Key Words: Samantha Bee on calling Ivanka Trump the c-word: ‘I never intended it to hurt anyone, except Ted Cruz’

A week after sparking a national firestorm by calling Ivanka Trump the “c-word,” comedian Samantha Bee offered a defiant apology on her show Wednesday night, saying she was sorry she caused a distraction from the real issue — how the U.S. detains and separates some immigrant children from their parents.

“I should have known that a potty-mouthed insult would be inherently more interesting to them than juvenile immigration policy.”

Samantha Bee

On her TBS show “Full Frontal,” Bee apologized — for a third time in a week — for her slur against President Donald Trump’s daughter.

Read: Is it ever OK to call another woman the c-word?

Here’s her full statement:

“You know, a lot of people were offended and angry I used an epithet to describe the president’s daughter and adviser last week. It is a word I have used on the show many times, hoping to reclaim it. This time I used it as an insult. I crossed the line, I regret it and I do apologize for that.

“The problem is, that many women have heard that word at the worst moments of their lives. A lot of them don’t want that word reclaimed. They want it gone. And I don’t blame them.

“I don’t want to inflict more pain on them. I want this show to be challenging and I want it to be honest, but I never intended it to hurt anyone, except Ted Cruz.

“Many men were also offended by my use of the word. I do not care about that.

“I hate that this distracted from more important issues. I hate that I did something to contribute to the nightmare of 24-hour news cycles that we’re all white-knuckling through. I should have known that a potty-mouthed insult would be inherently more interesting to them than juvenile immigration policy.

“I would do anything to help those kids. I hate that this distracted from them. So, to them I am also sorry.

“And look, if you are worried about he death of civility. Don’t sweat it. I’m a comedian. People who hone their voices in basement bars while yelling back at drunk hecklers are definitely not paragons of civility.

“I’m really sorry that I said that word. But, you know what? Civility is just nice words, may we should all worry little bit more about the niceness of our actions.

“OK, thanks for listening.”

Last Rites for a Boeing 747

TUPELO, Miss.—Its sheer size defies gravity. Its grace and elegance defy reason. The Boeing 747, mother of all jumbo jets, is in its twilight years for passenger service, leaving multitudes of travelers nostalgic for a time when air travel was comfy and exhilarating.

Only 180 of the original jumbo jets, dubbed the Queen of the Skies, remain in passenger service. Boeing Co. built more than 1,500 of the 747s—passenger and cargo—but is unlikely to be building any more of the passenger variety; the 24 orders that remain are all freighters. Delta and United, the last U.S. airlines flying the two-aisle humped giant, both retired their remaining 747s late last year.

On Saturday, United hosted five 747 aficionados who bid frequent-flier miles, along with their guests and some employees, for a final tour and celebration of the airline’s last one, tail number N118UA. It is here to be stripped of parts and cut up for recycling. Interest in the 747 retirements has been so strong that United auctioned the trip, including transportation to Tupelo, hotel, a tour of Universal Asset Management’s giant warehouse of reusable aircraft parts and a chance to climb all over the jet’s carcass and give it a final Champagne toast.

The five winning bids totaled 1.3 million Mileage Plus miles, says Tara From, senior manager of loyalty redemption at United. The two highest bids were 420,000 miles each, or easily enough for $10,000 or more worth of business-class tickets.

“I never had a bad flight on it,” says Ted Birren, a school administrator from the Chicago area who was one of the 420,000-mile bidders. Like many travelers, he says the physics of the 747 still boggle his mind. “To get something that big off the ground is amazing,” he says. “This plane really set the pace for the airline industry as we know it today.”

The 747—six stories tall, with a wingspan more than 70 yards wide and the fully loaded weight of roughly seven M1 Abrams tanks—was a breakthrough in aviation when it entered passenger service in 1970. It revolutionized international air travel, bringing affordable tickets to the masses and making it far easier to jet between continents.

Boeing 747 airline passenger fleet in service by month

May, 2018


Senate Banking Panel Set to Vote on Clarida, Bowman Nominations for Fed Posts

The Senate Banking Committee is set to vote Tuesday on the nominations of two of President Donald Trump’s picks for the Federal Reserve’s board of governors, including economist Richard Clarida to become its vice chairman.

Mr. Clarida, a professor at Columbia University and managing director at Pacific Investment Management Co., is a monetary policy expert. If confirmed, he would serve as the Fed’s No. 2 alongside Chairman Jerome Powell.

Ero Copper provides notice of reconstitution of the Nominating & Corporate Governance Committee

VANCOUVER, British Columbia, June 06, 2018 (GLOBE NEWSWIRE) — Ero Copper Corp. (the “Company”) (TSX:ERO) informs that the Board has reconstituted the Nominating and Corporate Governance Committee in recognition of best practice. Christopher Noel Dunn, the Executive Chairman of Ero, has been substituted on the committee by Matthew Wubs, an independent director.  As a result of the reconstitution, the committee is now comprised of Lyle Braaten (Chair), Steven Busby and Matthew Wubs, all of whom are independent directors.


Ero Copper Corp, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil.  The Company’s primary asset is a 99.6% interest in the Brazilian copper mining company, Mineração Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 37 years of operating history in the region.  The Company currently mines copper ore from the Pilar underground and the Surubim open pit mines.  In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperanҫa development project, an IOCG-type copper project located in Pará, Brazil.  Additional information on the Company and its operations, including Technical Reports on both the Vale do Curaçá and Boa Esperanҫa properties, can be found on the Company’s website ( and on SEDAR (

Signed:  “David Strang” For further information contact:
David Strang, President & CEO  Makko DeFilippo, Vice President, Corporate Development
  (604) 429-9244

Wraparound Mortgage

A wraparound mortgage is a type of junior loan which wraps or includes, the current note due on the property. The wraparound loan will consist of the balance of the original loan plus an amount to cover the new purchase price for the property. These mortgages are a form of secondary financing. The seller of property receives a secured promissory note, which is a legal IOU detailing the amount due.

The new lender, typically the seller of the property but sometimes a financial institution, assumes the payment of the current mortgage and provides the borrower with a new, larger loan, usually at a higher interest rate.

A wraparound mortgage is also known as a wrap loan, overriding mortgage, agreement for sale, a carry-back, or all-inclusive mortgage.

BREAKING DOWN ‘Wraparound Mortgage’

Frequently, a wraparound mortgage is a method of refinancing a property or financing the purchase of another property when an existing mortgage cannot be paid off. The total amount of a wraparound mortgage includes the previous mortgage’s unpaid amount plus the additional funds required by the lender. The borrower makes the larger payments on the new wraparound loan, which the lender will use to pay the original note plus provide themselves a profit margin. Depending on the wording in the loan documents, the title may immediately transfer to the new owner or it may remain with the seller until the satisfaction of the loan.

Since the wraparound is a junior mortgage, any superior, or senior, claims will have priority. In the event of default, the original mortgage would receive all proceeds from the liquidation of the property until it is all paid off.

Wraparound mortgages are a form of seller financing where Instead of applying for a conventional bank mortgage, a buyer will sign a mortgage with the seller. The seller then takes the place of the bank and accepts payments from the new owner of the property. Most seller-financed loans will include a spread on the interest rate charged, giving the seller additional profit. 

For example, Mr. Smith owns a house which has a mortgage balance of $50,000 at 4 percent interest. Mr. Smith sells the home for $80,000 to Mrs. Jones who obtains a mortgage from either Mr. Smith or another lender at 6 percent interest. Mrs. Jones makes payments to Mr. Smith who uses those payments to pay his original 4% mortgage. He makes a profit on both in the difference between the purchase price and the original owed mortgage and in the spread between the two interest rates. Depending on the loan paperwork, the home’s ownership may transfer to Mrs. Jones. However, if she defaults on the mortgage, the lender or a senior claimant may foreclose and reclaim the property.

Wraparound Mortgage vs. Second Mortgage

Both wraparound mortgages and second mortgages are forms of seller financing. A second mortgage is a type of subordinate mortgage made while an original mortgage is still in effect. The interest rate charged for the second mortgage tends to be higher and the amount borrowed will be lower than that of the first mortgage. A notable difference between wraparound and second mortgages is in what happens to the balance due from the original loan. A wraparound mortgage includes the original note rolled into the new mortgage payment. With a second mortgage, the original mortgage balance and the new price combine to form a new mortgage.

ZTE Nears Deal to End U.S. Ban, but Customers Are Antsy

SHENZHEN, China—ZTE Corp. is nearing a deal with the U.S. to save its business, but the Chinese telecommunications giant faces more battles ahead to turn around its fortunes as losses pile up and aggrieved customers demand compensation for delayed projects.

On Monday, ZTE executives in Shenzhen signed a preliminary agreement that would allow it to resume buying parts from American suppliers and restart idle smartphone and telecom-equipment factories following an April ban imposed by the U.S. Commerce Department, according to people familiar with the matter.

To clear the path to an agreement, ZTE has gone on the offensive to remedy its failures to meet the conditions set by the Commerce Department under a settlement of a probe into the company’s evasion of American sanctions on Iran and North Korea. ZTE has stripped responsibilities and job titles from a clutch of senior employees, issued letters of reprimand, and is attempting to claw back bonuses from 35 people, one person said.

Time is short for ZTE. It is facing a flurry of demands for compensation from foreign telecom network operators whose projects have stalled without supplies from ZTE, the people said. Even if U.S. companies resume shipments to ZTE, the Chinese company must win back customers and shake off damage to its reputation from the episode.

It isn’t clear when a formal deal will be ready, the people said. The agreement is under legal review by Trump administration officials and could be ready in a matter of days, one of these people said. Late last month, President Donald Trump said he would allow ZTE to resume buying U.S. goods in exchange for a fine of $1.3 billion and a leadership shake-up.

Mr. Trump’s actions have effectively turned ZTE into a bargaining chip in broader U.S.-China trade negotiations, which are sputtering. ZTE’s fate has also been linked by investors and analysts to China’s pending approval of Qualcomm Inc.’s $44 billion acquisition of NXP Semiconductors NV.

“No definitive agreement has been signed by both parties,” a Commerce Department spokesman said. A ZTE spokeswoman didn’t respond to a request for comment.

Members of both parties in Congress criticized Mr. Trump for aiding a Chinese firm that evaded U.S. sanctions. “Congress should move in a bipartisan fashion to block this deal right away,” Senate minority leader Chuck Schumer (D., N.Y.) said in a tweet Tuesday.

ZTE has been effectively closed for business since the mid-April Commerce Department order. The firm relies on an array of critical American components to build its phones and cellular equipment, including smartphone chips from Qualcomm Inc. and optical components used in base stations from smaller firms such as Maynard, Mass.-based Acacia Communications Inc. ACIA 1.59%

The company is now contending with blowback from customers, according to people familiar with the matter.

ZTE base stations and other cellular equipment are languishing in warehouses, leading major overseas customers to begin demanding penalty payments for unfinished work, according to these people. One of ZTE’s biggest European customers, the Italian carrier Wind Tre SpA, has demanded €100 million ($117 million) from ZTE for stalled construction and maintenance of its network, according these people. A spokesman for Wind Tre declined to comment.

ZTE’s coveted U.S. smartphone business is also under threat, with the wireless carrier T-Mobile US Inc. TMUS 0.77% last month telling ZTE it is walking away from an agreement, worth more than a billion dollars, to distribute ZTE smartphones and other gadgets in the U.S., according to people familiar with the matter.

A T-Mobile spokeswoman said the company is “monitoring and assessing the ZTE developments very closely and will certainly make any necessary changes or adjustments to take care of our business and our customers.”

Nearly three-quarters of ZTE smartphone sales are to customers in the U.S., where it is the fourth-largest vendor. The company spent years building its brand there through advertising campaigns and cultivating relationships with wireless carriers. Last year, ZTE sold 19 million phones in the U.S., according to research firm Canalys.

At ZTE’s Shenzhen headquarters on Monday, top management led a meeting of hundreds of senior and midlevel employees, according to a person familiar with the matter. At the meeting, executives took turns engaging in self-criticism, and ZTE’s chairman, Yin Yimin, pledged to improve management practices and culture, the person said.

In the weeks since the April order, many ZTE employees have been passing the time with team-building activities, training exercises and by singing motivational songs, including one song posted on social media about “being together in the same boat,” according to current and former employees.

ZTE has an uphill battle hanging on to customers, analysts said. It is one of the world’s leading firms competing in the race to develop “fifth-generation,” or 5G, wireless technology.

“If you’re a carrier in Europe that uses this company, and you’re uncertain about whether the denial order is lifted,” said Paul Triolo, of the political risk-consulting firm Eurasia Group, “you’re going to be rethinking your supply chain, particularly with things like 5G.”

Write to Dan Strumpf at

Appeared in the June 7, 2018, print edition as ‘ZTE Works to Repair Damage From U.S. Ban.’

Predatory Dumping

What is ‘Predatory Dumping’

Predatory dumping is a type of anti-competitive behavior in which a foreign company prices its products below market value in an attempt to drive out domestic competition. This may lead to conditions where the company has a monopoly in a certain product or industry in the targeted market. The practice is also referred to as “predatory pricing.”

BREAKING DOWN ‘Predatory Dumping’

“Dumping” in international trade refers to a company selling goods in another market below the price at which it would sell in its domestic market. Predatory dumping is a specific version of this in which the intention is to drive out domestic and other competitors in the targeted market, and ultimately aim at a monopoly in that market.

In this scenario, the foreign company, as well as domestic companies (and any other exporters active in the market), will be selling at a loss. For predatory dumping to work, the foreign company needs to be able to finance this loss until it can drive its competitors out of business — this could be done by subsidizing these sales through higher prices in the home country, or using other resources of the company such as a war chest. Once domestic producers are driven out of business (and any other exporters in the market driven out of it through low prices), the foreign company would have a monopoly and then be able to raise prices again as it sees fit.

Preventing Predatory Dumping

In practice, with the global economy being highly interlinked and open through trade liberalization, increased competition globally makes such an outcome unlikely. Moreover, such predatory dumping/pricing is illegal under World Trade Organization (WTO) rules if it harms producers in the targeted market, and countries can implement anti-dumping measures under WTO rules if domestic producers are being harmed.

The European Union (EU) has a specific framework to deal with dumping, and many countries (including the U.S., India and China) use anti-dumping measures. It is of course not only domestic producers who might be harmed, but other exporters too who cannot compete with artificially low export prices. However, the latter have no remedy under anti-dumping rules.

Anti-dumping measures are not considered protectionism, as predatory dumping is not a fair trade practice. The WTO rules are designed to help ensure that any anti-dumping measures that countries take are justifiable, and are not used as a guise for protectionism.

Madrigal Pharmaceuticals Prices Public Offering of Common Stock

CONSHOHOCKEN, Pa., June 06, 2018 (GLOBE NEWSWIRE) — Madrigal Pharmaceuticals, Inc. (Nasdaq:MDGL), a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapeutic candidates for the treatment of cardiovascular, metabolic, and liver diseases, today announced the pricing of an underwritten registered public offering of 1,347,232 shares of its common stock at a public offering price of $305.00 per share.  In the offering, Madrigal will issue and sell 983,607 shares and existing stockholders of the company, including certain of its executive officers and directors and affiliates thereof will sell 363,625 shares. The gross proceeds to Madrigal from the offering, before deducting the underwriting discounts and commissions and other estimated offering expenses, are expected to be approximately $300 million.  Madrigal will not receive any proceeds from the sale of the shares by the selling stockholders.  Madrigal has granted the underwriters of the offering a 30-day option to purchase up to an additional 202,084 shares of common stock from the company.

Goldman Sachs & Co. LLC, is the sole book-running manager of the offering. Cowen is acting as a lead manager of the offering. JMP Securities, Roth Capital Partners and H.C. Wainwright & Co. are acting as co-managers for the offering. The offering is expected to close on or about June 11, 2018, subject to the satisfaction of customary closing conditions.

The shares are being offered by Madrigal pursuant to an effective shelf registration statement on Form S-3 that was previously filed with the Securities and Exchange Commission (SEC) on June 5, 2018. A preliminary prospectus supplement relating to and describing the terms of the offering was filed with the SEC on June 6, 2018. The final prospectus supplement relating to the offering will be filed with the SEC and will be available on the SEC’s website at When available, copies of the final prospectus supplement and the accompanying prospectus relating to these securities may also be obtained by contacting one of the following: Goldman Sachs & Co. LLC, Attn: Prospectus Department, 200 West Street, New York, NY 10282, telephone: (866) 471-2526, facsimile: (212) 902-9316, email:; Cowen and Company, LLC, c/o Broadridge Financial Services, 1155 Long Island Avenue, Edgewood, NY 11717, Attention: Prospectus Department, or by telephone at (631) 274-2806; JMP Securities LLC, Prospectus Department, 600 Montgomery Street, 10th Floor, San Francisco, CA 94111, telephone: (415) 835-8985; Roth Capital Partners, LLC 888 San Clemente Drive, Suite 400, Newport Beach, CA 92660, (800) 678-9147; or H.C. Wainwright & Co., LLC,  430 Park Avenue, 3rd Floor, New York, New York 10022, email:, telephone: (646) 975-6995.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state or jurisdiction.

About Madrigal Pharmaceuticals, Inc.

Madrigal Pharmaceuticals, Inc. (Nasdaq:MDGL) is a clinical-stage biopharmaceutical company pursuing novel therapeutics that target a specific thyroid hormone receptor pathway in the liver, which is a key regulatory mechanism common to a spectrum of cardio-metabolic and fatty liver diseases with high unmet medical need. Madrigal’s lead candidate, MGL-3196, is a first-in-class, orally administered, small-molecule, liver-directed, thyroid hormone receptor (THR) β-selective agonist that is currently in Phase 2 development for non-alcoholic steatohepatitis (NASH) and heterozygous familial hypercholesterolemia (HeFH).

Forward-Looking Statements

Statements in this release concerning Madrigal’s future expectations, plans and prospects, including, without limitation, statements about Madrigal’s proposed public offering, constitute forward-looking statements for the purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results and future plans may differ materially from those indicated by these forward-looking statements as a result of various important factors, including, without limitation, risks associated with market conditions and the satisfaction of customary closing conditions related to the proposed offering, as well as those risks more fully discussed in the “Risk Factors” filed with Madrigal’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC, and in other filings that Madrigal makes with the SEC. There can be no assurance that Madrigal will be able to complete the proposed public offering on the anticipated terms, or at all. You should not place undue reliance on these forward-looking statements. In addition, any forward-looking statements represent Madrigal’s views only as of today and should not be relied upon as representing its views as of any subsequent date. Madrigal explicitly disclaims any obligation, except to the extent required by law, to update any forward-looking statements.

Investor Relations
Madrigal Pharmaceuticals, Inc.
Marc Schneebaum

Media Contact
Sam Brown Inc.
Kristin Paulina, 610-524-2959

Asia Markets: Asian markets surge forward after Dow’s rally

Asian markets climbed in early Thursday trading, following a surge on Wall Street that saw the Dow again top the 25,000 mark.

Japanese automakers were among the biggest gainers as the Nikkei
NIK, +0.95%
  climbed 0.9% and the dollar-yen hit fresh session highs of ¥110.21 soon after the opening bell. Toyota
7203, +1.82%
  was up 1.8%, Nissan
7201, +1.28%
  gained 1.2% and Honda
7267, +1.00%
  added 1%

Hong Kong’s Hang Seng Index
HSI, +0.52%
  was looking for its first six-day winning streak since last month. Geely
0175, +2.58%
  popped 3.2% following its late-Wednesday release of a 61% May sales jump. Internet giant Tencent
0700, +0.38%
  rose a further 1%, along with smartphone-parts firms AAC
2018, +0.00%

Chinese stocks joined the rest of the region in starting higher, though gains were slight. The Shanghai Composite
SHCOMP, +0.06%
  was up 0.3% and had risen three-straight days coming into Thursday’s trading, climbing a combined 1.3%.

Australian stocks
XJO, +0.68%
  were up, although poultry producer Inghams
ING, -8.56%
  plunged after the announcement that its CEO was stepping down. South Korea’s Kospi
SEU, +0.66%
  gained as trading resumed after a holiday Wednesday. Markets in
Y9999, +0.11%
FBMKLCI, +1.06%
 , Singapore
STI, +0.28%
  and New Zealand
NZ50GR, +0.48%
  were solidly higher as well.

All the ways you can mess up your 401(k) — even if you max out your contributions

Workplace retirement plans get a lot of bad press, primarily if they are loaded with high fees.

But truth be told, 401(k) retirement plans have been a boon to millions of Americans with access to them. In total, 55 million savers held $5.3 trillion in these plans at the end of 2017, according to industry data.

Put simply, 401(k)s work. In addition to providing an income-tax break, the plans are designed to fend off our worst impulses. For instance, you pay a penalty plus taxes due for withdrawing money too early. So people tend to leave money alone to grow and compound — and that’s huge.

That’s the good news. The bad news is that otherwise-diligent savers can still leave money on the table with a 401(k), often without realizing it. That’s true even for those contributing the maximum amounts.

Read: A simple change to your 401(k) statement could encourage you to save more for retirement

If you care about maximizing your retirement, be careful about how you treat your plan and avoid making these unforced 401(k) errors.

Mistake No. 1: Not saving in a 401(k)

It seems fundamental, but a shocking number of people simply ignore the opportunity to save for retirement in a workplace plan — up to 60% of eligible workers, according to one study. To overcome human inertia, companies have started to enroll employees automatically.

Of course, many people don’t have access to a workplace savings plan. A Pew Charitable Trusts study found that 35% of workers aged 22 or older had no access to a 401(k). While 80% of baby boomers join a plan if offered one, just 52% of millennials participate.

But even those who do have access to a 40l(k) plan at work and do save that way can leave money on the table.

Read: How to save twice your salary (or more) by age 35

Mistake No. 2: Not investing

Even with automatic enrollment in place, between 80% and 90% of participants fail to pick any investment at all, leaving those contributions in cash. Yet cash is subject to inflation and thus steadily loses value. Stocks and bonds promise growth above inflation, protecting the purchasing power of your savings.

Companies are responding by creating default portfolios, nudging us to opt out of that choice rather than to opt into it. Typically, this means a target-date fund, a type of all-in-one portfolio based on your age and retirement goals. That’s better than cash for sure, but target-date products can be too conservative, especially since we all are living longer in retirement.

Read: Should retirees hold onto equities? Not necessarily

Mistake No 3: Not getting the free money

Many companies incentivize saving by offering to match 401(k) contributions up to a specific amount each year. Saving less than the match is turning away free money. For that reason, default accounts often start out saving at the matching level. A typical match is 50 cents for each dollar you save up to 6% of your pay. So if you make $50,000 a year, the first $3,000 you put in a 401(k) would be matched with $1,500 from your employer.

Some employers do less, matching only up to 3% of your salary. While there can be a lot of corporate reasons for the difference, it’s worth asking why. While you should strive to save up to the IRS maximum — $18,500 in 2018 and $24,500 if you are 50 or older — getting your company’s full match is the minimum you should do.

Mistake No. 4: Missing out on company matches by front-loading contributions

This mistake may afflict aggressive savers who feel they should max out their 401(k) as quickly as possible each year. But having zero contributions in later pay periods risks not get all the matches you are due because some employers spread out their payments over the entire year. And if there is no contribution by you in one pay period, there is no match either.

Some employers will “true up” contributions to make sure you get the full amount, or make annualized matches to even out the year, but policies vary from company to company. A Deloitte study found that nearly nine in 10 companies match per pay period — and just 45% conduct a true-up.

Talk to your human-resources department before you front-load your 401(k).

Mistake No. 5: Paying high fees

A lot of small companies choose whichever 401(k) provider makes a pitch that best responds to their own needs, such as reduced paperwork if the firm can’t manage the plans in house. Yet these “easy” solutions can be loaded with higher-than-average fees — paid by employees.

That doesn’t mean you can’t advocate for yourself! Once you’re in a plan, choose low-cost index funds over costly active mutual funds. A BrightScope study finds that 98% of 401(k) plan participants have access to index funds in their plan, but just 31% of total plan assets are in low-cost funds vs. more costly mutual funds.

While digging into the fees in your plan can be fairly complicated and can vary according to your investment choices, it’s worth doing. Your human-resources department should be able to provide a human-readable breakdown. You also can compare your plan against others by simply searching for it at

Mistake No. 6: Trying to time the market

People tend to ignore their 401(k) balance for a long time. Then one day they open a statement and find out that they are 401(k) millionaires. Thanks to the power of time — known in investing as compounding — it happens.

In effect, your money starts to make money on its own, pushing up your account balance dramatically in the later years regardless of your continued contributions. Money prudently invested doubles, then doubles again, and then again, like folding a single sheet of paper until it’s too fat to fold even once more. (You can’t get past seven folds without serious help.)

The problem is that the method that got them rich — a risk-adjusted portfolio — falls by the wayside as the employee tries to trade his or her way to even greater riches.

Soon, a diversified portfolio becomes concentrated, the market changes course, and the once-fat 401(k) starts to look like a 201(k). Stick with what got you there, and compounding will take care of the rest. Prudently invested, $1 in 10 years should turn into $2, but then 10 years later it’s $4, then $8, and then $16 — even though you haven’t saved another cent.

Read: More than 40% of Americans are at risk of going broke in retirement — and that’s the good news

Mistake No. 7: Having orphaned accounts

Most Americans these days spend just a few years in any one firm. We hold 10 jobs by age 40 and 12 to 15 jobs in a lifetime, according to government data. In many of those jobs, though, we do last long enough to start a 401(k) — and then leave it behind.

Too often, those orphaned accounts are frittered away in high-fee plans.

Read: 401(k) accounts need to be easier to move from job to job

Having multiple 401(k)s is risky in another way too. They likely are invested in very different ways. You might have been mostly in stocks in your 20s, then in a 60%-40% mix of stocks and bonds in your 30s. Then maybe back to mostly stocks during a time when the economy boomed. Figuring out what you own now, and if the risk you take is appropriate, is nearly impossible with scattered money.

Better to roll those old balances over into an IRA and understand your real investment risk. Properly reinvested into a single account, it becomes much easier to choose investments for a portfolio that fits your long-term goals while keeping costs down.

Small problems such as missing matching money and high fund fees add up to big dollars over decades. The key is to take control of your financial future by paying attention to how your money is managed, no matter what stage you are in your career.

Your future, retired self will thank you.

When To Sell A Mutual Fund

If your mutual fund is yielding a lower return than you anticipated, you may be tempted to cash in your fund units and invest your money elsewhere. The rate of return of other funds may look enticing, but be careful; there are both pros and cons to the redemption of your mutual fund shares. Let’s examine the circumstances in which liquidation of your fund units would be most optimal and when it may have negative consequences.

Mutual Funds Are Not Stocks

The first thing you need to understand is that mutual funds are not synonymous with stocks. So, a decline in the stock market does not necessarily mean that it is time to sell the fund. Stocks are single entities with rates of return associated with what the market will bear. Stocks are driven by the “buy low, sell high” rationale, which explains why, in a falling stock market, many investors panic and quickly dump all of their stock-oriented assets.

Mutual funds are not singular entities; they are portfolios of financial instruments, such as stocks and bonds, chosen by a portfolio or fund manager in accordance with the fund’s strategy. An advantage of this portfolio of assets is diversification. There are many types of mutual funds, and their degrees of diversification vary. Sector funds, for instance, will have the least diversification, while balanced funds will have the most. Within all mutual funds, however, the decline of one or a few of the stocks can be offset by other assets within the portfolio that are either holding steady or increasing in value.

Because mutual funds are diverse portfolios rather than single entities, relying only on market timing to sell your fund may be a useless strategy since a fund’s portfolio may represent different kinds of markets. Also, because mutual funds are geared toward long-term returns, a rate of return that is lower than anticipated during the first year is not necessarily a sign to sell.

When Selling Your Fund

When you are cashing-in your mutual fund units, there are a couple of factors to consider that may affect your return:

Back-end loads
If you are an investor who holds a fund that charges a back-end load, the total you receive when redeeming your units will be affected. Front-end loads, on the other hand, are sales fees charged when you first invest your money into the fund. So, if you had a front-end sales charge of 2%, your initial investment would have been reduced by 2%. If your fund has a back-end load, charges will be deducted from your total redemption value. For many funds, back-end loads tend to be higher when you liquidate your units earlier rather than later, so you need to determine if liquidating your units now is optimal.

Tax consequences
If your mutual fund has realized significant capital gains in the past, you may be subject to capital gains taxes if the fund is held within a taxable account. When you redeem units of a fund that has a value greater than the total cost, you will have a taxable gain. The IRS has more detailed information on capital gains and their calculations in “Publication 564: Mutual Fund Distributions.”

When Your Fund Changes

Do keep in mind that even if your fund is geared to yielding long-term rates of returns, that does not mean you have to hold onto the fund through thick and thin. The purpose of a mutual fund is to increase your investment over time, not to demonstrate your loyalty to a particular sector or group of assets or a specific fund manager. To paraphrase Kenny Rogers, the key to successful mutual fund investing is “knowing when to hold ’em and knowing when to fold ’em.”

The following four situations are not necessarily indications that you should fold, but they are situations that should raise a red flag:

Change in a Fund’s Manager
When you put your money into a fund, you are putting a certain amount of trust into the fund manager’s expertise and knowledge, which you hope will lead to an outstanding return on an investment that suits your investment goals. If your quarterly or annual report indicates that your fund has a new manager, pay attention. If the fund mimics a certain index or benchmark, it may be less of a worry as these funds tend to be less actively managed. For other funds, the prospectus should indicate the reason for the change in manager. If the prospectus states that the fund’s goal will remain the same, it may be a good idea to watch the fund’s returns over the next year. For further peace of mind, you could also research the new manager’s previous experience and performance.

Change in Strategy
If you researched your fund before investing in it, you most likely invested in a fund that accurately reflects your financial goals. If your fund manager suddenly starts to invest in financial instruments that do not reflect the mutual fund’s original goals, you may want to re-evaluate the fund you are holding. For example, if your small-cap fund starts investing in a few medium or large-cap stocks, the risk and direction of the fund may change. Note that funds are typically required to notify shareholders of any changes to the original prospectus.

Additionally, some funds may change their names to attract more customers, and when a mutual fund changes its name, sometimes its strategies also change. Remember, you should be comfortable with the direction of the fund, so if changes bother you, get rid of it.

Consistent Underperformance
This can be tricky since the definition of “underperformance” differs from investor to investor. If the mutual fund returns have been poor over a period of less than a year, liquidating your holdings in the portfolio may not be the best idea since the mutual fund may simply be experiencing some short-term fluctuations. However, if you have noticed significantly poor performance over the last two or more years, it may be time to cut your losses and move on. To help your decision, compare the fund’s performance to a suitable benchmark or to similar funds. Exceptionally poor comparative performance should be a signal to sell the fund.

The Fund Becomes Too Big
In many cases a fund’s quick growth can hinder performance. The bigger the fund, the harder it is for a portfolio to move assets effectively. Note that fund size usually becomes more of an issue for focused funds or small-cap funds, which either deal with a smaller number of shares or invest in stock that has low volume and liquidity.

When Your Personal Investment Portfolio Changes

Besides changes in the mutual fund itself, other changes in your personal portfolio may require you to redeem your mutual fund units and transfer your money into a more suitable portfolio. Here are two reasons which might prompt you to liquidate your mutual fund units:

Portfolio rebalancing
If you have a set asset allocation model to which you would like to adhere, you may need to rebalance your holdings at the end of the year in order to return your portfolio back to its original state. In these cases, you may need to sell or even purchase more of a fund within your portfolio to bring your portfolio back to its original equilibrium. You may also have to think about rebalancing if your investment goals change. For instance, if you decide to change your growth strategy to one that provides steady income, your current holdings in growth funds may no longer be appropriate.

If your fund has suffered significant capital losses and you need a tax break to offset realized capital gains of your other investments, you may want to redeem your mutual fund units in order to apply the capital loss to your capital gains.

The Bottom Line

Selling a mutual fund isn’t something you do impulsively. It’s important to give the decision a great deal of thought. Remember that you originally invested in your mutual fund because you were confident in it, so make sure you are clear on your reasons for letting it go. However, if you have carefully considered all the pros and cons of your fund’s performance and you still think you should sell it, do it and don’t look back.

SEE: Watch Out For The Mutual Fund MetamorphosisMutual Fund Tune-Up Delivers High-Powered Performance

Treasury International Capital – TIC

DEFINITION of ‘Treasury International Capital – TIC’

Treasury International Capital (TIC) data measures flows of portfolio capital into and out of the U.S., and the resultant positions between U.S. and foreign residents. The data is compiled and published by the U.S. Treasury, and is also used by the Bureau of Economic Analysis as an input into the U.S. Balance of Payments data. TIC data is used as an economic indicator to help understand and predict the direction of the U.S. dollar.

BREAKING DOWN ‘Treasury International Capital – TIC’

Formally, the Treasury International Capital (TIC) reporting system is the U.S. government’s source of data on capital flows into and out of the United States, excluding direct investment, and the resulting levels of cross-border claims and liabilities. U.S. residents include U.S. branches of foreign banks, while foreign residents include offshore branches of U.S. banks. The information is collected from a number of institutions in the U.S., including banks and other depository institutions, and securities brokers and dealers. Data on securities transactions is recorded monthly, and cross-border positions and derivatives contracts are recorded quarterly.

TIC data, therefore, summarizes the effects of net foreign portfolio investment flows into the U.S. This is regarded as an important economic indicator because, as with any other balance of payments indicator, it can help explain past movements in the U.S. dollar (the data is released with about a 6-week lag) and provide information to use in forecasting the future direction of the dollar. Similarly, the data also helps with analysis of price movements of and net demand for the securities detailed in the TIC report, with a focus on net foreign demand for U.S. Treasuries which is regarded as a particularly important indicator. The data can thus affect price movements in the U.S. Treasury market too.

Taking into account activities by all parties, there was a net TIC outflow of $38bn in March 2018. A deeper look into the data showed significant differences between types of securities. There were net foreign purchases of long-term securities of almost $62bn in March 2018, resulting in a 12-month total of some $572bn, which was significantly higher than the prior year (12 months to March 2017) of $268bn. However, foreigners were net sellers of just over $10bn worth of U.S. Treasuries in March 2018. There were nevertheless still net inflows of just under $47bn into the U.S. Treasury market in the 12 months to March 2018, a turnaround from net outflows of $57bn in the prior year.

Allergan Needs a New Wrinkle

Allergan , AGN 2.08% the maker of Botox, could use a face-lift.

Two hedge funds, Appaloosa LP and Senator Investment Group, have called for changes at the drug giant best known for making the wrinkle-smoothing injection. Among the requests is that Allergan separate the roles of chairman and chief executive officer. Brent Saunders currently fills both.

Shareholders have voted down similar proposals in the past three years, but it is easy to see why even hedge funds not known for an activist approach are frustrated.

Worries about Allergan’s long-term growth prospects have obscured a string of strong quarterly results and its shares have shed more than half their value over the past three years.

Generic competition for Allergan’s second-best selling drug, the dry eye treatment Restasis, is likely imminent, while potential new competitors for Botox also loom. A spree of acquisitions and share buybacks have failed to reverse the stock’s fortunes and limited future flexibility. The company had nearly $25 billion in net debt at the end of March compared with about $5 billion back in 2016.

Last year, Allergan attempted to maintain patent protection for Restasis by selling intellectual property to a Native American tribe. The move was widely panned and eventually struck down in court. In April, Allergan had a brief, bizarre flirtation with acquiring rare-disease specialist Shire. Such a transaction would almost certainly have required issuing stock at depressed prices.

In light of that recent history, modest corporate governance changes seem reasonable. At the most recent annual meeting, about 40% of shareholders who submitted a ballot voted for the installation of an independent chairman—a fairly high tally.

Allergan would be wise not to try its newest critics’ patience.

Write to Charley Grant at

Appeared in the June 7, 2018, print edition as ‘Allergan Must Find a New Wrinkle.’

Franchised Monopoly

What is a ‘Franchised Monopoly’

A franchised monopoly is status given by the government to a company or individual. A monopoly refers to a situation where a given sector or industry is dominated by one firm, entity or corporation which has become large enough to own all or nearly all of the market for a particular type of product or service. A franchised monopoly is sheltered from competition by virtue of an exclusive license or patent granted to it by the government.

BREAKING DOWN ‘Franchised Monopoly’

Generally speaking, monopolies are discouraged. Empirically speaking, monopolized industries have led to non-competitive, closed marketplaces that are not in the best interest of consumers, as they are forced to transact with only one supplier, which can lead to high prices and low quality. In the United States, antitrust laws and regulations are put in place to discourage monopolistic operations. However, franchised monopolies are perfectly legal, since the government grants a company the right to be the sole producer or provider of a good or service.

Franchised Monopolies in Practice

Government-issued franchised monopolies are typically established because they are believed to be the best option for supplying a good or service from the perspective of both the producers and the consumers of that good or service. Given government intervention and sometimes outright subsidies, franchised monopolies allow producers to operate in markets where they must sink considerable sums of capital to produce a good or service. Likewise, since governments that grant monopolies often regulate the price that can be charged by the supplier of the good or service, consumers gain access to a good or service that in a free market may be unaffordable.

In most nations, franchised monopolies can be found in essential sectors such as transportation, water supply and power. In the United States, for example, utility companies and the U.S. Postal Service are examples of franchised monopolies. Another example would be the telecommunications firm AT&T (T), which until 1984, was a franchised monopoly sanctioned by the government to provide affordable and reliable phone service to U.S. consumers. In many countries, primarily developing nations, natural resources such as oil, gas, metals and minerals are also controlled by government-sanctioned monopolies. While one argument in favor of franchised monopolies is that they ensure that control over essential industries remains in the hands of the public and they help control the cost of capital-intensive output, opponents of such monopolies claim that they promote favoritism and introduce market distortions.

The Advantages Of Mutual Funds

Mutual funds are a popular investment vehicle for investors. For investors with limited knowledge, time or money, mutual funds can provide simplicity and other benefits. To help you decide whether mutual funds are best for you, here are a few key reasons to consider investing in mutual funds.

SEE: Analyzing Mutual Fund Risk


One rule of investing, for both large and small investors, is asset diversification. Diversification involves the mixing of different types of investments within a portfolio and is used to manage risk. For example, choosing to buy stocks in the retail sector and offsetting them with stocks in the industrial sector can reduce the impact of the performance of any one security on your entire portfolio. To achieve a truly diversified portfolio, you may have to buy stocks with different capitalizations from different industries and bonds with varying maturities from different issuers. For the individual investor, this can be quite costly.

By purchasing mutual funds, you are provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios. One caveat, however, is that simply purchasing one mutual fund might not give you adequate diversification. It’s important to check if the fund is sector– or industry-specific. For example, investing only in an oil and energy mutual fund might spread your money over fifty companies, but if energy prices fall, your portfolio will likely suffer.

Economies of Scale

The easiest way to understand economies of scale is by thinking about volume discounts; in many stores, the more of one product you buy, the cheaper that product becomes. For example, when you buy a dozen donuts, the price per donut is usually cheaper than buying a single one. This also occurs in the purchase and sale of securities. If you buy only one security at a time, the transaction fees will be relatively large.

Mutual funds are able to take advantage of their buying and selling volume to reduce transaction costs for investors. When you buy a mutual fund, you are able to diversify without the numerous commission charges. Imagine if you had to buy each of the 10-20 stocks needed for diversification. The commission charges alone would eat up a good chunk of your investment. Take into account additional transaction fees for every time you want to modify your portfolio, and as you can see the costs start to add up. With mutual funds, you can make transactions on a much larger scale for less money.


Many investors don’t have the exact sums of money to buy round lots of securities. One or two hundred dollars is usually not enough to buy a round lot of a stock, especially after deducting commissions. Investors can purchase mutual funds in smaller denominations, ranging from $100 to $1,000 minimums. Smaller denominations of mutual funds provide mutual fund investors the ability to make periodic investments through monthly purchase plans while taking advantage of dollar-cost averaging. So, rather than having to wait until you have enough money to buy higher-cost investments, you can get in right away with mutual funds. This provides an additional advantage – liquidity.


Another advantage of mutual funds is the ability to get in and out with relative ease. In general, you are able to sell your mutual funds in a short period of time without there being much difference between the sale price and the most current market value. However, it is important to watch out for any fees associated with selling, including back-end load fees. Also, unlike stocks and exchange-traded funds (ETFs), which trade any time during market hours, mutual funds transact only once per day after the fund’s net asset value (NAV) is calculated.

SEE: What is a mutual fund’s NAV?

Professional Management

When you buy a mutual fund, you are also choosing a professional money manager. This manager will use the money that you invest to buy and sell stocks that he or she has carefully researched. Therefore, rather than having to thoroughly research every investment before you decide to buy or sell, you have a mutual fund’s money manager to handle it for you.

The Bottom Line

As with any investment, there are risks involved in buying mutual funds. These investment vehicles can experience market fluctuations and sometimes provide returns below the overall market. Also, the advantages gained from mutual funds are not free: many of them carry loads, annual expense fees and penalties for early withdrawal.

SEE: Disadvantages of Mutual Funds

Dockworkers, East and Gulf Coast Ports Reach Tentative Labor Agreement

Dockworkers at U.S. East and Gulf Coast seaports reached a tentative six-year contract agreement with the port operators, the two sides said Wednesday, beating the September expiration of the current pact and setting the stage for several years of labor peace at the country’s trade gateways.

In a statement Wednesday, the International Longshoremen’s Association and the United States Maritime Alliance Ltd., which represents port associations and marine terminal companies from Maine to Texas, said in a statement that terms of the agreement were unanimously approved by 200 delegates of the ILA’s 65,000 maritime-worker membership after months of on-again, off-again negotiations.

Discussions between the ILA and the employers’ group, known as USMX, had broken off in December over disagreements on how ports define automation, but the parties returned to the table in March.

Also in Logistics…

The new contract carries through mid-2024. ILA President Harold J. Daggett, and David F. Adam, chairman of USMX, called it, “beneficial to both sides.” In a statement the parties said they hoped to have local agreements that go along with the broader master contract ironed out by July 10, 2018. A ratification vote by members will come after that.

A ratified agreement, along with an existing contract between the separate West Coast dockworkers’ union and port employers there, would leave all ports across the U.S. covered under labor deals through at least the middle of 2022, easing concerns by retailers and manufacturers over a sector marked by labor strife in recent years.

In late 2014, a labor contract between the West Coast’s International Longshore and Warehouse Union and port employers ran out while the parties were negotiating, leading to widespread delays in cargo handling at major gateways. Dozens of ships sat offshore outside the nation’s largest port complex in Los Angeles and Long Beach, Calif., waiting to unload, and businesses across the country faced inventory shortages for months during and after the negotiations finally concluded in February 2015.

“That all had an impact on the bottom line for companies and on the economy as a whole,” said Jonathan Gold, vice president for supply chain for the National Retail Federation. The new East and Gulf coast agreement provides retailers, manufacturers and exporters with long-term stability, Mr. Gold said.

The current contract between ILA and USMX was set to expire Sept. 30, 2018, and pressure for a new deal grew last year after the Pacific Maritime Association, which represents West Coast port operators, reached a pact with the union there to extend their 2015 agreement until July 1, 2022.

“Given the agreements that were reached on the West Coast, the East Coast really didn’t have a choice but to reach the same kind of agreement or they would really be risking jobs and business,” said Jon Slangerup, chief executive of American Global Logistics LLC, an Atlanta-based freight forwarder and logistics provider. Mr. Slangerup was chief executive of the Port of Long Beach from 2014 to 2016.

—Jennifer Smith contributed to this story.

Write to Erica E. Phillips at

Direct Cost

Loading the player…

What is a ‘Direct Cost’

A direct cost is a price that can be completely attributed to the production of specific goods or services. Some costs, such as depreciation or administrative expenses, are more difficult to assign to a specific product and therefore, are considered to be indirect costs. A direct cost can be considered a variable cost if it is inconsistent and often fluctuates in amount.


Direct costs are one of two general branches of product costs in accounting for manufactured goods. The other branch, which contains all non-traceable expenses, are indirect costs. Examples of direct costs include manufacturing supplies and commissions. Rent expense may only be a direct cost if only one cost object relates to the facility being rented.

Because direct costs can be specifically traced to a product, direct costs do not need to be allocated to a product, department or other cost object. Direct costs may be related to labor, materials, fuel or power consumption. Direct costs usually benefit only one cost object. Items that are not direct costs are pooled and allocated based on cost drivers.

Fixed vs. Variable

Direct costs do not need to be fixed in nature, as their unit cost may change over time or depending on the quantity being utilized. An example is the salary of a supervisor that worked on a single project. This cost may be directly attributed to the project and relates to a fixed dollar amount. Materials that were used to build the product, such as wood or gasoline, may be directly traced but do not contain a fixed dollar amount. This is because the quantity of the supervisor’s salary is known, while the unit production levels are variable based upon sales.

Inventory Valuation Measurement

Using direct costs requires strict management of inventory valuation when inventory is purchased at different dollar amounts. For example, the cost of an essential component of an item being manufactured may change over time. As the item is being manufactured, the component piece’s price must be directly traced to the item. For example, in the construction of a building, a company may have purchased a window for $500 and another window for $600. If only one window is to be installed on the building and the other is to remain in inventory, consistent application of accounting valuation must occur. Companies typically trace these costs using two methods: first in, first out (FIFO) or last in, first out (LIFO).

Fixed-Asset Turnover Ratio

Loading the player…

What is the ‘Fixed-Asset Turnover Ratio’

The fixed-asset turnover ratio is, in general, used by analysts to measure operating performance. It is a ratio of net sales to fixed assets. This ratio specifically measures a company’s ability to generate net sales from fixed-asset investments, namely property, plant and equipment (PP&E), net of depreciation. In general, a higher fixed-asset turnover ratio indicates that a company has more effectively utilized investment in fixed assets to generate revenue.

The fixed-asset turnover ratio is calculated as:

Formula for calculating the fixed-asset turnover ratio.

BREAKING DOWN ‘Fixed-Asset Turnover Ratio’

The fixed-asset turnover ratio is commonly used as a metric in manufacturing industries that make substantial purchases for PP&E in order to drive up output. When a company makes such significant purchases, wise investors closely monitor this ratio in subsequent years to observe the effectiveness of such an investment in fixed assets.

Overall, investments in fixed assets are representative of the sole, largest component of the company’s total assets. The ratio, calculated annually, is constructed in a way that is purposeful in reflecting how efficiently a company, primarily the company’s management team, has used these substantial assets to generate revenue for the firm.

Indications of the Fixed-Asset Turnover Ratio

A higher ratio is indicative of greater efficiency in managing fixed-asset investments, but there is not an exact number or range that dictates whether a company has been efficient at generating revenue from such investments. For this reason, it is important for analysts and investors to compare a company’s most recent ratio to both its historic ratios and ratio values from peer companies and/or industry averages.

Though the fixed-asset turnover ratio is of significant importance in certain industries, an investor or analyst must determine whether the specific company is in the appropriate sector or industry for the ratio to be calculated, before attaching any weight to it. Fixed assets vary drastically from one company to the next. As an example, consider the difference between an Internet company and a manufacturing company. An Internet company, such as Facebook, has a significantly smaller fixed-asset base than a manufacturing giant such as Caterpillar. Clearly, in this example, Caterpillar’s fixed-asset turnover ratio is of more relevance, and should hold more weight, than that of Facebook’s.

Variations on the Ratio

Some asset-turnover ratios substitute total assets for fixed assets in the equation. However, the latter acts as a representative of a number of management’s decisions on capital expenditures for their companies, because it is such a significant element in the firm’s balance sheet. A fixed-asset investment is a capital investment, but more importantly, the results of the capital investment are a greater indicator of performance, more so than that evidenced by total asset turnover.

Is L Brands' Dividend Sustainable?

L Brands (NYSE: LB) has had a difficult 2018. The stock of the owner of brands including iconic lingerie brand Victoria’s Secret and beauty retailer Bath & Body Works is down 43% for the year as of this writing, approaching 52-week lows after a weak first-quarter earnings report. The 2018 downturn has pushed the company’s forward price-to-earnings ratio  to just over 10, and the company’s dividend yield up over 7.5%.

LB Year to Date Total Returns (Daily) Chart

LB Year to Date Total Returns (Daily) data by YCharts

With L Brands possessing such an iconic brand in Victoria’s Secret and at such a low valuation, some may wonder if now may be the time to pull the trigger on this beaten-down stock. Is the dividend safe?

First-quarter blues

L Brands reported first-quarter results in late May that beat revenue expectations at $2.63 billion, yet missed earnings per share (EPS) expectations ($0.17 versus $0.18 estimates). In addition, the company lowered full-year 2018 EPS expectations, from the previous range of $2.95 to $3.25 to between $2.70 and $3.00 per share.

Cartoon of man in tie puzzling over downward-sloping graph conveying stock market crash.

Should investors be worried about L Brands’ payout? Image source: Getty Images.

Sales trajectory

While L Brands did, in fact, return to revenue growth last quarter, it was coming off a rather down year in 2017, meaning that L Brands is still making roughly the same amount of sales it did two years ago.


Q1 2016

Q1 2017

Q1 2018





Same-store sales




Square footage




*In millions. Data source: L Brands.

But while the company’s overall revenue has been stabilizing, it’s taken more and more square footage to produce the same amount of sales. That’s put L Brands’ margins under pressure, with gross margins , operating margins , and net income margins all deteriorating consistently over the past few years.

LB Gross Profit Margin (TTM) Chart

LB Gross Profit Margin (TTM) data by YCharts

This could mean that the company’s brands no longer commands the same premium, or that it may require more marketing to generate the same amount of sales. Either way, it’s not a great sign for the company. For the first quarter of 2018, L Brands reported Victoria’s Secret sales in the U.S. and Canada of $1.6 billion (60% of total) and Bath & Body Words sales in the U.S. and Canada of $760 million (30% of total).

Is the dividend covered?

Currently, L Brands pays out $2.40 per share in annual dividends, which is about 88% of the low end of this year’s earnings per share guidance ($2.70). That’s already cutting it close, and there are additional reasons to believe the dividend may be in further trouble. For instance, the company’s free cash flow profile (operating cash flow minus capital expenditures) is actually lower than net profits, and barely above the current dividend payout. The company paid out $686 million in dividends last year, just barely underneath the $699 million in free cash flow the company earned in 2017.

In addition, L Brands’ debt load continues to creep up even as margins narrow, which has led to a rather rapid expansion of the company’s debt-to- EBITDA ratio over the past few years.

LB Financial Debt to EBITDA (TTM) Chart

LB Financial Debt to EBITDA (TTM) data by YCharts

Thus, while the dividend is covered at the moment, the margin of safety between the dividend and both net income and free cash flow is very narrow. That means management needs to stabilize trends very soon, especially in the core Victoria’s Secret brand, and figure out a way to get profits moving in the other direction.

Feeling lucky?

Like many retailers, L Brands is looking to improve results through more direct online sales offsetting physical store sales declines, and is also looking to China for international growth. However, so far these growth seeds have yet to offset larger declines in L Brands’ core brick-and-mortar businesses.

If the online and international businesses take off and the core business stabilizes in a strong consumer environment, L Brands could end up being a bargain, but if current trends continue, investors could be in for a nasty dividend cut. Until I see proof of a turnaround, I’m steering clear.

10 stocks we like better than L Brands
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and L Brands wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares in some of  the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Asia AM Digest: EUR & AUD Up, Can Tokyo Echo Wall Street Rise?

Current Developments – Euro, Sentiment and Australian Dollar Rises

A rally in the Euro on Wednesday helped to keep the US Dollar suppressed as the markets searched for yield prospects outside of the world’s largest economy. During the first half of yesterday’s session, comments from ECB Executive Board Member Peter Praet helped push German front-end government bond yields higher, hinting at diminishing dovish monetary policy bets.

Mr. Praet said that inflation expectations are increasingly consistent with their aim and that it is ‘clear’ that the central bank will have to assess next week if to unwind their quantitative easing programme. This excited Euro bulls who now arguably see September as increasingly likely to being the end of QE. Also, higher rate prospects in Australia did not bode well for the greenback either.

There, Australia experienced its fastest pace of economic growth since the second quarter of 2016. Local government bond yields soared as well, helping to push the Australian Dollar higher against its major counterparts. But the sentiment-sensitive unit was also bolstered by a general pickup in risk appetite.

On this front, the Dow Jones climbed 1.4 percent which was its single largest daily advance since April 10. The S&P 500 was also up 0.86%. Earlier in the session, reports crossed the wires that US Treasury Secretary Steven Mnuchin asked President Donald Trump to exempt Canada from the metal tariffs.

This was ahead of a G7 Leaders Summit due at the end of the week. Perhaps the development may have inspired expectations that the world’s largest economy could soften its stance on international trade there. The pickup in sentiment diminished the demand for haven assets and understandably, the anti-risk Japanese Yen and Swiss Franc underperformed.

A Look Ahead – Will Asian Shares Echo US Gains?

If Asian shares echo the gains on Wall Street, then the Japanese Yen could depreciated. Meanwhile, the higher-yielding Australian and New Zealand Dollars could rise. As for the former, we will also get April’s Australian trade balance. Back on Tuesday, we had a softer local current account reading. Since net exports (also known as trade balance) are a portion of the current account, perhaps it won’t be surprising to see a miss there. Such an outcome could bode ill for the Aussie, but risk trends could support it more.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

Asia AM Digest: EUR & AUD Up, Can Tokyo Echo Wall Street Rise?

DailyFX Webinar Calendar – CLICK HERE to register (all times in GMT)

Asia AM Digest: EUR & AUD Up, Can Tokyo Echo Wall Street Rise?

IG Client Sen timent Index Chart of the Day: AUD/USD

Asia AM Digest: EUR & AUD Up, Can Tokyo Echo Wall Street Rise?

CLICK HERE to l earn m ore a bout the I G Client Sentiment Index

Retail trader data shows 48.2% of AUD/USD traders are net-long with the ratio of traders short to long at 1.07 to 1. The percentage of traders net-long is now its lowest since Apr 13 when AUD / USD traded near 0.77596. The number of traders net-long is 19.0% lower than yesterday and 26.8% lower from last week, while the number of traders net-short is 32.1% higher than yesterday and 43.8% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD / USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD / USD-bullish contrarian trading bias.

Five Things Traders are Reading:

  1. GBP/USD Technical Outlook: Sterling Rebound Eyes Initial Resistance by Michael Boutros, Currency Strategist
  2. Oil Prices to Succumb to Rising U.S. Output, Increased OPEC Supply by David Song, Currency Analyst
  3. Weekly Technical Perspective on the Japanese Yen (USD/JPY) by Michael Boutros, Currency Strategist
  4. S&P 500 Continues to Rise After Reaching the Highest Level in 3 Months by Abdullah AI Amoudi, DailyFX Research
  5. AUD/USD Forecast: Break of Bearish Trendline to Fuel Larger Recovery by David Song, Currency Analyst

— Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

original source

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from IG .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.