The 2 Truths That Reveal Why We Don't Accomplish Our Goals (And Ultimately Accept Failure)

Growing up, failure wasn’t allowed in my household.   

I remember being twelve years old, barely a step into middle school, when I caught the flu the morning of a jump rope fundraiser. My father walked into my bedroom, saw me still under the covers and said, “You’re not awake yet?” 

I had committed to jumping role for an hour straight at my middle school’s gymnasium to raise money for lung cancer. 

“Dad, I can’t,” I said, hovering over the bucket beside my bed. 

“That’s not what Michael Jordan said in the 1997 NBA finals against the Utah Jazz,” he said.

Yes, at 12 years old, my ability to push through in the face of failure was being compared to none other than the great Michael Jordan.

Groaning and on the edge of vomiting, I pulled myself out of bed, held my head in the car, and arrived to a packed gymnasium where I proceeded to jump rope while fighting sweats and shivers, taking intermittent sips of Gatorade. 

I spent the next two days in bed, my father coming in every so often to say, “I’m sorry that was so tough–but I told you that you could do it.”

Anyone who has ever pursued some sort of goal, no matter how big or how small, can pinpoint an infinite number of moments in which failure was a viable option–a “way out.” 

When I fractured my spine playing hockey as a teenager, I had the option of never returning to the sport.

When I was competing as one of the highest ranked World of Warcraft players in North America, I had the option of quitting the game after my teammate disbanded our team.

When I started bodybuilding in college, I had the option of giving up every time I experienced a new injury or grew tired of the overly demanding daily routine.

When I started my first job after college, working in advertising, I had the option of accepting my fate as a copywriter and listening to all the people in my life who said, “You can’t make a living as a full-time writer.”

When I took the leap four years later to become that full-time writer, I had the option of getting scared and throwing in the towel when things didn’t click perfectly right away.

And when I decided I was going to push the boundary even further and start my own writing agency, I could have accepted failure whenever someone told me, “No.”

But every time I’ve pushed through those moments where failure seemed like the only option, my father’s voice has played over and over again in my head:

“I’m sorry that was so tough–but I told you that you could do it.”

In all my pursuits, interests, hobbies and accomplishments, I’ve learned that there are reasons why we, as ambitious humans, fail. And as much as we would like to believe that failure is something that chooses us, the truth is, it’s the other way around.

We choose failure. And in the moments when we make the choice to surrender, give up, and accept things as they are, it’s because we believe one one of these two truths about ourselves:

1. We don’t believe we are capable.

Our comfort zone’s represent what we’ve already done–not what we are about to do.

When we are confronted with a challenge, we tend to compare that challenge to something we’ve already overcome. If the challenge seems less daunting or equally as daunting as something we’ve accomplished, we are less likely to choose failure because we’ve already proven our ability to succeed. 

However, if the challenge appears greater than anything we’ve ever done or successfully overcome in the past, this is where our comfort zone suddenly becomes exceedingly apparent. We see this as the line in the sand–and we doubt our ability to cross it.

2. We believe the pain will outweigh the gain.

Pain without purpose is torture. Pain with a purpose is a price.

Unless we believe that the end result will be worth the road it takes to get there, we will almost always choose to avoid the journey altogether. We see our time and efforts better spent on things that will guarantee a positive result–rather than investing in something that may or may not pay off in the end.

Unfortunately, we very rarely understand the rewards and lessons gained before we leap into the unknown. We can imagine what those gains might be, and weigh their potential value against the tough road ahead, but anyone who has overcome a tough obstacle will tell you their doubts beforehand and their pearls of wisdom gained in the process.

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Exclusive: Qualcomm set to win conditional Japanese antitrust okay for NXP deal – source

BRUSSELS (Reuters) – U.S. smartphone chipmaker Qualcomm is set to win “imminent” Japanese antitrust clearance for its $38-billion bid for NXP Semiconductors and gain Europe’s approval by the end of the year with slight tweaks to its concessions, a person familiar with the matter said.

FILE PHOTO: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

Winning the green light from both competition authorities would take Qualcomm a major step forward to closing the deal and reinforce its fight against an unsolicited $103-billion takeover bid from Broadcom.

The Japan Fair Trade Commission (JFTC) “is expected to clear Qualcomm’s acquisition of NXP imminently,” the source said.

“The European Commission is expected to follow soon.”

The JFTC did not respond to emailed requests for comments sent during out of office hours. The EU competition enforcer, which has set a March 15 deadline to rule on the deal, declined to comment while Qualcomm was not available for comment.

Qualcomm, which supplies chips to Android smartphone makers and Apple, wants to become the leading supplier to the fast-growing automotive chips market via the NXP purchase, the biggest-ever in the semiconductor industry.

To address competition concerns, the company has agreed not to purchase NXP’s standard essential patents and not to take legal action against third parties related to NXP’s near field communication (NFC) patents except for defensive purposes.

It also offered an interoperability pledge which will allow rival products to function with NXP’s products.

NXP co-invented NFC chips which enable mobile phones to be used to pay for goods and store and exchange data.

Qualcomm will make incremental changes to concessions offered to the EU authority last month, the person said.

A similar proposal was also proposed to the JFTC.

Broadcom made its move last week in an effort to become the dominant supplier of chips used in the 1.5 billion or so smartphones expected to be sold around the world this year. Qualcomm has dismissed the offer, saying it undervalues the company.

Broadcom, Qualcomm and NXP together would have control over modems, Wi-Fi, GPS and near-field communications chips, a strong position that could concern customers such as Apple and Samsung Electronics Co Ltd because of the bargaining power such a combined company could have to raise prices.

However, a combined company would also likely have a lower cost base and the flexibility to cut prices.

Editing by Toby Chopra

Our Standards:The Thomson Reuters Trust Principles.

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raceAhead: Apple’s Diversity Chief Leaves, Homeland Security Official Resigns After Racist Comments, We’re All Nigerian Now

Your week in review, in haiku

1.

Dear public servants:

No touching. Stop race-baiting.

Be welcome at malls.

2.

The sexiest man?

At Cracker Barrel, maybe.

“If that,” sniffs Twitter.

3.

Got any Russian

backdoor overtures lying

around? Just asking.

4.

One leaky Keystone.

Two hundred thousand problems.

No Native respect.

5.

Kicking the tires:

Wherefore art thou Koch brothers?

Reclaiming our Time.

Reclaim your weekend, everyone.

On Point

Apple’s diversity chief is leaving her post after six months
Denise Young Smith, the company’s most recent vice president of diversity and inclusion, is leaving her post and the company. The 20-year Apple veteran will be replaced by Christie Smith, a longtime Deloitte human resources executive. While Denise Young Smith reported directly to CEO Tim Cook, Christie Smith will report to Deirdre O’Brien, Apple’s human resources officer.
Fortune
Department of Homeland Security official resigns after racist comments come to light
Jamie Johnson, director of the Center for Faith-Based & Neighborhood Partnerships at the Department of Homeland Security (DHS), resigned last night after a CNN report revealed public comments he made disparaging African Americans and Muslims during numerous talk radio appearances. On one occasion, Johnson blamed black people for turning “major cities into slums because of laziness, drug use and sexual promiscuity.” During another appearance he said, “all that Islam has ever given us is oil and dead bodies over the last millennia and a half.” Johnson, who is a pastor, apologized on his way out. “I regret the manner in which those thoughts were expressed in the past, but can say unequivocally that they do not represent my views personally or professionally,” he said.
The Hill
Some DACA applications were lost in the mail and rejected, despite meeting a crucial deadline
Though the administration now says it will reconsider some applications that it processed incorrectly, it’s not clear how they’ll be able to keep that promise. At least 4,000 out of more than 130,000 renewal applications were rejected for barely missing the deadline, but advocates think the true number could be much higher. The Trump administration plans to end the Deferred Action for Childhood Arrivals, which protects nearly 700,000 young immigrants from deportation, in 2018.
NPR
The Nigerian women’s bobsled team is going to compete in the Olympics
The three women, Seun Adigun, Ngozi Onwumere and Akuoma Omeoga finished their fifth and qualifying race yesterday, and are officially heading for the Winter Olympics in Pyeongchang next February. They are the first African bobsled team in Olympic history, and their remarkable quest has already delighted an exhausted and cynical world. We are all Nigerian now, o.
Deadspin

The Woke Leader

For your weekend viewing pleasure: Mudbound
Mudbound, an extraordinary film by Dee Rees with co-writer, Virgil Williams, debuts today on Netflix. The film was adapted from Hillary Jordan’s 2008 first novel, “Mudbound” and is the story of two families during World War II, one black and one white, whose lives are intertwined on the same dusty, brown patch of farmland. It also features a resplendently bare Mary J. Blige, in a performance that is sure to generate buzz. Even the reviews are epic: “The radicalism of “Mudbound” thus lies in its inherently democratic sensibility, its humble, unapologetic insistence on granting its black and white characters the same moral and dramatic weight,” says film critic Justin Chang. “In a film industry that has only begun to correct its default position of presenting black suffering almost exclusively through a white gaze, this is no small achievement.”
LA Times
What sexual harassment looks like
The Washington Post has collected stories from women who were harassed at work and then reported the incident. The employers are not named, and the women are identified by first name and age only. But what becomes quickly apparent is how diverse and widespread the behavior is, and how economically vulnerable female employees often are. If you were a person who laughed off or misunderstood the meaning of “hostile workplace” in the past, consider this a painful primer. Oh, and the kicker? When women report, things often get far worse.
Washington Post
On the meaning of macaroni and cheese
If you think of mac and cheese as an easy, weeknight side dish that starts in a blue box, then you’re probably white. But if you think of macaroni and cheese as a made-from-scratch culinary event, then you’re probably black. And that’s part of the fascinating difference between a black and white Thanksgiving celebration.  “In black culture, for the most part, macaroni & cheese is the pinnacle, the highest culinary accolade. Who makes it, how it’s made and who’s allowed to bring it to a gathering involves negotiation, tradition and tacit understanding.” A delightful look at how a “simple” dish defines a culture.
Charlotte Observer

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OnePlus Heads Toward the All-Screen Phone Future With the New 5T

Want an easy way to get a straightforward, no-nonsense look at the state of the art in smartphones? Just check out whatever’s new from OnePlus. The Chinese company quietly takes all the best mainstream tech it can find, sticks it in a chassis, and sells it on its website. It’s never the first to experiment with wild new ideas, opting instead to wait for things to be a little more mature and a little more readily available.

So it is with the new OnePlus 5T. For the most part, the phone matches the OnePlus 5, which came out less than six months ago. Same specs, even the same overall size and shape. What’s changed since then, at least according to this device, mostly has to do with the display. The 5T’s 6-inch AMOLED screen matches the latest from Samsung and Apple, right down to the taller aspect ratio. (Samsung manufactures the panel for pretty much the whole industry.) OnePlus recognized that phone design now entails getting rid of everything but the screen, and it followed suit.

As with all the other just-the-screen phones, the 5T makes a few design changes to accommodate all that display. For the first time, OnePlus put a fingerprint reader on the back of the device, rather than in a button on the front. It’s still wickedly fast. And if you don’t want to pick up your phone just to look at it, you can use the new facial recognition feature. OnePlus is careful not to bill it as some hugely secure feature—you can’t pay for things with your face, or even open apps—but rather as a quick way to just get into the phone. And man, is it fast. Way faster than even the iPhone X. But, again, way less secure.

OnePlus

The 5T also comes with a better secondary camera on the back, and better software for its soft-background portrait mode. Photography was the 5’s biggest issue, and OnePlus seems to have focused on improving its lot. Have you noticed the theme here, by the way? It’s the same stuff everyone else is doing. OnePlus bets it can do them cleaner and simpler, and for a lower price. You’ll be able to get a 5T with 64 gigs of storage for just $499. If you’re counting, that’s half the iPhone X.

The new phone comes at an awkward moment for OnePlus. The company’s cultivated a reputation over the years for catering to power users, offering customization and options beyond many other phones. You know what power users hate? Security risks. And OnePlus is filthy with the stuff right now: The company had been shipping phones with an app that would grant hackers full access to your device, and collects a preposterous amount of data on all its users, storing it in easily identifiable ways.

OnePlus consistently makes the case that when you pay $1,000 for a phone, you’re paying for marketing as much as specs. I’ve been using the 5T a bit over the last few days, and I can tell you that it doesn’t feel quite as elegant or polished as some of the more expensive phones on the market. But then again, those phones don’t cost $500.

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Watch SpaceX's Top Secret Zuma Mission Launch Today

Usually, when a SpaceX thing unexpectedly goes boom, it grounds the company for months and raises questions about safety and reliability. On Sunday, November 5, SpaceX was preparing for an experimental engine test at its facility in McGregor, Texas when a propellant leak ignited, damaging the test stand.

But despite the explosion, Elon Musk’s spaceflight company will push on with its planned launches uninterrupted. The first mission following the failure will fire off on Thursday night from Kennedy Space Center during a two-hour window opening at 8pm Eastern time—and it’s a notable one. The payload, codenamed Zuma, is yet another covert mission for the US government. And this one is even more hush-hush than before, squeezed into the end of SpaceX’s 2017 launch slate with just a month’s public notice.

Veteran aerospace manufacturer Northrop Grumman built the payload, according to a document obtained by WIRED and later confirmed by the company. The company says it built Zuma for the US government, and it’s also providing an adapter to mate Zuma with SpaceX’s Falcon 9 rocket. But that’s where information starts tapering off. A typical SpaceX mission on the manifest would tell you exactly what the payload is and where it’s being delivered. Northrop Grumman simply says Zuma is bound for low-Earth orbit—or a destination between 100 and 1,200 miles above Earth’s surface.

At NASA’s Kennedy Space Center, mission payloads have three levels of security restrictions for pre-launch processing. Zuma is categorized at the highest level, sharing the designation with two other SpaceX payloads this year: the secretive X-37B spaceplane, launched for the Air Force, and a clandestine surveillance satellite for the National Reconnaissance Office. Northrop Grumman acknowledges that its payload—the documents obtained by WIRED mention that it is a satellite—was built for the government, but it did not specify which branch.

Weirdly, Northrop Grumman will be a direct competitor to SpaceX come July, when the company will complete the acquisition of spaceflight company Orbital ATK, which also delivers cargo to the International Space Station for NASA. Regardless, Northrop praises SpaceX’s prices and reliability; Zuma’s launch date was crucial to the success of the payload, and while the public acknowledgement only came in October, Northrop established a rigid November launch slot with SpaceX earlier this year. “This event represents a cost-effective approach to space access for government missions,” says Lon Rains, communications director for Northrop Grumman. “As a company, Northrop Grumman realizes that this is a monumental responsibility and has taken great care to ensure the most affordable and lowest risk scenario for Zuma.” Such praise from an old-school space systems company (and especially a future competitor) is pretty rare, especially for SpaceX.

Increasingly, SpaceX’s future is tied up in the success of federal contracts, regardless of their provenance. Having the ability to launch space missions is so important to the Air Force that it pays companies like SpaceX to develop new launch systems—anything to keep them from relying on the Russian-built RD-180 engine, the main power behind orbital military missions over the last few years.

Right now, the Air Force is sharing costs with SpaceX as it develops its Raptor engine, which was test-fired last year days before Elon Musk gave a talk at the International Astronautical Congress in Mexico where he presented how the Raptor would enable deep space missions to Mars. The original agreement allocated nearly $33.6 million to SpaceX under the conditions that they will provide double that amount for the Raptor development. Following an update on SpaceX’s plans for interplanetary travel at this year’s IAC in Australia, the Air Force awarded the company an additional $40.7 million.

SpaceX’s model of accepting development cash and completing contracts that lead to bigger ones has been a lucrative business model. Before it was a serious launch provider, the company was awarded almost $400 million to develop the Falcon 9 rocket and Dragon cargo capsule. After SpaceX spent nearly $450 million of its own cash to complete the vehicles and reach developmental milestones, they were awarded a $1.6 billion contract by NASA to deliver cargo to the ISS.

With so much riding on the success of those partnerships, last week’s explosion—the first after 16 non-problematic launches—was a justified scare. The engine failure originally reported by the Washington Post was actually a failure of the test stand, and sources familiar with the incident tell WIRED the explosion occurred before SpaceX actually fired the engine. A report published in NASASpaceflight points to a leak of liquid oxygen which was then ignited by a still-unknown source.

Housed on that test stand was an experimental Merlin engine, similar to the ones used to power the current fleet of Falcon 9 rockets. But this one in particular is a qualification unit for the upcoming Block 5 Falcon 9—a meaty upgrade that will increase the rocket’s thrust and cut down on refurbishment time between launches. SpaceX hopes to use the Block 5 Falcon 9 achieve its next big goal: flight to reflight of a single booster in 24 hours.

While that explosion doesn’t affect any federal contracts directly, it does call operations at the McGregor testing facility into question. When SpaceX wraps up its investigation, it may need to make upgrades to the test stands to avoid future problems—especially in the months leading up to human spaceflight returning to American soil. The Block 5 Falcon 9 rockets and accompanying Merlin engines will be used to lift humans safely to low-Earth orbit. Any incidents involving that hardware will raise serious questions.

Any further incidents, given SpaceX’s twin disasters in 2015 and 2016, will undoubtedly cause delays when the FAA and NASA require full investigations. Questions about SpaceX’s fueling procedures have been raised before, especially after the 2016 explosion that took out an entire rocket, an expensive customer satellite, and a launch pad. That, too, happened before a test fire and involved the ignition of leaked propellant.

This final version of the Falcon 9, the Block 5, will make its debut in late 2018 in time to fly astronauts to the ISS. SpaceX is still investigating the McGregor explosion to find its “root cause” and says it will stick to the upcoming launch schedule, including a resupply mission to the ISS, an Iridium satellite delivery, and—in the final days of 2017—the much-anticipated test flight of the Falcon Heavy, the linchpin in SpaceX’s crewed and interplanetary ambitions.

Elon Musk has casually floated the idea of a spectacular explosion during the Falcon Heavy test flight, and acknowledges the complexities of test-firing 27 of the Heavy’s Merlin engines. As the company gets closer to actually sending humans on the top of that rocket, you can bet that attitude will change.

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1 Strategy That Helps Small Businesses Attract More Seasonal Workers

Every fall, the staff count at Fun.com swells from 150 to as high as 2,000, as the online retailer fills orders for Halloween costumes and decor.

The company offers its seasonal staff at the warehouse in North Mankato, Minnesota, an incentive to perform well — those who do will be recommended for jobs at a greeting card manufacturer in town. That business needs between 300 and 400 people soon after Fun.com lets its seasonal crew go, says Joe Riska, the company’s head of human resources.

“Since they’ve already gone through a season and shown they can do good work, now they can go work for another company,” he says.

Small businesses that need extra help during the holidays or other busy times of the year are looking for employees willing to work hard and help the company meet its increased demand for products or services. So some owners approach recruiting and managing with the goal of turning temporary workers into long-term ones, or helping them find other jobs. It’s a strategy that’s critical when a national unemployment rate of 4.1 percent has shrunk the pool of candidates.

It can be hard for a business to find seasonal staffers if it offers them only a short-term paycheck, says Melissa Hassett, a vice president at staffing company ManpowerGroup. Many of these workers want to learn new skills. “A lot of people would love more career growth over time,” Hassett says.

But owners need to manage their seasonal workers’ expectations, and be clear what their chances are of getting a permanent job, says Carrie Gonell, an employment law attorney with Morgan Lewis in Costa Mesa, California. Some workers take a job hoping that it won’t end when the season does.

“Make sure you say that you intend for the job to be seasonal,” Gonell recommends to owners who expect to let those workers go when business slows.

At Fun.com, the seasonal workers start arriving in August, and most work until Halloween. About 10 percent will remain through Christmas to handle holiday shipments. Recruiting and managing that many temporary workers can be difficult, so the company increases its human resources staff from three to 15 people each year. It recruits college students looking for HR experience that they can list on their resumes, Riska says.

When appliance maker NewAir recruits workers for its busy seasons, warehouse manager Ronnie DeLeo tells prospective hires they have the chance to keep their jobs when the sales surge is over. While they’re working, they’ll compete for permanent jobs with NewAir’s existing staff.

NewAir, which makes small appliances like wine coolers and ice makers, takes on seasonal help for the summer and the winter holidays. The company’s warehouse in Cypress, California, has about 20 employees and hires 10 during the periods when orders from online customers and retailers soar and there’s more to pack and ship. During interviews, candidates learn that the company tracks employee productivity on a public scoreboard, and everyone knows the highest performers keep their jobs when the busy season ends.

“I’ve had cases where I’ve had fresh, new, driven, excited people working a lot faster and being more motivated than current staff members,” DeLeo says.

The company works with employees to help those who need to improve their performance, and pays severance in some cases when workers are let go, says product marketing director Andrew Stephenson. The competitive strategy is part of NewAir’s long-term growth plans, Stephenson says.

“We want to double — if not triple — our business in the next few years,” he says. “In the warehouse, the pace is going to increase and we have to staff accordingly.”

Hugh Jones hires 25 people every spring for his Mosquito Squad franchise to install and maintain outdoor pest control systems through the end of October. Jones, whose territory includes Greensboro, Winston-Salem, and High Point, North Carolina, believes that providing his seasonal employees with career counseling and mentorship will motivate them to do good work.

“Rather than say, ‘Come work here, it’s wonderful,’ we say, ‘Let’s work here and help you find a wonderful job,'” Jones says.

Jones serves his crew breakfast twice a month, bringing in motivational speakers who talk about life and working. Many of the seasonal workers are in their early 20s and haven’t yet figured out what path they want to take, he says. If they’re interested in a particular career, he’ll try to match them up with someone already doing that kind of work so they can learn more about it. Two years ago, one of Jones’ staffers told him he wanted to be a firefighter.

“I knew a fireman and brought him in to talk with him,” Jones says, “and now, two years later, he’s a fireman.”

–The Associated Press

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Amazon's New HQ. The 1 City That's Now Clear Favorite

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

I admit I once spent my birthday in the Race and Sports Book at the Hotel Bellagio in Las Vegas.

There’s something mesmerizing about watching horses race each other, all over the country, on vast screens as one sits in semi-darkness.

This may be why I’m fascinated by the 200-horse race to be the city of Amazon’s second headquarters.

A few weeks ago, I wrote about the betting being conducted on the site of Irish bookie Paddy Power.

At the time, there were two cities that seemed to be vying for the Amazon HQ2 title: Austin, Texas and Atlanta, Georgia.

Each was priced at 2-1. This means that the so-called smart money couldn’t decide how smart it really was. But it was sure it was smart.

Today, I returned to the Paddy Power site, wondering if anything had changed.

It has, and how.

There’s now a clear favorite. Oddly, despite Bezos being a Texan at heart, it isn’t Austin.

It’s Atlanta.

The home of Hawks and blown Super Bowls is now the 3-1 favorite.

Remarkably, Austin has drifted to 7-1. And it’s not alone there. Boston and Toronto (yes, the one in Canada) have surged up on the rails to join it.

Naturally, one can speculate about the information to which the bettors may (or may not) be privileged. 

This information might, of course, still be speculation. Amazon is really quite good at keeping secrets. 

However, these four cities are now far ahead in the betting. After the three 7-1 shots, the next is Portland (the one in Oregon) at 14-1, along with New York City, Pittsburgh and Washington D.C. 

Of course, favorites have lost before. It may be that a surprise city will emerge and sweep Amazon off its feet.

Then again, Amazon CEO Jeff Bezos is well-known for his commitment to data. I fear, therefore, that he’s had a very good idea of where he’d like to open HQ2 for some time.

Still, Amazon insists that it won’t make an announcement until next year.

Which leaves plenty of time for the smart money to get even smarter. 

I will continue to monitor the horses for signs of fatigue. Or, of course, doping.

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Freedom in Retreat — CEO Daily, Tuesday, 14th November

Good morning.

It’s been nearly seven years since the Arab Spring threw a spotlight on social media’s ability to fuel freedom movements around the world. Unfortunately, what we have learned in the years since is that those same social media tools can be used to abuse and restrict freedom.

This morning, Freedom House releases its annual report on Freedom on the Net. CEO Daily got an early look, and the global picture it paints is dim. Nearly half of the 65 countries reviewed in the study saw declines in Internet freedom, with the biggest declines registered in Ukraine, Egypt, and Turkey. Only 13 countries saw improvements—most of them minor.

While Americans are focused on reports of Russian efforts to interfere in the U.S. election, similar sophisticated campaigns to manipulate social media occurred elsewhere. According to Freedom House, manipulation and disinformation techniques played an important role in elections in at least 17 other countries over the past year. In some cases, those disinformation efforts were aimed at disrupting those in power; in others—the Philippines, Turkey, Venezuela—they were used to protect ruling regimes.

Beyond manipulation, the report finds an increasing number of governments have shut down mobile service at times for political or security reasons. And some also are blocking live video services—like Facebook and Snapchat live—to prevent broadcast of political protests. Cyber attacks on political opponents and rights groups also are on the rise. And several companies followed the lead of China—which gets the lowest score in the Freedom House survey—by restricting Virtual Private Networks, which are used by many companies to enable employees to access corporate files remotely.

A couple of pertinent stats. Of the 3.4 billion people who have access to the Internet around the world:

  • 63% now live in countries where people were arrested or imprisoned for posting content on political, social or religious issues;
  • 52% now live in countries where social media or messaging apps were blocked over the last year.

You can find the full report here. Its lesson: like most new technologies, dating back to the invention of fire, social media is neither good nor evil—but it provides considerable power to both.

More news below.

Top News

•  Mnuchin Draws a Tax Line in the Sand

Treasury Secretary Steven Mnuchin told The Wall Street Journal that a standard corporate tax rate of 20% is a red line for the administration and that it won’t accept anything higher that emerges from the House and Senate’s attempts to reconcile their two bills.  
WSJ, subscription required

Powerhouse of Europe, Again

Germany’s economy grew a faster-than-expected 0.8% in the third quarter, raising the annual growth rate to 2.3%. That’s well above the country’s medium-term trend and will reinforce fears of overheating against a background of sustained easy monetary policy at the ECB, which refused to set an end date for quantitative easing earlier this month. However, as in the U.S., inflation refuses to react, with wage pressures barely more visible than in the U.S., at least for now.  Elsewhere in the Eurozone, Italy notched its best annual growth rate in six years at 1.8%, but the recovery slowed in France, Spain  and the Netherlands.
Fortune

Qualcomm Rejects Broadcom

Qualcomm rejected Broadcom’s $105 billion bid for it, saying that the $70-a-share offer “significantly undervalued” it, but implicitly inviting a higher bid. #GLWT, said the market, which pushed Qualcomm only 2% higher, reflecting the perception that the initial bid was sufficiently rich.
Fortune

•  Amazon Sells China Cloud Business

Amazon has sold its Cloud hosting business in China to its local partner for a sum estimated at up to $300 million. It’s an admission that Amazon Web Services, the global leader in Cloud hosting, can’t straddle both sides of the Great Firewall,  and it illustrates the impossibility of building a truly global Internet-based company in such circumstances.  
Fortune

Around the Water Cooler

Donald Trump Jr. Was in Touch With Wikileaks in 2016

Donald Trump Jr. had repeated contact with Wikileaks during the 2016 election campaign, according to documents that leaked (!) from the Congressional investigation into Russian election hacking to The Atlantic. Wikileaks had published emails from the DNC and senior Democratic officials, including Hillary Clinton’s campaign manager John Podesta, with a view to discrediting Clinton ahead of the election. U.S. intelligence agencies have concluded that the emails were stolen by Russian intelligence. Wikileaks has denied that but refuses to say how it obtained the emails.
Fortune

Eli Lilly’s Azar to Head HHS

President Donald Trump said he’s nominating Alex Azar, a former top executive at Eli Lilly, to be the next Secretary of the Department of Health and Human Services (HHS). Trump’s previous HHS Secretary, Tom Price, resigned in September following a scandal centering on his use of private chartered jets on the taxpayer dime. The appointment may raise eyebrows, given Trump’s record of bashing the pharma industry for excessive drug pricing.
Fortune

McConnell Calls on Moore to Withdraw

Senate Majority Leader Mitch McConnell called on Roy Moore to withdraw from the special election to fill the vacant Alabama Senate seat, after a fifth woman accused him of sexual harassment. The woman, Beverly Young Nelson, was 16 at the time, and Moore was district attorney for Etowah county. Moore denied the allegations and said McConnell was the one who should resign. Most of the rest of the GOP caucus in the Senate sided with McConnell.  
NYT

•  Axa Plans Stock Market Return for Equitable

Europe’s largest insurer Axa filed for an IPO of its U.S. unit which includes the life insurance giant Axa Equitable and a majority stake in investment bank AllianceBernstein. The move is consistent with those of other big insurers such as Metlife in trying to reduce regulatory capital requirements. Axa’s core business, like the rest of the European insurance sector, remains hobbled by chronically low capital market rates that mean it is earning next to nothing on many of its assets.  
WSJ, subscription required

Summaries by Geoffrey Smith; geoffrey.smith@fortune.com

@geoffreytsmith

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Malaysia's CIMB says backup tapes containing banking customer data lost

KUALA LUMPUR (Reuters) – Malaysia’s CIMB Group Holdings Bhd on Monday said some magnetic tapes containing backup customer data were lost during routine operations, adding that there has been no evidence so far that any data has been compromised.

The tapes do not contain any authentication data such as pin numbers, passwords or credit card security numbers, the country’s second biggest lender said in a statement.

“Several magnetic tapes containing back-up data were physically lost in transit during routine operations. Some of these tapes contain customer information of CIMB Bank and its subsidiaries,” it said.

“Following a thorough and ongoing assessment, there is currently no evidence that any of this information has been compromised.”

The bank said it was working with relevant authorities and taking steps to protect customers. It did not say when the tapes were lost.

CIMB said it has heightened security measures following the loss of the tapes, including temporarily suspending some services via its call center.

In a separate statement, Malaysia’s central bank said it has been assured by CIMB that “necessary precautionary measures and mitigation actions have been taken to manage any possible negative impact arising from the loss of the tapes.”

Earlier this month, Malaysia said it was investigating an alleged attempt to sell data of more than 46 million mobile phone subscribers online, in what appeared to be one of the largest leaks of customer data in Asia.

Reporting by A. Ananthalakshmi, editing by David Evans

Our Standards:The Thomson Reuters Trust Principles.

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China's JD.com sees stock jump after swing to third-quarter profit

(Reuters) – JD.com, China’s second largest e-commerce firm, saw its stock jump over 7 percent in pre-market trading on Monday after it reported better-than-expected income for the quarter ended in Sept. 30, due to strong sales.

A sign of China’s e-commerce company JD.com is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province, China November 16, 2016. REUTERS/Aly Song

JD posted a net profit of 1 billion yuan ($151 million), its highest ever quarterly profit and outstripping analyst estimates of a 213 million yuan loss.

Revenue for the quarter was 83.8 billion yuan, just above analysts’ mean estimate of 83.6 billion according to Thomson Reuters I/B/E/S.

Despite strong bottom line results, gross merchandise volume (GMV) growth still dropped to its lowest rate in a year, reflecting a seasonal lull in sales before China’s biggest online sale event, Singles’ Day, which ended on Saturday.

“[Sales of appliances and mobile phones] both were dragged by weaker growth in September … mainly due to competition and slow seasonality,” said TH Data Capital analyst Tian Hou in a research note ahead of the earnings.

JD.com, the country’s largest consumer electronics retailer and second-largest e-commerce firm behind Alibaba Group Holding Ltd (BABA.N), booked $19 billion in total sales for Singles’ Day, which will be reflected in its fourth quarter earnings.

The results come as China’s e-commerce giants increasingly experience seasonal peaks around mega sale events in June and November, moderated by sluggish interim periods.

JD expects revenue for the quarter ending in December to be 107-110 billion yuan, a rise of 35-39 percent, roughly in line with analyst expectations. However, marketing costs related to the November sales, which ran for over a month, are expected to cut into its bottom line.

JD is expanding rapidly into offline stores and overseas markets, as rival Alibaba continues to invest heavily in logistics and retail alongside its marketplace business, edging further into JD’s territory.

This year, JD is investing in logistics infrastructure in Southeast Asia, expanding from existing commitments in Indonesia. At home, JD is hoping to tap big spenders with new ‘white glove’ platforms which feature imported food, fashion and electronics.

Last week during a visit to China by U.S. President Donald Trump, JD said it would purchase $2 billion in U.S. goods, including $1.2 billion in beef, over the next three years.

Reporting by Cate Cadell in Beijing and Munsif Vengattil in Bengaluru; Editing by Bernard Orr and Mark Potter

Our Standards:The Thomson Reuters Trust Principles.

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Retirement Strategy: Are You Waiting For An Engraved Invitation?

I really don’t want to sound like a broken record, so forgive me for putting this as bluntly as possible: Bank of America (BAC) is on sale, once again. At what point will YOU see it as a bargain?

If I were to show you the following chart, without naming the stock, what would you think?

I don’t know about you, but I would think to myself that since there are not that many bargains these days in the market, this one looks like a “no-brainer” to AT LEAST consider strongly buying shares of. I have to believe that just about anyone would agree with me. If not, perhaps I am looking at investing in a really odd way.

OK, now consider that BAC makes money by borrowing at the Fed “Discount Window” at rates that are about 1.75% and then lends that money at rates mostly well above 3.50%, and even higher for folks with low credit scores. To me this is like printing money. The bank does nothing but borrow low and lend high.

At the same time, millions of folks have checking and savings accounts with BAC and they MIGHT get an interest rate on their money of .65-1.00% unless you’re “special”. The bank turns around and lends YOUR money out at much higher interest rates to qualified borrowers. Are you still with me?

Now, these transactions take place every day, 24 hours per day, 7 days per week, 365 days per year. The only way the bank will LOSE money is if they lend unsecured funds, such as a credit card, but at interest rates that are over 20% most of the time. The risk is mitigated by the outrageously high interest charged. BAC will take that risk.

On the secured loans, there is either a house or a car, or an asset of some kind that allows BAC to cover most of their losses in the event a secured loan (like a mortgage) goes bad. These days, all banks, including BAC, have to meet certain requirements to keep cash available without touching it. Most banks now have enough in reserve to satisfy this requirement, and to have cash on hand in the event of a catastrophic financial problem, as we have seen so often in the past.

Are you still with me?

OK, so they have cash in reserve and money in checking and savings accounts that they pay paltry interest on, plus they have the “discount window” to borrow a whole lot of money. Then they lend the money to qualified borrowers or businesses. BAC sells nothing, manufactures nothing, and in reality offers one service, which is to keep your money safe with the help of the FDIC, which will guarantee your money up to a certain amount. Of course there are plenty of loopholes for individuals to have LOTS of money insured by the FDIC, but I am willing to bet everyone reading this knows what they are.

Now on top of the cash machine previously stated above, the bank also charges “fees”:

  • ATM fees.
  • Minimum balance fees.
  • Regular checking account fees for those who maintain a low average monthly balance.
  • Fees (like closing costs) just to actually lend mortgage money.
  • Fees on some loans if you decide to pay the loan off before a certain time frame.
  • Fees on their investment banking side, which has been getting stronger.

You could probably name a few more obvious ones that I am missing, but the entire business is all about making money on nothing but your money, or the Federal Reserve’s money. Are they printing money? Of course not, but it is as close to printing money without actually doing it that I can conceive of.

BAC never has to develop the next cell phone, or electric engine, or anything at all. It is not a cyclical business, and as long as BAC is solvent, they can do all of the above transactions all of the time.

Now It’s Time To Look At The Basics Again

I have shown one chart that for me says it all, but not quite everything. The following facts should be duly noted:

  • BAC has a price to book value of just 1.10 right now. Historically, BAC price to book is about 1.75 roughly.
  • The enterprise value is about $350 billion, while the market cap is about $280 billion.
  • BAC has a forward growth rate for the next 3-5 years of roughly 11% annually.
  • BAC has a 5-year average PE ratio of about 14.50, with a current ratio of about 15.20.
  • BAC has free cash flow of about $9 billion and a cash flow growth rate of about 32% annually over the last 5 years.
  • BAC’s gross margins are about 82%.

OK, so I think the picture is becoming more clear, right? Let’s take a look at the recent share price activity:

Chart

In just one week, the share price has dropped almost 5%. While I believe it was undervalued before this dip, I now believe that its stock is a total bargain, based on the fundamentals noted, and the way BAC makes money.

Not to mention that over the long term, interest rates will rise, and BAC will make more profits. As a matter of fact, the reason that I see for this dip is only because the Fed did not raise rates this time around. To me it stands to reason that when the Fed raises rates, the traders who have jumped off of the band wagon will jump ON the bandwagon once again, which should make the share price go back up. After that, in January when BAC announces earnings, it is more than likely to report another great quarter, as many analysts are “banking” on:

Dividend Growth Investing For The Future

I doubt if BAC will increase its dividend by 60% next quarter, but with the share price so favorable, and the yield just about 2% I would speculate that further dividend increases are coming. BAC has a very low payout ratio:

To me, this is like getting in on a ground floor opportunity at a cheap price. I believe this is what dividend growth is all about. BAC is now paying a dividend, has a low payout ratio, and in my mind could easily increase its dividends by 10-20% per year over the course of the next few years. I could be wrong, of course, but I am just adding up the facts that I know right now.

The Bottom Line

I believe that opportunity is knocking once again to buy shares of BAC. I added before, and I am adding again. There is no denying that the financial sector, specifically big banks, will lead the way for quite some time, and BAC offers a plenty of value all around.

Of course the choice is yours. While I understand that the current yield is lower than those who are already retired will accept, I cannot help seeing that the total return over the near, and longer term, is about as good as it gets for my risk level.

What do YOU have to say?

Not To Bore You, But…

Knowledge is power and many folks shy away from the investing world because that very world makes it more confusing each and every day in an effort to sell you something: stock picks, technical strategies, books, videos, subscriptions with “secret ideas,” gadgets, and even snake oil.

My promise to you is that my work here will remain free to all of my followers, with the hope of giving to you some of the things that took years for me to learn myself. That being said, let me reach out to you with my usual ending:

**One final note: The only favor I ask is that you click the “Follow” button so I can grow my Seeking Alpha friendships. That is my personal blessing in doing this and how I can offer my experiences to as many regular folks as possible, who might not otherwise receive it.

Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance. The long positions held are based upon what the model portfolio holds and I personally could have held all of the stocks noted at one time or another.

Disclosure: I am/we are long BAC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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China shopping festival smashes record at halfway mark

SHANGHAI (Reuters) – Alibaba (BABA.N), the Chinese e-commerce giant, said its Singles’ Day sales surged past last year’s total just after midday Saturday, hitting a record $18 billion, pointing to a likely giant haul for the world’s biggest shopping event.

Jack Ma, Chairman of Alibaba Group, and actor Nicole Kidman attend a show during Alibaba Group’s 11.11 Singles’ Day global shopping festival in Shanghai, China, November 10, 2017. REUTERS/Aly Song

Once a celebration for China’s lonely hearts, Singles’ Day has become an annual 24-hour extravaganza that exceeds the combined sales for Black Friday and Cyber Monday in the United States, and acts as a barometer for China’s consumers.

After a star-studded event in Shanghai late Friday to ring in the event, which is held each year on Nov. 11, the volume of goods sold on Alibaba’s platforms raced past a billion dollars in two minutes and hit $10 billion in just over an hour. The company’s tills are set to shut at midnight Saturday.

At just past the halfway mark, the gross merchandise value swept past last year’s dollar total of $17.7 billion. Shortly afterwards, sales surpassed 120.7 billion yuan, the total in 2016 in the local currency, which has appreciated against the dollar in the past year.

The event gets shoppers around China scouting for bargains and loading up their online shopping carts, while delivery men – and robots – are braced for an estimated 1.5 billion parcels expected over the next six days.

“This is a big event for China, for the Chinese economy,” Joseph Tsai, Ali Baba’s co-founder and vice chairman, said ahead of the sales bonanza. “On Singles’ Day, shopping is a sport, it’s entertainment.”

Tsai said rising disposable incomes of China’s “over 300 million middle-class consumers” was helping drive the company’s online sales – and would continue. “This powerful group is propelling the consumption of China,” he said.

Analysts and investors will closely watch the headline sales number, which last year rose by nearly a third at the eighth iteration of the event – though that was slower than the 60 percent increase logged in 2015.

At Alibaba’s Friday night gala, the company’s co-founder and chairman, Jack Ma, hosted guests including the actress Nicole Kidman, singer Pharrell Williams and Chinese musicians and film stars such as Zhang Ziyi and Fan Bingbing.

SLOWER GROWTH?

The excitement around the shopping blitz, however, masks the challenges facing China’s online retailers such as Alibaba and JD.com Inc (JD.O), which are having to spend more to compete for shoppers in a broader economy where growth is slowing.

A screen shows the value of goods being transacted at Alibaba Group’s 11.11 Singles’ Day global shopping festival in Shanghai, China, November 11, 2017. REUTERS/Aly Song

“A lot of the lower hanging fruit has been picked and there’s increased competition for a share of consumer spending,” said Matthew Crabbe, Asia Pacific research director at Mintel.

He estimated Alibaba’s Singles’ Day sales growth would likely slow to around 20 percent. Online retailers were being forced to push offline as well as overseas to attract new shoppers, and the overall online retail market was close to “saturation”.

“They’re having to spill over out of the purely online realm into the wider consumer market,” Crabbe said.

Slideshow (5 Images)

This has sparked deals to buy bricks-and-mortar stores in China, and overseas tie-ups especially in Southeast Asia. Technology, too, has been key, with virtual reality dressing rooms and live fashion shows to attract shoppers.

Alibaba also said it had turned 100,000 physical shops around China into “smart stores” for this year’s event. Goods people at the stores had perused, but then bought and paid for on Alibaba’s platforms would help add towards the gross merchandise value total.

Ben Cavender, Shanghai-based principal at China Market Research Group, noted that brands were being more careful with the deals they have on offer this year to avoid “margins getting killed”, and were often asking for deposits in advance.

In previous years, prices were often halved.

“I think prices seem high and I‘m totally lost as to the rules” about discounts, said Gao Wantong, 21, a student in Beijing.

Fu Wenyue, a 23-year-old dresser in Shanghai, said she had spent around 4,000 yuan ($600) on clothes, cosmetics and kitchen utensils in pre-event sales, transactions ahead of the day which officially only go through once midnight strikes.

“I’ve bought some stuff already, but I haven’t finished shopping yet,” she said.

For a graphic on China’s Singles’ Day spending, click tmsnrt.rs/2fg8Ad8

Reporting by Adam Jourdan and SHANGHAI newsroom; Editing by Ian Geoghegan

Our Standards:The Thomson Reuters Trust Principles.

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Google supports U.S. efforts to disclose buyers of online political ads

SAN FRANCISCO (Reuters) – Alphabet Inc’s Google unit told U.S. election regulators in a letter seen by Reuters on Thursday that it “strongly supports” tightening rules on online political advertising as part of efforts to curtail “foreign abuse and influence” in elections.

FILE PHOTO – The Google logo is pictured atop an office building in Irvine, California, U.S. August 7, 2017. REUTERS/Mike Blake/File Photo

Federal lawmakers have criticized Google, Facebook Inc and Twitter Inc for not doing enough to identify and block Russian agents from buying ads on their services. U.S. authorities say the ads were intended to influence voters during the 2016 presidential election.

U.S. law permits foreign entities to advertise about certain issues if they disclose such spending, but it is unlawful for them to interfere in elections.

In September, the Federal Election Commission, which sets campaign finance rules, voted to consider ensuring that those disclosure rules apply to online activity. It opened a public comment period that is set to expire Monday.

In the letter, Google on Thursday offered its formal response to the FEC’s deliberation.

“Now more than ever, we must work together to improve transparency, enhance disclosures and reduce foreign abuse and influence in U.S. elections,” the company wrote.

The stance marks an about-face from 2010 when Google sought an affirmative exemption from a requirement that an ad should state who purchased it. The commission did not reach a consensus on the exemption at the time.

Google now is calling on the commission to extend disclosure rules that apply to TV and print ads to the Web.

“Google strongly supports the commission’s proposal to proceed with a rulemaking so that the commission can provide the clarity that campaigns and other political advertisers need to determine what disclaimers they are required to include.”

The company, which is the world’s top seller of online ads, also asked federal regulators and lawmakers to expand restrictions on foreign participation in elections to cover content distributed and advertised on the Internet.

Ratifying such provisions could give tech companies guidance on how to treat soft influence, or content from organizations such as RT, a Russian news outlet that has drawn concerns from lawmakers for peddling propaganda on Facebook and Google’s YouTube service.

In its letter, Google also reiterated plans to offer the public a database of election ads purchased through its service. In addition, the company has said information about buyers would be more accessible.

Technology news website Recode first reported the Google letter.

Reporting by Paresh Dave; Editing by Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.

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Apple 10-K Confirms The New Super Cycle

The iPhone X product reviews, statements from Tim Cook that demand is “off-the charts,” the extreme buzz in the media – all indicate that Apple (NASDAQ:AAPL) may be entering an iPhone super cycle. A specific piece of data in the recent 10-K filing gave me hard evidence that this may indeed be the case. Below we analyze the data in the SEC filing, compare and contrast it to the previous time that happened, and call out how we expect the stock price to move in the next year.

What the 10-K reveals

Short-term purchase obligations, a metric Apple (AAPL) reports in 10-Qs and 10-Ks, has been a fairly accurate predictor of revenues for the following quarter. The most recent 10-K (emphasis added) shows that Apple has committed $37.6B in non-cancelable arrangements.

Manufacturing Purchase Obligations – The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform final assembly and testing of finished products. These outsourcing partners acquire components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of September 30, 2017, the Company expects to pay $37.6 billion under manufacturing-related supplier arrangements, substantially all of which is noncancelable.

When we compare the purchase obligations from previous years (Table 1), we find that the current year-over-year growth rate matches that of the 2014 iPhone 6 launch. So why is that interesting? Recall that iPhone 6 screen size was much larger than the previous iPhones, and that led to super-sized unit growth for several quarters. By calling out this outsize “purchase obligations” in the 10-K, my take is that Apple is expecting another super cycle.

iPhone 5s iPhone 6 iPhone 6s iPhone 7

iPhone 8, X

Oct-2013 Oct-2014 Oct-2015 Oct-2016 Oct-2017
purchase obligations ($M) 18,616 24,529 29,500 28,600 37,600
y2y% 31.76% 20.27% -3.05% 31.47%

Table 1

Before we jump to the conclusion that super cycle implies a super stock price gain from here, let’s look at the facts carefully. The high growth rate of purchase obligations imply that Apple expects a high unit growth rate of iPhone X in the coming year, similar to what we saw in 2015 after the launch of iPhone 6. To get the cues of the stock price in the year ahead, let’s check the stock chart of 2014-15. After the launch of iPhone 6 in October 2014, the stock continued to move up, reaching a high around $134 after January earnings call, moved sideways until early summer, and actually started to fall in the latter part of the year.

Chart

AAPL data by YCharts

So what was the cause of the stock price decline even though it was in a super cycle? While iPhone unit sales were above normal, investors started asking the question “what’s next” that could continue this growth rate. As the early rumors of iPhone 6s features started to surface in late summer, and the takeaway was that there was not much new and exciting, the fear that iPhone sales had peaked took hold, and the stock tanked over 30%. The media started to draw comparison with the PC industry of the 2000s that had gone into a permanent slow decline. Moreover, none of the other Apple products – iPad, Mac, or services – were growing, and there was no “next thing” that could save the company.

Will history repeat and will Apple stock be an under performer in 2018? We believe that it will be different this time.

What’s different this time

There are several factors that are different from the last super cycle.

First, with iPhone 6 and 6s cycle, while the units did grow, the ASP (average selling price) did not. I believe that in the current cycle, while the units may grow a lot in the first six months, they will settle down to mid single digits thereafter – similar to the iPhone 6 cycle. However, Apple has figured out that by adding features that customers really care about, they can increase the ASP. They first test marketed the ASP increase with iPhone 7-Plus (was $30 more than previous generation iPhone 6s-Plus); 7-Plus had a superior camera, and more customers opted for that than the cheaper 7, leading to a rise in overall ASP. This time around with iPhone X, the ASP is even higher ($999), and customers are more than willing to pay for the extra features like Face ID, OLED display, etc. My take is that Apple has “cracked the code” of higher ASPs, thus debunking the notion that prices for technology products always fall and iPhones will go the way of the PC industry.

Second, the services segment continues to grow at a healthy rate (20%-plus for the last several quarters). From the most recent transcript: “A few quarters ago, we established a goal of doubling our fiscal 2016 services revenue of $24 billion by the year 2020, and we are well on our way to meeting that goal. In fiscal 2017, we reached $30 billion, making our Services business already the size of a Fortune 100 company.” The implication is that if iPhone sales do suffer in the future for any reason, services could take that slack.

Third, the iPad that was in a steady decline is growing again. In the most recent quarter, iPad saw a “second consecutive quarter of double-digit unit growth.” Fourth, China that was hardly growing is back in growth mode again (revenue was up 12% from a year ago).

Conclusion

There is now hard data that with the launch of iPhone X Apple is indeed in a super cycle. While the last super cycle ended poorly for investors, I believe that Apple has figured out where things went south, and this time it will be different.

Disclosure: I am/we are long AAPL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Red Hat Ceph Storage 3 brings file, iSCSI and container storage

Open source software distributor Red Hat has released version 3 of its Red Hat Ceph Storage software-defined storage.

This adds file access storage, iSCSI block storage and storage deployed through Linux containers to the software-defined storage product, mostly aimed at OpenStack deployments.

The CephFS file system already existed as a “tech preview”, said Gerald Sternagl, business unit manager for Red Hat. This allowed customers to test it, and it has now been released for production workloads.

Sternagl said CephFs has been built from scratch and is a distributed file system. It is based on the use of discrete metadata servers that help coordinate data flows for better parallel operations.

“CephFS can scale across the whole datacentre. It’s easy to add more Ceph storage nodes to get unlimited scalability, potentially into petabytes and beyond,” said Sternagl. 

Use cases envisaged are mostly around OpenStack, through Manila, but Red Hat may provide NFS or SMB access in future, he added.

Ceph’s developer, Inktank, was acquired by Red Hat in April 2014. The software remains open source and is a software-only product based on multiple storage nodes and a technology called Rados (reliable autonomic distributed object store) that lays out and manages data across multiple clusters.

Meanwhile, Red Hat has taken open source iSCSI software and written it into Red Hat Storage to be redundant across multiple nodes.

Ceph already provided block storage through Rados Block Device (RBD), mostly as a means of providing block for OpenStack.

Key use cases for iSCSI are to provide protocol connectivity for existing scenarios, in particular VMware deployments, said Sternagl.

The new version of Ceph also provides storage in containers. Previously, Ceph storage deployments required a minimum of seven hardware nodes, on which different components of the software had to be deployed.

This can now be done in three hardware nodes because the various software components – such as management layer, object storage daemons and metadata servers – can be bundled into containers that can be co-located, whereas previously that wasn’t possible. The key advantage is a hardware saving in a ratio of 3:7.

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Facebook Wants to Teach You How to Spend Money on Facebook

What if mom-and-pop businesses had the same advertising capabilities as billion-dollar corporations with Madison Avenue media agencies at their beck and call? That’s the idea behind Facebook’s Blueprint “e-learning platform.” The company announced on Tuesday that the service is used by more than one million small businesses worldwide.

“We originally built Blueprint for the really sophisticated advertisers,” according to Dan Levy, Facebook’s VP of small business, told Inc. But the company noticed that ad agencies and other specialists weren’t the only users attracted to educational materials. “It’s a pretty big endorsement to us that this is valuable for them,” Levy said. Facebook still conducts in-depth and in-person trainings, but Levy said that Blueprint allows the company to scale its outreach to many more people.

The top five courses that small businesses flock to are “Welcome to Marketing on Facebook,” “Ad Policies for Content Creative and Targeting,” “Brand Best Practices,” “Extend Your Campaign’s Reach with Audience Network,” and “Targeting: Core Audiences.” There’s worldwide appeal: The countries in which Blueprint is most popular are the United States, Brazil, India, Great Britain, Mexico, Indonesia, Canada, Australia, Germany, and the Philippines.

Blueprint is not a philanthropic endeavor for Facebook, of course. In teaching businesss to use the company’s products more effectively, it not-so-tacitly encourages them to increase their advertising spend.

Not that they need much convincing. Facebook may have become a political hot potato, but it’s still a darn good tool for reaching potential customers.

For marketers, Facebook and Instagram “are the stuff of fantasy — grand bazaars on a scale never seen before,” as Burt Helm put it in The New York Times. Helm, who also writes for Inc., showed how Facebook advertising is increasingly the fuel that startups rely on to get their initial customers. “The leaders of more than half a dozen new online retailers all told me they spent the greatest portion of their ad money on Facebook and Instagram,” he added.

During its recent earnings call, Facebook reported that more than 6 million advertisers use the platform, a 20 percent jump since April. The majority of those advertisers are small businesses, a spokesperson said.

Part of what makes Facebook advertising so successful, and thereby makes the company so profitable, is the low barrier to entry. “If you know how to use Facebook, you can use Facebook for business,” Levy said. While the advent of so-called self-service ads allowed Facebook and Google to become the dominant duopoly of digital advertising, a significant portion of those 6 million advertisers need at least a little support. Blueprint is around to provide that extra handholding.

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Russia's 'Fancy Bear' Hackers Exploit a Microsoft Office Flaw—and NYC Terrorism Fears

As dangerous as they may be, the Kremlin-linked hacking group known as APT28, or Fancy Bear, gets points for topicality. Last year, the group hacked the Democratic National Committee and the Clinton campaign with shrewd, politically savvy timing. Now, those same hackers seem to be exploiting last week’s ISIS attack in New York City to advance their espionage tactics again, using a freshly exposed vulnerability in Microsoft’s software.

On Tuesday, researchers at McAfee revealed that they’ve been tracking a new phishing campaign from the Russia-linked hacker team. Security researchers have recently shown that a feature of Microsoft Office known as Dynamic Data Exchange can be exploited to install malware on a victim’s computer when they simply open any Office document. McAfee now says APT28 has used that DDE vulnerability since late October. And while the targets McAfee has detected so far are in Germany and France, the hackers have been fooling victims into clicking with file names that reference US-focused topics: both a US Army exercise in Eastern Europe known as SabreGuardian and last week’s ISIS truck attack that killed eight people on a Manhattan bike path.

Hacker groups using news events as lures is a well-worn tactic, says Raj Samani, chief scientist at McAfee. But he says that he’s struck by the prolific, state-sponsored hacker group’s combination of those news references with a just-released hacking technique. McAfee detected Fancy Bear’s use of Microsoft’s DDE feature going back to October 25th, a little over a week after the security research community first noted that it could be used to deliver malware.

“You’ve got an active group tracking the security industry and incorporating its findings into new campaigns; the time between the issue being reported and seeing this in the wild is pretty short,” Samani says. “It shows a group that’s keeping up to date with both current affairs and security research.”

Microsoft’s DDE feature is designed to allow Office files to include links to other remote files, like hyperlinks between documents. But it can also be used to pull malware onto a victim’s computer when they merely open a document, and then click through an innocuous prompt asking them if they “want to update this document with data from the linked files?”

The APT28 hackers appear to be using that technique to infect anyone who clicks on attachments with names like SabreGuard2017.docx and IsisAttackInNewYork.docx. In combination with the scripting tool PowerShell, they install a piece of reconnaissance malware called Seduploader on victims’ machines. They then use that initial malware to scope out their victim before deciding whether to install a more fully featured piece of spyware—one of two tools known as X-Agent and Sedreco.

According to McAfee, the malware samples, the domains of the command-and-control servers that malware connects to, and the targets of the campaign all point to APT28, a group believed to be working in the service of Russia’s military intelligence agency GRU. That brazen and politically attuned hacking team has been tied to everything from the intrusions into the DNC and Clinton Campaigns to the penetration of the World Anti-Doping Agency to Wi-Fi attacks that used a leaked NSA hacking tool to compromise high value guests across hotels in seven European capitals.

As APT28 exploits the latest Microsoft Office hacking technique in a new campaign, Microsoft itself has said that it has no plans to alter or patch its DDE function; it considers DDE a feature that’s working as intended, not a bug, according to a report from security news site Cyberscoop. Microsoft didn’t immediately respond to WIRED’s request for comment.

McAfee’s Samani says that means the latest APT28 campaign serves as a reminder that even state-sponsored hacking teams don’t necessarily depend on or use only the “zero day” vulnerabilities—secret flaws in software that the product’s developers don’t yet know about—that are often hyped in the security industry. Instead, astute hackers can simply learn about new hacking techniques as they arise, along with the news hooks to lure victims into falling for them.

“They’re keeping up to date with the latest security research that comes out, and when they find these things, they incorporate them into their campaigns,” says Samani. And they’re not above incorporating the latest violent tragedy into their tricks, either.

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Revolut becomes latest UK fintech firm to seek banking license

LONDON (Reuters) – British financial technology firm Revolut said on Wednesday it has applied for a European banking license, as it bids to join a growing number of digital-only banks looking to win away customers from larger, traditional lenders.

Revolut, which has offered a pre-paid cash card since 2015, is one of a number of smaller upstart finance firms hoping that coming regulation and technology can help it break the dominance of bigger banks.

Financial technology firms like Revolut are trying to chip away at traditional banks by offering users slick apps, slashed fees and an instant overview of their finances. From challenger banks to digital currencies like Bitcoin, the British government regards the ‘fintech’ sector as a key source of growth.

Changes coming into force in Britain and across the European Union will see banks forced to open up their closely held customer data to rivals, who will be able to use it to build products and better target clients.

Peers like Britain’s Starling Bank and Monzo and Germany’s N26 have already secured banking licenses ahead of the new rules.

“Even without a banking license, we have attracted over 950,000 users across Europe, many of whom consider Revolut as their primary current account and spending card,” said Nikolay Storonsky, Revolut’s founder and CEO.

The firm’s tagline promises an experience “beyond banking”, but so far it has been unable to offer some of the core services provided by banks, including current accounts, overdrafts, loans and direct debits.

It expects to receive a license effective in the first half of 2018 and to start offering these services in select markets straightaway.

It said it has applied for its license through the Lithuanian central bank and has sufficient capital in place.

Current accounts and credit will initially be available to users in Lithuania, before being rolled out to Estonia and Latvia and, as soon as possible, Britain. Next in line are France, Germany and Italy and eventually the rest of the European Union, the firm said.

Fintech lender Cashplus said last week it was considering applying for a UK banking license, while telecoms giant Orange has launched its own bank in France in a bid to steal established lenders’ market share by capitalizing on the rise of smartphones.

But incumbent banks are stepping up investment in their own digital platforms too. Last month, HSBC (HSBA.L) became the first to launch an app that allows customers to manage accounts with multiple banks in one place and offers them a similar financial overview as the app-only challengers.

Reporting by Emma Rumney; Editing by Hugh Lawson

Our Standards:The Thomson Reuters Trust Principles.

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Donald Trump's Twitter Hiatus Tops This Week's Internet News Roundup

Last week was a whirlwind in the media. The owner of Gothamist and DNAinfo shuttered them both. ESPN issued new guidelines for what their employees can say on Twitter and other social platforms. And Disney declined to give the Los Angeles Times early screenings of its films following the paper’s coverage of the company’s dealings with the city of Anaheim. But that’s just what was happening in the traditional media world. What about social media? Start scrolling, dear reader.

He’s Not There

What Happened: For 11 whole minutes last week, President Trump’s Twitter account went down. Reactions were swift and plentiful.

What Really Happened: So, last Thursday, out of nowhere, this happened:

Almost as soon as it was gone, it was back. Then the conspiracy theories started, some more serious than others.

Many, of course, were happy about Trump’s brief absence from Twitter.

But what actually happened, anyway?

Well, that certainly seems possible?

And then the plot thickened.

As the media started picking up on the story, the world waited for Trump’s inevitable response. He didn’t disappoint:

The Takeaway: For some, Trump’s Twitter hiatus was so brief it almost didn’t seem real.

That’s Not What Fossil Fuels Are For

What Happened: While no one should doubt that fossil fuels are capable of great things, there are limits on what they can reasonably do. Do you hear that, Rick Perry?

What Really Happened: Remember Rick Perry? The former Republican presidential candidate who, in 2011, forgot the three government agencies that he wanted to scrap and then, in 2017, became the head of one of those agencies? Well, speaking at an energy policy event this week in his official role as the Secretary of Energy, he had something very surprising to say:

Wait. What? Did Rick Perry literally just say that fossil fuels are necessary so that there can be electricity that powers lights, which will then shine righteousness on sexual assault? Is that a real thing that was actually said? Twitter was incredulous about the comment.

As the comment started being shared across the media—FYI, not everyone thought he was wrong—one environmental reporter decided to unpack what he’d said. Emily Atkin at The New Republic, step right up.

The more you know, as they say. Oh, and then there’s this ironic fact, as well:

The Takeaway: Speaking of responses from New Republic journalists, another tried to put Perry’s comments into a somewhat wider, snarkier, perspective:

He’s Not There (Reprise)

What Happened: The man behind the curtain, having noticed that people were paying attention after all, decided to make a career change and offer a half-hearted mea culpa.

What Really Happened: Robert Leroy Mercer wasn’t necessarily a name that was well-known even a few months ago, but it should have been. A former computer researcher turned CEO of hedge fund Renaissance Technologies, he was one of the main funders of a few things you might have heard of, like the Brexit campaign in the United Kingdom, Donald Trump’s election effort, and Breitbart. (You can read more about him here, if you’re curious.) Given that his causes are ascending right now, it was surprising to see this happen on Thursday.

Or, to put it another way…

Judging by the media coverage, the move was certainly unexpected, which led to many people wondering the obvious question: Just what could have been behind it? Twitter had some ideas, because of course it did.

Of course, Mercer might have had something else on his mind…

But for those who thought that this meant an end to the Mercer influence in politics, that was perhaps a bit misguided.

So there’s that.

The Takeaway: If nothing else, at least people can appreciate that Mercer stepped away from his position in a subtly ideological manner.

This Is Not the George Papadopoulos You’re Looking For

What Happened: Apparently, it’s not great for your Twitter mentions when you happen to share the same name as someone in the news. Who knew?

What Really Happened: I hope everyone had a good Indictment Day on Monday, when special counsel Robert Mueller handed down the first evidence that he’s been hard at work with the investigating over the last few weeks. As surprising as it was to see Rick Gates and Paul Manafort get charged, the real eye-opener that some campaign advisor called George Papadopoulos had already pled guilty months. The intrigue! It was straight out of the Shonda Rhimes playbook, and of course everyone wanted to know everything they could about this new character (if only because maybe he wore a wire in the White House, which is awesome).

There’s only one problem: Turns out, there is more than one George Papadopoulos.

Indeed, technically there are a lot of George Papadopoulouses, if you know where to look.

As you would expect, Twitter was extremely understanding about the mixup—or, you know, maybe kind of.

Still, at least he was taking it well.

Of course, other people know what it’s like to be the namesake of someone famous.

All of which leads us to wonder this one simple question: Is there someone else called Donald Trump out there in the world? And if so: Do you think he’s on Twitter?

The Takeaway: Before we leave the subject entirely: George, do you happen to have any words of advice to the other George P? You know the one who’s already said he was guilty of lying to the FBI?

Trick, or Treat?

What Happened: Just when you thought it couldn’t get worse with people using their kids—real and imagined—in political arguments on social media, it gets worse. And on Halloween, as well!

What Really Happened: Let’s close this week out with a simple morality play. It was Halloween last week, and you know what that means: trick-or-treating! That night when we share candy with kids in costumes because it’s always good to let kids have lots of sugar late at night. But one man—Donald Trump Jr.—tried to use the holiday for his own purposes.

Let’s see what everyone thought of that idea, shall we?

Even the media piled on, including Stephen Colbert using his television platform to offer a little lesson to the president’s son.

The Takeaway: Thankfully, Don Jr. took it all in the spirit it was intended.

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Toyota seeks more investments in Israeli auto tech, robotics

TEL AVIV (Reuters) – Japan’s Toyota Motor Corp is seeking more investments in Israeli robotics and vehicle technologies after its venture arm led a $14 million investment in Intuition Robotics in July.

A logo of Toyota Motor Corp is seen at the company’s showroom in Tokyo, Japan June 14, 2016. REUTERS/Toru Hanai/File Photo

The startup, which makes robots for the elderly, was the first Israeli investment for Toyota AI Ventures, a new $100 million fund investing in artificial intelligence, robotics, autonomous mobility and data and cloud computing.

“We will see more involvement of Toyota in the Israeli market in the future,” said Jim Adler, managing director of California-based Toyota AI Ventures, which is part of the $1 billion Toyota Research Institute.

“There’s more in the pipeline,” he told Reuters during a visit to Israel, adding that technologies dealing with perception and prediction and planning were of particular interest to Toyota.

Perception technology enables a self-driving vehicle to understand the world around it while prediction and planning can help a car interpret situations such as whether a child at an intersection might try to cross at a red light.

“There’s a tremendous amount of innovation happening in Israel as cars become more produced by data,” said Adler, who is in the country meeting companies whose technologies interest Toyota.

Israel is a growing center for automotive technology. Earlier this year Intel Corp bought autonomous vehicle firm Mobileye – one of Israel’s biggest tech companies – for $15.3 billion.

On Friday Germany’s Continental AG said it was buying Israel’s Argus Cyber Security, whose technology guards connected cars against hacking.

Toyota AI Ventures has made five investments and expects to invest in at least 20 companies worldwide.

Regarding its investment in Intuition Robotics – which plans to begin trials of its robots with older adults in their homes early next year – Adler said there were many common features between robotics and autonomous vehicles, which he referred to as “big robots with wheels”.

Japan’s population is aging, with 40 percent expected to be over 65 in 20 years, he said, and there will be demand for technologies that help the elderly stay in their homes, rather than have to move to assisted-living facilities.

“We think Toyota will have a role there,” he said.

Editing by Keith Weir

Our Standards:The Thomson Reuters Trust Principles.

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A Beaten-Down Small-Cap With No Debt, A Growing Business, And 270% Upside

The Company

WidePoint Corp. (NYSEMKT:WYY) is a US company founded in 1997 and headquartered in McLean, Virginia, that grew through acquisitions and mergers of IT consulting firms. It currently has about 300 full-time employees, plus consultants and temporary employees, runs offices in Columbus OH, Fairfax VA, Hampton VA, Fayetteville NC, Dublin, Reading UK, and the Netherlands, and five data centers located in Ohio, North Carolina and Virginia. It is specialized in technology-based product and service management solutions in the fields of wireless mobility management, cybersecurity, and consulting services. Specifically, it offers mobile, telecom solutions and expense management, identity services and Cert-on-Device (a cloud-based service that provides secure digital certificates to all types of mobile devices in order to enhance the information security assurance), analytics and management services, and communication integrated platforms to both the public and private sectors.

The Market

WidePoint operates in a fast growing market. Most of its customers are located in North America, where the service IT market is growing 15%+ per year (see research by Gartner.com), and Europe (Ireland, UK and Holland generate 6% of total revenue, and the share is falling). Some major drivers of growth have been identified by WidePoint as:

  • Mobile workforce expanding faster than in any prior technology cycle
  • Mobile devices forcing IT departments to support multiple, disparate platforms
  • Identity management & assurance has become critical to prevent ongoing network breaches

While the company’s private clients (among them JPMorgan Chase (NYSE:JPM), U.S. Bancorp (NYSE:USB), Cardinal Health (NYSE:CAH), Advanta, Carnegie Mellon Univ., Delta, FedEx (NYSE:FDX)) belong to a multitude of industries (Financial, Healthcare, Education, Retail, Transportation, etc.), WidePoint’s main customers are federal agencies and their contractors. WidePoint sometimes also acts as a subcontractor to large IT corporations (such as AT&T (NYSE:T) which, by the way, recently won a large contract with the US Army). The company’s focus on the public sector (more than 80% of total revenues) is unlikely to be reduced in the future. WidePoint has not been very successful in penetrating large private companies.

The public sector IT market is growing slowly but steadily. Network security concerns above all – a segment where the company is strong – are growing by the day. The Trump administration has asked for $95.7 billion for federal IT in 2018, up from $94.1 billion this year and $90 billion in 2016, most of it for the Department of Defense (source). The overall increase comes as the Office of Management and Budget details plans to move agencies off legacy IT systems that account for more and more of agency IT budgets.

From FY 2015 through FY 2018, government-wide legacy spending as a percentage of total IT spending rose slightly from 68 percent to 70.3 percent. Aging legacy systems may pose efficiency and mission risk issues, such as ever-rising costs to maintain and an inability to meet current or expected mission requirements,” OMB wrote in the IT chapter of the budget request. “Legacy systems may also operate with known security vulnerabilities that are either technically difficult or prohibitively expensive to address and thus may hinder agencies’ ability to comply with critical statutory and policy cybersecurity requirements.”

Government Contracts

WidePoint’s government client base is largely located in the Mid-Atlantic region of the U.S. Most contracts last in principle up to five years but are subject to annual renewal (normally not an issue). WidePoint currently holds major prime contracts with – among others – the Department of Defense, the Department of Homeland Security (“DHS”), the Department of Health and Human Services, the Transportation Security Administration, the Washington Headquarters Services, the U.S. Customs and Border Protection, the Centers for Disease Control, the Department of Justice, the FBI, as well as many government contractors. Recently, the company added some new important customers, such as the US Coast Guard and (as announced on November 1) the Federal Emergency Management Agency, and now provides TLM support to all of the major components of DHS.

Competition

Due to its diverse market capabilities, WidePoint has competitors in many different fields, including “publicly and privately held firms, large accounting and consulting firms, systems consulting and implementation firms, application software firms, service groups of computer equipment companies, general management consulting firms, offshore outsourcing companies”. Key competitors currently include Tangoe, Inc. (NASDAQ:TNGO), Calero, KEYW Holding Corporation (KEYW), VeriSign (NASDAQ:VRSN), IdenTrust, SureID, DigiCert, and Entrust, and in cybersecurity as well as consulting, Lockheed Martin Corporation (NYSE:LMT) and Northrop Grumman Corporation (NYSE:NOC).

Competitors often offer more scale, which in some instances enables them to significantly discount their services in exchange for revenues in other areas or at later dates. Pricing pressure is endemic in the industry. Because of WidePoint’s small dimension, significant fixed operating costs structurally lower its competitiveness and profitability potential. Fixed costs may be difficult to adjust in response to unanticipated fluctuations in revenues, but the company is doing its best to manage resources such as personnel and facilities (not much can be done about depreciation) in a flexible way.

Although operating in a highly competitive sector with rapidly evolving technologies and no barriers to entry, WidePoint has arguably demonstrated through the years an ability to dynamically upgrade and preserve its “technological advantages” through a decent level of R&D expenditure, product innovation, acquisitions, and attracting and training highly skilled professionals such as engineers, scientists, analysts, technicians, and support specialists. Its annual expenditure for internal software development is about $0.6 million. Current development activities are focused on the integration of WidePoint software based platforms, enhancements to improve the delivery of information technology services delivered through these platforms and Cert-on-Device. The company’s technology is “production available, scalable, and affordable” – in one word competitive – and so should remain for the foreseeable future.

Federal agencies have a lot of inertia. They are slow to move but once they award a service contract, they tend to perpetuate it. Incumbent service suppliers develop big competitive advantages over potential entrants for they become “insiders”, develop relationships, have access to immaterial knowledge (including the likely terms of renewal of service contracts) while not having to face learning entry costs. As the company states in a recent presentation: “Many of our professional staff work on-site or work in close proximity with our customers and we develop close customer relationships.” Indeed. Thus WidePoint’s business – especially with the US public sector – is rather stable, and revenues are rather predictable. However, due to the relative size of certain clients and contracts – the Department of Homeland Security provided 61% of total revenues in 2016 and its share is growing – the loss of any single significant customer can adversely affect year-end results of operations.

An Improved Governance

After years of disappointing results, WidePoint suffered a period of governance instability that was well described by SA author One Other Fool (you can read the details there). As a result, the company’s main shareholder (15.4%), Nokomis Capital, began to have an active role, and was awarded two seats on the Board. Although not a panacea, this has improved shareholders’ supervision on management actions. Lately, WidePoint completed its transition with Jin Kang, 53, now “firmly in place and fully in charge” as Chief Executive Officer and President of WidePoint Corporation. The old generation of managers – Steve Komar, Executive Chairman of the Board of Directors and former CEO, and Jim McCubbin, Executive Vice President and CFO – resigned effective October 31, 2017, after guiding the company for 20 years.

Management Ownership

Managers have been adding small amounts to their stock of shares recently; their overall ownership is not bad.

Financial Situation

WidePoint has no long-term debt. At June 30, 2017, net working capital was approximately $3.1 million as compared to $5.0 million at December 31, 2016. However, net losses amounted to roughly $2.5 million in the first half of this year, up from $1.5 million in the first half of 2016 (another $0.3 million was spent on an acquisition). WidePoint Corp.’s adjusted earnings per share data for the three months ended June 2017 was -$0.020, the same as the data for the trailing 10 years ended June 2017. The burning rate was high, and given the depressed price of the stock, there’s no margin of error left. To be clear, WidePoint’ s Altman Z-Score is 0.99, indicating it is in Distress Zones, implying bankruptcy possibility in the next two years.

WidePoint has a history of losses. Net losses amounted to approximately $4.1 million, $5.5 million, $8.4 million, and $1.7 million during the years ended December 31, 2016, 2015, 2014 and 2013, respectively. As of June 30, 2017, accumulated deficit was $68 million. Thus investing 10 years ago in WidePoint’s stock would have yielded -51% (the S&P 500 yielded +82%). And it never paid dividends. This negative past increases the dilution risk, should the stock appreciate, or if revenues disappoint again, or there is a need to finance an acquisition: companies such as WidePoint cannot help but grow in dimension and technological capability.

One positive legacy of its disappointing past is that, as of June 30, 2017, the company had approximately $33.4 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes, and approximately $30.0 million available to offset future taxable income for state income tax purposes. These NOL carry forwards expire between 2020 and 2036. Thus the ability to utilize these deferred tax assets depends upon its ability to generate future taxable income.

Outlook and Opportunity

The company has launched at the beginning of this year a fixed-cost reduction program, targeting especially general and administrative expenses, that is beginning to have a positive impact on the balance sheet. Facilities, offices, and disaster recovery sites are being consolidated, and staff and operational personnel are being cut by reducing technology platforms and combining redundant help desk support across functions. More worrisome, sales resources are being reduced too, as well as product and software development expenditures. This may show some “desperation” but as a consequence, third-quarter losses are expected to be minimal.

On the revenue side, WidePoint is attempting new, less aggressive pricing strategies with its own clients, while aggressively targeting competitors’ customers with lower introductory pricing to garner increased market share, and emphasizing higher margin solutions. I don’t know whether this short-term profit-boosting strategy will succeed, without hampering the much needed growth in scale. I estimate WidePoint’s annual revenue in 2017 to be broadly in the $84-86 million range ($78.4 million in 2016). Cost of revenues and operating expenses should reach $84-87 million: net loss should be $1.5 million or less, which implies a clearly profitable Q4.

The new contracts with the Coast Guard and FEMA could realistically boost revenue by at least $6-10 million in 2018 alone, although they will also raise operating expenditures. Furthermore, it is now becoming clear that penetrating the public sector takes a long, long time and translates into profits very slowly. For example Todd Dzyak, CEO of WidePoint Integrated Solutions, declared, “We look forward to expanding our managed services support and to introducing our enhanced TM2 Framework to FEMA,” hinting at how penetration proceeds in steps and takes time. But old contracts with other federal agencies are slowly producing a growing business stream.

Risks

As I suggested, WidePoint is an inherently risky bet. It’s a small cap with a history of losses and limited equity, operating in a highly competitive industry without the economies of scale of some competitors, and with a concentrated customer base. WidePoint has been unable in the past to raise prices to profitable levels. Thus, notwithstanding strong revenue growth, it still has to prove it can turn growth into consistent profits. If pricing pressure continues to adversely affect the bottom line, WidePoint could drag itself for a few years more until an adverse shock or a gradual decline in its technological capability pushes the company toward bankruptcy. A dilution of shareholders in 2018 is also possible if expected revenues and profits are slow in coming.

Having said that, it seems to me that these fears are largely based on a backward-looking perspective. Recent events have substantially de-risked the company’s medium-term outlook. Even in a pessimistic and disappointing scenario, where the revenue growth does not generate all of the expected profits, I have no doubts that 2018 will be in the black, giving the company (and the stock) a breathing space. In the IT services industry, M&As are frequent and as the balance sheet improves, WidePoint could become a target for a buyout. Such consolidation would solve the scale problem and reward shareholders.

Conclusions and Takeaway

Clearly, a turnaround is developing, based on a cost-cut strategy and some major recent contract awards. These awards are not a coincidence but rather the product of a slow, long-term strategy that is now bearing fruit. In 2018, net profit should reach $3-5 million, or $5c. per share (P/E ? 10). Current market capitalization, about $45 million, does not reflect the company’s stockholders’ equity (net assets) of about $28 million and current revenue trends. More than inherent risks, it is past history that weighs on investor confidence, creating an opportunity. The next (Q3) earning release in mid-November and an updated management guidance for 2018 should boost this unloved stock – currently trading at $0.54 – by 35% in the short term and by 90% by mid-February. I expect this stock to price $1.30/1.55 a year from now (+270%), although in a best-case scenario, it could reach $2-2.20 (+380%). As usual, risk and reward go hand in hand: only fools put all their eggs in one basket.

Disclosure: I am/we are long WYY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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Omega Healthcare Investors: Sometimes Short-Term Bad Can Be Long-Term Good

This article is about Omega Healthcare Investors (NYSE:OHI), a REIT, and why it’s a buy for the income investor long term, even when OHI has a short-term problem with one of its operators. I believe that the management of OHI is good and has already outlined the steps to be taken to get the Orianna properties to new operators with reduced rents.

Omega Healthcare is one of the largest operators of skilled nursing care properties and assisted living properties. OHI is a full position at 6.0% in The Good Business Portfolio. OHI’s position will be left to grow over time and added to whenever a dip like this happens. The company has at many times been under pressure and gotten down to $28 range, and each time it has bounced back, so this is another chance to buy into a good company with a very high yield.

When I scanned the five-year chart, Omega Healthcare Investors has a poor chart going up and to the right for 2013-2014, then down slowly for three years ending behind the market. In 2013, OHI had a good year when the market was up 27%; the company came in at a 30% increase.

Chart

OHI data by YCharts

Fundamentals of Omega Healthcare Investors will be reviewed in the following topics below:

  • The Good Business Portfolio Guidelines
  • Total Return And Yearly Dividend
  • Last Quarter’s Earnings
  • Company Business
  • Takeaways
  • Recent Portfolio Changes

I use a set of guidelines that I codified over the last few years to review the companies in The Good Business Portfolio (my portfolio) and other companies that I am taking a look at. For a complete set of the guidelines, please see my article “The Good Business Portfolio: Update To Guidelines And July 2016 Performance Review“. These guidelines provide me with a balanced portfolio of income, defensive, total return and growing companies that hopefully keeps me ahead of the Dow average.

Good Business Portfolio Guidelines

Omega Healthcare Investors passes 9 of 11 Good Business Portfolio Guideline, a fair score (a good score is 10 or 11). These guidelines are only used to filter companies to be considered in the portfolio. Some of the points brought out by the guidelines are shown below:

  1. Omega Healthcare Investors does meet my dividend guideline of having increased dividends for seven of the last ten years and having a minimum of 1% yield, with 10 years of increasing dividends and a 9.3% yield. Omega Healthcare Investors is therefore a good choice for the dividend income investor. The average five-year payout ratio is high at 82% because of its REIT designation. After paying the dividend, this leaves cash remaining for investment in expanding the business by buying bolt-on properties to the 1,000 it already owns or leases.
  2. I have a capitalization guideline where the capitalization must be greater than $7 billion. OHI fails this guideline by a small amount. OHI is a mid-cap company with a capitalization of $6.2 billion. Omega Healthcare Investors’ 2017 projected total yearly AFFO flow at $646 million is good, allowing the company to have the means for growth and increase dividends.
  3. I also require the CAGR going forward to be able to cover my yearly expenses. My dividends provide 3.2% of the portfolio as income, and I need 1.9% more for a yearly distribution of 5.1%. The one-year forward CAGR of 7.0% meets my guideline requirement. This good future growth for Omega Healthcare Investors can continue its uptrend benefiting from the continued growth of the senior citizen population.
  4. My total return guideline is that total return must be greater than the Dow’s total return over my test period. OHI fails this guideline since the total return is 64.33%, less than the Dow’s total return of 78.53%. Looking back, $10,000 invested five years ago would now be worth over $18,700 today. The total return in the good year of 2013 was 29.6% compared to the Dow gain of 27%, a small beat. This makes Omega Healthcare Investors a fair investment for the total return investor that has future growth as the senior citizen sector continues to grow. As an added plus we have President Trump cutting corporate taxes (both domestic and foreign) which will increase earnings slightly.
  5. One of my guidelines is that the S&P rating must be three stars or better. OHI’s S&P CFRA rating is three stars or hold with a recent calculated target price to $35.4, passing the guideline. OHI’s price is presently 25% below the target. It is under the target price at present and has a low price to AFFO of 10.8, making it a good buy at this entry point if you are a long-term investor that wants income with an above-average dividend yield.
  6. One of my guidelines is would I buy the whole company if I could. The answer is yes. The total return is weak, but an above-average yield makes OHI a good business to own for income with moderate growth long term. The Good Business Portfolio likes to embrace all kinds of investment styles but concentrates on buying businesses that can be understood, makes a fair profit, invests profits back into the business, and also generates a fair income stream. Most of all what makes OHI interesting is the potential long-term growth, as more skilled nursing care facilities are required and the income for the income investors is great.

Total Return And Yearly Dividend

The Good Business Portfolio Guidelines are just a screen to start with and not absolute rules. When I look at a company, the total return is a key parameter to see if it fits the objective of the Good Business Portfolio. Omega Healthcare Investors misses the Dow baseline in my 56.0-month test compared to the Dow average. I chose the 56.0-month test period (starting January 1, 2013, and ending to date) because it includes the great year of 2013, and other years that had fair and bad performance. The fair total return of 64.23% makes Omega Healthcare Investors a fair investment for the total return investor who also wants a steady increasing income. OHI has an above-average dividend yield of 9.3% and has had increases for the past 21 quarters, making OHI also a good choice for the dividend growth investor. The dividend has recently been increased to $0.65/Qtr., from $0.64 or a 1.6% increase for the quarter.

Dow’s 56.0-month total return baseline is 78.53%.

Company Name

56.0-month total return

Difference from Dow baseline

Yearly dividend percentage

Omega Healthcare Investors

+64.23%

-14.3%

9.3%

Last Quarter’s Earnings

For the last quarter, on October 30, 2017, Omega Healthcare Investors reported AFFO of $0.79 that missed expectations by $0.06 and compared to last year at $0.82. Total revenue was higher at $194 million, up 4.4% year over year and missed expectations by $44 million. This was a poor report with the bottom line missing expectations and the top line increasing. The next earnings report will be out in late January 2018 and AFFO is expected to be $0.82 compared to last year at $0.82. The company guided AFFO for the year to $3.27-3.38, but this assumes it will be able to fix the problem with one of its operators. Earnings will most likely be very volatile over the next six months.

Business Overview

Omega Healthcare Investors is one of the largest skilled nursing care and assisted living facilities REITs in the United States.

As per Reuters:

“Omega Healthcare Investors is a self-administered real estate investment trust (REIT). The Company maintains a portfolio of long-term healthcare facilities and mortgages on healthcare facilities located in the United States and the United Kingdom. It operates through the segment, which consists of investments in healthcare-related real estate properties. It provides lease or mortgage financing to qualified operators of skilled nursing facilities (SNFs) and assisted living facilities (ALFs), independent living facilities, rehabilitation and acute care facilities. Its portfolio consists of long-term leases and mortgage agreements. As of December 31, 2016, its portfolio of investments included 996 healthcare facilities located in 42 states and the United Kingdom and operated by 79 third-party operators. As of December 31, 2016, the Company’s portfolio consisted of 809 SNFs, 101 ALFs, 16 specialty facilities, one medical office building, fixed rate mortgages on 44 SNFs and two ALFs.”

The graphic below shows the type of facilities required today. With seniors remaining active into their 80s, 90s and beyond, skilled nursing facilities continue to evolve to meet the higher expectations new generations of seniors and their families want with regards to amenities, décor and care.

Source: Omega Healthcare Investors Web Site

Overall, Omega Healthcare Investors is a good business with a 7% CAGR projected growth as more skilled nursing care facilities are needed going forward. The good AFFO provides OHI the capability to continue its growth by increasing revenue as it buys bolt-on properties and increases dividends.

Also as a tailwind, we have President Trump wanting to lower corporate taxes on income. As the corporate tax rate is lowered, earnings of OHI should increase slightly.

The economy is showing moderate growth right now (about 2.9%), and the Fed has raised rates in June 2017, with future rate increases dependent on the United States economy and inflation. The Fed projects for one more increase in 2017. I feel the Fed is going slowly; it doesn’t want to trigger a slowdown in the economy.

From October 30, 2017, earnings call, Taylor Pickett (Chief Executive Officer) said:

Adjusted FFO for the third quarter is $0.79 per share. Funds available for distribution, FAD for the quarter is $0.73 per share. The reduction in adjusted FFO and FAD is primarily related to converting the Orianna portfolio to cash basis accounting with no adjusted FFO or FAD recognized for Orianna in the third quarter.

During the third quarter, we cooperatively completed the transition of Orianna’s Texas facilities to another Omega operator, and we completed the sale of the Northwest facilities to two buyers. Unfortunately, the remaining portfolio continues to underperform and Orianna continues to apply free cash flow to pay down past due vendors and other obligations.

We are in active discussions with Orianna’s owners and consultants regarding the potential transition and/or sale of certain assets versus a federal or state court restructure. We are hopeful, we can develop an out-of-court plan, which if successful, would likely result in cash rents of $32 million to $38 million per year, as compared to the current annual contractual rent of $46 million.

“We remain confident in our ability to pay our dividend, increasing our quarterly common dividend by $0.01 to $0.65 per share. We’ve now increased the dividend 21 consecutive quarters. Our dividend payout ratio remains conservative at 82% of adjusted FFO and 89% of FAD, and we expect these percentages will improve as the Orianna facilities return to paying rent. Our revised 2017 guidance reflects the impact of Orianna’s cash accounting and our anticipation that no cash were received for the balance of the year. “

This shows the feelings of the top management for continued growth of the business and shareholder returns and the action being taken to fix the problem with Orianna.

From October 30, 2017, earnings call Daniel Booth (Chief Operating Officer), said:

“Turning to new investments. During the third quarter of 2017, Omega completed two new investments totaling $202 million, plus an additional $36 million of capital expenditures. Specifically, Omega completed $190 million purchase lease transaction for 15 skilled nursing facilities in Indiana and as part of that same transaction simultaneously completed a $9.4 million loan for the purchase of the leasehold interest in one skilled nursing facility with an existing Omega operator.”

This shows that OHI is still growing even with an operator in trouble.

Takeaways

Omega Healthcare Investors is a great investment choice for the long-term income investor with its high yield and a fair choice for the total return investor. I take this downturn as a long-term opportunity to get a great income stream at a bargain price. Omega Healthcare Investors is 6.0% of The Good Business Portfolio and will be held as we watch it grow over time. If you want a growing income, OHI may be the right investment for you, but it will be volatile for the next six months and you should be a long-term investor.

Recent Portfolio Changes

  • Increased the position of Omega Healthcare Investors to 6.0% of the portfolio. I wanted a little more income and to take advantage of the recent dip in price.
  • Recently, on October, 16 trimmed Boeing (BA) from 11.3% of the portfolio to 11.0%. A great company, but you have to be diversified. The Paris Air Show was great for Boeing, and it easily beat Airbus (OTCPK:EADSY) in orders by a mile.
  • Wrote some L Brands (LB) November 17 strike 42.5 calls on the part of the holding. If the calls remain in the money near exercise time, they will be moved up and out.
  • Increased the position of L Brands to 3.2% of the portfolio; I believe the downturn in LB is well overdone.
  • Increased position of GE (NYSE:GE) to 4% of the portfolio, a full position. GE has now become a value and income play.
  • Sold the Harley-Davidson (HOG) position from the portfolio and will watch it see if President Trump cuts corporate taxes or brings foreign profits back at a low tax rate. This sell gets rid of an underperformer and makes room for a company with more present growth.
  • Added a starter position of 3M (MMM) at 0.5% of the portfolio. It has a good steady dividend history, a dividend king with 58 years of increasing dividends, and great total return. Please see my article “3M: Dividend King With Great Total Return“.

The Good Business Portfolio generally trims a position when it gets above 8% of the portfolio. The four top positions in The Good Business Portfolio: Johnson & Johnson (JNJ) 8.8% of the portfolio, Altria Group (MO) 6.8%, Home Depot (HD) 8.6%, and Boeing 11.0% of the portfolio; therefore, BA, JNJ, and Home Depot are now in trim position with Altria getting close.

Boeing is going to be pressed to 11% of the portfolio because of it being cash positive on 787 deferred plane costs at $316 million in the first quarter, an increase from the fourth quarter. The second quarter saw deferred costs on the 787 go down $530 million, a big jump from the first quarter. The second-quarter earnings were fantastic with Boeing beating the estimate by $0.25 at $2.55. The third-quarter earnings were $2.72, beating expectations by $0.06 with revenue increasing 1.7% year over year, another good report. Recently S&P Capital IQ raised its one-year target to $272.

JNJ will be pressed to 9% of the portfolio because it’s so defensive in this post-Brexit world. Earnings in the last quarter beat on the top and bottom line, and Mr. Market did like the growth going forward. JNJ is not a trading stock but a hold forever; it is now a strong buy as the healthcare sector remains under pressure.

For the total Good Business Portfolio, please see my article on The Good Business Portfolio: 2017 2nd Quarter Earnings And Performance Review for the complete portfolio list and performance. Become a real-time follower, and you will get each quarter’s performance after the earnings season is over.

I have written individual articles on JNJ, EOS, GE, IR, MO, BA, PEP, AMT, PM, LB, OHI, DLR and HD that are in The Good Business Portfolio and other companies being evaluated by the portfolio. If you have an interest, please look for them in my list of previous articles.

Of course, this is not a recommendation to buy or sell, and you should always do your own research and talk to your financial advisor before any purchase or sale. This is how I manage my IRA retirement account, and the opinions on the companies are my own.

Disclosure: I am/we are long BA, JNJ, HD, OHI, MO, IR, DLR, GE, PM, LB, MMM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Equifax clears executives who sold shares after hack

(Reuters) – Equifax Inc (EFX.N) said on Friday four of its executives who sold shares before the credit-reporting firm disclosed a massive data breach that wiped out billions from its market value were not aware of the incident when they made the trades.

FILE PHOTO: Credit reporting company Equifax Inc. corporate offices are pictured in Atlanta, Georgia, U.S., September 8, 2017. REUTERS/Tami Chappell/File Photo

A special committee set up by Equifax’s board to investigate the trades concluded that no insider trading took place and that pre-clearance for the trades was appropriately obtained. (reut.rs/2habhk9)

The company’s shares were up 0.2 percent at $109.10 on Friday at midday, around 24 percent lower than on Sept. 7 when Equifax disclosed that cyber criminals had breached its systems and accessed sensitive information on 145.5 million consumers.

The shares slumped as much as 37 percent in the days after the disclosure.

Atlanta-based Equifax had been aware of the breach since July 29, days before some of its senior executives, including its chief financial officer, sold $1.8 million in shares.

After an investigation that included 62 interviews and a review of over 55,000 documents, including emails, text messages, phone logs, and other records, Equifax said the executives had no knowledge of the breach when they sold the stock.

“The conclusion that the Company executives in question traded appropriately is an extremely important finding and very reassuring,” non-executive Chairman Mark Feidler said in a statement.

Former Equifax Chief Executive Officer Richard Smith, who stepped down in September and agreed to forgo his annual bonus, told lawmakers last month that the executives would not have known of the breach because suspicious incidents are detected every day at the firm and take days or weeks to confirm.

The U.S. Justice Department is conducting its own criminal investigation into the share sales.

The hack, among the largest ever recorded, exposed information that included names, birthdays, addresses and Social Security and driver’s license numbers.

It has also prompted investigations by multiple federal and state agencies as well as scores of class action lawsuits.

The exact financial toll on Equifax is still unknown, and as of early Friday, the company said it still had not set a date to release its third quarter financial results. If the company does not release the results by Nov. 9, it will have to seek an extension from the U.S. Securities and Exchange Commission, which gives large companies 40 days after the close of a quarter to report their financials to investors.

Equifax is also still searching for a replacement for former CEO Smith.

Credit monitoring services such as Equifax collect vast amounts of financial information from consumers, working with banks and other lenders, for example, to track the creditworthiness of individuals.

Reporting by John McCrank in New York and Aparajita Saxena in Bengaluru; Editing by Saumyadeb Chakrabarty and Frances Kerry

Our Standards:The Thomson Reuters Trust Principles.

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Tens of Millions of Americans Want an Apple iPhone X for the Holidays

Americans of all ages hope to get their hands on the iPhone X this holiday season.

A whopping 20% of American adults have placed Apple’s iPhone X atop their holiday smartphone wishlists, rewards provider Ebates revealed in a survey released this week. Among teens who said they want a smartphone this year, 35% chose the iPhone X. Collectively, tens of millions of people hoping to get a smartphone this year have their sights set on the iPhone X.

However, Ebates, which worked with researcher Propeller Insights in its survey of more than 1,000 adults and 500 teens, suggested the iPhone X has some competition. Namely, 38% of adults said they’d prefer the Samsung Galaxy S8, and 28% of teens said the same. Apple’s iPhone 8 Plus was atop 23% of adult smartphone wish lists, and the iPhone 8 attracted 22% of would-be adult smartphone buyers. A quarter of teens would like the iPhone 8 Plus and 35% say they’d like to get an iPhone 8.

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Apple’s AAPL iPhone X hits store shelves on Friday. The smartphone is the most expensive iPhone Apple has ever released at a starting price of $999. However, for that price, users are getting a dramatically redesigned handset with a screen that nearly entirely covers its front panel, a Face ID facial-scanning feature, and wireless charging.

There has been some debate over the extent of iPhone X demand. Some market analysts have wondered whether the price will drive customers away. Others have suggested that Apple’s pricing isn’t a problem and the company will attract customers far and wide. GBH Insights analyst Daniel Ives believes Apple could attract tens of millions of customers this year.

Apple started offering the iPhone X on pre-order last week, and its available units sold out in just minutes. Carriers similarly sold out quickly, though some iPhone X models were still available well into the day on Friday. Apple itself has not announced actual sales or pre-order figures, but called early pre-orders “off the charts.”

It’s unclear from the Ebates study why some adults might prefer the Galaxy Note 8 or iPhone 8 over the iPhone X. It is worth noting, however, that those handsets are readily available at stores and cost less than Apple’s top-of-the-line smartphone.

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Broadcom redomiciling to U.S. from Singapore

WASHINGTON (Reuters) – Chipmaker Broadcom Ltd (AVGO.O) plans to redomicile to the United States from Singapore, President Donald Trump said on Thursday at a White House news conference where the company’s chief executive cited Republican tax efforts.

U.S. President Donald Trump delivers remarks about the job market in the Oval Office of the White House in Washington, U.S. November 2, 2017. REUTERS/Carlos Barria

Broadcom Chief Executive Officer Hock Tan told reporters: “America is again the best place to lead a business with a global footprint. Thanks to you Mr. President, business conditions have steadily improved.”

The company later confirmed the plan in a statement that quoted Tan as saying: ”We expect the tax reform plan effectively to level the playing field for large multinational corporations headquartered in the United States and to allow us to go all in on U.S. redomiciliation. However, we intend to redomicile to the United States even if there is no corporate tax reform.”

Trump praised the move, calling Broadcom “one of the really great, great companies.”

“They employ over 7,500 workers in many states across our country. We’re looking forward to seeing that number grow very substantially, which it is now anticipated to do,” he added.

The company, which makes a range of semiconductor products for wireless communications, smartphones, data center networking and other markets, is currently incorporated in Singapore and co-headquartered there and in San Jose, California.

Its shares fell about 3 percent after the announcement.?

Reporting by James Oliphant; Writing by Eric Walsh; Editing by Cynthia Osterman

Our Standards:The Thomson Reuters Trust Principles.

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Why Bitcoin Is Flying Even Higher And Faster

If you’re going to invest in Bitcoin then you need to wrap your head around the fact that there’s an entire market of cryptocurrencies. In other words, there’s competition. As a result, this opens up opportunities for speculation and trading. There might be a short term play (or two) worth considering.

First, take a look at Coinbase to see how Bitcoin has moved in the last month:

Pretty easy to see that it’s up over 42%.

Now, take a look at Ethereum:

Up about 5%. That’s pretty weak compared to Bitcoin.

Typically, the top cryptocurrencies have moved in tandem, although they are are not perfectly correlated. To provide further clarity and provide you with some real numbers, take a look at this correlation matrix:

Source: sifrdata

You can see that Ethereum (and LiteCoin) are 0.66 correlated with Bitcoin.

  • 0.5 to 1: Strong positive relationship
  • 0.3 to 0.5: Moderate positive relationship
  • 0.1 to 0.3: Weak positive relationship

The 0.66 correlation tells us that there is a strong albeit not 1:1 correlation between Bitcoin and Ethereum. In fact, they are all kind of “hot” and moving upward in price.

So, we know that over the last 90 days Bitcoin [BTC] and Ethereum [ETH] have moved together but we also know from the price charts that Bitcoin moved “big time” compared to ETH; eight times as much in the last 30 days.

The Bitcoin Cash History Lesson

The best explanation for the BTC movement versus ETH is that Bitcoin is getting close to forking again. Let’s start with, “What’s a fork?”

A “fork” is a change to the software of the digital currency that creates two separate versions of the blockchain with a shared history. Forks can be temporary, lasting for a few minutes, or can be a permanent split in the network creating two separate versions of the blockchain. When this happens, two different digital currencies are also created.

While many people think about Bitcoin as an investment or a currency, it’s important to remember that it’s also a technology. Yes, Bitcoin is software and it’s a network.

Now, for some quick history, back on August 1, a hard fork of the Bitcoin blockchain created Bitcoin Cash [BCH].

As a result of this, money was practically created out of thin air. “Bitcoin” [BTC] itself barely moved from that fork and then just kept moving up again. See for yourself:

The Bitcoin fork creating Bitcoin Cash didn’t hurt a bit. Plus, this new Bitcoin cash went from a value of $0.00 (because it didn’t exist) to this:

Bitcoin Cash is worth about $470 right now and until the fork it didn’t even exist. In other words, since Bitcoin didn’t lose value and Bitcoin Cash was created out of thin air. Basically, you’re looking at free money.

Yes, the fork created free money for most people holding Bitcoin. Therefore, it’s pretty obvious why everyone is so interested in holding regular Bitcoin again right now.

With a new fork coming in late November, Bitcoin investors are hoping for another Bitcoin Cash to happen, where holders get the new token just for holding on to BTC.

To add some color to this, here’s exactly what Coinbase has to say:

The Bitcoin Segwit2x fork is projected to take place on November 16th and will temporarily result in two bitcoin blockchains. Following the fork, Coinbase will continue referring to the current bitcoin blockchain as Bitcoin (BTC) and the forked blockchain as Bitcoin2x (B2X).

Any customer with a BTC balance on Coinbase at the time of the fork will be credited with an equal amount of the B2X asset on the Bitcoin2x blockchain. No action is required — we will automatically credit your account. So, if you have 5 BTC stored on Coinbase before the fork; you will have 5 BTC and 5 B2X following the event. (Emphasis Coinbase)

Again, you don’t need to understand the technology perfectly here. What matters is that with history and experience from the Bitcoin Cash fork, investors are clearly loading up on Bitcoin.

It’s hard to ignore what this is doing to the entire cryptocurrency market right now. Ethereum and Litecoin, for example, are barely moving up compared to Bitcoin. Given the normally high correlation of BTC to ETH, and BTC to LTC, this is quite clear to my eyes.

Two Quick Trades to Consider

Obviously, because of the flow to Bitcoin in anticipation of the fork, there are some opportunities. What trades work here?

First, you might wish to invest in some Bitcoin in anticipation of the fork. There’s no guarantee that this will work out like Bitcoin Cash. But, it’s definitely an opportunity if you can tolerate the risk.

Per the notes above, Coinbase is one place to invest to keep it simple. Clearly, they are responding to demand and they are keeping their community updated on the Bitcoin Segwit2x fork, and what that means for a new currency.

So, that’s the first trade. It’s pretty simple and it’s something of a gamble based on previous fork history. It’s absolutely not meant to be sophisticated but it could pay a nice little dividend, of sorts.

The second trade comes very shortly after the Bitcoin Segwit2x fork. Once that for happens in November, a relatively simple guess is that investors will turn their eyes to the alternatives.

To keep things very clear, I’m talking about how fiat money (U.S. dollars for example) and Bitcoin will move into Ethereum and LiteCoin, as well as many other cryptocurrencies. The money that’s been pouring into Bitcoin will likely slow down a bit, but others like Ethereum and Litecoin will pick up steam.

I generally don’t like trying to guess or use a crystal ball, but I feel like this is the right story. Bitcoin is getting extra benefits from the fork and Ethereum, Litecoin and the others are being suppressed a bit. Bitcoin is the big winner right now. However, once the fork happens, the pressure will then move sideways into other cryptos. Ethereum and Litecoin, for example, will start pushing up even faster. I wouldn’t be surprised if ETH and LTC grow 2-3x faster than BTC after the fork. Of course, all of this assumes that there’s no general cryptocurrency catastrophe (e.g., regulation). Stay safe out there.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Long BTC, ETH, LTC

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Wall Street Breakfast: Bitcoin Sets New All-Time High

Just a week after pushing past $6,000, bitcoin broke through the $6,300 mark for the first time late Sunday, taking gains this year to well over 500%. Investors appear to be shrugging off some of the negative news associated with last week’s “hard fork,” which resulted in the creation of a new cryptocurrency called bitcoin gold. It’s also been an eventful year for cryptocurrencies in general, with bitcoin garnering the most attention from analysts and regulators across the world.

Economy

With pressure building, Puerto Rico has moved to cancel Whitefish Energy’s $300M contract to rebuild the territory’s electrical grid. Roughly 70% of the island remains without power, more than a month after Hurricane Maria struck on Sept. 20. Private companies like Tesla (NASDAQ:TSLA) have stepped in amid a tumult in responding to the natural disaster, helping to restore power to a children’s hospital in San Juan.

The decision is not final, but at this point President Trump has settled on Fed Governor Jerome Powell as next Fed Chairman, WSJ reports. If confirmed, he would take up the reins at the central bank in February. In an Instagram post on Friday, the president said he had “somebody very specific in mind” for the job and would announce his choice sometime this week.

Following a week of stability during China’s 19th Communist Party Congress, local stocks stumbled in early Monday trade. The Shanghai Composite fell as much as 1.7%, the most this year on an intraday basis, before clawing back losses to close down 0.8%. It comes as sovereign bonds extended a monthly rout amid mounting deleveraging concerns in the nation’s financial sector.

Catalonia’s ousted leader, Carles Puigdemont, has called for peaceful opposition to Spain’s decision to take direct control of the region, declaring that he will keep “working to build a free country.” However, many government workers returned to their jobs today, in the first signs of whether separatists will adhere to his call. Euro +0.3% to $1.1639.

The U.K.’s Brexit department has lost its third minister in four months after Joyce Anelay resigned from the government citing health reasons. The department, headed by David Davis, had already seen the departure of two junior ministers and its permanent secretary since June’s general election, raising questions about its readiness for upcoming Brexit negotiations.

Iraqi Kurdish President Massoud Barzani is stepping down, a month after an independence referendum he orchestrated angered Baghdad. An overwhelming majority of voters approved secession, triggering fighting with Iraqi government troops who seized Kurdish-held oil fields accounting for about 40% of their revenue. The move also reversed years of political gains by the Kurds, dashing their dreams of statehood.

Stocks

“Our pivot to Asia is driving higher returns and lending growth,” HSBC CEO Stuart Gulliver declared after reporting earnings. Pretax profit at Europe’s largest bank totaled $4.6B during Q3, up from $843M in the same period a year ago. That will lay a foundation for HSBC’s new leadership after a tough period of post-crisis restructuring.

The Comptroller of the Currency wants to loosen the leash on Wells Fargo (NYSE:WFC), making it easier for the bank to vet incoming executives and clear severance payments, Reuters reports. The restrictions were heaped on the institution following its phony accounts scandal, but the bureau has advocated easing up sanctions since Keith Noreika took control of the OCC in May.

Confirming rumors from Friday, Akzo Nobel (OTCQX:AKZOY) said it was in “constructive talks” to buy Axalta (NYSE:AXTA), in a merger that would create a multibillion-dollar coating and paints giant. The possible deal under consideration would involve the Dutch company first proceeding with its existing plans to spin off its specialty chemicals business. AXTA +2.6% premarket.

Signing an agreement with CVC Capital, Owens Corning (NYSE:OC) will scoop up Paroc Group, a European mineral wool maker, for an enterprise value of about €900M. The transaction, which is expected to be immediately accretive to 2018 EPS, is likely to yield a run rate of operational synergies of €15M by the end of 2019.

Nintendo has raised its sales forecast for its latest console, the Switch, following another quarter of strong performance. The company now expects to ship 14M units in its financial year ending March 2018, up from its previous prediction of 10M. Nintendo (OTCPK:NTDOY) also upped its annual profit outlook to ¥85B ($748M), well above an earlier estimate of ¥45B.

Shouqi Limousine & Chauffeur, a car-hailing operator, and Baidu (NASDAQ:BIDU) are partnering to develop driverless vehicles, including software, hardware and mapping technology, Xinhua reports. Baidu also recently signed an agreement with BAIC Group to mass produce Level 4 autonomous vehicles by 2021 and is targeting mass production of autonomous buses with King Long by 2018.

Tesla shares fell almost 2% on Friday amid worries about Model 3 production. The stock has also experienced a swift decline since hitting a high of $385 last month, falling 17%, near bear market territory. Falling knife or buying opportunity? The last time Tesla (TSLA) was in a bear market the stock fell 32% over the course of seven months (April 2016 – Nov. 2016), but in the following period (Nov. 2016 -Sept. 2017) shares rallied 122%.

Overturning a decision to quit the country, Chevron (NYSE:CVX) is staying in Bangladesh and will invest $400M at Bibiyana, the country’s largest gas field. In April, the U.S. oil company said it would sell to China’s Himalaya Energy its wholly owned subsidiaries that operate three gas fields, which together account for 58% of Bangladesh’s gas production.

The head of the New York Stock Exchange (NYSE:ICE) has not given up on the IPO of Saudi Aramco (Private:ARMCO), even as the kingdom’s bourse operator said it aspired to be the exclusive venue for the listing. The $100B IPO is aimed at helping raise the nation’s profile in the eyes of overseas investors, a key part of its Vision 2030 plan to diversify the economy away from oil.

The dismemberment of Jeff Immelt’s legacy continues. Citing sources familiar with the matter, the WSJ reported that General Electric (NYSE:GE) executives did not notify the board about the practice of trailing the former CEO with a spare jet anytime he traveled. Management for years also withheld from directors an internal complaint it received about the empty plane.

Kobe Steel has withdrawn its full-year profit guidance and said it wouldn’t pay an interim dividend, preparing for a potential blow to earnings from its data falsification scandal. It comes as Kobe (OTCPK:KBSTY) reported net profit of ¥39.3B ($346M) for the first six months of the financial year ending in March, beating its forecast of ¥25B, as the company’s steel business recovered.

Helping strengthen its oncology business, Novartis (NYSE:NVS) has announced a $3.9B deal to buy Advanced Accelerator Applications (NASDAQ:AAAP). AAA makes radio pharmaceutical products which contain radioisotopes and are used clinically for both diagnosis and therapy of tumors. It was spun off from Europe’s physics research center CERN 15 years ago and listed on Nasdaq. AAAP +2.9% premarket.

The U.S. distributor of Corona is chasing a new type of buzz, according to the WSJ. Constellation Brands (NYSE:STZ) has agreed to take a 9.9% stake in Canopy Growth (OTCPK:TWMJF), the world’s largest publicly traded cannabis company, with a market value of 2.2B Canadian dollars on the Toronto Stock Exchange. It also plans to work with the firm to develop and market cannabis-infused beverages.

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Retirement Strategy: One For Income, One For Growth, Both For My Retirement Portfolio

If you can find a stock that can provide a great dividend right now and probably increase its dividend for years to come, you might want the stock in your retirement portfolio, right? Obviously I am right, and that is a silly question.

On the flip side we have our growth investors always looking for capital appreciation either in the near term or the long term. If those folks can find one that is ringing a big fat bell that its share price will rise, growth investors will pay attention, I think. I could be wrong, of course, but I don’t think so.

Now let’s wave a magic wand and find 2 stocks that are literally screaming for all types of investors to look at them and perhaps build a retirement portfolio around them, right this minute. Folks I believe we have a match made in “portfolio heaven”: AT&T (T), and Bank of America (BAC).

The Following Facts Cannot Be Disputed

I realize that there are plenty of issues to point to with both of these stocks that have been written about ad nauseam, such as the T debt load and relatively high payout ratio, and the widely held disdain for BAC and its history with Countrywide, the mortgage and housing crisis, as well as the beating its share price took that crippled many investors’ portfolios. However, there are some irrefutable facts that should grab everyone’s attention

AT&T

  • The current dividend yield is 5.82%
  • T is a dividend aristocrat.
  • For every 100k invested right now in this stock, the income produced would be about $5,820 annually. There is NO other dividend aristocrat that can match this one.
  • The share price has dropped to 52-week lows.

I will defer to those folks who refuse to see T for what it is – a pure income investment for now – and agree that the company has debt issues that should not be ignored. What always seems to be lacking by the “negative nabobs” is how this company will be transformed when the merger of Time Warner (TWX) is completed by the end of the year. Here is a peek:

Time Warner beat expectations with Q3 earnings with broad gains, where HBO saw its highest quarterly growth in 13 years and Turner Broadcasting added subscriber strength.

Revenues grew 6% overall, and adjusted operating income was up 13% to $2.3B with support from all divisions.

HBO revenues grew nearly 13%, helped no doubt by the record seventh season of hit series Game of Thrones, which due to a delay fit entirely in Q3 this year.

Revenue by segment: Turner, $2.77B (up 6.1%); Home Box Office, $1.6B (up 12.6%); Warner Bros., $3.46B (up 1.7%).For the first nine months, cash from continuing operations hit $4B (up 12%) and free cash flow came to $3.6B (up 8%).

It reaffirmed its full-year outlook, expecting adjusted operating income to rise in the high single digits (exclusive of any merger effects or costs tied to the AT&T acquisition).

For Q4, it’s expecting steady subscription growth from Turner, with ad revenues increasing low single digits and operating income to “increase significantly.” HBO is expected to increase subscription growth but also see higher programming cost growth, with a net increase for operating income. Warner Bros. operating income is expected to decline due to the release mix (including last year’s release of Suicide Squad).

All of the above will be part of T’s balance sheet soon, and if you do not believe this will make AT&T a stronger, and more profitable company, then T is not for you and you are not for T. I happen to be a huge bull on T and have added even more shares personally just the other day.

Here is a chart to ponder:

Chart
T data by YCharts

To encapsulate: Dividend yield is up, forward PE ratio is down, the share price basically made new 52-week lows. These are facts. NOT opinions. Formulate your own, but mine is that T is a bargain, will continue paying and increasing its dividend, and will become a bigger and better company when the Time Warner deal finally closes.

Bank of America

  • BAC has become leaner in the last 6 years and is making a lot of money, both on the top and bottom lines.
  • Interest rates are on their way UP, even if it is a very slow trip, and that means greater profits and revenues on every type of loan for BAC.
  • The current administration has been loosening the reigns of banking regulations and is PUSHING for even greater relaxation (think Dodd-Frank) of all the rules.
  • The share price now has momentum and has been upgraded by various analysts to a “buy or strong buy”.

I will not make any social commentary on the long term affects that the economy might face if banking regulations are rolled back. Suffice it to say that all of us are living in the present, and jumping on an opportunity for right now is what matters for immediate needs and goals. Not the past, and not the guesses about the future. Right now, BAC should be considered for any type of portfolio, plus you get about a 1.75% dividend yield while you own it, which is about 3 times the bank’s regular savings interest rate.

Here is a chart to consider:

Chart
BAC data by YCharts

The share price has not completely rebounded, but it does have lots of momentum lately, and the price to book value is well off of the pre-crisis average of 1.60 (currently 1.16). Perhaps I am being overly optimistic to say that the stock has about a 40% upside over the long term (24-36 months), or about $40/share? OK, so I will be a bit more reasonable and put an optimistic share price of 20% over the next 2 years to about $33/share based on price to book value currently.

At the same time, the current dividend of .48/share annually is likely to be increased significantly in the near term, if for nothing else than to keep Warren Buffett continuing to hold his shares!

I have been “banging the table” on BAC since it was at about $22-$23/share and wrote this article about it at $24/share. I have just added even more several days ago to my personal account. Yes, I believe BAC will give me GROWTH.

The Bottom Line

For retired folks, and the younger investors just starting out, T and BAC seem to make sense to me right now for the “holy” grail of BOTH income and growth. I can almost visualize them as “bookends” for a retirement portfolio.

You might want to assess the risks of each, as well as your own risk tolerance. to see if these stocks could help YOU reach some financial goals.

Read, Decide, Invest (or not), it’s up to you!

Not To Bore You, But…

Knowledge is power and many folks shy away from the investing world because that very world makes it more confusing each and every day in an effort to sell you something: stock picks, technical strategies, books, videos, subscriptions with “secret ideas,” gadgets, and even snake oil.

My promise to you is that my work here will remain free to all of my followers, with the hope of giving to you some of the things that took years for me to learn myself. That being said, let me reach out to you with my usual ending:

**One final note: The only favor I ask is that you click the “Follow” button so I can grow my Seeking Alpha friendships. That is my personal blessing in doing this and how I can offer my experiences to as many regular folks as possible, who might not otherwise receive it.

Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance. The long positions held are based upon what the model portfolio holds and I personally could have held all of the stocks noted at one time or another.

Disclosure: I am/we are long BAC, T.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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World Economic Forum Says Tech Firms Must Do More to Tackle Extremism

If tech firms don’t act, governments may impose regulations limiting free speech.

U.S. tech firms such as Facebook fb and Twitter twtr should be more aggressive in tackling extremism and political misinformation if they want to avoid government action, a report from the World Economic Forum said on Monday.

The study from the Swiss nonprofit organization adds to a chorus of calls for Silicon Valley to stem the spread of violent material from Islamic State militants and the use of their services by alleged Russian propagandists.

Facebook, Twitter and Alphabet’s Google goog will go under the microscope of U.S. lawmakers on Tuesday and Wednesday when their general counsels will testify before three U.S. congressional committees on alleged Russian interference in the 2016 U.S. presidential election.

For more on Facebook and the spread of fake news, watch Fortune’s video:

The report from the World Economic Forum‘s human rights council warns that tech companies risk government regulation that would limit freedom of speech unless they “assume a more active self-governance role.”

It recommends that the companies conduct more thorough internal reviews of how their services can be misused and that they put in place more human oversight of content.

The German parliament in June approved a plan to fine social media networks up to 50 million euros if they fail to remove hateful postings promptly, a law that Monday’s study said could potentially lead to the takedown of massive amounts of content.

Tech

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Apple Reportedly Fires Engineer After Daughter Posts iPhone X Video

There’s a reason Apple is so good at keeping secrets. Brooke Amelia Peterson says she and her father have found that out the hard way.

The younger Peterson posted a short video to YouTube from the Apple campus, apparently sometime early last week. One segment, filmed from Apple’s campus, showed off her father’s pre-release iPhone X – the highly-anticipated super-flagship phone due to be released on November 3. Peterson’s father, according to her videos, was an engineer working on radio communications and Apple Pay features for the iPhone X, pronounced “iPhone ten.”

Apple watchdogs including 9to5 Mac and Apple Insider jumped on the video, which 9to5 Mac described as “probably our best look yet at the device in action.” It included substantial glimpses of the device’s calendar app, camera, Face ID, and the new Animoji feature, as well as the physical design of the phone itself.

In a followup video posted on Saturday, though, Peterson claims that Apple reacted to the video by firing her father, who was seen cheerfully participating – despite Apple’s well-known commitment to secrecy around unreleased technology.

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In yesterday’s video, the younger Peterson was conciliatory towards Apple, acknowledging that she and her father had made a mistake.

“At the end of the day, when you work for Apple, it doesn’t matter how good of a person you are. If you break a rule, they just have no tolerance.”

“I’m not mad at Apple,” she continued. “My dad takes absolutely full responsibility for the one rule that he broke. We’re not angry, we’re not bitter.”

Details of Peterson’s story have not been independently verified, but we have reached out to Apple and will update this story with any confirmation or details.

Peterson says she took down the original video at Apple’s request, and some mirrors of the full video appear to be down as well, but copies are still surfacing both around the web and on YouTube.

Tech

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