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SoFi Daily News: Thursday Jul 16, 2020


SoFi Daily News


JUL 16, 2020

Market Recap

Dow Jones

S&P 500


$2.67 (+0.69%)

-$1.96 (-2.57%)

$5.18 (+6.9%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority.
For more information on COVID-19 and your finances click here.

Apple’s Victory in the EU
EU’s General Court Rules in Favor of Apple and Irish Government
Apple (AAPL) won an important court case against the European Commission yesterday. In August 2016, the European Commission raised concerns that Apple had been granted special tax privileges by the Irish government. The company was accused of illegally avoiding paying $14.9 billion in taxes between 2003 and 2014. The Irish government and Apple challenged the commission’s ruling.

Yesterday, the General Court, Europe’s second-highest court, ruled in Apple and Ireland’s favor, saying the commission did not meet legal standards for displaying that Apple was given partial treatment. When news of Apple’s victory broke, the company’s shares rose 2% in premarket trading.

A Larger Conversation
European tax policy surrounding Big Tech has been highly debated in recent years. As Europe’s economy reels from coronavirus fallout and governments look for sources of revenue, questions about taxing large tech companies have taken on even more importance.

EU lawmakers have long debated whether or not the bloc should have a digital tax on large tech companies. Lawmakers in favor of this tax want to make sure tech companies do not have an unfair advantage over more traditional businesses, and want to raise revenue for governments. The General Court’s ruling complicates these discussions.

Looking Ahead
Already, several EU countries, like France, have implemented taxes on all tech companies. Margrethe Vestager, a member of the European Commission in charge of competition, has said that the EU as a whole may also adopt these policies unless changes are made by individual countries.

While the victory for Apple in Ireland is helpful for the company in the short term, it will add fuel to the fire for tech-industry critics in Europe. Some say this case is a signal that tax reform is needed in Europe. Big changes could be on the horizon, and investors will be carefully watching to see how discussions among European lawmakers unfold.


Lemonade Launches Pet Health Insurance Program

Easy Coverage for Dogs and Cats
Lemonade (LMND) rolled out a pet health insurance program yesterday. Now, dog and cat owners in 33 US states will be able to buy coverage for their four-legged friends through the platform.

The company’s pet health insurance will start at $12 per month. Existing Lemonade customers will have the opportunity to bundle renters or homeowners insurance with pet health insurance to receive a 10% discount off their monthly fee. Leftover premiums from the program will be donated to charities focused on animals.

Lemonade Forges Ahead After Successful IPO
Lemonade went public about two weeks ago, with one of the most successful IPOs of 2020 so far. The company is known for its hassle-free user experience, and mainly caters to millennials and younger generations. 70% of its customers are under the age of 35.

Lemonade has approached the insurance industry the way Salesforce (CRM) and CrowdStrike Holdings (CRWD) approached the software industry—by adapting a legacy business to meet the needs of people in a fast-moving, tech-centric world.

Offering pet insurance is Lemonade’s most recent step in creating a customer-centric experience.

The Pet Insurance Industry Is Poised for Growth
The US pet insurance market is worth billions of dollars. As pet adoptions rise, and veterinary costs go up, Lemonade saw an opportunity for growth.

Shai Wininger, COO and Co-Founder of Lemonade explained, ”As pet parents ourselves, we found the existing options to be lacking, so we built a product for cats and dogs from the ground up. This means an insurance policy that’s short and easy to understand, and a user experience created with the pet, and their parent, at its core.” Investors will be watching to see if Lemonade’s new offerings for users’ four-legged friends will continue to push its shares higher.


Trouble for the Tree Nut Industry

Growing Supply and Sinking Prices
Over the past decade, demand for almonds, walnuts, and other nuts has boomed. This is largely due to people turning to nuts and products made from nuts for healthy, high-protein snacks.

Nut groves take time to grow, so farmers could not respond to rising demand immediately. Five to 10 years ago, farmers ramped up planting—and this year, they are seeing results. Growing conditions were particularly favorable this year, which is also boosting the supply of tree nuts. America’s almond crop is expected to hit a record 3 billion pounds this year, up 20% from last year. Pistachio growers are expecting a 1 billion pound harvest, which is a new record. Other nut industries are seeing similar growth in supply.

However, the timing of this supply boom is causing problems for farmers. Because international trade, especially with China, has been limited, the price of nuts is sinking.

International Trade Is Down
The US grows and ships more tree nuts than any other country in the world. Normally, more than 50% of the US’ nuts are exported. However, international trade has slowed this year and almond prices are down 25% from a year ago.

China is normally one of the main destinations for American tree nuts. However, as tensions between China and the US rise, China is moving toward growing its own crops and putting tariffs as high as 75% on US products.

Typically, Lunar New Year in China is a big moment for the global nut industry because people buy boxes of nuts to give as gifts. Because the holiday this year took place during the height of the coronavirus pandemic in China, the nut industry took a hit. Because the holiday was so different from normal years, the pistachio industry saw a 15% dip in shipments.

An Inelastic Supply
The $9.5 billion nut industry may struggle with sinking prices for some time. The supply of nuts is very inelastic, meaning it is hard for farmers to quickly respond to changes in demand. Trees take years to mature and produce crops. Once trees are full-grown, they live for about 40 years, and farmers can’t control how many nuts they produce.

Marketing efforts are the main way the nut industry can control demand. Demand for plant-based protein is growing rapidly, and hopefully nut farmers’ high-yields this year will be able to capitalize on that trend.


Not-So-Breaking News

  • Companies around the world are investing in India’s booming digital economy. Yesterday, Google (GOOGL) announced it will buy a 7.73% stake in Reliance Jio Platforms, India’s largest telecom operator, for $4.5 billion. Four months ago, Facebook (FB) paid $5.7 billion for a 9.99% stake in the company.

  • Zoom (ZM) has created its first piece of hardware—a gadget called the Zoom for Home. The device has a 27-inch screen, three wide angle, cameras, eight microphones, and a touchscreen display. It is available for preorder for $599.

  • Moderna (MRNA) announced that its experimental COVID-19 vaccine produced high levels of antibodies able to kill the virus. More large-scale testing still needs to be done, but investors were hopeful about the news, which lifted the company’s shares up 11%.

  • Goldman Sachs (GS) reported that its second-quarter revenue hit $13.3 billion, $3.5 billion higher than expected. This was driven by a strong quarter for the company’s trading and investment banking divisions.

  • Stores and restaurants, including Best Buy (BBY), Starbucks (SBUX), and Costco (COST), have mandated that customers wear face masks. These policies follow a statement from the CDC saying that the US could get coronavirus under control in one to two months if everyone wore masks in public.

  • Many job seekers hate networking, but when done right it can be the golden ticket to landing your dream gig. Career coach Ashley Stahl tells us how on the SoFi Blog.

Financial Planner Tip of the Day
“SInsurance agents may justify the long break even point, low internal returns, and high costs of whole life insurance by emphasizing forced savings. There are other ways to automate your savings, so weigh the pros and cons before buying whole life insurance.”
– Brian Walsh, CFP® at SoFi

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