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Trump adviser Icahn may have broken trading laws: Senators

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Icahn: I'm against the stupidity of some regulations
Icahn: I’m against the stupidity of some regulations

 Trump adviser Icahn may have broken trading laws: Senators

  @mattmegan5

Democratic Senators want federal authorities to investigate whether President Trump’s special adviser, Carl Icahn, violated trading laws.

The lawmakers sent a letter on Tuesday to the SEC and two other regulators pointing to “troubling” evidence, including “massive” profits Icahn reportedly reaped in the market for renewable fuel credits.

“Publicly available evidence raises serious questions about Mr. Icahn’s conduct,” eight Senate Democrats led by Senators Elizabeth Warren and Sherrod Brown wrote in the letter.

They argue that these profits warrant a probe into whether Icahn, who has retained control of his vast business empire despite being named by Trump a special adviser on regulatory reform, violated insider trading, anti-market manipulation or other laws.

Additionally, the Democrats want SEC chair Jay Clayton and EPA administrator Scott Pruitt to consider recusing themselves from this matter. Why? Because Icahn was involved in the vetting practice for both positions in the Trump administration and even met with Pruitt before his nomination.

Icahn did not immediately respond to a request for comment.

However, in March the billionaire investor dismissed conflict-of-interest allegations in an interview with CNNMoney as “absurd” and “completely ridiculous.” He added, “I don’t talk to Donald that often.”

Related: Trump adviser Icahn is betting against the Trump rally

The crux of the controversy is linked to Icahn’s continued 82% ownership stake in CVR Energy(CVI), a small oil refinery. CVR has been hurt by EPA regulations that require oil refiners to either blend their oil with renewable fuels or buy credits.

Not surprisingly, Icahn has been a vocal opponent of these EPA rules, telling CNN’s Poppy Harlow they are “natural stupidity” and could cost CVR $200 million in 2017.

Senate Democrats note that Icahn may have benefited from a collapse in the market for these biofuel credits that he helped cause.

According to Reuters, CVR Energy, which is majority controlled by Icahn, generated an “extremely rare profit” on biofuels credits by betting against them in the months before Trump took office.

Biofuel credit prices plunged after Icahn became a special adviser to Trump. They took another hit after Bloomberg News revealed that Icahn and a trade group presented the White House with a deal to revamp the renewable fuel standard.

The collapse in biofuel credit prices allowed CVR to post a net gain of $6.4 million last quarter, a $50 million reversal from last year — according to Reuters.

Senate Democrats want regulators to investigate whether Icahn’s conduct violated any laws. They also asked regulators to investigate the “precise nature and extent” of Icahn’s communications with Trump officials, including the president himself.

The White House didn’t respond to a request for comment. A spokesperson for the administration in a previous statement emphasized that Icahn does not have a formal position with the administration. Icahn is “simply a private citizen whose opinion the President respects and whom the President speaks with from time to time.”

Published at Tue, 09 May 2017 20:07:35 +0000

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Nvidia Revenue Will Be Boosted By Nintendo Switch Success

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Nvidia Revenue Will Be Boosted By Nintendo Switch Success

By Donna Fuscaldo | May 9, 2017 — 8:40 AM EDT

It’s not only Nintendo (NTDOY) that is making money off of its new game console. Graphics chip maker is as well Nvidia Corp. (NVDA).

That’s according to RBC Capital Markets analyst Mitch Steves who said this week Nvidia could make $300 million to $400 million in its fiscal year 2018 all because of the Switch game console. In a research note to clients covered by Yahoo Finance, the analyst said Nintendo will double production of the Switch console to 16 million units from 8 million units, creating a situation when Nvidia earns even more off of the game console.

“We think the incremental 6-8M units could add $300-400M to the top line (3-4% growth to annual revenue on a $50 ASP),” wrote RBC Capital Markets analyst Mitch Steves according to Yahoo Finance. “This is a notable metric given that the Wii U sold ~13.5M units since its release in 2012 and 10M+ in the first 12 months are unlikely reflected in current estimates.” Nvidia makes a customized Tegra X1 chip for the Switch device. (See more: Nintendo Sold Close to a Million Switch Systems in March)

Ever since Nintendo rolled out the much anticipated Switch game console, which is a portable gaming system and home console rolled into one, it has been selling out all over the globe. Nintendo Switch uses a dock when it functions as a console. It switches to portable mode when lifted out of the dock. The strong response to the device has prompted Nintendo to increase the number of units produced with the Wall Street Journal reporting in March that companies that assemble the Nintendo Switch plan to manufacture 16 million more units. Originally, the plan was to assemble 8 million units.

In March alone, Nintendo said it sold close to 1 million Switch units in the U.S. The Japanese game maker said the Switch has sold faster at its launch than any other video game system in the company’s history, which bodes well for Nvidia and other component suppliers.

While Nvidia has long been one of the leading graphic chip makers, concerns about saturation in its core market have been cropping up. (See more: Is the Nvidia Growth Story Over?)

In an effort to move beyond the PC and gaming markets, Nvidia has been branching into new areas the past couple of years such as providing chips for the automotive market, data centers and for artificial intelligence. AI may be a big growth opportunity for Nvidia as the burgeoning technology starts to get adopted more by the masses.
Published at Tue, 09 May 2017 12:40:00 +0000

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Billionaire joins Twitter to fight media

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Trump: Twitter lets me bypass the media
Trump: Twitter lets me bypass the media

Billionaire joins Twitter to fight media

  @mattmegan5

The king of the bond market is angry.

Billionaire investor Jeff Gundlach says he’s joined Twitter because he’s “getting tired” of inaccurate reporting about him.

“I’ve had five consecutive news reports that are completely fallacious,” Gundlach said Monday at the 22nd annual Sohn Investment Conference in Manhattan.

Gundlach, whose recent success has given him the unofficial “bond king” title that used to be reserved for rival Bill Gross, didn’t explain which stories upset him.

The CEO of DoubleLine Capital said he’s “shunned social media,” other than Twitter. His Twitter handle? @TruthGundlach.

Within two hours, Gundlach amassed more than 4,000 followers, compared with just two followers when he began speaking.

Gundlach’s love for Twitter(TWTR, Tech30) gives him something in common with President Trump, who famously uses the platform to bypass the mainstream media and get his message directly to supporters.

Gundlach surprised the crowd of finance professionals at last year’s Sohn conference by predicting an upset in the race for the White House.

“I think you need to prepare for a Trump presidency,” Gundlach said at the May 2016 event, adding that Trump would dramatically add to the U.S. debt by ramping up government spending.

Financial professionals pay $5,000 for tickets to attend the Sohn conference. This year’s event raised more than $3 million to treat and cure pediatric cancer.

Besides bashing the media, Gundlach expressed skepticism about the Trump rally on Wall Street. Gundlach, who mostly invests in bonds, said the S&P 500’s valuation is at a “stretched level” when compared to the total size of the U.S. economy.

“There’s just not a lot of upside,” Gundlach said.
Published at Mon, 08 May 2017 22:45:48 +0000

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Big retailers hope to prove they aren’t dying

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America's top retailers in trouble
America’s top retailers in trouble

Struggling chains Macy’s, Kohl’s and JCPenney are all due to report their latest quarterly results. They are unlikely to be good.

Analysts are predicting another quarterly loss for JCPenney when it reports on Friday. Meanwhile, sales and profits are expected to fall at Macy’s and Kohl’s. They both release their results on Thursday.

Shares of Macy’s(M) and Kohl’s(KSS) are both down nearly 20% this year, while JCPenney’s(JCP) stock has plunged more than 30%.

Nordstrom(JWN) will report its earnings on Thursday as well. Sales are only forecast to rise 3% from last year while earnings are likely to be unchanged from a year ago. But its stock is up about 3% this year.

Traditional retailers have had a very tough time lately. Macy’s and JCPenney are both closing stores. So is Sears(SHLD), which also owns Kmart.

Target(TGT) said earlier this year it will look to cut prices to attract more shoppers after it reported awful sales for the holidays and warned that 2017’s results will be much lower than expected as well.

Several mall-based apparel chains are in even worse shape. Wet Seal, Aeropostale, Pacific Sunwear, American Apparel and The Limited have all recently filed for bankruptcy. So have The Sports Authority and Payless ShoeSource.

Amazon(AMZN, Tech30) is a major headache for all these companies. It now sells just about everything online, including food and clothing. Its prices are often lower than its rivals. And Amazon is even opening up more of its own physical stores.

Walmart(WMT) is another problem for struggling retailers. It’s making a big bet on digital commerce. Walmart now owns Jet.com and other online stores, including women’s apparel retailer ModCloth, outdoor gear retailer Moosejaw and footwear store ShoeBuy.

And it’s worth noting that Wall Street has applauded both Walmart and Amazon as they continue to gear up for battle. Shares of Walmart are up more than 10% this year while Amazon’s stock is up more than 25%.

So there is hope for traditional retailers. If they bulk up more on digital, shoppers and investors may embrace them.

Still, can Macy’s and other retailers that have fallen on hard times really bounce back? Wall Street will be looking for signs in this week’s earnings reports that these companies are going to invest even more on digital initiatives.

But many of these retailers are playing catch up. Simply put, they underestimated the threat from the likes of Amazon and now are scrambling to convince people that they are still relevant.

Macy’s chief financial officer Karen Hoguet said during the company’s last earnings call in February that “we were not able to overcome the secular changes in the industry related to shopping habits” during the holidays.

She added that “these changes appear to have had a bigger impact on our store business than we had expected. We recognize we need to make dramatic changes in how we operate the business.”

Macy’s isn’t alone. Most brick-and-mortar retailers have to do even more with their mobile and overall digital commerce operations in order to hold onto existing customers and attract new ones.
Published at Mon, 08 May 2017 15:57:20 +0000

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Reading the Balance Sheet

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Reading the Balance Sheet

A balance sheet, also known as a “statement of financial position,” reveals a company’s assets, liabilities and owners’ equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company’s financial statements. If you are a shareholder of a company, it is important that you understand how the balance sheet is structured, how to analyze it, and how to read it.

How the Balance Sheet Works

The balance sheet is divided into two parts that, based on the following equation, must equal each other or balance each other out. The main formula behind balance sheets is:

Assets = Liabilities + Shareholders’ Equity

This means that assets, or the means used to operate the company, are balanced by a company’s financial obligations, along with the equity investment brought into the company and its retained earnings.

Assets are what a company uses to operate its business, while its liabilities and equity are two sources that support these assets. Owners’ equity, referred to as shareholders’ equity in a publicly traded company, is the amount of money initially invested into the company plus any retained earnings and it represents a source of funding for the business.

It is important to note that a balance sheet is a snapshot of the company’s financial position at a single point in time.

Know the Types of Assets

Current Assets

Current assets have a life span of one year or less, meaning they can be converted easily into cash. Such assets classes include cash and cash equivalents, accounts receivable, and inventory. Cash, the most fundamental of current assets, also includes non-restricted bank accounts and checks. Cash equivalents are very safe assets that can be readily converted into cash; U.S. Treasuries are one such example. Accounts receivables consist of the short-term obligations owed to the company by its clients. Companies often sell products or services to customers on credit; these obligations are held in the current assets account until they are paid off by the clients.

Lastly, inventory represents the raw materials, work-in-progress goods, and the company’s finished goods. Depending on the company, the exact makeup of the inventory account will differ. For example, a manufacturing firm will carry a large amount of raw materials, while a retail firm caries none. The make-up of a retailer’s inventory typically consists of goods purchased from manufacturers and wholesalers.

Non-Current Assets

Non-current assets are assets that are not turned into cash easily, are expected to be turned into cash within a year, and/or have a lifespan of more than a year. They can refer to tangible assets such as machinery, computers, buildings, and land. Non-current assets also can be intangible assets such as goodwill, patents or copyright. While these assets are not physical in nature, they are often the resources that can make or break a company – the value of a brand name, for instance, should not be underestimated.

Depreciation is calculated and deducted from most of these assets, which represents the economic cost of the asset over its useful life.

Learn the Different Liabilities

On the other side of the balance sheet are the liabilities. These are the financial obligations a company owes to outside parties. Like assets, they can be both current and long-term. Long-term liabilities are debts and other non-debt financial obligations, which are due after a period of at least one year from the date of the balance sheet. Current liabilities are the company’s liabilities that will come due, or must be paid, within one year. This includes both shorter-term borrowings, such as accounts payables, along with the current portion of longer-term borrowing, such as the latest interest payment on a 10-year loan.

Shareholders’ Equity

Shareholders’ equity is the initial amount of money invested into a business. If, at the end of the fiscal year, a company decides to reinvest its net earnings into the company (after taxes), these retained earnings will be transferred from the income statement onto the balance sheet and into the shareholder’s equity account. This account represents a company’s total net worth. In order for the balance sheet to balance, total assets on one side have to equal total liabilitiesplusshareholders’ equity on the other.

Read the Balance Sheet

Below is an example of a balance sheet, circa 2016 of Walmart:

As you can see from the balance sheet above, it is broken into two areas. Assets are on the top, and below them are the company’s liabilities and shareholders’ equity. It is also clear that this balance sheet is in balance where the value of the assets equals the combined value of the liabilities and shareholders’ equity. Another interesting aspect of the balance sheet is how it is organized. The assets and liabilities sections of the balance sheet are organized by how current the account is. So for the asset side, the accounts are classified typically from most liquid to least liquid. For the liabilities side, the accounts are organized from short to long-term borrowings and other obligations.

Analyze the Balance Sheet with Ratios

With a greater understanding of the balance sheet and how it is constructed, we can look now at some techniques used to analyze the information contained within the balance sheet. The main way this is done is through financial ratio analysis.

Financial ratio analysis uses formulas to gain insight into the company and its operations. For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show you a better idea of the company’s financial condition along with its operational efficiency. It is important to note that some ratios will need information from more than one financial statement, such as from the balance sheet and the income statement.

The main types of ratios that use information from the balance sheet are financial strength ratios and activity ratios. Financial strength ratios, such as the working capital and debt-to-equity ratios, provide information on how well the company can meet its obligations and how the obligations are leveraged.

This can give investors an idea of how financially stable the company is and how the company finances itself. Activity ratios focus mainly on current accounts to show how well the company manages its operating cycle (which include receivables, inventory and payables). These ratios can provide insight into the company’s operational efficiency.

SEE: Ratio Tutorial

The Bottom Line

The balance sheet, along with the income and cash flow statements, is an important tool for investors to gain insight into a company and its operations. The balance sheet is a snapshot at a single point in time of the company’s accounts – covering its assets, liabilities and shareholders’ equity. The purpose of the balance sheet is to give users an idea of the company’s financial position along with displaying what the company owns and owes. It is important that all investors know how to use, analyze and read this document.
Published at Sat, 06 May 2017 15:03:00 +0000

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Best Kentucky Derby bet? Try the racetrack itself

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The Kentucky Derby for beginners
The Kentucky Derby for beginners

Classic Empire is the favorite to win the Kentucky Derby on Saturday. But the best bet may not be any of the horses in the 143rd Run for the Roses. It could be the track that those ponies are running on.

Churchill Downs, home to the Kentucky Derby, is a publicly traded company. And any investors that have made a wager on this particular pony have done quite well lately.

Shares are up 12% so far in 2017, more than 30% over the past 12 months and nearly 200% during the past five years. Churchill Downs(CHDN) has outperformed the S&P 500 over all these periods.

Why you might ask? Horse racing may still be known as the sport of kings, but it’s not nearly as popular as it once was

There has been a bit of a resurgence lately thanks to American Pharoah won the Triple Crown (the Kentucky Derby, Preakness Stakes and Belmont Stakes) in 2015. He was the first Triple Crown winner in 37 years.

But the recent winning streak for Churchill Downs has little to do with people getting dressed up in fancy hats, drinking mint juleps and singing “My Old Kentucky Home” in Louisville.

Churchill Downs, which just reported its latest earnings in late April, generated only 9% of its overall revenue from operating the famous Kentucky racetrack and several others across the country.

Nearly all of the company’s sales come from casinos and online gaming.

The company owns the online horse racing site TwinSpires.com, named for the iconic architecture at the racetrack. Churchill Downs also owns six casinos as well as the casual gaming site Big Fish.

Those are the businesses that make money for Churchill Downs. The racetrack division actually posted a decline in revenue in the most recent quarter and a bigger loss than a year ago.

There’s a saying among gamblers that there’s little money to be made in betting the “chalk” — big favorites that won’t pay all that handsomely if they win because the odds aren’t good. You might be better off going with a long shot that could yield a huge payoff.

But that’s not the case with Churchill Downs. It’s been the “chalk” on Wall Street for a while — and its track record has been as great as the legendary Secretariat and other Triple Crown winners.
Published at Fri, 05 May 2017 19:16:47 +0000

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Tesla Sells Off After Bearish Outlook

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Tesla Sells Off After Bearish Outlook

By Justin Kuepper | May 4, 2017 — 3:16 PM EDT

Tesla Inc. (TSLA) reported first quarter revenue that rose 134.8% to $2.7 billion – beating analyst estimates by $90 million, but on the bottom line, the company posted a wider than expected $1.33 per share loss – missing analyst estimates by $0.51 per share.

The company’s financial results conference call seemed to make matters worse by casting doubt on the Model 3’s production timeline. Goldman Sachs, Cowen & Co., and UBS analysts criticized the lack of clarity on the production timeline, although Baird analysts stepped in to defend the company’s earnings and reiterated their first-half delivery guidance.

Tesla recently made headlines by becoming the largest automotive manufacturer by market capitalization (prior to the recent drop), which exceeded established competitors like Ford Motor Co. (F) and General Motors Co. (GM), despite its lack of equivalent revenue. Critics of the company insist that its valuation has become stretched, while supporters argue that strong growth rates justify the valuation and Tesla has become more than just an automotive firm.

From a technical standpoint, the stock briefly reached its upper trend line and R1 resistance at $324.39 before falling to the bottom of its price channel near S1 support at $294.17. Traders should watch for a rebound from these strong support levels to the upper end of its price channel to make new highs. Alternatively, traders should watch for a breakdown below these levels to its 50-day moving average at $279.75 or S2 support at $274.26.

Technical indicators paint a mixed picture with the relative strength index (RSI) appearing neutral at 48.57 and moving average convergence-divergence experiencing a bearish crossover as the stock seems to have lost some of its momentum.

Investors will continue to watch for hints about the Model 3’s production timeline to alleviate any concerns of production delays, while traders will keep an eye on key support and resistance levels for a change in sentiment in the interim.

Charts courtesy of StockCharts.com. Author holds no positions in the stock(s) mentioned except through passively-managed index funds.
Published at Thu, 04 May 2017 19:16:00 +0000

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Which Surviving Spouses Get VA Mortgage Benefits

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Which Surviving Spouses Get VA Mortgage Benefits

Past and present military personnel have access to services that include Veterans Administration (VA)-guaranteed mortgage loans. If the veteran passes away, does his or her spouse has access to the same VA mortgage benefits? That depends, and it makes a difference. VA mortgages often come with better terms than conventional mortgages. (For more, see The Unique Advantages of VA Mortgages.)

Here’s what veterans and their families need to know.

VA Mortgage Loans Are Still Private

Don’t be fooled; the VA isn’t in the business of offering mortgage loans. Private mortgage lenders still make the loan, but the VA guarantees a portion of it and occasionally takes part in the process of obtaining it. Such actions allow the mortgage lender to be more confident that the loan won’t default, and if it does, at least the VA’s portion will be paid.

This means that even if the applicant falls below the standards the lender uses to approve the loan, the VA guarantee might be enough to gain approval. If you’re looking for a VA loan, don’t call the VA; work with your bank, credit union or mortgage broker.

They Come with Lots of Perks

VA loans come with benefits that often make them a better deal than conventional loans.

  • There is no down payment, providing that the sales price doesn’t exceed the home’s appraised value.
  • You don’t need private mortgage insurance, and with the annual cost of that at 0.5% to 1% of the entire loan, that’s a large savings.
  • You can only be charged a certain amount of closing costs.
  • There is no penalty for paying the loan off early.
  • The VA might help you if you have trouble making payments.
  • The loan is assumable by anybody who meets the qualifications for the loan.

Many Surviving Spouses Are Eligible

Not all surviving spouses are eligible. If any of these conditions apply to you, though, you probably are:

  • Spouses of military personal who died in active duty or from a service-connected disability who have not remarried
  • A surviving spouse who remarries after age 57 and on or after Dec. 16, 2003
  • A surviving spouse of some permanently disabled veterans whose injuries were or were not a result of their military service
  • The spouse of a person who is missing in action or a prisoner of war

Applying for a VA Loan Is Easy

First, find a lender that offers VA mortgages. Many do. As with any mortgage, you will have to meet eligibility requirements, including income, credit and other standards set by the creditor.

Second, the home must be the principal residence of the eligible surviving spouse. It cannot be an investment property, second home or a home being purchased for somebody else.

You’ll also need a certificate of eligibility (COE). This proves to the lender that the deceased veteran was eligible and allows the surviving spouse to receive those same benefits. To learn how to apply for a COE, click here. Often, you can also apply for one through your lender. The company will guide you through the process. For more information on eligibility, go to the VA’s website.

You Can Refinance, Too

Along with a loan to purchase a home, surviving spouses may be eligible for refinance an existing VA loan. The interest rate reduction refinance loan allows the surviving spouse to refinance an existing loan and roll into it all loan origination costs, so he or she doesn’t have to use existing cash to lower payments.

Dependents Aren’t Eligible

Unfortunately, VA mortgage benefits don’t extend to children of a deceased veteran. Only surviving spouses are eligible to apply.

The Bottom Line

Surviving spouses are often eligible for the same VA mortgage benefits as the deceased veteran. To learn if you are, contact the VA for further guidance. (For more, see How to Buy a House with a VA Loan.
Published at Wed, 03 May 2017 15:40:00 +0000

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Should Apple buy Disney? Tesla? The Raiders?

 

 

 

 

 

 

 

 

 

 

 

 

Should Apple buy Disney? Tesla? The Raiders?

Apple(AAPL, Tech30) said in its latest earnings report Tuesday that it now has $256.8 billion in cash and investments on its balance sheet. Yup. More than a quarter of a trillion dollars. Talk about money burning a hole (or canyon as the case may be) in your pocket!

Nearly all of this money is held overseas for tax purposes though. Apple CFO Luca Maestri said during the company’s conference call that $239.6 billion of the cash is outside of the U.S.

But that may eventually change. President Trump wants to give companies like Apple a one-time tax break to repatriate, or bring back, cash to America.

That has investors salivating about the possibility of Apple returning money to the US so it can do something more productive with it than just letting the pile grow larger and larger. Imagine CEO Tim Cook swimming in it like Scrooge McDuck and his gold.

Apple already announced on Tuesday that it will be boosting its quarterly dividend by nearly 11% to 63 cents a share. But even with that increase, Apple’s dividend payments are couch cushion change for the company.

An annual payment of $2.52 a year for each of Apple’s 5.25 billion shares outstanding would cost Apple about $13.2 billion.

Related: What to expect with the iPhone 8 — or whatever Apple calls it

Apple also said it is increasing its stock buyback program Tuesday by $35 billion. Repurchasing stock typically boosts earnings per share for companies. Shareholders like that.

But Apple still has a lot more money that it could use for other things, like building plants, hiring more workers and investing in research and development.

After all, for Apple to keep growing, it can’t just keep releasing one iPhone update after another. It needs new products, not just the iPhone∞.

Also, Apple, unlike Microsoft(MSFT, Tech30) in the late 1990s, doesn’t need to hoard cash in order to deal with the possibility of huge legal costs.

Microsoft built up a big rainy day fund partly because of all the antitrust litigation it was facing.

But nobody is calling for Apple to be broken up into pieces and/or pay out ungodly sums of cash to regulators and competitors like Microsoft did. Ironically enough, Apple was a major beneficiary of Microsoft’s largesse.

Microsoft invested $150 million in the company in 1997 to settle lawsuits. At the time, the investment was considered a lifeline for Apple. Steve Jobs had only recently returned as CEO. And there were no iPods, let alone iPhones, yet.

That’s why some investors think that Apple may use some of the cash for acquisitions. There have been rumors about Apple building a war chest for megadeals for some time now.

Apple’s biggest deal so far is the 2014 purchase of Dr. Dre’s headphone company Beats. But that was just $3 billion. Apple can — to borrow an old marketing slogan — “think different” with its acquisition strategy. And think much bigger for that matter.

Back in December 2015, an analyst at FBR made up a shopping list for Apple. The companies on it? Adobe, GoPro(GPRO, Tech30), Box(BOX) and Tesla.

If Apple bought all those companies today at their current market valuations, it would cost the company $122 billion — with nearly all of it going towards cloud computing leader Adobe(ADBE) and Elon Musk’s Tesla(TSLA).

Rumors have run wild for awhile now that Apple may be working on some sort of connected car. So if it didn’t want to buy Tesla, it could move in another direction.

How’s this for a mindboggling stat? Apple could use its cash to buy all of Detroit’s Big Three — GM(GM), Ford(F) and Fiat Chrysler(FCAU) — for “just” $110.6 billion. In other words, Apple would still have more than $146 billion left over.

That seems highly unlikely, though, of course. But analysts have been speculating about other deals that could make more strategic sense.

In the past year or so, there has been speculation that Apple could make a play for chip company AMD(AMD), which is currently worth just under $10 billion, as well as streaming music service Pandora(P), which has a market value of about $2.5 billion.

There’s even been talk of Apple making a bigger push into the media world, with some suggesting a purchase of Netflix(NFLX, Tech30) or even Disney(DIS).

Neither deal would be cheap though. Netflix is worth $67 billion and Disney’s market value is nearly $180 billion. Still, it’s astonishing to consider that Apple actually could afford to buy both companies at those prices with the cash it currently has.

So don’t hold your breath for Apple to make a bid for either company. But until Apple does make a bold, sexy acquisition, then expect the Wall Street gossip mill to keep churning — and more speculative stories like these suggesting things Apple could buy.

To that end, let me propose this. Apple would only need $11.7 billion to corner the market on the San Francisco sports scene.

That’s the combined value of the San Francisco Giants, Oakland A’s, Golden State Warriors, San Jose Sharks San Francisco 49ers and Oakland Raiders franchises, according to estimates from Forbes.

Of course, the Raiders are planning to move to Las Vegas. But maybe Tim Cook can keep them in Oakland and become a Bay Area hero in the process.
Published at Wed, 03 May 2017 15:42:53 +0000

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Health Carriers Hit New Highs Despite ACA Debacle

by NatoPereira from Pixabay

 

Health Carriers Hit New Highs Despite ACA Debacle

By Alan Farley | May 3, 2017 — 11:35 AM EDT

Aetna, Inc. (AET) and Humana, Inc. (HUM) ended their $34-billion merger agreement in February 2017 after government opposition, but neither stock has suffered from the untimely split, as evidenced by this week’s bullish first-quarter earnings results. Both health insurance giants have rocketed to all-time highs after their releases, ignoring the breakup as well as Congressional disagreement on the fate of Obamacare.

Health carriers have enjoyed all the perks of their Affordable Care Act (ACA) participation since it became law in March 2010 but few of the shortfalls because they can pull out of markets or the entire program whenever they choose. Even so, the risk is now rising geometrically because whatever form health insurance takes in coming years; carriers are less likely to avoid the weight of bad legislation, underwriting or case management.

AET

Aetna stumbled in the middle of the last decade, stalling just above $50 in 2006 and testing that resistance level in early 2008. Aggressive sellers took control at that time, dumping the stock in a major decline that accelerated during the economic collapse. Selling pressure eased at a 5-year low in the mid-teens at year’s end, ahead of a modest bounce that stalled in the mid-30s in 2009.

A 2010 test at that level triggered a reversal and pullback, ahead of a 2011 breakout that reached the 2007 high in 2013. It jumped above that resistance level quickly, entering a trend advance that continued into the June 2015 high at $134.40, ahead of a volatile correction that continued into the first quarter of 2016. Support in the low-90s denied short sellers, ahead of a slow and steady recovery wave into the fourth quarter.

The stock took off after the November election, in reaction to the President-elect’s call to repeal Obamacare, and stalled at 2015 resistance in December. A pullback into the first quarter of 2017 found willing buyers, ahead of constructive action that completed a cup and handle pattern. The stock broke out this week after strong earnings, with a measured move target in the 170s likely to attract a healthy momentum bid.

HUM

Humana topped out at $88.10 in January 2008 following a long uptrend and sold off in a vertical slide that continued into the March 2009 low at $18.57. The subsequent recovery wave unfolded at the same trajectory as the prior decline, completing a 100% round trip into resistance in 2011. Sellers took control at that time, triggering broad sideways action that continued for more than two years, ahead of a 2013 breakout.

The uptrend yielded the most fruitful period in the stock’s long public history, topping out above $200 in June 2015, ahead of a rounded correction that found support at $150 in July 2016. A fitful recovery intensified after the election in a vertical buying wave that reached within 2-points of 2105 resistance in December. A pullback into January 2017 found support at the 50-day EMA, ahead of a rally that finally reached resistance in March.

The company reported inline first-quarter earnings on Wednesday morning while reaffirming fiscal year 2017 guidance, triggering a gap up to an all-time high, followed by a pullback that’s testing shareholder commitment. It’s likely that bulls will win this conflict, allowing the breakout to gather momentum in a trend advance that could reach $300 later this year.

The Bottom Line

Former merger partners Humana and Aetna are trading near all-time highs after strong earnings reports that highlight health carrier abundance at a time that many Americans are struggling with the high treatment costs. The results could influence D.C. efforts to reform or repeal Obamacare, increasing carrier risk despite this week’s earnings euphoria.
Published at Wed, 03 May 2017 15:35:00 +0000

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Super-rich private equity stars rue ‘lousy’ reputation, say they are misunderstood

by davechan from Pixabay

Super-rich private equity stars rue ‘lousy’ reputation, say they are misunderstood

By Lawrence Delevingne| BEVERLY HILLS, Calif.

Ultra-wealthy private equity managers lamented their reputation as ‘lousy’ corporate profiteers at a plush Beverly Hills hotel on Tuesday, arguing their value to society was greater than the public realized.

Stephen Schwarzman, chief executive and co-founder of the Blackstone Group, touted the fact that companies owned by his private equity business employed about 600,000 people and had grown 50 percent faster, on average, than the S&P 500 Index.

“The idea that you can do all that and have great success and be perceived at best in a marginal way in terms of contribution to society, you’ve got to really wonder who’s doing the PR,” Schwarzman said during a panel discussion at the Milken Institute Global Conference at the Beverly Hilton hotel.

“People mistake us for financial people. I don’t know exactly why,” said Schwarzman – worth some $12 billion, according to Forbes – drawing a distinction between private equity investors which own businesses and mere financiers. “If you had 600,000 employees, you might be a company. A responsible company. And that’s what we are.”

Private equity has been criticized by some for saddling companies with debt only to sell their assets, cut jobs and take out profits. Private equity executives are some of the wealthiest people on Wall Street, deriving most of their income from fees paid by their fund clients, including keeping a cut of investment gains when companies are sold or go public. The founders of most of the biggest firms are billionaires.

Jonathan Sokoloff, managing partner of private equity firm Leonard Green & Partners, chimed in with Schwarzman.

“We’ve been able to deliver returns for 30 years dramatically in excess of the stock market,” said Sokoloff on the same panel. “Notwithstanding that, our industry still has a lousy reputation, we are generally viewed negatively by most people who don’t understand us.”

Sokoloff said the private equity industry employs hundreds of thousands of people, has generally avoided scandal and performed well through the financial crisis of 2008.

“We need some better PR and some help in how we market ourselves,” Sokoloff said

Thomas Barrack, executive chairman of real estate and investment management firm Colony NorthStar Inc, did not miss the chance to commiserate during the same discussion.

“People go ‘Oh, you’re in PE, don’t you just go in and buy companies and cut costs and then pray them up and flip them?'” Barrack said. “I say ‘No, we’ve never done that. We don’t do that at all. We grow businesses. We create value.'”

 

(Reporting by Lawrence Delevingne; Editing by Carmel Crimmins and Bill Rigby)
Published at Tue, 02 May 2017 22:54:40 +0000

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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

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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