After Hours Summary: CBAY +47% after landing gout license deal; SHAK +5%, CC +2%, IDXX +0.5% higher on index change news... AGRX -72% on Twirla update, TSLA -2% after missing delivery targetsAfter Hours Gainers:
- CBAY +47.4% (Kowa Pharmaceuticals America announces agreement with CymaBay Therapeutics to license gout compound)
- SHAK +4.6% (to Join S&P SmallCap 600)
- KOPN +2.1% and DEPO +1.3%(continued strength)
- CC +1.5% (to join S&P MidCap 400)
- ATHN +0.8% (upgraded to Overweight at KeyBanc)
- AMGN +0.8% (favorable patent ruling news)
- IDXX +0.5% (to join the S&P 500)
After Hours Losers:
- AGRX -71.8% (announces top-line results from its Phase 3 SECURE clinical trial of Twirla; plans to resubmit its NDA for Twirla in the first half of 2017 on the basis of the SECURE results)
- ACUR -10.7% (announces they are exploring a full range of financing and strategic alternatives, including a possible sale of the company)
- TSLA -1.8% (Misses Q4 delivery targets on production delays related to new autopilot hardware; net orders set new record)
- REGN -1.6% (unfavorable patent ruling news)
- ARR -1% (announces January 2017 dividend rate per common share of $0.19 vs $0.22/share prior month)
BILLIONAIRE HEDGE-FUND MANAGER TIES W.S.J. TO “FAKE” NEWS EPIDEMIC
If you’ve opened up a newspaper, turned on the TV, or logged onto the Internet over the past few months, you’ve likely encountered a discussion about the scourge of “fake news.” Web sites like InfoWars, which published countless false stories suggesting Hillary Clinton was running a child-sex-slave ring out of a D.C.-area pizzeria—leading one North Carolina man to show up to Comet Ping Pong with a gun to “self-investigate” the situation—would be a good example of the epidemic, and its effects on society. According to hedge-fund manager Ray Dalio, an article by The Wall Street Journal about his company, Bridgewater Associates, is another.
The story, written by Rob Copeland and Bradley Hope, reports that software engineers at the hedge fund are working on a project, referred to by Dalio as “The Book of the Future,” that will use technology to “automate most of the firm’s management,” including decisions like when to hire people, when to fire people, and even “whether an employee should make a particular phone call.” Within the piece, Copeland and Hope discussed Bridgewater’s unorthodox office culture, the principles of which are outlined in a series of maxims contained in Dalio’s company handbook cum cult text, Principles:
. . . and a discussion about hyenas killing wildebeests that serves as an argument for how to deal with people in the workplace:
“For example, when a pack of hyenas takes down a young wildebeest, is this good or bad? At face value, this seems terrible; the poor wildebeest suffers and dies. Some people might even say that the hyenas are evil. Yet this type of apparently evil behavior exists throughout nature through all species and was created by nature, which is much smarter than I am, so before I jump to pronouncing it evil, I need to try to see if it might be good. When I think about it, like death itself, this behavior is integral to the enormously complex and efficient system that has worked for as long as there has been life. And when I think of the second- and third-order consequences, it becomes obvious that this behavior is good for both the hyenas, who are operating in their self-interest, and in the interests of the greater system, which includes the wildebeest, because killing and eating the wildebeest fosters evolution, i.e., the natural process of improvement.”
Because of this, and other unusual aspects of life at Bridgewater—such as reportedly recording meetings and the expectation that employees must “criticize one another continually”—The Wall Street Journal reports that roughly “one-fifth of new hires leave within the first year” and “the pressure is such that those who stay sometimes are seen crying in the bathrooms.” According to Dalio himself, coming to work at Bridgewater is “a little bit like entering the Navy SEALS” and “there’s a period—usually of about 18 months— of ... adaptation to this. And some make it and some don’t make it. And so we call it ’getting to the other side.’ ”
In previous attempts to get outsiders to understand what goes on inside the firm, Bridgewater has produced testimonials starring employees who, like one named John, look into the camera and explain how Dalio’s unconventional methods yielded remarkable psychological breakthroughs. At first, John says, he resisted Dalio’s criticism that he had “a reliability problem,” but later realized he was being “illogical” by not asking why he was perceived that way. “I was closing myself off to the notion of exploring that, and reflecting on past experiences. I started to come to a realization that not only has being reliable been a problem for me professionally but personally, all the way back to the time that I was eight years old.” Most recently, Bridgewater put out another series of videos noting that joining the firm will mean that “at some point you’re going to be faced with something really painful and uncomfortable here and it’s up to you to decide if you want that experience.” According co-chief investment officer Greg Jensen, the point of the videos was to give people “a window into what it’s like to be here, to scare you away if you’re not the right kind of person or to potentially attract you if these ideas, if this way of being is attractive to you.”
Yet, despite pointing out themselves that Bridgewater is far from your typical company and clearly not for everyone, Dalio bristles at the idea that people might find aspects of life at the world’s largest hedge fund worth criticizing. Which is why, following the publication of Copeland and Hope’s article, Dalio proceeded to publish a 2,685-word response on LinkedIn, entitled “The Fake and Distorted News Epidemic and Bridgewater’s Recent Experience With The Wall Street Journal.” Although he professes to have “mixed feelings about describing our most recent experience with The Wall Street Journal because many people might misconstrue my doing this as me simply complaining about an article that I didn’t like,” Dalio says he has been “reflecting for quite a while on the destructive effects that fake and distorted media are having on our society’s well-being.”
One of Dalio’s biggest gripes is that the authors of the piece ”paint[ed] a one-sided negative picture of the work environment.” According to Dalio, that happened in part because “people who are happy with their experience and respecting our rules are not allowed to speak with the media so you end up hearing disproportionately from disgruntled people.” He says that Copeland did not take Bridgewater “up on [its] offer” to talk to “an extensive list of employees and former employees”—hand selected by the firm—”who could speak freely with him.” Dalio was also disappointed that Copeland and Hope only mentioned the (true) statistics about the high attrition rate of employees in their first and second years at the firm, while leaving out the “exceptionally low“ turnover rates of “those in years three, four, and five.” Dalio further took issue with the fact that Copeland called him out on espousing a culture of “radical transparency” while coming up with a new principle that states, “Expect those who receive the radical transparency to handle it responsibly and don’t give it to them if they can’t.” And that the writer didn’t just say, “Oh, O.K., that makes sense” when Dalio et al came back with some kind of baffling logic for how their process works.
When Copeland asked about how radical transparency works, he suggested that we were disingenuous because we didn’t pursue it totally. We explained our approach: “Don’t get me wrong: radical transparency isn’t the same as total transparency. It just means much more transparency than is typical. We do keep some things confidential, such as illnesses or deeply personal problems, sensitive details about intellectual property or security issues, the timing of a major trade, and at least for the short term, matters that are likely to be distorted, sensationalized, and harmfully misunderstood if leaked to the press.” And we pointed him to the relevant principles. Copeland and Hope chose to ignore those explanations and write “he decided to let only 10 percent have the full measure of what he calls radical transparency.” After he passed that by us, we replied that “It is incorrect that only 10 percent get radical transparency. Here’s the fact. Everyone can see most everything, but only the top 150 or so people get to see the most sensitive type of stuff which, in most companies would be limited to only the top 5 or 10 people.” The authors chose to go with their mischaracterizations, even though doing so was misleading.
In addition to not liking how building ”The Book of the Future” came across in print, Dalio says that Copeland and Hope “mischaracterized several other things . . . [but] I won’t delve into more examples because we are past the point of diminishing returns.” All you need to know is that there are ”systemic risks arising from fake and distorted media” and that those risks include coming away from a piece describing a hedge fund that, by all accounts, sounds pretty fncking strange and thinking, That place sounds pretty fncking strange.
For more examples of untrustworthy news sources, in Dalio’s opinion, refer to his essay entitled “The New York Times Story Is a Distortion of Reality,” which incidentally came out just after the Gray Lady published a story about a Bridgewater employee who claimed his superior sexually harassed him and was subsequently pressured by top managers “to rescind his claims.”
Closing Market Summary: Stocks Climb to Begin 2017The stock market began the new year on a higher note, but the bulk of today's advance took place during the initial minutes of the session. The S&P 500 added 0.9% after being up 1.1% during the opening hour.
The long weekend was fairly quiet from the news standpoint, but investors did receive upbeat economic data from China (Caixin Manufacturing PMI 51.9; previous 50.9) and the eurozone (December Manufacturing PMI 54.9; previous 54.9). The data was used to justify the sunny disposition in the pre-market, but roughly half of the early gains faded shortly after the open. The morning pullback coincided with a spike in the yen after the dollar/yen pair failed to climb above its December high (118.67). The yen picked up about 100 pips against the dollar in just over an hour, and the risk-off move in the currency market helped cool the buying jets in the stock market. However, the last 30 minutes of the session saw the market rally back towards its early high.
Ten out of eleven sectors ended the day in positive territory with health care (+1.4%) and telecom services (+1.9%) climbing into the lead as the broader market retreated during the late morning. Telecom services rallied behind Verizon (VZ 54.58, +1.20) after the stock was upgraded to ‘Buy' from ‘Neutral' at Citigroup while the health care sector received support from biotech names. The iShares Nasdaq Biotechnology ETF (IBB 270.24, +4.86) spiked 1.8%. Although biotechnology lifted the health care sector, it could not keep the Nasdaq Composite (+0.9%) ahead of the broader market due to relative weakness in chipmaker names. The PHLX Semiconductor Index (+0.1%) spent the bulk of the day in negative territory, but late afternoon buying prevented a lower finish while the broader technology sector (+0.9%) settled just ahead of the broader market.
Like technology, financials (+1.0%) settled in the neighborhood of the S&P 500, but the sector flirted with a 2.0% gain at the start. Similarly, energy (+1.2%) backed off its opening high, but still ended comfortably in the green even though crude oil surrendered a big gain to end lower by 2.6% at $52.33/bbl after climbing above $55.00/bbl in overnight action.
Automakers were in the news today, starting with General Motors (GM 35.15, +0.31). Shares of GM ended higher by 0.9% after being down 1.0% in pre-market after President-elect Donald Trump said, in a tweet, that GM should pay a "big border tax" on Chevrolet Cruze vehicles produced in Mexico. General Motors responded by saying that most Cruze vehicles for U.S. distribution are produced in Ohio. Separately, Ford (F 12.59, +0.46) climbed 3.8% after announcing it will expand its plant in Michigan instead of developing a new location in San Luis Potosi, Mexico.
On the downside, the utilities sector (-0.3%) was the lone decliner, spending the day in negative territory even as intraday demand for Treasuries pressured yields off their overnight highs. The 10-yr note ended flat with its yield at 2.45%.
Today's participation was above average as more than one billion shares changed hands at the NYSE floor.
Economic data included Construction Spending and ISM Index:
- Total construction spending increased 0.9% in November (consensus +0.5%) on top of an upwardly revised 0.6% increase (from +0.5%) in October. On a year-over-year basis, total construction spending increased at a seasonally adjusted annual rate of 4.1%.
- The key takeaway from the report is that construction spending is increasing and will serve as a positive input for Q4 GDP forecasts.
- The ISM Manufacturing Index closed 2016 on an upbeat note, hitting 54.7 (consensus 53.6), which was up from 53.2 in November and the highest reading all year. December marked the fourth straight month that the index was above 50.0, which is the dividing line between expansion and contraction.
- The key takeaway from the report is that it helps validate the market's budding growth assumptions for 2017 considering the strength in December was forged on the back of a big uptick in the component indexes for new orders and prices.
- For further detail on today's economic releases, be sure to visit Economic Calendar
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the Federal Reserve will release the December FOMC Minutes at 14:00 ET.
- S&P 500 +0.9% YTD
- Nasdaq Composite +0.9% YTD
- Dow Jones Industrial Average +0.6% YTD
- Russell 2000 +0.5% YTD
Intel to buy 15% stake in Here from AUDI, BMW and Daimler
Intel (NASDAQ: INTC), a Santa Clara, California-based semiconductor firm, will purchase a 15% ownership stake in HERE, a German provider of digital maps and location-based services, from German car markers Audi [ETR:NSU], BMW [ETR:BMW]and Daimler [ETR:DAI]. No financial terms were disclosed.
The transaction is expected to close in 1Q17.
Daimler, BMW and Audi bought HERE from Nokia in 2015 for EUR 2.5bn-USD 2.6bn.
Press release:
Intel has agreed to purchase a 15% ownership stake in HERE, a global provider of digital maps and location-based services, from HERE’s current indirect shareholders: AUDI AG, BMW AG and Daimler AG.
In conjunction with Intel’s acquisition of a stake in HERE, the two companies also signed an agreement to collaborate on the research and development of a highly scalable proof-of-concept architecture that supports real-time updates of high definition (HD) maps for highly and fully automated driving. Additionally, the two companies plan to jointly explore strategic opportunities that result from enriching edge-computing devices with location data.
“Cars are rapidly becoming some of the world’s most intelligent, connected devices,” said Brian Krzanich, Intel CEO. “We look forward to working with HERE and its automotive partners to deliver an important technology foundation for smart and connected cars of the future.”
“A real-time, self-healing and high-definition representation of the physical world is critical for autonomous driving, and achieving this will require significantly more powerful and capable in-vehicle compute platforms,” said Edzard Overbeek, HERE CEO. “As a premier silicon provider, Intel can help accelerate HERE’s ambitions in this area by supporting the creation of a universal, always up-to-date digital location platform that spans the vehicle, the cloud and everything else connected.”
The proof-of-concept architecture HERE and Intel plan to deliver will be designed to help make autonomous driving as safe and predictable as possible. For example, today’s navigation technology can pinpoint a car’s location to within meters, but next generation, HD mapping supports localization to within centimeters. This will help vehicles precisely position themselves on the roadway to enable reliable autonomous driving functionality. HERE HD Live Map, HERE’s cloud service supporting vehicle automation, gives vehicles the ability to “see” obstacles beyond their immediate field of vision and receive real-time updates as environments change due to traffic, road conditions and other factors.
Intel will also work with AUDI AG, BMW AG and Daimler AG to test the architecture. Intel and HERE envision making the architecture broadly available across the automotive industry as a seamlessly integrated offering that simplifies and shortens time of development for automakers.
A Shared Commitment to Autonomous Machines
Intel is positioned to provide a secure, flexible and scalable technology foundation for the future of autonomous driving from the vehicle to the data center. Intel’s assets span: high-performance and flexible, in-vehicle computing; robust cloud and machine-learning solutions; and high-speed wireless connectivity. In addition to furthering Intel’s efforts in autonomous driving, the next generation location services that result from this collaboration can fuel the continued growth of cloud computing and the Internet of Things.
HERE is a private company, which is indirectly wholly owned by AUDI AG, BMW AG and Daimler AG. HERE is a global provider of embedded navigation solutions. By working with Intel, HERE aims to offer automakers a universal solution that reduces both complexity and long-term development costs. Intel also provides expertise in developing and optimizing hardware, which will be fundamental to moving cloud-based algorithms to in-vehicle architectures. This same expertise will support HERE’s strategy to connect multiple industries beyond automotive, such as in the Internet of Things where location algorithms and location-based services are increasingly becoming embedded into connected devices. Intel and HERE intend to explore other potential collaborative opportunities spanning next-generation cloud analytics, IoT applications, machine learning, augmented reality and more.
Transaction Details and Timing
The transaction is expected to close in the first quarter of 2017, after obtaining regulatory approvals. Intel will nominate Doug Davis, senior vice president and general manager of the Automated Driving Group (ADG) at Intel, to HERE’s Supervisory Board of directors once the transaction is completed.
Chip maker Intel (INTC.O) is to take a 15 percent stake in digital mapping firm HERE, a person familiar with the process told Reuters on Tuesday.
A filing to the German cartel office earlier on Tuesday showed that Intel had sought approval to buy a stake in the company, which is controlled by German carmakers Daimler DAIGN.DE, BMW (BMWG.DE) and Volkswagen (VOWG_p.DE).
Intel declined to comment beyond the fact that is was seeking to take a stake in HERE.
Last month two Chinese companies and Singapore's sovereign wealth fund GIC agreed to buy a 10 percent stake in HERE
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Gapping down:
Nat gas stocks ticking lower on 7% decline in nat gas futures: RRC -2.5%, SWN -2.1%, COG -1.5%.
Other news:
- ITEK -65.6% (announces top-line results of MATrX-1 did not achieve its primary endpoint of superiority in reduction of intraocular pressure compared with placebo at all 12 time points; will wait for the full results from MATrX-1)
- TKC -4.4% (following Turkish terrorist attack)
Analyst actions:
- MDT -1.3% (downgraded to Neutral from Buy at BofA/Merrill, downgraded to Neutral from Overweight at JP Morgan, downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $77)
- NOK -1.3% (downgraded to Perform at Oppenheimer)
- KORS -1.0% (downgraded to Neutral from Overweight at Piper Jaffray)
- ANF -0.9% (downgraded to Underperform from Perform at Oppenheimer, downgraded to Hold from Buy at Jefferies)