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Disney buying Fox film, TV units for $52 billion in digital push

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Disney buying Fox film, TV units for $52 billion in digital push

(Reuters) – Walt Disney Co has struck a deal to buy film, television and international businesses from Rupert Murdoch’s Twenty-First Century Fox Inc for $52.4 billion in stock, giving the world’s largest entertainment company an arsenal of shows and movies to combat growing digital rivals Netflix Inc and Amazon.com Inc.

The deal brings to a close more than half a century of expansion by Murdoch, 86, who turned a single Australian newspaper he inherited from his father at the age of 21 into one of the world’s most important global news and film conglomerates. The new, slimmed down Fox will focus on TV news and sport.

Early indications are that the deal will not face strong resistance from antitrust regulators as AT&T Corp’s bid to acquire Time Warner Inc has done. U.S. President Donald Trump spoke to Murdoch on Thursday and congratulated him on the deal, according to the White House.

Shares of Fox, which have surged more than 30 percent since talk of the deal surfaced in early November, climbed more than 5 percent. Disney shares rose more than 3 percent after the company said it expects to buy up to $20 billion of its own shares to offset dilution from the all-stock deal. Disney will also assume about $13.7 billion of Fox debt in the deal.

Fox stockholders will receive 0.2745 Disney shares for each share held and will end up owning about a quarter of Disney.

Under the deal, expected to close in 12 to 18 months, Disney acquires 21st Century Fox’s film and television studios, its cable entertainment networks and international TV businesses.

That brings marquee franchises like “Avatar” and “The Simpsons” inside the Mouse House, on top of Iger’s previous purchases, including Pixar Animation Studios, Marvel Entertainment and “Star Wars” producer Lucasfilm.

The deal also includes 22 of Fox’s regional sports networks that have the rights to televise live games of U.S. professional baseball, basketball and hockey teams as well as popular college and high school games.

Disney’s global footprint expands with the acquisition of Fox’s international satellite assets, including Star TV network in India and a stake in European pay-TV provider Sky Plc and sports rights in several countries.

The new pipeline of shows and movies will help Disney battle technology companies spending billions of dollars on programming shown online that is siphoning audiences away from traditional TV networks.

“The deal illustrates the huge strategic challenge traditional media companies face and how they need to reinvent their business models to compete with digital, online competitors such as Netflix, Google and Amazon,” said Nick Jones, partner and head of technology at Cavendish Corporate Finance. “(It) helps Disney dramatically reduce its reliance on traditional television, a business that has declined over the last two decades.”

‘NEW’ FOX

Immediately before the acquisition, Fox will separate the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, its sports channels FS1, FS2 and the Big Ten Network, into a newly listed company that it will spin off to its shareholders.

“This will be a growth company, centered on live news and sports brands and the strength of the Fox network,” 21st Century Fox Executive Chairman Murdoch told investors. He said Fox was not retreating, rather “pivoting at a pivotal moment.”

Disney Chief Executive Bob Iger, 66, will extend his tenure through the end of 2021 to oversee the integration of the Fox businesses. He has already postponed his retirement from Disney three times, saying in March he was committed to leaving the company in July 2019.

If Iger sees out his new term, that would rule out a presidential bid in 2020, which had been the subject of some speculation.

“This acquisition reflects a changing media landscape, increasingly defined by transforming technology and evolving consumer expectations,” Iger told investors on a conference call.

He said new technology would be necessary to meet the demands of viewers who want to access content anytime. Fox’s regional sports networks and cable network puts Disney in a better position to sell more shows directly to more consumers, he added.

Disney has been struggling to bolster its TV business as cancellation of cable subscriptions is pressuring its biggest network, sports channel ESPN.

The company plans to launch its own streaming service in 2019, a calculated gamble that it can generate more profit in the long run from its own subscription service rather than renting out movies to services like Netflix.

It is not clear who will head the new Fox. Iger said current Fox CEO James Murdoch, Rupert’s younger son, will help with the transition and that the two will discuss whether he will have a longer-term role at Disney.

SKY‘S FUTURE

Through Fox’s stake in the Hulu video streaming service, Disney will assume majority control of one of Netflix’s main competitors. Hulu is also partially owned by Comcast Corp and Time Warner Inc.

A majority of antitrust experts contacted by Reuters said the deal would likely win approval from U.S. antitrust authorities, although the U.S. Department of Justice may require asset sales or conditions, they said.

Fox said it remained committed to buying the 61 percent of Sky it does not already own and expects to win regulatory approval from Britain and to close the deal by the end of June, 2018.

Britain’s Takeover Panel said Disney had informed the watchdog that should it only buy 39 percent of the company – if Murdoch fails to buy the rest of Sky – it did not think it should be forced to make a full bid for the company. The statement prompted Sky’s stock to fall by 1 percent.

In Britain, any investor acquiring 30 percent of a listed company is automatically forced to make a bid for the rest of the stock. The Takeover Panel said it would seek the opinions of Sky’s independent directors before making a decision.

Additional reporting by Susan Heavey in Washington, Lisa Richwine in Los Angeles, Diane Bartz in Washington and Kate Holton in London; Editing by Patrick Graham and Bill Rigby

Published at Thu, 14 Dec 2017 19:42:43 +0000

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The Billionaires Betting On Space Travel

 

The Billionaires Betting On Space Travel


The space race is on for some of the biggest names out there. Leading technology giants like Amazon.com, SpaceX, Microsoft, Virgin Group, Google, and Facebook are all getting in on the action.

Amazon.com CEO Jeff Bezos, the world’s second richest man after Microsoft’s Bill Gates, is funding rocket company Blue Origin to the tune of $1 billion a year. Blue Origin has been putting together a rocket factory in Kent, Wash., for several years. The company also plans to launch its rockets from a NASA launch pad in Cape Canaveral, Florida, in the near future.

Tesla CEO Elon Musk, who also heads SpaceX, is overseeing space flights with the mission of eventually making it to Mars. A new version of the ship, Dragon 2, next year will send astronauts to the International Space Station still in orbit around planet Earth.

A Morgan Stanley analyst even claimed that Tesla could lose Musk’s attention as he devotes more time to his SpaceX intergalactic travel company, with the possibility of an alliance between Tesla and SpaceX in the future.

“Investors widely expect Elon Musk to, over time, devote increasing amounts of his time and talents to SpaceX, raising the very real question of who could replace him at Tesla,” Jonas wrote. “A combination of efforts between the two firms could address this important issue.”

The two companies will play on this alliance during a TV commercial that will be broadcast in January. A SpaceX rocket will carry a Tesla Roadster sports car owned by Musk as payload when it travels toward Mars.

While an avid fan of vehicles running off renewably produced electricity, Musk’s Dragon flights are powered by Falcon 9 rockets running off of LOX (liquid oxygen) combined with RP-1, or rocket grade kerosene.

Bill Gates’ old business partner, Microsoft co-founder Paul Allen, sees a large opportunity in offering shared rides to outer space. SpaceFlight, backed by Allen, is already booking payloads on flights and has bought up the capacity of a SpaceX rocket that can be shared by paying customers.

Virgin Group founder Richard Branson’s has already spent more than $600 million to help get commercial passenger flights into suborbital space by the end of 2018.

Branson’s Virgin Galactic spaceflight company will be bringing hyper-fast airline flights to get from places like Boston over to Beijing. Its vehicles will likely fly at a top speed of Mach 2, about twice the speed of sound – or about 774 mph. Branson sees Virgin Galactic someday providing luxurious flight experiences to passengers going to places like Mars.

A study published in August by Bloomberg profiled some of the world’s wealthiest entrepreneurs who’ve invested in space travel startups and technology innovations.

Bill Gates is investing in Kameta, supporting efforts to bring the company’s mTenna satellite technology to market, with is designed around bringing communications to cars, planes, and boats.

Facebook founder Mark Zuckerberg is helping fund SETI, a University of California, Berkeley, project. One of its efforts has been Breakthrough Listen, which is looking into the existence of extraterrestrial lifeforms.

While these entrepreneurs see value in software, electric cars, social media, e-commerce, and airlines, each of them expects space travel to account for a growing part of the global economy. Thousands of residents of planet Earth have expressed interest in living on Mars, and there’s a growing market for rare metals that must be extracted from asteroids, comets, and other planets.

There’s also the appeal of offering hyper-fast trips to wealthy passengers willing to put down thousands on a trip around the Earth’s orbit. Since 2001, a Virginia-based company called Space Adventures has offered multimillionaires the opportunity to ride on a Russian flight to the International Space Station.

Earlier this year, Musk announced a bold new mission for SpaceX during 2018. Two unnamed passengers will be flying a roundtrip around the Moon. It will be the first private enterprise to offer that trip beyond government-funded astronaut space flights.

By John LeSage for Oilprice.com

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Published at Tue, 12 Dec 2017 15:01:25 +0000

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Use balance transfers to start 2018 with path to pay off debt

 

Use balance transfers to start 2018 with path to pay off debt

NEW YORK (Reuters) – When the U.S. Federal Reserve raises interest rates, as it did on Wednesday by a quarter-percentage point, the first pinch consumers usually feel is higher interest rates on credit cards.

U.S. outgoing Federal Reserve Chair Janet Yellen arrives for a news conference after a two-day Federal Open Market Committee (FOMC) meeting in Washington, U.S. December 13, 2017. REUTERS/Jonathan Ernst

Zero-interest balance transfers can offer respite from higher credit card rates, if used properly. These cards allow a person with debt (and a decent credit score) to move their balance to a new card and have no interest for an introductory period. Today’s offers typically top out at 21 months.

“I would jump on it sooner rather than later,” said Greg McBride, chief financial analyst for Bankrate.com, whose expectation of three more rate hikes by the Fed in 2018 is in line with the Fed’s own projection.

That is because annual percentage rates on credit cards are currently averaging over 16 percent, and outstanding credit card debt is about to hit $1 trillion, said Jill Gonzalez, senior analyst for Wallethub.com, a personal finance site. The average U.S. household has about $8,100 in credit card debt, which can cost a consumer over $1,000 a year in fees and finance charges.

While it sounds like a simple plan, people in debt do not necessarily have all the facts that could help them to make balance transfers happen. Comparecards.com, a division of LendingTree, surveyed 1,000 Americans with credit card debt in September and found that half did not take out balance transfers because they did not understand the process.

If you want to start the new year with some financial breathing room, here are the steps you need to take.

* PICK A DEAL

Most zero-percent cards charge a 3 to 5 percent fee for a balance transfer. But some currently offer this service for no fee – like BankAmericard’s basic card and Chase’s Slate. Both cards feature a zero-percent interest rate for 15 months, said Brian Karimzad, vice president of research for Comparecards.com.

There are online calculators to help you decide which card is right for you, such as the one at NextAdvisor.com (www.nextadvisor.com/credit_cards/balance_transfer.php).

But in general, the math is generally simple enough to do in your head.

If you are transferring $10,000, for example, and the balance transfer fee is 3 percent, you would pay $300. Your new balance will be $10,300 and you have up to 21 months to pay it down, said Jocelyn Baird, an associate editor at NextAdvisor.

If you wanted to rid yourself of this debt by the end of that term, pay $490 a month.

Keep in mind that if you choose a card with no fee but a shorter term, you may not be able to pay off the entire debt by the end of the zero rate period. And if you do not pay off the balance before the zero-rate period ends, the interest payments could end up exceeding the amount of the transfer fee.

* PICK AN ISLAND

While it is tempting to load up charges on a new card, you should not use the balance transfer card for anything else. The new charges will eat up all your payments, and may end up cancelling out your zero percent rate if you do not pay off the new charges in full.

Put it on an “island,” suggested Gonzalez. Direct your day-to-day spending card on another island. Use a third card just for travel that gets great rewards.

* PICK A DEBT PLAN

Pay down the debt on the balance transfer card above the suggested monthly minimum.

“Even if you don’t clear it at the end of that zero percent, if you’ve made a good effort, you’ll have chipped away at a significant portion of that debt,” says NextAdvisor’s Baird.

The final step is to address the actual problem that caused your debt.

“You have to fix the root issue,” said Bankrate.com’s McBride. “If that was habit of overspending, that’s the fire you have to fight. You have to discipline yourself and hold yourself accountable to a strict budget. Don’t buy things you can’t afford right away.”

(This version of the story corrects typographical error in company name NextAdvisor in paragraph ten.)

Editing by Lauren Young and Leslie Adler

 

Published at Thu, 14 Dec 2017 00:19:14 +0000

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Disney deal set to value Fox at more than $75 billion: source

by WolreChris from Pixabay

 

Disney deal set to value Fox at more than $75 billion: source

(Reuters) – Walt Disney Co’s (DIS.N) deal to buy film, television and international businesses from Rupert Murdoch’s Twenty-First Century Fox Inc (FOXA.O) will value the latter at over $40 per share, or $75 billion, a person familiar with the matter said.

The deal, which is set to be announced on Thursday, will end more than half a century of expansion by Murdoch, 86, who turned a single Australian newspaper he inherited from his father at the age of 21 into one of the world’s most important global news and film conglomerates.

Under the terms of the all-stock deal, Fox assets that will be sold to Disney, including the Twentieth Century Fox movie and TV studio, cable networks and international operations will be valued at around $29 per share, the source said on Wednesday.

Fox’s remaining assets, focused on news and sports, will be offered to existing Fox shareholders in a new company likely to be valued at more than $11 per share, according to the source, which asked not to be identified ahead of an official announcement.

Disney and Fox did not immediately respond to requests for comment. Fox shares ended trading on Wednesday at $32.75, giving it a market capitalization of $30.34 billion. The Wall Street Journal first reported on the exact terms of the deal.

The deal will mark a return by Murdoch to focus on the news business, his lifelong passion. Australian-born Murdoch inherited his father’s newspaper business in 1952 and transformed it over many years, acquiring premiere properties such as the Wall Street Journal, the London Times and the 20th Century Fox movie studio.

Murdoch’s shift to selling assets rather than buying them has come as a surprise to many who expected the 86-year-old to hand over the businesses to his sons, James and Lachlan.

None of the Murdochs are expected to be given board seats at Disney, according to the sources.

Disney has been struggling to bolster its TV business as cancellation of cable subscriptions is pressuring its biggest network, sports channel ESPN.

The Fox deal brings marquee franchises inside the Mouse House, on top of Iger’s previous purchases, including Pixar Animation Studios, Marvel Entertainment and “Star Wars” producer Lucasfilm.

Disney also will buy Fox’s stake in the Hulu video streaming service, giving it majority control of the competitor to Netflix Inc (NFLX.O). Hulu also is partially owned by Comcast Corp (CMCSA.O) and Time Warner Inc (TWX.N).

Under the deal, Disney will gain access to 46 million subscribers in three major markets, the U.S. Western Europe and India, according to Barclays analysts.

Reporting by Greg Roumeliotis in New York; editing by Bil Rigby

Published at Wed, 13 Dec 2017 23:04:18 +0000

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Should You Accept an Early Retirement Offer?

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Should You Accept an Early Retirement Offer?

By Roger Wohlner December 13, 2017 — 5:35 PM EST

Many companies offer employees early retirement packages to encourage them to leave. This is generally done to encourage voluntary departures when the organization is looking to reduce headcount. Over the years, I’ve been asked by clients and friends whether they should accept such an offer from their company. Almost without exception, I’ve encouraged these folks to take the offer and not to look back. In my experience, once a person is on “the list,” their employer has decided they should go, and, whether now or down the road, this will generally occur.

Common Early Retirement Packages Features

Severance pay is often based upon years of service with the company. Sometimes an employer will add some additional years to sweeten the deal and make it more attractive. They may even add some years of service to get the employee to a higher payment level if there is a pension plan involved. Severance pay should also include all accrued vacation and any sick leave pay. (See also: The Layoff Payoff: A Severance Package.)

Retiree medical coverage, where available, is a benefit that covers employees until they are eligible for Medicare and may offer supplemental coverage past age 65. The number of companies offering this benefit is shrinking all the time as it is very costly.

Bridging refers to a retirement benefit that some companies may offer early retirees. This is an income supplement meant to bridge the gap between early retirement and eligibility for Social Security. The benefit amount is often equivalent to what the employee would receive from Social Security at age 62. (See also: 4 Unusual Ways to Boost Social Security Benefits.)

First Offer Usually the Best

Every situation is different, but the initial early retirement package offered by a company might include ”sweeteners” such as extended medical coverage, years of service added to a pension calculation and additional severance pay over and above what an employee would normally be entitled to. Additional incentives might include training and outplacement help. In many cases these early retirement packages and the incentives are geared to areas like the ability to receive early pension payments.

A number of years ago a friend called me to discuss an early retirement buyout offer he had received from his employer, a major local corporation. Given his age and the terms of the buyout offer, I strongly encouraged him to take the package. In the end, he declined the offer and stayed with the company. About a year later he was let go and the financial terms of his separation were not nearly as favorable as the initial early retirement package. Almost without exception, in my experience, the initial early retirement package offered by a company is the most lucrative one. (See also: The Layoff Payoff: A Severance Package.)

Refusing the Offer

Losing a job might not seem like a great opportunity, but a generous early retirement package might actually be a great opportunity for you. If you will continue to work and you are able to find a new job quickly the buyout could serve as a nice financial bonus. Turning down an early retirement offer may mean that you that you are “on the list” to eventually be let go and the terms at that point generally will not be as lucrative in the future. If you turn down the package you should have a “Plan B” in mind such as seeking another job or starting your own business, or you should have some reason to believe that you won’t be let go down the road.

What to Consider If You Accept

This situation might serve as a springboard to start your own business. If you were looking to retire in the near future anyway, this could be just the opportunity you were looking for. A client called me a few years ago absolutely giddy that his employer, a major corporation, was asking for volunteers to take a sweetened early retirement package. Between these incentives and the careful planning and investing he had done over the years, this turned out to be a fantastic opportunity to get a jump on his retirement. (See also: Seven Considerations When You Negotiate Severance.)

In analyzing whether to take an early retirement package you should at consider the following factors:

  • What impact will this have on your overall financial plan and goals such as retirement and sending your kids to college?
  • What might you do next?  Retirement? Self-employment? Look for another job?
  • If you will stay in the workforce what are your employment prospects?
  • What are your health insurance options?
  • How good are the incentives being offered? Can you or should you try to negotiate a better package?
  • Are there consulting opportunities with your soon-to-be former employer?

The Role of a Financial Advisor

If you are presented with an early retirement package you would be wise to consult with a knowledgeable financial advisor. He or she can advise you as to the financial ramifications of the package. This might include the impact on your ability to retire. While the package may include some or all of the incentives discussed above, an advisor can help you assess your overall readiness for retirement. Have you saved enough in your 401(k) or other retirement plan? What other retirement resources can you rely upon? A pension? A spouse’s retirement plan? Other tax-deferred and taxable resources? (See also: 6 Tips to Stop Worrying About Retirement.)

A financial advisor can put together a financial plan including retirement projections based on a variety of scenarios and assumptions that factor in the impact of any incentives. Planning is important because, all things being equal, an early retirement puts added stress on your retirement resources.

The tax impact of the offer must also be considered. Depending upon your age, withdrawals from your retirement plan may be subject to a 10% penalty on top of regular income taxes if you are under 59½. There are potential exceptions to this for 401(k) plans and an advisor can help determine if this applies to your situation. (See also: How to Minimize Taxes on Severance Pay.)

The Bottom Line

Early retirement packages have long been offered to groups of employees at companies to provide an incentive for them to leave the company as they seek to reduce their headcount. If you are offered a package you should strongly consider it and should engage the services of a financial advisor to help you evaluate the terms of the package and the impact on your retirement. (See also: Laid Off? You Can Still Retire.)

Published at Wed, 13 Dec 2017 22:35:00 +0000

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Blockchain, IoT, and a $3.6 trillion Infrastructure Crisis

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Blockchain, IoT, and a $3.6 trillion Infrastructure Crisis

By: Michael Kern | Fri, Dec 8, 2017


There is a crisis unfolding in the United States. Infrastructure has become dated, decayed, and vulnerable to attack. A problem which the American Society of Civil Engineers estimates says will cost the country up to $3.6 trillion to address. So where does technology fit in to the United States’ next great undertaking?

The Internet of Things (IoT) is set to completely change every aspect of infrastructure as we know it. From transportation to energy production, there is an application for IoT technology. The world is more connected than it has ever been, and harnessing the technology at the core of this connection will present unique opportunities to usher in a new era of efficiency and security.

The Internet of Transportation

The U.S. highway system was arguably one of the most beneficial projects for the country’s economy that has ever been constructed. Built in what is known as “The Greatest Decade,” 1956-1966, America’s interstate highway system gave way to new opportunities for trade and the distribution of goods. But not only is it falling behind its competitors, it’s falling apart.

As the United States looks to rebuild its infrastructure, its highway system is a top priority, and in this massive operation, the U.S. has a chance to once again emerge as a leader in new infrastructure development.

The Internet of Things will have an essential role in the new highway system. With the development and rollout of self-driving cars, interconnected micro-sensors will provide connectivity between smart vehicles, creating a virtual highway on top of the physical highway. The development of this web of connection will be vital to navigation and safety of tomorrow’s self-driving fleet of cargo trucks and personal cars.

Additionally, the internet of transportation will provide a new opportunity to harness and distribute energy. Using piezoelectric crystals layered on the country’s new highways, energy could be generated from cars’ vibrations and with the addition of the expansive distribution of micro-sensors, energy can be connected to existing power grids, monitored, and secured, creating an entirely new source of power for U.S. cities.

While outfitting the country’s vast highway system with piezoelectric crystals and censors will certainly prove to be a massive project, U.S. cities are also looking to benefit from IoT tech. A number of cities have already begun integrating the IoT with basic infrastructure. These smart transportation initiatives include more intelligent traffic lights, data collection, and new routes for public transit outfitted with tech designed to reduce costs, increase safety, and alleviate congestion.

Transportation is only one aspect of the United States’ infrastructure challenges, but perhaps the most pressing is the country’s energy infrastructure, which has come under fire due to high profile pipeline leaks and its shocking susceptibility to malicious cyber-attack.

The Internet of Energy

It’s no secret that fossil fuels will reign as the go-to source of energy around the world for years to come, but distribution and management is currently a huge issue which stands to benefit from a tech overhaul.

The United States loses billions every year due to inadequate, old, or mismanaged energy infrastructure. Just a few weeks ago, there was a leak from the controversial Keystone pipeline, spilling up to 200,000 gallons of crude oil in South Dakota. Not only is this a costly problem for taxpayers, it is extremely detrimental to the environment. The Internet of Things looks not only to address some of these issues, but create even greater efficiency than previously thought possible.

Using smart sensor networks and artificial intelligence, oil and gas pipelines, nuclear plants, or even hydro-electric dams can be monitored and shut down the second there is an issue, giving way to a new era of safety.

In addition to the safety concerns which can be addressed by the IoT, the tech can completely transform the entire supply chain. In a system where getting from point A to point B is riddled with middle-men, unnecessary delays, and lost supplies, smarter monitoring of the chain will give way to cheaper energy and a more streamlined delivery of the end-product.

Renewables stand to benefit, as well. With a greater focus on smaller, smarter, and more independent grids, powered by renewable energy, the Internet of Things may very well be the answer the industry has been looking for. Producers and consumers will be connected in a new way, with the flow of energy carefully monitored and distributed in the most efficient manner possible.

With all of these interconnected censors spread throughout tomorrow’s energy infrastructure, there is also a tremendous amount of data being collected. Using this data, it is fair to suggest that the industry as a whole will be able to be analyzed and improved over time. But building and maintaining this huge collection of data and connecting the country’s most critical infrastructure on such a level also gives way to a new challenge – protecting it against malicious cyber-threats.

The Internet of Blockchain

There have already been several high-profile attacks on critical infrastructure around the world, with the most notable being Ukraine’s wide spread power outages in 2015 and 2016, which highlights a pressing need for new solutions to secure our grids. While it’s not entirely clear exactly how vulnerable America’s infrastructure is to malicious attack, the Federal Energy Regulatory Commission (FERC) has expressed its concerns.

John Wellinghoff, former chair of the FERC, noted: “We never anticipated that our critical infrastructure control systems would be facing advanced levels of malware.”

Enter blockchain tech. The decentralized nature of the technology creates a system which requires no approval from a single authority, and a ledger in which the blocks and transactions within the blocks created are viewable by anyone, while the content of the transactions remain private.

Sending and storing the vast amounts of information created by the IoT becomes seamless and secure. Because the information sent is unable to be changed or redirected, potential threats to the infrastructure are decreased drastically.

Though security risks are greatly reduced with new technology, it is not entirely free from potential attacks. Social engineering is already a huge piece of the hacking puzzle. Pretexting, phishing, and even tailgating have all been used to gain entry to some of the most secure places on the planet. While technology has the potential to create a safer world, it Is still up to the people in vulnerable positions to remain vigilant.

By Michael Kern via Crypto Insider

Editor at Oilprice.com, Writer at CryptoInsider.21mil.com

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Published at Fri, 08 Dec 2017 15:45:15 +0000

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These companies are coming clean on climate change

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Exxon's climate change problem: A timeline
Exxon’s climate change problem: A timeline

These companies are coming clean on climate change

Hundreds of major companies have promised to come clean on the risks from climate change.

Nearly 240 firms have signed up to a disclosure campaign led by billionaire Michael Bloomberg and Bank of England Governor Mark Carney. The number has more than doubled over the past six months.

BlackRock(BLK), Burberry(BURBY), JPMorgan Chase(JPM) and Mercedes-Benz owner Daimler(DMLRY) have all promised to reveal information about climate change in a standardized way, much like they report quarterly earnings.

The firms will report on topics such as carbon footprint, energy usage, risk management plans and strategy to slow climate change. The new signatories were revealed at a summit to celebrate the second anniversary of the Paris Climate Agreement.

“[Investors are] looking for this financial information,” Carney told Bloomberg TV. “Now they have a framework to get it.”

Bloomberg, the former mayor of New York City, said the firms will benefit by demonstrating to employees, customers and shareholders that they are being environmentally friendly, managing climate risks and pursuing climate-related business opportunities.

“If the investing public likes what they are doing, they’ll get a higher valuation, their stock will go up and [corporate] bonuses will be bigger,” he said.

The announcement was made one day after oil giant Exxon Mobil(XOM) bowed to shareholder pressure and agreed to disclose more details on how climate change could affect its business.

Some of its top rivals, including Shell(RDSA), Statoil(STO) and Total(TOT), have signed up to the initiative promoted by Bloomberg and Carney, which is called Task Force on Climate-related Financial Disclosures.

Carney said there is huge demand among top investment houses and insurance firms to see climate data as they make financial decisions.

“You now have the mass of the financial sector saying, ‘We want to distinguish between those who can see the [climate] opportunities, those who can manage the risks, and [those] companies that just don’t know the answers.’ ” he said. “It’s going to be more awkward to be in that last group.”

President Trump announced earlier this year that the United States, which is the world’s second biggest carbon emitter, would pull out of the Paris accord.

“Regardless of what our president [is doing]… the federal government doesn’t really have a lot of say in all of this,” said Bloomberg.

“In some senses, I think Trump has been helpful because he’s at least brought the issue out,” he said. “Those of us who think there really is [an environmental] problem, and hope to convince him that there is, we’ve rallied together.”

Published at Tue, 12 Dec 2017 15:18:17 +0000

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VW executive convicted in U.S. may seek transfer to Germany: Welt am Sonntag

 

VW executive convicted in U.S. may seek transfer to Germany: Welt am Sonntag

BERLIN (Reuters) – Volkswagen (VOWG_p.DE) executive Oliver Schmidt, convicted in the United States this week for his role in the German carmaker’s emissions scandal, may ask to serve his prison sentence in Germany, German weekly Welt am Sonntag reported, citing sources close to Schmidt.

The paper said such a request would have to be approved by the U.S. Department of Justice as well as a German court.

Schmidt was sentenced on Wednesday to seven years in prison and fined $400,000, the maximum possible under a plea deal the German national made with prosecutors in August after admitting to charges of conspiring to mislead U.S regulators and violate clean-air laws.

Schmidt read a written statement in court acknowledging his guilt.

Welt am Sonntag quoted Schmidt’s lawyer Alexander Saettele as saying that he was looking into a possible appeal but that no decision had been made yet.

The verdict “was not a surprise, but it was still disappointing to him that he was not able to get through to the judge,” Saettele told the paper.

Saettele of Berlin-based lawfirm Danckert Huber Baerlein was not immediately available for comment outside his firm’s office hours.

David DuMouchel, a Detroit-based lawyer for Schmidt of lawfirm Butzel Long, declined to provide any details on the case.

“There are a number of matters that remain to be done and so the matter is still active and therefore I cannot comment,” he said in an e-mailed statement.

Schmidt also still faces possible disciplinary action at Volkswagen, including damages claims and termination of his contract, according to a company spokesman.

“That is an integral part of the compliance guidelines of any company,” the spokesman told Reuters on Friday.

In March, Volkswagen pleaded guilty to three felony counts under a plea agreement to resolve U.S. charges that it installed secret software in vehicles in order to elude emissions tests.

Schmidt was in charge of the company’s environmental and engineering office in Auburn Hills, Michigan, until February 2015, where he oversaw emissions issues.

U.S. prosecutors have charged eight current and former Volkswagen executives.

Reporting by Maria Sheahan; Additional reporting by Jan Schwartz; Editing by Elaine Hardcastle

Published at Sat, 09 Dec 2017 23:04:23 +0000

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Why Isn’t Wall St. Backing The Next Shale Boom?

Why Isn’t Wall St. Backing The Next Shale Boom?


Only four of the companies in our Large-Cap Growth Portfolio are trading today in the upper half of their 52-week ranges: Concho Resources (CXO), Continental Resources (CLR), EOG Resources (EOG) and Diamondback Energy (FANG).

No doubt, these four companies are solid and have a lot of running room, but so are the other 12 companies.

Plus, all of the upstream oil & gas companies we follow are in much better shape today than they were a year ago. So, why is the Wall Street Gang not moving more money into these high quality upstream companies?

1. FEAR: This oil price cycle has been much worse and lasted much longer than previous cycles. Wall Street analysts are afraid to recommend upstream oil & gas companies when they fear an oil price pullback might come the next morning. I guess it is easier to recommend buying Bitcoin in your IRA even though no one on earth can explain the valuation.

2. There is not much confidence in OPEC + Russia sticking with their production quotas, despite the fact that they have actually been quite disciplined. In my opinion, OPEC + Russia must push up oil prices if they wish to survive. Even Saudi Arabia cannot survive Brent under $70 for more than a few more years. 2/3s of the OPEC nations are already bankrupt.

3. Wall Street still thinks the U.S. shale oil producers will ramp up production each time they can hedge oil over $50. Per EIA: U.S. crude oil production rose by 25,000 barrels per day (bpd) last week to 9.71 million barrels per day, bringing output close to levels of top producers Russia and Saudi Arabia. Early this year, the EIA predicted that U.S. oil production would top 10.0 million barrels per day by December 31st. Obviously that isn’t going to happen. My swag is that it will be difficult for the U.S. to get to and maintain production over 10.0 million barrels per day, unless oil prices go a lot higher. Global demand for oil will continue to go up by 1,500,000 barrels per day year-after-year and there is no way that the United States can keep up with the global rate of demand growth on its own.

4. Fear that electric vehicles will destroy demand for gasoline. My swag: Twenty years from now EVs will still be less than 10 percent of the vehicles on the road. Plus, no one knows where the battery materials are coming from even to make that happen. I am very bullish on a few lithium companies, especially Nemaska Lithium (NMKEF). I think the home market for power storage is much larger than the vehicle market.Related: Gas Shortage Has China Backtracking On Coal Ban

So, what will it take for Wall Street to wake up? Answer: a “Paradigm Shift”

A paradigm shift occurs when the under-lying assumptions that a person is basing their actions on are proven or perceived to be wrong. New assumptions cause a change in behavior.

Here is what I believe will cause a Paradigm Shift on Wall Street with regard to investing in upstream oil & gas companies:

1. Within six months, OECD oil in storage will dip below the 5-year average. There is already less than 30-days’ supply of oil in OECD storage, which is more important than the 5-year average.

2. Each year there is a big increase in demand for oil in the second quarter. 2018 will be no different than previous years. U.S. inventories of refined products are low today, so refinery utilization should remain high (93.8 percent per yesterday’s EIA report, compared to 90.4 percent a year ago). Winter has arrived in the Northeast U.S. an area that still burns a lot of oil for space heating.

3. The technical pattern for oil confirms strong support level at $55. This morning WTI moved briefly below $56 and then moved higher. In my opinion, the higher lows on each pullback since June 21st (when WTI dipped to $42) are very bullish.

Hang tough: It only takes a few Wall Street firms recommending rotation into the energy sector and “The Herd” will follow.

By Dan Steffens for Oilprice.com

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Published at Fri, 08 Dec 2017 15:47:17 +0000

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Intel Stock Nears Breakdown From Key Support Levels

 

Intel Stock Nears Breakdown From Key Support Levels

By Justin Kuepper | December 8, 2017 — 11:17 AM EST

Intel Corporation (INTC) shares have been trending lower since making 52-weeks highs of $47.30 in early November. Despite the recent weakness, the company has outperformed many other chipmakers that experienced similar sell-offs over the past month as traders took profit off the table, including Advanced Micro Devices, Inc. (AMD) and NVIDIA Corporation (NVDA). All of these companies had realized strong gains since the beginning of the year.

The positive news is that the industry’s fundamental performance has remained strong. During the third quarter, Intel’s revenue rose 2.3% to $16.15 billion – beating consensus estimates by $420 million – and net income of $1.01 per share beat consensus estimates by 21 cents per share. Management also raised its fourth quarter guidance to revenue of $16.2 billion and net income of 86 cents per share, both of which were above consensus estimates. (See also: Intel Stock Well Positioned for Year-End Rally.)

Technical chart showing the performance of Intesl Corporation (INTC) stock

From a technical standpoint, the stock moved sharply lower from its highs made earlier this year to trendline and S1 support around $43.38. The relative strength index (RSI) moderated to neutral levels of around 44.98, while the moving average convergence divergence (MACD) remains in a bearish downtrend dating back to mid-November. The stock remains significantly higher than its 52-week lows despite the recent downturn.

Traders should watch for a breakdown from the 50-day moving average at $42.88 to S2 support at $41.91 or to close the gap to around $41.00. If the stock rebounds from these levels, traders should watch for some resistance at around $44.50 or a move to the pivot point at around $45.23. Traders should maintain a bullish long-term bias on Intel but a bearish short-term bias, especially if the stock breaks down from current support levels. (For more, see: Why Intel and Broadcom Are Still Cheap.)

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

Published at Fri, 08 Dec 2017 16:17:00 +0000

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U.S. tax repatriation plan may not cure long-term dollar weakness

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U.S. tax repatriation plan may not cure long-term dollar weakness

NEW YORK (Reuters) – Investors looking for the U.S. Republican tax bill to prompt multinational companies to convert foreign profits into dollars and end the worst slide in the greenback in a decade may have to temper their hopes for a prolonged rebound.

The plan, designed in part to give U.S. multinationals a reason to repatriate the roughly $2.6 trillion in profits held by their foreign subsidiaries, would slash tax rates on such previously accumulated earnings. Companies have been slow to recognize those profits on their balance sheets so they can avoid paying U.S. corporate taxes, which stand at a rate of 35 percent. (Graphic: Overseas Cash Stash – reut.rs/2ABRzTu)

The dollar is down roughly 8.1 percent so far this year against a basket of currencies. The greenback has suffered as the Federal Reserve has raised interest rates more slowly than expected and President Donald Trump has not been able to sign any major legislation into law. (Graphic: Dollar Rise During 2005 Tax Holiday – reut.rs/2A77Y5o)

Yet analysts say that even if the tax bill becomes law, the dollar may not benefit in the long term because the legislation gives companies little incentive to convert their foreign profits right away. At the same time, many large companies already have those profits in dollar-denominated securities.

The Republicans’ proposals differ from the last tax break on foreign profits, which global financial services company Unicredit said brought roughly $300 billion to the United States.

The bill President George W. Bush signed in October 2004 drastically reduced tax rates to 5.25 percent over a 12-month window and, along with aggressive tightening by the Federal Reserve, helped send the dollar nearly 13 percent higher the following year.

This time, however, the Republican bills before a conference committee would permanently change how U.S. companies’ foreign profits are taxed.

The United States would no longer collect taxes on most future earnings a company makes beyond its borders. As a result, companies would have fewer incentives to bring previously accumulated foreign profits home quickly because rates are not scheduled to revert higher.

Up to $250 billion in foreign earnings could be repatriated over an indefinite period, according to TD Securities. While that could provide some boost to the dollar, repatriation will probably not be a significant ongoing factor in the $4.5 trillion global currency market, analysts said.

“It was a one-off repatriation and mandatory in 2005 so companies took advantage of it, and the dollar benefited from it,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto. “But this tax bill doesn’t have that same urgency.”

So far, there is no final version of the tax bill. Legislation passed by the House of Representatives would allow companies to bring back foreign profits at a 14 percent repatriation tax rate, as opposed to the current 35 percent, over eight years. The Senate bill, approved over the weekend, puts the rate at 14.49 percent.

Neither bill requires companies to convert foreign profits into dollars.

DOLLAR BULLISHNESS

Prospects of a tax break on companies’ foreign earnings and expectations of wider U.S. budget deficits helped boost the dollar to its highest levels since 2002 soon after Trump’s presidential victory in November 2016.

Now that the tax bills have passed both houses of Congress, “dollar bulls have started banging their drums” again, analysts at Unicredit said. However, they said this attitude is misguided because the vast majority of the earnings that companies will repatriate are probably already in dollar-denominated securities in the United States.

“Even a significant wave of repatriation might not lift the dollar directly, as some of the largest U.S. corporations already hold a lot of cash in dollar-denominated assets,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

In many cases, foreign profits are based in dollars held in accounts at U.S. banks, yet are treated as overseas assets on a company’s balance sheet. As a result, they are not recognized as U.S. income and are therefore not subject to U.S. taxes.

The Brookings Institution, a non-profit public policy organization based in Washington, estimates that at the 15 U.S. companies with the largest cash balances abroad, 95 percent of foreign profits are held in U.S. dollar-denominated cash or equivalents.

For example, Microsoft Corp noted in its annual report that as of June 30, roughly 92 percent of the cash and short-term investments held by its foreign units was already invested in U.S. dollar assets.

Despite some skepticism about U.S. repatriation flows, some analysts say the dollar could get a short-term boost.

“Immediately after tax reform is passed, you’re going to hear this giant sucking sound as money is heading home very quickly,” said David Woo, head of global rates and currencies research at Bank of America Merrill Lynch. Yet he does not expect a dollar rally to continue beyond the second quarter of 2018, partly due to concerns about the tax plan’s impact on the U.S. fiscal deficit.

Over the long term, the dollar will probably continue to slide, said Brian Jacobsen, multi-asset strategist at Wells Fargo Asset Management. The effects of the tax bill are already largely priced into the currency market, leaving little unexpected demand over the following 12 months, he said.

“We are positioning client portfolios for a little more dollar weakness,” he said. “Not strength.”

Reporting by Gertrude Chavez-Dreyfuss and David Randall; Additional reporting by Saqib Iqbal Ahmed and Megan Davies; Editing by Megan Davies, Jennifer Ablan and Lisa Von Ahn

Published at Fri, 08 Dec 2017 17:15:59 +0000

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California blames Wells Fargo for 1,500 fake insurance policies

California blames Wells Fargo for 1,500 fake insurance policies

  @MattEganCNN

Wells Fargo is being accused of more shady business.

Authorities say Wells Fargo customers in California were charged for insurance policies that they didn’t want.

A year-long investigation by the California Department of Insurance blamed the sale of nearly 1,500 of these unauthorized renters and term life insurance policies on “improper sales practices” at Wells Fargo.

These insurance policies were sold to Wells Fargo(WFC) customers at computer kiosks inside bank branches between 2008 and 2016.

Even though the insurance policies were provided by Prudential(PRU) and other third-parties, Wells Fargo’s notoriously unrealistic sales goals counted these insurance referrals towards employee compensation goals.

“Many customers complained they simply had no knowledge of ever signing up for such policies,” the complaint said.

Other Wells Fargo customers said bank employees entered their information onto a policy application “in the guise of merely issuing a quote, when in fact such applications were later submitted.” That’s despite the fact that the kiosks were supposed to be “self service” because Wells Fargo workers weren’t licensed to sell insurance.

Authorities said Wells Fargo “caused” a total of 1,469 unauthorized insurance policies to be issued to California customers. It’s not clear how many customers from other states were impacted.

California regulators are now moving to suspend or even revoke Wells Fargo’s insurance licenses, afterthe investigation found the bank “lacking in integrity,” “not of good business reputation” and having “shown incompetency or untrustworthiness.”

The probe also determined that Wells Fargo employees were selling insurance without a license.

“We are sorry for any harm this caused our customers,” Wells Fargo said in a statement, adding that it’s been cooperating with California authorities. Wells Fargo said it suspended the bank’s online insurance operation in December 2016 and is “making things right” for customers with refunds.

It’s the latest example of Wells Fargo’s rotten sales culture hurting customers. The bank has uncovered as many as 3.5 million fake bank and credit card accounts created by workers trying to meet unreachable goals.

Last week, Wells Fargo announced plans to exit the personal insurance business. It’s a significant shift for Wells Fargo. Since 2003 the bank has provided auto, homeowners, renters and umbrella personal insurance products. It plans to keep its life insurance business.

Most of the unauthorized insurance sales took place between 2008 and 2012 and concerned renters insurance issued by American Modern Insurance Group. Premiums typically ranged between $12 and $28 per month and were often automatically transferred from customer’s bank accounts.

Wells Fargo caused 1,258 unauthorized American Modern Insurance Group renters insurance policies to be issued, regulators allege. American Modern Insurance Group did not respond to requests for comment.

Investigators found another six unauthorized renters insurance policies provided by Assurant(AIZ), which replaced American Modern Insurance Group in 2012.

In a statement, Assurant said it has been “made aware of this matter” but it does not “comment on ongoing investigations.

Wells Fargo’s branch kiosks also allowed customers to sign up for term life insurance provided by Great-West Financial and Prudential. These policies had monthly premiums of $29 to $37.

California regulators uncovered 187 unauthorized Great-West term life insurance policies sold to Wells Fargo policies. Great-West terminated its agreement with Wells Fargo in 2014 following complaints, according to regulators.

“We did not suspect any fraudulent activity on the part of Wells Fargo,” a Great-West spokesman said. “We ended the relationship because we did not believe the business model was effective.”

There were another 18 unauthorized term life insurance policies at Wells Fargo when Prudential took over in 2014.

Prudential suspended its agreement with Wells Fargo in December 2016 and launched a review of the insurer’s relationship with the bank. That decision came after Prudential employees alleged in a lawsuit that Wells Fargo customers were sold insurance products they didn’t want. The Prudential lawsuit said that some insurance applications listed obviously fake home and email addresses on their applications like “Wells Fargo Drive” or “noemail@wellsfargo.com”

An investigation released earlier this year by Wells Fargo’s board of directors acknowledged that “sales practice concerns” have been “implicated” with the bank’s online insurance program. The board report said Wells Fargo has hired outside lawyers to conduct a probe into the insurance problems.

Prudential declined to comment. The insurer has said it’s willing to reimburse concerned customers.

A spokeswoman for the California Department of Insurance said that any decision to suspend or revoke Wells Fargo’s license would block the bank from selling life insurance in California.

Published at Wed, 06 Dec 2017 19:58:24 +0000

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Amazon’s Apparel Biz to Hit $85B by 2020: Instinet

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Amazon’s Apparel Biz to Hit $85B by 2020: Instinet

By Shoshanna Delventhal | December 6, 2017 — 7:25 PM EST

After Amazon.com Inc.’s (AMZN) blowout “Turkey 5” shopping period—from Thanksgiving Day to Cyber Monday—one team of analysts on the Street expects the e-commerce and cloud computing giant to continue taking market share and adding partnerships in the apparel segment. (See also: Amazon—Not Apple—Will Be First $1T Co.: NYU Prof.)

Geared with hundreds of new brick-and-mortar locations following its $13.7 billion acquisition of natural food grocer Whole Foods Market, analysts see Amazon as better positioned to expand into markets such as apparel and pharmacy. Over the holiday, Amazon noted strong sales of its branded hardware at Whole Foods locations. In this way, consumers could start to see an apparel section, a pharmacy, and other non-food products being sold at the organic food retailer.

Largest Ever Total Available Market

Instinet’s Simeon Siegel and team, noting that Amazon may already be the biggest apparel retailer, expect sales to boom between $45 billion and $85 billion by fiscal 2020. The analysts estimate that overall apparel and accessories sales on the platform exceed $1 trillion, with “above average” online penetration and “leading gross margins” compared with other categories.

“We believe Amazon has the largest [total available market] TAM (ever), doesn’t carry socio-economic retailing stigmas, can stock a limitless number of goods on its virtual shelf and knows customers better than they do,” wrote Siegel. “Amazon’s path to book dominance provides a potential road map for apparel success, with its fiscal 2007 media progress sharing similarities to its fiscal 2017 apparel achievements.”

Instinet also sees upside in Amazon’s growing importance among brands such as the world’s largest sportswear company Nike Inc. (NKE), with whom Amazon just inked a deal. Siegel, who rates AMZN at buy, has a price target of $1,360 on the stock, reflecting an 18% upside from Wednesday close. (See also: Amazon Pushes Into New Territory—Australia.)

Published at Thu, 07 Dec 2017 00:25:00 +0000

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First Solar Stock Showing Unusual Strength

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First Solar Stock Showing Unusual Strength

By Alan Farley | December 6, 2017 — 9:35 AM EST

First Solar, Inc. (FSLR) stock is sticking like glue to fourth quarter highs despite a series of bear raids intended to drop the Tempe, Arizona-based solar giant into an intermediate decline. This unusual strength suggests that the stock will head much higher in the first quarter of 2018, perhaps adding another 25% to dramatic gains posted since it bottomed out in April at a four-year low. As a result, market players should watch resistance at $62.50 for a breakout that sets off profitable buying signals.

The company raised 2018 earnings per share estimates above expectations in a Dec. 5 Analyst Day meeting, forcing many short sellers to cover positions. The bullish metrics eased newly bearish sentiment following passage of the Senate’s tax reform bill, which limits alternative energy credit provisions. On the flip side, a recent ruling on solar panel dumping by the the U.S. International Trade Commission (ITC) should underpin profits at the largest U.S. panel manufacturer starting in the first quarter of 2018. (See also: First Solar and SunPower: Effects of Solar Panel Tariffs.)

FSLR Long-Term Chart (2006 – 2017)

The company came public on the Nasdaq exchange in November 2006, opening at $24.50 and taking off in a powerful uptrend that reached $283 at the end of 2007. The stock’s value was nearly cut in half in the next 30 days, dumping to $143 ahead of an equally vigorous recovery wave that posted an all-time high at $317 in May 2008. A modest pullback accelerated during the economic collapse, dropping the stock through the prior low and into a 52-week low in the mid-$80s.

It bounced back above $200 in May 2009, stalling at the 50% sell-off retracement level while marking the highest high in the past eight years. A slow-motion decline followed, posting a series of lower highs and lower lows into a dramatic 2011 breakdown through the 2008 bear market low. The subsequent decline crushed remaining shareholders in a vertical impulse that reached an all-time low at $11.43 in June 2012.

A sturdy bounce into 2014 ended in the mid-$70s, marking major resistance that remains in force more than three years later. The stock then eased into a trading range, with support at $40 holding into a 2015 breakdown that ended at a higher low in the mid-$20s in April 2017. Committed buyers entered in force a few weeks later, generating a new uptrend that mounted broken range support in July. It stalled just above $60 in November and has spent the past five weeks consolidating impressive annual gains in a narrow range price pattern. (For more, see: The History of First Solar.)

FSLR Short-Term Chart (2016 – 2017)

A Fibonacci grid stretched across the 2016 into 2017 decline organizes two-sided price action, with the rally since April stair-stepping through harmonic resistance levels into the .786 retracement in the low $60s. Many bounces end at this critical level, while breakouts can be dramatic, generating momentum-fueled advances that complete V-shaped patterns. The 2016 high in the mid-$70s could be reached quickly if the bullish scenario plays out, offering sizable profits as long as exits are taken promptly.

On-balance volume (OBV) lifted to an all-time high at the start of 2016 and rolled into a distribution wave that ended at the same time the stock posted the deep April 2017 low. Healthy accumulation since that time has nearly reached the prior high, generating a bullish divergence, predicting that price will play catch up in the coming weeks. This bodes well for a breakout above harmonic resistance in the low $60s and a rapid ascent into the mid-$70s. (See also: First Solar Tops Q3 Earnings, Raises ’17 EPS Outlook.)

The Bottom Line

First Solar is holding close to fourth quarter highs while the Nasdaq-100​ sells off, signaling resiliency that should translate into higher prices. A breakout above horizontal resistance at $62.50 could set this rally wave into motion, targeting six-year resistance in the mid-$70s. (For additional reading, check out: Top 3 Solar Stocks as of December 2017.)

Published at Wed, 06 Dec 2017 14:35:00 +0000

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Shares of big U.S. banks jump as Senate approves tax overhaul

 

Shares of big U.S. banks jump as Senate approves tax overhaul

(Reuters) – Shares of the biggest U.S. banks rose on Monday, after the Senate approved a tax overhaul bill on Saturday, raising investor hopes that their earnings would get a boost from a significantly lower tax bill.

JPMorgan Chase rose 2.4 percent to hit a record on Monday, while Bank of America rose 3.5 percent to its highest since October 2008. Both were the top performers on the S&P 500 Index, which was up 0.7 percent.

Mid-cap and regional banks also gained, with KeyCorp, Citizens Financial and M&T Bank Corp rising almost 4 percent. Zions Bancorp and Comerica Inc rose more than 2.5 percent.

“Banks might be the biggest winners from the tax reforms,” Michael Mayo, a senior Wells Fargo analyst said.

Of the major S&P sectors, financials pay the highest effective tax rate at 27.5 percent, a Wells Fargo analysis of historical tax rates showed.

The tax cuts could add 16 percent to median bank earnings in 2018 and 18 percent in 2019, said Brian Klock, managing director in equity research at Keefe, Bruyette & Woods, who covers large regional banks.

Among large regional banks, Zions Bancorp, M&T Bank Corp and Comerica Inc stand to benefit the most, Klock said.

Talks will begin, likely next week, between the Senate and the House, which has already approved its own version of the legislation, to reconcile their respective bills.

While negotiations are ongoing, the legislation could cut the corporate tax rate to as low as 20 percent from 35 percent.

The tax overhaul is seen by President Donald Trump and Republicans as crucial as they head into mid-term elections in November 2018, when they will have to defend their majorities in Congress.

The S&P financial index rose nearly 2 percent to its highest since 2007, while the KBW Bank Index rose 2.7 percent.

Reporting By Aparajita Saxena; Additional reporting by Roopal Verma in Bengaluru; Editing by Shounak Dasgupta and Saumyadeb Chakrabarty

Published at Mon, 04 Dec 2017 16:15:42 +0000

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Apple may not need this supplier. Its stock crashes 23%

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Dialog Semiconductor is finding out what happens when you put most of your eggs (or apples, perhaps) in one basket.

Shares in the British-German tech company plunged 23% on Monday, after it acknowledged that Apple(AAPL, Tech30) — by far its biggest customer — can now develop the power management chips Dialog produces.

Dialog shares had already slumped in April on fears that Apple could drop the company as a supplier, and Monday’s crash took the stock’s losses this year to more than 40%.

The company has previously tried to play down those concerns. Monday was the first time it has publicly acknowledged Apple could eventually replace its chips with in-house production.

“Dialog recognizes Apple has the resources and capability to internally design a [power management integrated circuit]and could potentially do so in the next few years,” the company said in a statement.

A lot is at stake. Apple accounted for74% of Dialog’s sales in 2016, according to the company’s annual report.

“This is a major disaster,” said Tim Wunderlich, analyst at Hauck & Aufhauser.

“I would expect Dialog to experience declining sales from 2019 onward, intensifying gross margin pressure, (and) brain drain as uncertainties make the company a far less appealing employer for top talent,” he added.

The Nikkei Asian Review reported last weekthat Apple could start using its own power management chips as early as next year.

Dialog said it had no information to suggest Apple was getting ready to start making its own chips that soon.

It is working with Apple on plans for 2019 products, and will have a better idea about its future contracts with Apple by March, the company added.

Apple did not respond to a request for comment.

Another company, Imagination Technologies,(IGNMF) saw its stock drop more than 70% in April, after Apple said it was planning to stop licensing the firm’s technology in about two years.

Imagination has since been sold to China-backed Canyon Bridge Capital Partners for £550 million ($740 million), well below the £2 billion ($2.7 billion) it was worth at its peak in 2012.

Published at Mon, 04 Dec 2017 16:27:57 +0000

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Bank of America Rally Could Accelerate in 2018

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Bank of America Rally Could Accelerate in 2018

By Alan Farley | December 1, 2017 — 11:02 AM EST

Tax cut optimism and an expected December interest rate hike have lifted commercial banks to multi-year highs, in expectations of record profits through greater business activity and wider yield spreads. Bank of America Corporation (BAC) stock has attracted strong buying interest in this bullish wave, breaking out to a nine-year high in the upper $20s. More importantly, it has now opened the technical door to more rapid upside that could reach the upper $30s in the second half of 2018.

Commercial banks have already hit short-term overbought technical readings following a three-day vertical buying impulse, so risk-conscious market players may wish to stand aside right here and wait for an orderly pullback that tests new support. A decline that fills Bank of America’s Nov. 28 gap between $27.50 and $28 might do the trick, offering a low-risk entry ahead of a first upside target at $31.50. (See also: Bank of America Stock Breaks Out After Powell Testimony.)

BAC Long-Term Chart (1989 – 2017)

The stock topped out at a split-adjusted $13.75 in 1989 and sold off to $4.22 in 1990. It took nearly four years for the subsequent uptick to clear resistance at the prior peak, yielding a 1995 breakout that gathered substantial momentum into the July 1998 high at $44.22, when the Asian Contagion triggered a slide into the mid-$20s. The subsequent bounce failed to stir buying interest, yielding a series of lower lows into the first quarter of 2000, when it bottomed out in the upper teens.

A slow-motion recovery wave reached the 1998 high in 2003, ahead of a 2004 cup and handle breakout that generated mixed but positive price action into the November 2006 all-time high at $55.08. The tables then turned in a modest reversal that gathered hurricane force during the 2008 economic collapse, dropping to a 25-year low at $2.53, ahead of a quick upturn that stalled near $20 in the second quarter of 2010.

The stock spent more than six years testing that resistance level, finally breaking out after the November 2016 election and entering a powerful trend advance that stalled at $25.77 in March 2017. It completed a basing pattern at the 50-day exponential moving average (EMA) in September and turned sharply higher, posting new highs in October and again this week. This price action has finally cleared the .618 Fibonacci retracement of the dramatic sell-off wave between September 2008 and March 2009.

You may recall the massive September squeeze when U.S. Treasury Secretary Hank Paulson banned short sales in an effort to stabilize the troubled banking sector, but the politically motived move backfired, printing lower highs ahead of the final collapse. The stock has been retracing that selling wave for many years, finally mounting the critical .618 level in October 2017. In turn, this price action opens the door to the .786 retracement level at $31.50 and 100% retracement at $39.50. (For more, see: Short Goldman Sachs, Buy Bank of America: Bove.)

BAC Short-Term Chart (2016 – 2017)

A furious decline broke three-year support near $15 at the start of 2016, reaching a three-year low at $10.99 in February. It remounted the broken trading range in August, setting off a preliminary buying signal that came to fruition during November’s big breakout. Meanwhile, the price pattern since the deep low has drawn the outline of an Elliott five-wave advance, with the 2017 trading range marking the fourth wave consolidation, ahead of a fifth wave breakout that targets the .786 selloff retracement level in the low $30s. It also suggests that the stock will undergo a deeper correction following this final impulse. (To learn more, see: Elliott Wave Theory.)

The Bottom Line

Bank of America stock has rallied to a nine-year high in the upper $20s and could lift into the lower $30s in the first quarter of 2018, ahead of larger-scale upside that could eventually reach the September 2008 high near $40. (For additional reading, check out: These Sectors Benefit From Rising Interest Rates.)

Published at Fri, 01 Dec 2017 16:02:00 +0000

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Rent-to-Own Homes: How the Process Works

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Rent-to-Own Homes: How the Process Works

In a traditional home purchase, an offer is accepted, the buyer and seller meet to exchange funds and settle final costs, and, at the close of the transaction, the property and its title change hands. Typically, buyers use a mortgage to finance the bulk of the purchase.

But sometimes there is an alternative way to buy a home: a rent-to-own agreement, also called a lease option or a lease-to-own agreement. When buyers sign this kind of contract, they agree to rent the home for a set amount of time before exercising an option to purchase the property when or before the lease expires.

It’s not a common way to purchase a property, and the selection of rent-to-own properties is tiny compared to the selection of properties available purely for lease or sale. In addition, rent-to-own contracts tend to favor the owner/landlord and can put renters at a disadvantage.

Read on to find out how rent to own works, and when it may be a good choice for a potential homeowner.

How Rent to Own Works

In a rent-to-own agreement, potential buyers get to move into a house right away. While many states have their own regulations, and no two rent-to-own contracts are alike, someone in a rent-to-own agreement typically rents the property for a set amount of time (usually one to three years), after which he or she can purchase the house from the seller. It’s not as simple as paying rent for three years and then buying the house, though. Certain terms and conditions must be met, in accordance with the contract.

Option Money: In a rent-to-own agreement, the potential buyer pays the seller a one-time, usually non-refundable lease option fee called option money or option consideration. As with stock options, this gives him or her the opportunity to purchase the house in the future. It is important to note that some contracts (lease-option contracts) give the potential buyer the right but not the obligation to purchase when the lease expires. If he or she decides not to purchase the property at the end of the lease, the option simply expires. If the wording is “lease-purchase,” without the word “option,” the buyer could be legally obligated to purchase the property at the end of the lease. Clarifying the wording is one of many reasons buyers should have the contract vetted by a real estate attorney before agreeing to it.

The size of the option is negotiable. There’s no standard rate. It typically ranges between 2.5% and 7% (3% is common) of the purchase price. In some (but not all) contracts, all or some of the option money may be applied to the purchase price at closing. That’s a valuable clause. Consider that if a home has a purchase price of $200,000 and a 7% option consideration, the buyer would need to pay $14,000 up front. That’s a lot less than the $40,000 (the size of the standard 20% down payment) you’d make if purchasing outright.

Purchase price: The contact will specify when and how the purchase price of the home will be determined. In some cases, the buyer and seller agree on a purchase price when the contract is signed – often at or higher than the current market value. In other situations, the buyer and seller agree to determine the price when the lease expires, based on market value at that future point in time. Many buyers prefer to “lock in” the purchase price if possible, especially in markets where home prices may be increasing.

Rent: During the term of the lease, the potential buyer pays the seller a specified amount of rent, usually each month. In many contracts, a percentage of each monthly rent payment, called a rent credit, is applied to the purchase price. For example, assume the contract states that the buyer will pay $1,200 each month for rent, and that 25% of that will be credited to the purchase. If the lease term is three years, the buyer will earn a $10,800 rent credit to apply toward the purchase ($1,200 x 0.25 = $300; $300 x 36 months = $10,800). Factoring in these credits often makes the monthly payments slightly higher than the “going rate” for regular rentals. For the buyer, they act as down payments on the property. For the seller, they act as compensation for having taken the property off the market.

Maintenance: Depending on the terms of the contract, the potential buyer may be responsible for maintaining the property and paying for any repairs, homeowners association fees, property taxes and insurance. Because the seller is ultimately responsible for association fees, taxes and insurance (it’s still his or her house, after all), the seller may choose to cover these costs. Even in that case, the buyer still needs a renter’s insurance policy to cover losses to personal property and provide liability coverage if someone is injured while in the home or if the buyer accidentally injures someone.

Be sure that maintenance and repair requirements are specified in the contract. Maintaining the property – e-g., mowing the lawn, raking the leaves and cleaning out the gutters – is very different from replacing a damaged roof.

Purchasing the property: If the potential buyer decides not to purchase the property (or is unable to secure financing) at the end of the lease term, the option expires. The buyer forfeits any funds paid until that point, including the option money and any rent credit earned. If the buyer cannot purchase the property but has a legal obligation to (as stated in the contract), legal proceedings may be initiated.

If the buyer wants to purchase the property, he or she typically applies for financing (i.e., a mortgage) and pays the seller in full. According to the terms of the contract, a certain percentage of the option money and rent paid may be deducted from the purchase price. The transaction is completed at the closing, and the buyer becomes a homeowner.

When Are Rent to Own Homes a Good Idea?

A rent-to-own agreement can be an excellent option for people who want a home but who don’t yet qualify for a mortgage or who aren’t quite ready for the commitment of ownership.

For example, you might have a bad credit score – one that’s below 620, the bare minimum some lenders will accept – but the circumstances that depleted that score are behind you and you’ve been steadily improving it ever since. Maybe your debt-to-income ratio is too high, but not by much, and you have enough room in your budget to make extra payments and reduce your debt significantly over the next couple of years.  You might have a good job, or gotten one with a significantly better salary, but you haven’t been there long enough for a lender to consider it a stable source of income to repay your mortgage over the long run. Similarly, you might be successfully self-employed, but not have a long enough track record to make lenders comfortable. You might have started saving, but you haven’t accumulated enough to meet the usual 20% down payment on a home.

If any of these describe your situation, renting to own might be a good idea. You can lock down a property you like now and possibly save yourself a move or two. Then you’ll have some time, typically in two to three years, to improve your credit score, lengthen your employment history, increase your savings or do anything else you need to make yourself a stronger mortgage applicant. And, if the option money or a percentage of the rent goes toward the purchase price, you also get to start building some equity.

To make rent to own work, potential buyers need to be confident that they’ll be ready to make the purchase when the lease term expires. Be wary of getting into this if there’s a more than 50% chance you’re going to move and not buy. Otherwise, you will have paid the option money – which could be substantial – and also have wasted money on the nonrefundable rent credits with nothing to show for it at the end. It isn’t likely that you’ll get a landlord/owner to agree to a refundable rent credit and refundable option fee to give you the flexibility to move.

If there’s a good chance would-be buyers still won’t be able to qualify for a mortgage or secure other financing by the time the lease expires, they should instead continue renting (with a “normal” lease), building credit and saving for a down payment. Then, when they’re ready, they can choose from any home on the market in their price range.

Finding Rent-to-Own Homes

Numerous real estate aggregator websites such as Realtor.com, Trulia and Zillow make it easy – and free – to search for properties to buy or rent. If you’re in the market for a rent-to-own home, however, it can be a bit more challenging to find available properties. Two places to try are HousingList.com and iRentToOwn.com. Both of these websites have rent-to-own listings from across the nation – just enter your desired city and state or zip code to display a list of available properties. In markets with no current availability, a list of for-sale and for-rent homes may appear.

Be forewarned: Rent-to-own websites typically charge a “membership” fee to view any information beyond an exterior photo and the number of bedrooms and baths. HousingList.com, for example, charges “a nominal fee” for a seven-day trial, after which point you will be billed regularly per month unless you cancel (you must enter your credit card information to pay for the trial). iRentToOwn won’t even tell you the fee until you register, providing both an email and a phone number. It’s $1 for seven days, $99 for a three-month membership and $179 for an annual membership.

Another option is to ask sellers if they would consider a rent-to-own agreement. This is especially helpful if you’ve found your dream house, but you just can’t make the finances work out yet. Many sellers are open to such agreements, particularly in areas where homes spend a higher-than-average number of days on the market. In these markets, many sellers have already moved into their next homes – perhaps to relocate for a new job – and the longer the old home sits on the market, the harder it is to meet monthly debt obligations for two mortgages. In addition, many homeowners are leery – and rightfully so – about leaving a home vacant, especially for an extended period of time. As a result, these sellers may consider a rent-to-own agreement, even if the home is not listed as such.

You can also try working with a real estate agent in your desired market. Agents may have listings for rent-to-own homes, or may have inside information about sellers who may consider such agreements.

Renting vs. Owning a Home: Pros and Cons

If an owner is having trouble selling, rent to own provides an alternative to lowering the home’s price, taking the home off the market, or renting the home out long term. Because a selling price is established in the lease-option contract, the current homeowner knows exactly what to expect if a sale goes through. If the market declines slightly during the lease period, the sale price is already locked in, but the tenant will probably still be interested in buying the property because of the rent credit. Meanwhile, the owner gets help paying the mortgage, property taxes and insurance. Also, the tenants are more likely to take care of a lease-option property because they have the option to purchase it.

The main reason why a rent-to-own agreement appeals to buyers is the financial one, of course – no need to come up with a substantial down payment or qualify for a mortgage. The buyer also does not have to worry about immediately coming up with the money for property taxes, private mortgage insurance or homeowner’s insurance (though they should carry renter’s insurance, as noted above). Furthermore, by signing a contract now, the buyer locks in a purchase price, which means no worrying about rising home prices. (Bear in mind, however, that in a rapidly appreciating real estate market, a savvy owner would probably want to add a clause to the contract allowing for the price of the home to increase, especially if the lease is for several years.) Finally, by living in the home before deciding to purchase it, a buyer has the advantage of a lengthy test drive on the home before jumping into a major financial commitment.

And the downside? Since it’s less common, the rent-to-own process isn’t as tightly regulated as the home-buying industry or even the rental industry. While this lack of regulation can be a good thing, in that it gives would-be buyers and property owners more freedom in negotiating the purchase-option part of their contract (the lease agreement and purchase agreement are still subject to all the usual real estate laws), it can also make it easier for unscrupulous owners to take advantage of unsophisticated buyers. Sadly, the rent-to-own universe is rife with predatory landlords who have no intention of ever selling their property, and who are just trying to collect above-market rent and eventually make off with your nonrefundable option deposit. An owner could make the contract become void if the buyer is late on one payment or evict the buyer for not doing repairs. In one case in Florida, for example, a landlord with hundreds of properties negotiated contracts that permitted evictions for such items – with just three days’ notice.

In short, there’s little that’s “standard” in these legally binding contracts, making it especially important that you know exactly what you’re agreeing to. In fact, not all states allow lease options on residential property, so the buyer should ensure that even entering into this sort of agreement is legal. Even if a real estate agent assists with the process, or you hire a real estate attorney to explain (and maybe even negotiate) the contract, if you can’t understand both the legal and financial aspects of rent to own, you are not a good candidate.

Understanding Rent-to-Own Contracts

Like any contract, your rent-to-own contract needs to state the name of the tenant-buyer (that’s you) and the landlord-seller and be signed and dated by both parties. If anyone besides you will be occupying the property, that person should be named in the rental agreement, too. The contract should also have a legal description of the property: the full address and the parcel number. Including the parcel number helps eliminate any potential confusion about the address. You can get this number from the local property tax assessor’s office, often by simply looking up the address at the tax assessor’s website.

Lease Provisions

The lease portion of the contract should include everything you’d normally find in a property rental agreement. Key elements include:

  • The start and end dates of the lease period, whether that period can be extended and under what conditions
  • How much the rent is, when it is due, where payment should be made and what payment types the landlord will accept
  • Fees, if any, for late rent or returned checks
  • The amount of the security deposit, which should be fully refundable if you move out and haven’t damaged the property
  • Whether and which types of pets are allowed
  • Whether smoking is allowed
  • A description of any parking spaces or other amenities
  • Whether you can sublet the property, and if so, under what circumstances and terms
  • Which utilities the tenant is responsible for and which the landlord is responsible for
  • The conditions that can result in eviction, as well as the number of days you have to correct a problem before being evicted

A key difference between a regular lease and a rent-to-own lease is that under a regular lease agreement, the landlord will make and pay for all repairs and handle any routine maintenance. A rent-to-own agreement might make the tenant responsible for these items, the idea being that the tenant who intends to buy has a long-term stake in the property and should handle these tasks. Another possibility is that the landlord might not live nearby and it’s more convenient to make the tenant responsible.

However, until you actually own the property, you don’t want to be putting money into it that you might never get back. If the landlord won’t agree to handle repairs and maintenance, be wary. At most, you might agree to take on these responsibilities and expenses if they are added to your rent credit (which we’ll discuss in the next section). In other words, if you spend $1,000 to have some worn-out plumbing replaced, the seller will return that $1,000 to you at closing if you buy the place. But the risk to you is lowest if you don’t lay out the cash for these expenses in the first place.

Option Provisions

The option provisions might be the most complicated – and double-edged – part of a rent-to-own contract. These are the provisions that can make renting to own the property more favorable to you than just renting – or that can make it easy for the seller to collect extra monies with no intention of ever letting you buy.

These provisions should state:

  • The rent and what portion constitutes the rent credit
  • The option deposit – Under some agreements, you might pay only an option deposit or only a rent credit, not both. It’s up to you and the seller.
  • That you have the exclusive right to purchase the home at the end of the lease period – This means that the seller cannot let anyone else buy the property during the option period (basically, while you’re renting the property). Make sure this period is long enough to give you a chance to correct whatever problems, like poor credit or lack of a down payment, that have made you unable to qualify for a mortgage right now. Eighteen months to two years is often a reasonable time frame; three years might be even better. The contract should state how many days’ notice you are required to give the seller that you intend to buy, and at what point your option to buy expires. You may want to structure the contract so that you can buy before the end of the lease period if your financial situation improves sooner.
  • That the seller maintains homeowner’s insurance, that he/she stays current with property taxes and that he/she doesn’t take out any new loans against the house – You don’t want the seller to be able to do anything that gives another entity a right to the property because, if that happens, it will be difficult if not impossible for you to buy it.
  • Any other conditions, besides electing not to buy, under which you forfeit your deposit and rent credit –These might include vacating the premises, trashing the property or failing to pay rent as agreed – basically, the same things that could get you evicted.

Purchase Provisions

The purchase portion of a rent-to-own agreement is similar to a regular real estate purchase agreement. Your state’s laws may require a standard contract for real estate purchase agreements. But even in a standard agreement, there’s room to negotiate the fill-in-the-blank sections.

It will state the purchase price, which should be reasonable given current market values for similar properties. The seller might want to price the home 5% to 10% higher to account for price appreciation during the rental period. But keep in mind that home values could also decrease during that time. If that happens, not only might you not want to pay the price you originally agreed to, but a bank might not lend you enough for you to close the deal. In this situation, you will end up not exercising your option to buy, and you will lose your option deposit and rent credit unless your contract provides an alternative.

Let’s say the property is worth $200,000 at the time you’re drawing up the contract. You might be able to get the seller to agree to sell you the property for $210,000 or its appraised value at the time of purchase, whichever is lower. Whether the market increases or decreases, the price will be fair and the appraisal won’t prevent you from buying. Of course, these terms are highly favorable to you, the buyer, so don’t be surprised if the seller balks, concerned about taking a loss on the property or being unable to pay off his or her mortgage. So agreeing to a firm purchase price might be the only way to go.

The contract should explicitly state which appliances and fixtures come with the house if you decide to buy it.  Do you get the dishwasher, the fridge, the washer and dryer? What about the patio furniture and all the potted plants? Don’t assume anything; spell it out.

Ideally, the purchase portion of the contract should also provide you with a remedy if the seller backs out. You’ve put down the equivalent of an earnest money deposit in the form of your option deposit; have the contract require the seller to not only return your option deposit and rent credit, but pay you an additional sum if he or she doesn’t uphold the agreement when you’re ready to buy. You may never collect the money, but it doesn’t hurt to try. And just having such provisions in the contract could act as a deterrent to the seller’s reneging on the deal.

You also want to contract to give you an out, and give you your money back, if the title isn’t clear or if a property inspection reveals that the home is in poor condition. These are typical contingency clauses in a real estate purchase contract.

For protection, you should use an escrow service. This neutral third party acts as a financial intermediary between you and the landlord. It will hold your option deposit and monthly rent credits until you buy the property, at which point it’ll return the money to you to put toward your down payment and closing costs. If the purchase option expires and you decide not to buy, the escrow service will remit those sums to the landlord. It will also turn over the money to the correct party in the event that either of you violates your end of the agreement in a way that can’t be remedied.

Potential Pitfalls for Buyers

Before signing that contract and entering a rent-to-own agreement, a potential buyer should:

Check the seller’s credit report. Look for potential warning signs that the seller is in financial trouble, such as delinquent accounts or a large amount of outstanding debt. Even after a satisfactory credit check, a potential buyer who currently lives in the home should still pay attention to any warning signs that would indicate that the seller is in financial distress. Some examples include phone calls from debt collectors and suspicious-looking notices that are sent to the house.

Recognize that the seller could lose the property during the rental period. This could occur for any number of reasons such as if he or she is unable to make the mortgage payments, a tax judgment is placed on the property, he or she goes through a divorce, is being sued, and so on. If the seller loses the property, the potential buyer loses the possibility of buying the property, forfeits the extra rent paid and will have to find a new place to live.

Ensure that the lease option clearly states who is responsible for various types of maintenance or repairs. This agreement should also specify the types of changes or improvements (if any) the potential buyer is allowed to make to the property during the lease term.

Be sure to enter a “lease-option agreement” rather than a “lease-purchase agreement.” The former grants the option to buy at any time during the rental period, while the latter requires purchase by the end of the lease period and has legal ramifications for backing out.

Do market research and obtain a home inspection and an appraisal. This is how you can ensure that the home purchase price is fair before signing a contract.

Be aware that if the seller is unscrupulous, he or she can refuse to sell at the end of the lease-option period. This means that all the above-market rent money you’ve paid will be lost. A seller may also try to back out of the contract if the real estate market has appreciated rapidly and the property significantly increases in value – or hold you up for more money. Of course, none of these actions are legal, but if the buyer doesn’t have the financial resources to hire a lawyer, there won’t be much recourse against a shady seller.

Understand that if the market declines, you will still have to pay the higher price stipulated in the contract to own the home. However, if the price is too high, the lessee can just walk away and shop for a different property. However, you’ll will lose that portion of the rent that would have gone toward a down payment, so it’s important to do the math necessary to determine whether walking away is the best option.

Talk to a mortgage broker to find out what it will take to qualify for a home mortgage in future. While inability to obtain financing or sufficient financing is precisely why many buyers opt for rent-to-own arrangements, you want to make sure there’s nothing major in your credit history that could stop you from getting approved down the line. If you determine that you’ll still be unable to qualify for a mortgage by the time the lease expires, a rent-to-own agreement could become a costly mistake.

Obtain a condition of the title report. This can help a buyer learn how long the seller has owned the property. The longer the seller has owned it, the more equity and stability he or she should have built up in it.

The Bottom Line

Even though you’ll start off renting the property, it’s a good idea to perform the same due diligence you would if you were buying the property. Those who can afford to buy a home the traditional way, using financing, are probably better off doing so. But for those who just need to buy some time – or need to keep their options open or their funds liquid – renting to own can be a way to reside in your dream home now, and pay in full for it later.

Published at Fri, 01 Dec 2017 04:03:00 +0000

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Vanguard to offer its first active ETF lineup in U.S.

Vanguard Group’s CEO Bill McNabb is pictured in the board room at the Vanguard Headquarters in Valley Forge, Pennsylvania, December 2, 2010. To match Special Report INVESTING/ETF/ REUTERS/Tim Shaffer (UNITED STATES – Tags: BUSINESS)

Vanguard to offer its first active ETF lineup in U.S.

BOSTON (Reuters) – Vanguard Group Inc on Tuesday said it will offer six actively managed exchange-traded funds aimed at giving investors exposure to specific factors like low volatility or liquidity, increasing competition in the nascent investment product area.

The new funds mark the first active ETFs that Pennsylvania-based Vanguard will sell in the United States, and come as it looks to build out its active fund lineup as it expands internationally.

Vanguard also said in a statement that one of the funds, as well as a new mutual fund, will use more than one factor in selecting stocks, and that all will begin trading in the first quarter of 2018.

Vanguard is best known for its passive products, whose low costs have helped drive its total assets to $4.8 trillion, the most of any mutual fund firm.

Unlike traditional ETFs, which often track a particular index, holdings in actively managed ETFs can deviate from their benchmarks based on managers’ judgments.

Most active ETF assets are currently in fixed-income products such as Pimco Active Bond ETF and the SPDR DoubleLine Total Return Tactical ETF. Of the $43 billion in active ETFs as of Oct. 31, just a little more than $3 billion was in funds focused on equities, according to AdvisorShares.

Greg Davis, chief investment officer of Vanguard Group Inc. is pictured in this undated handout photo obtained by Reuters November 17, 2017. Vanguard Group Inc./Handout via REUTERS

But Vanguard’s new active ETFs could boost demand on the equity side, said Todd Rosenbluth, a director at fund researcher CFRA, along with similar products from rivals. Just last week, for instance, BlackRock Inc filed plans for a set of ETFs that would let a computer program choose and classify stocks.

The new funds will charge about 13 basis points, or 0.13 percent of assets. That will be a fraction of the 35 basis points active ETFs typically charge, said Matt Hougan, principal of conference organizer Inside ETFs.

“Vanguard’s entry is going to accelerate the fee wars,” he said.

Vanguard said the new funds will be advised by its Quantitative Equity Group, which currently oversees nearly $35 billion, including active ETFs in Canada and the United Kingdom.

Vanguard executives were not immediately available to comment. In a Nov. 15 interview Vanguard executives pointed to their non-U.S. active ETFs as the sort of new products they may offer to draw in more foreign investors.

“There’s a huge opportunity for us to offer low-cost active products outside of the U.S.” said Greg Davis, Vanguard’s chief investment officer.

Reporting by Ross Kerber in Boston; Editing by Dan Grebler and Lisa Shumaker

Published at Tue, 28 Nov 2017 21:19:37 +0000

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SEC looking at fixed-income markets with ‘greater focus’: Clayton

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

SEC looking at fixed-income markets with ‘greater focus’: Clayton

NEW YORK (Reuters) – U.S. Securities and Exchange Commission Chairman Jay Clayton said on Tuesday that the SEC had formed a group to examine fixed-income markets with the goal of protecting retail investors.

Clayton, speaking at the Managed Funds Association Conference, said the SEC was looking at fixed-income markets with “greater focus” than in the past as such markets would look more like equity markets in coming years.

“Developments you’ve seen in equity markets in recent years, they are going to come to the fixed income markets,” he said, following a big push by retail investors into fixed-income products that have become less complex and easier to use.

Retail investors, scarred by the 2008 financial crash, have become risk-averse and poured billions into bond funds against the backdrop of ultra low yields.

U.S-based bond mutual funds and exchange-traded funds have taken in $2 this year for every $1 pulled in by stock funds, according to Thomson Reuters’ Lipper unit.

Clayton said the SEC was waiting to see how MiFID played out in Europe before implementing tougher rules in the United States. The long-running practice of paying for research through trading commissions is being upended by new regulations in Europe, known as the revised Markets in Financial Instruments Directive, or MiFID II.

Part of the sprawling MiFID overhaul will force investors in the European Union to pay for research directly. Global asset managers are expected to “unbundle” payments in other regions as well.

Clayton said the SEC would listen to feedback from big long-term investors on MiFID to see what rule set they like better.

“Hopefully we have a little bit of a Petri dish,” he said.

Reporting By Lauren Tara LaCapra; Editing by Chizu Nomiyama and Andrew Hay

Published at Tue, 28 Nov 2017 15:56:13 +0000

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