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Even though the Aussie and Kiwi were boosted by the news, I don’t think it was particularly bullish because the older tariffs remain in place, and a decision had not been made over additional U.S. tariffs scheduled for December.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. The European Union made a last-ditch appeal to the U.S. to refrain from triggering retaliatory tariffs over illegal subsidies to Airbus SE, warning of economic harm to both sides and repeating a call for a negotiated solution.European Trade Commissioner Cecilia Malmstrom told her U.S. counterpart, Robert Lighthizer, that his plan to hit $7.5 billion of EU goods ranging from planes to whiskey with duties would compel the EU to apply countermeasures in a parallel lawsuit over market-distorting aid to Boeing Co. U.S. levies would make a negotiated settlement harder to reach, she said.“I strongly believe that imposing additional tariffs in the two aircraft cases is not a solution,” Malmstrom said in an Oct. 11 letter to Lighthizer seen by Bloomberg News. “It would only inflict damage on businesses and put at risk jobs on both sides of the Atlantic, harm global trade and the broader aviation industry at a sensitive time.”The World Trade Organization is due to give final approval for U.S. retaliation in the Airbus case on Monday, allowing tariffs to kick in as planned on Friday.The trans-Atlantic dispute over aircraft aid risks fraying a trade truce struck between the U.S. and EU in July 2018. At the time, both sides pledged to try to scale back commercial barriers and avoid a repeat of tit-for-tat tariffs that began with President Donald Trump’s duties on European steel and aluminum on U.S. national-security grounds.The WTO cases over subsidies to Airbus and Boeing are 15 years old. Because of the calendar, the U.S. is entitled to strike first and the EU would follow suit sometime in 2020.Malmstrom gave no sign in her letter to Lighthizer that an idea floated in some EU circles for quicker European retaliation is gaining ground. The idea weighed was to hit back by invoking an unrelated, older WTO case against a now-defunct U.S. tax break given to companies, including Boeing, via subsidiaries known as foreign sales corporations.Instead, Malmstrom said the EU’s planned countermeasures of $12 billion would be applied “when the time comes on the parallel Boeing case.”Aside from causing economic harm, hastier European retaliation could undermine the EU’s claim to be working to uphold the WTO system that Trump’s protectionism is shaking.“We are ready to negotiate a settlement for both the Airbus and the Boeing case addressing remaining compliance obligations on both sides, putting these cases behind us,” Malmstrom said.To contact the reporter on this story: Jonathan Stearns in Brussels at email@example.comTo contact the editors responsible for this story: Ben Sills at firstname.lastname@example.org, Tony Czuczka, Linus ChuaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- However frothy valuations currently seem to be, optimists can always argue they’re justified by strong earnings. In the past four years, S&P 500 operating earnings per share have grown by nearly 40%.Those numbers, however, may be as airy as the asset prices they support. The U.S. government’s national income and product accounts -- which cover a broader number of businesses than the S&P, use tax returns and adjust for certain accounting practices -- suggest that corporate profits actually peaked in 2014 and have been stagnant since. The national accounts also show significant downward revisions to corporate profit margins over the previous five years. While one would expect some discrepancies between that data and S&P numbers, which are based on Generally Accepted Accounting Principles (GAAP), the gulf is too wide to be ignored.What’s going on? In many cases, accounting choices appear to be distorting results. In early 2019, General Electric Co. reported GAAP losses of $2.43 per share; under adjusted figures it earned $0.65 per share. Tesla Inc. reported full-year GAAP losses of $5.72 per share but “non-GAAP” losses were only $1.33 per share. Over 95% of S&P 500 companies regularly use at least one non-GAAP measure, up about 50% over the last 20 years.One question is how companies choose to recognize income. In the case of long-term, multi-year contracts, such as construction projects, reported revenue can be based on a formula: a portion of the total contract amount, calculated as costs incurred in the relevant period as a percentage of total forecast costs. Understating estimated final costs allows margins to be increased and greater revenue to be recognized up front. Following the collapse of Carillion PLC, the firm was found to be aggressive in recording income which was sensitive to small changes in assumptions. Given the trend to converting sales of products (such as software) into long-term service contracts, these risks are only going to grow. Companies can understate expenses. Many tech companies use non-GAAP accounting to strip out the cost of employee stock options, for instance, thereby showing higher earnings. WeWork sought to redefine traditional earnings before interest, tax, depreciation and amortization as something called “community-based EBITDA.” The new measure conveniently excluded normal operating expenses such as marketing, general and administrative expenses, development and design costs.Spending may be treated as an asset, to be written off in the future rather than when expended. A recent JPMorgan Chase and Co. research report found software intangible assets (the amount spent but not yet expensed) averaged up to 15% of adjusted costs for a sample of European banks. The idea is to better match expenses to the period over which they are expected to benefit the business. But the practice may overstate current earnings.Related-party transactions can distort a company’s true financial position. Saudi Arabia slashed the tax rate on large oil companies to 50% from 85%, even though the government depends on the profits of Saudi Arabian Oil Co. for 80% of its revenues. Aramco will still pay most of its profits to the state, but as dividends rather than tax. That means reported profits will be higher, potentially increasing the company’s valuation ahead of a highly anticipated initial public offering. Complex structures can mask liabilities. Tesla, for instance, faces potential payments related to its SolarCity business. Before being bought by Tesla in 2016, SolarCity regularly sold future cash flows to outside investors in exchange for upfront cash. Tesla assumed these obligations and has continued the practice. The obligations now reportedly total over $1.3 billion.To reduce unfunded pension liabilities, some companies have borrowed at low available interest rates to inject money into the funds. That’s fine as long as fund returns -- generally assumed to be around 6% to 8% -- are higher than the cost of borrowing. If returns come in lower, however, the companies in question will have to raise their contributions, affecting future earnings.New business models often disregard potential costs. If Lyft Inc. and Uber Technologies Inc. drivers are reclassified as employees as proposed in California, then hidden employment costs would need to be recognized, perhaps retrospectively. Newly listed fitness company Peloton Interactive Inc. faces a $300 million lawsuit from music publishers who claim the company used their songs in workouts without paying licensing fees.Finally, stated asset values can be misleading. Goodwill, the difference between acquisition price and the fair value of actual assets acquired, now averages above 50% of acquisition price. Goodwill values are notoriously uncertain. In 2018, GE unexpectedly wrote off $23.2 billion of goodwill arising from its acquisition of Alstom SA.The problem is compounded by private markets, where funding rounds can establish questionable valuations. Recent investments into WeWork valued the company at over $40 billion, more than three times the projected pricing of its abandoned IPO. A recent proposal to get Saudi businesses to make anchor investments in Aramco ahead of its IPO could also inflate its valuation.“Fake” financials, as some would call them, undermine markets. With a correction looking increasingly likely, investors need to start working with regulators and standard setters now to close accounting loopholes, while scrutinizing underlying data more closely. Otherwise, the more creatively companies are allowed to manage their financial position for short-term gain, the bigger the bill is going to be.(Corrects definition of goodwill in twelfth paragraph.)To contact the author of this story: Satyajit Das at email@example.comTo contact the editor responsible for this story: Nisid Hajari at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Satyajit Das is a former banker and the author, most recently, of "A Banquet of Consequences."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The coming week’s docket of economic reports and earnings releases comes just following the Trump administration’s announcement of a partial trade deal with China late last week.
Every investor in Chevron Corporation (NYSE:CVX) should be aware of the most powerful shareholder groups. Institutions...
It is a big week ahead, with corporate earnings, trade talks, Brexit and economic data in focus. There’s also the IFM meetings and the EU Summit.
(Bloomberg) -- President Donald Trump repeatedly pressed then-Secretary of State Rex Tillerson for help getting a criminal case dropped against a client of Rudy Giuliani, long after the top U.S. diplomat made clear he felt the idea was inappropriate, said two people familiar with the matter.Tillerson grew increasingly frustrated with the president’s multiple requests in 2017 that he pressure the Justice Department or agree to a broader political bargain being put forward by Giuliani, according to the people.Through much of the year, Giuliani floated a plan to swap Reza Zarrab, a Turkish-Iranian gold trader, for Andrew Brunson, a U.S. evangelical pastor being held in Turkey.Tillerson insisted that the case against Zarrab, which was before the Southern District of New York, was a matter for the courts and should be allowed to run its course. His refusal left Trump increasingly frustrated, and there was deep friction between the two over the issue, one of the people said.Objections RegisteredOn Wednesday, Bloomberg News reported that Trump pressed Tillerson in an Oval Office meeting in the second half of 2017 to help get the case against Zarrab dropped. After the encounter, Tillerson pulled then-Chief of Staff John Kelly aside in a hallway and reiterated his objections, saying the request was illegal.The New York Times later reported that Giuliani and former Attorney General Michael Mukasey, who were both working for Zarrab, made their case in a prior meeting with Trump and Tillerson in early 2017, months after Trump’s inauguration.Another person familiar with the events at the time said Giuliani even showed up unannounced at the Justice Department and requested a meeting with top officials to discuss the case. The Department never seriously considered the idea of the prisoner swap, the person said.Read More: U.S. Inquiry Into Turkish Bank Inflamed Erdogan, Then Went QuietThe latest reporting shows that the specific episode wasn’t isolated and that the president remained concerned with the Zarrab case, which was a high priority for both Trump and Turkish President Recep Tayyip Erdogan.Swap SoughtIn a phone interview earlier this week, Giuliani -- who became one of Trump’s personal lawyers in April 2018 -- initially denied he’d ever raised Zarrab’s case with the president, but later said he might have done so. He acknowledged he spoke with U.S. officials as part of his effort to arrange a swap of Zarrab for Brunson, who was eventually freed in 2018.Zarrab was being prosecuted on charges of evading U.S. sanctions against Iran’s nuclear program. He’d hired Mukasey and Giuliani, who’s said he reached out repeatedly to U.S. officials to seek a diplomatic solution for his client outside the courts.After his arrest in Miami in early 2016, prosecutors alleged Zarrab had “close ties” with Erdogan. They accused him of using his network of companies to move money through the U.S. financial system with the goal of helping Iran evade sanctions as the U.S. was stepping up economic pressure on Tehran.Read More: Trump Urged Top Aide to Help Giuliani Client Facing DOJ ChargesZarrab later pleaded guilty and testified against Mehmet Hakan Atilla, who headed international banking at state-owned Turkiye Halk Bankasii AS, known as Halkbank. Zarrab said Erdogan knew of and supported the laundering effort on behalf of Iran. Erdogan and other senior Turkish officials repeatedly rejected the accusations, saying they were fabrications.Atilla was eventually convicted of helping Iran evade economic sanctions on billions of dollars of oil revenue and served 28 months in U.S. prison.Tillerson, the former chief executive officer of oil giant Exxon Mobil Corp., was fired by Trump in a March 2018 tweet. At a forum with Bob Schieffer of CBS News in December, he said the president frequently asked him to do things that were illegal, adding that “he got really frustrated when we’d have those conversations.”Trump hosted Brunson in the Oval Office in October 2018 when the American returned to the U.S. after almost two years in a Turkish prison. The pair will be together again on Saturday, when Trump attends the “Value Voters Summit” in Washington for a dinner in Brunson’s honor.\--With assistance from Jennifer Jacobs.To contact the reporter on this story: Nick Wadhams in Washington at email@example.comTo contact the editors responsible for this story: Kevin Whitelaw at firstname.lastname@example.org, ;Bill Faries at email@example.com, Ros KrasnyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
GE has frozen its pension for 20,000 workers and is offering buyouts to others. It marks another step in the death of the pension.
of his chairmanship of the crisis-hit aircraft manufacturer, keeping him on as chief executive but elevating David Calhoun, its senior independent director, to head the board. In a statement, Mr Calhoun said: “The board has full confidence in Dennis as CEO and believes this division of labour will enable maximum focus on running the business with the board playing an active oversight role.” Boeing would soon appoint a new director “with deep safety experience and expertise” to the board, he added.
(Bloomberg) -- Boeing Co. stripped Chief Executive Officer Dennis Muilenburg of his role as chairman, leaving him little margin for error in his final push to resolve the crisis engulfing the company’s 737 Max jetliner.Separating the CEO and chairman roles will let Muilenburg focus on getting the grounded jet back in the air, Boeing said in a statement Friday. While the board expressed its continued support for Muilenburg, it pledged “active oversight” of his performance, a sign of the pressure he’s under to surmount regulatory hurdles and soothe the safety concerns of customers, pilots and passengers.Lead director David Calhoun, a senior executive at Blackstone Group Inc., will take over as non-executive chairman. Calhoun, 62, a former boss of General Electric Co.’s aviation division, stands out on the board for his deep aerospace experience and has been mentioned in years past as a contender for Boeing’s CEO job.“It provides stability and continuity but also introduces a new approach to leadership,” said Richard Aboulafia, an aerospace analyst at Teal Group. “It’s not a huge move in itself, but it creates the potential for a much bigger move.”Muilenburg, 55, is under increasing scrutiny as the global flying ban on the Max nears the seven-month mark, with little clarity on when Boeing’s best-selling jet will return to service. The planemaker’s reputation and finances have been battered since two Max crashes killed 346 people and prompted a worldwide grounding.The shares were little changed after the close of regular trading in New York, having advanced 1.1% to $374.92 in the Friday session. Boeing slumped after the flying ban began in March, but the stock has climbed 17% since mid-August as investors bet that the Max would soon return to service. That’s the biggest gain on the Dow Jones Industrial Average over that period.‘Full Confidence’The board will soon add a director who will serve on a new safety panel, Calhoun said in the statement. The Aerospace Safety Committee is part of a board-ordered safety push.“The board has full confidence in Dennis as CEO,” he said.Muilenburg, 55, said he was “fully supportive” of the change.“Our entire team is laser-focused on returning the 737 Max safely to service and delivering on the full breadth of our company’s commitments,” he said in the statement. He took the reins as CEO in July 2015 and added the chairmanship in March 2016.Governance ActivistsCorporate-governance activists had already been clamoring to separate the chairman and CEO positions.Boeing opposed a proposal to divide the roles at the annual meeting earlier this year, saying directors should be able to select their leadership structure rather than be bound by an “inflexible policy.” Investors rejected the measure but it won 27% support, up from 20% the year before, including abstentions and non-votes.Shareholder activist John Chevedden filed a proposal Oct. 9 to raise the matter again at Boeing’s 2020 annual meeting. Directors would have the discretion to phase in an independent chairman, “although it would be better to have an immediate transition,” the measure said.The Max’s return continues to slip amid scrutiny from sometimes fractious regulators. Until recent weeks, Boeing had insisted the plane would be cleared early in the fourth quarter. But the Max’s three U.S. operators -- Southwest Airlines Co., United Airlines Holdings Inc. and American Airlines Group Inc. -- have taken the single-aisle jet out of their flight schedules until January.A longer delay would jeopardize Muilenburg’s position as CEO, said Aboulafia.“If they’re on course for re-certification in the fourth quarter as they maintain, then he could hang on,” he said. “If it slips much beyond that, then his job is definitely at risk.”Boeing LiferAn aerospace engineer by training and Boeing lifer, the CEO has served as the company’s public face throughout the Max crisis. That’s made him a target of critics who contend that Boeing was too slow to fully explain the role its flight-control software played in the crashes.Muilenburg will have two critical chances to shape perceptions about his handling of the crisis this month: When third-quarter results are released on Oct. 23 and when he testifies before Congress a week later.Directors already should have insights into the financial results, which analysts anticipate to be dented by unexpectedly low deliveries of the 787 Dreamliner and other aircraft.Boeing’s tally of 63 deliveries, down from 190 shipments a year earlier, was 12 jetliners less than predicted by Cowen & Co. analyst Cai von Rumohr.The shortfall probably pared $900 million from third-quarter revenue and 25 cents to 30 cents a share from estimated earnings, von Rumohr said in an Oct. 8 report. That probably resulted in a cash outflow of $1.7 billion to $2 billion for the quarter, he said.‘Undue Pressures’Boeing announced the decision to split the CEO and chairman jobs on the same day that a review panel of global aviation experts delivered a scathing assessment of missteps by the company and the U.S. Federal Aviation Administration in the development and certification of the Max.The Chicago-based manufacturer exerted “undue pressures” on some of its own employees who had FAA authority to approve design changes, according to a 69-page summary of the panel’s findings.Regulators assessing the aircraft sometimes didn’t follow their own rules, used out-of-date procedures and lacked the resources and expertise to fully vet the design changes implicated in two fatal crashes, the Joint Authorities Technical Review found.The findings are ratcheting up the pressure on Muilenburg as he seeks to guide Boeing out of one of the biggest crises in the modern jet era.When asked in an interview last week if he was the right person to lead Boeing out of the deepening turmoil, Muilenburg responded: “This is not about me, right? It’s about our company and what we do for our customers.” He then said, “I will serve in this role with everything that I have as long as the board wants me serving in this role.”(Updates with analyst comment in fourth paragraph.)\--With assistance from Richard Clough.To contact the reporter on this story: Julie Johnsson in Chicago at firstname.lastname@example.orgTo contact the editors responsible for this story: Brendan Case at email@example.com, Linus ChuaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Recent reports hint that Apple could release its iPhone 5G modem by 2022. Today, Apple stock hit a high of $233.81, with a market cap of $1.054 trillion.
Let's take a look at what investors need to know about Facebook and some of its Q3 estimates to help us determine if FB stock might be worth buying before the social media company reports its Q3 2019 earnings results...
Today, Lisa Su completed five years as the CEO of AMD. In these five years, she's brought it back from near bankruptcy and made it into a worthy competitor.
Oil prices rose on Friday on the back of some positive noises coming out of the trade war negotiations and reports that an Iranian oil tanker had been attacked
Shares of Netflix (NFLX) have fallen over 20% in the past three months. Let's dive into everything we know about Netflix heading into its Q3 earnings release to see what to expect from NFLX stock...
Based on the early price action, the direction of the AUD/USD the rest of the session on Friday is likely to be determined by trader reaction to the resistance cluster at .6809 to .6811.
The past trend shows that holiday season shopping euphoria is losing its craze, per Coresight. These retail ETFs may be hit hard if that be the case.
Oct.11 -- Uber Technologies Inc. plans to buy a majority stake in online grocer Cornershop, a deal designed to extend its geographic reach and bolster profits by bundling food delivery with rides. Bloomberg's Lizette Chapman reports on "Bloomberg Technology."
Oct.11 -- The Federal Aviation Administration's approval procedure for Boeing Co.'s 737 Max jetliner has been called into question following a report from the Joint Authorities Technical Review. Bloomberg Intelligence's George Ferguson has the details on "Bloomberg Markets."