• Dow Jones Futures: Will China Trade Deal Spur Stock Market Rally? 5 Giants Near Buy Points
    Investor's Business Daily

    Dow Jones Futures: Will China Trade Deal Spur Stock Market Rally? 5 Giants Near Buy Points

    Stock futures: Will the China trade deal spur the stock market to record highs like Apple? Microsoft, Google, Nvidia, Facebook, Visa are near buys.

  • Benzinga

    The Week In Cannabis: Corporate 'Carnage,' More Bud From Bud And Latin American Moves

    In yet another week packed with cannabis news, we saw Aleafia Health Inc. (OTC: ALEAF) terminate a cannabis supply agreement with Aphria (NYSE: APHA) subsidiary Emblem Corp. after it said the latter failed to provide Aleafia with the equivalent of 175,000 kg in cannabis products. Aphria said it had "every intention" of fulfilling its obligations. MedMen Enterprises Inc (OTC: MMNFF) announced Tuesday it has terminated a deal to acquire multistate cannabis operator Pharmacann. The company is also terminating its Chief Financial Officer Michael Kramer.

  • Bloomberg

    Beware of Funny Financials

    (Bloomberg Opinion) -- However frothy valuations currently seem to be, optimists can always argue they’re justified by strong earnings. In the past four years, S&P 500 operating earnings per share have grown by nearly 40%.Those numbers, however, may be as airy as the asset prices they support. The U.S. government’s national income and product accounts -- which cover a broader number of businesses than the S&P, use tax returns and adjust for certain accounting practices -- suggest that corporate profits actually peaked in 2014 and have been stagnant since. The national accounts also show significant downward revisions to corporate profit margins over the previous five years. While one would expect some discrepancies between that data and S&P numbers, which are based on Generally Accepted Accounting Principles (GAAP), the gulf is too wide to be ignored.What’s going on? In many cases, accounting choices appear to be distorting results. In early 2019, General Electric Co. reported GAAP losses of $2.43 per share; under adjusted figures it earned $0.65 per share. Tesla Inc. reported full-year GAAP losses of $5.72 per share but “non-GAAP” losses were only $1.33 per share. Over 95% of S&P 500 companies regularly use at least one non-GAAP measure, up about 50% over the last 20 years.One question is how companies choose to recognize income. In the case of long-term, multi-year contracts, such as construction projects, reported revenue can be based on a formula: a portion of the total contract amount, calculated as costs incurred in the relevant period as a percentage of total forecast costs. Understating estimated final costs allows margins to be increased and greater revenue to be recognized up front. Following the collapse of Carillion PLC, the firm was found to be aggressive in recording income which was sensitive to small changes in assumptions. Given the trend to converting sales of products (such as software) into long-term service contracts, these risks are only going to grow. Companies can understate expenses. Many tech companies use non-GAAP accounting to strip out the cost of employee stock options, for instance, thereby showing higher earnings. WeWork sought to redefine traditional earnings before interest, tax, depreciation and amortization as something called “community-based EBITDA.” The new measure conveniently excluded normal operating expenses such as marketing, general and administrative expenses, development and design costs.Spending may be treated as an asset, to be written off in the future rather than when expended. A recent JPMorgan Chase and Co. research report found software intangible assets (the amount spent but not yet expensed) averaged up to 15% of adjusted costs for a sample of European banks. The idea is to better match expenses to the period over which they are expected to benefit the business. But the practice may overstate current earnings.Related-party transactions can distort a company’s true financial position. Saudi Arabia slashed the tax rate on large oil companies to 50% from 85%, even though the government depends on the profits of Saudi Arabian Oil Co. for 80% of its revenues. Aramco will still pay most of its profits to the state, but as dividends rather than tax. That means reported profits will be higher, potentially increasing the company’s valuation ahead of a highly anticipated initial public offering. Complex structures can mask liabilities. Tesla, for instance, faces potential payments related to its SolarCity business. Before being bought by Tesla in 2016, SolarCity regularly sold future cash flows to outside investors in exchange for upfront cash. Tesla assumed these obligations and has continued the practice. The obligations now reportedly total over $1.3 billion.To reduce unfunded pension liabilities, some companies have borrowed at low available interest rates to inject money into the funds. That’s fine as long as fund returns -- generally assumed to be around 6% to 8% -- are higher than the cost of borrowing. If returns come in lower, however, the companies in question will have to raise their contributions, affecting future earnings.New business models often disregard potential costs. If Lyft Inc. and Uber Technologies Inc. drivers are reclassified as employees as proposed in California, then hidden employment costs would need to be recognized, perhaps retrospectively. Newly listed fitness company Peloton Interactive Inc. faces a $300 million lawsuit from music publishers who claim the company used their songs in workouts without paying licensing fees.Finally, stated asset values can be misleading. Goodwill, the difference between acquisition price and the fair value of actual assets acquired, now averages above 50% of acquisition price. Goodwill values are notoriously uncertain. In 2018, GE unexpectedly wrote off $23.2 billion of goodwill arising from its acquisition of Alstom SA.The problem is compounded by private markets, where funding rounds can establish questionable valuations. Recent investments into WeWork valued the company at over $40 billion, more than three times the projected pricing of its abandoned IPO. A recent proposal to get Saudi businesses to make anchor investments in Aramco ahead of its IPO could also inflate its valuation.“Fake” financials, as some would call them, undermine markets. With a correction looking increasingly likely, investors need to start working with regulators and standard setters now to close accounting loopholes, while scrutinizing underlying data more closely. Otherwise, the more creatively companies are allowed to manage their financial position for short-term gain, the bigger the bill is going to be.(Corrects definition of goodwill in twelfth paragraph.)To contact the author of this story: Satyajit Das at sdassydney@gmail.comTo contact the editor responsible for this story: Nisid Hajari at nhajari@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Satyajit Das is a former banker and the author, most recently, of "A Banquet of Consequences."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Amazon Stock Highlights: Week 2, October 2019
    Market Realist

    Amazon Stock Highlights: Week 2, October 2019

    In the last week, we looked at Amazon Inc (AMZN) stock trends. Here is another attempt to decode the same patterns for the second week of October 2019.

  • Trade war pause, retail sales, bank earnings – What to know in the week ahead
    Yahoo Finance

    Trade war pause, retail sales, bank earnings – What to know in the week ahead

    The coming week’s docket of economic reports and earnings releases comes just following the Trump administration’s announcement of a partial trade deal with China late last week.

  • D. E. Shaw & Company: Top Holdings and Fears
    Market Realist

    D. E. Shaw & Company: Top Holdings and Fears

    David Elliot Shaw or D.E. Shaw is a prominent billionaire hedge fund manager and founder of the firm D. E. Shaw & Company.

  • Cambridge Analytica whistleblower slams Facebook for 'stalker' practices
    Yahoo Finance

    Cambridge Analytica whistleblower slams Facebook for 'stalker' practices

    Cambridge Analytica whistleblower Christopher Wylie blasted Facebook’s continued influence after its widely publicized data scandal,

  • Nvidia Leads 5 Top Stocks Near Buy Points With China Trade Deal In Focus
    Investor's Business Daily

    Nvidia Leads 5 Top Stocks Near Buy Points With China Trade Deal In Focus

    Nvidia, Texas Instruments, Dollar General, Proofpoint and TJX are among top stocks clearing buy points Friday amid positive China trade deal headlines.

  • Financial Times

    Global regulators put pressure on Libra with enhanced scrutiny

    Facebook’s plans for a digital currency are coming under further pressure as global regulators step up their scrutiny of the troubled Libra project. In a letter to G20 finance ministers on Sunday, Randal Quarles, the head of the global Financial Stability Board, said that, with a “host of challenges” posed by global “stablecoins”, such as Libra, “possible regulatory gaps should be assessed and addressed as a matter of priority”. This, the letter said, created challenges including financial stability, consumer and investor protection, data privacy, money laundering, terrorist financing, fair competition, cyber security and tax evasion.

  • Financial Times

    Facebook’s hubris comes at a heavy cost for Libra

    As it meets with backers on Monday, Facebook is realising just how much. Digital transformation in banking is welcome, but regulators are right to argue that Facebook has yet to make the case for its own e-bucks. Libra — billed as a “stablecoin”, pegged to a basket of currencies — was sold as a disrupter that could bank the unbanked and slash transaction costs and times.

  • 3 Libra questions Congress should ask Facebook’s Zuckerberg
    Decrypt

    3 Libra questions Congress should ask Facebook’s Zuckerberg

    Little is known about Facebook's Libra five months after its launch. But Congress now has a chance to get answers straight from the horse's mouth.

  • Reuters

    UPDATE 1-Warren campaign challenges Facebook ad policy with 'false' Zuckerberg ad

    U.S. Senator Elizabeth Warren's Democratic presidential campaign this week challenged Facebook's policy that exempts politicians' ads from fact-checking, by running ads on the social media platform containing the false claim that Facebook CEO Mark Zuckerberg endorsed President Donald Trump's re-election bid. "Facebook changed their ads policy to allow politicians to run ads with known lies - explicitly turning the platform into a disinformation-for-profit machine. Facebook Inc's policy has come under fire from another Democratic front-runner in the 2020 race.

  • Financial Times

    California’s new model for fixing inequality

    The Democratic presidential candidate would like not only to break up Big Tech, but tax companies such as Facebook and people like Mr Zuckerberg a lot more. It galls me not that I pay roughly half my income in taxes, but that I do so because I earn it from actual work while those who earn money from rising share prices pay much less. , a book by Emmanuel Saez and Gabriel Zucman, who are advising Ms Warren on tax issues, including the details of how to tax wealth rather than just income.

  • Financial Times

    Bill Gates expresses regret over meetings with Jeffrey Epstein

    The world’s second-richest man said in a statement through a spokesperson that he recognised it was “an error in judgment” ever to have met Epstein, who committed suicide two months ago while facing charges of trafficking underage girls. This had given Epstein “an undeserved platform”. Mr Gates is among several prominent figures to have moved in recent weeks to distance themselves from Epstein, who cultivated a network of rich and powerful associates from business, academia, politics and royalty.

  • Buttigieg: 'There's no question there's anti-competitive behavior' in Big Tech
    Yahoo Finance

    Buttigieg: 'There's no question there's anti-competitive behavior' in Big Tech

    Democratic presidential candidate noted the anti-competitive behavior among Big Tech.

  • Benzinga

    Barron's Picks And Pans: Apple, Boeing, GE, Kellogg And More

    This weekend's Barron's cover story examines ways to maximize income in a low-rate environment. Other featured articles discuss a way to play the China trade talks and what a new baby boom means for retail ...

  • Benzinga

    Benzinga's Bulls And Bears Of The Week: Apple, Boeing, Facebook, Nike And More

    Benzinga has examined the prospects for many investor favorite stocks over the past week. Bullish calls included the iPhone maker, a mining giant and a recent IPO. Bearish calls included beleaguered health ...

  • Twitch: Bezos Owns the Ace of Spades
    Market Realist

    Twitch: Bezos Owns the Ace of Spades

    Even with Jeff Bezos bought the video game streaming company Twitch, he raised a lot of questions. At the time, his vision was unclear.

  • Netflix stock has fallen 30% in 3 months but its valuation is still irrational
    MarketWatch

    Netflix stock has fallen 30% in 3 months but its valuation is still irrational

    Reality is closing in on Netflix. With the stock (NFLX) down 30% over the past three months, poor second-quarter results and signs that third-quarter subscriber numbers (which the company reports on Oct. 16) might be below expectations, the market is no longer buying CEO Reed Hasting’s previous ridiculous claims like that Fortnite and YouTube are Netflix’s primary competitors. While the “sell side” remains bullish, with 70% of Wall Street analysts tracked by FactSet calling Netflix a buy, independent investors are increasingly skeptical of the company’s growth story.

  • Why no streaming company will be able to dethrone Netflix
    MarketWatch

    Why no streaming company will be able to dethrone Netflix

    For investors, it could be a costly mistake to be on the wrong side of that debate if Netflix’s stock price marches toward a record $419. The streaming service has done an excellent job penetrating Western Europe, which has fast broadband speeds.

  • Trump Opts for Bezos’s Twitch and Amazon
    Market Realist

    Trump Opts for Bezos’s Twitch and Amazon

    Bezos's Amazon (NASDAQ: AMZN) stock closed on Friday, October 11, at $1731.92. In the extended trading hours, the stock was around $1,732.

  • Why buying and selling a house could soon be as simple as trading stocks
    MarketWatch

    Why buying and selling a house could soon be as simple as trading stocks

    Artificial intelligence in housing won’t just eliminate Realtors. It could completely change the way we buy, sell and live.

  • Facebook’s Libra currency battered by defections, pushback
    MarketWatch

    Facebook’s Libra currency battered by defections, pushback

    Facebook faces a rough road ahead with Libra, but defections by high-profile partners are still unlikely to spell the end for the digital currency.

  • Microsoft looks like the ‘safest’ bet among big software stocks, says analyst
    MarketWatch

    Microsoft looks like the ‘safest’ bet among big software stocks, says analyst

    Sky-high valuations for software stocks necessitate a more defensive view of the industry, according to Jefferies analyst Brent Thill, and Microsoft Corp. shares look like the “safest” play.

  • 'One app to rule them all is dead': How Uber and Lyft can get disrupted
    Yahoo Finance

    'One app to rule them all is dead': How Uber and Lyft can get disrupted

    In Berlin, companies like Uber don't have a dominant hold on transportation. Instead, many companies compete for a slice of the market.