Alphabet Soup: Google Parent Hits a Milestone; Premium Quality: Tesla Could Get Even Pricier; SEC Gets SCOTUS-Smacked

Whoa…

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Image courtesy of lekkyjustdoit/FreeDigitalPhotos.net

Google’s parent company, Alphabet, broke the $1000 per share ceiling and yes, that is a vey impressive feat. Even for Google. What’s more impressive, is that this milestone happened on the very same day that shares of Apple, the world’s most expensive company, was downgraded. Not that Google would be experiencing any schadenfreude, or anything of the sort. In any case, Alphabet can pat itself on the back for becoming the third S&P 500 company to break the $1000 barrier, following in the illustrious footsteps of Amazon – who achieved that milestone just last week – and Priceline. Yes, Priceline. Remember them? To be fair, Google had, once upon a time, hit $1,200 a share but then the stock split. And then it became Alphabet, and the rest is S&P history.  Of course Berkshire Hathaway also trades above $1000. Way above $1000. In fact, if you’re inclined to spending $250,156.00, you could pick up a single solitary share of Warren Buffett’s company. But then again, what’re you gonna do with just one share?

Cry me a river…

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A new Tesla was sounding really good, at least up until the weekend when Automotive News reported that AAA is gearing up to raise its insurance rates on the super-shmancy electric automobiles. But that’s just AAA insurance. The verdict is still out on whether other insurers will follow suit. It’s all because of some very unflattering data detailing Tesla’s higher-than-usual and more expensive claims for both the Models S and Model X. In fact, those pricey claims could mean a 30% premium increase on Teslas, which makes you wonder if the fuel savings is even worth it. Tesla seems to be offended by the new data, calling it “severely flawed” and “not reflective of reality.” Apparently, the data had the audacity to compare a Tesla to a Volvo station wagon. I mean, c’mon? A Volvo station wagon? Not that I have anything against Volvo station wagons. Some of my best friends drive Volvos. And station wagons. It’s just that a station wagon is the last thing on my mind when fantasizing about being behind the wheel of a Tesla. Just saying.  In all fairness, however, Tesla boasts some of the most advanced safety features in their automobiles. Yet, none of that seems to help given the car’s expensive collision costs. In fact, claims for the Model S are 46% higher than other cars, and its losses come in at 315% higher. Yikes. Station wagons aside, those are some very un-sleek numbers. Ironically, Tesla’s medical payment claim frequency is below average while its personal injury protection losses are very low. So take that, Volvo!

Can’t touch this!

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Score one for Wall Street because it looks like the SEC won’t get to grab all those ill-gotten gains like it used to. At least according to the U.S. Supreme Court, which just ruled – in a 9-0 decision –  that the SEC’s use of “disgorgement” now has to face the wrong end of a five year statute-of-limitations. Disgorgment is the act of repaying money that was attained illegally, typically by people and firms in the financial industry.  For this latest Wall Street victory, the securities sector can thank Charles Kokesh, a New Mexico-based investment adviser. It all started back in 2009 when the SEC sued Kokesh for misappropriating funds from his investors. He may not be a saint, but he was ordered to pay $2.4 million in penalties plus another $35 million – which was for disgorgement purposes. The problem, Kokesh and his lawyers argued, was that much of that $35 million disgorgment figure had happened outside a five year statute of limitations. Instead of $35 million, the disgorgment should have been closer to $5 million, which is quite a substantial difference. As for the SEC, this new ruling is going to prove to be a real downer for the agency seeing as how it has since collected $3 billion for disgorgment claims.  Oh well. Maybe it’ll discover a new way around that minor, yet pesky obstacle.

 

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Coach Gets Quirky With Kate Spade; Warren Buffett’s Latest Thoughts; It’s Kumbaya for Comcast and Charter Communications

Luxury quirk…

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Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

Coach is about to get a whole lot more accessorized now that it announced it will be buying Kate Spade. The $2.4 billion price tag on the deal means Coach will be plunking down $18.50 per share, which ends up being a 9% premium over Kate Spade’s Friday closing price. Analysts are digging the merger, thinking it’s a good fit and news of the deal set Wall Street tongues wagging, subsequently sending shares of both companies up.  In fact, ever since Kate Spade brass decided on a sale back in December, the stock has been on the rise. Which is weird because before that the stock was flagging over increased competition and decreased traffic and sales. Much of the enthusiasm over the sale is because people think Coach will have an opportunity to up its street cred with millennials. After all, Kate Spade’s quirky merchandise tends to resonate with that finicky demographic. And when something actually resonates with millennials, companies want in and are quick to figure out how to make a lot of money in that arena.  In fact, 60% of Kate Spade sales come from millennials while only 15% come from outside the U.S. Go figure.

It’s all about the tapeworm…

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It was that time of year again where one of the wealthiest men in the world imparted his financial wisdom onto his shareholders, and also regular people. Sort of. At the annual Berkshire Hathaway meeting held in Omaha this past weekend, Warren Buffett and his partner, Charlie Munger, shared their isights on several topics including Wells Fargo, Amazon and even the Republican healthcare bill.  On Wells Fargo, Buffett said there were three huge mistakes, but the biggest one was not acting on the problem when they first heard about it. On the Republican healthcare bill, he shared this pearl: “Medical costs are the tapeworm of economic competitiveness.” Got it? Tapeworm. Also,  he messed up royally by not ever owning shares of Amazon.  He admits he never anticipated Jeff Bezos going as far as he did. Apparently Buffett’s oracle skills failed him on that one. On a different note, he said that if he dies tonight, he’s convinced shares of Berkshire Hathaway would go up tomorrow. Warms the heart now, doesn’t it.

Well isn’t this precious…

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Comcast and Charter Communications are joining hands in the spirit of fighting against the dreaded and unflagging power of wireless carriers. Apparently when it comes to fighting wireless carriers, there is an inherent safety in numbers. So together the two companies will join hands and tackle such things as customer billing and device ordering systems. Also, they made a deal with each other that neither one would attempt to buy any other wireless companies and to consult one another before either one would make related deals,. They want to avoid increasing competition between the two companies. A move like this allows them to develop wireless services for their own companies without worrying over competition from each other. So its’s a little kumbaya and a little self-preservation.  And bonus: The two companies have said the plan could have the potential of lowering costs for its customers. However, that remains to be seen so don’t hold your breath.

 

Show Me the Money! Forbes Unveils Its Annual List of People With Money to Show; UK Shows Google What Happens When You Don’t Shut Down Haters; Twitter Did Something Impressive. Just Not With Its Earnings

Rich-y rich…

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It’s that time of year again. The one where Forbes reminds us just how much money we don’t have relative to the richest people in the world. And here goes. There are 13% more billionaires this year than last year and their combined net worth totals almost $7.7 trillion. Yes. Trillion.  The number one spot goes to Microsoft co-founder Bill Gates who’s net with totals $86 billion. When Gates is not busy fixing the world and explaining to the President why his budget ideas are bad ideas, he runs the world’s largest charitable organization. Naturally, the Oracle of Omaha, Warren Buffet, comes in a close second with a net worth of $75.6 billion, while Amazon’s Jeff Bezos makes his debut into the top three with a net worth of $72.8 billion. And even though we only finally see a woman on this list at the number 14 spot, there’s still some uplifting news. For instance, the number of women who ma∂e it onto the list has increased 170% since 2009. Also, there’s a record 56 women on the list who are self-made billionaires. If you’re curious to see who did and didn’t make the list, click here to find out. And spoiler alert: Perhaps President Donald Trump really ought to consult Bill Gates on any and all future budget concerns for the country, considering he lost a billion in the last year and ranks #544.

Dis-content…

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Just when you thought Google could do no wrong, the search engine giant finds itself in the midst of some major policy revamping after a bunch of big-name advertisers pulled their marketing  – and whole lot of money – because it was showing up on /sexist/hate-filled/offensive/anti-semitic/terrorist-promoting content. The trouble started when major brands, including the BBC and department store chain Marks & Spencer, noticed their ads being being placed alongside content promoting violent extremist groups. Last I heard, department stores were no great fans of terrorism. Now, part of the policy revamp includes broadening Google and YouTube’s definitions of hate speech, which is always a good thing since hate manages to always rear its ugly face no matter how subtly its presented. Also, content won’t be able discrimnate against groups based on their identity, socieo-economic class and country of origin. Such measures ought to make it a tad bit more difficult for the haters to get their odious messages out. In addition to some added controls and a few default settings, Google should end up creating a kinder, gentler platform. Hopefully…

Speaking of which…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Even though Twitter doesn’t exactly have the fiscal luxury to delete accounts, to its credit, the social media company did just that and put the kibosh on close to 380,000 of them because of their links to terrorism. So lousy earnings aside I say “Kudos” to Twitter.  Those accounts were just the ones it took down between July and December of 2016.  Since August of 2015, over 635,000 accounts have been removed for the same reason. The information was disclosed in its latest transparency report and these actions are part of an effort to weed out extremist groups and other assorted haters. Interestingly enough, almost 75% of the accounts that were removed from Twitter were discovered by technology created just for this purpose for Twitter, while 2% of those accounts came down after governments made requests for the company to get rid of them.

 

Apples to Apples: Warren Buffett Increases Stake in Tech Giant; Groupon’s Earnings Show Everyone Loves a Deal; Trump Wine Makes Trouble

Well, if Warren Buffett’s doing it…

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It’s all about Apple and airplanes these days for Warren Buffett. His company, Berkshire Hathaway, again increased its position in the iPhone maker to 57.4 million shares back in December. This means the company now boasts a hefty $7.74 billion stake in the Cupertino-based company. The Oracle of Omaha also decided to scoop up more shares in the airline industry’s four biggest carriers in the United States: American Airlines Group, Delta Airlines, Southwest Airlines and United Continental Holdings. This little purchase set Berkshire Hathaway back by about $9.3 billion. What’s a bit weird about Warren Buffett’s new-found affection for Apple, is that he has never been much of a fan of tech stocks only because – or so he would like us to think – that they are apparently outside his realm of understanding. I’m pretty sure there’s very little in this world that’s outside his scope of knowledge. Just saying. The airline investment was also a little surprising given Warren Buffett’s hands-off stance on the industry for the last twenty years. Now, however, he apparently sees some potential in airlines that he hadn’t seen in years. In any case, the timing of Berkshire Hathaway’s Apple purchase couldn’t have been better because shares of Apple closed at an all-time high yesterday, as I noted here in this blog.  In fact, shares of all the companies in which Berkshire Hathaway invested have gone up. Because if Warren Buffett puts his fiscal stamp of approval on a company, investors take that as a sign – albeit a not very scientific one –  and they all tend to follow suit.  As for his ten year old Walmart stake, the news was not as good. Berkshire Hathaway dumped almost all of its shares  – close to a billion dollars worth – and analysts are now wondering just how bad of an omen is that.

Get your Groupon, yo!

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Groupon, it seems, is not only beloved to bargain hunters, but to Wall Street as well, as the company just released its fourth quarter earnings, easily beating estimates all-around. For a company that’s all about posting discounts, it took in revenues of $935 million, when analysts only expected $913 million. While the company earned close to $370 million in profit, analysts were left a bit bummed, since last year’s number was higher, at almost $372 million. However, Groupon did add 7 cents per share, more than triple the expected 2 cents. Plenty of its success from the quarter is apparently due to its acquisition of website LivingSocial, which Groupon scooped up back in October.  Groupon’s customers increased by two million, one million of whom came from LivingSocial, and its total amount of customers purchased 11% more goods and services during the same period last year. Interestingly enough, the amount of purchases this past quarter was a smidgen lower, coming in at $1.70 billion, when last year at this time it was more like $1.71 billion. But hey, what do you expect from bargain-hunters, after all?

Cheers…

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In today’s installment of “Who’s Next to Face a Boycott for Carrying Trump Merchandise?”and the #GrabYourWallet campaign, we turn our attention to Wegmans Food Markets.  The offending merchandise in question is wine, or rather products from the Trump Winery, of which Eric Trump, President Trump’s son, is the President. While a group aptly named “Stop Trump Wine,” is calling upon Virginians to boycott businesses that carry the beverages because “Eric Trump shares the views of his father,” the local chapter of the National Organization for Women got 300 of its members to come up with ways to get Wegmans to put the kibosh on the products. But my question is, if the wine is really good, will the boycott be effective? Just wondering. Like all other retailers, Wegmans, with its 92 stores, explains that it only looks at how a product is performing. If the products in question are performing well, with people still buying them, and the boycotts aren’t necessarily having an effect, chances are, the wine stays put.

The List of all Lists; Kate Spade’s Numbers Need to Get Accessorized; GoPro Goes Big With Latest Acquisitions

A-listers…

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Forbes unleashed its latest list of the world’s richest people just in time to make you feel really bad about yourself. 1,810 billionaires made the list and their combined net worth is a mind-blowing $6.48 trillion. But don’t be too impressed since that figure is actually $580 billion less than it was last year. Hey, times are tough. There are 16 less billionaires this year and 540 of them are living large in the United States. The gender gap managed to rear its ugly face on this list as only 190 women made the cut, with 65 here in the United States. Unfortunately that figure was down from 197 last year. Heiress and L’Oreal businesswoman Lilliane Bettencourt is the highest ranked woman, taking the 11th spot with a net worth of $36.1 billion. For the third year in a row, Bill Gates is sitting pretty at the top with a net worth of $75 billion. However, to be fair, he is $4.2 billion poorer than he was last year. My heart aches for him, really. Like Zara clothing? Apparently most people do since its owner, Amancio Ortega, ranks in the number two spot. Warren Buffett, no surprise, takes third while Carlos Slim snags the fourth spot. Facebook’s 31 year old Mark Zuckerberg took the sixth spot with his $44.6 billion and becomes the youngest billionaire in the top ten. Lucky him. And whether you love him or hate him, Donald Trump did make the list with an estimated net worth of $4.5 billion.

Accessorized…

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Image courtesy of iosphere/FreeDigitalPhotos.net

Kate Spade almost fell out of fashion on Wall Street today when the company reported that its fourth quarter sales fell short, coming in at $62 million and adding 32 cents per share. The company missed estimates by a penny and posted a 51% decline from last year  when the company saw $126 million with 49 cents added per share.  At least its revenue was up 7.6% to $429 million, although analysts did expect that number to ring in closer to $442 million. Oh well. Maybe next quarter. Yet, Kate Spade shares rose as high as 6.7% today. And why shouldn’t they? After all, the swaggy design house is expanding its merchandise into home decor and children’s apparel, prospects that have Wall Street tongues wagging, if ever so slightly. The company has had quite the quirky fiscal ride as it was down a staggering 42% for the last twelve months yet managed to creep up 12% since the beginning of the year. That was happening even while the almighty S&P was going down 5.5%.  Go figure.

Pro-active…

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What to do when your company takes a vicious downward spiral killing 70% of its value? You go shopping, of course. And that’s exactly what GoPro Inc. CEO Nicholas Woodman did. The action-camera exec announced he is plunking down $105 million to buy not one, but two video editing applications, in hopes of beefing up one of the company’s bigger problem areas.  Wall Street responded kindly by sending shares up and let’s face it, GoPro shares need all the help they can get. GoPro’s acquisitions are Replay and Splice, applications that will allow users the ability to easily cut and publish footage on their mobile phones. Given that Woodman himself called he GoPro editing experience an “inconvenience,” these acquisitions seem like a prudent move. Too bad, however, that this move comes on the heels of GoPro’s decision last month to cut 7% of its workforce after weak holiday sales and slashing the price of its newest camera by 50%. That’s what happens when you’re staring into a crowded market of action-cameras. But, taking a page from Warren Buffett, Woodman is optimistic that 2016 will be a record year for GoPro. Let’s hope so since 2015 saw GoPro’s stock hit an all-time low.

Toxic Times at Lumber Liquidators; Warren Buffett’s Rose-Colored Portfolio; Argentina Gets Back in Some Good Graces

End in sight?

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Image courtesy of iosphere/FreeDigitalPhotos.net

Not that this comes as any great shock but Lumber Liquidators took another hit on Wall Street today, this time posting a bigger drop than expected for its third straight quarter. Instead of sales falling an expected 12%, the embattled company ate a much harsher 17% loss. It’s almost hard to believe that it was just last year when the company pulled in a $17.3 million profit with shares gaining 64 cents. But that was just days before the scathing “60 Minutes” report that found that Lumber Liquidators’ wood flooring from China contained excessively high levels of cancer-causing formaldehyde. Today, the company reported that it lost $19.8 million and saw 73 cents shaved off of its shares. The company took in a net loss of $56.4 million, a major 180 from the $63.4 million it reported in 2014. Shares fell 10% today and hit a 7 year low as the company decided not to issue a financial forecast for 2016 – a prudent decision since the company’s not sure if they will be left with any customers. Then there are all those legal and regulatory issues still plaguing the company, the $29 million in legal expenses and a $13.2 million settlement stemming from an entirely unrelated investigation. But at least Lumber Liquidators finally named a new COO, former Lowes exec Dennis Knowles. If he can turn the company around he just might be eligible for a Nobel prize. That’s a big “if.” Lumber Liquidators currently has over 370 stores in the U.S. and Canada and on Sunday, in what seemed like an incredible act of desperation, took out full page ads in Sunday newspapers across the country attempting to reassure customers that its other products are of the highest quality and made using the highest safety standards. Just stay away from their flooring products made in China which are three times as likely to give you cancer.

Everything’s coming up roses…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Warren Buffett addressed his ever faithful shareholders over the weekend and shared with them his thoughts and wisdom gleaned from a storied and insanely successful lifetime in finance. The 85 year old Oracle of Omaha stressed the importance of optimism – an outlook, he feels, our current group of candidates lack since they “can’t stop speaking about our country’s problems (which, of course, only they can solve).” He took some time to share his thoughts on the role of a good effective leader which he feels involves the ability “to define reality and give hope.” Apparently he thinks Hillary Clinton is capable of doing this since that is the candidate he is rumored to be backing. Mr. Buffett’s optimism extends to the U.S. economy – its long-term prospects, anyway – which he feels is only going to get better, especially for the babies being born today whom he calls, “the luckiest crop in history.” And why shouldn’t the world’s third richest man express his optimism? His company, Berskshire Hathaway, was up 21% and took in a record full-year profit of $24.08 billion. Incidentally, Warren Buffett was also rather optimistic about IBM, even though the company has lost a whopping $2.6 billion since the major investment he plunked into it. Go figure. What Mr. Buffett wasn’t optimistic about is the climate change which he calls a major problem for the planet. I guess you would have to agree with him on that. Especially since Leonardo DiCaprio had similar sentiments in his Oscar acceptance speech last night.

You debt-or believe it…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

It seems like only yesterday when hedge fund billionaire  Paul Singer sued Argentina – yes, the country – for full repayment of the biggest sovereign default. Ever. Actually, it was closer to thirteen years ago but at least the two sides settled. Finally. Besides the enormous legal fees that both sides ate, Argentina was often unable to dock its naval ships or fly its Presidential planes in certain cities, lest they get seized by Singer and company. But now the settlement frees up Argentina  to hit up other countries and financial entities for more cash to borrow. Which is probably not the kind of thing you want to hear about a country whose commodities-based economy is on the skids. Oh well. As for the terms of the settlement, Argentina will be forking over $4.65 billion in cash – 75% of the principal – to Singer’s Elliott Management, besides the three other largest remaining creditors, including Aurelius Capital Management, Davidson Kempner and Bracebridge Capital. The agreement still needs approval from the Congress of Argentina which will hopefully check its drama at the door.

Classy…

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The middle class has fallen to less than 50% of the population, according to a new report published by the Pew Research Center. Gasp. The middle class used to account for 61% of the population and it’s a fact that has got everyone from economists to politicians in a tizzy, as each and everyone of them tries to dissect exactly what that means and how it will help or hinder their agendas. The upper class rose 47%, growing from 20 million people to 50 million people with their share of the national income pie up 49% from 28%. In case you were wondering, 190 million of us are not upper-class. Got three people in your household? Well, if your household income is $41,869, then call yourself middle-class. But, the good news is that the median income for the middle class has risen 34%…since the 1970’s. Then there’s lowest – and fastest growing – bracket: 70 million among us make just 9% of the national income. Apparently, 99% of gains are going to just the top 10% of the population and a family income of less than $50,486 after taxes has a nasty way of causing that particular family to go even deeper into debt. Some argue that this income disparity explains why economic recovery is taking so much longer than it should. Others, however, argue that it’s all matter of how you look at the information and that the picture really isn’t all that grim. Hmmm.

How do you like your stake?

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Guess what happens when Warren Buffett tells the world he owns shares of a company? If you guessed that shares go up then you’d be correct. For instance, today the Oracle of Omaha disclosed in a regulatory filing that his company, Berkshire Hathaway, owns a passive 8% stake in Seritage Growth Properties. So what makes for a “passive” stake? Basically, Warren Buffet buys a huge chunk, in this case about 2 million shares worth an estimated $70 million – $100 million and he, well Berkshire Hathaway anyway, sits on it for the long term. With Warren Buffett’s recent disclosure about his stake, the stock went up today as much as 17% at one point, hitting $41.18, all because of the exciting news. Seritage, by the way, is the spawn of a Real Estate Investment Trust (REIT) that was spun-off from Sears Holding Group as a way to help the embattled retailer capitalize on its approximately 235 real estate holdings. And Sears did just that when it managed to raise $2.7 billion from the REIT.  Incidentally, while activist investors tend to love REITs, Washington DC is not fan of the practice and is doing its very best from letting spun-off companies turn into REITs. REITs don’t pay as much to Uncle Sam in corporate income tax like other companies do and its profits go almost entirely to shareholders. Then shareholders pay the taxes on those dividends at the same tax rates as their ordinary income. Preventing companies from exercising this little practice would raise about $4.3 billion for the government. But for now, Warren Buffett can just sit pretty sit on his big/little stake while Washington dukes out the issue in Congress.

Pay days….

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Image courtesy of bplanet/FreeDigitalPhotos.net

Look out Apple Pay, Samsung Pay, Android Pay…Walmart has entered into the almost crowded mobile payment arena by launching, you guessed it – Walmart Pay. Through its own smartphone app, you simply use a credit, debit or even a gift card and voila! That purchase is yours in just a couple of swipes. Testing has already begun at Walmart’s home base in Arkansas and will likely launch in all 4,500 plus stores by next year. Walmart has been on the prowl to find ways to make for an easier shopping experience…at Walmart. It’s estimated that 22 million people use the current Walmart app every single month and that more than 50% of those online transactions take place on mobile devices. Walmart’s system, by the way, is cleverly designed to integrate nicely with other payment applications, including all the ones mentioned in the first sentence. If you need any more of a reason to use Walmart Pay, then consider that it’s actually a more hack-proof alternative – the app stores your card but transmits an alternate card number that is generated by the card issuer. The merchant never gets the real number which leaves hackers with nothing to hack from the merchant. By the way, Walmart doesn’t accept ApplePay. How very convenient.