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U.S. takes tough lines as NAFTA negotiations begin

 

U.S. takes tough lines as NAFTA negotiations begin

WASHINGTON (Reuters) – The United States on Wednesday laid down a tough line for modernizing the North American Free Trade Agreement, demanding major changes to the pact that would reduce U.S. trade deficits with Mexico and Canada and increase U.S. content for autos.

Speaking at the start of the talks in Washington, U.S. President Donald Trump’s top trade adviser, Robert Lighthizer, said Trump was not interested in “a mere tweaking” of the 23-year-old pact, which he blames for hundreds of thousands of job losses to Mexico.

“We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement,” Lighthizer, the U.S. Trade Representative, said in an opening statement.

Canadian and Mexican officials defended NAFTA and said its benefits and structure should be preserved while it is modernized.

Lighthizer said he would demand increased regional and U.S. content in autos produced in the region, the largest source of a $64-billion U.S. goods trade deficit with Mexico last year. He also said the United States would insist on strong provisions governing labor and currency practices.

“We need to ensure that the huge trade deficits do not continue and we have balance and reciprocity. This should be periodically reviewed,” said Lighthizer. “The rules of origin, particularly on autos and auto parts, must require higher NAFTA content and substantial U.S. content.”

The demand is at odds with auto producers and suppliers in the region, who are concerned that increasing local content requirements will raise their costs and make their factories less competitive with those in Asia and Europe.

Canadian Foreign Minister Chrystia Freeland, who suggested this week her country could walk away if the U.S. insisted on scrapping a NAFTA mechanism to resolve trade disputes, also took a swipe at the U.S. fixation on cutting its trade deficits.

“Canada does not view trade surpluses or deficits as a primary measure of whether a trading relationship works,” she said in her opening statement. “Nonetheless, it’s worth noting that our trade with the U.S. is balanced and mutually beneficial.”

Mexican Economy Minister Ildefonso Guajardo said NAFTA stood as model of North American integration and the talks should aim to strengthen the continent’s trade ties.

“The issue is not tearing apart what has worked, but rather, how we make our agreement better,” he said. “For a deal to be successful, it has to work for all parties involved. Otherwise, it is not a deal.”

Mexico is keen to maintain preferential access for its goods and services to the United States and Canada, where nearly 85 percent of its exports are shipped. Its NAFTA priorities also include greater integration of the continent’s labor markets and energy sectors.

Canadian Minister of Foreign Affairs Chrystia Freeland speaks at a news conference prior to the inaugural round of North American Free Trade Agreement renegotiations in Washington, U.S., August 16, 2017.Aaron P. Bernstein

Canadian and Mexican delegations were not surprised by the Lighthizer’s tough talk.

Raymond Bachand, the lead trade negotiator for the Canadian province of Quebec, said he was not worried by Lighthizer’s remarks that the U.S. would not accept minor changes to the agreement.

“Mr Lighthizer’s speech was very focused on U.S. domestic policy. President Trump promised to renegotiate NAFTA,” Bachand said. “There’s a lot of strategizing going on today because it’s clear that U.S. business circles have one objective – do no harm,” he told reporters.

The first round of meetings, which are expected to last until Sunday, will focus on consolidating the proposals from all three countries, a U.S. trade official said ahead of the talks, which are being held at a Washington hotel.

Slideshow (5 Images)

As the NAFTA talks began, Trump faced increasing political heat over his comments that both right-and left-wing extremists were responsible for violence at a white supremacist rally in Virginia on Saturday.

The biggest uncertainty in the NAFTA talks is whether a deal can pass Trump’s “America First” test. Trump has constantly blamed NAFTA for shuttering U.S. factories and sending U.S. jobs to low-wage Mexico. The test will be whether NAFTA negotiators can prove to him that a new agreement alters that course.

Business communities from all three countries have called on the sides to “do no harm” amid concerns that a new agreement will unravel a complex North American network of manufacturing suppliers built around NAFTA.

U.S.-Canada-Mexico trade has quadrupled since NAFTA took effect in 1994, surpassing $1 trillion in 2015.

Robert Holleyman, a former deputy U.S. trade representative during the Obama administration, said the “toughest nut to crack” will be whether changes meet Trump’s goal of reducing the trade deficit.

“We know where he wants to make changes to NAFTA. Whether those changes lead up to something that actually reduces the trade deficit with Mexico is wholly unclear,” Holleyman said.

NAFTA renegotiation will be a major test of Trump’s ability to meet his campaign promises to restore U.S. manufacturing jobs. Although he has inherited a strong economy that has added 1.29 million jobs this year, his promises of an ambitious legislative agenda have been derailed by the failure of a healthcare bill and the lack of a detailed plan for tax reform.

Also weighing heavily over the talks is the upcoming 2018 Mexico presidential election. Mexico has urged all sides to complete the negotiations before the campaign ramps up in February to avoid it becoming a political punching bag.

Additional reporting by Lesley Wroughton, David Lawder and Ginger Gibson; Editing by Leslie Adler and Nick Zieminski

 

Published at Wed, 16 Aug 2017 17:10:58 +0000

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Wells Fargo board chairman to retire, be replaced at year end

 

Wells Fargo board chairman to retire, be replaced at year end

(Reuters) – Wells Fargo & Co Vice Chair Betsy Duke will replace retiring Chairman Stephen Sanger next year, one of several changes announced on Tuesday in response to shareholder displeasure over the bank’s sales practices scandal.

Sanger will retire at year-end, even though he will not reach mandatory retirement age of 72 until April. Investors have pressured Wells Fargo to speed up the planned transition as the bank has dealt with fallout from the scandal.

The two longest-serving directors, Cynthia Milligan and Susan Swenson, will also retire at year end. Juan Pujadas, a former PricewaterhouseCoopers principal, will join as an independent director effective Sept. 1.

The board also detailed changes to four of its committees and said it will add more directors in the future “while maintaining an appropriate balance of experience and perspectives.”

Wells Fargo’s board hired Mary Jo White, a senior partner at law firm Debevoise & Plimpton LLP and former Chair of the U.S. Securities and Exchange Commission, to conduct a review of its structure and composition after a harsh shareholder vote in April.

Most directors, including Sanger, received relatively little support due to revelations that the bank had opened as many as 2.1 million phony accounts in customers’ names without their permission. The sales scandal led to the departure of former CEO John Stumpf. The scandal also prompted executive changes within the retail banking division and raised questions about board oversight.

The two Wells Fargo board members who received the lowest vote totals, Enrique Hernandez and Federico Peña, will remain on the board. Director Karen Peetz will replace Hernandez as chair of the risk committee.

Sanger, 71, will reach the mandatory retirement age of 72 on April 10.

Additional reporting by Arunima Banerjee in Bengaluru; Writing by Lauren Tara LaCapra; Editing by David Gregorio

 

Published at Tue, 15 Aug 2017 21:20:04 +0000

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Q&A: After the U.S. Treasury, the Paulsons look to save the planet

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By skeeze from Pixabay

Q&A: After the U.S. Treasury, the Paulsons look to save the planet

NEW YORK (Reuters) – When Henry “Hank” Paulson, Jr. finished his tenure as the U.S.’s 74th Secretary of the Treasury in January 2009, he put a capstone on his finance career and committed himself to another life-long passion: protecting the environment.

Paulson, now 71, was chief executive of Goldman Sachs before he joined the government. He served at the same time as chairman of the Nature Conservancy, a nonprofit based in New York. He now is running the Paulson Institute, a think tank dedicated to U.S.-China relations as they pertain to the economy and the environment.

Meanwhile, his wife Wendy Paulson, 69, oversees the Bobolink Foundation, the family’s conservation charity and has served in leadership roles on both national and state chapters of the Nature Conservancy. The Paulsons recently spoke with Reuters about the lessons they have learned concerning wealth, philanthropy and marriage.

Q: Hank, where did you learn your work ethic?

HP: I grew up on a working farm. It was small, a hundred acres, but we had cows and pigs and chickens and sheep and a vegetable garden. I spent hours pulling weeds, hoeing, feeding the horses, cleaning out the stalls. My dad was a tough taskmaster. I always worked, but we also had fun.

Q: Wendy, you were raised in a military family. Was your father similarly tough?

WP: My father was in the Marine Corps, but he was not a drill sergeant. Just the opposite – incredibly liberal-minded, committed to education. It’s where I got my love of teaching and being outdoors.

Q: What attitudes did your parents have about money?

HP: I grew up with a strong set of values – and one was never judging someone by how much money they had. Barrington, Illinois is a rural community – there are farms, the middle class, and a group of wealthy people who lived there, who hung around the country club. I never cared about money. When I was at school, I never wanted a car. I was focused on sports, studies, camping, being outdoors.

Q: You’ve been married for 48 years. What advice can you share?

HP: Wendy and I both like to be in wild, beautiful spots – we’re committed to conservation. And we like to get things done. I prefer to work at the policy level, on trying to fix flawed government policies. Wendy runs our foundation and prefers grassroots initiatives. We don’t do the same things, but we collaborate, share ideas, and work toward the same objective – protecting our planet’s ecosystem.

Q: How do you decide where to give your money?

WP: ​Our giving is focused on conservation. We tend to give where we’re personally involved, where we admire the people and where we’re directly engaged in the work. I guess I’d call it experiential giving.

Q: How do you get involved?

WP: In Barrington, Illinois, when we started our family, I became the Nature Lady and taught students about local nature – red-bellied woodpeckers, smooth green snakes, whatever we could find. That put me in touch with people in the conservation world.

I began to get involved in boards. When we moved to New York, I started leading bird walks in Central Park, and helped start a program called For the Birds in the public schools. When we moved to Chicago, I helped start a similar program, Birds in My Neighborhood. I love opening eyes to the natural world.

Q: What is your advice to people who are figuring out how they can best give back?

HP: Everyone wants to make a difference – that’s where happiness comes from. So you say, where do you have a comparative advantage? What do you enjoy? The word passion gets over-used today, but it’s their passion. That’s the biggest gift you can give someone.

Q: What did you teach your children about money as they grew up?

WP: When they were young, well-meaning relatives were showering the kids with things, and it drove me nuts. So for Christmas one year, we took the kids to a barrier island and we brought no gifts. Every year since then we’ve traveled to beautiful, natural spots — an experience, rather than things.

Q: Now that your children are grown up and married, what lessons do you hope they pass on to their kids?

WP: That education and diverse experience matter.  That caring for others and for the planet matters.  Learning, being good, doing good.

Editing by Beth Pinsker, Lauren Young and Andrew Hay

 

Published at Mon, 14 Aug 2017 17:42:47 +0000

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Is NVIDIA Stock Topping Out?

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Is NVIDIA Stock Topping Out?

By Alan Farley | August 11, 2017 — 11:37 AM EDT

NVIDIA Corporation (NVDA) shares sold off more than 5% in the first hour of Friday’s U.S. session, hitting a four-week low at $153.65 after the company reported a strong quarter but disappointed the momentum crowd with lower-than-expected guidance. The decline reinforces a three-month trading range between $138 and $175 while increasing the odds that the graphics giant is grinding through the middle stages of a long-term topping pattern.

The stock traded as low as $150.20 in pre-market action, forcing a supply of weak-handed shareholders back to the sidelines. Modest technical improvement since that time has eased bearish sentiment, but it will take a very strong close to draw fresh buying power into this market leader. That seems unlikely given the broad retreat generated by growing geopolitical risk. (See also: NVIDIA Shares Fall as Investors Fret Over Data Center Growth.)

It has been unwise to bet against NVIDIA in 2017 despite 2016’s parabolic uptrend, but gains have slowed considerably in recent months, with the stock now trading at the same level it did in early June. That is not an issue for long-term shareholders, but the momentum crowd is also holding positions while keeping one finger on the exit button at all times. An orderly decline could turn into a full-scale rout if this group tries to exit positions at the same time.

NVDA Weekly Chart (2011 – 2017)

A post-bear market bounce ended at the .618 Fibonacci sell-off retracement level in the mid-$20s in 2011, giving way to a long-term rounded correction that returned to resistance in the second half of 2015. The stock broke out into the end of that year and took off in a vertical trend advance fueled by the company’s strategic advantages in the growing virtual reality market. The rally continued its incredible trajectory into the end of 2016, posting greater than 300% annual gains. (For more, see: Figuring Out What NVIDIA Is Really Worth.)

NVIDIA shares pulled back in a bull flag pattern in the first quarter of 2017, undercutting the 50-day exponential moving average (EMA), and took off in a May rally wave that reached $168.50 in early June. Slightly higher highs in July and earlier this week failed to attract significant buying interest, while the bearish post-earnings reaction has dropped the price back into a broad trading range that could eventually yield a trend reversal.

Weekly and monthly stochastics oscillators will remain in buy cycles when the trading week comes to an end, indicating that bulls are still in charge. As a result, bearish observations serve as warning signs and red flags rather than sell signals that demand immediate action. However, that will change when the weekly indicator crosses into a sell cycle because the technical dominoes could then fall and generate long-term sell signals. (See also: NVIDIA Stock Risks Falling Below Key Support.)

NVDA Daily Chart (2016 – 2017)

The trading range between the July low at $138 and August high at $175 now becomes the dominant technical feature because a breakdown could drop the stock into the unfilled May 10 gap between $103 and $114. There is plenty of room for bulls and bears to get it wrong within this range-bound pattern, especially if price action fails to hold the 50-day EMA at $155. Shorter-term resistance now lies between $162 and $165 following the breakdown through the July 27 swing low.

The on-balance volume (OBV) indicator looks nearly bulletproof, grinding sideways close to the rally high. However, the stock has posted more than 100% of its average daily volume in the first hour of Friday’s session, telling us to watch for a downturn that will gain significance if it carries through the July low (red line). While that is unlikely to happen in one day, the decline could easily continue into the coming week, especially if geopolitical factors continue to weigh on the broad tape. (For more, see: NVIDIA’s Way to Win AI Chip Share: Give Them Away.)

The Bottom Line

NVIDIA is struggling on Friday morning after a sell-the-news reaction dropped the stock more than 5%. It has now dropped back within the prior trading range, denying breakout buyers while raising the odds that it will carve a longer-term topping pattern. (For additional reading, check out: Is NVIDIA Too Dependent on Bitcoin?)

 

Published at Fri, 11 Aug 2017 15:37:00 +0000

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Hotels: Occupancy Rate Down Year-over-Year

by Pexels from Pixabay

Hotels: Occupancy Rate Down Year-over-Year

by Bill McBride on 8/10/2017 03:33:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 5 August

The U.S. hotel industry reported mostly negative year-over-year results in the three key performance metrics during the week of 30 July through 5 August 2017, according to data from STR.

In comparison with the week of 31 July through 6 August 2016, the industry recorded the following:

Occupancy: -1.5% to 74.5%
• Average daily rate (ADR): +0.7% to US$129.00
• Revenue per available room (RevPAR): -0.8% to US$96.08
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateThe red line is for 2017, dash light blue is 2016, dashed orange is 2015 (best year on record), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

Currently the occupancy rate is tracking close to last year, and behind the record year in 2015.

Seasonally, the occupancy rate will remain strong over the next few weeks and then decline into the Fall.

Data Source: STR, Courtesy of HotelNewsNow.com

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Montreal Carbon Pledge

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Montreal Carbon Pledge

DEFINITION of ‘Montreal Carbon Pledge’

The Montreal Carbon Pledge is a commitment by investors to annually measure and publicly disclose their portfolio’s carbon footprint — that is, the impact on the greenhouse gases that contribute to global warming.

The Principles for Responsible Investment (PRI) network launched the Montreal Carbon Pledge in September 2014, and more than 120 investors worldwide with more than $10 trillion in assets under management (AUM) had joined the pledge as of December 2015. The pledge’s first 10 signatories were the Etablissement du Régime Additionnel de la Fonction Publique (ERAFP), PGGM Investments, Bâtirente, The Joseph Rowntree Charitable Trust, the Environment Agency Pension Fund, CalPERS, Nordea, Calvert Investments, Ownership Capital, and AP4.

BREAKING DOWN ‘Montreal Carbon Pledge’

An investor who signs the Montreal Carbon Pledge is making a formal commitment to measure, disclose, and reduce its carbon footprint. As stated on the Montreal Carbon Pledge website, the formal pledge is as follows:

“As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that there are long-term investment risks associated with greenhouse gas emissions, climate change and carbon regulation.

“In order to better understand, quantify and manage the carbon and climate change related impacts, risks, and opportunities in our investments, it is integral to measure our carbon footprint. Therefore, we commit, as a first step, to measure and disclose the carbon footprint of our investments annually with the aim of using this information to develop an engagement strategy and/or identify and set carbon footprint reduction targets.”

Investors might want to measure their portfolio’s carbon footprint in order to identify key areas for reducing emissions, track progress in making reductions, demonstrate a public commitment to addressing climate change, and address stakeholder concerns about climate change. Also, an investment portfolio may be exposed to risks and presented with opportunities related to climate change, and understanding both could lead to better investment returns. All asset owners and investment managers, regardless of whether they are PRI (Principles for Responsible Investment) signatories, may sign the Montreal Carbon Pledge.

A company’s carbon footprint is measured by its emissions of the six greenhouse gases identified by the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. The measurement takes into account direct emissions from sources that the company owns or controls and indirect emissions from electricity consumption, waste disposal, fuel extraction and other sources.

A portfolio’s overall carbon footprint is measured by summing the emissions of each company in the portfolio proportional to the amount of its stock that the portfolio contains. Third-party providers can be hired to calculate a portfolio’s carbon footprint. Investment managers can choose for themselves how to act on the information they learn about the portfolio’s carbon footprint. They might choose to reduce their exposure to holdings with a large carbon footprint or to actively invest in companies with low carbon footprints, but they are not required to do so.

Signatories are expected to provide their annual carbon footprint disclosure through their website, annual report, sustainability report, responsible investment report, or other publicly visible client/beneficiary reporting channel. Stakeholders may want to know how signatories view their findings and how they will address them. It is important for signatories to be clear about what they have measured, what progress they have made, what initiatives they have planned and what setbacks they have experienced and to offer stakeholders the opportunity to provide feedback.

Signing up is free and can be done online through a simple form that asks for the company’s name, assets under management, and the percentage of assets that the company will calculate a carbon footprint for. The form also asks whether the company has already set any carbon reduction target and for the name and email address of a contact person.

The Montreal Pledge had an initial goal of getting institutional investors with a total of least $500 billion in assets under management to commit to measuring and disclosing their carbon footprint by the United Nations Climate Change Conference (COP21) in December 2015. The Montreal Pledge’s suggested method for institutional investors to measure and evaluate their portfolio’s carbon footprint is to first build support among colleagues, clients, the board, trustees, investment committees, the chief investment officer (CIO), and portfolio managers. Then, they should choose how much of the portfolio to measure and how often.

For example, an investor might measure the carbon footprint of the equities portion of the portfolio or the part of a portfolio that represents a specific geographic region. The more areas that are measured, the more the investor will learn about the portfolio’s overall carbon footprint. Ideally, these measurements will happen annually, but it depends on the investor’s budget and resources to review and act on the findings.

Another step is choosing who will do the measuring. Portfolio managers might be able to do this, or it might be necessary to hire an outside service provider. Data on carbon footprints can be gathered from the annual reports of companies whose stocks are held within the portfolio or they can be estimated or modeled. Once measurements are available, investment managers need to analyze the data, making sure they understand the measurement methods used and any shortcomings (such as estimated data), then compare the results to a benchmark and decide how to act on it. Actions might include taking steps to lower the portfolio’s carbon footprint, talking with the companies within the portfolio about their carbon footprints, and discussing findings and their implications with the portfolio’s investors.

 

Published at Thu, 10 Aug 2017 21:44:00 +0000

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Kohl’s and Dillard’s Shares Could Add to Recent Gains

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Kohl’s and Dillard’s Shares Could Add to Recent Gains

By Alan Farley | August 9, 2017 — 11:59 AM EDT

This week’s department store earnings reports could yield buy-the-news reactions that add to gains posted since the group bottomed out in May following months of selling pressure. Tighter fiscal controls, fewer defections to online sales and speculation about the 2017 holiday season could underpin these issues, shaking out high short interest levels while working off long-term oversold technical readings.

Kohl’s Corporation (KSS) and Dillard’s, Inc. (DDS) release quarterly results prior to the Aug. 10 opening bell. They companies been evenly matched in recent years, facing identical headwinds at opposite ends of the shopping mall. Both are trading above their 200-day exponential moving average (EMA) for the first time since 2016, attracting significant bottom fishing interest, but neither has reached the hallowed technical ground needed to declare an uptrend or set off a long-term buying signal. (See also: 2017: The Year of Retail Bankruptcies.)

KSS Weekly Chart (2008 – 2017)

Kohl’s shares topped out at $78.83 in 2002 following a multi-year uptrend and fell into a narrow trading range that broke to the downside during the 2008 economic crisis. The stock found support at a 10-year low in March 2009, bounced back above broken range support in the $40s and eased into a narrow sideways pattern at the start of the decade. It held within those boundaries into a 2015 breakout that reversed just two months later at the 2002 high. (For more, see: Can Kohl’s Sales Boosting Initiatives Aid Q2 Earnings?)

Aggressive sellers took control through 2015 and into 2016, generating a steep downtrend that hit a seven-year low at $33.87 in June. Kohl’s stock bounced strongly off that level into the end of the year and resumed selling pressure after the company reported weak 2016 holiday sales. That downdraft settled just above the 2016 low, while a bounce into August has increased bullish calls for a double bottom reversal that signals a new uptrend.

On-balance volume (OBV) hit a multi-year high during the 2016 bounce and has held in the upper half of the long-term range into the second half of 2017. This resilience signals extensive bottom fishing, consistent with an improving technical outlook. Even so, the recovery faces a major challenge headed into earnings because it still has not penetrated the huge January 2017 gap between $44 and $49. The most bullish scenario in this complex price structure would unfold through a post-earnings rally gap that leaves behind a bullish island reversal. (To learn more, check out: Uncover Market Sentiment With On-Balance Volume.)

DDS Weekly Chart (2009 – 2017)

Dillard’s stock returned to the 1993 high at $52.75 in 2011 following a multi-year V-shaped pattern carved in the aftermath of the 2008 economic collapse. It paused at that level for more than six months and broke out, posting a series of new highs into the April 2015 all-time high at $144. The subsequent decline continued into the May 2017 five-year low, right in the middle of the 2011 into 2012 consolidation pattern, and took off in a bounce that confirmed long-term support in the $40s. (See also: 5 Retail Stocks With High Earnings Beat Predictability.)

The bounce off that low stalled at the 200-week EMA in the mid-$70s at the end of July, with price action easing into a sideways consolidation ahead of this week’s confessional. Dillard’s stock finally ended the string of lower highs off the 2015 peak in July, when it rallied above the 2016 swing highs in the mid-$70s, signaling the next stage in a bottoming pattern that could eventually support a new uptrend.

A buy-the-news reaction after earnings would run into steep resistance at the March 2016 high in the upper $80s, offering plenty of short-term upside, while a sell-the-news reaction could reach support at the top of the 18-month falling wedge breakout (blue lines) above $60. Volatile price action into that level could yield a higher low, but the tape may be too chaotic to profit from carefully placed pullback trades. (For more, see: Top Strategies for Mastering Pullback Trading.)

The Bottom Line

Bulls hold the advantage heading into this week’s department stores earnings flood, with the group working off long-term oversold technical readings that have lifted these struggling issues back above key support levels. (For additional reading, check out: Ailing Department Stores Grasp for Solutions.)

 

Published at Wed, 09 Aug 2017 15:59:00 +0000

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Disney to ditch Netflix, plans new movie streaming service

by WolreChris from Pixabay

Disney to ditch Netflix, plans new movie streaming service

(Reuters) – Walt Disney Co (DIS.N) will stop providing new movies to Netflix Inc (NFLX.O) starting in 2019 and launch its own streaming service as the world’s biggest entertainment company tries to capture digital viewers who are dumping traditional television.

Disney’s defection, announced on Tuesday alongside quarterly results showing continued pressure on sports network ESPN, is a calculated gamble that the company can generate more profit in the long run from its own subscription service rather than renting out its movies to services like Netflix.

In turn, Netflix and rivals such as Amazon.com Inc (AMZN.O) and Time Warner Inc’s (TWX.N) HBO are spending billions of dollars to buy and produce their own content and stream it straight to consumers.

Disney’s entry into a crowded subscription streaming market and the cost of technology to support its own online services could weigh on earnings, Wall Street analysts said.

Disney stock fell 3.8 percent in after-hours trade. Shares of Netflix fell 3 percent.

The new Disney-branded streaming service will follow a similar offering from ESPN that will be available starting in 2018, the company said.

The streaming services will give Disney “much greater control over our own destiny in a rapidly changing market,” Chief Executive Bob Iger told analysts on a conference call after earnings, describing the moves as an “entirely new growth strategy” for the company.

Disney has some experience with the direct-to-consumer model in Britain and could make more money in the long run from its own service, but the move could be “financially less advantageous” in the near term, said Pivotal Research Group analyst Brian Wieser.

The new ESPN service will feature about 10,000 live games and events per year from Major League Baseball, the National Hockey League, Major League Soccer and others, Disney said. It will not offer the marquee live sporting events shown on its cable channels.

STREAMING TECH DEAL

Disney said its new services would be based on technology provided by video-streaming firm BAMTech, and announced it would pay $1.58 billion to buy an additional 42 percent stake in that company, which it took a minority stake in last year.

The BAMTech deal will modestly dent earnings per share for two years, the company said.

Disney is one of the most recognized names on Netflix, but it is not the company first to pull away. Starz Entertainment in 2011 pulled roughly 1,000 films in the Starz catalog on Netflix at the time.

By ending the Netflix movie deal, Disney will keep movies such as “Toy Story 4” and “Frozen 2” for its own offering. The company has not yet decided where it will distribute films from superhero studio Marvel and “Star Wars” producer Lucasfilm after 2018, Iger said.

Netflix said it would continue to do business with Disney globally, including keeping its exclusive shows from Marvel television.

“U.S. Netflix members will have access to Disney films on the service through the end of 2019, including all new films that are shown theatrically through the end of 2018,” the company said in a statement.

The announcement came as Disney reported a near 9 percent fall in quarterly profit, pulled down by higher programming costs and declining subscribers at ESPN, as viewers ditch costly cable packages in favor of cheaper online offerings.

The company’s revenue fell marginally to $14.24 billion in the third quarter ended July 1 from $14.28 billion a year earlier.

Net income attributable to the company fell to $2.37 billion, or $1.51 per share, from $2.6 billion, or $1.59 per share.

Reporting by Aishwarya Venugopal in Bengaluru; additional reporting by Peter Henderson in San Francisco; Editing by Savio D’Souza and Bill Rigby

Published at Tue, 08 Aug 2017 20:34:07 +0000

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Prime Working-Age Population near 2007 Peak

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By geralt from Pixabay

Prime Working-Age Population near 2007 Peak

by Bill McBride on 8/07/2017 01:59:00 PM

The prime working age population peaked in 2007, and bottomed at the end of 2012. As of July 2017, according to the BLS, there were still fewer people in the 25 to 54 age group than in 2007.

At the beginning of this year – based on demographics – it looked like the prime working age (25 to 54) would probably hit a new peak in 2017.

However, since the end of last year, the prime working age population has declined slightly.

Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the “baby boomer” generation, the movement of younger cohorts into the prime working age is another key story. Here is a graph of the prime working age population (25 to 54 years old) from 1948 through May 2017.

Note: This is population, not work force.

Prime Working Age PopulatonClick on graph for larger image.

There was a huge surge in the prime working age population in the ’70s, ’80s and ’90s.

The prime working age labor force grew even quicker than the population in the ’70s and ’80s due to the increase in participation of women. In fact, the prime working age labor force was increasing 3%+ per year in the ’80s!

So when we compare economic growth to the ’70s, ’80, or 90’s we have to remember this difference in demographics (the ’60s saw solid economic growth as near-prime age groups increased sharply).

The good news is the prime working age group should start growing at 0.5% per year – and this should boost economic activity.

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Tesla Stock Generated Most Returns Among Car Makers This Year

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By most metrics, Tesla, Inc. (TSLA) lags its rivals in the car industry. But there is one metric in which Tesla has overtaken rivals. According to calculations by Charlie Bilello, director of research at Pension Partners, the Palo Alto, California-based company has generated the maximum returns this year for any car company listed in the markets.

Since the beginning of this year, investors have earned 63% returns from Tesla stock. Other car companies have produced far less. An investment in General Motors Company (GM) would have produced 3% returns in 2017. Ford Motor Company (F) generated negative 5% returns, while Honda Motor Co., Ltd. (HMC) and Toyota Motor Corporation (TM) produced negative returns of 2% and 4%, respectively. The party is expected to continue. Tesla’s stock price has jumped by more than 50% since the start of this year, and based on multiple analyst reports, it has further room to grow. (See also: Tesla Passes General Motors in Market Cap, Becomes Most Valuable Car Maker.)

To be sure, the return numbers are not indicative of actual performance. While they sport similar market capitalizations compared with Tesla, Ford and GM are vastly more experienced in producing and selling cars. This is reflected in the number of cars that they sell each year. For example, Ford sold 6.6 million cars last year versus approximately 76,000 cars sold by Tesla.

Instead, the run-up in Tesla’s shares is a reflection of the market’s assessment of the company’s prospects in the nascent electric car industry. Consumer tastes have shifted against gasoline and diesel – the fuels that power most vehicles made by car majors. Governments across the world also set mandates this year and promulgated policies to regulate and promote sales of electric cars. As a pioneer in the space, Tesla is expected to be a major beneficiary of this trend. (See also: Tesla Model 3 Expectations Are ‘Hitting the Moon’.)

Still, it is difficult to shake off the possibility of a bubble in Tesla’s stock price given the massive difference in car production numbers. A good point of assessment for investors may be Tesla’s progress with the Model 3, its first mainstream electric car.

Encouraging delivery and sales numbers for the Model 3 would imply two things. First, Model 3 success would suggest that Tesla’s production capabilities have matured to the point where it can take on car majors. Previously, the company struggled with multiple manufacturing and delivery issues for the Model S and Model X, cars that did not have the scale and ambitious numbers of the Model 3.

Second, and related to the first point, Tesla’s sales will take off if it delivers the Model 3 on time and without significant problems. The electric car company has already proven its capabilities in the luxury car segment. Successful execution of the Model 3’s mandate will help prove Tesla’s critics wrong and set the stage for sales to take off. (See also: UBS Believes the Model 3 Launch Will Determine Tesla’s Future.)

 

Published at Sat, 05 Aug 2017 20:12:00 +0000

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Amazon shadow looms large ahead of retail earnings

 

Amazon shadow looms large ahead of retail earnings

NEW YORK (Reuters) – As old and new Amazon.com (AMZN.O) competitors gear up to report earnings, investors are eager to know how they plan to withstand the growth of the No. 1 online retailer.

So far this quarter, Amazon has been brought up in some 130 earnings calls from S&P 1500 .SPSUP components according to a Reuters analysis. About 50 of those came in the last week alone.

More than 30 companies reporting earnings in the following weeks mentioned Amazon during their most recent earnings call or were directly asked about threats or opportunities regarding Amazon’s growth.

“Any retailer, whether it’s an online retailer or has online presence, or just brick and mortar, that tells you they’re not concerned about Amazon, they’re either in denial or lying,” said Steven Osinski, marketing lecturer at the Fowler College of Business at San Diego State University.

Beyond retailers like Wal-Mart (WMT.N) and Target (TGT.N), and following Amazon’s planned acquisition of Whole Foods Market (WFM.O) announced mid June, expect Amazon to pop up on earnings calls from food producers, packagers and retailers including SpartanNash (SPTN.O) and Dean Foods (DF.N).

Amazon mentions in less-expected earnings calls could also give investors an idea of where analysts expect the behemoth to strike next.

“It’ll be interesting to see (Amazon CEO Jeff) Bezos’ next move in terms of wanting to expand into a certain space,” said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta.

He said apparel as well as pharmaceutical distribution were among the areas where Amazon has been said to make its next big move.

“They’ve shown up in places we didn’t think they’d have competitive impact just two years ago.”

In a sign of Amazon’s widening clout, industry bellwethers like McDonald’s (MCD.N), 3M (MMM.N) and Johnson & Johnson (JNJ.N) in their latest earnings calls were asked for the first time about effects of Amazon on their businesses.

(For a graphic on Amazon’s stock growth, see bit.ly/2vxWft0)

NOT-SO-GREAT EXPECTATIONS

Consumer discretionary is the S&P 500 sector expected to post the smallest year-over-year earnings growth this reporting quarter, with a gain of 3.3 percent. Overall, earnings are seen rising 12 percent from last year.

Amazon’s own results weigh on the sector, as it earned 40 cents per share instead of the $1.42 analysts had expected. But its 25 percent revenue increase to $38 billion was seen as a detriment to some competitors and could weigh down expectations for their quarterly reports.

“Expectations have been pushed down because a lot of the retailers, particularly the bricks and mortar ones, have had problems – Amazon and other related – so expectations are pretty low,” said Nuveen Asset Management’s chief equity strategist, Bob Doll.

“Amazon obviously has a very powerful model but on the other hand, they’re not going to put every bricks and mortar retailer out of business. These guys aren’t going to sit and let it happen.”

However, stocks in the sector approach their earnings at relatively rich valuations. Including Amazon, which has an earnings multiple above 100, investors in consumer discretionary stocks are paying more than $19 for every $1 in earnings forecast over the next 12 months. That is near the highest since 2009.

As costly as sector stocks are, Amazon has kept growing faster than most, up more than 31 percent year to date. Amazon’s market cap, near half a trillion dollars, places it at about 20 percent of the S&P 500’s consumer discretionary sector.

Its growing clout has called for comparisons with rival Wal-Mart, whose growth in the early 2000s raised concerns it would put smaller retailers out of business.

“In some ways I don’t know if the Amazon effect is much different from what we’ve seen with Wal-Mart or Microsoft,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

“There’s fewer and fewer players and more concentration. It’s the result of winner-takes-all scenarios.”

Reporting by Rodrigo Campos, additional reporting by Caroline Valetkevitch; Editing by David Gregorio

Published at Sat, 05 Aug 2017 01:07:15 +0000

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Where’s my raise? Wage growth still sluggish

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U.S. unemployment rate falls to 16-year low
U.S. unemployment rate falls to 16-year low

Where’s my raise? Wage growth still sluggish

  @lamonicabuzz

More Americans are finding jobs, and the unemployment rate is at a 16-year low. That is undeniably good news.

But there is one number in the jobs report that remains frustratingly subpar: wage growth.

The government said Friday that average hourly earnings for workers rose 2.5% over the past 12 months, to $26.36 an hour. That is good, but not fantastic.

Many economists, including members of the Federal Reserve, feel that wage growth of 3% to 3.5% a year is healthier. That allows consumers to better keep up with inflation.

Wages were growing about 3% a year just before the Great Recession began at the end of 2007, but they have cooled since then. That could pose a problem for the economy.

Without higher wages, Americans may pull back on spending — regardless of whether tax cuts are coming from President Trump and the Republican-led Congress.

“Despite a roaring U.S. labor market, average wage growth remains stubbornly muted,” said Dr. Andrew Chamberlain, chief economist with job search site Glassdoor, in a report.

“Until that trend reverses, the gains from today’s economy will not be translating into improved paychecks for the average American worker,” Chamberlain added.

Usually, employers start to offer higher pay as the economy improves and workers become harder to find. One reason that’s not happening may be that employers are hiring workers who were left behind during the recession and are happy to be finding jobs at all.

When employers realize they don’t need to offer big salaries to attract the workers they need, that keeps a lid on wages.

“It is clear that employers need to do little to attract and retain the workers they want and any significant signs of labor shortages are simply not showing up,” Elise Gould, senior economist with the Economic Policy Institute, wrote in a report.

Still, others think that the modest increase in wages will be good enough to keep Americansin a good mood.

Doug Duncan, chief economist at Fannie Mae, said in a report that it would be a mistake to “nitpick” the gain in wages, adding that the steady rise over the past year “isn’t too shabby.”

It’s also worth noting that many companies in some lower-paying sectors, such as restaurants, leisure and hospitality, are starting to hire more workers.

That may be holding down wages overall, but it’s still a good sign that people are able to find work.

“Low-wage industries grew fastest in July,” said Jed Kolko, chief economist with job search site Indeed, in a report.

“That’s helping the least-educated Americans get back to work. The recovery is now strong and long enough to lift many of the people hurt most by the recession,” Kolko added.

And at least one economist thinks the tide might be turning for all job-seekers. Wage growth should eventually pick up and return to more normal levels as the overall labor market improves.

“It’s simple logic … that as the job market further tightens, workers will be able to demand higher salaries or take their skills to a competitor that will pay a higher wage,” Ameriprise senior economist Russell Price wrote in a report.

“Over time, there’s little doubt that as the labor market gets tighter and tighter, wages and salaries will eventually rise. Workers will start changing jobs to move to the highest bidder,” Price added.

 Published at Fri, 04 Aug 2017 16:30:12 +0000

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Toyota and Mazda to build $1.6 billion factory in the U.S.

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Toyota's space-age concept car for 2030
Toyota’s space-age concept car for 2030

The Japanese automakers said in a statement Friday that the facility would be operational by 2021, but did not specify where it would be built.

Mazda plans to build new crossover vehicles for the U.S. market at the plant, while Toyota will produce its Corolla model there.

The move is likely to be seen as a win for President Trump, who attacked Toyota earlier this year over its plans to build a new factory in Guanajuato, Mexico. He threatened to slap a “big border tax” on Toyota cars if the plant isn’t built in the U.S.

Toyota had intended to build Corollas — the world’s best-selling car — at the plant in Mexico. On Friday, the Japanese firm said it now plans to produce Tacoma pickup trucks at the plant in Mexico instead of the Corolla.

Trump welcomed the news, describing it on Twitter as a “great investment in American manufacturing.”

 

All Corollas currently sold in the U.S. are made in Ontario, Canada or Mississippi. Toyota also has plants in Indiana, Kentucky and Texas. Mazda has not made cars in the U.S. since a joint partnership with Ford unraveled earlier this decade.

The prospect of a new factory in the U.S. could set off a competition among states over its location. State and local governments are likely to offer subsidies and tax incentives to land the factory, which could produce as many as 300,000 vehicles a year.

Toyota has said it plans to invest $10 billion in the U.S. over the next five years.

Toyota(TM) and the much smaller Mazda(MZDAF) also announced a new business partnership on Friday — the latest example of consolidation in the auto industry. Toyota will pay about $450 million for a 5% stake in Mazda as part of the deal, while Mazda will buy a stake of the same value in Toyota.

In addition to the new factory in the U.S., the automakers said they would collaborate on safety and technology for electric vehicles.

Toyota lost its title as the world’s top automaker to Volkswagen(VLKAF) in 2016 after four consecutive years of dominance. General Motors(GM) last won the title in 2011. The traditional industry kings also now face a challenge from a rival alliance anchored by Renault(RNLSY) and Nissan(NSANF).

Toyota president Akio Toyoda made the case Friday that industry consolidation is needed because automakers face increased competition from tech firms including Apple(AAPL, Tech30), Amazon(AMZN, Tech30) and Google(GOOGL, Tech30) that are developing self-driving cars.

“New players from totally new business are challenging us,” he said at a press conference. “That’s why I feel it has become increasingly important for us automakers to gather new partners without seeing things in confrontational perspectives.”

 Published at Fri, 04 Aug 2017 14:17:14 +0000

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Wells Fargo to pay U.S. $108 million over veterans’ loans

 

Wells Fargo to pay U.S. $108 million over veterans’ loans

(Reuters) – Wells Fargo & Co (WFC.N) will pay the U.S. government $108 million to settle a whistleblower lawsuit claiming it charged military veterans hidden fees to refinance their mortgages, and concealed the fees when applying for federal loan guarantees.

The third-largest U.S. bank on Friday said the accord resolved claims that its Interest Rate Reduction Refinance Loans should have been ineligible for guarantees under a U.S. Department of Veterans Affairs loan guaranty program.

Such claims were raised in a lawsuit filed in 2006 and made public in 2011, in which Georgia mortgage brokers Victor Bibby and Brian Donnelly sought reimbursement for losses that the government suffered on guaranteed loans that went into default.

Similar claims were brought against other lenders, including Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N), and sought to recoup millions of dollars of taxpayer funds used to cover the losses. Some of these lawsuits have been settled.

“We are committed to serving the financial health and well-being of veterans,” Wells Fargo Chief Executive Tim Sloan said in a statement. “Settling this longstanding lawsuit allows us to put the matter behind us and continue to focus on serving customers and rebuilding trust with our stakeholders.”

Wells Fargo has in the last 11 months been addressing fallout from other practices, including a scandal over its creation of unauthorized customer accounts, and its charging of borrowers for auto insurance they did not want or need.

In 2011, it reached a $10 million settlement in a separate class-action lawsuit claiming it imposed excessive closing costs on about 60,000 refinancing loans for veterans.

Friday’s settlement is also notable because the government declined to help Bibby and Donnelly pursue their lawsuit under the federal False Claims Act. Such intervention often results in larger settlements.

James Butler, a lawyer for Bibby and Donnelly, declined immediate comment.

False Claims Act lawsuits let private whistleblowers sue on behalf of the government, and share in recoveries.

The case is U.S. ex rel. Bibby et al v Wells Fargo Bank NA et al, U.S. District Court, Northern District of Georgia, No. 06-00547.

Reporting by Jonathan Stempel in New York; Editing by Bill Rigby and Grant McCool

Published at Fri, 04 Aug 2017 16:54:32 +0000

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Q&A: Canada tries trading marijuana in new ETF

 

Q&A: Canada tries trading marijuana in new ETF

NEW YORK (Reuters) – You can smoke it or eat it, and now in Canada, you can trade it in your stock portfolio.

The $120 million Horizons Marijuana Life Sciences ETF (HMMJ.TO) – the first exchange traded fund in North America that focuses on the legal marijuana market – launched in April on the Toronto Stock Exchange. There are no U.S. competitors, at least initially, as federal law prohibits the drug, making it difficult to set up a fund.

Canada is on track to legalize recreational marijuana by July 2018 after the government put forward legislation in April that will allow it to regulate production but leaves the details of how the drug will be sold up to the provinces.

At least one detail of the new ETF has already changed: in June, its Canadian-based fund sponsor dropped “medical” from the fund’s name in anticipation that recreational marijuana will soon be legal in Canada.

With positions including marijuana grower Aurora Cannabis Inc (ACB.TO), medical marijuana companies such as GW Pharmaceuticals Plc (GWPRF.PK), and fertilizer company Scotts Miracle-Gro Co (SMG.N), the fund attempts to capture the full extent of the Canadian marijuana industry, which Deloitte expects could grow to $22.6 billion if the recent bill to legalize recreational use is successful.

Reuters spoke with Horizons Exchange Traded Funds President and Co-Chief Executive Officer Steve Hawkins recently about what is next for the firm’s marijuana ETF.

Q: With few pure plays for medical or recreational marijuana, how do you decide what goes into the fund?

A: We didn’t want to make this one actively managed, even though we are the biggest provider of actively managed ETFs in Canada. This is more index-rules based. It’s a very new and growing industry and we expect to add new constituents with every quarterly rebalance. With the full legalization news in Canada, there’s a lot of strong growth prospects for this industry.

We worked with Solactive, a German index provider, to create an index that fits in all aspects of the industry. Scotts Miracle-Gro is a part of it because they have been extremely public about their investment in the growth of the marijuana industry going forward with respect to hydroponics and specialized fertilizer. Then there are biopharm companies which are not specifically marijuana growers or distributors but are involved directly or indirectly in a derivative.

Q: Do you have as sense of the fund’s ownership base? Is it mostly Canadian, or are there U.S.-based investors as well?

A: More than 95 percent of the fund unit owners are Canadian. It’s very difficult for Americans to trade Canadian ETFs. That’s just the way that the SEC (U.S. Securities and Exchange Commission) set things up.

Q: Do you expect to launch a U.S.-listed fund?

A: We do have a sister company in the U.S. and we are looking at it but there are number of regulatory issues. It’s only at the state level in the U.S. where marijuana is approved and it creates a lot of legal concerns with respect to banks and stock exchanges. The fact that no large U.S. stock exchange has listed a marijuana stock is very telling. How could we list a marijuana ETF if they won’t list a marijuana stock?

Q: The fund is trading about 8 percent below its level in April. How do you expect to attract more investors to the fund?

A: We launched very quickly and raised $120 million in the first week and a half. Unfortunately from there we saw marijuana stocks themselves take a substantial hit from a performance perspective. We haven’t really seen any outflows from the fund. We are extremely pleased with the progress of the fund.

Editing by Beth Pinsker and Matthew Lewis

 

Published at Thu, 03 Aug 2017 16:01:52 +0000

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What Does the Move to GAAP Reporting Mean for Microsoft?

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What Does the Move to GAAP Reporting Mean for Microsoft?

By Daniel Liberto | August 4, 2017 — 7:14 AM EDT

Microsoft (MSFT) has confirmed that it will move to all-GAAP​ (generally accepted accounting principles) reporting in its new fiscal year, following in the footsteps of other technology companies including Alphabet’s Google (GOOGL), Facebook (FB) and Workday (WDAY).

During a conference call, the Redmond, Washington-based giant outlined its plans to switch to the preferred accounting standard, warning listeners that the changes will materially impact its financial results. To assist in the process, Microsoft provided some insight into how the new revenue recognition rules will impact its numbers. That included restating financial results for the fiscal years 2016 and 2017 to make it easier for investors to understand how GAAP accounting alters previously reported figures, as well as providing a platform to compare future results.

Microsoft’s move to GAAP came several months before it will become compulsory. By January 1, 2018, all public companies will be required to adopt the new method, which is being introduced to create uniformity in how listed firms recognize revenue in financial statements.

In many cases, customers tend to pay more in the later years of contracts. However, under the new accounting practices, companies will be forced to account for future revenues more evenly, spreading them out over the full period of the contract. This generally means that companies will report higher sales earlier, lifting revenues and profits in the short-term.

During the conference call, Microsoft claimed that the impact of GAAP on its revenues will be material, particularly as license fees for Windows 10, which are spread out over a number of years, are recognized upfront. Microsoft previously used non-GAAP​ adjusted figures to ease the impact of software revenue deferrals.

Amazon (AMZN) has emerged as another company that will soon be forced to recognize some of its revenues sooner. Under the new accounting rules, the company said that sales of electric devices from non-Amazon stores, together with partially unused gift cards, will now have to be recognized earlier, according to the Financial Times.

The Financial Times article, which featured a quote from Zuora CEO Tien Tzuo warning that Wall Street analysts might have difficulty correctly analyzing restated numbers, added that GAAP accounting will have a different impact on car-booking services such as Lyft and Uber. (See also: Uber Loses, Amazon Wins Under New Financial Rules.)

Uber’s revenues are predicted to fall by more than half when it adopts the new standards, as the ride-hailing service will only be able to calculate commissions from regular and carpool rides as revenue. Based on these changes, Uber’s first quarter revenue of $3.4 billion would fall to $1.5 billion. (See also: Uber Is Considering GE CEO Jeff Immelt for Top Role.)

 

Published at Fri, 04 Aug 2017 11:14:00 +0000

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Alibaba to Sell Cars Via Vending Machines

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Alibaba to Sell Cars Via Vending Machines

By Donna Fuscaldo | August 3, 2017 — 11:41 AM EDT

Alibaba Group (BABA) is getting into the vending machine business, but they won’t be stocked with soda or bags of chips. Rather consumers in China will be able to purchase a brand new car.

Yu Wei, the general manager of the automotive division on Alibaba’s Tmall ecommerce platform told the Financial Times that as soon as next year users will be able to shop for new cars on their mobile devices and pick them up from a massive vertical vending machine. Wei said purchasing a car via the internet has arrived in the automotive industry and that its vending machine will make purchasing a car as easy as buying a can of Coke, reported the FT. With the service, consumers who have good credit from Alibaba’s Sesame Credit will be required to put 10% down for their new vehicle and make monthly payments via its Alipay digital payment service. (See also: Alibaba Pushes Dual Strategy With New Stores.)

Flashy Car Flash Sales

Consumers in China have are already comfortable with purchasing cars over the internet. The FT pointed to Maserati, which was able to sell 100 vehicles in only 18 seconds during a Tmall flash sale. Meanwhile, Alfa Romeo, the Italian car company ran a similar sale and sold 350 Giulia Milano cars in 33 second, reported the FT, citing data from Alibaba. For the last 10 years, China has been the largest auto market with car sales totaling 28 million in 2016. (See also: Alibaba Aims to Become World’s Fifth Largest Economy by 2036.)

The move on the part of Alibaba to sell cars via vending machine is part of its offline-online retail vision in which the new buzzword signifies the ability of mobile platforms to facilitate the interaction between traditional offline business and their customers online through mobile apps. The business strategy draws customers into the physical offline premises via online transactions and relies on big data to make that possible. Its ability to harness data to entice consumers to shop more has drawn interest from Wall Street, which has been growing increasingly bullish on the company.

In June, HSBC upped its price target on the company to $162 from $145 a share. In a research note to clients at the time, HSBC said the company is in the beginning stages of “data-driven growth.” The Wall Street firm has a buy rating on the stock. But Alibaba isn’t the only company that is relying on vending machines to sell new vehicles. Carvana, a startup out of Phoenix, offers a similar service in a couple of states in the U.S.

 

Published at Thu, 03 Aug 2017 15:41:00 +0000

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Herbalife Sinks as FTC Regulation Stands to Thwart Growth

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Herbalife Sinks as FTC Regulation Stands to Thwart Growth

By Shoshanna Delventhal | August 2, 2017 — 4:35 PM EDT

Shares of multilevel marketing giant Herbalife Ltd. (HLF) started the day off on Wednesday down over 5% despite the firm posting better-than-expected second-quarter earnings results and lifting its full-year guidance after the closing bell on Tuesday.

The decline represents a win for the hedge fund Pershing Square Capital Management and a growing number of HLF short sellers as the company’s guidance renews concerns that a settlement with federal regulators will hamper future growth. (See also: Herbalife Scrambles, Hires New Lawyer as Short Interest Booms.)

Forecast: Revenue to Decline as Much as 5%

Herbalife’s Q2 earnings of $1.51 per share well surpassed the Street’s $1.12 consensus estimate and the company’s guidance of $1.05 at the midpoint. Yet since the Federal Trade Commission (FTC) forced the company to revamp its U.S. operations and cough up $200 million to refund its distributors, investors have been keeping a close eye on indicators that new regulations could present a roadblock for the Los Angeles-based firm. As part of the ruling, Herbalife must prove that a majority of its U.S. revenue comes from consumers instead of its distributors, who are trying to reach income payouts.

Investors were disappointed with weak current-quarter guidance, in which sales are expected to come in flat, or down as much as 5%. The Q3 earnings forecast for $0.75 per share at the midpoint also fell short of the $1.20 consensus estimate by a wide margin.

Herbalife’s latest Q2 report and subsequent sell-off provides some relief to Pershing Square’s billionaire hedge fund manager William Ackman, who has been waging a war against the nutritional supplement and weight loss company since 2012. Ackman has bet $1 billion on short selling HLF, indicating that the global corporation is an illegal pyramid scheme that wrongfully takes advantage of lower socioeconomic groups and minorities. Trading down 1.3% on Wednesday afternoon at $65.59 per share, HLF reflects an approximate 1.7% decline over the most recent 12-month-period and a 36.5% return year-to-date (YTD). (See also: William Ackman’s Crusade to Take Down Herbalife.)

 

Published at Wed, 02 Aug 2017 20:35:00 +0000

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Tesla Price Levels to Watch After Earnings

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Tesla Price Levels to Watch After Earnings

By Alan Farley | August 2, 2017 — 11:31 AM EDT

Tesla, Inc. (TSLA) earnings take center stage on Wednesday evening, providing a long overdue reality check into the Model 3 rollout after months of flamboyant marketing by controversial CEO Elon Musk. It will be tough for quarterly metrics to live up to the hype, but shareholders are likely to forgive growing pains because it could be months or years before Wall Street analysts can gauge the long-term demand for the Model 3.

Tesla stock is not cheap by any stretch of the imagination, holding a higher market capitalization than rivals General Motors Company (GM) and Ford Motor Company (F). Even so, Tesla has attracted the type of euphoric coverage usually reserved for market icons like Apple Inc. (AAPL), speaking to a new generation in language often misunderstood by older demographics. Even so, high levels of skepticism are warranted due to the lack of actual sales in recent years. (See also: Opinion: Right Now, Tesla Is More Than Ever a Carmaker.)

TSLA Long-Term Chart (2010 – 2017)

The company came public at $19 in June 2010 and carved a short-term trading range between $15 and $30.50. The stock broke out in November, but buying pressure faded quickly, yielding broader range-bound action between the low $20s and mid-$30s. Those levels held in place for more than two years, ahead of a 2013 breakout that caught fire, drawing in a large supply of momentum capital.

The stock rose nearly fivefold between May and October 2013, carving one of the strongest uptrends of the current bull market cycle. The rally’s trajectory eased when it neared $200, but continued buying pressure finally pierced that level in 2014, ahead of the September top at $291.42. That peak signaled the start of an intermediate correction that posted a two-year low at $141 in the first quarter of 2016, ahead of an April 2017 breakout and rally to $387 in June. (For more, see: The Case Against Tesla.)

The monthly stochastics oscillator ended a six-month sell cycle in November 2016, with a new buy cycle supporting the early 2017 breakout. The indicator hit the overbought level in June and has now crossed into a fresh sell cycle that predicts relative weakness for the rest of 2017. In turn, this raises the odds that the June rally high will also mark the 2017 high ahead of weaker performance into 2018.

TSLA Short-Term Chart (2015 – 2017)

July 2015 and April 2016 breakout attempts ran into aggressive selling pressure, while a slow-motion pullback into November 2016 improved the technical tone ahead of an April 2017 breakout that added about 100 points into June. The subsequent decline shook out a sizable population of weak hands, while the bounce into last week exhibited strong sidelined interest looking for relative bargains. (See also: Elon Musk Says He Might Be Bipolar.)

The early July decline into $302 marked the first test at new support generated by the April breakout. The stock has been sitting on the 50-day exponential moving average for the past two weeks, failing to bounce back to the rally high while signaling a holding pattern that should yield a sizable trend swing following this week’s earnings report. Weekly and monthly cycles favor lower prices following the release, but it is really a toss-up given relatively narrow trading ranges in place since May.

Short-term levels generated by July price action should be watched for clues following the release. The July 5 gap established new resistance at $350 that held firm last week, triggering a reversal at $347. On the flip side, the July low at $303 marks the top of a breakout support zone between $280 and $300 that needs to hold at all costs to keep the long-term uptrend intact. (For more, see: Tesla’s Model 3: Musk Warns of ‘Manufacturing Hell’.)

The Bottom Line

Tesla entered a holding pattern after hitting an all-time high at $386.99 on June 23, while intermediate and long-term cycles have flipped from bullish to bearish. This cycle shift lowers the odds for a strong buy-the-news reaction following this week’s earnings report, but downside remains limited given the solid technical tone. (For additional reading, check out: Tesla Stock Is at Risk of a Major Breakdown.)

(Disclosure: The author held no positions in the aforementioned securities at the time of publication.)

 

Published at Wed, 02 Aug 2017 15:31:00 +0000

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Apple Stock Unlikely to Break Multi-Year Resistance

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Apple Stock Unlikely to Break Multi-Year Resistance

By Alan Farley | August 1, 2017 — 10:34 AM EDT

Tech icon and Dow component Apple Inc. (AAPL) reports fiscal third quarter earnings after Tuesday’s closing bell, with the confessional gathering the customary undivided attention of Wall Street and the trading public. However, the news is unlikely to please long-term bulls or bears because the focus has already shifted into this fall’s iPhone 8 release, offering a timely excuse if Apple fails to meet expectations while reducing upside potential if it issues a solid report.

The stock reached four-year channel resistance in May and dropped into a trading range that could mark a long-term top. Price action since that time has been inconclusive, but the failure to post new highs since May 15 waves a red flag that supports the topping thesis while telling long-term shareholders to take defensive measures to protect profits ahead a potential decline that could reach $110. It is possible that the fall iPhone rollout will generate bearish catalysts for that decline. (See also: Apple in ‘Panic’ Mode Due to iPhone 8 Software Bugs: Report.)

AAPL Long-Term Chart (1987 – 2017)

The stock topped out at a split-adjusted $2.13 after the 1987 crash and entered a long period of underperformance, drifting sideways for more than a decade ahead of an ill-timed 1999 breakout that stalled at $5.37 in March 2000. The dotcom bubble then burst, dumping the price back within multi-year range resistance in the second half of the year and into a sideways drift that persisted into a 2004 breakout.

Apple stock reached 2000 resistance a few months later and took off in a powerful trend advance that surprised many market watchers of that era, lifting in multiple waves into the 2007 top at $29.00. A double top into 2008 yielded a breakdown that coincided with the economic collapse, but the stock held up relatively well compared with its peers, holding support in the low teens. That decline marked the first of three support tests in nine years at the 50-month exponential moving average (EMA). (For more, see: If You Had Purchased $100 of Apple in 2002.)

The subsequent uptrend exceeded the 2007 high in 2010, allowing the market leader to continue the string of higher highs and higher lows in place since 2003. A correction starting in 2012 reached 50-month EMA support for the second time in 2013 while completing the outline of a broad ascending channel that is still in force more than four years later. The 2015 high and 2016 low also reversed at channel boundaries, reinforcing a long-term pattern that now predicts another steep downturn.

AAPL Short-Term Chart (2015 – 2017)

The uptrend topped out near $130 in the first half of 2015, giving way to a correction that tested the will and pocketbooks of long-term shareholders, grinding lower in a volatile pattern that tested support at $90 four times in nine months. A bounce into the second half of 2016 caught fire following the presidential election, lifting the stock above 2015 resistance and into a series of new highs that peaked at $156.65 in mid-May. It then reversed at channel resistance, carving a trading range that still shows no signs of yielding a new trend wave – higher or lower. (See also: Apple Stock Could Fall to $110 in Coming Months.)

On-balance volume (OBV) topped out in May 2017 at the same time as price and entered a minor distribution phase that shook out weak hands into early July. The bounce into August has attracted healthy buying interest, but the price and the indicator have failed to reach their second quarter peaks, signaling a holding pattern that may not break higher or lower following this week’s quarterly report. (For more, see: Thinking About Apple’s Upcoming Results.)

The Bottom Line

Apple CEO Tim Cook could announce the date of the iPhone 8 release during this week’s earnings report, shifting attention away from second quarter results. Bulls and bears may need to lower their expectations, given this deflection, because the news might not attract the buying or selling power needed to lift the stock above multi-year channel resistance at $160 or drop it though two-month range support at $140. (For additional reading, check out: Why You Can’t Be Emotional About Apple Stock.)

Published at Tue, 01 Aug 2017 14:34:00 +0000

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