Friday May.14, 2021

🚗 Elon's crypto collision

_When Elon wants greener crypto mining [OJO Images via GettyImages]_
_When Elon wants greener crypto mining [OJO Images via GettyImages]_

Hey Snackers,

Lego is getting into ASMR. Behold: the "White Noise" album.

Stocks jumped yesterday for the first time this week. Investors took a break from worrying about inflation to check out weekly jobless claims, which hit a 14-month low.

Crypto

Crypto’s price collision: Elon’s green move spotlights Bitcoin’s environmental impact

Technoking, or Cryptoking?... Elon Musk tweeted a bombshell on Wednesday: Tesla will no longer accept Bitcoin payment for cars. Then: as much as $365B was wiped from cryptocurrency market value (that loss = Mastercard's entire market cap). Elon is #concerned about Bitcoin's fuel-burning environmental impact (we covered that last month). That's a major reversal from the Technoking's previous stance:

  • February: Tesla invested in $1.5B worth of Bitcoin, and started accepting it as payment for cars. Bitcoin soared on the news. Side note: is anyone actually buying Teslas with BTC?
  • Wednesday: BTC payments = suspended. Tesla also won’t be selling any of its Bitcoin, but will only transact when “mining transitions to more sustainable energy.”
  • Yesterday: Bitcoin, Ethereum, Dogecoin, Ripple, and other cryptocurrencies plunged.

The EV senses a disturbance... Tesla is worried about the rapidly rising use of fossil fuels (like: coal) for Bitcoin mining and transactions. Bitcoin is a sneaky carbon emitter, because powering it requires much more electricity than other cryptos. Bitcoin mining computers verify the legitimacy of blockchain transactions, making quintillions of attempts per second to solve increasingly complex equations (aka: major energy suck).

  • Bitcoin alone accounts for 0.5% of global electricity consumption — more than entire countries like Argentina. A single BTC transaction generates the same amount of carbon as ~1M Visa transactions.
  • In context: Bitcoin consumes 707 KWh of energy per transaction — that's 11X more than Ethereum, 38X more than Litecoin, and nearly 6,000X more than Doge. That's partly because the systems required to verify BTC transactions are more complex, and less energy-efficient.

The next phase in crypto mainstreamification... has arrived. The new trend of culturally-driven "coin crowding" is colliding with another trend: commitment to a clean energy future. Tesla said it's looking at other cryptos that use <1% of Bitcoin’s energy. Regardless of Elon’s next move, this has sparked a wider reckoning on crypto’s environmental impact — among individual investors, to climate-minded corporate investors. This shift could boost companies looking to make crypto’s infrastructure more sustainable. Like: Bitcoin-focused investment company Seetee and the new, more eco-friendly network, Chia.

AAPI

Asian American businesses have suffered “Twin Crises” during the pandemic

Lay down the stats… The pandemic has brought suffering for everyone, hitting small business owners especially hard. On a national scale, 34% of America’s small businesses have closed since January 2020. And Asian American-owned businesses have suffered an outsized impact: according to a recent report from the NY Fed, small firms owned by Asian Americans suffered more than those owned by Black, white, and Hispanic Americans.

  • ~90% of small Asian-American firms lost sales last year, a rate higher than for other groups.
  • ~60%: By the end of March, sales for Asian American businesses were down by 60% from 2019 — compared to a ~50% drop suffered by others.

Explain it… Only ~9% percent of firms owned by Asian Americans were financially “distressed” in 2019 — compared to 19% of Black-owned firms and 16% of Hispanic owned businesses. Despite starting the pandemic in a stronger financial position, Asian-American businesses suffered a heavier financial toll. A few reasons why...

  • Business type: Pandemic-related closures and restrictions were particularly hard on the restaurants, stores, nail salons, spas, and other service industries in which many Asian-owned businesses are concentrated.
  • Trouble accessing aid: Language barriers and a lack of banking relationships made it hard for some business owners to access government aid like PPP loans.
  • Racism, violence, and prejudiced rhetoric blaming Asians for the coronavirus may also have contributed to business declines. Over the past year, there has been a disturbing uptick in violence and hate crimes against Asian-Americans.
  • Geography: Asian populations are concentrated in states like NY, NJ, and CA, and in big urban areas — all of which have taken crushing financial hits.

Asian Americans have been facing “Twin Crises”... Economic struggle paired with racism amplified by the pandemic. Emily Yueh, a partner at McKinsey, says that while causation is difficult to prove, there is a correlation between rising discrimination and the financial injury experienced by Asian businesses. Looking ahead, Asian businesses are also taking longer to recover relative to others.

What else we’re Snackin’

  • Unmasked: The CDC said that people fully vaccinated against Covid-19 don't need to wear masks indoors or outdoors, except in certain cases.
  • UnMagical: Disney disappointed on sales and streaming expectations, reporting 104M Disney+ paid subscribers (vs. 109M expected).
  • Staycay: Airbnb's sales jumped 5% last quarter as travel picked up. But its algorithm for hosts reportedly made racial disparities worse.
  • Flated: Fed governor Christopher Waller said the recent rise in inflation is likely temporary.
  • Based: Coinbase's quarterly revenue tripled to $1.8B from the previous quarter, and profit 4X'd as crypto prices skyrocketed.

Friday

  • Earnings expected from Honda

Authors of this Snacks own: Bitcoin and shares of Disney

ID: 1648862

Get Your News

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Latest Stories

Markets
Net net
12h
Earnings can’t stop, won’t stop
Markets
Matt Phillips
9h

Chipotle continues to go on a tear, hitting a sales record

Hey it might not be the kind of AI stock investors are all hot and bothered over, but don’t sleep on the burrito business.

Chipotle posted much better-than-expected results on Wednesday, with sales rising 14% to a record $2.70B in the first quarter, which is like a billion additions of guac.

Profits jumped 23% to $359M.

Chipotle has quietly cruised higher over the last year. It’s up 63%, compared to the 24.5% gain for the S&P 500 over the 12 months through Wednesday’s close. Not bad for a rice-and-beans based business model.

Tech
Rani Molla
10h

Facebook had great earnings, the market hates it

Facebook reported impressive earnings. Record first-quarter revenue thanks to AI! Profit up 117% compared to a year earlier! But at the same time, its capital expenditures are going up and it’s expecting second quarter revenue potentially lower than analyst estimates. So in other words, the future doesn’t look as bright as the present.

All in all the stock is down more than 10%. (Basically the opposite of what happened with Tesla yesterday).

Business
Rani Molla
14h

Why Tesla investors are holding on to hope for a cheap car

Despite terrible earnings numbers last night — declining vehicle sales, disappointing revenue and profit, enormous spending — Tesla stock is up more than 10% as of midday. That’s a welcome move for the car company, that’s been among the worst performers this year in the S&P 500.

Why the about face?

While Reuters reported earlier this month that Tesla is no longer making its long-awaited $25,000 mass-market car — news sent the stock, already suffering from headwinds across the EV industry, down even further— Tesla reported during its earnings that it’s going to make cheaper cars than it currently has.

Before the second half of next year, Tesla said it will release “more affordable models” that “will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So rather than release the $25,000 Model 2, Tesla is incorporating some of that technology into its existing models. UBS called it the Franken-3Y2.

Read more
Spotify Q1

Spotify’s finally turning its user growth into serious cash flow

Tom Jones, David Crowther14h
Sponsored by
Go Deeper with Market Depth

Nasdaq TotalView powers the need-to-know data serious investors rely on.

Read more
Scuba Diving in the Wild Blue Yonder in French Polynesia
Job switchers and stayers

The FTC is banning non-compete clauses

Why that might make job switching even more lucrative

Millie Giles, David Crowther15h
Matt Phillips
15h
Hasbro pretty much entirely depends on Magic: The Gathering to make a profit

William Coulman, David Crowther
15h
Thousands of bank branches have closed across America

America has lost thousands of bank branches. The latest closure? JPMorgan’s iconic 45 Wall St. address.

Bank scene
16h

TikTok versus the United States

Casey Newton
Senate Takes Up Foreign Aid Package Passed By House

Your inbox is ready

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Culture
William Coulman & David Crowther
17h

Not so Gucci

French luxury fashion conglomerate Kering has seen its shares fall ~10% in the last 24 hours after reporting that sales at its flagship brand Gucci had dropped 21% in its latest quarter.

Kering’s other brands, which include Yves Saint Laurent, Bottega Veneta, and Balenciaga, fared slightly better — but the only real bright spot was the company’s eyewear division, where sales rose 24% (9% on a comparable basis).

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Gucci sales

Kering Warns Profit to Tumble Following Gucci Woes in China

Kering Warns Profit to Tumble Following Gucci Woes in China

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Gucci sales
World
Good morning
21h
What’s happening
22h

Starbucks is challenging a labor watchdog’s power in a far-reaching Supreme Court case

Max Knoblauch
Read
22h

What a US TikTok ban could mean for the rest of the market

Rebecca Moretti
Read
22h

Goldman ditches its robo-advisory biz as it breaks up with consumer banking

Jamie Wilde
Read
Markets
Worse than expected
4/23/24
Ugly numbers, but Tesla shares bounce
Elon Musk
Rebecca Moretti, Rani Molla
4/23/24
Just the start

Banning
TikTok

What it means for the rest of the market

Business
Jack Raines
4/23/24

The FTC vs. Big Handbag

The Federal Trade Commission has sued to block big tech, big grocery, big vacuum, and now, big… “affordable luxury handbag.”

Yesterday, the FTC sued to block Tapestry Inc’s $8.5B acquisition of Capri holdings. The agency is worried that a merger between Tapestry, which owns the Coach and Kate Spade brands, and Capri, which owns Michael Kors, would eliminate competition in the market.

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

FTC Moves to Block Tapestry’s Acquisition of Capri

FTC Moves to Block Tapestry’s Acquisition of Capri

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

Matt Phillips
4/23/24

Tesla had a good ride, but the stock’s price destruction is historic

Few people have created as much value as Elon Musk. The iconoclastic entrepreneur took Tesla from a market capitalization of roughly $2 billion at the time of its IPO in 2010 to $1.2 trillion in early 2023. That’s a return of about 55,000%. Musk made a lot of people a lot of money.

On the other hand, Tesla shares are down nearly 60% since their all-time peak. The company has ceded ground in EVs, prompting a series of profit crushing price cuts to preserve market share. The cumulative loss in market value over that period is pushing $800 billion. Few corporate executives have presided over such a degree of value destruction.

And it could get worse, as people are bracing for an ugly update when Tesla reports after the close Tuesday.

Jack Raines
Opinion
4/23/24
Starbucks could use a CIO

Customers give Starbucks billions of dollars in prepaid credits each year. Should the coffee chain be investing it?

Starbucks American Coffee Chain Cafe In Amsterdam
Tech
Rani Molla
4/23/24

Smaller AI models are in

Tech companies that have long touted the enormity of their AI models are now saying size doesn’t always matter.

Microsoft is the latest tech company to introduce smaller AI models, as part of its Phi-3 tech family. Last week Meta released two smaller models of its AI Llama 3 and earlier this year Alphabet did the same. All are open sourcing these models to encourage wider adoption.

Microsoft says its smallest model, which can fit on a smartphone and wouldn’t need to be connected to the internet to work, is nearly as good as OpenAI’s GPT-3.5. A Microsoft exec suggested this less expensive model could be a good fit for online advertisers, if not doctors.

Microsoft Makes a New Push Into Smaller A.I. Systems

Microsoft Makes a New Push Into Smaller A.I. Systems

Microsoft says its smallest model, which can fit on a smartphone and wouldn’t need to be connected to the internet to work, is nearly as good as OpenAI’s GPT-3.5. A Microsoft exec suggested this less expensive model could be a good fit for online advertisers, if not doctors.