No JEDI cloud deal left behind

Tuesday, December 10, 2019 by Snacks
_When you really, really want that JEDI military contract_

When you really, really want that JEDI military contract

Yesterday’s Market Moves
Dow Jones
27,910 (-0.38%)
S&P 500
3,136 (-0.32%)
Nasdaq
8,622 (-0.40%)
Bitcoin
$7,353 (-2.36%)
10-Yr US Treasury
1.823%

Hey Snackers,

Of the top GIFs of 2019, the frustrated #1 sums up investors right now.

The market's 3-day win streak ended as investors realize that the next (and biggest) round of US-China tariffs kicks off in less than a week (December 15th if you're keeping score).

Appeal

1. Amazon appeals the Trump administration's $10B "JEDI" contract (which Microsoft won)

Bezos pulled a Belichick... tossing the ol' red flag and demanding that the ref review the play. The Trump administration granted Microsoft an aggressively lucrative contract to manage the Defense Department's critical digital data in the cloud. Big loss for Amazon:

  • Huge: The US Department of Defense is America's largest employer, with over 3M employees/contractors handling enourmous amounts of computer files.
  • Sensitive: Storing sensitive military data is high-stakes stuff (think secret docs outlining strike targets or secret dinner menus for military mess halls).
  • Lucrative: $10B over 10 years. That's a lot, even for Amazon (its AWS cloud computing division made $26B in revenue last year).

Unfair call?... Analysts expected Amazon Web Services to win the deal because it boasts the biggest cloud in cloud computing — what Kleenex is to tissues, AWS is to fancy digital storage. But it didn't.

  • Amazon claims that President Trump sabotaged its bid because he doesn't like The Washington Post, which Amazon CEO Jeff Bezos happens to own.
  • Amazon's asking a judge to rule the contract unlawful, since military spending shouldn't be influenced by personal beef.
  • Best-case scenario for Amazon: The judge forces the administration to reconsider the contract.
THE TAKEAWAY

Let's talk about business ethics, baby... From insider trading to condoning sexual harrassmant, the answer is no to all (always). Those aren't ethical dilemmas — there's no gray area. But Amazon's situation smacks personal values against legal profit opportunities. It's the type of ethical challenge that dominates Big Tech right now.

  • Should Google — the leader in information transparency — let China block search results that its government doesn’t want its citizens to see?
  • Should Amazon — if its employees oppose drone strikes — let the government use its servers for controversial military attacks?
RIP

2. Former Fed Chairman Paul Volcker passed away — but his legendary "Volcker Rule" remains

Slayer of inflation. Protector of the consumer... Chairman of the Fed. From 1979 to 1987, Paul Volcker ruled America's central bank. When he saw inflation winter was coming (prices across the economy rose 13% in 1979) he fought back by jacking up interest rates (to a whopping 19%). Inflation hasn't been a worry since the '08 financial crisis, but the Jersey native left us another legacy:

Banks shouldn't gamble with your $$$... That cash in your bank account? Your bank makes money with it. Thankfully, account balances in American banks are protected by the Federal Deposit Insurance Corporation (FDIC) — the government agency that insures your money. If your bank goes bankrupt, you get up to $250K of your cash back, thanks to FDIC's taxpayer-funded program. That's where "The Volcker Rule" comes in:

  • It prevents banks from aggressively playing with customers' FDIC-insured cash.
  • Banks can't invest customer funds in Netflix stock for their own benefit or make risky hedge fund bets with your savings.
  • It wouldn't be fair for banks to benefit from the upside of risky investments with your cacsh, but then ask taxpayers to bail them out through FDIC insurance if those bets go wrong.
THE TAKEAWAY

That Volcker Rule could've helped prevent the last financial crisis... which is why we're happy the then-82-year-old Volcker pushed for it after Lehman Brothers collapsed in 2009. Preventing banks from engaging in "proprietary trading" with customers' cash is Paul's legacy — and it protects all of us daily without our even realizing it.

What else we’re Snackin’

  • Further Away: Away's co-founder/CEO is replaced by a Lululemon exec after leaks of a toxic culture where vacay days were taken away for poor performance
  • Copy That: Xerox expects revenues to grow $1.5B per year if it can merge with HP
  • Flixing: Netflix led all TV and movie studios with 17 Golden Globe nominations
  • Signing Off: China bans foreign computers and software from government offices and public institutions
  • Sketched Out: Skechers shares surge after 'year of record sales' because normcore is real and it's happening
  • Fairytale: Disney+ is expected to whip up a magical 20M+ subscribers before your New Year's Eve kiss

Tuesday

  • The 2-day Fed policy meeting kicks off to decide where US interest rates should be
  • Earnings reports from Dave & Buster's and GameStop

Disclosure: Authors of this Snacks own shares of Lululemon and Amazon

ID: 1032475

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