Don't Kid Yourself, Banning Flavored Juul Pods Is All About Money
The U.S. government has nearly 13 billion reasons to see e-cigarettes die a quick death. Juul, with its 75% market share, has been the one company in their crosshairs due to the rapid increase in vaping among teenagers and more recently, the outbreak in illnesses and deaths associated with vaping.
According to a survey funded by the National Institutes of Health, the number of teens who vape nicotine hit a record high last year. The percentage of 12th graders who said they've vaped in the previous twelve months increased from 27.8% in 2017 to 37.3% in 2018. When asked if they've vaped in the previous 30 days, the percentage nearly doubled from 11% in 2017 to 20.9% in 2018.
The CDC has so far reported 33 deaths and 1,479 lung injury cases associated with the use of e-cigarette and vaping products. The CDC says "Most patients report a history of using tetrahydrocannabinol (THC)-containing products. Therefore, CDC recommends that you should not use e-cigarette, or vaping, products that contain THC." To cover their bases, the CDC also "continues to recommend that people consider refraining from using e-cigarette, or vaping, products that contain nicotine."
The problem is Juul is being specifically targeted amid the outbreak despite the evidence so far pointing to THC-containing vapes as the culprit. The outbreak has quickly led the Trump Administration towards banning flavored e-cigarettes. So why is there so much attention drawn towards Juul when the products they sell may not be causing the deaths and illnesses?
As is the usually the case, the answer is money. With cigarette use among U.S. adults at the lowest level ever, the government is losing billions in tobacco tax revenue. The decline in tobacco tax revenue likely won't be reversed, either. A large reason many have given up cigarettes is because they've switched to e-cigarettes, which are thought to be a safer alternative. Whether they are is debatable. Of course sales of Juul and other e-cigarettes provide states with tax revenue, but it likely doesn’t make up for the lost tobacco tax revenue.
Yesterday, Juul finally caved to the pressure. The company announced it would immediately suspend sales of fruity e-cigarette flavors in anticipation of a Trump administration policy that would take them off the market. Juul's spokesman said "We continue to review our policies and practices in advance of FDA’s flavor guidance and have not made any final decisions."
Of course the rise in teens vaping nicotine is worrisome, but teens have smoked cigarettes for as long as they've been around. Furthermore, the CDC also recommends that people refrain from smoking cigarettes, but the government hasn't drafted laws to remove cigarettes from store shelves.
There's one telling statistic that illustrates deaths are not what the government is most concerned about. According to the CDC, cigarette smoking is responsible for more than 480,000 deaths per year in the U.S. In comparison, the number of deaths from the recent vaping outbreak is about 0.005% of the total deaths per year caused by cigarette smoking.
Made up Chinese economic data misses estimates. China's GDP grew 6.0% in the third quarter from the same period a year ago, the lowest rate in 27 years. As is becoming the norm, the slowing growth was blamed on the ongoing trade war. The drop in Chinese exports accelerated last month as imports fell for the fifth-consecutive month. The 6.0% growth rate falls on the low end of the Chinese government's official GDP forecast for the year of 6.0% to 6.5%. Separately, the country is dealing with an outbreak of African swine fever, which has caused pork prices to nearly double. Despite U.S. markets continuously rallying on hopes of China purchasing additional agricultural products, the Chinese need to import pork, which is a staple for hundreds of millions of Chinese citizens.
You'll be able to buy 1/1000th of a share of Berkshire Class A for about $300. Fresh off eliminating commission fees, Charles Schwab is now going to allow investors to trade fractions of stocks. Founder Charles Schwab said the move is part of a push to attract younger investors. A handful of smaller companies have offered this for some time, but Charles Schwab is the first major broker to do so. With insider selling at 20 year highs, it's probably just a coincidence young, inexperienced investors are suddenly getting the opportunity to buy fractions of stocks with no fees more than ten years into this bull market.
It used to mean you'd get a bigger valuation. Prior to this year, mounting losses for private companies meant a bigger IPO valuation. Airbnb may be the next private company to test the public market's interest in money-losing unicorns. In the first quarter, the company's losses doubled to $306 million as sales rose 31% to $839 million from the same period a year ago. The company, which last received funding at a $31 billion valuation, plans to go public in 2020. Maybe investors will be drawn to their new "Animals on Airbnb Experiences," where you can book experiences such as "Tea with Naughty Sheep" or "Dogs of Chernobyl."
Another IPO bites the dust. Luxury yacht manufacturer Ferretti has pulled its IPO in Milan following lackluster interest. The Italian company, which is partially owned by the son of Ferrari founder Enzo Ferrari, was not satisfied with the price of the listing. After previously cutting its price range, Ferretti still managed to only cover the books at €2 per share, the low end of the new range. At €2 per share, Ferretti would have been valued at €580 million, significantly less than the €1.08 billion valuation the company anticipated. The company's CEO said the company is discussing selling a stake to a private European investor instead.
It can all be lost so quickly. The NBA has spent a lot of time and money to bring basketball to the Chinese market, which is worth an estimated $4 billion. Following a tweet by the Houston Rockets' general manager two weeks ago in support of the Hong Kong protests, all of the NBA's progress in China is seemingly coming undone. NBA Commissioner Adam Silver said the tweet "has already cost the league substantial financial losses in China." NBA games in China have been pulled and the Chinese government even demanded the NBA fire the GM, which it has refused to do. Silver was unable to sugarcoat the situation, adding "I’m not even sure where we’ll go from here, but the direct answer to your question is the financial consequences have been and may continue to be fairly dramatic."