>>> Fed's Kaplan (moderate, voter): reiterates Fed should begin process of gradu

Fed's Kaplan (moderate, voter): reiterates Fed should begin process of gradual rate hikes - comments in Dallas 
- Economy is strong enough for the Fed to start raising rates; rate hikes can be done in a very patient way 
- Concerned that if inflation starts to heat up, Fed may need to hike rates more dramatically 
- US economic growth is sluggish by historical standards, but it is healthy given current demographics; lower US growth is the new reality

REcode.net : Is Snapchat going public too soon?

Is Snapchat going public too soon?
Evan Spiegel doesn’t think so. Your mileage may vary.

Every IPO sells a story: We went from here to here, and now we’re going ... there.

The trick is convincing investors that you’re going somewhere lucrative, and you’re moving fast. Sure, it’s risky — can’t have reward without risk! — but you know how you’re getting there.

But Snap does lots of things differently, and Snap’s IPO is different, too: Even by internet company standards, Snap isn’t sure, exactly, how it’s going to make money — it’s just sure that it will, and that it will make a lot of it.

In the meantime, Snap says, things will be “lumpy,” a word it uses repeatedly in its prospectus and roadshow presentations, to describe user growth, product development and revenue sources. Everything’s going to change, because lots of things haven’t been invented yet. It’s the financial equivalent of the shruggy emoticon: ¯\_(ツ)_/¯

Contrast that with Google, Facebook and Twitter, all of which had more concrete stories to tell about their business plans when they went public: Google was selling AdWords. Facebook was selling “social ads” in its News Feed. Twitter sold promoted tweets.

Some of those stories changed a lot after their IPOs, of course. Facebook spent a year in purgatory while it scrambled to create a mobile ad business from scratch. Twitter learned, eventually, that its ad ambitions didn’t fit the size of its audience. Now it’s in perpetual turnaround mode.

Snap’s story is fuzzier. Instead of a single ad product at the center of its pitch, it has two: “Creative tools” like sponsored filters, and TV-style “snap ads.” Wall Street would be very happy if Snap focused on the latter, but Snap won’t even identify itself as an ad company — it’s a camera company, CEO Evan Spiegel insists.

And while most big digital platforms sell advertisers on the notion that they have reams of personal information about their users so they can deliver personalized ads with precision, Snap has shied away from most targeting technology. Last fall, in the run-up to its IPO, instead of focusing on ad tech, Snap pushed Spectacles, a $130 pair of novelty glasses. Now it may be playing with drones.

If Snap does have a core selling point, it’s Spiegel himself, and the notion that he’s a product savant who can figure out how to attract and retain young users. The money part will come later.

It’s a good story. Here’s a chapter, relayed by Snap employees: Last fall, Spiegel showed up at Snap’s Venice, California headquarters and announced that he wanted to change the look of his app’s main “stories” page.

Spiegel said the page had too much stuff from Discover, the content supplied by professional publishers*. It was crowding out all the stuff posted by users’ friends. Push all the Discover stuff to the bottom of the page, he told his product people.

Cue a quiet freakout from Spiegel’s revenue team. While Discover isn’t the most popular feature on the app, it had been Snap’s most significant source of ad revenue. Pushing that stuff away from users, they worried, would push ad revenue down, and that would cause real problems for a company that planned on going public.

But Spiegel hadn’t asked anyone on his business team — including Imran Khan, his chief strategy officer — for their opinion. He thought it would make for a better product.

Days later, Spiegel got what he asked for. And, it turns out, Discover ad revenue didn’t decline.

If you’re buying Snap shares tomorrow, you’re hoping for more stories like this. It looked lumpy! But Evan was right and it all worked out.

I do wonder, though, why Snap is selling shares tomorrow. Why not wait a year, or longer, smooth out some of those lumps, and then go public, once you’ve worked out exactly what Snap is going to be?

If you are a Snap skeptic, you will point to Snapchat’s decelerating user growth and the $750 million incentive clause Snap’s investors gave Spiegel to go public, and make a simple argument: Snap is going public now because this is as good as it’s going to get. Sell the story when there’s still a chance of a hopeful ending.

On the other hand: Spiegel is smart. And with co-founder Bobby Murphy, he has full control of his company. If he was worried about exposing Snap’s flaws in public, he wouldn’t go public. Which means he believes Snap’s story, too.

* Vox Media, which owns this site, has a Discover partnership with Snap.

>>> Fed Beige Book Summary

Fed Beige Book Summary

Overall Economic Activity

  • Reports from all twelve Federal Reserve Districts indicated that the economy expanded at a modest to moderate pace from early January through mid-February.
  • Consumer spending expanded modestly since the last report. Retail sales increased at a subdued pace across most of the nation, with a number of Districts noting an ongoing shift from in-store to internet purchasing. Auto sales varied widely, but were said to be up in most Districts. Tourism activity was mixed but mostly stronger.
  • Manufacturing activity accelerated somewhat, with most Districts characterizing the pace of growth as moderate. The energy sector showed modest growth in early 2017, and transportation activity was steady to somewhat higher across the nation.
  • Home construction and sales continued to expand modestly in most Districts, while residential rental markets were mixed. Home prices were steady to up modestly in most Districts, and a number of Districts noted low inventories of existing homes. Commercial real estate construction grew modestly, and sales and leasing activity grew moderately. Lending activity was steady to somewhat higher.
  • Businesses were generally optimistic about the near-term outlook but to a somewhat lesser degree than in the prior report.

Employment and Wages

  • Labor markets remained tight in early 2017, with some Districts noting widening labor shortages. Employment grew moderately in most of the nation, though three Districts characterized growth as modest and two reported that it was little changed. A number of Districts noted that staffing firms were seeing brisk business for this time of year, and one noted more conversions from temporary to permanent workers.
  • In general, wages in most Districts rose modestly or moderately, with a few reporting some pickup in the pace of wage growth. A number of Districts noted that shortages of skilled workers—particularly engineers and IT workers—were driving up their wages, and there were also some reports of labor shortages in the leisure and hospitality, construction and manufacturing industries.

Prices

  • Pricing pressures were little changed from the prior report. Most Districts reported that selling prices were up modestly or moderately, though four indicated that prices had largely leveled off. Input prices were up modestly, on balance. Energy prices and farm prices were mixed but mostly steady, on balance, while prices for construction materials climbed in a number of Districts. Overall, businesses said they expected both input prices and selling prices to increase modestly in the months ahead.

(ZH) Euro Breakup Contagion Risk Is Exploding

Euro Breakup Contagion Risk Is Exploding

With existential elections looming, Sentix Euro Break-up Contagion Index - a market measure of the contagion risk from one or more countries leaving the euro area within the next 12 months period - has hit its post-2012 record recently...
As Sentix notes, the Eurocrisis is once again in the limelight. And this time the
drama consists of three main actors: Greece, Italy and France.
How
dangerous this tendency for the cohesion of the eurozone could become is
a look at the index to the spreading risk, which has almost climbed to
the 50% mark - an all-time high!


France and Italy both seeing Euro-exit odds rising...
The Eurozone has now developed many more breaking points than just Greece. Although it has now been somewhat calmer about Italy, the euro exit probability remains almost unchanged at 13.9%. Added to this is the strong rise in the probability of exit from France. This is now 8.4% - compared to 5.7% in January! An all-time high.

WSJ : Donald Trump’s Speech Agenda Will Face Legislative Challenges

Donald Trump’s Speech Agenda Will Face Legislative Challenges
GOP infighting and Democratic opposition await the president’s wish list

President Donald Trump on Tuesday night asked a joint session of Congress to set aside “trivial fights” and “work past differences of party” in order to act swiftly on his top policy priorities.

But Mr. Trump faces significant challenges in bringing lawmakers together. First, he needs to bridge differences within his own party on tax policy, health care and other matters. And he will also need support from Senate Democrats to pass much of his agenda, at a time when the party’s base voters are urging resistance.

Below are some of the policy goals Mr. Trump laid out in his speech and their prospects in Congress.

Mr. Trump: “We will soon begin the construction of a great, great wall along our southern border.”

First, some fiscal conservatives have suggested that Mr. Trump needs to cut spending elsewhere, or find other revenue in order to cover the cost, which the Department of Homeland Security has said could top $20 billion to build and maintain.

Second, Democrats are dead set against the idea and are expected to mount a fight.

“The speaker has said that we’re going to do this in a fiscally conservative manner,” said Rep. Mark Meadows, the leader of a group of influential House conservatives known as the Freedom Caucus. Many of his colleagues support the proposed wall but want to see it paid for, Mr. Meadows has said. It isn’t clear how far that group will push if Republican leaders decide to advance legislation without a way to cover the cost.


Spending bills need to meet a 60-vote threshold to pass the Senate, more than the 52 held by Republicans. Few Democrats are likely to back the wall, and the party in any event would want to withhold its support to bargain for immigration measures it supports but that many Republicans don’t.

One option for Republican leaders: Fund the border wall as part of a spending bill needed to keep the government running—a fight that could prompt a partial federal shutdown if the bill didn’t attract enough support.

Mr. Trump: “I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States—financed through both public and private capital—creating millions of new jobs.”

Legislative reality: Like the border wall, any major spending on infrastructure will need congressional approval. An infrastructure package, even partly financed by private dollars, would likely come with a big price tag that could cause discomfort among fiscal conservatives and deficit hawks.

Rep. Jim Jordan (R., Ohio) has said he would need to see details of the plan and its funding mechanism before supporting it. “We’ve got a $20 trillion debt,” he said. “Look, we’ve got to pay for things.”

Outside of Congress, some conservatives have started to rally opposition to the plan. Mark Levin, a radio host, said he opposes infrastructure spending aimed at “government-created jobs.”

“If you’re really an independent, thoughtful conservative, you’re scratching your head about that. You’re saying, ‘No, I reject that,’ ” he said this week.

Republicans were largely opposed to former President Barack Obama’s nearly $800 billion stimulus package that passed just weeks into his administration in 2009.

Mr. Trump: “I am also calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better health care.”

Legislative reality: Even Mr. Trump, who has promised “insurance for everybody,” acknowledged this week the difficulty of unwinding Mr. Obama’s signature health-care law without disrupting insurance markets and ensuring that covered people aren’t dumped off their health plans. “Nobody knew health care could be so complicated,” he said at the White House this week.

Conservative Republicans are opposed to a plan from the House GOP leadership to give tax credits to help Americans buy insurance after a repeal of the Affordable Care Act, calling it a new federal entitlement. Centrist Republicans don’t want to repeal the law without a robust replacement. GOP governors are divided over various plans for reshaping the federal-state Medicaid program, which the ACA expanded.

Democrats are unlikely to cooperate at all, as most see the law as a signature achievement for their party.

Former House Speaker John Boehner said this week that repealing the law and then replacing it with a new health system is “not what’s going to happen.” He predicted: “They’re basically going to fix the flaws and put a more conservative box around it.”

Mr. Trump: “My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone. At the same time, we will provide massive tax relief for the middle class.”

Legislative reality: Overhauling tax law is immensely complicated, because it affects the finances of so many businesses and individuals. The last major rewrite of the nation’s tax code was in 1986. Adding another complexity: Republicans want to put the difficult task of replacing the Affordable Care Act behind them before tackling taxes.

Though there is broad consensus, even across party lines, on the need to simplify the code, there are big divisions over the details. Republicans are split over a proposal called border adjustment, which would tax imports and exempt exports. Supporters favor it in part because it would raise money that could be used to lower rates overall. But many industries, such as retailers, would pay higher taxes under a border adjustment.

Mr. Trump’s stance on the proposal is unclear, though his comments Tuesday night were supportive of its premise. However, many Senate Republicans are opposed to it.

Democrats are unlikely to support either the framework put forward by House Republicans or the plan Mr. Trump proposed during the campaign, which would cut taxes on upper earners.

WWD : Charles S. Cohen Takes Majority Stake in Savile Row’s Richard James

Charles S. Cohen Takes Majority Stake in Savile Row’s Richard James
Cohen, a real estate and film entrepreneur, has long been a Richard James client.

LONDON – Savile Row tailor Richard James has sold a majority stake to one of its longstanding customers, Charles S. Cohen, an American real estate and film industry entrepreneur, WWD has learned.

As reported, Richard James co-founder Sean Dixon had been looking for an investor to take the business forward, and in 2015 hired Ironbridge Capital Partners to seek a new strategic investment partner. He described the new deal as a strategic partnership that will fuel an international growth in the U.S. and Asia in particular.

Cohen will take up the title of chairman, with plans to play an “active” role in the business. Dixon, who co-founded the brand with Richard James more than 25 years ago, will continue in his role as managing director.

Toby Lamb will remain design director while James will remain in an ambassadorial role. An announcement is expected later today.

Dixon called the investment a “once-in-a-lifetime opportunity” to build the brand internationally. “Charles brings a vision that matches our own and the wherewithal to accelerate our plans. We are looking forward to taking full advantage of the new horizons this partnership will open up,” he said.

In a telephone interview, Dixon said Cohen has been a client for about 15 years and has a “strong” sympathy for, and understanding of, the brand. “He also has a real appetite for quality, and for doing things correctly and properly.”

Dixon, who retains a minority stake in the company, added that Cohen’s property holdings and expertise would also help the brand expand. Already Richard James plans to take over the entirety of its Clifford Street building, adding ready to wear to the ground floor, with bespoke services upstairs. The Clifford Street shop currently offers bespoke only.

The brand’s collections also sell at stores including Selfridges, Harrods, Matchesfashion.com, Mr Porter, Brown Thomas in Ireland, Barneys New York, and Hudson’s Bay Co.

Although fashion may be a new business for him, Cohen said he was intrigued by the opportunity. He said his wife, Clo Cohen, introduced him to the team after “recognizing the creative skill of Toby and the ambitions of Sean and Richard.”

Richard James
Richard James Courtesy

He said the decision to invest and get involved was an easy one.

Cohen’s real estate holdings include 12 million square feet of prime properties across the United States, including the office tower at 623 Fifth Ave., Manhattan’s Decoration and Design (D&D) Building, the Pacific Design Center in West Hollywood, Calif., and the renovated and soon-to-re-open Quad Cinema in Greenwich Village. Cohen is also building Le Meridien hotel at the Design Center of the Americas in south Florida.

Cohen is in the film business, too. He is the owner, chairman and chief executive officer of Cohen Media Group, an independent film production and distribution company that owns a library of Buster Keaton, Douglas Fairbanks, Alfred Hitchcock and Luis Bunuel, films as well as a library of classic Merchant Ivory ones.

Cohen Media Group also distributes independent, foreign language and art-house films throughout North America and has released more than 64 to date. His company also has a library division that has restored and distributed more than 200 classic films.

In addition to tailoring, Richard James sells rtw and accessories and, until recently, was a fixture on the London men’s wear calendar. Founded in 1992, the tailor has one shop on Savile Row and the other on Clifford Street nearby. Clients include George Clooney, John Legend, Benedict Cumberbatch, Robert Downey Jr. and Mark Ronson.

Richard James was advised by Michael Pearce of Ironbridge Capital Partners LLP. Charles Cohen was advised by Jamie Dworkin of Threadstone Partners LP and David Fogel, senior vice president acquisitions and finance, handled the transaction internally for Cohen.

TechCrunch : Carriers banking on cars to drive 5G, rev up a new growth engine

From connecting all of the people to connecting all of the cars. As we noted earlier, car companies have a much bigger presence at this year’s Mobile World Congress tradeshow.

Wander the flashy hall 3, where smartphone makers have traditionally bagged most of the prime carpet-space to show off their latest glass slabs, and you’ll find a sprawling Ford booth and — everywhere you turn — another parked car being used as a prop by carriers and chipmakers keen to flog the 5G-plus-IoT future.

In hall 4, where in years past most of the space used to be given over to an elaborate free conference lunch, the GSMA now has a showcase touting IoT, and a minimalist exhibition space for Peugeot’s new concept car. Its self-driving slogan? ‘Augmented freedom’.

Passing this booth I overhear two grey-haired businessmen chatting. “It’s amazing that you find cars in this place,” says one to the other. “I suppose it’s all the IoT stuff in the cars,” he responds as they walk on without breaking stride.

The reason for all these fancy cars sitting idle at the world’s biggest mobile phone show is indeed simple: the smartphone market is facing saturation point. So even as former global mobile leader Nokia seeks to revive its iconic brand to retrotastically connect people again, the big scramble now is to connect things. Lots and lots of things.

And what’s the next best target when you can’t rely on big growth from connecting more people? Why, connecting cars. As many of the billion+ of them that you can…

Wearables have never looked like another smartphone-sized phenomenon, and are looking more like a niche health or fitness category every passing quarter. While tablets were quickly cannibalized by phones with bigger screens. And while some carriers have been toying with novel ideas like connected toys for kids (TC parent AOL’s parent Verizon is an investor in Toymail, for example), this sort of niche will live happily on Wi-Fi — at least when the category isn’t being mired in security issues…

Which just leaves cars as the most obvious thing for operators and chipmakers to focus on for selling more connectivity.

Softbank CEO Masayoshi Son, who last year acquired chipmaker ARM, took a turn on the MWC stage to talk up the prospect of the Singularity turning driverless cars into superintelligent four-wheeled robots within 30 years. Because of course he wants his company to be installing as many of the trillion chips he can which he reckons are coming down the pipe.

In another session here, Ola’s Ankit Jain described how the Indian ride-hailing startup is trying to differentiate its business from typical taxis by launching a personalized entertainment experience called Ola Play which automatically syncs users’ music preferences when they get into an Ola car. And while it’s using retrofitted tablets to power the offering, the impetus to turn cars into connected ‘entertainment pods’ is clear.

Add in the prospect of driverless cars in future and the car becomes even more of an entertainment hub. How are you going to kill all that driverless time? Why by streaming movies, chatting with friends, listening to music, browsing the Internet etc, etc.

And that’s just the tip of the connected car vision: connected cars will also be talking to connected cars and to other connected objects — to share data on road conditions, for safety, for navigation, and so on.

At least they will so long as the network coverage is there. Hence the carrier pitch for upgrading 4G/LTE networks to 5G. In a session yesterday on ‘building the 5G economy’, Orange’s CEO and chairman, Stéphane Richard, touted the next-gen network tech as having “much wider coverage” and ultimately enabling a “smarter society” with improved “public safety”.

“At some point we can all imagine a world of cars communicating with each other and red light will become useless,” he said, suggesting, for example, that connected cars plus 5G will lead to fewer traffic jams — thanks to the added layers of connectivity as connected cars speed through connected cities.

“All of the cities, social ecosystem infrastructure will be connected,” added Son on Monday. “All those things will be connected. All connected securely and managed from the cloud.”

“Cars might be what tablets could not be for carriers,” suggests Gartner analyst Carolina Milanesi. “Connected cars play a big role in the whole 5G roll out which is why both chipset vendors and carriers are talking about it.”

“When it comes to cars the interesting part for me is that network need will not just come from the sensors — as well it’s entertainment. I have an LTE car in the U.S. that is my daughter’s dream as she can now be connected when we go for long drives. 5G will allow for that experience to be much richer than it is today, although I’m not sure if necessarily cheaper.”

“It will be interesting to see how they price it,” she adds. “For instance I pay $10 a month for 2GB which is gonna go very fast if you stream.”

And with European carriers finally having to hang up on roaming costs this June, the prospect of a new type of streaming data plan with accelerated revenue potential will surely be music to their ears.

NYT : Snap Is Said to Have Worked on a Drone

Snap Is Said to Have Worked on a Drone

Snap has long been known as the maker of Snapchat, an app that sends disappearing messages, photographs and videos. But over the past few years, the company has repositioned itself as a modern-day camera company.

One of the products that Snap has worked on to bolster that direction is a drone, according to three people briefed on the project who asked to remain anonymous because the details are confidential. A drone could help Snap’s users take overhead videos and photographs, and then feed that visual data to the company.

It is unclear when or if Snap’s drone would become available to consumers. Like many technology companies, Snap often works on experiments, many of which are killed or repurposed into other projects. A Snap spokeswoman declined to comment.

The work on a drone builds on Snap’s unveiling last year of Spectacles, sunglasses that record short video clips. The company also changed its name to Snap from Snapchat to reflect that it intended to branch out into myriad products.

The drone gives a glimpse into what kind of future products Snap may be considering, which would affect the company’s growth. How the company plans to grow is on the minds of investors as Snap prepares to go public this week. Snap is expected to price its initial public offering on Wednesday and the stock is expected to trade on the New York Stock Exchange on Thursday, in what is set to be the biggest technology I.P.O. since the Chinese e-commerce company Alibaba in 2014.

Snap has said it planned to price its offering at $14 to $16 a share, which would value the company at as much as $22.2 billion.

Getting more visual data such as photographs and video is important to Snap because it helps bolster people’s interactions with Snapchat. Communicating on Snapchat is a highly visual process, intended to create an intense engagement among people with the app. Snap said in its public offering prospectus that the average Snapchat user opened the app more than 18 times a day, and that more than 2.5 billion messages and images were sent each day with the app.

Evan Spiegel, Snap’s chief executive, has been vocal about his company’s ambitions around cameras. In a video for investors about Snap’s public offering this month, Mr. Spiegel said cameras augmented the way a person communicates, rather than a person’s memory.

“We’re at the beginning of what cameras can do,” Mr. Spiegel told viewers of the video.

When Spectacles appeared, Snap faced questions from critics about why it would enter the realm of hardware products. The product is designed to make taking videos a fun and seamless part of everyday life, which dovetails with the company’s goal of getting users to feed Snapchat a steady stream of images and videos.

“We believe that reinventing the camera represents our greatest opportunity to improve the way that people live and communicate,” Snap said in its public offering prospectus. “Our products empower people to express themselves, live in the moment, learn about the world, and have fun together.”

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance
:
  • IPXL -21.1%, PANW -19.5%, BW -15.2%, ENPH -12.8%, CYBE -9.9%, SSW -9.2%, (also reduces quarterly dividend)
  • CHUY -8.8%, AKRX -8.7%, SRPT -7.2%, NVDQ -7%, CFI -6.6%, CLNS -6%,ETSY -5.9%, AEO -5.4%, LQ -5.3%, GORO -3.5%
  • CROX -3%, QUMU -2.8%, BBY -2.8%
  • CBI -2.4%, ( enters into a definitive agreement to sell its Capital Services business to an affiliate of private equity investment firm Veritas Capital for $755 million in cash)
  • BVN -2.4%, AMBA -2.3%, VSI -2.3%, PTLA -2%, TSRO -1.8%, VEEV -1.6%
  • MXWL -1.6%, (Maxwell Tech to acquire substantially all of the assets and business of Nesscap for $23.175 million ), CRM -1%
M&A news:
  • IBKC -5.6% (IberiaBank to acquire Sabadell United Bank in a stock and cash transaction valued at $1.025 billion; to be accretive to EPS in 2018)
Select Cyber Security related names showing weakness:
  • PFPT -1.7%, CHKP -1.6%, FTNT -1.4%, SYMC -1%, CYBR -0.8%
Select metals/mining stocks trading lower:
  • GG -1.8%, MUX -1.7%, GDX -1.4%, AG -1.3%, AEM -1.2%, EGO -1%, GFI-1%, ABX -0.9%, GLD -0.8%
Other news:
  • AKRX -8.7% ( received FDA approval for its ANDA for Mycophenolate Mofetil for Injection USP 500 mg/vial)
  • NVS -3.4% (head of North America Operations and President of Novo Nordisk Inc. has resigned from the company)
  • SFR -1.4% (light volume; commences public offering of 18,476,891 of its common shares, of which 10,476,891 common shares will be offered by certain selling shareholders)
Analyst comments:
  • AVT -1.3% (downgraded to Sell from Neutral at Goldman)
  • INTC -0.7% (downgraded to Underperform from Mkt Perform at Bernstein)