NY Times : S.E.C. Lets All Firms Keep Parts of I.P.O. Filings Secret

S.E.C. Lets All Firms Keep Parts of I.P.O. Filings Secret

In an attempt to revitalize the public capital markets, the nation’s top regulator of stocks is turning to stealth mode.

The Securities and Exchange Commission, in Walter J. Clayton’s first major policy move as chairman, is expanding a program that will allow all private companies to keep some details of their finances and business strategies under wraps early in the process of an initial public offering.

Currently, only smaller companies are allowed to confidentially file draft registration statements for review by the agency before offerings. Some well-known companies, like Snap, Twitter and the burger chain Shake Shack have been able to do so, but the threshold of annual gross revenue of $1 billion has barred others.

Beginning July 10, all companies will have access to that program, which originated in the 2012 JOBS Act, the commission said late Thursday. The companies would be required to file their paperwork publicly at least 15 days before any “road show” to meet with potential investors, the commission said.

Filing confidentiality is intended to make it easier for companies that want to go public. It allows companies to iron out any wrinkles in their financial reporting with the regulator privately. And they do not have to worry about competitors getting an early peek at their figures.

Yet some market specialists say confidential filing has had little impact and question why markets regulators are emphasizing secrecy over openness.

Since the JOBS (Jumpstart Our Business Start-Ups) Act was enacted, some 1,350 confidential filings have been submitted, as of March 31, the Securities and Exchange Commission said.

The Nasdaq stock market, which competes with the New York Stock Exchange for the listings of new companies, cheered the S.E.C.’s decision.

“We have long supported such an action and believe it is one step forward in making the public markets more attractive, which will foster economic growth,” Adena Friedman, the chief executive of Nasdaq, said in a statement.

Jay R. Ritter, a professor at the Warrington College of Business at the University of Florida, who studies initial public offerings, was more skeptical about its effects, although he generally supported the idea.

“This is not necessarily going to encourage more companies to go public,” Professor Ritter said. “The whole JOBS Act has had very marginal impact.”

One criticism of the confidentiality provision has been that it shortens the time between when a prospectus becomes public and the road show for investors before the trading debut of a stock. But that should not be a major obstacle for big investors who can spend time poring over the filing, Professor Ritter said.

The move by the commission follows several slow years in the market for new stocks. And fewer initial public offerings have meant fewer publicly traded companies. From a peak of 7,322 publicly traded companies in 1996, the total number of companies listed on the United States stock market has plunged by nearly half, according to research by Credit Suisse, aptly titled “The Incredible Shrinking Universe of Stocks.”

At his confirmation hearing in March, Mr. Clayton — who as a longtime lawyer at the Wall Street law firm Sullivan & Cromwell worked on a number of initial public offerings, including Alibaba’s and Och-Ziff Capital Management’s — emphasized that he would “like to see more companies going public here.”

He and Republican lawmakers have pointed to regulation as a prime culprit for the shrunken universe in American stocks.

“We are striving for efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation and a stronger U.S. economy,” Mr. Clayton said on Thursday.

Yet other forces have clearly been at work over the last two decades. Wave after wave of mergers and acquisitions have caused many stocks to be delisted. Mutual funds and other big investors tend to prefer bigger investments to many small investments in new company offerings and the like.

Perhaps more important, younger companies, particularly in technology, are now able to raise huge sums of capital privately and have no need of public markets. Take Uber, which has raised more than $14 billion from venture capitalists and other investors, giving the private company a valuation of $70 billion.

Mr. Clayton cited Uber during his confirmation hearing as an example of a company that 20 years ago probably would have gone public at this point.

This year, however, there have been signs of improvement in the market for new stocks. Renaissance Capital noted on Thursday that 54 initial offerings raised $11 billion in the second quarter — the most in number and proceeds in two years. Already, the market for new stocks, led by companies like Altice USA and Blue Apron, has raised more capital this year than in all of 2016.

The commission said on Thursday that permitting all companies to file secretly would give them more flexibility to plan their offerings and reduce “the potential for lengthy exposure to market fluctuations that can adversely affect the offering process and harm existing public shareholders.”

Anna Pinedo, a partner at Morrison & Foerster who specializes in securities law, said the expansion on confidential filing would also apply to companies considering a direct listing on a stock exchange without seeking to raise capital through a public offering.

The streaming music service Spotify is said to be considering a direct listing — a move that eliminates the need to hire underwriters and conduct a road show to woo investors. The advantage of a direct listing is that a company’s shares simply begin trading on an exchange.

But until now, a company considering a direct listing had to make its filing public when it applied. Ms. Pinedo said the commission’s action would permit any company to keep its financial statements confidential until 15 days before its shares are set to begin trading.

“If you look at how much money unicorns have raised, perhaps they don’t need to do a conventional I.P.O.,” she said.

WSJ : Europe Is Becoming a Bigger Problem for Silicon Valley

Europe Is Becoming a Bigger Problem for Silicon Valley
Decisions against Google, Facebook and others highlight EU’s aggressive approach to tech giants

A deep cultural divide between the U.S. and Europe in their approaches to Silicon Valley has thrust European officials into the role of global tech-industry cops.

The result is that many of the most heated battles over whether or how regulators should protect car makers, news organizations and other industries from the disruptive effects of tech giants are playing out first in Brussels, Paris and Berlin instead of Washington or San Francisco.

Just Friday, Germany approved new legislation imposing €50 million fines on social-media companies that fail to quickly remove hate speech and terrorist content—over strident opposition from Facebook Inc. FB -0.04% and other tech companies, which advocate self-regulation to tackle those problems. That step followed the €2.42 billion ($2.76 billion) fine that the European Union’s executive arm levied this week against Alphabet Inc.’s GOOGL -0.87% Google for abusing its dominance as a search engine.

These decisions have significant implications for the companies in Europe, one of their most important markets with its 500 million consumers. The rulings also influence regulators, courts and officials globally. This week, South Korea’s antitrust chief told the Yonhap News agency he will examine how to curb the market clout of Google and Facebook.

Google said it “respectfully disagrees” with the EU decision and will consider an appeal, and didn’t immediately respond to requests for comment on South Korea’s plans. Facebook declined to comment.

Some of these issues are coming to a head in the U.S., too, though at a slower place. American policy makers in some cases are rethinking policies that were designed to nurture the tech industry in its early days, now that these companies are touching every sector of the economy.

The companies also are coming to terms with the loss of a strong ally in the White House in former President Barack Obama. When Republicans took charge in January, GOP lawmakers set out to roll back several big Obama-era policies that favored tech companies. That included the “net neutrality” regulations that prevented broadband providers from prioritizing certain internet content, and recent privacy rules that hit telecom companies but not tech firms.

Up to now, though, the U.S. generally has favored a lighter approach, driven partly by Americans’ aversion to restrictions on free speech. Across the Atlantic, the more tightly controlled approach is illustrated by Europeans’ war-hardened devotion to personal privacy and restricting hate speech.

“It stems from very different economic traditions in how much of a role the state should have in resolving problems,” says James Waterworth, vice president for Europe at the U.S.-based Computer & Communications Industry Association, a lobby group that represents U.S. tech companies including Facebook and Google. “In a globalized world, with large transnational companies, these things increasingly come into conflict.”

Some free-market supporters in the U.S. and Europe view the moves by regulators as cover for political interventions and even protectionism. Europe dominated the early mobile-phone era but now has no tech companies on the scale of Google or Facebook.

Mr. Obama in 2015 said the EU’s investigations into big U.S. tech companies were “more commercially driven than anything else,” suggesting the EU was trying to help out European competitors.

EU officials deny such accusations but frequently say that if large tech companies, which are primarily American, want access to the bloc, they must “play by the EU’s rules.”

The EU’s antitrust watchdog is still investigating other aspects of Google’s business and chip maker Qualcomm Inc. for allegedly abusing their market positions. The watchdog also has been probing whether Amazon.com Inc. paid appropriate taxes in Luxembourg. The companies all deny wrongdoing.

Meanwhile, the EU is considering proposing more rules for internet platforms to prevent them from offering unfair terms to small businesses that use their services to sell or promote products.

And Europe’s national privacy regulators—who next May will get the power to issue fat fines for privacy-rule violations—are coordinating multiple investigations into Facebook’s handling of personal information from chat service WhatsApp.

“These companies have become so dominant, so powerful, when [they] demote rivals, who puts the limit?” said Ramon Tremosa i Balcells, a liberal lawmaker from Spain who backed the European Parliament’s resolution in 2014 calling for a breakup of Google.

Regulatory scrutiny in the U.S. may never match that of Europe, but some American politicians have raised concerns about the size of tech companies and their power in the market. President Donald Trump’s nominee to be the Justice Department’s antitrust chief, Makan Delrahim, has promised to “investigate and vigorously enforce the antitrust laws with respect to online platforms.”

One factor in the policing has been tech firms’ disruption of traditional industrial giants in Europe. In response, many legacy players have lobbied for new rules and tougher enforcement against the interlopers—and found open ears. European telecom firms, angry about seeing their revenue from text messages undercut by chat apps, were among the first to advocate new legislation to mandate a “level playing field.”

More recently, European car makers have lobbied EU officials to support industry proposals that car makers should be the primary gateway for drivers to share car data. Some executives fear Silicon Valley firms could hoard vehicle data, turning cars into low-margin devices like many mobile phones, one auto executive said. German publishers also lobbied for copyright proposals that would help them seek remuneration from Google and other news aggregators for snippets of articles used on their websites.

aggressive approach to tech giants
The London offices of Google, whose parent company was fined by the EU’s executive arm this week
The London offices of Google, whose parent company was fined by the EU’s executive arm this week PHOTO: FACUNDO ARRIZABALAGA/EUROPEAN PRESSPHOTO AGENCY
By Sam Schechner in Paris, Natalia Drozdiak in Brussels and John D. McKinnon in Washington
June 30, 2017 3:06 p.m. ET
45 COMMENTS
A deep cultural divide between the U.S. and Europe in their approaches to Silicon Valley has thrust European officials into the role of global tech-industry cops.

The result is that many of the most heated battles over whether or how regulators should protect car makers, news organizations and other industries from the disruptive effects of tech giants are playing out first in Brussels, Paris and Berlin instead of Washington or San Francisco.

Just Friday, Germany approved new legislation imposing €50 million fines on social-media companies that fail to quickly remove hate speech and terrorist content—over strident opposition from Facebook Inc. FB -0.04% and other tech companies, which advocate self-regulation to tackle those problems. That step followed the €2.42 billion ($2.76 billion) fine that the European Union’s executive arm levied this week against Alphabet Inc.’s GOOGL -0.87% Google for abusing its dominance as a search engine.


These decisions have significant implications for the companies in Europe, one of their most important markets with its 500 million consumers. The rulings also influence regulators, courts and officials globally. This week, South Korea’s antitrust chief told the Yonhap News agency he will examine how to curb the market clout of Google and Facebook.

Google said it “respectfully disagrees” with the EU decision and will consider an appeal, and didn’t immediately respond to requests for comment on South Korea’s plans. Facebook declined to comment.

Some of these issues are coming to a head in the U.S., too, though at a slower place. American policy makers in some cases are rethinking policies that were designed to nurture the tech industry in its early days, now that these companies are touching every sector of the economy.

The companies also are coming to terms with the loss of a strong ally in the White House in former President Barack Obama. When Republicans took charge in January, GOP lawmakers set out to roll back several big Obama-era policies that favored tech companies. That included the “net neutrality” regulations that prevented broadband providers from prioritizing certain internet content, and recent privacy rules that hit telecom companies but not tech firms.

Up to now, though, the U.S. generally has favored a lighter approach, driven partly by Americans’ aversion to restrictions on free speech. Across the Atlantic, the more tightly controlled approach is illustrated by Europeans’ war-hardened devotion to personal privacy and restricting hate speech.

“It stems from very different economic traditions in how much of a role the state should have in resolving problems,” says James Waterworth, vice president for Europe at the U.S.-based Computer & Communications Industry Association, a lobby group that represents U.S. tech companies including Facebook and Google. “In a globalized world, with large transnational companies, these things increasingly come into conflict.”


Some free-market supporters in the U.S. and Europe view the moves by regulators as cover for political interventions and even protectionism. Europe dominated the early mobile-phone era but now has no tech companies on the scale of Google or Facebook.

Mr. Obama in 2015 said the EU’s investigations into big U.S. tech companies were “more commercially driven than anything else,” suggesting the EU was trying to help out European competitors.

EU officials deny such accusations but frequently say that if large tech companies, which are primarily American, want access to the bloc, they must “play by the EU’s rules.”


The EU’s antitrust watchdog is still investigating other aspects of Google’s business and chip maker Qualcomm Inc. for allegedly abusing their market positions. The watchdog also has been probing whether Amazon.com Inc. paid appropriate taxes in Luxembourg. The companies all deny wrongdoing.

Meanwhile, the EU is considering proposing more rules for internet platforms to prevent them from offering unfair terms to small businesses that use their services to sell or promote products.

And Europe’s national privacy regulators—who next May will get the power to issue fat fines for privacy-rule violations—are coordinating multiple investigations into Facebook’s handling of personal information from chat service WhatsApp.

“These companies have become so dominant, so powerful, when [they] demote rivals, who puts the limit?” said Ramon Tremosa i Balcells, a liberal lawmaker from Spain who backed the European Parliament’s resolution in 2014 calling for a breakup of Google.

Regulatory scrutiny in the U.S. may never match that of Europe, but some American politicians have raised concerns about the size of tech companies and their power in the market. President Donald Trump’s nominee to be the Justice Department’s antitrust chief, Makan Delrahim, has promised to “investigate and vigorously enforce the antitrust laws with respect to online platforms.”

One factor in the policing has been tech firms’ disruption of traditional industrial giants in Europe. In response, many legacy players have lobbied for new rules and tougher enforcement against the interlopers—and found open ears. European telecom firms, angry about seeing their revenue from text messages undercut by chat apps, were among the first to advocate new legislation to mandate a “level playing field.”

More recently, European car makers have lobbied EU officials to support industry proposals that car makers should be the primary gateway for drivers to share car data. Some executives fear Silicon Valley firms could hoard vehicle data, turning cars into low-margin devices like many mobile phones, one auto executive said. German publishers also lobbied for copyright proposals that would help them seek remuneration from Google and other news aggregators for snippets of articles used on their websites.


News Corp , owner of The Wall Street Journal, has formally complained to the EU about Google’s handling of news articles in search results.

“The revenues generated by creators, performers and those that invest in creative content are accruing disproportionately to a few large players who themselves do not engage in content creation,” Günther Oettinger, the EU’s German commissioner and former digital chief, said in November, defending the commission’s proposed new copyright rules.

WSJ : Global Stocks Post Strongest First Half in Years, Worrying Investors

Global Stocks Post Strongest First Half in Years, Worrying Investors
Market watchers wonder whether the strong showing heralds smooth sailing or choppy water ahead

HONG KONG—Global stock markets collectively had their best opening half-year in years, a strong run capped by turbulence this week that could be a harbinger of greater volatility in the second half of the year.

All but four of the 30 major indexes representing the world’s biggest stock markets by value have risen this year, a first-half performance unmatched since 2009, according to an analysis by The Wall Street Journal. In the past 20 years, only four first-half rallies have been as widespread or better than the current global surge. Two of them preceded sharp market crashes, while two others came at the beginning of multiyear bull markets.

In the U.S., the tech-heavy Nasdaq Composite surged 14%, its best first half since 2009. The Dow Jones Industrial Average and S&P 500 each rose 8%. But the U.S. wasn’t alone. Stock benchmarks from South Korea to India to Spain were among the biggest risers over the first six months, all registering double-digit percentage gains.

Investors attribute the broad breadth of the rally to strengthening corporate earnings, improving economies and continued support from central banks. Europe in particular has been the beneficiary of surprisingly stronger-than-expected economic conditions. A sentiment reading of Eurozone businesses and consumers released this week jumped to its highest level since before the financial crisis. In the U.S., strong earnings growth has been a crucial underpinning of the market’s performance. And a resilient tech sector led by U.S. and Chinese giants has had an increasing influence on markets domestically and in Asia.

Despite President Donald Trump’s challenges with parts of his agenda, and political jolts in countries from Brazil to the U.K., stock markets have been unusually steady too. Measures of volatility in the year’s first half were at or near multiyear lows not only in the U.S., but also in Europe and Asia.

The question for stock investors is whether the strong first six months heralds a choppier second half or the start of a multiyear upswing. The data on global rallies offers a mixed record.

A surge in the first half of 1999 preceded the bursting of the tech bubble. The rally to start 2007 came before the global financial crisis. But broad, world-wide gains similar to this year’s also occurred in 2003 and 2009. Both of those were early stages of yearslong market rallies.


High stock valuations and tranquil trading this year have prompted concerns that investor complacency is setting in. Federal Reserve Chairwoman Janet Yellen warned that asset valuations were “somewhat rich.” The S&P 500 trades at about 18 times projected earnings over the next 12 months, around its highest level in 13 years. Still, this forward multiple was above 26 times at the dot-com bubble’s peak in 2000, according to FactSet.
Valuations are more modest elsewhere. In Germany, the DAX trades at less than half its peak multiple in 2000. The Nikkei 225 fetches at 17 times forward earnings, around its average over the past five years.
This week, investors tasted the greater uncertainty that could lie ahead, when top European Central Bank officials offered mixed messages on the future of its bond-buying program. Heads of central banks in the U.K. and Canada also indicated they were pondering when to raise interest rates.
Stocks and currencies gyrated on the concern of less central-bank accommodation, moves reminiscent of the 2013 “taper tantrum” in the U.S., touched off when the Fed signaled a reduction in asset purchases.
“Central banks have created huge distortions in the markets, which are going to be difficult to unwind,” said Colin Graham, chief investment officer of multiasset solutions at BNP Paribas Asset Management.
“But we think they are going to talk hawkish and walk dovish,” Mr. Graham continued, implying that central banks won’t do anything too drastic that risks roiling markets.

The stakes are high. In the U.S., the Dow, S&P 500 and Nasdaq Composite have set numerous records highs in the ninth year of a bull market. Globally, nearly half of the top 30 stock indexes are at or near all-time highs.
“We’re really seeing a synchronized global recovery take shape this year,” said Graeme Bencke, global portfolio manager at Pinebridge Investments in London. “Everything is looking better.”
The tech sector’s rising clout has been key. The five largest U.S. companies by market capitalization are tech- and consumer-related companies, led by Apple Inc. They propelled the Nasdaq to 38 new closing records this year, its most through the first half of a year since 1986.
China’s tech behemoths fared even better. Tencent Holdings Ltd. , the world’s largest videogame publisher by revenue, and China’s largest social network, WeChat, have jumped more than 40% this year. Alibaba Group Holding Ltd. , the online marketplace, surged roughly 60%, pushing the MSCI Asia Ex Japan Index up more than 20% for the year.
Even sectors that have mostly underperformed this year, such as financials, have belatedly joined in. After all major U.S. banks passed the Fed’s annual stress tests, analysts say they look attractive again. Banks including Citigroup Inc. and Bank of America Corp. said they would boost share buybacks and dividends.
Among the few losers this year were energy stocks, thanks to oil’s sharp decline. Exxon Mobil Corp. and Chevron Corp. were some of the Dow’s worst performers.

One irony is that this year’s market gains have come about for different reasons than many expected in January.
Investors then hoped Donald Trump’s election victory would trigger lower taxes, less regulation and more infrastructure spending. Many believed U.S. interest rates would rise, the dollar would strengthen and oil would keep rising.
Abroad, there were worries Mr. Trump’s presidency would spark trade tensions that might hit emerging markets. A close French presidential election loomed over Europe’s prospects.
So far, though, Mr. Trump hasn’t enacted major changes to fiscal policy or taken significant protectionist measures. In France, pro-Europe Emmanuel Macron eventually romped to election victory, allaying fears about the rise of anti-European Union sentiment.
Through it all, the market’s focus has instead remained on central bankers, the pattern since the financial crisis. While the U.S. has raised short-term interest rates four times since the end of 2015, the ECB and Bank of Japan have mostly remained accommodative, helping juice asset prices. U.S. government bond yields have fallen, the dollar has weakened and oil prices have declined.
“It really has been a first half of the contrarian trade,” said Mark Tinker, head of Framlington Equities Asia at AXA Investment Managers, which has $835 billion under management.
Investors point to the pickup in earnings growth as a vital driver of global gains this year. In the U.S., first-quarter earnings from S&P 500 companies increased 14% from a year earlier, the best growth since 2011. Analysts now expect roughly double-digit profit growth this year and in 2018, according to FactSet.
Earnings in Asia-Pacific, excluding Japan, and in Europe, which had disappointed for years, also increased at a double-digit rate in the first quarter.
“Europe has gone from a headwind to a tailwind,” said Mark Matthews, head of research for Asia at Swiss private bank Julius Baer . “There was a fear that the euro was unraveling. The fear is behind us.”
Not every market has rallied. Russian stocks were among the world’s worst-performing equity markets, dropping 14%. Oil’s fall and the possibility of tighter sanctions hit stocks there after their strong surge in 2016. Indexes in Israel, China and Canada were the other rare decliners in the first half.
The tricky part now, investors say, is picking which regions will continue rallying. Bargain-hunting opportunities have been rare and fleeting. Brazilian shares tanked in May amid a fresh political scandal. But global fund flows to the country soared the week after, and the market quickly bounced back.
Meantime, comments from some investors suggest doubts are creeping in.
“We’ve never been in a period like this,” Mr. Bencke of PineBridge Investments said. “It’s like central banks are slowly pulling the rug from under your feet. My hope is they’ll move slowly, and the world will err on the side of caution.”

Barron's : A Surge of Dealmaking Ahead for Cable, Wireless

A Surge of Dealmaking Ahead for Cable, Wireless
As cable and wireless operators contemplate tie-ups, opportunity lurks. Possible takeover targets.

Cable and wireless companies appear headed for a dealmaking surge. Look for subscale cable operators—any not named Comcast or Charter Communications —to tie up each other; two of them, Altice USA and WideOpenWest, have newly issued shares to use as currency. And more than two decades after a brief, awkward romance involving Comcast and Sprint, the two are suddenly talking again, this time with Charter in the mix.

That conversation won’t necessarily result in a deal, but a cross-industry combination or two looks likely. Cable companies are keen to roll out bundled wireless service to their U.S. customers, after seeing how well such packages sell in Europe. And big wireless operators have run out of room to grow.

Comcast (ticker: CMCSA) is perhaps the least-motivated dealmaker in the bunch, and for that reason, it’s the most likely to get excellent terms, or none at all. Plus, it can benefit from a transaction involving Charter (CHTR) while standing on the sidelines, thanks to a pact between the two to cooperate on wireless pursuits. Comcast is also a peppy grower on its own. That makes it a top choice for investors now, even at a premium valuation. Shares could gain 15% in a year.

Sprint is an obvious target, but it holds a weak hand, with relatively poor coverage and heavy debt. For a safer investment on the telecom side, look overseas, to Deutsche Telekom (DTE.Germany), which controls T-Mobile USA (TMUS), which is gobbling up market share stateside. It can hold out for better terms in a Sprint merger, or dangle T-Mobile in front of Dutch communications giant Altice (ATC.Netherlands), which this month brought public Altice USA (ATUS), owner of cable firms Cablevision and Suddenlink. Deutsche Telekom, too, could gain 15% in a year.


There are two key things to know about the cable and telecom deal landscape. First, the regulatory climate has warmed. As a candidate, Donald Trump expressed grave concern over the possibility of AT&T (T) buying Time Warner (TWX). As president, he has appointed communications and antitrust officials who appear to have few objections to the pending deal. The second is that cable companies hold most of the cards. Wireless carriers have saturated the U.S. with service, and a price war is pushing down average revenue per user. That’s lowering the return on all that money spent on 4G networks, and making the thought of a future 5G spending spree less attractive. The Time Warner deal, at least, gives AT&T an opportunity to sell more to phone customers—HBO content, for example. Verizon Communications (VZ), by comparison, has been rummaging in the dented-can bin, buying AOL and Yahoo!.

Cable companies are at risk of losing pay TV subscribers to online services like Netflix (NFLX), but Comcast, for one, has been adding TV subscribers. Streaming shows requires fast internet service, and therein lies cable’s key advantage: It rules broadband, including so-called wireless broadband, and will for years to come. An estimated 52% of data traffic travels over wired connections. Another 45% goes over Wi-Fi, meaning the bulk of home streaming on mobile devices is cable business, not wireless business.

THAT MAKES NOW a good time for wireless and cable to join forces. Comcast and others made a go of that with Sprint in 1994, but quickly shifted their attention to the emerging cable internet business. Today, Comcast is what’s called a mobile virtual network operator, or MVNO, meaning it resells someone else’s connection. In April, it launched Xfinity Mobile, which is basically Verizon in disguise. Charter could launch Verizon-backed service next year. The terms, set in 2011, favor Verizon. The Sprint talks could thus mean Comcast and Charter are looking to take an equity stake in exchange for better MVNO terms. Or they could be squeezing Verizon for a better deal.

A buyout seems unlikely. Sprint is losing money, needs plenty of investment, and has a hefty enterprise value—shares plus debt—of $65 billion. Flourishing T-Mobile is valued at just $10 billion more.

Comcast could benefit if Verizon comes up with a sweetened MVNO deal. Verizon reportedly tried to buy Charter recently and was rejected. If Verizon comes up with an acceptable offer, Comcast could win, too, by using its wireless pact with Charter to share in the spoils.

COMCAST AND CHARTER are too large to combine, but in the mother of all deals they could pursue a joint purchase of Verizon. In a painful twist for Verizon, it sold a large portion of its valuable Fios assets to Frontier Communications (FTR), which according to FBN Securities analyst Robert Routh, was likely meant to reduce antitrust objections in a future cable deal. Like just about everyone, Verizon thought Hillary Clinton would win.

If Sprint walks away from the talks with nothing, it might be willing to give Deutsche Telekom favorable terms in a merger. Meanwhile, Altice USA and Colorado-based WideOpenWest (WOW), which private equity investors brought public in May, look hungriest to expand, according to Amy Yong, who covers cable at Macquarie Research. Privately held Cox Communications and Mediacom, along with Cable One (CABO) and Frontier Communications, are the likeliest targets, according to Yong.

Don’t forget that Comcast has some lucrative side businesses—television, movies, and theme parks under NBC Universal. Its earnings per share could grow 50% cumulatively over the next three years. A rise from $39 to $45 in a year would leave shares at 20 times earnings—not too expensive, considering the growth. A similar percentage rise for Deutsche Telekom would put it at 18 times earnings.

Barron's : Beyond Bitcoin: How Blockchain Is Changing Banking

Beyond Bitcoin: How Blockchain Is Changing Banking
The digital currency has taken off this year, nearly tripling in price.

The hottest investment of the first half of the year wasn’t Amazon.com, Netflix, or even Tesla. In fact, your broker probably isn’t pitching it, and it is barely even recognized by the Securities and Exchange Commission. Yet cryptocurrencies—the most famous of which is Bitcoin—are shooting out the lights.

Investors who bought Bitcoin for $5 or less just five years ago are millionaires today, as its price has soared above $2,500. Unlucky ones have lost small fortunes simply by misplacing a password, much like leaving a suitcase full of cash at the train station. Bitcoin, which has nearly tripled in price this year alone, is blamed for fueling drug sales and for helping hackers wreak havoc on businesses and governments. On some days, its price swings 20% up or down, often on a whim or a rumor. (See related story: “How to Invest in Bitcoin.”

It’s easy to dismiss the digital currency as an outlandish, even dangerous, fad. Don’t.

Even if Bitcoin ultimately falls apart or crashes, its underlying technology—known as “blockchain”—is likely to disrupt financial markets for years to come.

A blockchain is a digital ledger that is kept and validated simultaneously by a network of computers, almost like a shared Excel document that no one person can change without the agreement of the others. Importantly, it allows deals to be made without the blessing of a “trusted intermediary,” such as a clearinghouse.

Companies are already using blockchain technology to send payments and redesign how trades are settled. Financial giants like JPMorgan Chase (ticker: JPM) and Bank of America (BAC) could save billions by standardizing their record-keeping for all sorts of financial processes—at a time when they have come under increasing pressure to raise margins and cut costs. And it shows promise in other areas, from insurance to medical record-keeping to energy trading. Even traditionally conservative financial companies are speaking of the technology in world-changing terms.

“Blockchain technology isn’t just a more efficient way to settle securities,” said Fidelity Investments Chairman and CEO Abby Johnson at a blockchain conference in May. “It will fundamentally change market structures—and maybe even the architecture of the internet itself.” Johnson has a unique viewpoint: She’s even “mined” Bitcoin herself.

BITCOIN IS MORE THAN CASH you can trade over the internet. Unlike traditional currencies, the supply of which is controlled by central banks, new Bitcoins are mined about every 10 minutes by a global network of computers that maintain a constantly updated list of Bitcoin transactions. (The network itself is also called Bitcoin.)


Theoretically, anyone can become a Bitcoin miner by hooking their computer into the Bitcoin market, but there’s little chance they’ll win many Bitcoins. The mining business is dominated by Chinese operations that use specialized equipment to quickly complete the complicated mathematical tasks of verifying transactions.

There is no physical token involved—Bitcoin owners get codes, or “keys,” to access their money. The keys that each party enters allow the system to verify the transaction and memorialize it in a block. Only 21 million Bitcoins will ever be created (16.4 million of them have already been mined), so no central authority can devalue the currency.

Bitcoin was not the first idea for a digital, or “crypto,” currency. For at least a decade before it was created, libertarian-minded tech enthusiasts had dreamed of inventing a digital token that would allow them to trade directly with each other and avoid interference from central banks and regulators. Yet early efforts failed to catch on.

In 2008, in the heat of the financial crisis, a programmer or programmers using the name Satoshi Nakamoto shared an idea for a currency called Bitcoin on an online message board. Bitcoin’s key innovation is that it allows people to trade with each other without relying on a trusted intermediary, a strong selling point at a time when a growing number of people distrusted the institutions that were supposed to protect their money.

For some people, finding Bitcoin was a eureka moment. “I felt like I had stumbled across a really big idea that had the potential to be really important, but I also realized it would take years for something like Bitcoin to prove itself worthy of people’s trust,” wrote Gavin Andresen, a very early Bitcoin proponent, in an email to Barron’s. Andresen, a Massachusetts software developer, quickly became one of Bitcoin’s most prominent figures. In 2011, Nakamoto, just before ending public communication, appointed him as Bitcoin’s lead developer.
Bitcoin was beset by controversy and fraud from early on. People who didn’t want to mine Bitcoin by connecting their computers to the Bitcoin network often bought and traded them on exchanges, which were easily corruptible. The largest of them, named Mt. Gox, “lost” 850,000 Bitcoins (some were recovered), worth $450 million at the time and $2.2 billion today, and filed for bankruptcy in 2014.

Criminals quickly realized Bitcoin’s potential, too. A vast Bitcoin-fueled drug-dealing operation called Silk Road briefly thrived, then imploded. Hackers and blackmailers have demanded ransom in it.

All this could have destroyed Bitcoin, particularly if the U.S. government had stepped in to regulate it. But the Bitcoin network itself proved resilient to hacking and other chicanery—and its core users were in it for the long haul. “Most of us expected (and still expect) that Bitcoin would be a long-term project, not a get-rich-quick scheme,” Andresen writes.

IN THE EARLY DAYS, Andresen literally gave away Bitcoins in order to spur interest. Not anymore. One Bitcoin fetched eight cents in 2010. Last week, Bitcoins were trading for $2,550, up 170% since the start of the year. Clearly, investors are speculating on Bitcoin; many view it as an asset that, like gold, has a low correlation to the rest of the economy.

But Bitcoin is also rising because it has gradually gotten more useful and accepted. Stephen Pair, the CEO of Bitcoin payment-processor BitPay, says he was “happy to get five or 10 transactions a day” when he co-founded the company in 2011. “Today, we’re doing around 8,000 per day, on average.” Expedia (EXPE) and Overstock.com (OSTK) accept Bitcoin, and people sometimes use it to buy houses and cars. In general, though, your local grocery clerk or tailor isn’t accepting it, and perhaps never will.

In the U.S., about 0.5% to 0.75% of the adult population—roughly 1.2 million to 1.9 million people—have used Bitcoin, according to Scott Schuh, director of the Consumer Payments Research Center at the Boston Federal Reserve. “We’re not finding that the adoption rate is growing very fast,” he says. Bitcoin has gotten a better reception in some places overseas, where central banks have devalued the local currency. In fact, BitPay pays its employees in Argentina in Bitcoin.

Lately, Bitcoin has been suffering growing pains. Its network is too slow to handle the number of transactions people are attempting to process, forcing users to pay fees if they want their payments to go through. Only five to eight blockchain transactions can be processed per second, while credit-card networks process 10,000 times as many, according to a Goldman Sachs report. Absent a major change to the underlying Bitcoin code, the subject of a fierce debate among adherents, the cryptocurrency will be too illiquid to use for daily purchases, and will mostly be a store of value—a bar of gold instead of a Visa card.


The government, for its part, hasn’t even settled on what Bitcoin is. The Internal Revenue Service considers it an asset; the Commodity Futures Trading Commission says it’s a commodity; and Treasury Department regulators have described it as a “virtual currency.” Fed Chair Janet Yellen has said the agency has no authority to oversee Bitcoin, but has encouraged central bankers to study it. The SEC didn’t respond to Barron’s question about how the new administration will handle cryptocurrencies.

FOR INVESTORS, buying Bitcoin is a major gamble. There are few options beyond purchasing Bitcoins themselves or shares of the Bitcoin Investment Trust (GBTC), an over-the-counter security that tracks the price of Bitcoin (see “How to Invest in Bitcoin”). The SEC rejected an application by Cameron and Tyler Winklevoss, famous for suing Mark Zuckerberg over Facebook, to create a Bitcoin exchange-traded fund—the Winklevoss Bitcoin Trust—though the decision is being reviewed.

Meanwhile, entrepreneurs have come out with other digital coins that mimic Bitcoin’s structure, with some differences. The value of the most popular offshoot, a cryptocurrency called Ethereum, has risen to $300 from about $10 at the start of the year—a 3,000% rise. (Its market value is about $27 billion, versus $42 billion for Bitcoin.) Like Bitcoin, it’s extremely volatile, and even had a “flash crash” last month, when it briefly traded for 10 cents.

Yet Ethereum is much more than a coin. The blockchain network it runs on allows people to embed complicated information, including “smart contracts” that turn contractual terms into computer code and govern how they are executed.

“The sky is the limit in what I can express” with a smart contract, said Grainne McNamara, who runs financial blockchain programs for PwC, at an SEC conference in November. “I can write a check that says, ‘Look, I’d like to fund your Kickstarter, I’d like to give you $5,000, but only if you have raised the $5 million that it’s going to take you to shoot your new indie film. Otherwise, the money reverts back to me.’”

The Ethereum platform is so useful that JPMorgan Chase, Microsoft (MSFT), and dozens of other companies have formed an Enterprise Ethereum Alliance—yes, it sounds like something out of DC Comics—to explore its potential.

THE SUCCESS OF BITCOIN AND ETHEREUM has convinced others to launch their own “initial coin offerings,” some of which have raised tens of millions of dollars on little more than promises. The new coinmakers often say they’ll create a product tied to the coin and give coinholders preferential treatment. But there’s no guarantee a product will ever appear, and it’s starting to resemble a mania—Massachusetts Institute of Technology Professor Christian Catalini warns that we’re headed for a “dot-coin bubble.”

“Given the enthusiasm and the levels and amount of money that have been raised, it’s almost inevitable,” he said in an interview.

BUBBLES? DRUG MARKETPLACES? Malicious hackers? How is it possible that anyone in the traditional banking industry is interested in this stuff?

In the post-Napster, post-Uber world, Wall Street no longer has the option of ignoring technologies whose legality or utility isn’t immediately clear. That doesn’t mean that U.S. banks have started trading Bitcoin. Few, if any, will touch it, in part because they can’t effectively comply with “know your customer” laws.

The financial institution that has seemed most interested in experimenting with Bitcoin is Fidelity, which allows employees to use the currency in its cafeteria and invites guest Bitcoin lecturers to its Bits + Blocks Club. Fidelity Charitable helps clients turn their Bitcoins into tax-advantaged charitable donations.

Fidelity will soon allow people who hold Bitcoin through a company called Coinbase to see their balances in their Fidelity account, although the customers will have to leave the Fidelity site to actually transact in it.

STILL, FEW EXPECT that Bitcoin will find a place in the traditional finance system anytime soon. Instead, entrepreneurs are harnessing the underlying technology to change finance.

By 2014, startups were already designing financial products that used blockchain technology with no direct connection to Bitcoin. Their pitch to bank executives: The new tech could speed up several back-office operations, such as settling trades or making cross-border payments, and make these activities cheaper. And unlike Bitcoin—whose users need no permission to enter the network—blockchains can also be closed to the public, creating a system that users can access only with explicit permission. That makes it secure enough to operate in the tightly regulated world of finance. Also, while Bitcoin transactions can be anonymous, blockchains can be designed to be transparent, so every transaction is easily linked to a person or corporation.

“That was the tipping point,” says Julio Faura, an executive at Banco Santander (SAN) who first became aware of blockchain’s promise in 2014. Faura got his Ph.D. in electrical engineering and designed computer chips before getting his M.B.A. He is now the head of research and development at Santander, leading the bank’s blockchain efforts.

“The rails on top of which the financial system was built—those rails are not broken,” Faura says. “They do work. It’s just that they are old. Our job was to see how this could help build a better financial infrastructure, rather than disrupting the world of finance.”

Santander has been a leader in testing and adopting the new technology. It has partnered with a company called Ripple that allows employees to send cross-border payments, an innovation that cut processing times to hours from days.

Bank of America Merrill Lynch and others are also partnering with Ripple.

While financial trades happen virtually instantaneously, the process to settle them remains slow and cumbersome. It often takes days to actually exchange assets, and financial counterparties tend to use different systems to settle accounts, which can make disputes particularly thorny.

Speeding up transactions and encasing them in a shared blockchain could save financial institutions $15 billion to $35 billion per year, according to Bain & Co. And it could actually make those transactions more secure, because the true record is kept by all participants. “Architecturally, it does not depend on just one, but on a community of people,” says Faura. “There is no single point of failure.”

THE DEPOSITORY TRUST & Clearing Corp., or DTCC, and its precursors have been settling trades since the 1970s, giving brokers a central clearinghouse to exchange securities. The DTCC is now working with IBM (IBM) and two startups named Axoni and R3 to put the $11 trillion credit-default-swap market on a distributed ledger similar to a blockchain. (A distributed ledger is an umbrella term for technologies, including blockchain, where computers certify transactions in a shared record.)

That credit-default-swap ledger should be operational by next year. The DTCC is also redesigning the $3-trillion-a-day U.S. Treasury repo market after completing a successful test with tech firm Digital Asset.

There have also been some experiments in share-trading. Overstock.com announced late last year that it had issued public securities on a blockchain. Nasdaq, too, has created a blockchain to trade shares, although its experiment was in the private market. Under Nasdaq’s system, developed with a company called Chain, private companies transferred shares without having to keep a literal paper trail, as many do today.

The pilot program was successful, says Fredrik Voss, who oversees the blockchain programs at Nasdaq. The exchange is now considering whether to open this option up to more clients. “The tech is there,” he adds in an interview.

Nasdaq’s experiments are not limited to trading shares: The company is also creating an exchange using blockchain that allows advertisers to buy, sell, and trade ad inventory. And it has put together a proxy voting platform in Estonia that lets shareholders vote on the internet, which “successfully demonstrated how a blockchain could be used for something other than transaction settlement.”

Other companies are embarking on similarly ambitious projects.

IBM last week announced that it will work with seven European banks, including Deutsche Bank (DB), to conduct trade-finance transactions—which now can take weeks and reams of paper—on a blockchain.

Elsewhere, blockchains are being tested to store medical records. The technology has even been employed in esoteric smaller-scale projects, like a solar electricity trading platform in one Brooklyn, N.Y., neighborhood.

VOSS IS OPTIMISTIC that blockchains will gain wider adoption, but he says that financial firms need more guidance from regulators. How will different governments treat cross-border payments made over closed networks? What information needs to be embedded in each trade or contract? What’s the right balance between security and privacy? “The world is full of these legal questions right now,” Voss says. “For people to commit billions to this, we need more guidance.”

More market players need to become involved in blockchain-powered exchanges to make them worthwhile. “This is a technology that’s not about building a faster engine for us,” he adds. “It’s about building a new road. If no one else is using it, there’s no use in having it.”

Banks are also reluctant to commit too many staff members or too much hardware to the projects, knowing that the first movers in blockchain—the ones who create the rails—will absorb most of the initial risk and upfront costs.

Indeed, much of Wall Street remains reticent. Bain surveyed executives at financial firms and found that about 80% expected the technology to be transformative and see their firms using it in some form by 2020. Still, they’re sketchy on where exactly they’ll deploy it at a time when older technologies still work.

One executive in a blockchain consortium with other companies told Bain that “half of the people in the group are looking for a solution; the other half are there uniquely to obstruct progress.”

“If there’s a consortium working on some sort of new cool solution, but that will threaten your existing business, people will try to steer it one way or the other or potentially delay it while they work on their own solution,” Thomas Olsen, a Bain blockchain expert, said in an interview. “There’s some of that going on right now.”

EXECUTIVES KNOW they need to understand blockchain, but not everyone is clear yet on how exactly it will help their business. Payment-processing company WEX surveyed 500 chief financial officers, and nearly two-thirds said they had a strong understanding of the technology. But only six explained how they were actually putting it into practice.

Nonetheless, Olsen expects blockchain to gain wider acceptance soon, spreading in a “piecemeal” fashion, rather than a “big bang” like how Uber changed taxi service.

What’s true of Bitcoin—and really all money—is true of blockchain too: It has value only inasmuch as everyone believes it has value. Then, perhaps, the sky’s the limit.

(Challenges) Comment Michel Combes tient ferme le cap de l'empire de Drahi

Comment Michel Combes tient ferme le cap de l'empire de Drahi

Rachats des droits de foot, cotation aux Etats-Unis, nom de SFR effacé au profit de celui de la maison mère: l’empire de Patrick Drahi avance à marche forcée. Et a réponse à tout.

En tant que patron de SFR Group, Michel Combes prenait, aux Matins HEC-Challenges, la parole pour la dernière fois. La dernière? Non, il ne lâche pas les rênes… Mais le 23 mai, toutes les marques télécoms du groupe Altice ont adopté le nom de la maison mère. Cette uniformisation "coup de fouet" s'est faite hâtivement, alors que France Télécom avait mis dix ans à passer à Orange. "Dans notre univers, la puissance des marques est importante, rappelle-t-il. Trois agences ont travaillé en concurrence pour ce changement de nom. Nous avions dix agences créatives et huit d'achats d'espaces dans le monde: la conséquence sera de passer à une seule. Cette transformation que nous autofinançons devrait prendre trois ans", raconte Michel Combes, sans en préciser le coût.

Tout au long de cette heure où il est aimablement mis sur le gril, l'habile directeur général d'Altice a réponse à tout. Les 350 millions d'euros déboursés pour arracher les droits de diffusion télévisés des matchs de football des Ligues des champions et Europa? Un montant qui, à ses yeux, n'est pas disproportionné, même si cela représente le double de ce que payait Canal+ jusqu'à présent: "C'est le plus bel actif européen qu'on ait." Pas convaincu? " Ecoutez, faites le calcul. Le foot devrait nous rapporter 1.000 euros de revenus annuels pour chacun de ces clients à haute contribution. Il suffit donc d'en acquérir entre 300.000 et 400.000 pour rentrer dans nos frais."

Attachement à la France
Sur une autre actualité forte, Michel Combes développe une réponse bien calibrée: Altice USA vient en effet d'entrer en Bourse le 22 juin dernier. "Nous souhaitons toucher des liquidités et nous doter d'une monnaie pour une consolidation future", répète le dirigeant. Mais cette opération n'aurait-elle pas aussi pour but de résorber une partie de la dette de 49 milliards d'euros accumulée par le groupe lors d'acquisitions successives? En aucune façon, promet-il: "Aux Etats-Unis, nous sommes à un niveau de dette de cinq à six fois l'Ebitda du groupe - la moyenne des groupes télécoms outre-Atlantique -, et nous avons refinancé 2,3 milliards d'euros au cours des derniers mois."

Puis vient l'argument massue: "Nous veillons à ce que la dette soit toujours remboursable en dix ans si d'aventure nous arrêtions là les investissements." C'est en Amérique du Nord que tout va se jouer dans les prochains mois: 40% des marges d'Altice proviennent de ce continent. Avec de tels résultats, le groupe ne projetterait-il pas d'abandonner la France? Michel Combes riposte en affirmant son " attachement total " au pays. Il est d'ailleurs optimiste sur la situation actuelle: "Je n'ai pas l'habitude de faire de la politique. Mais voir l'image de notre nouveau président Emmanuel Macron dans la presse internationale, cela développe un sentiment de fierté. Nous incarnons une nouvelle dynamique à l'étranger." Sur l'Europe, c'est une autre paire de manches. Les opérateurs de télécoms nationaux sont " dans une position de faiblesse". Et Michel Combes de hausser la voix pour lancer un appel solennel en faveur des consolidations: "Il est urgent de faire émerger de grands groupes digitaux!" Pas sûr qu'il soit entendu par Bruxelles…

Management décapant
Altice, de toute façon, n'a pas le temps d'attendre. Le PDG de SFR Group retrace la construction d'"un groupe industriel cohérent", comme si tout était écrit d'avance. "Altice, c'est un projet industriel lancé il y a quinze ans par Patrick Drahi avec, déjà, l'intention de bâtir une convergence avec les médias, dit celui qui en fut un des premiers administrateurs. Nous nous sommes récemment placés dans la publicité. Avec les datas de nos utilisateurs, nous avons une richesse inouïe. " Dans le divertissement, il va lancer les séries télé Altice Studios dès la fin de l'été. "A terme, les opérateurs seront en mesure de financer la création. Pour le permettre, il faut revoir la chronologie des médias en France", plaide-t-il. Tant pis si, depuis sa reprise par Altice, SFR a perdu des milliers de clients! "Nous avons construit une plateforme industrielle et nous sommes repartis en croissance", ajoute-t-il, rassurant.

Ce rebond repose sur sa «recette managériale» décapante. Altice a la réputation d’être une boîte «dure» pour ses salariés, surtout à l’heure d’un plan de départs de 5.000 personnes chez SFR. Michel Combes botte en touche. « Oui, mon mode de management est très exigeant. Mais quel que soit l’environnement, il est possible de transformer les organisations.» Il se fixe des objectifs à six mois, sortes d’exercices annuels raccourcis, comme lui a appris Thierry Breton quand ils travaillaient ensemble à France Telecom il y plus de dix ans. «J’ai la volonté d’accélérer le temps». L’heure est effectivement passée en à peine trente minutes…

>>> US Close Dow +0.29% S&P +0.15% Nasdaq -0.06% Russell -0.06%

Closing Market Summary: Down Week Ends on Shaky Note

The stock market was on track to end Friday on its session high, but quarter-end selling during the final minutes of the action knocked the key indices off their afternoon highs. The S&P 500 added 0.2%, trimming this week's loss to 0.6%, while the Nasdaq Composite (-0.1%) underperformed, widening its weekly decline to 2.0%. Shielded from this week's underperformance in technology, the Dow Jones Industrial Average (+0.3%) shed just 0.2% for the week.

Equity indices began the day with modest gains that were a by-product of relative strength in groups like consumer discretionary (+0.6%), industrials (+0.8%), and energy (+0.4%) while top-weighted sectors like financials (-0.1%), technology (-0.1%), and health care (-0.1%) could not stay away from their flat lines. The three influential groups reluctantly followed the market higher in the afternoon, but a wave of selling in the final minutes of the session knocked the market to lows.

The discretionary sector received an early boost from NIKE (NKE 59.00, +5.83) after the apparel heavyweight beat fourth quarter expectations. The company issued cautious revenue guidance for the first quarter, but its top-line outlook for the full year was in line with expectations. In addition to reporting results, NIKE announced a pilot program to begin selling its products on Amazon (AMZN 968.00, -7.93). Shares of NIKE soared 11.0%, helping the Dow Jones Industrial Average spend the day ahead of its peers. Apparel retailers had a good showing overall and the SPDR S&P Retail ETF (XRT 40.74, +0.26) rose 0.6%.

Like the discretionary sector, industrials outperformed throughout the day. Transport stocks fueled the rally as the Dow Jones Transportation Average climbed 0.9%, extending its June gain to 4.4%.

The energy sector (+0.4%) was not far behind, catching a bid amid a 2.6% spike in crude oil, which jumped to $46.03/bbl and snapped its five-week skid. WTI crude gained 7.0% for the week while the energy sector advanced 0.7%, finishing only behind financials (week-to-date +3.3%).

The lightly-weighted materials sector (+0.5%) also finished ahead of the broader market while the remaining groups settled closer to their flat lines. Technology saw an intraday gain, which vanished during the late-afternoon slide. Micron (MU 29.86, -1.61) reported better than expected quarterly results, but the stock slid 5.1% nonetheless. The broader PHLX Semiconductor Index fell 0.5%, losing 4.9% for the week.

Treasuries held modest losses in morning action before retreating into the close. The benchmark 10-yr yield rose three basis points to 2.30%.

Economic data included Personal Income/Spending, Chicago PMI, and Michigan Sentiment:

  • Personal income increased 0.4% in May (consensus +0.3%) after a downwardly revised 0.3% increase (from 0.4%) for April. Personal spending was up 0.1%, as expected, following an unrevised 0.4% increase in April. The core PCE Price Index, which excludes food and energy, increased 0.1%, as expected.
    • The key takeaway is that inflation moved away from the Fed's longer-run inflation target of 2.0%, not toward it as the Fed is anticipating. That will help solidify the market's belief that the Fed doesn't have enough data-based scope to raise the fed funds rate until perhaps its December meeting at the earliest.
  • The Chicago Business Barometer, otherwise known as the Chicago Purchasing Managers Index, jumped to 65.7 in June (consensus 57.8) from 59.4 in May.
    • The key takeaway from the report is that the New Orders Index served as the springboard for the June jump, rising from 61.4 to 71.9 and signaling solid manufacturing demand in the Chicago Fed region.
  • The University of Michigan's Index of Consumer Sentiment was revised from the preliminary reading of 94.5 for June to 95.1 with the final reading. The latter was above the consensus estimate of 94.7, but below the final May reading of 97.1.
    • The key takeaway from the report is that consumer confidence has dipped to its lowest level since the election, yet it still remains at favorable levels as the average level of 96.8 for the first half of the year was the best half-year average since the second half of 2000.

Monday's economic data will feature the 10:00 ET release of May Construction Spending and June ISM Index while June auto and truck sales will be reported throughout the abbreviated session, which will end at 13:00 ET.

  • Nasdaq Composite +14.1% YTD
  • S&P 500 +8.2% YTD
  • Dow Jones Industrial Average +8.0% YTD
  • Russell 2000 +4.3% YTD