Facebook removes accounts advertising stolen identities

(Reuters) – Facebook Inc has removed a number of accounts and pages that advertised and sold social security numbers, addresses, phone numbers, and alleged credit card numbers of dozens of people, following a report by news website Motherboard.

FILE PHOTO: Silhouettes of laptop users are seen next to a screen projection of Facebook logo in this picture illustration taken March 28, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

“Posts containing information like social security numbers or credit card information are not allowed on Facebook, and we remove this material when we become aware of it,” a Facebook spokesman said on Tuesday.

Hackers have advertised databases of private information on the social platform and Motherboard reported here on Tuesday that Facebook has held stolen identities and social security numbers for years.

Shares of Facebook were down 3.8 percent at $159.58 following the report.

Tech companies are under intense scrutiny about how they protect customer data after Facebook was embroiled in a huge scandal where millions of users’ data were improperly accessed by a political consultancy.

The report said at least some of the data in these posts appeared real. Motherboard said it was able to confirm the first four digits of the social security numbers, names, addresses, and dates of birth for four people whose data appears in a post from July 2014.

A Google search inquiry still pulls up a few public Facebook posts that offers to sell personal details including credit card numbers. However, many of such posts appeared to be removed once the link was opened.

Reporting by Munsif Vengattil in Bengaluru; Editing by Bernard Orr

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India's Infosys to renew focus on digital services

MUMBAI (Reuters) – Infosys Ltd, India’s second-biggest IT firm, plans to renew its focus on digital services as it looks to boost growth amid shrinking profit margins in its legacy business and rising competition from local and international rivals.

FILE PHOTO: The logo of Infosys is pictured inside the company’s headquarters in Bengaluru, India, April 13, 2017. REUTERS/Abhishek N. Chinnappa/File Photo

Digital services – such as cloud, big data and analytics which accounted for more than a quarter of Infosys’ revenue in year to March 2018 – are a massive opportunity, Chief Executive Salil Parekh said on Monday at the company’s first analyst meeting in nearly two years.

“The idea is – this is a huge market, how can we be more relevant for our clients’ future through this market,” Parekh said.

India’s $154 billion software services industry, led by Tata Consultancy Services and No. 2 Infosys, is facing a margin squeeze in its legacy business such as routine infrastructure maintenance as clients increasingly demand more work for less money.

Digital services are the new, big long-term opportunity for most Indian IT firms as they help Western clients transform traditional businesses and prevent them from getting disrupted by tech-savvy and agile start-ups.

Infosys, earlier this month, reported a rise in profit and forecast healthy revenue growth for the year, but its outlook on profit margins failed to cheer investors.

On Monday, Parekh said Infosys had set a three-year roadmap. “The first year in fiscal 2019 to stabilize where we are, the second year to start to build momentum and (the) third year to start to accelerate where we can have more and more share of our clients’ relevance and that will obviously translate, overall, to a better Infosys,” he said.

Bigger rival TCS on Monday became the first Indian company to hit the $100 billion market capitalization mark, riding on the back of a record quarterly profit and a weaker rupee.

Reporting by Sankalp Phartiyal; Editing by Euan Rocha and Susan Fenton

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Weighing The Week Ahead: The Costly Quest For Fresh Fears

The economic calendar is normal, with an emphasis on housing and sentiment data. Earnings season is in full swing and expectations remain high. We have witnessed improvement on several fronts. Since that is not very newsworthy, the punditry will be asking:

Where can we find some fresh fears?

Last Week Recap

In my last edition of WTWA, I asked whether strong earnings were already reflected in stock prices. That was a good guess, as each good earnings report was explained as “strong” or “anticipated,” depending upon whether the stock subsequently moved higher or lower.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, so check it out.

A screenshot of text Description generated with very high confidence

The gain for the week was about 0.5%, and the trading range was only about 2%. I summarize actual and implied volatility each week in our Indicator Snapshot section below.


Amazon (NASDAQ:AMZN) has over 100 million subscribers to their “Prime” service, including 55% of the households in the US. (Barron’s)

Nearly half of crypto traders do not pay taxes. (MarketWatch).

Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) web presence dominates everyone else put together. (Visual Capitalist)

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

Feel free to add items that I have missed. Please keep in mind that we are looking for current news, especially from the last week or so. WTWA is not about long-term concerns like debt. These are important, of course, but not our weekly subject unless there has been some major change.

The Good

  • High frequency indicators remain positive (New Deal Democrat).
  • Industrial production increased 0.5%, down from 1.0% in February, but beating expectations of 0.3%. (Jill Mislinski, and see the Big Four update below)
  • Hotel occupancy broke records in Q1. Some astute readers pointed out that a past analysis was wrong because of holiday timing. Mrs. OldProf, who reads both the posts and the comments each week, jumped on this. “See, your readers agree with me!” Thirty-eight years and as mistake-prone as ever. Calculated Risk provides analysis and this chart.

  • Retail sales increased 0.6%, beating expectations of a 0.4% bump.
  • Mortgage delinquency rates are lower. Those thirty days past due – 3.73%. In foreclosure – 0.63%. (Calculated Risk).
  • Corporate earnings are strong, regardless of the chosen metric – beat rate, size of earnings and revenue beats. John Butters reports:

To date, 17% of the companies in the S&P 500 have reported actual results for Q1 2018. In terms of earnings, more companies are reporting actual EPS above estimates (80%) compared to the 5-year average. In aggregate, companies are reporting earnings that are 5.9% above the estimates, which is also above the five-year average. In terms of sales, more companies (72%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are 1.6% above estimates, which is also above the five-year average.

Brian Gilmartin agrees, but is more concerned about the effect of higher interest rates.

  • Corporate cash is increasing (WSJ) suggesting room for higher dividends and more stock buybacks. David Templeton (HORAN) explains, illustrating with this chart.

  • Housing starts for March hit a seasonally adjusted annual rate of 1,319K, beating expectations by 4%. Building permits of 1,354K also beat expectations. Calculated Risk comments on the data (mostly due to multi-family starts) and also on Homebuilder Confidence – down one point at 69, but still on “firm ground.”

The Bad

  • Jobless claims were almost unchanged from last week at 232K, but this was 5K worse than expectations. (Bespoke)
  • The Beige Book supported the current Fed picture of modest growth, but also had some warnings about the impact of current policies. Companies mentioned spikes in aluminum and steel prices. (Business Insider).
  • Leading indicators increased only 0.3%. This is a gain, of course, but smaller than the February pace of 0.7% and slightly below expectations of 0.4%. Jill Mislinski provides analysis and charts.

The Ugly

How about something that is responsible for 2.3 million annual deaths? From the International Energy Agency:

Today around 2.8 billion people – 38% of the global population and almost 50% of the population in developing countries – lack access to clean cooking. Most of them cook their daily meals using solid biomass in traditional stoves. In 25 countries, mostly in sub-Saharan Africa, more than 90% of households rely on wood, charcoal and waste for cooking. Collecting this fuel requires hundreds of billions of hours each year, disproportionately affecting women and children. Burning it creates noxious fumes linked to 2.8 million premature deaths annually.

Timothy Taylor explains:

The report estimates that an investment of an additional $42 billion, above and beyond what is already happening, would be needed by 2030 to provide access to clean cooking for the 2.3 billion people who otherwise will not have access to clean cooking by that time. At one level, $42 billion is a lot of money: at another level, it’s almost an absurdly cheap price to pay for the potential benefits.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

We have a normal economic calendar, featuring housing data, consumer confidence and sentiment, and the first look at Q1 GDP. Corporate earnings reports will again be the most important real news.

Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

A screenshot of a cell phone Description generated with very high confidence

Next Week’s Theme

The economic calendar emphasizes housing data and sentiment polls. The focus, barring important tweets to the contrary, will continue to be corporate earnings reports.

The quest to find an explanation for every market move reached a new peak last week. With evidence of good earnings, a stronger economy, and positive sentiment, an explanation was needed for the volatile market. Why is it flat at lower levels? I expect pundits and financial writers to be asking:

Where can we find some fresh fears?

One of the better CNBC anchors gave us a taste of what to expect. Chip stocks had moved lower, mostly because of events related to a single stock. With the ETF connections and algorithmic trading, the entire sector got hit and dragged the market down as well. (That’s the best I can do here, but I promise more in a special post. Meanwhile, I love most chip stocks, especially Lam Research (NASDAQ:LRCX)).

The anchor asked her guest. Aren’t semiconductor stocks cyclical? If this is the top of the cycle, what does it say about the overall economy?

That question could be a litmus test for traders versus investors.

There is plenty of reaching to find something wrong, and that was just one example. Here are some currently-raised concerns:

  • Yield curve inversion. So many who are rookies at recession forecasting are jumping on the yield curve inversion. Dr. Robert Dieli, the top expert on this topic, repeatedly warns not to forecast this signal. When it occurs, it will still provide lead time of about nine months. And it is more than just the yield curve. One must also consider the economic background and confirming indicators. Despite this, many are reaching far into the future.
    • Hale Stewart – A real possibility in the next 18 months. I frequently cite Hale on various topics, but economic forecasting is not his happy zone. Speculating on this topic is not helpful to investors.
    • Another favorite source, Pension Partners, seems to be reaching on this topic.
    • Barron’s notes, citing Dan Clifton (a good source), “My take from discussing the issue with clients is that the headwinds from a possible trade war are colliding with the tailwinds from $300 billion of additional stimulus from spending on top of the recently enacted tax cuts.”
  • The Fed. A knee-jerk reaction to the direction of Fed moves and old slogans. Those citing this fear pay little attention to the starting level of rates, the pace of change, or the criteria for increases (stronger economic data). Throw in the changes in Fed membership and leadership, and it is open season. (Barron’s).
  • The end of QE. Those who were wrong about QE effects (hyperinflation) and attributed stronger equity markets to Fed policy are now taking the other side. This gives them a chance to be wrong in both directions!
  • Debt.

    • US government debt. It is growing rapidly, and the pace cannot be sustained.
    • The pension time bomb. $400 trillion by 2050. (Visual Capitalist).
  • Trump Administration policies, especially regarding trade.

And here are some sensible refutations.

  • Yield curve.

Flat or inverted yield curves tell us something about:

Recessions – Inverted yield curves precede recessions, although flat curves can last for a long time before becoming inverted or showing a recession signal. All recessions are preceded by inversions but not all inversions lead to recessions.

Fed behavior – Flattening and inverted yield curve are associated with tightening of Fed policy, but tightening does not mean that a market sell-off or recession is around the corner. The link between the beginning of the tightening cycle and the impact on financial markets is loose.

Term premium risk – Flat yield curves tell investors there is no compensation for taking duration risk. There is limited reason to take marginal duration risk. We find that flat curves signal future increases in yield. It is a negative signal for bonds.

Equity markets – Flatter yield curve do not mean lower stock returns. Flattening curves are not associated with market sell-offs.

If you do not understand the chart below, you should be especially careful about reading scary stories about the yield curve. It is more than the slope of the curve; it depends upon how it happens.

    • Brian Gilmartin takes a balanced approach, citing some (ahem) other good sources.
    • Bob Dieli continues to deliver the best analysis of the business cycle. His monthly report is chock-full of data, analysis, and even some humor – if you are willing to go with economist jokes. Here is his current business cycle rating. You will not agree. Please note that he has been correct while almost everyone else has been wrong. The current expansion could have years to run.

This analysis has helped me stay on the right side of the market for eight years. Serious investors and institutions should subscribe to his service. It is information and analysis you cannot get elsewhere. Those on a low budget get the benefit of the basic conclusion via the “C-Score” in the weekly indicator snapshot.

  • Current conditions remain solid.
    • The Capital Spectator analyzes the current state of the business cycle, replete with data and charts, suggesting “that the economy will continue to expand.”
    • The Big Four update via Jill Mislinski is a great method to see the most important indicators at a glance.

As usual, I’ll save my personal conclusions and suggestions for today’s Final Thought.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

Short-term trading conditions improved significantly this week. In mildly bearish conditions, our trading approaches can still be profitable, but that might not be true for everyone. We continue to monitor the technical health measures on a daily basis. The indicator did not drop low enough to take us out of the market in trading programs, but it was close.

The long-term fundamentals and outlook are little changed. The long-term technical health is back to strongly bullish.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

Georg Vrba: Business cycle indicator and market timing tools. None of Georg’s indicators signal recession.

Doug Short and Jill Mislinski: Regular updating of an array of indicators. Great charts and analysis.


David Merkel explains why we should watch the thirty-year bond.

Dr. Ed Yardeni updates the forward earnings outlook.

JPMorgan demonstrate how this translates into stock prospects for next year, and the next five years.

Insight for Traders

Check out our weekly Stock Exchange post. We combine links to important posts about trading, themes of current interest, and ideas from our trading models. This week we asked, “How do you filter out noisy trading signals?” As usual, we discussed some stock ideas and updated the ratings lists for Felix and Oscar, this week featuring the Russell 1000 stocks. Blue Harbinger has taken the lead role on this post, using information both from me and from the models. He is doing a great job, presenting a wealth of new ideas and information each week.

This week’s theme was inspired by yet another great post from Dr. Brett Steenbarger. He explains that traders need to start each day with an open mind and focus on the job at hand. This is also excellent advice for investors, who spend waste too much of their time on bombast and sensationalism. We all want to be informed and to make intelligent decisions, so picking our sources and focus is crucial.

Insight for Investors

Investors should have a long-term horizon. They can often exploit trading volatility! I remind investors of this each week, but now is the time to pay attention.

Best of the Week

If I had to pick a single most important source for investors to read this week, it would be JPMorgan Asset Management’s quarterly Guide to the Markets. All facts, all charts, and no argument. It is professionally prepared – a valuable resource which you can get for free. Anyone spending some time with this will learn something valuable. Here is one example.

I hope readers will use the comments to suggest other examples.

Runner-up for BOTW is Alan Steel’s tirade. He captures what I am trying to say here in fewer words, and much more colorfully.

He recounts the failed predictions about QE, the PIIGS, Japan, US budget decisions, the fiscal cliff and the Mayan Calendar.

They’re all gone.

Lest we forget all of those presumed Armageddons; spat out by experts and their gimp-like algorithms boasting ninetieth percentile (plus) accuracy that resulted in zero-sum truths.

Did oil ever get to $250 a barrel, gold go to $5,000 an oz, the FTSE drop down to 500, or the Dow Jones Index fall to 1,000?

Now move a bit further backward and remember the global consensus of experts telling us planes would fall out the sky thanks to the Millennium Bug…

Floating Sideways

The truth about these things isn’t inconvenient to anyone other than the “experts” who predicted them, and of course those who fretted their arrival, or worse, lost out financially because they listened.

Those offenders experts expect our memories to remain as silent as their missing apologies for all that gloom and doom that’s now floating sideways on the other side of the global economic goldfish bowl.

Stock Ideas

Chuck Carnevale identifies 10 fairly valued dividend growth stocks, with an emphasis on total return. It is his usual combination of great ideas and a lesson in stock selection.

Blue Harbinger suggests ten investment ideas that compare favorably with the FAANG stocks, which have plenty of volatility and risk. Which reminds me. Diane Freeman (Investing.com) had an excellent roundtable on this topic more than a week earlier. She asked about FAANG versus the tech stocks. I tried to inject a touch of humor in the first part of my answer:

My approach separates the two parts of your question. I like tech in general but see the FAANG run as over-extended. Those who love emphasizing the high-flying leaders may keep the run going by changing the membership. They have already added an “A” to the original lineup and may be about to lose a consonant. Vanna can’t help with that one.

And then… CNBC takes up this topic on Fast Money, even simulating Wheel of Fortune. I suppose that GMTA is always possible, but I note that the mainstream media never cites sources for these ideas. It seems to happen often when I coin a new term. (Mrs. OldProf thinks they ripped me off, it is funny, but I should chill out. So, I will).

Time for Walmart (NYSE:WMT)? Hale Stewart continues his series on “Bottom Fishing the Aristocrats” with an interesting blend of fundamentals and technical analysis. I always like to illustrate both ideas and methods. Hale begins with support from the consumer staples sector, as shown here:

Great portfolio and side moat? Medtronic (NYSE:MDT) fits the bill. (Morningstar).

Eddy Elfenbein’s holdings are always a source of ideas. He provides regular updates on the stocks in his holdings. His method has a proven edge over the market. Or you can get the entire package easily and inexpensively by buying Eddy’s ETF (CWS).

A battle for the lead in AI chips, says Barron’s. This is an important theme. Should we guess the winning companies or buy a basket?

How about some energy ideas? Kirk Spano suggests two stocks to play the oil bull market.

Personal Finance

Seeking Alpha Senior Editor Gil Weinreich has expanded his excellent series for financial advisors (and serious individual investors) to include some podcasts. This week I especially enjoyed his discussion of how to cut retirement costs, with another great link to Prof. Laurence Kotlikoff. Read the entire post for several great ideas.

Abnormal Returns is always worth reading, with many links on an array of interesting topics. Wednesday the focus is on personal finance. From many good choices this week, I especially liked the advice from Ben Carlson, 3 Ways to Make Up for a Retirement Savings Shortfall.

Watch out for…

Taking Social Security too soon. Michael Tove (Kiplinger) explains the math. “Once you reach your full retirement age, your monthly Social Security check gets 8% larger for every year you delay taking benefits through age 70 (technically, it’s 2/3% per month). Mathematically, the “crossover point” is about 12 years”. That is just the beginning, since there are other benefits as well.

Real estate investor mistakes. Pat Curry (Bankrate) lists ten “terrible mistakes.” I usually do not link to slideshows, but this one does not launch a new ad on each click. The information about real estate planning is valuable, both for first-time buyers and for downsizing baby boomers.

IBM (NYSE:IBM), facing seasonal headwinds (Stone Fox Capital). [Jeff] Perhaps so, but that makes it a good platform for writing calls. It is currently on our watch list for that purpose.

Final Thoughts

Sources are important.

Since most people pay little attention to the background of those claiming authority, they might not notice that economists specializing in the business cycle are reaching a different conclusion from most others. These observers, new to the topic and eager to make a mark, use reasoning like the following:

  • The age of the business cycle – known to be irrelevant.
  • Guessing when an indicator like the yield curve will change – the “forecasting the forecast” error.
  • Speculating about the impact of proposed policies – even though we don’t know whether they will be adopted or what the effects might be.

I have a personal list of valuable sources. They are the very best contrarian indicators! They provide a regular listing of what is going wrong. Recently, I have noted a change. As conditions have improved, these sources have shifted in focus. Here are a couple of examples.

  • No near-term worries? No problem! Just reach farther into the future. It is actually easier to spin a tale when there is plenty of time and uncertainty.
  • Be flexible. Take whatever side works at the moment. If earnings are low, discuss the weak consumer and the unfairness. If earnings are rising, then emphasize the inflation threat.

Their business model seems to be one of supporting the insatiable appetite for confirmation bias from investors who have misjudged the market. Unfortunately, many average investors stumble on these sources and take the material seriously. They do not know about past errors or track records.

You never see a retraction or admission of an error. The only clue is that these sources monetize their audience with a “solution” to fear – gold, annuities, a no-fail trading system, or some other seductive, high-commission product.

The popular concerns are often quite valid. That is what makes them dangerous noise for individual investors.

The level of government debt is an important social problem. So is the inadequate funding for government pensions. We should address these problems before it becomes too late. But they do not have much to do with the current choices offered to investors.

I’m more worried about:

  • A negative confidence scenario. Investment and spending decisions depend on positive expectations.
  • Deterioration in the tariff and trade talks. This is the most sensitive issue for the market, and it remains a rhetorical playground for world leaders.

I’m less worried about:

  • North Korea. There seems to be genuine potential for reducing the nuclear threat and moving closer to normal relations. (Washington Post on Pompeo trip)
  • Market volatility. It has receded to a range close to historic norms. There are plenty of excessive moves offering opportunity.

[Are you struggling to remain objective about risk? Scared out of the market and unable to get back in? Not doing well on your own? I have several free papers on these topics. Just write for our free information on these topics. While they describe what I am doing, the do-it-yourself investor can apply the same principles. Just email your request to main at newarc dot com. Because of the turbulent conditions, I have also set aside extra time to speak with individual investors during the first week in May. Just write for an appointment—no charge and no obligation].

Disclosure: I am/we are long LRCX.

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

Additional disclosure: And may institute a covered write in IBM on Monday.

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General Electric's Q1 2018 Results: Good Enough?

General Electric (GE) reported Q1 2018 financial results and, as expected, the financial community’s reactions were mixed (see here and here, both were articles from TheStreet.com). The market, however, was pleased – that is, GE shares finished the trading day up almost 4% on the better-than-expected results. The one-day stock performance is great and all, but let’s not forget that GE shares are still down by over 16% so far in 2018.


GE data by YCharts

GE’s Q1 2018 results were nothing to write home about but, in my opinion, improvements in several key metrics (will discuss below), coupled with the strength shown by the 2 key operating segments (Aviation & Healthcare), were good enough to keep the market happy for at least the time being.

The Q1 2018 Results, Just Good Enough

The industrial conglomerate reported adjusted EPS of $0.16 on revenues of $28.7B. When compared to the same quarter of the prior year, Q1 2018 revenues and adjusted EPS increased by 7% and 14%, respectively.

The Aviation and Healthcare units were again the top performers for the quarter but it is also important to note that the consolidated industrial results showed promise (revenue and profit were up 9% and 7%, respectively). But, of course, the pundits are instead only focusing on the company’s ‘weak’ cash flow metrics.

GE’s FCF was negative for the quarter on both an adjusted and non-adjusted basis but they were still big improvements from Q1 2017. Unlike the bears, I am impressed with the Q1 2018 FCF metrics and I actually expected worst results for the quarter. Additionally, management talked up the progress that was made and they also re-affirmed the full-year guidance for FCF:

We’ve got a lot to execute on but the first quarter was a good start to executing on our 2018 plan. There is no change to our framework of $1 to $1.07 earnings per share and $6 [to] 7 billion of free cash flow. We expect earnings pressure in Power will be offset by better Aviation and better Healthcare earnings and lower corporate costs. Renewables, Transportation and Oil & Gas should be about as expected. – Mr. John Flannery, Q1 2018 Conference Call

More importantly, management again stated that there were no plans to cut the dividend – income investors would have ran for the hills if GE cut the dividend again.

At the end of the day, GE’s Q1 2018 results were not stellar but they were good enough to buy Mr. Flannery and team some additional time. Remember, it is going to take this company years (not months) to right the ship so, in my opinion, investors should fully expect for GE to report ‘mixed’ results over the next few quarters. The company still expects to earn $1.00-$1.07 in earnings and $6.00-$7.00B of FCF, while also focusing on streamlining the business and funding its pension, so that alone should make the bulls happy. However, there were additional developments from the earning release that also need to be considered.

Other Developments:

(1) The company mentioned that the Distributed Power unit is officially on the trading block, along with the other units (small Aviation platforms, Current & Lighting, and Transportation) that are already in the process of being disposed of.

(2) There were rumors circulating that the company is in talks to sell its rail business to Wabtec (WAB). Management already hinted at the fact that the rail business could be spun off or sold, so I would not be surprised if a deal for this division was announced in the near future.

(3) The company took an ~$1.5B charge related to its subprime mortgage business. Management disclosed that the charge was related to potential legal settlements for subprime mortgage violations from the pre-Financial Crisis era.

A Positive Business Environment

In GE: The Good, The Bad And The Ugly, I made the argument that GE’s turnaround could largely hinge on global growth and an improving business environment, and I still believe that this is the case. GE has tentacles that reach almost every corner of the global economy so, as you can expect, the industrial conglomerate’s businesses will benefit when its customers are doing well. To this point, 17% of the companies in the S&P 500 have already reported Q1 2018 financial results and business prospects are looking promising. According to FactSet, “more companies are reporting actual EPS above estimates (80%) compared to the 5-year average. In aggregate, companies are reporting earnings that are 5.9% above the estimates, which is also above the five-year average. In terms of sales, more companies (72%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are 1.6% above estimates, which is also above the five-year average.”

Source: FactSet

In my opinion, 80% of companies reporting better-than-expected earnings (and 72% for sales) is telling us a story about the business environment. GE operates in a lot of industries, obviously, but I highlighted the sectors that are material to this company. As shown, the companies in these sectors are smashing estimates.

Mr. Flannery and team will obviously have to get their own house in order to truly pull GE out of the trenches but I do believe that investors should not overlook the potential benefits of an improving backdrop. In my opinion, a business environment that is firing on all cylinders, coupled with Mr. Flannery streamlining operations and spinning off/selling non-core assets, could turn out to be an additional boost that GE needs to fuel the turnaround.


What is the right valuation for a company that cannot seem to get out of its own way? Plus, there are major risks to the story – material pension deficit, Power struggles, cash flow concerns, etc. Therefore, the company definitely does not deserve a multiple in line with the likes of Honeywell (HON) but, in my opinion, 14.5/15x 2018E earnings seems like an attractive valuation.


GE PE Ratio (Forward) data by YCharts

Additionally, management again re-affirmed estimated 2018 earnings so this company may finally be in a position to slowly begin to win over the market. Yes, it will take time but you have to start somewhere, right?

Bottom Line

There was a lot to like about GE’s Q1 2018 results but let’s not get ahead of ourselves just yet. This company still has plenty of work to do before it will be able to win over the market. However, I do believe that Mr. Flannery has this storied industrial conglomerate heading in the right direction. There are definitely risks to the thesis [cash flow concerns, Power downturn, jet engine fallout (possibly), financial leverage and credit rating], but, in my opinion, GE shares are finally starting to find a bottom.

GE is a risky long-term investment and it is a multi-year turnaround story, but I plan to stay long the stock. How about you?

Author’s Note: All images were obtained from General Electric’s Q1 2018 Earnings Presentation, unless otherwise noted.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Disclosure: I am/we are long GE, HON.

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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Xbox Hacking, LinkedIn Bugs, and More Security News This Week

If you haven’t read this month’s WIRED cover story about teen hackers who went too deep into Microsoft Xbox’s systems, make that your first stop. In more current news, the White House sent mixed messages on cybersecurity policy this week, calling out Russian hackers for compromising popular routers and firewalls—a problematic, but unsurprising and even popular type of attack. Meanwhile, the White House is also losing its well-regarded cybersecurity coordinator Rob Joyce to the NSA.

An alternative security conference on Tuesday called out the industry for lack of diverse representation and inclusion. Researchers are starting to shed more light on the techniques Russian actors used to spread disinformation on social platforms ahead of the 2016 presidential elections. WIRED has new details about the malware and techniques attackers used last fall to taint millions of downloads of the popular CCleaner PC optimization tool. And a new app works to stymie unauthorized physical access to MacBooks simply by sending a notification to the owner if someone the lid.

Facebook’s universal login feature comes with some important security drawbacks thanks to online tracking scripts. Researchers demonstrated how feasible it is to exploit Internet of Things device weaknesses one after another to compromise a corporate network without ever touching a PC or server. There’s a pressing need to standardize the use of ultrasonic communications in location-based apps. And a new attack vector known as “trustjacking” can take advantage when you choose to “Trust” a computer from your iPhone.

Oh, and Pornhub now accepts cryptocurrency, just FYI. Plus there’s more! As always, we’ve rounded up all the news we didn’t break or cover in depth this week. Click on the headlines to read the full stories. And stay safe out there.

Google Removes App Engine Attribute That Apps Used for Anti-Censorship Features

Though internet censorship has been ramping up recently in countries like Russia, privacy advocates noticed this week that Google has changed its App Engine architecture so it no longer includes a quirk that was helping apps get around repressive digital schemes. The mechanism, known as domain-fronting, allowed services to make it look like they were sending requests to generic digital entities, namely Google, when they were actually communicating with blocked sites and services. The change will impact certain VPNs, apps like Signal, and other tools that prioritize anti-censorship features. Domain-fronting was never an actual Google feature, and the company said its decision to plug the hole was long-planned. The mechanism has also been abused by hackers to hide malicious activity.

Flaw in LinkedIn’s AutoFill Plugin Exposed Account Data

LinkedIn’s popular AutoFill plugin was leaking user data until a fix on Thursday. The plugin fills information from users’ profiles into a number of trusted third-party sites, but any of these whitelisted services were able to proactively access users’ data without their approval. On top of that, if any of the trusted services were using cross-site scripting that is vulnerable to a certain type of attack, unauthorized platforms could have also grabbed the data. This type of cascade occurred in at least one instance, exposing Linkedin profile data to an untrusted web service, according to researcher Jack Cable. There isn’t evidence evidence of malicious behavior, though. “We immediately prevented unauthorized use of this feature, once we were made aware of the issue,” a LinkedIn spokesperson told ZDNet.

Forget Cambridge Analytica, This Company Has Been Building a Facial Recognition Database Off of Facebook Photos For Years

Lots of services draw on Facebook’s huge cache of public and semi-public data, including the facial recognition service Face-Int, which Forbes discovered has swept up Facebook data for five years, while also crawling YouTube videos and numerous other sites for digital faces. Founded by a former Israeli intelligence agent, the database is now owned by an Israeli company called Verint that is known to offer intelligence services to the US government and others around the world. Face-Int has data about individuals “harvested from such online sources as YouTube, Facebook and open and closed forums all over the globe.”

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Bank Of America: The 'One-Time' Benefit That Is Also A Long-Term Tailwind

On April 16, 2018, Bank of America (NYSE:BAC) reported Q1 2018 results that beat the top and bottom line estimates, but the market was not impressed (the stock is basically flat since earnings were released). BAC shares are trading pretty much in line with the S&P 500 on a YTD basis, but looking back, the stock is outperforming the broader market by a wide margin over the past year.


BAC data by YCharts

I have written about Bank of America several times since early 2015, and my thoughts about this bank being a great buy-to-hold investment has not changed over the years. After reviewing its Q1 2018 results, I still believe that Bank of America is worthy of investment dollars. Actually, I am even more bullish now than I was when shares were trading in the mid-teens.

The financial community dubbed Bank of America’s Q1 2018 earnings, along with those of other large U.S. banks, as weak due to the “one-time” benefit to earnings that was created by the passage of the tax reform bill. I, however, believe that the tax reform bill not only provided a big bump to earnings for the most recent quarter, but it will also positively impact the bank’s future growth prospects in a material way.

The Results – A Lot To Like Here

For Q1 2018, Bank of America’s total revenue and adjusted EPS increased by 4% and 38%, respectively.

Additionally, the bank experienced significant improvements in several key metrics – return on average assets and efficiency ratio. As I described in a previous article, Bank of America used to be a cut artist (i.e., only focused on cutting expenses), but now, Mr. Brian Moynihan, CEO, has the bank positioned for growth. For example, analysts estimate that Bank of America will growth EPS by ~21% over the next five years (per Finviz).

This bank has many growth drivers (digital, expense management, rising rates, etc.), but it is also important to note that the pieces of the puzzle have already started to fall into place. To this point, its operating results were impressive almost across the board.

Source: Q1 2018 Earnings Press Release

There was a lot to like about Bank of America’s quarterly results (e.g., growth in operating leverage, 300 bps improvement in its efficiency ratio, improving return metrics), so in my opinion, investors should be encouraged about how it is positioned for 2018 and beyond. Furthermore, as I described above, the lower corporate tax rate is more than just a one-time benefit to the bank.

Only A One-time Benefit?

The Wall Street Journal recently reported that the large U.S. banks made $2.5 billion from the tax reform bill in the first quarter of 2018. Bank of America’s tax rate was 9 percentage points lower due to the new bill, which brought the quarterly effective tax rate to 18% (it would have been 20% if other quarterly items were backed out). This is real savings. Yes, the uptick in earnings for Q1 2018 looks good on paper, but there is more to the story. Consider this, Bank of America had an effective tax rate for 2017 that was double what was reported for the most recent quarter.

Source: 2017 10-K

This change in rate translates into billions of dollars that will simply drop to the bank’s bottom line. To me, this is more than just a “one-time” benefit.

Let’s also consider what management had to say about the tax reform bill:

Growth in earnings was driven by not only tax reform, but also operating leverage and continued strong asset quality, which is easily seen in our $8.4 billion pre-tax income, which was up 15% year-over-year.

Paul Donofrio, CFO, Q1 2018 Conference Call

Moreover, pundits would have you believe that the business-friendly tax change is the only thing going for Bank of America, but I, on the other hand, would say that there is a lot going right for the bank at this point in time. Mr. Moynihan taking on growth in a more conservative way, while also trying to focus on how best to position the bank for the future, sounds like a reasonable approach to me, especially for a company that was viewed as “can’t-do-anything-right” bank just a few short years ago.

Therefore, in my opinion, it is key to not lose sight of the fact that this bank has come a long way in a short period of time, but also that Bank of America’s management team has it properly positioned to benefit from lower tax taxes, rising rates, deregulation, digitalization, and an overall improving operating environment.


Bank of America’s current valuation also helps the bull case for this bank.

Price Book Value Tangible Book Value
Citigroup $70.28 $71.67 $61.02
Valuation 0.98 1.15
JPMorgan $111.72 $67.59 $54.05
Valuation 1.65 2.07
Wells Fargo $51.54 $37.33 $31.33
Valuation 1.38 1.65
BAC $30.18 $23.74 $16.84
Valuation 1.27 1.79
Averages 1.32 1.66
Averages (w/o Citi) 1.43 1.83

Source: Table created by W.G. Investment Research; data from Citigroup’s (NYSE:C) Q1 2018 Earnings Slides, JPMorgan’s (NYSE:JPM) Q1 2018 Earnings Slides, Wells Fargo’s (NYSE:WFC) Q1 2018 Earnings Press Release, and Bank of America’s Q1 2018 Earnings Slides.

Citigroup is (and has been) trading at a major discount to the other banks, so the average P/TBv without factoring in this bank is 1.83. Bank of America is definitely not as attractively valued as it was over the past few years, but I still think that the risk is to the upside. What’s the right valuation? In my opinion, it’s closer to 2x P/TBv, but you could easily make the argument that even that may turn out to be too low.

Bottom Line

The tax reform bill will have a lasting impact on Bank of America’s earnings potential, and I do not believe that it has been factored into the stock yet. It is hard not to be encouraged about the bank’s improving backdrop, as it is now operating in business-friendly environment (deregulation and lower tax rates) and as it enters into what appears to be a rising rate environment. Plus, let’s not forget that the bank will have an opportunity to return a significant amount of capital to shareholders in the years ahead.

At the end of the day, Bank of America has several long-term catalysts in place that should help propel the stock higher in 2018 and beyond. As such, investors with a time horizon longer than three-to-five years should consider the pullbacks as buying opportunities.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

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

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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Indonesia's Go-Jek planning Philippine expansion: regulator

MANILA (Reuters) – Indonesian ride-hailing and online payment company Go-Jek is looking to expand into the Philippines, Manila’s transport regulator said on Friday, just days after Uber Technologies Inc [UBER.UL] shut down its local business as part of its exit from Southeast Asia.

Go-Jek executives have requested for a meeting with the regulator next week, Aileen Lizada, a board member at the transport regulator, told Reuters.

A Go-Jek spokesman declined to comment.

Reuters reported in March that Go-Jek, which counts Alphabet Inc (GOOGL.O), Singapore’s Temasek Holdings Ltd [TEM.UL] and China’s Tencent Holdings Ltd (0700.HK) as investors, was set to announce its first expansion to another country in Southeast Asia in the “next few weeks.”

The move comes weeks after Uber sold its loss-making Southeast Asia business to regional rival Grab, and just days into Uber’s exit from the Philippines, to the dismay of the riding public that has complained of higher fares, longer waiting time and picky drivers.

The Philippines’ transport regulator this week approved the accreditation of homegrown ride-hailing companies Hype Transport Systems Inc, HirNa Mobility Solutions Inc and Golag Inc to spur competition.

The country’s transportation agency caps the number of ride-sharing vehicles at 65,000 across all brands and reviews the figure every three months.

Reporting by Neil Jerome Morales; Editing by Biju Dwarakanath

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5 Science Books That Will Totally Change How You See the World

We generally think of vision as a simple mirror — there are certain objects out there and our eyes and brains process light to let us see those things — but science shows reality is a lot weirder and more complicated than that. Creative people, for instance, literally see things that others do not, and your mood can affect whether you perceive another face as smiling or sad.

In other words, we don’t perceive the world so much as we construct it. And if we change our emotions or our ideas we quite literally see things differently. If you want a fresh perspective, you can go to new places, or you can look at the same old places with fresh eyes.

If you’re looking to do the latter, Big Think recently put together a great list for you. The roundup of perspective-shifting books on science from writer Derek Beres promises titles that “push boundaries by confronting common wisdom and updating our collective knowledge.” Read them and the world will look strange and new.

“If you want to know why humans behave how we do, start with American neuroendocrinologist Robert Sapolsky’s tour de force,” suggests Beres. (These TED talks on psychology might help too.)

We’ve all likely heard that thanks to cell death and replacement, you have a mostly new body every seven years or so. But it’s not just your skin and bones that replace themselves — your brain actually grows new cells deep into adulthood and can reorganize itself to heal after trauma. That process is explored in depth in this book by poet/psychoanalyst Doidge.

“A clear bright light of optimism shines through every page,” wrote fellow neuroscientist V. S. Ramachandran in his review of the book.

“Psychology professor Lisa Feldman Barrett presents one of the most counterintuitive books in recent memory by claiming that we don’t react to our environment so much as constantly construct our reality. This groundbreaking work will change how you view your inner world forever, empowering you with the knowledge that pretty much every ‘reaction’ can be changed,” raves Beres about this book.

Tech addiction and just how positively — or negatively — our screens are affecting our lives is a hot topic lately. What does science have to say on this issue? To find out look no further than Levitin’s book. It “will change how you view tech–and your life,” promises Beres.

Want an unforgettable illustration of just how powerfully fresh ideas can reshape how we see the world? Then check out what this title does for your view of the humble octopus.

“Australian philosopher and professor Peter Godfrey Smith has exposed the unworldly reality of the octopus in such candor that we’ll never view this incredible cephalopod the same way. In the process he offers keen insights into the development of sentience and intelligence throughout the animal kingdom, humans included,” explains Beres.

If you’re convinced you should add a few more popular science titles to your reading list to spark creativity and awe, then check out the complete Big Think list for five more great suggestions.

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Facebook Is Giving You New Privacy Options, But It’s Clear What It Wants You to Choose

Facebook’s users will soon be asked to make choices about how they want their data to be used, as the social network tweaks its service.

This isn’t about calming people down after the Cambridge Analytica scandal; these are changes that Facebook already has to make in order to comply with the European Union’s sweeping new privacy law, the General Data Protection Regulation (GDPR), and has decided to roll out to users globally.

The big thing here is consent. Facebook will ask users to say whether they agree to it using data from outside sources to target them with ads, and it will check whether it’s okay for Facebook to make use of people’s political, religious, and relationship information.

The company will also ask users whether they’re fine with having their faces analyzed with Facebook’s facial recognition tech. Currently, it only uses this technology outside the EU and Canada—Facebook did use facial recognition on people in the EU before 2012, but in that year privacy regulators cracked down on the practice due to a lack of real consent on the part of users.

“While the substance of our data policy is the same globally, people in the EU will see specific details relevant only to people who live there, like how to contact our Data Protection Officer under GDPR. We want to be clear that there is nothing different about the controls and protections we offer around the world,” Facebook’s chief privacy officer and deputy general counsel, Erin Egan and Ashlie Beringer, wrote in a blog post.

So will these changes make Facebook compliant? That remains to be seen—the EU’s privacy regulators no doubt will be studying them closely—but it certainly seems like Facebook is trying to steer people towards giving it as many permissions as possible.

When presented with options, users will see a bright blue box reading “accept and continue,” and a less conspicuous box above it that reads “manage data settings.”

As TechCrunch’s Josh Constine, a journalist given a preview of the settings at Facebook HQ, wrote: “Facebook’s consent flow starts well enough with the screen above offering a solid overview of why it’s making changes for GDPR and what you’ll be reviewing. But with just an ‘X’ up top to back out, it’s already training users to speed through by hitting that big blue button at the bottom.”

When asked to accept or decline Facebook’s new terms of service, which have been redesigned in line with the GDPR, users will see a big blue button marked “I accept,” while the option to decline the terms is almost invisible, and marked “See your options.” This is unlikely to please the EU regulators.

And if those regulators end up deciding that Facebook still hasn’t fallen in line, the company could face fines as high as 4% of its global annual revenues. Based on last year’s revenues, that would be a whopping $1.6 billion.

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Why Facebook Is Suddenly Courting Conservatives

Facebook has asked conservative groups for their ideas and advice in dealing with the “rush” in Congress to regulate it over privacy.

In an email revealed by Politico, Facebook public policy manager Lori Moylan wrote: “I know it’s not lost on anyone in the free market community that with GDPR on the way in Europe and the rapidly changing discussions here in Washington, there’s an increased chance Washington will rush to regulate, with privacy concerns at the top of the radar.”

“It would be incredibly helpful for our privacy team to hear from you—we’d love to talk through any ideas/advice you have and run our thinking by you as well.”

The EU will on May 25 introduce a new law called the General Data Protection Regulation (GDPR), which gives users many more rights in protecting their privacy online. Facebook is making significant changes to its privacy settings for users as a result, not just in the EU but around the world—including in the U.S.

Facebook (fb) told Politico is it reaching out to groups across the ideological spectrum for help as it faces possible new American legislation in the wake of the Cambridge Analytica scandal. And it makes sense that Moylan, a former employee of the conservative and libertarian American Enterprise Institute and R Street Institute, was the one to get in touch with groups in that ideological range.

Nonetheless, the email is noteworthy in the light of the way conservatives have in recent years been bashing Facebook over its supposed liberal bent.

The onslaught started in 2016, when reports accused the team that assembled Facebook’s Trending Topics feed of having a liberal bias—Facebook conducted an internal investigations and said it found no evidence of bias.

More recently, conservatives have been expressing outrage about the alleged suppression of video bloggers Lynnette Hardaway and Rochelle Richardson, who go by the name Diamond and Silk. Facebook told the pro-Trump sisters that it was limiting the reach of their content because it was “unsafe to the community,” although it later said the email it had sent to them was “inaccurate.”

The Diamond and Silk episode came up repeatedly during Facebook CEO Mark Zuckerberg’s appearance last week before senators and members of congress, an appearance that was prompted by the Cambridge Analytica scandal.

“Why is Facebook censoring conservative bloggers such as Diamond and Silk?” asked Republican representative Joe Barton, to which Zuckerberg admitted his team had made an “enforcement error.” The issue was also raised by Rep. Marsha Blackburn and Senator Ted Cruz, both Republicans.

In reality, Facebook provides a very useful platform for conservatives. According to a report last year, conservative publishers outnumbered liberal publishers on Facebook by three to one, and received much more engagement from users.

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Singapore seeks feedback on proposal to allow Airbnb-style rentals

SINGAPORE (Reuters) – Singapore began seeking public feedback on proposals to allow short-term rentals of private homes such as those on Airbnb.

FILE PHOTO: A woman talks on the phone at the Airbnb office headquarters in the SOMA district of San Francisco, California, U.S., August 2, 2016. REUTERS/Gabrielle Lurie/File Photo

The government is seeking feedback on issues such as what homes should qualify and the responsibilities of short-term accommodation platforms, the Urban Redevelopment Authority said on Monday.

The proposed rules require that a significant majority of owners in a condominium agree to the presence of short-term rentals in their development. The agency also proposed an annual rental cap of 90 days that a property can be used for short-term rentals.

Earlier this month, a Singapore court fined two Airbnb hosts a total of S$60,000 ($45,800) each for unauthorized short-term letting.

Reporting by Aradhana Aravindan; Editing by Stephen Coates

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UK could launch retaliatory cyber attack on Russia if infrastructure targeted: Sunday Times

LONDON (Reuters) – Britain would consider launching a cyber attack against Russia in retaliation if Russia targeted British national infrastructure, the Sunday Times reported, citing unnamed security sources.

A Russian flag is seen on the laptop screen in front of a computer screen on which cyber code is displayed, in this illustration picture taken March 2, 2018. REUTERS/Kacper Pempel/Illustration

Britain’s relations with Russia are at a historic low, after it blamed Russia for a nerve agent attack on former Russian spy Sergei Skripal and his daughter in England, prompting mass expulsions of diplomats.

Russia has denied involvement, and on Saturday also condemned strikes against Syria by Western powers, which Britain took part in.

Cyber security has become a focal point of the strained relations. On Thursday, a British spy chief said that his GCHQ agency would “continue to expose Russia’s unacceptable cyber behaviour”, adding there would be increasing demand for its cyber expertise.

The Sunday Times also said that British spy officials had been preparing for Russia-backed hackers to release embarrassing information on politicians and other high-profile people since the attack on the Skripals.

Reporting by Alistair Smout; editing by Jonathan Oatis

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The Airline Whose Planes Are Said to Break Down In Mid-Air More Often Than Anyone's Is About To Have a Big PR Problem

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

They say you should get out ahead of a bad story.

Present your version before the story hits, so that people can have good feelings about you before aspersions are cast.

I wonder, therefore, what Allegiant Air might do this weekend.

I wrote about this airline a couple of years ago, after it had been accused of having planes that break down four times more often than those of other airlines.

In mid-air, that is.

Of the airline’s 86 planes, it was said that 42 of them had broken down in mid-air the previous year.

The airline fought back and claimed that the accusations were “incendiary.” Indeed, its stock went up 24 percent soon after the original Tampa Bay Times article was published.

Now, though, Allegiant might have a bigger PR problem. 

On Sunday, it’ll be featured in a 60 Minutes segment, one that CBS teases will be twice the usual length.

Here’s the teaser.

Just those 48 seconds suggest that Allegiant should brace for something of calm, considered skewering.

I asked the budget airline what it thought of the upcoming exposé. A spokeswoman told me Allegiant would wait until the segment airs before offering a rebuttal.

One of the main issues with Allegiant’s record of breakdowns is that it flies old planes. Very old planes, some 22 years of age.

Recently, though, it has begun to replace these planes with Airbuses. Indeed, last May was the first time that Allegiant enjoyed the experience of fitting out a new(ish) plane.

The question, then, is how much Sunday’s 60 Minutes piece will reflect the whole current scenario.

The problem for the airline’s PR department, though, is that Allegiant will surely come out looking not so good on one of the most respected news programs in America, one that’s watched by 12 million people.

It’s inevitable, then, that it will instantly be associated with the sort of bad reputation that plagued United Airlines over the last year. 

Worse, perhaps, is the idea that instead of a brutal lack of customer sensitivity — as in the United case — Allegiant might be tarred with the notion that it’s simply an unsafe airline.

On Friday, the airline’s stock began to drop. What might happen to it on Monday?

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Within Facebook, a Sense of Relief Over the Zuckerberg Hearings

About two hours, or 20 percent, into Mark Zuckerberg’s marathon testimony before Congress this week, the Facebook CEO had a slightly awkward exchange with senator John Cornyn (R-Texas). Cornyn wanted to know what happens to people’s data when they delete their accounts. Zuckerberg responded that Facebook deletes their data. But Cornyn continued, “How about third parties that you have contracted with to use some of that underlying information, perhaps to target advertising for themselves?”

To Zuckerberg, this must have been exasperating. As he has said over and over, Facebook doesn’t sell data to advertisers. Doing so could allow outsiders to build competitive ad-targeting products that would undermine Facebook’s business. And so Zuckerberg patiently explained, yet again, how Facebook works. “We do not sell data to advertisers. We don’t sell data to anyone.”

Before the hearings, Zuckerberg’s colleagues in Menlo Park had been nervous. The company had been battered, insulted, and mocked for weeks. The stock price had collapsed. And now Zuckerberg, who isn’t known for his charisma or quick-witted stage presence, would be grilled by professional grillers. The whole thing felt to Facebook roughly like watching the father of the bride at a tense wedding, refilled glass of chardonnay in hand, slide up to the microphone to give a toast. It could go OK. It should go OK. But it might also go horribly wrong.

Once the hearings started, though, according to numerous Facebook employees asked about their reactions, everyone at headquarters started to calm down. For one, it became immediately clear that many of the senators didn’t actually know what Facebook does. “I was personally surprised by how ill-prepared the members were,” one Facebook executive told me. “Once it was clear how bad it was and how mismatched they were, everybody had this awakening: We have made some mistakes, but these guys know even less.” Numerous people at the company passed around a meme in which Chuck Grassley (R-Iowa) putatively asked Zuckerberg, “Mr. Zuckerberg, a magazine I recently opened came with a floppy disk offering me 30 free hours of something called America On-Line. Is that the same as Facebook?”

After Zuckerberg finished his session with Cornyn, John Thune (R-South Dakota) interjected that it was time to take a break. Thune may have had the most power over Facebook in the room—he oversees the Senate Commerce Committee, which in turn helps oversee the Federal Trade Commission—and he may also have the best jawbone. But Zuckerberg responded that, actually, no, he was fine to keep going. “You can do a few more,” Zuckerberg said. He wasn’t worn down.

In Menlo Park, there were cheers from some employees. According to one who was watching a TV nearby, “It was like magic.” At another spot in Facebook’s offices where senior executives had gathered, people started laughing and smiling. The toast was going just fine. Nothing was going to go horribly wrong. Meanwhile, employees had their eyes on the stock ticker, which, for the first time in a while, had started to turn upward.

Shortly thereafter, Dean Heller (R-Nevada) asked a question without an easy answer. “Do you believe you’re more responsible with millions of Americans’ personal data than the federal government would be?”

Zuckerberg had a choice: He could weasel his way out and say the answer is hard. He could throw out something patriotic and muddled. But he decided to do something simple. He just said, “Yes.” Then he paused and moved on to talking about something else.

It was another moment of magic, a Facebook employee said. “The mood totally changed internally.”

Some Bad Reviews

Zuckerberg didn’t impress everyone this week. The New York Post dubbed him “The Social Nitwit.” At the TED conference, Facebook was hammered repeatedly, and one speaker, Jaron Lanier, declared, “I don’t think our species can survive unless we fix this.” People made fun of him for sitting on what was dubbed a booster seat. Those perhaps seeing Zuckerberg for the first time were surprised that he can appear like a humanoid. Trevor Noah said Zuckerberg must “have sent a robot version of himself.” Jimmy Kimmel declared that he “almost even managed to replicate a human smile.”

It’s unlikely, though, that Zuckerberg cared much about the cheap shots and the jokes. He surely noticed that the value of the company rose by about $17 billion during the hearings, making him more than $2.5 billion richer. And in some ways, the most important part of the hearings was to calm his restive employees. In recent weeks, working at Facebook has come to seem a bit like working at Goldman Sachs in 2008. The most important challenge for Facebook is employee retention: Despite the billions the company makes and the kombucha shots it serves on the corporate roof, competition for engineers in Silicon Valley is severe. In recent weeks, Facebook has seemed weak and easy to raid. One employee even boasted publicly of quitting.

And if your metric is employee morale, Zuckerberg’s testimony was a success. Early in the Senate hearings, Orrin Hatch (R-Utah) pushed Zuckerberg on why the company doesn’t have a subscription model. Zuckerberg responded carefully and cautiously. Hatch then asked, “Well, if so, how do you sustain a business model in which users don’t pay for your service?”

Zuckerberg responded, again, with a smile: “Senator, we run ads.”

Since then, in Menlo Park, numerous Facebook employees have repeated the mantra in meetings, joking, “Senator, we run ads.”

How the Ad Business Works

That isn’t to say the hearings went over perfectly, even at home. One mystifying thing to employees was that Zuckerberg frequently seemed to come up short when asked for details about the advertising business. When pressed by Roy Blunt (R-Missouri)—who, Zuckerberg restrained himself from pointing out, was a client of Cambridge Analytica—Facebook’s CEO couldn’t specify whether Facebook tracks users across their computing devices or tracks offline activity. He seemed similarly mystified about some of the details about the data Facebook collects about people. In total, Zuckerberg promised to follow up on 43 issues; many of the most straight-ahead ones were details on how the ad business works. It’s possible, of course, that Zuckerberg dodged the questions because he didn’t want to talk about Facebook’s tracking on national TV. It seemed more likely to some people on the inside, however, that he genuinely didn’t know.

Why was this? Inside Facebook it was simply seen of a sign of something that many of his colleagues know: Zuckerberg is much more interested in product and engineering than he is in the business. His former speechwriter Kate Losse told me that she thinks he did well. But she too was struck by his inability to answer questions about the details of the way Facebook makes most of its money. “I genuinely believe that he doesn’t care about ads.”

Zuckerberg’s marathon testimony also didn’t close out questions about some of his company’s biggest threats. Zuckerberg did not give thorough answers (and the congressmembers did not ask thorough questions) about the extent of Russian operations on the platform. It is still entirely possible that we will, in due course, see the threads of the Cambridge Analytica and Russia stories converge. If that happens, the company will have to deal with something much darker than even the mess of the past few weeks. It will mean, in short, that the data—and even the private messages—of trusting Facebook users ended up in the hands of a foreign adversary trying to manipulate a presidential election.

And there is still the looming issue of the 2011 FTC consent decree, and whether Facebook violated its terms by not acting reasonably to protect people’s privacy after it learned about Cambridge Analytica’s data gathering. An investigation is ongoing, which Zuckerberg did little to put to rest. It could cost the company billions.

Still, back at home, the troops were happy. On Thursday, the day after the hearings ended, Sheryl Sandberg was supposed to address the staff in a company-wide Q&A. Instead, Zuckerberg returned to Menlo Park and answered questions in person. “It was a Mark lovefest,” one employee said.

Facing Up

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Weibo to ban gay, violent content from platform

SHANGHAI (Reuters) – China’s Sina Weibo will remove gay and violent content, including pictures, cartoons and text posts, during a three-month clean-up campaign, the microblogging platform said.

FILE PHOTO – A man holds an iPhone as he visits Sina’s Weibo microblogging site in Shanghai May 29, 2012. REUTERS/Carlos Barria

Friday’s announcement comes amid a clampdown targeting content across social media platforms as China’s leaders look to tighten their grip on a huge and diverse cultural scene popular with the young.

Weibo announced the move on its official administrator’s account, saying the action aimed to comply with China’s new cyber security law that calls for strict data surveillance.

The post drew more than 24,000 comments, was forwarded more than 110,000 times, and prompted users to protest against the decision, using the hashtag “I am gay”.

“I am gay and I’m proud, even if I get taken down there are tens of millions like me!,” said one poster, who used the handle “rou wan xiong xiong xiong xiong” and posted a photo of himself.

Some posts were quickly blocked by the platform, with the message displayed that they contained “illegal content”.

This week, news and online content portal Toutiao, which is luring investors, was forced to pull a joke sharing app after a watchdog denounced its “vulgar and improper content”.

Award-winning gay romance “Call Me By Your Name” was also dropped from a Chinese film festival last month. Homosexuality is not illegal in China, but activists say the conservative attitudes of some parts of society have prompted occasional government clampdowns.

Weibo has so far cleared 56,243 pieces of content, shut 108 user accounts and removed 62 topics considered to have violated its standards, it added.

Reporting by Brenda Goh; Editing by Clarence Fernandez

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How Lyft, Mastercard, and Drone Companies Are Experimenting With Artificial Intelligence

Artificial intelligence technologies aren’t just being used to help computers more quickly recognize dogs in photos.

Several businesses like Mastercard and fast-growing drone companies are exploring ways that AI technologies like machine learning can better verify people’s identities and process insurance claims.

Executives from companies like ride-hailing company Lyft and German energy company Innogy, a subsidiary of energy giant RWE, explained different ways they are exploring AI technologies on Thursday at the Bootstrap Labs Applied AI Conference in San Francisco.

Here’s some interesting ways these businesses are using the technology.

1. Insurance Companies Want to Speed Up Claims Processing Using Drones

During the past few years, insurance companies like Allstate have been using drones to inspect homes for storm damage. One reason is that inspecting home rooftops is one of the most dangerous jobs, said drone startup Kespry CEO George Mathew.

Following hurricanes Harvey and Irma last year, Kespry helped insurance companies that he did not name take aerial photos of damaged home rooftops. After snapping the pictures, the drone wirelessly transmits the images to data centers, where machine learning technology helps identify damage to homes.

Currently, it takes about 75 minutes to process a claim, but insurance companies want to trim it to 25 minutes per drone flight, Mathew explained. To things speed up, Matthew is considering installing the same computer chips used to improve video game visuals, GPUs, into the company’s drones because they are good with handling machine learning tasks.

2. Using Artificial Intelligence to Power the Electrical Grids of the Future

The future, according to German energy company Innogy executive Thomas Birr, may involve powerful electrical grids that are linked to everything from Internet-connected dishwashers to solar panels to electric cars.

As more devices are connected online, Birr says that electrical grids will need artificial intelligence technologies to more efficiently distribute power. He wants to avoid situations in which several people charging their electric cars on the same city street may overload the power grid.

For example, using artificial intelligence technologies, Birr said that energy companies could better predict the weather and notify customers who have Internet-connected electric cars when it is a good time to charge their vehicles without overloading the system.

3. Artificial intelligence Supercharging Cybersecurity

Will Summerlin, the founder of Pinn Technologies, is exploring how AI can be used to prevent fraud and better verify customer identities.

Consider modern-day smartphones that are outfitted with sensors that can capture information like how people swipe their display screens or hold their devices. By correlating that data with information like a person’s palm print or other so-called biometric data, financial services companies could better verify their identity when making online payments.

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It’s an idea that Mastercard security executive Chris Merz acknowledged that his company is looking into.

4. One Reason Lyft Is Testing Self-Driving Cars

One reason ride-hailing company Lyft is testing self-driving cars is to help the company expand into more rural areas.

Nadeem Sheikh, the vice president of Lyft’s self-driving car program, said that it’s currently too expensive for Lyft to expand in places like rural Wisconsin, where his 80-year-old father lives. His elderly father is unable to drive like he once was able to, which has caused his parents to see their friends as often as they once did.

If autonomous car technology becomes safe enough, however, Lyft could afford to debut its ride-sharing service in places like where his father lives, Sheikh believes. By that time, Lyft may have a ride-sharing service that people subscribe to, similar to Netflix, Sheikh explained.

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Mark Zuckerberg's Congress Testimony Day Two: Republicans and Democrats Diverge

It was about three hours into Facebook CEO Mark Zuckerberg’s testimony to the House Energy and Commerce Committee on Wednesday, when all of the attention quickly shifted from Zuckerberg’s glistening brow to the exhibit looming over Missouri Republican Billy Long’s head.

“Who are they?” Long asked, referring to the two women whose larger-than-life faces filled the giant poster board.

Zuckerberg paused, before offering, almost in question, “I believe…is that Diamond and Silk?”

Of course, Zuckerberg by then knew them well. It wasn’t the first time members of Congress had asked him about the two Trump-supporting internet celebrities that day, and it wouldn’t be the last. Again and again, Republican members of the committee asked the embattled founder why Diamond and Silk recently received a message explaining that their Facebook Page’s reach was being throttled because their content was considered “unsafe to the community.”

“What is unsafe about two black women supporting President Donald J. Trump?” Long asked accusingly.

If Zuckerberg sounded befuddled in response, perhaps it was because he expected to discuss Facebook’s recent data privacy scandal on Capitol Hill, not the particulars of any one Facebook Page. Diamond and Silk’s names don’t appear to be in the notes Zuckerberg used to prepare for his face time with Congress—the same goes for their real names, Lynnette Hardaway and Rochelle Richardson, respectively. Neither does another word: censorship. And yet, over the course of the five-hour hearing Wednesday, it became clear that Zuckerberg was being grilled as much for the perceived suppression of conservative thought as he was for lax data policies. In a way, Zuckerberg was testifying before two simultaneous, but distinct, hearings: one helmed by privacy advocates on the left, and another by free-speech defenders on the right.

From the start, Wednesday’s interrogation of Zuckerberg proved more partisan than the joint hearing of the Senate he attended the day before. Ranking member Frank Pallone, Jr. skewered Republicans in his opening remarks for continuing to “block or even repeal the few privacy protections we have.” Meanwhile, Republican representatives accused liberal lawmakers of hypocrisy for expressing so much outrage about Cambridge Analytica. “They were high-fiving what took place in 2012 with President Obama,” said Michigan’s Tim Walberg, referring to the Obama campaign’s own use of Facebook data in political advertising.

With these divisions laid bare, lawmakers’ questions mainly came down along party lines. Democrats hit Zuckerberg with a fresh round of questions about Facebook’s fundamentals, echoing their counterparts in the Senate on Tuesday. Their limited patience flustered Zuckerberg, as he struggled to provide short answers about whether Facebook collects browsing data on its users (it does) or collects data about people who don’t have Facebook profiles (it does that, too). Pallone, in particular, pressed Zuckerberg to say whether Facebook is prepared to change its default user settings to minimize “to the greatest extent possible” the collection of user data. “Congressman, this is a complex issue that I think deserves more than a one-word answer,” Zuckerberg replied, to Pallone’s disappointment. Zuckerberg said he’d follow up.

When it was their turn at the microphone, Republican lawmakers took a markedly different approach, zeroing in on what they see as pervasive censorship of conservatives at Facebook. It didn’t arise out of thin air. Facebook first began facing these questions in early 2016, when members of Facebook’s Trending Topics moderation team said the company wasn’t featuring news from conservative outlets the same way they featured mainstream or liberal outlets. A deafening outcry from the right culminated in Zuckerberg calling on prominent conservatives to meet with him in Palo Alto.

For a time, the topic appeared to dissipate, amid new crises like the rise of fake news and the infiltration of Facebook by Russian trolls.

But this week, suspected political bias at Facebook became a focal point once again, with Diamond and Silk at the epicenter. It first came up sparingly during Tuesday’s hearing, when senators Ted Cruz and Ben Sasse pressed Zuckerberg on how the platform handles religious or traditionally conservative content. But it was far more central on Wednesday. Early in the hearing, Texas representative Joe Barton read a question he received—yes, through Facebook—from a constituent. “Please ask Mr. Zuckerberg why is Facebook censoring conservative bloggers such as Diamond and Silk?” he read. “Facebook called them unsafe to the community. That is ludicrous. They hold conservative views. That isn’t unsafe.”

“Congressman, in that specific case, our team made an enforcement error, and we’ve already gotten in touch with them to reverse it,” Zuckerberg replied frankly, a defense he would return to repeatedly. Diamond and Silk later denied hearing from Facebook.

Later on, Marsha Blackburn of Tennessee also broached the topic of free speech. “Do you subjectively manipulate your algorithms to prioritize or censor speech?” she asked, prompting Zuckerberg to launch into a lengthy spiel about how certain posts, like terrorist content, have to be censored.

“Let me tell you something right now: Diamond and Silk is not terrorism,” Blackburn retorted.

Conservative lawmakers had broader suppression concerns than just Diamond and Silk’s status, and some did express serious qualms over Facebook’s privacy problems. But the divergent lines of questioning underscored that the House remains divided in its view of Facebook and how to fix it—just as it is about almost every policy issue. Both sides seem unhappy, but they also seem woefully unprepared to work together to do anything about it, choosing instead to form protective circles around favored issues.

The conversation about ideological censorship on Facebook is a critical one. Even Pallone acknowledged that in an interview following the hearing, “I think it’s a legitimate concern about purging content.”

And yet, no conversation about censorship on Facebook is complete without mentioning how Facebook may have to give some countries the ability to curtail speech as the company pushes into places like China. Remarkably, over the course of five hours focused in large part on censorship, that never came up. On Wednesday, the free speech crusaders were mostly self-concerned. Listening to it all, you got the sense that Diamond and Silk’s recent squabble has been a frequent topic of conversation in conservative circles on Fox News—or, you know, on Facebook.

Mr. Zuck Goes to Washington

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Here’s Why Facebook Just Gained $21 Billion in Value

Facebook[/f500link] CEO Mark Zuckerberg faced off with a room full of senators on Tuesday in what many believed would be a tough grilling about privacy in the wake of news that political consulting firm Cambridge Analytica had obtained data about 87 million Facebook users.

But investors concluded that Zuckerberg responded to the challenge better than expected, sending the company’s shares up 4.5% to $165, their biggest one-day gain in nearly two years.

With the gain, Facebook added $21.3 billion in market value to $479.4 billion. That reverses some of the company’s 15% in lost valuation since reports emerged in March, when the news about Cambridge Analytica first erupted.

Of course, some of the rise could be also be attributable to the general market optimism on Tuesday after China appeared more conciliatory about a potential trade war. The Nasdaq Composite rose 2%.

Rather than squirming in his seat during the questions about data privacy and Russian-backed political ads, Zuckerberg appeared poised and in control on Tuesday. Instead, it was the lawmakers who appeared to have forgotten their homework.

“How do you sustain a business model in which users don’t pay for your service?” Sen. Orrin Hatch (R-UT) asked Zuckerberg, apparently unaware how Facebook made money. Zuckerberg deadpanned, “Senator, we run ads,” eliciting responses like the following on Twitter:

Facebook’s stock gains came despite lawmakers having plenty of ammunition against the company in addition to the Cambridge Analytica scandal. The honeymoon period between Silicon Valley and Washington D.C. has been fading quickly over the past year and a half, with lawmakers questioning to what extent Facebook had influenced the outcome of the presidential election by allowing fake news and Russian-backed political ads onto its platform. Critics also question whether Facebook had censored some conservative content in favor of content more favorable to liberals.

Shares of Twitter also received a boost on Tuesday, rising as much as 7%, or $878.6 million in value for a total market capitalization of $22.2 billion.

Still, Facebook isn’t out of the woods yet. Shares of the company are still about 11% below their pre-Cambridge Analytica price.

Meanwhile, it still remains to be seen whether lawmakers may seek to impose new regulations on tech firms. Both Twitter and Facebook said Tuesday ahead of the hearing that they would support the Honest Ads Act, a proposed piece of legislation that would require tech firms that sell ads to disclose how much they are paid for placing political ads on their platform.

Senators have also urged Google to support the act, although the tech giant has yet to comment. Shares of Google were up 1.5% on Tuesday, roughly in line with the wider market.

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Facebook’s Most Popular Black Lives Matter Page Was Fake and Had Ties to a White Australian Man

The largest Black Lives Matter page on Facebook was discovered to be a fake with ties to online fundraisers that raised nearly a $100,000 — some of which was transferred to Australian bank accounts — raising questions over how Facebook verifies the identity of its pages.

The page bore the same exact title of the actual organization but had more than twice the amount of followers — nearly 700,000 in total — according to a report from CNN. The outlet found the page was connected to a “middle-aged white man in Australia” and used services such as PayPal, Patreon and Donorbox to collect money that was intended to be for Black Lives Matter-affiliated causes in the U.S.

PayPal and Patreon suspended the campaigns upon learning of the page’s connections via CNN, the outlet reports. Donorbox and another fundraising platform, Classy, had already done so.

It took nearly a week for Facebook to suspend the page after being contacted by CNN, according to the outlet. The incident comes days before Facebook CEO Mark Zuckerberg is set to testify in front of Congress in the wake of the Cambridge Analytica data scandal that brought to light Facebook’s difficulty in protecting its users’ personal data.

The fake Black Lives Matter page was linked to Ian Mackay, a National Union of Workers official in Australia, according to CNN. The union did not immediately respond to a request to comment from Fortune.

Last week, Facebook announced plans to ensure verification of its pages with a large number of followers. “This will make it much harder for people to administer a Page using a fake account, which is strictly against our policies,” Facebook wrote in a statement. “We will also show you additional context about Pages to effectively assess their content. For example, you can see whether a Page has changed its name.”

Fortune has reached out to Facebook for comment and will update this story when the company responds.

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Arizona election database targeted in 2016 by criminals, not Russia: source

WASHINGTON (Reuters) – A hack on an Arizona election database during the 2016 U.S. presidential campaign was carried out by suspected criminal actors and not the Russian government, a senior Trump administration official told Reuters on Sunday.

A woman arrives at a polling site during the U.S. presidential election in Phoenix, Arizona, U.S., November 8, 2016. REUTERS/Nancy Wiechec

The official was responding to a report on CBS News’ “60 Minutes” citing an internal government document that Russian hackers successfully infiltrated computer systems associated with at least four U.S. states, including Arizona, leading up to the 2016 election.

Hackers working for the Kremlin breached systems in Illinois, a county database in Arizona, a Tennessee state website and an information technology vendor in Florida, according to the previously undisclosed Oct. 28, 2016, assessment from the Department of Homeland Security, according to the program.

But an administration official, speaking on condition of anonymity, said media reports had at times relied on outdated or incomplete information and conflated criminal hacking with Russian government activity. The cyber attack on Arizona was not perpetrated by the Russian government, the official said.

Media outlets including Reuters reported in August 2016 that the Federal Bureau of Investigation had detected Russian breaches of voter registration systems in Arizona and Illinois.

Reuters was not immediately able to confirm the authenticity of the DHS assessment, which would have been issued less than two weeks before the election. A DHS representative could not immediately be reached for comment.

FILE PHOTO – The U.S. and Arizona flags flutter in the wind in Fountain Hills, Arizona, U.S. on September 30, 2016. REUTERS/Ricardo Arduengo

U.S. intelligence agencies last year accused Russia of using hacking, false information and propaganda to disrupt the 2016 election and try to ensure Republican Donald Trump defeated Democrat Hillary Clinton. Russia denies interfering in the election. Trump has denied any collusion between his campaign and Moscow.

In June 2017, the news website The Intercept published a classified U.S. intelligence document that described a spear-phishing attack waged by Russian military intelligence on a U.S. election software company based in Florida.

The alleged breach of Tennessee’s state website had not been previously reported.

U.S. officials have repeatedly said publicly that at least 21 of the 50 states had experienced initial probing of their election systems from Russian hackers in 2016 and that a small number of networks were compromised.

While DHS has said there is no evidence any votes were actually altered, it has not publicly provided full details regarding which states experienced compromised systems or how deeply hackers penetrated them.

Americans vote in November in congressional elections, which U.S. intelligence officials have warned in recent weeks could be targeted by Russia or others seeking to disrupt the process.

Reporting by Dustin Volz; Editing by Peter Cooney

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Buy This Oversold Blue-Chip Bank With A 5.4% Dividend

On April 4th, Bloomberg reported that HSBC (HSBC) is considering an exit or sale from smaller consumer operations such as Bermuda, Malta, and Uruguay. In addition, the bank plans to expand its asset management division and is currently looking at a potential merger with a rival.

In our view, the news confirms that the group’s management will remain committed to transforming HSBC into a more focused and more efficient banking institution. More importantly, even though HSBC’s operations in Bermuda, Malta, and Uruguay are small compared to the group’s total assets, we believe a potential sale of these units would have a positive impact on the bank’s capital position, supporting stock buybacks and special dividends.

The recent rise in LIBOR should support HSBC’s NIM

LIBOR has grown by more than 130bps since the beginning of the year. Such a notable increase is currently among the most widely discussed topics. Several analysts suggest that this is an early indicator of a bear market or even a severe financial crisis. In our view, the increase has been driven by idiosyncratic reasons, in particular, higher supply of short-term Treasuries and lower demand from corporates due to the US tax reform.

Source: Bloomberg

With that being said, despite the reasons of the rise in LIBOR, HSBC should benefit from higher short-term rates. As shown below, the bank discloses its NII (net interest income) sensitivity to a shift in yield curves. However, this analysis is based on a parallel shift, while yield curves in most global economies continue to flatten.

Source: Company data

What is important here is that HSBC has a variable-rate loan book. More importantly, a significant part of its credit portfolio is priced off short-term rates. This suggests to us that the rise in LIBOR should be a positive for the bank’s asset yields and its NIM.

Source: Company data

One may argue that higher short-term rates will also affect HSBC’s funding costs, especially given that wholesale sources and corporate deposits are generally tied to the short-end of the yield curve. The caveat here is that HSBC has a unique funding position. As shown below, the bank has one of the lowest LtD (loans-to-deposits) ratios among European banks. In other words, HSBC does not need expensive deposits in order to fund its loan growth. HSBC had been struggling from abundant liquidity for many years as a low interest rate environment has virtually crippled its NIM. Given that rates have started rising, the bank’s excessive liquidity is gradually turning into a positive that will protect HSBC’s NIM in a rising interest rate environment.

European banks: Loans-to-deposits ratio

Source: Bloomberg, Renaissance Research

Saudi Aramco’s IPO

Saudi Aramco (Private:ARMCO) has appointed HSBC as an adviser on its much-awaited IPO. JPMorgan (JPM) and Morgan Stanley (MS) will also act as consultants. As such, HSBC is the only non-US bank that will have a crucial role in Aramco’s IPO.

Anecdotal evidence suggests that while many US and UK investors are skeptical on Saudi Aramco’s IPO, as state-owned oil companies have been underperforming their private peers for quite a while now, Chinese investors would be interested in Aramco’s shares. Hong Kong Exchanges and Clearing (OTCPK:HKXCF) (OTCPK:HKXCY) plans to introduce the so-called Primary Connect program, which would allow mainland Chinese investors to participate in initial public offerings on the HKEX.

We believe Aramco’s IPO would strengthen HSBC’s position in the region. In our view, it would also underpin the fact that HSBC is a global banking group with unique access to Chinese investors.

Buybacks and dividends

HSBC pays a $0.51 dividend per ordinary share or $2.55 per ADR. That corresponds to a 5.4% dividend yield, based on the current ADR price. We believe that a 5.4% dividend from a global blue-chip bank with a strong presence on Asian markets looks very attractive.

Additionally, it is also worth noting that the bank has temporarily suspended its buyback program due to technical reasons related to the issuance of additional Tier 1 capital. We expect HSBC to announce a new buyback in the second half of 2018.

Final thoughts

The shares have fallen by almost 15% since January, and we believe this sell-off represents a great opportunity to buy a global bank with an attractive dividend yield. HSBC has excess capital, thanks to its US unit, and, as a result, we expect the bank to announce a new buyback program in the second half of the year.

If you would like to receive our articles as soon as they are published, consider following us by clicking the “Follow” button beside our name at the top of the page. Thank you for reading.

Disclosure: I am/we are long HSBC, JPM.

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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California proposes new rules for self-driving cars to pick up passengers

SAN FRANCISCO (Reuters) – California’s public utility regulator on Friday signaled it would allow self-driving car companies to transport passengers without a backup driver in the vehicle, a step forward for autonomous car developers just as the industry faces heightened scrutiny over safety concerns.

FILE PHOTO: A Waymo self-driving vehicle is parked outside the Alphabet company’s offices where its been testing autonomous vehicles in Chandler, Arizona, U.S., March 21, 2018. REUTERS/Heather Somerville

The California Public Utilities Commission, the body that regulates utilities including transportation companies such as ride-hailing apps, issued a proposal that could clear the way for companies such as Alphabet Inc’s (GOOGL.O) Waymo and General Motors Co (GM.N) to give members of the public a ride in a self-driving car without any backup driver present, which has been the practice of most companies so far.

FILE PHOTO: The GM logo is seen at the General Motors Warren Transmission Operations Plant in Warren, Michigan, U.S., October 26, 2015. REUTERS/Rebecca Cook/File Photo

The California Department of Motor Vehicles had already issued rules allowing for autonomous vehicle testing without drivers, which took effect this week. The commission said its proposed rules complement the existing DMV rules but provide additional protections for passengers.

The proposal, which is set to be voted on at the commission’s meeting next month, would clear the way for autonomous vehicle companies to do more testing and get the public more closely acquainted with driverless cars in a state that has closely regulated the industry. It also comes as regulators across the country are taking a harder look at self-driving cars in the aftermath of a crash in Arizona that killed a pedestrian.

Last month, an Uber SUV operating in self-driving mode struck and killed a 49-year-old woman in the first known fatality caused by a driverless car. Uber [UBER.UL] suspended its self-driving car operations, and the crash remains under investigation by federal safety officials.

The proposed California rules require that companies hold an autonomous vehicle testing permit from the DMV for at least 90 days before picking up passengers. The service must be free – companies are not allowed to accept payment from passengers – passengers must be 18 years or older and no airport trips are allowed.

The proposal also mandates that companies file regular reports to regulators including the number of miles their self-driving vehicles travel, rides they complete and disabled passengers they are serving.

Reporting by Heather Somerville; Editing by James Dalgleish

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Virgin Galactic Just Completed Its First Powered Test Flight Since Deadly 2014 Crash

Virgin Galactic is “back on track” after completing its first rocket-powered test flight since a fatal crash in late 2014.

The spaceflight company’s VSS Unity vehicle on Thursday successfully completed its first powered test flight, Virgin Galactic tweeted. During the mission, pilots David Mackay and Mark Stucky brought the ship to its top speed and altitude before guiding it back to the company’s California spaceport, Space.com reports.

After the voyage, Virgin Group founder Richard Branson tweeted that “space feels tantalisingly close now.”

VSS Unity has completed a series of unpowered test flights over the past year, according to Space.com, but Thursday’s mission marks Virgin Galactic’s first return to powered flight since the VSS Enterprise crashed in 2014, killing one of its pilots. The company will continue to run progressively longer test trips throughout 2018, Space.com reports, with the goal of launching commercial service by the end of the year.

Virgin Galactic aspires to “open space for everyone” and use “space for good while delivering an unparalleled customer experience,” according to its website. The VSS Unity and its sister spaceships will eventually “offer everyone the opportunity to become private astronauts and experience the wonder of space for themselves,” the company says.

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Spotify shares attract all ages, not just Millennials

NEW YORK (Reuters) – The buzzy debut of Spotify Technology SA (SPOT.N) on the New York Stock Exchange on Tuesday drew retail investors across generations, not just the Millennials who make up the largest proportion of the music streaming service’s customer base, retail brokerages said on Wednesday.

FILE PHOTO: The Spotify logo is displayed after the stock began selling as a direct listing on the floor of the New York Stock Exchange in New York, U.S., April 3, 2018. REUTERS/Lucas Jackson

Spotify’s listing was hotly followed, as it went public via the unusual method of a direct listing, without selling new shares. There was demand for the stock, and shares ended up 12.9 percent on their first day of trade on the New York Stock Exchange. On Wednesday, the shares ended the day’s session at $145.87, down 2.1 percent from Tuesday’s close.

Social media platform Snap Inc’s (SNAP.N) high-profile IPO last year had been notable for being popular with Millennials, the primary user base for the company’s mobile app Snapchat. But though Millennials are also a key demographic for Spotify, the Swedish company’s listing did not draw disproportionate interest from that generation.

Demand was seen across age groups, according to brokerages Fidelity and TD Ameritrade.

“There’s good interest in it,” said J.J. Kinahan, TD Ameritrade’s chief market strategist, who is based in Chicago. “It’s pretty well split across age groups.”

Fidelity said among its customers, baby boomers were slightly more active in trading Spotify shares than Millennials or members of Generation X. Baby boomers made nearly one-third more trades than Millennials and 20 percent more trades than members of Generation X. A similar pattern holds for other tech IPOs, a Fidelity spokesman said.

Retail investor behavior indicated some caution about jumping in.

On StockTwits, a social media platform whose users are mostly retail investors, only 40 percent of members were bullish on Spotify ahead of the debut. Negative sentiment toward the IPO rose as the date approached and the expected trading price climbed, said Pierce Crosby, StockTwits director of business development, based in New York.

“Our community is as bearish as they’ve ever been (about Spotify),” Crosby said.

On the site, users posted messages expressing concerns about Spotify’s lack of profits and competition from companies such as Apple Inc (AAPL.O).

High-profile IPOs of companies associated with the tech sector have had a mixed track record in the past year. Shares of MuleSoft Inc (MULE.N) and Roku Inc (ROKU.O), which went public in March 2017 and September 2017, respectively, have climbed more than 100 percent since those companies’ IPOs. On the other hand, shares of Snap and Blue Apron Holdings Inc (APRN.N) have fallen below their IPO prices.

Individual investors who spoke with Reuters similarly expressed reservations about buying Spotify shares.

“I think a lot of similarly situated retail investors still view many of the VC-backed, marketplace tech companies as destined IPO flops,” said Layla Tabatabaie, an entrepreneur and advisor to tech startups who lives in New York.

Others said they would only consider buying the stock at a lower price.

“It’s certainly a strong company in regards to the service it offers,” said Jonathan Johnson, a relationship banker in Portland, Oregon. “I’d consider buying it but not at these (price) levels.”

Reporting by April Joyner; additional reporting by Sinéad Carew in New York; Editing by David Gregorio

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This Dividend Stock Gave Up Just 30% Of The S&P 500's Value Collapse

Here we go again. The Dow Jones Industrials (DIA), midday Monday, was down over 720 points, and the broader S&P 500 index (NYSEARCA:SPY) was down more, falling 3.16%.

Tech stocks traded down hard again Monday, following last weeks’ debacle in that space. Facebook (FB) was down a further 3.3% putting it solidly in bear market territory as market participants believe the company has not done enough to assure users that their identities and data will be secured to give users the privacy they feel entitled to.

Amazon, Inc. (AMZN) fell over 6% as a presidential tweet storm continued, accusing Amazon of using the Postal Service as its delivery boy. Most economists believe that the volume of business that Amazon gives to the postal service actually keeps it in business.

The trade war escalated Monday as China said it would impose 25% tariffs on pork products and recycled aluminum. 10% tariffs would be imposed on some 120 other products imported from the U.S., including fruits, nuts and assorted other goods. Though the total of goods that would see tariffs imposed amounted to just $3 billion out of hundreds of billions shipped to China, it was seen as a retaliation to Trump’s tariffs on $60 billion of imported steel and aluminum from China. In trade wars, one thing can easily lead to another. If one country doesn’t blink first, we might be on the brink of a full-scale, worldwide trade war.

The Ballast Afforded by Dividend Stocks

Dividend stocks, which give investors a cash back-up of dividend income every month or quarter, are once again proving their resiliency. As the 10-year Treasury bond rises and the interest rate declines another 2 basis points, investors are again seeking the risk-off, safety trade.

Our RODAT Subscriber Portfolio has given up just 36% of the market value that the S&P 500 has. It, and the Fill-The-Gap Portfolio have retreated just 1.14% and 1.3% respectively.

Right on schedule, and regardless of the market volatility swirling around them, several of our holdings paid their dividends Monday.

Image result for iron mountain logo

Iron Mountain Latest Developments

Expanding its business reach, beyond the collection, storage and shredding of company documents, Iron Mountain (IRM) on March 23 announced its Crozier Fine Arts subsidiary was acquiring Artex Fine Arts Services for undisclosed terms.

Artex is a fine arts transportation and collection management company.

Artex CEO John K. Jacobs will join the Crozier team.

In a further development, on March 27, Goldman Sachs initiated Iron Mountain at a Buy rating with a $41 price target, a 31% upside to the March 26th closing price.

The initiation came as analyst George Tong launched coverage on American business services with an Attractive view due to “idiosyncratic opportunities” in the expanding service economy.

Iron Mountain shares were up 2% premarket to $31.90 on that news.

About Iron Mountain

Iron Mountain Incorporated is a global business dedicated to storing, protecting and managing, information and assets.

Organizations across the globe trust us to store and protect information and assets. Thousands of local enterprises work with us, as does almost all of the FORTUNE 1000. From critical business information to geological samples, works of fine art to original recordings of treasured artists, our customers can rely on us to protect what they value and help unlock its potential.

source: IRM Website

The Dividend Perspective

Market prices go up and they go down. The last several weeks has seen the return of tremendous volatility as geopolitical events trigger wide swings coming off of investors’ emotional reactions to them.

500 and 600 point swings are becoming increasingly common. The main way dividend investors can steady their nerves is to try to tune out the noise and stay focused on the ever-growing pile of dividends that continue to accumulate in their accounts on a regular basis. The proactive way is to search out those names on their watch lists that are presenting accidentally high yield in response to their compressed valuations.

The Fill-The-Gap Portfolio

The FTG Portfolio contains a good helping of dividend growth stocks, like AT&T (T). It was built with the express purpose of benefiting from this defensive strategy.

Three years ago, on December 24, 2014, I began writing a series of articles to demonstrate the real-life construction and management of a portfolio dedicated to growing income to close a yawning gap that so many millions of seniors and near-retirees face today between their Social Security benefit and retirement expenses.

The beginning article was entitled “This Is Not Your Father’s Retirement Plan.” This project began with $411,600 in capital that was deployed in such a way that each of the portfolio constituents yielded approximately equal amounts of yearly income.

The FTG Portfolio Constituents

Constructed beginning on 12/24/14, this portfolio now consists of 22 companies, including AT&T Inc. (T), Altria Group, Inc. (MO), Consolidated Edison, Inc. (ED), Verizon Communications (NYSE:VZ), CenturyLink, Inc. (NYSE:CTL), Main Street Capital (MAIN), Ares Capital (ARCC), British American Tobacco (BTI), Vector Group Ltd. (VGR), EPR Properties (EPR), Realty Income Corporation (O), Sun Communities, Inc. (SUI), Omega Healthcare Investors (OHI), W.P. Carey, Inc. (WPC), Government Properties Income Trust (GOV), The GEO Group (GEO), The RMR Group (RMR), Southern Company (SO), Chatham Lodging Trust (CLDT),Iron Mountain, Inc. (IRM) and Roku, Inc. (ROKU).

Dividend growth investors like us have less to fear from the constant ups and downs in the prices of our stocks. In fact, if dividend income is our main focus, we are basically insulated from the fears that constantly weigh on price-focused investors, especially during scary corrections we are currently experiencing, or bear markets.

I know that some readers’ eyes glaze over on some charts and tables and they tune out. But if you devote just a minute and look at this chart, it’ll be well worth your time. We have enjoyed nine very recent dividend raises in the FTG Portfolio.

table credit: the author

Your Takeaway

As I write this, the Dow Jones Industrial Average has fallen 3300 points from its recent record high. The S&P 500 on Monday afternoon was off 3.16%. By contrast, Iron Mountain was down only 1.1%.

1.1%/ 3.16% = .30, or 30%

To be clear, investors in search of the reliability and durability of dividends kept a floor on the company’s price, such that the price declined only 30% as much as the S&P 500 index.

To illustrate further, had you invested $10,000.00 this past Thursday (the market was closed Friday for the holidays) in the S&P 500, your investment would be worth just $9684 today. In contrast, an investment Thursday in Iron Mountain would be worth $9890 today. This is a testament to investors who gravitate towards solid, dividend growth companies with good business prospects in times of market stress. Doubt and fear tend to lend support to dividend growth stocks in general. That is why the stock prices of the Fill-the-Gap Portfolio are lending comfort to readers who have mirrored in part, or in full, the equities contained therein.

With a Goldman Sachs buy rating with a $41 price target and 31% upside from the March 26 closing price, we retain our buy rating on Iron Mountain as well.

Current buyers will receive an annual dividend of $2.35 and a yield of 7.25% versus its 4 year average dividend yield of just 5.8%. Buyers at these levels can grab 25% more yield and income compared to its average yield point.

Want to retire sooner with higher income? Buy ’em when they’re down and they’re yield is up.

In these times of extreme fear, you may even outperform the markets as readers have, as investors seek safe haven in government bonds and the type of dividend stocks we’ve bought and continue to hold for income.

Your Engagement Is Appreciated

As always, I look forward to your comments, discussion and questions. What is your take on the Facebook debacle? Do you think the big data companies will get ahead of the curve and finally persuade users and investors that they’ll be able to guarantee a higher degree of user privacy and less exploitation of the data they collect? Do you think the moves on the tariff front are simply tit for tat, or do they represent the opening salvos in a worsening trade war? Please let me know in the comment section how you approach these situations in your own portfolio and how you arrive at your decisions.

Author’s note: Should you be interested in reading any of my other articles detailing various strategies to enhance your returns on a dividend growth portfolio, you will find them here.

If you’d like to receive immediate notifications as soon as I write new content, simply click the “Follow” button at the top of this article next to my picture or at the bottom of the article, then click “Get email alerts.”

Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

Disclosure: I am/we are long ALL FILL-THE-GAP PORTFOLIO STOCKS.

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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Retirement Strategy: A Fate Worse Than Death?

What if we live beyond our means, never plan for our later years, and have absolutely nothing but social security benefits to live on? Well to be rather blunt, we would more than likely not have a great “golden years” period. Yes, there are many people who simply do not care and whatever happens, happens. The good news here is that if you are reading this, you already have a better shot at a financially sound retirement. Now, please drag some folks you know over to Seeking Alpha to read some of my simple little articles!

What Might Happen If We Rely Solely On Social Security Benefits?

The average benefit from social security is about $1,300/month for an individual and for a couple is roughly $2,200/month. Since I have already shown what the average couple spends annually during retirement, the difference could be around $30k per year! If you have nothing else, then your simplest option is to reduce your expenses to less than your income. If you think that is an easy task in this scenario, then you are living in a fantasy world. This article gives us an idea of just how common this situation actually is:

Nine out of 10 Americans 65 and older receive Social Security benefits, and it’s often their primary source of income. Social Security was at least 50 percent of income for 52 percent of beneficiary couples and 74 percent of single beneficiaries, and at least 90 percent of income for 22 percent of couples and 45 percent of singles.

This Forbes article paints an even more dire scenario for the future:

…most Baby Boomers will be down to subsistence living by the time they are 80-living on Social Security and other government benefits with help from any capable children.

I would love to hear from our readers if you are one of those rare creatures that can make a go of it on 15-20k per year, and how you do it. It’s probably not impossible but I doubt if I MYSELF would want to be on that position.

The Limited Options

Well, as tough as it may be, there are some options that an individual can take to help squeeze by.

  • Reduce expenses to less than your SS benefit, forever (this will be a very frugal lifestyle at best).
  • Work until you are 70 1/2 to receive roughly 35% more SS income. Even if you do not live a long life, you will ALWAYS have a higher benefit, as will your spouse if they never worked.
  • Work part-time to close the gap between your expenses and income.
  • Make arrangements to live with your adult children and share your income with them to help defray their costs.

A Few “Outside The Box” Side Gigs

Those of us who are healthy and physically well enough might consider several “unique” side jobs to help boost your income.

Golf Ball Retrieval

Don’t laugh too hard, but even the US Bureau of Labor Statistics has an entire section on this “job”:

Typically, golf ball divers earn money for each ball they recover. Buyers include the golf course, retailers, and golf ball companies. Anecdotal information suggests that divers earn about $200 a day.

Image result for golf ball diving

If you like golfing and scuba diving, this just might work!

Dumpster Diving

I couldn’t find any statistics from the BLS, however, it does seem to be a popular “cult” thing to do!

…dumpster diving seems to be totally blowing up… it’s basically green’s answer to dubstep for search query volume and media references. Check out Google’s trend analysis and you can see the dumpster diving traffic spike laid out pretty clearly, with Portland, OR leading the way…

You might not make much cash, but you just might be able to subsidize your food bill! Maybe even clothing! Here is an actual article on some key “tips” for successful dumpster diving. I think if you are going to do this, you might as well do it right, don’t you?

So for those of you out there interested in saving a ton of money on food, reducing your environmental impact, or sharing a huge bounty of food with your friends and people in need I’m here to help with that.

Image result for dumpster diving

Photo Source

I am not sure about you, but I am not thrilled with this option!

Professional Dog Walker

This side gig is actually quite popular! Of course, you have to like dogs, have no allergies to them, and be prepared with plenty of “pooper-scooper” baggies! Rather than having me tell you about it, check out this article:

The benefits to opting for this type of business are clear. Dog walking for a living allows people who enjoy both the outdoors and the company of canines to combine business with pleasure.

Any initial outlay to become a professional dog walker is also reasonably small, with transport the only real material expense to those launching their business.

photo credit: Alberto Gonzales/Flickr

According to a survey conducted by the National Association of Professional Pet Sitters (NAPPS), animal caretakers charge a median rate of about $16.00 for a thirty-minute visit, which is the length of a standard dog walk.

At this rate, if you did five walks a day every weekday, your dog walker salary would be $19,000.00 per year.

Not to be outdone by dumpster diving, here is an article with 7 tips on being a great dog walker! This side gig might actually be fun!

OK, Chuckle Time Is Over, So Hopefully You Will Get Down To Business!

Of course, all of this might be considered tongue-in-cheek, and I am attempting to get a few laughs on yet another rough day, but obviously I am once again trying to get my message across that saving and investing as soon as you can, for as long as you can, just might “save” you from even THINKING about the above options.

The model Dividend King Retirement Portfolio was constructed for those of us with shorter time horizons and a lower risk tolerance level, but by no means is it a one size fits all approach, especially if you have 15+ years to go before you decide to quit the “rat race”.

The model DKRP currently consists of Coca-Cola (KO), Procter & Gamble (PG), Johnson & Johnson (JNJ), 3M (MMM), Emerson Electric (EMR), Cincinnati Financial (CINF), Lowe’s (LOW), Hormel (HRL), Colgate-Palmolive (CL), Dover (DOV), and AT&T (T).

By having a plan to invest (and re-invest) in some of the greatest companies on the planet, that have a history of paying and INCREASING their dividends for over 50+ consecutive years, you just might be giving yourself a better shot at a more secure financial future. The “secret” is to focus on income, start investing as soon as you can and keep re-investing the dividends to add more shares as time goes by.

Aside from the current market, adding shares by buying the dips will grow the portfolio exponentially. More shares mean more income. Keep in mind that due diligence is required to make sure that the companies in YOUR portfolio can continue to pay and increase their dividends. If not, then be prepared to take action and make changes in your core. Other than that, buying and holding STILL works with this approach as long as you have the risk tolerance level to ignore daily share price fluctuations.

Keep in mind that over the very long term, the markets have ALWAYS gone higher, even after the most disastrous corrections and/or bear markets:

The stocks within the portfolio are just a few of the Dividend Kings that have achieved this elite status and all of them can be found right here.

The current 2018 (updated) Dividend Kings list:

American States Water (AWR) – 63 consecutive years

Dover – 62 consecutive years

Northwest National (NWN) – 62 consecutive years

Emerson Electric – 61 consecutive years

Genuine Parts (GPC) – 61 consecutive years

Procter & Gamble – 61 consecutive years

Parker Hannifin (PH) – 61 consecutive years

3M – 59 consecutive years

Vectren (VVC) – 58 consecutive years

Cincinnati Fin. – 57 consecutive years

Johnson & Johnson – 55 consecutive years

Coca-Cola – 55 consecutive years

Lancaster Colony (LANC) – 55 consecutive years

Lowe’s – 55 consecutive years

Colgate-Palmolive – 54 consecutive years

Nordson (NASDAQ:NDSN) – 54 consecutive years

F&M Bank (OTCQX:FMBM) – 53 consecutive years

Tootsie Roll Industries (TR) – 52 consecutive years

Hormel Foods – 51 consecutive years

ABM Industries (ABM) – 50 consecutive years

California Water Services (CWT) – 50 consecutive years

Federal Realty Investment Trust (FRT) – 50 consecutive years

SJW GROUP (SJW) – 50 consecutive years

Stanley Black & Decker (SWK) – 50 consecutive years

Target (NYSE:TGT) – 50 consecutive years

I would guess that there are lots of folks who would prefer giving this approach a shot rather than dumpster diving!

But Wait, How About The Cash I Have Been Building??

Several months ago, I stated that since I am a retired old guy, I was not going to continue buying every dip and would wait for a real, steep correction that lasts longer than 24 seconds. It appears that I made the correct decision. I have not added one share of anything nor have I sold anything. As far as I am concerned, the new tax rules and corporate earnings have been strong enough for the companies I follow, but the uncertainty of almost everything else is allowing this market to sell off in such a sporadic manner that even if I had a crystal ball, it would probably freak out!


^SPX data by YCharts

From a technical standpoint, it looks like we keep testing support levels, and if you have been buying every dip, you might be running out of cash at some point. I myself am only 50% invested and I will continue to wait for a large leg down to begin adding to my shares.

That being said, the model DKRP, as well as other dividend kings, might have actually hit correction territory. What that means to me is that I will begin making a shopping list of several good buys that I will consider adding to.

Let’ take a look at where this model portfolio stands:


KO data by YCharts

As you can see from the chart above, after 6 months of craziness, there are not many stocks that are even close to true correction territory. The only one that I will be doing research on for POSSIBLY adding to the 3M position. I will let you know what I decide.

For the record, 3M is selling for about $212 share (as of 4/2/2018) and yields roughly 2.50%. The current price is below the mid-point of the 52-week high and low (188-259) and is a combination technology, industrial, and consumer product company with a very wide moat as well as a stellar balance sheet. Its funds from operations at the end of 2017 were $5.62 billion and its free cash flow was at a very healthy $4.89 billion. Strong enough to continue paying and increasing its dividend as it showed back in late January by raising its dividend by a very generous 16.2%, from $1.17/share to $1.36/share.

At the time, the yield was only 2.2%, so the drop-in share price and the increased dividend makes this a stock I would consider adding to, even in this wacko market.

All of this being said, I am STILL completely content to continue building cash while this market continues its recent gyrations. If I had 10+ years to go before I retire, then I probably would be taking small bites of each stock to grow the number of shares held and the income. Being retired and having enough of an income stream right now makes building cash and capital preservation higher priorities for me.

I continue to dislike this market as a whole, by the way. How about YOU?

The Bottom Line

Hopefully, you got a few laughs from this article, but the unfortunate truth is that without a plan, you just might face very limited options to have a more secure financial future. I will continue to keep you posted as to what I am doing with cash reserves.

***If you like this article and hope to see more like it, check the little thumbs up at the end of the article.

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:

*A Special Note About My Free Articles:

Seeking Alpha is a business, and believe it or not, they do need to make a few bucks to keep bringing you all of its amazing content at virtually no charge! To that end, Seeking Alpha will be charging some fees to access older (and remarkable) content from its extraordinary library of information, not just from me, but from all authors.

All of my articles will remain free until they are placed behind the paywall after a minimum of 10 days. Only ticker-specific articles will be placed behind a paywall, not articles such as this one! If you are a real-time follower, you will be notified immediately of any of my new (and free) articles, just as you have received in the past!

**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.


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: The portfolio is for educational purposes only and not an actual portfolio. The long positions are based on the model portfolios.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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Tesla said to make 2,000 Model 3s per week, stock down

(Reuters) – Tesla Inc (TSLA.O) was reported to be making 2,000 of its Model 3 sedans per week, enough to ease stock market nerves around billionaire Elon Musk’s electric carmaker on Monday after a week dominated by news of a crash involving its semi-autonomous autopilot.

Musk told employees in a company-wide email on Monday that Tesla had just passed the 2,000 per week rate, according to auto website Jalopnik.

That was short of its 2,500 per week target but a big increase on the 793 Model 3s that the company built in the final week of last year. It produced 2,425 of the cars in the whole fourth quarter. [nL4N1OY42A

Slideshow (2 Images)

Tesla shares recovered from an 8 percent loss before the Jalopnik report filtered into markets to trade down 3.5 percent on the day. bit.ly/2uFdEBr

The company did not immediately respond to requests for comment.

Jalopnik also quoted Musk in the email to employees as saying: “If things go as planned today, we will comfortably exceed that number over a seven day period!”

Reporting by Sonam Rai in Bengaluru, Editing by Peter Henderson and Patrick Graham

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Walmart opens first small high-tech supermarket in China

BEIJING/NEW YORK (Reuters) – Walmart Inc has opened its first small high-tech supermarket in China, where smartphones can be used to pay for items that are mostly available on the U.S. retailer’s store on Chinese online marketplace JD.com, it said on Monday.

FILE PHOTO: Pedestrians walk past a signboard of Wal-Mart at its branch store in Beijing, China, October 15, 2015. REUTERS/Kim Kyung-Hoon/File Photo

The world’s largest retailer, known for its hypermarkets, is expanding in China as shopping with mobile devices gains popularity in the country, and as retailers and technology companies such as Alibaba Group Holding Ltd and Tencent Holdings Ltd cut deals to integrate online and offline shopping.

Walmart is also targeting more online shoppers, who spend twice as much in the United States when buying on its website.

Walmart had run smaller Walmart Express stores in the United States, with 12,000 to 15,000 square feet, compared with about 105,000 square feet for its typical supermarket. But the concept did not take off and the retailer was forced to shut them down in 2016.

Walmart did not specify the size of the China store, in the southern city of Shenzhen. The company did not immediately respond to a request for comment.

The outlet will stock more than 8,000 items ranging from stir-fried clams to fresh fruit, 90 percent of which will be available online, it said in a statement. Items can be delivered within a 2 kilometer (1.2 mile) radius as quickly as 29 minutes, said Walmart, which owns a stake in JD.com.

Customers can opt to pay with their smartphone using a program on Tencent Holding Ltd’s WeChat messaging.

In March, Walmart said it would expand its grocery home deliveries in key markets to reach more than 40 percent of U.S. households, or 100 metro areas from six currently.

Reporting by Pei Li and Brenda Goh in Beijing and Nandita Bose in New York; Editing by Muralikumar Anantharaman and Richard Chang

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Best Fitness Trackers (2018): Fitbit, Suunto, Garmin, Nokia, Apple Watch

This stark, minimalist device is a hybrid between an analog watch and a smart one. It looks like an elegant fashion accessory, but connects to the Nokia Health app on your phone to show stats like your heart rate, steps, and distance traveled. It’s simple and slim, with a velvety silicone band, and can transition from surfing to a wedding brunch without skipping a beat. And, at $180, it is one of the most affordable fitness trackers out there.

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