BUSINESS BY CARLSON 8-2-17

Content provided by Paul Vaaler of the Carlson School

Welcome to August and all that month brings us: a hot beginning (and hint of Fall at the end); the beginning of the Vikings’ season (and the beginning of the end for the Twins); time at the lake cabin; the State Fair (and mini-donuts!); back-to-school rituals. And…a sputtering stock market? That’s right, August has become the “trickiest” month for investors. Here is where you can learn more about how and why: file:///C:/Users/vaal0001/Downloads/The%20Trickiest%20Time%20of%20the%20Year%20for%20Stocks%20-%20MoneyBeat%20-%20WSJ.pdf. Over the past half century, an investor who put $100 into the S&P 500 only for themonth of August each year would have $98 today. That same amount invested only in December, another typically slow month for the market and the best for performance,would be worth $204 over the half-century span. When trading volumes are thin, then moves by a few larger market players can move indices more. In August, those larger players more often sell and lock in profits, while in December they buy. (If only those larger players would also go to their lake cabins!). I think there’s less chance of an August slide this year. Quarterly earnings (and revenues) have been strong for so many Fortune 500 firms.

Target has been sponsoring race car teams for more than 25 years, but recently CEO Brian Cornell has decided to put his sponsorship dollars elsewhere. Here is where you can learn more about this move: https://www.bizjournals.com/twincities/news/2017/07/28/target-pulls-out-of-nascar-circuit-steers-spending.html. Last year, Target ended 27 years of sponsoring Chip Gnassi’s Indy car racing team. This year, Target will end it’s +10 year sponsorship of Kyle Larsen’s NASCAR racing team. Who will get the $30-40 million now freed up sponsorship dollars? The answer appears to be Major League Soccer. Target is more interested in getting it’s logo on dozern’s of MSL Soccer player jerseys and thousands of MLS Soccer fans rather than on a few Indy or NASCAR car hard tops. Why? The answer may be demographic. Brian Cornell wants to market Target to faster growing customer groups, which are younger, more feminine, and more Hispanic. More than 90% of NASCAR fans are white and non-Hispanic. And only 9% are 18-34 years old. Here is where you can learn more about the NASCAR demographic: http://brandongaille.com/52-fantastic-nascar-demographics/. 35% of a smaller but fast-growing MLS Soccer fan base are Hispanic, and Milllenials comprise a much larger percentage. Here is where you can learn about the soccer demographic: http://money.cnn.com/2017/03/03/news/mls-growth-don-garber/index.html. And women? NASCAR has a strong female fan base at (only) 34%. But I don’t see a NASCAR ladies racing circuit coming on anytime soon. Soccer is big with girls and young women. Target’s sponsorship of MLS Soccer is a bet on the future that makes some sense.

Britain’s impending exit from the European Union is imposing substantial costs and substantially important decisions on US, Asian, and European banks, including UK banks. Here is where you learn more about those costs and decisions: http://money.cnn.com/2017/08/01/news/economy/brexit-banks-cost-economy-jobs/index.html?iid=hp-stack-dom. It all gets down to uncertainty about how these banks, currently located in London, will be able to do business on the European continent after March 2019, the date for Britain’s exit from the EU. The EU negotiators seem unwilling to give London-based banks free access to their single financial services market after Brexit. This has a knock-on effect for those US, Asian and European bankers now in London. They may need to move their homes and banking licenses to the continent. That’s what’s now happening, but they are also keeping their London homes and UK operating licenses. The cost of maintaining two locations in the next two years, and then close one or the other after 2019 is likely to cost those banks more than $50 billion. Minnesota banks are paying part of that bill. Wells Fargo, for example, has a large operation in London. HSBC has already decided that two locations is one too many, so it’s moving to Paris. Will Wells follow in the next few months?

Lyft and Uber are fighting for the shared ride market in larger US cities. Uber has had a slightly upper hand in those battles for market share, but Lyft seems to have fought back with some unlikely partners…at least in New York City. Read about it here: https://www.nytimes.com/2017/07/25/business/media/lyft-taco-bell.html. Lyft has partnered with Taco Bell to offer occasional taco nights: From 9p-2am, Lyft users can get a ride from point A to point B with a stop at a nearby Taco Bell for free. Marisa Thalberg is the chief marketing officer at Taco Bell. She calls the Lyft taco night an “inverse delivery” service. Instead of delivering the chalupa to you, Lyft delivers you to the chalupa. What’s next? I think Lyft should set up a similar partnership with Lunds-Byerlys grocery stores in the Twin Cities. Free evening stops at the grocery store on the way home for a “lefse Lyft.” I’ll take mine with butter and brown sugar.

Have a great rest of the week.

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