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Monday, August 10, 2020
Despite a predicted drop in demand, Apple is planning on upping iPhone production by 4 percent year-over-year through March 2021, according to a report. The Cupertino, Calif.-based company plans to crank out 213 million iPhones over the next 12 months, according to Japanese service Nikkei. It will be a roughly even split between the newly announced iPhone SE, which is now Apple’s cheapest model, starting at $399, and the successor to the iPhone 11, which is likely to be far more expensive and feature 5G technology. Apple is expected to introduce three to four new 5G iPhones, according to the report. Whether Apple will be able to move all the phones it plans to produce, however, is a different story. An executive at a components maker told Nikkei that “Apple’s production outlook is pretty bullish,” adding he was not sure if it is “realistic.” The executive said that “actual production” could be 10 to 20 percent lower than forecasts. The report comes just days after analysts at Goldman Sachs said they expect iPhone shipments to fall 36 percent during the third quarter as customers around the world remain in lockdown, and downgraded Apple’s stock to “sell.” Apple’s retail stores outside of China remain closed indefinitely due to the virus, though the company said last week that it planned to reopen a store in Seoul, South Korea. Share this:
NBCUniversal has sold a $178 million stake in stationary-bike company Peloton, whose shares have lately been surging because of the coronavirus crisis. The Comcast-owned broadcaster — an early investor in Peloton, which went public last September — has been looking at its portfolio of investments as it seeks to shore up its cash reserves amid the coronavirus pandemic. In a filing Tuesday with the Securities and Exchange Commission, NBCUniversal said it sold about half of its stake in Peloton, whose exercise bikes and livestreaming workout videos have become popular as the coronavirus keeps fitness freaks holed up at home. Peloton shares are up more than 50 percent since mid-March, when the coronavirus began to spur lockdowns that emptied office buildings nationwide. On Tuesday, they were recently up 0.6 percent at $31.25. NBCUniversal, led by chief executive officer Jeff Shell, sold 5.2 million shares for $34.21 each, not far below their 52-week high of $38.08. NBCU still holds more than 5.1 million shares in Peloton. It is not immediately clear whether NBCU intends to hold on to those shares or liquidate them. The media and entertainment giant participated in Peloton’s private Series E and Series F funding rounds in 2017 and 2018. NBCUniversal also partnered with Peloton on content, including streaming some classes in 2018 from PyeongChang, South Korea, during the Winter Olympics. NBCU owned 19.1 percent of Peloton’s shares as of Oct. 31; however, the fitness company has significantly expanded its share base after the initial public offering, which would suggest that NBCU’s stake was effectively below 4 percent, according to The Hollywood Reporter. Peloton’s lockup period for insiders expired in late February, allowing certain employees and early investors to begin selling their stakes, the trade publication said. The Peloton sale is the second major recent stock sale from NBCU. The company sold its $500 million stake in Snap last year, reporting a gain of $293 million in fiscal 2019. With debt obligations stemming from its acquisition of Sky and billions of dollars committed to its nascent Peacock streaming service, the media giant decided that its cash would be best put to use on internal efforts, rather than an investment in an outside company, the firm said. Comcast also raised $4 billion in debt in March in response to the coronavirus crisis to boost its liquidity. Share this:
Huawei’s explosive growth has nearly come to a halt as the coronavirus crisis and a confrontation between the US and the Chinese Communist Party weighs on the Chinese tech giant. Huawei’s revenue climbed just 1.4 percent to 182.2 billion yuan (about $25.7 billion) in the first quarter, the company said Tuesday — a meager increase compared to the 39 percent jump reported a year ago. The smartphone maker’s profit margin also shrank to 7.3 percent from roughly 8 percent in the first quarter of 2019. Huawei said its first-quarter results were “in line with expectations,” acknowledging “tough challenges” such as the coronavirus pandemic, which started in its home base of China. The Trump administration also placed Huawei on a blacklist last May over national security concerns, a move that limited the sale of American-made goods to the company. “The growth rate has slowed, but this is also a resilient performance in the face of both the entity list and the coronavirus we are facing at this moment,” company vice president Victor Zhang said in a Tuesday statement. Huawei did not disclose its net profit or the number of smartphones it shipped in the quarter, metrics that it has included in previous financial reports. The company reported shipping 59 million smartphones in the first quarter of 2019 and 240 million through all of last year. Huawei has said that this year would be its toughest yet as the US pushes other countries to keep the company out of its 5G wireless networks. Rotating chairman Eric Xu warned last month that the “external environment will only get more complicated going forward.” With Post wires Share this:
Coca-Cola’s sales volumes have plunged 25 percent this month as the coronavirus crisis sucks up commercial demand for soft drinks, the company said Tuesday. Almost all of that global decline has come from places such as restaurants, bars and movie theaters, which have been closed across the world to contain the bug, the beverage maker said as it reported its first-quarter earnings. Coca-Cola expects to take a financial hit from the drop in the second quarter of this year given that those channels make up roughly half of its revenues. But the ultimate impact is “unknown at this time, as it will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery,” the Atlanta-based company said. Coke said its sales had been strong before the coronavirus upended the global economy. Volume — or the number of cases of drinks sold by Coke and its bottling partners — was growing 3 percent outside China in February before consumers started stockpiling beverages for at-home consumption in March, according to the company. Overall, volume fell 1 percent in the first three months of the year as a 7 percent drop in the Asia Pacific region — where the virus slammed markets in February and March — offset a 3 percent jump in North America, Coke said. Coca-Cola’s earnings per share climbed 65 percent to 64 cents in the first quarter despite net revenues falling 1 percent to $8.6 billion. The company said it could not estimate its financial performance for the year because of uncertainty about the coronavirus. Coca-Cola shares climbed 0.3 percent in premarket trading to $46.68 as of 7:28 a.m. Share this:
The virus isn’t the only thing going on in Washington that Wall Street and investors need to pay attention to. There is another Black Swan about to take flight that could poop on the markets. As I’ve been telling you for a long time, there are going to be repercussions from the political scandals of 2016. The time is coming soon – maybe very soon – when we will find out who will be indicted and what impact these legal actions will have on the 2020 presidential election. John Durham, the US Attorney in Connecticut, has been investigating whether there was wrongdoing before and after the last presidential election. His focus seems to be on whether warrants were improperly obtained to spy on the Trump campaign. But over the two-plus years since Durham has been on the case, the probe seems to have expanded. High up intelligence officers in the US seem to be the target. Durham’s probe could turn very political if his evidence determines that actions were taken by the intelligence community to aid the Democrats. Recently, Attorney General Bill Barr had this to say about Durham’s probe: “His primary focus isn’t to prepare a report. He is looking to bring to justice people who were engaged in abuses,” Barr said. Barr added, “We are going to get to the bottom of it. And if people broke the law, and we can establish that with the evidence, they will be prosecuted.” “My own view,” Barr said, “is that the evidence shows that we’re not dealing with just mistakes and sloppiness. There’s something far more troubling here. And we’re going to get to the bottom of it.” The longer it takes for Durham to disclose his finding the more this’ll look like political payback for the impeachment antics. Barr was supposed to go before the House at the end of March and that’s when I expected some news. That appearance was canceled because of coronavirus. The fact that the attorney general is now making these public statements means he’s giving us a heads up. Hopefully the virus will be old news by the November election. The results of the Durham investigation will be front and center either way. Wall Street won’t be riled if there are indictments of US intelligence leaders and maybe even some Democrats. But the financial markets won’t be happy if the Democrats retaliate and cause legislative business to come to a halt before the virus has stopped hurting the US economy. Share this:
Lord & Taylor is exploring filing for bankruptcy protection after it was forced to temporarily shut all of its 38 US department stores in the wake of the coronavirus outbreak, people familiar with the matter said on Monday. It is one of several options that the retailer and its advisers are exploring, which also include trying to negotiate relief from creditors and finding additional financing, some of the sources said, adding that no final decisions have been made. Fashion rental service start-up Le Tote acquired Lord & Taylor last year from Saks Fifth Avenue owner Hudson’s Bay Company for $100 million. Hudson’s Bay kept ownership of some of Lord & Taylor’s real estate and assumed responsibility for its rent payments, amounting to tens of millions of dollars a year. The sources requested anonymity because the deliberations are confidential. Lord & Taylor did not immediately respond to a request for comment. A Le Tote spokeswoman said Lord & Taylor is working through various options and declined to comment further. A representative for Hudson’s Bay, based in Canada, declined to comment. Lord & Taylor is not alone among US department store operators forced to weigh bankruptcy in response to prolonged store closures following the coronavirus outbreak. Neiman Marcus Group plans to file for bankruptcy as soon as this week, while J.C. Penney Company Inc (JCP.N) is also considering a similar move, Reuters previously reported. Lord & Taylor was famous for its holiday window display in its flagship on New York City’s Fifth Avenue, but Hudson’s Bay sold the building to co-working space operator WeWork in 2019. Le Tote also owes Hudson’s Bay $33.2 million stemming from a promissory note from the deal. Le Tote acquired Lord & Taylor to expand beyond e-commerce into brick-and-mortar stores. It acquired Lord & Taylor’s operations, including its merchandise inventory, online business and most of its employees. As part of the deal last year, Hudson’s Bay also secured an ownership stake in Le Tote and two seats on the company’s board. Hudson’s Bay representatives have since stepped down from the board, one of the sources said. Many US businesses grappling with the economic fallout from the pandemic have tapped government funds as part of a $2.3 trillion stimulus program. But most retailers have not been eligible for aid. The National Retail Federation (NRF), which represents department stores and other shops and e-commerce firms, asked the US Treasury last week to include them in government support programs. “The Treasury has been a good partner, and we continue to work with them on this and a number of other issues important to our members,” the NRF said on Monday. Share this:
The unofficial holiday celebrating all things marijuana is Monday, but the coronavirus pandemic has made the special day a time of melancholy. It was supposed to be a long weekend of festivals and music culminating on April 20, or 4/20, the code for marijuana’s high holiday. Instead, it has been reduced to an online replica because of stay-at-home orders to curb the pandemic. Virtual parties and video chats are replacing vast outdoor smoking sessions to mark the rise of legalization and celebrate cannabis culture. The origins of the annual celebration are believed tied to a group of Northern California high school friends, who used the code as slang for smoking pot in the early 1970s. As the nation’s emerging legal marijuana market braces for an economic blow from the coronavirus crisis, many consumers are reducing spending or going underground for deals. Some customers could be especially vulnerable during an economic downturn. Among cannabis users in states where its legal, 32 percent have incomes below $35,000 and only 54 percent have full-time employment, according to BDS Analytics. Anyone on a tight budget might be more apt to avoid taxes that go with legal purchases and buy from illicit market dealers. “Stay home,” the National Organization for the Reform of Marijuana Laws, or NORML, said bluntly. San Francisco Mayor London Breed threatened arrests: “We will not tolerate anyone coming to San Francisco for 4/20 this year.” For businesses, 4/20 is usually their once-a-year Black Friday, when sales soar. Instead, they are reporting up-and-down buying and pondering an uncertain future. The pandemic means the world economy could face its worst year since the Great Depression in the 1930s. In a sign of what’s to come, U.S. retail sales overall dropped nearly 9 percent in March — a record. Millions are out of work. As for the holiday, “there’s a somber feeling to this one,” said Jordan Lams, CEO of Pure CA, which specializes in marijuana extracts and does business as Moxie brand products. Before the outbreak, “it was going to be the biggest 4/20 in history,” Lams said. Steve White, CEO of Arizona-based Harvest Health & Recreation, said he’s watching to see if consumers treat marijuana more like beer or toilet paper when money runs short. When the economy tumbles, beer sales traditionally spike. With toilet paper, panic-buying might empty shelves but people do not use more of it. They just buy less later. It will be a telling year, because no one in the relatively new industry knows if sales will plunge, stay flat or even rise. “Do people buy less cannabis, or does it become more ingrained as part of their daily life?” White said. The uncertainty in the market poses the latest challenge for an industry that’s expanded in some form to all but a handful of states. The risks are spotlighted in California, where businesses contend with hefty taxes, an illicit market that still dwarfs the legal one and a tourism-reliant economy that’s crippled by virus restrictions. Because cannabis remains illegal at the federal level, most banks don’t want to do business with pot companies and they aren’t included in the coronavirus rescue package that will help other businesses. Steve DeAngelo, co-founder of Harborside dispensaries in California, said it’s difficult to predict what’s next, with no template for how cannabis consumers will react in a deep economic downturn. Still, he notes that the industry has endured for years through times good and bad, even when consumers had only one option: illegal purchases. Consumers who see marijuana as part of their daily routine will keep coming back, he predicted. But, for businesses, there will be a “sorting out,” DeAngelo said. Companies with strong brands and cash reserves are likely to fare better in a poor economy; those saddled with heavy debt and that made too-rosy promises to investors will face challenges. “There is not going to be an extinction moment,” DeAngelo said. “It’s going to prove more resilient than many, many other industries.” Share this:
The world’s biggest tech firm wants to liberate information. That was once unthinkable TWO DECADES ago Microsoft was a byword for a technological walled garden. One of its bosses called free open-source programs a “cancer”. That was then. On April 21st the world’s most valuable tech firm joined a fledgling movement to liberate the world’s data. Among other things, the company plans to launch 20 data-sharing groups by 2022 and give away some of its digital information, including data it has aggregated on covid-19.Microsoft is not alone in its newfound fondness for sharing in the age of the coronavirus. “The world has faced pandemics before, but this time we have a new superpower: the ability to gather and share data for good,” Mark Zuckerberg, the boss of Facebook, a social-media conglomerate, wrote in the Washington Post on April 20th. Despite the EU’s strict privacy rules, some Eurocrats now argue that data-sharing could speed up efforts to fight the coronavirus.But the argument for sharing data is much older than the virus. The OECD, a club mostly of rich countries, reckons that if data were more widely exchanged, many countries could enjoy gains worth between 1% and 2.5% of GDP. The estimate is based on heroic assumptions (such as putting a number on business opportunities created for startups). But economists agree that readier access to data is broadly beneficial, because data are “non-rivalrous”: unlike oil, say, they can be used and re-used without being depleted, for instance to power various artificial-intelligence algorithms at once.Many governments have recognised the potential. Cities from Berlin to San Francisco have “open data” initiatives. Companies have been cagier, says Stefaan Verhulst, who heads the Governance Lab at New York University, which studies such things. Firms worry about losing intellectual property, imperilling users’ privacy and hitting technical obstacles. Standard data formats (eg, JPEG images) can be shared easily, but much that a Facebook collects with its software would be meaningless to a Microsoft, even after reformatting. Less than half of the 113 “data collaboratives” identified by the lab involve corporations. Those that do, including initiatives by BBVA, a Spanish bank, and GlaxoSmithKline, a British drugmaker, have been small or limited in scope.Microsoft’s campaign is the most consequential by far. Besides encouraging more non-commercial sharing, the firm is developing software, licences and (with the Governance Lab and others) governance frameworks that permit firms to trade data or provide access to them without losing control. Optimists believe that the giant’s move could be to data what IBM’s embrace in the late 1990s of the Linux operating system was to open-source software. Linux went on to become a serious challenger to Microsoft’s own Windows and today underpins Google’s Android mobile software and much of cloud-computing.Brad Smith, Microsoft’s president, notes that fewer than 100 firms collect more than half of all data generated online. More sharing would, in his view, counteract the concentration of economic—and political—power. Bridging the “data divide”, as he calls it, and growing a big open-data movement won’t be easy. Data are more complex than code. Most programmers speak the same language and open-source collectives mainly solve technical problems; people in charge of data often come from different industries without a common vocabulary and talk business.Indeed, like IBM before it, Microsoft has reasons other than altruism to champion open data. It makes most of its money not by extracting value from hoarded data through targeted advertising, like Alphabet or Facebook, but by selling services and software to help others process digital information. The more data that are shared, the better for Microsoft. Mr Smith argues that this makes his firm the perfect campaigner for open data. “If you want to know who to trust,” he says, “you should look at the company’s business model.”That may be so. But this also points to a bigger hurdle. Even if technical and legal barriers to sharing could be removed, many data-rich firms will be reluctant to forfeit their lucrative monopoly over user information. Mr Zuckerberg’s declarations notwithstanding, don’t expect Facebook to follow Microsoft’s lead any time soon. Reuse this contentThe Trust Project
Got a big swimming pool that’s empty and you don’t plan to use? Well, here’s a money-making idea that your town and neighbors will hate. Fill it with crude oil. Here’s how bizarre the oil market was on Monday. The price of a barrel of crude oil declined to a negative $38. NEGATIVE $38! That was a better than 300 percent decline for the day. That means, for every one barrel of oil investors owned, they not only lost their initial investment, but also another $38. Now, you have to understand: That price is on a barrel of oil in the May futures contract that expires today Tuesday. And the way this works, the holder must either sell the contract or take possession of actual barrels of oil at expiration. Because of the dreadful economy these days, nobody anywhere in the world is using a lot of oil and gasoline. Normally, oil would be in demand this time of year because gasoline use goes up and that makes oil more valuable.Not this year. So that extra unneeded oil and gas is now sitting in tanks on land or tanker ships at sea. And there is little or no room to store more oil. With no place to put the stuff, the last thing anyone who owns those futures contracts wants is to have to take possession of more oil. That’s where your pool comes in. Technically – and I’m not seriously suggesting this – one of those hard luck investors could give you $35 to dump every barrel of his oil into your pool. And to put it into perspective, there are 1,000 gallons of oil associated with each futures contract. So, one contract alone could earn you $35,000 if you are willing to give up swimming for the summer. (Seriously, you would probably also need a new pool next year. But this is only fantasy, so humor me.) You are going to see stories about how oil became worth less than nothing on Monday. That really isn’t true; it was the May futures contract that did that. The June futures contract was still trading at more than $20 a barrel, at least until investors wake up and start worrying about oil all over again next month. Share this:
In the 2015 movie “The Big Short” about the Great Recession, Brad Pitt’s character Ben Rickert is strolling in Las Vegas with two Wall Street colleagues who are elated about all the money they made betting that the US economy was in trouble. Their bet, of course, was that problems with mortgage-backed securities would hurt banks and the entire American financial system. That’s exactly what happened in real life. Pitt’s Rickert chastises his colleagues for acting so happy and says: “Every 1 percent unemployment goes up, 40,000 people die. Did you know that?” Is that 40,000 figure just Hollywood nonsense? Well, it’s not. Or at least it is close. And that, in a nutshell, is what President Trump has to deal with right now. If he opens up the economy, there could be a spike in cases of coronavirus and a rise in deaths unless there is some medical breakthrough. Already, 41,000 people are reported to have died from the disease in the US alone. But if the president keeps the economy closed, the unemployment rate is bound to climb and if you believe Pitt’s character — and the academic research upon which that statement is based — people will die because of that as well. There’s a technical term for this — it’s called being damned if you do and damned if you don’t. Before the economic mess this virus caused, the US unemployment rate was just 3.5 percent. In March, it rose to 4.4 percent. And there are predictions that it will go as high as 13 percent and maybe even 15 percent before people start returning to work. So, if the calculations are correct, that 10 percentage point-plus rise in the jobless rate would cause more than 400,000 deaths that have nothing to do with the virus and everything to do with the distressed economy. And, of course, there will be a lot of financial troubles for those who don’t die. But let’s just look at just the death rate. The actual figure in academic research is a 37,000 increase for each percentage-point rise in the unemployment rate. It comes from a book called “Corporate Flight: The Causes and Consequences of Economic Dislocation” by Barry Bluestone, Bennett Harrison and Lawrence Baker. “Corporate Flight” was published in 1982 and mainly had to do with companies moving operations overseas. I couldn’t reach Bluestone, Harrison or Baker, but last week I was able to contact Wade Thomas, who teaches economics and business at SUNY Oneonta and who quoted those figures in his own co-written 2005 book called “Economic Issues Today: Alternative Approaches.” Here’s the paragraph from Thomas’ book that applies: “According to one study [the one by Bluestone et al.] a 1 percent increase in the unemployment rate will be associated with 37,000 deaths [including 20,000 heart attacks], 920 suicides, 650 homicides, 4,000 state mental hospital admissions and 3,300 state prison admissions.” Thomas says things are different today but those old studies may help us understand the hidden problems that the coronavirus is causing. “I would hesitate to extrapolate from the old estimates of corporate flight as a means of quantifying present circumstances,” Thomas wrote to me in an e-mail, adding that “there are too many variables involved now to assert definitive cause and effect between unemployment and the litany of health consequences cited in the 1981 study.” But, Thomas said, “it informs our thinking about some of the potential problems that may accompany this wave of joblessness.” Two things are definitely different today. One, Washington acted quickly to help the unemployed. It didn’t when companies were moving overseas. And, as I said in my last column, a great deal of those who have lost their jobs because of the virus are only being furloughed. They are scheduled to get their jobs back once companies reopen their doors. Let’s hope that the data from 1981 is – excuse the expression – dead wrong. Share this:
Crude oil prices plunged below zero for the first time in history on Monday, with traders actually paying to get barrels of the stuff off their hands as the coronavirus kills demand. The May futures contract for West Texas Intermediate crude, which is set to expire Tuesday, dropped as low as minus $10.31 per barrel after briefly hovering at just a penny a barrel early Monday afternoon. That’s an indication that traders were paying a substantial premium for the ability to slash bloated inventories amid concerns that producers are churning out more fuel than the world can store. The below-zero contracts are deals to purchase oil due to be delivered next month, but many are concerned there won’t be anywhere to put it given that oil is still being pumped and demand has evaporated amid the pandemic. Tanks are full at key facilities across the US, traders said, including the country’s main delivery point of Cushing, Oklahoma. The June contract for US crude, meanwhile, held up better but was still down 11 percent at $22.26 a barrel as of 1:43 p.m. And the June futures contract for international Brent crude was recently off 8.7 percent at $25.62 a barrel. “Oil prices tend to be a gauge for the health of the global economy,” said Dan Russo, chief market strategist at Chaikin Analytics. “It’s difficult to be bullish on global economic growth with oil prices at multi-decade lows.” Oil prices have plunged in recent months as the coronavirus crisis led to global travel restrictions and caused demand for travel to evaporate. An international price war between Russia and Saudi Arabia exacerbated the situation by causing a glut of supply. The latest plunge came amid fears that an international deal to cut global oil production by 9.7 million barrels a day would not be enough stabilize a market rattled by the virus crisis. The International Energy Agency has predicted demand for oil will plummet by 26 million barrels a day in May, while supply will fall by just 12 million barrels that month following the deal between Russia, Saudi Arabia and other countries. With Post wires; additional reporting by Thornton McEnery Share this:
United Airlines said on Monday it expects to report a pre-tax loss of about $2.1 billion for the first quarter, after the coronavirus pandemic smothered its growth aspirations in Latin America and led the company to seek another $4.5 billion in government aid. Chicago-based United said first quarter revenues are seen at $8 billion, down 17 percent from a year earlier, with the bulk of the declines in the last two weeks of March as coronavirus outbreaks accelerated globally, causing an average daily revenue loss of $100 million. The results are preliminary and final first-quarter numbers may change, it said, without disclosing a date for publication. Delta Air Lines and Southwest Airlines are to report first-quarter results this week. All US airlines are seeking government money to help them weather what they say is the worst crisis in the industry’s history. With few people flying, United said it plans to operate only about 10 percent of its normal schedule in May and June. In addition to $5 billion it will receive from the US government to cover payroll through Sept. 30, United said it also expects to borrow up to about $4.5 billion from the Treasury Department for up to five years. Once the terms are finalized, it will have until the end of September to decide whether to draw the money. If it borrows the full amount, United would issue warrants for the Treasury to buy 14.2 million shares at its April 9 closing price of $31.50 per share. Shares in United were down 2.9 percent, at $28.24, in early-afternoon trading. The estimated first-quarter loss includes just over $1 billion in special charges, mainly reflecting a reserve on a loan United made in connection with an investment in Colombia’s Avianca Holdings as part of its plans for a larger tie-up in Latin America. The loan was backed by a controlling interest in Avianca, which has not flown any passenger flights since March 24 as its main Colombia and El Salvador hubs shut down their air spaces. Avianca has furloughed half of its staff with no pay and has not publicly disclosed when it expects to fly again as governments in Latin America repeatedly extend quarantines. United also wrote down the value of its investments in Brazilian carrier Azul Linhas Aereas Brasileiras and took a $50 million impairment charge for its routes in China, where the coronavirus first started to affect travel in January. US airlines, including United, have warned that they will have to downsize in October if demand does not show signs of recovering. Share this: