Financial market 'pause party' makes Fed rate cut less likely - Reuters

WASHINGTON/NEW YORK (Reuters) - Risk-taking has been the rage since the Federal Reserve quit hiking interest rates at the end of last year. U.S. stocks are back near record highs and investors are stockpiling the lowest-grade corporate bonds with only a smidgen of extra compensation for the added risk.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2019. REUTERS/Brendan McDermid

That rebounding mood on Wall Street may be welcomed by a president that has been demanding the Fed cut rates after markets fell sharply last year, and complaining that even pausing at the current level is the wrong call.

But if anything the ‘pause party’ on Wall Street makes it even less likely that the U.S. central bank will cut rates. Recent positive news on retail sales and exports, which have eased concerns of a sharply slowing economy, makes the case for a rate cut even weaker.

Investors at least have gotten the message, and shifted from projecting a rate cut later this year to now putting the odds at only 50-50 that the Fed will move lower by early 2020.

Wall Street celebrates the Fed's 'pause tmsnrt.rs/2VRQYqp

The state of financial markets, say some analysts, is evidence the Fed’s rate increases last year were on point, allowing the economy to continue growing while keeping risks in check. A rate cut at this stage would only be courting problems.

“The argument for why they should keep the possibility of a rate hike on the table is because of financial stability,” Citi chief economist Catherine Mann said in remarks on Wednesday to a conference on financial stability at the Levy Economics Institute of Bard College.

After a decade of near zero interest rates, “moving toward a constellation of asset prices that embodies risks is critical for getting us to a more stable financial market,” she said, noting that both equity prices and low-grade bond yields show a market that remains too sanguine.

In their critiques of the Fed, U.S. President Donald Trump, White House chief economic adviser Larry Kudlow, and possible Fed nominee Stephen Moore have argued that lower rates would allow faster growth and be in line with Trump’s economic plans. They contend that, with the risk of inflation low, the central bank does not need to maintain ‘insurance’ against it by keeping rates where they are.

     Overlooked in that analysis are the financial stability concerns steadily integrated into Fed policymaking since the 2007 to 2009 financial crisis. Mann spoke at a conference named in honor of economist Hyman Minsky, who explored how financial excess can build during good times, and unwind in catastrophic fashion. The downturn a decade ago showed just how deeply that dynamic can scar the real economy.

     Financial stability isn’t a formal mandate for the Fed, which under congressional legislation is supposed to maintain the twin goals of maximum employment and stable prices. But since the crisis the central bank has concluded that keeping financial markets on an even keel is a necessary condition for achieving the other two aims.

    That doesn’t mean an end of volatility or a guarantee of profits, but rather that risks are properly priced and that the use of leverage – investments made with borrowed money – is kept within safe limits.

Keeping an eye on stock valuations tmsnrt.rs/2Dr6u5z

     That’s a key reason why even policymakers focused on maintaining high levels of employment, like Boston Fed president Eric Rosengren, at times have taken on a hawkish tone in favor of rate increases. The worse outcome for workers, Rosengren and others have said, would be to let markets inflate too much, and crash again, even if that means risking a bit higher unemployment in the interim. 

Markets are currently “a little rich,” Rosengren said in recent remarks at Davidson College in North Carolina.

Though not enough to warrant a rate increase, he said, it does argue against a rate reduction. Overall, Fed officials including Chairman Jerome Powell say they feel financial risks are within a manageable range, something policymakers feel has been helped along by the rate increases to date.

The state of financial markets is “something that the Fed has to wrestle with,” Rosengren said. “It’s appropriate for interest rates to be paused right now.”

Corporate bond valuations look frothy tmsnrt.rs/2VU0Yj3

Reporting by Howard Schneider and Trevor Hunnicut; Editing by Dan Burns and Andrea Ricci

Our Standards:The Thomson Reuters Trust Principles.

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2019-04-21 11:12:00Z
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Carole Ghosn goes on the offensive, launching media blitz for jailed auto executive husband - The Japan Times

With no signs of Carlos Ghosn’s five-month legal drama wrapping up anytime soon, his wife has assumed a starring role in the former Nissan Motor Co. chairman’s defense, becoming his chief spokeswoman and crisscrossing the world to appeal to both the public and politicians on his behalf.

Carole Ghosn has flown to France to ask the government there to intervene in the case, returned to Japan for questioning by prosecutors and appeared in multiple media interviews in the United States where she has repeatedly proclaimed her husband’s innocence. She even penned an op-ed asking U.S. President Donald Trump to act.

But while the media blitz may generate some sympathy, it’s not likely to have a significant impact on the outcome of the case, experts interviewed by The Japan Times said Friday.

In Japan, it is highly unusual for the family member of a defendant to engage in an aggressive media campaign before a trial to assert innocence, said Kuniyoshi Shirai, a professor of risk management at the Graduate School of Information and Communication in Tokyo.

“Mrs. Ghosn has been very active and is using a variety of methods (to argue her husband’s case), hoping that he will be released soon,” Shirai said. “I am sure she is getting help from (public relations) experts.”

Carole Ghosn has been vocal about her husband’s innocence since shortly after his initial arrest. She wrote a letter to Human Rights Watch in January complaining about her husband’s long detention and the legal system as a whole and has given multiple media interviews to highlight his plight.

But her husband’s latest arrest appears to have inspired a full-scale offensive. Since April 4, she has ramped up the frequency of her media appearances and taken some particularly bold steps, such as the pleas to the leaders of France and the U.S. to help her embattled and ailing husband.

The Japan Times reached out to Carole Ghosn for comment, but she did not respond by the time of publication.

Carlos Ghosn was served with a fresh warrant on April 4, accused of misappropriating a Nissan sbsidiary’s payments to Suhail Bahwan Automobiles, a distributor in Oman. Prosecutors allege that some of the money, totaling about ¥560 million, was siphoned off to a Lebanese investment firm he effectively owns, and was tapped for personal use, such as the purchase of a yacht.

When the former auto executive was arrested that fourth time, which occurred early in the morning, Carole, by the day’s end, had given interviews with The New York Times and The Wall Street Journal, giving her and her husband’s account of the event.

She said her Lebanese passport, diary, letters and cell phones were confiscated. Carole also claimed her privacy was invaded, saying that when she exited the shower that morning, she was handed a towel by a female prosecutor.

“I was treated like a criminal even though I am not a suspect, and I have not been charged with anything,” she wrote in an op-ed published by The Washington Post on Thursday. “The intent of the pre-dawn raid was clear: This was a deliberate, inhumane attempt to humiliate us, invade our privacy and violate our most basic dignities as human beings.”

There have also been media reports that suggest her involvement in the latest affair involving the Lebanese investment firm. Prosecutors believe some of the money that reportedly flowed to the Lebanese company was transferred to a firm in the Virgin Islands headed by Carole Ghosn, a Lebanese and American citizen, as well as a firm established by the couple’s son in the U.S., Kyodo News reported.

Renault SA, where Carlos Ghosn was also chairman, alerted French authorities in February that he might have misappropriated the company’s money for his Marie Antoinette-themed wedding at the Chateau de Versailles.

In The Washington Post op-ed, Carole Ghosn also bashed what she and other critics have dubbed the country’s “hostage justice” system. She said that the accused is not entitled to the same level of legal protection offered in the U.S. — citing prolonged detentions before indictments and the lack of the right to have an attorney present during questioning. She then pressed Trump to discuss the case with Prime Minister Shinzo Abe when they meet at the White House at the end of the month.

“I hope and pray that our president will urge Abe to allow my husband to obtain bail so he can prepare for trial,” she wrote.

Stephen Givens, a Tokyo-based American corporate lawyer, said the description of the raid might draw some degree of sympathy from those outside Japan.

At the same time, Givens said, the couple have not been able to refute prosecutors’ allegations, especially the latest claim involving the Oman distributor. Legal experts, including Givens, say it is the most serious charge brought so far.

Givens also warned the duo about the perils of just repeating their declarations of Ghosn’s innocence and blasting the Japanese legal system without addressing the specific charges laid against him.

“I think that proclaiming that you are innocent and a victim when there is concrete evidence to the contrary makes you look bad,” he said.

But another lawyer, Shigeru Nakajima, who practices transactional law in Tokyo, says a defendant in a criminal case rarely speaks publicly on the case itself before trial because of the danger of entrapping oneself.

Shortly after the April 4 arrest, Carole Ghosn left Japan using her American passport to travel to France. She was quoted by the media as saying she went to France for her safety and to appeal to the French government to do more.

Yasuyuki Takai, an attorney and a former prosecutor at the Tokyo District Public Prosecutor’s Office, said Carole Ghosn’s departure for France wasn’t a smart move and was one that could affect the court’s decision to grant bail. He also described her media campaign as a “futile” effort that will not influence the outcome of the case.

While she returned to Japan to answer questions by prosecutors, she then traveled to New York. There, she continued to seek media exposure, appearing on Fox Business Network and speaking to The Associated Press.

Shirai, the risk management professor, echoed the view that her media exposure would have limited impact. Despite her pleas to the French and American governments, he said they are unlikely to take action in order to avoid interfering in the internal affairs of another country.

Even in France, where the former auto titan initially saw wide support, “the government and people are increasingly growing skeptical toward him,” Shirai said.

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2019-04-21 08:36:00Z
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The Tech IPOs Delivering the Most for Investors - The Wall Street Journal

Zoom Video Communications CEO Eric Yuan at the Nasdaq’s market site in New York on Thursday. Photo: carlo allegri/Reuters

By

Rolfe Winkler

Rolfe Winkler
The Wall Street Journal
• Biography
• @RolfeWinkler
• Rolfe.Winkler@wsj.com

Updated April 21, 2019 1:41 a.m. ET

Consumer-focused businesses may have more cachet, but technology startups that cater to companies are what is really hot.

Until recently, few people outside the corporate IT department had heard of Zoom Video Communications Inc., ZM 72.22% a specialist in videoconferencing software for companies. Still, the company, which counts tens of thousands of business customers, overshadowed better-known Pinterest Inc., which claims some 265 million monthly users of its online pinboards, when the two companies made their debuts on the stock market Thursday.

Zoom shares soared 72% to close at $62 each from its initial-public-offering price of $36 a share—which itself was a nearly 10-fold jump when Zoom last raised capital privately in 2017.

Pinterest shares rose 28% to close at $24.40 a share. Bankers said its $19-a-share IPO price was above its target range, yet the figure still fell short of the $21.53 when it last raised capital in June 2017.

Zoom ended the day with a market value of $18 billion, while Pinterest was at $16 billion.

Nearly 50 U.S. business-software companies have gone public since 2016, including Twilio Inc., MongoDB Inc. and Zscaler Inc. That compares with 13 consumer-technology companies, such as Dropbox Inc. and Snap Inc.

The business-software companies have performed much better, their shares rising a median 126% from their debuts through Tuesday’s market close, according to a Wall Street Journal analysis of Dealogic data. That compares with a median 15% increase for the consumer-tech companies.

Share Your Thoughts

Why do you think business-technology companies tend to perform better with stock-market investors than consumer-tech companies? Join the conversation below.

Why the different reception? For one thing, consumer technology—from smartphones to social media—is dominated by giants that have proven effective at fending off upstart rivals. “It’s hard to compete with Facebook , Apple , Amazon, Netflix and Google,” said Jeff Richards, managing partner at venture firm GGV Capital.

Social-networking company Snap is exhibit A, robbed of momentum after Facebook Inc.’s Instagram mimicked Snap’s core product. Since its 2017 IPO Snap shares have fallen 31%.

The existing players in business technology, including Microsoft Corp. , International Business Machines Corp. , and Oracle Corp. , have less of a stranglehold on their markets. That is largely because the shift to cloud computing—where companies rent computing power, software and services on others’ servers—has disrupted old markets and created vast new opportunities. “Fund managers have made a ton of money on enterprise companies the last few years,” said Mr. Richards.

Shares in little-known PagerDuty Inc., which helps companies manage their web operations, jumped 63% since its IPO last week, giving it a market capitalization of roughly $3 billion.

UiPath Inc., a closely held specialist in “software robots” that mimic humans to complete mundane back-office tasks, is in talks to raise capital at around a $7 billion valuation, said a person familiar with the company. That equates to a sevenfold jump in just 12 months.

Related Video

With Lyft making its Wall Street debut, WSJ's Lee Hawkins outlines the three biggest challenges the ride-hailing service will face in the next 12 months. Photo: AP: Reuters

Concerns over huge losses are robbing some consumer-focused tech companies of momentum. Ride-sharing company Lyft Inc.’s shares have slid 19% since its late March IPO, and rival Uber Technologies Inc. recently cut its proposed IPO valuation.

Overall, business-software firms tend to go public at lower market capitalizations, a median of $1.3 billion for those that went public since 2016, according to Dealogic data, compared with $1.6 billion for consumer-focused tech companies.

Zoom was valued more highly relative to its size than Pinterest at its IPO price, with a market capitalization 32 times last year’s sales compared with 17 times for Pinterest. Zoom was slightly profitable last year while Pinterest lost money.

Before they went public, Snap and file-storage firm Dropbox, like Pinterest, were high-profile consumer-focused companies well known to Silicon Valley investors. They drew private capital at high valuations only to stagnate before going public. Dropbox’s valuation has flatlined—it currently trades near its IPO price just over a year ago—in part because the company has struggled to move beyond consumers and sell its software to companies.

Zoom says it has grown because it developed video-focused conferencing software tailored to cloud computing, rather than having to adapt old products like some competitors did.

Read More

• Pinterest, Zoom Shares Surge in Trading Debuts
• Zoom Opens 81% Higher in Trading Debut
• Pinterest Prices IPO at $19 a Share (April 18)
• Lyft Shares Continue to Skid After IPO (April 15)
• Uber Aims for Public Valuation of as Much as $100 Billion (April 10)
• Gold Badges and Boozy Breakfasts: Inside the Frenetic Fight for IPO Listings (April 5)

Chief Executive and founder Eric Yuan came to the U.S. from his native China in 1997 and started as an engineer at videoconferencing service WebEx Communications Inc., which was acquired by Cisco Systems Inc. a decade later. He said in an interview that his expertise in videoconferencing enabled him to spot an opportunity for an alternative service, leading him to start Zoom in 2011.

Santiago Subotovsky, a general partner at venture firm Emergence Capital, was the first institutional investor to plow money into Zoom in 2014. He said consumer-oriented tech companies such as Pinterest get more attention, and that leaves more opportunity for investors focused on technology for businesses.

“You’re not competing with everyone else and their dog” to invest, he said.

Zoom went mostly unnoticed for some time by venture investors who depended on products like WebEx, Microsoft’s Skype, and Google Hangouts for videoconferencing, said Mr. Subotovsky.

He said he used Zoom to do videoconferencing with people abroad—he hails from Argentina and his wife lived in Kenya—and found that it worked better than the other products. When he recommended that his foreign contacts download it, and saw them share Zoom on their own, he decided he wanted to invest, buying in at 87 cents a share.

It wasn’t until March, when the company filed to go public and revealed both fast growth and a solidly profitable bottom line, that the wider market took notice of the company, said Mr. Subotovsky.

The big spike in Zoom shares on their first trading day suggests bankers may have priced them too low for the IPO. But Mr. Yuan said that isn’t a concern, that it is “better to leave money on the table” for investors to profit.

Write to Rolfe Winkler at rolfe.winkler@wsj.com

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2019-04-21 05:41:00Z
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This 1 Assumption Could Totally Destroy Your Retirement - The Motley Fool

Many seniors look forward to retirement, especially those who wrap up their careers feeling overworked and overwhelmed. But while the freedom associated with retirement is certainly something positive to anticipate, many Americans who go into retirement excited about that prospect wind up cash-strapped and miserable fairly early on. And the reason often boils down to one problematic assumption about their golden years.

You'll need more retirement income than you think

Many people assume that their living costs will drop dramatically once they stop working. But in reality, many seniors only notice a modest decline in spending. Some, on the other hand, wind up spending more in retirement than they did during their working years, and when we really stop to think about our bills, it makes sense.

Image source: Getty Images.

The only expenses that are likely to disappear in retirement are your commuting and job-related costs, and your retirement plan contributions. The rest of your expenses are highly likely to stay the same, or even go up to a certain degree. After all, you'll need food in retirement just like you did when you were working. You'll also need housing, transportation, clothing, utilities, and other such necessities that are by no means a function of having a job.

And if you think your housing costs will decline a bunch if you pay off your mortgage prior to retirement, think again. As homes age, they tend to require more maintenance, and as people age, tackling that maintenance themselves starts to prove challenging. Throw in the fact that property taxes have a tendency to rise over time (even during periods when home values decline), and it could very well be that case that you do indeed eliminate your mortgage payment in time for retirement, only to have it replaced with other housing expenses.

Then there are healthcare and leisure to consider -- two expenses that often go up in retirement. The former often rises because health issues tend to creep up and escalate as people age, and while Medicare can help pick up the tab for healthcare matters, there are a number of key services the program won't cover. Also, Medicare is by no means free -- between premium costs, deductibles, and copays, even covered services could cost you a small fortune.

Similarly, being retired means having more free time on your hands, and occupying that time is apt to cost money. As such, you might easily spend more on leisure as a senior than you did as a working adult.

Boost your savings while you can

Hopefully, by now you're at least somewhat convinced that retirement may end up being a more expensive prospect than you initially assumed it would be. The good news is that if you ramp up your savings game, you have a shot at accumulating enough of a nest egg to cover the aforementioned senior living costs, and then some.

Let's assume you have a good 30 years until you're set to retire, and that you're able to invest your savings in a manner that generates an average annual 7% return during that period. (This should be more than doable with a stock-heavy portfolio.) Here's what your ending nest egg balance might look like based on your monthly contributions:

Monthly Savings Amount	Total Accumulated Over 30 Years at an Average Annual 7% Return
$200	$227,000
$400	$453,000
$600	$680,000
$800	$907,000
$1,000	$1.13 million

Data source: Calculations by author.

You have to admit, those are some pretty impressive numbers, especially as you work your way down the table. Therefore, don't stress about the fact that retirement will cost a lot of money. Rather, accept it, and do your best to save appropriately. If you skimp on savings under the assumption that you'll spend a whole lot less as a senior, you'll likely wind up very sorry for it after the fact.

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2019-04-20 22:18:00Z
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What if Elon Musk’s $420 dream hadn’t gone up in smoke? - The Verge

Last August, Elon Musk tweeted he had “funding secured” to take Tesla private. That turned out not to be true, and he eventually had to settle securities fraud charges with the Securities and Exchange Commission.

Musk is still battling the SEC over that very same settlement, and it’s possible he will be held in contempt of court for allegedly violating it. With the decision looming, it’s worth asking: what if he had lined up funding? What did Musk stand to gain by turning Tesla, which has been publicly traded on the New York Stock Exchange since 2010, back into a privately held company?

How could he have done it?

There are a few different ways Musk could have taken Tesla private. One of the most common ways would be to secure funding from a small group of institutional investors to buy out the company’s shareholders. Shareholders usually want a premium over the price of the shares at the time (like, say, $420!), and they also have to approve the deal in a vote. The investors then get an ownership stake of the company in return, but the total number of owners would be below the Securities and Exchange Commission’s thresholds for public reporting.

At first, this seemed like the path Musk wanted to take, but his subsequent tweets complicated things, according to Stephen Diamond, a law professor at Santa Clara University and an expert in securities law and corporate governance — specifically the one where Musk expressed his hope that “*all* current investors remain with Tesla even if we’re private.”

“It would be very challenging him to herd a subgroup of several thousand shareholders into some kind of entity” that the SEC would consider below those thresholds, Diamond says.

Another way to take Tesla off the public stock exchange would be to execute a “leveraged buyout,” according to Ann Lipton, an associate professor of corporate law at Tulane University. Here, the goal is the same — buy out the shareholders so only a few remain — but the source of money is different. Instead of trading ownership stakes for funding, Tesla would borrow money from entities like banks to buy out the shareholders. Finance types often call debt leverage because it sounds less dangerous; hence, “leveraged buyout” instead of “debt-fueled buyout.”

The problem with this, Lipton says, is Tesla already had a lot of debt — around $11 billion at the time of the “funding secured” tweet — and not a lot of free cash on hand.

“The theory of a leveraged buyout is you take a company with a lot of cash and you use that to pay down the debt, but that’s not Tesla,” she says.

So if Tesla were private today, probably it wouldn’t have happened through a leveraged buyout. More likely, it would have taken the first route, of a small group of investors. Had that happened, it would have cost tens of billions of dollars and been “one of the largest and most complex private equity plays,” according to Diamond. Since Musk didn’t actually have funding lined up from Saudi Arabia, he likely would have had to find it from existing or outside institutional investors, and then use it to buy out the shareholders in a transaction they’d have to approve.

Many shareholders would inevitably be upset (as some were that day in August), either by the amount Musk offered or the way the deal was executed, says Gregory Shill, a law professor at the University of Iowa. This happens in a lot of buyouts, actually. Litigation over the deal price is especially inevitable, he says. But even if Musk “dotted his i’s and crossed his t’s,” Shill says, there would probably be a lawsuit about how the process was handled.

To understand why, it helps to look at Tesla’s 2016 acquisition of SolarCity. Musk was chairman of the solar energy company when he made the offer, and it was run by his cousins. He recused himself from voting on the deal, and 85 percent of shareholders approved it. And yet some shareholders still sued, alleging the process was corrupted because of the close relationship between Musk and his cousins, and the fact that Tesla’s board of directors was stacked with Musk supporters. The case is still ongoing.

Lipton says Musk “didn’t even pretend to negotiate at arms length” in the SolarCity case, and so it’s possible a similar case would have been raised if Tesla had gone private. So even if Musk had succeeded in his effort, he and Tesla would likely be defending it in court today. (Instead, they’re still fending off shareholder lawsuits about the alleged securities fraud.)

What would Musk have gained from taking Tesla private?

If Musk had taken Tesla private in a more traditional way, there likely wouldn’t have been an SEC lawsuit. That means Musk would still be chairman, would be $20 million richer, and wouldn’t have appointed independent directors in Larry Ellison and Kathleen Wilson-Thompson to the company’s board.

Had Tesla gone private, fewer people would have access to the company’s financials because it would no longer be required by the SEC to publish these figures. (Though, Lipton points out, some of Tesla’s debt is tied up in bonds that require some disclosure. So the company would have to pay off that debt to truly “go dark,” she says.) The carmaker would also be under less pressure from Wall Street analysts who view a company’s stock price as its measure of performance. The company would be released from the obligation to report its financials every quarter, too, which Musk has said puts “enormous pressure on Tesla.”

But that doesn’t mean Tesla would be free of scrutiny, according to Diamond.

“In a private setting he would have some very tough co-owners who represent very sophisticated investors,” Diamond says. Consolidating ownership means this smaller group of stakeholders would also wield a “significant amount of influence over the day to day life of the company.”

“If he thinks he’s going to find some dumb billionaires out there who are going to give him free rein, I think he’s kidding himself,” he says.

Musk would likely have more control over the company’s narrative, Diamond says.

“He would be able to avoid public scrutiny by investors, and he would be able then, with his own voice, to present the Tesla story to the public the way he wants to,” Diamond says. “The problem today is he shares ownership with other investors, and that requires him to keep them informed about what’s going on. And he has to be honest. He doesn’t have to tell them everything, but when he does speak he cannot mislead them.”

The story of Tesla is crucial to Musk, and something he’s fought to control. He’s accused the media of writing stories that misrepresent what’s going on inside the company, one time going so far as to shout “shame” on them during a conference call. He constantly claims short-sellers, people who make bets that a company will fail, spread lies about the company. “[S]hort sellers are desperately pushing a narrative that will possibly result in Tesla’s destruction,” he once told the New York Times. Musk has also accused both journalists and short-sellers of being funded by “big oil.”

Journalists would have less access to Tesla’s financials, though they wouldn’t stop covering Tesla. But a private Tesla means the short-sellers wouldn’t have a way to place those bets against the company, Shill says.

Tesla short-sellers existed long before the go-private attempt, but they’ve grown in numbers across the last year and a half as the company struggled to ramp up Model 3 production. They’ve connected on Twitter and even built a website where they display their theories and research, which they claim exposes fraudulent practices by Musk. Even if Musk had found a way to take Tesla private, this community of internet sleuths would likely still be around.

Knowing all this, Shill says Musk might have wanted distance from the SEC more than anything. Taking the company private would let Musk “stay in the public imagination, keep getting on the front page of the Wall Street Journal, and be all over Twitter, but he wouldn’t have the cops knocking on his door in the form of the SEC,” he says.

Musk has taunted the SEC multiple times in the months since the two sides reached a settlement, calling it the “Short-seller Enrichment Commission,” and saying outright on 60 Minutes that he doesn’t respect the agency. Musk also continues to battle with the SEC over the settlement he agreed to last year. So it’s easy to imagine him wanting distance from the agency’s grasp.

“That was the true appeal,” Shill says.

The Tesla that never was

A private Tesla would be less exposed to the public, more under Musk’s control, and released from the pressure of reporting good quarterly performance. But that control would be set against stronger, more interested shareholders. Musk would likely still be his same mercurial (and often pugnacious) self on Twitter. The company would be locked in litigation with its former shareholders, and people who believe Tesla is a fraud would still be working to prove that out.

Meanwhile, Tesla would still be running a fledgling mass-market electric car company, one that needs a lot of money just to survive — let alone grow. So even if Tesla had gone private, it probably wouldn’t have stayed private forever, says Diamond.

“The reason you go private is to kind of focus management on solving production problems, restructuring the company, and then making it more palatable to a larger array of investors,” he says. “You want a smooth running machine.”

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2019-04-20 20:20:00Z
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Boeing's Dreamliner jet is now facing claims of manufacturing issues - CNBC

At a Boeing manufacturing facility in North Charleston, South Carolina, the aerospace giant reportedly pressured workers to speed up production while ignoring employee complaints about potential safety risks and defective manufacturing, according to a new report from The New York Times.

After interviewing more than a dozen current and former employees of the Boeing facility, which makes the 787 Dreamliner, and reviewing "hundreds of pages of internal emails, corporate documents and federal records," The New York Times reported on Saturday that the newspaper's investigation "reveals a culture that often valued production speed over quality."

Boeing workers have filed numerous safety complaints with the federal government over issues ranging from shoddy manufacturing practices to tools and debris being left on planes, and workers say they have been pressured to not report regulatory violations to authorities, The New York Times reports. The investigation found that Boeing workers have installed faulty parts in planes at the facility, and that some aircraft have even taken test flights with debris such as tools and metal shavings inside the engine or tail, creating potential safety hazards.

Boeing has denied manufacturing problems with the Dreamliner, and the company said "Boeing South Carolina teammates are producing the highest levels of quality in our history," in a statement to The New York Times. However, the newspaper also reported that at least one major carrier, Qatar Airways, had been frustrated by manufacturing issues at that particular Boeing facility, with the airline opting to only buy its Dreamliners from a different Boeing facility since 2014.

When reached for additional comment by CNBC, a Boeing spokesperson sent CNBC an internal memo sent today to Boeing employees by Brad Zaback, the vice president and general manager of Boeing's 787 program.

"A story that posted in today's New York Times, however, paints a skewed and inaccurate picture of the program and of our team here at Boeing South Carolina. This article features distorted information, rehashing old stories and rumors that have long ago been put to rest," Zaback writes in the memo, the full text of which can be found below.

The report raises questions about the production process of Boeing's 787 Dreamliner at a time when the company is already facing investigations, including a federal criminal probe, into the certification process for the Boeing 737 Max. Those probes followed a pair of deadly crashes involving the aircraft, with an Ethiopian Airlines 737 Max that crashed in March coming just months after a similar crash involving a Boeing 737 Max in Indonesia.

Read the full report in The New York Times

Here is Zaback's full memo:

New York Times story paints an inaccurate picture of Boeing South Carolina

Team,

The 787 program has a lot to be proud of these days. Our transition to Rate 14 continues to be the most seamless rate transition in the program's history, and our Boeing South Carolina 787 manufacturing operations are the healthiest they've ever been. More importantly, our quality metrics show that we are performing at all-time high levels as well. That is a testament to each of you, demonstrating your pride and your ongoing commitment to excellence with respect to both safety and quality.

A story that posted in today's New York Times, however, paints a skewed and inaccurate picture of the program and of our team here at Boeing South Carolina. This article features distorted information, rehashing old stories and rumors that have long ago been put to rest.

I want all BSC teammates to know that we invited the New York Times to visit Boeing South Carolina once they contacted us, so that they could see first-hand the great work that is done here. They declined this invitation.

The allegations of poor quality are especially offensive to me because I know the pride in workmanship that each of you pours into your work every day. I see the highest quality airplanes – airplanes that meet rigorous quality inspections and FAA standards – deliver on time on a regular basis from Boeing South Carolina, where they perform exceptionally well in service for our valued airplane customers around the world. Our customers feel the same way, and shared their own thoughts with the New York Times:

American Airlines said it conducted rigorous inspections of new planes before putting them into service. "We have confidence in the 787s we have in our fleet," said Ross Feinstein, a spokesman for the airline.

In a statement, Qatar Airways said it "continues to be a long-term supporter of Boeing and has full confidence in all its aircraft and manufacturing facilities." Note that only a portion of their quote was included in the story, and we wanted to ensure you had their full perspective: "Qatar Airways continues to be a long-term supporter of Boeing and has full confidence in all its aircraft and manufacturing facilities as a strong commitment to safety and quality is of the utmost importance to both our companies. We have over 100 Boeing aircraft in our fleet, manufactured in both Everett and Charleston, with many more to join in the coming years as part of our significant, long-term investment in the US economy."

In fact, we also heard from Suparna Airlines and Norwegian in response to the story, and here's what they told us:

Suparna Airlines: "The entire process of the aircraft delivery was very smooth. We want to thank the Boeing team in South Carolina who worked diligently with the Boeing standard and discipline to make the delivery a pleasant experience for us. The airplane has carried out more than 200 scheduled flights with total flight hours up to 500 at an operational reliability of 99.99%. We are happy with the performance of our first Dreamliner."

Norwegian: "We are very satisfied with the quality and reliability of all our 33 Dreamliners, regardless of where they have been assembled."

The inaccurate picture the New York Timespaints is also offensive to me because they are counter to our company's core values. Quality is the bedrock of who we are. That's why we relentlessly focus on quality improvements and FOD elimination at all Boeing locations. No matter how good we are today, we always believe we can be even better tomorrow. That drive to be the best will never change at Boeing as we continue to strive to be a Global Industrial Champion and the leader in quality.

It's unfortunate and disappointing that the New York Times chose to publish this misleading story. This story, however, does not define us. Our company and our customers recognize the talent, skill and dedication of this excellent Boeing South Carolina team that works together to assemble and deliver incredible airplanes. I want to leave you with a word from Kevin McAllister, Boeing Commercial Airplanes president and CEO, which was not included in full from the New York Times:

"Safety and quality are at the core of Boeing's values – there is nothing more important than that. The 787 program has delivered 823 airplanes to more than 76 customers since its launch. As Boeing marks 10 years in North Charleston, our more than 7,000 Boeing South Carolina teammates are producing the highest levels of quality in our history. And, we are seeing this translate across our work and the in-service performance with our customers. We test our airplanes and verify components are fully operational, and when we find a component that is not, it is replaced and tested again. This is core to our quality system, as it is for the industry. I am proud of our teams' best in-process quality of production and stand behind the work they do each and every day."

This is a team that I am very proud to be a part of, and I'm thankful for all that you do every day.

Brad

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https://www.cnbc.com/2019/04/20/boeings-dreamliner-jet-now-facing-claims-of-manufacturing-issues-nyt-report.html

2019-04-20 19:13:14Z
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Corporate America embraces 420 as pot legalization grows - NBC News

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April 20, 2019, 5:08 PM GMT

By Associated Press

LOS ANGELES — Marijuana users have for decades celebrated their love of the drug on April 20, but the once counter-culture celebration that was all about getting stoned now is so mainstream Corporate America is starting to embrace it.

No, Hallmark doesn’t yet have a card to mark “420.” But many other businesses inside and outside the multibillion-dollar cannabis industry are using April 20, or 4/20, to roll out marketing and social media messaging aimed at connecting with consumers driving the booming market.

On Saturday, Lyft is offering a $4.20 credit on a single ride in Colorado and in select cities in the U.S. and Canada. Carl’s Jr. is using a Denver restaurant to market a hamburger infused with CBD, a non-intoxicating molecule found in cannabis that many believe is beneficial to their health.

On 420 last year, Totino’s, a maker of frozen pizza snacks, tweeted an image of a microwave and an oven with the message: “To be blunt, pizza rolls are better when baked.”

“I think brands that associate themselves with cannabis kind of get that contact high. In other words, they’re just considered to be cooler by association,” said Kit Yarrow, consumer psychologist at Golden Gate University. “As pot becomes more legal, more discussed, more interesting to people, more widely used, then 420 becomes more mainstream as well.”

Marijuana normalization has snowballed since 2012, when Colorado and Washington were the first states to legalize recreational use. Eight more followed, including California, Oregon and Michigan. Medical marijuana is legal in two-thirds of the states, with conservative-leaning Utah and Oklahoma among recent additions.

April 20, 201901:51

Meantime, the CBD market has exploded. CBD oil can be found in candies, coffee and other food, drinks and dietary supplements, along with perfume, lotions, creams and soap. Proponents say CBD helps with pain, anxiety and inflammation, though limited scientific research supports those claims.

U.S. retail sales of cannabis products jumped to $10.5 billion last year, a threefold increase from 2017, according to data from Arcview Group, a cannabis investment and market research firm. The figures do not include retail sales of hemp-derived CBD products.

Ben & Jerry’s was one of the earliest big brands to foster a connection with the marijuana culture through marketing. The Vermont-based ice cream company features Cherry Garcia and Phish Food, honoring late Grateful Dead member Jerry Garcia and the band Phish. Both bands are favorites of the marijuana-smoking crowd.

To mark 420 in recent years, Ben & Jerry’s debuted taco and burrito inspired ice cream sandwiches. This year the company partnered with a San Francisco Bay Area cannabis retailer to give customers who place delivery orders on Friday and Saturday a free pint of Half Baked, a combination of cookie dough and fudge brownie.

“We have a lot of fun, never being overt, but really playing into the moment of 420,” said Jay Curley, the company’s global head of integrated marketing.

Last year, Ben & Jerry’s also turned more serious, asking consumers to call on lawmakers to expunge prior marijuana convictions and press for pardons or amnesty for anyone arrested for smoking pot. This year the company is using the holiday to call for criminal justice reform.

“We’re actually using this as an opportunity not to tell a stoner joke like we have in the past, but to raise what we see as a much more serious issue around justice,” Curley said.

Those in the marijuana marketplace also are ramping up advertising around 420. Much of the marketing about cannabis or related products takes the form of online ads, emails, text messages and social media. Shops typically offer discounts. Some host parties with food and entertainment. The larger 420 events can draw thousands of people.

Verano Holdings, whose businesses include cannabis shops, sponsors street festivals in Chicago and Tulsa, Oklahoma, where attendees can learn about marijuana products, listen to music and grab a bite. The company expects this Saturday’s festival in Chicago, going on its third year, will draw more than 4,000 people. Last year, it drew 1,500, said Tim Tennant, Verano’s chief marketing officer.

March 26, 201900:00

In San Francisco’s Golden Gate Park, Hippie Hill will again be the site of a 420 celebration. Last year, more than 15,000 attended the event, which has transformed from a small informal gathering into a full-blown festival of corporate sponsors and commercial booths selling smoking devices, T-shirts and food.

Roger Volodarsky, whose Los Angeles-based Puffco makes portable vaporizers, has celebrated 420 since he was a teenager. Back then, he said, “420 was the day that you splurged on yourself and got high in interesting ways. It was the day that you made a gravity bong and coughed your brains out.”

Volodarksy likes that some Main Street brands are getting into the industry and the holiday.

“What’s important to me about these ad campaigns is they’re speaking to people who aren’t users and they’re normalizing the space to people who aren’t users,” he said.

Even as popularity grows, some companies will stay away from 420 as a marketing tool, said Allen Adamson, co-founder of Metaforce, a marketing consulting company.

“If you’re talking about a big brand that needs to appeal to everybody and is very risk-averse, then probably not,” he said. “I don’t think you’ll see large financial institutions doing it.”

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https://www.nbcnews.com/news/us-news/corporate-america-embraces-420-pot-legalization-grows-n996716

2019-04-20 17:08:00Z
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