U.S. and U.K. Lawmakers Demand Investigations of Facebook’s Data Handling

U.S. Senators and U.K. legislators immediately called for government action following Saturday’s high-profile reports of the mishandling of Facebook user data by the right-wing electioneering firm Cambridge Analytica.

Senator Amy Klobuchar (D-Minn.) called for Facebook CEO Mark Zuckerberg to testify before the Senate Judiciary Committee, and said that the “major breach . . . must be investigated.”

Senator Mark Warner (D-Va.) said on Twitter that “the online political advertising market is essentially the Wild West,” and reiterated the need for a proposed bill called the Honest Ads Act that he cosponsors. The act would impose disclosure requirements for online political advertising similar to those already in place for television and other ads.

Representative Adam Schiff (D-Calif.) has also called for Alexander Nix, CEO of Cambridge Analytica, to speak to the House Intelligence committee.

Meanwhile, in the British homeland of Cambridge Analytica’s parent company SCL Group, member of Parliament Damian Collins has said he will ask Facebook CEO Mark Zuckerberg to testify before the parliamentary committee he chairs on digital issues, or send another senior executive to do so. U.K. information commissioner Elizabeth Denham has also said the new reports would become part of an ongoing investigation into the political use of data analytics.

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Klobuchar’s description of the event as a “breach” raises one of the key questions of any official investigation: whether the transfer of millions of users’ Facebook data from Cambridge researcher Aleksandr Kogan to Cambridge Analytica qualifies as a “data breach” for which Facebook bears responsibility. That could, among other implications, make it subject to laws in most U.S. states, Europe, and Britain that require notification when personal data is hacked, stolen, or otherwise compromised.

Kogan initially told Facebook that he was collecting data, ultimately amounting to roughly 50 million user profiles, for academic research purposes. But Facebook, according to reports, was aware by 2015 that Kogan had shared the data with Cambridge Analytica and SCL Group for commercial use, violating Facebook’s terms. Nonetheless, Facebook did not notify users whose data was compromised.

Following the discovery of the wrongful data sharing, Facebook required Cambridge Analytica to delete the data, but the New York Times reported Saturday that Cambridge still possesses “most or all” of it, in unencrypted form. Cambridge Analytica has said that it did destroy the data, and has further claimed to Fortune that it destroyed “all derivatives,” including any algorithms that might have been created using the data. That claim is contradicted by Christopher Wylie, a key Cambridge player turned whistleblower, who told the Times that the data was the “saving grace” that allowed Cambridge Analytica to construct the models that right-wing hedge fund backer Robert Mercer wanted to use to influence elections.

Facebook leadership, despite clearly losing control of massive amounts of user data, have strongly disputed descriptions of the event as a “breach” that would require public notification. They argue that all the data was gathered according to Facebook rules, and without compromising security systems, before being wrongly shared.

U.S. data-breach notification laws are currently a state-by-state patchwork, and there has been little progress on a unified national version of the rules. That could leave Facebook, like Equifax before it, subject to a welter of state-level legal actions over failure to properly notify users. Though Kogan’s data gathering reportedly focused on U.S. citizens, there may also be legal exposure in Europe and Britain, both of which have strict privacy laws.

Buy This 16.2% Yielding REIT Now, Bargain Price, The CEO Is Buying

This research report was jointly produced with High Dividend Opportunities co-author Philip Mause.

The markets continue to act in an irrational manner when it comes to property REITs. The news on the bankruptcy of Toys “R” Us this week has sent the share price of mall REITs, including CBL & Associates (CBL) and Washington Prime Group (WPG) even lower this week, despite the fact that this bankruptcy was expected, and exposure of both companies to Toys “R” Us is either very limited or non-existent. Readers should note that CBL and WPG have a highly diversified property portfolio and are very unlikely to be much affected by the bankruptcy of a single tenant.

  • CBL posted a list of its 25 largest tenants as of the end of 2016. Toys “R” Us was not on the list. The smallest tenant on the list accounted for 0.75% of revenue – thus, Toys “R” Us percentage of CBL portfolio must be below that number.
  • WPG posted in its June 2017 supplement document listing its 20 largest tenants. Toys “R” Us was not on the list. The smallest tenant on the list accounted for 0.1% of annual base rent so that Toys “R” Us must be below that number. In addition, WPG has no single tenant with more than 3% of total rent.
  • Many Toys “R” Us stores were stand-alone and not in malls.
  • It seems as if the financial impact on WPG and CBL will be minimal, although the bankruptcy will affect sentiment and underlines the problems for traditional retailers.

Despite the fact that we are seeing evidence that mall REIT rents and occupancies are stabilizing, the shares prices are still trading at multi-year low valuations – their lowest since the 2008 Financial Crisis.

Buy This 16.2% Yielding REIT Now, Bargain Price, The CEO Is Buying

Washington Prime Group traded recently at $6.19 and pays a dividend of $1.00 per share per year for a yield of 16.2%. The $1.00/year dividend was amply covered by its AFFO of $1.63 per share, the bull case is fairly simple. WPG trades at roughly 4 times funds from operations (AFFO). In the REIT sector, FFO multiples are critical because they disclose cash flow; REITs selling for less than 10 times FFO are generally considered bargains and many REITs trade for more than 15 times FFO.

The Business – WPG resulted from a spin-off of less desirable assets by the Simon Property Group (NYSE:SPG) and a subsequent merger with another mall REIT. WPG’s properties tend to be located away from the more competitive and dynamic “Standard Metropolitan Statistical Areas” (or geographical regions with a relatively high population ). This factor is a double-edged sword. On the negative side, WPG’s properties will not attract the matrons of Beverly Hills or Silicon Valley. On the other hand, WPG’s properties are generally located far from competition and tend to have the “only game in town” advantage. A recent investor presentation highlights this advantage and should be consulted by investors to get the flavor of the new CEO’s dynamic approach. WPG’s locational advantage is significant. The average drive time to the nearest competitor of a WPG property is 38 minutes; the average drive time to the nearest Class A mall is 70 minutes. WPG tends to serve the part of the country which is actually underserved by shopping malls.

WPG’s strategy has been to aggressively re-purpose its properties. With an innovative and energetic CEO – Lou Conforti – WPG is converting properties into dominant town centers. WPG is attracting entertainment and dining tenants; in 2017, 47% of the new leasing volume was in the “lifestyle” category (food, beverage, and entertainment). WPG has actually opened its own candy stores in several properties and these are doing very well. WPG is also emphasizing the important role of the general managers of these properties. The town centers are actually growing revenue at a pretty good clip – 2017 was up 4.5% year over year. They are becoming the place to go in regions that are underserved with retail and entertainment venues.

WPG has been spinning off its Tier-2 properties and using the funds to pay down debt (debt declined by $400 million in 2017). It has positioned itself to continue investing in its Tier-1 and Open Air properties. WPG has reduced exposure to traditional department stores (including Sears (NASDAQ:SHLD), J. C. Penney (NYSE:JCP), Macy’s (NYSE:M), Dillard’s (NYSE:DDS), and others) to only 3.6% of its annual base rent.

Source: WPG Website

WPG’s portfolio is now highly diversified with no single tenant with more than 3% of total rent.

WPG’s management is definitely on the right track, and we would argue this management is one of the best in the mall REIT space.

CEO is buying – The CEO Mr. Conforti has recently put his money where his mouth is and purchased US$183,000 worth of WPG stock on the open market (in February 2018), which shows that he has some degree of confidence that the company is on the right path.


Following the purchase, Mr. Conforti owns now about 121 thousand shares valued at $750 thousand at the current price.

Economic Performance – WPG achieved AFFO (used rather than FFO because certain one-time items artificially inflated FFO) of $1.63 a share in 2017. It is projected FFO of between $1.48 and $1.56 for 2018. Using the mid-point of $1.52, WPG now trades at a price/forward FFO ratio of 4.1 and would have dividend coverage of 152%. Put another way, after paying its dividend, WPG has more than $100 million of cash flow to spend on debt reduction and investment in its properties. WPG has been reducing its debt, and its debt/EBITDA ratio has declined from 7.9 in 2015 to a current level of 6.5.

Same center performance for Tier-1 and Open Air properties has been solid but Tier-2 properties have been posting negative results. As Tier-2 accounts for only 10% of net operating income and this percentage is likely to decline due to divestiture of underperforming assets, WPG should trend in the direction of stable or growing overall performance over time.

In fact, based on the latest earnings report, WPG’s “net operating income” went down by just 1%, the average sales per square foot remain at close to all-time-highs, while the leasing performance suggests strong demand for space by retailers. This suggests to us that WPG is not only trading at a dirt-cheap valuation but that too much bad news is priced into the stock.

Bottom Line – The mall sector is in the doghouse and WPG (as well as CBL Properties) is probably not even being allowed into the nicer parts of the doghouse by the other occupants. The market is clearly pricing in dramatic declines in FFO and large dividend cuts. The key issue is whether WPG can stabilize its FFO and other financial results so that the market will price in steady FFO or slightly increasing FFO rather than pricing in an expectation of continued declines. If stability is achieved, WPG should be able to trade at a level of at least 8 times FFO.

At the current price, WPG is a bargain and a classic case in which income investor gets paid handsomely (a 16.2% yield) to wait. Investors have also the opportunity to add shares at a time the CEO is buying. We are watching announcements and earnings reports as there may be a sign that the downward trajectory is turning around soon, and that could lead to a substantial increase in the price/FFO multiple. Using a very conservative assumption that they can stabilize FFO at a level of even $1.25 a share (or at 18% lower from the 2018 projected FFO level), a multiple of 8 would yield a price of $10.00 a share – more than 50% up from the current price. WPG could be the big winner in your high-yield portfolio given a period of 12 to 24 months.

If you enjoyed this article and wish to receive updates on our latest research, click “Follow” next to my name at the top of this article.

Disclosure: I am/we are long CBL, WPG.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

Large digital companies operating in the European Union, such as Alphabet Inc. or Twitter Inc., could face a 3 percent tax on their gross revenues based on where their users are located, according to a draft proposal by the European Commission.

The draft, seen by Bloomberg, was circulated on Friday and outlines how a targeted levy on gross revenues would increase the tax bill digital giants face, as the bloc seeks to raise money from an industry it says provides less than it should to public coffers. EU countries have been looking into methods to tax digital companies, including Amazon.com Inc. and Facebook Inc., in a way that captures the true value created in the region.

The commission’s planned revenue tax, which is expected to be proposed on March 21, would only represent a targeted, short-term solution. The bloc also plans to propose a more comprehensive, longer-term approach that will focus on a digital permanent establishment.

The scope of the planned tax would cover companies offering services such as advertising or the sale of user data, according to the draft prepared by the EU’s executive arm. It would also cover services provided by multi-sided digital platforms, which let users find and interact with each other and where users supply goods and services directly to each other.

Digital Revenue

The levy would cover companies that have annual worldwide total revenue exceeding 750 million euros ($920 million) and total taxable annual revenue from offering digital services in the EU above 50 million euros, according to the draft. The parameters may change until the proposal is approved.

The levy, which would be charged annually based on gross revenues, would be at a single rate across the EU of 3 percent, according to the draft proposal, although the rate, too, could change in the final version. Earlier drafts envisaged the rate somewhere between 1 percent and 5 percent.

The commission’s proposal comes as traditional taxation practices have so far failed to capture business proceeds from an industry where value added tends to be virtual rather than material and digital companies have sought to take advantage of loopholes created by uncoordinated European regulation.

Even as national governments accept that the current taxation system needs to be altered, the path forward is fraught with difficulties, with some countries warning that a new levy could discourage digital use and push customers to products outside of Europe.

Any tax proposal will need the unanimous approval of all 28 current members of the EU before turning into law, so one country alone could block it.

Other countries have argued that discussions and decisions on this issue should be tackled at a global level and with the help of the Organisation for Economic Cooperation and Development, a group that advises its 35 members on tax policy.

But a report by the OECD published on March 16 indicated that there is still no global consensus on how best to proceed with the taxation of the digital economy or on the merits of an interim solution.

6 Signs You're About to Be Fired

No matter how hard you work, there’s a possibility you may someday be laid off or fired, often without much warning. However, after your boss has delivered the bad news, chances are you’ll be able to look back and think of a few warning signs.

But what if you could know in advance that the hammer was about to fall? Those who have been fired multiple times often report similar experiences in the hours, days, and even weeks before they were let go.

Here are a few signs that you may need to dust off your resume.

1. Your boss warns you.

Your boss likely won’t give you an exact date and time of your firing in advance, but many employees do get warnings. The first indication is likely your performance review, which will contain valuable insights into how your boss thinks you’re doing.

Beyond that, you may receive verbal or written warnings about certain behaviors that could put your job at risk. If you ignore those warnings and refuse to make changes, your supervisor may feel there’s no other choice but to terminate.

2. You commit fireable offenses.

Not every fired employee is guilty of an offense, but there are things you can do that will increase your risk. If you’re chronically late, for instance, you could end up on the chopping block.

In fact, in a 2017 CareerBuilder survey, a whopping 41 percent of employers said they’ve fired an employee for being late. You’ll also put a target on your back by having an affair with a coworker or client, blabbing about your company on social media, or behaving inappropriately.

3. The job is a bad fit.

When you landed the job, it may have been the right fit at the time. Or perhaps it was always a bad match, but you needed the money. Whatever the situation, if your job is no longer right for you, you may not be the only one noticing it.

Consider edging your way back into the job market by networking and keeping an eye out for opportunities that are a good fit. Otherwise, you’re not only risking termination, but you’re wasting time in a job that won’t further your career.

4. You’ve been ostracized.

It usually takes a while for employers to fire someone, especially if HR brings pressure to document everything to avoid legal issues. During that time period, any employees who know the termination is imminent can tend to distance themselves from the person. You may notice people have difficulty making eye contact or you are shut out of important meetings. If you start to feel as though people are avoiding you, it might be time to get your resume ready.

5. Your boss’s behavior has changed.

In the months leading up to a termination, an employee often finds his or her boss has a sudden change in behavior. I’ve seen this run in extremes. At one job years ago, not too long before I was let go, my boss began clamping down on me, micromanaging my every move. I’ve also seen it where a soon-to-be-fired colleague found themselves completely abandoned by the boss. Either way, this type of sudden behavior change isn’t usually good news.

6. Your company has changed.

Layoffs and terminations often occur as a result of a company-wide change. It could be something as simple as losing a big client, cutting the business’s income. Mergers and acquisitions also prompt unexpected staff changes, sometimes impacting large groups of people at once.

It’s important to realize that not every company change will result in terminations. However, employers will usually expend a great deal of effort reassuring employees nothing will change, only to turn around and make changes soon after.

As a journalist and employee of television and radio stations, I saw this situation repeatedly because of the ever-changing media landscape and the layoffs that came with it over the years. You sometimes get a little too familiar with that feeling of dread that pops up before an expected layoff. The best remedy for this is to always keep your resume up to date.

Firings often catch people by surprise, even if there were warning signs. But if you begin to feel uncomfortable with your work situation, you can always meet with a recruiter or begin networking in your industry to make valuable connections. Once you are ready to begin looking for a job, you’ll be in a position to quickly move on to something else.

Facebook Lite to launch in developed countries, including U.S.

(Reuters) – Facebook Inc on Thursday said it will roll out the stripped down version of its social media platform, Facebook Lite, to more countries including developed ones, to attract users struggling with slower mobile data connections.

The Facebook application is seen on a phone screen August 3, 2017. REUTERS/Thomas White

Facebook Lite, presently available in over 100 countries, was launched in 2015 targeting developing markets and designed to work in areas with slower or limited internet connections.

The new rollout will now be available to users in more countries, including the United States, Canada, Australia, United Kingdom, France, Germany, Ireland, and New Zealand.

“We’ve seen that even in some developed markets people can have lower connectivity, so we want to make sure everyone has the option to use this app if they want,” the company said.

The app will be available for download from Friday.

Reporting by Munsif Vengattil in Bengaluru and David Ingram in San Francisco; Editing by Bernard Orr

The VR Metaverse of 'Ready Player One' Is Just Beyond Our Grasp

Virtual reality, as it’s been promised to us by science fiction, is a singular realm of infinite possibility. Star Trek’s Holodeck, Yu-Gi-Oh!’s Virtual World, Snow Crash’s Metaverse: Each is the all-powerful experience generator of its world, able to accommodate a character’s any desire. Novelist Ernest Cline sharpened this vision in his 2011 debut, Ready Player One, which hits theaters in March courtesy of Steven Spielberg. While the story is set in the strife-torn meatspace of 2045, most of its action unfolds in a vast network of artificial worlds called the OASIS. And in the tradition of reality playing catch-up to sci-fi, the OASIS has become the endgame for real-world VR developers, many of whom are actively trying to replicate its promise. Are they making progress? Absolutely. Are they doing it right? Absolutely not.

The OASIS is saddled with a terrible acronym—hopefully Spielberg never lets one of his characters say “Ontologically Anthropocentric Sensory Immersive Simulation”—but it offers something attractive: breadth. Some of the environments contained in the OASIS are created by users, others by government agencies; they range from educational to recreational (reconstructions of ’80s fantasy novels are popular), nonprofit to commercial.

Today’s real-life multiuser VR experiences, by contrast, are less OASIS and more ­PUDDLE (Provisionally Usable Demonstration of Dazz­ling Lucid Environments). Some of the constraints are aesthetic: In AltspaceVR, users are limited to a narrow range of expressionless human and robot avatars, while the goofy up-with-people charm of Against Gravity’s Rec Room hinges on you not caring that avatars lack noses. Other constraints are experiential: Facebook’s Spaces lets you hang out only with people you’re already Friends with. Startups with OASIS-size ambitions are hampered by still other issues, whether that’s a noob-unfriendly world-building system (Sansar) or a dark-side-of-Reddit vibe that invites trollery (VRchat).

The problem, though, isn’t such metaphorical boundaries—it’s literal ones. None of these PUDDLEs touch. You can’t hop from Rec Room to VRchat; you’re stuck where you started. That’s why it’s hard to feel truly immersed. To reach Cline’s 2045, developers need to start laying the foundation now for an infrastructure that links each of these worlds. If that sounds idealistic, or even dangerous, it’s not. Think of the days before the internet, when various institutions ran their own walled-off networks. Only when computer scientists came together to standardize protocols did the idea of a single network become possible. Now imagine applying that notion to VR—a metaverse in which users can flit between domains without losing their identity or their bearings as they travel.

The OASIS works because it feels like it has no owners, no urgent needs. It’s a utility, a toolkit available for artisans and corporations alike. If we want to realize this potential ourselves—universal freedom and possibility—let’s start thinking about VR the way Cline does: not as a first-to-market commodity, but as an internet all its own.

Peter Rubin (@provenself) is the author of the upcoming book Future Presence.

This article appears in the March issue. Subscribe now.

All photo references by Getty Images

Bitcoin exchange reaches deal with Barclays for UK transactions

LONDON (Reuters) – One of the biggest bitcoin exchanges has struck a rare deal which will allow it to open a bank account with Britain’s Barclays, making it easier for UK customers of the exchange to buy and sell cryptocurrencies, the UK boss of the exchange said on Wednesday.

Workers are seen in at Barclays bank offices in the Canary Wharf financial district in London, Britain, November 17, 2017. Picture taken November 17, 2017. REUTERS/Toby Melville

Large global banks have been reluctant to do business with companies that handle bitcoin and other digital coins because of concerns they are used by criminals to launder money and that regulators will soon crack down on them.

San Francisco-based exchange, Coinbase, said its UK subsidiary was the first to be granted an e-money license by the UK’s financial watchdog, a precursor to getting the banking relationship with Barclays.

The Barclays account will make it easier for British customers. Previously, they had to transfer pounds into euros and go through an Estonian bank.

“Having domestic GBP payments with Barclays reduces the cost, improves the customer experience…and makes the transaction faster,” said Zeeshan Feroz, Coinbase’s UK CEO.

The UK is the largest market for Coinbase in Europe, and the exchange said its customer base in the region was growing at twice the rate of elsewhere.

A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration taken December 8, 2017. REUTERS/Benoit Tessier/Illustration

Feroz said that it took considerable time to get a UK bank on board, partly because Barclays needed to be sure that Coinbase had the right systems in place to prevent money laundering.

Regulators across the globe have warned that cryptocurrencies are used by criminals to launder money, and some exchanges have been shut down.

“It’s a completely brand new industry. There’s a lot of understanding and risk management that’s needed,” Feroz said.

Despite growing interest in both digital currencies and the technology behind them, some big lenders have limited their customers ability to buy cryptocurrencies, fearing a plunge in their value will leave customers unable to repay debts.

In February, British banks Lloyds and Virgin Money said they would ban credit card customers from buying cryptocurrencies, following the lead of JP Morgan and Citigroup. [nL8N1PU10Y]

Coinbase said it had also become the first crypto exchange to use Britain’s Faster Payments Scheme, a network used by the traditional financial industry.

Reporting by Tommy Wilkes and Emma Rumney; Editing by Elaine Hardcastle

Microsoft women filed 238 discrimination and harassment complaints

SAN FRANCISCO (Reuters) – Women at Microsoft Corp working in U.S.-based technical jobs filed 238 internal complaints about gender discrimination or sexual harassment between 2010 and 2016, according to court filings made public on Monday.

FILE PHOTO: The Microsoft logo is shown on the Microsoft Theatre in Los Angeles, California, U.S., June 13, 2017. REUTERS/Mike Blake/File Photo – RC177D20CF10

The figure was cited by plaintiffs suing Microsoft for systematically denying pay raises or promotions to women at the world’s largest software company. Microsoft denies it had any such policy.

The lawsuit, filed in Seattle federal court in 2015, is attracting wider attention after a series of powerful men have left or been fired from their jobs in entertainment, the media and politics for sexual misconduct.

Plaintiffs’ attorneys are pushing to proceed as a class action lawsuit, which could cover more than 8,000 women.

More details about Microsoft’s human resources practices were made public on Monday in legal filings submitted as part of that process.

The two sides are exchanging documents ahead of trial, which has not been scheduled.

Out of 118 gender discrimination complaints filed by women at Microsoft, only one was deemed“founded” by the company, according to the unsealed court filings.

Attorneys for the women described the number of complaints as“shocking” in the court filings, and said the response by Microsoft’s investigations team was“lackluster.”

Companies generally keep information about internal discrimination complaints private, making it unclear how the number of complaints at Microsoft compares to those at its competitors.

In a statement on Tuesday, Microsoft said it had a robust system to investigate concerns raised by its employees, and that it wanted them to speak up.

Microsoft budgets more than $55 million a year to promote diversity and inclusion, it said in court filings. The company had about 74,000 U.S. employees at the end of 2017.

Microsoft said the plaintiffs cannot cite one example of a pay or promotion problem in which Microsoft’s investigations team should have found a violation of company policy but did not.

U.S. District Judge James Robart has not yet ruled on the plaintiffs’ request for class action status.

A Reuters review of federal lawsuits filed between 2006 and 2016 revealed hundreds containing sexual harassment allegations where companies used common civil litigation tactics to keep potentially damning information under wraps.

Microsoft had argued that the number of womens’ human resources complaints should be secret because publicizing the outcomes could deter employees from reporting future abuses.

A court-appointed official found that scenario“far too remote a competitive or business harm” to justify keeping the information sealed.

Reporting by Dan Levine; Additional reporting by Salvador Rodriguez; Editing by Bill Rigby, Edwina Gibbs and Bernadette Baum

AT&T & Time Warner: Prepare For The Worst

When news broke that AT&T (T) was purchasing Time Warner (TWX) in a cash and stock deal valued at $107.50 for Time Warner holders I felt very confident that the move would improve AT&T’s profitability and widen its moat. AT&T was (and remains) one of my largest positions, so the news was welcome as I previewed the prospective ecosystem where premium original content and provider flowed seamlessly together permitting AT&T to leverage both as a compelling consumer package.

AT&T has a lucrative history marketing ‘bundle deals’ via DirecTV/U-verse, phone and internet. Adding Time Warner’s content to the mix was like adding another weapon to their arsenal. The move would fortify their position in an era where content is king and the average American residence has nearly 3 TVs per household.

With more and more customers embracing OTT services like Netflix (NFLX) and ditching cable, AT&T recognized the writing on the wall and (potentially) acquired Time Warner to help mitigate the impact and diversify them away from their reliance on legacy telecom services.

Perhaps it was not only adding a weapon to their arsenal but adding a shield to insulate them from the evolving landscape. I credit the management team led by CEO Randall Stephenson for their proactive approach getting ahead of the curve.

Obviously Time Warner’s stock popped immediately on the news while AT&T’s gyrated as investors digested the antitrust risks and whether or not AT&T overpaid.

Let’s take a look at those risks now.

Did AT&T Overpay?

The buyout offer did not come cheap ($85B) and some analysts groaned that while Time Warner was a nice asset, it came at too high a cost. But obtaining regulatory approval would be no walk in the park and AT&T knew they were in for protracted litigation. Let’s look at the EPS and Revenue numbers for the last two FYs for Time Warner:


You will note that on an EPS basis, Time Warner jumped about 9% year over year from $5.86 to $6.41. Time Warner grew EPS over 20% the year before that. When the $107.5 price tag was initially applied to the prior 4 quarters of earnings in October 2016, the P/E ratio stood at approximately 21.

That did look a bit steep.

However, the deal has not closed and when applying today’s earnings to the buyout price, the P/E ratio dips to 16.7. That looks much healthier. You have to tip your hat to AT&T’s management here since they had the prescience to realize that while the initial premium to Warner shareholders seemed lofty, it allowed them to garner unanimous approval from both boards by offering a rich enough premium to Warner holders while not seeming reckless to AT&T holders.

Stephenson and company knew earnings would continue to rise for the content king and before (IF) the deal closes, they will look like geniuses as earning would have grown into the multiple applied at the time of the offer.

Regulatory Risk

And that brings us to the elephant in the room: whether AT&T can out-litigate the DOJ in their pending antitrust case. President Trump has been vocal in his opposition to the buyout and may see it as fulfilling a campaign promise to defeat the deal. But Trump will not have the final word, it will be adjudicated in the courtroom not the political arena, however you would be naïve to believe that those worlds don’t intersect despite our system of checks and balances.

In the interim, AT&T has tried to curry favor with the Trump Administration by announcing bonuses to its employees and lauding the President for the tax bill. Nevertheless, the antitrust team is pushing ahead with bluster and bravado to paint the government as underdogs thwarting corporate strong-arming.

In November of last year I penned a post in the immediate aftermath of DOJ filing suit recommending purchasing shares of Time Warner during the turmoil called, “Time Warner: Heads I Win, Tails You Lose”. In just two days TWX share price plummeted from $95 to below $87. I quickly logged into my brokerage account to pick up shares of Time Warner in the $80’s.

In the post I explained why the volatility generated a perfect arbitrage opportunity, in summary:

This remains mostly true today, however Time Warner’s share price has since rebounded near $95 thereby shrinking some of the potential returns if the buyout is approved. While I have contacts within the antitrust division of the DOJ from my Washington days, they are not at liberty to speak about the case and therefore I know only as much as the public announcements trickling out on a daily basis.

And it is my opinion that the deal looks less likely to succeed now than it did 4 months ago when I wrote that post. But that reminds me of a saying by Clive Davis:


Prepare To Take Action:

During the previous dip, I was on vacation with my wife refilling the gas tank when I checked the market news to find out that Time Warner was selling off. We waited at that pit stop probably longer than she preferred so I could buy shares since I knew that the dip was an overreaction and would not last.

This time, I am planning ahead by placing limit buy orders at $85 and below that are good-til-cancelled in the scenario where the DOJ wins and/or impactful news hits the stock causing a knee-jerk reaction. In essence the hypothetical case looks like this:


In the portion of the chart above circled, you will see a red candlestick where news adversely impacted a stock sending it cascading into free-fall. But you will also notice the rapid rebound where the stock recovered quickly above that price.

The window to pounce and take advantage of the dip was small. That is why I am preparing to maximize the opportunity if it presents itself again. I believe that owning Time Warner shares at $85 and below provides a margin of safety if the two parties are forced to go their separate ways.

Time Warner Flying Solo?

Will I be saddled with overvalued shares of Time Warner purchased at $85? I doubt it. Here’s why:

Growth for Time Warner shows no signs of abatement as each operating division increased revenue and profits in the latest quarter (yet again). HBO’s subscription revenues increased 11% and its unparalleled show Game of Thrones is not due back until 2019. I expect an even larger increase in the months building up to the premiere.

Additionally, on the heels (pun intended) of Wonder Woman’s success, and in the backdrop of the #metoo movement, I believe Warner Bros. has incentive to continue to produce content with powerful heroines. HBO produced an amazing women focused hit with Big Little Lies and it’s due back for a second season featuring Meryl Streep. HBO made a savvy move by riding the coattails of Reese Witherspoon’s success.

On the cable news front, CNN was rated the #1 network in primetime and total day viewership among young adults and tops in digital news as well (from their 4Q earnings release). Whether you believe the treatment of the Trump Administration is favorable or not, it has been favorable to the bottom line of CNN.

And those are just a few samples of the many reasons why I remain bullish on Time Warner.

No one knows for certain how the trial will shake out, but I am positioning myself for success no matter the outcome.

Disclosure: I am/we are long T, TWX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Broadcom Shares Surge on Reports that Intel is Considering an Acquisition

Shares of semiconductor company Broadcom surged following a report on Friday that Intel is considering an acquisition.

Broadcom’s stock rose 4% in after-hours trading on Friday to $264.21 after the Wall Street Journal reported of Intel’s interest in acquiring Broadcom, which engaged in a hostile takeover attempt of mobile chip maker Qualcomm.

The Wall Street Journal reported that Intel (intc) was pondering an acquisition of Broadcom as one of a number of possible deals to help Intel remain competitive if and when Broadcom (broad) buys Qualcomm (qcom). A combination of Qualcomm and Broadcom would pose a significant threat to Intel.

Intel, which makes semiconductors for data center servers and personal computers, is the larger of the three companies and has a $244.2 billion market capitalization. Broadcom, which makes wireless and mobile computer chips, has a market value of $109.5 billion, while Qualcomm is valued at $93.3 billion.

For the past few months, Qualcomm has been trying to fend off Broadcom’s unsolicited advances and has rejected multiple Broadcom bids, the most recent being for $121 billion, or $82 a share. Qualcomm has said that each of Broadcom’s bids undervalues it and has also cited regulatory concerns.

Earlier this week, the U.S. Committee on Foreign Investment was reported to be considering an investigation of a potential Broadcom takeover of Qualcomm, which prompted Qualcomm to a shareholder meeting until April. While Broadcom is incorporated in Singapore and also operates a co-headquarters in San Jose, Calif., the semiconductor giants plans to reincorporate in the U.S.

Intel shares were relatively flat in after-hours trading on Friday at $51.90.

Intel has acquired a handful of companies over the past few years like chip maker Altera for $16.7 billion and automotive component and sensor provider Mobileye for roughly $15 billion, but a possible acquisition of Broadcom would dwarf those deals.

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Fortune contacted Intel and Broadcom for comment and will update this story if it responds.

Apple's Swift Programming Language Is Now Top Tier

Apple’s programming language Swift is less than four years old, but a new report finds that it’s already as popular as its predecessor, Apple’s more established Objective-C language.

Swift is now tied with Objective-C at number 10 in the rankings conducted by analyst firm RedMonk. It’s hardly a surprise that programmers are interested in Apple’s language, which can be used to build applications for the iPhone, Apple Watch, Macintosh computers, and even web applications. But the speed at which it jumped in the ranks is astonishing. Swift is the fastest growing language RedMonk has seen since it started compiling these rankings in 2011. Even Go, a programming language that Google released in 2009, hasn’t been able to break into the top 10.

The second fastest grower is Kotlin, which Google now officially supports on Android. It leaped from number 46 in the third quarter of 2017 to number 27 in January.

RedMonk’s rankings don’t necessarily reflect whether companies are using these languages for real-world projects, or how many jobs are available for developers who know them. Instead, the firm tries to gauge how interested programmers are in these languages. Popularity among programmers could influence business decisions such as what languages to use for new projects.

RedMonk compiles its rankings by looking at the number of questions people ask about each language on the question and answer site Stack Overflow as well as the number of projects using particular languages on the code hosting and collaboration site GitHub. The methodology was originally created by data scientists Drew Conway and John Myles White in 2010.

Apple first released Swift in 2014. The idea was not just to make it easier for new developers to learn to program, but to simplify life for experienced coders as well. Many languages over the years have aimed to smooth the programming process by offering syntax that’s easier to read or building in features that programmers otherwise commonly write from scratch. But these sorts of languages often produced applications that ran more slowly than ones written in more difficult programming languages. Swift aimed to combine programmer-friendly features with performance.

Kotlin, which was created by the company JetBrains and officially released in 2016, has similar goals. What sets Kotlin apart is that it’s compatible with the widely used Java programming language, which means programmers can include Java code in their Kotlin programs, or even write new features for Java applications using Kotlin. Kotlin had already received widespread attention from Java developers, but once Google announced full support for the language on Android, interest skyrocketed. RedMonk analyst Stephen O’Grady pointed out in the report that Kotlin’s Java roots could help it find its way into more places than Swift, such as large enterprise applications.

Apart from the big gains for Swift and Kotlin, the RedMonk rankings changed fairly little this quarter. JavaScript and Java remained the two most popular languages, closely followed by Python, PHP, and C#. As O’Grady notes in the report, it’s becoming harder and harder for new languages to break into the top 20. That makes the rise of Swift and Kotlin all the more impressive.

Language Lessons

Amazon’s Echo Speakers Are Spontaneously Laughing—And Users Are Spooked

Amazon is trying to stop its Amazon Echos, powered by the Alexa voice-activated assistant, from suddenly laughing.

The online retail giant told to tech news publication The Verge on Wednesday that it is aware that some Echo Internet-connected speakers have a laughing problem and is “working to fix it.”

Amazon’s (amzn) acknowledgement of the issue comes after several people have reported on Twitter and Reddit that their Amazon Echo speakers have started laughing, for no apparent reason. People typically activate their Echo speakers by saying the word “Alexa,” which triggers the device to listen and respond to commands like changing the volume.

The latest laughing is causing some customers to feel unsettled and confused. Other say it’s spooky, like something out of a horror film.

Although third-party devices like some HP Inc. personal computers and certain modems work with Alexa, the problem appears to be limited to the Amazon Echo and the smaller Echo Dot.

A Reddit user also described problems with the Amazon Echo Dot two weeks ago:

We just added the echo dots two months ago. The dot we have in the master bath has twice now randomly played a track of a woman laughing at about 10 p.m. the first time I thought the fire tv was sending audio through it since I had been trying to sync them up to the tv, but tonight was completely random. No indication on the app that the device heard any command. We had the dot laugh several times and it wasn’t the laugh Alexa produces, but definitely sounded like a canned laugh, not like someone laughing live.

It’s unclear what’s causing the errors and Amazon’s brief statement did not say when the problem would be fixed or if other Alexa-enabled devices are also affected.

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Fortune contacted Amazon for more details and will update this story if it responds.

Google Just Indexed Millions of ‘Life Magazine’ Photos Using Artificial Intelligence

Google has used its artificial intelligence to automatically index millions of photographs from the defunct Life Magazine.

The search giant, which debuted a website for the photo project on Wednesday, said it was able to categorize over 4 million iconic Life Magazine photographs without human help. After clicking on a particular label like “skateboarding,” for example, users are shown photos of people performing skateboard tricks along with Wikipedia’s definition of the sport.

Google uses deep learning technology to help its computers better understand objects like dogs or cats in pictures and make its image search tool more efficient to people wanting to see a particular image.

Compared to the core Google search, the photo project’s website is slow to load, especially when there are thousands of images assigned to a particular label like “road.”

Although Google has hosted a Life Magazine archive since 2008, the new website makes using it easier. Searching Life Magazine’s photojournalism for ballet brings up relevant photos alongside the name of the photographer who took the picture, the title of the photo like “Nutcracker Ballet,” and what in the photo Google’s computers were able to recognize, like a dancer.

Although usually accurate, Google’s technology does have some hiccups that highlight some of AI’s current limitations. For instance, under the “skateboarding” label is a photo that is shown sideways of a man wearing a top hat and holding a cane who is performing what looks like a campy musical number. For unknown reasons, the computers mistakenly thought it saw a skateboard in the image.

Additionally, the computer that created the index has come up with some odd categories that human editors likely wouldn’t have. One such label is “identity document,” which brings up photos of people’s passports and railroad tickets as well as a photo of musician Paul McCartney holding a Grammy plaque. It’s likely the computers saw similarities between a typical document and McCartney’s Grammy plaque, which in this case resembled more of a small, commemorative plate than the conventional 3-dimensional Grammy statue.

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Another label, “concrete,” highlights thousands of photos, some of which appear random. There’s a picture of an old tombstone, a photo of a marine boot camp, a picture of a person hunting a snake in a small enclosure, and a photo of the “Roosevelt Raceway” that shows a man—incorrectly identified by the computer as a fisherman— sweeping. While there indeed seems to be some sort of concrete object involved with each photo, it’s still an unconventional way to group all the pictures together considering they are displaying very different subjects.

In addition to the misidentified photos, the technology also failed to create labels for some obvious topics. They include some of Life Magazine’s most iconic photos.

For instance, the computers did not create a label for the “Vietnam War,” a subject that should include some of Life Magazine’s best known and most powerful photos. The computer did create is a “war” label, but it appears to have grouped over 23,000 photos, making searching for a particular picture difficult.

Cryptocurrencies are risky for consumers, says BoE's Haldane

LONDON (Reuters) – Cryptocurrencies pose a risk to British consumers, though not to the financial system as a whole, the Bank of England’s chief economist, Andy Haldane, said on Tuesday.

FILE PHOTO: A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration taken December 8, 2017. REUTERS/Benoit Tessier/Illustration/File Photo

“There’s lots of potential risks there, one of which is the danger to the consumer from buying into this stuff,” Haldane said in a BBC television interview.

Bitcoin BTC=, the best known cryptocurrency, soared in value from around $1,000 at the start of 2017 to almost $20,000 in mid-December, before tumbling below $6,000 last month and then staging a partial recovery.

Haldane’s concerns are similar to those expressed by BoE Governor Mark Carney in a speech on Friday, and previously by Britain’s Financial Conduct Authority.

Many global regulators have warned about cryptocurrencies this year and China has banned financial institutions from processing them. Carney said this would be a step too far, given the potential of the underlying technology to improve payments and asset clearing and settlement.

Haldane said the BoE continued to monitor cryptocurrencies, and that at less than 1 percent of total global wealth, they did not pose a big danger to the world’s financial system.

But asked if he would invest in cryptocurrencies himself, Haldane said he was very risk averse, and would not.

Reporting by David Milliken; Editing by James Dalgleish

Pennsylvania Sues Uber Over Data Breach Disclosure

Uber faces more potential legal consequences for waiting to make public a major hack until a over a year after it happened. The Pennsylvania Attorney General filed a lawsuit against Uber Monday for violating the state’s data breach notification law, which says hacks should be disclosed within a “reasonable” time frame. Uber didn’t merely keep quiet about the massive breach; it reportedly paid a $100,000 ransom to the perpetrators in exchange for their silence. And while experts say Uber will likely settle the case, it may be just the latest in a cascade of similar lawsuits.

The stolen Uber data included the names and driver’s license information of around 600,000 drivers—including at least 13,500 from Pennsylvania—as well as data belonging to 25 million users in the US. It impacted over 57 million people in total. “Uber violated Pennsylvania law by failing to put our residents on timely notice of this massive data breach,” Josh Shapiro, the states’s attorney general, said in a statement. “Instead of notifying impacted consumers of the breach within a reasonable amount of time, Uber hid the incident for over a year and actually paid the hackers to delete the data and stay quiet.” Under Pennsylvania’s data breach notice law, the attorney general may seek fines up to $1,000 for each violation, leading to a maximum penalty of $13.5 million for Uber.

Pennsylvania’s joins a growing line of lawsuits against the ride-share company. Both Washington state, and cities including Los Angeles and Chicago filed suits when the breach was first made public by the company’s new CEO Dara Khosrowshahi in November. Two class-action lawsuits were also filed in California days after the breach was first disclosed. Attorneys general from New York, Missouri, and Connecticut have also said they would look into the breach. Forty-eight states, (excluding South Dakota and Alabama) currently have laws on the books regulating how and when a data breach must be disclosed.

“Since starting on this job three months ago, I’ve spoken with various state and federal regulators in connection with the data breach pledging Uber’s cooperation, and I personally reached out to Attorney General Shapiro and his team in the same spirit a few weeks ago. While I was surprised by Pennsylvania’s complaint this morning, I look forward to continuing the dialogue we’ve started as Uber seeks to resolve this matter,” Tony West, Uber’s chief legal office said in a statement. “We make no excuses for the previous failure to disclose the data breach. While we do not in any way minimize what occurred, it’s crucial to note that the information compromised did not include any sensitive consumer information such as credit card numbers or social security numbers, which present a higher risk of harm than driver’s license numbers. I’ve been up front about the fact that Uber expects to be held accountable; our only ask is that Uber be treated fairly and that any penalty reasonably fit the facts.”

The Pennsylvania lawsuit is also the first to cite a Senate hearing in February where John Flynn, Uber’s chief information security officer, testified in front of the Committee on Commerce, Science, and Transportation about the hack. Uber initially said the payment it made to the hackers responsible for the breach was not a ransom, but simply a payout under its existing bug bounty program, a system many tech companies deploy to reward security researchers for bringing vulnerabilities to their attention. But during the hearing, Flynn acknowledged that the agreement made with the perpetrators—as well as the $100,000 payment—were not typical for its bug bounty program, which usually compensates researchers only a couple thousand dollars.

“The fact that this was a multistep malicious intrusion, a downloading of data, and extortionate demands means this wasn’t consistent with the way that [the bug bounty] program normally operates,” Flynn testified. He also said that Uber “made a misstep not reporting to law enforcement.”

William McGeveran, a professor at University of Minnesota Law School who specializes in data privacy law, said it’s possible Uber will settle with Pennsylvania for a fraction of the total $13.5 million fine, and take on commitments to ensure a similar breach doesn’t happen in the future. “In these settlements many times regulators care more about fixing the problem than about being punitive,” says Mcgeveran. But more suits could follow from other states, especially because Flynn’s statements before the Senate committee provide state prosecutors with more evidence to work with.

“Given the alleged facts in this case, it wouldn’t surprise me at all to see more lawsuits,” says Woodrow Hartzog, a law and computer science professor at Northeastern University who studies privacy and data protection issues. “Oftentimes you will have state attorneys general that might even work together if that appears to be the best course of action. They’ll probably be using the facts in this case as an example of how not to respond to a data breach.”

Uber has also already faced disciplinary action from federal regulators twice, once for a separate hack in 2014 that exposed the information of 100,000 drivers, and once for misleading drivers about how much money they could make. The FTC said in November that it was also evaluating the “serious issues” raised by the 2016 breach.

Uber has yet to pay any fines to the federal government, and won’t have to if it makes good on its promises to protect its drivers’ and customers’ privacy. The agreement between the FTC and Uber lasts 20 years. If the FTC decides that the 2016 breach is considered a violation of that agreement, the ride-hailing company could face expensive consequences. In 2012 for example, the FTC fined Google $22.5 million for violating its 2011 settlement.

For now, no federal law exists requiring companies disclose a data breach within a certain time frame. But since nearly every state has a data breach law, Uber could still face a patchwork of further lawsuits. Some lawmakers are also pushing for federal legislation. In December, Democratic senator Bill Nelson introduced the Data Security and Breach Notification Act, which would require companies to report breaches within a month, or face up to five years in prison.

Federal laws punishing companies for failing to notify about a breach wouldn’t necessarily improve protections for consumers, however. “I would be skeptical of the claims that a unified data security protection law are going to provide clarity and better data protection at the same time,” says Hartzog, who has testified before Congress about data breach legislation. “A movement to have a single unified standard among the United States would be seen as an opportunity to water down those requirements.”

State laws also give attorneys general the chance to act if they perceive the Federal Trade Commission to be not aggressive enough. “I think we’re going to see more activity by state attorneys general in privacy and security cases because it’s not clear how much the FTC is going to do under its current management compared to previous,” says McGeveran. “These states have a better argument because they have specific requirements that you notify about a breach.”

Besides, it’s not hard for a major corporation like Uber to juggle multiple state regulations at once, especially because the ones governing breach disclosure mandate the same things. “Many of them are quite similar in their requirements, many of them have the same deference to industry standards,” says Hartzog. It’s far harder to navigate, say, every state’s regulations on taxis.

Uber Issues

Reddit CEO Steve Huffman Acknowledges Users Shared Russia Propaganda

Russian trolls used Reddit to spread propaganda in prelude to the 2016 U.S. presidential election, Reddit said on Monday.

Reddit CEO Steve Huffman said in a post on Reddit that the company removed a “few hundred accounts” from its social media service that it believed were linked to Russian-based entities that had spread misleading information.

Huffman did not identify the groups, but the Daily Beast reported last week that members of the Russia-based Internet Research Agency had spread misinformation on Reddit’s various message boards as well as on Tumblr blogging service. The IRA was one of three Russian groups identified in a recent Justice Department indictment alleging that Russian individuals had spread fake news and propaganda through popular social networking and messaging services like Facebook (fb) and Twitter (twtr) in an effort to exacerbate existing divisions in the U.S..

“As for direct propaganda, that is, content from accounts we suspect are of Russian origin or content linking directly to known propaganda domains, we are doing our best to identify and remove it,” Huffman wrote. “The vast majority of suspicious accounts we have found in the past months were banned back in 2015–2016 through our enhanced efforts to prevent abuse of the site generally.”

Huffman said that there’s not much evidence that Russian trolls bought online ads on Reddit to disseminate propaganda, as they are alleged to have done on Facebook and Google.

“We don’t see a lot of ads from Russia, either before or after the 2016 election, and what we do see are mostly ads promoting spam and ICOs,” Huffman said.

Huffman also said that thousands of U.S.-based Reddit users may have unwittingly promoted Russian propaganda on the service. He cited the fact that these Reddit users endorsed the postings of @TEN_GOP Twitter account, which they thought were linked to a real Republican group but was actually a “Russian agent.”

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“I wish there was a solution as simple as banning all propaganda, but it’s not that easy. Between truth and fiction are a thousand shades of grey,” Huffman wrote. “It’s up to all of us—Redditors, citizens, journalists—to work through these issues.”

The Senate Intelligence Committee now wants more information from Reddit about the possibility that Russia may have exploited the service, the Washington Post reported Monday. The committee also plans to hold a briefing with Tumblr, the newspaper said citing an unnamed source.

Devops is essential to the cloud, and to its payoff

The notion of devops means that you’re streamlining the movement of applications from the point of need to production. It matters not if you’re changing or improving applications or building new ones.

Of course, devops arose around the rise of cloud computing, and that’s no mystery. Cloud computing provides a point of central deployment using a shared consumption model. So, devops, fits well into that model considering that you’re consistently developing and deploying applications around the notion of continuous improvement.

However, what’s more interesting is not the fact that devops is a nice way to leverage the value of cloud computing; it’s the fact that devops should be systemic to all that is cloud for most, if not all, enterprises. Indeed, I’m rarely working on a cloud migration project that does not have a devops component. Either the company is building a new devops organization and processes at the same time, or it is improving existing ones. Enterprises are getting it—or have already got it.

Devops is to cloud computing as are security, governance, and managemen—meaning it’s no longer optional. It’s needed to gain the true value of cloud computing.

Of course, there are still many enterprises that are doing cloud first and devops second. That’s a huge mistake considering that you’re leaving as much as 30 percent of the value of cloud computing on the table. Fortunately, enterprises are understanding more and more than one can’t be decoupled from the other and so are biting the bullet around the extra costs associated with building a devops organization and related tools.

The downside of all this is that it makes cloud computing costlier to implement. Considering that you also need to add security and the other subcomponents that make cloud computing work, devops is often something new on the budget line.

However, the ROI is just one year in most cases, and then returns are as much as 30 percent after that. That being the case, cloud computing and devops are clearly now functionally tightly coupled.  

GDPR and the cloud: What you need to know

The General Data Protection Regulation (GDPR), aka EU Regulation 2016/679, unifies data protection for all residents of the European Union (EU) as of May 25, 2018. Additionally, GDPR also addresses the export and processing of personal data outside the EU, which is where cloud users are getting concerned around compliance.

So, what do you do to comply? The spirit of regulation is to protect the privacy of EU residents. While many people believe that this means their data must be kept in the EU country where the person resides, that fact of the matter is that the data can be stored anywhere in the world—as long as its collection and use comply with GDPR regulations.

If you’re looking to do business with EU residents, there are a few basic rules to follow. To support those rules, GDPR defines several roles, including data controller, data processor, and data protection officer (DPO):

  • The data controller defines how personally identifiable information (PII) is processed and for what purpose. Again, this can take place inside or outside the EU, as long as the regulations are followed. 
  • Data processors maintain and process personal data records.  GDPR holds processor liable for breaches. This is important when considering the use of cloud-based platforms, because it’s possible that both your company and cloud providers will be held liable for noncompliance. Even if an outsourced processor actually violated the regulations, both you and the cloud provider could be in trouble. Basically, you can be liable for the actions or inactions of the provider you hired.
  • The DPO is a mandated role for any company storing and processing EU residents’ data. It’s the designated person to educate the company, ensure GDPR compliance, and be the contact point for regulators if there are concerns or violations.

If you do business with EU residents, which most Global 2000 companies do, you must understand these new regulations now. Indeed, if you’ve not started the process of retooling and reorganizing for GDPR, it’s perhaps too late.  

As part of that effort, be sure to update the SLAs to include terms around compliance with GDPR. Again, both you and the cloud provider carry some risk here, and each can hurt the other if basic GDPR rules and processes are not followed. 

I also suggest that you run internal compliance audits at least twice a year to better understand your ability to comply with GDPR. If you run afoul of these regulations, there are stiff financial penalties, whether you are based in the EU or not.   

The cost of compliance could keep some smaller companies unable to serve EU residents—and they should be certain that they don’t do so. Everyone else needs to make sure that not only they but their providers are following the GDPR rules.

Related video: The ins and outs of GDPR

Space Photos of the Week: 410 Lights Years Away, a Proto-Saturn Comes to Life

Water, water, everywhere! This is our moon, pockmarked with craters and scratches that show its rich history of run-ins with other objects in our solar system. But this time it’s something below the surface that has scientists excited. We knew there was water on the moon—and a decent amount, too—but new data reveals that instead of the water being hidden in specific regions, it might instead be spread out everywhere.

The Juno spacecraft snapped this series of images on February 7 while flying over the south pole of the planet Jupiter. While these images might look like they’re the same, they’re not. Look closely from left to right and you’ll see how the spacecraft’s trajectory changed as it sped away from the planet.

This is Jupiter like you’ve never seen it before. This close-up image of the south pole was captured by the Juno spacecraft during its eleventh orbit on February 7. This image shows the terminator of the south pole where the planet is no longer illuminated by the sun. The glowing section is over-exposed, but after image processing by citizen scientist Gerald Eichstädt, some of the features suddenly come to life.

The Chandra X-Ray observatory captured this stunning photo of the Whirlpool galaxy, illuminated by billions of stars. But there is one especially bright object to the left side of the image: an ultra luminous X-ray source, or ULX. Astronomers believe most of these ULX signatures were supermassive black holes, but this new object turns out to be a neutron star. Neutron stars are some of the densest objects in the universe—just a teaspoon weighs more than a billion tons—so their gravity pull in lots of material around them from nearby stars. As this material speeds into the neutron star, it glows in the X-ray light seen here.

This blurry orange photo is actually a young star system called AS 209, surrounded by a disc of gas and baby planets. The gaps surrounding the star, captured by the ALMA telescope array in Chile, are actively being carved out by new planets as they form. This system appears to be growing a Saturn-sized planet—likely responsible for that largest gap in the outer part of the system.

This lumpy rock is actually Mars’ largest moon, Phobos—though it’s still pretty tiny, coming in at only seven miles wide. Enjoy it now, because someday Phobos will cease to exist. Mars is slowly pulling its moon closer, and eventually Phobos will break apart or slam into the planet, leaving only a crater as a reminder.

Did GE Just Bottom?

Source: DaytonDailyNews.com

General Electric (GE) dipped below $14 this week, seemingly for the first time since 2009/2010, a time when the company was just beginning to climb out of the messy financial crisis. I think it’s noteworthy to mention that back then there was a freeze-up in the financial system that threatened to prevent the flow of liquidity to GE. This scenario would have essentially resulted in a bankruptcy for the company if credit was not made available immediately. Aside from this moment in history, you would have to trace GE’s price back all the way to early 1996 to see the company trading at a comparable price. So, is GE in as dire shape as it was amid the financial collapse? Or is the stock finally trying to put in a bottom as it tests the nearly decade-low $14 level?

Source: Nasdaq.com

Although it is difficult to point to an exact price when the stock may hit a long-term bottom, I am convinced that this point is not far from the current price. GE has extremely valuable businesses, and the current crisis the company is experiencing is one of confidence, perpetuated by years of mismanagement. Much of the negative news is now baked into GE’s share price, and any shift in news flow to a more positive tone should result in a higher share price for the company. Moreover, there is a price point at which prominent investors will begin to recognize significant value in the company, and could begin to acquire substantial stakes in the company. Furthermore, a valuation breakdown of GE suggests the stock is trading at a significant discount to the underlying value of GE’s businesses.

So, How Bad of Shape is GE in?

There is no denying it, GE has seen much brighter days. The company is going through a period of decreased profitability, which has forced GE to cut its sought-after dividend. Moreover, the recent insurance unit debacle had resulted in a massive charge of $6.2 billion, and will require another $15 billion to recapitalize the unit in the upcoming years. If that weren’t bad enough, the company’s pension obligations are underfunded by roughly $31 billion, the greatest shortfall out of any U.S. company. And then there is the recent announcement of the SEC investigation. GE seems to be under a relentless barrage of negative news coverage and the stock is getting hammered perpetually.

However, most of these developments have been known about for months, and are no surprise to investors by now. Thus, the following issues should be largely factored into the ultra-low share price as is. Also, the SEC investigation should have a very limited effect on the company long term. If any irregularities are found and that is a big if, GE is likely to be let off the hook with a slap on the wrist, a relatively benign fine most likely. The pension liabilities are also likely to get resolved over a prolonged period of time, and should have a limited effect on overall future profitability.

As to the question which shoe will GE drop next? Perhaps there are no more shoes to drop. What if these are the last significant skeletons GE has in its closet? There don’t appear to be any fundamental/structural issues at GE. The issues at hand are largely transient in nature, are likely to get resolved over the next few years, and should not significantly impact GE’s performance over the long term. In the meantime, the stock has hit what appear to be generational lows while GE’s businesses still hold significant value.

GE’s Value

It is said that the market is always right, and an argument can be made that this statement is true. However, at certain times, due to significant shifts in sentiment, the market can cause prices to become drastically disconnected from fundamentals. We saw this occur in the dotcom boom, with mortgage-backed securities, and this often occurs at a time of extreme sell-offs. Sometimes panic and extreme pessimism cause stocks to get sold off and become extremely cheap relative to their “true value.” I am not saying that GE is necessarily at this drastically oversold level now, and the stock could slide further, but a breakdown of its businesses does suggest that the company’s “business value” is worth significantly more than the market is currently giving the company credit for.

GE’s Businesses: The Good, The Bad, and The Ugly

GE’s current enterprise value is roughly $192 billion. However, the value of GE’s businesses appears to be significantly higher if the units are valued independently. For instance, GE’s top enterprises, the Aviation and the Healthcare segment, could be valued at roughly $200 billion alone. If we look at GE’s 2017 full-year financial results we can see that certain segments performed extremely well, but the predominant destructive force, the troubled Capital segment, weighed down the entire company dramatically.


GE Enterprise Value data by YCharts

The Good

Let’s start with GE’s crown jewel, its coveted Aviation business. This segment generated $27.38 billion in revenues last year, illustrated revenue growth of 4%, a healthy profit margin of 24.3%, and brought in an impressive $6.64 billion in profit. If we apply a relatively modest valuation of 19.5 times trailing earnings we can value this unit at roughly $130 billion. Comparatively, United Technologies (UTX) trades at 23.25 time trailing P/E.

The Healthcare segment, another top performer at GE generated revenues of $19.12 billion last year. The unit showed yoy revenue growth of 5%, demonstrated a very healthy 19.7% profit margin, and brought in $3.45 billion in profits. If we apply a trailing multiple of 22 times earnings, roughly consistent with the industry’s average, we arrive at an approximate value of $75 billion for this segment. Competitors such as Boston Scientific (BSX), Medtronic (MDT), and others have significantly higher trailing P/E ratios upwards of 30.

GE’s Renewable Energy segment may be one of the more underestimated units. It showed significant revenue growth of 14% last year. Moreover, as the world moves towards increased use of renewable forms of energy, this segment is likely to perform extremely well going forward. Renewable Energy brought in revenues of $10.3 billion, showed a profit margin of 7.1%, and delivered a profit of $727 million. Using a valuation of 25 times trailing earnings, we arrive at a value of $18 billion for this unit.

Source: Pinterest.com

GE’s Oil and Gas segment also appears to be an underestimated property. Oil has increased in value significantly over the past few years and is likely to continue going higher due to increased inflationary pressures and growing demand. Therefore, this segment should continue to do well going forward, and is likely to increase in value significantly down the line. Moreover, despite the volatile oil prices of last year, GE’s oil and gas segment performed relatively well, suggesting that future returns could be much better than many analysts envision.

Last year the oil and gas segment brought in revenues of $17.22 billion, had an impressive revenue growth of 34%, a profit margin of 5.2%, and showed a profit of $900 million. If we apply a trailing earnings multiple of 22 to this segment, the approximate value of this unit comes to $20 billion. Most competitors like Halliburton (HAL), Schlumberger (SLB), and other competitors can’t show P/E ratios for last year due to mounting losses because of wildly fluctuating oil prices, operational difficulties, and other setbacks.

The Bad

Now that we’re done with the good, let’s move on to the bad, GE Power. Although the Power segment’s revenue of $36 billion appears impressive, the rest of the unit’s metrics, not so much. Revenue growth in the Power business was negative, at -2%, profit margin was just 7.7%, profit came in at $2.78 billion in 2017, down by 45% on a yoy basis. The drastic drop in profits is likely a transient phenomenon due to a reshuffle in the company’s power and lighting segments. Therefore, it is not likely the start of a long-term trend. However, given the circumstances, it is difficult to assign a trailing P/E of higher than 12 to this segment, which gives it a value of roughly $34 billion. Nevertheless, I do think that this unit can regain some of its value if GE improves its profitability position. For instance, if we value the unit according to 2016’s earnings, at a 12 multiple the segment would be worth over $60 billion. This could be a low point for EPS in the power segment, therefore the unit’s value could expand going forward.

Another struggling segment, GE’s Transportation unit experienced a revenue drop of 11% to $4.18 billion on a yoy basis. However, the unit is quite profitable with a healthy 19.7% profit margin, and a profit of $824 million. An 11 trailing P/E multiple provides a value of roughly $9 billion for the transportation unit.

GE Lighting showed revenues of $2 billion, but experienced a sharp drop of 60% in revenues last year. A profit margin of just 4.1% appears a bit soft, and the unit brought in a profit of just $93 million. If we put a 10 times trailing P/E multiple on this segment, a value of around $1 billion is derived.

The Ugly

Now the ugly, GE Capital. This unit clocked in a loss of $7.6 billion last year. Moreover, GE is now on the hook to recapitalize the unit’s insurance segment to the tune of $15 billion. Therefore, this segment can be valued at a negative number, – $15 billion. GE Capital is an enormously troubled unit that has apparently been mismanaged worse than any other GE asset. The component is responsible for numerous losses at GE, including a $6.2-billion charge last quarter, and the $15-billion insurance related unfunded liability. The Capital unit is one of the prime sources for trouble at GE.

GE’s Combined Value

  • Aviation: $130B
  • Healthcare: $75B
  • Renewable Energy: $18B
  • Oil and Gas: $20B
  • Power: $34B
  • Transportation: $9B
  • Lighting: $1B
  • Capital: – $15B
  • Total Value: $272B
  • Enterprise Value: $192B
  • Apparent Disconnect: $80B

GE’s Problem is One of Management

GE’s biggest problem is one of management. However, a turnaround effort appears to be in the works. The days of Jeff Immelt’s double jet travels are over. If there was a time GE’s plundering management could operate in relative opaqueness, that time has probably come to an end. The company’s management is going to be under a microscope for the foreseeable future. Shareholders, newly appointed board members, regulators, pundits, and other market forces are closely observing GE with a few crucial factors in mind. Is the company reforming its culture? Is management effectively cutting costs? Can the company do a better job managing its various businesses? etc., etc. The bottom line is that with so much pressure and scrutiny stacked up against GE, the company’s management may have no choice but to get its house in order.

Source: MalaysiaGlobalBusinessForum.com

Shift in News Flow

Another element that is likely to play a favorable role going forward is a possible change in news flow. There has been a continuous and overwhelming drumbeat of negative news flow surrounding GE for the better part of a year now. The stock has cratered by more than 50%, as about $150B worth of value has been erased from GE’s market cap in that time. However, at some point the news flow will change to a more positive tone, and it’s likely to occur sooner than later. Some positive developments are already starting to materialize. GE recently appointed three new board members. A shakeup at the board suggests a constructive step towards better governance. Management is continuing to work on spin-off efforts, and news of asset sales should be perceived as a positive element.

Institutional Buyers

Big institutional buyers and activist investors could be warming up to GE at current levels. Even Warren Buffett recently commented that GE has some great businesses that he understands, adding that he would seriously look at GE “at the right price.” Buffett has experience investing in GE at distressed levels, as he became a large shareholder during the days of the financial crisis. Also, Mr. Buffett has about $116B in cash at Berkshire (NYSE:BRK.A) (NYSE:BRK.B) to spend, and a great industrial business, with an iconic name like GE, which he understands, could make a lot of sense around these levels.

Technical View

Technically GE is bouncing around $14 support. This level may not hold in the short term, especially if the overall market continues its slide. However, at these already depressed levels, unless the stock market falls through recent correction lows GE’s downside is likely to be very limited here. Moreover, the RSI and CCI are showing that the stock has been in relative oversold territory for about 6 weeks now. A possible reversal in momentum from negative to positive seems likely, especially if some favorable fundamental elements begin to materialize.

Source: StockCharts.com

Bottom Line

GE’s stock has been battered over the past year, and for good reason. The company’s performance has declined noticeably, the dividend got cut in half, and some alarming skeletons have been exposed. However, things are clearly changing at GE. Management appears to be making some difficult decisions, and the company’s corporate structure is under the scrupulous eye of various market participants pressing for reform. Furthermore, a shift to a more favorable tone in news flow could change investor sentiment, and certain activist and institutional investors may start looking to enter the stock or acquire parts of the company.

Ultimately, it appears that the badly battered GE company is already significantly undervalued. The $80B disconnect between the company’s $192B enterprise value and the $272B assessed value of its businesses suggests that the stock’s fair value is roughly 42% higher from current levels, which would put GE’s share price at around $20. Once the price stabilizes, market participants could bid the stock up aggressively into year’s end, especially once favorable fundamental developments begin to emerge. Therefore, my year-end price target range for GE is $19-21.50.

Disclaimer: This article expresses solely my opinions, is produced for informational purposes only, and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please always conduct your own research and consider your investment decisions very carefully.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Colt DCS ramps up renewable power use across European datacentre estate

Colt Data Centre Services (DCS) has confirmed that nine out of 17 of its European carrier neutral colocation facilities now run exclusively on renewable power, as the firm pushes ahead with its efforts to improve the environmental friendliness of its datacentre portfolio.

The company says the initiative is focused on cutting down the carbon emissions generated by its datacentre activities, as well as improving the overall energy efficiency of its operations.

To this end, Colt said it is committed to using renewable energy sources to power its datacentres “wherever possible”, but concedes there are some territories where it is prevented from doing so at the moment.

“In France, the country’s reliance on nuclear power and an energy generation shortfall makes it impossible for any datacentre provider to guarantee 100% renewable power, although it is hoped that planned developments for renewable energy will meet the shortfall by 2023,” the company said in a statement.

The datacentre industry’s energy consumption habits, including its use of renewable power, remains under tight scrutiny at the moment, as concerns about how sustainable its growth is from an environmental perspective continue to mount.

In response, a number of the hyperscale cloud giants – including Amazon Web Services (AWS), Google and Microsoft, have all pledged to ramp up their use of renewable energy to ensure the growth of their operations does not come at the expense of the environment.

Meanwhile, cross-party think tank, Policy Connect, published a research paper on 20 February, for example, looking into the environmental impact of the UK’s increasingly digital economy, from both an energy cost and carbon emissions perspective.

In particular, it calls on policymakers to start taking stock of how much energy is used to power internet-connected devices, data transmission networks and the datacentres.

“To date, the energy cost and carbon impact of the digital economy has not increased to the epic proportions once predicted. High energy bills, new efficient ICT technologies and regulations have kept the proportion of electricity used by ICT products and services in check,” the report states.

“However, there is a risk that with a growing dependence on connected devices and digital technologies, energy efficiency gains may slow or even stall.”

For this reason, Colt DCS CEO Detlef Spang, said it is time for the technology industry to “face up to its global responsibilities” on energy consumption and use of renewables.

“Colt DCS believes our industry has a moral and ethical duty to go far beyond the minimum requirements for sustainability, and to deploy techniques and new infrastructure technology that will have a major and measurable effect on the resources we use,” he said.

“This will require major investment, but by adopting the latest technologies and best practices, we will deliver lower lifetime costs for our customers while also ensuring we leave the smallest possible ecological footprint in the territories where we operate around the world.”

Google not obligated to vet websites, German court rules

FRANKFURT (Reuters) – Google (GOOGL.O) is not obligated to ensure websites are free from defamatory content before displaying links to them in search results, Germany’s highest court ruled on Tuesday.

The case, which comes in the context of debate about the so-called “right to be forgotten”, had been brought by two individuals seeking Google to prevent its search engine from displaying links to websites on which they were verbally attacked by other internet users.

They wanted Google, a unit of Alphabet Inc, to set up search filters to keep those websites from appearing in future search results, information about the users who had posted the offending comments and payment of damages, saying Google was partly responsible for the violation of their rights.

The German Federal Court of Justice said, however, that a search engine operator need only take action if it is notified of a clearly recognizable violation of individuals’ rights, rather than checking ahead of time whether the content complies with the rules.

“Instituting a general duty to inspect the content would seriously call into question the business model of search engines, which is approved by lawmakers and wanted by society,” the court said in a statement.

“Without the help of such search engines it would be impossible for individuals to get meaningful use out of the internet due to the unmanageable flood of data it contains,” it added.

In May 2014, the Court of Justice of the European Union (ECJ) ruled that people could ask search engines, such as Google and Microsoft’s Bing (MSFT.O), to remove inadequate or irrelevant information from web results appearing under searches for people’s names – dubbed the “right to be forgotten”.

Google has since received requests for the removal of more than 2.4 million website links and accepted about 43 percent of them, according to its transparency report.

Reporting by Maria Sheahan; Editing by Mark Potter

Crypto 'noobs' learn to cope with wild swings in digital coins

NEW YORK (Reuters) – After researching digital currencies for work last year, personal finance writer J.R. Duren hopped on his own crypto-rollercoaster.

Duren bought $5 worth of litecoin in November, and eventually purchased $400 more, mostly with his credit card. In just a few months, he experienced a rally, a crash and a recovery, with the adrenaline highs and lows that come along.

“At first, I was freaking out,” Duren said about watching his portfolio plunge 40 percent at one point. “The precipitous drop came as a shock.”

The 39-year-old Floridian is part of the new class of crypto-investors who do not necessarily think bitcoin will replace the U.S. dollar, or that blockchain will revolutionize modern finance or that dentists should have their own currency.

Dubbed by longtime crypto-investors as “the noobs”– online lingo for “newbies” – they are ordinary investors hopping onto the latest trend, often with little understanding of how cryptocurrencies work or why they exist.

“There has been a big shift in the type of investors we have seen in crypto over the past year,” said Angela Walch, a fellow at the UCL Centre for Blockchain Technologies. “It’s shifted from a small group of techies to average Joes. I overhear conversations about cryptocurrencies everywhere, in coffee shops and airports.”

Walch and other experts cited parallels to the late-1990s, when retail investors jumped into stocks like Pets.com, a short-lived online seller of pet supplies, only to watch their wealth evaporate when the dot-com bubble burst.

Bitcoin is the best-known virtual currency but there are now more than 1,500 to choose from, according to market data website CoinMarketCap, ranging from popular coins like ether and ripple to obscure coins like dentacoin, the one intended for dentists.

Exactly how many “noobs” bought into the craze last year is unclear because each transaction is pseudonymous, meaning it is linked to a unique digital address, and few exchanges collect or share detailed information about their users.

A variety of consumer-friendly websites have made investing much easier, and online forums are now filled with posts from ordinary retail investors who were rarely spotted on the cryptocurrency pages of social news hub Reddit before.

Reuters interviewed eight people who recently made their first foray into digital currency investing. Many were motivated by a fear of missing out on profits during what seemed like a never-ending rally last year.

One bitcoin was worth almost $20,000 in December, up around 1,900 percent from the start of 2017. As of Friday afternoon it was worth about $10,000 after having fallen as much as 70 percent from its peak. Other coins made even bigger gains and experienced equally dizzying drops over that time frame.

“There was that two-month period last year where all the virtual currencies kept going and up and I had a couple of friends that had invested and they had made five-figure returns,” said Michael Brown, a research analyst in New Jersey, who said he bought around $1,000 worth of ether in December.

“I got swept by the media frenzy,” he said. “You never hear stories of people losing money.”

In the weeks after Brown invested, his holdings soared as much as 75 percent and tumbled as much as 59 percent.


Investors who got into bitcoin before its 2013 crash like to refer to themselves as “OGs,” short for “original gangsters.” They tend to shrug off the recent downturn, arguing that cryptocurrencies will be worth much more in the future.

“As crashes go, this is one of the biggest,” said Xavier Levenfiche, who first invested in cryptocurrencies in 2011. “But, in the grand scheme of things, it’s a hiccup on the road to greatness.”

Spooked by the sudden fall but not willing to book a loss, many investors are embracing a mantra known as “HODL.” The term stems from a misspelled post on an online forum during the cryptocurrency crash in 2013, when a user wrote he was “hodling” his bitcoin, instead of “holding.”

Mike Gnitecki, for instance, bought one bitcoin at around $18,000 in December and was sitting on a 43 percent decline as of Friday, waiting for a recovery.

“I view it as having been a fun side investment similar to a gamble,” said Gnitecki, a paramedic from Texas. “Clearly I lost some money on this particular gamble.”

Duren, the personal finance writer, is also holding onto his litecoin for now, though he regrets having spent $33 on credit card and exchange fees for a $405 investment.

Some retail investors who went big into cryptocurrencies for the first time during the rally last year remain positive.

Didi Taihuttu announced in October that he and his family had sold everything they owned — including their business, home, cars and toys — to move to a “digital nomad” camp in Thailand.

In an interview, Taihuttu said he has no regrets. The crypto-day-trader’s portfolio is in the black, and he predicts one bitcoin will be worth between $30,000 and $50,000 by year-end.

His backup plan is to write a book and perhaps make a movie about his family’s experience.

“We are not it in it to become bitcoin millionaires,” Taihuttu said.

Reporting by Anna Irrera; Editing by Steve Orlofsky; Editing by Lauren Tara LaCapra

​Docker has a business plan headache

Video: Microservices and containers: Eight challenges to this approach

Read this

What is Docker and why is it so darn popular?

What is Docker and why is it so darn popular?

Docker is hotter than hot because it makes it possible to get far more apps running on the same old servers and it also makes it very easy to package and ship programs. Here’s what you need to know about it.

Read More

We love containers. And, for most of us, containers means Docker. As RightScale observed in its RightScale 2018 State of the Cloud report, Docker’s adoption by the industry has increased to 49 percent from 35 percent in 2017.

All’s not well in Docker-land

There’s only one problem with this: While Docker, the technology, is going great guns, Docker, the business, isn’t doing half as well.

For users, this isn’t that much of a problem. Whatever Docker the business’ future, Docker the technology is both open source and a standard. Docker could close up shop today, and you’d still be using Docker containers tomorrow.

Read also: Weak Docker security could lead to magnified vulnerabilities due to efficiency of containers

Of course, it’s a different story if you have a contract with Docker. But, while that would prove annoying — not to mention an ugly mark on the balance sheet — it shouldn’t impact your business flow. Containers are now a well-known technology. Securing and managing them continue to be troublesome, but deploying and running them? Not so much.

Still, you should be aware that all’s not well in Docker-land.

What’s the business plan?

Docker’s problem is simple: It doesn’t have a viable business plan.

It’s not the market. According to 451 Research, “the application container market will explode over the next five years. Annual revenue is expected to increase by 4x, growing from $749 million in 2016 to more than $3.4 billon by 2021, representing a compound annual growth rate (CAGR) of 35 percent.”

Read also: Top cloud providers 2018: How AWS, Microsoft, Google Cloud Platform, IBM Cloud, Oracle, Alibaba stack up

But to make that revenue, you need a business that can exploit containers. So, Google, Microsoft, Amazon Web Services (AWS), and all the rest of the big public cloud companies, earn their dollars from customers eager to make the most of their server resources. Others, like Red Hat/CoreOS, Canonical, and Mirantis, provide easy-to-use container approaches for private clouds.

Docker? It provides the open-source framework for the most popular container format. That’s great, but it’s not a business plan.

Confusion is not what you want

Docker’s plan had been, according to former CEO Ben Golub, to build up a subscription business model. The driver behind its Enterprise Edition, with its three levels of service and functionality, was container orchestration using Docker Engine’s swarm mode. Docker, the company, also rebranded Docker, the open-source software, to Moby while continuing to use Docker as the name for its commercial software products.

Read also: Docker appoints industry veteran as new CEO

This led to more than a little confusion. Quick! How many of you knew Moby was now the “official” name for Docker the program? Confusion is not what you want in sales.

Mere weeks later, Golub was out, and Steve Singh, from SAP, was in.

Docker has never explained why Singh was brought in from outside to become the leader, but it doesn’t take a genius to see that core container technologies were becoming commoditized. The Cloud Native Computing Foundation (CNCF)‘s Open Container Initiative (OCI) standard turned today’s container fundamentals, including Docker containers themselves, into open standards. There wasn’t much value-add that Docker could offer its enterprise customers.

As Dave Bartoletti, a Forrester analyst, told The Register at the time: “The poor guy has to figure out how to make money at Docker. That’s not easy when a lot of people in the community just bristle at anyone trying to make money.”

The rise of Kubernetes

Making matters much harder for Docker’s business plans is that Docker swarm and all other orchestration programs have found themselves overwhelmed by the rise of Kubernetes.

Read also: Docker LinuxKit: Secure Linux containers for Windows, macOS, and clouds

Today, Kubernetes — whether it’s a grand Google plan to create a Google cloud stack or notdominates cloud orchestration. Even Docker adopted Kubernetes because of customer demand in October 2017.

When your main value-add is container orchestration and everyone and their uncle has adopted another container orchestration program, what can you offer customers? Good question.

Docker has also been dealing with internal changes. Solomon Hykes, a co-founder and former CTO, was kicked upstairs to vice chairman of the board of directors and chief architect. Hykes, a controversy lightning rod, was also the public face of the company. He’s been far more quiet lately.

Red Hat’s answer was to buy Docker’s chief rival, CoreOS. That gave Red Hat not only its own container platform, but its own enterprise Kubernetes platform: Tectonic.

Docker really needs cash from customers

So, what should you do if you depend on Docker the company’s support? I’d look to my operating system and cloud vendors for help. After all, most of them, Red Hat, AWS, Google Cloud Platform, Microsoft Azure, SUSE, VMware, etc., already incorporate Docker.

Read also: Docker, IBM expand partnership

In the last few months, Docker raised another $75 million in venture capital. This brings the total capitalization of Docker to a rather amazing $250 million from ME Cloud Ventures, Benchmark, Coatue Management, Goldman Sachs, and Greylock Partners. That’s a lot of money, but I still don’t see how Docker will pay out.

Cash from investors is great, but what Docker really needs is cash from customers.

For most enterprise users, there are no real worries here. Docker or Moby, the container standard is both open source and an open standard. For Docker investors, well, that’s another story.

Related stories

Apple moves to store iCloud keys in China, raising human rights fears

SAN FRANCISCO/BEIJING (Reuters) – When Apple Inc begins hosting Chinese users’ iCloud accounts in a new Chinese data center at the end of this month to comply with new laws there, Chinese authorities will have far easier access to text messages, email and other data stored in the cloud.

That’s because of a change to how the company handles the cryptographic keys needed to unlock an iCloud account. Until now, such keys have always been stored in the United States, meaning that any government or law enforcement authority seeking access to a Chinese iCloud account needed to go through the U.S. legal system.

Now, according to Apple, for the first time the company will store the keys for Chinese iCloud accounts in China itself. That means Chinese authorities will no longer have to use the U.S. courts to seek information on iCloud users and can instead use their own legal system to ask Apple to hand over iCloud data for Chinese users, legal experts said.

Human rights activists say they fear the authorities could use that power to track down dissidents, citing cases from more than a decade ago in which Yahoo Inc handed over user data that led to arrests and prison sentences for two democracy advocates.  Jing Zhao, a human rights activist and Apple shareholder, said he could envisage worse human rights issues arising from Apple handing over iCloud data than occurred in the Yahoo case.

In a statement, Apple said it had to comply with recently introduced Chinese laws that require cloud services offered to Chinese citizens be operated by Chinese companies and that the data be stored in China. It said that while the company’s values don’t change in different parts of the world, it is subject to each country’s laws.

“While we advocated against iCloud being subject to these laws, we were ultimately unsuccessful,” it said. Apple said it decided it was better to offer iCloud under the new system because discontinuing it would lead to a bad user experience and actually lead to less data privacy and security for its Chinese customers.

As a result, Apple has established a data center for Chinese users in a joint venture with state-owned firm Guizhou – Cloud Big Data Industry Co Ltd. The firm was set up and funded by the provincial government in the relatively poor southwestern Chinese province of Guizhou in 2014. The Guizhou company has close ties to the Chinese government and the Chinese Communist Party.

The Apple decision highlights a difficult reality for many U.S. technology companies operating in China. If they don’t accept demands to partner with Chinese companies and store data in China then they risk losing access to the lucrative Chinese market, despite fears about trade secret theft and the rights of Chinese customers.


Apple says the joint venture does not mean that China has any kind of “backdoor” into user data and that Apple alone – not its Chinese partner – will control the encryption keys.  But Chinese customers will notice some differences from the start: their iCloud accounts will now be co-branded with the name of the local partner, a first for Apple.

And even though Chinese iPhones will retain the security features that can make it all but impossible for anyone, even Apple, to get access to the phone itself, that will not apply to the iCloud accounts. Any information in the iCloud account could be accessible to Chinese authorities who can present Apple with a legal order.

Apple said it will only respond to valid legal requests in China, but China’s domestic legal process is very different than that in the U.S., lacking anything quite like an American “warrant” reviewed by an independent court, Chinese legal experts said. Court approval isn’t required under Chinese law and police can issue and execute warrants.

“Even very early in a criminal investigation, police have broad powers to collect evidence,” said Jeremy Daum, an attorney and research fellow at Yale Law School’s Paul Tsai China Center in Beijing.  “(They are) authorized by internal police procedures rather than independent court review, and the public has an obligation to cooperate.”

    Guizhou – Cloud Big Data and China’s cyber and industry regulators did not immediately respond to requests for comment. The Guizhou provincial government said it had no specific comment.

There are few penalties for breaking what rules do exist around obtaining warrants in China. And while China does have data privacy laws, there are broad exceptions when authorities investigate criminal acts, which can include undermining communist values, “picking quarrels” online, or even using a virtual private network to browse the Internet privately.

Apple says the cryptographic keys stored in China will be specific to the data of Chinese customers, meaning Chinese authorities can’t ask Apple to use them to decrypt data in other countries like the United States.

Privacy lawyers say the changes represent a big downgrade in protections for Chinese customers.

    “The U.S. standard, when it’s a warrant and when it’s properly executed, is the most privacy-protecting standard,” said Camille Fischer of the Electronic Frontier Foundation.


Apple has given its Chinese users notifications about the Feb. 28 switchover data to the Chinese data center in the form of emailed warnings and so-called push alerts, reminding users that they can chose to opt out of iCloud and store information solely on their device. The change only affects users who set China as their country on Apple devices and doesn’t affect users who select Hong Kong, Macau or Taiwan.

The default settings on the iPhone will automatically create an iCloud back-up when a phone is activated. Apple declined to comment on whether it would change its default settings to make iCloud an opt-in service, rather than opt-out, for Chinese users.

Apple said it will not switch customers’ accounts to the Chinese data center until they agree to new terms of service and that more than 99.9 percent of current users have already done so.

Until now, Apple appears to have handed over very little data about Chinese users. From mid-2013 to mid-2017, Apple said it did not give customer account content to Chinese authorities, despite having received 176 requests, according to transparency reports published by the company. By contrast, Apple has given the United States customer account content in response to 2,366 out of 8,475 government requests.

Those figures are from before the Chinese cyber security laws took effect and also don’t include special national security requests in which U.S. officials might have requested data about Chinese nationals. Apple, along with other companies, is prevented by law from disclosing the targets of those requests.

Apple said requests for data from the new Chinese datacentre will be reflected in its transparency reports and that it won’t respond to “bulk” data requests.

Human rights activists say they are also concerned about such a close relationship with a state-controlled entity like Guizhou-Cloud Big Data.

Sharon Hom, executive director of Human Rights in China, said the Chinese Communist Party could also pressure Apple through a committee of members it will have within the company. These committees have been pushing for more influence over decision making within foreign-invested companies in the past couple of years.


Reporting by Stephen NellisEditing by Jonathan Weber and Martin Howell

Now Is The Time To Buy These 2 Undervalued, High-Yield Stocks

Source: imgflip

The goal of my high-yield retirement portfolio is to build a highly diversified mix of companies in all sectors and industries, including those with very strong growth characteristics. Industrial REITs fit that bill well, thanks to the strong tailwinds created by an expanding US economy.

Source: Monmouth Investor Presentation

In addition the rise of e-commerce is fueling rapid demand growth for warehousing space for distribution centers, further putting the wind in the sails of industrial REITs such as STAG Industrial (STAG), and Monmouth Real Estate Investment Corp. (MNR).

Let’s take a closer look at why these two high-yielding REITs represent a great mix of generous, secure, and growing income potential that might be just what your diversified dividend portfolio is looking for. That’s especially true at today’s attractive prices, made possible by the current REIT bear market.

In addition, learn what risks these REITs face in the coming years. And more importantly whether or not these could derail their enticing investment cases.

STAG Industrial: Fast Growing Niche Empire

STAG Industrial got its start in 2003 when STAG Capital partners was formed to own free-standing and single tenant warehouses and light industrial facilities. It IPOd as a publicly-traded REIT in 2011 and ever since has been on an impressive growth streak (goal of 25% portfolio growth each year).

Source: STAG earnings supplement

Today STAG owns 356 properties in 37 states, in over 60 cities, and leases its buildings to 312 tenants. The REIT is highly diversified in terms of geography, industry, and tenant. In fact, the single largest occupant representing just 2.6% of rent. And keep in mind that this tenant, the General Services Administration, is a federal agency, and thus represents a highly reliable income source.

Source: STAG earnings supplement

What sets STAG apart from most of its rivals is that it long ago concluded that Wall Street’s perceptions about the industrial sector were wrong. Specifically that the secondary market (cities with 25 million to 200 million of rentable areas) were being mispriced.

This was out of a belief that primary and super primary markets (big cities) have higher and more stable occupancy rates over economic cycles. This is why it was thought that they maintain stronger pricing power during economic downturns.

Source: STAG investor presentation

However, during the last recession (far more severe than most) this didn’t prove to be the case. In fact, occupancy rates for secondary markets held up better than primary markets, and rental rates fell less severely.

Management believes this is because in smaller cities there is less competitive industrial real estate. This means that tenants have less pricing power because of higher switching costs. In other words, secondary markets are more of a “sellers’ market.”

In addition, because most investment dollars have been focused on primary and super primary markets in recent years, there is less competition for acquiring new properties. Thus, STAG can buy quality properties for less, resulting in higher cap rates (cash yields), and achieve more profitable growth.

The key to STAG’s long-term investment thesis is management’s ability to strike a fine balance between very fast growth, but also remain disciplined in what it buys. This is possible thanks to its deep and experienced bench. For example, CEO Benjamin Butcher, who has been with STAG Capital since 2003, has 24 years of commercial real estate investment experience.

This explains why STAG is so selective about its purchases, usually only buying about 1% of properties it considers each year.

STAG 2016 Acquisition Selectivity

Source: STAG investor presentation

In 2017, the REIT closed on a record 53 property acquisitions, with an average lease term of 7.5 years and a cap rate of 7.4% (1.9% above industry average).

This helped drive very strong growth in revenue and core FFO/share.


2017 Growth (Except Payout Ratio)

Core FFO




Shares Outstanding


Core FFO/Share






AFFO Payout Ratio


Source: STAG earnings release

However, that didn’t translate into better bottom line results. Owing to the older nature of its buildings and a lack of economies of scale, its adjusted funds from operation (REIT equivalent of free cash flow and what funds the dividend) grew slower than its core FFO. Also due to the large number of shares issued to fund its growth last year, AFFO/share growth was mostly flat. This explains the tepid dividend growth in 2017.

The good news is that in 2018, management expects to rely less on equity markets because the share price has taken a hit recently due to rising rate concerns. Instead, it plans to fund its growth plans with modest amounts of cheap debt.

Source: STAG earnings supplement

Fortunately, management has been disciplined with its use of debt in the past. When shares were high it used equity to grow, allowing it to achieve a below average leverage ratio.

Today the REIT is safely capable of borrowing more and in fact, management intends to take leverage from 5.0 to about 5.5 in 2018. But this won’t risk breaching its debt covenants, which the REIT is nowhere near violating. The strong balance sheet is why STAG is rated BBB by Fitch, and enjoys access to very low-cost borrowing (average interest rate 3.5%).

This means that going forward, STAG should be able to achieve stronger AFFO/share growth, and raise its payout at a quicker pace. Currently, analysts estimate this to be about 5% over the long term.

To help drive that growth is STAG’s impressive $1.9 billion growth pipeline, consisting of 144 properties that total 32.4 million square feet. This is notable because right now STAG only owns 20 million square feet of leasable space. This means that the properties it plans to buy are larger, and likely to generate more rent per building than its existing property base.

Source: STAG investor presentation

And that $1.9 billion growth pipeline is just a drop in the bucket when it comes to STAG’s growth potential. Management estimates that STAG has 1% market share in the $250 billion industrial property markets it’s targeting. Or to put another way, STAG has potentially decades of strong growth ahead of it.

Monmouth Real Estate: A Fast-Growing Dividend Aristocrat With A Bright Future

Monmouth is one of the oldest REITs in the world, having been founded in 1968. Over that time it’s built up a property portfolio of 109 properties in 30 states. Almost all of its rent (85%) is from strong investment grade blue chips such as: FedEx (FDX), International Paper (IP), Coca-Cola (KO), and United Technologies (UTX).

Source: Monmouth Investor Presentation

While its property base is very small, it’s also the highest quality in the industry. That’s because Monmouth’s portfolio has: the youngest buildings (less maintenance cost, higher rents), the longest leases, and the highest occupancy.

Source: Monmouth Investor Presentation

This means that MNR’s rent roll (leases expiring in the next three years) is also the smallest, which gives it excellent cash flow predictability. Combined with a below average payout ratio (77% vs. industry average 83%) this makes this REIT’s dividend highly secure.

Source: Monmouth Investor Presentation

In 2017, Monmouth had a record year of growth, thanks to $287 million in new property acquisitions. All of these were effectively brand new facilities, with 10 to 15-year leases. This boosted its property count by 10%, and led to massive growth in its top and bottom line.


Fiscal Q1 2018 Growth







Shares Outstanding






AFFO Payout Ratio


Source: Monmouth Earnings Release

Note that Monmouth, despite its tiny size, was able to show signs of strong operational leverage, meaning that AFFO grew faster than revenue. This is a sign that management runs a tight and efficient ship, despite lacking the economies of scale of its larger peers. It’s also due in part to the very young nature of its buildings, which have very low maintenance costs.

Strong growth is nothing new to Monmouth, which has been growing at a quick pace for years.

Source: Monmouth Investor Presentation

This has helped it to generate some of the industry’s best total returns.

Source: Monmouth Investor Presentation

Monmouth has a $135 million growth pipeline to drive growth in 2018. When combined with the long-term industry tailwinds, including the continued exponential growth of e-Commerce, MNR is expected to remain one of the fastest growing industrial REITs in America.

Source: Monmouth Investor Presentation

Industrial REIT FFO/Share Growth Projections

Source: Brad Thomas

This bodes well for its future dividend growth prospects, which combined with a generous yield, mean that it could easily prove to be a market beater.

Dividend Profiles Point To Excellent Total Return Potential



AFFO Payout Ratio

Projected 10-Year Dividend Growth

10-Year Potential Annual Total Return

STAG Industrial



4% to 5%

10% to 11%

Monmouth Real Estate



6% to 7%

10.8% to 11.8%

S&P 500





Sources: earnings releases, FastGraphs, Multpl.com, CSImarketing

The primary reason for owning any REIT is the dividend. This is why I look at every stock’s dividend profile, which consists of: yield, payout safety, and long-term growth potential.

Both STAG and Monmouth offer attractive current yields, especially compared to the market’s paltry payout. More importantly, those dividends are well covered by AFFO.

Now there’s more to dividend safety than just a good payout ratio. The balance sheet is also important, because too much debt cannot just put a dividend at risk, but also decrease a REIT’s growth potential.


Debt/Adjusted EBITDA

Interest Coverage Ratio

Fixed-Charge Coverage Ratio

Credit Rating

STAG Industrial




BBB (Fitch)

Monmouth Real Estate





Industry Average





Sources: Gurufocus, earnings supplements

Here we see that Monmouth has the weaker balance sheet, though not one that should put the dividend at risk. Its leverage ratio is only just above the industry average. However, I would prefer if the fixed-charge coverage ratio (EBITDA minus unfunded capital expenditures and distributions divided by total debt service costs), were higher.

That being said, Monmouth’s access to low cost capital doesn’t seem to be impaired. For example, in the last quarter it was able to refinance its very long duration (11.5 year) fixed debt down to an average rate of 4.2%. This indicates the bond markets have confidence in: management’s long-term abilities, its very strong counter parties, and its long leases.

Meanwhile STAG industrial enjoys a leverage ratio right at the bottom of management’s long-term 5.0 to 6.0 target. And thanks to its very strong fixed charge coverage ratio it sports a strong BBB credit rating that allows it to borrow very cheaply and generate one of the highest interest coverage ratios in the industry.

All told I (and most analysts) expect STAG and MNR to be capable of strong long-term dividend growth. That’s courtesy of their small sizes and very long growth runways (industrial real estate is a $1 trillion market). Specifically that means 4% to 5% payout growth for STAG, and 6% to 7% for MNR, over the next decade.

Combined with their current yields, that should allow both REITs to easily beat the returns generated by the overheated S&P 500.

Valuations: Worth Buying Today


STAG Total Return Price data by YCharts

Ever since tax reform passed fears of an overheating economy stoking rising inflation have sent long-term interest rates up sharply. This has battered REITs, including STAG and MNR.

However, where some see this as a reason to stay away, I view it as a potentially good buying opportunity.


2018 P/AFFO

Historical P/AFFO


Historical Yield

STAG Industrial





Monmouth Real Estate





Sources: FastGraphs, Gurufocus

There are numerous ways to value a REIT, both in terms of historical valuation metrics, and forward looking ones. Today STAG and MNR are both trading at historically low price/AFFO (REIT equivalent of a PE ratio).

In addition STAG is trading slightly higher than its historical (since IPO) median yield. Monmouth, however, is not. But that doesn’t mean it’s not a good buy. Remember that over the long-term a dividend stock’s total return will usually follow the formula yield + dividend growth. So this is where a forward looking discounted dividend model comes in handy.

That’s because we can estimate the fair value of a dividend stock by the net present value of its future payouts.


Forward Dividend

Projected 10-Year Dividend Growth

Projected Dividend Growth Years 11-20

Fair Value Estimate

Dividend Growth Baked In

Margin Of Safety

STAG Industrial


3% (conservative case)





4% (likely case)




5% (bullish case, analyst consensus)




Monmouth Real Estate


5% (conservative case)





6% (likely case)




7% (bullish case, analyst consensus)




Sources: FastGraphs, Gurufocus

Since 1871 a low cost S&P 500 ETF (if it existed) would have generated a 9.1% total return, net of expenses. Since this is the default investment option for most investors (and what most people benchmark off), I consider this the opportunity cost of money, and a good discount rate.

Now of course there is a lot of uncertainty with any forward looking valuation model, especially one that uses a 20 year time frame. This requires smoothed out growth assumptions that aim to isolate long-term growth potential based on an industry’s fundamentals, and the capabilities of its management team.

This is why I use a range of conservative to bullish growth cases to try to estimate the intrinsic value of a dividend stock. In this case, based on the most likely growth scenarios, I estimate that STAG and MNR are 12%, and 13% undervalued, respectively.

This means that the market is assuming lower dividend growth than what they are likely to generate. Or to put another way, both REITs have a low bar to clear, and thus the opportunity to outperform. This seems to confirm my earlier estimates of their market beating total return potentials, and makes both stocks a good buy right now.

Risks To Consider

There are two kinds of risks to consider with industrial REITs. The first are company specific.

For example, two things potentially concern me about STAG Industrial. These are why I consider it a medium risk stock (5% max position size in my portfolio). First, the REIT’s historical focus on shorter-duration leases in secondary markets (and with older buildings) have caused it to see far lower retention rates than many of its peers.

Now in fairness to STAG this has largely been by design. That’s because the long economic expansion has meant that overall industrial rental rates have been climbing. This means that all industrial REITs have pretty strong pricing power, and thus have more incentive to not offer price breaks to retain older tenants.

For example, according to Monmouth CEO Michael Landy, the average asking price (per square foot) went up 5.3% in 2017. And while STAG has a lower quality portfolio ($4.09 per square foot vs. $5.96 for Monmouth), the point is that current retention rates are low for a reason. And in 2018 STAG does expect retention to climb to about 75%, as it focuses more on longer-term leases, and more primary market properties.

In other words, STAG is likely preparing itself for the next recession, by trying to increase its cash flow stability. That’s a smart long-term move since STAG hasn’t publicly been through a recession, and STAG Capital has been through just one. This means that the “secondary market occupancy and rent will hold up better than primary” theory hasn’t been fully tested yet across multiple downturns. At least not enough for me to call it a low risk dividend stock.

With an AFFO payout ratio of 81% STAG doesn’t seem like its dividend might be put in peril during the next downturn. However, its lower quality portfolio does mean that management might want to create a larger safety buffer before raising the dividend at the 4% to 5% that it’s likely capable of.

Basically this means that STAG Industrial shareholders may end up waiting several more years, and potentially until after the next recession, before they see more than token dividend increases.

As for Monmouth, there are two potential concerns I have. First, it has a very high concentration of its rent coming from just one company, FedEx.

Recently Amazon (NASDAQ:AMZN) announced it was launching its own competing delivery service. The good news is that JPMorgan (JPM) expects this to hurt the USPS far more than FedEx. This means that Monmouth’s most important tenant isn’t likely to fail anytime soon.

In addition in the last quarter the REIT acquired a 300,000-square foot distribution center in Oklahoma City leased for 10 years to Amazon. This indicates that even if Amazon ends up disrupting package delivery, (which is far from certain), Monmouth should be able to adapt as it has successfully done since 1968. After all, plenty of tenants have failed over that time period.

Still given its rental concentration, such a worst case scenario would likely take a few years to overcome in a slow growth turnaround period. During which we might see Monmouth return to previous nasty habit of several years with no dividend growth.

Source: Simply Safe Dividends

The other worry I have about Monmouth is the slightly over-leveraged balance sheet. The industrial REIT industry is facing a potentially challenging year or two. That’s thanks to rising interest rates and falling cap rates on new properties.

Source: Monmouth Investor Presentation

Monmouth’s relatively higher debt levels are not dangerous as of now. But they might limit its future borrowing ability, making it more dependent on fickle (and currently bearish) equity markets to fund its growth.

The problem here is that industrial property cap rates have been declining for years due to rising property values. If they fall too low it can be harder for all industrial REITs to grow profitably. That’s especially true for smaller ones that lack massive scale and large access to cheap growth capital.

Industrial Property Cap Rates

Source: Monmouth Investor Presentation

As you can see, cap rates for industrial properties are cyclical, rising and falling with the economic environment. During recessions, when vacancies rise and the industry struggles, cap rates increase. This makes it easier for REITs to invest profitably.

The second longest US economic expansion in history, (which will hit 10 years in June of 2019), has also seen interest rates near zero for much of the decade. This has led to rising property values and declining cash yields.

For example, back in 2010 STAG Capital was able to acquire properties for cap rates as high as 9.2%. By 2016 that had fallen to 7.9%, by 2017 7.4%, and now in 2018 management is guiding for 7.0%. And keep in mind these are mostly secondary markets, which have lower prices and higher cap rates.

Monmouth on the other hand, has historically targeted prime market properties, specifically: brand new buildings, with the strongest tenants, and the longest leases. While this gives it the best property portfolio in the industry, it also means the REIT has to pay more for growth. For example, in 2017 the average cap rate for its 10 acquired properties was 5.9%.

The concern here is that because they are small REITs, STAG and MNR might lack the scale to keep their cost of capital low enough. At least low enough to generate the kinds of strong gross cash yields on investment (cash yield on new property minus cost of capital) to fuel their projected growth rates.

STAG Industrial

Estimated Cash Cost Of Capital


2018 Cap Rate


Approximate Gross Cash Yield On New Investment


Sources: earnings releases, FastGraphs, Gurufocus, management guidance

In 2017 STAG’s higher share price allowed it to enjoy a lower cost of equity. When combined with higher cap rates this generated a gross cash yield on acquisitions of about 3.0%. That is expected to decline to 2.3% this year, due to a lower share price, and management’s focus on more prime market properties with longer lease durations (which cost more to buy).

Monmouth Real Estate

Estimated Cash Cost Of Capital


2017 Cap Rate


Approximate Gross Cash Yield On New Investment


Sources: earnings releases, FastGraphs, Gurufocus, management guidance

And while Monmouth enjoys a slightly lower cost of capital due to its slightly higher share premium, the gross cash yield on new properties was rather low in 2017.

The good news is that according to STAG higher long-term rates will EVENTUALLY drive cap rates up, thus preventing a liquidity growth trap in which industrial REITs are unable to grow profitably.

However, this might not be for several months or even a year or more. It depends on the rate at which long-term rates rise, as well as numerous other factors.

But there are reasons for optimism. Monmouth says that in their latest quarter (Q1 of Fiscal 2018) they were able to acquire two new properties for $52.1 million. These were leased to FedEx and Amazon for 15 and 10 years, respectively. The cap rate on these buildings was 6.1%, 0.2% higher than last year. This potentially indicates that perhaps the prices for top grade industrial properties may be near its top and set to start falling relatively soon.

Still we can’t forget that there are two parts to the profitability formula, cap rates, but also cost of capital. STAG and Monmouth have enjoyed the lowest interest rates in history, which has allowed even small REITs like these to still borrow very cheaply. For example STAG’s average borrowing costs are 3.5% while Monmouth’s longer duration bonds, (average of 11.5 years), have an average interest rate of just 4.2%.

With long-term rates now rising it’s unlikely that either REIT can expect to see borrowing costs fall any lower, but rather start drifting higher. This could largely offset any near-term increase in cap rates caused by higher interest rates.

So if cap rates move up a bit, and borrowing costs move up by the same amount, doesn’t that mean that the profitability of new properties will remain the same? Not necessarily, at least not in the short to medium-term.

This is because REITs have been incorrectly used as a “bond proxy” by yield-starved income investors for so long, the sector is currently highly rate sensitive. This means that when 10-year yields rise, so do REIT yields, indicating falling share prices, and thus higher costs of equity.

Source: Hoya Capital Real Estate

The amount of sensitivity is determined in part by the duration of a REIT’s leases. This is because the longer the lease, the more inflation sensitive a REIT’s cash flows are thought to be. In reality, rental escalators usually have inflation baked into their formula. But in the short term, perception is reality, at least on Wall Street.

The good news is that industrial REITs have below average rate sensitivity, at least compared to other kinds of REITs. However, Monmouth’s very long lease durations mean that its sensitivity may be the highest among its peers.

This indicates that, at least until industrial cap rates start moving higher, and REIT rate sensitivity declines, (it’s cyclical and mean reverting), both STAG and Monmouth might see slower than expected growth.

For example, STAG industrial is guiding for about $450 million in net acquisitions in 2018, down from $545 million in 2017. For a REIT with a goal of growing its portfolio 25% a year, this slowdown is a potentially troubling sign. Management says that the slower growth will be mainly from growing dispositions as lower cap rates mean it can recycle capital very profitably, (12% unlevered returns on property sales in 2017).

Monmouth too is likely to not repeat 2017’s record year of growth, because its current growth pipeline is just $135 million. That’s compared to $287 million in acquisitions last year.

The good news is that over the long term, interest rates don’t actually hurt: REIT growth, dividend safety or total returns. In fact, because rates usually rise during times of economic prosperity, REIT fundamentals tend to do best in a rising rate environment. And both STAG and Monmouth have long histories (since 2003 and 1968, respectively) of growing during all manner of economic and interest rate environments. Thus, I have full confidence that these quality management teams will be able to keep growing and generating: generous, secure, and rising dividends over time.

But until the market starts focusing on those positive economic, industry, and individual REIT fundamentals, investors need to brace for a potentially painful year. Both in terms of share price, and potentially slower than expected growth rates for these REITs.

Bottom Line: These 2 Undervalued, Fast-Growing Industrial REITs Make Potentially Great Long-Term Buys At Today’s Prices

Don’t get me wrong, I’m not calling a bottom for REITs. For all we know, the sector might end up lagging the broader market for the next year or more, due to rising rate concerns.

What I do know is that industrial REITs like STAG and Monmouth have a bright future, and strong long-term total return potential. I have full confidence in their skilled management teams to continue adapting to various challenges, as they have successfully done in the past.

Which means that at today’s prices, long term, high-yield income growth investors are likely to do well adding these two stocks to their diversified income portfolios.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Nvidia: After The Fall

Pronounced Drop And Volatility

After radical swings in the stock price of Nvidia Corp. (NASDAQ:NVDA), which included a rapid 18% drop, investors can examine the causes of this volatility to form a view of prospects for the stock over coming months. This author believes that more growth may be expected in the price of Nvidia shares.

Investors saw a pronounced drop in Nvidia before an outstanding full-year’s earnings report. Thereafter the stock entered a very volatile range. That volatility continues and is to date more than double that of the weeks before the marked fall, and is greater than at any time in more than a year.

For example, on February 21 Nvidia fell more than $10.00 (4.00%) as the stock exemplifies high beta. To compare with its competitors, Nvidia registers a beta of 1.87, while Advanced Micro Devices, Inc. (NASDAQ:AMD) shows 1.58, and Intel Corp. (NASDAQ:INTC) has a beta of 1.41. Whenever beta becomes elevated, that is a time for investors to exercise increased vigilance as it may presage transitions, trend reversals and fake-outs.

Heightened Volatility Persists

In light of continuing volatility persisting after announcement of earnings outperformance, understanding the cause of the drop and its volatile aftermath should aid investors in reconciling these contradictions to determine the future direction of the stock.

Between January 21, 2018 and February 6, Nvidia fell precipitously by $45.27 (18.16%) to lose in just four trading days what it had taken nearly one month to gain. During such rapid market moves, valuation offers no protection. Then on February 8 the company announced that 2018 financial year profit grew by 83%, revenue climbed nearly 41%, and gross margin grew by 110 basis points. This outperformance has now taken the stock beyond previous highs, yet heightened volatility persists and may trouble holders.

NVDA data by YCharts

The 18.16% fall in price was caused mainly by technical market factors, not fundamental considerations particular to Nvidia. Approximately 85% of the total volume of stock market trades are based on algorithmic or quant criteria, and consequently by virtue of that sheer volume of technical trading, markets often rise and fall around technical trigger points.

Market Correlations

Underscoring this prominence of technical considerations is the correlation that the fall in Nvidia stock had with the drop in both the semiconductor sector as a whole and in the entire stock market. Compare the similarity in the charts below of both the semiconductor sector and the S&P 500 with that of Nvidia above.

As regards the overall stock market, a significant technical element on this occasion was the volume of short volatility trades using instruments tied to volatility indexes like the VIX. As a result of the power of market correlation, the downdraft in the stock market as a whole depressed stock prices in the semiconductor sector and pulled Nvidia down.

SOXX data by YCharts
SPY data by YCharts

This view of the attribution of the market pullback to technical factors was also stated by fellow Seeking Alpha contributor, Mohamed El-Erien:

It is driven by technicals, not fundamentals. The ongoing market correction doesn’t reflect a worsening of economic and corporate fundamentals. Rather, it is being driven by technical factors, including the unwinding of “short-volatility” trades . . . the testing of relatively new products and a shift in investor conditioning away from the “buy-the-dip” paradigm.

Demand May Weaken

Continuing volatility in Nvidia’s stock is in significant part due to concerns in some quarters regarding Nvidia’s exposure to cryptocurrency demand, as there are factors at play which may cause that demand to weaken in the foreseeable future. Cryptos generate approximately 10% of the company’s revenue, compared to approximately 3% of revenue for rival Advanced Micro Devices, Inc. (NASDAQ:AMD).

The future evolution of cryptocurrencies, especially Ethereum, threatens to render mining less profitable as it diminishes the block reward and reduces the difficulty of algorithms. In areas characterized by high energy costs, the profitability of mining is also waning. A mooted move to proof of stake settlement would reduce the need for mining.

To be considered additionally, Nvidia’s switch from in-car entertainment systems to AI driving systems is demonstrating lower than anticipated cash flow from the automotive segment. In the fourth quarter, automotive income grew 3% year-on-year, while falling 8% sequentially. However, 1Q19 automotive revenue is projected to climb above 1Q18 levels.

First Driving Processor

This market promises much increased revenue from approximately 2020 when mass market car manufacturers are expected to launch their first wave of autonomous vehicles. Nvidia is to launch the world’s first autonomous driving processor, named Drive Xavier, constructed with more than 9 billion transistors in the first quarter of 2019. Nvidia’s road to a sizable share of the autonomous driving market will be based on its alliances with Volkswagen, Uber, Mercedes-Benz, Baidu Inc. (NASDAQ:BIDU) and China’s ZF among others.

While there are valid concerns as discussed above, it may be expected that Nvidia’s increasing revenue derived from the cloud enterprise segment with their Volta chips, with capital expenditure in this market rising annually at a rate of 20-30%, will more than compensate for any reductions in cryptocurrency or auto market revenue. To underscore this point, Nvidia’s sequential growth in data center revenue exceeds 20%. A further growth area for Nvidia promising markedly increased earnings is that of AI inference applications and the IoT as these markets, presently in their infancy, evolve exponentially.

Nvidia’s financial base is healthy and growing, forming a foundation for projecting a continuing rise in share price. Sales growth in financial year 2018 was 40.58% year-on-year. The cost of sales in the same period grew at a slower rate than sales revenue, while EBITDA in 2018 was $3.41 billion compared to $2.16 billion in 2017. Total assets rose to $11.24 billion in 2018 from $9.84 billion in 2017, and total liabilities fell from $4.08 billion to $3.77 billion in the same period.

The drag on net income of Nvidia’s transition away from in-car entertainment towards AI driving systems, with their inherent cash flow lag, has been minimal with net income rising in 2018 to $3.05 billion from $1.67 billion in 2017. Free cash flow rose in 2018 to $2.91 billion from $1.5 billion the previous year.


After a jolting fall in share price, which can largely be attributed to technical factors, the full year’s earnings report has led Nvidia stock into a very volatile period with heightened beta relative to its peers. However, this phase promises to resolve into a continued upward trend as a result of growing demand in the enterprise segment. Concerns about a downturn in cryptocurrency revenue or lag time in realizing a higher volume of auto revenue are unlikely to halt that uptrend.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

How to Use the Power of Your Personal Brand to Skyrocket Your Business

In his new book, The Rise of the YoupreneurChris Ducker argues that the key to building a sustainable, future-proof business lies within your own experience, interests, and personality. Ultimately, finding success boils down to unleashing the power of your personal brand (what he calls, being a “Youpreneur”).

It sounds simple, but taking the leap to becoming a “youpreneur” takes vulnerability and authenticity.

I know the tactics Ducker suggests in his new book work, because they are the same strategies I used to pivot from my career as a TV news reporter to an entrepreneur. I didn’t know it at the time, but leveraging a strong personal brand and loyal fan-base is what helped me to build a successful business, with zero experience.

Here are my top four takeaways from Ducker’s book, if you want to leverage your personal brand for business success.

1. Be Original

While it may feel like there are no new ideas in business, Ducker suggests you can avoid the copycat marketing that is so prevalent these days, by building a business centered around you.

Anybody can have the same business model, the same services, or the same pricing. But nobody has your exact personality and experiences.

While you might be able to “get by” for a while modeling your business after another, ultimately, being successful boils down to being different and memorable. The easiest way to do it? Infuse your personal brand into your business.

As Ducker says, being different from your competitors beats being “better” every time.

2. Share Stories

You don’t have to look far for the most powerful marketing tool in your business: your own stories of what you have done and what you can do for other people.

Ducker shares that in order to use your stories to attract the right people to your business (and repel the wrong ones), you need to identify your true strengths and weaknesses and use these to captivate your audience.

It makes sense. People like doing business with other people. Major brands spend millions to develop characters or spokespeople that their customers can relate to. The benefit to the “youpreneur” business model is that you already have the spokesperson (you) and the stories to go with it.

Spend time identifying which stories your audience can relate to and leverage those in your marketing.

3. Create Content

Ducker recommends taking one piece of content and re-purposing it on multiple platforms.

This is something I call the “content compound effect.” It’s where you take one piece of content, let’s say a video interview, and you turn it into a blog post, a podcast, and a media pitch. You can develop a webinar around it or offer a live workshop on the topic.

I started doing this in business out of necessity- I just didn’t have the time to create original content on a dozen different platforms. Turns out, it’s a pretty effective marketing hack. If you’re going to spend time creating content, you might as well get the most return out of it as possible. Re-purpose your content for different platforms and you’ll reach more people as a result. 

4. Be an Expert

Ducker shares how he experienced a major shift in business when he decided to put himself front and center by hosting a podcast, blogging, and doing more public speaking.

It’s easier said than done, but for those willing to do it, the rewards are significant.

I’ve worked with many entrepreneurs who are too humble or overwhelmed to take center stage as an expert in their industry. The ones that are willing to take the leap and share their expertise in media interviews, training workshops, and public speaking, benefit from reaching a larger audience and making a bigger impact. 

While Ducker lays out a full strategy to becoming a Youpreneur in his book, I don’t think  it has to be all or nothing. Pick a couple tactics and start small. Begin infusing more of your personal brand into your content or your web copy. Make some media pitches and do a couple podcast interviews. Start peeling back the layers of your business to reveal the authentic, original brand of you and you’ll begin to experience the benefits of being a Youpreneur. 

6 Keys to Attracting and Nurturing Breakthrough Innovators on Your Own Team

Breakthrough innovation is the dream of every entrepreneur, but it’s still a scarce commodity. Selecting and nurturing people who are likely to help you in this regard is an even more elusive capability, and one that every angel investor, like myself, wishes he could get a lock on.

In fact, every manager and business owner needs this skill just to survive with today’s pace of change. 

We all wish we were the next Steve Jobs, or Elon Musk, or Thomas Edison. If we’re not, then at least we would like to recognize them when they come through the door, or better yet, create a few like them in our own organization.

I wish I understood what makes some people so spectacularly innovative, producing triumph after triumph, while the rest of us merely get by.

I’ve seen a lot of speculation on this challenge over the years, but I was recently impressed with the insights in a new book, Quirky, by Melissa A. Schilling.

From her position as professor at NYU Stern, and recognition as one of the world’s leading experts on innovation, she takes a deep dive into the lives and foibles of eight well-known innovators, including the ones mentioned.

One of her encouraging conclusions is that we all have potential in this regard, which can be brought out naturally by life circumstances and special circumstances, or nurtured by the people and culture around us.

I’ll paraphrase her key recommendations for capitalizing on this potential, for use on yourself and members of your team:

1. Incentivize people to challenge norms and accepted constraints.

Everyone wants to fit in, but most of us have felt a sense of being an outsider, which needs to be nurtured rather than crushed. In business, that means never saying or implying “that’s not the way things are done around here.”

It also means giving people opportunities in areas they have interest, but no track record. Elon Musk, for example, had no experience or training as a rocket scientist when he came up with the idea of reusing rockets, and the innovative idea for SpaceX

2. Give people time to think beyond current job assignments.

When you are looking for breakthroughs, you need time to think outside the box without fear of consequences. Make it clear, as they do at Google, that you are expected to spend some “20 percent time” outside your current job assignment.

The payoff value of a person working alone on side projects, tapping into intrinsic motivation, has been the source of several of Google’s most famous products, including Gmail. 

3. Reinforce people’s belief in their ability to succeed.

One of the most powerful ways to increase creativity, at both the individual and organizational level, is to encourage people to take risks by lowering the price of failure, and even celebrating bold-but-intelligent failures.

Also, creating near-term project milestones, with plenty of opportunities to celebrate early progress, is extremely valuable to reinforce people’s belief in their ability.

4. Inspire ambitions by setting grand goals and purpose.

Driving business goals that have a social component that people can embrace as improving quality of life provides intrinsic motivation to increase creativity and effort in their activities. Steve Jobs was obsessed with revolutionizing personal expression, more than making a computer.

5. Tap into people’s natural interests and favorite activities.

In business, this is called finding the flow. It requires both self-awareness on what you like to do, and a willingness on the part of your manager to personalize work assignments. With most jobs, there are many ways to get to results, so let your employees tell you what steps and tools they prefer.

Thomas Edison loved to solve problems and he designed his own experiments. Thus he was happy to persevere, despite 10,000 of his light bulb filament material tests that didn’t work. 

6. Increase focus on technological and intellectual resources.

With today’s pervasive access to the Internet, with powerful search tools from Google, WolframAlpha, and many others, the Library of Congress is at everyone’s fingertips. They just need the inspiration, time, and training to capitalize on these tools, and the new devices that arrive every day.

Schilling and I do agree that you have to start with people who possess substantial intellect, so the conventional indicators of skill and accomplishments cannot be ignored.

In addition, it’s important to find partners and team members with a high need for achievement, a passionate idealism, and faith in their ability to overcome obstacles, often seen as a level of quirkiness.

We are talking here about finding and nurturing people who can literally help you change the world, because that’s what breakthrough innovation is all about. If your business and personal goals don’t measure up to that standard today, maybe your first focus should be on rethinking your own objectives.

The bar for staying competitive in business keeps going up.

Broke Out Of This Jailhouse REIT

It’s one thing when jails are successful in housing and rehabilitating prisoners, but when those jails themselves become dysfunctional, something has to give. We were originally very positive on the concept of private prison ownership, knowing that the government couldn’t handle or didn’t want to handle the workload. But with its own set of issues and challenges, we are throwing in the towel on this Jailhouse REIT.

CoreCivic Inc. (CXW) (formerly Corrections Corporation of America) is a real estate investment trust company specializing in correctional, detention, and residential reentry facilities and prison operations. It also makes certain healthcare, food, work and recreational programs available to offenders as well as providing a variety of rehabilitation and educational programs like basic education, faith-based services, life skills and employment training, and substance abuse treatment – programs that intend to help reduce recidivism and prepare offenders for their successful reentry into the society upon their release.

It earns revenue on an inmate per-day based on actual or minimum guaranteed occupancy levels. In 2016, the company recorded $1.9 billion revenue. It has 13,755 employees and is the largest player in the correctional facilities industry with 34% market share. It owns 57% of all privately owned correctional and detention capacity.

Source: CoreCivic Investor Presentation

If Planning To Visit

As of September 30, 2017, CoreCivic owned 79 real estate assets and manages 7 additional facilities owned by its government partners. It owns 44 correctional facilities with 64,064 bed capacity and manages 7 facilities with total bed capacity of 8,769 beds. It leases 2 correctional facilities with 4,960 beds capacity and leases 7 residential centers with a total of 1,047 beds capacity to other operators and leases another 3 properties with total area of 30,000 sq. ft. to the federal government. It also operates 23 residential reenter centers with total capacity of 4,792 beds.

Aside from its principal executive offices in Nashville, TN, it also owns two corporate office buildings.

Source: CoreCivic Investor Presentation

Customers/Key Buyers

CoreCivic’s customers consist of federal and state correctional and detention authorities. Its key federal customers include the Federal Bureau of Prisons (BOP), the United States Marshals Service (USMS), and U.S. Immigration and Customs Enforcement (ICE).

Contracts from federal correctional and detention authorities account for about 51% of the company’s revenue whereas contracts from state customers account for about 42% of its revenue. Most of these contracts contain clauses allowing the government agency to end the contract at any time without cause. Moreover, these contracts are also subject to annual or biannual legislative appropriation of funds.

Aside from diversifying within federal, state, and local agencies, the risks of ending a contract prematurely is that CoreCivic has staggered contract expirations with most of its customers having multiple contracts. In the past, BOP has tended to let contracts end rather than end them prematurely as it is dependent on private prisons to house low-security inmates – typically undocumented male immigrants.

We knew about the concentration of government dependence when we invested in the stock but have become increasingly concerned with both the lack of inmate growth (see below) and the potential for government decisions that could adversely affect revenues – particularly in a highly polarized political environment that frankly, we find unpredictable.

Source: CoreCivic Investor Presentation

Recent Trends

Because the majority of the company’s revenue come from the federal government, its contracts are susceptible to annual or biannual appropriations, and having short terms of just three to five years, CoreCivic could be largely affected by an impending government shutdown. At present, immigration policy is one of the major issues wherein the Republicans and Democrats have opposing stances. For example, from January 19th to the 22nd, the U.S. entered a government shutdown after the two parties failed to come to an agreement about the funds allocated to immigration issues like the Deferred Action for Childhood Arrivals (DACA).

With the U.S. Immigration and Customs Enforcement being one of the major customers of CoreCivic, the company is directly affected by these shutdowns.

During a shutdown, the government will not be able to pass any short-term spending bills that allow budget allocations to be released to various agencies. Companies like CXW receive fixed monthly payments so the BOP may not be able to release funds or pay CoreCivic for a short period of time, depending on when and how long the shutdown occurs – resulting in cash flow and working capital challenges. Luckily, the government shutdown did not last very long, but the potential for a similar risk in the future is still relevant.

Another trend that is likely to affect CoreCivic’s business is the continuous decline in the number of prisoners. The number of prisoners under state and federal jurisdiction has declined by 7% from 2009 when the U.S. prison population peaked (See the table below). Federal prison makes up 13% of the total U.S. prison population and contributed 34% of the decline in the total prison population in 2016.

Source: U.S. Department of Justice

Accordingly, prisoners being held in private prisons have declined. According to Pew Research, after a period of steady growth, the number of inmates being held in private prisons has declined since 2012 and continues to represent a small share of the nation’s total prison population. We’re not confident this trend will reverse.

Another reason for the declining population in private prisons is the growing government commitment to progressive criminal justice, particularly to nonviolent offenders – low-security prisoners who are catered by private prisons. For example, the recommended mandatory minimum sentencing for nonviolent drug traffickers has been reduced. These progressive trends are likely to lead to further decreases in inmate populations.

Source: Pew Research

In August 18, 2016, the DOJ also issued a memorandum to the BOP directing that as each contract with privately operated prisons expires, BOP should either decline to renew contacts or substantially reduce scope in line with the BOP’s inmate population.

However, despite the said memorandum, BOP did exercise a two-year renewal option for CoreCivic’s McRae Correctional Facility. Moreover, in February 2017, the Department of Justice also reversed the memorandum to phase out private prison. It argues that this policy will impair the government’s ability to meet the future demands of the federal prison system. This decision saves the private prison industry from the risk of being phased out in the near future but may only push that decision out a few years. The uncertainty worries us.

To make matters worse, a class action lawsuit (Grae v. Corrections Corporation of America et al.) was filed against CoreCivic’s current and former offices in the United District Court for the Middle District of Tennessee. The lawsuit alleges that from February 27, 2012 to August 17, 2017, the company made misleading or false information and public statement regarding its operations, programs, and cost-efficiency factors to inflate its stock price. CoreCivic insists that these accusations are without merit but it still puts CXW and private prisons in a negative light.

Lastly, CoreCivic has also been receiving criticisms about its services. Complaints were received from Trousdale Turner Correctional Center in Hartsville after allegedly failing to address the concerns of prisoners and their families, including the healthcare needs to diabetic inmates. The scabies outbreak in its Metro-Davidson County Detention Facility is also cited as an example of its negligence to protect the wellbeing of prisoners. These lawsuits do not help CoreCivic’s image especially after it has laid off 500 employees after losing three jail contracts in Rusk, Jack, and Willacy counties.


According to IBISWorld, the correctional facilities industry revenue is expected to grow minimally at an annual rate of 0.1% to reach $5.3 billion from 2017 to 2022, but industry profit is not expected to rise significantly. The trend in the number of prisoners will slow down the growth of the industry despite the overcrowding problem in the state prisons, which may or may not compensate for decreased demand for its services at the federal level.

Overall, we do not view the company’s prospects favorably in light of industry trends, governmental risks, and reputational image that can affect fundamentals and create unwanted headline risk. For this reason, we are selling CXW out of the REIT Portfolio.

America is the land of the second chance – and when the gates of the prison open, the path ahead should lead to a better life. – George Bush

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UberEATS Driver Fatally Shoots Customer in Atlanta, Police Say

Atlanta police say a driver for UberEATS, the ride-hailing company’s food delivery service, shot and killed a customer in the city’s posh Buckhead neighborhood late Saturday night.

The victim was identified by a local NBC affiliate as 30-year-old Ryan Thornton, a recent Morehouse College graduate. According to NBC’s report, Thornton and the UberEATS driver exchanged words after the delivery was made. The driver then allegedly shot Thornton several times and fled in a white Volkswagen vehicle.

Thornton was taken to a local hospital, where he later died from his wounds. The alleged shooter was still on the run from police early this morning.

An Uber spokesperson said the company was “shocked and saddened” by the event, and are cooperating with Atlanta police in the investigation.

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One Buckhead resident told the television station that he would be more cautious about using Uber services after the shooting. Uber drivers have been implicated in violence in the past, and the company’s approach to screening its drivers has been criticized for some of its legal and public relations problems.

The most damaging case was likely that of an Indian passenger who was raped by an Uber driver in 2014. In court documents, the passenger alleged that Uber executives wrongfully obtained her medical records with apparent plans to discredit her. The driver was sentenced to life in prison, and Uber settled the civil suit brought by the victim late last year.

Last November, two women filed a class-action lawsuit against the company in the U.S., alleging that its failure to screen drivers has led to thousands of incidents of sexual harassment and even rape of female passengers. In one example, an Uber driver was arrested for the rape of a passenger last December, also in Atlanta. Just days later, an Uber driver in Lebanon confessed to murdering a British Embassy staffer there.

Under former CEO Travis Kalanick, Uber fought hard against certain driver-screening rules. In one case, Uber shut down its operations in Austin, Texas in 2016 after spending millions of dollars to defeat a background-check rule there, and failing. It returned to the city after state legislators overturned the local ordinance. Safety concerns were also among the reasons London has barred Uber from operating there.