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(ZH) "This Is Watergate": Trump Accuses Obama Of Wiretapping The Trump Tower

"This Is Watergate": Trump Accuses Obama Of Wiretapping The Trump Tower

President Trump on Saturday morning alleged that his predecessor Barack Obama had “wired tapped” the Trump Tower before Election Day, tweeting the accusation without however providing evidence so far.

“Terrible! Just found out that Obama had my ‘wires tapped’ in Trump Tower just before the victory. Nothing found. This is McCarthyism!” he wrote.

“Is it legal for a sitting President to be "wire tapping" a race for president prior to an election? Turned down by court earlier. A NEW LOW!” he added in subsequent tweets. “I'd bet a good lawyer could make a great case out of the fact that President Obama was tapping my phones in October, just prior to Election!”

Trump compared Obama's alleged activity to Nixon's bugging of the Watergate hotel. "How low has President Obama gone to tapp my phones during the very sacred election process. This is Nixon/Watergate. Bad (or sick) guy!"

It was not immediately clear what evidence or report Trump was referencing. On Friday night, Breitbart News reported on conservative radio host Mark Levin’s claim that Obama executed a “silent coup” of Trump via “police state” tactics.

Since Trump has a tendency to tweet about things he has just seen on TV or read in the press, and since there has been no definitive report on that topic, Trump may be referencing an internal report. And since the allegations in his tweets are material, and will surely provoke a response by Barack Obama (at least his twitter account), this may escalate significantly.

Also on Saturday, prior to the wiretapping tweet, Trump had also linked Obama to Attorney General Jeff Sessions’s meetings last year with Russia’s U.S. ambassador.

“The first meeting Jeff Sessions had with the Russian Amb was set up by the Obama Administration under education program for 100 Ambs,” he tweeted.

Trump on Saturday also blasted Obama for meeting with Kislyak 22 times while president, as the Daily Caller reported first on Friday, tweeting: “Just out: The same Russian Ambassador that met Jeff Sessions visited the Obama White House 22 times, and 4 times last year alone.”

The Trump administration has sought to push back on accusations of being cozy with Moscow, by pointing out instances of Democrats meeting with Kislyak. Critics have responded that the issue isn’t that Sessions met with the ambassador, but that he falsely told Congress he hadn’t while under oath. So far, according to some media outlets, Trump has failed to "fend off" the Russia questions, which continue to reemerge virtually every night in some new front page story on the WaPo, NYT, in a recurring pattern as described in the following blog post.

(BFW) Aberdeen Asset, Standard Life Said to Mull GBP11b Merger: Sky

>>> Weekly update

Weekly Market Update: Fed Speak Moves Hike Expectations to March; Dow Tips 21,000

The stock markets started the week on hold as investors slowed down the pace and strength of the recent bull run. Markets were muted at the beginning of the week, awaiting President Trump's speech to Congress on Tuesday evening. Investors were looking for some concrete details on economic policy including tax reform, which the speech failed to deliver. Trump did, however, strike what many considered a much more presidential tone while promising a $1 trillion infrastructure spending spree. Global stock markets received the comments extremely well sending the Dow up above the 21,000 mark for the first time. For the week, the DJIA gained 0.9%, the S&P500 rose 0.7%, and the Nasdaq added 0.4%.

Reflation trade flows picked up again helped by NY Fed president Dudley's comments on Tuesday clearly hinting at a likely rate at the March FOMC meeting. That foreshadowed what would be the narrative by a chorus of fed speakers through the week’s end, culminating Friday with Chair Yellen . The probability of a rate hike, determined by Fed Fund futures prices, jumped Monday from 35% to 50%, on the back of continued strong economic data. By Wednesday that probability had jumped to above 80% after a spate of hawkish commentary from Fed officials supporting the notion of a ‘live’ FOMC meeting on March 14-15.

The 10-Year Treasury Yield started the week at 2.35% and continued to rise, closing Friday at 2.51%. A stronger sell off in the shorter end of the curve caused the yield curve to flatten with the 10-year/30-year spread decreasing from 62bps to 59bps, and the 5-year/30-year curve decreasing 6bps to 106bps. The US dollar continued to rally as a March rate hike was priced in with the British Pound losing 1% over the week, the dollar index up 1.1%. By Friday gold prices dropped back towards the 90 day moving average for the first time in nearly a month.

The UK Brexit bill experienced a minor setback this week as the upper house endorsed an amendment to safeguard the rights of EU citizens in the country. PM May has stated her invocation of Article 50 remains on track for this month and she has asked the House of Commons to throw out the amendment when they debate the bill again March 13 and 14. In France the far-right anti EU candidate, Marine Le Pen, has begun to fall behind in the polls to the independent candidate Macron, who enjoys a more than 20 point lead in polling for the May run-off election. However, EGBs were subdued and core bonds continued to fall in price as inflation data for Germany was higher than expected.

As earnings season winds down, some key retailers reported this week and continued to paint a worrying picture for the sector. Best Buy’s Q4 earnings came in above estimates, but revenue lagged, driven by weakness in gaming, tablets, wearables and phone sales. Target shares plunged after missing profit estimates amid unexpected softness in stores, and the retailer guided a decline in SSS for next year, warning its investment into lower gross margins may present headwinds to short-term performance. Costco underperformed on the top and bottom line, and announced it would increase membership fees for the first time in six years. On the positive side, Lowe's shares surged on continued strong results and outlook. Snap Inc’s long-awaited Wall Street IPO finally debuted, and despite cautious comments from analysts, shares of the social media/tech firm were up 61% by the end of the week.

SUN 2/26

GSK.UK Has conducted the world's first drug trial under "real world" conditions, as the company looks to to prove the value of its medicines in a cost conscious health system - FT

MON 2/27

*(EU) EURO ZONE JAN M3 MONEY SUPPLY Y/Y: 4.9% V 4.8%E

*(EU) EURO ZONE FEB BUSINESS CLIMATE INDICATOR: 0.82 V 0.79E; CONSUMER CONFIDENCE (FINAL): -6.2 V -6.2E

*(US) JAN PRELIMINARY DURABLE GOODS ORDERS: 1.8% V 1.7%E; DURABLES EX-TRANSPORTATION: -0.2% V +0.5%E

TUE 2/28

(FR) FRANCE FEB PRELIMINARY CPI M/M: 0.1% V 0.4%E; Y/Y: 1.2% V 1.5%E

(FR) FRANCE Q4 PRELIMINARY GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.2% V 1.1%E

TGT Reports Q4 $1.45 v $1.50e, R$20.7B v $20.7Be; Will invest in lower gross margins

JPM Guides FY17 core loan growth +10% y/y - ahead of analyst day

- Guides Q1 trading rev up modestly y/y; Q1 invest banking largely flat q/q; FY17 NII $11B v $10B y/y

VRX Reports Q4 $1.26 v $1.24e, R$2.40B v $2.35Be

(IN) India Q4 GDP Y/Y: 7.0% v 6.1%e; GVA Y/Y: 6.6% v 6.0%e

*(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 1.9% V 2.1%E; PERSONAL CONSUMPTION: 3.0% V 2.6%E

(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.2% V 1.3%E

(US) Feb Chicago Purchasing Manager: 57.4 v 53.5e (highest since Dec 2014)

(US) FEB RICHMOND FED MANUFACTURING INDEX: 17 V 10E

(US) FEB CONSUMER CONFIDENCE: 114.8 V 111.0E (highest since 2001)

(US) Fed's Williams (moderate, non-voter): sees March hike getting serious consideration - comments in Santa Cruz

CRM Reports Q4 $0.28 v $0.25e, R$2.29B v $2.27Be

(AU) AUSTRALIA Q4 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 2.4% V 2.0%E

(CN) CHINA FEB MANUFACTURING PMI (govt official): 51.6 V 51.2E

(CN) CHINA FEB CAIXIN MANUFACTURING PMI: 51.7 V 50.8E (8th consecutive expansion)

(HK) Macau Feb Gaming Rev MOP22.99B v MOP21.5Be; y/y: 17.8% v +10%e

WEDS 3/1

(DE) GERMANY FEB FINAL MANUFACTURING PMI: 56.8 V 57.0E

*(UK) FEB MANUFACTURING PMI: 54.6 V 55.8E (7th month of expansion)

BBY Reports Q4 $1.95 v $1.66e, R$13.5B v $13.6Be; raises dividend 21% to $0.34 from $0.28 (indicated yield 3.22%)

(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.6% V 0.6%E; Y/Y: 2.2% V 2.1%E

(US) JAN PCE CORE M/M: 0.3% V 0.3%E; Y/Y: 1.7% V 1.7%E

(US) JAN PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.2% V 0.3%E

(US) JAN PCE DEFLATOR M/M: 0.4% V 0.5%E; Y/Y: 1.9% V 2.0%E

*(US) FEB ISM MANUFACTURING: 57.7 V 56.2E; PRICES PAID: 68.0 V 68.0E (Manufacturing Activity highest since Aug 2014)

(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED

(US) Atlanta Fed cuts Q1 GDP forecast to 1.8% from 2.5% on 2/27

AVGO Reports Q1 $3.63 v $3.48e, R$4.14B v $4.06Be

(KR) White House reportedly considering options against North Korea, including possible use of force, as part of strategy review - press

(AU) AUSTRALIA JAN TRADE BALANCE (A$): +1.3B V +3.8BE; 3rd straight surplus

THURS 3/2

DTE.DE Reports Q4 adj Net €973M v €959M y/y, adj EBITA €5.3B v €5.1B y/y, Rev €19.5B v €19.0Be; Takes €2.2B writedown ; proposes 9% dividend increase to €0.60/shr

ABI.BE Reports Q4 $0.43 v $0.98e, EBITDA $5.25B v $5.64Be, Rev $14.2B v $13.8Be

*(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 2.0% V 2.0%E (highest level since Feb 2013); CPI CORE Y/Y: 0.9% V 0.9%E

*(EU) EURO ZONE JAN UNEMPLOYMENT RATE: 9.6% V 9.6%E (matches its lowest level since May 2009)

(US) INITIAL JOBLESS CLAIMS: 223K V 245KE (lowest since Mar 1973); CONTINUING CLAIMS: 2.07M V 2.06ME

(US) Fed's Powell (moderate, voter): Rate hike in March is on table for discussion; we're certainly getting very close to 2% inflation goal - CNBC interview

SNAP IPO opens for trade at $24.00

(US) Attorney General Sessions: To recuse himself from any investigations related to the Trump campaign

COST Reports Q2 $1.17 v $1.35e, R$29.1B v $30.0Be; To increase membership fees by $5-10/year (+8.3-9.1%)

(HK) HONG KONG FEB COMPOSITE PMI:49.6 V 49.9 PRIOR; 2nd month of contraction

FRI 3/3

(US) FEB FINAL MARKIT SERVICES PMI: 53.8 V 54.0E

GM Peugeot board reportedly met today and approved Opel acquisition; to announce the deal on Monday – press

(US) Fed Chair Yellen: Raising interest rates at March meeting would probably be appropriate if economy evolves as expected - comments in Chicago

DBK.DE Confirms undertaking preparatory work for a potential €8B capital increase and further strategic measures including reintegration of Postbank

(US) US Trump administration to announce it will reopen 2022-2025 vehicle emissions standards for review next week - press

Barron's : Snap’s Stock Price Could Be Cut in Half

Snap’s Stock Price Could Be Cut in Half

The parent of Snapchat surged 50% from an already full IPO valuation. Investors will need to be very patient.

Snap investors better be more patient than Snapchat users. The company’s shares look ridiculously valued after surging 59% to $27 from an initial public offering price of $17 on Wednesday, giving the company a market value of $37.8 billion. That’s a stunning 93 times its 2016 revenue of $405 million. The parent of Snapchat, a popular instant-messaging service, isn’t expected to be profitable until 2019 or 2020.

Even assuming strong growth, it’s hard to justify more than half the current stock price. Snapchat looks more like Twitter (ticker: TWTR), which fizzled, than Facebook (FB), which sizzled. Bears argue Snap (SNAP) will be constrained by a large but limited user base, which skews toward those 24 years or younger in North America and Western Europe.

Snap is now worth more than CBS (CBS), which is valued at $28 billion. Snap lost $515 million last year and its red ink deepened quarter by quarter in 2016.

A flurry of cautious analyst notes did appear in the wake of the Snap IPO, but they did little to damp investor enthusiasm for what bulls view as the next Facebook.

Nomura/Instinet analyst Anthony DiClemente began coverage of Snap with a Reduce rating and a $16 target. He cited four negatives: slowing user growth, slowing growth in monetization of users, fierce competition from Facebook, and a “rich valuation relative to current and future growth.”

The bull case for Snap is that it offers a unique advertising platform targeting a young demographic that’s difficult to reach through television and other traditional media and that brand advertisers will pay to get.

However, huge advertising growth is already reflected in Snap’s stock price. The company is valued at some 34 times projected 2017 revenue of $1 billion based on its enterprise value (market value less net cash). Facebook fetches 10 times sales.

Bulls are betting that Snap’s revenue can top $2 billion in 2018, but DiClemente is skeptical. “Snap has a niche audience. It doesn’t have the targeting tools of Facebook. It can’t customize advertising as well as Facebook,” he says.

PROBABLY THE MOST important financial measure to watch in coming quarters is revenue, followed by active daily users, which totaled 158 million in the fourth quarter. If Snap can’t hit $1 billion in 2017 revenue and $2 billion-plus in 2018, the stock could get crunched. Continued slow user growth also is a risk.

“Without meaningful reacceleration in user growth, which stood at just 3.3% in the fourth quarter (relative to the third quarter), we do not believe Snap will be able to reach an audience large enough to justify an aggressive valuation,” DiClemente wrote.

Other issues for Snap include the challenge of reaching out beyond top-100 brand advertisers to the small and midsize businesses that use Facebook and Alphabet ’s (GOOGL) Google. Then there is the potentially faddish nature of the Snapchat service and the difficulty in developing a large audience over 25. Snap users are believed to skew female, another possible limiting factor.

“Snap has a promising and innovative advertising offering, but so far it is still mostly unproven and difficult to quantify its ultimate scale,” wrote Brian Wieser of Pivotal Research Group, which began coverage of Snap with a Sell rating and a $10 price target. “Investors will also be exposed to what appears to be a suboptimal corporate structure operated by a senior management team lacking experience transforming a successful new product into a successful company.” IPO investors received nonvoting stock, giving them no say in the company controlled by Chief Executive Evan Spiegel and Chief Technology Officer Robert Murphy.

The IPO was skillfully handled by underwriters led by Morgan Stanley, which appeared to put shares in the hands of long-term holders and minimized the number of flippers who got IPO allocations, then quickly sold the shares. Flippers usually are big institutional investors who, by virtue of their relationship with Wall Street underwriters, are rewarded with allocations of hot IPOs they have no intention of keeping.

Cable giant Comcast (CMCSA) invested $500 million in the $3.9 billion deal (this assumes the full 230 million shares were offered). Buyers of a quarter of the IPO are expected to agree to a one-year lockup.

Bulls point to a huge opportunity, since Snap’s North America recent quarterly revenues of about $2 per user are just 10% that of Facebook. But Snap’s current valuation assumes it can substantially close that gap. Snap had 69 million daily active North American users at the end of the fourth quarter.

IF SNAP GETS TO 100 MILLION users and hits $20 per quarter of revenues per user ($80 per year), it would generate $8 billion in North American revenue. Assume a 40% operating margin and 35% tax rate, and Snap would generate $1.50 a share of net income based on the current share count of 1.4 billion. There would also presumably be non-U.S. income. Such a scenario, if possible, is a long way off.

Snap could continue to rally as institutions seek to build holdings, but recall that Twitter went public at $26 in 2013, and soon hit $74, before crashing to a current $16. Stay away from Snap. It’s priced for perfection.

Barron's : AstraZeneca Struggles to Justify Rejection of Pfizer

AstraZeneca Struggles to Justify Rejection of Pfizer

Hit by patent expirations and sagging shares, the pharma company has been seeking partnerships, cutting costs, and building a pipeline.

This could be the year that British drugmaker AstraZeneca finally starts delivering on the promise made to shareholders in 2014, when it claimed it would fare better alone than by accepting a $120 billion takeover bid from U.S. rival Pfizer.

Investors who stuck with the company haven’t had an easy ride. Pfizer ’s (ticker: PFE) final bid valued AstraZeneca (AZN) shares at about 55 pounds ($67.74) each. Today they trade around £47.

The pressures that AstraZeneca faces are common to most big pharmaceutical companies, battling to replace money-spinning blockbuster drugs as patents expire and cheaper generic alternatives sap revenue.

When AstraZeneca released earnings last month, it said this year could be a turning point, as the company gets beyond a series of major patent expirations and brings some important new drugs to the market. It sets particular store by its immuno-oncology treatments and others aimed at fighting respiratory and metabolic diseases.

“It is an exciting time as we rapidly approach the inflection point for our anticipated return to long-term growth, built on the solid foundations of a science-led pipeline,” AstraZeneca said in 2014.

KESTRA PRIVATE WEALTH SERVICES CEO Rob Bartenstein is an AstraZeneca fan, but he admits it’s a relatively risky bet. “I’ve gotten over 10% appreciation since early December, but this is not a position I would ever turn my back on,” he says.

He says the company is motivated to reward shareholders and has a healthy pipeline of treatments in clinical development. But he warns that the regulatory process is slow and full of pitfalls for even the most promising of new drugs.

“Even when you get to the final stage of trials, you can still have an implosion. We’ve seen that in related businesses, and we’ve seen it in this business,” Bartenstein says.

On the positive side, investors awaiting AstraZeneca’s turnaround are being paid to hold tight. With a dividend yield of about 4.7%, the stock is returning considerably more than U.S. 10-year Treasuries. “If you’re going to pay me that much to ride it out, I’m inclined to be patient,” Bartenstein says.

He reckons that investors have reason to be optimistic. AstraZeneca is well exposed to emerging markets, where revenue growth is running at about 6%. In China, it’s around 10%, while Japan is also a promising market, he says.

“There’s great expansion in market share in Japan, which is one of the largest health-care markets in the world and the third-largest per capita spender on pharma, so there’s some great news to be had there,” Bartenstein says.

The patent on AstraZeneca’s top-selling Crestor cholesterol treatment expired last July, allowing cheaper competitors to chip away at its roughly $5 billion worth of annual sales. In 2016, as generic alternatives sprang up in the U.S., Crestor’s sales plunged 32%, to $3.4 billion. That impact was most pronounced in the fourth quarter, when sales more than halved to $631 million from a year earlier.

AstraZeneca has a pipeline of 132 projects making their way along the slow and uncertain regulatory trail. The company has sought to monetize the potential from some of those by forging so-called externalization deals, in which it partners with other companies that make upfront payments for the right to market the drug.

Externalization revenue helped cushion some of the impact from sliding Crestor sales, rising 58%, to $1.68 billion, over the full-year 2016. Still, not all investors are keen on such deals.

“For a company that is dealing with the patent cliffs of Crestor and others, you can say that’s a reasonable strategy because you need a stop-gap measure from a revenue standpoint,” says Bartenstein. But with 80% of that revenue nonrecurring, he adds, “You’ve got to wonder if you’re not robbing Peter to pay Paul.”

MORE IMPORTANT, ASTRAZENECA has made considerable progress in containing costs. In the fourth quarter, the amount it spent on everything from research and development to selling, general, and administrative expenses fell sharply from a year earlier. As a result, despite a 15% decline in product sales to $5.26 million over the period, net profit jumped to $1.84 billion from $808 million.

With annual sales down 7% last year at $23 billion, the $45 billion that AstraZeneca insisted it could hit by 2023 when it rejected Pfizer remains a daunting goal.

Bryan, Garnier analyst Eric Le Berrigaud has AstraZeneca at Buy with fair value of 5,400 pence, giving it 14% upside based on Friday’s closing share of 4,779 pence.

Says Berrigaud: “If one franchise can make AstraZeneca a different company, one that can be profoundly transformed in the coming years, and one able to see unparalleled earnings growth in the large-cap pharma space, it’s oncology.”

Barron's : Telecom’s Next New Thing: Connecting Things, Not People

Telecom’s Next New Thing: Connecting Things, Not People

Consumers expecting big advances to smartphones from 5G may be disappointed. But companies like Ericsson, Nokia, Ciena, and Juniper Networks will likely prosper.

In the elegant seaside city of Barcelona last week, the telecom industry outlined a plan for a world of wireless that will have less and less to do with humans and more to do with machines.

The setting was the Mobile World Congress, the biggest annual trade show for mobile phones and the phone networks they run on. The cause of the excitement was the sudden maturation of plans for a standard called 5G. It’s the next bump up in speed for wireless, promising handset and tablet connections will someday be faster than most home Internet connections. Verizon Communications (ticker: VZ) said it will be testing the new technology in 11 cities in the U.S. this year, early proof the stuff is almost ready for prime time. Full-scale deployment by many phone companies is expected in the next two years.

That should be a boon for companies that sell the radio equipment that powers 5G, such as Ericsson (ERIC) and Nokia (NOK) and for a whole host of networking companies, including Ciena (CIEN) and Juniper Networks (JNPR), whose gear is needed to boost the transmission of data inside the network.

It could be a less-momentous development for the human race. While phones will get faster, the real emphasis of 5G is to connect all sorts of things that aren’t human: self-driving cars, industrial equipment on factory floors, oil rigs, parking meters, even freight tankers with no human crew.

All this was explained by Ericsson’s chief strategy and technology officer, Ulf Ewaldsson, a witty, dapper-looking fellow relaxing in a conference room after days of meetings at the show.

He recalls that 5G got its start in 2013 at a dinner at a marina somewhere that he attended with a group of other big thinkers in telecom. And the inspiring first idea for 5G was that it should “create a performance that is amazing for connecting things, not just people.”

Unlike humans talking on their phones, machines have a very prickly requirement for latency—the time it takes for bits and bytes in a data stream to go from one machine to another. Machines, like connected cars, will require very low latency as they do things like navigate the highways, assisted by constant navigational input from computers far away.

More important, says Ewaldsson, was that the dinner was the first time the industry decided to focus their efforts on machines, not humans. Indeed, this new network, arriving in the next couple of years, will be built for machines first, with smartphone-toting humans coming along for the ride.

Ewaldsson likens it to Albert Einstein’s theory of relativity. First came “special relativity,” and only later was it broadened to what Einstein called “general relativity.” Ewaldsson means that humans were telecom’s special case for years, but now it’s looking to a broader future in which humans are just one of the many things that happen in the world.

The immediate implication is that if Ericsson, Nokia, and others help AT&T (T) and Verizon get it right, the volume of business for the telcos will increase dramatically as everything becomes connected.

Some people at the show were less optimistic, pondering, for example, completely unmanned tankers crossing the seas guided by wireless communications, with only an occasional visit by helicopter from a human crew. What would be the consequence if such a ghost ship was hacked into via its wireless connection and sent on a rogue mission to a foreign port?

Not all of the grand plans will come together, says Ewaldsson. “Sure, there’s a lot of stuff that will be built that will just be a mess. But that’s okay,” he says with a smile, “because it all requires connectivity, and we will sell connectivity to anyone who drinks it.”

Time for the machines to belly up to the bar.

Barron's : Two Chinese Tech Stocks With 25% Upside

Two Chinese Tech Stocks With 25% Upside

Shenzhen Huiding Technology and Egis Technology are providing Asian smartphone makers with fingerprint sensors to rival Apple’s.

Ever since Apple introduced fingerprint sensors on the iPhone 5S in 2013, rival smartphone makers have been playing catchup. They’re getting closer. In 2017, over half the smartphones shipped by vendors other than Apple will have the sensors. Two Asian stocks are the beneficiaries.

Shenzhen Huiding Technology (ticker: 603160.China), known as Goodix, has seen its stock soar 230% since going public in Shanghai last October, while shares of Taiwan’s Egis Technology (6462.Taiwan) advanced 70% in the past year. Both have at least 25% upside.

Goodix started designing algorithms for its fingerprint sensors in 2014, and has rapidly taken share from market leader Fingerprint Cards (FINGB.Sweden). In 2015, Fingerprint had 83% of Chinese original equipment manufacturers’ business. This year, Goodix is expected to take the top spot, with a 60% share, reckons Morgan Stanley ’s Charlie Chan.

Goodix has done two things right. First, it is the second-largest vendor of touch control chips—which are also used in smartphones—in China, and has been able to take advantage of existing relationships with smartphone makers. Fingerprint has had to rely on its module vendor, Shenzen O-film Tech (002456.China), to establish and maintain relationships with Chinese customers.

Second, Goodix has kept costs low. Whereas Fingerprint contracts with larger and more expensive foundries, such as Taiwan Semiconductor Manufacturing (2330.Taiwan) and Semiconductor Manufacturing International (SMI), Goodix has used a small Korean foundry. As a result, Goodix’s chips cost only US$ 2 to $3.20 each, about 20% to 30% below Fingerprint’s prices.

IN JUST TWO YEARS, Goodix’s fingerprint-sensor business has blossomed, accounting for about two-thirds of total sales. In 2016, revenue jumped 175% to $453 million. Morgan Stanley’s Chan thinks Goodix can increase its earnings per share by 48% to 3.28 yuan ($0.48) this year.

Not surprisingly, valuation is an issue. Goodix trades at 28 times forward earnings. Based on a cash-flow analysis, Chan reckons the stock is worth 115 yuan, about 24% higher. Chan warns that growth at Goodix could slow in 2018 as the market matures. Right now, it’s looking abroad for growth, and already has a deal to supply LG Electronics (066570.Korea), Goodix CEO David Zhang told Barron’s.

A cheaper, less-liquid option is Taiwan’s Egis, the market’s low-cost vendor. Its fingerprint-sensor algorithm allows smartphones to detect identities with fewer data points, so manufacturers can use smaller sensor chips and cut costs. Egis’ average price is only US $1.40 to $1.80, even lower than Goodix’s.

Egis started shipping fingerprint chips to Samsung Electronics (005930.Korea) last May and is expected to supply up to half of Samsung’s total orders this year. Having lost money for a decade, Egis broke even in the September quarter. Its next step is China. The Taiwanese company has won projects at Lenovo (0992.Hong Kong). Morgan Stanley estimates Egis can generate 20.83 New Taiwan dollars ($0.68) in earnings per share this year, thanks to Samsung. If it can gain a 10% share in China, Egis may earn NT$37.61 next year. The stock was trading at NT$262 last week; Morgan Stanley’s target is NT$360.

And Apple (AAPL)? It’s moving on to iris identification.

(BFW) Italy May Present New Takeover Rules Wednesday: Il Sole

>>> Fed Chair Yellen: Raising interest rates at March meeting would probably be

Fed Chair Yellen: Raising interest rates at March meeting would probably be appropriate if economy evolves as expected - comments in Chicago

- "At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

- Risks to growth have receded; developments since mid-2016 support view that Fed is on track to reach goals

- FOMC sees risks to the outlook as roughly balanced

- No evidence the Fed has fallen behind the curve

- Gradual accommodation removal likely still appropriate

- Reiterates monetary policy cannot be and is not on a preset course.

- With labor market conditions now in the vicinity of our maximum employment objective, the Committee considers it appropriate to move toward a neutral policy stance.

Link: https://www.federalreserve.gov/newsevents/speech/yellen20170303a.htm

Fed Chair Yellen: Fed members have decided to be patient and wait to see what happens with Trump administration policy plans - Q&A

- Central bankers do understand there are linkages between countries

- There's not all that much the Fed can do to affect labor force growth

Reuters : EPA expected to reopen vehicle emissions decision: source

Reuters - EPA expected to reopen vehicle emissions decision: source - http://reut.rs/2mQ10aM

The U.S. Environmental Protection Agency is expected to announce next week it would reopen a review of 2022-2025 vehicle emissions requirements after automakers urged the Trump administration to reverse a decision under former President Barack Obama, a source said on Friday.

Last week, trade groups representing General Motors Co (GM.N), Toyota Motor Corp (7203.T), Volkswagen AG (VOWG_p.DE), Ford Motor Co (F.N), Honda Motor Co (7267.T) and others formally asked new EPA Administrator Scott Pruitt to withdraw an Obama administration decision to lock in vehicle emission rules through 2025.

A person briefed on the matter who had seen the draft order restarting the review said it was expected to be unveiled next week. The source was not authorized to discuss contents of the order publicly.

The EPA notice is expected to say that the agency plans to work in tandem with the U.S. Transportation Department to set consistent standards for corporate average fuel efficiency and emissions limits, the source said.

A White House spokeswoman and an EPA spokesman declined to comment.

The EPA had until April 2018 to decide whether the 2022-2025 standards were feasible under a "midterm review" but in November moved up its decision to Jan. 13, just before Obama left office.

The auto group requests follow a separate letter to President Donald Trump earlier this month from the chief executives of GM, Ford Motor Co and Fiat Chrysler Automobiles NV (FCAU.N) (FCHA.MI), along with the top North American executives at Toyota, VW, Honda, Hyundai Motor Co (005380.KS), Nissan Motor Co Ltd (7201.T) and others urging Trump to revisit the decision.

GM CEO Mary Barra told reporters on Tuesday that automakers were "looking to actually have the midterm review." She said the review needs to look "at all the different dynamics that are occurring."

Automakers say the rules impose significant costs and are out of step with consumer preferences. Environmentalists say the rules save drivers fuel costs and should not be changed.

In 2011, Obama announced an agreement with automakers to raise fuel efficiency standards to a fleet average of 54.5 miles per gallon by 2025. This, the administration said, would save motorists $1.7 trillion in fuel costs over the life of the vehicles but cost the auto industry about $200 billion over 13 years.

In July, EPA said because Americans were buying fewer cars and more SUVs and trucks, it now estimated the fleet will average 50.8 mpg to 52.6 mpg in 2025.

Earlier Friday, eight environmental organizations urged Pruitt not to reopen the issue. These included the Sierra Club, Union of Concerned Scientists, League of Conservation Voters and Natural Resources Defense Council.

"EPA should stay the course and look to the future, to protect our climate and the workers developing clean car technologies," council President Rhea Suh said in a statement.