The Daily Alpha: Real Talk on Snapchat, Ed Lampert, John Mackey, and Nicolas Maduro

May 11 2017 | 12:00pm ET

Today we discuss Snapchat’s terrible earnings report, Ed Lampert’s fire sale, a shakeup at Whole Foods, and The Man with the Big Red Balloon… also known as Nicolas Maduro. 

Hair of the Dog:

Shot and Chaser in One Picture: Great Journalism Matters…

 

Quotes of the Day 

"The No. 1 question we receive about Snap is can it sustain its user growth and how big can it be."

A research note from William Blair analyst Ralph Schackart was cited after a dismal earnings report for Snap, the parent company of social media giant Snapchat.

Shares of Snap fell 22% Thursday morning after the firm reported a massive surge in operating expenses at a time that its user base growth can't match analyst expectations.

Both co-founders lost $1 billion on paper yesterday afternoon thanks in part to a 10% quarterly decline in revenue.

Why is anyone surprised on CNBC today?

This was all explained at length during our Modern Trader feature on Snapchat before the IPO.

The article was picked up by Business Insider, and its bearish argument has remained the same. At best, there is no reason to own Snap stock until after the IPO lockup period.

At worst, this is a company that is completely unprofitable and should be patient zero for the reason why dual-class voting structures are a bad idea.

Given that the company’s dual-class structure makes it impossible for an activist to come in ever and fix it… [then again, who would want to]... or for institutional shareholders like CALPERS to have any influence on the company's direction, this is going to be hard to watch for the rest of the year...

 

“Personally, I feel that if I were president, poise would be important. Leadership would be important. Taking responsibility for everybody. [If I didn't agree with someone] on something, I wouldn't shut them out. I would actually include them.”

That’s Dwayne “The Rock” Johnson talking about the possibility of him running for president one day. Johnson gives his take on the U.S. today and hints that we may actually have this to look forward to in 2020.

Why not?

Someone has to stop Mark Zuckerberg from taking over America, right?

 

“I Am Not in Denial”

That’s Sears Holdings (SHLD) CEO Ed Lampert.

Good to know. Because Sears is doomed.

Is this all by design then? The company’s peak market capitalization fell by 96% from 2006 to 2016.

What exactly is his plan aside from owning a ton of mall space? Skating parks? Golf courses? Burn them down for insurance money?

Because anyone who still owns Sears stock right now is in denial.

 

“We pay attention to what our shareholders tell us.”

That’s John Mackey, CEO of Whole Foods, in an interview.

The company announced a shakeup to its board after activists pressured changes at the director level. Whole Foods now has a new CFO, a new chairman, and five new board members.

That’s nice that they listen to shareholders.

Perhaps they should next listen to customers…

And not do things like charge $6.00 for asparagus water.

 

"This situation perfectly illustrates the hypocrisy of Venezuela's socialist regime."

As Venezuela's economic crisis deepens, the nation’s tyrant isn’t giving up anything.

While the average citizen has lost 19 pounds due to a lack of reliable food supplies, President Nicolas Maduro's stepsons spend their days skydiving with international athletes.

Red Bull is facing boycotts over the event, and Javier El-Hage, chief legal officer of the Human Rights Foundation, pointed out that it’s just the latest indulgence of a socialist regime that doesn’t understand the optics of their current situation.

This mirrors the basic plot of The Man with The Big Red Balloon.

Those who are in control are never forced to ration.

They never starve. Yet their solution is to demand more sacrifice by their citizenry.

And they stoke crisis and blame others for their own failures, while consolidating more power. It is the history and future of socialism.

And it will never be reformed otherwise.

 

Thursday Reading List

 

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Garrett Baldwin is the voice of the The Daily Alpha, the features editor for Modern Trader magazine, and the author of The Man with The Big Red Balloon. 

 


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