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Avoid These Tech Behemoths Despite Strong Earnings

 

Avoid These Tech Behemoths Despite Strong Earnings

By Alan Farley | April 28, 2017 — 12:12 PM EDT

Big tech behemoths and Nasdaq-100 components Alphabet, Inc. (GOOGL) and Amazon.com, Inc. (AMZN) blew away high expectations in their quarterly confessionals on Thursday evening, yielding sharply higher prices in Friday’s U.S. session. Their undisputed success highlights the Internet’s steady transformation from 1990s Wild West capitalism into 2010s corporate monopolies.

But neither stock is setting off buy signals after the news, despite posting bull market and all-time highs, because they’re technically overbought after long-term rallies that have carved few pullbacks. In turn, this price action raises odds for corrections that last a minimum of six to nine months while giving up at least 20% of current values. So, while it often makes sense to buy high in anticipation of selling higher, position risk in these market leaders has risen to unacceptable levels.

GOOGL Weekly Chart (2012–2017)

GOOGL

The stock returned to the 2007 high at $374 in the second-half of 2012 and broke out into 2013, entering a powerful trend advance that continued into the 2014 high above just $600. It then dropped into a shallow correction that tested support near $500 twice into a 2015 recovery wave and second half breakout. Price stair-stepped above $800 in early 2016 and spent the year pressing against resistance, ahead of a January 2017 buying spurt that’s now added more than 100-points.

Price action eased into a rising wedge at the end of 2015, with that pattern still in play nearly 18-months later. This signals a mixed blessing because upper and lower trendlines are now converging, pointing to a low volatility technical condition that’s unsustainable. In fact, many violent trend reversals occur when wedge support finally breaks because, while shareholders are getting paid, the relatively shallow price rate of change generates a good deal of anxiety and frustration.

Other technical measurements continue to support the powerful uptrend, with On Balance Volume (OBV) holding near an all-time high while the monthly and weekly Stochastics oscillators remain glued to overbought levels These readings are common in strong uptrends, but it will take little selling pressure at this point to trigger bearish crossovers, dumping the stock into a multi-month correction.

AMZN Weekly Chart (2012–2017)

AMZN

Amazon topped out just above $100 at the turn of the millennium and fell into single digits during the Dot.com bear market. It returned to that resistance level in 2007 and built a 2-year handle into a 2010 cup and handle breakout that generated a strong uptrend. The stock posted higher highs into the start of 2014 and topped out at $400, ahead of a rounded correction that found support near $280.

It returned to resistance in April 2015 and broke out into mid-year, adding points at a rapid pace. A steep decline into 2016 found aggressive buying interest, triggering a V-shaped recovery wave that yielded a fresh breakout to new highs in the second half of the year. That bullish impulse has continued into April 2017, with this week’s earnings report lifting the e-commerce giant to an all-time high above $940.

Price action has also congested into a rising wedge pattern that denotes contracting volatility. Also, the rally has carved an Elliott 5-Wave pattern that’s reached within a few points of Fibonacci extension targets while approaching significant psychological resistance at $1000. Both technical factors raise odds for a correction that could drop the stock under $800 before the end of 2017.

The Bottom Line

Alphabet and Amazon hit home runs in the first quarter, handily beating analyst expectations, but overbought technical extremes, declining volatility, and completed price targets raise odds for pullbacks that could be measured in hundreds of points.
Published at Fri, 28 Apr 2017 16:12:00 +0000

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Tesla’s Automation Expert Ousted After Clash With Musk

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Tesla’s Automation Expert Ousted After Clash With Musk

By Daniel Liberto | April 28, 2017 — 6:35 AM EDT

Klaus Grohmann, founder of the German automated manufacturing firm that Tesla (TSLA) bought late last year to ramp its production capabilities, has left the electric carmaker after just six months, according to Reuters.

Reuters claims that Grohmann, whose Pruem-based engineering firm is expected to help increase Tesla’s production to 500,000 cars per year by 2018, was ousted after clashing with CEO​ Elon Musk. Grohmann reportedly grew frustrated with Musk ordering him to carry out tasks that risked alienating his firm from its legacy clients, including Tesla’s German-based rivals Daimler and BMW. (See also: Tesla Buys German Automation Firm​.)

Despite Tesla’s initial determination to retain Grohmann’s services following its takeover of his company, these disagreements eventually led to his exit last month. “I definitely did not depart because I had lost interest in working,” Grohmann said in a brief statement to Reuters.

A Tesla spokesperson responded with the following statement: “Part of Mr Grohmann’s decision to work with Tesla was to prepare for his retirement and leave the company in capable hands for the future. Given the change in focus to Tesla projects, we mutually decided that it was the right time for the next generation of management to lead.” (See also: Tesla Faces Worker Unrest in Germany.)

Business as Usual?

Reuter’s sources added that Grohmann’s departure will not impact Tesla’s efforts to meet its challenging production commitments, including its ambitious bid to launch its first mass-market electric car, Model 3, by July.

Grohmann Engineering’s other staff are reportedly still continuing to work with Tesla, although these same sources did warn that a portion of the workforce now felt more “insecure” following the exit of their former boss. (See also: Tesla Makes Risky Moves in Model 3 Production.)

Reuters earlier reported that the company sought to ease any potential unrest by offering staff bonuses and fresh incentives. Uwe Herzig, head of Grohmann’s work council, said that Tesla offered employees a 1,000 euro ($1,089) one-time bonus after Easter, as well as job guarantees, additional pay increases and stock options.
Published at Fri, 28 Apr 2017 10:35:00 +0000

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Goldman hopes high rates will lure consumers to online bank

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Goldman hopes high rates will lure consumers to online bank

By Olivia Oran

Goldman Sachs Group Inc (GS.N) plans to promote its high-interest bearing deposit products in a marketing push to consumers later this year as it looks to grow its online bank, Chief Strategy Officer Stephen Scherr said in an interview on Thursday.

Historically known as an adviser to the world’s richest people and corporations, Goldman Sachs has been trying to do more business with ordinary consumers to diversify its business and have a more stable source of funding.

A little over a year ago, the Wall Street bank acquired $16 billion worth of online deposits from General Electric Co (GE.N), about half of which came from individuals. Goldman has since increased those deposits by $4 billion, or 50 percent, and wants to grow more, Scherr said.

“It carries … great strategic potential,” he said. “The ambition we have is for the retail deposit platform to grow so that it becomes a real, sizable channel.”

By acquiring GE’s deposits, Goldman began a process that may help it better weather future disasters. Deposits are less likely to disappear during times of stress than other funding sources because they are federally insured. Regulators have been pushing big Wall Street banks to rely more on deposits since the 2008 financial crisis.

Goldman’s online deposits from individuals now total $12 billion. Although they have grown quickly, they are still a small fraction of the $124 billion in overall deposits on Goldman’s balance sheet and an even tinier fraction of deposits at banks with sprawling branch networks. JPMorgan Chase & Co (JPM.N), for instance, holds $1.4 trillion in deposits.

Goldman has been offering a competitive interest rate of 1.05 percent for digital savings accounts to attract new customers. The average national rate for savings accounts is currently 0.06 percent, according to the U.S. Federal Deposit Insurance Corporation.

The bank offers even higher rates for depositors who agree to lock their money up for a set period of time, through products like certificates of deposit.

Deposits will help Goldman boost profits if it can find ways to lend them profitably. The bank is looking to move further into traditional lending broadly across wealth management to investment banking, as businesses like trading struggle to generate the type of returns they once did.

Last year, the bank launched Marcus, its first major foray into consumer lending which is led by former Discover Financial Services (DFS.N) executive Harit Talwar. It also acquired Honest Dollar, an online retirement savings platform for small businesses and startups.

(Reporting by Olivia Oran in New York; editing by Lauren Tara LaCapra and Chizu Nomiyama)
Published at Thu, 27 Apr 2017 19:30:12 +0000

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CalSTRS pares down U.S. equity exposure in market’s record run

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CalSTRS pares down U.S. equity exposure in market’s record run

By Daniel Bases and Robin Respaut| NEW YORK

Record high U.S. stock prices are providing the California State Teachers’ Retirement System with profit-taking opportunities as it cuts exposure to U.S. equities and moves money off shore, the plan’s chief investment officer told Reuters on Wednesday.

Christopher Ailman, the chief investment officer of CalSTRS, as the system is known, said he did not see the U.S. economy as growing much beyond a 1-2 percent range, although he hopes it can average 3 percent in the years ahead.

“We have enjoyed obviously the benefits of this equity rally in the USA, but we still don’t think the US economy is that strong,” Ailman said in an interview while visiting investors in New York.

“We have been shaving off profits in the U.S. equity market every time we hit new highs like this and rebalancing into Europe and Asia,” said Ailman, who oversees $200 billion in assets.

Earlier on Wednesday the benchmark S&P 500 stock index .SPX traded above its record closing high, but tipped down by the close after the Trump Administration unveiled the basic outline of its proposed tax reforms that calls for a slashing of business tax rates.

“We are going to stay at about 50 to 55 percent global equity exposure. We had a home country bias to the USA for the last, almost, decade. We were 65 percent US. We are reducing that down to where eventually it will be about 55 percent US, 45 percent non-US.”

 

LONG-TERM ALLOCATIONS

CalSTRS has looked to real estate and infrastructure for opportunities to deliver returns closer to 8 percent. Ailman said real estate was “almost priced to perfection,” and the fund had become a net seller of that asset.

Infrastructure has been trickier but nonetheless important to the pension fund, which has about $3 billion worth in the portfolio, Ailman said.

CalSTRS, like most U.S. public pension funds and other large institutional investors, prioritize infrastructure deals that generate long-term, stable cash flows. But those deals are scarce and often overpriced. The majority of transactions are in Canada, Australia and the United Kingdom, despite the critical need for more infrastructure investment in the United States.

“We’re hopeful. I’ve never seen such an enormous capital need and so much capital trying to go to work,” said Ailman. “There’s an appetite, just not a lot of transactions.”

U.S. public pension funds are under increasing pressure to return investment around 7 percent without taking on too much risk. Mature funds like CalSTRS pay out more in benefits to retirees than collect in contributions from current workers. Because of this negative cashflow, CalSTRS must be more attentive to short-term, downside risks, said Ailman.

In response to these risks, CalSTRS created a risk mitigation strategy to be more resilient to market downturns.

The strategy, which focuses on being less correlated to global stocks and economic downturns, uses 30-year government bonds, commodity trading advisors (CTA) and global macroeconomics focused hedge funds.

Ailman hopes the strategy will reach a target allocation of 9 percent by June 2018 from its current 4 percent level.

(Reporting By Daniel Bases in New York and Robin Respaut in San Francisco; Editing by Chris Reese)
Published at Wed, 26 Apr 2017 22:39:58 +0000

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How Does PepsiCo Make Money?

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How Does PepsiCo Make Money?

By Shobhit Seth | Updated April 26, 2017 — 9:07 AM EDT

PepsiCo Inc. (PEP), a global giant in the snack and beverage business, reported its first quarterly earnings report in 2017, and growth was largely due to demand of its healthier snack options. How does the global behemoth operate, and which are its key products and markets across the globe in terms of sales? Let’s takes a look. (See also: PepsiCo Profit Beats on Demand for Healthier Snacks, Drinks)

Global Divisions

With its beverages, snacks and food products sold around the globe, PepsiCo operates through its six global divisions. Depending on the product portfolio and regional market, these various divisions work independently. Many also offer licensed products from other brands and operate with third parties as required in different regional markets.

North American Beverages (NAB): NAB is the largest revenue earner of the PepsiCo empire and it constitutes all beverages business across the U.S. and Canada. As per Q1 2017 results, it contributed $4.46 billion to total revenues of $12 billion of PepsiCo. According to the company: “NAB offers 11 billion-dollar brands that span carbonated soft drinks, juices and juice drinks, ready-to-drink teas and coffees, sports drinks, and bottled waters.” This division includes world famous proprietary brands like Pepsi-Cola, Gatorade, Mountain Dew, Naked and Tropicana. It also includes partnership brands like tea variants from Pepsi-Lipton, and coffee variants from Pepsi Starbucks partnerships. Additionally, NAB also markets licensed products from Dr. Pepper Snapple Group, Inc. (DPS), like Dr. Pepper, Crush and Schweppes, Dole Food Company, Inc. and from Ocean Spray Cranberries, Inc.

Frito-Lay North America (FLNA): FLNA makes up the second largest revenue generating business. It accounts for $3.5 billion of total revenues. Focused on the North American markets of the U.S. and Canada, this division includes potato chips brands like Lay’s and Ruffles, tortilla chips brand like Doritos, Santitas and Tostitos, and snacks brands like Stacy’s, Cheetos, Sun Chips and Fritos. FLNA also operates a joint venture with Strauss Group for manufacturing, marketing, sales and distribution of Sabra brand refrigerated dips and spreads.

Quaker Foods North America: The leading brand in oatmeal breakfast and cereals, it also includes products spanning across hot and cold cereals, healthy snack bars, rice based snacks, Real Medleys cereals and popped crisps. Though Quaker constitutes only about 5% of total revenues, it complements the NAB and FLNA divisions in keeping a good market share for PepsiCo in the North American markets.

Europe Sub-Saharan Africa (ESSA): ESSA operates a full range of beverages, food and snack products in Europe and in the Sub-Saharan regions of Africa. Established brands in this market include Lay’s, QuakerDoritos, Cheetos, Ruffles, Wimm-Bill-Dann, Walkers and Marbo. This market contributed $1.4 billion of total revenues in Q1 2017.

Asia, Middle East & North Africa (AMENA): Spread across two large continents, this market contains snack brands like Lay’s, Kurkure, Chipsy, Doritos, Cheetos and Smith’s, and beverages brands like Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina and Tropicana. It also has partnership brands like Lipton iced tea products with Unilever (UL). This market contributed $970 million of revenues in Q1 2016.

Latin America (LA): The LA division operates an entire product range in the Latin American markets and includes beverages, food and snack products. It constituted around 8.9% of total revenues in Q1 of 2017. Leading brands include Toddynho in Brazil, Sabritas and Gamesa in Mexico, Natuchips in Venezuela, Colombia and Ecuador, Tortrix in Guatemala and Toddy Cookies in Argentina.

The Bottom Line

The PepsiCo portfolio contains 22 brands spread across beverages, food and snacks, diversification offers sufficient room for offsetting declines in one product line with growth in others. This product and regional diversification combined with dynamic business strategies enables it to be a regular dividend payer and a leader in the cola market.
Published at Wed, 26 Apr 2017 13:07:00 +0000

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Wells Fargo board pays price for letting whistleblowers whistle in the wind

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Wells Fargo board pays price for letting whistleblowers whistle in the wind

By Dan Freed| NEW YORK

Wells Fargo & Co directors could have avoided a shareholder backlash over a sales practices scandal if they had paid more attention to scores of whistleblowers who complained, in vain, for years.

A slow response to warnings is not unique to Wells Fargo, but it is an immediate concern at the third-largest U.S. bank, whose board is facing a no-confidence vote at its annual shareholder meeting on Tuesday.

Wells Fargo has been engulfed in scandal since September, when it reached a $190 million settlement with regulators over complaints that its retail banking staff had opened as many as 2.1 million unauthorized client accounts. The bank fired 5,300 employees for improper sales tactics over five years, but did not make more substantive changes to policies and procedures or hold managers accountable until there was a public outcry.

An third-party investigation commissioned by the board found such practices were not flagged as “a noteworthy risk” until 2014, even thought lawsuits and complaints suggested the problem existed at least as far back as 2010.

George Sard, a spokesman for Wells Fargo’s board, declined to comment. The bank’s spokeswoman Richele Messick said Wells Fargo takes the issue “very seriously” and detailed multiple steps the bank has taken to improve procedures since the scandal erupted, including reviews of its ethics hot line and new standards and training for employees.

“It’s critical that all team members feel safe escalating concerns, and have confidence those concerns will be addressed,” Messick said.

Influential proxy advisor Institutional Shareholder Services recommended shareholders vote against 12 of its 15 directors, including Chairman Stephen Sanger, arguing directors failed in their oversight duties for years leading up to the settlement.

The Wall Street Journal reported on Sunday that several directors were at risk of losing re-election based on a tally of those who have already cast ballots.

Sanger, who led the internal investigation after being installed as independent chairman in October, had faced controversy involving whistleblowers before.

In 2004, an employee sued General Mills Inc, the company Sanger ran from 1995 to 2007, for allegedly retaliating against him after he raised concerns that the company was shipping more products to retailers than they wanted to artificially boost sales figures.

General Mills and the employee ultimately agreed to settle out of court and the U.S. Securities and Exchange Commission dropped a probe it had launched without bringing a case.

Sanger did not return a request for comment and Sard declined to comment on his behalf. The whistleblower could not be reached.

Nancy Bush, an analyst with NAB Research who owns Wells Fargo shares, said she was unaware of the General Mills episode, but thought it should not affect Tuesday’s vote. Instead, shareholders should focus on Sanger’s track record at Wells Fargo, she said, echoing a sentiment shared by other analysts and investors reached by Reuters.

“In the years since the financial crisis … a corporation’s obligation to listen to whistleblowers has changed – very much so,” Bush said. “I don’t think the experience of 2004 is necessarily applicable to today’s environment.”

 

HOTLINES AND SURVEYS

Attorneys and consultants who work with whistleblowers and their employers say management teams must show they take internal complaints seriously, even if their first instinct is to dismiss them as unimportant or flawed. Among the steps they recommend: allowing employees to report problems anonymously, and following up on reports without trying to identify whistleblowers.

Having third parties run whistleblower hotlines, analyze corporate culture and compensation practices, and survey the satisfaction of employees also helps to avoid getting blindsided.

A spate of recent high-profile whistleblower cases shows many companies still have work to do.

Blood-testing company Theranos downplayed concerns of a whistleblower until The Wall Street Journal reported last year that its tests were flawed. Regulators have since barred it from the blood-testing business for two years.

Fox News recently ousted its CEO and top television host Bill O’Reilly, and has paid millions of dollars in settlements, after years of employees’ sexual harassment complaints. Volkswagen ended up paying more than $20 billion in fines and reparations over rigged emissions tests, something it could have avoided if it had listened to a whistleblower in 2011.

And in the financial industry, Barclays PLC Chief Executive Jes Staley is now being investigated by two UK regulators for inappropriately using a security team to track down a whistleblower.

“In a case where you have a fundamental breakdown in your culture you have you have to have sustained and substantial effort,” said Jordan Thomas, chair of the whistleblower representation practice at Labaton Sucharow. “I would get a baseline survey. I would bring in external people to train the entire workforce. I would then change the way people’s performances are evaluated.”

(Reporting by Dan Freed in New York; Additional reporting by Jonathan Stempel, Patrick Rucker and Ross Kerber; Editing by Carmel Crimmins and Tomasz Janowski)
Published at Mon, 24 Apr 2017 18:17:52 +0000

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Can the Electric Grid Handle Self-Driving Electric Trucks?

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tags
By falco from Pixabay

Can the Electric Grid Handle Self-Driving Electric Trucks?

By: Mike Shedlock | Sun, Apr 23, 2017


In response to some of my recent posts on self-driving and electric vehicles,
several readers asked if the electric grid could handle the increase. Other
readers flat out stated the electric capacity was insufficient.

What’s the real story?

An electrical engineer in the utility industry emailed his thoughts in a pair
of emails yesterday.

Mish,

I agree with you 100% about autonomous trucking. The driver plus insurance
represent 39% of the cost per mile of operating a truck, according to the
ATRI.

Something you might consider is that autonomous trucking will make electric
trucks inevitable. It is easy to build a 200-mile range electric truck today.
There are a few on the market. Driving this across the country makes no sense
if you’re paying a driver to sit around for 1.5 hours every 200 miles (based
on a 400kWh battery and a 350kW charger). Once autonomous trucks work, only
electric makes sense. The value of fuel savings is much more than the lost
productivity from frequent stops.

Electric trucks require 2kWh/mi to operate and will have dramatically lower
repair and maintenance costs. ATRI says a diesel truck’s fuel plus R&M
is 58.3c/mi plus 15.8c/mi. At the national average 10c/kWh and 90% lower
R&M costs, the electric truck fuel plus R&M will be 70% cheaper.

If you are concerned about battery life replacement costs, Tesla has already
demonstrated that properly
operating a battery can dramatically reduce degradation
. They see about
5% of range loss per 100k miles of operation. Some of this is related to
aging and some to use. Either way, oversizing the battery pack so it provides
a reasonable range for its life is pretty economic.

With reasonable assumptions, autonomous driving will make freight 40%
cheaper per mile. Autonomous electric will be 55% cheaper per mile compared
to today.

I asked the responder what his background was, whether or not I could quote
him, and whether or not he had any links or supporting evidence to back his
claims.

He said the company he worked for would not like the publicity but he had
a link and a personal spreadsheet to back his claims.

I said I would call him EEUI (Electrical Engineer Utility Industry).

Second Email from EEUI

I’m an electrical engineer in the utility industry. I’ve been studying this
question from an electric load growth perspective. Electrifying overland
freight in my part of the world would increase our load by about 30%. Maybe
more, if the cost reductions resulted in more freight being hauled.

Check out the ATRI report on Operational
Costs of Trucking
. The relevant information is on page 17:

The attached are my numbers. All numbers are in dollars per mile. WAG stands
for wild ass guess. I assume that automation increases the equipment cost
by 20% and electrification by another 80%.

You’re welcome to use my numbers but I work in an industry that prefers
to avoid publicity.

EEUI

Truck Costs From ATRI

Truck Costs per Hour From ATRI

$23.61 in driver wages and benefits will largely vanish. That’s a 34.7 % reduction
in costs rights there assuming all driver miles vanish (which they won’t).

But insurance costs will drop as will maintenance costs. Electric vehicles
have far fewer parts to wear out and things like braking will be much smoother.

That’s how I saw things before looking at EEUI’s spreadsheet.

EEUI Spreadsheet

Diesel from ATRI Automated Elec Automated
Fuel 0.583 0.583 same 0.2 10c/kWh, 2kWh/mi
Lease 0.215 0.258 20% higher (WAG) 0.43 100% higher (WAG)
R&M 0.158 0.158 same 0.0158 90% lower
Insurance 0.071 0.0071 90% lower 0.0071 90% lower
Permits 0.019 0.019 same 0.019 same
Tires 0.044 0.044 same 0.044 same
Tolls 0.023 0.023 same 0.023 same
Driver wage 0.462 0 0
Driver ben 0.129 0 0
1.704 1.0921 0.7389
Saving 36% Savings vs Automated 32%
Savings vs Today 57%

EEUI estimates an operating saving of 36% with diesel and 57% with electric.

My assumption is that EEUI is on the high side, perhaps by a lot, especially
with electric. But that is not what matters. A savings of 20% is enough to
guarantee automation. An additional savings of another 15% or less is enough
to make electric happen.

Move to Driverless Accelerates

Study
Says by 2030 1/4th of Miles Driven will be Driverless
. I expect 85 percent
of miles driven will be driverless by 2030.

For further discussion, please consider Second-Order
Consequences of Self-Driving Vehicles
.

Also consider Portland
Says Yes to Testing Driverless Cars, Other Cities Will Follow: Mass Adoption
When?

The move to driverless is clearly accelerating and for numerous good reasons. Savings
will force the industry in these directions, far sooner than most believe.


Mike Shedlock

Mike Shedlock / Mish
Mish Talk

Mike Shedlock

Michael “Mish” Shedlock is a registered investment advisor
representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com/ to
learn more about wealth management for investors seeking strong performance
with low volatility.

Copyright © 2005-2017 Mike Shedlock

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Published at Sun, 23 Apr 2017 09:31:41 +0000

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Brick & Mortar Retailers Could Punish Short Sellers

by MichaelGaida from Pixabay

 

Brick & Mortar Retailers Could Punish Short Sellers

By Alan Farley | April 20, 2017 — 11:30 AM EDT

Brick and mortar retailers have been sold relentlessly in the last few months, succumbing to reports that hedge funds have taken significant short positions in anticipation of bankruptcies. Despite the bearish wave, sector indices continue to hold long-term support while relative strength readings approach deeply oversold levels. This potent combination could generate a short squeeze that wipes out overconfident sellers and brings the beaten-down group back into equilibrium.

Department stores have taken the biggest hits since a mild recovery wave fizzled out in February, with the main players descending to 2017 lows. While a squeeze isn’t likely to alter the bearish technical tone, these issues should offer the greatest upside because they’ve attracted the highest short interest. Even so, anticipating upside catalysts will be challenging because these mall anchors aren’t scheduled to report earnings until mid-May.

XRT

The SPDR S&P Retail ETF (XRT) returned to the 2007 high at $22.75 in 2010 and broke out into 2011, gaining ground in a powerful trend advance that continued into the 2015 all-time high at $51.25. It sold off to the 200-week EMA in the first quarter of 2016 and bounce in a recovery wave that stalled in the mid-40s. The fund has tested moving average support four more times, with the current test now in its seventh week.

This resilient price action on top of long-term support should generate a buying wave that squeezes short sellers for many weeks. The upper-40s looks like a logical reward target that reaches the yearlong rising trendline and tests resistance at 2015 high. Multi-week positions taken in anticipation of this upsurge should place trailing stops because a breakout is unlikely, given the power of the secular downtrend.

KSS

Kohl’s, Corp. (KSS) tested 2002 resistance in the mid-70s in 2007 and again in 2015, with aggressive sellers hitting the bids and taking control both times. The most recent downturn found support in the low-30s in May 2016, ahead of a recovery wave that stalled near $60 in December. A selloff into 2017 posted a bearish island reversal, establishing a new resistance zone between $44 and $50.

The stock fell to a 7-month low in March and is now grinding sideways just below the 50-day EMA at 40. A breakout above this intermediate resistance level could set a short squeeze into motion, with a gap fill offering an aggressive profit target near $50 (blue line). The 200-day EMA falling through the low-40s could act as a final barrier, ahead of more vertical advance. The company reports earnings on May 11.

esignal.com

Nordstrom, Inc. (JWN) broke out above the 2007 high at $59.70 in 2014 and rallied to an all-time high at $83.16 in March 2015. It then turned sharply lower, dumping in a vertical decline that posted a 5-year low in the low-30s in June 2016. A bounce into November ran into a buzzsaw of selling pressure at the 200-week EMA, generating a reversal that continued to post lows into late March.

The recent upturn from $40 could mark a higher low in the broad pattern and yield a short squeeze that eventually tests the long-term moving average in the upper-50s. Range resistance marked by the January gap between $45 and $48 (blue line) looks like the trigger point, with a breakout above that price zone forcing short sellers to cover positions in a positive feedback loop that reaches the upside target.

The Bottom Line

Selling pressure in the retail sector may have run its course, setting the stage for a multi-week short squeeze that returns equilibrium to this lopsidedly negative market group. However, risk remains high because rallies should eventually attract strong-hand sellers so it makes sense to place tight trailing stops to protect intermediate profits.
Published at Thu, 20 Apr 2017 15:30:00 +0000

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Trump to American steelworkers: I’ve got your back

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Blackstone CEO: Infrastructure most important for Trump
Blackstone CEO: Infrastructure most important for Trump

  @lamonicabuzz

President Trump and Commerce Secretary Wilbur Ross have a message for big American steel companies. We’ll protect you.

Ross said Thursday that the Commerce Department plans to launch an investigation into whether or not foreign steel companies, particularly those from China, are dumping steel on the U.S. market.

Ross argued that China is not acting in good faith to cut back on exports.

He said in a press conference that steel imports “have continued to rise, and they’ve continued to rise despite repeated Chinese claims that they were going to reduce their steel capacity when instead they have actually been increasing it consistently.”

Ross noted that steel imports are up nearly 20% so far this year and that foreign steel now makes up more than a quarter of the entire U.S. market. He said that has had “a very serious impact” on the domestic steel industry and that it could impinge on “our economic and national defense security.”

Shares of many American steel companies, including U.S. Steel(X), Nucor(NUE), Cliffs Natural Resources(CLF), AK Steel(AKS) and Steel Dynamics(STLD) all soared on the news, with some of the steel stocks climbing nearly 10%.

Steel Dynamics also reported solid earnings Wednesday and Nucor issued a strong report Thursday, further helping to lift the group.

The broader market was in rally mode too, thanks in large part to comments from Treasury Secretary Steven Mnuchin about the possibility of a tax reform plan being announced soon. The Dow surged nearly 200 points.

Ross told reporters that no firm decisions had been made yet about what the U.S. will do to try and make American steel more competitive.

But he did not rule out the possibility of tariffs, saying that the plan likely “won’t be to prohibit foreign imports, it just will be to change the price.”

Any moves by the Trump administration would be another example of the president’s desire to protect old school, blue collar U.S. industries, many of which have been laying off workers due to a combination of the effects of automation and globalization.

Trump has also pledged to try and help workers in hard hit sectors such as oil and coal mining.

Whether or not tariffs or other protectionist measures will actually boost any of these industries remains to be seen. But steel companies were quick to applaud the president.

U.S. Steel said in a statement that it is “pleased” that the president is launching a national security investigation into steel dumping.

“For too long, China and other nations have been conducting economic warfare against the American steel industry by subsidizing their steel industries, distorting global markets, and dumping excess steel into the United States” the company said.

U.S. Steel added that “tens of thousands of workers in the American steel industry, the industry’s supply chain and the communities in which our industry operates have lost their jobs due to unfair and illegal practices by foreign producers.”

And AK Steel CEO Roger Newport said in a statement that “we are hopeful that this action on behalf of our Administration will help us and other steel producers in America compete on an even playing field in all of our markets.”

Newport, U.S. Steel chief Mario Longhi and several other steel CEOs met with Trump at the White House on Thursday to discuss the state of the industry and the administration’s plans to crack down on steel dumping.

Trump and Ross need to tread cautiously though. If the U.S. clamps down too aggressively on Chinese steel, China could retaliate by slapping tariffs on American-made cars, electronics and other consumer goods.

China also owns more than $1 trillion worth of U.S. government bonds. China has been steadily trimming its Treasury holdings in recent months. If China ramps up the pace of its sales, that could send long-term bond yields sharply higher –something Trump would not want to see as he tries to stimulate the U.S. economy.

But Trump seems to recognize the need to be careful with China. He has already backed off his campaign pledge to label China a currency manipulator in his first few days in office for example.
Published at Thu, 20 Apr 2017 19:29:41 +0000

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Top Reagan economist tells Trump: Cut taxes ASAP

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Trump signs 'Buy American, Hire American' order
Trump signs ‘Buy American, Hire American’ order

  @byHeatherLong

One of President Ronald Reagan’s top economic advisers has some blunt advice for President Trump: Put health care aside and focus on cutting taxes.

“Cut the corporate tax. Just do it,” economist Arthur Laffer told CNNMoney.

Trump really wanted a big win in his first 100 days in office, but the repeal of Obamacare failed spectacularly in March. Trump refuses to let it go. Last week, he stunned many by saying he still wants to “do health care first,” before tackling tax reform.

Laffer thinks that’s the wrong move. Laffer advised Trump during the campaign. He’s an informal counselor now, but he’s telling everyone in the White House who will listen to do what the Reagan team did: break up tax reform into small bits instead of trying to cram it all into one huge bill.

The easy win would be cutting business taxes, Laffer argues. It could even be done by August (the original deadline the White House set for action on taxes but has since backed away from).

“There’s no one who thinks a 35% federal corporate tax rate is appropriate,” Laffer says. He notes the U.S. has the highest tax rate on businesses out of any major economy in the world.

Trump proposed slashing business taxes to 15% on the campaign trail. Republican House Speaker Paul Ryan has pushed for a 20% top rate on business.

Republican economists tell Trump: Cut taxes ASAP

There’s a loud chorus of right-leaning economists telling Trump to drop health care and move on to tax cuts. In an Op-Ed in the New York Times on Wednesday, four of Trump’s top economic advisers from the campaign — Laffer, Steve Forbes, Larry Kudlow and Stephen Moore (a CNN contributor) — wrote, “Tax reform probably should have gone first, but now is the time to move it forward with urgency.”

The Op-Ed comes on the heels of Glenn Hubbard, President George W. Bush’s top economist, giving Trump that same advice back in March.

It’s notable though that Goldman Sachs(GS), the Wall Street firm that used to employseveral of Trump’s top advisers, now predicts tax cuts are “likely to slip to early 2018.”

The chorus of GOP economists says Trump should enact business tax cuts in 2017 and then tax reform for individuals in 2018.

Arthur Laffer says: Cut taxes but don’t cut spending yet

arthur laffer
Arthur Laffer was one of President Reagan’s key economic advisers. He also advised Trump during his campaign.

 

Laffer says the only reason Trump wants to tackle health care first is because overhauling Obamacare could generate more money for the U.S. Treasury. However, he argues Congress and the White House should stop obsessing about having tax cuts “paid for.” That would mean tax cuts do not add anything to America’s $19 trillion debt.

“The ‘pay for rule’ is the silliest rule I have ever heard in my life,” Laffer says. “You cannot balance the budget in the U.S. without growth.”

Laffer is telling Trump to cut taxes now and keep government spending about the same. The Trump Administration doesn’t appear to be heeding that advice. The White House is mulling deep cuts to the federal budget in order to fund an increase in military spending.

“Do not cut government spending right away. Wait until tax cuts have their effect on economic growth,” Laffer cautions.

How to revive Trump’s approval rating

Trump’s approval rating is just 41%, according to Gallup. That’s actually up from 35% a few weeks ago. But Laffer says Reagan faced something just as bad in his early years in the White House.

“Our first two years were a disaster,” Laffer says of the Reagan administration. He believes Trump will rebound if he gets back on track with tax cuts. “People criticized Reagan non-stop. Reagan made gaffes as well.”

President Reagan’s approval rating did hit a low of 35% as well, but that didn’t happen until 1983, two years into Reagan’s first term. During his first 100 days in office, Reagan had an approval rating of almost 70%.

Ronald Reagan approval ratings

 

The Kansas warning sign?

Laffer is a big champion of cutting taxes to spur growth. He’s often called the father of “supply-side economics” for his research on how cutting taxes can actually bring the government more revenue.

But Laffer’s theories have come under heavy criticism lately. Many point to Kansas, a state that cut taxes in 2012 and has since faced massive budget shortfalls and a floundering economy, as proof that Laffer is wrong.

Laffer says the real problem in Kansas is that Republican Governor Sam Brownback didn’t go far enough.

“The tax cut was too small. It was a rounding error,” Laffer told CNNMoney.
Published at Wed, 19 Apr 2017 16:59:15 +0000

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Bank of America’s wealth revenue rises on assets under management, fees

A Bank Of America sign is pictured in the Manhattan borough of New York August 21, 2014. REUTERS/Carlo Allegri

Bank of America’s wealth revenue rises on assets under management, fees

By Elizabeth Dilts| NEW YORK

Bank of America’s (BAC.N) wealth business reported revenue climbed 3 percent to $4.6 billion in the first quarter this year from last year on higher client assets under management and fees, Bank of America Chief Financial Officer Paul Donofrio said Tuesday.

The results come amid the backdrop of the bank’s decision to break from its wealth management peers and wind down its commissions-based retirement business and the departure of 145 financial advisers from Merrill Lynch’s “thundering herd.”

The firm committed to ending its IRA accounts last year in preparation for the U.S. Labor Department’s fiduciary rule that takes effect on June 9 and requires firms to eliminate potential conflicts of interest for advisers managing client’s retirement accounts.

“These solid results were produced in a period of change for the industry as firms and clients anticipate new fiduciary standards and other market dynamics such as the shift between active and passive investing,” Donofrio said on a call with analysts.

The bank’s Global Wealth and Investment Management division, which includes Merrill Lynch and U.S. Trust, reported long-term assets under managed rose to $29.2 billion in the three months ended March 31 from $18.9 billion in the fourth quarter last year.

The unit’s pretax profit margin, a key metric that can show growth across business segments, rose to 27 percent from 26 percent a year earlier.

Overall, the second-largest U.S. bank’s total revenue rose about 7 percent to $22.45 billion, beating the estimate of $21.61 billion.

Last month, Merrill Lynch partly walked back its statement that it would completely end commissions-paying retirement accounts after the fiduciary rule was delayed by 60 days from the original implementation date of April 10.

Nonetheless, the portion of advisers with more than half of their clients enrolled in fee-based accounts, which pay an adviser a flat-fee rather than a commission, continued to rise this quarter, up 2 percent to 66 percent of advisers compared to the prior quarter.

Brokerage and other non interest income fell $83 million over last year as the firm moves away from commissions-paying accounts.

Donofrio acknowledged that transactional revenue continued to decline, but said it was offset by higher assets under management and fees.

Merrill Lynch revenue rose 5 percent to $3.78 billion from the prior quarter on higher asset management fees and net interest income. The firm’s total number of advisers fell to 14,484 from 14,629 in the fourth quarter last year.

 

(Reporting By Elizabeth Dilts; Editing by Bernard Orr)
Published at Tue, 18 Apr 2017 16:59:42 +0000

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U.S. business group urges Washington to ‘use every arrow’ against China

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 U.S. business group urges Washington to ‘use every arrow’ against China

By Michael Martina| BEIJING

The United States should “use every arrow” in its quiver to ensure a level commercial playing field in China, a U.S. business lobby said on Tuesday, warning that 2017 could be the toughest year in decades for American firms in the country.

China’s policies designed to support domestic companies and create national champions have narrowed the space for foreign companies, the American Chamber of Commerce in China said in its annual business climate report.

The White House has said U.S and Chinese officials are fleshing out a pledge by leaders Donald Trump and Xi Jinping for a 100-day plan to cut the U.S. trade deficit with China, which reached $347 billion last year.

But the chamber said it hoped more attention would be paid to market access for American firms in China.

“Right now basically we are recommending everything you have in your quiver – please use every arrow possible, with the understanding that some of these points of leverage could be counterproductive to us,” chamber chairman William Zarit said, referring to possible backlash from Beijing.

He was speaking at a briefing on the report.

U.S. business groups want U.S. officials to act against Beijing on market imbalances, but not push the world’s two largest economies toward a trade war.

Nonetheless, more vociferous complaints by American businesses mark a shift from years past, when many companies eschewed the idea of forceful action by Washington for fear of retribution by China.

Foreign technology companies fear what they see as Beijing’s plans for subsidies of billions of dollars to domestic competitors and regulations that could force the surrender of key technology or hit competitiveness.

“With uncertainty stemming from political and economic transitions in both the U.S. and China, perceptions of a deteriorating investment environment for foreign companies in China, and a slowing economy, 2017 will likely be one of the most challenging years in decades for U.S. companies in China,” the chamber said.

China is committed to further opening its economy, in a process whose speed is “quite visible,” the foreign ministry said.

“China is already one of the most open developing nations,” spokesman Lu Kang told a regular news briefing.

U.S. business leaders also worry that Trump’s focus on reining in North Korea could undercut U.S. commercial interests in China. Last week, Trump tweeted that Beijing would get a better trade deal if it helped resolve the issue.

“I’m sorry to see there is a possibility we may lose some momentum on helping to level the playing field with China in our economic relationship, due to the situation in North Korea, if there is some kind of trade-off,” Zarit said.

(Reporting by Michael Martina; Additional reporting by Christian Shepherd; Editing by Clarence Fernandez)
Published at Tue, 18 Apr 2017 08:31:52 +0000

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Premarket: 6 things to know before the bell

 

premarket Monday
Click chart for more in-depth data.

1. China GDP: The Chinese economy picked up steam in the first quarter, with GDP up 6.9% from a year earlier.

That’s the fastest pace of growth since the third quarter of 2015 and slightly above what some economists had been predicting.

China’s ruling Communist Party has been prioritizing economic stability ahead of a key leadership reshuffle later this year when President Xi Jinping’s second term in power will start. But the International Monetary Fund and other agencies have urged the Chinese government to focus on tackling the country’s high levels of corporate debt.

The Shanghai Composite lost 0.7% on Monday, while the tech-heavy Shenzhen Composite shed 1.4%.

2. North Korea tensions: U.S. Vice President Mike Pence has issued a warning to North Korea after a failed attempted missile launch by the country on Sunday.

Pence, who was in South Korea, said that Pyongyang should not test the resolve of the U.S. “or the strength of our military forces.”

Increased tensions in the region, along with the deterioration in relationship between the U.S. and Russia and attacks in Syria, have forced investors to look for safe havens assets.

Gold, the Japanese yen and the Swiss franc all gained in early trading on Monday.

3. Moneygram bid: Chinese firm Ant Financial on Monday upped its offer to $1.2 billion for MoneyGram(MGI), one of the most popular avenues for sending money from the U.S. to Mexico and other countries.

The original deal struck in January was for $880 million, but U.S. rival Euronet Worldwide(EEFT) jumped in last month with an unsolicited $1 billion offer.

4. Global market overview:U.S. stock futures are edging lower.

Most European markets are closed for a holiday. Asian markets ended mixed.

Turkey’s main stock market advanced 1% after a referendum to expand the powers of President Recep Tayyip Erdogan saw the “yes” side winning by the slimmest of margins.

The Turkish lira also strengthened in response.

U.S. crude oil futures were down 0.9% to trade at $52.70 per barrel.

5. Earnings and economics:United Continental Holdings(UAL), the owner of United Airlines, will release its quarterly report after the closing bell on Monday, a week after becoming embroiled in a turbulent PR nightmare.

The company will hold a conference call with investors on Tuesday.

Netflix(NFLX, Tech30) will also report after the markets close on Monday. Sales for last quarter are expected to clock in at $2.6 billion, up from $2 billion this time last year.

6. Coming this week:

Monday – China GDP; United Airlines(UAL), Netflix(NFLX, Tech30) earnings
Tuesday – U.S. Tax Day; United Airlines(UAL) analyst call, Goldman Sachs(GS), Bank of America(BAC) and IBM(IBM, Tech30) report earnings
Wednesday – U.S. Crude oil inventories report, Morgan Stanley(MS), BlackRock(BLK), eBay(EBAY), American Express(AXP) publish results
Thursday – Mattel(MAT) earnings report
Friday – U.S. release of Samsung’s(SSNLF) Galaxy S8
Published at Mon, 17 Apr 2017 08:51:49 +0000

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Could Wix.com’s Rally Finally Be Coming to an End?

 

Could Wix.com’s Rally Finally Be Coming to an End?

Wix.com Inc. (WIX), a Tel Aviv-based web development platform targeting small businesses, has soared nearly 70% so far this year and 250% over the past 52 weeks. While the company is not profitable, its four-year compounded annual revenue growth rate stands at an enviable 38% with nearly 100 million users on its platform. The company’s history of beating earnings and achieving breakneck growth has led to its premium valuation.

After its recent move higher, the stock trades with a price-sales ratio of nearly 10x compared to an industry average of just 7x. The market for web development platforms is also becoming saturated with competitors like Shopify, Squarespace, and WordPress. WIX has benefited from its freemium business model (only ~3% of users are paying customers), but free customers bleed cash unless they’re converted into paying customers.

Raymond James recently downgraded Wix from Outperform to Market Perform due to these valuation concerns following its 250% rise over the past 52 weeks.

On a technical level, Wix faces a rising wedge chart pattern that could signal a bearish reversal. The stock attempted to breakout from its upper trend line and R2 resistance at $77.13, but has since moved lower toward its R1 resistance at $72.52. A breakdown from these levels could test lower trend line support at around $70 and a move below those levels could lead to a move to the 50-day moving average at $64.94 or S1 support at $61.87.

Wix is expected to report its first quarter earnings on May 3, which is an important day for traders and investors to watch. If it surpasses expectations, as it has done in the past, the stock could rally further. But, a failure to meet expectations could lead to a significant downturn as analysts become increasingly concerned over the company’s lofty valuation. The upshot is that it seems the company is well-capable of growing into its valuation over time.

Charts courtesy of StockCharts.com. Author holds no position in stocks mentioned.
Published at Fri, 14 Apr 2017 10:24:00 +0000

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Uber’s revenue hits $6.5 billion in 2016, still has large loss

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Uber’s revenue hits $6.5 billion in 2016, still has large loss

Ride-hailing service Uber Technologies Inc [UBER.UL] generated $6.5 billion in revenue last year and its gross bookings doubled to $20 billion, the company said on Friday.

Its adjusted net loss was $2.8 billion, excluding the operation in China it sold last year, Uber said.

As a private company, now worth $68 billion, Uber does not report its financial results publicly. It confirmed the figures in an emailed statement after Bloomberg reported the results.

Uber did not provide first quarter figures, but a spokeswoman said they “seem to be in line with expectations.”

For the final quarter of 2016, gross bookings increased 28 percent from the previous quarter, to $6.9 billion. But Uber’s losses grew to $991 million in the period, as revenues grew 74 percent to $2.9 billion from the third quarter.

In a separate emailed statement, Rachel Holt, Uber’s regional general manager for the United States and Canada, said: “We’re fortunate to have a healthy and growing business, giving us the room to make the changes we know are needed on management and accountability, our culture and organization, and our relationship with drivers.”

Uber has been rocked by a number of setbacks lately, including detailed accusations of sexual harassment from a former female employee and a video showing Chief Executive Travis Kalanick harshly berating an Uber driver.

The company is in the process of hiring a chief operating officer to help Kalanick manage it, repair its tarnished image and improve its culture.

Two of Uber’s high-level executives recently said they intended to leave, and last week the company’s communications head announced her departure.

 

(Reporting by Sangameswaran S in Bengaluru; Editing by Bill Rigby and Dan Grebler)
Published at Fri, 14 Apr 2017 22:59:19 +0000

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Apple granted autonomous car testing permit in California

Speculative rendering of an Apple Car (ClickMechanic.com)

Apple granted autonomous car testing permit in California

Apple is still in the car business. The autonomous car business.

Despite reports that the tech giant was scaling back its secretive automotive project, it was just granted a permit by the California Department of Motor Vehicles to test self-driving cars on public roads.

Apple joins a long list of companies on the registry that includes Google, Ford, Tesla, GM, and Bosch. That last one is doubly significant, because one of its facilities in Germany responsible for automotive parts showed up last month on an Apple supplier responsibility report, according to Apple Insider.

WHAT WILL THE APPLE CAR LOOK LIKE?

Apple hasn’t revealed exactly what its working on in the automotive space, but CEO Tim Cook has called it “interesting,” and that the company is always looking at new things. Recent rumors point to Apple being focused on the software and equipment that will enable autonomous cars, rather than the development of an entire vehicle.

We should find out more about it soon, as the permit requires public reporting of accidents involving the test vehicles and how often they require human intervention

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Trump is dialing back his economic promises. Bigly

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Watch Trump's stunning U-turns on key issues
Watch Trump’s stunning U-turns on key issues

  @byHeatherLong

President Trump and his top advisers appear to have a new message for America: Lower your expectations.

Trump played up his image as a businessman and dealmaker who could rescue the U.S. economy. The day he was sworn in, he vowed to create 25 million new jobs — the most of any president in history — and double the growth of the Obama era (among other promises).

Wall Street has roared in anticipation, with the stock market hitting new heights. Over on Main Street, small business and consumer confidence hit multi-decade highs.

Now, reality is setting in for how much Trump can really get done (and how fast) on the economy.

The big tax reform that was supposed to be done by August? Don’t bet on it. White House Press Secretary Sean Spicer put it this way: “It still would be a great opportunity before they leave for August recess, but we’re going to make sure we do this right.”

Trump’s campaign promise to greatly reduce — or even eliminate — America’s federal debt? “That was hyperbole,” White House budget director Mick Mulvaney told CNBC Wednesday. “I’m not going to be able to pay off $20 trillion worth of debt in four years.”

Labeling China a currency manipulator on Day One? That’s not happening (not even on Day 100). “They’re not currency manipulators,” Trump told the Wall Street Journal Wednesday in a major U-turn. During the campaign, Trump had said China has the upper hand against American manufacturers because it keep its currency artificially low.

Repealing Obamacare and replacing it with something “something terrific”? That’s up in the air. His first attempt failed in March when he couldn’t gin up enough votes in Congress. Many business leaders hoped Trump would move on to tax cuts, but Trump surprised many by telling Fox Business on Tuesday, “I have to do healthcare first.” Now, confusion abounds on what the next priority is.

Fixing America’s “disastrous trade policies”? The White House has decided to study the issue. Commerce Secretary Wilbur Ross announced a 90-day comprehensive trade review at the end of March. Much of the “trade war” talk has been dialed back after Trump’s recent meeting with Chinese President Xi.

Spending $1 trillion on infrastructure? That’s unlikely. Mulvaney said he and top economic adviser Gary Cohn are “assuming a $200 billion number.”

“The Trump train appears to be coming off the tracks as the president backpedals on a number of issues,” says Mike O’Rourke, chief market strategist at Jones Trading.

Investors run to ‘safe haven’ assets again

There are also his flip flops on NATO (now he’s really for it), China’s trade surplus (he says he’ll give China more favorable trade terms if they help out on North Korea), Syria (now the White House wants regime change there) and Janet Yellen (he bashed her on the campaign trail for propping up the Obama economy. Now he says he “likes her” and that low interest rates are good).

All this dialing back of expectations is causing a reality check in the markets.

U.S. stocks have stalled — and even dipped — since the S&P 500 closed at an all-time high on March 1. Even more telling is how investors are stocking up on “safe haven” assets like gold and government bonds.

Gold has jumped 7% in the past month, and the 10-year U.S. Treasury bonds are now yielding a mere 2.26%, a significant decline from 2.58% a month ago. The yield goes down when more people are buying bonds.

The key might still be tax reform

Since the election, the consensus view has been that Trump would do a major tax cut/overhaul (the biggest since the 1986 reform under President Reagan), scale back regulations and spend more money on the military and infrastructure. All of this was supposed to juice the economy — and stocks.

But now that thesis is breaking down. Any action on taxes probably won’t happen until later this year — or even 2018. Infrastructure and the massive budget cuts Trump wants are in doubt, and Trump’s “get tough” foreign policy is causing some alarm that the U.S. could be headed for more war.

“The 30 Freedom Caucus members in the House have sent a chill through the Trump inner circle. It’s clear they can block much of the Trump agenda, and Democrats seem lukewarm, at best, about cooperating,” says Greg Valliere, chief strategist at Horizon Investments. “So Trump has to lower expectations.”

Valliere still believes the “pro-business” faction of the White House, led by Goldman Sachs alum Gary Cohn, will prevail.

Business owners from Wall Street to Main Street would probably forget (and forgive) a lot of Trump’s flip flopping and uncertainty if tax reform gets done. But all the indications are the White House and Congress are a long way from making that happen.

“We’re talking about revamping one of the most complicated tax systems in the developed world, which would understandably take time to draft and negotiate across party lines,” says Lindsey Piegza, chief economist at Stifel Fixed Income.
Published at Thu, 13 Apr 2017 19:02:46 +0000

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Uber’s PR Chief Whetstone Quits Amid Crisis

 

Uber’s PR Chief Whetstone Quits Amid Crisis

By Craig Adeyanju | April 12, 2017 — 6:45 AM EDT

Uber Technologies Inc.’s communication chief Rachel Whetstone is leaving the ride-hailing giant amid a public-relation crunch embattling the company. (See also: Can Uber Solve Its Leadership Crisis?)

Whetstone made the announcement in a statement released on Tuesday without giving any reason for her departure. Whetstone joined Uber from Alphabet Inc. (GOOG) subsidiary Google where she also served as the head of communications and public policy. Whetstone’s deputy, Jill Hazelbaker, who also worked under Whetstone at Google, will assume the duties of Whetstone, according to a Wall Street Journal report.

Uber has been dealing with a raft of controversies in recent months. CEO Travis Kalanick has had to issue public apologies in recent weeks after a video of Kalanick berating an Uber driver went viral. There has also been a sexual harassment scandal around the company after an ex-Uber engineer, Susan Fowler, revealed that she was sexually harassed during her time at Uber. Alphabet has also sued the ride-hailing firm for allegedly stealing a patented self-driving car technology. (See also: Google’s Self-Driving Car Division Sues Uber)

Whetstone’s departure is the latest in a string of high-profile departures. President of Ride-Hailing Jeff Jones, who joined from Target Corp. (TGT) last September to help improve Uber’s reputation, left in March, saying the ride-hailing company’s beliefs and approach to leadership were inconsistent with his own ideologies. Ed Baker, vice president of product and growth, Raffi Krikorian, who was in charge of Uber’s self-driving car activities and Brian McClendon, vice president of maps and business platform had also departed Uber.

Whetstone has been instrumental in developing responses to Uber’s recent crisis, which included an advanced external investigation into the sexual harassment claims brought forward by Fowler. (See also: Uber’s Race to Catch Asian Rivals May Hurt Profits)

Whetstone joined Uber, which is valued at around $70 billion, at a time when the company was putting together an experienced management team in response to the rapid expansion the ride-hailing company was undergoing, especially to deal with regulators in cases where the company’s operations violated local policies such as taxi laws.
Published at Wed, 12 Apr 2017 10:45:00 +0000

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U.S. job openings rise to seven-month high in February

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 U.S. job openings rise to seven-month high in February

U.S. job openings rose to a seven-month high in February while the pace of hiring slipped, pointing to a growing skills mismatch and a further tightening of labor market conditions.

Job openings, a measure of labor demand, increased 118,000 to a seasonally adjusted 5.7 million, the Labor Department said on Tuesday. That was the highest level since July and lifted the jobs openings rate to 3.8 percent after holding steady at 3.7 percent for four straight months.

Hiring, however, slipped to 5.3 million from 5.4 million in January. The hiring rate dipped to 3.6 percent from 3.7 percent the prior month.

“It shows you that there is one of the most gigantic skills mismatches out there across the country that we have ever seen in history,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The U.S. labor market is viewed as being near or at full employment. The unemployment rate is at a near 10-year low of 4.5 percent, below the most recent Federal Reserve median forecast for full employment.

(Reporting By Lucia Mutikani; Editing by Meredith Mazzilli)
Published at Tue, 11 Apr 2017 15:00:32 +0000

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Guinness Exports Subject to Brexit Uncertainty

Guinness Exports Subject to Brexit Uncertainty

By Shoshanna Delventhal | April 8, 2017 — 11:09 PM EDT

Diageo Plc’s (DEO) iconic Guinness beer could face problems as the Dublin-based brewer foresees potential border compilations between the United Kingdom and Ireland, a European Union member state.

The 310-mile border between The Republic of Ireland and Northern Ireland will serve as the only land border between the U.K. and another EU country. Barrels of Guinness cross this border twice before being shipped out to beer connoisseurs around the world.

Companies Fear Return of Hard Border

Ingredients for Guinness are shipped from across Ireland to Dublin where they are mixed and fermented at the brand’s famous brewery at St. James Gate. The stout is then transferred into tanker trucks and moved 90 miles north to a Diageo packaging facility across the border in East Belfast. The Guinness, ready to hit the markets, then passes the unmarked border a second time before returning back home to Dublin.

Over the past two decades, an open border has allowed for the overall peaceful exchange of trade and culture between the U.K. and Ireland. While E.U. and British politicians say border controls between the states won’t return, many wonder how realistic that is. “For me, there’s no question, there has to be some sort of customs visibility on either side of the border,” Bloomberg quoted Robert Murphy, a former European Commission worker in Brussels.

Restraint of Trade?

The Irish government estimates cross-border trade between the U.K. and Ireland surpasses an annual 3 billion euros, or about $3.2 billion. A hard border could cost corporations big time, as the two states have a highly integrated agri-food sector. Diageo, for example, is estimated to lose 100 euros on each beer journey from Ireland just due to a time delay, amounting to 1.3 million euros in additional cost per year given border controls revamp.

The Economic & Social Research Institute estimated Brexit​ could cut trade flows between Ireland and the U.K. by 20%. Diageo for one, has said it will work with the the two governments on finding a solution to the border issue. E.U. leaders are scheduled to meet later this month for a summit to begin what is estimated to become two years of Brexit negotiations. (See also: Diageo: Finally Benefiting From ‘Transition Year’?)
Published at Sun, 09 Apr 2017 03:09:00 +0000

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