Don’t hail Uber for its Kalanick ouster, it took too long

Travis Kalanick, the embattled bad boy founder of Uber resigned late Tuesday night, ending three years of questionable actions at the ride-sharing company.

My colleague at The New York Post, Jonathon Trugman wrote on Sunday:

When the board finally got around to getting a handle on the matter, one of its members, private equity giant David Bonderman, ended up having to step down after making a sexist slur about female board members.

For starters, one needs to understand the incestuous relationship between Silicon Valley’s boards and their company’s executives.

Generally speaking, there are two currencies used to get a board seat at many prominent Silicon Valley companies: money, and the credibility lent by fame. Most board members of tech firms are the executives, along with early stage investors. That’s how TPG co-founder Bonderman found himself in the hot seat.

Well it looks like the Uber board of directors finally acted by asking Kalanick to step down, according to reports. One wonders though if the did for the right reasons.

You see the private shares of Uber have taken a hit over the last month or so as news of the booze-filled company trips and sexual harassment as charges have dripped out from a report by former Obama Attorney General Eric Holder’s report.

As Trugman said, the board members are early investors with a huge stake in the company, so was it out of respect for common decency or a need to bolster creditability and a flagging share price that brought the board to its senses?

Here is a somewhat complete list of the Uber woes over the last few months as composed by Zero Hedge:

  1. Another tale of sexism and unacceptable workplace behavior in Silicon Valley company has emerged. This time it’s at Uber, according to an explosive blog post published on Sunday by a former company engineer named Susan Fowler Riggetti.
  2. Uber’s newly hired VP of engineering Amit Singhal was asked to, and did, resign on Monday after the company learned from Recode that he was accused of sexual harassment shortly before leaving Google a year ago. Here’s more on the difficult position of former employers in this case.
  3. A video showing Uber CEO Travis Kalanick rudely arguing with a long-time driver at the end of his ride was published by Bloomberg. “I need leadership help,” Kalanick said in an apology he issued shortly after.
  4. Susan Fowler Rigetti, the former Uber engineer who wrote of discrimination, said she’s hired attorneys after a new law firm began to investigate her claims. Uber confirmed it has hired Perkins Coie, which reports to former A.G. Eric Holder, who’s leading the investigation.
  5. Uber said on Thursday that it will finally apply for a DMV permit to test self-driving cars in California after its cars’ registrations were revoked in December because it refused to get the permit.
  6. Charlie Miller, one of the two famous car hackers who joined Uber’s Advanced Technology Center in August 2015, announced he’s leaving the company.
  7. The New York Times uncovered a secret Uber program called Greyball, through which the company uses software and data to evade law enforcement in cities.
  8. Keala Lusk, a former Uber engineer, published a blog post detailing how her female manager mistreated her, signaling that the company’s problematic culture isn’t limited to the men who work there.
  9. Ed Baker, Uber’s head of product and growth, resigned. Though the reason is unclear, he was allegedly seen kissing another employee three years ago, which was anonymously communicated to board member Arianna Huffington, according to Recode.
  10. A report outlines a trip by a group of Uber employees to a Seoul karaoke-escort bar in 2014, which included company CEO Travis Kalanick and his girlfriend, Gabi Holzwarth. After arriving, several male employees picked escorts to sit with, and went to sing karaoke. Uncomfortable, a female marketing manager, who was part of the group, left after a couple of minutes, while Holzwarth and Kalanick left after an hour.
  11. California regulators have recommended that Uber be fined $1.13 million for failing to investigate and/or suspend drivers who are reported by a passenger to be intoxicated. The state requires ride-hailing companies to have a zero-tolerance policy for driving under the influence of alcohol or drugs.
  12. A new report says Uber used a secret program dubbed “Hell’ to track Lyft drivers to see if they were driving for both ride-hailing services and otherwise stifle competition. Only a small group of Uber employees, including CEO Travis Kalanick, knew about the program, according to a story in The Information, which was based on an anonymous source who was not authorized to speak publicly.
  13. Waymo sued Uber in civil court, claiming that Uber was using trade secrets stolen from Google to develop Uber’s self-driving vehicles.
  14. Uber fires Anthony Levandowski, a star engineer brought in to lead the company’s self-driving automobile efforts who was accused of stealing trade secrets when he left a job at Google.
  15. Uber said Tuesday that it had made a mistake in the way it calculated its commissions, at a cost of tens of millions of dollars to its New York drivers, and the company vowed to correct the practice and make the drivers whole for the lost earnings.
  16. Uber fires over 20 staff following the release of a report about sexual harassment in the workplace.
  17. Reports emerge that Uber CEO Travis Kalanick fired off a bizarre email in 2013 to hundreds of employees where he listed the conditions under which they could have sex with each other at a company outing in Miami,

So I did not come to hail Uber, but to question the board’s motives again.

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Markets ignore Euphrates line in the sand

This will be a brief posting today, since I have to remove a large tree limb that came down on my wife’s art studio during Monday’s storm.

As I wrote yesterday, the markets are immune to a sell off despite global events. Monday’s development in the Middle East.

Humans are said to have developed in the Euphrates Valley, well this week we could see the ramping up of our demise in the same region as US-Russian warplanes may be having dog fights over the Crescent of Civilization.

Given this difficult situation where the Pentagon came out and said that US fighters will defend the airspace against all hostile actors, equity markets hit new highs, the VIX, or fear index, almost had a 9-handle and bonds are at very low yields. It’s too strange to be true.

Look no further than the price of crude. At $44 a barrel there is no premium being paid for the unrest in the Gulf Oil states as well as Middle East.

I’ll have more on this as I dig further, but there’s a limb that needs to be removed from the roof.

No fear or loathing in the markets

Do you recall the days when markets would pull back when there was a terrorist event in the world?

When investors would at least pause when the fired FBI Director was speaking on Capitol Hill about events and conversations with the White House?

Some of these market participants would even sell when the Federal Reserve raised rates. Speaking of the Fed — the ultimate backstop on falling security prices — it said last week it would begin pulling some $2 trillion out of the markets over the next 2 years or so.

What did we get from the markets?  Crickets

These investors used to be called skittish. But they seem to be gone. They have been muscled out by money that seems to know something. There are so many signs that the market is ready for a pull back.

What that something is that the markets know could certainly be helpful to small investors.

However, this is the time market pros say when the “dumb money” comes into the market. Small investors seeing new record highs most days and who have been on the sidelines fearing a repeat of 1987, 2001 and 2008.

I’m of the opinion that you don’t need to catch the last 5% move upwards, when the risk is you could get caught in a 50% downside collapse. It’s not a zero-sum game, you can take some profits and leave some positions for the possibility markets will go higher.

 

Leonardo DiCaprio tied to “Wolf of Malaysia,” DOJ

You can file this under the heading of life imitating art

On Thursday the Justice Department seized a Picasso and Basquiat paintings given to Leonardo DiCaprio, as well as rights to two Hollywood film comedies, in complaint filings to claw back $540 million they say was “stolen” from the Malaysian sovereign wealth fund, 1MDB.

The high-end art work was given to DiCaprio by Jho Low — a Malaysian financier — who the feds charged with laundering more than $400 million stolen from 1MDB through an US  account.

Low used the ill-gotten gains to fund a film production studio called Red Granite to live the life depicted in DiCaprio’s “Wolf of Wall Street” where he and his friends used the money to pay for lavish parties, gambling and yachts.

The DOJ’s filing also sought to claw back the assets of two other Red Granite films, which the federal investigators say were financed by money from the 1MDB fund.

“Dumb and Dumber To” starring Jim Carrey in the 2014 comedy, and 2015 comedy “Daddy’s Home” starring Will Ferrell.

Last year, the DOJ also tried to seize the rights to “The Wolf of Wall Street” although the Red Granite Pictures said on Thursday it was “actively engaged in discussions with the Justice Department aimed at resolving these civil cases and is fully cooperating.”

“Mr. DiCaprio initiated return of these items, which were received and accepted by him for the purpose of being included in an annual charity auction to benefit his eponymous foundation,” the actor’s people said in statement on Thursday. “He has also returned an Oscar originally won by Marlon Brando, which was given to Mr. DiCaprio as a set gift by Red Granite to thank him for his work on ‘The Wolf of Wall Street,'” the statement added.

Low also had connections with a former Goldman Sachs Far East director Tim Leissner, who helped the government set up the sovereign wealth fund and profited from its many bond offerings to allegedly funds airports, roads  and other infrastructure projects.

Leissner also had a Hollywood connection with his second wife Kimora Lee Leissner, the ex-wife of Russell Simmons, the cofounder of Def Jam Records. Leissner resigned from Goldman in 2016 has been barred from the securities industry in Malaysia for 10 years.

Fed’s rate hike hurts the ailing US consumer

I stand corrected. The Federal Reserve raised rates by 0.25 points Wednesday.

However, that does not mean it was correct to do so.

If you look at the US economy right now we have a slowing economy as GDP projections of +3% for the quarter are being pulled back to sub 2%. We also have inflation targets that are well below the Fed’s 2% target. Right now it’s at 1.6%.

The US has credit constriction you don’t have to look any future than look at the retail sector to see that the cost of cash is rising and more difficult to attain.

The growing asset bubbles are no longer the sure-fire collateral for extending credit.

So into this environment, the Fed takes it funds rate to a range between 1% and 1.25%. We already see that the consumer has tapped out on credit card usage with available credit at a years low-level, while outstanding balances hit all-time highs.

Student loan debt also at all-time high levels and mortgages for new and existing homes have been flat to slightly lower as rates rise. Car loans are persona non grata for originations and resale in the market due to low quality (think NINJA mortgages) and high quantity.

So why would the Fed raise rates at this time? To put another bullet in the chamber in case it needs to lower them again. To also tell Wall Street to tighten its reigns on credit and bring the bond market inline with other asset classes.

However this rates rise only affects us on the downside. We will pay more for credit and still get little to no interest on our savings.

And how the markets reacted tells you there is little change in either stocks or bonds. It was expected.

Now the Fed also announced the beginning of a plan to unwind its $4.5 trillion balance sheet. These were toxic mortgages and other troubled assets along with plenty of treasury bills and notes.

Now the Fed reinvest those proceeds as they mature, next year it will pare back the reinvestment according to a schedule that will be phased in.

There are lots to say about this and I will address it in the near future, but let’s just say I don’t believe the unwinding will be able to be pulled off beginning in 2018 for reasons I will address later.