foxex: Streaking

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Tuesday's Headlines

1. U.S. markets add to record highs with fifth-straight day of gains

2. House passes spending bill to avoid U.S. government shutdown

3. FedEx misses on earnings and revenue

4. Uber's former CEO has been on a selling spree

Markets Closed

Dow
28,267.16 +0.11%

S&P
3,192.52 +0.03%

Nasdaq
8,823.36 +0.10%

VIX
12.29 +1.24%

Bitcoin
$6,603.70 -4.66%

US 10-Yr Yield
1.889 -0.16%

Credits: Matthew Stockman / Getty Images

Markets Today

Another day of record highs for U.S. markets as investors stick with stocks as the year winds down. The S&P 500 is up more than 27% in 2019, its biggest annual gain since 2013. The DJIA and the Nasdaq are up 21% and 32% respectively, for the year. Those low interest rates in the U.S. are lighting up the housing market as building permits for November jumped to a 12-and-a-half-year high. More home building means more consumer spending, which means more economic growth. We could roll into 2020 with the economic wind at our backs, which is a far cry from where we were in August when fears of a recession had taken hold. It's an even farther cry from where we were a year ago when U.S. markets were in a steep correction.

Headlines

U.K. Prime Minister Boris Johnson said that the U.K. will leave the European Union at the end of 2020, with or without a deal. A "no-deal Brexit" would likely cause substantial harm to the U.K. economy as its businesses would suddenly face new tariffs and other difficulties. That said, Johnson said earlier this year that he would "rather be dead in a ditch" than extend Brexit negotiations past the end of October. He did extend them, so his end of 2020 deadline may not be as final as he claims.
Retailer Bed Bath & Beyond (BBBY) is shaking up its management, getting rid of six top executives including its chief brand officer, who resigned last week. This is just the most recent change as Bed Bath & Beyond has been trying to turn around its declining same-store sales. CEO Mark Tritton joined in early November, and five of the directors stepped down early in the year.
Amazon (AMZN) is no longer allowing third-party sellers to use FedEx's ground-delivery shipping, the latest escalation in the ongoing rivalry between the companies. FedEx (FDX) in August announced it would end its ground-delivery contract with Amazon, after ending its express U.S. shipping contract with Amazon in June. Fedex reported quarterly financials after markets closed today and missed on both revenue and earnings.
Consumer goods giant Unilever Plc (UN) cut its sales guidance for 2019 citing weakness in North America and South Asia, particularly India. The parent company of brands such as Q-Tips, Vaseline, and Ben & Jerry's says it now expects underlying sales growth for 2019 to be slightly below its previous guidance of sales coming in at the lower half of its 3%-5% forecast range.

Correction: In yesterday's note we misstated the amount of federal income tax Walmart paid in 2018 as $64 billion. The actual amount was $3.2 billion. Since 2008, Walmart has paid $64 billion in taxes (as of year-end 2018). That's a big difference and we regret the error. Thanks to one of our smart readers for flagging that.

photo: Getty Images

Hey, Big Seller

One of the benefits of being a co-founder and CEO of a company backed by hundreds of millions of dollars in venture capital is the enormous war chest of equity you are able to accumulate over time. If your company makes it to the public markets or gets bought out at a premium, you eventually get to cash that war chest in - even if you are no longer the CEO.

Such is the case with Travis Kalanick, the former CEO of Uber who was ousted from the company in 2017 before it went public. When Uber went public in 2019, Kalanick owned about 117.5 million shares of its stock, worth about $5.3 billion at the initial public offering price. As Fortune tells it, he sold a few million shares in the IPO, but then the IPO lock-up prevented him from selling any more shares for six months. The lock-up ended in November, and since then he has been very, very busy:

According to SEC filings, Kalanick has sold stock every day since the lock-up expired on November 6th. He has accounted for about 7.8% of Uber's volume during that time; one out of every 13 shares sold in the last five weeks were sold by Kalanick.

In December alone, Kalanick unloaded shares worth $350 million, bringing his proceeds to more than $2.1 billion since the lock-up ended.

According to Bloomberg, Kalanick's remaining stake in the ride-hailing company now constitutes about a fifth of his $3 billion fortune, down from about 75% before the lock-up. Mind you - there is nothing illegal or even unethical about what Kalanick is doing. He put 8 years into building Uber into the phenomenon that it is today, and was ousted by the board in a bitter divorce. He is just cashing in on shares that are rightfully his.

An insider sale is called a Form 4 filing with the SEC, and that's about the only thing you can see in Uber's filings right now. Here's one of the most recent Form 4 filings showing Kalanick's stock sales from December 11-13.

The Biggest Endowment

Buried in a fascinating story by the Washington Post about the Church of Jesus Christ of Latter-day Saints alleged misuse of donations by its members so it could build a $100 billion investment portfolio, is the fact that the Mormon Church has one of the biggest investment funds on the planet. The Church is typically reserved about its membership and its businesses, so any news about its inner dealings is rare. Mormon law usually asks its members to donate or tithe one tenth of their income every year.

I have no idea if this story is true, and the Church of the Latter Day Saints did not respond to the Washington Post, but if the chart below is accurate, the Church has built one of the largest investment funds on the planet. (Bill Gates is doing rather well, too, by the way).

More News:

Why ETFs Seen Soaring 10-Fold to $50 Billion Will Steamroll Skeptics

5 Trends Goldman Sachs is Watching in 2020

Markets Extend Rally, Led by Tech Sector

chart courtesy YCHARTS

Chemical company Albemarle rose 3.9% today. Streaming company Netflix rose 3.7% after it released new subscriber data indicating strong international growth.

Shipping firm FedEx dropped 4% today after Amazon announced it would no longer allow third-party sellers to use FedEx ground shipping for sales made on Amazon Prime. Drug companies Cardinal Health, AmerisourceBergen, and McKesson fell 4%, 3.3%, and 2.6% respectively after they were sued by the state of Michigan over their involvement in the opioid crisis.

Word of the Day

IPO Lock-Up

An initial public offering (IPO) lock-up is also referred to as a lock-up period. It is a contractual caveat outlining a period after a company has gone public when major shareholders are prohibited from selling their shares. Lock-up periods usually last between 90 to 180 days. Once the lock-up period ends, most trading restrictions are removed.

Today in History

December 17, 1992

Today in 1992 the North American Free Trade Agreement (NAFTA), was signed by U.S. President Bush, Mexican President Salinas de Gortari, and Canadian Prime Minister Brian Mulroney. The treaty went into effect on January 1, 1994, though some of its provisions were slowly phased in, with the last of them going fully into effect on January 1, 2008. By this time, trade between the three countries had more than tripled since NAFTA first went into effect. In September 2018, the U.S., Mexico, and Canada reached an agreement in principle to replace NAFTA with the United States-Mexico-Canada Agreement (USMCA), though NAFTA remains in effect until the USMCA is ratified.

Source: https://www.reuters.com/article/uk-trade-nafta-timeline/timeline-opposed-from-the-start-the-rocky-history-of-nafta-idUKKCN1AW0A2