China bans Facebook messaging service WhatsApp

The Chinese government has disabled Facebook-owned messaging service WhatsApp, the New York Times reports.

Nadim Kobeissi, an applied cryptographer at Paris-based research firm Symbolic Software, told the Times his company began noticing slowdowns in the service Wednesday. By Monday, the block had become comprehensive.

Authorities blocked video-chat and file-sharing functions within WhatsApp in mid-July, but the app’s messaging capabilities, which employ a rare and strong form of encryption, remained functional. The government lifted bans on video chat and file sharing later, but has since disabled the app in its entirety, reports say.

WhatsApp’s messaging service uses a renowned end-to-end encryption technique. As the Times explains it, even Facebook itself cannot decode messages sent via the app. The encryption method is not widely used and is therefore difficult to compromise.

But the ban, as the Times points out, indicates that Chinese authorities have developed a means by which to breach WhatsApp messaging encryption.

“This is not the typical technical method in which the Chinese government censors something,” Kobeissi said.

Censorship of various technological communication services is commonplace in the country. If the government does not disable a service entirely, it slows down that service to such a degree that it becomes unusable.

“If you’re only allowed to drive one mile per hour, you’re not going to drive on that road, even if it’s not technically blocked,” Lokman Tsui, an internet communications specialist at the Chinese University of Hong Kong, explained to the Times.

The goal of the censorship is to funnel users toward a handful of communication services that the government can easily monitor. WeChat is one such service. It is similar to WhatsApp except that the former, according to the Times, offers broader functionality.

Tencent, the company that runs WeChat, is based in Shenzhen and has said that it will comply with the government’s requests for information. In total, 963 million people use WeChat, the Times says.

Services like WhatsApp and WeChat have largely replaced e-mail in China, and are vital to many business operations. A large number of China-based businesses were unwilling to use WeChat, whether because of the threat of surveillance or some other reason.

Some former WhatsApp users in China expressed frustration on social media, the Times reports.

“Losing contact with my clients, forced back to the age of telephone and email for work now,” one user complained on Weibo, a Twitter-like microblogging site.

“Even WhatsApp is blocked now? I’m going to be out of business soon,” another person said via the same site.

WhatsApp was the last Facebook product available in mainland China, the Times says. The country banned the company’s main social media site in 2009. Instagram, another Facebook offering, is disabled as well.

The WhatsApp ban represents a setback for the social media behemoth, whose founder and chief executive, Mark Zuckerberg, has been advocating and taking steps toward re-entering the Chinese market.

The handful of American-created communication services China does tolerate include Microsoft’s Skype and Apple’s FaceTime. The former does not employ end-to-end encryption, the Times points out, and is, therefore, easier for the government to monitor. The latter does use end-to-end encryption but is less secure than WhatsApp.

The Times notes that the Office of the United States Trade Representative is investigating whether Chinese authorities have violated the intellectual property rights of American citizens. The Office has not clarified whether it will consider the bans as part of the investigation, or merely look for cases in which China has stolen US technology.

The WhatsApp ban comes just prior to the country’s Communist Party Congress on October 18, during which authorities appoint the leaders of the party, who in turn run the country.

According to the Times, the meeting, which the country holds once every five years, will likely reinstall President Xi Jinping as party leader. The question remains as to who will join Xi on the Standing Committee of Politburo, the party’s highest ranking group.

Under Xi’s leadership, the Times notes, China has tightened censorship, closed several churches and jailed a number of human rights activists.

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Walgreens to revise proposal to buy over 2,000 Rite Aid stores

In yet another effort to appease the Federal Trade Commission (FTC), U.S. pharmacy chain Walgreens will likely revise its June proposal to acquire 2,186 individual Rite Aid stores for $5.18 billion, sources told Bloomberg Monday.

Walgreens’ announcement could come early this week, the sources said.

The two chains have been pursuing a deal for almost two years, but the three proposals they have submitted thus far have met resistance from the FTC. In October 2015, Walgreens proposed an outright takeover of Rite-Aid. Under that deal, the former company would have purchased the latter for $9 per share—that amounts to a total of $9.4 billion.

Walgreens offer represented a 48 percent premium on Rite Aid’s closing price on October 26, the day before the proposal was announced.

The FTC reportedly worried that Walgreens’ purchase of Rite Aid would compromise competition.

A report by the Drug Channels Institute indicates that at the close of 2016, Walgreens controlled 13.8 percent of the U.S. prescription market, in terms of revenue. Under five percent of that market belonged to Rite Aid. The takeover would have given the combined company 18.4 percent of the market.

CVS, the nation’s largest pharmacy chain in terms of revenue, holds 23.4 percent of the prescription market.

This January, in response to the FTC’s concerns, Walgreens revised the price per share to between $6.50 and $7—putting the total value of the purchase between $6.84 billion and $7.37 billion—and pledged to sell as many as 1,200 of its newly acquired Rite Aid stores (about a quarter of the 4,600 or so Rite Aid locations Walgreens would have acquired) to Fred’s, a regional pharmacy chain.

In June, amidst continued skepticism from the FTC, Walgreens took a different tack. Rather than taking over Rite Aid, Walgreens proposed buying 2,186 individual Rite Aid stores—roughly 48 percent of the total number of Rite Aids—for a total of $5.18 billion, leaving Rite Aid to operate as a stand-alone entity.

Because it abandoned the original takeover plan, Walgreens was obligated to pay Rite Aid a termination fee of $325 million in addition to the purchase price.

Rite Aid stock plunged about 30 percent on news of the abandoned takeover, Fortune notes.

The Fortune piece casts doubt on whether the FTC was set to block the merger, citing a CTFN report that in turn cites antitrust lawyers and a former DOJ official as saying in late June that the FTC was “more likely than not” to approve the deal.

Prior to the companies’ withdrawal of the proposal, the FTC had taken no action to block the agreement. Following the withdrawal, Fortune says, the FTC released a statement calling the companies’ action “voluntary” and saying it came before the companies “would have been free to close their transaction absent Commission action.”

But, Walgreens Chief Executive Officer Stefano Pessina implies that he amended the deal in the face of regulatory pressure

“This deal [the one announced in June] is much simpler,” said per Bloomberg, of the June proposal. “It is an asset deal so it is less controversial.”

The FTC has allegedly frowned upon that deal as well, so Walgreens is set to amend its proposal for the fourth time. Sources told Bloomberg the “number of stores involved in the deal would not change dramatically” (Bloomberg’s paraphrasing).

The deadline by which the FTC was required to complete its review of the June proposal is nearing, Bloomberg notes. When that deadline arrives, the agency will either approve the deal or request additional information.

If Walgreens submits a revised plan prior to the deadline, though, the FTC would have 30 more days to consider that new proposal, and investigation of the previous one would end.

Rite Aid shares jumped 3.8 percent to a two-and-a-half-year high Monday on news that Walgreens was considering revising the deal. Walgreens surged in early trading but quickly modulated. At the market’s close, the company’s shares had risen marginally (0.12 percent).

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Equifax stares down almost two dozen class actions after cyberattack

Credit reporting and monitoring company Equifax is facing at least 23 proposed class action lawsuits in the wake of its announcement Thursday that a cyber attack compromised the personal information of up to 143 million Equifax customers, USA Today reports.

Various law firms have filed suits in 14 different states as well as D.C., according to USA Today. More suits will likely come. Victimized customers may receive a pretrial settlement from Equifax, and/or may be entitled to some portion of any financially pejorative judgment levied against the firm.

“Equifax probably injured 143 million people, which is kind of a record…with 143 million people it doesn’t surprise me there are already 23 suits,” said John Coffee, who directs the Center on Corporate Governance at Columbia Law School.

USA Today notes that the number of people the breach potentially victimized represents 44 percent of the U.S. population.

“Assume that if you’re an American with a credit card or a mortgage, your data has been leaked,” Zach Whittaker, security editor for CBS’s ZDNet, tweeted.

Hackers carried out the attack from mid-May through July, seizing customers’ names, social security numbers, birth dates, addresses and, in some cases, driver’s license numbers. Equifax says it became aware of the breach in late July. The company alerted the public of the incident on September 7. In the interim, Equifax hired third-party consultants to investigate the crime and provide suggestions as to how the company might bolster its cyber-defenses.

Many of the lawsuits take issue with the lag time between Equifax’s discovery of the attack and the firm’s notification of the public. USA Today says one suit calls the delayed disclosure “willful, or at least negligent.” Another argues that the delay “deprived [consumers] of their opportunity to meaningfully consider and address issues related to the potential fraud, as well as to avail themselves of the remedies available under the FCRA (U.S. Fair Credit Reporting Act) to prevent further dissemination of their private information.”

The company would presumably argue that it was justified in assessing the nature and extent of the attack before alarming the public.

A third suit notes that Equifax fell victim to similar attacks earlier this year, as well as in 2013 and 2016. Therefore, said suit argues, Equifax “knew and should have known of the inadequacy of its own data security.”

Other filings take aim at TrustedID, an Equifax service that provides identity theft protection and credit monitoring. One document says the company “failed to disclose to consumers that it owned TrustedID,” and baited customers into signing up for the service.

To help customers identify whether their information was compromised by the attack, Equifax is offering free TrustedID service to all U.S. customers

New York Attorney General Eric Schneiderman, who is investigating the Equifax case, took issue with a clause in the agreement Equifax requires TrustedID members sign. The clause in question says that in signing up for TrustedID, a user waives his/her “right to bring or participate in any class action…or to share in any class action awards.”

“This language is unacceptable and unenforceable,” Schneiderman tweeted Friday. “My staff has already contacted @Equifax to demand that they remove it.”

Equifax subsequently explained that the waiver does not prohibit TouchID members from participating in class actions regarding the cyber security incident.

In addition to Schneiderman, other government entities are pursuing the Equifax case. USA Today obtained a copy of a letter Senators Omin Hatch and Ron Wyden, both of whom hold key positions on the Senate Committee on Finance, sent to Equifax requesting details about the attack and the manner in which the company is handling it.

The letter requests a timeline of the breach and asks how Equifax is identifying affected customers and what measures the company is taking to limit consumer harm. The document also asks Equifax to clarify the amount of information that was compromised.

Legal arguments must take place before the proposed suits achieve class action status. If the court grants class action status, USA Today says, a “federal panel on multi district litigation” will likely consolidate the suits into a single case, then assign that case to a judge, who would, in turn, appoint one law firm or a group of law firms as plaintiff counsel.

At the market’s close Tuesday, Equifax stock has dipped 18.7 percent since the original announcement. 4.7 percent of the drop has come since Monday morning when news of the proposed class actions broke.

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Markets rise as Irma weakens, North Korea anniversary passes without nuke test

Markets around the world are rising as Florida missed the worst of Irma this weekend, and as North Korea’s founding celebration, which took place Saturday, did not include a missile test, Reuters reports.

Irma hit the Florida keys Sunday as a Category 4 hurricane, then came into Miami, damaging several buildings and creating a storm surge that caused flooding in the downtown area of the city, The Wall Street Journal reports. The full extent of the damage remains unknown, as many of the hardest-hit areas are still inaccessible. The Journal points out that the National Weather Service expects severe conditions to persist in central and western Florida.

Irma continues to lose strength, The Washington Post notes. By Tuesday, experts expect it to weaken to a tropical depression. But, the storm remains capable of producing hurricane-force gusts, and will likely create a “life-threatening” storm surge, cautions the National Hurricane Center. A storm surge warning is in effect across much of the Atlantic and Gulf coasts.

The Post cites a National Weather Service tweet that says Irma’s storm surge produced record flooding in downtown Jacksonville Monday morning.

Nonetheless, Floridians caught something of a break over the weekend. On Friday, the Journal says, some models projected that the storm would hit Miami and east coast Florida head-on—instead, the storm turned toward the gulf coast.

“For now, we’re seeing a bit of a relief rally [in the market]. It does appear that the worst-case scenario for Florida has been evaded,” said Peter Cardillo, chief market economist at First Standard Financial in New York, per Reuters.

Meanwhile, North Korea tested no missiles over the weekend, though, according to the New York Times, leaders did hold a massive gala for the country’s nuclear scientists Saturday, in conjunction with national anniversary celebrations.

Last Sunday, North Korea successfully detonated its sixth nuclear bomb.

The MSCI AC World Equity Index, MIWD00000PUS, which tracks 2,400 stocks in 47 countries, according to Reuters, surged to a new high Monday morning, and as of 1:27 Eastern Monday. DXY, an index that compares the U.S. dollar to six other currencies, has jumped 33 cents (0.36 percent) since 11:59 p.m. Sunday. DXY is recovering after having hit a two-and-a-half-year low Friday.

Meanwhile, stock markets in Tokyo had their best session since June, according to Reuters. Relief about the situation in North Korea, as well as a weakening yen, spurred the surge.

In the U.S., shares are up one percent across Wall Street, Reuters says. As of 2:30 p.m. EST Monday, the DOW Jones Industrial Average has risen 260.19 points (1.19 percent) since it closed Friday. The S&P 500 has jumped 1.06 percent since Friday’s close, and now sits at 2487.67.

Demand for gold is falling, as investors are, according to Reuters, more inclined to assume risk given the relative stability of the U.S.’s relationship with North Korea and the relatively mild damage Irma wreaked upon Florida. As of 2:47 Eastern Monday, one troy ounce of gold is worth $1330.61, a decrease of $10.64 (0.8 percent).

Oil investments are falling out of favor as well, as the market frets over Irma’s and Harvey’s impacts on the supply of oil in the U.S., which Reuters says consumes more oil than any other nation.

“Brent crude oil futures for November delivery LCOc1 were down 66 cents [1.23 percent] at $53.12 a barrel, while benchmark U.S. West Texas Intermediate crude CLc1 declined by 33 cents [0.7 percent] to $47.15,” Reuters writes.

Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis, said that a weaker dollar, along with lower interest rates, will provide more fuel to the U.S. economy in the near future.

“We are massively stimulating this economy that’s already doing pretty well,” he said. “That’s likely to accelerate an already-good economy even further the next 12 months.”

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Facing $5 billion worth of debt, Toys “R” Us hires restructuring consultants

Toys “R” Us has hired law firm Kirkland & Ellis as restructuring consultants to help the reeling toy giant negotiate its debt as the holiday season approaches, CBS News reports. The company may seek bankruptcy protection.

In its first quarter earnings statement, the company reported over $5 billion in long-term debt as of April 29. Per CBS, $446 million of that is due by the end of this fiscal year, and $2.2 billion is due by the end of next fiscal year. Although Toys “R” Us is privately-held, it reports earnings because its debt is publicly traded, according to CBS.

“What Toys ‘R’ Us has been doing is extending the debt as it comes due and paying higher interest rates,” Howard Davidowitz, the head of the retail consultancy and investment bank Davidowitz & Associates, told CBS.

That approach has caused the debt to pile up. “They have got enormous debt,” says Davidowitz.

In its quarter two earnings call, scheduled for September 26, the company plans to discuss new fiscal strategies, and to unveil a program intended to improve customers’ experiences over the holiday season, spokeswoman Amy Von Walter told CBS.

Davidowitz said, per CBS, that a considerable percentage of Toys’ R Us’ debt results from the $6 billion sale of the company to a group of notable private equity firms in 2015. No evidence is available to corroborate the claim, though.

Toys “R” Us’ debt has prevented it from investing in online sales, which has, in turn, hampered its ability to compete with the likes of Walmart and Amazon. Over the last four years, CBS notes, the iconic toy retailer has spent just $100 million to bolster its online presence.

In 2013, Toys “R” Us generated 18 percent as much revenue as Amazon did; last year, Toys “R” Us’ figure was 8.5 percent of Amazon’s.

After Toys “R” Us failed to deliver many online orders in time for Christmas in 1999, the company partnered with Amazon in an effort to establish a stronger eCommerce presence. But, in 2004, Toys “R” Us sued Amazon for violating an exclusivity agreement, and relations soured. In 2009, Amazon paid Toys “R” Us $51 million to settle the case.

Founded in 1948, Toys “R” Us has been a household name in American industry for decades. Though the company has lost ground to competitors in recent years and is now buried under a potentially fatal mountain of debt, it maintains a strong presence in the market.

CBS quotes a June report by Moody’s, a credit rating agency, as saying: “We believe Toys ‘R’ Us remains a compelling competitive force in the toy and baby sub-segment of retail, however it is also our view that Toys’ competitive position continues to suffer challenges as a result of many of its larger, better-capitalized competitors such as Walmart, Target and Amazon using toys as traffic-drivers to both brick-and-mortar locations and websites, especially during the key holiday season, which seems to begin earlier every year.”

Forbes ranked Toys “R” Us the 22nd largest private company in the U.S. based on full-year revenue in 2016.  That year, the toy giant brought in $11.4 billion in revenue.

But, that figure marks a 2.2 percent drop from 2015. In fact, the company’s revenue has fallen in each of the last five years, according to data collected by D&B Hoovers. Since 2013, annual revenue has plummeted more than $2 billion—almost 15 percent. From 2013 to 2014, revenue dropped $1 billion (7.4 percent).

Gross profit has fallen $843 million—17 percent—since 2013, from $4.95 billion to $4.11 billion.

Toys “R” Us has reported net losses every year since 2014. That year, the company lost more than $1 billion. The bleeding has subsided each year since, though. In 2016, Toys “R” Us lost $36 million.

If anyone needs a good holiday, it’s Toys “R” Us.

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Starting school later could boost the U.S. economy by $83 million over 10 years

A recent study conducted by the RAND Corporation suggests that delaying the start of the school day until 8:30 a.m. could boost the U.S. economy by $83 billion over the course of a decade, madison.com reports.

Pediatric health experts have long argued that a later start to the school day would better accommodate teenagers’ sleep needs, and would improve students’ concentration, as well as their mental and physical health.

According to madison.com, up to 60 percent of teens do not sleep for the recommended eight to 10 hours per night. Researchers have correlated lack of sleep with suicidal thoughts and other adverse mental and physical health conditions.

Policymakers have been reluctant to delay the start of the school day, citing costs associated with rerouting bus schedules and making other necessary changes. However, RAND’s study finds that over the course of a few years, the economic benefits derived from a later beginning to the school day would outweigh the costs of implementing the change.

“A small change could result in big economic benefits over a short period of time for the U.S. In fact, the level of benefit and period of time it would take to recoup the costs from the policy change is unprecedented in economic terms,” said Marco Hafner, a senior analyst at RAND Europe who co-wrote the report.

The study identifies two primary factors that would precipitate economic growth if school started later. First, traffic fatalities would decrease. Therefore, more children would grow to adulthood and contribute to the country’s workforce.

The RAND study cites CDC and AAA data indicating that one in five fatal traffic accidents involves a tired driver. RAND also cites a study conducted in 2008 that found that starting school later would reduce the rate of traffic accidents by 16.5 percent.

Second, academic performance would improve, boosting high school graduation and college attendance rates. Another study indicated that giving students an additional hour of sleep would increase their likelihood of graduating high school by 8.6 percent, on average, and their likelihood attending college by 13.4 percent, on average.

Students who graduate high school stand to earn a higher income than those who do not. Those who attend and/or graduate college generally make higher wages than those who do not. Higher income means more spending and, therefore, increased economic contribution.

The economic benefits of the policy shift would increase at an accelerating rate over the first 15 years following the implementation of the policy. There would be no change in economic output one year after the shift, for the students graduating that year would have benefited from just one year of enhanced academic performance. After two years, though, the economy would grow by $9 billion; after five, by $37 billion; and after 15, by $140 billion.

RAND claims to have been conservative in many aspects of the study,

“Throughout the cost-benefit projections, we have taken a conservative approach when establishing the economic gains,” Hafner said. “We have not included other effects from insufficient sleep — such as higher suicide rates, increased obesity and mental health issues — which are all difficult to quantify precisely. Therefore, it is likely that the reported economic and health benefits from delaying school start times could be even higher across many U.S. states.”

Still, RAND says, the study supports the conclusion that a later school start time would benefit the nation’s economy as well as the health of students.

“From a policy perspective, the potential implications of the study are hugely important. The significant economic benefits from simply delaying school start times to 8.30 a.m. would be felt in a matter of years, making this a win-win, both in terms of benefiting the public health of adolescents and doing so in a cost-effective manner,” says said Wendy Troxel, a senior behavioral and social scientist at RAND who co-wrote the report.

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U.S. Labor Department releases August 2017 employment data

Friday, the U.S. Labor Department released hiring and unemployment data for August, The New York Times reports. Employers created 156,000 jobs last month—less than analysts expected.

Employers added more than 200,000 in June and July (the Department revised each of those figures downward by 41,000 in this most recent report). August’s figure marks a sequential decrease of 22%. Analysts anticipated a dip, but not one so pronounced. August job-creation figures have come in below analyst expectations in four of the last five years.

Still, job creation rose 50 percent year-over-year last month.

The unemployment rate saw a marginal sequential increase, up to 4.4 percent in August from 4.3 percent in July. Joblessness continues to hover around a 16-year low. The so-called participation rate, which reflects the percentage of able workers who are either working or looking for work, came in at 62.9 percent. It has remained more or less static over the past 12 months.

Average hourly wages rose just 0.1 percent, coming in below analyst expectations. Wages generally rise with hiring rates, but the data has gone against that trend in recent years.

As wages rise, theTimes notes, the Federal Reserve raises the federal funds rate—that is, the interest rate at which banks lend money to one another—so as to guard against inflation. But the flatness of hourly wages means inflation is minimal.

“There’s no sign of inflation, which keeps the Federal Reserve on hold in terms of interest-rate hikes, and it suggests stocks should keep doing well,” Torsten Slok, chief international economist at Deutsche Bank, said, per the Times.

Stocks are up slightly today. The DOW Jones Industrial Average is up 0.18 percent, and the Nasdaq Composite is up 0.10 percent.

There is a 30 percent chance the Federal Reserve will raise the federal funds rate when it meets in December. The Fed will also meet later this month, but will not modify the interest rate.

The Federal Reserve is watching whether workers who exited the workforce during the latest recession (which took place from January 2008 through May 2009) are re-entering now. In 2010, ten percent of Americans were unemployed. That figure has dropped by more than 50 percent as of today.

The hiring and unemployment report comes on the heels of the Department of Commerce’s publication Wednesday of national economic data for the second quarter of the year. The Department reported 3.0 percent GDP growth, up from 1.2 percent in quarter one.

Last recession hit the manufacturing sphere particularly hard. Two million jobs (just under 15 percent of the industry’s workforce) vanished. Since January 2010, though, have of those jobs have come back.

The growth is accelerating. Over the first seven months of 2017, the Times notes, factories hired 101,000 workers. In August, 36,000 more employees came on board.

Mack Truck is hiring in at its assembly plant in Pennsylvania’s Lehigh Valley, the Times notes. in illustration of the rebound of the manufacturing sector. Since 1905, Mack has built every truck it sells in North America at the Lehigh Valley plant.

In 2016, Mack lost nearly a third of its workers at the plant: the facility employed 1,875 workers at the end of 2015 and 1,287 after 2016.

Today, 1,800 people take a paycheck home from the plant, which is currently offering 26 jobs.

Because the failure of the housing market largely spurred the recession, the construction industry took arguably the biggest hit. At the beginning of 2008, 7.49 million people held construction jobs in America. The recession slashed that figure by almost 25 percent, and the industry continued to decline in the recession’s wake. At the end of January 2011, employment across the sector hit a ten-year low. 5.45 million people held construction jobs—37 percent less than of at the end of 2007.

Today, the industry employs 6.9 million people—just under 27 percent more than on March 1, 2011. It has added 101,000 jobs in 2017, including 28,000 in August.

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Consumers accuse Best Buy, other Texas retailers of price-gouging in Harvey’s wake

A photo taken at a Best Buy in Houston after Hurricane Harvey shows 12-packs of Smart Water listed for $29.98 and 24-packs of Dasani water advertised at $42.96. The photo went viral on social media, causing many to accuse the company of price-gouging in the wake of the storm.

A Best Buy spokeswoman told CNBC the exorbitant pricing resulted from a “big mistake” made by a few employees at one store.

The company issued a statement Wednesday explaining that because it does not sell water by the case, its computer systems contain no pricing information for cases of water. When employees at the store in question failed to find prices for cases, they multiplied the price of individual bottles by the number of bottles in a case and arrived at the numbers listed above.

The statement says the explanation is not an excuse and expresses remorse for the occurrence.

“We feel terrible about this because, as a company we are focused on helping, not hurting people affected by this terrible event,” the statement says. “We are all deeply sorry that we gave anyone even the momentary impression that we were trying to take advantage of the situation.”

Best Buy is just one of a number of Houston-area retailers consumers have accused of using the storm to pad the bottom line, The Washington Post reports. The state attorney general’s office has received 684 complaints from consumers, most of which allege price-gouging.

“Anytime catastrophic storms hit Texas, we witness the courage of our first responders and the generosity of neighbors coming together to help their fellow Texas,” Attorney General Ken Paxton said in a statement, per the Post. “Unfortunately, in the wake of the damage from storms and flooding, we also see bad actors taking advantage of victims and their circumstances.”

Some businesses have charged as much as $8.50 for a single bottle of water, and up to $99 for a case, the Post says.

An investigation by KXAN, an NBC affiliate based in Austin, revealed that a Best Western hotel in Robstown was charging almost triple its ordinary nightly rate. A crew working undercover for the station paid $289.99 ($321.89 with tax) for a room that typically costs $119 per night.

Best Western spokeswoman Kelly Dalton said in a statement that the nationwide hotel chain had reimbursed the overcharged customers and intends to cut ties with the Robstown location.

One woman says she paid more than $60 for two cases of beer at a RaceWay gas station in Corpus Christi. RaceWay says the overcharge resulted from a clerical error, and that the owner, who is an “independent Raceway contract operator,” according to a statement by RaceWay, gave the customer a full refund when the mistake came to light.

Still, the company says: “We take these allegations seriously and are investigating them with the operator.”

Texas law enforcement takes price-gouging seriously as well. The offense carries a fine of $20,000 per incident. If victims are over the age of 65, the penalty is $250,000 per incident.

Price-gouging, Paxton says, is something “you can’t do in Texas.”

A few gas stations have reportedly been charging upwards of $3.50 per gallon for gas, Kayleigh Lovvorn, a spokeswoman for the attorney general’s office, told the Post. One store, she said, charged $20/gallon. The average gas price in Houston is $2.21, according to gaspricewatch.com.

Sunday, the Post reported that Harvey had forced the shutdown of a quarter of the oil and gas production in the Gulf of Mexico, and disabled ten percent (two million barrels per day worth) of the country’s refining capacity. The shutdowns will drive up the gas prices in and around Houston.

Paxton’s office is investigating whether the $20/gallon price was an act of price-gouging or a necessary response to the refinery shutdowns.

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Harley-Davidson rolls out new models as sales decline

Harley-Davidson, Inc. is set to revamp its Softail lineup with a slew of new 2018 models, Charles Fleming of The LA Times reports. The company told Fleming the new models are “already on their way to dealerships.”

The new bikes will weigh less than their predecessors and will feature new engines with more torque. Many will have improved lean angles so that they steer and corner better.

The company has announced eight new Softails, according to Fleming: the Fat Boy, the Heritage Classic (formerly the Heritable Softail Classic), the Low Rider, the Softail Slim, the Deluxe, the Breakout, the Fat Bob and the Street Bob.

The Softail line has absorbed the Dyna line, leading to the discontinuation of the Sportster 1200T, the Del VROD Muscle and Night Rod Special, and the Wide Glide.

Milwaukee-Eight 107 V-twin engines will come standard on each of the new models. Those engines measure 107 cubic inches and boast 147 Nm of torque.

The larger Milwaukee-Eight 114 will be available as an upgrade on the Heritage Classic, the Breakout and the Fat Boy. That engine will pack 161 Nm of torque.

Harley has taken steps to reduce the vibration in both engines, Fleming says, thereby reducing RPMs during idling and limiting engine noise when the bikes are at rest.

Harley told Fleming the two engines are “the most powerful…ever offered” in its Big Twin cruiser category.

Each of the new models will also be equipped with a new chassis and new suspension.

Harley has seen sales drop as the core of its customer base continues to age, and the company is struggling to attract a younger generation of bikers. Many among the new generation prefer other bikes over Harleys, and the company’s dominance in the market is waning.

So, prior to rolling out its new offerings, Harley launched what it calls, per the Times, “the most extensive research and development program” in its history, which dates back to 1903. The company asked current as well as prospective riders to suggest improvements, and many of those surveyed asked for lighter bikes with better handling.

Harley delivered, but doubt remains as to whether the new bikes will precipitate a rise in sales.

“This model year lineup may not be enough to reverse Harley’s US retail sales declines, now in their third consecutive year,” said USB analyst Robin Farley, per the Times.

Harley sold 54,786 units domestically in quarter two of last year, and 49,668 in this most recent quarter. That’s a decline of 5,118 units (9.3%) year-over-year.

The company has made other changes in an effort to drag its hogs into the modern age. LED headlights and a USB port will come standard on all new models. Cruise control will come standard on the Heritage Classic and will be available as an add-on on all other models. Anti-lock breaks will come pre-installed on the Fat Boy, the Deluxe, the Heritage Classic and the Breakout, and will be optional on the other models.

Some die-hard Harley riders, Fleming says, have resisted such changes as electric starters and anti-lock breaking systems.

Perhaps in an effort to appease such customers, Harley has given the Heritage Classic, along with some of the other new models, a vintage look, featuring, per Fleming, “spoked wheels, blacked-out rims and period-correct headlight bezels,” among other “details.”

Like all Harleys, the new models will benefit from the company’s parts and accessories catalog. Riders will be able to modify seat and handlebar configurations and make other changes.

Fleming, who test-rode the Heritage Classic and the Fat Boy, says both of those bikes sit low, making them suitable for smaller riders.

The Low Rider and the Street Bob, each of which costs $14,999, are the most budget-friendly of the new models. The Heritage Classic and the Fat Boy are the most expensive of the new bikes; with the 114 engine, each of those bikes will cost $20,299.

Featured Image via Wikimedia Commons

Boeing, Northrop to compete to design new land-based nukes for US

The US Air Force announced Monday that it has awarded two defense companies—Boeing and Northrop Grumman—each a $359 million contract to design new, land-based, nuclear Intercontinental Ballistic Missiles (ICBMs), CNBC reports. The companies will compete in what the Pentagon calls the “technology maturation and risk reduction” phase of development, which CNBC describes as the “preliminary design” phase.

The development of the new missiles is part of the US Military’s Ground-Based Strategic Deterrent (GBSD) intercontinental ballistic missile (ICBM) weapon system program.

A third potential contractor, Lockheed Martin, has dropped out of the running. The narrowing of the design-competition field marks a step forward for the GBSD program, notes Jefferies analyst Howard Rubel, per CNBC.

Said Rubel: ”You went from three competitors to two. You went from what I call broad concepts to now, two competing designers, who will come up with an industrialization concept that will…probably have some testing done to prove certain points along the way.”

The contract also represents a “win” for the Boeing’s defense operation, Rubel says, pointing out that Boeing lost a long-range strike bomber contract to Northrop, and has faced setbacks on an aerial tanker project.

Boeing hasn’t selected subcontractors yet, and Northrop has released just a partial list. Rubel told CNBC he expects Orbital ATK and Aerojet Rocketdyne, two manufacturers of rocket motors, to “split the propulsion work in some fashion.”

The new missiles, which the military expects to begin producing and deploying in the late 2020s, may replace the United States’ current nuclear ICBM, dubbed Minuteman III, the development of which Boeing led in the 1970s.

“Things just wear out, and it becomes more expensive to maintain them than to replace them,” Secretary of the Air Force Heather Wilson said of the aging missiles in a statement. “We need to cost-effectively modernize.”

China and Russia are both modernizing their nuclear fleets, and North Korea is becoming a credible nuclear threat to the US and others.

Still, some experts debate whether the GBSD project is cost-effective and whether modernization of the country’s land-based missiles is an effective defense strategy.

The Air Force originally estimated the cost of “acquiring” the new missiles at $62 billion, but now expects costs between $85 billion and $140 billion. Per CNBC, Reif Kingston, director of disarmament and threat reduction policy for the ACA, called the pricing information on which the Air Force and the Pentagon have based the fiscal projections “old and incomplete.”

“We [i.e. the US] haven’t built a new intercontinental ballistic missile in decades. As the program proceeds, they will have start to get a better sense of the costs. But at this point, there’s a lot of uncertainty, and the Air Force’s [first] estimate [of $62 billion] by all accounts is unrealistically low,” Kingston told CNBC.

Kingston also disputes Wilson’s claim that the development of new missiles would be cheaper than the continued maintenance of Minuteman III. At least in the short term, he says, there is an economic reason to delay GBSD.

“Sustaining the Minuteman III for a period of time (say 10-15 years) beyond 2030 would be cheaper than GBSD over that period,” he said. “The case for deferring a decision on GBSD and pursuing another life extension of the Minuteman III is strong.”

Were the Pentagon to defer the development of Minuteman III replacements, Kingston concedes, the nation’s supply of land-based ICBMs would indeed diminish. “A smaller force,” however, “would not diminish the overall strength and credibility of the U.S. nuclear deterrent,” said Kingston.

The US currently deploys a “nuclear triad”: a combination of land, sea, and air weapons.

Some critics of the GBSD project say nuclear land missiles are not as effective in a defense capacity as nuclear bombs and torpedoes. Air and sea weapons, such critics argue, are more suited to dispersion and avoidance of detection than land weapons.

As part of what CNBC calls a “nuclear posturing review,” the Trump administration will examine whether the triad remains an efficient strategy.

Featured image via Wikimedia Commons

Monday’s total solar eclipse cost US employers almost $700 million

On Monday, many Americans saw a total solar eclipse for the first time in their lives. The last time United States denizens had a clear line of sight for a total solar eclipse was in 1979, according to a report by Challenger, Gray, and Christmas, Inc. So, American workers were more than willing to interrupt their banal daily routines to catch a glimpse of the historical event.

And financial experts were busy calculating the losses. According to the aforementioned report, the solar eclipse cost companies throughout the nation almost $700 million in lost time. Challenger, Gray, and Christmas estimated that 87,307,940 Americans would be at work during the eclipse and that each worker would take 20 minutes, on average, to gather his/her viewing supplies, travel to an appropriate viewing site, watch the two-and-a-half minute eclipse, and return to work.

The average hourly wage is $23.86, so if each worker takes a third of an hour to view the eclipse, he/she will cost his/her company $7.95. Multiply that figure by the estimated number of Americans at work during the eclipse and you find that U.S. employers lost approximately $694,098,123 as a result of the event.

Employers in areas which lie on the eclipse’s “path of totality” lost a combined $200 million, the report estimates. In Chicago, which lies just off of the totality path, employees “stole” $28 million worth of time.

However, the report notes that, in most cities, the eclipse occurred around lunch time, when workers are already taking breaks. “Since this is happening over the lunch hours, the financial impact is minimal,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, in the report.

Moreover, preventing employees from viewing the eclipse would likely do more damage to morale than allowing viewing would do to the bottom line.

So, Challenger advised employers not to “board their windows and keep employees locked up in conference room meetings until the eclipse ends.”

“Rather,” he says, “looking for how to turn this lack of productivity into a way to increase morale and strengthen the team is a much better use of the eclipse.”

Challenger adds that the eclipse, in fact, “offers a great opportunity to boost morale. Employers could offer lunch to their staff, give instructions on how to make viewing devices, and watch together as a team.”

The eclipse’s “path of totality,” which encompasses the locations from which viewers could see the eclipse in all its fullness, travelled from the Pacific Northwest—those in Newport, Oregon, saw the eclipse at 10:15 a.m. local time—through the midwest—Troy, Kansas residents saw the eclipse at 1:05 pm local time—and into the Southeast—the eclipse hit Clayton, GA at 2:35 pm Eastern. Click here for a full list of locales within the “path of totality.”

Many people traveled to such locales to view the event. According to US News, AAA Mid-Atlantic issued an advisory preparing travelers for “huge crowds of eclipse watchers, long lines and roadside delays caused by the influx of travelers from other states into prime eclipse-viewing destinations.”

GreatAmericanEclipse.com says most American’s live within a day’s drive of some location within the eclipse’s path of totality. Further, because August is a popular vacationing time, the site points out, many people presumably planned getaways around the eclipse.

The event’s effect on auto traffic, the site says, was akin to that of “20 Woodstock festivals occurring simultaneously across the nation.”

Whatever toll the eclipse took on the average American employer, it likely provided a proportionate boost to the country’s travel industry. Lodging enterprises benefited from an influx of eclipse-seekers, and towns not ordinarily considered tourist destinations became the epicenters of eclipse-viewing.

The next total solar eclipse visible on American soil will occur on April 8, 2024, per greatamericaneclipse.com. The path of totality will stretch from Mexico through central Texas, Arkansas, Ohio, Indiana, New York, and Montreal, Canada.

After 2024, North America will not see another total eclipse until 2045. So, get your gear and make your travel arrangements.

And tell your boss you’re taking a long lunch on April 8, 2024.

Featured image via Twitter/V3ctor

 

Chrysler to join BMW, Intel in autonomous driving consortium

Italian-American automaker Fiat Chrysler announced plans Wednesday to join an autonomous car development consortium with Germany’s BMW and American tech giant Intel, MarketWatch reports. UK-based Delphi Automotive PLC and German component manufacturer Continental AG each joined the group earlier this summer.

Israeli collision-avoidance software developer Mobileye was originally an independent member of the alliance, but in March, Intel acquired Mobileye.

The group has released a statement indicating intentions to build a self-driving framework “that can be used by multiple automakers around the world, while at the same time maintaining each automaker’s unique brand identities.”

The coalition aims to have a fleet of 40 test vehicles on the road by the end of the year. BMW said in March that it plans to field a Level 5 autonomous vehicle by 2021.

“In order to advance autonomous driving technology, it is vital to form partnerships among automakers, technology providers and suppliers,” Fiat Chrysler CEO Sergio Marchionne said in a statement. “Joining this cooperation will enable FCA to directly benefit from the synergies and economies of scale that are possible when companies come together with a common vision and objective.”

In May, Fiat Chrysler partnered with Google’s parent company, Alphabet, whose self-driving subsidiary is branded Waymo. In total, the automaker has given Waymo 600 Chrysler Pacifica minivans.

Marchionne has indicated that the Alphabet-Chrysler alliance is by no means exclusive.

“We need to be ready to collaborate with as many people as we can find,” he said in the company’s quarter two earnings report.

USA Today points out that cooperation is key to defraying the prohibitive costs of an autonomous vehicle, particularly for a company like Chrysler, which may be unable to allocate a huge budget toward autonomous vehicle development.

At this stage, investments in autonomous vehicle development are not yielding fruits on the bottom line because the gap between the capabilities of the technology and the trust levels of consumers is too wide to justify selling self-driving cars on the open market.

Marchionne has voiced concerns about the liability associated with the safety questions around self-driving cars. He also worries about the lack of regulation in place to assign responsibility for that liability.

For instance, if a Fiat Chrysler vehicle featuring, say, technology developed by Waymo and cameras built by Nvidia malfunctions, there are no regulations governing which of those companies would be held legally responsible.

“That’s a big issue going forward, because when you’ve got tier-one suppliers that will start providing autonomous driving equipment — both software and hardware — into these vehicles, the question about who owns liability associated with the running of those operations is a big issue yet untouched,” Marchionne said in January, per Aaron Marsh of FleetOwner.

Still, cooperation seems to be the strategy across the industry with respect to the push toward autonomous vehicles, although Ford and General Motors each has its own in-house self-driving development operation.

Auto manufacturers are increasingly partnering with tech companies and component-producers. Such automotive giants as Audi, Tesla, and Toyota have partnered with Nvidia Corp., whose Drive PX platform is among the most advanced systems of autonomous driving technology in the industry.

In April, Damlier AG, of which Mercedes-Benz is a subsidiary, formed an alliance with components producer Robert Bosch GmbH. Together, the companies are working toward developing a fleet of autonomous taxis that customers can hail. If the plan takes shape, the automotive alliance will compete with ride-hailing companies like Uber and Lyft.

Google’s Waymo has unveiled a similar system in Phoenix. Using an app proprietary to Waymo, customers can hail one of the 600 Chrysler vans mentioned above

Damlier and Bosch have also developed an autonomous valet system that can navigate a multi-story parking garage, find a spot, and park with no human input.

Featured image via Wikimedia Commons

Customer sues Cheesecake Factory over “suggested gratuity” figures

Marcel Goldman is suing The Cheesecake Factory over its billing practices, Buzzfeed reports.

When diners request a split bill at the restaurant chain, the “suggested gratuity” figures printed on each customer’s bill are calculated based on the total amount of the collective bill, rather than on an individual diner’s share.

Goldman says she paid a “suggested 20% tip” of $15.40, though her individual bill was $38.50. In other words, she paid 40% gratuity on her share of the check.

Goldman sent a letter to The Cheesecake Factory’s headquarters in Calabasas, CA, but the company did not reimburse her.

The restaurant chain told Buzzfeed: “All gratuity amounts listed on our guest checks are suggestions only. Guests are free to tip as they please.”

The lawsuit argues that the restaurant should not require customers, many of whom are in various stages of food and/or alcohol-induced intoxication by the time their checks arrive, to employ their mental math skills (or lack thereof).

“Why are we left to our own devices to do arithmetic acrobatics when the suggested gratuity represented is not true? The mathematic calculation is misleading. It must end. It needs to change,” said Goldman’s lawyer, Julian Hammond, per Buzzfeed.

The suit is seeking class-action status; Hammond claims the restaurant chain has employed the practice at more than 200 locations over the past four years.

This is not the first time The Cheesecake Factory has taken flack over its “suggested gratuity” figures. Some patrons have taken issue with the chain’s practice of calculating “suggested gratuity” on the post-tax rather than the pre-tax total (customarily, people tip on the pre-tax amount).

One Yelp! reviewer posted a response he received in defense of the practice from a customer service representative, Buzzfeed points out.

The representative allegedly said the decision to suggest gratuity based on the post-tax total was “a decision by our company executives,” and that the practice is employed across all the chain’s locations nationwide. The spokesman added that the company “did review different restaurants in the high casual dining segment and found that…some were calculating pre-tax and some, post-tax.”

If customers are frustrated by the chain’s gratuity suggestions, they are not angry enough to put down their forks or even close their wallets. The company’s revenue has increased every year since 2012, according to 2016’s annual report. From 2012-2016, revenue jumped a combined $467 million (25.8%). From 2015 to 2016, the figure was up $175 million (8.3%) to just under $2.3 billion.

Net income per share rose $0.95 (just over 50%) from 2012-2016, and $0.46 (19.4%) from 2015-2016.

The company has continuously opened more and more locations as well. 208 Cheesecake Factory locations were open nationwide at the end of fiscal 2016—31 more than were operational at the close of fiscal 2012. The chain added 8 locations from fiscal 2015 to fiscal 2016.

The Cheesecake Factory’s stock, however, currently sits at a yearlong low of $44.91/share. It has fallen more than 33% since May 3. Shares dipped by almost 1% after news of the lawsuit broke Friday morning, but has since modulated toward its Thursday closing price of $44.94.

Maybe The Cheesecake Factory would be wise to include a statement on the bill explaining how they calculate suggested gratuity. Then again, the same patrons who fail to notice that they have paid an inadvertently large tip would likely fail to notice the explanation.

Customers should be expected to understand how much they are tipping. At the same time, a diner should be able to assume that a restaurant’s “suggested gratuity” is reasonable.

Featured image via Wikimedia Commons

CVS, Walgreens sued over inflated copays

Megan Schultz of California sued CVS Health Corporation, the US’s largest pharmacy chain, Monday, accusing the company of charging excessive copayments for certain medicines, The Boston Globe reports. Schultz says she paid a $166 copay for a drug for which she could have paid $92 in cash.

The suit was filed in a federal court in Rhode Island, where CVS is headquartered.

It alleges that the pharmacy chain has forged agreements with benefit managers—companies that, according to a Bloomberg report, “process prescriptions…and determine whether they will carry a copay”—to conceal the cash price of medicines so that both parties can collect exorbitant copays. These alliances, according to the document, violate federal racketeering and insurance laws, and lead to artificially high prescription costs. Clauses in the contracts allegedly forbid CVS from informing customers that a given medicine is available at a lower price.

The Boston Globe quotes the following passage from the suit: “CVS, motivated by profit, deliberately entered into these contracts, dedicating itself to the secret scheme that kept customers in the dark about the true price [of drugs].” The suit accuses CVS of holding such agreements with benefit managers including Express Scripts Holding Co. and CVS Caremark, CVS’s own prescription benefit management arm.

CVS spokesman Michael DeAngelis categorically denied the suit’s allegations, which he says, per The Boston Globe, are “built on a false premise and…completely without merit.” He added that benefit managers unilaterally determine the size of copays.

The suit “does not name any benefit managers as defendants,” the Globe says, but DeAngelis said CVS Caremark does not inflate copays. Express Scripts spokeswoman Jennifer Luddy said the allegations were “meritless.”

According to Bloomberg, a lobby group for benefit managers released a statement in July saying it “support[s] the patient[’s] paying the lowest price available at the pharmacy counter for the prescribed drug.”

The practice of charging inflated copays for drugs is a form of “clawbacking.” A “clawback,” according to Investopedia, is any action by which “an employer or benefactor takes back money that has already been disbursed, sometimes with an added penalty.” In effect, insurance companies give customers money by covering the cost of medications, etc. By charging excessive copays and pocketing the margin, the companies are taking that money back.

According to the Globe, Schultz’s suit, which is seeking class action status, is another in a long string of similar cases filed across the nation. Wednesday, a frustrated customer filed sued Walgreens, the U.S.’s second-largest pharmacy chain, over clawbacks. Schultz’s lawyer will represent him as well.  Twice in the fall of 2016, United Health, along with its benefit management operation, OptumRX, was sued in connection with copay clawbacks. Humana, Inc. and Cigna Corporation have also been taken to court over the issue. In total, more than fifteen clawback-related lawsuits have been filed in the US since the practice was first exposed last year.

Some states have passed laws meant to prohibit clawbacks. In July, Connecticut Governor Dan Malloy approved a bill that will allow pharmacies to inform customers when a drug’s cash price is cheaper than the copay amount, Bloomberg says. The law will go into effect in January. North Dakota, Louisiana, Georgia, and Maine have passed similar statutes.

CVS is the nation’s largest pharmacy chain in terms of both number of stores—there are almost 10,000 CVS stores throughout the country—and total prescription revenue, and its performance is only improving.  In quarter two, CVS reported $45.6 billion in revenue and just under $1.1 billion worth of net income. Revenue increased $1.9 billion (4.5%) year over year, while net income jumped by $174 million (18.8%).

CVS stock closed at $79.06/share on Monday, but fell 2.6% Tuesday morning on news of the pending litigation. It has since climbed to $79.43/share.

Featured image via Flickr/Mike Mozart

SoftBank Looks to Make Inroads Into US Ride-Hailing Sector

SoftBank CEO Masayoshi Son has indicated intentions to make inroads into the US ride-hailing market with a multi-billion dollar investment in Uber or Lyft, CNN’s Sherisse Pham reports.

At a news conference Monday, Son said his company was “definitely interested” in pursuing a partnership with one of the two ride-hailing operations. Son expects a boom in the ride-hailing industry to accompany the rise of self-driving cars.

“…when that stage comes [i.e. when autonomous cars sponsored by ride-hailing companies hit the streets],” said Son, “this ride share business becomes even more important.”

SoftBank already holds sizable stakes in a host of Asian ride-hailing companies, including China’s Didi Chuxing, India’s Ola, Brazil’s 99, and Singapore’s Grab. According to The Wall Street Journal, Son’s interest in Uber may indicate that he believes the US startup will combine its operations with Ola and Grab

Uber has set a precedent of willingness to partner with local companies in international markets. After a heated competition between Uber and Didi Chuxing ended in a stalemate, Uber agreed to sell its Chinese business to Didi in exchange for a 20% stake in the Chinese company. In July, Uber announced plans to strike a similar deal with Russia’s YandexTaxi.

On July 25, the Wall Street Journal reported that SoftBank was considering investment in Uber, but said negotiations between the two companies were “preliminary and one-sided.” A deal would likely be postponed until Uber appointed a new CEO in the wake of former chief Travis Kalanick’s resignation over sexual harassment allegations in June. The scandal also left the company without a chief operating officer, a general counsel, and an independent board chair, according to Bloomberg. On August 4, The Washington Post reported that Uber’s shortlist for the CEO position had been cut to three people.

The management vacancies, coupled with the increasing success of Lyft, are prompting many early Uber investors to jump ship. Sources told Bloomberg two such investors are negotiating to sell their stakes to larger investment firms.

With a market cap of $89.7 billion, SoftBank is among Japan’s most valuable companies. Its subsidiaries include Sprint, Yahoo! Japan, Myspace Japan, and myriad others.

In May, SoftBank, along with Saudi Arabia, Apple, and others, formed a $100 billion dollar tech fund, called the Vision Fund, that “will focus on investments of more than $100 million in technology businesses of the future,” according to a CNN report. It is unclear whether SoftBank’s investment in Uber or Lyft will be pulled from that fund.

Last Thursday, SoftBank contributed $250 million to Kabbage, a financial technology company based in Atlanta, GA. Kabbage, a next generation lending company, uses an online system to quickly evaluate a small business’s eligibility for a capital loan. According to the company’s website, the evaluation process analyzes business performance as well as credit score, and a customer can gain approval for a loan in less than 10 minutes. The website also says Kabbage has lent more than $3.5 billion dollars worth of funding to more than 100,000 businesses.

Kabbage licenses out its technology to traditional banks who wish to offer automated lending; the program is currently used by banks like Banco Santander SA (SAN.MC), ING Groep NV, and Scotiabank. SoftBank is the first Asian player outside of China to enter the automated lending space.

Son’s press conference on Monday coincided with the release of SoftBank’s quarterly earnings report, in which the company reported $4.33 billion worth of profit—a 50% year-over-year increase. The jump came after SoftBank included the Vision Fund as a reportable segment for the first time.

Profits were further boosted by the success of Sprint, in which SoftBank owns an 80% stake. The cellular service provider reported its first profit in more than three years Monday. SoftBank is considering a potential merger between Sprint and T-Mobile, or between Sprint and Charter Communications Incorporated.

SoftBank’s shares have risen just over 1% since Monday.

Featured Image via Flickr/Nobuyuki Hayashi

Cannabis Company Purchases an Entire Town in Eastern CA

According to an Associated Press report published by Business Insider, cannabis company American Green, Inc. announced Thursday that it is in the process of purchasing the entire town of Nipton, CA, which spans 80 acres and is home to less than two dozen residents, with the intention of turning it into “an energy-independent, cannabis-friendly hospitality destination.”

Nipton’s current owner, Roxanne Lang, said per the AP that the sale was still in escrow, but confirmed that American Green was the buyer. She did not disclose the price but did mention that the town was listed at $5 million when she and her husband, Gerald Freeman, put it on the market a year ago.

According to the AP, Nipton consists of an “Old West-style” hotel, a few houses, an RV park, and a coffee shop. Located just three miles west of the California-Nevada border, the town generates much of its revenue by selling California lottery tickets to Nevada residents, whose home state is one of six without a state-sponsored lottery.

American Green aims to turn Nipton into the epicenter of the cannabis tourism industry, creating an economy driven almost entirely by marijuana. The company will invite edibles manufacturers and other major players in the cannabis industry to relocate to Nipton, bringing jobs. American Green will also sell cannabis-infused water drawn from the town’s aquifer.

“We are excited to lead the charge for a true Green Rush,” David Gwyther, American Green’s president and CEO, said in a statement, per AP. “The cannabis revolution that’s going on here in the US has the power to completely revitalize communities in the same way gold did during the 19th century.”

A gold rush put Nipton on the map in the early 1900s, but by the time Freeman came upon the town in the 1950s, Nipton was all but deserted. Freeman bought it in 1985 and set to work revitalizing the hotel and creating a solar farm.

As part of its energy-independence initiative, American Green plans to expand the solar farm Freeman built. In fact, Lang told the AP after a laugh, Freeman would likely have supported American Green’s purchase of Nipton. Freeman, a libertarian, defended people’s right to smoke pot and would have been all for American Green’s efforts toward energy independence.

Lang has an interesting tagline to describe her town’s location: “I like to say it’s conveniently located in the middle of nowhere,” Lang said, per the AP. The town sits 60 miles south of Las Vegas and about 10 miles east of I-15, which connects Vegas and LA.

The remoteness of Nipton is exactly what Carl Caveness, a handyman at the town’s hotel, likes about the town. “We [Caveness and his wife] like the quiet and solitude,” the 53-year-old told the AP.

American Green’s announcement surprised Caveness, who worries that the town’s new owners may push him out of Nipton.

Today, most of the guests at the Hotel Nipton are “desert aficionados” and Old West fanatics, according to the AP. If American Green’s vision takes off, the hotel could become an unparalleled tourist destination.

American Green revolutionized the market with its ZaZZZ vending machines, which use “military grade biometrics” to verify consumers’ ages, thereby allowing the legal sale of age-restricted products like beer, cigarettes, and marijuana.  With its purchase of Nipton, the company is poised to see the cannabis industry through another revolutionary leap.

With 50,000 individual shareholders, American Green possesses “the largest shareholder base of any cannabis-related public company in the US,” according to its website. Shares increased 131% to $.0037—that’s 37/10,000 of a dollar or 37/100 of a cent—apiece on news of the Nipton acquisition. If the venture takes off, that decimal point may move quite a few places to the right.

Featured image via Wikimedia Commons

Toyota & Mazda Will Join Forces to Build Manufacturing Plant in US

Toyota announced Thursday that it will join forces with Mazda to build a $1.6 billion assembly plant in the U.S., The New York Times reports.

The plant will be operational by 2021 and will create 4000 jobs and produce 300,000 vehicles a year, according to The Wall Street Journal. Half of the vehicles would be Toyota Corollas, and the other half would be “an unspecified Mazda model, according to the Wall Street Journal.

A source told the Journal the two automakers would also “co-develop electric vehicles, safety features and connected-car technologies.”

Mazda and Toyota have shared technology before. In May 2015, they partnered in an effort to defray the cost of producing fuel-efficient vehicles. Toyota shared its plug-in hybrid and fuel cell technologies, while Mazda offered technology to optimize the fuel-economy of gas and diesel engines. Toyota mentioned the 2015 agreement in its statement, indicating that the assembly plant endeavor was the latest fruit of prolonged “[exploration of] various areas of collaboration” with Mazda.

As part of the deal, Toyota will purchase a 5% stake in Mazda.

A source told the Wall Street Journal in May that “Toyota President Akio Toyoda is concerned that [his company] tends to be too inward-oriented, and feels it needs to open up more to work with and learn from other companies.”

Toyota partnered with Subaru’s parent company, Fuji, in 2011, and has worked with Tesla.

Mazda, for its part, held a partnership with Ford from 1974 until 2015. From 1996 until late 2008, Ford owned a third of Mazda. The two companies worked together at an assembly plant in Flat Rock, Michigan. The new plant will be Mazda’s first manufacturing venture in the US since the automaker abandoned Flat Rock in 2012.

Toyota already has a host of factories throughout the southern and midwestern US, in states including Indiana, Kentucky, Mississippi, and Texas.

As Japanese brands capture an increasing share of the US market, many have migrated production to the U.S. so as to “be closer to the U.S. market and reduce exposure to currency fluctuations,” says Adrienne Roberts of The Wall Street Journal. According to a June 2016 report by Dan Eaton of bizjournals.com, 75% of Japanese vehicles sold in the USA are also produced here. In 2015, the three largest Japanese automakers built 3.48 million cars on American soil. The three biggest American manufacturers at the time—Chrysler, Ford, and GM—built 6.44 million vehicles on their home turf.

In other words, Japanese manufacturers had about half as much production presence in the US as native companies. But, if we isolate car production—that is, remove trucks, SUVs, crossovers, etc. from the picture—Japan outproduced America by a tally of 1.75 million to 1.53 million in 2015.

To frame the data another way, half of the vehicles made in America by Japanese companies were cars (i.e. sedans, etc.), while less than a quarter of American vehicles produced domestically were cars.

Companies like Toyota and Mazda are looking to shift their focus toward trucks, SUVs, and crossovers as demand for sedans falls in the US market, partly as a result of low gas prices.

Japanese car brands have only increased their production operations to the States in the years since 2015, and the White House is encouraging them to do so. Toyota originally planned to shift its Corolla production to a $1 billion facility in Mexico but canceled those plans when President Trump threatened an import tax. 

Following Trump’s objection, Toyota released a statement (per WSJ) saying, “Toyota looks forward to collaborating with the Trump Administration to serve in the best interests of consumers and the automotive industry.” The newly announced plant may be their compromise.

Construction of Two Nuclear Reactors in South Carolina Comes to a Halt

Two utilities companies announced Monday that they will abandon construction of a pair of nuclear reactors in South Carolina, Brad Plumer of The New York Times reports. The project has been beset by construction difficulties, regulative hindrances, and financial struggles resulting from decreasing demand for electricity amidst improvements in energy efficiency.

The reactors are 40% complete and have already cost a combined $9 billion.

The V.C. Summer project, as the effort to build the reactors is known, was proposed in 2007 with a view toward reviving the United States’ nuclear power program. At that time, the country had not built a new nuclear reactor since the 1970s.

Originally, the project was scheduled to be complete by 2018, but earlier this year, officials said they did not expect the reactors to be functional until 2021. Moreover, project administrators revised their cost estimates to $25 billion; the initial figure was $11.5 billion.

“This was a first-of-a-kind project, so it was always going to be hard,” said Rich Powell, executive director of the ClearPath Foundation, a clean-energy group in Washington, per The New York Times. “But you can also see this as a symptom of a broader problem. We’ve let our nuclear industry atrophy for 30 years, and we’ve lost the robust supply chains and expertise needed” to build reactors.

Customers of the two utilities companies spearheading the project, SC Electric & Gas and Santee Cooper, were funding it. Before the abandonment plans, the project accounted for 18% of the bills of the former company’s customers. The latter company, which is state-owned, had raised rates five times to cover the ballooning costs.

The reactors were AP1000 models designed by Westinghouse Electric Company, a subsidiary of Toshiba. The Westinghouse website touts the AP1000 as “the safest and most economical nuclear power plant available in the worldwide commercial marketplace.”

But, officials broke ground on the VC Summit project before the AP1000 model was finalized, and as a result, costly safety modifications had to be made during the construction process.

In 2015, Westinghouse bought out its partners and became the leading contractor on the South Carolina project, but according to Plumer, “analysts say the company did not have sufficient expertise in handling large construction projects.”

In March, buried under the costs of its nuclear development programs and reeling in a market in which demand for electricity was stifled by a glut of natural gas, Westinghouse filed for bankruptcy. Parent company Toshiba paid $2.2 billion to be “released from the project” (Plumer’s words), but SCEG and Santee cited “the [insufficient] amount of anticipated guaranty settlement payments from Toshiba” as a principal factor in their decision to abort the project.

Westinghouse was also spearheading construction of the two other nuclear reactors being built on US soil, a pair of AP1000s at the Vogtle nuclear power plant in Georgia. Southern Company has agreed to take the lead on those projects in the wake of the Westinghouse bankruptcy, but the nuclear efforts in Georgia face their own obstacles.

According to Plumer, “the [Vogtle] reactors will have to come online before 2021 to qualify for federal tax credits, although Congress is working on a bill to extend that deadline.”

President Obama’s Clean Power Plan would have provided incentives to finish the nuclear projects, Plumer says, but the Trump administration is “dismantling” the CPP initiative.

Nuclear power is a leading contender as an environmentally-friendly fossil-fuel alternative, but the potential hazards, the inconvenient size, and the high costs of today’s nuclear power plants make wind energy and solar energy more attractive to utility companies. Nuclear power has been further pushed to the back burner by the affordability of natural gas.

However, companies like Oregon-based NusScale Power are working to make reactors smaller and safer. NuScale submitted plans for the first ever small modular reactor to the US Nuclear Registry Commission (NRC).

Still, the abandonment of VC Summit, which comes as over a dozen nuclear plants across the USA are being retired, is widely regarded as a major setback to the nation’s nuclear power efforts.

US Commerce Department Releases US Economic Data for Q2 2017

Friday, the US Commerce Department published national economic data for the second quarter of 2017. After a sluggish 2016, the economy appears to be modulating toward a strong growth rate. Last year saw the slowest economic growth rates since the recession of the late 2000s, so analysts say the economy is not booming, just regaining equilibrium.

“The economy is moving along at a pace that’s unexciting but not worrisome. I wouldn’t want to emphasize that growth is accelerating based on the second quarter. The economy is plodding along at a slow and steady pace,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York (once again, per Bloomberg).

Real Gross Domestic Product grew 2.6% in quarter two, after rising just 1.4% in the first quarter, according to CNBC. Final sales to domestic purchasers increased 2.4%, as it did in quarter one.

Consumer spending, which accounts for 70% of the economy, jumped 2.8%, spurred by low prices and stock and home equity gains, according to Bloomberg. Real disposable income rose 3.2 percent; in the first quarter, it rose 2.8%. According to survey data collected by the University of Michigan, 51% of consumers have seen recent improvements in their finances—that’s the largest percentage since November 2000. Business investment in equipment jumped 8.2%, more than it has in almost two years. Bloomberg attributes that spike to business owners’ anticipation of increases in demand.

However, gross personal income increased just 118.9 billion this period, after it saw $217.6 billion worth of growth in quarter one. The Commerce Department’s report says the slow-down comes as a result of “decelerations in wages and salaries, in government social benefits, in nonfarm proprietors’ income, and in rental income,” and due to “downturns in personal interest income and in farm proprietors’ income. Moreover, the aforementioned survey from U of M revealed that 34% of Americans expect to advance financially in the coming year.”

Employment cost index rose by 0.5% after a 0.8% rise in the January-March quarter. Residential investment saw its largest drop since 2010, as builders struggle to “find available labor and lots,” Bloomberg says.

The Trump administration still has some work to do to meet its goal of 3% growth, and the economy will need to grow by 2.5% in the second half of the year if it is to achieve 2.2% median projection the Federal Reserve has put forth.

Continued economic growth could hinge upon the success or failure the president’s tax reform efforts. Bloomberg reports that “White House officials and congressional leaders have been meeting weekly to agree on a framework to rewrite the tax code.” Trump has said the revisions will benefit the middle class, theoretically freeing-up income to be recirculated in the economy.

“If a well-constructed tax reform deal is enacted this year or next, the economy may fire on all cylinders and accelerate closer to President Trump’s 3 percent goal, but for now, we are firmly entrenched at around 2 1/4 percent,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said in a note, per Bloomberg.

The White House, for its part, is pleased with the progress. “From day 1 [President] Trump has been fighting to restore jobs, opportunity & prosperity to the U.S, & is already making a remarkable difference,” VP Mike Pence said in a tweet Friday.

“…our economy is growing, 850,000 jobs have been created & businesses are more optimistic than they’ve been in 20 years,” Pence added in a subsequent tweet, presumably referencing the increase in business investment in equipment.

The economy is rebounding, but not soaring ahead.

With Trump’s tax reform on the horizon, the coming months may reveal the effect the changing political climate will have on the economy long term.

U.S. Housing Prices Out of Touch with Reality

U.S. home resales have been unable to match expected projections in June as prices reach record highs, keeping first-time buyers hesitant on the peripheral. The record high housing prices are a result of a small property supply being pursued by a large customer demand, meaning that the value of each property increases as the supply dwindles.

The housing market has been facing a severe shortage of homes available for sale for about two years, all the while new individuals are entering the housing market searching for accommodation. As the labor market releases more jobs while builders simultaneously struggle to secure land, building materials, and skilled labor, the situation is set to worsen.

On one hand, the high demand for housing signifies a positive and encouraging economic health that enables laborers to have the means and intent for housing, but when it comes to the housing markets, buyers tend to be less enthusiastic. While this climate impacts current and future homeowners, those especially impacted are first-time buyers who are now in a difficult position when trying to find entry-level homes for sale.

The shortage of properties has led to customer bidding-wars, as the demand ensures real estate the ability and flexibility to ask a higher sales price on the basis that there are customers willing to pay more. This has quickly resulted in house price increases outpacing wage gains, making it but nigh impossible for lower salary wage earners to afford housing.

The National Association of Realtors has reported that existing home sales have dropped 1.8 percent to a seasonally adjusted annual rate of 5.52 million units last month. Economists including Svenja Gudell, chief economist at Zillow, predict that sales will fall a further 1.0 percent to a 5.58 million unit-rate, despite sales being up 0.7 percent from June 2016.

There were 1.96 million houses on the market last month, which was done 7.1 percent from a year ago, however, this is not the first dip in a trend. In fact, housing inventory has dropped for 25 months on a year-to-year basis. As the supply diminishes, prices rise, and considering the increasing demand for housing, the prices greatly rise. The median house price has increased 6.5 percent from a year ago to a record high of $263,800 in June, as part of the unbroken 64-month chain of year-on-year price increases.

Despite the constant price increase as well as the persistent housing shortage, the NAR believes that the price surge does not suggest another housing market bubble is building. This is based on the fact that the inflation-adjusted median price was below its peak in 2016.

Houses are typically staying on the market for 28 days last month, lower than the 34 days’ average that was present a year ago. Demand is being driven by a tight labor market, which currently holds a 4.4 percent unemployment rate that is boosting employment opportunities for young workers. But the tight labor market has not stimulated a faster wage growth, with an annual wage growth struggling to break above 2.5 percent, creating a distinct and increasing gap between the two.

First-time buyers are accounting for a smaller share of home sale transactions at 32 percent, which is well below the ideal 40 percent share that is needed for a robust and thriving housing market. This is not something that is simply corrected by reducing housing prices or increase wage growth but requires a combination on the two alongside other qualities including a maintained housing demand.

Property economists expect the housing demand to continue, which does encourage future sales growth. However, the issue is that expectation that the inventory shortage will improve this year, suggesting continued price increases. While it may not be solved this year, the sooner labor and effort is invested in building and providing new homes, the sooner the housing sales growth will adjust to better match the wage growth.