Internal | July 31th, 2024

GOOD MORNING

Here's everything you need to know today: CrowdStrike shares plummeted almost 10% on Tuesday, hitting their lowest point this year after a CNBC bombshell that Delta Air Lines has roped in legal juggernaut David Boies to squeeze damages out of the cybersecurity firm. Tuesday’s nosedive continued a catastrophic freefall that’s obliterated a third of the company’s value since July 19, when a CrowdStrike-induced Microsoft meltdown sent industries, including airlines, into a tailspin.

Delta, currently drowning in 176,000 refund requests after nearly 7,000 flights went kaput is facing a possible $500 million blow, so it decided to call in Boies… the same dude who beat Microsoft in a 2001 antitrust Supreme Court cage match. His involvement is the plot twist no one asked for, especially considering his star-studded, albeit controversial, client list, featuring Harvey Weinstein and Theranos’s Elizabeth Holmes among others.

Meanwhile, the Department of Transportation is poking around Delta’s service fiasco, which might be Crowdstrike’s best hope of getting “Boies-ed.”

Let’s dive into more detail below.

BREAKING NEWS
Nothing screams "Here's what my presidency will look like" quite like the list of people throwing money at a candidate.

In the red corner, we have Trump 2020, backed by the ever-so-subtle real estate moguls and our favorite fossil fuel aficionados. These donors weren't just sending love letters; they were cashing in on significant tax cuts, deregulation sprees, and fossil-fuel-friendly policies (hello, Paris Climate Agreement rollback!).

And in the blue corner, we have Harris, nee Biden, riding high on the tech wave with buddies like Google and Microsoft. Their cheerleaders also included the healthcare and education sectors, paving the way for tech booms, healthcare overhauls, and educational reforms.

So, when Quiver Quantitative drops its latest donation data, it’s a stark reminder: follow the money, and you’ll see exactly what kind of ride you’re in for with Trump or Harris in 2024.

WHAT HAPPENED
A peek behind the curtain at the top donor contributions to the Harris/Biden and Trump camps reveals a glaringly obvious divide in sector loyalty.

Let’s start with Trump: Boeing threw in a tidy $68,303, Lockheed Martin followed suit with $60,483, and Northrop Grumman and Raytheon weren't far behind. Surprise, surprise, these are the same guys who thrive on military contracts. Given Trump’s love affair with defense spending—ramping it up to a whopping $738 billion for fiscal year 2020—it’s no shock they’re back to fill his war chest.

His administration boasted about "completely rebuilding the United States military" with over $2.2 trillion in defense spending. With a focus sharper than a drone strike on aerospace and defense, Trump’s “Make America Great Again” mantra is basically a love letter to the military-industrial complex.

On the flip side, Harris is all about that Silicon Valley swagger. With deep roots in San Francisco and the Bay Area, it’s no wonder she calls tech giants “family.” The numbers don’t lie: Google coughed up $613,503, Microsoft handed over $419,132, Oracle pitched in $114,873, and Apple added $94,667. These contributions align perfectly with her tech-centric policy priorities, proving that the tech world is betting big on their Bay Area buddy.

So, there you have it: Trump's camp is flush with defense dollars while Harris’s coffers are overflowing with tech cash. In the game of political patronage, it’s clear whose team each candidate is playing for.

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BREAKING NEWS
Bill Ackman is having some issues in his transition to becoming finance’s version of Logan Paul.

Just weeks ago the billionaire investor-cum-social media celebrity was hoping to raise $25 billion in an IPO of his rather creative new investment fund, Pershing Square USA. In a filing on Tuesday, Ackman scaled back that lofty goal a little bit, to $2 billion.

The root cause of Ackman’s drastic shrinkage can be traced to his hamfisted handling of a new phenomenon, balancing his appeal to retail investors who like his hot-takes on X with maintaining the trust of Wall Street, which has the actual money to actually fund an ambitious IPO.

WHAT HAPPENED
Ackman’s latest humbling is actually just the newest chapter in his… let’s go with “unique” career.

Known as much for his activist investment triumphs like Wendy’s and Canadian Pacific Railways to disasters like Valeant Pharmaceuticals and Herbalife, Ackman has spent more than two decades as one of Wall Street’s most divisive personalities.

But despite many people on The Street hoping he wouldn’t (Google “Ackman and Icahn” if you want a taste of who really hates Bill), Ackman has a penchant for bouncing back. Riding high on consecutive years of solid returns at his hedge fund, Pershing Square Capital, Ackman became quite the Twitter edgelord, criticizing everything from Harvard’s response to antisemitism following the October 7 Hamas attacks on Israel to diversity initiatives and President Biden. He recently endorsed Trump on the platform now known as X.

For Wall Street, Ackman’s social media antics were seen as a ploy to woo retail investors to his Pershing Square USA IPO. But that also meant that big Wall Street investors stayed wary of both Ackman’s habit of taking very big swings and a vehicle targeted at what they still see as dumb money.

Ackman’s overzealous $25 billion IPO target, which he splashed all across financial media, looked and smelled like a pipe dream, and it seemed to dawn on him that all of his billionaire frenemies (and reporters) were starting to laugh at him behind his back.

So, he did the SEC version of a viral tweet, filing an open letter that he intended to create FOMO amongst the hoi polloi of asset management by dropping his fundraising goal to between $2.5 billion and $4 billion, and name-dropping that big-time players like Seth Klarman’s Baupost Group and the Texas Teachers Retirement System were investing. Instead, the letter only highlighted the lack of significant interest from almost every other major asset manager, and read more like a regulatory version of “Please, help, this is going bad, you guys.”

But wait, there’s more! Ackman’s letter was preceded by a filing from Pershing Square’s lawyers that basically asked prospective investors to ignore almost everything Ackman said in the letter.

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BREAKING NEWS
The crypto community's loathing for SEC Chairman Gary Gensler is well-earned, just ask the crypto community.

Gensler’s perpetual waffling on crypto regulations has left the industry in legal limbo, juggling lawsuits and widespread market uncertainty. For example, on Tuesday, Gensler backtracked yet again on bringing digital currencies into the normcore equities market by dropping the bid to classify tokens like Solana (SOL) and Cardano (ADA) as securities as part of the SEC’s case against Binance.

Crypto enthusiasts quickly speculated: Was it Trump’s vow to fire Gensler at the Bitcoin Conference? Pressure from Wall Street before potential rate cuts? Or maybe Gensler has a crypto stash to unload? Whatever the reason, this retraction marks another SEC strikeout in the crypto game.

WHAT HAPPENED
In June 2023, SEC Chairman Gary Gensler targeted Binance, the world’s leading crypto exchange, classifying ten cryptos—including BNB, Binance USD, Solana, and Cardano—as securities. This SEC-induced “FUD” triggered mass panic, leading exchanges like Robinhood and Coinbase to delist these assets.

Changpeng Zhao (CZ), Binance’s then-CEO (now serving four months for inadequate anti-money laundering measures), was especially frustrated by the SEC’s lack of clear guidance and due process. Brian Armstrong of Coinbase echoed these sentiments, describing his interactions with Gensler as receiving an "icy reception."

To contextualize Armstrong’s meaning, here is a quote from Gensler from 2022: "Not liking the message isn't the same thing as not receiving it.” Here, he is referring to those in the crypto industry who have requested more guidance on regulations.

The SEC also alleged that Coinbase traded at least 13 crypto assets, including Solana, Cardano, and Polygon, as securities that should have been registered, essentially making the case that Coinbase was operating as an unregistered exchange, broker, and clearinghouse.

"The SEC chair is really an outlier,” Armstrong said at a Bloomberg conference, adding that several lawmakers he had talked to supported developing a clear regulatory framework for the technology.

As former President Trump promises Bitcoin and crypto enthusiasts that he’ll fire Gensler, the Bitcoin ETF and Ethereum ETF—an asset Gensler once insisted was a security but is now treated as a commodity—are thriving. The U.S. crypto retail market is becoming more integrated into the social and political fabric. With mounting pressure and bullish news in the crypto world, Gensler’s fight against crypto seems increasingly untenable. How much longer can he keep up this losing battle?

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1. McDonald’s Reports Global Sales Decline

McDonald’s has reported its first global sales decline in over three years, attributing the drop to inflation affecting lower-income consumers who are opting to eat at home. Despite the sales slump, McDonald’s shares saw a rise.

2. Merck Beats Earnings Expectations

Merck announced better-than-expected earnings for the second quarter of 2024. The pharmaceutical giant raised its sales outlook to $63.4 billion to $64.4 billion, driven by strong demand for its oncology treatments, particularly Keytruda.

3. Delta Air Lines Seeks Compensation for Cyber Outage

Delta Air Lines has hired a law firm to seek compensation from Microsoft and CrowdStrike following a global cyber outage earlier this month that disrupted flights. Delta’s move signals potential legal action to cover losses incurred from the incident.

4. BP Raises Dividend After Strong Q2 Earnings

BP reported stronger-than-expected second-quarter profits, leading the company to increase its dividend by 10% and extend its share buyback program. The positive earnings were attributed to strong crude oil pumping activities.

5. Pfizer Raises Annual Profit Forecast

Pfizer raised its profit expectations for the year, buoyed by stronger-than-expected sales of its oncology products. The company’s new profit forecast ranges from $2.45 to $2.65 per share, up from the previous estimate of $2.15 to $2.35.

6. JetBlue Posts Surprise Profit and Defers Aircraft Spending

JetBlue reported a surprise profit for the second quarter and announced it would defer $3 billion in spending on new aircraft through 2029. This move is part of a broader strategy to cut costs and return to profitability.

7. Tesla Recalls Nearly 2 Million Vehicles

Tesla announced a recall of approximately 1.8 million vehicles due to a hood latch issue that could increase the risk of crashes. This is the second largest recall for Tesla this year, affecting various models produced over the last five years.

8. Meta Agrees to $1.4 Billion Settlement Over Privacy Violations

Meta has agreed to a $1.4 billion settlement with Texas over allegations that it used biometric data from users without their consent. This settlement marks one of the largest privacy violation settlements to date.

9. Microsoft Investigates Office 365 Outages

Microsoft is investigating outages affecting its Office 365 services, impacting users globally. This incident comes shortly after a similar outage caused by a software update from CrowdStrike.

10. AMD Sees Growth from AI Chip Sales

AMD reported a significant increase in sales from its AI processors, providing an upbeat revenue forecast for the current quarter. The company’s shift towards AI chip production is seen as a key growth driver amidst a broader tech industry downturn.

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