Tesla Deliveries Anything But Electrifying; Sec’y of State Nominee’s Future Looks Green; Trump’s SEC Chairman Pick

Not electrifying…

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Tesla’s fourth quarter sales rose 27%, yet deliveries fell short with CEO Elon Musk pointing to production delays. And Tesla didn’t fall short according to Wall Street’s predictions but rather its very own.  It may seem like a convenient excuse, but it’s a valid one that was also used to blame the company’s second quarter shortcomings. The electric car company delivered 22,000 cars in its last quarter, which was over 5,000 more than the same time last year. That might seem awfully impressive except that Tesla wanted that figure to top 25,000 vehicles. So now, that 3,000 car miss becomes an ugly smudge on the company’s fourth quarter earnings report. Tesla’s grand total of car deliveries for the year hit over 76,000. But once again, because Tesla went ahead and predicted that number would hit 80,000, it disappointed only itself.  Setting forecasts he just can’t meet is a nasty habit that Elon Musk can’t seem to break.  Production delays or not, maybe Tesla’s should stop trying to predict the future.  Shares were down 11% for 2016 which marks the first time that Tesla reported an annual decline since its 2010 IPO. But miraculously those shares still rose today because Wall Street clearly has a thing for Elon Musk. Well, his company, anyway.  Wall Street and consumers alike are waiting with bated breath to see if the much anticipated $35,000 Model 3 will actually surface this year. Some experts, however, think the more affordable model will only be making its grand debut in 2018. That still has’t stopped loyal Tesla buyers and enthusiasts from shelling out a total of $350,000 worth of deposits for the car.

Hatched…

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President-elect Donald Trump’s pick for Secretary of State, Rex Tillerson, reached a very lucrative retirement deal with ExxonMobil. If Tillerson does in fact get confirmed – and that’s still kind of iffy – then he’ll walk away from his post with $180 million comfortably nestled in a trust account. And that’s the approximate value of Tillerson’s 2 million deferred shares of the energy giant. Because he would not be allowed to own shares of the company if he took the post, the shares would get cashed out and put into an independently managed trust account. Besides dumping his ExxonMobil shares, Tillerson will not be allowed to work in the oil and gas industries for a period of ten years. Plus, he has to give up a cash bonus and other benefits that are worth another $7 million because he won’t be there in March, when he’ll have reached the company’s official retirement age that affords him the opportunity to collect on that $7 million package. But, that $180 million ought to tide him over. He’ll also need to agree to sever ties in order to avoid any conflicts of interest. Should he decide to return to the industry, then all that money would be given to charities of the main trustee’s choosing. But I did write that his confirmation is”iffy” because there are plenty of Congressional members who aren’t down with Tillerson’s cushy relationship with Russian president Vladimir Putin. That’s going to come up a lot during the confirmation hearings and it’ll probably be ugly, if not wholly entertaining.

And I choose you…

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Trump just announced his pick for Securities and Exchange Commission Chairman and it’s one that should surprise…no one. Enter Jay Clayton, a lawyer with the law firm Sullivan and Cromwell, who has plenty of experience with banks. Well, representing them, anyway. Besides banking clients, Clayton also defended a variety of “large financial institutions” against such entities as the Department of Justice, other government agencies and regulators and – get this – even the SEC itself.  Some of his more notable achievements include representing everybody’s favorite Chinese e-commerce giant, Alibaba, when it made its grand IPO debut. He’s also represented Barclays when it unceremoniously scooped up Lehman Brothers, and Bear Stearns when JP Morgan took it on. You didn’t think we’d leave out Goldman Sachs, did you?  Because he repped that one too.  Word on the street is that Carl Icahn interviewed Clayton, along with several other candidates for the post. Presumably the two gentlemen discussed how to best undo obstructive banking regulations, Dodd-Frank and all those other pesky rules that have been casting a major downer on the financial world.

Oil-vey! Trump’s Secretary of State Pick Putin Us On; Trump vs. Silicon Valley; Rate Hike Sends Joy Throughout Wall Street

Energized…

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Trump’s latest pick, this time for Secretary of State, has naturally already ruffled more than a few political feathers. Enter Exxon Mobil Corp. CEO Rex Tillerson, a man who happens to be very very cushy with Russia and its fearless leader, Vladimir Putin. If you recall, Russia is very brazenly messing with Ukraine, to the point where the U.S. felt compelled to impose sanctions. Now, the CIA said the country also launched cyber attacks against the U.S. in an effort to influence the election results. But that very same country awarded Tillerson the Friendship Medal in 2013.  Tillerson, who has never held a public office, has been at Exxon, the world’s largest energy firm, for 40 years and during that time spent many many hours cultivating relationships and establishing major business deals with countless foreign countries and companies. But he’ll still need to be confirmed by the Senate. However, considering that former Secretaries of State Condoleeza Rice and James Baker are big fans, not to mention Defense Secretary Robert Gates, he shouldn’t have too much of an uphill battle. By the way, Condoleeza Rice also happens to be a consultant at Exxon Mobil, and Robert Gates was a consultant at one point too. Rumor has it that they all plan to vouch for the CEO.  Lindsay Graham and John McCain, however, are just not that into him, presumably because of his chummy relationship with Putin, of whom they are not particularly fond. Also not in Tillerson’s favor is the fact that Exxon currently has billions of dollars in deals with Russia, not to mention one valued at $500 billion that involves exploring and pumping for oil in Siberia. Those deals can only go forward if the U.S. decides to lift its sanctions against Russia and, fyi,  Tillerson was never much of a fan of the sanctions. And just so you know, according to a filing from a year ago, Tillerson owns $218 million in Exxon stock along with a $70 million pension plan. Shares of Exxon Mobil went up 2.2% on the news of Tillerson’s nomination.

 

Speaking of Trump…

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Tomorrow is a big day at Trump Towers as some of Silicon Valley’s top execs head over to the President-elect’s digs for a little quality time with Donald Trump. Expected to attend the power meeting are: Apple’s Tim Cook, Facebook’s Sheryl Sandberg, Microsoft’s Satya Nadella, Amazon’s Jeff Bezos, Tesla’s Elon Musk and Google’s Sergey Brin and Eric Schmidt…to name but a few. While the agenda’s not public, there are some predictions about what might be discussed tomorrow. There’s the not-so-minor issue of antitrust enforcement and those pesky government demands for user data. But much higher on that list is Trump’s immigration policies and how they have the potential to put a very major damper on the inner workings at many of these Silicon Valley companies. The fact that these companies bring in a lot of employees on special visas, not to mention that they also send plenty of jobs overseas, doesn’t exactly jibe well with Trump’s vision of “Making America Great Again.”  To be fair, Apple did say it has 80,000 employees in the United States and is also responsible for creating another 2 million jobs from all the business opportunities Apple creates. However, Trump did say, in his very eloquent way, that he wants to “get Apple to build their damn computers and things” right here.  Donald Trump is all for establishing major tax reforms and is acutely aware that all these tech companies have a lot of cash offshore. Major reform will help bring that cash back to the States. So its in everyone’s best interests to work together towards that goal, whether they supported Trump’s presidential aspirations or not. And for the record, they did not.

Stocks, and bonds and hikes…Oh my!

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Stocks all over the world rejoiced today by going up while the Dow Jones Industrial Average came thisclose to hitting the 20,000 mark following its 9% surge since Election Day. Actually, the index came within 50 points of the 20,000 mark which sent Wall Street into fits of fiscal joy. The S&P got in on the action by going up .8% to its very own all-time high. The reason for all this excitement is because the Federal Reserve is expected to officially and finally finally announce a rate hike tomorrow, marking the second time in ten years that we get to witness and take part in that elusive increase. Rate hikes are welcome since they signal that the economy is strong and steady in all the right ways. Low interest rates have this nifty little effect on stocks that makes them cost higher. Problem is low interest rates are just no good  for the savers among us who like high interest rates because of the income they get from bonds and bank accounts.  Even though borrowing costs are about to get that much higher, investors are still positively giddy at the prospect that the President-elect intends to usher in an era of potentially lower corporate tax rates, less regulation and lots more infrastructure spending.

 

Banking Scandal or Ben Affleck Movie?; Airline Ranks and Tanks; Drones to the Rescue

Who gets the movie rights?

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The latest scandal to come out of the banking world has its very own name – “The Panama Papers.” It seems a Panamanian law firm called Mossack Fonseca helped a slew of politicians, celebrities, businessman etc. to create offshore accounts and shell companies for the last forty years. It’s estimated that 500 banks all over the world enlisted the help and resources of Mossack Fonseca to help them set up these shell companies since 1977. Fast forward to a year ago when an anonymous source leaked some 11 million documents to Germany’s biggest newspaper, Suddeutsche Zeitung, which then enlisted the help of the International Consortium of Investigative Journalists. The ICIJ shared information and hunted down leads for over a year in an effort to publicize “The Panama Papers” that contain information on some 214,000 offshore companies. The documents also have plenty of unflattering details about Russian President Vladimir Putin, FIFA officials and over 30 other people and companies that are blacklisted by the U.S. government. These include people indicted for corruption and have ties to drug trafficking and terrorism. Strangely enough, Mossack Fonseco only seems to know the true identities of just over 200 companies out of the over 14,000 that the firm managed to incorporate just in the Seychelles. Now banks across Europe find themselves under the microscope as regulators try to establish if and how those banks found ways to hide assets. The Kremlin, ironically, is calling the allegations “a series of fibs” and thinks its just an attempt to thwart Putins chances in upcoming elections, which are said to be rigged anyway. FIFA, another group that could use a lesson or two on business ethics, called the allegations “ridiculous.” To be fair, it’s not clear to certain people that any actual illegal activity occurred. Of course the banks denied any wrongdoing while Mossack Fonseca calls itself the victim of a data breach.

Bumpy landing…

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Results are in for the Airline Quality Rating and you might just be surprised. Or not. Virgin America took the top spot, even earning the best score in the baggage handling rate category. While Virgin America no doubt takes pride in getting the best ranking, Sir Richard Branson is not exactly celebrating considering Alaska Airlines is buying him out for $2.6 billion. Alaska Airlines, by the way, is paying $57 in cash per share, – a 47% premium over Virgin America’s closing price on Friday. Incidentally, Alaska Airlines came in fifth, though it was ranked highest when it came to fewest customer complaints. But it is anyone’s guess how this buyout will impact Virgin America’s rating next year. In any case, JetBlue came in at number two with Delta, shockingly enough, earning a very respectable third place ranking. Overall industry performance improved slightly. Really slightly. Six carriers actually improved, while another six did not. Spirit came in dead last, but in all fairness, Spirit is new to the list. Also in all fairness, Spirit ranked the highest in customer complaints, which makes sense considering that its culture is best described as “take it or leave it.” Amerian Airlines plunged three spots from last year to number 10. Which sounds about right. American, by the way, is the largest carrier in the world, just not on the United States. United is and yet it doesn’t exactly boast an enthusiastic following. Hawaiian Airlines ranked number one for on-time performance. And that’s really great. Especially if you’re going to Hawaii. Which unfortunately, I am not.

Start-up STAT…

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Bay Area start-up Zipline just scored $18 million in funding  – but not from just any investors.  Microsoft co-founder Paul Allen and Yahoo Founder Jerry Yang saw fit to plunk down tons of cash for the drone company but the question is: what makes this drone company different from all the other drone companies? At least for Paul Allen and Jerry Yang. I suppose it has something to do with the fact that Zipline founder Keller Rinaudo is using his drone technology not for delivering books and groceries, but rather to save lives in third-world countries. Zipline’s drones will be delivering blood and much-needed medical supplies to remote, hard-to-reach areas in Rwanda. Rinaudo, a Harvard-trained scientist said that there is “nothing more precious than blood and medicine” and plans on making those items much more accesible than they have ever been. He also wisely pointed out: “Getting medicine to remote places is both a huge market and a global challenge.” As of now places in Rwanada get resupplied a few times a year. But Rinaudo is planning for his drones to make up to 150 drops a day come July. The government of Rwanda is footing the bill to make that happen. And unlike many other types of drones that can’t operate properly in inclement weather, Zipline’s drones can, are able to carry up to 3.5 lbs. and fly within a 75 mile range. Considering that Rwanda is one of the poorest nations in the world, it will become the first country to employ commercial drone delivery, all while Amazon and other companies continue fighting regulatory battles and FAA hurdles.

 

GM Says Nyet to Russia Deliveries; Start Spreading the News: Gov Cuomo Bans Fracking; Kraft-y New CEO

Rubles the wrong way…

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Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Russian President Vladimir Putin gave his annual hours long press conference where he discussed the plunging ruble. He said the economic recovery could take up to two years and, of course, he made sure to point his country’s finger (presumably the middle one) at the US and the EU because he says plunging oil prices and economic sanctions are to blame. Oh and also the central banks messed up too because they apparently didn’t respond fast enough to economic issues as they arose. Darn central banks! Then GM went ahead and suspended deliveries to Russia, becoming one of the latest western companies to do so. And who can blame them. After all, when currencies drop, the companies lose big bucks.  But considering GM only sold 170,000 vehicles in Russia so far this year  – it sells more than that in a single month over here – its sure not to put any major crimp in their business. Apple also shut down operations while other companies, like BMW, took the route of raising their prices to make up for the drop in the ruble rate. Why his love life came up during the press conference is a mystery, but at least now we know that Vladimir Putin is in love –  and somebody even loves him back –  according to him anyway.

Frack off…

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Image courtesy of xedos4/FreeDigitalPhotos.net

Governor Andrew Cuomo (D) has made it official: New York has become the first state to ban the ever-controversial fracking process, a decision that puts a major chink in the oil and gas industry. The process, which involves tapping into natural gas by using high-pressure water blasts and, of course, chemicals, has been under a moratorium in New York State since 2008 after it was felt that more research was needed to see just how bad the process is for the environment and our health. At a press conference, Governor Cuomo handed the reins over to health and environmental officials who said the issues are too great to allow it to happen and conveniently had several studies on hand to back up their claims. Now if they could just do something about those traffic jams…

Nothing cheesy about it…

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Image courtesy of digitalart/FreeDigitalPhotos.net

In a move that shocked analysts, who generally make it a habit of predicting things, Kraft CEO Tony Vernon, who is but 58 years young, announced that his retirement from the company will officially take place on December 27. Vernon has been at the post since October of 2012 and will stay on as an adviser until March. His replacement will be John Cahill, who already has Pepsico  gracing his resume. Kraft, the intrepid force behind Velveeta cheese and the ever-malleable Jell-O, said that it needs to make big changes quickly if it wants to keep up with the constantly changing needs of the food industry. Sounds fair, considering Kraft saw an 11% drop in its third quarter profits.

 

Russia: Sanctions? Ha! I’ll Show You Sanctions! More Boffo Hits to BofA and Time Warner Not Feeling Foxy

Putin it out there…

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Image courtesy of Simon Howden/FreeDigitalPhotos.net

Russian president Vladimir Putin always has to have the last word, doesn’t he. He’s like one of those inflatable punch toys. No matter how you much you punch it, it just floats right back up. I am talking about sanctions, mind you. The ones that Russia is imposing on the West, including the United States. Russia majorly one-upped the entities imposing sanctions on it over tensions in the Ukraine by banning agricultural products from the US, the EU, Canada and even Japan. They plan to have this ban in effect for a year!  Apparently it’s a very very long list of items too. So yeah, if the West wants to send Putin a message it’s going to have to think way beyond that teeny tiny economic sanctions box. Of course food prices are sure to rise in Russia with a move like this. But make no mistake that there’s also a steep $1.3 billion price to pay in the US and the rest of the West. And that’s going to be awfully hard to swallow.

And it’s official…

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Bank of America is out almost $17 billion (it will be anyways) all because it misled investors over mortgage-backed securities. This settlement comes just weeks after a New York judge ordered the bank to pay out $1.27 billion for its less than virtuous Countrywide Financial “Hustle” program which is just as bad as it sounds. Some of the settlement cash will actually go towards helping struggling homeowners by reducing their mortgages. The rest is fees fees fees and a few billion in penalties to various federal, state and local entities. BofA CEO Brian Moynihan and US Attorney General Eric Holder have been hashing out the details as of late. BofA was trying to get away with paying just under $13 billion but fate, the justice system and AG Holder’s impending lawsuit had other plans. Now BofA holds the dubious distinction of holding the record for the largest settlement payout, knocking JP Morgan off its $13 billion podium. But Bofa still comes out a winner since no criminal charges will be filed for what could arguably be considered awfully criminal behavior.

Time Warner is running out?

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Image courtesy of dream designs/FreeDigitalPhotos.net

There was no shortage of love today on Wall Street for Rupert Murdoch and his 21st Century Fox empire now that his $80 billion bid for Time Warner has been scrapped. In fact, the media company’s stock surged while, ironically (or maybe not) Time Warner’s second quarter earnings took a hit. Sure its quarterly profits were up 10% with $6.8 billion in quarterly revenue. But the stock took an 11% dive thanks to Fox just because its interest in its rival came to a bittersweet end.