Financial Review

And It’s Back

Sinclair Noe — November 16, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW + 187 = 23,458
SPX + 21 = 2585
NAS + 87 = 6793
RUT + 22 = 1486
10 Y + .03 = 2.36%
OIL – .16 = 55.17
GOLD + .70 = 1279.30

Cryptocurrency

• Number of Currencies: 905
• Total Market Cap: $225,401,252,418
• 24H Volume: $11,650,534,328

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	7,874.3	$131.56B	$5.00B	43.18%	1	+8.26%	+9.30%
	Ethereum	ETH	329.30	$31.59B	$784.75M	6.77%	0.04184	-0.48%	+2.37%
	Bitcoin Cash	BCH	900.81	$15.21B	$1.98B	17.07%	0.114825	-23.91%	+36.44%
	Ripple	XRP	0.22450	$8.75B	$1.00B	8.67%	0.00002874	+7.52%	+3.69%
	Litecoin	LTC	70.980	$3.77B	$318.04M	2.75%	0.00887902	+12.13%	+7.47%
	Dash	DASH	419.57	$3.21B	$96.41M	0.83%	0.0530133	-0.34%	+27.02%
	IOTA	MIOTA	0.84219	$2.37B	$135.08M	1.17%	0.0001082	+7.02%	+54.52%
	NEO	NEO	28.700	$1.89B	$40.65M	0.35%	0.00367968	-2.02%	-8.87%
	Monero	XMR	120.02	$1.84B	$73.94M	0.64%	0.0152058	-0.80%	+0.57%
	NEM	XEM	0.20351	$1.78B	$15.98M	0.14%	0.00002515	+0.60%	-7.95%

If you have been following the on-again, off-again path of the tax cut plan on Capitol Hill, it is becoming clear that a tax cut is not fully priced into stocks. Yesterday – bad news about the plan as the Senate linked another Obamacare repeal effort to the tax plan and the first Republican senator defected.

Today – the House passed their initial version of the Tax Cuts and Jobs Act. That certainly wasn’t the only factor contributing to the bounce back in stocks, but it was noteworthy.

Cisco Systems leapt 6.2 percent, its biggest move since February 2016, after the internet gear maker reported a bigger profit than analysts expected and said revenue should grow in its next quarter after two years of declines.

Wal-Mart jumped over 10 percent after the retail giant reported strong third-quarter results and raised its annual profit outlook. Walmart, which has been challenging Amazon by adding products, partners and perks, saw online sales jump 50% in its most recent quarter. Food sales were strong as well, which means that Amazon’s purchase of Whole Foods makes even more sense.

Walmart’s moves to revamp its stores and hone its customer service appear to be paying off as sales at U.S. stores open at least a year — a key industry measure of financial performance — rose 2.7%. Traffic, which has been dipping at many retailers as more consumers shop online, climbed 1.5%.  Walmart shares posted their biggest gain since May 2016.

Procter & Gamble was up 1.3 percent after activist investor Nelson Peltz said an independent count showed he won election to the consumer products company’s board.

Cisco, P&G, and Wal-mart are components of the Dow Industrial Average, so…

Technology sector stocks, which have done far better than the rest of the market this year, accounted for some of the biggest gains in early trading. Data storage company NetApp led the sector, picking up about 15% on a strong earnings report.

The House of Representatives passed tax legislation by a partisan vote of 227-205. That does not mean we have a new tax code. Now, the legislation moves over to the Senate, which has its own, different version. The Senate might vote next week. And because the Senate slides into the driver’s seat, the House was able to pass a badly flawed bill surely would not have passed on its own merits.

But now, Republican representatives can go home and tell their base and their donors that they voted for the tax bill, without having to accept the responsibility of the bill inflicting damage on their constituents.

A new congressional analysis found that the Senate’s revised tax bill would raise taxes on lower-income Americans within a few years. The Joint Committee on Taxation projected that Americans earning $30,000 or less would see their taxes increase beginning in 2021, if the Senate bill becomes law. The committee also projected that Americans earning $75,000 or less would face large tax increases in 2027, after the individual tax cuts expire.

The updated analysis stems from the Senate’s last-minute inclusion of a provision that would repeal the Affordable Care Act’s requirement that most people buy health insurance.

The repeal would lead many lower-income Americans to choose not to buy insurance, and thus not claim tax subsidies that currently help them defray the costs of health coverage. For those that remain, their insurance premiums would go up, probably by 10% or more – wiping out any tax savings and resulting in a net loss.

And because of a 2010 budget law, the bill would trigger automatic cuts to Medicare and other important programs that low-income and middle-class Americans depend on. Medicare used to be considered the “third rail” – you don’t cut Medicare without incurring significant blowback. So, who benefits from the tax plan? The rich and corporations.

Few voters seem fooled. Just 25 percent approved of the tax plan in a recent Quinnipiac poll, while 52 percent said they disapproved of it. Even some Republican lawmakers are beginning to catch on that this tax-cut plan is politically radioactive. The Senate bill is already teetering, with one Republican senator opposed and others voicing concerns. The GOP bill can lose no more than two senators to advance.

Thirteen Republican representatives voted against the bill today, all but one from states that have high income and property taxes. The House bill included a compromise on state and local tax deductions. The Senate bill does not accept the House compromise on state and local tax deductions, or SALT; it eliminates the break entirely, which could cause an exodus of Republican votes in the House if that were to be in the final bill.

And the House bill does not repeal Obamacare’s individual mandate, which the Senate added to its proposal earlier this week.

Wall Street dropped the past couple of days as the tax bill hit a couple of obstacles. Wall Street cheered today as the House passed a bill, but it looks like most of the tax plan has been priced into the market already and the risk of legislation failing seems far greater than the reward of legislation passing. If positive news continues, we could see another bull run from the recent dip, but this is also a good time for caution.

House passage of the tax bill has another – likely unintended – consequence. It might kill off any chance for infrastructure spending. The House bill ends tax breaks for private activity bonds, a key part of public-private partnerships in projects ranging from roads to low-income housing. The administration has said it wants to leverage those partnerships to reduce the direct cost of the president’s building plan”

The National Association of Home Builders’ monthly confidence gauge rose two points to 70 in November. That was the second-highest reading since the housing bubble of 2005. The sub-index that tracks current sales conditions also rose two points, to 77, but the gauge of sales over the next six months dipped one point to 77.

The home-builder lobby has been critical of recent developments in the tax reform debate, arguing that reform will quash demand for new homes. The group warned the bill proposed by House Republicans “eviscerates existing housing tax benefits by drastically reducing the number of home owners who can take advantage of mortgage interest and property tax incentives.”

Arizona released data on nonfarm employment for October. The state unemployment rate dropped from 4.7% in September to 4.5% in October. The state added 18,700 jobs for the month. Arizona Nonfarm employment grew by 1.2% (32,000 jobs) over the year in October. The Private Sector accounted for 32,200 jobs (1.4%). Government employment decreased by 200 jobs in October.

San Francisco Fed President John Williams says global central bankers should take this moment of “relative economic calm” to rethink their approach to monetary policy, warning that to fight the next recession, as with the last, they would need to do more than just cut interest rates.

With many major economies facing slower growth and thus lower interest rates even when unemployment is low, central banks will need to find ways to stimulate their economies that work even when many other countries are also trying to boost their growth.

Williams says strategies that central banks should consider including not only the bond-buying and forward guidance used widely in the last recession, but also negative interest rates that was used in some non-U.S. countries, as well as untried tools including so-called price-level targeting or nominal-income targeting. Central banks may also want to consider setting a higher inflation target.

Meanwhile, Federal Reserve Governor Lael Brainard said today that traditional lenders should demand that online financial companies protect consumer privacy and money interests Banks often pay tech companies for the information they gather on borrowers.

For that reason, those lenders can set high standards in consumer protection and privacy. Brainard said, “Banks have a stake in ensuring that their vendors and third-party service providers act appropriately, that consumers are protected and treated fairly, and that the banks’ reputations aren’t exposed to unnecessary risk”

Sandell Asset Management proposed to take Barnes & Noble private with the help of current shareholders and $500 million in debt financing in a deal that valued the company at more than $650 million, or over $9 per share. But the bookstore chain said the offer did not appear to be bona fide and seemed unlikely to happen.

Casino operator Caesars Entertainment said it would buy privately owned casino and horse racing company Centaur Holdings LLC for $1.7 billion in cash to expand in Indiana.

Emerson Electric raised its cash-and-stock offer to acquire Rockwell Automation to $29 billion, ratcheting up pressure on its smaller peer to engage in deal talks.

Tesla short sellers finally made some money this month. They’ve raked in $890 million in mark-to-market profits since the start of the fourth quarter, according to data compiled by the financial-analytics firm S3 Partners. At least until today.

Tesla bounced back, a little, enough to shake out at least a few short-sellers. In a couple of hours, Elon Musk will unveil a new Tesla a self-driving big rig semi-trailer (electric, of course). The Tesla semi was anything but a 10-4-good-buddy move for Tesla.

While many observers expected a pickup truck to join the carmaker’s lineup of all-electric cars, the big rig was a surprise. Musk tweeted, that the truck would “blow your mind clear out of your skull and into an alternate dimension.” Which seems like a totally fine and not at all hyperbolic way to manage expectations.

Barbarians at the Gate with Toothpaste

Sinclair Noe — October 10, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW + 69 = 22,830 (Record)
SPX + 5 = 2550
NAS + 7 = 6587
RUT + 4 = 1508
10 Y – .02 = 2.35%
OIL + 1.34 = 50.92
GOLD + 3.90 = 1288.50

Cryptocurrency

• Number of Currencies: 874
• Total Market Cap: $153,183,891,232
• 24H Volume: $3,150,277,911

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	4,745.0	$79.08B	$1.51B	47.97%	1	-0.62%	+10.31%
	Ethereum	ETH	301.25	$28.69B	$332.08M	10.54%	0.0637418	+0.63%	+2.43%
	Ripple	XRP	0.25804	$10.12B	$329.41M	10.46%	0.00005539	-0.10%	+28.57%
	Bitcoin Cash	BCH	315.99	$5.28B	$261.54M	8.30%	0.0668111	-0.32%	-21.06%
	Litecoin	LTC	50.400	$2.69B	$81.09M	2.57%	0.0106525	-0.02%	-3.77%
	Dash	DASH	287.90	$2.20B	$28.65M	0.91%	0.0609756	-0.73%	-4.26%
	NEM	XEM	0.21437	$1.91B	$4.76M	0.15%	0.00004475	+2.96%	-4.85%
	NEO	NEO	30.150	$1.50B	$47.56M	1.51%	0.00634651	+2.97%	-10.79%
	IOTA	MIOTA	0.47300	$1.32B	$7.64M	0.24%	0.00009993	-0.63%	-14.76%
	Monero	XMR	86.08	$1.31B	$24.55M	0.78%	0.0181888	-0.49%	-6.51%

The Dow and the Nasdaq opened at record high. The Dow Industrials managed to hang on for a record high close. Only two of the 11 primary S&P 500 sectors are in negative territory for the year, and for broader indexes, even mild pullbacks of 3% have basically been nonexistent for months.

Volatility is near record lows. Other regions have also reported strong gains: European equities are up more than 20% this year, as are emerging markets. Basically, every country—as gauged by the most popular single-country exchange-traded funds—is positive on the year.

The International Monetary Fund is holding a meeting in Washington. Today a reporter asked Maurice Obstfeld, the chief economist at the International Monetary Fund: “Are financial markets being irrationally exuberant?” Obstfeld’s response? “Maybe.”

And he went on to add: “To some degree, asset prices are being supported by very, very low interest rates. They are supported by growth expectations that could be disappointed. Our assessment that longer-term growth rates, particularly in advanced economies, are subdued, feeds into that. So, our concern is simply that, if interest rates were to rise faster than expected or growth outcomes not validate these high asset prices, there could be abrupt repricing that could be disruptive.”

The IMF seems to be taking a more cautious stance – still calling for global economic growth, but issuing a warning against complacency. The IMF fears that financial markets are ignoring the risks, just as they did in the buildup to the crisis in 2007.

What’s more, central banks and finance ministries have used up much of their ammunition in the past decade. There is little or no scope to cut interest rates, QE has long since been subject to the law of diminishing returns, and governments are running much bigger budget deficits.

Remember that tax reform plan that was released just a couple of weeks ago. We were told it was the greatest thing since Ronald Reagan invented sliced bread. Today, Trump said he plans to make changes to his tax plan within the next few weeks, while dismissing concerns that his public spat with Senator Bob Corker would scuttle an overhaul. Trump didn’t specify what kind of changes, and it’s unclear whether he now intends to release another version.

Environmental Protection Agency Administrator Scott Pruitt is trying to repeal the Clean Power Plan, declaring “The war on coal is over.” What Pruitt forgot to say is that coal lost. Nobody in their right mind wants to go back to coal – it is dirty, expensive and an environmental nightmare. The Clean Power Plan hasn’t gone into effect yet, so there is no data to show if it had an impact on emissions. The repeal effort will end up in court. Next on the EPA’s agenda – bringing back whale oil.

The barbarians were at the gate, demanding more profit from the sale of toothpaste and detergent. But Procter & Gamble declared victory over activist investor Nelson Peltz, saying initial figures show it won the biggest proxy battle in history. But the narrow win puts pressure on the owner of Bounty and Tide to move faster in its turnaround and regain the support of investors. P&G will file results with the Securities and Exchange Commission when the vote is finalized.

Peltz’s fund Trian Partners said it plans to challenge the proxy results. With a market capitalization of $230 billion, P&G is the largest company to have fought a proxy fight and one of a few companies larger than $50 billion. In 2015, David Taylor took over as CEO and since then the company simplified its corporate structure, streamlined its portfolio, poured more money into research and development and worked to improve operations.

But the proxy fight wasn’t about how the company is run, rather it is how the shares have performed. Since Taylor took the reins, P&G’s stock has outpaced most U.S. consumer products companies, including Clorox and Colgate-Palmolive, though it under-performed against the S&P 500.

Walmart said it expects US online sales to jump about 40% in the next fiscal year. Walmart plans to invest heavily in e-commerce and online grocery in the coming months, with plans to double its online grocery pickup locations by the end of next year.

They will redesign their website by the first quarter and it will feature Jet.com’s “smart-cart” system – which basically gives automatic discounts the more stuff you throw in the cart. Now this is where it gets interesting. Walmart is ubiquitous for its brick and mortar stores but they haven’t shown great leadership online – that’s where Amazon shines.

Amazon’s is on a parallel track where they’re trying to build up the logistical capability and the brick-and-mortar capability, frankly, that Walmart already possesses. Walmart has been automating its supply chain and moving into online sales. Armed with open-source software such as the OpenStack cloud, Walmart is fighting Amazon on its high-tech turf.

Amazon responds AWS, Amazon Web Services, their own cloud which controls everything. In other words, this is a battle of the retail giants. Each brings its own set of skills to the fight. So, where does one have an advantage?

Unless you follow the retail business like a hawk, you might not know that Amazon was beating Walmart every day on its “Everyday Low Price” guarantee. Walmart responded by calling in the major consumer suppliers — from diapers to clothes to TVs — with an offer they couldn’t refuse: Either cut their wholesale prices by at least 15 percent off, or Walmart would limit their presence in stores and create its own branded products to compete with them.

Amazon, never afraid to cut sales margins by increasing volume, has responded by selling even more CRaP, an inside Amazon acronym for “Can’t Realize a Profit” products. Amazon will cut its own profit to get a new customer. Amazon will reinvest its last dollar in new technology – they’ll even invest money they don’t have.

Also, today Walmart announced $20 billion in share buybacks. This is something I would never expect from Amazon. Share buybacks are the fallback position for management that can’t figure out the next big innovation. Either way, Walmart and Amazon are the 800-pound gorillas of retail, and this will be an ongoing battle.

Last year, the South Korean military’s computer network was breached by North Korean hackers. The hack was discovered in September last year. Now South Korea is reporting it was worse than previously estimated. The North Koreans stole classified wartime contingency plans jointly drawn by the United States and South Korea.

It remained unclear how much the hacking has undermined the joint preparedness of the South Korean and United States militaries, with South Korean officials simply saying that they have been redressing whatever damage was caused by the cyberattack.

A security breach at Deloitte, a major accounting and consulting firm, may be much more serious than the company admits. Deloitte previously said on Sep. 25 that “very few clients” had been affected by a hack into its email platform, which began in fall 2016 and was uncovered in March 2017.

Yet the Guardian reported today that the affected server housed emails exchanged with about 350 clients, many of them high profile. That group includes the U.S. departments of defense, state, energy, and homeland security, along with the National Institutes of Health, the U.S. Postal Service, and major companies like Fannie Mae and Freddie Mac. The server also contained emails to or from unnamed global banks, airlines, car manufacturers, energy companies, and pharmaceutical manufacturers.

More than a dozen wildfires burned across Northern California for the third straight day. Here’s what we know: At least 15 people have died since Sunday night, when most of the fires began. Nine deaths were in Sonoma County. More than 100 people were being treated at Napa- and Sonoma-area hospitals for fire-related injuries or health issues.

About 2,000 homes and businesses have been destroyed by the fires. Wildfires were burning more than 115,000 acres in California as of Tuesday morning; firefighters are still in rescue mode, not containment mode. Fires have left more than 91,000 customers without power in the state. Some of the largest of the 14 blazes burning over a 200-mile region were in Napa and Sonoma counties, home to dozens of wineries that attract tourists from around the world.

They sent smoke as far south as San Francisco, about 60 miles (96 kilometers) away. The causes of the fires were unknown. A large part of Santa Rosa was evacuated. Authorities imposed a sundown-to-sunrise curfew for parts of the city. Taken as a group, the fires are already among the 10 deadliest in California history, and the death toll is expected to grow.

Alongside the new Pixel 2 smartphones Google unveiled last week, the company also launched a set of Bluetooth earbuds called the Pixel Buds with one standout feature: instant translation between 40 different languages using a Pixel smartphone.

In a live demo on stage, the Pixel Buds were shown translating short phrases back and forth between English and Swedish using Google Translate running on a Pixel 2 smartphone. This isn’t the first time Google has tried to break the language barrier.

The Google Translate app on Android and Apple’s iPhone can already perform the same trick. For non-Android’s, the Bragi Dash Pro does the same thing, using the iTranslate app on an iPhone.

Financial Review

Good Luck

Sinclair Noe — August 23, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW – 87 = 21,812
SPX – 8 = 2444
NAS – 19 = 6278
RUT – 1 = 1369
10 Y – .04 = 2.17%
OIL – .06 = 48.35
GOLD + 5.90 = 1291.30
BITCOIN + 0.29% = 4203.23 USD
ETHEREUM – 1.81% = 318.06

Stocks fell for the first time in three days, the dollar slumped and Treasuries gained.

So, Trump was in Phoenix yesterday. Maybe you heard about that. He spoke for a little over an hour at a campaign rally at the Civic Center. We won’t try to recap everything he said (full transcript here), but there were a couple of important lines that have received particular attention.

First, in what almost seemed like an aside, Trump said, “If we have to close down our government, we’re building that wall. One way or the other, we’re going to get that wall.” That’s not what markets wanted to hear.

Congress needs to pass a spending measure by September 30 to keep the government open —the same time it’s facing a deadline to raise the nation’s debt limit. Failure to do so could cause a multitude of problems, as we have seen in the past. Fitch Ratings  warned the country risks a review of its sovereign rating if it fails to raise the limit next month.

Yesterday, Senate Majority Leader Mitch McConnell said there was zero chance of a government default on its debts; today the chance of a default is significantly higher than zero. Whether it was just a bluff or not, one thing is clear – it doesn’t look like Mexico will pay for the wall.

Trump also spoke about the difficulty in trying to negotiate a better trade agreement with Canada and Mexico, saying: “So I think we’ll end up probably terminating NAFTA at some point, OK? Probably.”

There were no details on what a post-NAFTA world might look like or how it might affect American business.  There was a brief mention of tax reform but absolutely no details of an actual plan.  The Dollar Index dropped .039% today, continuing a sharp downtrend for the year as investors have been looking for alternative safe havens in other markets, from Switzerland to Japan.

Trump spent about half the speech blasting the media and denying he is a racist, while recapping his response to Charlottesville and completely omitting his remarks of Tuesday, August 15. He went on to suggest that he would pardon convicted former Maricopa County Sheriff Joe Arpaio but did not make a formal pardon.

Then he ripped into Arizona’s two Republican senators, without naming names. However, it was clear he was talking about Senator Jeff Flake when he said, “nobody wants me to talk about your other senator, who’s weak on borders, weak on crime.” Last week Trump tweeted: “Great to see that Dr. Kelli Ward is running against Flake Jeff Flake.”

McCain cast the deciding vote that led to the Senate’s rejection of the “skinny repeal” bill, a watered-down version of a plan to repeal parts of the Affordable Care Act. McCain, who has been diagnosed with brain cancer, was one of three Republican senators who voted against the bill. And Trump decided to blast McCain, the longtime senior senator, former Republican presidential candidate, and war hero who is currently undergoing treatment for brain cancer.

If you thought you would never live long enough to hear a president mock a guy going through chemo for brain cancer, congratulations. You made it.

So, I guess vacation time is over. And after a visit to Reno, it is back to work on tax reform, infrastructure, funding the government, not defaulting on the debt, passing the defense authorization bill, NAFTA and all that.

These are important issues and there is no room for legislative error. Meanwhile, the New York Times reports the relationship between Trump and Senator Mitch McConnell has disintegrated to the point that they have not spoken to each other in weeks, and McConnell has privately expressed uncertainty that Trump will be able to salvage his administration after a series of summer crises.

What was once an uneasy governing alliance has curdled into a feud of mutual resentment and sometimes outright hostility. In a series of tweets this month, Trump criticized McConnell publicly, and berated him in a phone call that quickly devolved into a profane shouting match. A Republican “super PAC” aligned with McConnell released a web ad on Tuesday assailing Kelli Ward as a fringe-dwelling conspiracy theorist.

West Texas Intermediate crude dipped 6 cents to settle at $48.35 a barrel. The EIA reported today that oil stockpiles have dropped every week since late June and gasoline inventories also fell, while crude production climbed for a second week.

Meanwhile, Harvard University researchers have published a study showing Exxon Mobil misled the public about climate change for years even as its research echoed the growing scientific consensus that global warming is real and caused by human activity.

The findings potentially add grist to the mill as several attorneys general continue to investigate whether Exxon misled shareholders. The Securities and Exchange Commission is also probing how the oil major values its fossil fuel reserves considering global warming.

New-home sales tumbled in July. The Commerce Department reports sales of newly-constructed homes were at a seasonally adjusted annual rate of 571,000. That was 9.4% lower than an upwardly-adjusted June rate of 630,000, and 8.9% below the year-ago level.

The median sales price in July was $313,700, 6.3% higher than a year ago. At the current pace of sales, it would take 5.7 months to exhaust all supply, among the highest ratios of the past few years. The median sales price in July was $313,700, 6.3% higher than a year ago. At the current pace of sales, it would take 5.7 months to exhaust all supply, among the highest ratios of the past few years.

Newly built homes are more expensive than they’ve ever been before. They are also more expensive when compared to similar existing homes than they’ve ever been before. So, that’s why.

Lowe’s, the home-improvement retailer, dragged down the S&P 500 after it reported profit and revenue for the latest quarter that were weaker than analysts expected. It gave a profit outlook for the year that fell short of Wall Street’s forecast, and its stock fell 3.7 percent.

WPP is the world’s largest advertising agency and today the company lowered its full year forecast for net sales growth to 1 percent or even less, blaming the pull back on lowered spending by packaged goods companies. The packaged goods sector has become a battleground between online shopping giant Amazon and other e-commerce sites and traditional brick-and-mortar grocery stores and discount retailers.

Price wars and changing consumer tastes have turned some of the once mainstay brands into virtual commodities, with less supermarket shelf space and now less marketing clout. Weakness in advertising spending by major consumer product companies rippled through the global media industry. And WPP shares dropped about 10 percent.

Amazon has become the 800-pound gorilla of online retail, with the spillover effect of shutting down brick and mortar retailers. Who could fight such a behemoth? How about two 800-pound gorillas? Google and Walmart are testing the notion that an enemy’s enemy is a friend.

The two companies said Google would start offering Walmart products to people who shop on Google Express, the company’s online shopping mall. It’s the first time the world’s biggest retailer has made its products available online in the United States outside of its own website. The two companies said the partnership was less about how online shopping is done today, but where it is going in the future.

They said that they foresaw Walmart customers reordering items they purchased in the past by speaking to Google Home, the company’s voice-controlled speaker and an answer to Amazon’s Echo. The eventual plan is for Walmart customers to also shop using the Google Assistant, the artificially intelligent software assistant found in smartphones running Google’s Android software.

Walmart customers can link their accounts to Google, allowing the technology giant to learn their past shopping behavior to better predict what they want in the future. Google said that because more than 20 percent of searches conducted on smartphones these days are done by voice, it expects voice-based shopping to be not far behind.

There are more than 50 retailers on Google Express, including Target and Costco. Walmart is partially repurposing its stores into e-commerce fulfillment centers. Customers can now order their groceries online and then pick them up at hundreds of stores. For some items that they purchase online and pick up in a store, customers receive a discount.

Meanwhile, the Federal Trade Commission said today it’s decided not to pursue an investigation of Amazon’s purchase of Whole Foods – so, no antitrust problem.

Samsung announced the successor to the ill-fated Note 7 smartphone today, an updated phone named the Note 8. The new phone resembles a larger version of Samsung’s flagship devices, the S8 and S8+, but is slightly larger and includes a stylus called an “S pen,” which slips into the device. The Note 8 is big for a phone; it is also important for the success of Samsung.

The most important thing is that it doesn’t explode, hopefully.

The Powerball jackpot for Wednesday’s drawing is up to a little more than $700 million. After taking the lump sum and paying the taxes, you would end up with less than half that amount, but that’s still a lot of money. Even if you had to split the jackpot with another winner, it is still a lot of money.

Your odds of hitting the jackpot are about 292-million to one, so you really don’t have to worry about what to do if you win. Good luck.

Financial Review

Toxic

Sinclair Noe — August 17, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW – 274 = 21,750
SPX – 38 = 2430
NAS – 123 = 6221
RUT – 24 = 1358
10 Y – .03 = 2.20%
OIL + .23 = 47.01
GOLD + 4.70 = 1288.50
BITCOIN – 0.70% = 4286.30 USD
ETHEREUM + 2.42% = 297.73

All 30 companies in the Dow Industrials finished in negative territory.

Cisco Systems fell 4% after the networking-equipment company late Wednesday reported earnings that missed forecasts and lowered its guidance for next quarter, and Walmart fell 1.6% after its results, which included lower-than-expected sales from its Sam’s Club division.

All 11 of the S&P 500’s sectors closed lower on the session, which has only happened two other times this year.

And the Nasdaq was the biggest percentage loser – down 1.9%. The last time all three major benchmarks finished down 1% or more was May 17.

The Dow is now 1.7% off its closing record, with the S&P 500 and Nasdaq off 2.1% and 3.1% their respective closing highs. Meanwhile, the small-cap oriented Russell 2000 index fell 1.8% to finish at just below 1,359, its first close below its 200-day moving average in 14 months.

The latest deadly use of a vehicle to carry out mass violence occurred Thursday in the Spanish city of Barcelona, where a van mowed down pedestrians on a busy avenue popular with tourists. Many things about the event remain unclear, but it appears that a dozen people have died and about 100 are injured.

ISIS has claimed responsibility and 2 suspects are in custody. Increasingly, cars, trucks, and vans have become weapons of terrorists, from a white supremacist’s deadly attack on protesters in Charlottesville, Va. last weekend to several other vehicle attacks in European cities in recent months.

Airline stocks were among the bigger losers Thursday, with American, Alaska Air and Delta among the 10 worst performers in the S&P 500. The big carriers tend to get hit when people worry about terrorism and the possible impact on global travel.

An exchange traded fund that owns leading companies in Spain also fell after the attack. The iShares MSCI Spain ETF (EWP) was down more than 2%, led by drops in Banco Santander and Telefonica.

Stocks were already having a bad day because of lingering concerns over President Trump’s rift with business leaders. Yesterday, Trump’s Manufacturing Council and the Strategy & Policy Council quit. Today comes word the President’s Advisory Council on Infrastructure, which was still being formed, will not move forward.

The moves marked a most unusual repudiation by American business leaders. The bar for a chief executive of a public corporation to repudiate a United States president is extraordinarily high. Corporate leaders aren’t given their power, prestige, responsibility and nine-figure pay packages to use the corner office as their personal soapbox.

Such a public breakup between a president and business leaders left corporate historians at a loss for precedent; apparently this kind of thing has never happened.

So far, there have been no resignations among White House staff or the administration’s cabinet. However, a rumor this morning that Gary Cohn would resign seemed to spook Wall Street.   Gary Cohn is Trump’s chief economic adviser. Cohn is the former president of Goldman Sachs. Cohn is a calming influence in the administration.

He is also a point man on Trump’s push for tax reform, where his deal making skills will come in handy with Congress. Cohn is now under pressure to quit after the president on Tuesday doubled down on blaming both sides in a white-supremacist rally in Virginia that turned violent and trying to claim that there were many fine people on both sides.

Just a reminder, there are videos of the rally in Charlottesville of protesters carrying torches and Nazi flags and chanting “Jews will not replace us” and “blood and soil”. Temple Beth Israel in Charlottesville was patrolled by armed militia with semi-automatic rifles, and worshippers said it was like they were under siege.

There are several reports today that Cohn was deeply offended by Trump’s remarks. Several former colleagues have urged him to resign before his reputation takes an unrecoverable hit. Many of his former clients abandoned the president’s CEO advisory councils earlier this week because of Trump’s remarks.

Cohn is also considered the front-runner to replace Janet Yellen a chair of the Federal Reserve, when her term expires in February. So, Cohn has a decision to make. Does he try to stick it out or does he cut bait now.

If Cohn leaves, there would be a definite lack of economic talent left in the administration. But it’s not just Cohn, the big issue spooking Wall Street is that if Cohn leaves, it could spark a mass exodus.

Nearly all the nation’s top military leaders unequivocally condemned racism in public messages Wednesday. Five of the country’s top uniformed leaders — of the Army, Navy, Air Force, Marine Corps and National Guard — have all sent tweets critical of “racism,” “hatred” and “extremism.”

The chairman of the Joint Chiefs of Staff, Gen. Joe Dunford was traveling and told reporters in Beijing, “I can absolutely and unambiguously tell you there is no place — no place — for racism and bigotry in the U.S. military or in the United States as a whole.”

Trump unloaded on two Republican senators, Lindsey Graham of South Carolina and Jeff Flake of Arizona. Graham had criticized Trump’s Charlottesville response, prompting Trump to accuse him of telling a “disgusting lie.” Graham said Trump suggested there was a “moral equivalency” between white supremacists and those who protested the rally. Trump has blamed “both sides” for the violence.

Trump called Flake “toxic” and all but endorsed Kelli Ward, who is challenging Flake in a primary. “Great to see that Dr. Kelli Ward is running against Flake,” Trump tweeted. Flake said Wednesday on Twitter, “We can’t claim to be the party of Lincoln if we equivocate in condemning white supremacy.”

It’s possible Trump will further comment when he visits Phoenix on Tuesday for a rally for his 2020 re-election campaign. Although Phoenix Mayor Greg Stanton issued a statement that he was disappointed to learn of Trump’s visit so close to the violent events in Charlottesville.

The mayor called on Trump to delay the visit.  The statement said: “If President Trump is coming to Phoenix to announce a pardon for former Sheriff Joe Arpaio, then it will be clear that his true intent is to inflame emotions and further divide our nation.”

The Labor Department reports initial jobless claims in the period running from Aug. 6 to Aug. 12 declined by 12,000 to 232,000.

Philly Fed’s manufacturing index for August came in at 18.9, compared with a reading of 19.5 in the prior period.

The leading economic index rose 0.3% last month after a 0.6% increase in June, suggesting potentially faster growth in the final six months of 2017.

Industrial production rose in July for the second month in a row. Output climbed 0.2% last month, a touch below expectations. Production at utilities surged 1.6% as Americans cranked up the AC to deal with another sweltering summer.

Mining output also rose 0.5% — the fourth straight increase — reflecting in part frackers pulling more oil and natural gas out of the ground. Yet output among manufacturers slipped 0.1%, the third decline in five months. The drop-off largely stemmed from lower production among auto makers whose sales have cooled off.

Auto production sank 3.5%. Production of business equipment and construction output also declined.

Arizona’s unemployment rate remained unchanged at 5.1% in July. The national unemployment rate declined from 4.4% in June to 4.3% in July. A year ago, the Arizona seasonally adjusted rate was 5.2% and the U.S. rate was 4.9%.

Arizona lost 20,900 Nonfarm jobs in July. The Private Sector lost 9,400 jobs and government lost 11,500. Arizona Nonfarm employment grew by 1.7% (45,000 jobs) over the year in July.

Walmart reported second-quarter earnings and revenue that topped Wall Street estimates, boosted by an increase in foot traffic and by strong online sales. Shares, however, are trading down by about 2%.

America’s largest brick-and-mortar retailer said US comparable-store sales rose 1.8% versus a year ago, making for the 12th straight quarter with positive results. Walmart said food categories delivered their strongest comparable-store sales performance in five years. Walmart raised its guidance slightly.

Alibaba reported yet another winning set of quarterly financials. Revenue was up 56% on-year hitting $7.4 billion, and operating profit more than doubled over the same period to hit $2.88 billion. While investors will likely be pleased, the Chinese government is not.

The Cyberspace Administration of China sent a warning to Alibaba, its music-streaming subsidiary Xiami, and three other companies. The letter accused Taobao, Alibaba’s e-commerce marketplace, of allowing some of its vendors to sell “tools that break computers’ IT systems,” “illegal controlled substances,” “illegal VPN tools,” and “internet accounts.”

It demanded that Alibaba immediately remove such vendors from its site, and called on it to launch a “self-investigation.” Alibaba is almost as valuable as Amazon and closing the gap fast.

Mylan has finalized a $465 million settlement resolving Justice Department claims it overcharged the government for its EpiPen emergency allergy treatment, which became the center of a firestorm over price increases.

The settlement resolved claims that Mylan avoided higher rebates to state Medicaid programs by misclassifying EpiPen as a generic product, even though it was marketed and priced as a brand-name product. Under the deal, Mylan did not admit wrongdoing. It will reclassify EpiPen and pay the rebate applicable to its new classification as of April 1, 2017.

Financial Review

Black Hole Sun

Sinclair Noe — May 18, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

Subscribe: iTunes | Android | RSS

DOW + 56 = 20,663
SPX + 8 = 2365
NAS + 43 = 6055
RUT + 5 = 1361
10 Y + .02 = 2.23%
OIL – .01 = 49.34
GOLD – 14.10 = 1247.80

Yesterday the stock market had a little panic attack. As is often the case, these things pass. Therefore, it is important to see confirmation of a major move.

Today we did not see confirmation. Equities did not take kindly to news of Trump influencing or impeding an FBI investigation. The S&P 500 closed at the lows, down 1.8%, and the Nasdaq wiped out 18 days of gains in one session.

So, yesterday was not insignificant, but looking back over the last half year, it is not enough, in and of itself to change the trend, which is still up.

The news of the week is important, and it was a catalyst for the big sell-off yesterday, but while the term ‘impeachment’ may appear more frequently in the press today, the process is initiated by a vote in the House, where Republicans hold a 45-seat majority.

A House impeachment of President Trump would look unlikely. But that doesn’t mean Trump’s problems have been resolved, just slow-tracked. Late yesterday, a special prosecutor was named – former FBI Director Robert Mueller – and whatever the outcome of his investigation, nothing will happen immediately.

Meanwhile, Rep. Jason Chaffetz said today that he will resign from Congress next month, a move that calls into question the future of the House Oversight Committee’s investigation of President Donald Trump and his campaign’s ties with Russia.

Washington can make a slug look like a speed demon. Nothing is imminent and so the markets rebooted. Traders bought the dips. That said, this is proving a distraction from the president’s agenda, including what should be a more detailed budget released next week.

After months of major stock markets posting record highs and historically low volatility across a range of asset classes, something was bound to snap and nobody knows whether it was a one-off or an omen. We’ll get clues in the days and weeks ahead, but a day like yesterday should jolt us from our lethargy and remind us that volatility hasn’t died.

The VIX index was jolted from its slumber yesterday and chalked up its seventh-biggest rise in percentage terms since its launch in 1990. This is an appropriate time to look at risk levels and reassess where we are as investors.

The dollar, two- to 10-year Treasury yield curve and yields on 10-year Treasury Inflation-Protected Securities (TIPS) are all back where they were before Trump was elected in November. The spread between two- and 10-year Treasury yields is its smallest since before the presidential election.

This so-called yield curve flattening suggests investors are losing faith in the economy’s ability to withstand higher interest rates. Money markets have slashed the probability of the Federal Reserve raising rates next month to less than 60 percent from over 90 percent last week.

The U.S. economy is already into its third-longest expansion ever, and a recent fall in the U.S. economic surprises index suggests it is running out of steam. That does not mean a recession is in the offing but it might point to slightly slower growth.

Any time we see a shift, the fast money will look for fresh opportunities. The gap between the U.S. and European surprises indexes is the widest in two years, U.S. corporate earnings growth is double-digit but still lagging the euro zone, and the political turmoil that was supposed to beset Europe this year is concentrated in the United States.

Yesterday was not enough to push investors to cash or run scared but today many investors reconsidered their tactical positions, and rethink their appetite for risk.

Earlier in the day the Philadelphia Federal Reserve said business activity index rose in May after declining for two months. Weekly unemployment data also pointed to strength in the labor market.

Brazilian markets took a big hit, the benchmark Bovespa dropped about 9%. One of the country’s largest newspapers reported that a secret recording exists of President Michele Temer approving a payment to Eduardo Cunha, the former House speaker and mastermind behind last year’s impeachment of former President Dilma Rousseff.

The tape was submitted to the Supreme Court by two senior executives from meat-packing giant JBS as part of a plea bargain deal, according to O Globo newspaper, in which information is offered in exchange for reduced sentences. Though the president’s office confirmed the meeting between Temer and a JBS executive took place in March, it denied Temer asked for payments to silence Cunha.

Temer is far from the only politician to be tied to the corruption scandal, dubbed “Operation Car Wash,” which has implicated nearly all of Brazil’s political class, including every senior member of the ruling party.

Earnings reports from major brick and mortar retailers have been a long list of disappointments, with the occasional exception of Home Depot or Target, and today Walmart reported. Wal-Mart said sales at U.S. stores open at least a year rose 1.4 percent, better than estimates. Investments to bring more customers into the discount retailer paid off and a bigger push into e-commerce boosted online purchases.

Online sales rose 63 percent in the first quarter, which was higher than 29 percent growth in the fourth quarter and 20 percent in the third quarter. Walmart said it is benefiting from a $2.7 billion investment to increase entry-level wages and enhance the training of its workforce, which has led to better stocked shelves and cleaner stores.

Walmart earned $1 per share, topping estimates of 96 cents. Consolidated net income fell to $3.04 billion from $3.08 billion due to a higher tax rate. Revenue rose 1.4 percent to $117.5 billion, slightly lower than analysts’ expectations of $117.7 billion due to a stronger dollar, which reduces the value of overseas sales. Revenue grew 2.8 percent on a currency neutral basis.

Walmart shares flirted with 52-week highs.

Alibaba Group beat first-quarter revenue forecasts but fell short of earnings estimates. The Chinese company, which is targeting new business lines such as cloud computing, big data, entertainment and offline retail as it expands beyond e-commerce, also announcing it will buy back $6 billion shares over the next 2 years.

Salesforce.com reported better-than-expected earnings and raised its full-year revenue guidance. The cloud-software company reported a net loss of $9.2 million on revenue of $2.39 billion for its fiscal first quarter. After adjustments for stock-based compensation and other effects, the company claimed a profit of 28 cents a share, which topped estimates.

Facebook celebrates its fifth anniversary as a publicly traded company. The IPO was 5 years ago today, and it was a mess, but since then the stock is up 279%.

The Telecommunications Services sector was the S&P’s biggest percentage gainer with a 1.2-percent rise. The Federal Communications Commission has officially begun undoing net neutrality rules the agency passed two years ago. The FCC voted 2-1, along political party lines to begin a rule-making process to replace the Open Internet order, or net neutrality rules, adopted in 2015.

The rules won’t disappear overnight but FCC chair Ajit Pai has made it clear that, barring a successful legal challenge, the agency will give up its authority to enforce net neutrality regulations. The rules, first passed in 2015, ban internet service providers from blocking, slowing down, or otherwise discriminating against lawful content.

Without these rules in place, your home internet provider would be free to slow down your Netflix connection to try to keep you paying for cable TV. Your mobile carrier would be allowed to block Skype to promote its own voice plan. Naturally, the country’s largest broadband providers say you have nothing to worry about.

In fact, the industry now claims to love net neutrality. But what the industry is calling “net neutrality” doesn’t really fit the full definition. It’s a version of net neutrality that doesn’t cover the loopholes internet providers have already discovered. If the FCC decides to drop its own protections, you probably won’t wake up one day to find YouTube or Slack blocked. But the principles that made the internet what it is today could still erode over time.

We are already seeing a “toll road’ version of internet service. AT&T, for example, allows users to watch as much video as they want from its own DirecTV Live streaming service without having it count toward their data caps. Competing services like Dish’s Sling, on the other hand, will count against those caps unless the companies behind them pay AT&T to “sponsor” that data.

Verizon has a similar system in place. These data exemptions, known as “zero rating,” may sound innocent enough. Everyone loves getting free stuff. But critics argue that they will end up harming competition.

Although the telecommunications industry group US Telecom sued the FCC to try to reverse its net neutrality protections, most big internet providers say they support net neutrality in principle. Their beef, they say, is just that the FCC went too far in reclassifying broadband access as a “Title II” common carrier service, much like telephone services.

The telecoms say they don’t mind a little regulation if there are great big loopholes. The problem is that without Title II, the FCC won’t be able to enforce net neutrality. And that means that the big, beautiful, collaborative mosaic of the internet could soon be missing many of the smaller tiles that add so much color to the overall picture.

Financial Review

No Coffee Today

Sinclair Noe — March 21, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

Subscribe: iTunes | Android | RSS

DOW – 237 = 20,668
SPX – 29 = 2344
NAS – 107 = 5793
RUT – 37 = 1346
10 Y – .04 = 2.44%
OIL – .72 = 47.50
GOLD + 10.30 = 1245.20

The Treasury yield curve reached its narrowest level since the end of February, a possible indicator that investors are losing faith in the “reflation trade.” Yields started falling last week after the Federal Reserve raised interest rates for the second time in three months.

Typically, such a move would help push rates higher across the curve to better align with the higher baseline rates. However, the Fed’s reluctance to commit to a faster pace of interest-rate hikes, resulting in a short squeeze, which then lured bond bulls back into the debt market.

Long-term rates continued lower over the past two days as congressional Republicans have struggled to secure the support necessary for President Trump’s proposed health-care overhaul bill to make it out of the House of Representatives. A vote on the bill has been set for Thursday. Trump has said that passage of the bill is a prerequisite for tax reform.

These two events have brought into question the underlying assumptions that helped send Treasury yields rocketing higher in the aftermath of Trump’s Nov. 8 electoral victory. The Federal Reserve said they were sticking to guidance for 3 rate hikes, and not including speculation about potential pro-growth fiscal policies, including tax reform and infrastructure spending, throwing shade on Trump’s yet un-released details about his plans for the fiscal overhaul.

The American Health Care Act is not finding public support; per Five-Thirty-Eight the most recent six polls from firms such as Fox News, Morning Consult, and YouGov/CBS News showed that an average of 30% of Americans support the American Health Care Act, while 47% of people surveyed were against it. And health-care reform is undergoing last minute revisions prior to a vote.

Trump went to Capitol Hill this morning to muster support for the bill, but even if it passes the House, it might not clear the Senate. The bill might pass, or not – time will tell, but for today at least, the markets felt uncertainty. No coffee for the closer.

The stock market sold off sharply with many market leaders of the reflation trade lagging. And this is in context of a market that has priced in tax reform, infrastructure spending, and maybe a bit more.

And it follows on the heels of FBI Director Comey’s testimony before a rare open congressional committee hearing. The market ignored the slam at Trump’s credibility, and while the president himself may be Teflon, the market is not when it comes to his policy initiatives.

Earlier today, Bank of America Merrill Lynch released its monthly fund managers’ survey, with a record number saying the market is extremely overvalued, and just 10 percent expecting to see US tax reform passed by Congress before its August recess, as promised by the administration.

Again, a record number of institutional investors say the US equity market is overvalued. Yet at the same time, a net 48% of these managers say they are overweight stocks in their portfolios, meaning they hold more than their benchmarks would require.

If the health care bill passes the House and Senate, and if we see solid details on tax reform, we might still see a rally, but today was a day of uncertainty.

The Dow and the S&P snapped a months’ long streak without a drop of 1% for either index. As investors sold stocks, they snapped up bonds.

The yield on the 10-year Treasury note fell 4.6 basis points to 2.426% on Tuesday, while the yield on the two-year note shed 3.6 basis points to 1.260%, leaving the spread between the two at 1.166 percentage points, the narrowest level since Feb. 28.

The general direction of the yield curve in a given interest-rate environment is typically measured by comparing the yields on the two- and 10-year issues, although the difference between the federal funds rate and the 10-year note are often used as well.

The underlying concept is straightforward. When the difference between yields on short-term bonds and yields on long-term bonds decreases, the yield curve flattens, that is, it appears less steep. A flat yield curve is typically an indication investors and traders are worried about the macroeconomic outlook.

The big losers today were bank stocks, with the XLF ETF that tracks the sector dropping as much as 2.6%. Individual losers in the banking sector were Goldman Sachs, down almost 3%, Bank of America down over 5.5%, and Morgan Stanley, down 4%.

The US current-account deficit, a measure of the nation’s debt to other countries, fell 3.1% to $112.4 billion in the final quarter of 2016, the government said. The drop in the current-account deficit in the fourth quarter was tied to a large increase in primary income — returns on American-owned assets held abroad. That offset a larger trade deficit in goods.

There are a raft of Federal Reserve officials speaking this week. This morning, Fed Bank of New York President William Dudley gave a talk at a forum on banking standards in London, in which he was critical of Wells Fargo but made no mention of monetary policy. Dudley is calling for better incentives to drive performance on Wall Street, while stating banks have “a long way to go” in reforming internal culture.

Google has issued a public apology to major advertisers after their spots were featured alongside YouTube videos carrying homophobic and anti-Semitic messages. It led to Marks & Spencer, HSBC, the BBC, and McDonald’s pulling ad content from Google sites in the UK.

The tech giant is taking a “tougher stance on hateful content” in response, as well as hiring more staff and tightening safeguards in its YouTube Partner Program.

Wal-Mart will launch its first investment arm to expand its e-commerce business in partnership with retail start-ups, venture capitalists and entrepreneurs. Called Store No. 8, the Silicon Valley-based investment team will work with startups that specialize in areas like robotics, virtual and augmented reality, machine learning and artificial intelligence.

Augmented reality is coming to Apple, and the first fruits could be “Matrix-style” 3D photographs that users can move around – and eventually view through AR smartglasses. Meanwhile, Apple unveiled an updated version of its iPad tablet with a brighter screen and a $329 starting price that is the lowest ever for a full-sized tablet from Apple.

Just don’t take it on a plane. The US issued new rules that will prevent passengers from carrying most electronic devices into the cabin during flights from eight countries in the Middle East and Africa. Passengers will have to check in any devices bigger than a smartphone — including iPads, Kindles and laptops — before clearing security or boarding.

Saudi Arabia may extend production cuts if oil supplies stay above the five-year average. New data shows the US rig count growing for a ninth week. US crude output has climbed to 9.1 million barrels a day, the most since February last year. And a Libya official said two major ports are preparing to restart oil exports.

British inflation last month shot past the Bank of England’s 2% target for the first time since the end of 2013, leaping by 2.3% in annual terms. The British government announced yesterday that Prime Minister Theresa May would trigger Article 50 of the Lisbon Treaty on March 29 and initiate the two-year negotiation process for leaving the European Union.

Goldman Sachs will begin moving hundreds of people out of London before any Brexit deal is struck as part of its contingency plans for Britain leaving the European Union. Leading financial firms warned before last year’s June referendum that they would have to move some jobs if there was a leave vote, and have been working on plans for how they would do so for the past several months.

Many banks now believe they will lose “passporting” rights, that let them sell services across the EU from their London hubs. The bulk of Goldman’s European operations are in Britain, where it has around 6,000 employees.

Britain’s high street banks processed nearly $740 million from a money-laundering operation run by Russian criminals with links to the Kremlin and the FSB, per The Guardian. HSBC, RBS, Lloyds and Barclays are among 17 banks based in the UK that are facing questions over what they knew about the international scheme and why they didn’t turn away suspicious money transfers.

Marriott International plans to add up to 300,000 rooms worldwide by 2019, as part of a three-year growth plan, ahead of the No. 1 hotel chain’s investor day. The owner of Ritz-Carlton and St. Regis luxury hotel brands said it would earn $675 million in stabilized fees from hotel rooms added to its system. Earlier this month, Marriott said it would speed up expansion of its Starwood brand in Europe by 2020.

Target’s first fully redesigned shop in Houston will include two separate entrances: one for time-crunched grocery shoppers, and another for those who want to browse fashion or beauty. The company will use the design, which also includes order pickup parking spots, as a starting point for the 500 stores it plans to make over in 2018 and 2019. It’s part of the $7 billion investment Target disclosed last month.

Sears revealed “substantial doubt” about its ability to stay in business in an annual report filed late Tuesday. The company said in the report, “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.”

Sears said its efforts to generate cash by selling or licensing brands like Kenmore and Diehard, as well as selling valuable real estate, should mitigate that doubt and satisfy its estimated cash needs for the next 12 months. But the company said it can’t make any guarantees.