ECB Goes Negative on Rates, GM Probes Itself, Brown Forman High on Whiskey

The Dow (DJINDICES: ^DJI  )  jumped 96 points and the S&P 500 rose to a fresh new record thanks to some big finance news out of Europe.

1. European Central Bank resorts to negative interest rates
Reverse banking is now happening in the struggling eurozone. The European Central Bank announced a reduction of interest rates Thursday to an unprecedented negative level. Instead of paying commercial banks interest for their cash deposits, the ECB will start charging interest.

The goal is to get banks to lend excess cash to people and businesses instead of hoarding it in the ECB. Will banks finally put their cash to work by investing in the economy? No se.

Rates are already at historical lows but they're literally moving into the negative now. Unemployment is destroying lives in many euro-using countries, so ECB President Mario Draghi is trying to force the banks' hands and make them lend instead of hoard money. Stocks rose in Europe on the growth-friendly news.

The takeaway is that inflation -- or lack of it -- is Draghi's biggest fear. There is almost no inflation in the eurozone (0.5%) because econ growth is so low, and wages and prices aren't increasing. Deflation -- when prices are falling -- is horrible for an economy because it incentivizes people not to spend now, but to wait. The ECB is on the brink of deflation, and this jolt should get money flowing, and create the rising prices that an economy needs to encourage people to spend now.

2. GM chief Mary Barra speaks about internal investigation of faulty cars
It was time for soul-searching at General Motors (NYSE: GM  )  after revelations this winter that GM let millions of defective cars dangerously roll the streets with faulty ignition switches -- for more than 10 years. GM recalled millions of vehicles this year, and Thursday, the company announced the results of a large internal investigation. Was there a cover up, or were GM workers just asleep at the wheel?

A "pattern of Incompetence and negligence" plagued the company for years. The new CEO nicely threw her predecessors under the bus for failing to act on clear signs of faulty cars. Barra and her people were not involved at all (naturally), but 15 people have been fired for this, she reported.

GM is not guilty of institutional efforts to cover up the problems, reported Barra -- GM was just a crappy company for years. There was no communication between the engineers who noticed defects, and the decision makers who could do something to fix them. That failure ultimately led to 13 deaths, and GM is setting up a fund to pay the victims' families.

The takeaway is, that was the "old GM," infamous for bureaucracy and silos. The stock shrugged off the news though -- down 0.7% -- as Barra preaches that the "new GM" since bankruptcy is all better, even though the report included the same lameness through 2012. Now, Barra's off for the inevitable apology tour this summer.

3. Brown-Forman stock rises on flavored whisky demand
How do we take our Wall Street headlines? On the rocks. And that's just how the liquor industry mammoth Brown-Forman (NYSE: BF-B  )  serves up its earnings reports. Shares of BF rose more than 1% Thursday after announcing an impressive 6% increase in global net sales during the last year. We'll drink to that.

It's all about Jack. Sales of the nation's top-selling whiskey brand, Jack Daniels, led Brown-Forman's strong performance, improving 8% worldwide. Plus, the company has recently introduced "Tennessee Honey" flavored whiskey -- you've seen their bee ads on every NHL playoffs commercial break-- and the stock jumped 36% after doubling in 2013.

The takeaway is that the flavored vodka era of the Sex and the City gals is over; we've now entered the Mad Men whiskey phase. Demand for flavored whiskeys is gaining popularity in Europe, South America, and the U.S., and Brown-Forman plans to introduce a cinnamon-flavored "Tennessee Fire" to compete with the Fireball whiskey all your buddies order shots of when they can't think of something creative.

As originally published on

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9/2/2015 3:05 PM
^DJI $16268.74 Up +210.39 +1.31%
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Brown-Forman Corp CAPS Rating: ****
GM $29.05 Up +0.41 +1.43%
General Motors CAPS Rating: ***