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The last JEDI

The delivery wars are here and they are hot
August 3, 2019 Read in Browser

Good Saturday morning. On this day in 1852, Harvard and Yale held a rowing competition on Lake Winnipesaukee in New Hampshire. The event is considered the first intercollegiate athletic competition in the U.S., and it’s stood the test of time: The legendary Harvard-Yale Regatta (or is it Yale-Harvard?) continues to this day. 
Have any Brew readers competed or attended?

-4.3 bps

*As of market close
  • Markets: The S&P and Nasdaq capped their worst weeks of 2019 as traders struggled to digest tough trade news.
  • Trade: As of the first half of this year China is no longer the U.S.’ top trading partner. Pop quiz: Who is now the U.S.' top trading partner? (Answer at bottom.)
  • More trade: President Trump announced an agreement to boost beef exports to the EU. He then floated a 25% tariff on Mercedes and BMW car imports...but don't worry, he was “only kidding.”

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Francis Scialabba
This week, delivery companies jacked up their fight for consumers who increasingly want to eat food from restaurants, but not in restaurants. The trend: We’re spending plenty on meals we don’t make at home, but next year more than 50% of restaurant spending is projected to take place “off premise”—delivery, takeout, or drive-through.

The battle started Tuesday with grubby earnings from Grubhub

The delivery app’s net income fell 96% annually and it lowered guidance for the year. Revenue did beat estimates, increasing 36% annually to $325 million. 
CEO Matt Maloney’s take? Maybe we’re losing, but the other guys are cheating. In forceful interviews, Maloney called out rivals like DoorDash that charge extra fees on top of food and delivery costs, which Maloney called “price gouging.”

One thing the other guys are definitely doing: consolidating

On Thursday, Grubhub (+4.72%) announced plans to buy Caviar from Square (-14.05%) for $410 million in cash and stock. Buyer and seller are old friends: DoorDash has worked with Jack Dorsey’s digital payments company on merchant purchases. 
Like fish eggs, the appeal of Caviar the delivery app isn’t clear. Reports from 2016 said it was struggling to turn a profit and Square was (unsuccessfully) shopping it around for $100 million. 
  • But...DoorDash just paid 4x that. An Axios source said Caviar was attractive because it’s amassed a large number of partner restaurants and penetrated areas DoorDash hasn’t yet reached.
  • Square bought Caviar in 2014 for a reported $90 million. 
Zoom out: The online delivery sector is Sriracha-hot. According to Cowen, off-premise spending will account for up to 80% of restaurant industry growth in the next five years. Elbows are getting sharper as firms jockey to capitalize on that growth. 


How's the Economy? Busy.

With its avalanche of market-moving headlines, this week might’ve topped the 2014 Commerce Department holiday party in terms of “wait, did that just happen?” moments.
You already know 1) the Fed cut interest rates for the first time since 2008 and 2) President Trump unveiled more China tariffs.
But those milestones came served with a garnish of nationwide data.
  1. Jobs: The U.S. economy added 164,000 of them in July, in line with expectations, while unemployment held steady at 3.7%. With broad gains across most sectors, the employment situation remains strong.
  2. Manufacturing: Not quite as strong. IHS Markit’s gauge of U.S. manufacturing fell to its lowest level since September 2009 in July. And the separate ISM factory sector reading fell to a nearly three-year low.
  3. Consumers: Confident. One measure of U.S. consumer sentiment hit its highest level this year, never mind trade issues and lagging growth.


South Korea and Japan Trade Trade Blows

The U.S. may have a monopoly on failed music festivals, but it certainly doesn't have one on trade wars. Yesterday, Japan dropped South Korea from its list of countries with preferential trade status. South Korea vowed to do the same, and all is officially not well between the two East Asian powerhouse economies.
The backstory: Tensions between the countries go back to Japan’s colonization of the Korean Peninsula from 1910–1945. But the recent trade dispute started on July 1, when Japan tightened controls over three key chemical exports to South Korea. 
The tech world has taken notice. South Korean factories rely on those chemicals to make components, and U.S. firms like Apple and Amazon rely on those components to make their own products. 
The dispute has led to a not-so-small-scale boycott of Japanese goods in South Korea. Per the AP, sales of Japanese beer at South Korea’s largest retailer dropped 38% from the previous month. And some gas stations in South Korea are even refusing to fill up Japanese cars.


I Got That Summertime, Summertime Sneakers

On the lookout for fresh footwear to upgrade your summer wardrobe? In CARIUMA we trust. Their stylish sneakers are perfect for the office, summer travels, and everything between. 
How CARIUMA makes it happen:
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  • A variety of vibrant colors & summer styles that’ll turn heads wherever you go.
Did we mention they’re perfect for spontaneous summer shenanigans? Lace up or toss them in the getaway bag to spice up a well-deserved vacay.
Bottom Line: The hottest summer sneakers of 2019 have arrived.

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This week, the White House instructed the Pentagon to reevaluate the bidding process for a tantalizing $10 billion cloud computing contract called the Joint Enterprise Defense Infrastructure, or JEDI. 
JEDI is a contract you’ll be hearing a lot about. It's a game-changing deal for cloud computing technology, and it’s centered around Amazon (-1.73%), whose CEO Jeff Bezos is among President Trump’s favorite targets.
State of play: Right now, only two companies are still battling to become the last JEDI—Amazon and Microsoft. But the White House is reportedly concerned the Pentagon’s bidding process is tilted in Amazon’s favor.
  • Trump previously cited “tremendous complaints” about the bidding process from companies no longer in the running, like Oracle and IBM. 
  • He vowed to “take a very long look” at the contract and has some Congressional backup.
Why it matters: Thwarting Amazon’s JEDI ambitions undercuts its play for federal $$$. Today, it’s the Defense Department’s IT contractor to beat.
Looking ahead...this review leaves one of the military’s priciest infotech deals ever in limbo. The Pentagon had planned to choose a winner as soon as Aug. 23, but it’s unclear if this will push that date back.

  • Apple (-2.12%) is stopping its practice of having human graders listen to a sample of users’ Siri conversations.
  • Apple’s also dropping the rewards program from a longtime credit card tie-in with Barclays ahead of the release of its own Apple Card.
  • Huge oil companies are hurting from lower natural gas prices. Exxon Mobil’s (-1.02%) Q2 profits fell 21%.
  • JPMorgan (+0.01%) is reportedly on track to become the first foreign company to boast a majority stake in a Chinese mutual fund business.
  • Google will require competitors to bid in order to be listed as alternate search engines on its Android devices.


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  • It's never too late in the summer for a good reading list. NBC's Dylan Byers asked the top execs in the country (Tim Cook, Bob Iger, etc.) what they are currently reading. We can confirm, they're reading some good books. See the books
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Saturday Headlines

This is Saturday Headlines at its most classic: Three of these headlines are real. One is satire. Can you spot the Onion headline? 

Saturday Headlines
Didn't think this one was too hard. The Equifax one was made up. 
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