Starting today, U.S. freight railroads are poised to cut back on some service with a new union rail contract up for negotiation. The reduced service would come ahead of a potential rail strike date of Sept. 17 if talks fail to progress. While ten of the twelve railroad worker union have struck deals, the holdouts – Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal Air, Rail and Transportation Workers – account for more than 90K rail employees.
Quote: “While these preparatory actions are necessary, they do not mean a work stoppage is certain,” the Association of American Railroads said in response to the developments. “The railroads want, and continue to advocate for, a prompt resolution that would provide historic wage increases to rail employees – and allow the railroads to continue servicing customers and prevent further disruption to the struggling supply chain.”
A rail strike could disrupt the retail industry and giants like Walmart (WMT), Target (TGT), and Home Depot (HD) if domestic trucking rates accelerated again. FedEx (FDX) and UPS (UPS) could also be impacted. Economists warn that an extended rail strike could weigh on food prices and be another contributor to inflation in the U.S., while the Association of American Railroads estimates that a strike would cost the economy $2B per day.
Related tickers: Berkshire Hathaway (BRK.B), Brookfield Infrastructure Partners (BIP), Canadian National Railway (CNI), Canadian Pacific Railway (CP), CSX Corp. (CSX), Norfolk Southern (NSC) and Union Pacific (UNP). (97 comments)
The International Organization for Standardization, or ISO, has voted to create a new Merchant Category Code (MCC) for gun stores to use when processing payment card transactions, similar to the ones used for hair salons, bicycle shops and restaurants. The move is set to ignite a political storm over fears of consumer privacy and that the codes could unfairly hinder firearm purchases. Prior to the decision, gun stores sales were classified under categories like “general merchandise” or “sporting goods.”
Backdrop: Amalgamated Financial (NASDAQ:AMAL), which refers to itself as America’s socially responsible bank, kick-started the recent campaign by making an application for the ISO code this past spring. An earlier attempt was rejected, but this time around, the lender argued that it was necessary to identify credit risk. The push also received support from Massachusetts Senator Elizabeth Warren and Democratic lawmakers, as well as NYC Mayor Eric Adams and the California’s teachers’ pension fund.
“We all have to do our part to stop gun violence,” Amalgamated Bank CEO Priscilla Sims Brown said in a statement. “The new code will allow us to fully comply with our duty to report suspicious activity and illegal gun sales to authorities without blocking or impeding legal gun sales.” Credit card giants Visa (NYSE:V), Mastercard (NYSE:MA) and American Express (NYSE:AXP) are all adding the new merchant category for firearms and ammunition retailers, though big-box stores that sell rifles and handguns will have different MCCs.
Thought bubble: Gun safety activists say the move will help law enforcement officials flag suspicious purchases, while others feel the role of reducing gun violence should be left up to Congress. There are further risks in having payment networks serve as a moral authority for choosing which goods or services will be tagged with a specific code, or how and if the MCC will be shared with law enforcement. While MCCs now exist for nearly every kind of sale, the latest addition could lead to the creation of more ISO codes that could be used to track other politically-charged businesses like abortion providers. (35 comments)
Activist investor Daniel Loeb is backing away from plans to push Disney (DIS) to spin off ESPN, which he hoped could result in new business areas like sports betting and reduce the entertainment giant’s debt load. While ESPN gives Disney a steady cash flow through cable TV licensing agreements, the model has been put under the spotlight given the rising costs of sports broadcast rights. Loeb’s Third Point even took another $1B stake in Disney last month to push for the changes, which included a cost-cutting program, cash dividend suspension and buying out a minority stake in Hulu.
New tweet: “We have a better understanding of @espn’s potential as a standalone business and another vertical for $DIS to reach a global audience to generate ad and subscriber revenues,” Loeb wrote on Twitter. “We look forward to seeing [ESPN Chairman James] Pitaro execute on the growth and innovation plans, generating considerable synergies as part of The Walt Disney Company.”
Over the weekend, Disney CEO Bob Chapek even made a reference to Loeb’s new stance during the D23 Expo in Anaheim, California. He said he has been “deluged” with interest from companies seeking to buy ESPN this year on speculation that the firm may be considering selling the sports network, but related that he has a plan to restore ESPN to its “growth trajectory.” Those talks included “regular conversations” with Third Point, which he described as “very collaborative, non-antagonistic and collegial.”
Mouseverse: Over at the D23 Expo, Chapek fielded a number of questions that surrounded Disney’s future, with some particularly curious if the House of Mouse is heading into the metaverse. “We call it next-gen storytelling,” he declared backstage. “We tend not to use the M word too often, because it has a lot of hair on it. But yes, Disney+ will not just be a movie service platform, but it’s going to become an experiential lifestyle platform. A platform for the whole company to embody both the physical things that you might be able to experience in a theme park, but also the digital experiences that you can get through media.” (21 comments)
The ETF sector has experienced a big shakeup since the start of the pandemic as an increasing amount of funds and providers flood the industry. Charles Schwab (SCHW), Fidelity, Invesco (IVZ) and State Street (STT) are all jostling for position, as well as others like ARK Invest that are attempting to disrupt the space and beat the market. It comes amid a long-running battle over cheaper ETF fees, as well as the ever-growing suite of products and investing angles.
Top dogs: BlackRock (BLK) and Vanguard rule more than 60% of a U.S. ETF market, which has expanded by nearly fivefold to $6.6T from $1.35T a decade ago, but the rivalry has grown more intense in recent years. Since the start of 2020, Vanguard has recorded inflows of around $656B vs. the $411B of BlackRock’s iShares ETF unit (which it bought from Barclays in 2009). While BlackRock markets a broader range of ETFs and targets bigger institutional investors, Vanguard has emphasized its standing as a low cost provider to attract retail investors and financial advisors.
“We are playing a different game. We want to lead, but it is also about expanding ETF usage across all client types. That’s more important,” said Armando Senra, Head of iShares Americas. “We are continually looking at expanding the offering, but we will be very judicious,” added Vanguard’s Dan Reyes. “We tend to stay away from thematic or narrowly sliced versions of the universe.”
Who will win? BlackRock’s iShares Core U.S. Aggregate Bond ETF (AGG) is close to being surpassed by the Vanguard Total Bond Market ETF (BND) as the world’s largest bond exchange traded fund. However, Blackrock still has $2.96T in global ETF assets, compared to $2.04T for Vanguard at end of July, though the latter is catching up. Meanwhile, the largest ETF by assets is State Street’s SPDR S&P 500 Trust (SPY), but BlackRock and Vanguard still dominate the next 15 out of 16 rankings. (2 comments)
Be the first to comment