|Bid||0.00 x 1000|
|Ask||0.00 x 800|
|Day's Range||197.00 - 200.67|
|52 Week Range||151.70 - 245.08|
|Beta (3Y Monthly)||1.31|
|PE Ratio (TTM)||8.36|
|Earnings Date||Oct 15, 2019|
|Forward Dividend & Yield||5.00 (2.55%)|
|1y Target Est||237.82|
CEOs of consumer-facing brands have been careful to align their companies in partisan Trump era politics. Here are some of the business leaders who have thrown dollars behind the President.
(Bloomberg Opinion) -- With support for globalization and free trade declining in much of the world, Asia has a historic chance to break out of its traditional role as a capital exporter to the West and to instead redirect flows to improve its own economies and financial industries.According to some estimates, the region’s pool of wealth at $110 trillion exceeds those of North America and Europe and is growing faster. Japan and China were at or near the top of foreign portfolio investment in the United States, including stocks and short- and long-term bonds, in 2017 with $2 trillion and $1.5 trillion respectively, a U.S. Treasury survey showed. Yet Asia has a poor record of protecting its assets stranded overseas when the cycle turns. In the 1990s, Japanese investors incurred significant losses, primarily on property. During the 2008 crisis, a range of Asian sovereign wealth funds and high net-worth individuals lost heavily on advanced economy shares, real estate, and mortgage-backed and structured securities.The desire to invest overseas partly reflects concern about political risk and governance at home. But leaving familiar territory brings other risks.Distance, language and cultural differences can put Asian investors at a disadvantage when it comes to information. As a result, investors often rely too heavily on intermediaries whose interests don’t align with their own.Their main failing, though, is a bias toward certain assets. In an echo of the ill-fated Japanese purchases of Rockefeller Center and the Pebble Beach golf course in the 1980s, Asian investors are buying prime office buildings in New York and London. Swanky apartments are quickly snapped up in world cities, especially by Chinese buyers.Lacking cozy domestic informational networks, Asian investors are particularly susceptible to chasing name asset managers or fashionable businesses. That restricts their options since the best funds are frequently closed to new arrivals. Managers often can’t repeat past results. Inadequate expertise frequently leads to unwise choices. In the run-up to 2008, Asian banks and investors suffered losses on purchases of structured products and collateralized debt obligations, or CDOs. High net-worth and retail segments are buying again. Japanese banks have purchased up to 75% of AAA tranches of collateralized loan obligations, and perhaps one-third of all CLOs, which have common features with CDOs.Where investments are leveraged, they must be financed by borrowing dollars and euros in wholesale markets. Losses may create difficulties in rolling over funding. As in 2008, forced sales and the lack of trading liquidity will accelerate declines in prices.Why look abroad at all? There is a mismatch between Asian savings and the size of domestic capital markets, which are marked by low returns, a smaller range of investment products and limited local expertise. The regional rivalries between Singapore, Hong Kong, Shanghai, Mumbai and Tokyo and a bias toward real industry have hampered the development of financial services.Asia lacks quality indigenous banks such as JPMorgan Chase & Co. or The Goldman Sachs Group Inc., or asset managers such as BlackRock Inc. or Pacific Investment Management Co. Most financial institutions are domestically focused. In 2018, assets under management at Asian hedge funds fell 10% to just over $100 billion, a mere 3% of the global total. Private wealth management remains the preserve of Western firms.Asia’s high savings are a global anomaly, driven by rising incomes, a culture of thrift and minimal social safety nets. Governments need to move with greater determination to enable more savings to be absorbed locally. The timing may be right as the world is tilting more toward national interests and self-sufficiency.The first step must be to accelerate development of capital markets to boost size, depth, liquidity and investment choices. Revised listing and issuance rules, harmonized pan-Asian regulations, breakups of family dominated conglomerates, and partial or full privatization of key state-owned firms would improve market depth. Changes in rules and tax incentives should encourage local pension funds or insurance companies to adopt stable, long-term investment practices.Second, the creation of world-class financial institutions and skilled asset managers needs to be a priority. To attract the best and brightest, limited career choices and pay that lags behind international levels need to be addressed. State-sponsored financial skills training and accreditation systems should be improved. A system of mutual recognition of qualifications would increase labor mobility.Finally, retaining capital within Asia requires improving confidence in the security of savings. Key steps include creating independent institutions free from political interference, as well as bolstering the rule of law and transparent and consistent regulations. Singapore and Hong Kong, despite its recent protests, are examples to emulate.Without change, the familiar cycle of exuberant foreign investment and the loss of Asian wealth is likely to be repeated in the next downturn. To contact the author of this story: Satyajit Das at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Satyajit Das is a former banker and the author, most recently, of "A Banquet of Consequences."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
General Electric (NYSE:GE) stock price plunged more than 11% yesterday after forensic accountant Harry Markopolos issued a report accusing the conglomerate of massive accounting fraud and predicted that it could go bankrupt soon. GE stock price is climbing 6.5% today but remains about 20% below its July 24 levels.Source: JPstock / Shutterstock.com Known for reporting Bernie Madoff's Ponzi scheme to the federal government years before Madoff was caught, Markopolos' has earned some credibility with The Street.Yet, for multiple reasons, including Markopolos' history and recent conduct, I'm very skeptical about his conclusions. For these reasons, I recommend that risk-tolerant investors buy General Electric stock on weakness.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Markopolos Can Make Money if the Street Believes His StoryAccording to CNBC, Markopolos said that a mid-sized, U.S.-based hedge fund had agreed to give him "a decent percentage of profits" that it would earn by betting on the decline of GE stock. * 10 Cheap Dividend Stocks to Load Up On Let's say that the hedge fund bet $100 million against GE stock, and that it, using put options, made $50 million on the trade. Let's say that Markopolos' percentage was 20%. He would then of course earn $10 million on the deal. That's a pretty high sum for putting together a report and appearing on a few TV shows.And, if Markopolos' report had not been negative enough to push GE stock price down, it appears he would earn nothing on the deal. So, I'd say calling him pretty biased when it comes to GE stock would be a huge understatement.My confidence in the accountant isn't increased by his refusal to name the hedge fund that's paying him or the exact percentage of their profit he's getting. And in my opinion his statement that his report was "self-funded" could make some people mistakenly believe that he has no profit motive in this case. As somebody who scathingly criticized GE for a lack of transparency, Markopolos' own lack of transparency is puzzling and disappointing. Markopolos' Past Prophecies Haven't Come TrueMarkopolos, of course, was spot on about Madoff, but his warnings about insurance companies haven't been nearly as prophetic. As CNBC noted, his case centers around GE's long-term care insurance unit.Interestingly, in an interview published by Business Insider in November 2016, Markopolos alleged that all sorts of fraud was rampant across the insurance sector."I have some large insurance fraud cases that I'm going to make public in 2017. And they're going to be in the tens of billions of dollars each. … Basically the insurance industry is where the banking industry was in 2007," he told Business Insider. But over two years later, I can't find any references to insurance fraud exposed by Markopolos. Does anybody else hear a wolf? America Doesn't Crack Down Hard on Illegal Conduct by CompaniesIn his report, Markopolos compared GE to two of the very few large American companies that collapsed due to illegal conduct: Enron and WorldCom.But the reality is that the vast majority of large firms that violate the law do survive, and many thrive. For example, American International Group (NYSE:AIG), Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) were charged with committing fraud during the financial crisis. Toshiba (OTCMKTS:TOSBF) had its own accounting scandal in 2015. They all managed to survive and thrive since then. More recently, Wells Fargo (NYSE:WFC) has admitted to various fraudulent actions. Multiple hospital-chain owners have admitted to Medicare fraud. None of them have gone out of business, either. So even if GE did commit fraud or break laws, the chances of it disappearing are pretty low. Most of GE's Problems Involve a SubsidiaryAs CNBC pointed out, most of Markopolos' allegations of insolvency and lack of liquidity relate to GE's long-term insurance business. He identifies Employers Reassurance Corporation as the source of much of the debt he says GE owes.But ERAC is a subsidiary of GE, rather than part of the company itself. Interestingly, earlier this year, another GE subsidiary, sub-prime lender WMC Mortgage, went bankrupt. Although I'm not a legal or financial expert, I do think it's fair to wonder why GE cannot get rid of most of its debt stemming from ERAC by simply having the unit declare bankruptcy. Apparently, bankruptcies by insurers are not unheard of or illegal. Why Would Culp Join a Corrupt Company?General Electric CEO Larry Culp is in an altogether different situation than the CEOs of Enron and WorldCom were. In the latter two cases, the long-time heads of the companies were involved in fraud for years.Culp, by contrast, just joined GE at the end of last year. At that point, Markopolos alleges that GE had already started their fraudulent practices. By all accounts, Culp was tremendously respected for the turnaround he engineered while he was CEO of Danaher (NYSE:DHR).If Markopolos' accusations are true, Culp either did not examine GE's financial situation prior to taking the job, didn't understand its financial situation or knew that it was about to crash but, for some reason, didn't care about wrecking his sterling managerial reputation. None of those scenarios seems very likely. General Electric Stock's Fundamentals Are StrengtheningDespite the bears' insistence that GE stock is doomed and its fundamentals are collapsing, there are concrete signs that the company's fundamentals are improving or are poised to improve.The oracle of the GE stock bears, JPMorgan analyst Stephen Tusa, reported that GE's second quarter was an operational miss and that the company's fundamentals had worsened.But, as I pointed out in a previous column, the gas power segment of GE's Power unit jumped 27% in the first half of the year, and the company's overall backlog jumped 11% year-over-year. Culp reported that GE Power would benefit from positive trends going forward, including strong demand for natural gas in Asia. Moreover, despite temporary problems, the company's Aviation unit received a record $55 billion of orders at the Paris Air Show in June.Meanwhile, Greentech reported earlier this month that U.S. wind energy development accelerated in the second quarter, which should boost GE's renewable energy unit. Additionally, New York and New Jersey are going all-in on offshore wind, which also bodes well for GE.Finally, Caterpillar (NYSE:CAT) reported that the orders of its power business surged 17% year-over-year. Woodward (NASDAQ:WWD), which sells parts to GE, said that its gas turbine business is improving. And Barclays analysts reported that U.S. power turbine orders jumped more than 12% year-over-year.Based on all of those numbers and fundamental catalysts, I really can't see how Tusa can state with confidence that GE's fundamentals are worse. I also am not very confident at all about Markopolos' charges, so I would recommend buying GE stock on weakness.As of this writing, Larry Ramer was long GE. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post Investors Should Buy General Electric Stock on Its Latest Decline appeared first on InvestorPlace.
(Bloomberg) -- It’s hard enough to find a stock bull these days. But one sanguine enough about the economic outlook to forecast just one more rate cut this year? That’s a contrarian.While Goldman Sachs Group Inc.’s investment management arm is still waiting for better entry levels to buy the dip, it continues to favor equities and credit over government bonds in a rejection of growing fears of an imminent recession. The unit, which oversees about $1.7 trillion, expects the Federal Reserve to lower rates only once more in 2019 before eventually returning to a hiking cycle, versus the futures market that’s pricing in a good chance of three more cuts.Goldman’s stance goes against the consensus investor view that has triggered a rally in bonds while punishing stocks in August. Bond funds saw the fourth-biggest ever week of inflows through Aug. 14, while equity funds saw outflows, according to a Bank of America Corp. report.“We don’t subscribe to the view that this is the end of the business cycle,” said London-based executive director David Copsey, who is part of the global portfolio solutions group managing about $122 billion at Goldman Sachs Asset Management. “If our central thesis comes true -- which is economic growth continues to slow from an elevated level but remains around trend in the second half of the year and recessionary risk is low -- we would believe core inflation will gradually continue to grind higher.”Ripe for ContrariansWith global shares erasing $4 trillion this month, the riskiest credit buckling and government bonds reaching parabolic levels, the time seems ripe for contrarian bullishness. But it’s not for the faint of heart: securities have swung wildly all week between conflicting trade headlines and a bond market flashing recessionary signals.Copsey rejects several of the market’s glummest theses. An inverted yield curve isn’t always immediately followed by a recession, he stresses. In his view, the usual signals of fragility -- debt levels of households and non-financial corporations -- are still quite benign. The U.S. core personal consumption expenditure index, one measure of inflation, has been picking up, he notes.He also doubts the current impact of the U.S.-China trade war will be strong enough to end the global growth cycle.“There’s potentially a natural barrier on how bad things can get because ultimately while both sides have credible concerns and credible agendas that they’re looking to pursue, neither of them wants to ultimately negatively affect their domestic long-term growth prospects,” he said by phone late Thursday.Credit Suisse Group AG strategists too argue that the yield curve is not necessarily flashing a sell sign for equities. The most dependable signals still show a recession is unlikely before 2021, they wrote in a note Thursday, saying they are overweight European cyclicals -- some of the most beaten up stocks in this month’s sell-off.Some dip-buying was evident on Friday. The S&P 500 climbed 0.9% as of 9:42 a.m. in New York, while the Stoxx Europe 600 was up 1%.Within stocks, Copsey’s team is looking for shares with high dividends and dislocated value rather than exposure to the market’s broader direction or cyclical risk. Another contrarian view: it’s overweight Europe, especially economies such as Spain’s that are more domestically driven, as that region is cheaper and some temporary headwinds to growth should fade, he said. It’s neutral on the U.S. and emerging markets.As for government bonds, he says they’ve probably run their course.“The reaction from bonds is probably somewhat overdone now,” Copsey said. “To justify these yield levels and the market pricing of rate cuts, we would need to see a further deterioration in the growth data, beyond our current expectations.”(Updates market moves in 10th paragraph.)To contact the reporter on this story: Justina Lee in London at email@example.comTo contact the editors responsible for this story: Blaise Robinson at firstname.lastname@example.org, Namitha Jagadeesh, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Two Goldman Sachs analysts collaborated on a research report, published Friday, that compares General Electric insurance reserves to other life insurers.
(Bloomberg Opinion) -- The London Stock Exchange’s trading failure on Friday came at a bad time for the markets but a relatively good time for its newish CEO David Schwimmer. The former Goldman Sachs Group Inc. banker has been enjoying a glorious honeymoon. It had to end at some point.The precise cause of the outage, fixed within an hour and 40 minutes, isn’t clear. But when trading isn’t available for such a long period after the scheduled open, something has gone badly wrong. Time for an investigation.Schwimmer’s mind has been on big strategic matters. That’s what bankers like to do. Last month’s $27 billion deal to acquire the data provider Refinitiv (which competes with Bloomberg LP, the parent of Bloomberg News) from a Blackstone Group LP-led consortium and Thomson Reuters Corp was widely applauded. It saves London Stock Exchange Group Plc’s investment case from being defined by worries about Brexit. As a result, Schwimmer has plenty of personal capital right now. It helps also that he is relatively new and was appointed after a period of board turmoil.Leading the LSE nevertheless requires operational expertise. Schwimmer ran teams in his previous career, but in taking this job he has chosen a life as a full-time operator. Day-to-day management is as important as the 10-year vision. The consequences of this outage could have been far worse: It's been a volatile week in financial markets. Fortunately, there was little market-moving news flow on Friday morning.The LSE is a relatively small company, with roughly 4,500 staff. It comprises semi-autonomous silos, partly the result of being assembled through acquisition. When the former CEO Xavier Rolet’s future was in doubt, investors were relaxed about the individual units being able to run themselves if there was a long wait for a successor.Maybe the LSE’s fragmented organizational structure and governance has nothing to do with Friday’s failure. However, the outage gives Schwimmer a good reason to probe whether operations are sufficiently robust and ask if operational expertise is fully shared across the entire group. While this is a dull job compared to transformational M&A, management so often is.Refinitiv takes the LSE into new rather than overlapping areas. A big integration looms, although with little overlap it may not hamper the enlarged group’s ability to deal with a mini-crisis like this one. The deal will also further diminish the revenue contribution from trading in the FTSE 100 and FTSE 250 stocks that were suspended on Friday. Cash equities will still be the disproportionate driver of the LSE’s corporate reputation. Failures are highly visible. The business requires disproportionate focus.A week ago, large parts of the U.K. – including elements of the London transport commuter network – were hit by a power cut. Memories of that are already fading. People tend to forget about temporary outages so long as they don’t repeat. But Schwimmer shouldn’t waste this opportunity to channel his gaze inwardly.To contact the author of this story: Chris Hughes at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Andrea Vella was Goldman Sachs’s top dealmaker in Hong Kong. He had a nose for splashy trades, a fondness for the Bentley Continental, and a vague enough resemblance to George Clooney that there was even a joke among some bankers: “What would George do?”That was almost a year ago. Then U.S. prosecutors dragged him into one of the biggest Wall Street scandals in a generation. Without charging him, they filed court documents tying Vella to the conspiracy that looted billions of dollars from the Malaysian investment fund known as 1MDB. The bank promptly put him on leave.Now as the U.S. weighs how to handle Goldman Sachs, Vella is the mystery man to watch. If someone so powerful is found to have helped fuel the fiasco, it will be much harder for the bank to contain it by pinning blame on a rogue partner, Tim Leissner.During confidential talks, the bank has been at odds with prosecutors over their description of Vella’s role in key moments of the 1MDB deals, according to people familiar with the discussions. Authorities have said that he dealt with the scandal’s alleged mastermind, Jho Low, and was aware of plans to bribe officials -- a narrative Goldman has been disputing.There’s another reason Vella’s involvement strikes a nerve. He helped structure 1MDB’s fundraising, and after money went missing played a central role in Goldman’s initial review of what went wrong, one of the people said. When U.S. prosecutors in Brooklyn described his involvement in court filings last year, without naming him, it alarmed some members of Goldman’s board, who worried the claims might further taint the firm’s senior leadership, two people said.In the months since, Vella has been lying low in Asia, training for a triathlon while collecting checks from the firm that doesn’t want him at the office. The charismatic banker has skirted scandals before, bouncing back at least twice after major deals in Greece and Libya went south.This account of how Vella ended up in limbo is drawn from interviews with more than a dozen colleagues, friends and people involved in examining Goldman’s alleged role in the 1MDB scandal. Representatives for Vella and for the Brooklyn prosecutors declined to comment. “Goldman Sachs refused to confirm any of these details, but we are continuing to cooperate with the proper authorities,” bank spokeswoman Maeve DuVally said.Money MakerThe Italian investment banker could have been a rocket scientist. Vella spent two years at the United World College of the Atlantic in Wales, then six more at the Sapienza in Rome, according to his LinkedIn profile. It says he graduated from the university, one of the oldest in Europe, in 1997 with a master’s in aeronautical engineering.Instead he became a banker, working for JPMorgan Chase & Co. in a burgeoning new field, helping structure complex derivatives for clients. That business proved particularly lucrative, and Vella soon emerged as an important money maker at JPMorgan’s outpost in London. He came to be associated with some of the most elaborate products sold to clients in Southern Europe.In 2007, Vella’s team at JPMorgan arranged a Greek bond deal that left the country’s pension funds feeling cheated. That triggered the labor minister’s ouster, a protest strike and questions about what executives knew. The bank ended up firing a sales executive, who claimed he was scapegoated by his bosses. JPMorgan denied his accusation at the time.Vella jumped to Goldman Sachs months later, joining as a partner, the bank’s most senior rank -- a rare feat for an outsider. People who worked with him describe him as both macho and charming, at times riffing off his similarity to Clooney, especially when sporting a beard. Above all, he aggressively focused on making big sums of money for the firm.Libyan LossesThree months after joining Goldman he flew to Tripoli, where despot Moammar Qaddafi had started a $60 billion sovereign wealth fund. At the time, Vella coached a colleague in an email about how to land such a big client: “Often they don’t know what they want or need, we need to interpret their confused words and show them the right things.”The Libyans placed derivative bets with Goldman that blew up, costing them more than $1 billion. When they sued Goldman in London’s High Court, Vella was called as a witness. Asked about an allegation that a salesman on the deal used his own money to pay for two prostitutes during a trip with an official’s brother, Vella said “it’s inappropriate” but that it would be “more of a personal relationship at that point.” As for a claim that Vella got so mad as the deal was falling apart that he took off his shoe and pounded it on the table? That he didn’t recall. He wasn’t accused of wrongdoing.By the time the court sided with Goldman Sachs, the dispute with the Libyans was already overshadowed by the firm’s work for Malaysia. At the time, Vella was one of two executives overseeing investment banking for all of Asia except Japan, making him one of the most powerful dealmakers outside the firm’s New York headquarters.Goldman Sachs’s description of what happened in Malaysia goes like this: The bank didn’t know that much of the $6.5 billion it raised for 1MDB in 2012 and 2013 would allegedly be steered out of the country. That’s because Goldman says it was tricked by Leissner, its chairman for Southeast Asia. Goldman made an eye-popping $593 million off those deals, which the firm has said was appropriate given the risk involved.After the U.S. accused Leissner last year of bribing officials and helping to pilfer proceeds meant for the investment fund, he pleaded guilty to charges including conspiring to launder money. His former deputy, Roger Ng, was later extradited to the U.S. after spending time in a Malaysian jail. He’s fighting the charges and, according to his attorney, denies any complicity in wrongdoing or sharing information with Vella about bribes, as the U.S. has alleged.‘Co-Conspirator 4’Investigators in Asia and the U.S. have been trying to make the case that corruption at Goldman Sachs reached beyond Leissner and Ng. Last week, prosecutors in Malaysia ratcheted up their pressure on the bank by filing criminal charges against 17 current and former executives. Yet that move appeared to be technical -- adding directors and officers who can be held accountable for crimes under their watch. Vella wasn’t among them. Goldman called the expansion of that case “misdirected,” vowing to contest the claims.The bigger fight is looming in the U.S., where Assistant Attorney General Brian Benczkowski has said prosecutors are preparing to hash out a settlement with the bank. Last year’s charging documents against Leissner show investigators believed problems reached up the chain to “Co-Conspirator 4.” He has since been identified as Vella.In that account, authorities said Vella was briefed on a plan to pay bribes and kickbacks to ensure 1MDB’s fundraising proceeded, and that he, Leissner and others conspired to circumvent Goldman’s systems protecting against foreign corruption. Investigators say that at times Vella met with Low, yet failed to mention the middleman’s involvement to Goldman’s internal gatekeepers. Prosecutors didn’t accuse Vella of looting 1MDB.Still, Goldman is sticking to its rogue-employee defense, telling investigators and regulators that none of its senior executives at the firm knew about the involvement of middlemen. In confidential talks with the government, the firm has said Vella didn’t know about money allegedly funneled to officials to smooth the deal’s path. After poring through Vella’s travel records, Goldman concluded he wasn’t in Malaysia at the time that prosecutors said he met Low and 1MDB officials, according to people familiar with the matter.Also at issue is a March 2012 meeting in Abu Dhabi that prosecutors mentioned in court records last year. Goldman has determined that Vella met Low, but told prosecutors it had nothing to do with the 1MDB deal. The event was a dinner party with more than a dozen other people that included Low’s female companion, according to one person familiar with the matter.In LimboThe firm’s defense of Vella contrasts with the way Goldman has treated Leissner. David Solomon, who ran investment banking at the time of the Malaysian deal and now leads the firm, has called Leissner a criminal who lied to bosses.Yet the firm stood by Vella. His involvement years ago in the bank’s initial postmortem of what went wrong in Malaysia rankled colleagues, according to a person with knowledge of the situation. Some subordinates were also heard griping about his ability to hold on to his role as the region’s banking chief when such a big deal was under scrutiny.Then, in October of last year, the firm kicked him into the ceremonial role of co-chair. Days later, the Justice Department unsealed its accusations, prompting Vella’s leave -- and his limbo ever since.(Updates to add Goldman’s response to Malaysian case in 17th paragraph.)\--With assistance from Dan Reichl and Cathy Chan.To contact the reporters on this story: Sridhar Natarajan in New York at email@example.com;Max Abelson in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, David Scheer, Alan GoldsteinFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Revlon Inc. retained financial advisers from Goldman Sachs Group Inc. to explore strategic alternatives for the cosmetics company, according to a person with knowledge of the matter.The makeup company backed by billionaire Ronald Perelman and under pressure from smaller rivals, is exploring all options, including potential sales of parts or all of the business, said the person, declining to comment further. No deals have been reached, but Revlon is reviewing all strategies, according to the person, who asked not to be identified discussing a private situation. A representative for Goldman Sachs confirmed the bank was hired by Revlon but declined to comment further.Revlon’s shares rose as much as 17% on the news, trading at $15.56 as of 2:44 p.m. in New York.Revlon has struggled to remain relevant and stem falling sales amid competition from Estee Lauder and a host of smaller companies that have used social media to rapidly gain prominence. Cash flow strengthened during the most recent period, but sales continue to slide in its North American segment due to overall challenges in the U.S. market and lower foot traffic at retail locations, S&P said in a report affirming the company’s CCC+ rating.The company reported $107.5 million of liquidity, including $63 million of unrestricted cash as of the quarter-ended June 30. Liquidity increased to $260 million as of Aug. 6, Revlon said.Majority owned by Perelman’s MacAndrews & Forbes Inc., Revlon offers over 15 brands in over 150 countries, including Elizabeth Arden and Elizabeth Taylor. The company has more than $3 billion of debt on its balance sheet, a majority of which comes due starting in 2020. Representatives for Revlon and MacAndrews & Forbes declined to comment.The cosmetic company got some financial breathing room recently after getting a $200 million loan from existing lender Ares Management Corp. Proceeds of the new loan will be around $187 million after fees.Revlon sought to grow by acquiring Elizabeth Arden in 2016 for about $419 million -- but the results haven’t panned out. Perelman acknowledged the challenges in January 2018 after his daughter, Debra Perelman, was tapped to take over as chief executive officer after the departure of Fabian Garcia, who was in the top role for less than two years. Arden showed some signs of growth in the most recent quarter, reporting a 10.7% sales increase in the second quarter driven by higher sales of its skin care products.The company’s mounting losses and junk-rated debt have fueled speculation that Perelman will seek some kind of deal or asset transfer. The billionaire held about 87% of the company’s shares as of June 7 according to data compiled by Bloomberg. Revlon’s $500 million of 5.75% senior unsecured notes trade around 89 cents on the dollar, according to Trace bond trading data. Its $1.8 billion first-lien loan due 2023 is quoted around 76 cents on the dollar, according to prices compiled by Bloomberg.Some investors and researchers have raised questions over the prospect of Revlon doing a J. Crew-style debt makeover. That retailer transferred assets to an offshore subsidiary, leaving less collateral for lenders to claim in a potential restructuring. Revlon’s then-Chief Financial Officer Chris Peterson sought to tamp down those concerns last year. “A material asset transfer is not being considered,” he said in a statement at the time.Revlon faces a substantial debt wall in the next two years, which S&P expects the company will address in the coming months. The ratings agency maintains a negative outlook on the company, reflecting a risk of downgrade if Revlon is unable to refinance its unsecured notes before they come current in February 2020. Revlon’s support from owner MacAndrews & Forbes should help the company refinance its capital structure, S&P said.(Updates details on liquidity as of August in fifth paragraph and Arden financials in eighth paragraph.)\--With assistance from Jonathan Roeder.To contact the reporter on this story: Katherine Doherty in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Rick Green at email@example.com, Shannon D. Harrington, Dawn McCartyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Oil fell to the lowest level in a week as the U.S.-China trade war escalated against the backdrop of swelling American crude inventories.Futures fell 1.4% in New York on Thursday. In the latest salvo of the dispute between the world’s biggest economies, the Chinese government said it “has no choice but to take necessary measures to retaliate” against planned U.S. tariffs on billions of dollars in products. Meanwhile, U.S. oil stockpiles expanded by about four million barrels during the past two weeks, halting almost two months of storage withdrawals.“The trade war and other indicators are all pointing to a global economic slowdown,” said Andy Lipow, president of Lipow Oil Associates LLC. “That’s contributing to the overall bearish sentiment towards oil that is continuing today, because these factors don’t change overnight.”Oil has fallen about 7% this month as the trade war has darkened the global economic outlook and U.S. crude production remained near a record. Investors are fleeing risky assets such as oil and seeking shelter in U.S. government debt, gold and the Japanese yen. Weak economic data from Germany and China and the inversion of a key part of the Treasury yield curve has also fanned concern of a global recession.With economic data weakening across the globe, “I’m just not sure where the demand comes in that would convince the market to take more upward moves,” said Carolyn Kissane, a professor at New York University’s Center for Global Affairs. “It’s not that we won’t have blips, but how do we get to $65, $70 and stay there?”West Texas Intermediate crude for September delivery slipped 76 cents to settle at $54.47 a barrel on the New York Mercantile Exchange.Brent for October settlement declined $1.25 to settle at $58.23 on the ICE Futures Europe Exchange. The global benchmark traded at a $3.81 premium to WTI for the same month.See also: U.S. Oil Hub Stockpiles Drain as WTI-Brent Spread Narrows: ChartU.S. stockpiles rose by 1.58 million barrels last week, confounding analysts who forecast a decline. The increase was especially bearish as it happened during the peak U.S. summer driving season, when demand for motor fuels typically surges.(Corrects the scope of price drop in headline)\--With assistance from James Thornhill, Grant Smith, Sharon Cho and Alex Nussbaum.To contact the reporter on this story: Kiran Dhillon in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: David Marino at email@example.com, Catherine TraywickFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
George Wells, Chairman, Principal & Co-Founder of Wells Group of New York By John Jannarone Many young companies have almost all the right ingredients for success. But without a capable Chief Financial Officer or Chief Operating Officer in place, there is a serious risk a business will experience a failure in corporate governance and even […]
(Bloomberg) -- Cloudflare Inc., a firm that helps websites protect and distribute content, warned potential investors in its initial public offering that risks to its business go beyond the boilerplate Silicon Valley advisory that it may never become profitable.The San Francisco-based company said in its IPO filing Thursday that the risks include negative publicity from the use of its network by 8chan, a website favored by white supremacists and used by gunmen before mass shootings in El Paso, Texas and Christchurch, New Zealand, this year. It also cited the use of its services by neo-Nazi website The Daily Stormer around the time of the 2017 protests in Charlottesville, Virginia.Activities of such groups have had “significant adverse political, business, and reputational consequences” for the company, Cloudflare said in the filing. Terminating those accounts, though, has raised censorship concerns, it said.“We received significant adverse feedback for these decisions from those concerned about our ability to pass judgment on our customers and the users of our platform, or to censor them by limiting their access to our products, and we are aware of potential customers who decided not to subscribe to our products because of this,” according to the filing.Cloudflare co-founder and Chief Executive Officer Matthew Prince has publicly struggled with decisions balancing freedom of speech on the internet with the need to limit hateful, racist online posts and potentially dangerous calls for violence.Risky PrecedentAfter deciding to cut services to The Daily Stormer, Prince said the move could set a dangerous precedent.“After today, make no mistake, it will be a little bit harder for us to argue against a government somewhere pressuring us into taking down a site they don’t like,” Prince wrote.In its filing with the U.S. Securities and Exchange Commission, the company listed the amount of its offering as $100 million, a placeholder that will change when terms of the share sale are set later.Customers, LossesCloudflare said about 10% of Fortune 1,000 companies are paying customers. Its security services blocked an average of 44 billion cyber threats a day during the second quarter, it said.For the first six months of the year, Cloudflare lost $37 million on revenue of $129 million, compared with a loss of $32 million on revenue of $87 million for the same period last year, it said in its filing.Prince currently controls 16.6% of Cloudflare’s shares, according to the filing. Its largest investor is the venture capital firm New Enterprise Associates Inc., with a 20.4% stake, followed by Pelion Ventures with a 18.8% share and Venrock Associates with 16.2%.After going public, the company will have a dual-class stock structure that will give its Class B stockholders 10 votes per share, according to the filing.The offering is being led by Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. Cloudflare is applying to list the shares on the New York Stock Exchange under the symbol NET.(Updates with details of risks starting in second paragraph)To contact the reporter on this story: Michael Hytha in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Liana Baker at email@example.com, Michael Hytha, Alistair BarrFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The stock had been trading near its 52-week low before Thursday's upward movement on a Bloomberg report. It's a bit more than half its 52-week high.
The new Apple-Goldman Sachs credit card may have limited scale, and its lack of fees could lead to losses if the economy turns sour, according to an analyst.
(Bloomberg Opinion) -- Stock buybacks are a fraught and confusing issue. In recent years, the value of corporate share repurchases has soared:A number of politicians have decried this practice, and sought restrictions or a ban. U.S. Senator Tammy Baldwin has led the charge against buybacks, while Representative Alexandria Ocasio-Cortez has labeled the practice a “pyramid scheme.”Many observers are mystified by this animosity. Conventional wisdom says that share repurchases are like dividends -- a way to return money to shareholders. When companies don’t have any way to invest their money profitably, they might as well give the money back to investors. More companies are paying dividends now compared to a decade ago, so maybe buybacks are up for the same reason -- companies just can’t figure out how to invest their money productively. If so, that’s bad news for the economy, but it’s not a nefarious corporate scheme.Complications arise, however, once the effect of repurchases on stock prices gets taken into account. Ocasio-Cortez’s claim that buybacks are a pyramid scheme relies on the notion that share repurchases artificially push up stock prices, thus providing a big reward to executives who are compensated with equity and options. That’s not really a pyramid scheme, but it could still represent a failure of corporate governance, if executives are being paid to take money out of their companies instead of investing it productively for the future. It would also mean that executives are using repurchases to manipulate prices -- the very reason that buybacks used to be illegal until 1982.But it’s very hard to tell if buybacks actually have this effect. When companies repurchase their stock, it increases their earnings per share (by reducing the number of shares), so if investors value stocks based on a simple price-to-earnings multiple, the price will go up. But this would be a mistake on investors’ part, because removing cash from a company in a repurchase actually decreases the company’s value -- the investors who don’t sell their shares are now holding a larger piece of a smaller pie, so the share prices should remain unchanged.Of course, that’s just theory; in reality, investors aren’t always rational, and corporate actions like buybacks can also send signals about what executives think about the company’s prospects. So ultimately it’s an empirical question. There is evidence that stock prices tend to rise after buybacks, but that doesn’t necessarily mean the latter causes the former. It could be that executives simply know when their companies are undervalued, and are timing the market on behalf of themselves and those shareholders who didn't sell. Or it could be, as some economists argue, that executives are using buybacks not to raises prices to irrationally high levels but to prevent them from going irrationally low after a run of bad news. Because the true value of stocks is very hard to know, it’s difficult to assess which of these stories is true. It’s also questionable whether stock-based compensation actually has anything to do with buybacks; executives who get paid in company stock don’t spend a higher share of their companies’ profits on repurchases than other executives, according to a Goldman Sachs report.There are other concerns about buybacks besides price manipulation. Some worry that buybacks encourage companies to take on too much debt; economist J.W. Mason has noted that there is now very little correlation between corporate borrowing and capital investment. That suggests that companies are taking on debt to pay for buybacks, which could make them more vulnerable to bankruptcy. Yet other analysts argue that issuing new shares to employees tends to cancel out the shares retired in buybacks, and thus they see buybacks as a sneaky way to pay executives more.In other words, no one really understands why repurchases happen or what they do. So should they be banned? On one hand, going back to the way things were before 1982 would still leave companies able to return cash to shareholders via dividends -- and if buybacks are just another form of dividends, then the effect wouldn’t be that large.On the other hand, many of the concerns people have with buybacks probably could be better addressed by reforming other parts of the corporate system. If executive short-termism is the problem, stock- and option-based compensation should be discouraged. If debt is the problem, tax corporate borrowing more heavily. And it’s also possible that the issue could simply resolve itself -- in recent years, buybacks haven’t done much to help the stock prices of the companies that have tried them:If repurchases really are supporting stock prices, legislators should be very careful about banning them. A market crash would wipe out a lot of personal wealth and could throw the country a recession. Perhaps instead of attacking buybacks, reformers should focus on fixing other parts of corporate America.To contact the author of this story: Noah Smith at firstname.lastname@example.orgTo contact the editor responsible for this story: James Greiff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Alarm bells are ringing louder in bond markets.Among the superlatives: the yield on 30-year Treasuries fell below 2% for the first time and the world’s pile of negative-yielding debt surpassed $16 trillion. And looming over it all was the 10-year Treasury yield dipping below the two-year, in what’s considered a harbinger of a U.S. economic recession in the next 18 months.That expectation, nurtured in recent weeks by worsening U.S.-China trade relations and signs global growth is slowing, was bolstered by weak Chinese and German economic data. The so-called yield inversion drew the ire of U.S. President Donald Trump, who tweeted that Federal Reserve Chairman Jerome Powell is “clueless.”“We’re heading into a global recession and central banks don’t have much ammunition to counter it,” said Nader Naeimi, AMP Capital Investors Ltd.’s head of dynamic markets in Sydney. “The huge shock from the trade war has basically offset whatever central banks are doing, and that’s some of the signals from the yield-curve inversion.”The 30-year Treasury yield fell as much as six basis points to 1.9623% in Asia trading on Thursday, after sliding 15 basis points the day before.Meanwhile, an inversion of the 2-10 year yield curve that briefly occurred during New York trading surfaced again. The 10-year Treasury yield was as much as 1.3 basis points below the two-year rate on Thursday.Bad European and Chinese data were the trigger for the global bond rally, said Praveen Korapaty, chief global rates strategist at Goldman Sachs Group Inc. “From the pace of the move, I suspect some long-held steepeners are being unwound as well.”Another widely-watched recession indicator, the yield difference between three-month and 10-year Treasuries, inverted in March and has been negative much of the time since, bedeviling investors who anticipated that the curve would steepen as the Fed began to cut interest rates. The global rush for bonds also inverted the two-year to 10-year U.K. yield curve Wednesday.Trump placed the blame for the “crazy inverted yield curve” squarely on the U.S. central bank, which he believes raised interest rates too quickly. The Fed’s reluctance to ease policy more aggressively is “holding us back,” he tweeted.Yield curves normally slope upward as investors demand compensation for putting money at risk over longer periods.As fears grow of a weaker economy in the future, investors drive down yields on longer-dated assets on expectation that rates will drop. There’s another incentive to buy longer bonds, and that’s due to the positive convexity value. This means that those with a longer duration will see larger price climbs in a rally than those with shorter maturities.The U.S. bond market has been a destination for haven flows given that there are fewer and fewer positive-yielding assets to park cash in globally, according to Richard Kelly, head of global strategy at Toronto-Dominion Bank.“The curve inversion to this point is flagging a 55-to-60 percent chance of a U.S. recession over the next 12 months,” Kelly said. “We can all debate whether those signals are as accurate as they once were, but we still seem to be in a slow grind lower for sentiment and momentum and need some positive surprises to change those trends.”The curve isn’t the only thing flashing high alert. The New York’s Fed index showing the probability of a recession over the next 12 months is close to its highest level since the global financial crisis, at around 31%.Others aren’t ready to sound the alarm yet. The Reserve Bank of Australia’s No. 2 official weighed in on the debate on Thursday questioning the value of using the inversion as a sign of recession.“At the moment the U.S. economy is actually growing above trend so they’ve got a fair way to slow from here,” said RBA Deputy Governor Guy Debelle. Trade disputes are a key risk, though, he said.There’s little evidence in U.S. economic data to suggest a recession is imminent, according to Goldman’s Korapaty, who sees the 10-year yield returning to 1.75% by year-end.Others including macro hedge fund Ensemble Capital are more wary of rising recession risks.“Yes, recession is coming,” according to Ensemble’s Chief Investment Officer Damien Loh. “The ball’s in the court of the White House and Trump given the flip flops on trades we’ve seen.”(Updates with latest bond yields in fifth and sixth paragraphs, RBA comments.)\--With assistance from Emily Barrett, Greg Ritchie and Michael P. Regan.To contact the reporters on this story: Katherine Greifeld in New York at firstname.lastname@example.org;Ruth Carson in Singapore at email@example.com;John Ainger in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, ;Ven Ram at firstname.lastname@example.org, Tan Hwee AnnFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Goldman Sachs (GS) is entering the consumer finance space as the bank behind the upcoming Apple Card. But is this a smart move for the investment bank?
Bill Baruch of Blue Line Futures and Erin Gibbs of Gibbs Wealth Management spoke on CNBC about opportunities in the banking sector. Baruch sees value in Goldman Sachs Group Inc (NYSE: GS ). He said the ...
Alibaba Group (NASDAQ:BABA), the Chinese Cloud Emperor, reports earnings before trading opens Aug. 15, and not much is expected.Revenue of $16.5 billion would be close to what it did in the fourth quarter of last year. Earnings of $1.49-$1.51 per share would be close to what it did in its most recent quarter.The shares were due to open Aug. 14 below $161 per share, about 5% from where they were a year ago but 19% ahead of where they were at the start of the year.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 15 Growth Stocks to Buy for the Long Haul Analysts love Alibaba stock, with Jefferies recently initiating a "buy" rating with a target of $216 per share. But traders seem to hate it, pointing to its latest downturn, an early August thud that brought it from $178 to $155.Who's right and who's wrong? It depends on your time horizon. BABA Stock a Short-Term PainIn the near-term Alibaba faces serious issues.The trade war and Chinese economy top the list. Shareholders recently approved an 8:1 stock split ahead of a listing in Hong Kong. Alibaba stock is listing there to access Chinese investors because Hong Kong supports dual-class shares. Like many U.S. tech and media companies such as Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), Alibaba is structured to give insiders control without ownership.But if China decides to take the economic hit and end Hong Kong's special status to put down protests, the market's special rules may disappear with it. China's stock exchanges practice corporate democracy - one share, one vote - and Alibaba originally listed in the U.S. to avoid it. A China move on Hong Kong would also hit Alibaba stock, and the Chinese economy, very hard, threatening a recession.The bigger issue for Alibaba is corruption. Corruption took down the head of its digital media division last December. A government video is publicizing other cases against Alibaba Group and other Chinese tech companies. China has investigated a half-dozen major cases against Alibaba this decade.Then there is Michael Evans, a Canadian who now serves as Alibaba Group president and joined from Goldman Sachs (NYSE:GS) in 2015. He faces charges over the 1Malaysia Development Berhad scandal, in which $8 billion was misused. Alibaba Stock a Long-Term GainOver the longer-term Alibaba's future looks so bright you need shades.As I've noted, Alibaba's cloud is unique in that it's selling Alibaba financial applications. An example is a new "operating system" for stores the company recently rolled out, making it a "one throat to choke" for retailers' computer needs.Applications represent a higher-value use of the cloud than infrastructure, the market dominated by Amazon (NASDAQ:AMZN), or the platform business dominated by Microsoft (NASDAQ:MSFT). Alibaba has almost 20% of the Asia-Pacific cloud market, more than any other company. BABA has services throughout Southeast Asia, which is booming as western companies move supply chains out of China.Then there's the Alipay payments platform. It's well ahead of rivals like Visa (NYSE:V) in fintech, backed by a $150 billion money market fund. Our Wayne Duggan calls Alipay the company's secret weapon. I agree. The Bottom Line on BABA StockIt's going to be a bumpy ride.China's decision to let the Yuan float means Alibaba stock's Chinese results must be downgraded. The threat of a recession on the mainland is real and Alibaba will suffer for it.This means you could see Alibaba stock trade below the $130 level it was at in the beginning of the year. Local investors may not pick up the slack as U.S. bears attack the stock.But over the longer run, five to 10 years out, Alibaba should be a core holding for any investor. Watch the tape, accept the risk, and grab a bargain.Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O'Flynn and the Bear, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN, MSFT and BABA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post Last Chance to Buy Alibaba Stock Before Earnings appeared first on InvestorPlace.