💥 The Fed's Batman move backfires

1. The Fed's big interest rate cut backfires

When they tell you not to freak out... but it just makes you panic more. The Federal Reserve announced its first emergency rate cut since the '08 financial crisis, slashing interest rates by half a percentage point. Bold attempt to quash investors' coronavirus-induced fears — but it actually made them panic more.

• "The Fed" is like the economy's Batman — watchful guardian, swooping in when danger strikes. Its interest-rate controlling powers have a massive effect on the economy, trickling down from financial institutions to consumers.
• When the Fed lowers rates, banks and lenders do too — that means lower interest rates for variable rate credit cards or savings accounts. It lowers the cost of borrowing while encouraging you to take money out of low-interest accounts.
• Spending and stock investing becomes more tempting, while saving and investing in gov't bonds becomes less appealing (because lower interest rates = lower returns). It's all supposed to kick-start economic activity.
• So stocks often rise after the Fed cuts rates...

Except the Fed's economic mind game backfired... Like when ramped up security at an event is supposed to make you feel safer, but actually makes you feel like there's a big threat. The move suggests to investors and consumers that things could be worse than originally thought — The Dow plunged 800 points as spooked investors sold off stocks, even though Fed rate cuts often have the opposite reassuring impact.

THE TAKEAWAY

The Fed gave the US economy the Heimlich Maneuver... when it wasn't choking yet. During the '08 financial crisis, the Fed's aggressive cuts helped bring the economy back to life. But despite recent drops in stock prices, the market is still in an 11-year bull run — and a rate cut won't turn coronavirus-affected factories back on. The pre-emptive move also limits the Fed's wiggle room if things get really bad.

2. Waymo drives home $2.25B in its first external fundraise

Waymo cash, way less drivers... Waymo is the self-driving car project that evolved out of Google's "moonshot factory." It just drove home a whopping $2.25B in investment cash. For the first time, it wasn't all internal funding — this was an external fundraise.

• Waymo was born in Google's X lab, and later graduated into a subsidiary company of Google's parent, Alphabet. It's Google's most successful moonshot, valued at an estimated $105B last fall (probably more now).
• "The World's Most Experienced Driver" — what Waymo calls its robotic self-driving tech (it literally trademarked the phrase). And it's driven a lot of miles (a whopping 20M) to test the concept.

Waymo opportunities to expand... Waymo makes the software and sensors that make driverless cruising possible — it can then sell this tech to other companies as a service — we're calling it SDaaS ("self-driving as a service"). And its tech (and ambitions) aren't just limited to consumer vehicles:

• Robotaxis: Waymo launched a ride-hailing service/app called Waymo One (tested in Phoenix).
• Delivery/Trucking: In January, Waymo said it would begin testing autonomous long-haul trucks in Texas and New Mexico.
• Sensors: It has plans to sell its custom LiDAR sensors outside of vehicle-related industries — think robotics, security, and agricultural tech.

THE TAKEAWAY

Waymo wants to be the Gore-Tex of cars... Look inside your parka and odds are it's ensconced in a Gore-Tex waterproofing liner. Gore-Tex doesn't make the North Face or Patagonia jackets, it just sells its weather-tech to the jacket brands. Waymo is the same way — it doesn't want to make its own driverless cars, it wants to sell its driverless tech to other companies. Car companies like Ford are slow to develop the tech themselves, but Waymo also has competition: GM's Cruise, Tesla, and Uber, among others.

What else we’re Snackin’

• Retweet: Twitter becomes the 1st major US company to "strongly encourage" all of its employees to work from home (on coronavirus concerns)
• Bell Pepper: Taco Bell is launching an all-vegetarian menu (called "Veggie Mode") with 50 meat-free items — tap it on a kiosk to hide all the carne options
• Cashi: Short-video streamer Quibi closes a 2nd round of funding worth $750M, bringing its total raised to $1.75B — FYI its launch ETA is next month
• Splurged: Lab equipment giant Thermo Fisher will dish out $11.5B to buy diagnostic company Qiagen and its (timely) coronavirus-testing kits
• Pickup: Target's upping its e-grocery game by adding fresh food and alcohol to its same-day pickup/curbside service, which grew over 90% in 2019

Snack Fact of the Day

Wednesday

• OPEC's big oil meeting in Vienna
• Earnings expected from Zoom, Splunk, Dollar Tree, Campbell Soup, LG, and American Eagle

Disclosure: Authors of this Snacks own fractional shares of Alphabet

ID: 1108364