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Proxy advisory firm ISS says Qualcomm should negotiate sale to Broadcom

by mikadago from Pixabay

Proxy advisory firm ISS says Qualcomm should negotiate sale to Broadcom

(Reuters) – U.S. semiconductor company Qualcomm Inc should try to negotiate a sale to Broadcom Ltd following the latter’s sweetened $121 billion offer, proxy advisory firm Institutional Shareholder Services Inc (ISS) said.

Qualcomm has been seeking to walk a fine line between resisting Broadcom’s acquisition approach, which it says undervalues it and is fraught with regulatory risks, and demonstrating to shareholders and proxy advisory firms such as ISS that it is willing to engage to secure a better deal if possible.

In a report published late on Friday, ISS recommended to Qualcomm shareholders that they vote for four out of the six board director nominees that Broadcom has put forward for election at Qualcomm’s shareholder meeting on March 6.

While this recommendation would fall short of Broadcom’s nominees winning a majority on Qualcomm’s 11-member board, ISS said such a vote by Qualcomm shareholders would offer a reasonable path to a negotiated deal that would deliver value.

“The tenor of (Qualcomm‘s) engagement leading up to the present raises questions as to whether the incumbent (Qualcomm) board is committed to playing its part in attempting to maximize the offer,” ISS said in its report.

Broadcom first unveiled an unsolicited $70 per share cash-and-stock offer in November, which Qualcomm rejected. It raised its offer to $82 per share in cash and stock on Feb. 5 and offered other concessions, including paying an $8 billion breakup fee in the event regulators thwart the deal, which would be the technology sector’s largest-ever acquisition.

ISS said it did not recommend voting for all six Broadcom nominees because Qualcomm’s board would then be less inclined to drive a hard bargain with Broadcom in deal negotiations. ISS recommended that Broadcom nominees Samih Elhage, Julie Hill, John Kispert and Harry You should be elected as Qualcomm board directors.

Qualcomm on Friday called a Feb. 14 meeting with Broadcom constructive and opened the door to more talks, but continued to reject the proposed deal.

As of Saturday afternoon, no new meeting between the two companies had been scheduled, according to people familiar with the matter. Broadcom and Qualcomm representatives offered no immediate comment.

FILE PHOTO: Broadcom Limited company logo is pictured on an office building in Rancho Bernardo, California May 12, 2016. REUTERS/Mike Blake/File Photo

The takeover battle is at the heart of a race to consolidate the wireless technology equipment sector, as smartphone makers such as Apple Inc and Samsung Electronics Co Ltd use their market dominance to negotiate lower chip prices.

Singapore-based Broadcom is mainly a manufacturer whose connectivity chips are used in products ranging from mobile phones to servers. San Diego-based Qualcomm primarily outsources the manufacturing of its chips which are used for the delivery of broadband and data, a business that would significantly benefit from the rollout of 5G wireless technology.

ISS said in its report that Broadcom’s latest $82 per share cash-and-stock bid, which Broadcom CEO Hock Tan has called its best and final offer, does not appear to be clearly superior to Qualcomm’s potential standalone value in the short term. ISS added, however, that the offer seemed to represent a reasonable starting point for negotiations.

Even though both companies “have adopted strategies that do not lend themselves to fluid negotiations,” a deal between them is possible, ISS said. It suggested that Qualcomm shareholders could gain greater exposure to the deal’s potential upside if they were to receive more of the combined company.

ISS also said it appeared more likely than not that Broadcom and Qualcomm, with their collective experience and resources, can find a reasonable path to regulatory approval, despite Qualcomm’s current concerns about antitrust risk.


Qualcomm is currently seeking to complete a $38 billion deal to acquire NXP Semiconductors NV, which is still pending regulatory approval. NXP shares ended trading on Friday at $118.50, significantly above Qualcomm’s $110 per share all-cash offer, as some NXP shareholders, led by activist hedge fund Elliott Management Corp, have called on Qualcomm to raise its price.

Broadcom has said its acquisition offer is contingent on either Qualcomm buying NXP at currently disclosed terms of $110 per share in cash or the deal being terminated.

ISS said in its report that Qualcomm could negotiate provisions with Broadcom to close the NXP deal at a mutually agreed price, which would provide Qualcomm with the “next-best safety net of diversification” in the event the deal with Broadcom falls through.

China’s MOFCOM is the only regulator globally required to approve the Qualcomm-NXP deal that has yet to do so. With the start of the Chinese New Year public holiday this week, Qualcomm may now delay its decision on raising its offer for NXP until after the March 6 Qualcomm shareholder meeting.

Reporting by Greg Roumeliotis in New YorkEditing by Matthew Lewis

Published at Sat, 17 Feb 2018 20:41:42 +0000

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Trying to calm investors, Wells Fargo CEO stresses on stability

A Wells Fargo Bank is shown in Charlotte, North Carolina, U.S., September 26, 2016. REUTERS/Mike Blake

Trying to calm investors, Wells Fargo CEO stresses on stability

(Reuters) – Wells Fargo & Co Chief Executive Tim Sloan tried to deliver a message of consistency and stability at an investor event on Tuesday, less than two weeks after it disclosed a regulatory sanction related to a long-running sales scandal.

Asked whether an asset cap imposed by the U.S. Federal Reserve would have any impact on Wells Fargo’s expenses, growth, core businesses, customer retention, employee turnover or capital return plans, Sloan said repeatedly that nothing much had changed.

“We’re absolutely open for business,” Sloan said at a Credit Suisse industry conference. He has returned to that catch-phrase repeatedly to dampen concerns about fallout from the scandal.

Wells Fargo’s problems took root more than a decade ago, when the bank started pushing employees to sell as many products as possible to customers.

That culture became a serious problem for the bank in September 2016, when it reached a settlement with regulators over employees opening fake accounts in customers’ names without their permission to hit aggressive sales targets.

Since then, Wells Fargo has discovered other issues with auto loans, mortgages, frozen funds and improperly closed accounts and has faced a number of other regulatory probes and litigation.

On Feb. 2, the Fed announced a consent order requiring Wells Fargo to prove that it is making appropriate changes to corporate governance and risk management. Until the requirements are met, Wells cannot grow its balance sheet beyond the $1.95 trillion in assets it had at year end.

Management immediately detailed plans to comply with the order, and said it would not hit profits significantly. Still, the severity of the Fed’s action so many months after the scandal erupted, underlined questions about how long it will take for the bank to get past its sales practices woes.

At the event on Tuesday, Credit Suisse analyst Susan Katzke pressed Sloan on whether the Fed’s action, and broader reputational issues, are affecting business on the ground, or management’s outlook for growth and shareholder returns.

Sloan reiterated statements he has made about business being stable, employees being happy to work at the bank, and Wells Fargo management being focused on generating better results. Asked to share metrics to back up some of his comments, Sloan jokingly changed topics and began talking about the Olympics.

“There’s a lot of different metrics that you look at, but they’re all pointing to a slow but steady recovery,” he eventually said, without offering any specific numbers. “It’s never as fast as I would like, but it’s absolutely occurring.”

Sloan also said the bank intends to get capital levels down to about 10 percent over the next two to three years. The bank ended 2017 with common equity Tier 1 ratio of 11.9 percent.

Wells Fargo shares were up 2.1 percent at $57.69 in afternoon trading. Through Monday’s close, the stock had lost nearly 14 percent since the Fed placed restrictions on it on Feb 2.

Reporting By Aparajita Saxena in Bengaluru; Writing by Lauren Tara LaCapra in New York; Editing by Maju Samuel and Shailesh Kuber

Published at Tue, 13 Feb 2018 19:07:30 +0000

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Clean Oil That Only Costs $20

by GDJ from Pixabay

Clean Oil That Only Costs $20

The United States is in the midst of an energy revolution.

Oil production has risen by 5 million barrels per day (bpd) since 2010, an increase of nearly 100 percent. New technology, particularly techniques in shale oil drilling, has opened up vast new opportunities for oil and gas companies.

The proof is in the numbers. In 2017, the United States averaged 9.3 million bpd. This year, the EIA predicts that U.S. oil and gas production will reach record levels, averaging 10.3 million barrels bpd to surpass the record reached in 1970 (9.6 million bpd).

In 2019, the EIA expects U.S. production to average 10.8 million bpd, which will allow the U.S. to rival Saudi Arabia and Russia as the world’s largest oil producer.

If there’s one big reason for the U.S. energy revolution, it’s that new technology has allowed American companies to beat the competition

Thanks to such innovation, a barrel of oil produced in the U.S. can cost as little as $20 to produce.

Not even OPEC could stop the host of American shale drillers, who persevered through a global production glut and historically low prices from 2015 to 2017, and who have now emerged victorious.

But the shale revolution is starting to reach its limits. With shale production likely to peak shortly after 2020, investors are looking for new, innovative technologies that will break new barriers to output.

Companies like Petroteq Energy Inc. are pioneering new approaches to energy extraction. While OPEC producers stick to the tried-and-true methods, American companies are exploring new horizons, watching production costs fall and profits shoot through the stratosphere.

A key area where advancements will be made is in oil sands, a sector most companies had left for dead. Thanks to Petroteq and other innovative firms, the technology to unlock clean, cheap oil sands could soon fuel the next chapter of the U.S. energy revolution.

Oil Sands: the Alternative Unconventional

Oil sands are deposits of bitumen, a thick and viscous substance that can be refined into petroleum products.

The potential trapped within oil sands deposits is staggering: the Canadian tar sands deposits in Alberta is estimated to contain 165.4 billion barrels.

In the United States, large deposits of oil sands bitumen remained untapped. In Utah, for instance, there are bitumen deposits totaling 30 billion barrels.

However, three things are holding back oil sands exploitation: cost, political opposition and environmental risk.

Producing from oil and tar sands had always been a costly enterprise. When prices fell in 2015, companies began divesting from their tar sands investments, cutting and running from oil that was now too expensive to produce.

In 2017, oil giant Royal Dutch Shell completed its divestment from the Canadian tar sands. After entering the unconventional drilling field several years before, Shell concluded that the cost to continue investment in Canadian tar sands was simply too high.

Other companies have done the same: investment in Alberta tar sands fields was dumped by Marathon Oil, Statoil and other companies.

Low prices and rising concerns over the “dirty” nature of tar sands production, which is believed to be one of the most carbon-heavy methods of energy production, fueled an exodus.

Oil sands gained a bad reputation as the dirtiest source of energy, which fueled a political backlash. News coverage of Canada’s oil industry has lately focused on how tar sands production is dirty, costly, destructive and ultimately non-economical. Opposition to new tar sands projects inside the U.S. has risen in recent years.

But that trend may be reversing. Despite divestment, bad press and lower-than-average prices, oil sands production will increase in 2018.

Unlocking Potential

Advances in oil sands technology, and efforts to make the process cleaner and cheaper, means that the sector could be poised for a turnaround.

Petroteq Energy is pioneering safe and clean methods for unlocking oil sands assets. The company has two patents on technical methods for extracting oil sands in a way that avoids producing waste materials.

The company produced 10,000 barrels from its production facility in Utah in 2015 using its brand-new technology, and now it’s upgrading a second facility in Utah to increase its production capacity.

The company’s goal, according to CEO Alex Blyumkin, is developing “sustainability.” Proprietary methods allows Petroteq to extract oil sands without producing excess waste. By utilizing blockchain technology, the company cuts down on production costs and allows oil sands production to be more streamlined.

Petroteq has already found interested partners in Mexico, where it has signed a lucrative deal with national energy company Pemex for its blockchain-based management platform.

Other companies are getting in on the action as well. By following Petroteq’s lead, unconventional drillers are taking a second look at oil sands production.

Question of Cost

What made shale drilling in the U.S. so successful was the question of cost. At a time when oil prices were plummeting, American drillers used new technology to radically cut costs and maintain competitiveness. By 2017, shale drillers had reduced cost by as much as 42 percent.

Today, the average cost of a barrel of fracked oil varies between $20 and $50. That might look like a lot compared to cheap oil from Saudi Arabia or Kuwait, where per-barrel costs can be as low as $10.

But that doesn’t take into account “social costs” that OPEC states have to consider. The plunge in oil prices after 2015 placed immense pressure on OPEC states, which all depend on oil exports to maintain fiscal equilibrium.

Middle Eastern oil producers have endured immense pressure, while Venezuela was thrown into political and economic chaos by the drop in prices.

Social costs, according to a study by the Oxford Institute for Energy Studies, will increase the cost of OPEC oil in the coming years. While U.S. shale drillers can operate profitably with prices at $50 per barrel, OPEC countries ideally want $70 or even $100 a barrel to sustain their economics. This gives U.S. producers a massive competitive edge.

Now, thanks to technological advances from Petroteq and other companies, oil sands could be as profitable and as cheap as shale.

Through cleaner methods and blockchain-based management, Petroteq can produce for as little as $20 a barrel.

Petroteq’s methods can be licensed anywhere, and could release the billions of barrels locked inside oil sands deposits all across the American West.

If its technology catches on, oil sands could be the next big play in the U.S. energy revolution, ensuring American oil dominance for years to come.

By. James Stafford

NOT AN INVESTMENT ADVISOR. is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

RISK OF INVESTING. Investing is inherently risky. While a potential for rewards exists, by investing, you are putting yourself at risk. You must be aware of the risks and be willing to accept them in order to invest in any type of security. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities.

RISK OF BIAS. We often own shares in the companies we feature. For those reasons, please be aware that we are extremely biased in regards to the companies we write about and feature in our newsletter and on our website.

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Published at Tue, 13 Feb 2018 17:23:05 +0000

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Japan’s zany tech billionaire wants to be Warren Buffett

Meet 'crazy' tech tycoon Masayoshi Son
Meet ‘crazy’ tech tycoon Masayoshi Son

Japan’s zany tech billionaire wants to be Warren Buffett


Japanese billionaire Masayoshi Son has said he wants to be the Warren Buffett of tech. Now, he’s going after the legendary investor on his home turf.

SoftBank(SFTBF), the deal-happy tech company founded by “Masa” Son, is negotiating for a minority stake in European reinsurance provider Swiss Re. The talks are still in a “very early stage” and could still fall apart, Swiss Re said.

The prospect of SoftBank getting into the insurance business has added fuel to comparisons between Son and Berkshire Hathaway(BRKA) boss Buffett: Both investors make bold deals, and both look long term.

Insurance interests would be yet another similarity.

“SoftBank has often been compared to Berkshire Hathaway in terms of the exceptional acumen of each founder: if this deal went through, they would have more in common,” said analysts at CLSA.

Berkshire’s core business is insurance, and Buffett uses the cash it generates to invest in blue chip companies including Wells Fargo(WFC), Kraft Heinz(KHC), Apple(AAPL) and Coca-Cola(KO).

SoftBank is a telecoms company that owns Sprint(S). Son’s $100 billion Vision Fund, which is backed by Saudi Arabia and Apple(AAPL), has invested in companies including Slack, WeWork and Nvidia(NVDA).

The tycoon has said his goal is to raise another 100 trillion yen ($900 billion) to fund future investments.

SoftBank did not respond to a request for comment on Thursday.

Analysts said the interest in insurance made sense for SoftBank, which could benefit from a having a more diverse portfolio of investments.

Swiss Re has historically paid an annual dividend around 5%. The Zurich-based firm suffered big losses in 2017 from hurricanes Harvey, Irma and Maria, but generated profits of more than $3.5 billion in each of the previous four years.

“To some extent, [a Swiss Re investment] could be seen as a major hedge against the diverse business risk of [SoftBank’s] operations,” said analysts at CLSA.

While Buffett and Son both love a deal, the comparison is not perfect.

“Whereas investors trust Buffett’s instincts and understand his value investing approach, they fear Masa’s big bets on the future,” Chris Lane, an analyst at Sanford C. Bernstein & Co., wrote in October.

Son, who says he has a 300-year plan for SoftBank, could be looking to shake up the insurance business.

“It is … possible that SoftBank sees some room to disrupt the current structure of the insurance business through better application of technology,” saidthe CLSA analysts.

Published at Thu, 08 Feb 2018 16:41:51 +0000

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Steve Wynn steps down as CEO of Wynn Resorts

Steve Wynn accused of sexual misconduct in WSJ report

Steve Wynn accused of sexual misconduct in WSJ report

Steve Wynn steps down as CEO of Wynn Resorts


Steve Wynn has stepped down as the CEO of Wynn Resorts after allegations of sexual misconduct piled pressure on the billionaire casino mogul and sent the company’s stock tumbling.

“It is with a collective heavy heart, that the board of directors of Wynn Resorts today accepted the resignation of our founder, CEO and friend Steve Wynn,” one of the directors, Boone Wayson, said in a company statement late Tuesday.

Wynn, 76, has denied the accusations of misconduct, which gained widespread attention in late January after an investigative report by The Wall Street Journal detailed numerous allegations against him, citing dozens of sources.

“In the last couple of weeks, I have found myself the focus of an avalanche of negative publicity,” Wynn said in a statement. “As I have reflected upon the environment this has created — one in which a rush to judgment takes precedence over everything else, including the facts — I have reached the conclusion I cannot continue to be effective in my current roles.”

Wynn Resorts(WYNN) said it has appointed Matt Maddox, who currently serves as the company’s president, as its new CEO effective immediately. Wayson will take over as chairman.

Losing Wynn is a heavy blow for the global gambling empire he built and that bears his name.

He said he was stepping down from “a company I founded and that I love.”

Analysts have expressed concern about how Wynn’s businesses in Las Vegas and the Chinese territory of Macau would operate without him at the helm.

“Mr. Wynn is the Wynn,” analysts at investment firm Bernstein wrote in a note to clients last week. “Without him, the Wynn Resorts … is a different operation.”

But the allegations against him made his position increasingly untenable.

He already resigned as finance chairman for the Republican National Committee shortly after the Journal story came out. And the Wynn Resorts board formed a special committee to investigate the allegations.

The accusations against him have also drawn scrutiny from gambling regulators in Nevada, Massachusetts andMacau.

The Chinese territory is particularly significant for Wynn Resorts, accounting for the large majority of its revenue and profits.

Investors have become increasingly concerned about the situation, driving down the company’s stock. Wynn Resorts shares have plunged more than 18% since news of the allegations broke.

The stock was down about 1.5% in pre-market trading early Wednesday, according to data from FactSet.

The company said details of Wynn’s “separation agreement” would be announced once it has been finalized.

The casino business has already made him an incredibly rich man. Forbes puts his current net worth at $3.3 billion.

His wealth includes an 11.8% stake in Wynn Resorts, making him its biggest single shareholder. That means that even after his departure, he could carry a lot of influence at the company.

The tycoon is also handsomely paid for his work as CEO. His total compensation for 2016 came to $28.2 million. And over the past five years of reported income, his total compensation came to $111.6 million.

Wynn has been a major figure in the gambling world for decades.

The mogul is credited with being the person who transformed Las Vegas casinos from gambling dens into entertainment hubs where guests could watch spectacular shows and eat in high-end restaurants.

Wynn first entered the world of gambling when he took over his father’s bingo parlors in Maryland. He moved to Las Vegas in 1967 with a stake in the Frontier Hotel, followed by a short stint as the owner of a wine and liquor distributor, Wynn said in a 2014 interview with the Hoover Institution’s Peter Robinson.

Things picked up when Wynn scored a lucrative land deal via business mogul Howard Hughes. He parlayed that money into an investment in the Golden Nugget Casino.

Steve Wynn bets billions on Macau
Steve Wynn bets billions on Macau

Wynn’s success in transforming the Golden Nugget into an elegant destination led to a string of new projects, each one increasingly opulent.

The Mirage, Wynn’s first major casino on the Vegas Strip, opened in 1989. He then opened Treasure Island in 1993, and the Bellagio in 1998.

In 2006, he opened his first casino in Macau, where gambling revenues now dwarf those of Las Vegas. An even bigger one, Wynn Palace, followed 10 years later.

— Julia Horowitz contributed to this report.

Published at Wed, 07 Feb 2018 07:51:32 +0000

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Tesla Earnings Could Reward Loyal Shareholders

Tesla Earnings Could Reward Loyal Shareholders

By Alan Farley | February 7, 2018 — 9:07 AM EST

Tesla, Inc. (TSLA) has struggled with the Model 3 production ramp-up in recent months, forcing CEO Elon Musk to backtrack on ambitious goals he has outlined for the highly anticipated electric automobile. That could change after this week’s earnings report, with a little good news having an outsized impact on recently weak buying interest. It is urgently needed at this point, given rapid cash burn that could empty company coffers before the end of 2018.

Musk has been firing on all cylinders in other recent projects, including the successful launch of SpaceX’s Falcon Heavy rocket and selling out an inventory of 20,000 flamethrowers through his Boring Company. Loyal but frustrated shareholders hope that this momentum escalates into publicly traded Tesla, lifting the stock through heavy resistance between $350 and $400 and into a major uptrend. (See also: Elon Musk Biography.)

TSLA Long-Term Chart (2010 – 2018)

The company came public at $19 in June 2010, quickly selling off to $14.98, which marks the lowest low in the past eight years. It bounced into the mid-$30s a few months later and settled into a broad trading range, testing resistance several times before breaking out in April 2013. The subsequent uptrend advance posted dramatic gains into the third quarter of 2014, topping out just below $300.

Sideways action into 2015 generated strong support just above $180, with that level finally breaking down in the first quarter of 2016, dropping the stock to a two-year low at $141. It popped back above broken range support two months later, denying short sellers while generating a failed breakout attempt. The stock pulled back to the contested level once again after the presidential election, posting a higher low that established a strong platform for an April 2017 breakout.

That trend advance lasted just two months, lifting to a new high at $387 and pulling back to $300 in July. It returned to range resistance in September, exceeding it by less than three points before aggressive sellers took control, generating a selling wave that undercut the July low. Deeper support at the April breakout level held, with the subsequent bounce drifting into the midpoint of the 10-month trading range ahead of this week’s earnings report.

The monthly stochastics oscillator is perfectly positioned for bulls heading into the release, crossing over at the deepest oversold technical reading since December 2016. This predicts at least six to nine months of relative strength, suggesting that bulls will ultimately prevail, lifting the stock through resistance and into a rally impulse that could eventually cross $500 while silencing Musk’s many critics. (For more, see: How Tesla Mauled the Bears.)

TSLA Short-Term Chart (2016 – 2018)

The stock has carved a seesaw trading range since May 2017, loosely outlining a rectangle or head and shoulders pattern. A bearish reaction to the report needs to hold the red line near $310 to avoid a downswing that completes the head and shoulders pattern and favors a more bearish outcome, including a failed breakout and descent through $250. Conversely, a rally that exceeds the Jan. 23 high at $360 opens the door to a second test at range resistance, completing a more bullish rectangle that could yield a major breakout.

On-balance volume (OBV) peaked in 2014 and drifted through a long distribution phase, finally turning higher in the fourth quarter of 2016. It posted a new high in September 2017 and has pulled back into 2018, indicating that funds and private investors are sitting on their hands, concerned about the slow Model 3 ramp-up. However, it will take just a few higher-than-average rally days for the indicator to hit another high. (See also: Tesla Stock Poised to Rebound By March, Traders Say.)

The Bottom Line

Tesla heads into earnings with relative strength indicators turning up from deeply oversold technical levels. This pattern strongly favors bulls following the release, with the potential to break resistance and head into a new trend advance. (For additional reading, check out: Tesla Raises $546M in First Asset-Backed Deal.)

Published at Wed, 07 Feb 2018 14:07:00 +0000

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Snap Stock Breaks Out to New Highs Following Earnings

Snap Stock Breaks Out to New Highs Following Earnings

By Justin Kuepper | February 7, 2018 — 11:55 AM EST

Snap Inc. (SNAP) shares surged more than 40% in early trading on Wednesday after the company reported favorable fourth quarter financial results. Revenue rose 72.4% to $285.69 million – beating consensus estimates by $32.74 million – and net losses of 13 cents per share beat consensus estimates by three cents per share. Shares rose in after-hours trading before opening sharply higher and rising during Wednesday’s session.

Aside from the top-line financials, user growth exceeded analyst expectations with a 5% increase over the previous quarter. Average revenue per user rose 46% year over year to $1.53, while the cost of revenue per user rose 5% year over year to $1.02. The company had cash and equivalents of just over $2 billion by the end of the year, with its fourth quarter cash burn reaching nearly $200 million. (See also: Snap Crosses IPO Price After Adding Nearly 9 Million Users.)

Technical chart showing the performance of Snap Inc. (SNAP) stock

From a technical standpoint, the stock broke out from trendline and R2 resistance at $16.25 and longer-term trendline resistance at $18.00 to its highest levels since last summer. The relative strength index (RSI) moved to overbought conditions at 80.91, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal more upside ahead over the coming weeks and months.

Traders should watch for some near-term consolidation, given the overbought RSI readings, above $18.00 support levels. After a period of consolidation, the stock could move higher to test its next major trendline resistance levels at around $22.00, which were set back in June of last year. Analysts remain mixed, with Bank of America Merrill Lynch upgrading the stock with a $24.00 price target and Susquehanna downgrading the stock with a $7.00 price target. (For more, see: Snap’s VP of Product Announces Exit Amid Crucial Redesign Rollout.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Wed, 07 Feb 2018 16:55:00 +0000

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Prime Working-Age Population At New Peak, First Time Since 2007

Prime Working-Age Population At New Peak, First Time Since 2007

by Bill McBride on 2/06/2018 02:19:00 PM

Update through January: The U.S. prime working age population peaked in 2007, and bottomed at the end of 2012. As of January 2018, according to the BLS, for the first time since 2007, there are now more people in the 25 to 54 age group than in 2007.

Demographics is a key reason GDP growth has been slow over the last decade.

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 January 2018.

Note: This is population, not work force.

Prime Working Age Populaton

Click 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, ’80s, or ’90s 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 grow at 0.5% per year (depending on immigration policies), and this should boost economic activity.



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Starbucks launches new credit card for coffee addicts

Inside the first ever Starbucks store
Inside the first ever Starbucks store

Starbucks launches new credit card for coffee addicts


Put it on your Starbucks card. But we’re not talking about one of those gift cards.

The coffee king has a new idea to fight slowing sales — its own Visa credit card. It’ll help you build Starbucks rewards even if you’re using it to buy stuff outside of the coffee shops.

Starbucks(SBUX) announced the new Starbucks Rewards Visa Card Thursday. It’s backed by JPMorgan Chase(JPM). Starbucks first hinted last year that a new co-branded card was coming soon.

Customers can use the card at Starbucks as well as other stores that accept Visa(V), and they can earn points, dubbed Stars (why not Bucks?), that can be redeemed for drinks and food at more 8,000 Starbucks locations nationwide.

Cardholders will also become members of the company’s Starbucks Rewards loyalty program, which already has more than 14 million people signed up.

The card will have an annual fee of $49. People who apply for the card will get a physical piece of plastic within 7-10 days of getting approved for the card. They will also get a digital version of the card immediately loaded into the Starbucks mobile app.

But Starbucks said that it and JPMorgan Chase(JPM) are also working on a co-branded prepaid debit card that will launch later this year. That could attract consumers who have poor credit histories or are wary of adding on more debt.

Any moves that can potentially boost sales at Starbucks would be welcomed by investors. The company needs a caffeine jolt.

Revenue growth has started to slow in the United States. Starbucks said in its fourth quarter earnings report that sales at U.S. stores open at least a year rose just 2% — below analysts’ expectations.

CEO Kevin Johnson, who took over for Howard Schultz last year, told analysts during a conference call that demand for the company’s limited-time holiday beverages, gift cards and other merchandise “did not resonate with our customers as planned.”

Starbucks is also having trouble attracting new customers. All its same-store sales growth in the United States came from customers spending more. The number of actual transactions in the fourth quarter was flat.

Shares of Starbucks fell more than 4% on the disappointing earnings report and the stock is now down for the year — missing out on the hot start for the broader market so far in 2018. Starbucks stock is also down slightly since Johnson succeeded Schultz.

Meanwhile, the S&P 500 is up 20%, while Starbucks’ rival Dunkin’ Brands(DNKN) has gained nearly 20% and the resurgent McDonald’s(MCD), which has added more premium coffee beverages to its menu lately, has soared more than 30%.

 Published at Thu, 01 Feb 2018 16:45:11 +0000

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Fidelity Investments Has $40B Outflows From Actively Managed, $50B Inflows to Passive Funds: Morningstar

Fidelity Investments Has $40B Outflows From Actively Managed, $50B Inflows to Passive Funds: Morningstar

Mutual funds and exchange-traded funds (ETFs) saw massive inflows in 2017, with passive funds leading the charge and Vanguard and BlackRock, Inc. (BLK) clear winners, according to Morningstar data. Fidelity Investments also saw billions of dollars pour into its passive funds, but when it came to actively managed mutual funds, Fidelity was a clear loser.

According to a Morningstar report, Fidelity Investments had outflows of $40 billion from its actively managed funds, leading the fund companies that saw outflows in that area of investing. The Boston-based firm did have $51.3 billion of inflows into passive funds during 2017, underscoring the movement on the part of investors to shun actively managed mutual funds, which typically have higher fees and expenses associated with them. Pimco, which had $33 billion of inflows in its actively managed funds, was the winner on that front. In passive investing, Vanguard had inflows of $328 billion – almost half of all inflows for 2017 – while BlackRock came in second place with $213 billion in inflows, Morningstar found.

All told, inflows into mutual funds and ETFs hit $684 billion in 2017, with actively managed funds breaking even last year. Morningstar called that a bit of a victory given “extreme” outflows in both 2015 and 2016. Without taxable bond inflows, however, Morningstar said that active funds would have seen outflows of $185.8 billion last year.

While Fidelity suffered from outflows on its actively managed funds, investors who stuck with those funds last year were rewarded, even if the investment vehicles are out of fashion. According to an earlier Morningstar report, after years of posting disappointing results, Fidelity’s actively managed mutual funds showed signs of improvement in 2017, excluding the flagship Fidelity Magellan Fund.

Morningstar pointed to the Fidelity Contrafund, Fidelity Low-Priced Stock Fund, Fidelity Growth Company Fund, Fidelity Blue Chip Group Fund and Fidelity OTC Fund, all of which did better than their peers. These funds not only beat their rivals – they came out as the top funds in their groups. What’s more, Morningstar said that Fidelity’s major U.S. stock funds beat their index rivals, in some cases by a lot.

“Of course, one year isn’t very long,” wrote Morningstar research analyst John Rekenthaler in a recent report. “Fidelity’s stock funds would need to outdo the indexes for three years at the very least to qualify as long-term successes, and their record during that time period is decidedly more mixed. Even with their powerful 2017 showings comprising the final third of their 36-month records, the funds haven’t as a group demonstrated their superiority.”

Published at Thu, 01 Feb 2018 18:44:00 +0000

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EBay and PayPal’s divorce just got messier

Apple exec: No one will use cash in the future
Apple exec: No one will use cash in the future

EBay and PayPal’s divorce just got messier


EBay and PayPal’s divorce just got messier.

EBay(EBAY), one of the world’s biggest online marketplaces, announced Wednesday that it’s dropping PayPal as its main partner for processing payments in favor of Dutch company Adyen.

The news prompted investors to offload PayPal(PYPL) stock, which fell more than 11% in after-hours trading.

The two U.S. tech companies have a complicated history.

In 2002, eBay paid $1.5 billion to buy PayPal, an online payments company whose founders include Silicon Valley heavyweights Elon Musk and Peter Thiel.

It proved to be a very successful investment. When eBay spun off PayPal in 2015 — something investors and analysts had urged it to do — the payments company’s market value was close to $50 billion. It’s now above $100 billion.

Despite the split, the two companies’ businesses have remained tightly linked. PayPal continued to process payments for eBay and is the preferred payment method for most of the buyers and sellers on the site.

But eBay is now moving to cut those ties. The ecommerce company plans to take more direct control of payments on its site with help from Adyen.

EBay said the benefits of the changes would include lower costs for sellers and more payment options for buyers.

The shift will start gradually in North America later this year and eBay expects most marketplace customers around the world to be using the new system in 2021.

PayPal spokeswoman Amanda Miller said the company will “continue to provide a comprehensive payments solution to eBay through July 2020.” It will also remain a payment option at checkout for eBay customers until July 2023.

PayPal’s business with eBay is big and still growing: it was up 10% in the fourth quarter of 2017. But that’s slower growth than other parts of PayPal’s operations, which means that eBay makes up a decreasing portion of the tens of billions of dollars of payments the company processes.

EBay accounted for 13% of the payments PayPal handled in the fourth quarter, down from 16% in the same period a year earlier, PayPal said.

Adyen said it’s “thrilled” to be getting its hands on the eBay payments business.

“We look forward to powering transactions on eBay, starting in North America, and supporting their continued global growth,” the Dutch company said in a statement.

Based in Amsterdam, Adyen already works with other big tech companies including Uber and Netflix(NFLX). It says it handles more than 200 different payment methods and over 150 currencies.

Published at Thu, 01 Feb 2018 16:30:23 +0000

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Massachusetts Steve Wynn probe hinges on $7.5 million settlement to manicurist

Massachusetts gambling regulators want to know why Steve Wynn and Wynn Resorts failed to disclose a $7.5 million settlement when they were applying for a state license in 2013.

The settlement will be a primary part of the investigation as it moves forward, investigators said at a meeting Wednesday.

The Massachusetts Gaming Commission announced Sunday that it’s reviewing the license it issued for Wynn Boston Harbor, a $2.1 billion casino and hotel project set to open in 2019. The commission could ultimately decide to alter, suspend or revoke the license as a result.

The probe follows a Wall Street Journal investigation published last week thatdetailed decades of sexual misconduct allegations against Wynn, the 76-year-old founder and CEO of Wynn Resorts(WYNN).

Wynn has denied all the charges against him, calling them “preposterous.”

Karen Wells, director of the commission’s investigations team, said Wednesday that during the state’s “suitability” review of both Wynn and Wynn Resorts, no one disclosed a $7.5 million settlement that had been paid to a manicurist over sexual misconduct claims she made in 2005.

The Massachusetts Gaming Commission wasn’t told about the payout until it was reported by the Wall Street Journal, she said.

Wells said she confirmed the existence of a settlement with a lawyer for Wynn Resorts, who told her it had not been disclosed to investigators “upon advice of counsel.”

The Wynn Resorts attorney also told Wells that the settlement had been resolved outside of court, so there were no court documents that could have been provided.

Wells said the commission intends to investigate the matter further.

“The circumstances around this $7.5 million settlement and the decision not to disclose it to investigators during the suitability investigation remain a critical element of this review,” Wells said.

The Massachusetts Gaming Commission explained Wednesday that it intends to look not just at Wynn’s suitability, but also at the suitability of the board, as well as the company’s ongoing financial stability.

“[We will look into] any corporate action or lack thereof contemporaneous with the alleged misconduct,” Wells said. “The question is: Who knew what when, and what did he or she do about it?”

In a statement, Wynn Resorts said it plans to cooperate.

“We respect the process outlined by the Massachusetts Gaming Commission and will cooperate fully with the investigation. Our construction is on schedule for a 2019 opening and continues to create more than 4,000 local union trade jobs,” a Wynn Resorts spokesperson said.

Shares of Wynn Resorts fell after the meeting. They ended the day down nearly 3.4%.

Wynn faces a number of investigations into his conduct.

The board of directors of Wynn Resorts has formed a special committee to look into the allegations. The Nevada Gaming Control Board is conducting its own review, and officials in Macau — where Wynn’s business makes most of its money — have also expressed concern.

Published at Thu, 01 Feb 2018 00:05:34 +0000

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Restaurant Stocks Sell Off After McDonald’s Earnings


Restaurant Stocks Sell Off After McDonald’s Earnings

By Alan Farley | January 30, 2018 — 9:36 AM EST

Dow component McDonald’s Corporation (MCD) led a slate of restaurant earnings and analyst calls on Tuesday morning, triggering modest sell-the-news reactions. The group has shaken off 2017 worries that higher commodity prices would affect margins, riding the wave of strong U.S. economic growth and overseas opportunities. Even so, performance has now bifurcated into winners and losers, with giant chains prospering while mid-size and smaller franchises, including Jack in the Box Inc. (JACK) and Sonic Corp. (SONC), have been sold aggressively.

Mickey D’s beat fourth quarter EPS and revenue estimates by a wide margin, also reporting that quarterly comps increased by a healthy 5.5%. The stock fell more than a point after the news, suggesting a vanishing pool of available capital on the sidelines following months of higher prices. However, the State of the Union address and Federal Reserve rate decision may be distorting order flow, and it could take several sessions to gauge the market’s true reaction. (See also: McDonald’s Earnings: Same-Store Sales Will Be Key.)

McDonald’s stock has been on a tear since breaking out above May 2016 resistance at $132 in April 2017, posting a high-volume breakaway gap and adding more than 45 points in a powerful uptrend that has held above the 50-day exponential moving average (EMA) for the past four months. It posted an all-time high near $180 just one day before the earnings release, indicating that complacent shareholders were confident that quarterly metrics would not stall or reverse the rally.

Ironically, this superior performance sets the stage for an intermediate correction because price action has generated extremely overbought technical readings that need to be worked off through price and time. The stock has been trading above the 200-day EMA since November 2016, while a single eight-point pullback characterized the sum total of 2017 bear power. This type of upside is unsustainable, raising the odds for a decline as low as $150 some time in 2018. (For more, see: Why Is McDonald’s Valued Like a Big Tech Stock?)

Yum! Brands, Inc. (YUM) has matched McDonald’s rapid ascent in the past year, lifting to an all-time high. Nomura Securities downgraded the holding company for Pizza Hut, KFC and Taco Bell from “Buy” to “Neutral” just an hour before its rival reported earnings, generating a knee-jerk decline that is testing weekly support in the mid-$80s. Yum! Brands reports earnings on Feb. 8, with mixed action likely between now and then.

The stock topped out in the upper $60s in May 2015 following a multi-year uptrend and sold off to a two-year low in the mid-$40s in the first quarter of 2016. The company spun off China operations through Yum China Holdings, Inc. (YUMC) in November 2016, generating healthy uptrends in both parent and child. Yum! Brands stock broke out above the 2015 high in May 2017 and has gained nearly 30 points since that time. Like McDonald’s, the stock looks overbought following its dramatic run, raising the odds that earnings will trigger a sell-the-news reaction. (See also: McDonald’s, Yum Are the Best Chains: Bernstein.)

Chili’s parent Brinker International, Inc. (EAT) broke out above the 2007 high in the mid-$30s in 2013 and ended the rally at an all-time high in the mid-$60s in 2015. It then turned sharply lower, entering a multi-legged downtrend that cut through breakout support, dropping to a four-year low in September 2017. A bounce into December reinstated the breakout before pausing in the upper $30s, building a holding pattern through the first month of 2018.

The company beat fiscal second quarter EPS estimates by a wide margin in Tuesday’s pre-market release but missed revenues by a small margin. A healthy increase in fiscal year 2018 guidance may keep sellers at bay, supporting a bounce that faces stiff resistance in the mid-$40s. A breakout above that barrier could take months, but strong accumulation since September should allow bulls to complete that task. (For more, see: Here’s How Brinker Plans to Turn Chili’s Around.)

The Bottom Line

McDonald’s reported strong fourth quarter earnings but sold off after the news, suggesting that overbought technical conditions are starting to exert their influence. However, it will take a decline through the 50-day EMA near $172 to overcome the strong fundamentals and signal an intermediate correction. (For additional reading, check out: How to Analyze Restaurant Stocks.)

Published at Tue, 30 Jan 2018 14:36:00 +0000

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JPMorgan promotes Pinto and Smith, fueling race to succeed Dimon


A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar/Files

JPMorgan promotes Pinto and Smith, fueling race to succeed Dimon

NEW YORK (Reuters) – JPMorgan Chase & Co on Monday promoted Daniel Pinto and Gordon Smith to be co-presidents and co-chief operating officers, a move seen as heightening competition for the job of CEO held by Jamie Dimon.

However, Dimon said in a statement he plans to continue in his current role “for approximately five more years”.

Pinto and Smith run JPMorgan’s most prominent businesses, with Pinto, 55, overseeing the corporate and investment banking unit while Smith, 59, runs consumer and community banking.

While their names have been mentioned before as potential successors to Chief Executive Officer Jamie Dimon, their elevation is the clearest signal that planning is actively under way for when he steps aside.

Dimon, 61, has been running JPMorgan since 2005, making him one of just two big bank CEOs who have been in the role since before the 2007-2009 financial crisis. The other is Goldman Sachs Group Inc CEO Lloyd Blankfein, who also has two deputies acting as co-presidents and co-COOs.

The question of who will be succeed Dimon is one of Wall Street’s favorite parlor games, and his eventual departure is something that worries investors who credit him with steering JPMorgan through the financial crisis and turning it into the largest U.S. bank.

“The longer he can stay, the better,” said Walter Todd, president and chief investment officer of Greenwood Capital Associates. “We’ve been a long-time holder of JPMorgan and you could argue he’s probably the best bank CEO in the country.”

Dimon’s plan to stay as CEO for about five more years may provide some relief for shareholders who were worried he might leave to run for political office in 2020, said Brian Kleinhanzl, a bank analyst at Keefe, Bruyette & Woods.

“A small overhang is lifted from shares of JPMorgan,” Kleinhanzl wrote in a note to clients. JPMorgan shares were little changed in after-hours trading.

Shareholders have worried about Dimon’s departure for some time.

When JPMorgan suffered more than $6 billion losses from outsized positions of a trader known as the “London whale” in 2012, there was speculation that Dimon might be forced to leave.

Two years later, Dimon was diagnosed with cancer, for which he was successfully treated.

Just last autumn, there were conflicting reports about whether he would leave to become U.S. Treasury Secretary under President Donald Trump.

More recently, people in political and business circles have wondered whether Dimon will run for U.S. president himself in 2020. It is something he has mused about publicly, though people close to Dimon say he has no intention of hitting the campaign trail.

While Pinto and Smith are now considered front-runners to succeed Dimon, Monday’s promotions do not guarantee that either of them will become CEO.

In the past, top JPMorgan executives who were said to be favorites in the CEO race ended up leaving the bank instead.

They include Matt Zames, who had been sole COO until June, as well as Michael Cavanagh, who left to join private equity firm Carlyle Group LP in 2014, and Jes Staley who instead became CEO of Barclays PLC.

Other names cited by sources as potential successors include Chief Financial Officer Marianne Lake, as well as Mary Erdoes, who runs asset management and Doug Petno, who runs commercial banking. In the statement, Dimon thanked them for taking on added responsibilities last year and for supporting company-wide initiatives.

Reporting by David Henry in New York; Writing by Lauren Tara LaCapra; Editing by Clive McKeef

Published at Tue, 30 Jan 2018 01:32:26 +0000

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Jamie Dimon plans to lead JPMorgan until 2023


Jamie Dimon, who took over JPMorgan Chase more than 12 years ago, will turn 62 in March. Credit Mike Blake/Reuters

Jamie Dimon plans to lead JPMorgan until 2023

Jamie Dimon isn’t planning on going anywhere.

The JPMorgan Chase(JPM) boss revealed Monday that he’ll stay at the helm of America’s largest bank for about five more years. He said he and the board agreed on the time frame.

Dimon, already Wall Street’s longest-serving CEO, is credited with steering JPMorgan through the financial crisis. The new plan would leave Dimon, who is 61, in charge for about 17 years.

The announcement could quiet speculation that Dimon, who leads a powerful business lobby, could leave Wall Street for Washington as a presidential candidate or a cabinet secretary.

Some of JPMorgan’s rising stars have left the bank in recent yearsas it became clear the top job would remain filled.

JPMorgan emphasized on Monday that it’s grooming potential successors. The bank announced the promotions of Daniel Pinto and Gordon Smith eachto the roles of co-president and co-chief operating officer. That sets them up as potential heirs.

“Both have proven track records of working successfully across the firm,” Dimon said in a statement, “and both truly possess the capabilities, character and intellect that exemplify great leadership.”

Pinto isCEO of JPMorgan’s corporate and investment bank, while Smith leads its consumer and community banking division.

“The Board and Dimon both believe that under all timing scenarios, whether today or in the future, the company has several highly capable successors in place,” JPMorgan said in a statement.

The management shuffle comes after several potential successors departed JPMorgan.

Last June, chief operating officer Matt Zames left the bank after 13 years. Michael Cavanagh left in 2014 for private equity firm The Carlyle Group(CG), and Jes Staley departed in 2013 and later became CEO of Barclays(BCS).

In 2014, Dimon received successful treatment for curable throat cancer.

Dimon became JPMorgan’s CEO on December 31, 2005, and was named chairman a year later. His leadership helped JPMorgan escape the financial meltdown better than many other big banks. Dimon has also been a vocal critic of additional regulation after the crisis.

Dimonchairs the Business Roundtable, a powerful lobbying group that took out a multimillion-dollar advertising blitz to champion tax reform.

In the past, Dimon has been floated as a potential Treasury secretary or even a presidential candidate.

“I would love to be president,” Dimon said in 2016, before adding that he thinks it’s “too hard and too late.”

— CNNMoney’s Paul R. La Monica contributed to this report.

Published at Mon, 29 Jan 2018 22:12:56 +0000

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U.S trade body backs Canadian plane maker Bombardier against Boeing

FILE PHOTO: Boeing’s logo is seen during Japan Aerospace 2016 air show in Tokyo, Japan, October 12, 2016. REUTERS/Kim Kyung-Hoon

U.S trade body backs Canadian plane maker Bombardier against Boeing

MONTREAL, WASHINGTON (Reuters) – A U.S. trade commission on Friday handed an unexpected victory to Bombardier Inc (BBDb.TO) against Boeing Co , in a ruling that allows the Canadian plane-and-train maker to sell its newest jets to U.S. airlines without heavy duties, sending the company’s shares up 15 percent.

The U.S. International Trade Commission’s unanimous decision is the latest twist in U.S.-Canadian trade relations that have been complicated by disputes over tariffs on Canadian lumber and U.S. milk and U.S. President Donald Trump’s desire to renegotiate or even abandon NAFTA.

Trump, who did not weigh in on the dispute personally, took his “America First” message to the world’s elite on Friday, telling a summit that the United States would “no longer turn a blind eye” to what he described as unfair trade practices.

The ITC’s commissioners voted 4-0 that Bombardier’s prices did not harm Boeing and discarded a U.S. Commerce Department recommendation to slap a near 300-percent duty on sales of the company’s 110-to-130-seat CSeries jets for five years. It did not give an immediate reason.

Boeing’s shares closed flat.

“It’s reassuring to see that facts and evidence matter,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “This part of the trade policy process works unimpeded despite President Trump’s protectionist rhetoric.”

The decision will also help Bombardier sell the CSeries in the United States by removing “a huge amount of uncertainty,” at a time when its Brazilian rival Embraer is bringing its new E190-E2 jet to market, a source familiar with the Canadian company’s thinking said.

The ITC had been expected to side with Chicago-based Boeing. It alleged it was forced to discount its 737 narrow-bodies to compete with Bombardier, which it said used government subsidies to dump the Cseries during the 2016 sale of 75 jets at “absurdly low” prices to Delta Air Lines.

Bombardier had called the trade case self-serving after Boeing revealed on Dec. 21 that it was discussing a “potential combination” with Embraer. Boeing denied the trade case was motivated by those talks.


However, the dispute may not be over.

“This can still be appealed by Boeing,” Andrew Leslie, parliamentary secretary to Foreign Minister Chrystia Freeland, told reporters in Montreal.

Boeing said it would not consider such options before seeing the ITC’s reasoning in February. It said though that it was disappointed the commission did not recognize “the harm that Boeing has suffered from the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market.”

Bombardier, Delta and the U.S. consumer advocacy group Travelers United all called the ITC decision a victory for consumers and airlines.

The decision may also end up helping Trump’s plan to boost U.S. jobs as the CSeries jets for U.S. airlines will be built in the United States rather than Canada.

Through a venture with European planemaker Airbus SE, which has agreed to take a majority stake in the CSeries this year, Bombardier plans to assemble CSeries jets in Alabama to be sold to U.S. carriers starting in 2019.

Airbus Chief Executive Tom Enders promised to push ahead “full throttle” with the Alabama plans. “Nothing is sweeter than a surprise, a surprise victory,” he said.

The case had sparked trade tensions between the United States and its allies Canada and the UK. Ottawa last year scrapped plans to buy 18 Super Hornet fighter jets from Boeing.

The well-paid jobs associated with the CSeries are important both to Ottawa and the British government. Bombardier employs about 4,000 workers in Northern Ireland, whose Northern Irish political party is helping keep Prime Minister Theresa May in power.

The British Prime Minister’s office said it welcomed the decision “which is good news” for the British industry, while Canada’s Innovation Minister said the IRC came to the “right decision” on Bombardier.

Former ITC chairman Dan Pearson praised the decision. “Not a single commissioner was willing to buy Boeing’s arguments,” he said. “I think ‘America First’ is a policy of the White House and the Commerce Department. But it’s not the policy of an independent agency (like the ITC).”

Reporting by David Shepardson, Lesley Wroughton and Allison Lampert; Additional reporting by Alana Wise and David Ljunggren; Editing by G Crosse, Bill Rigby and Susan Thomas

Published at Fri, 26 Jan 2018 23:16:27 +0000

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GE is under SEC investigation

A general exterior view of the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

GE is under SEC investigation

General Electric is under investigation by the Securities and Exchange Commission.

GE (GE) said on Wednesday that regulators are investigating a $6.2 billion insurance loss that the company revealed last week. The disclosure is a new and potentially much more serious problem for a company already reeling from missteps and questionable management decisions.

The SEC is also investigating the company’s accounting, chief financial officer Jamie Miller told analysts during a conference call. Specifically, she said the agency is looking into “revenue recognition and controls” for the company’s long-term service agreements.

“We are cooperating fully with the investigation, which is in very early stages,” Miller said.

GE said it will restate its 2016 and 2017 quarterly numbers to reflect new accounting standards.

The SEC declined to comment.

Over the years, GE has gotten rid of most of GE Capital, its lending arm. GE sold most of its insurance business by 2006, but the company held on to a portfolio of policies. It’s been a decade since GE took on any more long-term care insurance, which protect against nursing home and assisted living costs.

That’s why Wall Street was so surprised last week when GE announced that a “comprehensive review” led by outside experts found that the insurance portfolio needs cash — a lot of it. Most of the money is going to shore up the long-term care policies.

Around the insurance industry, long-term care policies have been hurt by soaring healthcare costs and longer life expectancies. Other insurance companies have been forced to book losses in recent years.

But it wasn’t until last week that GE announced a $6.2 billion hit and warned it will devote $15 billion to boost insurance reserves.

GE said the SEC is probing “the process leading to the insurance reserve increase” as well as the fourth-quarter loss.

Lynn Turner, former chief accountant at the SEC, said the insurance problems raise questions about GE’s controls and bookkeeping.

“GE seems to be way behind the 8-ball on this. Others have been boosting reserves and GE hasn’t,” Turner said.

GE is facing a cash crisis that analysts blame on years of terrible deal-making, murky accounting and needless complexity.

Most of those decisions were made under former CEO Jeff Immelt, who was replaced last year by GE veteran John Flannery. Immelt certified GE’s most recent annual report, which covered 2016. A spokesman for Immelt declined to comment on the SEC investigation.

The surprise exit of longtime chief financial officer Jeffrey Bornstein spooked Wall Street last fall. Unexpected CFO departures often make investors nervous about potential accounting problems.

Miller, who was promoted to CFO last year, said an ongoing “very deep review” of GE’s books has thus far uncovered “nothing here that I’m overly concerned about.”

Scott Davis, lead analyst at Melius Research, pointed the finger at Immelt for the accounting issues. “We can’t be certain that prior management misled investors,” Davis wrote in a report on Wednesday, “but we certainly believe there were ethical lapses that deserve attention.”

GE’s accounting is currently overseen by the board’s audit committee. Former SEC chairman Mary Schapiro has chaired GE’s audit committee since April 2016.

In 2009, the SEC charged GE with accounting fraud, alleging the company used “overly aggressive accounting” to make false and misleading statements to investors. GE paid $50 million to settle the charges. It neither admitted nor denied wrongdoing.

“GE has a reputation for questionable and nontransparent financial reports that play too close to the line when it comes to accounting,” said Turner, the former SEC official.

Beyond the new SEC investigation, GE faces other legal troubles in its lending unit. GE Capital’s discontinued subprime mortgage business, known as WMC, is under investigation from the Justice Department. The government is probing WMC’s pre-crisis sale of subprime loans.

GE, which sold WMC in late 2007, has set aside $400 million to cover the subprime mortgage problems. Miller said GE has not yet had “substantive discussions” with the Justice Department.

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Level 3 Assets


Level 3 Assets

What are ‘Level 3 Assets’

Level 3 assets are assets whose fair value cannot be determined by using observable inputs or measures, such as market prices or models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges.

BREAKING DOWN ‘Level 3 Assets’

Generally Accepted Accounting Principles (GAAP) require companies to record certain assets at their current value, not historical cost. Investors rely on the fair value estimates that a company records in its accounting statements in order to analyze the firm’s current condition and future prospects.

In 2006, the US Financial Accounting Standards Board (FASB) verified how companies were required to mark their assets to market through the accounting standard known as FAS 157 (No. 157, Fair Value Measurements). Now named Topic 820, FAS 157 introduced a classification system which aims to bring clarity to the balance sheet assets of corporations. The categories for asset valuation were given the codes Level 1, Level 2, and Level 3. In effect, Level 1 assets are those valued according to readily observable market prices. These assets can be marked-to-market and include Treasury Bills, marketable securities, foreign currencies, gold bullion, etc. Level 2 assets and liabilities have their values based on quoted prices in inactive markets, or linked to models which have observable inputs (interest rates, default rates, yield curves, etc.). An interest rate swap is an example of a Level 2 asset.

Level 3 is the least marked-to-market of the categories, with asset values based on models and unobservable inputs. These assets and liabilities are not actively traded, and their values can only be estimated using a combination of complex market prices, mathematical models, and subjective assumptions. Examples of Level 3 assets are mortgage-backed securities (MBS), private equity shares, complex derivatives, foreign stocks, distressed debt, etc. The stated value of Level 3 assets for accounting purposes is subject to interpretation, therefore, a margin of safety needs to be factored in to account for any errors in using Level 3 inputs to value an asset. The process of estimating the value of Level 3 assets is known as mark-to-management.

Topic 820, introduced in 2009, requires firms to not just state the value of their Level 3 assets, but to also outline how using multiple valuation techniques might have affected those values. The accounting standard requires a reconciliation of beginning and ending balances for Level 3 assets, with particular attention paid to changes in value of existing assets as well as details on transfers of new assets into or out of Level 3 status. In addition to Level 1 and Level 2 assets (both of which have more accurate fair values), Level 3 assets must be reported on by all publicly traded companies.

Even though they are hard to value, Level 3 assets are held at large investment shops and commercial banks by the billions. These assets received heavy scrutiny during the credit crunch of 2007, as many Level 3 assets consist of mortgage-backed securities, which suffered massive defaults and write-downs in value. The firms that owned them were often not adjusting asset values downward even though credit markets for asset-backed securities had dried up, and all signs pointed to a decrease in fair value.

Published at Thu, 25 Jan 2018 02:00:00 +0000

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The Blockchain Revolution Is Heading To Space


The Blockchain Revolution Is Heading To Space

By: | Tue, Jan 23, 2018

There is a new wave of coders and hackers looking to upend the entire internet, signaling the start of a brand new space race.

No, this isn’t an episode of HBO’s Silicon Valley, this is actually happening.

Currently, the internet is built by large centralized services including server owners, data managers, cloud providers, search engines, telecommunication companies, and social media websites. And these entities are beginning to expand their reach.

Internet security and net neutrality are quickly becoming hot topics as more people become aware of the dangers of centralization. And for good reason. Google, Amazon, and Facebook are racing to create new infrastructure that could very well threaten the internet freedom which we have grown accustomed to. The way data is used and abused by massive corporations is taking center stage in discussions regarding the future of the internet, and people are demanding change.

And it’s no surprise that the crypto-fanatics are looking to disrupt this pattern, with some even looking towards the stars for solutions.

Blockchain, the tech that built bitcoin, and 2017’s hottest buzzword, could very well be the answer.

The technology has the potential to disrupt nearly every industry imaginable, and the internet is no exception. Everything is heading to the blockchain, from energy trading to citizenship identification. No stone will be left unturned.

Source: Equinix

It brings a voice to the voiceless, accountability to the unaccountable, financial services to those without resources, ownership to those lost in the system, and even identity to the stateless. On top of all of this, it could allow smaller entities a stake in some of the biggest and most powerful industries on the planet, which will ultimately chip away at the entire notion of “too big to fail.”

“The possibilities of this technology are limitless – it is a paradigm shift that will impact every industry in every corner of the world. Any centralized market place that is dominated by a few middle men is likely to be taken over by blockchain technology. Anything you can think of where the marketplace can become more democratic,” says Steve Nerayoff, CEO of Global Blockchain Technologies Corp., the world’s first publicly traded stock that invests in top-tier blockchain and digital currency innovations.

Indeed, this technology has the potential to create an entirely new internet, or at least, an entirely new way to share data in a completely decentralized fashion. And while this is still a long-term goal, some companies are looking to fuel the adoption of blockchain technology in the short-term.

Leading the way in blockchain adoption is Blockstream Inc., one of the world’s leading blockchain innovators. The company is at the forefront of the industry, providing new solutions to scaling issues, privacy issues, and security, and now, the company has created a satellite network with the goal of enhancing coverage and creating opportunity for the 4 billion people without internet access to participate in the blockchain revolution.

Bitcoin has become an entirely new e-commerce platform with the potential to change the lives of millions living in poorer countries with unstable currencies. And with blockchain satellites, anyone with a phone or a computer will be able to make and receive transactions, access data, or add to the distributed ledger.

“With more users accessing the Bitcoin blockchain with the free broadcast from Blockstream Satellite, we expect the global reach to drive more adoption and use cases for Bitcoin, while strengthening the overall robustness of the network,” says Dr. Adam Back, co-founder and CEO of Blockstream Inc.

Blockstream’s current satellite coverage.

Many argue that Blockstream’s approach is, in fact, centralized. But this is only the beginning. More and more companies are looking to send their platforms into space, as well.

Getting ahead of this trend is Global Blockchain Technologies Corp., an incubator for blockchain startups that are aiming to change the world. If there is something happening in the blockchain space, you will normally find Global Blockchain at the center of it – with the cryptocurrency induced stock explosion of Eastern Kodak being the latest example. And now, as the blockchain races to space, there will undoubtedly be a few Global Blockchain backed companies joining the fray.

The race is already underway however, with Vector, a forward-thinking nanosatellite startup, and Nexus, a blockchain developer, having teamed up to launch a new cryptocurrency hosted in space. According to Nexus, the currency will be completely decentralized, while granting greater transparency and freedom in accessing global financial services. Nexus also notes that, because the peer-to-peer network will be hosted in space, the services will not be tied to a nation-state, further protecting its users from data harvesting mega-corporations and overreaching governments.

Spacechain is another player with its eyes on the sky. Also using nanosatellites, the Singapore based company is looking to go head to head with the likes of Google and Amazon. Zheng Zuo, Spacechain’s ambitious 25-year-olkd CEO noted: “You can run a decentralized ecommerce platform, but in the backend, you’re using [Amazon Web Services],” adding, “It’s their technology infrastructure. After we all start depending on this centralized service, it’s hard to realize true decentralization.”

While each of these projects are looking to space for their own reasons, there is no doubt that others will follow, and as the competition grows thicker, so too will the possibilities.

It would not be farfetched to suggest that blockchain satellites could provide a new hedge against global catastrophe. Even if grids fall and ground-based internet infrastructure fails, satellites will still be able to beam down smart contracts, voting ballots, currencies, and more.

This race into space seems to be the perfect metaphor for blockchain’s unrelenting rise, a rise that investors and industry giants like Global Blockchain Technologies Corp are watching intently.

As the blockchain industry powers through milestone after milestone, it seems that the potential of this new tech is just being realized.

By Michael Kern


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Published at Tue, 23 Jan 2018 16:15:15 +0000

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Capacity Management

Capacity Management

What is ‘Capacity Management’

Capacity Management is the management of the limits of an organization’s resources, such as its labor force, manufacturing and office space, technology and equipment, raw materials, and inventory. Capacity management also deals with the capacity of an organization’s processes – for example, new product development or marketing – as well as with capacity constraints that arise when various resources are combined.

BREAKING DOWN ‘Capacity Management’

The capacity of a business measures how much a company can achieve, produce, or sell within a given period of time. For example, a call center can handle 7,000 calls per week, a café can brew only 800 cups of coffee per day, a production line is able to complete 250 trucks per month, a service center can attend to 40 customers per hour, a restaurant has a seating capacity of 100 diners, etc. Since capacity can change due to seasonal demand, industry changes, unexpected economic events, recent increase in capacity, maintenance and repair programs, etc., companies need to incorporate a system management in place that ensures it is able to meet expectations at all times. This type of management process is referred to as capacity management.

Companies that integrate capacity management seek to ensure that adequate capacity is available at all times to meet current and future needs of a business and its consumers in a cost-effective manner. Capacity management requires a thorough understanding of how business demand influences demand for services, and how service demand influences demand on components.

Resources that may need to be adjusted depending on demand include on-hand inventory, labor capacity, service quality, office space, ,etc. Implementing capacity management may include working overtime, outsourcing business operations, purchasing more equipment, leasing or selling buildings, etc. A company with a poor management system which sees customer demand, even if sudden, not fulfilled runs the risk of losing revenue, market share, and consumers.

Inadequate or improper capacity management can affect a company’s financial performance and impede its business prospects. For example, a company that has introduced an innovative new product and mounted an aggressive marketing campaign to promote it must ensure that it has enough manufacturing capacity to meet the expected surge in demand. If manufacturing capacity is insufficient, the product may be sold out before it is replenished in retail outlets, which could lead to a shortfall in sales and cause disappointed customers to look for other alternatives at competing businesses. Since capacity constraints in any process or resource can be a major bottleneck for a company, capacity management is of critical importance in ensuring that an organization operates smoothly.

In order to manage a business’ capacity, a company has to factor in the proportion of capacity that is actually being used over a time period. For example, consider a company’s physical location operating at its maximum capacity of 500 employees across 3 floors of the building. If the company downsizes, reducing the number of employees to 300, it will be operating at a capacity of 300/500 = 60% utilization. 40% of its office space is left unused, which means that the firm is spending more on production or unit costs even if its output has decreased due to the fewer number of workers. To save costs, the company might decide to allocate its labor resources to only 2 floors, and end its lease of the office space on the third floor. If it does this, the company will reduce costs for building rent, insurance, utilities, and any other costs associated with the additional floor.

While businesses usually aim to produce as close to full capacity as possible to minimize production costs and to ensure its capital is not tied to underutilized resources, there are some issues with operating at high levels of capacity. The company may not have the time needed to implement quality control on its products or services, machinery and equipment might break down often due to frequent use, and employees may suffer from stress and low employee morale if they are required to work overtime for a prolonged period.

Published at Wed, 24 Jan 2018 02:00:00 +0000

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