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Merrill: “The undocumented economy”

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Merrill: “The undocumented economy”

by Bill McBride on 2/27/2017 04:45:00 PM

A few excerpts from a Merrill Lynch research note: The undocumented economy

Let’s consider three scenarios:

1.Improved border security and more aggressive deportations that lower the number of undocumented workers by 200,000 per year. This could be achieved by increasing annual deportations from about 400,000 to 500,000 and stopping 100,000 more people per year at the border.

2. Cut the number of undocumented workers in half over a four year period through tougher enforcement.

3. Effectively eliminate all undocumented workers over a four year period.

In the first scenario the economic impacts are likely to be very small. …  The story is very different under the second and third scenarios. Undocumented immigrants tend to specialize in certain kinds of jobs. Hence cutting the labor force in these areas could hurt the productivity of complementary workers causing indirect loses beyond the direct labor force reduction. … With full deportation an outright recession seems plausible, as output would be disrupted and as the Fed may be unwilling to act because a labor shortage would mean a surge in wage and price inflation.

Undocumented immigrants are a relatively small part of the overall labor force [and] our baseline is relatively benign, but we see significant downside risks to that baseline.

Read more at http://www.calculatedriskblog.com/#dzdy2gcvMFzvoz6W.99

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Buffett expected to tout passive investing in Berkshire annual letter

File Photo: Berkshire Hathaway CEO Warren Buffett plays bridge during the Berkshire annual meeting weekend in Omaha, Nebraska May 3, 2015. REUTERS/Rick Wilking/File Photo

Buffett expected to tout passive investing in Berkshire annual letter

By Jonathan Stempel| NEW YORK

Warren Buffett, widely considered one of the world’s best investors, is likely to tout the merits of passive investing this weekend to readers of his annual letter to Berkshire Hathaway Inc (BRKa.N) shareholders.

The letter, slated for release around 8 a.m. EST on Saturday, will probably focus on familiar themes for the 86-year-old Buffett, with many single-spaced pages reviewing Berkshire’s businesses and managers, Wall Street, the economy and perhaps even politics.

“The letters are written as much for sophisticated financial people as for people in high school,” said Andy Kilpatrick, author of “Of Permanent Value: The Story of Warren Buffett.” “It’s a fun read, and when you get through it, you think, ‘Wow, I could be doing better with my life and my investing.'”

Buffett believes most stock investors are better off with low-cost index funds than paying higher fees to managers who often underperform. He told Fortune magazine he expects to write “a lot” about passive investing. (here)

Berkshire itself might seem anomalous, with shares of the Omaha, Nebraska-based conglomerate having generated a roughly 2 million percent gain in Buffett’s nearly 52 years at the helm.

In 2016, Berkshire’s stock price rose about 23.4 percent, easily outpacing the market, though most investors who bought its stock in recent years have achieved closer to market-average returns.

Kilpatrick expects Buffett to discuss Precision Castparts, an aircraft parts maker that Berkshire bought last January for $32.1 billion, its biggest acquisition.

Buffett is likely to discuss other Berkshire businesses, such as insurance and the BNSF railroad, and shower praise on Berkshire managers, perhaps including investing deputies Todd Combs and Ted Weschler.

Combs alerted Buffett to Precision Castparts, and Buffett may discuss what drove Berkshire’s unexpected, multi-billion-dollar investments in Apple Inc (AAPL.O) and the four biggest U.S. airlines.

Buffett may also focus on his desire to spend Berkshire’s huge cash pile after Kraft Heinz Co (KHC.O), which Berkshire partly owns, on Sunday scrapped a bid to buy food rival Unilever Plc (ULVR.L) that Berkshire might have helped finance.

U.S. President Donald Trump may also be a focus for Buffett, who was a vocal supporter of Hillary Clinton.

Buffett alluded elliptically to Trump in last year’s letter, bemoaning the “negative drumbeat” from presidential candidates talking down U.S. economic prospects.

Berkshire is also expected to report fourth-quarter results. Analysts expect operating profit of around $4.5 billion, or $2,717 per Class A share, down from $4.67 billion last year, Thomson Reuters I/B/E/S said.

 

(Reporting by Jonathan Stempel in New York; Editing by Jennifer Ablan and Dan Grebler)

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Published at Thu, 23 Feb 2017 21:03:24 +0000

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Wells Fargo fund business on the defensive amid sales scandal

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Wells Fargo fund business on the defensive amid sales scandal

When a scandal over unauthorized accounts rocked Wells Fargo & Co’s retail division last fall, executives at its asset management arm sprang into action to limit its fallout at an already tough time for their business.

A Reuters’ review of minutes from about two dozen state and municipal pension board meetings across the country from October to December showed Wells Fargo wealth management executives offering apologies, weighing fee cuts and emphasizing their own controls on staff hiring and vetting.

Joe Ready, head of Wells Fargo’s institutional retirement plan business, for example, told trustees of the city of San Diego’s defined contribution plan that participants’ $1 billion in assets were walled off from other parts of Wells Fargo.

Last September, the bank said it reached a settlement with the authorities over findings that its branch staff opened up to 2 million unauthorized customer accounts.

“Mr. Ready apologized for any inconveniences the recent incident has caused. Mr. Ready confirmed that the retirement plan accounts are not impacted by the recent events,” according to minutes of the Oct. 6 meeting published on the city’s website.

San Diego pension officials declined to comment for this story. Wells Fargo declined to make Ready available and said it would not comment on its interactions with specific clients, but said in a statement:

“We certainly understand the concerns about what happened in our community bank and have been in regular dialogue with our investor clients regarding the settlement,” the bank said.

It is difficult to determine the scandal’s precise business impact. Like other fund managers, Wells Fargo is grappling with the seismic shift of money into funds that track indices. Even before the scandal erupted investors had been pulling money out of its funds.

Yet its fund unit has seen faster outflows than its peers and the withdrawals accelerated in the last quarter of 2016.

Wells Fargo’s core mutual funds business, for example, had the biggest market share decline among large U.S. fund families in 2016, according to Morningstar Inc data. In December alone, the funds recorded $7.1 billion in net withdrawals, two and a half times more than second-worst performer.

 

CYCLICAL UNDERPERFORMANCE

Asked to comment on the data, the bank said in a statement it did not believe “there is a connection between our fund flows and the September 2016 sales practice settlement between Wells Fargo and regulators.”

“The recent underperformance of many active managers is simply cyclical,” it added in the statement.

The bank declined to make executives available for further comment.

In one case, however, the accounts debacle played a role in a lost bid for new business.

The bank’s $482 billion asset management arm was among three finalists to run a $40 million bond portfolio for Oakland’s police and fire pension fund last fall.

The contract went to a firm with 17 employees and $1.5 billion in assets and David Sancewich, a consultant who helped the pension fund with the selection, told Reuters the scandal influenced Oakland’s choice.

“It was one variable as part of the decision process,” he said in an email.

In another instance, however, Wells Fargo’s assurances appeared to have had some mitigating effect. In Vermont, administrators of Champlain College who considered dropping the bank as an underwriter of a $77 million bond because of the scandal, ultimately chose to stick with Wells Fargo following a review of the bank’s operations.

When contacted, the college provided Reuters with a copy of an October memo, which said it made the decision “following a robust discussion,” while stressing that the school had no relationship with Wells Fargo’s retail unit. Champlain declined further comment.

To be sure, Wells Fargo funds business, which ranks 28th nationally, plays a secondary role for investors, who focus more on other, bigger divisions of the bank.

“It’s a small piece of Wells Fargo’s business and doesn’t drive the stock price,” said Shannon Stemm, an analyst at Edward Jones.

Still, at least in the immediate aftermath of the scandal that led to a $185 million settlement and dismissal of 5,300 employees, some of the bank’s staff grappled with the repercussions.

Employees at Wells Fargo’s institutional retirement and trust unit were fielding about 75 calls a week after the settlement from participants in pension plans in which the bank acts as custodian or record-keeper, Ready told San Diego pension officials at a special meeting in October, the minutes showed.

The callers wanted assurances that their money was walled off from the retail banking operations, Wells Fargo executives told San Diego pension officials.

One executive sought to distance herself from the head office altogether.

At a Nov. 10 meeting of the North Carolina supplemental retirement board, Carrie Callahan, a managing partner at Galliard Asset Management, noted how Galliard was a subsidiary of Wells Fargo but a distinct brand.

“She stressed that there had been no impact to Galliard’s business due to the activity at Wells Fargo,” according to the meeting’s minutes.

Callahan declined to comment. North Carolina officials were not available to comment.

 

(Editing by Carmel Crimmins and Tomasz Janowski)
Published at Tue, 21 Feb 2017 06:03:21 +0000

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SoftBank shares up; sources say company willing to cede control of Sprint

File Photo: SoftBank Group Corp Chairman and CEO Masayoshi Son attends a news conference in Tokyo, Japan, February 8, 2017. REUTERS/Toru Hanai

SoftBank shares up; sources say company willing to cede control of Sprint

Shares in SoftBank Group Corp (9984.T) rose nearly 3 percent in morning trade on Monday after a Reuters report that the Japanese company is prepared to cede control of Sprint Corp (S.N) to T-Mobile US Inc (TMUS.O) to clinch a merger of the two U.S. wireless carriers.

SoftBank is expected to approach T-Mobile parent Deutsche Telekom AG (DTEGn.DE) for negotiations when an ongoing auction of airwaves ends in April and a ban on talks between rivals is lifted, people familiar with the matter told Reuters.

A potential deal could bolster SoftBank’s shift towards what billionaire founder Masayoshi Son calls the “Berkshire Hathaway of the tech industry,” or a company with cutting-edge tech investments as the telecoms services markets mature.

The proceeds of the possible sale of all or a portion of its Sprint stake to a third party could improve SoftBank’s credit rating and “allow it to dedicate more of its managerial and financial resources to growth businesses,” analysts at SMBC Nikko Securities said in a research note.

While SoftBank’s domestic mobile business remains a cashcow necessary to fund investments, analysts have said it may be hard for Sprint to grow on its own as it lacks the scale to challenge larger rivals.

Son told reporters earlier this month that he was focused exclusively on an acquisition of T-mobile three years ago, but that Sprint’s return to profits has opened various new possibilities for SoftBank in an upcoming industry realignment.

Son’s previous attempt to merge T-Mobile and Sprint, ranked third and fourth respectively, fell through amid opposition from U.S. antitrust regulators.

 

(Reporting by Makiko Yamazaki; Editing by Chang-Ran Kim and Stephen Coates)
Published at Mon, 20 Feb 2017 00:56:59 +0000

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Kraft walks away from ‘friendly’ bid for Unilever

FILE PHOTO – The company logo for Unilever is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 17, 2017. REUTERS/Brendan McDermid/File Photo

 

Kraft walks away from ‘friendly’ bid for Unilever

By Carl O’Donnell| NEW YORK

U.S. food company Kraft Heinz Co (KHC.O) withdrew its proposal for a $143-billion merger with larger rival Unilever Plc (ULVR.L), the companies said on Sunday, raising questions about whether Kraft will turn its focus to another target.

Kraft had made a surprise offer for Unilever to build a global consumer goods behemoth that was flatly rejected on Friday by Unilever, the maker of Lipton tea and Dove soap.

Kraft withdrew its offer because it felt it was too difficult to negotiate a deal following the public disclosure of its bid so soon after its approach to Unilever, according to people familiar with the matter who requested anonymity to discuss confidential deliberations.

Kraft had not expected to encounter the resistance it received from Unilever, one of the people said. Some key concerns raised during talks included potential UK government scrutiny, as well as differences between the companies’ cultures and business models, the person added.

“Kraft Heinz’s interest was made public at an extremely early stage,” Kraft Heinz spokesman Michael Mullen said in a statement. “Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction. It is best to step away early so both companies can focus on their own independent plans to generate value.”

Kraft was forced to publicly disclose its offer on Friday to comply with Britain’s takeover regulations, after rumors of its approach to Unilever circulated among stock traders.

Under UK takeover rules, Kraft’s public withdrawal of its offer precludes it from reviving takeover talks with Unilever for six months.

A combination would be the third-biggest takeover in history and the largest acquisition of a UK-based company, according to Thomson Reuters data. The combined entity would have $82 billion in sales.

The premature exposure of Kraft’s bid left the aggressive acquisition machine scrambling to craft an appetizing message for shareholders, the press, Unilever’s rank and file, and British and Dutch leaders.

Prime Minister Theresa May ordered top officials to investigate if the proposed deal posed potential threats to British economic interests, the Financial Times reported.

May has been adamant the government should be more active in vetting proposed foreign acquisitions of UK companies. She had previously singled out Kraft’s 2010 acquisition of another British household name, Cadbury Plc, as an example of a deal that should have been blocked.

A deal for Unilever would have marked the next installment of Brazilian private equity firm 3G Capital Management Inc’s longstanding strategy of buying food companies and slashing costs.

In 2013, 3G teamed up with billionaire investor Warren Buffett to acquire Heinz and then purchased Kraft two years later. It is now the second-largest shareholder in Kraft, behind Buffett’s Berkshire Hathaway Inc (BRKa.N).

Unilever feared that a merger with Kraft, under 3G Capital’s relentless cost-cutting, risked eroding the value of its brands and could impede its expansion in emerging markets, which requires more investment, according to people familiar with the company’s thinking.

Unilever also saw its household products and consumer care divisions as too distinct from Kraft’s food business, the people added.

3G made its name in corporate America by orchestrating large debt-laden acquisitions and then slashing costs dramatically to juice profits. Using a strategy called zero-based budgeting, its managers must justify all expenses, from pencils to forklifts.

 

KRAFT STILL HUNGRY?

The breakdown in deal talks sparked speculation among analysts and investors about whether Kraft might attempt to purchase another large consumer goods company as a backup plan.

“We believe this announcement serves as a reminder – if needed – of (Kraft’s) interest, capacity, and commitment to pursuing large-scale M&A in a potentially near-term time horizon,” said Barclays analyst Andrew Lazar in a note.

Its bid for Unilever, where more than 60 percent of sales come from home and personal care products, signals a willingness to make big buys outside of its historic area of focus – food – said Sanford Bernstein analyst Ali Dibadj.

He cited Colgate-Palmolive Co (CL.N) as one potential target, noting that its stock popped 4 percent Friday on news that Kraft was eyeing Unilever.

However, the breakdown of the Unilever talks means that some food companies that have long been speculated as potential targets for Kraft, such as Mondelez (MDLZ.O), are still very much on the table, said an industry banker, who declined to be named because he was not authorized to speak to the press.

Low interest rates and cheap debt have fueled big cross-border deals, marking the busiest start to the year for M&A activity on record. The bid also reflected a broader interest in UK companies as acquisition targets, in part due to the British pound, which has been under pressure since Britain announced plans to withdraw from the European Union.

Labor union representatives expressed relief that the deal talks broke down, citing concern about its potential effect on jobs and consumers.

“How many scares must the government put UK workers through before they actually do as they have promised, which is to make the takeover process socially responsible?” said Len McCluskey, general secretary at Unite, Britain’s largest union.

 

(Reporting by Ismail Shakil in Bengaluru, Pamela Barbaglia in London, Lauren Hirsch and Greg Roumeliotis in New York; Editing by Nick Zieminski and Phil Berlowitz)
Published at Mon, 20 Feb 2017 00:13:52 +0000

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Ouch. Fund loses $600 million betting against Trump rally

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Stocks on longest record run in 25 years
Stocks on longest record run in 25 years

  @mattmegan5

Betting against Wall Street’s ferocious Trump rally can be dangerous.

A mutual fund using complex trading strategies lost $600 million over just five days because it picked a terrible time to be bearish.

The alarming losses for the $3.2 billion Catalyst Hedged Futures Strategy Fund underscores just how powerful the rise in the stock market has been.

The Dow, S&P 500 and Nasdaq all closed at record highs for five days in a row through Wednesday, something that hadn’t happened since January 1992. President Trump even tweeted about the feat.

The problem is that Catalyst placed defensive bets that would protect investors from market turmoil, but expose them to losses if the market got any higher.

That’s exactly what happened, causing the mutual fund to suffer a loss of 15% through Thursday’s close, Catalyst confirmed to CNNMoney.

The situation was worsened by the fact that the options that Catalyst had bet on were set to expire on Friday, making them virtually worthless given the market rally.

“This type of market, rapidly rising prices with low and falling volatility, is the exact thing the fund is positioned against,” Catalyst Capital Advisors CEO Jerry Szilagyi said in a statement.

The losses sparked rumors on Wall Street over the fund’s financial health. But Szilagyi said investors didn’t dramatically yank their money and insisted the fund “is not, and has not been, under any duress.”

Szilagyi said the losses triggered a risk management process to “kick in,” causing Catalyst to reverse its bearish position into a bet that the market would rise.

Michael Block, chief strategist at Rhino Trading, said the fact that Catalyst and possibly other firms had to turn bullish may have actually helped contribute to the rally on Wall Street. He said the episode shows how strong market momentum can run over funds leaning in the wrong direction.

“It spirals and snowballs, forcing you to buy high and sell low,” Block said.

Catalyst emphasized that it has no further exposure to the bets that got the fund in trouble.

“We have navigated through this type of market in the past, and we believe we will do so again,” Szilagyi said.

Of course, the big rally on Wall Street has now cooled off a bit. The Dow opened down nearly 100 points on Friday after six-consecutive record days.

Block noted that the markets dipped a bit on Thursday during Trump’s press conference. He said Trump didn’t inspire confidence during the event because he focused way more on attacking the media than touting pro-growth tax cuts and deregulation.

“We’ve seen the market rally quite a bit when he talks about tax cuts and Dodd-Frank going away,” Block said. “But when he’s hectoring a journalist, it just reminds me of Hugo Chavez. What’s he doing?”

Published at Fri, 17 Feb 2017 17:16:31 +0000

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Samsung chief Lee arrested as South Korean corruption probe deepens

Samsung Group chief, Jay Y. Lee, leaves the Seoul Central District Court in Seoul, South Korea, February 16, 2017. Picture taken on February 16, 2017. Shin Wong-soo/News1 via REUTERS

 

Samsung chief Lee arrested as South Korean corruption probe deepens

By Hyunjoo Jin and Joyce Lee| SEOUL

Samsung Group chief Jay Y. Lee was arrested on Friday over his alleged role in a corruption scandal rocking the highest levels of power in South Korea, dealing a fresh blow to the technology giant and standard-bearer for Asia’s fourth-largest economy.

The special prosecutor’s office accuses Lee of bribing a close friend of President Park Geun-hye to gain government favors related to leadership succession at the conglomerate. It said on Friday it will indict him on charges including bribery, embezzlement, hiding assets overseas and perjury.

The 48-year-old Lee, scion of the country’s richest family, was taken into custody at the Seoul Detention Centre early on Friday after waiting there overnight for the decision. He was being held in a single cell with a TV and desk, a jail official said.

Lee is a suspect in an influence-peddling scandal that led parliament to impeach Park in December, a decision that if upheld by the Constitutional Court would make her the country’s first democratically elected leader forced from office.

Samsung and Lee have denied wrongdoing in the case.

Prosecutors have up to 10 days to indict Lee, Samsung’s third-generation leader, although they can seek an extension. After indictment, a court would be required to make its first ruling within three months.

Prosecutors plan to question Lee again on Saturday.

No decision had been made on whether Lee’s arrest would be contested or whether bail would be sought, a spokeswoman for Samsung Group [SARG.UL] said.

“We will do our best to ensure that the truth is revealed in future court proceedings,” the Samsung Group said in a brief statement after Lee’s arrest.

The same court had rejected a request last month to arrest Lee, but prosecutors this week brought additional accusations against him.

“We acknowledge the cause and necessity of the arrest,” a judge said in his ruling.

The judge rejected the prosecution’s request to also arrest Samsung Electronics (005930.KS) president Park Sang-jin.

Shares in Samsung Electronics ended Friday down 0.42 percent in a flat wider market .KS11.

Ratings agencies did not expect any impact on the flagship firm’s credit ratings, and said Lee’s arrest would accelerate improvements in management transparency and corporate governance.

 

SENSITIVE TIME

While Lee’s detention is not expected to hamper day-to-day operations at Samsung firms, which are run by professional managers, experts said it could hinder strategic decision-making at South Korea’s biggest conglomerate, or chaebol.

Samsung is going through a restructuring to clear a succession path for Lee to assume control after his father was incapacitated by a heart attack in 2014.

Decisions that could be complicated by Lee’s arrest include deliberations over whether to reorganize the group under a holding company structure, as well as its plan to abandon its future strategy office, a central decision-making body that came in for criticism during the scandal.

Staff moves have also been in limbo. Samsung, which employs around half a million people, has yet to announce annual personnel promotions and changes, which it typically does in December.

One employee at Samsung Electronics’ chip division said colleagues were unsettled that prosecutors had singled out Samsung. “The mood is that people are worried,” the person said.

However, another Samsung Electronics employee described the situation as business as usual. “It wouldn’t make sense for a company of that size to not function properly just because the owner is away.”

Both employees declined to be identified, given the sensitivity of the matter.

Lee’s incarceration comes as Samsung Electronics tries to get past last year’s disastrous roll-out of its Galaxy Note 7 smartphones, which were prone to fires. It is under pressure for the upcoming launch of its next flagship phone, the Galaxy S8, to be a success.

 

WIDER IMPACT

Major business groups criticized the decision, worried about the impact on Samsung and the country.

“A management vacuum at Samsung, a global company representing the Republic of Korea, will increase uncertainty and undermine global confidence, posing a big burden on the already struggling economy,” the Korea Employers Federation said.

Lee’s arrest gives a boost to prosecutors who have zeroed in on Samsung to build their case against President Park and her close friend Choi Soon-sil, who is in detention and faces charges of abuse of power and attempted fraud.

Both Park and Choi have denied wrongdoing.

Prosecutors have focused on Samsung’s relationship with Park, 65, accusing the group of paying bribes totaling 43 billion won ($37.74 million) to organizations linked to Choi to secure government backing for the controversial 2015 merger of two Samsung units, a deal that was seen as key to smoothing Lee’s succession.

The prosecution office on Friday accused Lee of bribery not only in seeking to smooth the merger but in the broader process of his succession. A prosecution spokesman did not elaborate.

If parliament’s impeachment of Park is upheld, an election would be held in two months. In the meantime, she remains in office but stripped of her powers.

Her would-be successors praised the decision to arrest Lee.

“We hope it marks a beginning to end our society’s evil practice of cozy ties between government and corporations and move towards a fair country,” said Kim Kyoung-soo, a spokesman for Moon Jae-in, a member of the liberal opposition Democratic Party who is leading opinion polls in the presidential race.

 

(Additional reporting by Ju-min Park and Cynthia Kim; Writing by Tony Munroe; Editing by Lincoln Feast and Ian Geoghegan)

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Published at Fri, 17 Feb 2017 08:27:44 +0000

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Cisco helps Wall Street extend streak of record highs

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By Yashaswini Swamynathan

U.S. stocks eked out enough gains on Thursday for the three main indexes to notch a record intraday high for the sixth straight session, helped by gains in Cisco.

The rally was sparked a week back by President Donald Trump’s vow of a ‘phenomenal’ tax announcement. Robust economic data has also been a boost, while bank stocks have risen on prospects of an upcoming interest rate hike.

Trump tweeted on Thursday: “Stock market hits new high with longest winning streak in decades. Great level of confidence and optimism – even before tax plan rollout!”

“The market is likely to take a breather after recklessly rising to continued record highs without a pause,” Perter Cardillo, chief market economist at First Standard Financial wrote in a note.

This type of action is due to the market expecting a perfect fiscal reform and that maybe placed on hold, he said.

The S&P 500 technology index .SPLRCT rose 0.29 percent and gave the broader index its biggest boost. Cisco (CSCO.O), which jumped 2.8 percent to $33.76 was the top stock on the three main indexes.

Adding to strong data points of late, a Labor Department report Thursday that showed the number of Americans filing for unemployment benefits rose less than expected last week.

At 9:38 a.m. ET (1438 GMT), the Dow Jones Industrial Average .DJI was up 14.36 points, or 0.07 percent, at 20,626.22, while the Nasdaq Composite .IXIC was up 10.13 points, or 0.17 percent, at 5,829.57.

The S&P 500 .SPX was up 0.96 points, or 0.04 percent, at percent, at 2,350.21. The index ended higher for the seventh session in a row on Wednesday, its first such streak since September 2013.

Six of the 11 major S&P sectors were higher, with utilities .SPLRCU and real estate .SPLRCR gaining the most, after two straight days of losses.

NetEase (NTES.O) jumped nearly 10 percent to $287.19 following the Chinese online game developer’s revenue beat.

Molina Healthcare (MOH.N) tumbled 16 percent to $50.35 after the health insurer reported a fourth-quarter loss and forecast 2017 profit far below estimates.

Alexion Pharma (ALXN.O) rose 2.9 percent to $135.84 after the company gave a 2017 revenue forecast that a Leerink analyst said would likely quell investor concerns.

Advancing issues outnumbered decliners on the NYSE by 1,425 to 1,132. On the Nasdaq, 1,231 issues rose and 972 fell.

The S&P 500 index showed 39 new 52-week highs and no new lows, while the Nasdaq recorded 75 new highs and eight new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)
Published at Thu, 16 Feb 2017 14:54:20 +0000

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States’ rights? Not so much, when it comes to retirement savings

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By Mark Miller| CHICAGO

So much for states’ rights.

The Republican-controlled Congress took aim this week at states that are creating retirement saving programs for workers who do not already have 401(k)s through their jobs. Seven states – including populous California, Illinois and Maryland – are implementing government-sponsored auto-IRA plans, and another 30 are considering their own, according to AARP, which has been supporting and tracking the initiatives.

Saving for retirement should not be all that controversial, but state plan opponents in the business community object to an expansive government role and the mandatory features of some of the state plans.

The House of Representatives approved a resolution on Wednesday that would invalidate an important rule handed down last year by the U.S. Department of Labor (DoL) in support of the state plans. The measure now goes to the Senate. The rule exempts state plans from the Employee Retirement Income Security Act of 1974 (ERISA) if they meet certain conditions. That provides important reassurance to employers participating in the plan, who worry about compliance cost and legal liability under ERISA.

The House resolution is an especially aggressive reach into the business of states – and one rich in irony, considering Republicans’ frequent worship at the altar of states’ rights. But the auto-IRA programs have powerful opponents in the financial services industry who do not want to see a lower-cost government-sponsored “public option” to the retirement products they sell.

“This is a payoff to the financial services industry,” said Joshua Gotbaum, a guest scholar at the Brookings Institution who is serving as chairman of the Maryland auto-IRA program.

“They are afraid of competition that would come from a huge program like this that forces them to cut their own fees,” said Gotbaum, who is a former director of the Pension Benefit Guaranty Corporation, the federally sponsored agency that insures private sector pensions.

The resolution adds the auto-IRA to an anti-consumer hit list that already includes the DoL fiduciary rule governing advice to retirement savers. (reut.rs/2lP6l1v).

Repeal would not stop the states that have already enacted programs, Gotbaum said. But it will create uncertainty. “It might mean that states will need to get opinions from lawyers or the courts on whether the plans are subject to ERISA or not.” And repeal could well slow down the momentum among states still considering the idea.

The state initiatives started after the Obama administration’s proposal for a national auto-IRA program was shot down by the Republican Congress.

And support for the idea across the country has been strong. Just last week, a telephone poll of 800 Americans by the National Institute on Retirement Security found a 75 percent public approval rating for state plans.

 

LESS GOVERNMENT?

Opponents’ objections – summarized in a letter to lawmakers this week from a business coalition led by the U.S. Chamber of Commerce – include opposition to the mandatory participation feature of some state plans, although the mandate is to simply require employers to enable payroll deductions (but not contributions) for uncovered workers. They also worry about the administrative burden of managing plans with differing standards in multiple states.

The Chamber letter also argues that states cannot be trusted to run these programs in light of underfunding of public-worker pension funds in some states. That argument does not hold water, since pooled pension plans funded by taxes and worker contributions bear no resemblance whatever to the auto-IRA plans, which envision individual accounts held by a third party custodian.

So this really is an ideological attack on the idea that government should take steps to help people save more money. “Our nation faces difficult retirement challenges, but more government isn’t the solution,” said U.S. Representative Tim Walberg, a Michigan Republican who co-sponsored the House resolution.

Never mind that the private sector has failed to deliver on coverage: 401(k)s have existed since the 1980s, yet only half of U.S. private-sector workers participate in a retirement plan at any given time, according to the Center for Retirement Research at Boston College.

Republicans are coalescing around a different approach to expanded retirement plan coverage. The Retirement Enhancement and Savings Act (RESA), approved by the Senate Finance Committee last year, aims to expand saving through enhanced tax credits for small employers who start workplace plans. The bill also would make it easier for businesses to create shared retirement plans – sometimes called Multiple-Employer Plans (MEPs) – as a way to cut costs and administrative burden.

MEPs have enjoyed bipartisan support, but they would be voluntary. Few experts think they would have as much impact on coverage levels as the mandatory state IRA plans. “There is a lot of skepticism that if these plans don’t have a required participation feature of some sort, it won’t be enough to shift the tide,” said Shai Akabas, director of fiscal policy at the Bipartisan Policy Center. “There needs to be more of a gentle nudge in that direction.”

AARP, which has been a major lobbying force in favor of state plans, agrees that these plans may not be the perfect solution – and it does not object to the Republican MEP initiative. But it holds that some action is better than none.

“We do have a preference for things like auto-enrollment and payroll deduction, because behavioral economics tell us that these things work,” said Cristina Martin Firvida, AARP’s director of financial security. “But letting the perfect be the enemy of the good doesn’t expand coverage for anyone. We don’t want to keep waiting for the perfect solution to come along.”

 

(Editing by Matthew Lewis)
Published at Thu, 16 Feb 2017 12:10:00 +0000

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Berkshire takes huge bite of Apple, boosts airline stakes

Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at the Fortune’s Most Powerful Women’s Summit in Washington October 13, 2015. REUTERS/Kevin Lamarque/File Photo

Berkshire takes huge bite of Apple, boosts airline stakes

By Jonathan Stempel| NEW YORK

Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) was an aggressive buyer of stocks in last year’s fourth quarter, nearly quadrupling its stake in Apple Inc (AAPL.O) and increasing its stake sevenfold in the four biggest U.S. airlines.

In a regulatory filing, Berkshire reported owning 57.4 million shares of Apple as of Dec. 31, which would now be worth $7.74 billion, up from just from 15.2 million shares in the iPhone maker three months earlier.

Berkshire also reported a $9.3 billion airline stake, with investments topping $2.1 billion in each of American Airlines Group Inc (AAL.O), Delta Air Lines Inc (DAL.N), Southwest Airlines Co (LUV.N) and United Continental Holdings Inc (UAL.N).

It also disclosed new stakes in satellite radio company Sirius XM Holdings Inc (SIRI.O) and seed company Monsanto Co (MON.N), which is being bought by Germany’s Bayer AG (BAYGn.DE).

Though it is unclear who make which investments, the filing appears to reflect much of the $12 billion of stock that Buffett said he had bought between the Nov. 8 Presidential election and the end of January.

Larger Berkshire investments such as Wells Fargo & Co (WFC.N), Coca-Cola Co (KO.N) and International Business Machines Corp (IBM.N) are normally Buffett’s, but the 86-year-old billionaire has given his deputies Todd Combs and Ted Weschler more to invest over the years.

Berkshire’s initial investment in Apple got attention last year, given Buffett’s usual aversion to technology companies – apart from IBM – which he considers outside his zone of competence.

The new, larger stake makes Berkshire one of Apple’s 10 biggest investors.

“I’m stunned to see the size of that Apple position,” said Thomas Russo, who oversees $11 billion of assets, including 12 percent in Berkshire, at Gardner Russo & Gardner in Lancaster, Pennsylvania.

Berkshire did not respond to a request for comment.

The Omaha, Nebraska-based conglomerate also owns roughly 90 companies such as the BNSF railroad, Geico car insurance and Dairy Queen ice cream.

Its Class A shares closed on Tuesday up $2,078.95 at $250,419, a record high closing price and less than 0.2 percentage points below its all-time high on Dec. 14.

 

APPLE BECOMES CORE HOLDING

The plunge into Apple appears particularly well-timed.

Shares of Apple closed on Tuesday up $1.73 at $135.02, also a record closing high.

Assuming Berkshire has not sold its stake, Apple’s 16.6 percent gain this year would leave it with a $1.1 billion paper profit in 2017 alone.

It had been widely believed that Berkshire’s initial investment came from Combs or Weschler.

But their decisions have sometimes influenced Buffett, as when Berkshire last year paid $32.1 billion for aircraft parts maker Precision Castparts Corp, once a Combs investment.

“It’s quite possible that Warren woke up and began to understand the virtues of Apple that he had been neglecting or, like with Precision Castparts, Todd or Ted had an affinity for Apple that sparked interest from Warren,” Russo said.

Combs and Weschler are the leading candidates to eventually succeed Buffett as Berkshire’s chief investment officer.

The airline investments, meanwhile, suggest that Buffett has overcome his two-decade aversion to the sector after an unhappy – though, he has said, profitable – investment in US Air Group.

Buffett told talk show host Charlie Rose in an interview last month that it was “in large part” his decision to dive back into airlines.

“The industry was once balkanized, but now it is bulking up, and has come to realize that an empty seat is a perishable asset,” Russo said. “More planes are traveling more full.”

Shares of American, Delta, Southwest and United, as well as Apple, Monsanto and Sirius, rose in after-hours trading.

Such increases often occur when investors perceive that Berkshire has given a company its imprimatur.

Monsanto and Sirius did not immediately respond to requests for comment.

To make room for new investments, Berkshire appeared to have shed a $1.8 billion stake in agricultural equipment maker Deere & Co (DE.N) and nearly all of what remained from a more than decade-old stake in retailer Wal-Mart Stores Inc (WMT.N).

(Reporting by Jonathan Stempel in New York; Additional reporting by Jennifer Ablan and Dan Burns; Editing by Leslie Adler, Bernard Orr)
Published at Wed, 15 Feb 2017 11:03:35 +0000

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Goldman Sachs rises to 1st record since crisis

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Trump fills top spots with Goldman Sachs employees
Trump fills top spots with Goldman Sachs employees

Goldman Sachs rises to 1st record since crisis

  @mattmegan5

Goldman Sachs has finally recovered from the 2008 financial crisis. Ironically, the main catalyst is President Trump’s promises to undo safeguards put in place to prevent another meltdown.

Goldman Sachs stock closed on Tuesday at a new all-time high, taking out the prior record that was set in October 2007.

Virtually all bank stocks have been on fire since Trump’s victory in anticipating of lighter regulation, higher interest rates and faster growth. But Goldman Sachs(GS) has been particularly hot, surging an incredible 37% since the election. That’s quadruple the S&P 500’s post-election advance.

Clearly, Goldman Sachs has already emerged as a big winner of Trump’s pledge to “do a big number” on Dodd-Frank, the 2010 Wall Street reform law.

“If you really think deregulation is coming and banks are going to be cut loose, who’s going to win? It’s going to be them. We’ve seen that time and again,” said Michael Block, chief market strategist at Rhino Trading.

Goldman’s market value surged by $4 billion on the day that Trump signed an executive order beginning the process of rolling back Dodd-Frank.

goldman sachs stock record high

The irony is that Trump slammed Wall Street and Goldman Sachs during the campaign. He even used an image of Goldman Sachs CEO Lloyd Blankfein during his closing campaign ad while condemning the “global power structure.”

But Trump has gone from criticizing Wall Street and Goldman Sachs to hiring Goldman veterans to help him govern. Trump’s two biggest economic hires are Treasury Secretary Steven Mnuchin, a former Goldman Sachs partner, and top economic adviser Gary Cohn, who stepped down in December as chief operating officer of Goldman Sachs.

Analysts say those hires may actually be helping Goldman stock.

“With so many Goldman Sachs alums in the administration, maybe some think that policies will skew in the bank’s favor,” said Michael Wong, a Morningstar analyst who covers Goldman Sachs.

Wong cautioned that he doesn’t think “anyone should make an investment thesis based on that.”

Mnuchin, who was confirmed on Monday as treasury secretary, is in favor of reforming the Volcker Rule, which prevents big banks like Goldman Sachs from making risky bets with their own money.

Goldman’s post-election surge can’t really be explained by higher interest rates. Higher rates provide a bigger boost to the profits of consumer-focused lenders like Bank of America and Wells Fargo(WFC) than investment banks like Goldman.

“Higher interest rates is not playing that much into Goldman Sachs’ valuation,” said Wong.

But Goldman Sachs would benefit from faster growth and increased CEO confidence that could spark a wave of lucrative M&A and IPO deals.

Goldman shares have made a remarkable rebound from the 2008 crisis when many investors feared the complete collapse of the financial system. Goldman is up 380% since its low of $52 in November 2008.

While JPMorgan Chase returned to its pre-crisis high in 2013, it wasn’t until now for Goldman stock. Other big banks like Bank of America(BAC), Citigroup(C) and Morgan Stanley(MS) are nowhere near their all-time highs.

But is the Goldman rally overdone?

After all, not even Trump is talking about completely repealing Dodd-Frank and efforts to water regulation down are running into resistance, including from Federal Reserve chief Janet Yellen.

Yellen: U.S. banks are lending and globally competitive
Yellen: U.S. banks are lending and globally competitive

Wong thinks Goldman shares are “slightly overvalued” at this point.

“They’re pricing in a lot of perfection in terms of deregulation and the ability to take advantage of that,” Block said.
Published at Tue, 14 Feb 2017 21:40:53 +0000

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Apple Offers First Look at Its TV Shows

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Apple Offers First Look at Its TV Shows

By Deborah DSouza | February 14, 2017 — 6:13 AM EST

Yesterday Apple Inc.’s (AAPL) Senior Vice President of Internet Software and Services Eddy Cue took questions about Apple’s new TV shows during the Code Media conference. Cue shared the stage with Ben Silverman and Ben Winston, producers partnering with Apple. During the livestreamed conference, audiences got a sneak peek of Apple’s reality TV shows Planet of the Apps and Carpool Karaoke: The Series, which will be made available this spring to more than 20 million Apple Music subscribers. The trailer of Carpool also aired during the 59th Grammy Awards Sunday night. “We’ve got the greatest platform in the world, the one that’s in your pocket all the time – the iPhone,” said Cue.

Planet of the Apps bears a striking resemblance to ABC’s Shark Tank. App developers pitch their ideas to four celebrity entrepreneurs – Jessica Alba (The Honest Co.), Gwyneth Paltrow (Goop), Will.i.am (i.am+) and Gary Vaynerchuck (Vayner Media). Those selected, work with their advisors to develop a final pitch to present to investors from Lightspeed Venture Firms. Successful apps will be promoted on Apple’s App Store. When gently chided that there must have been a reason no one made a reality show about apps before, Silverman said the fact that the audience can use the product, in this case the apps, is a “game changer.” “This is the American Dream. It is individuals, it’s not large companies, that have the opportunity to really change the world and do that as individuals. It’s hard to do that. Apps provide that,” said Cue.

Produced by CBS (CBS), Carpool Karaoke: The Series is a version of comedian James Corden’s popular segment on The Late Late Show. The premise of celebrities driving around and singing along to music played in the car has proven incredibly popular going by the number of views the clips received on YouTube. Guests featured include John Legend, Ariana Grande, Will Smith, Chelsea Handler and Blake Shelton.

The shows will not have any advertisements played during their duration. Interviewer Peter Kafka tried to prod Cue into revealing whether Apple has any big content plans, but Cue denied that Apple is looking to enter the TV space in a big way through the acquisition of a large company like Netflix or Time Warner. He said it’s hoping to use its own platforms to deliver something “unique” and “cultural.” This is one of its strategies to promote Apple Music and Cue says there is more to come. Apple Music Chief Jimmy Iovine has told The New York Times that Apple is producing more original content this year, including scripted dramas. When asked again about the growing trend of content being bought by distribution channels, Cue wearily said, “We are doing some innovative things in the video space and we’ll see where that takes us.” (See also: Netflix Consumer Engagement to Increase: eMarketer)
Published at Tue, 14 Feb 2017 11:13:00 +0000

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Couples save by celebrating belated Valentine’s Day

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 Couples save by celebrating belated Valentine’s Day

By Chris Taylor| NEW YORK

When it comes to romantic screwups, missing Valentine’s Day is about as bad as it gets. But what if you miss it on purpose?

Kathryn Hauer does that every single year. Married to her husband for 33 years, she is not hung up on the actual date. Feb. 14 may come and go, but the post-holiday bargains are just too good to pass up.

“For us, it’s fiscally smart,” said the Aiken, South Carolina, financial planner. “As a gal who loves the after-holiday sales, I’m all for scooping up deals for my husband.”

Plenty of other people are following suit, according to a new survey by financial comparison site Finder.com. Almost two in five Americans, or 39 percent, have celebrated their love after Valentine’s Day.

 

What markups are they avoiding?

Americans are slated to spend $2 billion on flowers this Valentine’s Day, according to the National Retail Federation, with 35 percent of us ponying up for a bouquet.

Florists themselves pay more for stems during the mad scramble, and they pass the higher prices on to consumers.

Hotel rooms cost an average of 25 percent more on Valentine’s Day than the same day a week prior, according to a study by travel site Hipmunk.com. In popular spots like New York City, rates are more like 70 percent higher.

And when it comes to that romantic dinner for two, 71 percent of Americans plan to go out on Valentine’s Day, and 44 percent order pricier menu selections than they normally would, according to a survey by reservation website OpenTable.com. On that day, reservations skyrocket by 520 percent, compared with a more typical day on the calendar.

Younger Americans in particular are more amenable to a delayed Valentine’s Day, according to the Finder.com survey. Almost half of millennials (46 percent) have done so, compared with 36 percent of Generation X and 32 percent of baby boomers.

Just beware that a postponed Valentine’s Day can be emotionally dangerous territory. A few tips on saving a few dollars while keeping your significant other:

Bring the idea up early

Waiting until Feb. 13 to suggest a delay can seem thoughtless. If you mention the idea relatively early, then you are demonstrating that you are thinking about your partner and are putting some effort into logistics and planning. “Otherwise you could get yourself into some real trouble,” said Fred Schebesta, Finder.com’s founder and CEO.

Gauge your partner’s reaction

Holidays mean different things to different people. If your partner likes to celebrate on Valentine’s Day itself, then drop the idea altogether. But if you sense flexibility and interest in saving some money, then bring up the option and offer veto power over it.

Take the length of the relationship into account

“The newer the relationship, the less tolerance there is to celebrate love the day after,” advises Angel Melgoza, a financial planner in McAllen, Texas.

If you have been together for a long time, though, you may have more leeway to try something a little different.

Make it a bigger celebration

One way to sweeten the pot for a late Valentine’s Day: Instead of a muted midweek celebration (this year the holiday falls on a Tuesday), you can wait for a weekend.

“If they just want to be treated more special than usual,” said financial planner Jon Powell of Rockville, Maryland, “make the case to delay your plans and have a bigger weekend together when prices are more reasonable.”

(Editing by Beth Pinsker and Lisa Von Ahn)

 
Published at Mon, 13 Feb 2017 14:04:26 +0000

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Auto CEOs want Trump to order review of 2025 fuel rules

FILE PHOTO – The GM logo is seen in Warren, Michigan, U.S. on October 26, 2015. REUTERS/Rebecca Cook/File Photo

 

Auto CEOs want Trump to order review of 2025 fuel rules

By David Shepardson| WASHINGTON

The chief executives of 18 major automakers and their U.S. units urged President Donald Trump to revisit a decision by the Obama administration to lock in vehicle fuel efficiency rules through 2025.

In a letter sent late Friday and viewed by Reuters, the chief executives of General Motors Co (GM.N), Ford Motor Co, Fiat Chrysler Automobiles NV, along with the top North American executives at Toyota Motor Corp (7203.T), Volkswagen AG (VOWG_p.DE), Honda Motor Co (7267.T), Hyundai Motor Co (005380.KS), Nissan Motor Co (7201.T) and others urged Trump to reverse the decision, warning thousands of jobs could be at risk.

On Jan. 13, the head of the U.S. Environmental Protection Agency finalized a determination that the landmark fuel efficiency rules instituted by then President Barack Obama should be locked in through 2025, a bid to maintain a key part of his administration’s climate legacy.

As part of a 2012 regulation, EPA had to decide by April 2018 whether to modify the 2022-2025 model year vehicle emission rules requiring average fleet-wide efficiency of more than 50 miles per gallon through a “midterm review.” The agency in November moved up the timetable for proposing automakers could meet the 2025 standards.

The auto CEO letter asked Trump to reopen the midterm review “without prejudging the outcome” and praised Trump’s “personal focus on steps to strengthen the economy in the United States and your commitment to jobs in our sector.”

Days after Trump was elected, automakers quickly appealed to Trump to review the rules, saying they impose significant costs and are out of step with consumer preferences.

Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, said Sunday, automakers are “seeking a restoration of the process — that’s all. This is a reset.”

The chief executives of Ford, GM and Fiat Chrysler also raised the issue in a White House meeting with Trump last month.

The letter warned the rules could “threaten future production levels, putting hundreds of thousands and perhaps as many as a million jobs at risk.”

Environmentalists say the rules are working, saving drivers thousands in fuel costs and shouldn’t be changed. Luke Tonachel of the Natural Resources Defense Council, said lowering the standards would “cost consumers more, increase our dependence on oil and put Americans at greater risk from a changing climate.”

Trump EPA nominee Scott Pruitt told a Senate panel he will review the Obama administration’s decision.

In 2011, Obama announced an agreement with automakers to raise fuel efficiency standards to 54.5 miles per gallon. This, the administration said, would save motorists $1.7 trillion in fuel costs over the life of the vehicles, but cost the auto industry about $200 billion over 13 years.

The EPA said in July that because Americans were buying fewer cars and more SUVs and trucks, it estimated the fleet will average 50.8 mpg to 52.6 mpg in 2025.

 

(Reporting by David Shepardson; Editing by Andrea Ricci)
Published at Sun, 12 Feb 2017 16:53:37 +0000

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Senators question Goldman Sachs on its role in Trump banking policy

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 Senators question Goldman Sachs on its role in Trump banking policy

By Sruthi Shankar

Two U.S. senators are seeking details from Goldman Sachs Group Inc’s (GS.N) chief executive on the extent to which the bank’s employees were involved in drafting of the recent executive orders on banking and fiduciary regulations.

In a letter to CEO Lloyd Blankfein dated Feb. 9 and made public on Friday, Democratic Senators Elizabeth Warren and Tammy Baldwin asked for details on “lobbying” activities in the bank related to review of the Dodd-Frank Act and the Obama-era fiduciary rule on financial advice.

Blankfein was also asked to detail the profits Goldman would make if these reforms came into effect.

“We’ve had no involvement in the drafting of any executive orders,” a Goldman spokesman said on Friday.

In December, Trump appointed Gary Cohn, former Goldman president and chief operating officer, to head the White House National Economic Council, a group that coordinates economic policy across agencies.

Trump last week ordered reviews of major banking rules that were put in place after the 2008 financial crisis, drawing fire from Democrats who said his order lacked substance and squarely aligned him with Wall Street bankers.

“The executive orders released by President Trump on Friday last week raise our concerns about the degree to which Cohn’s advice to Trump is good for Wall Street, but bad for Americans,” the senators wrote on Thursday.

“Goldman Sachs would be a major beneficiary of these efforts to deregulate the financial industry,” they added in the letter.

Trump also named former Goldman partner Steven Mnuchin as his pick for Treasury secretary in December.

The senators have asked for any communication between the bank’s employees and Cohn, Mnuchin, nominee for the SEC chair Jay Clayton and chief strategist Steve Bannon.

(Editing by Sandra Maler)
Published at Fri, 10 Feb 2017 21:41:26 +0000

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Fast Food Trends Favor Burgers, Tacos

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Fast Food Trends Favor Burgers, Tacos

By Rebecca McClay | February 10, 2017 — 4:51 PM EST

If fourth quarter earnings from Yum! Brands Inc. (YUM), McDonald’s Corp. (MCD) and Buffalo Wild Wings Inc. (BWLD) are any indication, fast food trends are turning toward speedier drive-through services and away from eat-in-only casual restaurants.

Comparable sales for McDonald’s and Yum! Brands’ Taco Bell and KFC chains increased from the same quarter a year prior while Buffalo Wild Wings and Pizza Hut suffered declines.

McDonald’s Corp. (MCD) recently reported comparable store sales rose 2.7 percent in the fourth quarter, although U.S. same-store sales declined by 1.3 percent. For the full 2016 fiscal year, McDonald’s saw same-store sale increase 3.8 percent with every segment posting gains. (See also: McDonald’s: Best Comparable Sales Since 2011.)

Yum! Brands posted mixed fourth quarter results Thursday, with adjusted earnings of 79 cents per share topping the FactSet analyst estimate of 73 cents per share. Revenue of $2.02 billion fell short of Wall Street’s target of $2.04 billion.

Both Taco Bell and KFC noted sales increases and proved consumer draws this quarter while ailing Pizza Hut, which does not traditionally offer drive-through services, continued to struggle with a 2% decline in global same-store sales.

Earlier in the week, casual restaurant Buffalo Wild Wings’ disappointing results, released Feb. 7, sent shares tumbling more than 5%, although they’ve since recovered. The Minneapolis-based chicken wing chain’s same-store sales fell 4 percent in the fourth quarter from a year prior. Total revenue increased only 0.8% to $494.2 million, boosted in part by 31 restaurant openings but well off the FactSet estimate of $514.3 million.

In upcoming fast food earnings this quarter, Del Taco Restaurants Inc. (TACO) reports earnings on Feb. 13, Wendy’s Co. (WEN) reports Feb. 16, Jack In The Box Inc. (JACK) and Domino’s Pizza Inc. (DPZ) both report Feb. 23 and Shake Shack Inc. (SHAK) on March 6.
Published at Fri, 10 Feb 2017 21:51:00 +0000

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iRobot’s Q4 Tops Analysts’ Revenue, EPS Estimates

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iRobot’s Q4 Tops Analysts’ Revenue, EPS Estimates

By Eric Volkman | February 9, 2017 — 9:50 AM EST

iRobot (NASDAQ: IRBT) cleaned up in the final quarter of 2016, delivering a frame that comfortably exceeded analyst projections. For the fourth quarter, the Roomba maker’s revenue inched up by 3% year over year to $212.5 million — an all-time Q4 high for the company. Net profit went in the other direction, however, falling by 29% to $13.7 million ($0.49 per diluted share).

In spite of that bottom-line slide, both figures were well higher than analysts’ average estimates. These anticipated revenue of just under $206 million, and a per-share net profit of $0.41.

This is the latest in a string of quarterly earnings beats by iRobot. In the third quarter, it reported EPS of $0.70; on average, analysts were modeling EPS of $0.43.

For the full year, iRobot’s revenue was slightly below $661 million, 7% higher than the 2015 result. Net profit fell by 5% to $41.9 million ($1.48 per share).

The company also proffered guidance for the current year. It believes it will book revenue of $770 million to $785 million for 2017, which would be 16% to 19% higher than the 2016 result. It anticipates that its EPS will be in the $1.35 to $1.65 range.

In the press release unveiling the results, iRobot CEO Colin Angle said that the top-line growth will result from “deeper household penetration of Roomba in the U.S., accelerating growth in overseas markets, [and] capitalizing on our first mover advantage in the wet floor care category, particularly in Asia.”

The company has been active in the latter segment since 2005; currently, its key product in the category is the Braava floor mopping robot.

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Published at Thu, 09 Feb 2017 14:50:03 +0000

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The world’s largest money manager warns of ‘dark shadows’

The BlackRock sign is pictured in the Manhattan borough of New York, in this October 11, 2015 file photo. REUTERS/Eduardo Munoz/Files

The world’s largest money manager warns of ‘dark shadows’

Donald Trump recently lavished praise on Larry Fink for growing the president’s fortune. But the BlackRock boss isn’t exactly returning the compliment.

Fink warned on Wednesday he sees “a lot of dark shadows” that could rattle global markets in the coming months. That’s quite a warning, coming from the CEO of the world’s largest money manager BlackRock (BLK), which controls more than $5 trillion in assets.

Fink joins a growing list of corporate leaders and Wall Street analysts to raise concerns about the timing of Trump’s agenda and the markets’ overly-optimistic expectations for it.

This week, Irene Rosenfeld, the CEO of Oreo maker Mondelez (MDLZ) expressed worry about “significant disruption and uncertainty” from the “backlash against globalization,” and Goldman Sachs warned about the potential negative effects of restrictions on trade and immigration.

Speaking at the Yahoo Finance All Markets Summit, Fink also specifically cited the “breakdown of globalization” signaled by Brexit and Trump’s election.

Fink is concerned about businesses putting major decisions on hold as they seek more clarity on the timing and details of Trump’s plan to stimulate the American economy through tax cuts, infrastructure spending and regulation-busting.

“Most business people are not investing today. They’re waiting to see what may happen. I believe we’re in the midst of a slowdown as we speak because of all the uncertainty,” Fink said.

Fink has supported Democrats and donated money to Hillary Clinton in the 2016 presidential race. The BlackRock boss was even mentioned as a leading contender to be treasury secretary if Clinton had defeated Trump in November.

Still, Fink was named to Trump’s all-star team of CEOs and the president praised him at the group’s first meeting at the White House last week.

“Larry did a great job for me. He managed a lot of my money. I have to tell you, he got me great returns,” Trump said.

Fink’s words of caution come as U.S. markets are sitting near all-time highs. The Dow has surged more than 1,700 points since Trump’s election and recently crossed the 20,000 milestone for the first time ever.

But markets have priced in little risk of a setback. The S&P 500 has gone 81 days without a 1% selloff, the longest period without a big drop since 2006.

“I think markets are ahead of themselves,” Fink warned.

While Trump has slammed trade deals for shipping jobs overseas, the BlackRock CEO forcefully defended globalization, saying, “I believe the world is better…because of global trade.”

Fink admitted that some people are being “left behind,” but suggested much of that is driven by the powerful force of “technology transformation.”

Recent research supports that point that Americans should be more concerned about robots than Mexico. One study by professors at Ball State University found that between 2000 and 2010 about 87% of the manufacturing job losses were caused by factories becoming more efficient through automation and better technology. Just 13% of the lost jobs were because of trade.

Fink warned that a breakdown in global trade and globalization — Trump has pulled out of the Trans-Pacific Partnership and wants to renegotiate NAFTA — is deflationary.

That’s why Fink said there’s a good chance the 10-year Treasury rate could plunge back below 2%. The closely-watched rate is currently sitting at 2.35%.

Yet Fink hedged a bit, explaining he could also make a case for the 10-year Treasury yield continuing its post-election climb to 4%, especially given the low unemployment rate and promises for more stimulus.

“Obviously you’re hearing from me that I’m pretty confused. We’re living in a bipolar world right now,” Fink said.

Asked for the last time he felt like he was living in a “bipolar” world, Fink responded: 2008.

Andy Serwer, Yahoo Finance’s editor-in-chief, joked that the comparison isn’t all that comforting.

“I’m not relaxed. Sorry,” Fink said.

–CNNMoney’s Patrick Gillespie contributed to this report.

CNNMoney (New York)First published February 8, 2017: 4:20 PM ET

Published at Wed, 08 Feb 2017 21:21:08 +0000

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Bank of America opens branches without employees

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By Dan Freed

Bank of America Corp has opened three completely automated branches over the past month, where customers can use ATMs and have video conferences with employees at other branches, according to spokeswoman Anne Pace.

Like many U.S. banks in recent years, Bank of America has been reducing its overall branch count to cut costs even as it opens new branches in select markets. New branches are typically smaller, employ more technology, and are aimed at selling mortgages, credit cards and auto loans rather than simple transactions such as cashing checks.

Pace said there is one completely automated branch in Minneapolis and one in Denver, both of which are relatively new markets for the bank’s consumer business. They are about a quarter of the size of a typical branch.

 

The new branches were mentioned briefly Tuesday by Dean Athanasia, co-head of Bank of America’s consumer banking unit, during a question and answer session at an investor conference, but he did not provide details.

Athanasia said Bank of America will open 50 to 60 new branches over the next year, though Pace said the bank will also be closing branches in certain markets, so the 50 to 60 branches do not represent a net increase. Bank of America opened 31 new branches in 2016.

Bank of America had 4,579 financial centers at the end of the fourth quarter of 2016, compared to 4,726 in the fourth quarter of 2015 and 5,900 at the end of 2010.

(Reporting by Dan Freed in New York; editing by Clive McKeefe)
Published at Tue, 07 Feb 2017 22:06:15 +0000

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U.S. refiners face weakening demand at pump for first time in 5 years

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By Jarrett Renshaw
| NEW YORK

U.S. refiners are facing the prospects of weakening gasoline demand for the first time in five years, stoking fears that earnings this year may be even worse than the dismal performances seen in 2016.

The sign of weakening U.S. gasoline demand comes as U.S. refiners are in the midst of reporting their worst year of earnings since the U.S. shale boom started in 2011. The oil boom turned to bust in 2014, and U.S. independent refiners reaped the profits as plunging pump prices and a growing economy helped fuel a surge in demand.

U.S. refiners amassed large inventories that punished margins last year, but record gasoline demand and robust exports helped provided a firewall against further slippage. Now the industry faces the prospects of higher crude prices following global production cuts and fresh federal data that suggests their gasoline demand safety net may be eroding.

“We are very cautious on refining margins, and on demand,” Sarah Emerson, a managing principal at ESAI Energy LLC, said. “When oil prices goes up, gasoline demand is going to go down.”

The U.S. Energy Information Administration said Wednesday that the four-week average of gasoline supplied in the United States was 8.2 million barrels per day, lowest since February 2012. U.S. gasoline demand is closely watched by traders since it accounts for roughly 10 percent of global consumption. [EIA/S]

“It’s tough to base conclusions solely on the weekly data, which can be off significantly,” said Mark Broadbent, a refinery analyst with Wood Mackenzie. “If the demand is low as it the data shows, then it’s a going to be real problem for refiners.”

 

Gasoline use has grown every year since 2012, despite fears that demand has topped out amid the growth of fuel efficient cars, urbanization and a graying population.

Executives at independent U.S. refiners Marathon Petroleum Corp, Phillips 66 and Valero Energy Corp acknowledged the weaker-than-expected seasonal volume in earnings calls this past week, but said they anticipated strong demand to return. They said they expect production cuts in the U.S. Midwest and a busy spring refinery maintenance season to help trim inventories.

“Although we have seen unusual weakness in refined products demand in January, we expect that solid economic growth will continue to support good, underlying demand for refined products as inventory levels are worked down over the course of the year,” Marathon CEO Gary Heminger said on Thursday.

 

Other refiners, including PBF Energy Inc, Tesoro Corp and HollyFrontier Corp, will be reporting earnings this week.

Valero executives said the EIA data did not reflect what they are seeing in their own network, where demand has remained strong. They noted that gasoline demand has risen on a year-over-year basis when exports are added to domestic consumption.

Last January, overall crude runs were up 500,000 bpd as refiners shifted away from diesel and other products to gasoline to chase more attractive margins amid a mild winter and sluggish diesel demand. The move led to an overbuild of gasoline stocks that lingered into the summer, punishing margins when they should have been at their strongest.

 

This January, crude runs are at historic levels, up by roughly 300,000 bpd over last year.

While executives noted the similarities to last year, they said one thing that sets this season year apart is that gasoline inventories are now swelling with winter-grade gasoline, which must be sold off to make room for summer grade, which U.S. regulators require to have a lower Reid Vapor Pressure, or RVP. That means inventories are not likely to linger – and so summer gasoline margins could be preserved.

Valero, the largest U.S. independent refiner, reported $2.3 billion in net income for 2016, lowest since 2012, while Marathon reported $1.2 billion in net income for 2016, lowest in at least five years.

(Reporting by Jarrett Renshaw; Editing by Lisa Shumaker)
Published at Sun, 05 Feb 2017 12:04:59 +0000

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