FT : Which technologies will underpin the smart cities of the future?

Which technologies will underpin the smart cities of the future?
Range, cost and speed will determine the best tools for each job

The world of dumb objects from rubbish bins to water pipes is about to become smart. We are on the brink of a communications revolution, with the potential impact almost as great as the introduction of mobile phones and the internet.

Connectivity in 21st century societies will be completely different, says Rupert Pearce, chief executive of the satellite company Inmarsat. “We’re moving from person-to-person voice centric networks, to machine-to-machine data centric networks.”

In the so-called smart cities of the future, urban infrastructure will be interconnected; networked devices will be everywhere, from buses and cars to streetlamps, all linked to networks via the internet of things (IoT). Roads themselves will be online. Water and power grids will have smart sensors. All this should make our urban spaces more efficient and convenient, less polluted, safer and more liveable.

Plenty of real-life examples already exist. Seattle has a real-time rain prediction system called “Rainwatch” which anticipates precipitation at neighbourhood level and sends out flood warnings. The City of London has recently begun a programme to connect thousands of street lights to a mesh network (where individual lights act as nodes). This means greater ease of operation and that the lights will eventually form part of a network of sensors that can detect factors such as pollution.

Many of the applications are surprising and hidden. “One IoT application is putting sensors in concrete which feed back when the concrete is set,” says William Newton, president and Emea managing director of WiredScore, a company that provides a rating system for commercial property connectivity. “This means you don’t need to leave a margin of error and you can put up buildings much faster. A lot of the internet of things will be small improvements like that.”

The consultancy Gartner predicts that there will 11.2bn devices connected by the end of this year and 20.4bn by the end of 2020.

The choice of networks that power and enable this connectivity, says Mr Pearce, will depend on “use case” and market factors — ie who (or what) is using them and what business and commercial needs they answer. He adds: “We’re looking at heterogeneous networks, each of which has a sweet spot when you look at coverage, reliability security and efficiency.” It is a mistake, he explains, to think of 5G as just the next iteration of mobile rather than the future of communications more broadly.

For cities, this is likely to mean a mix of mobile, WiFi, fixed connectivity and other networks such as LoRa — a long-range, low-power wireless platform that is well suited to IoT networks. “In smart cities, no one solution meets all requirements,” says John Hicklin, an IoT expert at PA Consulting. Technological considerations such as range, cost, power consumption, bandwidth and latency (the delay in transferring data) will all inform which solutions are the most appropriate for any given task.

The backbone of all of this will be fibre, says Jeremy Chelot, chief executive of Community Fibre, a business providing internet connectivity to social housing in London.

“A single thread of fibre enables a torrent of data and will mean virtually unlimited capacity.” He points to the introduction of earlier communication networks such as landline phones as a guide to how things might play out: “If you look at the last hundred years, we rolled out copper cable to almost every premises. Fibre will eventually mean fibre to everything.”

It is the volume and speed this allows, he adds, that will make the greatest difference to our lives.

Some countries are already there. Singapore and South Korea have some of the world’s highest “fibre to the home” penetration. In the latter, it is possible to get home broadband with a speed of 2.5Gb per second. This is more than 50 times the UK average.

When it comes to building the networks to power smart cities, not everywhere is equal, though. “In the Middle East and Asia,” says Mr Hicklin, “cities are often being built from the ground up.” This has considerable advantages. Fibre can be laid everywhere without disruption to traffic and businesses. Moreover, the city builders can take a strategic overview of what is needed and existing legacy technologies do not need to be taken into account.

In developed-world cities, incorporating “smartness” tends to be more piecemeal; the organisations that look after rubbish collection, for instance, will not necessarily be linked to those who look after transport. There is also the challenge of having to fit new digital infrastructure around existing buildings, underground lines and sewers. A lot of this is hidden — older buildings often lack the space for the technology to ensure excellent WiFi and mobile coverage inside. Newer buildings can be designed to accommodate this.

For the developing world, the picture is different again. Here, cities are often going from very limited connectivity and networks to broadband and widespread mobile data coverage. They will be the ones that experience the greatest transformations — and may even be able to leapfrog the legacy technologies that in many cases hold back the developed world.

Mr Newton cites Somaliland as a “hotbed” of innovation for local telecoms companies, “especially widespread adoption of mobile money, because telecommunications companies can build masts everywhere and trial new products”.

ZH : Companies Are Suddenly Slashing Profit Guidance At A Record Pace

Companies Are Suddenly Slashing Profit Guidance At A Record Pace

One of the more peculiar features of the last financial crisis, is that it took place at such a breakneck pace, most corporations were unprepared for the carnage that would ensue, and few companies even had the time to cut profit guidance into the Lehman abyss.
This time, things are different.
As we reported last week, Factset found that after a spectacular Q1 and Q2 earnings season, which blew away expectations, corporations have turned decidedly sour on their own prospects, and as they head into the start of Q3 earnings season, 76% (74 out of 98) of companies have issued negative EPS guidance, which is not only above the five-year average of 71%, but if 76% is the final percentage for the quarter; it would also mark the highest percentage of S&P 500 companies issuing negative EPS guidance for a quarter since Q1 2016 (79%).
The Factset report promptly went viral across Wall Street desks, which after the earnings bonanza in the past 2 quarters have been especially sensitive to any suggestion that the dreaded "peak earnings" moment in the S&P500 is upon us.
To be sure, so far such worries have proven to be unfounded: In Q1, earnings soared 24% Y/Y; a number which was also repeated in the second quarter. And while most sellside estimates predict another blowout quarter in Q3, any time there is a major divergence between company guidance and analyst optimism, the market immediately pays attention... and in this case the divergence between company and analyst outlooks is remarkable.
And it's not just Factset: according to Bloomberg, led by high-profile warnings from Netflix and Applied Materials, the number of S&P 500 companies saying profits will trail analyst estimates outnumbered those saying they’ll beat them by a ratio of 8-to-1 in the third quarter. That’s the most in Bloomberg data which goes back to 2010.
While several conclusions are possible, not all are concerning; one is them that analysts - who saw their predictions beat at record rates in the first half - got tired of being wrong and lifted estimates to unrealistic heights. Or, as Bloomberg notes, "it could be that companies, which hate merely to match estimates, are making room for the quarterly ritual in which they beat every forecast by a penny."
However, while it possible that there is perfectly innocent explanation, for skeptics looking for evidence income growth is peaking, a more ominous take-away has emerged, and comes as a consequence of global trade at a time when everything from rising costs to weakening overseas demand threaten to damp growth, according to Citi's equity strategist, Tobias Levkovich.
"Given ebullient investor sentiment, we do not think there is much room for companies to disappoint without taking a hefty toll on share prices. Notably stronger dollar and higher interest rates plus some softness in emerging economies all intimate the potential for misses."
He's right, because with companies expected to earn $42.11 a share in the third quarter - which would be a new quarterly record - and with valuations (especially for the median company) already at nosebleed levels, the margin of error is getting thin. Consider that among the 19 S&P 500 companies that have reported results early this season, all but two exceeded profit estimates: their stock dropped an average 2.8% in first-day reactions.
Meanwhile, there is another reason why everyone's attention is focused on earnings: with everything else in the world on edge, amid growing fears over higher rates, populist politics, escalating geopolitcal conflicts and outright trade war, strong and rising US earnings have been the backbone behind the S&P's record price. So any sign that this is changing is an especially acute threat. Miller Tabak's Matt Maley explained it best:
"Strong earnings have been the most important factor that has enabled the stock market to ignore the headwinds it has faced this year. If the projection for future earnings suddenly become less bullish, it could/should be enough to upset the balance between the bullish & bearish macro factors that are facing the markets right now."
What is troubling is that as sellside analyst projections have remained bubbly, management sentiment slumped in the second quarter according to UBS. Such negative guidance language is likely to accelerate during this reporting season given the uncertainty around trade talks between the U.S. and China, said Keith Parker, the firm’s head of U.S. equity strategy.
The question in such as a situation, as usual, is what do management teams know that analysts don't (a rather simple answer is "everything") and why are they turning so pessimistic (this should be self-explanatory). What didn't help is that those analysts who were cautious on company earnings in Q2, ended up looking like fools. Bolstered by tax cuts and a strengthening economy, more than 80% of S&P 500 companies delivered better-than-expected profits during last reporting season, a record high rate. Q2 earnings were so strong that they topped forecasts by a whopping 5.2%.
However, that record pace of beats is unlikely to continue, said QMA chief investment strategist Ed Keon,
"You’re going to go to a slower trajectory. You’ll see the second quarter will turn out to be the peak in terms of growth rates."
The ominous message sent by management teams who are slashing guidance at a near record pace, and which the market is so far ignoring, is that Keon is right.

WSJ : Barnes & Noble Launches Formal Review to Evaluate Possible Sale

Barnes & Noble Launches Formal Review to Evaluate Possible Sale
A special committee of the Barnes & Noble board will lead a strategic review; board has adopted short-term shareholder rights plan

Barnes & Noble Launches Formal Review to Evaluate Strategic Alternatives, Including Possible Sale

Barnes & Noble Has Received Expressions of Interest From Multiple Parties, Including Chairman Leonard Riggio

Special Committee of Barnes & Noble Board Will Lead Strategic Review

Barnes & Noble Board Adopted Short-term Shareholder Rights Plan


Barnes & Noble Inc. said it is considering a sale of the company after receiving expressions of interest from multiple parties, including from the company’s executive chairman, Leonard Riggio.

The struggling bookseller on Wednesday said it would launch a formal review process to evaluate its strategic options. A special committee of the board will lead the review.

Barnes & Noble also said it has adopted a short-term shareholder rights plan, after observing “rapid material accumulations” of its stock by parties it can’t identify. The rights, which will expire in a year, would go into effect if a person or group acquires 20% or more of Barnes & Noble common shares without the board’s approval.

The plan would allow all rights holders to purchase preferred shares that are equivalent to the retailer’s common stock at a 50% discount. This would dilute the outsider’s holdings.

The company said Mr. Riggio, who has a 19.2% stake, will vote his shares in favor of any transaction recommended by the committee.

In after-hours trading, Barnes & Noble shares were trading at $6.75, up nearly 24%.

>>> US Close Dow +0.52% S&P +0.07% Nasdaq +0.32% Russell +0.92%


Closing Market Summary: Stocks Trim Early Gains As Yields Surge

The S&P 500 flirted with record territory on Wednesday morning, but pulled back in the afternoon as investors expressed concern over a surge in bond yields. The S&P 500 finished the session with a slim gain of 0.1% after trading as high as +0.6% intraday.

As for the other major indices, the Dow managed to keep 0.2% of its 0.7% intraday gain, closing at a new record high for the second day in a row. The tech-heavy Nasdaq finished +0.3%, and the small-cap Russell 2000 finished +0.9%, undoing some of the damage done on Monday and Tuesday.

Investors awoke to encouraging news out Italy, where the new anti-establishment government reportedly decided to cede to some of the EU's budget demands. Italy's budget-deficit target will be reduced from 2.4% of GDP in 2019 to 2.2% in 2020 and then to 2.0% in 2021. That news helped alleviate fears of an EU-Italy showdown and pushed stock futures and Treasury yields higher overnight.

Yields continued to climb after the September ADP Employment Change report, which is a prelude to Friday's nonfarm payrolls reading, showed an estimated 230K positions were added to private sector payrolls -- well above the Briefing.com consensus estimate of 184K -- and after the ISM Services Index for September hit a record high of 61.6% (Briefing.com consensus 58.2%), clearly indicating that business activity in the service-providing sector of the economy is strong.

Stocks were able to hold on to opening gains throughout the morning, but started wavering in the afternoon as Treasury yields continued to climb, with the benchmark 10-yr yield crossing a high-water mark dating back to July 2011. The 10-yr yield closed at 3.16% -- a daily gain of ten basis points -- while the more Fed-sensitive 2-yr yield rallied to 2.86% (+6 bps).

Unsurprisingly, the financial sector, which often moves in tandem with Treasury yields, was among the top-performing S&P 500 groups on Wednesday with a gain of 0.8%.

The energy sector advanced 0.8% as well, benefiting from the continued rise in the price of crude oil; WTI crude futures jumped another 1.6% on Wednesday to $76.39/bbl, marking a new four-year high. Wednesday's rise in oil prices came despite the Department of Energy's weekly inventory report showing an unexpected build of 8.0 million barrels -- the largest weekly increase of the year.

On the downside, six of 11 sectors finished in the red, with utilities (-1.2%), real estate (-1.0%), and consumer staples (-1.1%) being the worst performers.

In individual stocks, General Motors (GM 34.00, +0.70) climbed 2.1% after announcing that it will be partnering with Honda Motor (HMC 29.37, -1.09) to build autonomous vehicles. Honda shares fell 3.6%. Separately, struggling retailer J.C. Penney (JCP 1.62, +0.06) jumped 3.9% after appointing a new CEO, Jill Soltau, who is the former President and CEO of Joann Stores, and homebuilder Lennar (LEN 46.24, -0.53) dropped 1.1% after reporting earnings.

Rehashing Wednesday's economic data, which included the ISM Services Index for September, the ADP Employment Change report for September, and the weekly MBA Mortgage Applications Index:

  • The ISM Non-Manufacturing Index checked in at 61.6% for September (consensus 58.2%), up from 58.5% in August.
    • The key takeaway from the report is that it clearly indicates business activity is strong for the service-providing sector of the economy, which accounts for a much larger slice of economic activity than the manufacturing sector does.
  • The ADP National Employment Report showed an increase of 230,000 in September (consensus 184,000), and the August reading was revised to 168,000 (from 163,000). The ADP reading is seen as a prelude to the BLS's nonfarm payrolls figure (consensus 184,000), which will be released on Friday.
  • The weekly MBA Mortgage Applications Index was flat to follow last week's increase of 2.9%.

Looking ahead, investors will receive weekly Initial Claims and August Factory Orders on Thursday.

  • Nasdaq Composite +16.3% YTD
  • S&P 500 +9.4% YTD
  • Russell 2000 +8.8% YTD
  • Dow Jones Industrial Average +8.5% YTD

WSJ : Peabody Energy Held Talks to Buy Drummond to Expand Global Footprint

Peabody Energy Held Talks to Buy Drummond to Expand Global Footprint
The deal would be valued at between $4 billion and $4.5 billion and see the U.S. miner acquire 80% of its Colombian peer

U.S. mining company Peabody Energy Corp . BTU +1.68% has held discussions to buy Colombian peer Drummond International LLC, people familiar with the matter said, a deal that would cement a swift comeback from bankruptcy for America’s largest coal producer.

It is unclear how advanced the talks are or if the two sides will reach an agreement.

The potential deal would see Peabody acquire 80% of Drummond International, Colombia’s top coal exporter, leaving the remaining 20% in the hands of Japanese trading house Itochu Corp. , the people familiar with the matter said. The deal could be valued at between $4 billion and $4.5 billion, according to one of the people. Itochu paid $1.5 billion for the 20% stake in Drummond in 2011.

Peabody was pushed into bankruptcy in 2016 by large debts and lower coal prices, and emerged from the process last year. Its revival comes as the price of thermal coal, which is used to generate power, hits its highest levels in several years. The coal industry has also been backed by President Donald Trump, who has replaced Obama-era climate policies with new rules to help coal-burning power plants.

Shares of Peabody rose 3% by midmorning trade in New York.

A spokesman for Peabody declined to comment on whether there is a deal.

But “I would note that our focus is on the current platform, the incident at North Goonyella in Australia, and completing and integrating the Shoal Creek Mine acquisition in Alabama,” he said in an email.

In September, Peabody bought Drummond Co.’s Shoal Creek metallurgical coal mine, located in central Alabama, for $400 million. Last week, the St. Louis-based company said it didn’t expect any production from its North Goonyella mine in Australia in the fourth quarter after a fire at the site. It is unclear whether the fire will impact discussions on the potential deal.

Peabody has a market cap of $4.33 billion, similar to the expected size of the deal under discussion, meaning that buying Drummond would significantly expand the U.S. company’s market value and international footprint.

Drummond, which is owned by a privately held Alabama-based company, didn’t respond to phone calls and an emailed request for comment.

Colombia is the top source of U.S. coal imports, according to the Energy Information Administration. Drummond was Colombia’s top producer and exporter of thermal coal in 2017, the company’s website said.

Cleaner energy sources like renewable energy and gas have made inroads into the Western power markets once dominated by coal. A decade ago, coal fueled almost 50% of U.S. electricity but that share has fallen to less than one-third.

But while the cost of gas and renewable energy has fallen, emerging markets in Asia are still hungry for large, cheap sources of energy, lifting prices to near their highest level in years.

The price of thermal coal delivered to Europe is up around 6% year-to-date at about $102.36 a metric ton.

Swiss mining and trading giant Glencore said its coal division was a big driver in the resources giant’s record first half earnings this year, generating more than a quarter of its $8.3 billion in earnings before interest, taxes, depreciation and amortization.

Peabody noted in its own first half results that while U.S. domestic coal demand for power generation has weakened, exports have continued to benefit from strong seaborne pricing.

Corrections & Amplifications
The deal would be valued at between $4 billion and $4.5 billion and see the U.S. miner acquire 80% of its Colombian peer. An earlier version of this article incorrectly stated that Peabody’s peer was Columbian in the subhead of the story. (Oct. 3, 2018)