Copyright © Daniel Cullinane CPA.
The trade war between China and the United States has started. According to Reuters:
U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday, with Beijing saying it had no choice but to respond in kind, as the two trading giants escalated a bitter row.
Hours before Washington’s deadline for the tariffs to take effect, U.S. President Donald Trump upped the ante, warning that the United States may ultimately target over $500 billion worth of Chinese goods, or roughly the total amount of U.S. imports from China last year.
The Federal Reserve remains positive on the U.S. economy. According to Reuters:
U.S. central bankers discussed whether recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong, minutes of the Federal Reserve’s last policy meeting on June 12-13 released on Thursday showed.
The minutes, which described a meeting in which the Fed raised interest rates for the second time this year, also suggested policymakers might soon signal that the Fed’s rate-hiking cycle was advanced enough that policy was no longer boosting or constraining the economy.
Plans for one of the largest IPOs in history may come apart. According to The Wall Street Journal:
Preparations for the public listing of Saudi Arabia’s state oil company, a centerpiece of the government’s plan to open its economy, have stalled, leaving government officials and people close to the process doubting that it will go forward at all.
The initial public offering of Saudi Arabian Oil Co., better known as Aramco, was meant to be the cornerstone of the kingdom’s plan to be less reliant on oil. It would create the largest public company in the history of capital markets, an opportunity coveted by Wall Street’s biggest names.
The vacant stores of defunct retailer Toys “R” Us could have some new tenants. According to The Wall Street Journal:
Hobby Lobby Stores Inc., Burlington Stores Inc. and TJX Co. are among the retailers expected to fill the spaces vacated by defunct retailer Toys “R” Us Inc., according to one of the nation’s biggest owners of open-air shopping centers.
More than 700 Toys “R” Us stores in the U.S. closed their doors last week after the retailer abandoned its plan to reorganize in a chapter 11 bankruptcy case.
China telecom firm Xiaomi may have trouble with its IPO. CNBC reports:
Chinese smartphone maker Xiaomi is ready to put its business to the verdict of investors with an IPO in Hong Kong, but a disappointing pricing and a listing delay in mainland China are casting a cloud over its debut.
Xiaomi, established only in 2010, is now the world’s fourth-largest smartphone manufacturer by producing low-priced devices that have drawn comparisons — favorable and accusatory — to the iPhone.
Troubled movie subscriptions services provider MoviePass has added new charges. According to CNNMoney:
MoviePass subscribers might have to spend a little more money on their next trip to the theater.
The service, which lets customers see one movie a day for $10 a month, began rolling out surge pricing Thursday.
MoviePass told customers that its Peak Pricing model will trigger whenever there is a lot of demand for a movie or showtime. For example, a subscriber who wants to see a popular evening showing of the latest “Avengers” movie might be warned by the MoviePass app that he or she will have to pay a few extra dollars to book a ticket
Here are five things you must know for Thursday, July 5:
1. -- U.S. Stocks Rise as China Tariffs Loom
U.S. stock futures suggested Wall Street would open higher on Thursday, July 5, while stocks in China declined as investors braced for the first major wave of U.S. tariffs on China-made goods and the potential for a reciprocal reply from Beijing.
China's Commerce Ministry spokesman, Gao Feng, told reporters Thursday that around 60% of the goods earmarked for tariffs from the White House, and set to kick in on Friday, July 6, were made by non-Chinese companies, including American-owned companies. The $34 billion in levies, he argued, were "essentially attacking global supply and value chains. To put it simply, the U.S. is opening fire on the entire world, including itself."
European stocks rose Thursday, getting a boost from the auto sector, following a report from Germany's Handelsblatt newspaper that said U.S. Ambassador Richard Grenell told executives at Germany's biggest carmakers that Donald Trump would suspend his threat to slap a new 25% tariff on imports if the European Union removed its levies on U.S. cars heading into the bloc.
Contracts tied to the Dow Jones Industrial Average rose 185 points, futures for the S&P 500 were up 20.45 points and Nasdaq futures rose 58.50 points.
Global oil prices traded higher Thursday after Trump attacked OPEC again, demanding the cartel cut crude oil prices.
The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $'s. This must be a two way street. REDUCE PRICING NOW!
— Donald J. Trump (@realDonaldTrump) July 4, 2018
2. -- ADP Jobs Report, Fed Minutes Highlight Thursday's Calendar
The U.S. economic calendar on Thursday includes the ADP National Employment Report for June at 8:15 a.m. ET, weekly Jobless Claims at 8:30 a.m., the PMI Services Index for June at 9:45 a.m., the ISM Non-Manufacturing Index for June at 10 a.m., and minutes from the June meeting of the Federal Open Market Committee at 2 p.m.
Earnings are expected Thursday from PriceSmart Inc. (PSMT) .
3. -- ZTE Replaces Executives to Comply With U.S. Mandate
ZTE Corp. (ZTCOY) named a number of new top executives, including a new CEO, as the Chinese telecommunications company presses ahead with U.S.-mandated leadership changes, The Wall Street Journal reported, citing a person familiar with the matter.
ZTE's new CEO is Xu Ziyang, the former head of the company's business in Germany, the person said. The company also named a new chief financial officer, as well as a new chief technology officer and a new head of human resources, the person told the Journal.
The new leadership comes less than a week after ZTE's board resigned and shareholders voted to install a new eight-person board. ZTE is required to name a new board and senior executives as conditions for the U.S. government to lift a ban on purchasing American-made parts, the Journal noted.
4. -- Praxair Sells European Businesses
Praxair Inc. (PX) agreed to sell the majority of its businesses in Europe to Taiyo Nippon Sanso Corp. of Japan for €5 billion ($5.85 billion) to address European regulators' concerns over its planned $80 billion merger with Germany's Linde AG.
"We are taking a constructive approach to address regulatory concerns with the merger in the European Economic Area," said Steve Angel, Praxair chairman and CEO, in a statement on Thursday. "Taiyo Nippon Sanso is a strong and capable global industrial gas buyer for our assets and we are pleased that they will continue to serve the needs of our customers in Europe."
Linde was even clearer about the purpose of the sale, with the Munich-based company saying in a regulatory statement that it and Praxair "consider a divestiture of such business to be necessary in order to allow merger clearance of the proposed business combination by the European Commission."
Praxair to Sell Most European Businesses to Japan's TNSC
5. -- Starbucks Loses Another Key Executive
Starbucks Corp. (SBUX) said its deputy general counsel in charge of ethics and compliance, Matthew Shay, has left the company, confirming Shay's departure to the New York Post.
Shay, 60 years old, told management he planned to retire in January, according to Starbucks. He had been with the company for 21 years.
Last week, Starbucks announced the surprise retirement of Chief Financial Officer Scott Maw, who had served in the role since February 2014. Executive Chairman Howard Schultz, the company's former CEO, also stepped down last week.
The stock rose 0.5% in premarket trading on Thursday.
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German Chancellor Angela Merkel said on Thursday she would back lowering European Union tariffs on U.S. car imports, responding to an offer from Washington to abandon threatened levies on European cars in return for concessions.
However, she added EU tariff negotiations required a "common European position and we are still working on it."
U.S. President Donald Trump threatened last month to impose a 20-percent import tariff on all EU-assembled vehicles, part of a tough line on trade that has raised tensions across the world and which could upend the EU industry's current business model for selling cars in the United States.
The U.S. ambassador to Germany, Richard Grenell, has repeatedly met with executives of German carmakers Volkswagen (VW), BMW and Daimler and automotive suppliers including Continental, most recently on Wednesday, to discuss the issue.
An industry source told Reuters earlier that Grenell had mentioned to the executives that Trump could abandon his threats if the EU scrapped duties on U.S. cars imported into the bloc.
A spokesman for the embassy said no formal offer on tariffs had been made, and that Grenell's goal was rather to explore the options for a wider transatlantic trade agreement.
"That is an ongoing process," the spokesman said.
VW, BMW, Daimler and Continental declined to provide details of Wednesday's discussion with Grenell.
Automotive stocks rose nonetheless on Thursday, on hopes that U.S. tariffs may not come after all. At 1330 GMT, shares in VW, BMW and Daimler were all up 4 percent from Wednesday's close. Continental was 2.5 percent higher.
Merkel said any move to cut tariffs on U.S. vehicles would require reductions on those imported from other countries to conform with World Trade Organization rules.
"I would be ready to support negotiations on reducing tariffs, but we would not be able to do this only with the U.S.," she said.
German automotive trade body VDA said any suggestions about mutually removing tariffs and other trade barriers were positive signals.
"But it is clear that the negotiations are exclusively being held at a political level," it said in a statement.
Trump's protectionist trade policies, which also target Chinese imports, have raised fears of a full-blown and protracted trade war that threatens to damage the world economy.
JULY NEWSLETTER 5
When Saudi Arabia confirmed in early 2016 that it was considering an initial public offering (IPO) of a slice of the country’s national oil company, the excitement among investment bankers was palpable. The Saudi Arabian Oil Company, better known as Aramco, claims about 261 billion barrels of proved crude oil reserves worth around $8 trillion at the then-current crude price of around $30 a barrel. At $70 a barrel, the value rises to more than $18 trillion.
A proposed IPO of 5% of the company would value the publicly traded slice at more than $900 billion at today’s prices and leapfrog Aramco to a position as the most valuable publicly traded company in the world.
A report on Thursday in The Wall Street Journal now suggests that the proposed IPO may be unraveling. The original plan called for the IPO to occur last year on a major exchange with a second listing on Saudi Arabia’s own Tadawul exchange. The soonest an IPO could happen now is sometime next year, and even that timetable is vague.
As a private company, Aramco reveals very little about its reserves, its operations or its finances. If it were to trade publicly in New York or London or Hong Kong, the company would have to divulge far more information than it ever has about its business. That is not something that many government officials want to happen.
Instead, some have suggested, Aramco should offer just a tiny bit of stock on the Tadawul. It would have to be tiny since the exchange’s value is barely more than $500 billion.
The kingdom has also had good luck issuing bonds. An offer in April attracted $52 billion in orders for $11 billion offered in tranches of 7, 1, and 31 years. The government also plans to issue domestic bonds valued at up to 70 billion riyals (about $18.7 billion). The riyal is pegged at 3.75 to the dollar. Beginning with the first sale in 2016, the Saudis have sold four international bonds valued at a total of around $60 billion.
With oil prices now more than double what they were when Crown Prince Mohammed bin Sultan proposed the IPO, the kingdom’s finances are in much better shape, and the prince’s goal of diversifying the Saudi economy may be achievable without giving up the crown jewel, so to speak.
The Wall Street Journal report notes that Saudi officials have carefully avoided discussing how difficult the IPO process has become in order to avoid fouling relationships with banks and other advisers already frustrated with the delays. All have taken minimal fees with the expectation of a big payday when the IPO is completed. The excitement dissipated months ago, and now that a listing on a major exchange may be out the window, bankers’ anticipation is no better than lukewarm.
Friday’s rollout of the first 30 Tesla Inc. (NASDAQ: TSLA) Model 3 production vehicles might generated as much ink (including burned pixels) as the Hollywood premiere of “Gone with the Wind.” After all the hype, we can all be forgiven if we think that the Model 3 is the only all-electric (EV) on U.S. roads.
In fact, though, including the Tesla Model S sedan and Model X crossover, there are 13 EVs available in the United States, varying in price from around $28,000 to well over $100,000 for a top of the line Tesla Model S P100D.
The Model 3’s main competitor is the Chevrolet Bolt from General Motors Co. (NYSE: GM) which is available at a list price of around $37,500 compared to the Model 3’s base price of $35,000. What sets these two cars apart is their range on a single full charge — more than 200 miles, double the range of any other vehicle in the group at the base price.
Sales of all-electric cars are up nearly 30% in the United States through the first six months of this year. A total of 44,228 EVs have been sold with four models taking up the lion’s share of the total: Tesla’s Model S (11,100; 25% of sales); Tesla Model X (9,100; 24% of sales); Chevy Bolt (7,592; 19% of sales); and Nissan Leaf (7,248; 17% of sales). Many EVs are not available for sale in all 50 states
We’ve combined two reports, one from hybridcars.com and the other from greencarreports.com, to create this list of the 13 EVs currently for sale along with the vehicle’s MSRP and its range on a fully charged battery. The list is ordered by 2017 year-to-date sales.
Tesla Model S: $69,200; 210 miles (60 kWh battery); 11,100 total 2017 sales
Tesla Model X: $90,000; 238 miles (75 kWh battery); 9,100 sales
Chevy Bolt: $37,495; 238 miles (60 kWh battery); 7,592 sales
Nissan Leaf: $31,545; 107 miles (30 kWh battery); 7,248 sales
BMW i3: $43,395; 81 miles (22 kWh battery); 2,992 sales
Fiat 500e: $32,780; 84 miles (24 kWh battery); 1,865 sales
VW e-Golf: $30,000 (est.); 125 miles (35.8 kWh battery); 1,887 sales
Ford Focus EV: $29,995; 115 miles (33.5 kWh battery); 1,058 sales
Kia Soul EV: $32,800; 93 miles (27 kWh battery); 836 sales
Mercedes B-Class Electric: $40,825; 87 miles (28 kWh battery); 317 sales
Hyundai Ioniq EV: $29,500; 124 miles (28 kWh battery); 157 sales
Smart forTwo EV: $16,850; 80 miles (17.6 kWh battery); 57 sales
Chevrolet Spark (discontinued): $25,120; 82 miles (19 kWh battery); 13 sales
Volkswagen’s 2017 version of its e-Golf is a significant improvement over the previous model. Ford Motor Co.’s (NYSE: F) Focus EV competes directly with the VW e-Golf on price and range, but June sales of the VW EV were more than double that of the Focus EV. The good news for VW is that six-month sales of the e-Golf are up 30% year over year. The better news for Ford is that Focus sales are up 137% for the first half of this year. The less-good news is that both cars sold fewer copies in June than they did last year.
Two years from now the number of EVs with battery ranges of at least 200 miles will rise from four to 10 and by the end of 2020 there could be as many as 20 on the market. Hybridcars.com lists 14 models currently known to be in the works:
Audi e-tron Quattro Crossover: April 2018
Jaguar i-Pace Crossover: July 2018
BMW 3 Series: October 2018
Audi eTron Sportback Crossover: June 2019
Mercedes ELC (based on GLC): June 2019
Mercedes C-Class: October 2019
Mini Unnamed: October 2019
Porsche Mission E (Pajun is nickname): October 2019
BMW X3: 2020
Ford Model E Crossover: April 2020
Smart BEV: CY20
Volvo BEV: CY19
VW ID Crozz Crossover: October 2021 (not counted for 2020)
VW ID Car: January 2021 (not counted for 2020)
Google, a division of Alphabet (NASDAQ: GOOGL), plans to relaunch its Glass wearable product. Glass was first released in August 2013, but by January 2015 it was withdrawn from the market. Originally targeted at consumers, Google will launch a new version aimed at the corporate market. The original Glass launch was among the most visible tech product failures of recent years.
Jay Kothari, product lead for Glass, wrote in a blog:
Glass, as you might remember, is a very small, lightweight wearable computer with a transparent display that brings information into your line of sight. In a work setting, you can clip it onto glasses or industry frames like safety goggles so you don’t have to switch focus between what you’re doing with your hands and the content you need to see to do your job.
Workers in many fields, like manufacturing, logistics, field services, and healthcare find it useful to consult a wearable device for information and other resources while their hands are busy. That’s why we’ve spent the last two years working closely with a network of more than 30 expert partners to build customized software and business solutions for Glass for people in these fields. We’ve also made improvements to the design and hardware so that it’s lightweight and comfortable for long term wear. We’ve increased the power and battery life too.
Glass was originally plagued by faults and a $1,500 price tag. The lenses had a display that allowed users to read information and initiate phone calls. It also had a high-definition camera and some features that were voice activated.
The product was subject to several criticisms. The first was that users could violate the privacy of people they observed, since those wearing Google Glass may take photos or shoot video instantaneously, according to the ABA Journal. Some versions of Glass had facial identification features. Several establishments, including a restaurant in Seattle, banned people wearing the devices.
Another concern was that if owners lost the device, others could hack into it and collect information about what they had seen and done. There were also rumors that Glass could cause vision problems.
In addition, there were safety concerns about Glass. Among them was that people could be distracted while driving and using Glass simultaneously. The safety concerns were based on worries similar to those of texting while driving. A distracted driver is more likely to have an accident than one focused strictly on driving.
In October 2013, Cecilia Abadie, a software developer from California, was fined for driving while wearing Google Glass in a case that was eventually dismissed by a court commissioner.
Court Commissioner John Blair threw the case out saying that there was no proof the device was in use at the time Abadie was driving, when she was pulled over by a highway patrol officer.
At least seven states — Delaware, Illinois, Missouri, New Jersey, New York, West Virginia and Wyoming — considered laws prohibiting people from driving while using Google Glass.
In January 2014, a moviegoer in Columbus, Ohio, wearing prescription Google Glass was pulled out of an AMC theater showing the movie “Jack Ryan: Shadow Recruit” and detained for hours by agents from the Immigration and Customs Enforcement’s Homeland Security Investigations unit, which targets piracy.
The man was released, but an AMC representative told entertainment magazine Variety that wearing a device with the “capability to record video” was inappropriate at the movies. Google Glass was eventually banned from movie theaters by the Motion Picture Association of America and the National Association of Theatre Owners in October 2014.
Because Glass was launched with such fanfare and was one of Google’s few hardware products, the failure was considered one of the great debacles by a major U.S. tech company. Its limited release for corporate use allows Google to market Glass for controlled environments. However, it will almost certainly never be a consumer product again.
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778
They are both long-term planners and partners.
From friend-of-the-blog David Thall, writing in another forum:
Chinese leadership may be a lot of things, but they are not stupid. And neither is Cook and Company.
Without rehashing their co-dependent relationship—which everyone here knows very well—simply put: Apple employs a lot of Chinese, so Apple gets to sell a lot of product over there. And at a very profitable margin.
If I can offer any insight, and this is just my opinion of course, it is that China and Apple share something else significant in common. They have spent years and years developing their business relationship.
They are both long-term planners and partners.
Contrast this to Trump and his gang’s short-term political agenda. A president who, relatively speaking, will be gone soon. Whether he gets re-elected or not, he will inevitably pass like a bad case of gas. Or perhaps a better metaphor—a kidney stone.
I can’t see China wrecking it’s very good long-term relationship with America’s premiere company for a relatively short-term political inconvenience— throwing out the proverbial baby with the bath water. It’s not in their nature.
If China screwed Apple with tariffs, what would Cook—the master of supply & demand, do?
He would without question mitigate the damage to Apple—by developing a more reliable manufacturing partner. Maybe build automated manufacturing domestically?
Bottom-line: China has a lot more to lose long-term if they damage Apple short-term. JMHO
COMPETITION FOR TESLA
REDUCING TARIFFS ON US AUTOS
Healthcare, which struggled mightily during the brutal election season last year and even back into 2015, has had a nice first half of 2017. Given the current nosebleed levels of the market, the sector may be a solid bet for the rest of 2017 and into next year.
In a new report from SunTrust Robinson Humphrey, analysts make the case that big pharmaceuticals may be the place to be. From a total return standpoint, which includes gains in share price and dividends, healthcare stocks might be a safer place to move more aggressive stock money now.
Healthcare stocks have been showing trading volume gains, they have solid pricing leverage, and the individual companies featured by SunTrust all have potentially significant catalysts in the coming months and years that could drive their share prices higher if the outcome is favorable.
These are four of the top-rated healthcare stocks to buy from SunTrust.
This stock is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories.The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia, and neuroscience.
One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year the patent board instituted Coherus’ Inter Partes Review or IPR against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market.
The SunTrust team expects the company to release ABT-494 Phase 3 readouts for rheumatoid arthritis. In addition, Risankizumab Phase 3 readouts for psoriasis are also expected. These are in addition to a host of other expected clinical results over the next year.
Shareholders are paid a solid 3.54% dividend. The SunTrust price target is posted at $85, and the Wall Street consensus price target for the shares is set at $74.50. The shares closed Tuesday at $72.23.
This is another company with substantial upside potential. Eli Lilly and Company (NYSE: LLY) is a global healthcare company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments. The product portfolio includes Zyprexa (schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder – ADHD), Erbitux (cancer) and Alimta (chemotherapy). Lilly also has a strong presence in the diabetes market.
The SunTrust team cite Abemaciclib Phase 3 data for 2L breast cancer (MONARCH 2) and an investor webcast at ASCO as a big upcoming event. Also, the Phase 3 readouts for galcanezumab for migraine prevention and Lasmiditan for acute migraine. Both of these are expected in the second half of 2017.
Shareholders are paid a 2.5% dividend. The SunTrust price objective is $101, and the consensus price objective is $90.14. The stock closed Tuesday at $83.70.
This top company remains a leading healthcare stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular disease, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammation, osteoporosis, male pattern hair loss, and fertility diseases. It also provides neuromuscular blocking agents for use in surgery; antibacterial products for skin and skin structure infections; cholesterol modifying medicines; non-sedating antihistamine; and vaginal contraceptive products.
The SunTrust team point to additional follow-up data from KEYNOTE-021G, and Phase 1 and 2 data for Keytruda with INCY’s IDO1 inhibitor for advanced solid tumors. In addition, they point to Keytruda Phase 3 readouts for 1L Non Small Cell Lung Cancer (KEYNOTE-189), as well as several other indications, all coming in the second half of 2017.
Merck shareholders receive an outstanding 3.01% dividend. The SunTrust price target is $73, while the consensus price target is set at $70.30. The shares closed Tuesday at $62.41.
This company is one of the top picks on Wall Street in specialty pharma. Shire plc (NASDAQ: SHPG) develops, licenses, manufactures, markets, distributes, and sells pharmaceutical products. It offers various products for the treatment of attention deficit hyperactivity disorder (ADHD). The company also focuses on the development of resources projects in various therapeutic areas, including rare diseases, neuroscience, ophthalmics, hematology, and gastrointestinal disorders; and early development projects primarily on rare diseases. Shire plc markets its products through wholesalers and pharmacies.
The SunTrust team points to the resolution of multiple ongoing patent litigation cases the company has with major pharmaceutical peers. It also notes that other catalysts include the ongoing Xiidra (dry eye) ramp targeting 18 million diagnosed patients in the US. Xiidra, with a European Union filing in third quarter of 2017, and the global launches of Natpara, Gattex, Firazyr, Cinryze, Kalbitor, Xiidra through the footprint of operating affiliates. Another big catalyst is Onivyde & Natpar approval in the EU for pancreatic cancer & hypoparathyroidism, respectively.
The SunTrust price target is lowered to $283 from $298, and the consensus for the company is at $237.50. The shares closed last Tuesday at $164.37.Four top companies that all have data that could move the shares coming in 2017. These stocks make good sense for more conservative buy and hold strategies looking for total return. All have been around for years, and should remain sector leaders for years to come
RECOMMENDED HEALTH CARE STOCKS