Apple Throws Billions Towards U.S. Manufacturing; Ferrari Speeds into Double Digit Margins; Republicans Wage War on Dodd-Frank

iManufacture…

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China’s about to get some very unwelcome manufacturing competition from Apple. The tech giant just announced that it is starting a $1 billion fund promoting advanced manufacturing. Gosh, is the President going to take credit for this too? In fact, CNBC host Jim Cramer had the dubious distinction of being the first person to hear the news on his show “Mad Money.”  For those of you wondering what the difference is between manufacturing and “advanced manufacturing,” it means Apple will basically have to offer specialized skills and training for the latter and fill job gaps with these newly-trained, highly-skilled workers. In any case, Apple has thus far created some two million jobs in the U.S. and can hardly wait to create even more. But how does Apple plan on spending that $1 billion it’s setting aside for this latest project? Well, don’t get too excited just yet, because some of that cash is first going to a company that Apple has partnered with for this initiative. And the name of that lucky company has yet to be announced.

Magnifico!

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Ah Ferrari. What could be better than tooling around in a machine like that? How about its earnings, for one. The Italian automaker just released its first quarter earnings report and they were everything you’d expect from the maker of one of the world’s finest sports cars. Shares are up well over 6% today after the company announced a 36% earnings increase along with a 50% surge in deliveries. And by the way, those earnings were even better than expected, coming in at around $265 million  – which equals 242 million euros – in case you were curious. Estimates, mind you, were for 222 million euros. Revenues also impressed and elated investors, as they increased 22% to 821 million euros, easily beating expectations of 767 million euros.  Sure, those numbers are almost magical, but that’s not really what’s got Wall Street tongues wagging. It was Ferrari’s margins, which are now right up there with the aforementioned tech giant we call Apple. But I guess that’s to be expected when you’re selling cars whose ticket prices start well into the six-figures and can exceed $2 million. After all, we are talking about a company who sold out of a car, the Aperta convertible, before the car even made its official debut.

Let’s me be Dodd-Frank with you…

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Things are looking grim for Dodd-Frank, the Wall Street Reform and Consumer Protection Act. The Republican-led House Financial Services Committee argued that the law sucks for the economy since it slows it down, and today passed a bill that would overhaul and repeal parts of it. It certainly helps Republicans that President  Trump promised way back in his campaign to overhaul the law, which he says costs banks a fortune in compliance and limits lending way too much. Democrats argue the opposite and are convinced that the bill, if passed, will once again create the same conditions that led to the 2008 fiscal crisis. In case it wasn’t obvious, the law was initially passed under President Barack Obama. Naturally, Democrats voted against the bill and lost 34-26.

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Fed Chairwoman Shuts Down Congressman; Mattel Goes For Big With Alibaba; Apple Hits New High On iPhone Dreams

Sit back down…

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Almost everyone’s favorite Federal Reserve Chair, Janet Yellen, was in the hot seat today. First she graciously explained in a letter to Republican Congressman Patrick McHenry that, in fact, the Fed possess the authority and has the responsibility to work and consult with foreign entities with regard to financial industry oversight and the development of international banking rules. McHenry, who is Vice Chairman of the House Financial Services Committee, didn’t appreciate that the Fed had already engaged in international talks before President Trump had a chance to put his peeps into play to conduct their own reulatory review. But no dice for McHenry as Chairwoman Yellen explained that such efforts were to the benefit and in the best interests of the United States and its financial stability. In other news, Ms. Yellen was mum on whether the Fed would raise rates at its next meeting in March but said waiting too long wouldn’t be a good idea. Besides inflation and the labor market, Yellen and co. are looking to see what policy changes President Trump is going to make before making any major announcements from the Fed’s end. Which seems like a prudent plan, especially from someone who was appointed by President Obama, but is doing her best to keep from playing sides since she has still has a few years left on her term during the current administration. And also because Trump criticized her during the campaign when he said that she was deliberately keeping rates low in order to benefit President Obama. Yikes.

Ni-Hao Barbie…

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Mattel’s wound licking might just be on hold for now, despite losing some major Disney-Princess licensing mojo to Hasbro awhile back. The toy company has begun to forge a new path with Chinese e-commerce giant Alibaba. Nothing like gaining a foothold in the $7 billion Chines toy marketplace to ease those Disney-licensing blues. By the way, the United States’ toy industry is estimated at over $20 billion. Just saying. The company that makes Barbie dolls and Hot Wheels cars is in a partnership with Alibaba to create and promote interactive and educational toys, in addition to producing entertainment content based on Mattel products. Because hey, who doesn’t love shows based on toys – and vice-versa? Mattel will be selling its new wares via Tmall.com, which is Alibaba’s business-to-consumer retail site. Incidentally, Mattel had already been selling on Tmall.com for about six years now and rumor has it that its selection of Fisher-Price toys have actually been the top-sellers for five years in a row on Alibaba’s November 11 Singles Day. Mattel’s new products for Alibaba will hit Alibaba’s virtual shelves by mid-2017.  Mattel could really use the boost, especially since sales of Barbies have not been doing as well as they have in the past, and despite throwing some more realistic features onto the doll. Also, the company reported an earnings miss February 1, taking in 52 cents per share on an 8% revenue decline to $1.83 billion, when analysts expected 71 cents per share. But with Alibaba boasting over 440 million active buyers, chances are Mattel has the ability to turn that last earnings report into a mere distant bad memory.

Apple of my i-Phone…

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For the first time in two years, Apple hit a new high of $134.90 and a market cap of $701 billion. And in case you don’t own any shares, that probably means a whole lot of nothing to you. The last time it hit a new high was back on April 28, 2015, when the stock hit $134.54. But that 36 cents means a whole lot to investors who are hoping, and probably betting, that Apple will release a new iPhone, dubbed the iPhone 8, or the iPhone X – if you dare –  that will magically lift blah sales for the tech giant. While the company reported impressive earnings in its last earnings report, its outlook was less so, and the fact that Apple’s revenue decreased by 8% for 2016 didn’t help the mood on Wall Street as of late, even if it is the most valuable company in the world.  Rumor has it, the new phone is going to be even more expensive than previous ones, which is always a good way to get Wall Street tongues wagging.

Trump Tweet-Targets Nordstrom; Under Armour CEO Says It All Wrong; Wells Fargo Continues to Anger

Oh no you didn’t…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

 

Just one week after pulling Ivanka Trump’s fashion line from its stores, Nordstrom has managed to incur some serious Presidential social-media wrath, via Twitter of course. The Tweeter-In-Chief wrote that his daughter was “treated so unfairly” by the department store and “She is a great person — always pushing me to do the right thing! Terrible!” Nordstrom argued that the merchandise’s performance wasn’t up to snuff, and that it regularly evaluates the thousands of brands that it carries to decide which ones get the boot and which ones don’t. And Ivanka’s line got it, though the chain had been carrying the line since 2009. Back in November, Nordstrom co-president Pete Nordstrom sent out a company memo explaining that the turmoil surrounding the election is putting the retailer in a “tight spot.” It risks offending Trump-haters for keeping the line, but also risks alienating shoppers who support him. Nordstrom tried to explain that it makes a “sincere effort not to make business decisions based on politics but on performance and results,” but found itself “in a very difficult position.”  That difficult position probably had to do with calls for boycotts of the merchandise, and even the store.  And it’s not like Nordstrom was the only one who took this sort of action. Neiman Marcus Group also stopped selling her jewelry online and in one of its stores in the northeast. Shares of Nordstrom had dropped a smudge 1% following Trump’s tweet. But they quickly bounced back. So maybe the effect of Trump’s fury only goes so far.

That’s gonna come back to haunt you…

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Speaking of which…Under Armour CEO Kevin Plank played nice with Trump so of course, it’s now going to cost him. Literally. During an interview on CNBC’s “Fast Money Halftime Report,” host Scott Wapner asked the athletic apparel chief executive about his involvement in Trump’s initiative to create manufacturing jobs in the United States. Some of the pearls that escaped Plank’s mouth included, “To have such a pro-business president is something that is a real asset for the country…People can really grab that opportunity.” [cue crickets chirping]. Naturally, Under Armour had to issue a statement to clarify Kevin Plank’s remarks – lest anyone think that he really meant what he said, which would lead to a boycott. Except that sort of already happened as “Boycott Under Armour” hashtag made its way into the Twitter-sphere in no time. In the meantime, UA insisted that it engages in “policy, not politics” and Plank’s statements had to do with job creation.  I shall spare you the details of official company statement – you’re welcome! – but rest assured it included all the usual themes about the beauty of unity, diversity, welcoming immigrants etc. The fact is, UA can’t afford any boycotts, whether Plank meant what he said or not. Its shares have been falling lately and in its most recent earnings report, the company missed expectations and forecasted slower growth for 2017.

And here’s one more reason to hate Wells Fargo…

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In case you weren’t incensed enough by Wells Fargo’s fraudulent account scandal, CEO Tim Sloan said that the bank is committed to helping the Dakota Pipeline project. While it would be nice to focus all rage on Wells Fargo, who loaned $120 million toward this project, the fact is the bank is just one of 17 that gave loans to help fund the $3.8 billion project. Obama had initially halted the project, but President Trump swiftly reversed that action and is looking forward to its completion. Come June, the pipeline is expected to ship half a million barrels of crude every day from North Dakota to Illinois. Unfortunately the 1,200 mile pipeline cuts through an Indian reservation with deep cultural significance, and it’s likely the pipeline will incur damage on the site. The pipeline also poses major environmental hazards where it crosses the Missouri River. The Standing Rock Sioux reservation is downstream from the crossing and the pipeline could end up polluting the Tribe’s drinking water. The Seattle Council is doing its part to combat Wells Fargo’s involvement by pulling about $3 billion in city funds.  Seattle has a contract with the bank that expires in 2018, and it most definitely will not be renewed. In the meantime, the council is on the hunt for a more “socially responsible bank.” Good luck with that one.

Russia Says Nyet to LinkedIn; No Regrets for Macy’s on Ditching President-Elect’s Line; Trump Making Plans

Linked Out…

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It’s Game on between LinkedIn and Russia as the social network gets banned by the Russian government. Back in 2015 Russia passed a new law requiring foreign websites to store personal data of Russian users on Russian servers. While LinkedIn counts six million registered users in the country, the social media giant said no thank you to the new law and now finds itself listed in a very unflattering registry of websites that are banned in the country. Russia’s leaders would like to put an end to its dependance on foreign tech and is even in the process of developing replacements for such services like WhatsApp. In case it wasn’t obvious, Russia has been stepping up its control over internet usage in the last few years. In the meantime Google, eBay and Uber have been looking for ways to comply with the new law lest their fate ends up similar to that of LinkedIn. However, all eyes are on Facebook to see if and how the social media giant intends to deal with this lofty piece of legislation .

Trump’d Up…

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Today, Macy’s CEO Terry Lundgren said that he stands by his decision to boot Donald Trump’s clothing line from his stores back in the summer of 2015. Trump had tried to retaliate by getting people to boycott the department store. But after all, Trump did say that many Mexican immigrants were rapists and murderers and well, that’s just not cool. So needless to say, his calls to boycott weren’t all that successful. Well, maybe a little as Macy’s has been struggling to post some solid quarterly gains. In any case, the retailer has been trying to court more Hispanic shoppers and getting rid of a line of clothing from a man who has been nothing short of hostile and racist seems like a prudent move. To be fair, Lundgren says he would have had to get rid of Trump’s clothing line once he entered politics anyway, even if he hadn’t made his odious comments. Macy’s doesn’t do politics and Lundgren added that even if Hillary Clinton had her clothing own line – of pantsuits, presumably – that would have to go as well once she announced her political aspirations. Incidentally, Ivanka’s clothing line at Macy’s is alive and well, which seems only right considering she has yet to offend entire races of people. Also incidentally, Ivanka’s line is manufactured in China and the Donald just hates it when American businesses outsource manufacturing there. In fact, as part of his economic plans, he wants to impose harsh tariffs on imports in an effort to curb, or perhaps even obliterate the practice. Good luck with that one, Ivanka.

More Trump’d Up…

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In other Trump news, rumor has it that the President-Elect wants to install JP Morgan CEO Jamie Dimon as Treasury Secretary. FYI, Dimon is a life-long Democrat and Obama supporter, although the arrival of the Dodd-Frank laws made him a less enthusiastic one. What’s so very peculiar about Trump’s choice is that he once criticized Dimon for his decision to settle civil suits against the bank. Donald is not one to settle court cases. At least that’s what he said. In the meantime, there’s no word from Jamie Dimon about whether he plans to accept. However, other rumors are swirling that he won’t as he was rooting for Hillary Clinton to win the election. And you know who probably wont be asked to join Trump’s government? Amazon CEO Jeff Bezos. As the owner of the Washington Post, Jeff Bezos didn’t care for Trump’s opinions on the mainstream media bias and said Trump was “eroding our democracy.” Incidentally, Amazon’s stock went down today over 4%. Experts say it’s because all tech stocks, including Apple, Google and Microsoft took a beating today since Trump’s economic plans don’t do much for that sector. But the experts with a better sense of humor – and serious undertones – think the drop is because it’s payback time for Bezos and company, who for the most part don’t care for the President-Elect and were pretty vocal about it during campaign season. The tech sector employs a large population of foreign engineers and, well you know how Trump feels about that. Experts also think that companies like Amazon can expect payback in the form of higher taxes and anti-trust litigation. At least Bezos had the good sense to tweet: “I for one give him my most open mind and wish him great success in his service to the country.” Maybe Bezos will get a pass this time. Wink wink, nod nod.

 

The Hits Keep on Coming for Wells Fargo; Janet Yellen Gets a Grilling; Perk Up! Thursday is National Coffee Day

Smacked…

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The hits just keep on coming for Wells Fargo as the great state of California gave the bank a major diss in the form of a year-long suspension of its business relationships. The bank is officially barred from underwriting debt and handling bank transactions for the Golden State. And if Wells Fargo still can’t get its act together, it can expect a “complete and permanent severance.” Yikes. I guess that’s what happens when you open up 2 million fraudulent accounts and according to State Treasurer John Chiang, promote “a culture which actively promotes wanton greed.” More yikes. Since Chiang oversees $2 trillion worth of banking transactions, besides managing a $75 billion investment pool, he’s probably a bit sensitive about the way banking institutions handle all that money. In the meantime, Wells Fargo CEO John Stumpf will kiss goodbye his $41 million in unvested stock awards.  Carrie Tolstedt, who oversaw the division that was responsible for green lighting the fraudulent accounts, loses all of her unvested awards and gets no further retirement benefits.  Other than the really good ones she already received.

Awkward…

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Fed Chairwoman Janet Yellen took a beating today from Congressman Scott Garrett over Lael Brainard’s chummy relationship with Hillary Clinton. Brainard, in case you might not know, is the governor of the Fed and is rumored to be the top pic for Treasury Secretary. She also gave $2,700 to the Clinton campaign. Congressman Garrett doesn’t take too kindly to this appearance of impropriety and asked the Chairwoman if this doesn’t pose a conflict of interest for the Fed, seeing as how Brainard is in talks with the Clinton campaign. After all, the Fed is supposed to be non-partisan. Yellen, said she was’t aware that there was, in fact, a conflict while also maintaining that the Central Bank has no biases as far as politics are concerned. Of course, Donald Trump disagreed vehemently with that assessment during Monday night’s presidential debate when he insisted that the Fed is keeping rates low to make Obama look good.  Incidentally, Janet Yellen chaired President Bill Clinton’s Council of Economic Advisers. Besides all that, there apparently is no issue with Fed officials giving money to campaigns. Who knew.

Oh the perks…

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Consider this next bit a public service announcement:  Thursday September 29 marks National Coffee Day. Yes, that’s a real thing. And before you whip out your wallet, you might want to know which eating establishments wont be charging you for your java fix. If you happen to be near a Krispy Kreme store, then I urge you to step inside. Rumor has it you’ll score a free coffee and glazed donut just for showing up. But be sure to say thank you! Manners are key. If you’re a fan of Wawa coffee, then you’re in luck as that chain is also offering free cups of its brew. Particpating 7-Elevens are also giving out free coffee. Just make sure you have their smartphone app and register for its 7Rewards program. Dunkin’ Donuts will offer medium-sized cups of coffee for just 66 cents in honor of the company’s 66th birthday. As for Starbucks, don’t expect any freebies. Ever. However, the company is affording you the opportunity to be charitable. For every brewed cup of Mexico Chiapas Starbucks sells, the company will donate a coffee tree to Latin American growers whose crops have been destroyed by fungus.

French Company Goes Organic for U.S. Acquisition; U.S. Airlines Gear Up for Cuba; U.S. Banks Bond Over Brexit

Let them eat organic cake!

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Dannon Yogurt’s parent company, Danone (said with a French accent) is looking to pick up  a major U.S company that will effectively double its size. That’s assuming all goes according to plan. Danone wants to offer organic food provider, WhiteWave, purveyor of favorites like Silk Almond and Soy Milk, Horizon Milk and Earthbound Farms, $10.4 billion in cash for the fiscal pleasure of its company. That’s a 24% premium over WhiteWave’s thirty day average closing price and comes out to about to $56.25 per share. But for Danone, whose looking to make itself a bigger presence in the United States, it’s well worth it, since WhiteWave’s offerings tend to attract wealthier consumers. WhiteWave generates annual sales of about $4 billion and with this acquisition, Danone expects to see a $300 million boost in operating profit. Danone has also been struggling in other parts of the world and this acquisition would ease the burden of some of those lesser-performing markets. FYI, when companies offer to buy other companies, their offers tend be at least at a 30% premium. Because this offer was not, it theoretically means that the bidding door is still open to other offers from companies like Coca Cola, PepsiCo and Kellogg Co, to name but a few. In a regulatory filing, though, WhiteWave did graciously say that it wouldn’t solicit other offers. However, there are exceptions. Should WhiteWave go with another offer, Danone still wins because it will get a $310 million break-up fee.

Bienvenido…

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Believe it or not, Hillary Clinton wasn’t the only topic of conversation today coming out of Washington DC. President Obama announced a proposal to allow eight U.S. airlines to provide nonstop service between Cuba and ten U.S. cities, beginning this fall. This will mark the first time in 50 years that travel of this kind will be available. And all this just one year after diplomatic relations were re-established. The city and airline selections were made by the Department of Transportation and the lucky airline winners are: Alaska Airlines, American Airlines, Delta Airlines, Frontier Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines. American Airlines is actually no stranger to the island nation, as it has been offering charter services there since 1991. Just last year the airline made over one thousand chartered flights to Cuba, while JetBlue made over 200 chartered trips. That’s awfully welcome news for an industry that took a fiscal beating lately. The cities that can look forward to the new service had to have have substantial Cuban-American populations already in place. Hence, Florida finds itself the recipient of 14 out of the 20 daily nonstop flights, since it boasts the largest Cuban-American population. The cities include: Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami,  Newark, New York City, Orlando and Tampa. According to Cuban officials, the number of American travelers to Cuba is up 84%, compared to last year, in just the first half of the year.  But there is still a trade embargo in place, which does include a travel ban. However, there are twelve convenient categories of reasons to fly to Cuba that you can check off should you decide to make your way to Havana any time soon.

Come together…

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It’s a fiscal kumbaya as four U.S. banks offered up their sincerest support for London following the Brexit vote. The gracious supporters include, JPMorgan, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley. The banks agreed to help British Finance Minister George Osborne find ways to ensure that the U.K. remains the prominent financial player that it always was, pre-Brexit. And of course they all will try and find new and exciting ways to lure and retain big banking to London so that the consequences of the Brexit don’t do the country in completely. While that sentiment no doubt warmed the hearts of investors all over the world, the investment banks could not offer up as much optimism as far as the jobs situation is concerned. After all, “no one in their right mind would currently invest in Britain.” Keeping those jobs there might might be the biggest challenge of all and no one wants to make any promises on that. Especially Jamie Dimon, who had previously mentioned that around 4,000 jobs could make their way out of London. In the meantime, the French wasted no time – I mean NONE! – in announcing to the world that it would make its tax regime as enticing as possible, in a not at all subtle attempt to grab some pricey banking business from London.

Obama Dashes Pfizer/Allergan Inversion Dreams; Oil-Vey: The Wrath of the DOJ; Verizon Gets Awesome(ness);

Breaking up is hard to do…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Pfizer can kiss its $160 billion merger with Allergan goodbye all thanks to some new treasury rules that seemed to have been designed just with this particular deal in mind. President Obama unveiled the new rules that make it harder for corporations to do inversions and basically make them not fiscally worth it. The rules make sure to target “serial inverters” which are foreign companies that became corporate giants by buying up American companies for tax reduction purposes. President Obama and the Treasury are trying to end corporate inversions and calls the practice “one of the most insidious tax loopholes out there, fleeing the country just to get out of paying their taxes.” Plenty of American companies have moved parts of their operations to countries where the corporate tax rates are more hospitable and essentially reincorporate in those places. The Pfizer/Allergan deal would have been the largest deal of its kind and would have effectively knocked off a $1 billion chunk of change from Pfizer’s corporate tax bill. Which explains why Pfizer was so eager to do its deal with Ireland-based Allergan. According to President Obama, global tax avoidance is a “huge problem.” So is climate change and the roster of presidential candidates, by the way, but Obama was only able to do something to curtail inversions. Just saying. Now experts suspect other foreign companies with large American operations will fall under the microscope and things could get ugly for them as well. Pfizer will now have to pay Allergan $150 million to reimburse the company for expenses from the deal that wasn’t. At least its not as much as the $1.6 billion AbbVie had to pay Shire back in 2014 when that $55 billion deal fell apart. Why Congress can’t make the corporate tax rate just as hospitable in the United States as it is in other countries, and maybe even attract foreign companies to come here and pay billions in taxes is a mystery to me. If someone has an answer, I’d love to hear it.

Oil drink to that…

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Pharmaceutical Corporations aren’t the only ones displeased the with the U.S. government today. Enter two of Big Oil’s biggest players who have some unkind thoughts for the Department of Justice. Halliburton and Baker Hughes happen to be the second and third largest oil companies and control 15.8% of the market share. Together, the two companies pulled down a combined revenue of $39.3 billion. Halliburton alone scored over a $5 billion profit for 2014. But in 2015, the oil giant didn’t fare nearly as well and instead posted a $165 million loss with a major decline in revenue. The drop in oil prices have left dozens of oil companies filing for bankruptcy as hundreds of thousands of people in the industry are now without jobs. Halliburton and Baker Hughes think a merger would help keep both of them from going under but the DOJ is not buying it. The DOJ says anti-trust is written all over this deal, calls it anti-competitive and feels it would make the newly-formed entity way too powerful. The DOJ argues that the deal would lead to much much higher prices and consumers would be at the mercy of the companies. But maybe Baker Hughes can console itself with the $3.5 billion break-up fee it gets to collect from Halliburton now that the deal won’t be going through. At least for now…

Everything is awesome…

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As wireless companies hunt for new ways to make money, Verizon figured out one way to do it – through the very hip and very lucrative teen demographic. So like any eager telecom giant, it found a business to buy that it hopes will help them pull in some of more cash. Enter AwesomenessTV, a company that’s home to some of YouTube’s most popular channels and features all sorts of short videos, from dating advice to celebrities. Verizon plunked down $160 million for a 24.5% stake in the company that boasts 3.6 million subscribers. DreamWorks Animation SKG Inc already owns a 51% stake while Hearst Corp owns the remaining stake. DreamWorks Animation was prescient enough to buy AwesomenessTV back in 2013 for the bargain price of just $33 million. This new deal puts AwesomenessTV’s latest valuation at a very cool $650 million. Part of the deal includes Verizon creating a mobile video service for the endeavor and it will be a part of Verizon’s go90 mobile video app – which of course, will be exclusive to Verizon.  Double boom for Verizon because there tends to be lots of juicy revenue in mobile video that comes from both data usage and advertising. AwesomenessTV already had an exclusive deal with Verizon to provide content for go90 so this new development ought to fit in nicely. DreamWorks Animation’s Jeffrey Katzenberg must also be pretty stoked about the deal since he expects annual revenue for AwesomenessTV to double because of it.