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Elon Musk: The amped-up version of Tesla’s Model 3 will cost $78,000

Watch: Tesla Model X tows plane, breaks record
Watch: Tesla Model X tows plane, breaks record

Elon Musk: The amped-up version of Tesla’s Model 3 will cost $78,000

Elon Musk just laid out plans for the superfast version of the Tesla Model 3.

Musk said on Twitter over the weekend that the performance version of the Model 3 will sell for about $78,000.

That’s more than double the price of the basic Model 3, which starts at $35,000.

Musk said the price is comparable to the BMW M3, a high-performance version of the BMW 3-series sedan. But the high-end Tesla Model 3 will be “15% quicker [and] with better handling,” he said.

“Will beat anything in its class on the track,” Musk tweeted.

(The M3 starts at $66,500, according to BMW’s website.)

The amped-up Model 3 will be able to go from zero to 60 miles per hour in 3.5 seconds, and has a driving range of 310 miles, according to the initial specs.

Only black and white interiors will be available initially because of a parts limitation, Musk said.

The car will feature a dual motor system, with one motor optimized for power and one for driving range.

There is currently a dual motor, all-wheel drive option for Model 3s for an extra $5,000. Musk said the performance model will accelerate more quickly and have a higher top speed than cars with the regular all-wheel drive option, however.

While a faster Model 3 sounds nice, the basic Model 3 has had enormous trouble just getting off the assembly line.

The production troubles have been so acute that Moody’s downgraded Tesla debt deep into junk status earlier this year.

In February, Tesla said it had taken deposits and orders for more than 500,000 Model 3s in the last two years. But it had built only 12,500 through the end of March.

Recently production has increased to more than 2,200 cars a week. Tesla has said it plans to hit 5,000 Model 3s per week by the end of June.

Shortly before sharing the specs for the Tesla Model 3 performance version, Musk mentioned a service option called Tesla Ranger, in which a technician will come and “take care of your car” after just a few taps on a smartphone.

There’s no need for paperwork or to bring the car in yourself, Musk said on Twitter.

Published at Sun, 20 May 2018 21:13:09 +0000

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Trump’s Trade Dilemma: Export Growth Or National Security

U.S. President Donald Trump waves as he and China’s President Xi Jinping walk along the front patio of the Mar-a-Lago estate after a bilateral meeting in Palm Beach, Florida, U.S., April 7, 2017. REUTERS/Carlos Barria


Trump’s Trade Dilemma: Export Growth Or National Security

According to the U.S. administration, Chinese tech giant ZTE violated sanctions by selling equipment to Iran and North Korea. In April, this led to a ban on U.S. companies selling to ZTE—a move that would cripple the Chinese company. This week, Trump reversed that decision in what he describes as part of a negotiation for a larger trade deal.

The sudden about-face is in line with Trump’s pattern of attempting to gain leverage, bringing things to a fever pitch and then re-negotiating—but this time we’re talking about a major national security threat, and the trade-off is more exports.

Almost exactly a year ago, ZTE agreed to plead guilty and pay nearly $900 million for U.S. sanctions busting. This was the culmination of a five-year investigation into the tech equipment maker, which conspired to evade U.S. embargoes by buying U.S. components, incorporating them into ZTE equipment and then illegally selling them to Iran and North Korea.

In other words, they were getting sensitive American technology to hostile regimes.

There is no question that ZTE was, and still represents, a threat to national security. It was the most obvious target in a trade war that has been strongly focused on China’s theft of American technology secrets.

And as the Wall Street Journal notes, “U.S. concerns about ZTE go beyond its evasion of sanctions. For years, the U.S. has accused equipment made by Shenzhen-based ZTE and its larger crosstown rival Huawei Technologies Co. of being a national security threat, an accusation that both companies have denied. The U.S. has largely blocked both companies from selling telecommunications gear in the U.S.”

For this reason, the sudden promise by Trump to help ZTE out of a major bind that would likely have brought it to its knees is perplexing.

(Click to enlarge)

Trump insists that it is part of negotiations for a larger trade deal, suggesting that the U.S. is going to get something big in return (presumably the U.S. as a nation, not the Trump Organization), but details have been vague at best. And it would have to be something big, indeed, if the administration is simply going to ignore sanctions violations with rogue regimes like Iran and North Korea, especially given that Washington is again on the sanctions warpath with the former.

Now that ZTE is facing bankruptcy, Trump is promising to turn things around because “too many jobs in China [will be] lost”.

(Click to enlarge)

So now, suddenly, Washington is ostensibly worried about Chinese jobs rather than American jobs, and Trump’s sudden reversal led to some serious blowback.

(Click to enlarge)

The senator followed that up later with this statement: “The toughest thing we could do, the thing that will move China the most, is taking tough action against actors like ZTE. But before it’s even implemented, the president backs off. This leads to the greatest worry, which is that the president will back off on what China fears most – a crackdown on intellectual property theft – in exchange for buying some goods in the short run. That’s a bad deal if there ever was one.”

The issue intensified on Tuesday and Wednesday, when media reports emerged about a Chinese loan for a Trump Organization project in Indonesia.

Last Thursday, China’s state-own MCC Group construction company announced it had formalized plans to develop a theme part in Lido, Indonesia in part of a project for which the Trump Organization has licensing agreements, CNN reported. On May 11, the Indonesian project got a $500-million development loan from MCC, right before Trump’s ZTE reversal.

The issue here is that the Trump Organization will benefit from the project though, though not directly, and only some of this will go to facilitate the construction of Trump-branded properties here.

Trump has branded it all ‘fake news’, and the story itself hasn’t gained significant traction, largely because regardless of whether or not the deal in Indonesia is a blockbuster for the Trump Organization or not and represents a conflict of interest, the likelihood is that the Chinese realize this sweetens the deal, but it’s not at the heart of the negotiations.

The problem is that ZTE is a national security threat and flip-flopping on this without anyone knowing why makes it seem that we’re not getting the upper hand in this trade deal. It also leads many to question Trump’s ability to strategize beyond the immediate term.

As the Financial Times put it: “If Mr Trump has bargained away a serious threat to US national security for some short-term gimmicks from Mr Xi such as ordering Chinese state-owned companies to buy more American exports, it is one of the worst deals he has ever struck. It is entirely possible that Mr Trump will quickly U-turn on his U-turn, particularly if he does not quickly get what he wants on trade from Mr Xi.”

China is definitely desperate for a deal on ZTE. So from that perspective, Beijing is probably willing to negotiate. China has already said it was “willing in principle” to import more U.S. agricultural products in return for an easing of penalties on ZTE.

The question then, in other words, is: should the U.S. be willing to risk national security for the sake of exports? We’ll find out more this week as Chinese officials continue trade talks in the U.S.

By Fred Dunkley for

Published at Wed, 16 May 2018 21:00:00 +0000

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Facebook took down 21 million pieces of adult nudity in three months


How to find out what Facebook knows about you
How to find out what Facebook knows about you

Facebook took down 21 million pieces of adult nudity in three months

Facebook’s technology is good at removing nudity and violence, but not at removing hate speech.

The social network said it took down 21 million pieces of adult nudity in the first three months of the year, according to its first Community Standards Enforcement Report.

The report, released Tuesday, revealed how much content has been removed for violating standards. Its enforcement efforts between October 2017 and March 2018 include six categories: graphic violence; adult nudity and sexual activity; terrorist propaganda; hate speech; spam; and fake accounts.

The company estimated that for every 10,000 pieces of content seen on Facebook overall, between seven and nine of them violated its adult nudity and pornography standards.

Facebook’s internal technology flagged adult nudity or sexual content about 96% of the time before it was reported by users, according to the report.

But most of Facebook’s removal efforts centered on spam and fake accounts promoting it. In the first quarter, Facebook disabled about 583 million fake accounts and removed 837 million pieces of spam, the report said.

Facebook acknowledged it has work to do when it comes to properly removing hate speech. It took down 2.5 million pieces of hate speech during the period, only 38% of which was flagged by its algorithms.

“For hate speech, our technology still doesn’t work that well and so it needs to be checked by our review teams,” Guy Rosen, Facebook’s VP of product management, said in a blog post.

Meanwhile, Facebook removed or added warning labels to about 3.5 million pieces of graphic violence content. In this case, 86% was flagged by its technology.

The company said government requests for account data rose globally by about 4% during the first half of 2018 compared to the first half of 2017. Requests increased from 78,890 to 82,341.

In the United States, government requests were roughly the same compared to the same period last year.

“We always scrutinize each government request we receive for account data — whether from an authority in the US, Europe, or elsewhere — to make sure it is legally valid,” Chris Sonderby, Facebook VP and deputy general counsel, said in a blog post. “If a request appears to be deficient or overly broad, we push back, and will fight in court, if necessary.”

Published at Tue, 15 May 2018 16:03:40 +0000

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Xerox pulls out of Fujifilm deal and teams up with Carl Icahn

The iconic US printer and copier company announced the move in a statement late Sunday, saying it had reached a new agreement with activist investors Carl Icahn and Darwin Deason, who had bitterly opposed the Fujifilm deal.

The Japanese company said it disputes Xerox’s “unilateral decision” and doesn’t think the US company has the legal right to ax the deal.

Under the plan that Xerox (XRX) and Fujifilm (FUJIF) announced in January, the US company’s operations would be merged with those of Fuji Xerox, a joint venture between the two firms. The deal would leave Fujifilm holding 50.1% of Fuji Xerox, with Xerox shareholders owning the rest.

But Icahn and Deason blasted the deal, saying it significantly undervalued the US company and would be its “death knell.” With a combined 15% stake in Xerox, they launched an aggressive campaign to halt the merger and oust top managers, including CEO Jeff Jacobson.

They appeared to have gotten what they wanted earlier this month, striking an agreement with the Xerox board to replace Jacobson and six other directors with their own representatives — and to move quickly to terminate or renegotiate the Fujifilm deal.

That plan fell apart days later amid recriminations from both sides, but now the Xerox board and the activist investors have settled their differences again. Under the agreement announced Sunday, Jacobson and five other directors have already stepped down, with the activist shareholders’ picks replacing them, Xerox said.

Helping Icahn and Deason’s case was a court decision in late April that temporarily blocked the planned merger with Fujifilm.

The Xerox board said it repeatedly asked Fujifilm in recent weeks to start new talks about improving the terms of the takeover but the Japanese company “provided no assurance that it will do so within an acceptable timeframe.”

As a result, it said it felt it was “in the best interests of the company and all of its shareholders” to scrap the Fujifilm deal and side with Icahn and Deason.

Fujifilm said in a statement that it’s reviewing all its options, including legal action.

It said it still believes the takeover is “the best option designed to allow the stockholders of both companies to share the enhanced future value of the combined company.”

Published at Mon, 14 May 2018 04:52:09 +0000

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NAFTA math may not add up to more U.S. auto jobs

by manfredrichter from Pixabay

NAFTA math may not add up to more U.S. auto jobs

DETROIT (Reuters) – Trump administration demands in NAFTA trade negotiations meant to push auto jobs back to the United States may not be enough to spark a shift in where automakers build cars and trucks.

New math to determine what qualifies as vehicle content, what limits apply to allow tariff-free auto imports and how long companies would have to comply under a new NAFTA agreement will likely not move the needle for Detroit automakers in particular, industry executives and supply chain experts said.

Automakers are unlikely to uproot billions of dollars of investments in plants and supply chains. And those that cannot comply with standards for passenger cars could simply pay tariffs of around $800 to $900 per vehicle and buy low-cost parts from Asia to offset the cost, industry experts said.

“Broadly speaking the (tariff) increase isn’t big enough to make a wholesale change,” said Mark Wakefield, head of the North American automotive practice for consultancy AlixPartners. “No one is likely to shut down an active factory in Mexico and build a new one to replace that in the U.S.”

Tough U.S. proposals on autos are meant to bring back U.S. manufacturing jobs and central to the Trump administration’s approach to renegotiating the North American Free Trade Agreement between Canada, Mexico and the United States.

General Motors Co, soon to be the only Detroit Three automaker building pickup trucks in Mexico, is confident it could comply with content requirements for trucks the United States proposes without shifting production, a person familiar with the company’s plans said.

But GM’s Mexican-made trucks already have a significant share of their value, such as engines, produced in the United States at United Auto Workers union-represented factories, and GM would get another boost if it is allowed to tally engineering done in Michigan.

GM is retooling a high-volume factory to build a new generation of large Chevrolet and GMC pickups in Silao, Mexico. Pickup trucks that do not have enough U.S. or North American content under NAFTA rules could be hit with a crippling 25 percent tariff.

Last year GM churned out more than 400,000 large pickup trucks from Silao, more than 40 percent of its 2017 U.S. pickup truck sales.

Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne said on Friday a revised treaty could prompt FCA to “redirect” some Mexican production but would not cause it to further dial back its presence in Mexico.

In January FCA had said it would shift production of heavy-duty pickup trucks from Mexico to Michigan in 2020 to reduce the profit risks should the United States pull out of NAFTA.

Senior U.S., Canadian and Mexican officials on Friday ended a week of talks without a deal to modernize NAFTA, agreeing instead to resume negotiations soon, ahead of a deadline next week.


The United States wants 40 percent of the value of light-duty passenger vehicles and 45 percent of a truck’s content to be built at hourly wages of $16 to qualify for tariff-free import from Mexico.

Those demands are aimed at preserving relatively higher-wage U.S. and Canadian production and pressuring Mexico’s low auto wages.

Mexico wants 70 percent of a vehicle’s content to be made within North America, less than the 75 percent U.S. negotiators propose.

Automakers that do not comply with tougher U.S. or North American content and wage rules, if adopted, could face 2.5 percent tariffs on cars or sport utility vehicles shipped to the United States from Mexico. That may be a level of pain they can live with.

Automakers producing sedans, SUVs and crossovers in Mexico include Ford Motor Co, Toyota Motor Corp, Mazda Motor Corp, Nissan Motor Co Ltd, Honda Motor Co Ltd and Volkswagen AG (VOWG_p.DE).

The U.S. proposal would allow automakers to count salaries for engineering, research, sales, software and product development jobs, a provision favoring Detroit automakers versus foreign brands.

And companies would have two, four or nine years to comply, depending on the specific condition involved.

Still, some automakers are more of a question mark, especially when it comes to trucks. Toyota plans to expand production in Mexico of its Tacoma pickup trucks, part of a realignment of its North American manufacturing that includes a new $1.6 billion assembly plant in Alabama.

It also makes Tacomas in San Antonio, Texas, so could in theory switch production. The automaker declined to comment.

And the Trump administration proposals could complicate matters for electric vehicles and self-driving cars automakers want to build in Mexico. The U.S. proposals call for 75 percent of an electric or autonomous vehicle’s value to be made within North America to avoid tariffs.

Since much of those vehicle’s value can come from batteries made overseas, that means automakers must make up for the content largely on the human side.

At nine years, electronic vehicles are subject to the longest period until they must comply.

“EVs and AVs have so much electronic content and there is no electronics industry here,” said Kristin Dziczek of the Center for Automotive Research in Ann Arbor, Mich. “Nine years is not enough to build up an electronics industry to that scale.”

Reporting By Nick Carey; Editing by Meredith Mazzilli

Published at Mon, 14 May 2018 05:05:53 +0000

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Merrill: “Retail spending stalls again”


Merrill: “Retail spending stalls again”

by Bill McBride on 5/11/2018 09:25:00 AM

A few excerpts from a Merrill Lynch research note: Retail spending stalls again

According to BAC aggregated credit and debit card data, retail sales ex-autos declined 0.1% mom seasonally adjusted in April. This suggests that the better momentum in consumer spending seen in March failed to carry over to start the second quarter. We saw two headwinds for the consumer in April: weather and higher gasoline prices.

We find evidence that unseasonably cold weather conditions likely played a role in holding back consumer activity. Specifically, the Midwest and the Northeast experienced below average temperatures …

Higher gasoline prices also likely dampened overall consumer spending. According to the Energy Information Administration, retail gasoline prices jumped 6.4% mom in April as crude oil prices rose on negative supply shock and solid global demand. This led to a surge in spend at gasoline stations and a shift away from other categories. …

Bottom line: Retail spending softened in April. The weather impact should prove temporary but rising gasoline prices is likely to persist, eating away some of the positive impact from higher after-tax wages seen post tax reform.

CR Note: Retail sales for April are scheduled to be released on Tuesday, May 15th. The consensus is retail sales increased 0.3% in April.

Published at Fri, 11 May 2018 13:25:00 +0000

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Wells Fargo trims expected hit from regulatory cap on assets

Wells Fargo trims expected hit from regulatory cap on assets

BOSTON (Reuters) – Wells Fargo & Co on Thursday said a cap on the bank’s growth imposed by regulators after sales practices scandals would hurt earnings less than it thought this year, and forecast 2019 expenses below Wall Street expectations.

Analysts were upbeat about the expense outlook, financial targets and lessened fallout from the regulatory restrictions, though Wells Fargo said that reflected slower loan and deposit growth. But some had hoped for more revenue details at the bank’s annual investor day.

“While we expect the market to view this financial outlook favorably, (portfolio managers) keep on telling us they need to see the negative headlines abate … and revenue growth to return,” Barclays analyst Jason Goldberg wrote in a note.

Wells Fargo is under Federal Reserve orders to keep its assets below $1.95 trillion until governance and controls improve. Chief Executive Tim Sloan said the bank, now the fourth-largest U.S. lender by assets, is making plans to operate under that limit for the first part of 2019.

He acknowledged the bank previously had not executed so well on compliance and risk oversight, but pushed back on the idea that it has a lot more work to do and said some news headlines were getting “tiresome.”

“I think we’re through most of the historical review,” Sloan said during a question-and-answer period at the daylong meeting in Charlotte, North Carolina, which was webcast.

The bank previously expected the asset cap to hit after-tax net income by up to $400 million, but lower deposit and loan growth gave it room under the limit and caused it to cut that figure to less than $100 million, Treasurer Neal Blinde said.

Well Fargo said net interest income, or the difference in what it pays for deposits and what it earns on loans, will be relatively flat in 2018 as lower earning assets and higher deposit costs offset higher interest rates.

The bank’s shares closed at $54.65 on Thursday, up 1.7 percent.

Wells Fargo Chief Financial Officer John Shrewsberry said the bank would not provide updated guidance on its efficiency ratio. Investors and analysts have watched for improvements in that key measure of costs per dollar of revenue since the sales scandal erupted in 2016.

Shrewsberry said under one scenario for 2020 it is possible the bank would have expenses of $50 billion to $51 billion, and revenue consistent with 2017 results, but cautioned that was not a formal projection.

Under questioning from analysts he declined to offer more specific revenue forecasts, citing the many variables at play.

Noninterest expenses for 2019 would total $52 billion to $53 billion excluding litigation and remediation items, the bank said, compared to analyst expectations of $53.2 billion according to Thomson Reuters I/B/E/S.

Barclays analyst Goldberg noted that two profitability targets Wells Fargo gave on Thursday roughly met his expectations: a two-year return on equity of 12 percent to 15 percent and two-year return on average tangible common equity of 14 percent to 17 percent.

Perry Pelos, who leads Wells Fargo’s wholesale business, said it remains the primary bank of about 11 percent of U.S. middle-market companies. While the bank’s issues have prompted client questions, Pelos said, “by and large they have hung with us.”

Reporting by Ross Kerber; additional reporting by David Henry. Editing by Meredith Mazzilli and Bernadette Baum

Published at Thu, 10 May 2018 21:40:29 +0000

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How Trump’s steel tariffs kick the can business

How Trump’s steel tariffs kick the can business

WOODLAND, Calif. (Reuters) – Dan Vincent is in a bind.

The president of Pacific Coast Producers (PCP) plans to use around 700 million tin-coated steel cans this year for tomatoes, peaches and pears from 168 growers here in California.

His cooperative then sells the canned fruits and vegetables to grocers ranging from Walmart Inc to Kroger Co, as well as food services companies such as Sysco Corp and a host of restaurant chains.

Since President Donald Trump announced sweeping tariffs on steel and aluminum to help the domestic steel industry on March 20, PCP’s steel costs have jumped 9 percent as the market prices in the tariffs before they even take effect.

Vincent now expects his steel bill for the year to rise $18 million to $20 million, forcing him to choose between taking a potential 75 percent cut to his company’s profits, or pushing the added costs to his retail customers and eventually to consumers – many of whom are lower-income Americans “who can least afford it,” Vincent told Reuters.

“Look, we all want to protect U.S. steelworkers,” Vincent said while touring a tomato farm in Woodland, California. “But we don’t want to be an unintended consequence of this.”

Meant to protect U.S. jobs and even out trade imbalances, the Trump administration’s tariffs on steel and aluminum are having a ripple effect throughout the U.S. economy, from cars to aircraft to oilfield pipes. Cans have a special significance in the debate over the pros and cons of the policy.

U.S. Commerce Secretary Wilbur Ross, during a March 2 appearance on CNBC, held up a Campbell Soup Co can and said it only contained 2.6 cents worth of steel in it, equating to less than a one cent added cost per can.

“Who in the world is going to be too bothered by six tenths of a cent?” Ross said.

A Commerce Department spokesman said the figures Ross used were based on the cost of tin plate steel and calculated for a 10.75 ounce (0.3kg) can, adding steel is “only one component of the cost.”

Canning industry executives, however, say the cost of America’s most common 15 ounce (0.43kg) can is actually around 17 cents, and will rise 4 cents thanks to tariffs.

Even a 10-ounce can costs food processors up to 14 cents, and should cost 3 cents more with tariffs.

Those pennies add up. If the cost of all 24 billion cans Americans use annually went up 3 cents, it would generate an additional $720 million in costs someone in the supply chain must eat, industry executives said.

“Our members have razor-thin margins,” said Nickolas George, president of the Midwest Food Products Association, which represents Seneca Food Corp and Del Monte Pacific Ltd, which both can fruit and vegetables, among others. “Lower profits for them mean less innovation, less investment, less expansion into new markets and less hiring.”


For consumers, a spike in prices in the grocery aisle puts poorer Americans at risk, U.S. government statistics show, because they spend more of their budget on food than those in higher income brackets.

The canning industry has made economic fairness part of its public argument for canceling the tariffs. According to 2012 research commissioned by the Can Manufacturers Institute, Americans on food stamps and other food assistance programs consumed 7.1 cans of fruit and vegetables every week, compared with the national weekly average of 5.5 cans.

Retailers and companies like PCP work to keep the cost of canned fruit and vegetables under 99 cents, which is what Vincent calls the “magic number,” a psychological threshold over which poorer U.S. consumers in particular have historically walked away.

“I’m afraid the tariffs are going to push us over that 99 cent threshold,” Vincent said.

A key question is whether Walmart will let producers pass on higher costs, as the retail giant is renowned for pushing back against price hikes, said Edward Jones analyst Brittany Weissman.

Walmart referred Reuters to the Retail Industry Leaders Association trade group. Hun Quach, the group’s vice president for international trade, said with tariffs “the bottom line is there is no other place for through costs to go than to consumers.”

Rivals for PCP in China and Europe, meanwhile, are seen getting a boost from steel tariffs. Canned fruit and vegetables imported into the United States will not be subject to tariffs because they are classified as finished goods, so foreign competitors are under no pressure to raise prices.


The farmers in PCP’s cooperative grow fruits and vegetables in the rich, sandy-loam soil of California’s Central Valley, east of San Francisco.

A forklift passes cans at Pacific Coast Producers’ distribution center in Lodi, California, U.S., April 27, 2018. REUTERS/Noah Berger

One of those farmers is Frank Muller, chairman of the cooperative’s board and a second-generation tomato farmer.

On the thousands of acres he farms, workers carefully drop young tomato plants into perfectly-formed holes, irrigated by underground strips to save water. New seeds and more precise planting techniques have helped Muller more than double the yield of his fields during the past three decades to 55 tons of tomatoes per acre.

But at the same time, his costs have exploded. In just one example, he now pays $2,600 per 100,000 seeds up from $20 three decades ago.

Muller had planned a new steel equipment storage building on his farm, but that investment is on hold, he said, due to uncertainty about the cost.

“The tariffs hit me at both ends,” Muller said. “It means higher input costs and it will hurt our end markets.”

Richard Elliot is another of PCP’s farmers worried by tariffs. A fifth-generation pear grower, he said a broader trade war would hurt his exports to Canada and South America. But Elliot is more concerned steel tariffs will harm PCP, which he relies on to buy and can a significant portion of his crop.

“We can’t be in business unless PCP is doing well,” he said.

PCP has expanded over the years, investing in a fruit import business to can exotic fruit and a cherry-growing operation in Oregon. When a rival closed its Modesto, California, peach-canning plant earlier this year citing rising costs and “import competition from China and Europe,” PCP took over that business.

The 700 million cans PCP needs for this year’s growing season will add close to $20 million in unplanned additional cost. The company had expected profit for this year of $24 million, but those extra steel costs could cut PCP’s profits by up to $18 million, Vincent said.

To cut costs, PCP will process the extra fruit without adding to its labor force.

“There’s a lot of money we could have made that will go into steel,” PCP’s Vincent said.

Reporting By Nick Carey; editing by Joe White and Edward Tobin

Published at Wed, 09 May 2018 14:39:00 +0000

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Small Business Optimism Index increased slightly in April, “Poor Sales” Near Record Low


Small Business Optimism Index increased slightly in April, “Poor Sales” Near Record Low

by Bill McBride on 5/08/2018 08:57:00 AM

From the National Federation of Independent Business (NFIB): April 2018 Report: Small Business Optimism Index

The Small Business Optimism Index sustained record-high levels increasing to 104.8 in April, driven by reports of improved profits, the highest in the NFIB Small Business Economic Trends Survey’s 45-year history. Additionally, the number of small businesses reporting poor sales fell to a near record low.
Reports of employment gains remain strong among small businesses … Owners reported adding a net 0.28 workers per firm on average, the third highest reading since 2006 (down from 0.36 workers reported last month, the highest since 2006). …

Fifty-seven percent reported hiring or trying to hire (up 4 points), but 50 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Twenty-two percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 1 point), exceeding the percentage citing taxes or regulations.
emphasis added

Small Business Optimism Index

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 104.8 in April.

Note: Usually small business owners complain about taxes and regulations.  However, during the recession, “poor sales” was the top problem.

Now the difficulty of finding qualified workers is the top problem.


Published at Tue, 08 May 2018 12:57:00 +0000

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Tesla Stock Bouncing Back After Musk Misfire


Tesla Stock Bouncing Back After Musk Misfire

By Alan Farley | May 7, 2018 — 11:35 AM EDT

Tesla, Inc. (TSLA) CEO Elon Musk stunned Wall Street analysts during last week’s earnings conference, cutting off questions about the controversial automaker’s capital requirements and customer reservations. His reaction to “boring bonehead” questions triggered a double-digit decline and quick $3 billion loss in market value. Tesla stock has bounced back since that time, but the outburst could undermine longer-term buying interest and investor confidence.

The stock entered a stealth downtrend after topping out near $390 in June 2017 and has been flirting with a 52-week low in recent months, caught between an April 2017 breakout and March 2018 breakdown. This holding pattern is likely to generate a strong trend move as soon as the battle between low Model 3 production levels and high cash burn provides a clearer view of Tesla’s ability to survive and prosper into the new decade. (See also: Is Elon Musk Making Things Worse for Tesla?)

TSLA Long-Term Chart (2010 – 2018)

The company came public at $19.00 in June 2010 and posted an all-time low at $14.98 one month later. The subsequent uptick mounted the IPO opening print in November, ahead of a buying spree that stalled at $36.42 in December. Multiple breakout attempts failed into the second quarter of 2013, when the stock took off in a momentum-fueled advance that stalled in the $260s in February 2014.

A pullback into May established support in the $180s, ahead of a rally wave that exceeded the prior high by 26 points in September. It sold off from that level, triggering a failed breakout while reinforcing a broad trading range that broke to the downside in January 2016, dropping the stock to a two-year low at $141.05. It remounted broken range support two months later, trapping short sellers in a squeeze that reached range resistance in April.

The stock posted a higher low in the $180s after the presidential election and took off in a positive feedback loop that cleared major resistance in April 2017. Long-term trend followers then entered aggressive positions, but the uptick ended just two month later near $387, generating a September test at that level, followed by a downtrend that broke a 10-month double top and the 200-day exponential moving average (EMA) in March 2018.

TSLA Short-Term Chart (2016 – 2018)

A decline into April 2018 undercut the 2017 breakout level by 40 points, but the stock bounced strongly, once again shaking out overeager short sellers. It is now trading in no-man’s land, stuck between triangle resistance above $310 and breakout support stretched between $270 and $290. Neither long nor short positions make sense within this battleground, which could persist until Model 3 production levels take off or the company runs out of cash.

On-balance volume (OBV) topped out in 2014 and entered a broad distribution wave that finally ended in the first quarter of 2016. Buying pressure into 2017 reached the prior high, ahead of a breakout that coincided with bullish price action. The indicator carved a topping pattern into 2018 and broke support in April, triggering a bearish divergence that raises the odds of price following suit in the coming months.

Broken double top support roughly aligns with the .382 Fibonacci retracement of the uptrend into 2017 and the round number $300, while the 200-day EMA has now turned lower at $315. The price band between $300 and $320 now marks major resistance that will take considerable buying power to overcome, with a breakout setting off bullish signals that could generate an advance above $400. Conversely, a decline through the 2015 high at $287 would sound a warning bell that could presage downside through $200. (For more, see: Tesla Shorts May Soon Lose Their Attractiveness: S3 Partners.)

The Bottom Line

Tesla broke a triangle top in March 2018, confirming a downtrend that started in May 2017. However, the stock is still holding the last level of major support and could recover if the persistently negative news flow dissipates. (For additional reading, check out: After Call, Tesla Gets Most Bullish Forecast Yet.)

Published at Mon, 07 May 2018 15:35:00 +0000

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$70 oil will create headaches for these companies


$70 oil will create headaches for these companies


A 50% spike in the price of crude oil over the past year has set off a celebration for Big Oil. But it’s sending shudders through other major businesses.

Fears that President Trump will kill the Iran nuclear agreement lifted crude above $70 a barrel late Sunday for the first time since late 2014. Wall Street is already banking on fatter profits for the likes of ExxonMobil(XOM), Chevron(CVX) and shale giant Continental Resources(CLR).

Yet the return of higher oil prices — and $3-a-gallon gas — will also be greeted with eye rolls, not just by American drivers but by CEOs of big companies like Hershey(HSY) and Sherwin-Williams(SHW). More expensive oil will eat into their bottom line.

That’s especially true for certain chemicals, paper packaging, retail, transportation and packaged food companies.

Chemicals makers are particularly vulnerable because they use crude oil as a major ingredient. Polyone(POL), Univar(UNVR) and KMG Chemicals have at least half of their production costs in oil and products derived from petroleum, according to Goldman Sachs.

Eastman Chemical(EMN), Huntsman(HUN) and paint giant Sherwin-Williams spend nearly as much on oil.

Raw materials costs are “all heading in the wrong direction,” Sherwin-Williams chief financial officer Allen Mistysyn recently told analysts.

Oil is also a major expense for Goodyear Tire & Rubber(GT), as well as auto parts companies such as AutoZone(AZO), Advance Auto Parts(AAP) and Adient(ADNT).

higher oil prices companies
Goodyear, General Mills and Sherwin-Williams are among the companies that could feel the pinch of higher oil prices.

Consumer products companies are likewise nervously watching the rising price of raw materials, especially crude oil.

For instance, Goldman Sachs found that oil and oil products make up at least 18% of expenses for Hershey, Estee Lauder(EL), Clorox(CLX), Mondelez(MDLZ) and Church & Dwight. These companies spend on oil to manufacture, package and ship their products to customers.

Other big oil spenders in consumer goods include Post-It maker 3M(MMM), Haagen-Dazs and Cheerios maker General Mills(GIS), and JM Smucker(SJM).

CEOs have recently warned that they are already grappling with the higher cost of raw materials, especially steel and aluminum, which have become more expensive since President Trump imposed tariffs.

“Obviously with the oil price at $70, that just puts further pressure,” Whirlpool(WHR) CEO Marc Bitzer said during a recent call with analysts.

Higher oil prices can be a double whammy for consumer companies. Not only are their expenses higher, but Americans will have less disposable money to spend at the stores if they’re dealing with pain at the gas pump.

Airlines are also bracing for higher fuel costs. American Airlines(AAL) CEO Douglas Parker noted on April 26 that oil prices have spiked 60% from last summer. “That’s a big increase over a short period of time,” Parker warned, adding that it will have a “material” impact on all airlines.

The good news is that many major companies, especially airlines, use hedging strategies to lock in energy prices when they’re low. That means the pain from higher prices may not be immediate.

Other companies should be able to pass along higher energy costs to their customers, especially because the US and world economies are healthy. The US unemployment rate fell below 4% in April for the first time since 2000.

The surge in oil prices has been driven by a range of factors, including robust demand and production cuts by Russia and OPEC countries.

More recently, the oil market has been lifted by geopolitical factors such as plunging output in Venezuela and, now, expectations that Trump will re-impose sanctions on Iran. Trump faces a May 12 deadline to decide the fate of the Iran nuclear deal.

Tamas Varga, lead analyst at brokerage firm PVM Oil Associates, predicted “panic buying” that will briefly lift benchmark US oil prices to $75 a barrel if Trump snaps sanctions back on Iran.

The big question will be whether Iran’s major customers — China, India, South Korea and the European Union — comply with new sanctions. There has been considerable pushback, especially in Europe, to Trump’s bid to rip up the Iran nuclear deal.

On the other hand, crude oil prices could plunge if Trump surprises the market and re-certifies the Iran deal.

In the longer term, the surge in oil prices could be contained by two major factors.

First, oil traders will be watching closely to see how fast shale drillers in the United States respond to $70 oil by ramping up more production. A healthy dose of new US output could cool the market off.

And at a certain point, high prices are likely to cure themselves. Varga said “demand destruction” will eventually “limit any upside.”

Published at Mon, 07 May 2018 17:48:15 +0000

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How to Protect Your Retirement After a Divorce

How to Protect Your Retirement After a Divorce

by Mark P. Cussen, CFP®, CMFC, AFC

Divorce can be one of the hardest and ugliest things to deal with in your life. The emotional and familial turmoil that typically surrounds this process is often exacerbated by financial issues and the battle over division of assets. Retirement plans and pensions are often a key asset that is targeted by both spouses, especially when a nonworking spouse may be left without savings of any kind if he or she is unable to get anything from the former partner. Here’s what you can do to protect your retirement savings or rights to benefits if you face this unfortunate dilemma. (For more, see: Get Through Divorce with Your Finances Intact.)

Know the Rules

The first step in protecting your retirement assets is to know the rules that govern your plans, accounts and pension payments. Most plans and accounts have specific procedures that must be obeyed when it comes to dividing retirement assets, and failure to follow these instructions may lead to forfeiture of some or all of those assets — even if they were accorded to you in the divorce decree. (For more, see: Pitfalls of Getting Divorced After 50). For example, the Thrift Savings Plan, a defined-contribution plan for federal employees and members of the uniformed services, requires that the division of plan assets be clearly spelled out and referred to as the TSP balance directly in the divorce decree. A verbal agreement between the parting spouses will not suffice to process a rollover under the Qualified Domestic Relations Order (QDRO) rules. The decree itself must say something to the effect of “the spouse is entitled to X percent of the participant’s TSP balance” somewhere in the document or one of its appendices. If it does not, the spouse of the participant will receive nothing, regardless of any other agreement that was made. (For more, see: Is a TSP a Qualified Retirement Plan?)

Any debt that is owed inside a retirement plan also usually is considered to be a joint obligation. For example, if the participant spouse took out a $50,000 loan from his $200,000 401(k) plan, then a 50-50 split may be calculated on the remaining balance in the plan, unless the divorce decree specifically states that the loan must be repaid before the division. (For more, see: 401(k) Loans Pros and Cons.)

Pension Plans

Bureaucratically speaking, dividing IRAs and defined contribution plans is usually a relatively straightforward process. Either the divorce decree itself or a QDRO is used to move account balances from one spouse to the other in the form of a rollover. Dividing guaranteed pension payouts can be another matter in many cases. Although both types of retirement funds must usually be divivied up at the time of divorce by some form of court order, there are several key factors that enter into how monthly benefits are allocated between spouses. Any pension that was earned while the divorcing spouses were married is typically considered to be joint property in most states and therefore subject to some form of division in a divorce. That said, there are several ways that this current or future payout can be divided. (For more, see: 3 Life Events That Can Ruin Retirement Plans.)

Most pensions offer some form of survivor benefit, and in some cases the ex-nonworking spouse may simply opt to retain this benefit. In other cases, the actual monthly benefit is divided between the spouses and the survivor benefit may be waived, retained or transferred depending upon the divorce decree. In some cases, the nonworking spouse may come out ahead by waiving the survivor benefit and having the other spouse purchase a life insurance policy naming him/her as a beneficiary. This can be especially prudent if the survivor benefit will stop if the nonworking spouse remarries before a certain age. (For more, see: Divorce Over 50: Seven Mistakes to Avoid.)

For example, the pension that is paid to a retired member of the U.S. military has a survivor benefit that will cease if the spouse of the deceased service member remarries before age 55. Therefore a spouse who is divorcing a service member who will receive a pension should run the numbers to compare a life insurance death benefit against what they will receive from the survivor benefit plan if they remarry before age 55 (which is, of course, rather likely in most cases). (For related reading, see: Say ‘I Do’ to Financial Compatibility.)

What You Need to Do

If you are either getting divorced or are seriously contemplating doing so, now is the time to get your ducks in a row regarding the division of retirement assets. The following steps can help to ensure that you either get or retain your fair share of retirement plan assets during the divorce proceedings.

  • Do Your Homework – As mentioned previously, those who understand the general rules of how plans are divided will be much better able to assess whether they are getting or retaining what they should. If the divorce decree states that a plan or account is to be split evenly, then a rollover order for the entire amount is obviously not correct. Non-participant or non-owner spouses have the right to obtain complete information about all retirement plan or account balances that are owned by the other spouse and should be able to get current statements on all assets, retirement or otherwise that are eligible for division. You also need to be aware that many rules and laws pertaining to the division of pension and retirement assets vary from one state to another, so be sure to find out what rules apply in your state and locality. (For more, see: State Laws Dictate Division of Joint Property.)
  • Get professional representation – Even if dividing the rest of your marital assets looks to be relatively straightforward, it is probably wise in most cases to at least consult a pension lawyer in order to review the division of retirement assets. Divorcing spouses who are uneducated in this matter can both lose in some cases due to simple ignorance of how pensions work and which payout options may be the best for both parties even when they are divided.
  • Send all court orders and divorce agreement documents to plan and account custodians immediately – If you delay too long in doing this, you may forfeit what is due to you because your paperwork has become outdated and therefore invalid. Although private pension plans are required under the Pension Protection Act of 2006 to accept any court order regardless of when it was issued, it is still critical to submit this paperwork before any of the assets in the plan or pension have been distributed. If you don’t, you may be faced with the prospect of trying to recover those assets yourself, which can incur further legal fees and bureaucratic wrangling. Also, if your soon-to-be ex-spouse has serious health issues or is terminally ill, be sure to get your legal documents to plan custodians sooner rather than later. Settling the affairs of a deceased ex-spouse who died before this paperwork was submitted can be a real nightmare. (For more, see: The Pension Bill: A Wolf in Sheep’s Clothing.)
  • Review Social Security benefits – If you were married to your ex for at least 10 years, you may be eligible for a portion of his or her Social Security benefits. Visit the Social Security website for what you will need to do to collect. If you are entitled to your own benefits as well, you are usually allowed to receive the larger of either your benefit or your share of your ex-spouse’s payments. (For more, see: Types of Social Security Benefits.)
  • Be sure that you are specified as the survivor – If your ex is getting a pension that you are dividing, make certain that you are listed as the survivor or beneficiary on the plan if you intend to continue collecting benefits after he or she is gone. Find out what forms you need to sign and keep copies of them in a safe place for future reference.
  • Create a prenuptial agreement – This may be the most straightforward way to protect your retirement assets and interests if you split up. Just be sure to include plans for how pensions and other assets can be divided, and perhaps leave some room for certain adjustments that could benefit you both depending upon your circumstances at the time of divorce. (For more, see: Marriage, Divorce and the Dotted Line.)

The Bottom Line

Divorce is never a fun process, but knowing the rules and anticipating the impact of retirement plan division and pension payouts can make things a great deal easier for both parties. If you have questions about what you need to be doing to make sure your assets are distributed correctly, visit the Pension Rights Center website or consult your financial advisor. (For more, see: Divorcing? The Right Way to Split Retirement Plans.)

Published at Sun, 06 May 2018 23:46:00 +0000

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Warren Buffett defends Wells Fargo’s ‘cardinal sin’

Buffett defends Wells Fargo's 'sin'
Buffett defends Wells Fargo’s ‘sin’

Warren Buffett defends Wells Fargo’s ‘cardinal sin’

Warren Buffett said on Saturday that Wells Fargo committeda “cardinal sin” by turning a blind eye to the bad behavior caused by its horrible incentive system.

But, the billionaire Wells Fargo(WFC) shareholder defended the scandal-ridden lender, arguing its misdeeds aren’t much worse than what other big banks have done.

Buffettsaid at theBerkshire Hathaway(BRKA) annual meeting in Omaha, Nebraska, that Wells Fargo had the “wrong incentives.”

Wells Fargo’s wildly unrealistic sales goals led workers to create millions of fake accounts and the bank has admitted to charging customers for auto insurance they didn’t need and mortgage fees they didn’t deserve.

“That was bad,” Buffett said. “But then they committed the much greater error” by “ignoring the fact that they had a faulty incentive system.” He said unrealistic sales goals encouraged workers to do “crazy” things, like opening millions of fake accounts.

“That is the cardinal sin at Berkshire,” he said.

Despite Wells Fargo’s 20-month nightmare, Berkshire Hathaway has largely stood by the bank. Buffett’s holding company still owns more than 458 million shares, a 9% stake.

Buffett reiterated his support for Wells Fargo and its embattled management team even though the bank’s legal troubles have persisted.

“I see no reason why Wells Fargo as a company — from both an investor standpoint and a moral standpoint going forward — is in any way inferior to the other big banks with which it competes,” Buffett said.

He pointed to the legal problems that plagued American Express(AXP) in the 1960s, noting that the company emerged stronger.

Yet a Berkshire Hathaway shareholder noted that Buffett has famously said that if you find yourself in a “chronically leaking boat,” it would be more productive to devote energy to “changing vessels” than “patching leaks.”

“At what magnitude of leakage would Berkshire consider changing boats?” the shareholder asked Buffett about Wells Fargo.

While Wells Fargo made a “big mistake,” Buffett said “all the big banks have had troubles of one sort or another.”

“I like Tim Sloan as a manager,” Buffett said of Well Fargo’s CEO, who has had to fight off calls for his resignation. “He is correcting mistakes made by other people.”

Just a day earlier, Wells Fargo agreed to pay $480 million to settle claims it misled shareholders about its fake-account scandal. Wells Fargo denied the allegations in the securities fraud class action, but said it agreed to pay to “avoid the cost and disruption of further litigation.”

Wells Fargo’s troubles aren’t limited to the fake-account scandal. Last month, federal regulators fined Wells Fargo $1 billion for auto insurance and mortgage abuses.

And in February, the Federal Reserve slapped Wells Fargo with unprecedented sanctions for “widespread consumer abuses.” The penalties prevent the bank from growing any bigger until it cleans up its act.

Wells Fargo remains under investigation from the Department of Justice, Department of Labor and the Securities and Exchange Commission. Federal regulators also recently urged Wells Fargo’s board to probe whether the bank made inappropriate recommendations to customers about their 401(k) plans.

Charlie Munger, Berkshire’s vice chairman, argued that it’s precisely because of all of these legal problems that Wells Fargo will be stronger in the future.

“I think Wells Fargo is going to be better going forward than it would have been if these leaks had never been discovered,” Munger said.

“If I had to say which bank is more likely to behave the best in the future,” Munger said, “it might be Wells Fargo.”

 Published at Sat, 05 May 2018 18:15:05 +0000

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Buffett’s Berkshire Hathaway bought 75 million more Apple shares in first quarter: CNBC

Buffett’s Berkshire Hathaway bought 75 million more Apple shares in first quarter: CNBC

Buffett’s Apple commitment over the past two years has surprised many, given his historical aversion to companies associated with the technology sector.

Berkshire’s initial investment in Apple was small, suggesting it was made by one of Buffett’s investment deputies, but with the latest stake purchase, it has grown to a solid 240.3 million shares worth $42.5 billion.

“If you look at Apple, I think it earns almost twice as much as the second most profitable company in the United States,” CNBC quoted Buffett as saying.

The billionaire investor recently sold out of an unsuccessful investment in International Business Machines Corp, at the same time he was buying Apple.

Berkshire said in February Berkshire’s Apple stake grew by about 23 percent since the end of September to roughly 165.3 million shares. [nL2N1Q422I]

Buffett has praised Apple Chief Executive Tim Cook and suggested he views Apple more as a consumer company, despite its Silicon Valley pedigree.

However, there may also be another reason for the investment: Berkshire’s cash position.

Berkshire has gone more than two years since a major acquisition, and Buffett said in his annual letter that he wants one or more “huge” non-insurance acquisitions to help him reduce Berkshire’s $116 billion in cash and equivalents.

Buying Apple accomplishes that, even though Buffett would rather buy whole companies than their stocks.

Berkshire typically discloses its largest common stock holdings and percentage stakes in its quarterly and annual reports. The report for the first quarter is scheduled for release on Saturday morning, just before Berkshire’s annual shareholder meeting in its Omaha, Nebraska, hometown.

Apple reported $61.1 billion in revenue for the March quarter, up from $52.9 billion last year, and promised $100 billion in additional stock buyback.

Berkshire Hathaway and Apple were not available for comment outside regular business hours.

Up to Thursday’s close, Apple stock had risen more than 5 percent since Berkshire disclosed on Feb. 14 that it had raised its stake in the Cupertino, California-based company.

Reporting by Philip George in Bengaluru and Jonathan Stempel in New York; Editing by Amrutha Gayathri

Published at Fri, 04 May 2018 04:08:04 +0000

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Apple surprises with solid iPhone sales, announces $100 billion buyback

Apple surprises with solid iPhone sales, announces $100 billion buyback

(Reuters) – Apple Inc on Tuesday reported resilient iPhone sales in the face of waning global demand and promised $100 billion in additional stock buybacks, reassuring investors that its decade-old smartphone invention had life in it yet.

Apple’s quarterly results topped Wall Street forecasts, which dropped ahead of the report on growing concern over the iPhone. The Cupertino, California-based company also was more optimistic about the current quarter than most financial analysts, driving shares up 3.6 percent to $175.25 after hours.

Suppliers around the globe had warned of smartphone weakness, playing into fears that the company known for popularizing personal computers, tablets and smartphones had become too reliant on the iPhone.

Sales of 52.2 million iPhones against a Wall Street target of 52.3 million was a comfort and up from 50.7 million last year, according to data from Thomson Reuters I/B/E/S.

Apple bought $23.5 billion of stock in the March quarter, and said it planned to hike its dividend 16 percent, compared with a 10.5 percent increase last year. Analysts believe the heavy emphasis on buybacks will bolster share prices, but some investors wished Apple had found different uses for the cash.

“I’d hoped for more on the dividend side or maybe a strategic investment,” said Hal Eddins, chief economist for Apple shareholder Capital Investment Counsel. “I assume Apple can’t find a strategic investment at the current prices that will move the needle for them. The $100 billion buyback is good for right now but it’s not exactly looking to the future.”

The cash Apple earmarked for stock buybacks is about twice the $50 billion market capitalization of electric car maker Tesla Inc.

Apple posted revenue for its March quarter of $61.1 billion, up from $52.9 billion last year. Wall Street expected $60.8 billion, according to Thomson Reuters I/B/E/S.

Average selling prices for iPhones were $728, compared with Wall Street expectations of $742. The figure is up more than 10 percent from $655 a year ago, suggesting Apple’s iPhone X, which starts at $999, has helped boost prices.

Analysts had feared the high price was muting demand for the iPhone X, but Apple Chief Executive Tim Cook said it was the most popular iPhone model every week in the March quarter.

“This is the first cycle that we’ve ever had where the top of the line iPhone model has also been the most popular,” Cook said during the company’s earnings call.

“It’s one of those things like when a team wins the Super Bowl, maybe you want them to win by a few more points. But it’s a Super Bowl winner and that’s how we feel about it.”

The iPhone X has shaped up to be “a good, not a great product. There was a time prior to its introduction that investors expected it to be a great product,” said Thomas Forte, an analyst with D.A. Davidson Companies.

“Now that we know it is a good product, as investors have lowered expectations, that is enough, in my view, for shares to go higher from current levels.”

Positive iPhone news boosted shares of chip suppliers.

Skyworks Solutions Inc rose 2.9 percent, Broadcom Inc was up 2 percent, while Cirrus Logic gained 4.3 percent.

Apple also predicted revenue of $51.5 billion to $53.5 billion in the June quarter, ahead of the $51.6 billion Wall Street expected as of Monday evening, and the share repurchases in the March quarter drove Apple’s cash net of debt down slightly to $145 billion.

“We are returning the cash to investors as we have promised,” Chief Financial Officer Luca Maestri told Reuters in an interview.

Profits were $2.73 per share versus expectations of $2.68 per share, as of Monday, and up from $2.10 a year ago.

Apple’s services business, which includes Apple Music, the App Store and iCloud, posted $9.1 billion in revenue compared with expectations of $8.3 billion. Heading into earnings, investors were hopeful that growth in that segment could help offset the cooling global smartphone market.

Julie Ask, an analyst with Forrester, said Apple’s services segment results were positive but warned that Apple needed to continue to boost subscriptions on its platforms, which reached 270 million users in the March quarter and includes people who subscribe to third-party apps on the iPhone as well as Apple’s own services like iCloud.

“Apps are carrying most (services revenue) right now, but Apple needs to get to a place where it’s mostly subscriptions and monthly fees and not just one-off downloads,” Ask said.

Apple traditionally updates its share buyback and dividend program each spring, and the $100 billion it added this year compares with an increase of $50 billion last year.

In February, Apple said it planned to draw down its excess cash, although Cook had downplayed the possibility of a special dividend.

But investors have had concerns around Apple because of brewing trade tensions with China.

Greater China sales rose 21 percent from a year earlier, Apple’s best growth rate there in 10 quarters, to $13.0 billion. While there has not yet been a tariff on devices such as Apple’s iPhone, Cook traveled last week to Washington to meet with U.S. President Donald Trump at the White House to discuss trade matters.

“China only wins if the U.S. wins and the U.S. only wins if China wins,” Cook said on the call, when asked about a possible trade war. “I’m a big believer that the two countries together can both win and grow the pie, not just allocate it differently,” he said.

Apple has been emphasizing its contributions to the U.S. economy in recent months, outlining a $30 billion U.S. spending plan and highlighting the tens of billions of dollars it spends each year with U.S.-based suppliers.

In recent months, Apple has been emphasizing the size of its overall user base, which includes used iPhones, rather than focusing strictly on new device sales, a sign of the increasing importance of making money off users without selling them new hardware.

Reporting by Stephen Nellis in San Francisco; Editing by Peter Henderson, Lisa Shumaker and Peter Cooney

Published at Wed, 02 May 2018 02:35:12 +0000

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Why Exxon isn’t enjoying America’s big oil party


Trump attacks OPEC for rising oil prices
Trump attacks OPEC for rising oil prices

Why Exxon isn’t enjoying America’s big oil party


ExxonMobil missed the invitation to America’s big oil party.

Booming shale oil production could soon make the United States king of the oil world. Yet Exxon, the nation’s most powerful oil company, is still in decline in large part because of its late arrival to the shale game.

Exxon(XOM) delivered a fresh reminder of its difficult position on Friday, reporting oil and natural gas production fell by 6% during the first quarter. That’s despite the recent surge in crude oil prices.

It’s part of an alarming trend: Exxon’s output is down seven of the past eight quarters.

“They are trying to catch up, but they’re late to the party,” said Brian Youngberg, senior energy analyst at Edward Jones.

Chevron(CVX), Exxon’s smaller US rival, has been able to move much more quickly to capitalize on the shale boom and higher prices. Chevron’s global production jumped 6% last quarter, helping to fuel a 33% profit increase that exceeded expectations.

Not surprisingly, Chevron’s fastest growth occurred in the shale oil hotbed of the Permian Basin, where output spiked by 65%.

Exxon is struggling to keep up — and Wall Street is losing patience. The oil giant said shale production increased by a more modest 18% at its Permian and Bakken projects.

Even though the US is on track to pump a record amount of oil in 2018, Exxon’s domestic oil production inched up just 2% during the first quarter. Overall oil output failed to grow for the seventh quarter of the past eight. Exxon pumps less oil than it did a decade ago.

“Production was on the low side. That’s obviously not a good thing. There is no escaping that,” said Pavel Molchanov, an energy analyst at Raymond James.

Exxon’s stock fell 3% on Friday, leaving it down 4% over the past year. Chevron is up 20% over that span, while ConocoPhillips(COP) has soared 38%.

Darren Woods, Exxon’s CEO, attempted to reassure investors by saying that the company is positioned “well for future growth” thanks to new discoveries and acquisitions. Exxon also noted that it ramped up capital spending by 17%.

One bright spot: Exxon generated the highest amount of cash flow from operations and asset sales since 2014. That’s despite Exxon being hurt by an earthquake in Papua New Guinea that halted production.

Yet Exxon is still recovering from missteps during the leadership of former CEO Rex Tillerson, who left Exxon last year to become US Secretary of State. Under Tillerson, Exxon was slow to recognize the game-changing potential of shale oil. Huge technology advances unlocked vast amounts of oil that had been trapped beneath the earth.

“They viewed shale as not important,” said Youngberg.

Instead of plowing money into what became lucrative shale plays in Texas and North Dakota, Exxon stuck to the Big Oil script by investing heavily in expensive projects, including ones in Russia, Alaska and the Gulf of Mexico.

However, some of these big bets failed to pay off. Most notably, Exxon’s dream of teaming up with Russian oil company Rosneft was scuttled by US sanctions on Moscow. In March, Exxon pulled out of the Rosneft joint venture, undoing one of Tillerson’s crowning achievements.

Shortly after Tillerson left the company, Exxon made a shale splash in January 2017 by acquiring assets in the Permian Basin for $5.6 billion.

The deal doubled Exxon’s position in the Permian, the fastest growing shale field in the United States. It was also Exxon’s biggest purchase since buying natural gas producer XTO Energy for $41 billion in 2010, just before natural gas prices crashed.

“That was one of the worst acquisitions in the history of the energy business. It was exquisitely poorly timed,” said Molchanov. “Rex Tillerson deserves much of the blame for it. It was essentially $40 billion down the drain.”

Rather than invest in shale, prior to 2015 Exxon spent heavily on share buybacks that were ill-timed. Exxon’s stock price has since declinedand the company halted buybacks during the oil-price crash three years ago.

“They used to buy a ridiculous amount of shares — at the wrong time,” Youngberg said.

Exxon upset Wall Street on Friday by saying it won’t restart its buyback program just yet. Exxon did boost its dividend more than expected though.

Given the ground Exxon has to catch-up to its rivals, Youngberg said holding off on buybacks probably makes sense.

“It reflects their strategy of attempting to jump-start growth,” said Youngberg.

Published at Fri, 27 Apr 2018 16:16:08 +0000

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Microsoft Stock Breaks Out Toward Top of Channel


Microsoft Stock Breaks Out Toward Top of Channel

By Justin Kuepper | April 28, 2018 — 10:06 AM EDT

Microsoft Corporation (MSFT) shares initially moved lower in the aftermath of its third quarter financial results, but they recovered on Friday following new guidance and analyst upgrades. Revenue rose 15.6% to $26.82 billion – beating consensus estimates by $1.05 billion – while earnings per share of 95 cents beat consensus estimates by 10 cents per share. The strongest growth came from server and cloud services, which grew 20%.

On its conference call, the company provided fourth quarter revenue guidance of $28.8 billion to $29.5 billion, which was higher than the $28.08 billion consensus estimate. JPMorgan analysts upgraded the stock from Neutral to Overweight and increased their price target to $110 per share, which represents a significant premium to the current market price. Additional analysts could weigh in on the results next week and provide potential catalysts for traders. (For more, see: Microsoft Jumps After Earnings Beat.)

Technical chart showing the performance of Microsoft Corporation (MSFT) stock

From a technical standpoint, Microsoft stock rebounded from the 50-day moving average at $93.06 to break out from R1 resistance at $96.65 and prior highs, but it remains within its price channel dating back to December of last year. The relative strength index (RSI) appears neutral with a reading of 56.82, but the moving average convergence divergence (MACD) continues to trend higher past the zero line, suggesting potential for a further rebound ahead.

Traders should watch for a breakout from the upper end of its price channel at around $100.00 to R2 resistance at $102.02 or a breakdown to retest support at the 50-day moving average or pivot point at $91.86. Despite the positive financial results, traders should tread carefully moving into next week given that Friday’s black candlestick shows a close below the highs of the day. That said, the intermediate trend remains bullish. (For additional reading, check out: Microsoft: 7 Secrets You Didn’t Know.)

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

Published at Sat, 28 Apr 2018 14:06:00 +0000

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Proxy adviser ISS backs call for gun safety report at Sturm Ruger

Proxy adviser ISS backs call for gun safety report at Sturm Ruger

BOSTON (Reuters) – Proxy adviser Institutional Shareholder Services on Wednesday recommended investors vote to support a shareholder proposal calling for gunmaker Sturm Ruger & Co to report on gun safety, which could put new attention on so-called “smart gun” technology.

In a note to clients, ISS also backed the election of all director nominees at Sturm Ruger ahead of its shareholder meeting scheduled for May 9.

The board of Connecticut company Sturm Ruger had recommended investors vote against the call for the safety report. Its proxy statement said that “the intentional criminal misuse of firearms is beyond our control. Similarly, the constitutional right of firearms ownership carries with it certain responsibilities and the Company has long advocated the safe and responsible ownership and use of firearms.”

Sturm Ruger representatives did not immediately respond to a request for further comment.

Second-ranked proxy adviser Glass Lewis made the same recommendations to Sturm Ruger investors on April 14, citing gun violence as a risk to the company’s reputation.

Just what additional steps if any weapons makers should take on safety has drawn renewed interest in the wake of a shooting at a Florida high school in February in which 17 people were killed.

Banks including Citigroup Inc and Bank of America Corp lately have restricted lending to clients involved with firearms. Also, asset managers including BlackRock Inc and Vanguard Group have said they would raise safety concerns with gunmakers whose stocks they own.

BlackRock and Vanguard are the top two investors in Sturm Ruger, together with about 25 percent of shares.

Representatives for both firms declined to discuss how they might vote at Sturm Ruger.

The shareholder proposal was filed by the Sisters of the Holy Names of Jesus and Mary in Oregon. It asks the company report on gun safety such as how it monitors violence, research on safer guns, and its assessment of risks to its reputation.

The proposal mentions smart guns, designs with electronic limits on their ability to fire, which it says could help reduce accidental shootings and suicides.

Smart guns have faced opposition from gun rights groups concerned about their practicality and legislative implications.

ISS wrote the technology could make guns safer, and that a market for smart guns could help overcome engineering problems. ISS noted the proposal does not call for the production of smart guns, but only seeks evidence that Sturm Ruger’s board is properly assessing risks.

Reporting by Ross Kerber in Boston; editing by Grant McCool

Published at Wed, 25 Apr 2018 23:02:23 +0000

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Facebook’s rise in profits, users shows resilience after scandals

Facebook’s rise in profits, users shows resilience after scandals

(Reuters) – Facebook Inc (FB.O) shares rose on Wednesday after the social network reported a surprisingly strong 63 percent rise in profit and an increase in users, with no sign that business was hurt by a scandal over the mishandling of personal data.

After easily beating Wall Street expectations, shares traded up 7.1 percent after the bell at $171, paring a month-long decline that began with Facebook’s disclosure in March that consultancy Cambridge Analytica had harvested data belonging to millions of users.

The Cambridge Analytica scandal, affecting up to 87 million users and prompting several apologies from Chief Executive Mark Zuckerberg, generated calls for regulation and for users to leave the social network, but there was no indication advertisers immediately changed their spending.

“Everybody keeps talking about how bad things are for Facebook, but this earnings report to me is very positive, and reiterates that Facebook is fine, and they’ll get through this,” said Daniel Morgan, senior portfolio manager at Synovus Trust Company. His firm holds about 73,000 shares in Facebook.

Facebook’s quarterly profit beat analysts’ estimates, as a 49 percent jump in quarterly revenue outpaced a 39 percent rise in expenses from a year earlier. The mobile ad business grew on a push to add more video content.

Facebook said monthly active users in the first quarter rose to 2.2 billion, up 13 percent from a year earlier and matching expectations, according to Thomson Reuters I/B/E/S.

The company reversed last quarter’s decline in the number of daily active users in the United States and Canada, saying it had 185 million users there, up from 184 million in the fourth quarter.

The results are a bright spot for the world’s largest social network amid months of negative headlines about the company’s handling of personal information, its role in elections and its fueling of violence in developing countries.

Facebook, which generates revenue primarily by selling advertising personalized to its users, has demonstrated for several quarters how resilient its business model can be as long as users keep coming back to scroll through its News Feed and watch its videos.

It is spending to ensure users are not scared away by scandals. Chief Financial Officer David Wehner told analysts on a call that expenses this year would grow between 50 percent and 60 percent, up from a prior range of 45 percent to 60 percent.

Much of Facebook’s ramp-up in spending is for safety and security, Wehner said. The category includes efforts to root out fake accounts, scrub hate speech and take down violent videos.

Facebook said it ended the first quarter with 27,742 employees, up 48 percent from a year earlier.


“So long as profits continue to grow at a rapid rate, investors will accept that higher spending to ensure privacy is warranted,” Wedbush Securities analyst Michael Pachter said.

It has been nearly two years since Facebook shares rose 7 percent or more during a trading day. They rose 7.2 percent on April 28, 2016, the day after another first-quarter earnings report.

Net income attributable to Facebook shareholders rose in the first quarter to $4.99 billion, or $1.69 per share, from $3.06 billion, or $1.04 per share, a year earlier.

Analysts on average were expecting a profit of $1.35 per share, according to Thomson Reuters I/B/E/S.

Total revenue was $11.97 billion, above the analyst estimate of $11.41 billion.

The company declined to provide some details sought by analysts. It has not shared the revenue generated by Instagram, the photo-sharing app it owns, and it declined to provide details about time spent on Facebook. Facebook also owns the popular smartphone apps Messenger and WhatsApp.

Tighter regulation could make Facebook’s ads less lucrative by reducing the kinds of data it can use to personalize and target ads to users, although Facebook’s size means it could also be well positioned to cope with regulations.

Facebook and Alphabet Inc’s (GOOGL.O) Google together dominate the internet ad business worldwide. Facebook is expected to take 18 percent of global digital ad revenue this year, compared with Google’s 31 percent, according to research firm eMarketer.

The company said it was increasing the amount of money authorized to repurchase shares by an additional $9 billion. It had initially authorized repurchases up to $6 billion.

Facebook shares closed at $185.09 on March 16, the day that the Cambridge Analytica scandal broke after the bell on a Friday. In the days immediately afterward, the company lost more than $50 billion in market value.

The Cambridge Analytica scandal, which has sparked government investigations globally, was mentioned only once on an hour-long conference call between analysts and Facebook management, when one analyst asked Zuckerberg what he learned from testifying in U.S. congressional hearings.

Zuckerberg said the two days of hearings this month were “an important moment for the company to hear the feedback, and to show what we’re doing.”

Reporting by David Ingram in San Francisco and Munsif Vengattil in Bengaluru; Editing by Lisa Shumaker

Published at Thu, 26 Apr 2018 03:27:08 +0000

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Millennials turn to parents to navigate money milestones

Millennials turn to parents to navigate money milestones

April 25 (Reuters) – – Amanda Farris got an ATM card from her father when she was about 13. Her dad told her to treat it like cash and taught her how to tap her allowance and the money she made working odd jobs.

Now, at 25, Farris and her husband are fully independent financially from their parents. But Farris, who works in branding and marketing for a Missouri bar association, has not stopped asking her father for guidance. When she bought her first home a year ago, he gave extensive advice.

As millennials navigate financial milestones – like buying real estate or switching jobs – the advice of those who raised them continues to guide their decisions. Despite being so-called digital natives, many millennials continue to rely on their parents and mentors more than on online information.

According to a 2017 Instamotor survey, 78.5 percent of U.S. millennials say their parents have given them financial advice, and more than half feel their parents prepared them well to make good financial decisions.

While Farris welcomes information from many sources, the advice she gets from her parents has a special advantage: trust. “Those two people, especially, will always have my best interests at heart,” she said.


What is the best way for parents to give money advice? “Look for opportunities to create conversations about topics – rather than delivering lectures,” said Rich Ramassini, senior vice president at PNC Investments. In addition to decades in the financial industry, Ramassini has first-hand experience with his millennial son.

Many financial principles prove applicable across generations – like the power of compounding interest. “That is an eternal truth that remains true today. Time is your biggest ally when it comes to investing,” said Ramassini.

But Ramassini also noted differences between millennials – often defined as those born between 1980 and 2000 – and other generations.

When Ramassini began in the business a few decades ago, he said, you had to go to a financial adviser to get any information. But now, with the proliferation of online data and advice, the opposite problem exists – too much information. “People have trouble turning that information into knowledge,” he said.

Technology has also opened up new ways of saving and investing, he added, such as through financial apps.


Besides having to deal with an abundance of technology and data, millennials also face different economic challenges than the baby boomers before them.

A 2017 Credit Suisse study found that millennials face tougher borrowing rules, rising home prices and lower income mobility than their parents’ generation.

Additionally, Americans now owe over a trillion dollars in student debt.

These concerns are reflected in the topics on which millennials seek advice. The most popular subject was saving, with 72 percent discussing it with their parents, followed by budgeting at 59 percent, according to the Instamotor survey. Half had discussed debt with their parents.

Millennials are twice as likely as the overall investor population to target social or environmental goals while making investments, according to a 2017 report by the Institute for Sustainable Investing.


Experienced mentors can fill the void when parents are not available.

Tarah Rupp, who is an independent caregiver in Los Angeles, does not discuss money with her mother, and her father is deceased.

The most useful advice has come through her church and her in-laws. Before Rupp turned 21, an older friend from church sat her down to discuss budgeting, and before she bought her first car, her father-in-law taught her how to negotiate and to avoid high interest rates.

Katy Neylon, 27, said she is “pretty much an open book” when it comes to talking about money with her parents, although the conversations are mostly one direction. While Neylon does share salary and investing habits with her parents, she does not ask them about their own finances.

Beyond asking for money and job-hunting guidance, Neylon, a marketing administrator at a private golf community, also turns to her father for advice on more philosophical aspects of consumption, like how to maintain a basic level of happiness – specifically, how to avoid ratcheting up one’s desires and expectations with every rise on the career and salary ladder.

Working in Durango, Colorado, a “really tiny mountain town” focused on hospitality, gives her a lifestyle where she can ski nearly every weekend, she said. But it also required giving up a potentially more lucrative career path elsewhere.

She and her father often share their feelings on the balance between happiness and financial success. “We come to the conclusion that sometimes we pick lifestyle over pay, which is definitely what I’m doing,” she said.

Published at Wed, 25 Apr 2018 17:11:40 +0000

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