Stocks do nothing, Yahoo's board fight arrives -- what you need to know in markets

Stocks fell on Friday to close the week with modest losses as markets will be closed for Good Friday tomorrow.

First, the scoreboard:

  • Dow: 17,504, +2, (+0.01%)
  • S&P 500: 2,034, -2, (-0.1%)
  • Nasdaq: 4,770, +2, (+0.04%)
  • WTI crude oil: $39.60, -0.5%


Americans love suburbs.

On Wednesday, the Census Bureau updated its latest county population estimates.

And while much media attention has been paid to the trend of Americans increasingly preferring to live in cities over suburbs, the data simply does not bear that out.

As Elena Holodny noted, housing economist Jed Kolko argued in a post Wednesday that the latest batch of data from the Census showed that Americans are moving west and south as well as into the suburbs and out of the city.

And while an idea has long been propagated that younger people prefer cities to suburbs, the move out of the suburbs — or really, the exurbs — was a post-crisis trend as much as anything else.

“After volatile swings in growth patterns during last decade’s housing bubble and bust, long-term trends are reasserting themselves,” Kolko wrote. “Local population growth trends are reverting to pre-2000 patterns as the housing bubble and its aftermath recede.”

Remember: Millennials are just like everybody else.

US Economy

The US labour market is still red hot.

Thursday’s weekly report on initial jobless claims showed claims totaled 265,000 last week, up from the prior week’s 259,000 but still way below the 300,000 level seen as an inflection point for the labour market.

And with Thursday’s report, claims have now been under 300,000 for 55 weeks, the longest streak since 1973. This report also contained revisions that showed the March 5 report had new claims for unemployment insurance actually total 253,000, the lowest figure since November 1973.

So, all is well here.

Thursday morning also gave us the latest reading on durable goods orders as well as Markit’s preliminary reading on services activity in March, both of which were a little disappointing. Durable goods orders fell 2.8% in February, less than the 3% that was expected but still not a great reading on manufacturing activity.

“The decline today in business capital goods orders does show companies are not going to be adding to their capital stock as much as we had thought earlier in the year,” wrote Chris Rupkey at MUFG in an email on Thursday.

“There’s no need to panic, the sky is not falling, but business capital spending is potentially going to be a half percentage point drag on real GDP growth this year.”

Meanwhile, Markit’s latest flash services reading showed that activity in the most important sector of the US economy rebounded in the first part of this month, but things are far from rosy. The index hit 51.4, worse than expected, and in the report Markit’s Chris Williamson said bleakly, “The US economy is going through its worst growth spell in three-and-a-half years.”

The Atlanta Fed’s GDPNow tracker, we’d note, is currently calling for first quarter GDP growth of just 1.4%, down from as much as 2.3% earlier this quarter. Friday morning will give us the third estimate for fourth quarter GDP growth, which is expected to remain at 1%.


So, Yahoo’s board fight is here.

In a letter on Thursday, activist hedge fund Starboard Value said it would nominate an entirely new slate of directors to Yahoo’s board.

Starboard owns 1.7% of Yahoo.

Current CEO Marissa Mayer, who has been under fire from the investment community for most of the last couple years, recently told Charlie Rose that she has a three-year plan for the company and wants to stay. Starboard, it seems clear, disagrees.

Though that the activist fund went ahead and nominated an entire new slate of directors — setting up an almost unavoidable proxy fight at the company — likely isn’t news to the company, which has more or less known something to this effect was coming for months.

Or as Bob Peck, an analyst at SunTrust, wrote in a note to clients on Thursday, “Yahoo recently disclosed it had expanded the Board from 7 to 9 by adding 2 new independent members. While the business rationale for making such a move on the eve of the meeting with Starboard remains unclear, we believe it likely signifies that Yahoo has already been gearing up for a proxy contest.”


One year ago, this is the last thing I’d expect to see from someone inside Google (er, Alphabet).

Via Jillian D’Onfro: “‘The fiscal discipline era has now descended upon everything,’ the CEO of Alphabet’s smart thermostat company, Nest, told The Information’s Reed Albergotti in an article published Thursday.”

So, I guess the party’s over? Like, look, Google is one of the most valuable companies in the world, it is well-respected by investors, industry peers, employees, the media, and so on. But times are changing there, clearly.

Maybe there wasn’t a party that needed ending, but Josh Brown’s classic parody that Google’s new Alphabet structure — which puts the hyper-profitable ad business (technically now Google) inside an Alphabet umbrella which contains projects like Nest — created a furnace the company could shovel $100 bills into certainly seems dead.

Recall that last week reports surfaced that Google wanted to sell Boston Dynamics, the robotics startup it purchased in 2013. And the upshot of this report was, again, that Google is trying to tighten its belt when it comes to “moonshot” projects, which seems to encapsulate anything the company isn’t convinced will become profitable soon(ish).

Last week, Gary Bradski, who co-founded a robotics company Google acquired, told Jill that he argued for selling his company to Google over Amazon because of the company’s seeming interest in “pie-in-the-sky” research work. As it turns out, Amazon would probably have been the better place.

“In a sense, Google wanted a moonshot whereas Amazon had a ladder to the moon.” Things change, etc.

Speaking of Amazon, Fortune had a big Jeff Bezos profile out Thursday. (Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.)

Lots of stuff in there, but among the highlights include a revelation that Bezos loves getting advice from Jamie Dimon. “I ask Jamie questions. I think he has a really good outlook on life and is very inspiring,” Bezos said.

Artificial Intelligence

Microsoft had a Twitter problem.

Here’s BI UK’s Rob Price:

Microsoft’s new AI chatbot went off the rails Wednesday, posting a deluge of incredibly racist messages in response to questions.

The tech company introduced “Tay” this week — a bot that responds to users’ queries and emulates the casual, jokey speech patterns of a stereotypical millennial.

The aim was to “experiment with and conduct research on conversational understanding,” with Tay able to learn from “her” conversations and get progressively “smarter.”

But Tay proved a smash hit with racists, trolls, and online troublemakers, who persuaded Tay to blithely use racial slurs, defend white-supremacist propaganda, and even outright call for genocide.

So, this seems like the problem with where artificial intelligence is. Its intuitive to humans thinking a little bit hard — or see, maybe the thing is: the idea that this is obvious in a way proves it’s not that interesting — that basic service jobs done by humans will be done by robots.

There are a lot of worries about this. What will happen to humans? To inequality? To our jobs? And so on.

I think there are two false beliefs undergirding the idea that “the robots are coming” though.

The first is that humans won’t be able to figure out something else to do with themselves that is productive. I realise that much of the alleged capitalism Western economies operate inside is really something like loosely-managed socialism or bloated bureaucratic gobbledygook, but if we think capitalistic principles actually support something like the global, Westernized, post-World War II economic project, then advances will be additive not zero-sum. Said another way, just because there are robots taking jobs currently done by humans doesn’t mean humans won’t find other jobs to do.

But the other problem is what Microsoft ran into. Namely: AI is going to be controlled by humans. And so trolls on the internet manipulated Microsoft’s Twitter bot into sounding like a more terrible, warped version of Donald Trump and the AI couldn’t fight back. Now, if you’re scared of AI you think this is a big moment for AI, I guess. Like, “Oh, AI will now understand what it needs to overcome or something like that.”

This is still, though, like the first worry, roughly a bear case for humanity. Like, humans are not that innovative and will invent something that will make them obsolete and not be able to respond and this Microsoft-AI-experiment-gone-wrong is a false flag showing not the weaknesses but the strengths of the technology.

Maybe I’m wrong and a robot will do this job and I’ll be getting a small monthly payment from the government. Seems like a long way off, sort of.


Narayana Kocherlakota on helicopter money.

Yanis Varoufakis had lunch with The Financial Times.

Greg Ip on stocks and oil.

The GAAP vs non-GAAP earnings debate now has a Donald Trump angle. Finally!

Scottie Pippen’s ex-financial advisor got 3 years in jail.

Bob Goldfarb out at Sequoia after the Valeant debacle.

Mark Fields, Ford CEO, talks with Henry Blodget, Business Insider CEO.

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