|Bid||41.19 x 800|
|Ask||41.20 x 900|
|Day's Range||41.80 - 42.48|
|52 Week Range||26.19 - 43.48|
|Beta (3Y Monthly)||0.19|
|PE Ratio (TTM)||13.62|
|Earnings Date||Oct 24, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||41.99|
(Bloomberg) -- Central bankers from around the world are gathering in Jackson Hole, Wyoming, for the Kansas City Federal Reserve’s annual retreat.This year’s meeting occurs against a backdrop of volatile financial markets, rising fears of recession and global trade tensions. On Friday, the trade war between the world’s biggest economies escalated further as China announced that it would levy retaliatory tariffs on another $75 billion of U.S. goods. President Donald Trump quickly tweeted that he’ll respond later in the day.Markets gyrated as the U.S.-China news unfolded and as comments emerged from Jackson Hole, headlined by Federal Reserve Chairman Jerome Powell who said the U.S. economy was in a favorable place but faced “significant risks.”Here’s a running summary of news and commentary from the gathering.Choose a Rule: 12:55 p.m.Former Federal Reserve Economist and European Central Bank policy maker Athanasios Orphanides renewed the argument for central bankers to set interest rates by following a formulaic policy rule.“Monetary policy is most effective when it is formulated in a systematic manner, following a clearly communicated monetary policy rule,” Orphanides wrote in the third paper presented Friday at Jackson Hole.A long-time proponent of policy formulas, Orphanides argued that choosing a simple rule as a benchmark would help the Fed communicate its reasons for interest-rate movements and shield it from the perception that it was influenced by political pressure. That’s a timely point as the Fed has been under relentless pressure from Trump to slash rates.Orphanides, who is now an economics professor at MIT, recommended a so-called first-difference rule, which would adjust the benchmark interest rate according to changes in near-term projections for inflation and growth. He and New York Fed President John Williams co-authored a paper on the concept in 2002.World’s Central Bank: 11:55 a.m.Powell and his colleagues don’t want the Fed to be viewed as the world’s central bank, but their monetary policy has huge ripple effects on economies in Europe and Asia, according to the second paper presented Friday at Jackson Hole.University of Maryland economist Sebnem Kalemli-Ozcan, in a review of policy implications, found that Fed interest rate changes have “large spillover effects’’ on emerging markets, affecting capital flows, domestic borrowing and exchange rates.Developing countries can mitigate the impact of U.S. rate change in part by having a flexible exchange rate and by strengthening institutions to reduce corruption and ensure the rule of law, the economist wrote in the paper “U.S. Monetary Policy and International Risk Spillovers.’’Riders on the Storm: 10:30 a.m.Central bankers are like “riders on the storm,’’ their policies buffeted by global forces beyond their control. That was the argument made in a paper by that name which was the first presented Friday at Jackson Hole.In it, economists Oscar Jorda of the San Francisco Fed and Alan Taylor of the University of California, Davis argue that central banks that ignore global interest rate trends risk generating imbalances and credit dislocations in their own economies.The research has some relevance for Fed officials today, as they struggle over what policy changes, if any, to make in response to weakening economies and falling interest rates overseas, and a rising dollar.Much of the paper deals with the so-called neutral interest rate that neither spurs nor restricts a nation’s economy.Powell Speaks: 10 a.m.Fed Chairman Jerome Powell says the U.S. economy is in a favorable place but faces “significant risks” as growth abroad slows amid trade uncertainty, keeping another rate cut on the table when officials meet next month.“We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective,” Powell said in the text of his remarks to the conference.“We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government,” he said.Fed’s Harker: 9:45 a.m.Philadelphia Fed President Patrick Harker weighed in with the hawks in a Jackson Hole interview, saying lower rates wouldn’t boost the economy when the concern is a trade war.“Right now, we are where we need to be,’’ Harker told Bloomberg Television. “There are clearly downside risks to the economy. We would have to act as appropriate if those look like they are coming to fruition.’’“If business investment is not being held back by the cost of capital, us reducing interest rates will have no effect,’’ he said. “What is holding you back is uncertainty around policy, particularly trade policy.’’Fed’s Mester: 9 a.m.Federal Reserve Bank of Cleveland President Loretta Mester says she will probably favor keeping rates on hold when policy makers gather in September, but she has an “open mind” about the argument for further cuts.“At this point, if the economy continues where it is, I would probably say we should keep things where they are, but I am very attuned to the downside risks of the economy,” Mester said in interview Friday with CNBC television.Mester isn’t a voter on the Federal Open Market Committee this year. Several of the Fed’s policy makers have voiced their resistance this week to the notion that the U.S. economy needs lower interest rates.The Cleveland official told Bloomberg’s Michael McKee Friday that China’s latest plan to impose additional tariffs against the U.S. just adds to the uncertainty surrounding businesses’ plans.“If we were ever data-dependent before, we have to be uber-data dependent now,’’ she said.As Mester spoke from Jackson Hole, U.S. President Donald Trump resumed his tweets pressuring the Fed. He’s repeatedly called for the central bank to slash rates more aggressively.Fed’s Kaplan: 8:40 a.m.Dallas Fed President Robert Kaplan, who is not an FOMC voter this year, also sounded hesitant about cutting at the next Fed meeting, set for Sept. 17-18.“Even though I am open to an adjustment either in September or the next few meetings, I prefer not to have to make an adjustment,” he said in an interview with Bloomberg Television Friday, because it encourages risk taking.“The fulcrum or center of gravity of U.S. economic today policy is not monetary policy. It is trade uncertainty, it is probably immigration policy to some extent, it is policies that relate to improved skills training, infrastructure spending,” he said. “That is the center of gravity.”Fed’s Bullard: 8 a.m.Federal Reserve Bank of St. Louis President James Bullard said Friday that the central bank needs to take out additional “insurance” in lowering interest rates, and hinted he might be willing to support a cut larger than a quarter point.“I think there will be a robust debate about 50, so I think it’s creeping on to the table here, but obviously the markets have a base case of 25 basis points,” Bullard said in a Bloomberg TV interview with Michael McKee from Jackson Hole.Bullard said the Fed needs to be cushioning against the impact of a global manufacturing slowdown and U.S. trade war with China. He compared the situation to the mid-1990s, when a Fed led by Alan Greenspan reduced rates 75 basis points to keep the expansion going.“That’s what they did in the 1990s, I don’t know where we will end up,” Bullard said.Insurance Cut: 7:30 a.m.“How much risk are we facing from the fact that we’ve got a global manufacturing contraction going on?,” Bullard asked in an earlier interview Friday with CNBC television. “There is some downside risk, and I would like to take out more insurance against the downside risks.”One of the most dovish members of the Federal Open Market committee, Bullard said low inflation and the unusual dynamic in the U.S. Treasuries market also provide policy makers justifications to cut.“The yield curve has inverted,” he said, referring to the fact that yields on longer-dated debt have fallen below yields on short-term securities. He also noted that the federal funds rate is high relative to Treasury yields. “We have one of the higher rates on the yield curve. That is not a good place to be.”\--With assistance from Vince Golle, Michael McKee and Christopher Condon.To contact the reporters on this story: Steve Matthews in Atlanta at email@example.com;Rich Miller in Jackson Hole at firstname.lastname@example.orgTo contact the editors responsible for this story: Margaret Collins at email@example.com, Alister BullFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Federal Reserve Chairman Jerome Powell said the U.S. economy is in a favorable place but faces “significant risks,” reinforcing bets for another interest-rate cut next month though the remarks failed to mollify President Donald Trump.“Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said Friday in a speech to the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming, minutes after China announced it would impose additional tariffs on $75 billion of American goods.“We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective,” the chairman said.Treasury yields fell after Powell’s remarks and traders of fed funds futures extended slightly the amount of easing they expect from the U.S. central bank this year. That trend increased after Trump said he would respond to the latest Chinese tariff news, with U.S. stock prices dropping over 1%. Fed officials next meet Sept. 17-18.Powell “is trying to set the record straight,” said Priya Misra, head of global rates strategy at TD Securities USA. “They are aware of higher risks since July 31, and they are saying they can ease while not ringing any alarm bells.”Trump TweetsTrump, who has been repeatedly calling on the Fed to cut rates to support the economy during his trade war, immediately criticized Powell after the speech, tweeting “as usual the Fed did NOTHING.”It would be unusual for Fed officials to cut rates at Jackson Hole -- outside of a normally scheduled policy meeting -- unless there were signs of a sharp downturn or a financial panic. Trump added that the U.S. has a strong dollar and a “very weak Fed,” and said he would “work ‘brilliantly’ with both.”Citing slowing global growth and muted inflation, the Fed cut interest rates last month for the first time in more than a decade, reducing its target range by a quarter-percentage point to 2%-2.25%. Powell described the rate reduction at the time as “a mid-cycle adjustment to policy,” telling reporters on July 31 that it wasn’t the beginning of a long series of cuts.But in his remarks Friday, Powell didn’t use that characterization and noted that events since that meeting “have been eventful.”Global Risks“We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government,” Powell said, also mentioning one of the running salvos in Trump’s trade war with China.The chairman also stressed that the Fed had a limited ability to cushion the headwinds from uncertainty stemming from the escalating trade war.“In principle, anything that affects the outlook for employment and inflation could also affect the appropriate stance of monetary policy, and that could include uncertainty about trade policy,” Powell said. “There are, however, no recent precedents to guide any policy response to the current situation.”“He certainly didn’t lean against the September ease, which the markets have priced in,” said William English, a professor at Yale University and former senior Fed economist. “If he thought they were priced in the wrong place I think he would have put in a bit more protest, and this didn’t feel to me like he was protesting.”Investors have fully priced in another quarter point reduction at next month’s meeting and Powell’s remarks suggest the committee remains on alert for risks in the economy.“We are carefully watching developments as we assess their implications for the U.S. outlook and the path of monetary policy,” Powell said.Powell’s remarks examined U.S. monetary policy since World War II. He broke the analysis into three long-run questions: Can the central bank restrain inflation? Can the central bank buffer inevitable financial excess? Can the central bank still provide stimulus and counter-cyclical policy in a time of very low interest rates?He answered the first two positively, saying that the Fed has the tools to quell inflation, while the post-crisis financial system is more resilient and monitoring has improved. Answers on the third question are a work in progress, he said.“Our economy is now in a favorable place, and I will describe how we are working to sustain these conditions in the face of significant risks we have been monitoring,” he said.Hawks vs DovesThe chairman may face opposition from some of his colleagues at next month’s meeting. The July rate cut drew two dissents in favor of holding policy steady, from Kansas City Fed chief Esther George and Boston’s Eric Rosengren, and both reiterated this week that they want to see more evidence of a U.S. slowdown before moving rates again.Philadelphia Fed President Patrick Harker and Cleveland’s Loretta Mester made similar arguments on Friday. “Right now, we are where we need to be,” Harker said in a Bloomberg Television interview. “There are clearly downside risks to the economy. We would have to act as appropriate if those look like they are coming to fruition.” Neither of them are voters this year on the rate-setting Federal Open Market Committee.(Updates with Fed presidents pushing back on need for cuts in final two paragraphs.)\--With assistance from Christopher Condon.To contact the reporters on this story: Craig Torres in Washington at firstname.lastname@example.org;Rich Miller in Washington at email@example.comTo contact the editors responsible for this story: Margaret Collins at firstname.lastname@example.org, Sarah McGregorFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- It’s kinda, sorta funny, I suppose, that Patrick Byrne resigned Thursday as chief executive of Overstock.com Inc. a week after issuing a bizarre press release bragging about his romantic entanglement with a Russian spy while also being involved with the “deep state” and the “Men in Black.” Just as it’s kinda, sorta funny that President Donald Trump canceled a state visit to Denmark because its prime minister told him she wouldn’t discuss his “absurd” idea of selling Greenland to the U.S.Except that Byrne (like Trump) has been prone to saying and doing unhinged things since at least the mid-2000s. What’s more, as Bloomberg Opinion’s Barry Ritholtz pointed out Thursday on Twitter, “He was a terrible CEO of a not very good company.”I began paying attention to Byrne in 2005, six years after he took over an online retailer and renamed it Overstock. That year, he held the looniest conference call I’ve ever heard. He claimed that there was a vast conspiracy to drive down Overstock’s shares orchestrated by someone he called the “Sith Lord.” He wouldn’t name the Sith Lord, but described him as “one of the master criminals of the 1980s.” He titled the conspiracy “the Miscreants Ball.”(1)At the same time — and this is what caught my attention — Overstock filed a lawsuit against Gradient Analytics, a research firm, and Rocker Partners, a hedge fund run by David Rocker and Marc Cohodes — yes, the very same Marc Cohodes who was the subject of my columns this week about MiMedx Group Inc. — that specialized in short-selling. Byrne claimed in the lawsuit (as I wrote at the time) “that they were acting in concert to hurt the company and manipulate its stock price.”It wasn’t long before Byrne was including certain financial journalists in the conspiracy. When a television interviewer asked him if he was accusing Herb Greenberg,(2) the great former MarketWatch reporter, of “helping others front-run” the company’s stock, he replied, “That’s correct.” His “thesis” was that Greenberg was taking orders from Rocker.That wasn’t the worst of it. Byrne became convinced that an illegal practice called “naked short-selling”(3) was Wall Street’s dirty little secret, and he devoted himself to rooting it out and exposing it. (Barron’s once described naked short-selling, rather aptly, as “the grassy knoll of the equity markets, denounced by crackpots, devotees of penny stocks, and troubled companies eager to divert attention from their failings.”)Overstock’s director of communications, Judd Bagley, would “friend” Byrne’s critics on Facebook, then publish the names of their friends on a website, especially those friends who could serve as “evidence” of a conspiracy. (I’m one of the journalists this happened to.) Byrne started a conspiracy-minded website called Deep Capture, the purpose of which was to smear his critics, myself included.If the purpose of all this was to silence us, it worked. I wrote three columns about Byrne, and then moved on. So did most of the other journalists who had once covered him and Overstock. Rocker, the rare short-seller willing to talk to reporters on the record, stopped giving interviews. The journalist (and my friend and former co-author) Bethany McLean once told an interviewer that in effect, Byrne had won, because his tactics had caused his critics to stop writing about him.Since his Deep Capture days, Byrne has found a different means to distract people from Overstock’s lousy performance: In 2015, he announced the formation of a company that would issue a cryptocurrency called tZero. For a while, at least, it worked. Between July 2017 and January 2018, the Overstock share price went from around $20 to almost $87. But it couldn’t last. With the company’s free cash flow negative $168 million in 2018, and its net income negative $169 million,(4) the stock sank back down to earth, bottoming out at $9.40 a share in June.Yet when he finally stepped down, it wasn’t because the company was losing money, or because the tZero effort was faltering, or because, as usual, Byrne was too busy with his side ventures to focus on the company he was supposed to be running. It was because he wrote a bonkers press release.On Thursday evening, Byrne was interviewed by CNN’s Chris Cuomo. Byrne claimed that FBI agents — including James Comey! — had instructed him to “rekindle” his relationship with the Russian spy, Maria Butina. Later that evening, as Cuomo discussed the interview with another CNN host, Don Lemon, he defended Byrne. “He’s not some lunatic or something like that,” he said.Clearly, Cuomo should have had a seat on the Overstock board.(1) Byrne later told me that his Sith Lord conference call was “one of the 10 proudest moments of my life.”(2) Alas, Greenberg has since left financial journalism and now runs his own investment research firm, Pacific Square Research.(3) Don’t ask.(4) According to Bloomberg data.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Stacey Shick at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Google said yesterday that it would be shutting down 210 YouTube channels pumping out misinformation about the Hong Kong protests.
(Bloomberg Opinion) -- Federal Reserve Chair Jerome Powell doesn’t like how President Donald Trump’s trade war is impacting the U.S. economy. To make matters worse, the central bank has no playbook for how to deal with the current situation, he said in prepared remarks at the Kansas City Fed’s Economic Policy Symposium in Jackson Hole, Wyoming.He had no idea the starkest example would come about an hour after he delivered his speech when Trump announced he would have an afternoon response to China’s threat to impose additional tariffs on $75 billion of American goods. The stock market, which had been up after Powell spoke, immediately reversed course and was down 1.7% just before noon. So he and other Fed officials have to draw up their own plan of attack. His suggestion? More interest-rate cuts.Noticeably missing from his remarks was the phrase “mid-cycle adjustment,” which he and other officials used last month to describe their potentially one-off rate reduction. Instead, he chose to emphasize that the Fed would “act as appropriate to sustain the expansion.” Bond traders read between the lines to take that as openness to as many cuts as the data justifies. Two-year Treasury yields fell about 9 basis points, reversing Thursday’s move after a flurry of regional Fed presidents sounded hawkish and gave Powell cover to push back on market expectations.What can’t go ignored is that Powell’s speech came amid heavy fire from Trump, who has criticized the central bank for not lowering interest rates faster and sooner. The president, of course, has long been fixated on the Fed, clearly viewing it as an easy scapegoat for any economic weakness. But his derision was especially apparent this week:On Monday, he tweeted about “the horrendous lack of vision by Jay Powell and the Fed” and said officials should cut rates by 100 basis points. On Wednesday, he lamented that “the only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt.” He again called for a “BIG CUT,” and then asked “WHERE IS THE FEDERAL RESERVE?” On Thursday, after seeing Germany issue negative-yielding 30-year bonds, he complained that “our Federal Reserve does not allow us to do what we must do. They put us at a disadvantage against our competition.” On Friday, just about an hour before Powell was scheduled to speak, Trump flipped to encouragement: “Now the Fed can show their stuff!” he tweeted.The symposium’s theme in 2019 is “Challenges for Monetary Policy,” though the organizers probably didn’t think the U.S. president’s Twitter feed would be such a glaring obstacle. Trump wasted little time analyzing Powell’s remarks:Then he couldn’t resist a potshot, comparing the Fed chief with President Xi Jinping of China.Powell did somewhat push back against Trump, in a telling passage about how much he and other policy makers are struggling to get their hands around his trade policy. Remember the context here — the Fed cut interest rates for the first time in more than a decade on July 31, and a day later, Trump announced additional tariffs on Chinese goods and sent markets into a tizzy. He wasted even less time on Friday, declaring on Twitter “I will be responding to China’s Tariffs this afternoon.” Here’s the central bank’s thinking about trade in its entirety:“We have much experience in addressing typical macroeconomic developments under this framework. But fitting trade policy uncertainty into this framework is a new challenge. Setting trade policy is the business of Congress and the Administration, not that of the Fed. Our assignment is to use monetary policy to foster our statutory goals. In principle, anything that affects the outlook for employment and inflation could also affect the appropriate stance of monetary policy, and that could include uncertainty about trade policy. There are, however, no recent precedents to guide any policy response to the current situation. Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade. We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives.”All told, though, it comes off as rather meek, and an implicit acknowledgment that the central bank will err on the side of easing as long as trade tensions remain heated. “It will at times be appropriate for us to tilt policy one way or the other because of prominent risks,” Powell said. Further interest-rate cuts are not a consensus view. Regional Fed presidents including Boston’s Eric Rosengren, Kansas City’s Esther George, Philadelphia’s Patrick Harker, Dallas’s Robert Kaplan and Cleveland’s Loretta Mester all expressed stronger reluctance to further easy monetary policy, given their respective views of the U.S. economy.Powell is going to have to bridge the divide between that contingent and those who side more with St. Louis Fed President James Bullard. He said on Friday that he expects a “robust debate” on a half-point rate cut among the Federal Open Market Committee voters, adding that “our job is to get the yield curve uninverted.”At least for today, it’s mission accomplished. The yield curve from two to 10 years, which closed with a negative spread on Thursday for the first time since 2007, is back to positive as short-term yields fell the most on renewed expectations for persistent Fed easing. Ahead of Powell’s remarks, Kaplan commented that he was open to cutting interest rates, but he’d prefer not to. I’d wager that’s Powell’s line of thinking as well. But clearly, he feels the Trump administration’s policies have boxed him in. The path forward, as long as the U.S.-China trade war wages on, appears to be ever-lower interest rates. To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China threatened to impose additional tariffs on $75 billion of American goods including soybeans, automobiles and oil, in retaliation for President Donald Trump’s latest planned levies on Chinese imports that pushed U.S. stocks and farm commodities lower.Some of the countermeasures will take effect starting Sept. 1, while the rest will come into effect from Dec. 15, according to the announcement Friday from the Finance Ministry. This mirrors the timetable the U.S. has laid out for 10% tariffs on nearly $300 billion of Chinese shipments.An extra 5% tariff will be put on American soybeans and crude-oil imports starting next month. The resumption of a suspended extra 25% duty on U.S. cars will resume Dec. 15, with another 10% on top for some vehicles. With existing general duties on autos taken into account, the total tariff charged on U.S. made cars would be as high as 50%.China’s tariff threats take aim at the heart of Trump’s political support -- factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down. Soybean prices sank to a two-week low.The move drew a sharp reaction from Trump that sent stocks tumbling further on concern the talks are falling apart. “We don’t need China and, frankly, would be far better off without them,” he tweeted. “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”Among automakers, Tesla Inc. and Germany’s Daimler AG and BMW AG are the most vulnerable to the additional levies. Shares of the two German companies fell more than 2% in Frankfurt, while Tesla dropped 2.2% in New York.BMW and Daimler ship large numbers of sport utility vehicles from plants in South Carolina and Alabama to China, while Tesla doesn’t yet make its electric cars in the country. Six of the top 10 vehicles exported from the U.S. to the world’s biggest car market are from the two German brands, according to forecaster LMC Automotive.U.S. stocks dropped along with Treasury yields and oil prices. Emerging-market currencies also declined, while havens such as the yen and gold gained.The tariffs beginning in September include 10% on pork, beef, and chicken, and various other agricultural goods, while soybeans will have the extra 5% tariff on top of the existing 25%. Starting in December, wheat, sorghum, and cotton will also get a 10% tariff.While China will impose a new 5% levy on oil, there was no new tariff on liquefied natural gas.In Washington, the initial reaction from the White House was aimed at easing concerns about the fallout. “The amount of money being tariffed is not material in terms of macro growth,” Trump adviser Peter Navarro said on Fox Business Network. The retaliation will “absolutely not” slow growth, he said.China’s announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole, Wyoming, to discuss issues such as the global slowdown. The Chinese announcement was foreshadowed by a tweet from Hu Xijin, the editor-in-chief of the Global Times, a newspaper controlled by the ruling Communist Party.China promised earlier this week that any new tariffs from the U.S. would lead to escalation and retaliation. The U.S. has said it will put 10% tariffs on some $110 billion of Chinese goods starting Sept. 1 and the same levy on another $160 billion on Dec. 15, a staggered approach aimed at ease the impact on the American economy.After Trump gave the go-ahead earlier this month for tariffs on the nearly $300 billion in Chinese imports that haven’t been hit by higher duties, China halted purchases of agricultural goods and allowed the yuan to weaken.Since then, negotiators have spoken by phone and are planning another call in coming days. People familiar with their intentions previously said that the Chinese delegation is sticking to their plan to travel to the U.S. in September for face-to-face meetings, which may offer a chance for further reprieve.The U.S. side is still hoping for that visit to happen, with Trump’s economic adviser Larry Kudlow telling Fox Business Network that “hopefully we are still planning on having the Chinese team come here to Washington D.C. to continue the negotiations.”“I don’t want to predict, but we will see,” Kudlow said on Thursday in Washington.(Updates with Trump’s tweet in fifth paragraph. An earlier version corrected source of statement in second paragraph.)\--With assistance from Anthony Palazzo.To contact the reporters on this story: Natalie Lung in Hong Kong at email@example.com;James Mayger in Beijing at firstname.lastname@example.org;Miao Han in Beijing at email@example.comTo contact the editors responsible for this story: Jeffrey Black at firstname.lastname@example.org, Brendan MurrayFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Outraged over the Amazon fires, Emmanuel Macron branded Brazil’s president a liar and threatened to block the European Union’s trade deal with the Mercosur countries as he prepares to whip the Group of Seven leaders into climate action.The French president’s office said that it has become clear that Jair Bolsonaro wasn’t serious about his commitments on tackling climate change when he spoke to world leaders at the Group of 20 summit in Osaka earlier this year."The president can only conclude that President Bolsonaro lied to him in Osaka," at the G-20, the statement said. "Under these conditions, France is opposed to the Mercosur deal."A day before he’s due to welcome G-7 leaders to Biarritz, Macron said he would make the burning of the Amazon jungle a priority at the summit. That provoked an angry response from Bolsonaro, who accused him of acting like a colonialist."The news is really worrisome, but we need to lower the temperature, there are fires in Brazil every year," Brazilian Agriculture Minister Tereza Cristina Dias told reporters in Brasilia. "There were fires in Portugal, in Siberia, there were fires all over the world and Brazil wasn’t questioning them."Trade, ClimateThe way that an environmental dispute escalated so quickly into a new front in the global trade tensions shows the growing importance of climate as a fundamental plank of geopolitics. Even before Macron’s announcement, Ireland said it could not vote for the Mercosur agreement and Finland wants the EU to consider a ban on Brazilian beef.The EU has sought to leverage the size of its market to pressure trading partners into doing more to reduce emissions and is also concerned that its companies will be undercut by rivals operating in places with looser restrictions.But the configuration of the G-7 right now will make it difficult for Macron to make a lot headway beyond some token words. Donald Trump famously ripped up last year’s communique and does not want to be cornered. U.K.’s Boris Johnson is eager to tighten his bond with the U.S. president and at odds with European allies over Brexit. Italy is mired in a messy political crisis at home and has no prime minister. Japan is unlikely to stick its neck out -- it is more concerned about the potential fallout from the U.S. trade war with China.In fact, the run-up to the G-7 was overshadowed by China whacking the U.S. with higher tariffs on soybeans, cars and oil in retaliation for Trump’s latest planned levies.And Trump himself has signaled where his priorities lie. On waking up he began tweeting against the Federal Reserve Chairman Jerome Powell and China’s Xi Jinping -- not on the Amazon fires. A U.S. official said that the U.S. are deeply concerned about the impact of the fires while indicating the administration did not see it as part of the broader climate issue.The EU wrapped up 20 years of negotiations to seal an accord with South America’s leading customs union just weeks ago, in what was then seen as a major retort toTrump’s attacks on the global system of free trade. The deal could affect almost 90 billion euros ($100 billion) of goods and Brazil expects to see its economy increased by about $90 billion over the next 15 years.Officials on both sides are still fine-tuning the agreement and it still needs to be approved by EU governments before it can enter into force. A Brazilian official, with direct knowledge of the government’s position, said that the EU-Mercosur deal is not ready to be signed yet, and that while the deal could be rejected or put to one side, it could not be changed.The official added that France stood to lose a lot if the agreement didn’t go through, citing the presence of supermarket chain Casino Guichard-Perrachon SA and carmakers such as Renault SA and Peugeot SA.Another senior government official however said that France’s position is a cause of concern and that the Bolsonaro administration needed to change the narrative. There are signs that the president is already poised to do that.Speaking on Friday morning in Brasilia, Bolsonaro said the government is considering declaring a state of emergency in the region, allowing the president to deploy armed forces and extra funding to the region: “We discussed a lot of things and whatever is within our reach we will do. The problem is resources.”(Adds Johnson’s tweet.)\--With assistance from Arne Delfs, Alex Morales, Kati Pohjanpalo, Peter Flanagan, Rachel Gamarski, Mario Sergio Lima and Josh Wingrove.To contact the reporters on this story: Helene Fouquet in Bairritz, France at email@example.com;Simone Iglesias in Brasília at firstname.lastname@example.orgTo contact the editors responsible for this story: Flavia Krause-Jackson at email@example.com, Ben SillsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Blank-check company Legacy Acquisition Corp. has agreed to purchase a global digital marketing company to be renamed Blue Impact Inc., clearing the way to grow organically and through M&A. Legacy, which raised $300 million almost two years ago, is led by former Procter & Gamble executive Edwin Rigaud but the new company will be […]
(Bloomberg) -- President Donald Trump wants America’s closest allies to ratchet up the pressure on Iran. But this weekend in France he’ll find they’re still reluctant to join him.Divisions over Iran will be on full display when Trump meets his European peers at a Group of Seven meeting starting Saturday in the coastal city of Biarritz. While the agenda will focus on the global economy, the most pressing security challenge will be navigating the wreckage of Trump’s decision last year to abandon the 2015 deal constraining Tehran’s nuclear program.Even with Iran downing an American drone and being accused of a spate of tanker attacks in the Persian Gulf, European nations want to preserve the Joint Comprehensive Plan of Action they say kept a rein on Iran’s nuclear program. But they’ve failed to find a way to help Tehran get the economic benefits promised under the deal. Iran is desperate to get its oil back on world markets, but that’s a non-starter for the U.S.No compromise has emerged.The Iran debate -- and the distrust it has fueled -- reflects the strains between the U.S. and Europe in the Trump era: displeasure over his maximalist approach, umbrage over his scorn for allies and, beneath it all, wariness about his intentions. In the case of Iran, allies can’t shake the suspicion that Trump, or his more hawkish advisers, want to provoke a war, no matter his insistence otherwise.Read More: Multilateralism Is Dead. Long Live the G-7“I’ve heard several folks in Europe say, ‘Look, all of us were serving as diplomats during the Iraq War, so we’ve seen the beginnings of this movie before and we’re not going to get dragged into it again,”’ said Ellie Geranmayeh, a senior policy fellow at the European Council on Foreign Relations. “The Europeans will not want to side with the administration on issues that could lead to military conflict.”The president hasn’t laid the groundwork for a productive summit. He’s arriving in France on the warpath over trade, allied contributions to NATO and a self-inflicted feud with Denmark over what appeared at first to be a joke: a suggestion the U.S. buy Greenland.Trump’s best shot at winning some European support will come by working his personal rapport with U.K. Prime Minister Boris Johnson. The two unconventional leaders will meet for breakfast on Sunday, and Johnson may want to straddle European backing for the JCPOA with the need to keep Trump on his side for an eventual trade deal following Brexit.A U.S. official, who asked not to be identified discussing internal deliberations, said the administration is “optimistic” that Johnson could bring the U.K. closer to the U.S. position on isolating Iran.A U.K. official, speaking on condition of anonymity, pushed back on expectations that Johnson could be swayed. The new prime minister doesn’t want to rock the boat for French President Emmanuel Macron, who is the host of the G-7, the official said. The U.K. is sticking to its support for the nuclear deal.Read More: Johnson’s G-7 Goal is to Be Serious and Get Something From EveryoneBut that too has its dangers. One person familiar with the White House thinking on the matter, who also asked not to be identified, said the administration realizes it needs to be careful calibrating its attitude toward Johnson, who may be wary of being seen as too close to Trump ahead of a possible election later this year.“The president wants to give Boris Johnson a big boost -- he sees Johnson as Britain’s Trump, a like-minded model,” said Heather Conley, director of the Europe Program at the Center for Strategic and International Studies in Washington. “The challenge is Boris Johnson is winding up for an election and he’s got to walk a very fine line on what the domestic instinct is toward Trump.”U.S. officials are playing down the disagreements between Washington and European capitals, arguing that all sides agree on the threat posed by Iran’s sponsorship of terrorist groups, its development of ballistic missiles and its attacks on tanker traffic around the Strait of Hormuz.‘Tactical Disagreements’“We have had tactical disagreements but there isn’t any disagreement on end states,” Brian Hook, the State Department’s Iran envoy, told Bloomberg TV on Aug. 21. “We share the same threat assessment. The Islamic Republic of Iran is the principle driver of instability in today’s Middle East.”Anxiety is growing in Europe about a growing list of Iranian violations of the 2015 nuclear accord, which the Islamic Republic had obeyed until Trump quit the deal. Angry that the Europeans haven’t been able to deliver economic benefits in defiance of Trump’s sanctions, Iran now has exceeded enriched-uranium limits set by the agreement and is threatening further violations if Europe doesn’t find a way around the American restrictions.Zarif’s DiplomacyIranian Foreign Minister Javad Zarif -- who was recently sanctioned by the U.S. -- will be in France ahead of the summit on Friday to urge the Europeans to stick to the nuclear deal.According to press reports and a person familiar with Emmanuel Macron’s thinking, the French president is also circulating a proposal under which the U.S. would ease some restrictions on Iranian oil exports in exchange for the start of a diplomatic dialogue.U.S. officials say Iran would need to make far bigger concessions for them to entertain such an offer. The idea flies in the face of the administration’s approach, which is to keep ramping up its “maximum pressure” campaign, under the belief that sanctions will so ruin Iran’s economy that its leaders will have no choice but to negotiate.Two recent cases show just how different the U.S. and European approaches to Iran have become, and how wary U.S. allies are in being associated with the Trump administration’s stance.Gibraltar CourtThe U.K. rebuffed a demand from the White House to keep holding an Iranian oil tanker laden with $130 million in crude allegedly bound for Syria in Gibraltar. A court in the territory deemed it could no longer keep the ship after Iran offered assurances it wouldn’t go to Syria.Senior U.S. officials had conveyed “grave disappointment” over the decision to let the tanker go, even raising the possibility that an eventual U.S.-U.K. trade deal might be in jeopardy. The Justice Department filed a complaint aimed at blocking the ruling. But the Grace 1 -- renamed the Adrian Darya 1 -- left as planned.Even more embarrassing to the U.S. has been Europe’s shunning of the plan the Americans call Project Sentinel -- a bid to protect ships passing through the Strait of Hormuz. In July, the U.K. signed up but was careful to portray its participation as a European-led initiative that was getting help from -- and not being led by -- the U.S. France and Germany flatly refused to join, leaving the U.S. with two partners: Australia and the U.A.E.“It’s absolutely necessary to keep the Gulf open, but the fact that they won’t do it tells you something about how toxic President Trump is in European politics,” said Nicholas Burns, a former senior State Department official and professor at the Harvard Kennedy School. “The Europeans don’t trust that Trump will keep his word that he won’t attack Iran.”\--With assistance from Kevin Cirilli and Helene Fouquet.To contact the reporter on this story: Nick Wadhams in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Bill Faries at email@example.com, Larry LiebertFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- U.K. Prime Minister Boris Johnson is barreling through Europe’s capitals with nothing concrete to say on Brexit beyond an unappealing offer of “new deal or no deal.” With Angela Merkel offering a response so cryptic that Germany was still explaining it a day later, France’s Emmanuel Macron was on hand to clarify: The European Union’s red lines, including upholding the single market and peace in Ireland, won’t shift.The French president was also sending a more subtle message to his fellow EU leaders: I told you so.It was Macron after all who predicted that the Brits would try to delay and renegotiate Brexit rather than jump over the cliff of a no-deal withdrawal back in March – something that duly happened. It was Macron who then guessed correctly that anything longer than a technical extension to that original March Brexit day would be seen by London as a chance for a do-over of the agreed deal. And it was Macron who angered his fellow member states after rejecting talk of pushing back Brexit until 2020 – a softer position supported by Merkel – in favor of an Oct. 31 deadline.The hard-Brexit antics of Johnson since he took power from Theresa May and Nigel Farage’s Brussels-baiting after his recent success in the European Parliament elections have vindicated Macron’s realism. Merkel’s “good cop” will probably have less sway at the next EU summit.Yet it’s hard to see this confirmation of Macron’s perspicacity as anything other than bittersweet. There was nothing from Johnson that promised viable alternatives to the thorny Irish backstop (the guarantee of no hard border between north and south) that would let him go home with a new deal. Failing some 11th-hour miracle, such as a successful U.K. parliamentary revolt blocking no deal and delivering an impasse-breaking general election or second referendum, Britain is on its way out. That leaves some big questions for Macron, Merkel and the rest of the EU about what they should do next.Most attention is usually given to putting out immediate economic fires. How can Brussels ease the estimated hit of losing up to 1.5% of the EU’s annual output post-Brexit, especially as recession looms on the continent? And how can Macron avoid political blowback if French fishing fleets find themselves barred from British waters and blame the Elysee Palace? The answers might involve some sticking plasters to make sure no-deal contingency plans work, more public spending to support business, and even more European Central Bank stimulus.But Brexit isn’t just about trade and money, it’s about geopolitics too. The U.K. is a nuclear power with a permanent seat at the UN Security Council, and Johnson took care to remind Macron that British helicopters were transporting French troops in Mali. Although Macron has been making enthusiastic noises about multilateral problem-solving ahead of this weekend’s G7 summit in Biarritz, a U.K. that’s shifting its focus back across the Atlantic toward Washington adds to the long list of reasons for the EU to feel isolated in a hostile world.U.S. President Donald Trump is openly anti-EU. This week he lobbed Twitter bombs at the German economy, Europe’s reliance on the NATO umbrella and ECB policy. The G7 has been disrupted by Trump in the past, and having his pal Johnson there will up the ante. Meanwhile, China is exploiting European divisions to try to deepen its presence in EU member states such as Italy.Ideally the EU would rise to the challenge of what Sciences Po Professor Zaki Laidi calls its “De Gaulle” moment – the realization that it must defend its interests alone. That requires more support for the federalist ambitions sketched out by Macron, especially from Merkel and her successor.There are glimpses of hope. France and Germany are planning to build a fighter plane together, while the continent appears to be taking a common stand against Trump’s trade threat. Christine Lagarde’s imminent coronation at the ECB gives heart to those who believe the euro zone needs to develop a common fiscal policy, rather than always depending on ineffective quantitative easing. The former Polish deputy prime minister Jacek Rostowski thinks Germany’s economic struggles will give Macron the upper hand in trying to pursue deeper ties.Nevertheless, crises have a habit of creating disunity. The combination of Brexit, the recession threat, trade spats and disputes with Italy could easily push things further apart. Macron will be perfectly aware of that.To contact the author of this story: Lionel Laurent at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Germany getting paid to borrow for three decades will reassure Chancellor Angela Merkel’s government as it looks at contingency plans for a crisis.Merkel’s coalition is mulling reviving the economy by boosting expenditure. If she should tap bonds to help stoke growth, she’d find the cost far better than a decade ago when borrowing hit a postwar record during the international bank crisis.“With investors paying the government to buy bonds the temptation to suspend budget discipline and borrow is very strong,” said Frank Schaeffler, a lawmaker with the opposition Free Democrats. “Negative rates are sweet poison for the economy, for investors, for savers but I expect that won’t stop the government from going ahead and tapping the well of cheap debt.”The country’s debt agency conceded it may have tried to sell too many bonds in a 30-year auction paying investors nothing Wednesday, as market demand faltered. Yet the government is confident it can place a sizeable amount of fresh short-term debt in case a recession warrants it, said a person familiar with planning, who asked not to be named as the discussions were private.So far, the government has said it’s sticking to its zero-deficit principle and hasn’t said how it would finance as much 50 billion euros ($55 billion) extra spending. Germany’s central bank doesn’t see a need for fiscal stimulus at this time, even though it expects the economy to shrink again this quarter, according to two people familiar with the Bundesbank’s stance.Budget spending limits are in focus for European bond investors after a battle between Rome and Brussels roiled Italian bonds in the past year. Germany’s public sector is running a large budget surplus and has a relatively low debt burden, while France’s was just under 100% of gross domestic in the first quarter and Italy’s is over 130%.Across Europe, borrowing for governments and companies has never been so cheap. Bond yields have fallen to record lows, with Germany’s entire curve now in negative territory. The stock of negative-yielding debt globally has climbed to a record of more than $16 trillion as policy makers begin to restart stimulus in a frantic effort to revive slowing growth.Germany’s “debt brake” has helped the federal government keep net new borrowing at zero over the last five years. For now, no net deficit is envisaged before 2023 at the earliest, according to the Finance Ministry’s medium-term plan. A constitutional clamp on runaway spending limits leeway for raising debt -- except in the event of exogenous shocks like natural disasters or a plunging economy.In the midst of the financial crisis in 2009, Merkel’s government raised borrowing to a record, relying on placing a large amount of 12-month and nine-month bills into the market, a step that it could repeat, paying off the debt quickly when the economy recovers.Between 2008 and 2017, the government budgeted about 450 billion euros in all in interest payments on fresh debt. It ultimately paid just 288 billion euros, the Handelsblatt newspaper reported in April last year, citing the Finance Ministry.German 10-year yields are currently near a record low at around -0.65%, compared with a yield of near 3.5% at the end of 2009. Given it would take a recession to spur any emergency debt issuance, that would likely be soaked up by investors looking for safety, leaving this week’s poor auction as little more than a “hiccup” toward even lower yields, according to Rabobank.“The notion that a loosening of German fiscal policy will trigger an upward adjustment of yields threatens a tactical correction at best in our view,” wrote Rabobank strategists led by Richard McGuire in a note to clients. “The economic distress necessary to prompt such a policy adjustment is also likely to be accompanied by yet higher demand for euro-zone safe haven debt.”\--With assistance from Birgit Jennen.To contact the reporters on this story: Brian Parkin in Berlin at firstname.lastname@example.org;John Ainger in London at email@example.comTo contact the editors responsible for this story: Ven Ram at firstname.lastname@example.org, Neil Chatterjee, Raymond ColittFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Jay Powell, Federal Reserve chairman, said that fitting trade uncertainty into the central bank’s policy framework was “a new challenge”, emphasising the Fed has little ability to influence international trade negotiations. Mr Trump fired back on Twitter: “As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly.
A round-up of the week’s best FT stories, plus a few others that you shouldn’t miss. If this email was forwarded to you, and you want to receive Long Story Short in your inbox every Friday, you can sign ...
This week's podcast guest shares how investors can find stocks to buy and hold for the long run. Plus, we analyze Twitter stock, HubSpot stock and Carvana.
(Bloomberg Opinion) -- In the past, emerging markets looked to the Federal Reserve for cues about monetary policy. Increasingly, they’re turning to the yield curve. Chairman Jerome Powell must regain control of the narrative at Jackson Hole this weekend before his equivocation leads to deeper turmoil in developing economies.On Thursday, Bank Indonesia cut its benchmark policy rate by 25 basis points to 5.5%, the second consecutive maneuver after starting an easing cycle in July. Most economists polled by Bloomberg had expected the central bank would hold. This was no easy decision for Jakarta. Indonesia – a so-called twin deficit nation, with fiscal and current-account shortfalls – is one of the most vulnerable emerging markets. Foreigners hold roughly 40% of the country’s sovereign bonds, so the economy is sensitive to outflows: Investors abroad yanked roughly $430 million from Indonesia’s high-yielding bonds this month alone, even as yields in other parts of the world sank below zero. The rupiah has weakened 1.5% against the dollar in the first three weeks of August.Textbook economics would say that another rate cut would accelerate that slide. And yet Bank Indonesia is braving the storm. Indonesia’s central bankers aren’t simply reckless. Rather, like the rest of the market, they’re looking past the Fed’s July meeting minutes – which indicated its cut was merely to “insure against” slower growth and inflation. A more reliable indicator has become the bets Fed funds futures traders are making. That metric implies almost 65 basis points of reductions this year, after a closely watched part of the yield curve this month inverted for the first time since 2007, an occurrence that has reliably predicted past recessions.Can you blame Jakarta for deviating from the Fed’s official narrative? The central bank “can’t put a back-to-back consistent message together. It is different at every single meeting,” Jeffrey Gundlach, the chief executive of DoubleLine Capital LP, said this week. As recently as late December, the Fed was still in the midst of tightening. By July, Powell was talking about a “mid-cycle adjustment.” Meanwhile, U.S. President Donald Trump has been busy bullying the Fed into faster and deeper rate cuts on Twitter, putting blame for a stronger dollar, the inverted yield curve, and the possibility of a recession at the Fed’s feet. While Americans may still believe in the independence of their central bank, emerging-market central bankers may start to think otherwise. The president surely seems to be getting what he wants. Compared with many emerging markets, the U.S. economy isn’t doing that badly. It’s like a Christmas tree – some lights are flashing red but plenty are flashing green, as former Fed official Nathan Sheets put it recently. At this weekend’s Jackson Hole, Powell needs to pick a color. If emerging-market central banks begin to trust fickle markets over the Fed, we’re in for a volatile holiday season. To contact the author of this story: Shuli Ren at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Alphabet Inc's Google announced on Thursday that its YouTube streaming video service disabled 210 channels appearing to engage in a coordinated influence operation around the Hong Kong protests, days after Twitter and Facebook said they dismantled a similar campaign originating in mainland China. "This discovery was consistent with recent observations and actions related to China announced by Facebook and Twitter," said Shane Huntley, one of Google's security leaders, in a blog post.
(Bloomberg) -- Google said it disabled 210 YouTube channels involved in “coordinate influence operations” around the Hong Kong protests, following similar measures earlier this week by social media companies Facebook Inc. and Twitter Inc.The Alphabet Inc. unit didn’t specify which channels were shut down in Thursday’s blog post announcing the decision. But the post said the company discovered accounts “consistent with recent observations and actions related to China” from Facebook and Twitter.The social media companies said earlier this week that they had removed hundreds of accounts linked to the Chinese government that were pushing messages meant to undermine the legitimacy of the protests in Hong Kong. Twitter also blocked advertising from state-controlled media. Facebook and Google have not made similar moves on advertising.YouTube, like Google search and other social media services, does not operate in China.To contact the reporter on this story: Mark Bergen in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Andrew Pollack, Robin AjelloFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Facebook (FB) and Twitter (TWTR) are yet again the center of attention over claims of propagating disinformation, this time for the Hong Kong protests.
The seemingly endless trade war has left countless victims maimed and wounded in its wake. Escalating tariffs and slower global growth is taking a bite out of corporate profits and souring full-year forecasts. But not all companies are getting bogged down by the brouhaha. Today we'll look at three internet stocks to buy that are holding firm.Identifying which companies are being hurt or helped or are unaffected by the trade war is a simple matter of following price. There's no need to dive deep into balance sheets and investigate business models. A glance at the price chart reveals all you need to know.Stocks that are immune to the trade war are ones that are flying high. They boast strong trends and relative strength in spades. If these companies had vulnerabilities to the U.S.-China food fight, then they wouldn't be skirting the stratosphere. One common theme tying together today's trio is they're all internet stocks.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Marijuana Stocks That Could See 100% Gains, If Not More Let's take a closer look at these internet stocks to buy. 3 Internet Stocks to Buy: Snap (SNAP)Snap (NYSE:SNAP) shares got a bit overheated after last month's earnings report. The numbers were good enough to deliver a three-day 24% rip to new 52-week highs. Since then we've seen profit-taking strike, and the gains have been thoroughly digested.The past month of consolidation has taken on the form of a falling wedge that is providing a lower-risk entry point. Last week's test and bounce off the 50-day moving average confirmed dip buyers are still alive and well. This morning's 3% rally could signal the completion of the flag and beginning of the next advance.Source: ThinkorSwim Watch for a break over the 20-day moving average ($16.75), then deploy bullish trades. Buy stock or buy the October $15 calls for around $2.10. 3 Internet Stocks to Buy: Pinterest (PINS)New IPO stocks are always on the radar of momentum traders. Their higher volatility and potentially explosive growth make them prime targets for these big game hunters. July's earnings report and subsequent gap higher for Pinterest (NYSE:PINS) shares put it on the map. Yesterday's breakout to all-time highs has spectators salivating.Though PINS stock is retreating this morning after a powerful three-day run, weakness has to be viewed as a buying opportunity given its strong uptrend. Multiple potential support levels will come into play if the selling pressure continues. The 20-day moving average near $32 also houses a horizontal support zone and unfilled gap.Source: ThinkorSwim * 10 Marijuana Stocks to Ride High on the Farm Bill I fully expect buyers to vigorously defend their turf if we end up pulling back that far. PINS lower price tag makes it an ideal candidate for naked puts. If you're willing to bet, we remain above $31 for the next month then sell the September $31 put for 50 cents. 3 Internet Stocks to Buy: Twitter (TWTR)Our final pick is Twitter (NYSE:TWTR) which sits a stone's throw from new 52-week highs. Its trend is strong, and the 20-day, 50-day, and 200-day moving averages are stacked atop each other in bullish fashion. The past month has built a box between $43.50 and $40. And while this morning's 2.5% drop is showing TWTR isn't ready to break out yet, I think it's only a matter of time before resistance gives way.Source: ThinkorSwim A break below $40 would warrant reassessment. Until then it's game on for bull trades. I like naked put trades on TWTR, just like PINS. If you're willing to bet, TWTR sits above $38 a month from now, then sell the September $38 put for 50 cents.As of this writing, Tyler Craig didn't hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post 3 Internet Stocks Immune to the Trade War appeared first on InvestorPlace.
(Bloomberg Opinion) -- This is the second of two columns about MiMedx and the short-sellers. Read the first here.Most of the time, Eiad Asbahi, the 40-year-old founder of Prescience Point Capital Management, is a short-seller.According to its website, the firm, based in Baton Rouge, Louisiana, specializes “in extensive investigations of difficult-to-analyze public companies in order to uncover significant elements of the business that have been overlooked or ignored by others.” Such investigations usually lead to the discovery of problems that will cause the stock to fall once they become known.“But every now and then,” Asbahi says, “we find a company that is incredibly hated and where the shorts have it wrong.” SeaWorld Entertainment Inc., which has been hammered for its treatment of its whales and dolphins, was one such company. Two years ago, Asbahi bought the stock, believing that “the mispricing was extreme.” He was right. Since it bottomed out in November 2017, SeaWorld’s shares have more than tripled.On Jan. 8 of this year, Prescience Point released a report about its latest big investment idea: MiMedx Group Inc., a company that was under siege by Marc Cohodes and a handful of other short-sellers. After six months of research, Asbahi concluded that the thesis developed by the shorts — which had helped push the stock from $18 to $1.15 — was wrong.Contrary to what Cohodes et al were claiming, Prescience Point’s research suggested that MiMedx products were “legitimate and sustainable”; that it had positive cash flow; and that, while “channel stuffing” to improperly boost revenue at the end of the quarter had taken place, the company’s critics had “failed to produce any smoking guns to support their claims of massive fraud.”“In our view MDXG is one of the largest mispricings we have ever identified,” the report concluded. At the time it was issued, MiMedx stock was at $2.16. Prescience Point predicted that it would quadruple.When I spoke to Asbahi a few weeks ago — by which time the stock had topped $5 — he went further in his criticism of Cohodes and the other short-sellers. In his view, MiMedx’s stock had tanked in 2018 as much because of what the shorts had gotten wrong as what they had gotten right.“What we found,” Asbahi said, “is that they had some credible channel stuffing allegations” — and then they made a series of additional, less credible accusations. There was never any bribery or Medicare fraud, Asbahi said. And MiMedx’s products, often maligned by the shorts, were considered “best in class” by many doctors. “It is not a short activist campaign they’re running,” Asbahi concluded. “It is a smear campaign.”Cohodes’s initial allegations were serious enough that the MiMedx board hired a law firm to investigate. That investigation led to the discovery of the channel stuffing and the dismissal of several top MiMedx executives, including chief executive Parker Petit. But as I noted Monday, even after Petit and the others resigned, Cohodes kept MiMedx in his crosshairs, vowing to take down the company “if it’s the last thing I do.” Once Asbahi released his MiMedx report, Cohodes added Prescience Point to his list of targets.Within days of the report’s release, Cohodes was tweeting that it was “false & misleading” and that Prescience Point “will be ruined.” He has kept up a steady drumbeat of criticism ever since. Just a few weeks ago, he called Prescience Point a “pump-and-dump operation,” a charge he’s made several times before.This last allegation is ludicrous. Prescience Point is MiMedx’s largest shareholder, with 7.7% of the stock. In May, it launched a proxy fight that led to the company agreeing to add six new board members. Three of them were Prescience Point’s nominees.When I asked Cohodes what proof he had to back up the pump-and-dump charge, he replied (via email) that it was his understanding that Prescience Point had purchased the stock at between $6 and $10 a share — and was now “obviously attempting to generate positive interest to make back its investment.” He also said that Prescience Point had sold MiMedx stock after publishing “glowing information about the company.”In truth, Prescience Point bought the stock at an average price of about $2.60 a share, a fact that can be easily found in government disclosure documents. Although the firm sold some stock, it did so only to avoid triggering the company’s poison pill. Once the proxy fight ended — and the poison pill was a nonissue — Prescience Point bought more stock. “We set up a single-idea fund to invest in MiMedx with a two-year lockup,” Asbahi told me. “Does that sounds like a pump-and-dump scheme?”Today, MiMedx is a very different company from when Petit was running it. Of Petit’s 16 top executives, 13 are gone. Its new chief executive, Timothy Wright, has been a top level executive at a number of biotech and pharmaceutical companies, including Teva Pharmaceutical Industries Ltd, the big generics manufacturer.Among the new directors is Richard Barry, a respected health-care investor. He is so bullish about MiMedx’s prospects that he bought 3% the stock. All of this information is readily available. Yet Cohodes and his allies refuse to acknowledge that MiMedx has changed. Instead they are making the same allegations they’ve been making all along — except louder and more insistently.Why?Cohodes gave me two reasons. The first, he said, was that the company was still engaged in “criminal activity.” “Doctors have been bribed by MiMedx. And all the perps who carried out the fraud are still there doing it,” he told me.The second reason, he said, was that MiMedx’s products are deeply flawed. “This is a public health deal. This stuff is so bad, and they are taking advantage(1) of veterans. I have to speak out.”Let’s examine the bribery issue first. One doctor the shorts have targeted — including online — is Brandon Hawkins, a podiatrist in Bakersfield, California. He is a major buyer of MiMedx’s primary product, a wound graft made from placental tissue called EpiFix. Indeed, Hawkins told me he is probably the fourth or fifth biggest user of EpiFix in California. He has been paid by MiMedx to give occasional lectures, a common practice in medicine, which he discloses. His brother-in-law is a MiMedx salesman. And he lives quite well, something one can glean from the family’s Facebook page.The MiMedx critics have linked these facts to claim that Hawkins is on the take. But Hawkins says he uses EpiFix for a perfectly sensible reason: It works better than competing wound grafts. “Wounds that would normally heal in 12 to 20 weeks sometimes heal in four weeks with EpiFix,” he said. He added that there is a high incidence of diabetes in Bakersfield, and EpiFix has been an important tool in healing the foot ulcers that often develop in diabetics.Matthew Garoufalis,(2) a Chicago podiatrist, explained that diabetics are often “so immunocompromised” that their ulcers don’t heal. Studies show that some 20% of diabetics who develop foot ulcers will eventually have part or all of a leg amputated below the knee. But the placental-cell formula used in EpiFix “stimulates the wound healing cycle” even with ulcers that are not responding to other healing products, Garoufalis said. He also told me there are lots of good data affirming the efficacy of EpiFix. A 2016 study published in the International Wound Journal concluded that the technology used by EpiFix “is superior to standard care” in healing foot ulcers. After my first MiMedx column was published Monday, several of Cohodes’s short-selling allies took to Twitter, saying they had proof that MiMedx was guilty of bribing doctors. As Bloomberg News reported last year, three employees of a South Carolina Veterans Affairs hospital were indicted for accepting payments and other inducements from the company that resulted in “excessive use of MiMedx products.” One of the three was a doctor. The indictment, however, does not allege any wrongdoing by MiMedx. You see, MiMedx had contracts with the three VA employees — just as it has contracts with doctors all over the country. And MiMedx itself didn’t play a part in the conduct that got the VA employees into hot water. The employees were supposed to get the contracts approved by the hospital. But apparently that didn’t happen. The case wasn’t about bribery; it was about violating government rules. Within five months of the indictments, prosecutors had concluded that the case wasn’t worth going to trial over. The three employees agreed to “pretrial diversion,” meaning that if they paid the money back — about $3,500 in two cases, and about $20,000 in the third — the indictments would be dismissed. That happened in April. What about Cohodes’s charge that MiMedx’s products are creating a public health hazard? This should also raise an eyebrow (or two). The product he is primarily criticizing is AmnioFix. It also uses placental tissue, but it’s processed in such a way that it can be injected. AmnioFix’s primary purpose is to relieve degenerative joint and tendon pain — pain that is currently difficult to treat. It’s a relatively new product, and many of those who are long MiMedx stock think it has blockbuster potential.Cohodes, however, says that AmnioFix has never been proved effective for anything, and that it hasn’t been approved by the Food and Drug Administration. “MiMedx was and is selling unapproved products to an unsuspecting and vulnerable public,” he said in an email. “People in pain often search for solutions in the unapproved drug world when they have run out of options. MiMedx has exploited that vulnerability and that is tragic.”Let me offer an alternate take. In December 2017, the FDA issued new guidelines for injectable tissue — and gave companies three years to come into compliance and get approved indications for their products. With a year and a half to go, MiMedx is in the middle of a Phase III trial for the use of AmnioFix to relieve plantar fasciitis, and a Phase II trial for osteoarthritis. MiMedx bulls think it will have the indications approved by the December 2020 deadline.Studies indicate that the technique MiMedx is pioneering with AmnioFix works: One showed that three months after an injection, 91 percent of patients felt significant pain relief. And the FDA is on record as saying that AmnioFix “has the potential to address unmet medical needs.” My exchanges with Cohodes left me with the distinct impression that he views AmnioFix as some kind of rogue drug, operating outside the FDA system. Based on everything I've learned, it’s not.Digging into Cohodes’s claims, I concluded that Asbahi is probably right: The short-seller and his allies are conducting a smear campaign intended to damage the company. I say this with a heavy heart. I’ve written in the past about companies Cohodes and his former partner David Rocker exposed, and I’m a big believer in the importance of short-sellers. Investors need to listen to skeptical voices as well as bullish ones. As a general rule, those who bet against companies are performing a service for all investors.But it’s also important that short-sellers tell the truth about what they find and have an open mind if a company, say, changes its tactics and its senior management. Stretching the facts to push a stock down is as bad as stretching them to push a stock up. And flogging a misguided narrative about products that could help millions of patients is just wrong. Campaigns like Cohodes’s against MiMedx give short-sellers a bad name.In an email, I asked Cohodes why he remained so obsessed with MiMedx. “You call it ‘obsessed,’ he replied, “but that’s the wrong word. I am committed to truth and always have been.”There was a time when I would have believed him. Not anymore.*****A postscript: On Monday afternoon, Bloomberg and I received a lengthy letter from Cohodes’s lawyer, David Shapiro, claiming that my first MiMedx column was “false and defamatory” and demanding a retraction. The letter reminded me of how this all started for Cohodes: with a presentation at a 2017 investment conference in which he denounced MiMedx and its then-CEO Petit for having sued three of the company’s critics. “Quit intimidating the shorts, the critics, the free speakers,” Cohodes said then. “It has to stop.”Apparently, Petit isn’t the only one willing to use intimidation tactics to quiet his critics.(1) Bloomberg’s standards regarding foul language prevent me from repeating his actual words.(2) I spoke to a third doctor, Raymond Otto of Boise, Idaho, who also praised EpiFix as a superior wound product. I should note that all three doctors have given lectures on MiMedx’s behalf. Garoufalis told me that the typical lecture fee is $1,500 or less.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Stacey Shick at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Growth is sputtering all over the world. Germany and the U.K. have both reported that their economies shrank in the second quarter, and signs of a slowdown are apparent in lots of other places. But as central bankers gather in Jackson Hole, Wyoming, and government leaders in Biarritz, France, to discuss what to do, it seems worth pointing out how slow growth already was in most rich countries even before the recent bad news. Historically slow, in the case of the U.K.:These statistics (most of them, at least) are from the Maddison Project at the University of Groningen in the Netherlands, which maintains the database of long-run per-capita gross domestic product estimates originally compiled by the late economist Angus Maddison and updated in 2018 by Jutta Bolt, Robert Inklaar, Herman de Jong, and Jan Luiten van Zanden. I had been looking through it because I was curious when exactly economic growth had accelerated in Britain during the Industrial Revolution,(1) and I calculated ten-year moving averages (using the compound-annual-growth-rate formula) to cut through the year-to-year noise.(5)As soon as I’d made the chart, the deceleration since about 2006 caught my eye. The Maddison Project numbers end in 2016, so I added in World Bank data for 2017 and 2018.(4) Those improved the picture a teeny bit, but still show the U.K. going through the worst slowdown since the demobilization after World War II. That slowdown was followed by a rapid return to high growth rates. The 1920s depression in the U.K. was much worse, and lasted for a while. But again it was eventually followed by per-capita real growth of more than 2% a year, which sure doesn’t seem to be in the cards for the near future.How about in the U.S.?The spectacular GDP increases of the World War II years give the chart a different scale, and the recent numbers are a little more encouraging, but the same basic story repeats. After decades of strong growth in real per-capita GDP, the post-global-financial-crisis period has been anomalously bad.With Germany and Japan, which I put together because I figured they might display some similar patterns (they did not disappoint), the picture is more of a long deceleration after the spectacular growth of the postwar decades, although Germany did bounce back in the 2000s from a post-reunification growth slump.The Maddison Project has per-capita GDP estimates for 14 countries for the year 1 A.D. (Italy was the richest, followed by Greece and Egypt), a smattering of other estimates over the next 13 centuries and lot of really old numbers for the England and Holland, which are now both part of larger nations (the U.K. and the Netherlands). But the only entire countries for which there are annual estimates going back to the Middle Ages are France and Sweden. Here’s Sweden:The pre-1800 numbers are pretty noisy, which is why I decided to calculate the annual growth rate from 1300 to 1800; at 0.04% a year, it really wasn’t much. I did something similar for France, where there are no estimates for the three decades following the Revolution of 1789 but there are numbers going back all the way to 1280.What’s most striking here is how close Sweden’s and especially France’s current per-capita growth numbers now are to those that prevailed before 1800. This is partly just because the 2008 global financial crisis and the recession that followed were especially awful and the 10-year rolling window I’ve chosen for my charts is going to keep reflecting that awfulness for a couple more years, and partly because the percentages involved are so tiny that they look more similar than they really are — France’s dismal 2006-2016 average annual growth rate of 0.2% was still more than three times higher than the annual rate from 1280 to 1789. We aren’t really back in the Middle Ages. But per-capita GDP growth in wealthy countries does seem to have slowed to a much slower pace than in the 20th century, and possibly at any time since the dawn of the Industrial Revolution. Add to this the fact that population isn’t growing much in these countries, and in some cases is actually shrinking, and you have at least part of the explanation for why interest rates are so low and politics so weird these days. The growth that we’ve gotten used to over the past two centuries or so just hasn’t been there lately.Now it’s worth pointing out that some economists worried in the 1930s and again after World War II that the age of rapid growth might be coming to an end. “We are passing, so to speak, over a divide which separates the great era of growth and expansion of the nineteenth century from an era which no man, unwilling to embark on pure conjecture, can as yet characterize with clarity or precision,” Harvard’s Alvin H. Hansen said in his presidential address to the American Economic Association in 1938. It might turn out to be an era, he went on, of “secular stagnation — sick recoveries which die in their infancy and depressions which feed on themselves.”Turns out it was instead an era of even-more-rapid growth and expansion. But maybe that was just a lucky break (or inadvertently smart fiscal policy). Harvard economist and former Treasury Secretary Lawrence Summers — this era’s leading worrier about secular stagnation — tweeted as part of a long thread this morning about slowing growth and what central banks and governments can do about it:There are other ways of looking at the growth slowdown: University of Houston economist Dietrich Vollrath has a book coming out in January(3) called “Fully Grown: Why a Stagnant Economy Is a Sign of Success,” in which he argues that with their material needs more than satisfied, many people in rich countries are simply shifting their focus to activities that don’t generate as much growth in productivity or GDP. Could be! But it would still mean that we have entered a new era that none of us are really prepared to navigate.(1) I have strange hobbies.(2) It might seem odd to measure early-1700s U.K. growth inU.S. dollars adjusted for purchasing-power parity, but the Maddison Project does that so you can easily compare incomes in different countries at different times.(3) That is, I calculated annual growth rates over moving 10-year periods starting with 1990 using the World Bank data, checked that the growth rates matched up pretty closely with those from the Maddison database for 2000-2016, and then plugged in the 2017 and 2018 numbers.(4) I just got a galley, and I haven't read it yet but I did peek.To contact the author of this story: Justin Fox at email@example.comTo contact the editor responsible for this story: Sarah Green Carmichael at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. President Donald Trump resumed his assault on the U.S. central bank Thursday, turning Germany’s sale of negative-yield bonds into a criticism of the Federal Reserve.“Germany sells 30 year bonds offering negative yields,” Trump tweeted. “Germany competes with the USA. Our Federal Reserve does not allow us to do what we must do. They put us at a disadvantage against our competition.”Germany on Wednesday attempted to sell 2 billion euros of zero-coupon bonds in an auction. It failed to generate the expected demand with investors purchasing 824 million euros worth of the securities at an average yield of -0.11%, a record low.The sale represents cheap financing for the German government, but more importantly demonstrates how weak the European economy is. Some investors are so skeptical over growth prospects they are willing to pay for the safety of government bonds.Though the Fed cut rates in the U.S. by a quarter-point on July 31 to guard against a potential downturn made more likely by Trump’s ongoing trade disputes, the president has repeatedly called for the central bank to slash rates more aggressively.“They move like quicksand,” Trump said in his tweet. “Fight or go home!”To contact the reporter on this story: Christopher Condon in Washington at email@example.comTo contact the editors responsible for this story: Alister Bull at firstname.lastname@example.org, Jeff KearnsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
If I told you in late 2018 that social media company Snap (NYSE:SNAP) would be one of the market's hottest stocks in 2019, you probably would've laughed at me. After all, in December 2018, SNAP was a $5 stock that had lost about 80% of its value over roughly 18 months.Source: ArthurStock / Shutterstock.com But that's exactly what has happened. SNAP stock has turned into one of the market's biggest winners in 2019. So far this year, SNAP stock price is up about 200%.The big question is: will the rally of Snapchat stock continue?InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn order to answer that question, we need to first answer five other questions which will give us more insight into how big Snap's opportunity is, how much of that opportunity Snap will capture, and how much higher SNAP stock price can go. * 10 Marijuana Stocks That Could See 100% Gains, If Not More How Much International Growth Potential Does Snap Have?One of the core tenants of the bull thesis on SNAP stock is that this company's overseas user base can increase tremendously.The logic behind this belief is pretty solid. For a long time, Snap had a bad Android. app, but it recently revamped its Android app, and it's finally good. Most overseas consumers utilize Android . Thus, Snap's Android revamp should improve the experience of a ton of its international users. That, in turn, could enable Spark's international growth to accelerate for a long time.Recent data supports this thesis. Following the Android revamp, Snap added 9 million international users in the second quarter versus the first quarter, its largest sequential net increase of overseas users in a long, long time.But, on the other hand, Snap is jumping into an international market that is already saturated with Stories apps. Specifically, Facebook's (NASDAQ:FB) Facebook, Instagram, WhatsApp, and Messenger apps all have Stories. Thus, why would overseas consumers who are already using any of those four apps to communicate with Stories jump to Snapchat because of the revamp of its Android app?They might not. As a result, there are some question marks surrounding just how much more Snap's international user base can realistically grow. Will Young Consumers Stick With Snap As They Grow Up?A core tenant of the bear thesis on SNAP stock is that it's a "kids only" app. That is, no one over the age of 35 uses the app, and those are the consumers with most of the money, so being dominant among teenagers really isn't that valuable.Bulls reply by telling bears to take a look at Facebook (NASDAQ:FB). That was a "kids only" app at one point in time. Now, over 2 billion people use it all around the world. Bulls argue that Snap will retain its users, too.I have a tough time buying that argument. Facebook launched at a time when there were very few other social media platforms. Thus, as consumers went from their 20s to their 30s, there was no other social media platform to "graduate" into, so consumers just stuck with Facebook. Today, there are plenty of social media platforms which consumers can "graduate" into as they grow older: Instagram, Facebook, Twitter (NYSE:TWTR), etc.As a result, I still have a tough time buying the argument that there will be a bunch of 30- to 40-year-old consumers running around in five to ten years, snapping each other with as much frequency as they used when they were in their 20s. Instead, I think Snap will forever largely be a "kids only" app. How Valuable Are Young Users to Advertisers?Assuming that Snap does largely remain a "kids only" app for the foreseeable future, then one has to ask just how valuable being a "kids only" app is.After all, kids don't make much money. Sure, they are heavily influenced by what they see on social media and in digital ads. But they don't have much purchasing power. As a result, SNAP stock bears argue that Snap's hold on Generation Z isn't all that valuable, unless SNAP maintains that advantage as those consumers get older.There's merit to that argument. However, brands aren't going to stop spending an arm and a leg on advertisements targeted to Generation Z. Ads get people to think more about companies' products, and that's reason enough to justify the spending.As a result, having a hold on young consumers should prove to be pretty valuable for Snap in the long-run. though not as valuable as attracting other demographics like Facebook and Twitter have,. As a result, Snap's unit revenues look poised to be lower at their peaks than those of FB and TWTR. Where Will SNAP's Margins End Up?One important question regarding Snap's long-term profit potential relates to where exactly its margins will be at the end of the day. Specifically, where will its gross margins wind up?Snap hosts a lot of expensive content. Storing and saving videos and photos in data centers is a lot more expensive than storing and saving texts. Considering pretty much all of Snap's content is photos and videos, the company presumably will have a higher hosting cost rate than pretty much all of its peers.Indeed, Snap's gross margins are depressed today. They are making progress, and they will continue to make progress for the foreseeable future. But will Snap's margins hit Facebook-type 80%-plus levels? Probably not, both due to Snap's lack of size and its higher content hosting rates. What Does Snap Stock Price Reflect Today?Perhaps the biggest question has to do with the valuation of Snap stock; how much is priced into SNAP stock today?Snap has around 200 million daily active users. Twitter has around 140 million daily actives. Yet the market cap of SNAP stock is about 30% below Twitter's market cap.From that perspective, SNAP stock may actually be undervalued.But each of Twitter's users generates way more value than each of Snap's users. Specifically, over the last 12 months, Snap's users have produced an average of about $6 of revenue and no profits. Each user on Twitter has produced an average of over $24 in revenue and tons of profit.Of course, the bull thesis on SNAP stock is that one day, Snap's users will generate as much revenue and profits as Twitter's users, and that because Snap has more users than TWTR, it will be more valuable than Twitter. But that scenario probably won't materialize, given the demographic and content differences I outlined above. If it ever happens, it will take five to ten years to materialize.Thus, SNAP stock is richly valued. Yes, there's runway for it to grow into the valuation. But there's also plenty of room for SNAP to fall if the company doesn't execute as expected. The Bottom Line on SNAP StockI think SNAP is a company that has been firing on all cylinders, but whose future growth outlook relies on a lot of hope, which is clouded by fundamental challenges.I'm not convinced the company's international opportunity is that tremendous, given that Facebook's properties already dominate that market. I'm also not convinced that Snap's user base will stick with it as they grow up, nor am I convinced that Snap can extract that much value out of each user if its user base forever consists of mostly young and broke consumers. Margins are also a big question mark for SNAP stock going forward.The valuation underlying SNAP stock seems to ignore all these risks. But perhaps Snap will execute exactly as expected, and maybe Snap will become the next big thing in social media.I just have a tough time believing that scenario now. There are too many risks facing SNAP stock, and not enough of those risks are reflected by SNAP stock price. As a result, I'll watch the Snap show from the sidelines. Hopefully, I won't be kicking myself in a year.As of this writing, Luke Lango was long FB. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post 5 Huge Questions About Snap Stock appeared first on InvestorPlace.
in an attempt to stamp out surveillance of European citizens. The European Commission is planning regulation that will give EU citizens explicit rights and limit “indiscriminate” use of facial recognition technology by companies and public authorities, senior officials told the FT.