Is There a Debt Crisis? Can Cannabis Light Up an L.A. Neighborhood? Is Harvard to Blame for Sheryl Sandberg?

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Good Wednesday Morning,

DAYLIGHT  

A Volkswagen and Ford alliance might be one borne out of necessity. VW’s misleading emissions data controversy has hurt their global stock and Ford has stopped making everything except basically Mustangs and trucks. The trade war hasn’t helped either automaker, but this wouldn’t be a merger, more of an agreement to tackle niches in the industry such as hybrid SUVs and autonomous vehicles.

By the way, GM won’t be making any of the following cars as it closes more factories across the nation: Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevy Cruze, Impala and Volt.

RETAIL

The largest marijuana retail space in the country is opening in Downtown Los Angeles amid hopes that it will rejuvenate its Jewelry District: “A seven-story building in the heart of Los Angeles’ Jewelry District will open up, filled with tenants who all have cannabis somewhere in their job description. The 67,000-square-foot Green Street Building (the name is in reference to its anchor tenant, the Green St. Agency, which works solely with clients in the marijuana industry) will house everything from co-working spaces to an art gallery, dispensary, restaurant, law firm, luxury spa and lounge.”

THE ECONOMY

President Trump is blaming the Fed and higher interest rates for recent stock market declines and for General Motors’ announcement of plant closures and layoffs: “I’m doing deals, and I’m not being accommodated by the Fed,” Trump said. “They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

Is the US on the verge of a corporate debt crisis? “In the last decade, well-established companies including GE, AT&T, CVS Health, Sherwin-Williams and Campbell Soup went on acquisition binges fueled largely by cheap borrowing.

“As interest rates rise and the economy appears to be slowing, they are in not-insignificant danger of defaulting on the debt, a fear that has started to cause disturbing ripples in the debt and equity markets. Exhibit A of brewing trouble is GE – once the world’s most valuable company and a paragon of debt virtue – it had a AAA credit rating until 2015. Those days are gone.”

CULTURE  

Elon Musk’s plan to solve California’s traffic problem will be put on the “what if” shelf as he has pulled the plug. The Boring Company had already dug a two-mile tunnel. The withdrawal is reportedly because community groups sued the city of Los Angeles after it planned to exempt the company from an environmental review process. The Boring Company has plans to build a tunnel under Dodgers Stadium.

SELLING THE BUSINESS

Josh Hix is a great example of a smart exit. After raising $100 million for his company and a feature on Shark Tank, he was able to sell his meal-kit service Plated for $300 million to Albertsons. Hix’s exit was smooth and beneficial because he kept his investors savvy to the M&A process. That meant having private, marathon conversations with the primary investors so they could be heard. Part of it comes from listening and getting along.

M&A

From M&A Guru Zack Eller – Atar Capital acquired Microcel Corporation. Microcel is a distributor of tech products. With some very interesting product offerings, Microcel should be making its way into the United States in the next 12 months.

Dynamic Engineering Solutions was acquired by EverWatch solutions. EverWatch has a variety of government contracts while DES serves as a consultant. DES recently partnered with Amazon and Redhat, and our guess is that they will be picking up government contracts for their consulting services soon.

INTERNATIONAL

The World Chess Championships are underway and before you scroll past, would it make a difference that an American is in the final and we could have our first champion since 1972 which was Bobby Fischer? Magnus Carlsen and Fabiano Caruana have played 12 straight draws.

MANAGEMENT

Is Harvard to blame for Sheryl Sandberg’s struggles at Facebook? “The article helped spawn the annual multi-billion-dollar exercise in nonsense known as the Leadership Industry, with Harvard as ground zero. The article gave Harvard Business School a new raison d’être in light of the fact that the product it had been selling for decades – managers – was suddenly no longer in vogue.

“Henceforth, it would be molding leaders. Which brings us back to Sheryl Sandberg, the ostensible exemplar of what Harvard Business professor Bill George calls Authentic Leadership. Before the wheels started to fall off at Facebook, Sandberg was profiled in George’s book, Discover Your True North, as a model of the kind of authentic leader HBS claims to churn out.”

Or maybe it was just about Facebook, according to an unidentified CEO: “There’s also a kind of Entrepreneurial delusion that seems unavoidable when you get that big, that fast. They were too focused on making every sale, making Wall Street happy, raising the stock price, and making themselves rich and self-satisfied. When you get that wealthy, you start to buy your own bullshit.”

FOR FEMALE FOUNDERS

Apple has its own Entrepreneur Camp which is a free two-week lab helping female Founders and Entrepreneurs in app development. Apple engineers can help them in one-on-one classes on coding, design and marketing in the App Store.

You need to have an idea already put into practice and have at least one woman on your development team to qualify. It also helps if the Founder’s model is already an app-driven business. The program hopes to add legitimacy to startups so they may get more funding. Apple has conducted Entrepreneur camps before, but this is the first focusing on female-founded and/or female led companies.

TECHNOLOGY

Nostalgia still sells as Sony brings back the original Playstation console, rebranding it as Playstation Classic. The legendary game system that was in every Millennial’s basement will hit shelves December 3.

The same way in which  hipsters brought back the vinyl record player, video game nerds (it’s a term of endearment now, surprisingly) are reviving classic titles like “Final Fantasy” and the original “Grand Theft Auto” on the groundbreaking console. Excellent to have another revenue stream for a company that hasn’t yet abandoned a customer base which helped propel video gaming to mainstream entertainment and even competition.

MARKETING

Celebrities, Entrepreneurs and small companies are disrupting the beauty industry: “The emerging brands use social media to challenge the playbook of industry stalwarts: selling products in drugstores and at department stores’ beauty counters. ‘Everybody is tackling the challenges of living in a new environment where consumers can buy makeup anywhere,’ said Larissa Jensen, an analyst at NPD Group who covers the beauty industry.

“A big hook for the younger generation is the celebrity status of some of the companies’ Founders, such as ‘Keeping Up with the Kardashians’ star Kylie Jenner, Glossier’s Emily Weiss and British makeup artist Pat McGrath, who have leveraged their popularity, makeup expertise or fan base into thriving beauty brands.”  

SPORTS

Hue Jackson getting canned from the Cleveland Browns’ head coaching job was clearly not enough for rookie quarterback Baker Mayfield who hasn’t been shy in calling Jackson “fake” and a serial loser. If you followed college football last year, Mayfield was no stranger to controversy and hot takes. But as a first-year player on one of the worst franchises in sports history, he’s flirting with the Brilliant Jerk label.

Nowhere near as bad as Johnny Manziel because Mayfield’s won more games. But to be so public and inflammatory about a former colleague only a week after his organization fired him does not bring stability to an already suspect franchise. Browns face the Houston Texans on Sunday.

HEDGE FUNDS

More From Zack Eller – Koch Equity Development, the private equity division of Koch Industries, agreed to invest $500 million in Getty Images, a subscription photo service. Getty already does a little bit of everything in photos. In 2015, Getty Images ran into financial trouble. This looks like another plea for assistance.

VENTURE CAPITAL

Quip, a dental care startup, has raised $40 million. It recently expanded from a subscription service replacing toothbrush heads and toothpaste to having a successful launch debut at Target (following the model established by subscription-razor service Harry’s). Quip has ambitions beyond appliances as it recently bought dental insurance provider Afora.

The High Note, a cannabis company, raised $15 million. Not only would the funding help in expanding their cannabis lifestyle brand, but also in developing a business park in California City. The company grows, extracts, distributes and sells its own product.

SPOTLIGHT

Loren’s guest on Sirius XM’s Mind Your Business Thursday will be Lou Mosca, chief operating officer of American Management Services, a consulting firm that helps business owners. Among other things, they’ll be talking about how to plan for 2019 with so many conflicting economic signals in the air: rising interest rates, falling real estate prices, tariffs, corporate debt, GM closing factories. Got a question or a comment? Call 844-942-7866 during the show, which airs at 1:00 p.m. ET on SiriusXM 132.

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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