Aye carumba! This trade war is getting muy caliente
Well, May was a bit of a nightmare for the US share markets with the S&P 500 closing out the month with its biggest Trump, er, SLUMP, since May 2010. Why? President Trump's threat of tariffs on Mexico has fuelled fears that the world is facing a trade war on multiple fronts, which could very well lead to a recession.
Trump’s answer to his immigration problem
The plan is that Washington will impose a 5% tariff starting on June 10, which will rise steadily to 25% until illegal immigration across the southern border stops. Wow, where’s Vincente Fox when you need him?Mexican President Andres Manuel Lopez Obrador responded simply by urging Trump to back down. Applying a trade tariff to a national security issue is new for the US, and the markets reacted accordingly with the Dow falling 1.41%, the S&P 500 lost 1.32%, and the Nasdaq dropped 1.51%. Blergh.
Don’t forget China
So, what’s an investor to do? Some investors worried about the deteriorating trade talks between the US and China are looking to government bonds as safe investments, while others are doing as they always do: buying and holding. The technology and energy industries are some of the hardest hit sinceTrump ramped up tariff threats with Beijing earlier in May – so you could potentially see this as an extended Queen’s Birthday Weekend sale. Optimism aside, US car makers and manufacturers are in a bind: General Motors (GM) dropped 4.25% and Ford Motor (F) 2.26%. In response to Trump’s threats, Beijing warned last Friday that it wouldn’t take any of this lying down, promising to hit back with a hit-list of "unreliable" foreign firms that they haven’t yet named. We’re presuming the US tech firms who compete with Huawei (hi Apple) will be on there. Speaking of….
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Nothing lasts forever. It’s time to say goodbye to iTunes if you haven’t done already because Apple (APPL) iTunes is no more. Thankfully, now collector's items, you won't need to consign your old iPod with the rest of the tech garbage (like your Walkman and your Blackberry) clogging up the planet.
A lot is hAPPening
Apple is launching 3 separate apps for music, TV, and podcasts, turning the company into an entertainment service rather than a hardware company. iTunes launched in January 2001 and was Steve Jobs’s revolutionary platform for music storage and downloads. Put your hands in the air if you remember ripping your CDs into digital form. We see you. iTunes was Apple’s play to influence music lovers to buy albums rather than use popular peer-to-peer file sharing sites (*cough* remember Napster?! We’re really showing our age here). To be fair, iTunes didn’t really have a chance competing with the likes of Spotify (SPOT), Tidal, and Apple’s own Apple Music. Now that’s disruption from the inside at its best!
Et tu, U2?
Blame it on Beyonce (but don’t), or blame at least a little iTunes demise on U2. You might not remember the bold marketing ploy in 2014 where U2’s album Songs of Innocence was automatically added to 500 million users’ accounts. On purpose. Customers were less than impressed, complaining about not having a choice over what music was on their devices. Fair enough! Even Bono apologised a month later, which is saying something. We all know the writing was on the wall when Apple Music launched in 2015 – no one saw iTunes living past 2020. Innovation is afoot, including the next-gen version of iOS, and we’re excited to see what other tricks they have up their sleeves.
Ring the alarm: Slack is going public on June 20. The company was last privately valued at $7.1 billion and serves more than 88,000 paying customers. Notoriously outspoken, Mr Butterfield has stayed out of the spotlight for the last year, which is a surprisingly conservative approach to going public.
Will they succeed?
Slack’s public listing carries huge significance now after a year of lacklustre IPOs from big-name tech firms like Lyft (LYFT) and Uber (UBER). Interestingly, they’re choosing a “direct listing,” which is a cheaper, lower profile method of going public in which only existing shares are sold. This also means no cash is raised for the company, but the thing is, they don’t need the money. Bold move, Slack! They might not need the money, but they’re not allowed to be slack (ha! sorry…) about their competition: Microsoft’s (MSFT) got Teams, and Cisco (CSCO) and Facebook (FB) have similar tools. Slack is smaller than these big guns, and on Friday, they disclosed a $32 million loss in the first quarter. There is some good news though: revenue rose 67% over the last year to $135 million.
If anyone can do it, Butterfield can
Starting out with a humble life living on a commune in British Columbia, Canada, Butterfield eventually co-founded Ludicorp, which created a photo-sharing site you may have heard of – Flickr – that he sold to Yahoo in 2005 for $25 million. Slack grew out of Butterfield’s second attempt at building a gaming start-up, but he eventually focused the company on an internal messaging system they had created. Fun fact: Slack is an acronym for “Searchable Log of All Conversation and Knowledge”. Even with its weird name, it quickly became an investor darling raising $1.4 billion in funding from various venture capital firms and have had buy-out offers from Microsoft, Amazon (AMZN), and Google (GOOG). This just might be a tech IPO worth watching.
Other interesting stuff
As China Takes Aim, Silicon Valley Braces for Pain
Facebook’s False Standards for Not Removing a Fake Nancy Pelosi Video
Why investors should worry about the latest tariff threat
In The Next Recession, You can Make Money Rather than Lose It