crash was amongst the largest in history with the DJIA falling 22.6% in one day or the equivalent of 5,300 points.  While some are worried about current market valuations, it should be noted that a repeat of Black Monday is unlikely to happen again due to modern trading technology, implementation of circuit breakers, and the way funds are managed.  Yep, this time is different.

So let’s start with the big news.  Procter & Gamble held off activist investor Nelson Peltz with the certification of the proxy vote this week.  The vote was very close with a margin of victory of only 0.2% or roughly 6 million votes.  While this means P&G is out of the woods, for now, the fight for a board seat likely isn’t over.  CEO, David Taylor, insists that the current transformation underway is working but will take time.  Today’s earnings announcement of just one percent organic growth undermines management’s defense and leaves the door open for the likes of Mr. Peltz to make another run at the company.

In other news, I learned this week that there may be a huge hike in the SIFI threshold on the way.  You may remember in the aftermath of the 2008 financial crisis, certain financial institutions including banks, brokerage companies, and insurance companies were determined to be “too big to fail”.  The official term given by the Federal Reserve for these institutions is “Systematically Important Financial Institutions” or SIFI for short. Gary Cohn, the chief economic advisor to President Trump and the Director of the National Economic Council, said the Trump Team and Congress are working on a plan to raise the asset level to be considered systematically important from $50 billion to $200 billion.  The reason this is significant is that companies considered systematically important have more stringent regulatory requirements regarding capital and reserves.  Undoing this measure just nine years after the financial crisis seems dicey, but we’re currently in a risk-on environment.

I came across two stories this week that involved the Saint Regis Mohawk Tribe.  Having never heard of this Native American tribe, I was curious.  A federal judge in Texas invalidated four key patents for the dry-eye treatment Restasis, dealing a blow to its manufacturer Allergan.  In September, Allergan took the highly unusual step of paying the Saint Regis Mohawk Tribe in upstate New York to take possession of the patents, which then were leased back to the company.  The tactic was a way to protect the company from a patent challenge that is underway before the United States Patent and Trademark Office (USPTO).  The Mohawk tribe has claimed that sovereign immunity shields the patents from challenges.  While the ruling this week is a blow to Allergan, the case with the USPTO remains unsettled.  Oddly enough, I came across another story this week in which the Saint Regis Mohawk Tribe is suing Microsoft and Amazon for patents it holds.  I am intrigued by this technicality and wonder if this may become a loophole for corporations, not unlike some of the other unsavory strategies they’ve employed such as the “double Irish with a Dutch sandwich” which shifts taxable profits to a low or no tax jurisdiction.

In closing, I’d like to share a research survey by Piper Jaffray.  The survey looks at the spending habits of teenagers and hopes to gain insight into the current trends.  The following are some of the highlights:

  • Snapchat is the preferred social media platform for 47% of teens, up 12% year-over-year.
  • 82% of teens expect their next phone to be an iPhone, which is the highest ever seen in this survey.
  • Streaming continues to gain teen video share as preference for “linear” TV declined 2%
  • Only 35% of teens listen to Pandora radio versus 49% last year.
  • Teens increasingly prefer Amazon as their favorite website at 49%, up 9% year-over-year.
  • Starbucks remains the only public brand to garner double-digit mindshare among restaurants.

Now you know.

October 20, 2017

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