Who Wants a Pet Direwolf? Perhaps a Passenger Pigeon?

For the past few years science writer Britt Wray has been delving into the strange field of “de-extinction,” traveling the world to meet with scientists who are working to bring back species ranging from the aurochs to the thylacine to the woolly mammoth. One of the most promising efforts is Revive & Restore, which hopes to create a living passenger pigeon by the year 2022.

“That is what they have said as a target year where they can expect their gene editing experiments to produce the kind of birds that they would feel comfortable calling a de-extincted passenger pigeon,” Wray says in Episode 286 of the Geek’s Guide to the Galaxy podcast. “Of course it’s hard to put a real finger on when these experiments will succeed, but that’s how long they think they need.”

There were once billions of passenger pigeons in North America, and a passing flock of them could darken the sky for hours. Now that seems like something out of Lord of the Rings, at least according to Ben Novak, lead scientist on the project.

“He was learning, at the age of 13—while being a huge fantasy fan, usually reading about mythical creatures—that this species was not mythical, but it had the same sort of effect for widening his imagination for what it would be like to live in a world with them,” Wray says.

And Novak isn’t the only fantasy fan with an interest in passenger pigeons. A Game of Thrones author George R. R. Martin is also involved with the project. “They need money in order to do this,” Wray says, “so they collected donations, and yes, George R. R. Martin’s name is there as one of the donors.”

But given that Westeros is home to several extinct species, including aurochs and direwolves, it’s maybe not surprising that an author like Martin would have a special interest in seeing extinct animals live again. “De-extinction is so fantastical in its ambition that it makes sense that it attracts minds like George R. R. Martin who have a really vibrant way of visualizing the world and the type of creatures that could inhabit it,” Wray says.

Listen to our complete interview with Britt Wray in Episode 286 of Geek’s Guide to the Galaxy (above). And check out some highlights from the discussion below.

Britt Wray on Jurassic Park:

“Michael Crichton read this [paper], and was aware of this thinking that came from the group, and called George Poinar Jr. asking if they could discuss it, because he was working on a project that this experimental thinking could benefit, and George Poinar therefore became one of the foundational scientists to actually influence the science that went into Jurassic Park, because as you’ve probably already guessed from listening to that explanation I just gave, it sounds a lot like what Jurassic Park puts forward as a way that you could have actually created dinosaurs from petrified, encased mosquitoes that were prehistoric. … It’s been tried, but no one has ever recovered decipherable DNA sequences from old, old, old specimens of amber-encased DNA from those times, from millions and millions and millions of years ago.”

Britt Wray on climate change:

“The hypothesis here is that having many, many re-created woolly mammoths—or woolly mammoth/elephant hybrids—that could move north and run around in these areas where there is thawing permafrost, they could punch holes in the snow with their big mammoth feet, basically perforating this insulating blanket of snow and then allowing cold air from the atmosphere to come down, hit the topsoil of the permafrost, and promote some kind of refrigeration or cycling of frigid air. And then additionally perhaps they’d be able to knock over dark plants that absorb the sun’s heat, and fertilize the soil with their dung, giving rise to light, reflective grasses, eventually geo-engineering that area back into what it was like more similarly during the Pleistocene.”

Britt Wray on capitalism:

“One researcher who I met with a few times over the course of researching the book, Hendrik Poinar—the son of George Poinar Jr., the scientist who influenced Michael Crichton’s science for Jurassic Park—is a woolly mammoth genetics expert. He has sequenced its genetics, with his collaborators. And he was once taken out for a lunch by a rich businessperson—over a $7,000 bottle of wine—who offered to provide him a job if he would leave his academic post and join him on a mission to bring back the mammoth and open up some kind of theme park, so that people could pay to come and visit these marvelous, re-created beasts. He turned him down, and nothing went forward with the plan, but it demonstrates that some people already have their minds turning on ways to capitalize off of this kind of research.”

Britt Wray on DNA data storage:

“There have been many experiments to show that things such as movie clips or photographic stills or entire digital books can be converted and stored in a DNA molecule, and then sequenced back out from that molecular form back into binary, and it can be experienced again in a computer, and can be shown to work, to not have broken down or completely changed. Also, when you’re just storing it in a molecule you’re not putting it in a cell, so it’s not going to mutate and do all sorts of things, it can just sit there as an inert molecule, which opens up all kinds of possibilities for how we might store data in the future—particularly as we are generating so much more digital data all the time and we need places to put it, and it’s very energy-expensive to store it the way that we currently do.”

Apple iPhone X Improves Availability as iMac Pro Launches

For Apple customers looking to buy the latest and greatest tech from the company, it’s been a good week.

Over the last several days, some of Apple’s most important products have either been released or were made more readily available. Apple’s iMac Pro, for instance, hit store shelves on December 14 and will begin shipping to customers who purchased online later this month. The iPhone X, which began shipping to customers last month, is now getting to customers in just a couple of days after their order. Even the Apple TV is now easier to find, thanks to Amazon starting to sell it again after a two-year hiatus.

But it wasn’t just about hardware. Apple’s week was punctuated by news that the company has acquired music-discovery service Shazam in a deal rumored to have cost the tech giant $400 million. Add that to a $390 million investment in one of its suppliers, and Apple had an awfully costly week.

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Read on for more on those topics and others in this week’s Apple news roundup.

This is Fortune’s latest weekly roundup of the biggest Apple news. Here’s last week’s roundup.

  1. Good news for prospective iPhone X owners this week: Apple has been able to reduce shipping delays. If you order an iPhone X right now from any major carrier or unlocked, so it can be used on different carrier networks, you should be able to get the handset delivered to your house in just a couple of days. That stands in stark contrast to the weeks-long delay Apple customers dealt with last month after the iPhone X’s release.
  2. In a move that was tipped last week, Apple confirmed on Monday that it has acquired music-discovery service Shazam. Terms of the deal were not disclosed, but Apple said that it wants to integrate Shazam’s features, including the ability to identify what song is playing over the radio by using your smartphone’s microphone to “listen” to the music, into its Apple Music streaming app.
  3. Always a good source for sound bites, Apple senior vice president of worldwide marketing Phil Schiller said that his week that there’s a big difference between the iPhone X’s face-scanning feature Face ID and alternatives bundled in devices from Samsung and others: Apple’s option is better. In fact, Schiller used even more colorful language to describe the face scanners in Android alternatives, saying they “all stink.” Face ID lets iPhone X users scan their faces to open the handset and access its software, as well as verify purchases through the company’s Apple Pay mobile-payments service.
  4. As promised, Apple on Thursday released its iMac Pro desktop. The computer features a 27-inch screen and components that sit behind the display, making it an “all-in-one” computer. Apple has called the iMac Pro its most powerful computer ever. The iMac Pro starts at $4,999, but if you really want the most powerful experience possible, you can customize the components inside the device, including the processor and video card, and boost its price to more than $13,000.
  5. Apple this week said that it will invest $390 million in a laser company called Finisar. Apple said that Finisar will use its investment to build a factory in Texas and build laser technology the company uses in its Face ID scanner. The investment was made from Apple’s Advanced Manufacturing Fund, a $1 billion initiative by Apple to boost strategically important manufacturing efforts to benefit its products. Apple previously invested $200 million into Corning for its glass smartphone screen development.
  6. If the iMac Pro isn’t powerful enough for you, Apple confirmed this week that it’s working on a new version of its Mac Pro desktop. Apple said that the Mac Pro will be designed specifically for “pro users” and will likely retake the crown of Apple’s most powerful computer that the iMac Pro currently holds. No release date has been announced.
  7. Apple will make its Swift programming language available to students in Chicago starting in spring 2018. The Chicago schools will use Swift to teach students to how to code apps that could be used on iPhones, iPads, and Macs.

One more thing…Looking for an Apple TV set-top box but want to buy it on Amazon? After a two-year hiatus, Amazon this week began selling the Apple TV again.

How Ford Build a New Kind of Engine for Its GT Supercar

When the Ford GT won its class in the famously grueling 24 Hours of Le Mans endurance race last year, it wasn’t just a celebration for the team which developed the all new supercar. It was a relief. The victory in the GTE Pro class came 50 years after Ford’s historic 1966 win with the GT40, when the American automaker proved (mostly to spite Ferrari) that it could dominate the track in Europe as well as the US. Marking the golden anniversary of that defining moment with anything less than first place would have been a letdown.

But engineers took a huge gamble in the development of the all new GT: They threw out the V8 engine, the kind of engine it rode to victory in the 1960s, which many believed essential to producing the kind of power necessary to win a race like Le Mans. Instead, they opted for the turbocharged V6 EcoBoost, best known for powering the company’s F-150 pickup truck—not exactly the same use case.

That choice sent them on a mission to double the horsepower to an insane 647, from just 3.5 liters of displacement. “What’s critical for these performance engines is you have to get all the power out of them that you can,” says Ben Peterson, a research engineer at Ford.

But they couldn’t stop there, they also had to make sure it could survive a full 24 hours on the track. They redesigned the way the engine breathed, using computer modeling software and 3-D printing. They pushed key components to the limits of failure and beyond, and tested the result on the track and in super accurate simulators.

This is the story of the engine that went from hauling hay to hauling ass.

Regulator slaps conditions on D.Telekom all-you-can-watch video product

FRANKFURT (Reuters) – Germany’s regulator ordered Deutsche Telekom on Friday to offer an all-you-can-watch video product on the same terms throughout the European Union, in a decision the company slammed as “incomprehensible”, saying it would appeal.

Telekom’s ‘StreamOn’ option charges nothing for data used watching video-on-demand services and seeks to emulate the success of its T-Mobile US unit, which has gained on its rivals by providing Netflix “on us”.

In its ruling, the Federal Network Agency (BNetzA) said Deutsche Telekom would have to make Stream-On available in compliance with the European Union’s rules on roaming and net neutrality.

That would require Telekom to abide by the “roam like at home” principle, under which charges should be the same regardless of where the customer is in the European Union. Net neutrality means there should be no differential throttling of data speeds depending on location.

“Stream-On can continue to be offered by Telekom. In the interest of consumers, adjustments are necessary,” BNetzA President Jochen Homann said in a statement.

“StreamOn must uphold the roam-like-at-home principle and customers must have access to video streaming in unrestricted bandwidth.” Telekom has until the end of March 2018 to comply.

The ruling comes a day after the U.S. Federal Communications Commission voted to repeal net neutrality rules that entered force in 2015. The decision marked a victory for telecoms by making it easier for them to funnel customers to their preferred content partners.

Deutsche Telekom said it had signed up 700,000 customers for StreamOn, which is available as a free add-on to its MagentaMobil product range in Germany that costs between 30 and 70 euros ($35-$83) a month depending on the amount of data used for other purposes.

That number is growing by 20,000 a week.

“Today’s decision is clearly directed against the interests of customers, because the economic basis of a free offering is being put into doubt,” the company said. “For that reason, the regulator’s decision is absolutely incomprehensible.”

Telekom will examine how the ruling can be implemented while continuing to offer its StreamOn product.

“We see no reason to change our legal opinion and will therefore appeal,” it said. “By taking legal action we will fight so that our customers can continue to use StreamOn while the legal situation is being clarified.”

Reporting by Douglas Busvine; Editing by Adrian Croft

5 Alternatives to a Traditional New Year's Resolution

As a psychotherapist, I’ve watched countless people create positive change in their lives. But it’s rare that I’ve seen anyone change their lives after making a New Year’s resolution.

Think about it. When was the last time you heard someone say, “I lost 50 pounds last year thanks to my New Year’s resolution!” or “I finally paid off all my debt after I created that New Year’s resolution”?

Depending on which study you read, an estimated 88 to 92 percent of people fail to keep their New Year’s resolutions. Yet, despite the dismal probability of success, most people continue to declare a new year will bring about new habits.

If you really want to make 2018 your best year yet, think beyond the traditional New Year’s resolution. These alternatives will help you go on more  adventures, connect with amazing people, learn new things, and grow stronger

1. Establish a New Goal Each Month

Rather than establish a huge resolution that you’ll tackle for the next 365 days, establish monthly goals for yourself. Perhaps January will be the month you go to the gym before work three times a week. And February will be the month you tackle packing your lunches instead of eating out every day.

You might decide to create a 12-month calendar that outlines each month’s goal ahead of time or you may decide to just pick January’s goal for now.

The key to success is to pick measurable goals. So rather than say, “I’ll manage my money better this month,” commit to a goal like, “I’ll save $500 this month.” Short-term, realistic goals can help you stay motivated to keep going.

2. Keep Track of Your Healthy Habits

Stay flexible and leave room for spontaneity by tracking your healthy habits every day. So instead of setting out to accomplish specific things each week or month, you might simply track the healthy choices you make each day.

At the end of the day, write down three healthy things you did that day on a calendar. Having a visual aid that displays your accomplishments–even small ones like ordering the salad instead of the burger or taking the stairs instead of the elevator–will motivate you to keep up the good work.

You might also pick a healthy habit that you want to track–like going to the gym. Rather than set out to go to the gym five times a week, simply decide that each time you go you’ll put a marble inside a jar. When the jar gets full, treat yourself to something nice (just make sure the treat doesn’t involve something that will sabotage your progress).

3. Develop a Mantra

Rather than decide 2018 is going to be the year that you “save more money,” create a mantra that says, “Buy only what you need.” Then, commit to following that mantra without any strict rules or rigid guidelines. When you’re shopping, remind yourself of your mantra.

A mantra can feel more positive and empowering than a resolution. After all, you either fail or succeed with a resolution but a mantra becomes a way of life.

Of course, that doesn’t mean you won’t tune out your mantra and throw caution to the wind sometimes–you will. But, if you keep repeating it in your head, the message will sink in and your behavior will change over time.

4. Conduct Weekly Experiments

Rather than make 2018 the time you’re going to engage in grueling habits or deprive yourself of anything fun, decide to make it a year of curiosity. Establish weekly experiments that test out various habits or that challenge you to do new things.

One week you might decide to talk to five strangers every day just to see what happens. If you approach it with an open mind you might discover that your mood improves or that you make new friends.

Or, you might set out to go for a brisk morning walk before you start your work day. You might discover that it gives you more energy throughout the whole day.

You can do anything for a week. And you just might discover new strategies that you’ll want to turn into regular habits–but you won’t know unless you try.

5. Make a Bucket List

Choose a whole bunch of things you’d like to do next year. Whether you want to take a Chinese cooking class or you want to fly in a helicopter over Las Vegas, create a list of things you want to do in 2018.

If you pick small things, you might put 52 items on your list and check one item off each week. If you’re hoping to do some big things, pick 12 and tackle one item each month.

Having things to look forward to can boost your mood–and when you feel better, you’re likely to do better. So you might find you naturally want to get healthy, save money, or be kinder to others when you’re enjoying your bucket list items.

Change Your Life One Small Step at a Time

These New Year’s resolution alternatives will remind you to live life to it’s fullest as you create a healthier, happier life. So give up the idea that you need to pick one big thing to work on and decide that you’re going to reach your goals and become your best self one small step at a time.

Artificial Intelligence Is Killing the Uncanny Valley and Our Grasp on Reality

There’s a revolution afoot, and you will know it by the stripes.

Earlier this year, a group of Berkeley researchers released a pair of videos. In one, a horse trots behind a chain link fence. In the second video, the horse is suddenly sporting a zebra’s black-and-white pattern. The execution isn’t flawless, but the stripes fit the horse so neatly that it throws the equine family tree into chaos.

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Turning a horse into a zebra is a nice stunt, but that’s not all it is. It is also a sign of the growing power of machine learning algorithms to rewrite reality. Other tinkerers, for example, have used the zebrafication tool to turn shots of black bears into believable photos of pandas, apples into oranges, and cats into dogs. A Redditor used a different machine learning algorithm to edit porn videos to feature the faces of celebrities. At a new startup called Lyrebird, machine learning experts are synthesizing convincing audio from one-minute samples of a person’s voice. And the engineers at Adobe’s artificial intelligence research unit, called Sensei, are infusing machine learning into a variety of groundbreaking video, photo, and audio editing tools. These projects are wildly different in origin and intent, yet they have one thing in common: They are producing artificial scenes and sounds that look stunningly close to actual footage of the physical world. Unlike earlier experiments with AI-generated media, these look and sound real.

The technologies underlying this shift will soon push us into new creative realms, amplifying the capabilities of today’s artists and elevating amateurs to the level of seasoned pros. We will search for new definitions of creativity that extend the umbrella to the output of machines. But this boom will have a dark side, too. Some AI-generated content will be used to deceive, kicking off fears of an avalanche of algorithmic fake news. Old debates about whether an image was doctored will give way to new ones about the pedigree of all kinds of content, including text. You’ll find yourself wondering, if you haven’t yet: What role did humans play, if any, in the creation of that album/TV series/clickbait article?

A world awash in AI-generated content is a classic case of a utopia that is also a dystopia. It’s messy, it’s beautiful, and it’s already here.

Currently there are two ways to produce audio or video that resembles the real world. The first is to use cameras and microphones to record a moment in time, such as the original Moon landing. The second is to leverage human talent, often at great expense, to commission a facsimile, in this example by hiring a photo illustrator to carefully craft Neil Armstrong’s lunar gambol. (If Armstrong never landed on the Moon, you’d have to use this second alternative.) Machine learning algorithms now offer a third option, by letting anyone with a modicum of technical knowledge algorithmically remix existing content to generate new material.

At first, deep-learning-generated content wasn’t geared toward photorealism. Google’s Deep Dreams, released in 2015, was an early example of using deep learning to crank out psychedelic landscapes and many-eyed grotesques. In 2016, a popular photo editing app called Prisma used deep learning to power artistic photo filters, for example turning snapshots into an homage to Mondrian or Munch. The technique underlying Prisma is known as style transfer: take the style of one image (such as The Scream) and apply it to a second shot.

Now the algorithms powering style transfer are gaining precision, signalling the end of the Uncanny Valley—the sense of unease that realistic computer-generated humans typically elicit. In contrast to the previous sweeping and somewhat crude effects, tricks like zebrafication are starting to fill in the Valley’s lower basin. Consider the work from Kavita Bala’s lab at Cornell, where deep learning can infuse one photo’s style, such as a twinkly nighttime ambience, into a snapshot of a drab metropolis—and fool human reviewers into thinking the composite place is real. Inspired by the potential of artificial intelligence to discern aesthetic qualities, Bala cofounded a company called Grokstyle around this idea. Say you admired the throw pillows on a friend’s couch or a magazine spread caught your eye. Feed Grokstyle’s algorithm an image, and it will surface similar objects with that look.

“What I like about these technologies is they are democratizing design and style,” Bala says. “I’m a technologist—I appreciate beauty and style but can’t produce it worth a damn. So this work makes it available to me. And there’s a joy in making it available to others, so people can play with beauty. Just because we are not gifted on this certain axis doesn’t mean we have to live in a dreary land.”

At Adobe, machine learning has been a part of the company’s creative products for well over a decade, but only recently has AI started to solve new classes of longstanding problems. In October engineers at Sensei, the company’s AI research lab, showed off a prospective video editing tool called Adobe Cloak, which allows its user to seamlessly remove, say, a lamppost from a video clip—a task that would ordinarily be excruciating for an experienced human editor. Another experiment, called Project Puppetron, applies an artistic style to a video in real time. For example, it can take a live feed of a person and render him as a chatty bronze statue or a hand-drawn cartoon. “People can basically do a performance in front of a web cam or any camera and turn that into animation, in real time,” says Jon Brandt, senior principal scientist and director of Adobe Research. (Sensei’s experiments don’t always turn into commercial products.)

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Machine learning makes these projects possible because it can understand the parts of a face or the difference between foreground and background better than previous approaches in computer vision. Sensei’s tools let artists work with concepts, rather than the raw material. “Photoshop is great at manipulating pixels, but what people are trying to do is manipulate the content that is represented by the pixels,” Brandt explains.

That’s a good thing. When artists no longer waste their time wrangling individual dots on a screen, their productivity increases, and perhaps also their ingenuity, says Brandt. “I am excited about the possibility of new art forms emerging, which I expect will be coming.”

But it’s not hard to see how this creative explosion could all go very wrong. For Yuanshun Yao, a University of Chicago graduate student, it was a fake video that set him on his recent project probing some of the dangers of machine learning. He had hit play on a recent clip of an AI-generated, very real-looking Barack Obama giving a speech, and got to thinking: Could he do a similar thing with text?

A text composition needs to be nearly perfect to deceive most readers, so he started with a forgiving target, fake online reviews for platforms like Yelp or Amazon. A review can be just a few sentences long, and readers don’t expect high-quality writing. So he and his colleagues designed a neural network that spat out three-to-five-sentence, Yelp-style blurbs. Out came a bank of reviews that declared such things as, “Our favorite spot for sure!” and “I went with my brother and we had the vegetarian pasta and it was delicious.” He asked humans to then guess whether they were real or fake, and sure enough, the humans were often fooled.

With fake reviews costing around $10 to $50 each from microwork services, Yao figured it was just a matter of time before a motivated engineer tried to automate the process. (He also explored using neural nets that can defend a platform against fake content, with some success.) “As far as we know there are not any such systems, yet,” Yao says. “But maybe in five or ten years, we will be surrounded by AI-generated stuff.” His next target? Generating convincing news articles.

Progress on videos may move faster. Hany Farid, an expert at detecting fake photos and videos and a professor at Dartmouth, worries about how fast viral content spreads, and how slow the verification process is. Farid imagines a near future in which a fake video of President Trump ordering the total nuclear annihilation of North Korea goes viral and incites panic, like a recast War of the Worlds for the AI era. “I try not to make hysterical predictions, but I don’t think this is far-fetched,” he says. “This is in the realm of what’s possible today.”

Fake Trump speeches are already circulating on the internet, a product of Lyrebird, the voice synthesis startup—though in the audio clips the company has shared with the public, Trump keeps his finger off the button, limiting himself to praising Lyrebird. Jose Sotelo, the company’s cofounder and CEO, argues that the technology is inevitable, so he and his colleagues might as well be the ones to do it, with ethical guidelines in place. He believes that the best defense, for now, is raising awareness of what machine learning is capable of. “If you were to see a picture of me on the moon, you would think it’s probably some image editing software,” Sotelo says. “But if you hear convincing audio of your best friend saying bad things about you, you might get worried. It’s a really new technology and a really challenging problem.”

Likely nothing can stop the coming wave of AI-generated content—if we even wanted to. At its worst, scammers and political operatives will deploy machine learning algorithms to generate untold volumes of misinformation. Because social networks selectively transmit the most attention-grabbing content, these systems’ output will evolve to be maximally likeable, clickable, and shareable.

But at its best, AI-generated content is likely to heal our social fabric in as many ways as it may rend it. Sotelo of Lyrebird dreams of how his company’s technology could restore speech to people who have lost their voice to diseases such as ALS or cancer. That horse-to-zebra video out of Berkeley? It was a side effect of work to improve how we train self-driving cars. Often, driving software is trained in virtual environments first, but a world like Grand Theft Auto only roughly resembles reality. The zebrafication algorithm was designed to shrink the distance between the virtual environment and the real world, ultimately making self-driving cars safer.

These are the two edges of the AI sword. As it improves, it mimics human actions more and more closely. Eventually, it has no choice but to become all too human: capable of good and evil in equal measure.

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Want to be Trusted? – Here are Eight Places to Start That Most Executives Forget

When I built my first company, I didn’t understand that trust was so valuable. I had read every book in the world but didn’t fundamentally understand the basics.

Building trust among your team is one of the most important qualities in developing a successful work culture. Over the years I’ve had to learn that it’s a lot easier said than done.

Increasing team camaraderie can increase productivity, where your employees want to work harder, longer, and care more for the company’s success.

1. Create a mentorship program.

Building an official mentorship program helps your new hires better adjust to the company culture. From day one, new employees will get access to their mentor, who can be a closer, less intimidating resource than say, an upper level director. This generally makes for a much easier transition and helps employees focus on their new role faster.

Furthermore, creating this holistic and inclusive program prevents “targeting.” You do not want to select special groups for extra training or onboarding, as they may feel singled out (for better or worse). It is generally best to try and be as fair as possible!

2. Be transparent.

Your employees have a desire to feel important. They do not want to work on meaningless tasks that no other people will ever actually read. Often times, managers will sugar coat the importance of a project to get their employees to work harder.

This backfires long term. You want your employees to trust you! So have managers share the “true project plans” as quickly as possible. While a bit radically transparent, this helps you gain buy in with your employees. And, it helps you keep them around longer term – no one expects this type of treatment off the bat.  

3. Institute no hour tracking.

Employees do not want to feel like they are constantly being monitored. Take them off the leash and trust them. Things like clocking in and out all of the time are activities that breed feelings of distrust.

While it may not always be your intention, putting these systems in place can ruin the culture of the workplace. Make for more flexible hours, and even allow remote work, you will be amazed by the response!

4. Have team bonding events.

Being self-employed is hard. One hard thing for me is that no one looks forward to working on a Friday afternoon. And most people’s productivity levels show that! Plain and simple, people are not efficient nearing the weekend in the middle of the summer. As a company, you should try and find activities that recharge your team and instill new life.

A great way to do that is to find a community event that your employees can attend. Things like trips to the local park, hiking, and sporting events can make for fun, team building times for your team. These are great opportunities for everyone to get to know each other and even learn a thing or two about the company.

5. Do community service as a team.

Finding opportunities to give back gets seemingly harder and harder as you get older. Help your employees accomplish their own personal goals, while helping out your local community. Show to them that you are willing to invest in their passions (like community service) by hosting events and fundraisers for the causes they choose.

Your employees will see the investment you are making in them and be more likely to stay long term.

6. Host a March Madness tournament.

People are naturally competitive, and the opportunity to compete against coworkers is an experience that can bring people together.

Given that many of the games take place outside of work hours, creating this tournament could also result in many employees spending time together outside of the office to build comradery

7. Have a “bring your children to work” day.

In empathizing with your employees, realize that their children are often the most important people in their life. An easy way to make them happy is to help them see their “most important people” more often.

Host a “bring your children to work day” to show your team you appreciate them. More than that, you can make both they and their kids’ week by making the investment in them, so they can have fun together. Be sure to plan fun activities for the kids!

8. Solicit feedback and implement change!

One of the most important ways to make employees feel trusted is as simple as it gets – listen to what they have to say! Employees spend countless hours working in their job, and as a consequence they really understand what works well and what can be improved.

There are many ways to get feedback, from employee-manager meetings to open forums to anonymous feedback sessions. The most important thing, however, is to actually try and implement some crowd-sourced solutions.

Nothing is more disillusioning to an employee than sharing an idea they thought about for a long time and feel personally connected to, but not acting on it.

While you shouldn’t be forced to take on every employee’s new ideas, it is good etiquette to, at least listen to the idea all the way through. Then engage the employees and tell them why you feel as if their suggestion is not able to implemented at this time.

These simple changes that any company can do go a long way in increasing employee satisfaction and happiness.

Uber appeal case against London license loss planned for April or June next year

LONDON (Reuters) – Uber’s [UBER.UL] appeal against the loss of its London license should begin on Apr. 30 for five days but might be delayed until June, a British judge said on Monday at a preliminary hearing.

FILE PHOTO: A photo illustration shows the Uber app on a mobile telephone, as it is held up for a posed photograph, in London, Britain November 10, 2017. REUTERS/Simon Dawson/File Photo

There will be two further preliminary hearings on Tuesday and Wednesday next week to decide whether a trade union and the London Taxi Drivers’ Association can join Uber and transport regulator Transport for London (TfL) in the case.

TfL ruled in September that the ride-hailing service’s approach and conduct was not fit and proper to hold a private vehicle hire license.

Reporting by Costas Pitas; editing by Michael Holden

Our Standards:The Thomson Reuters Trust Principles.

Weighing The Week Ahead: Plenty Of Cross-Winds For Santa

The economic calendar is normal, but there are plenty of cross-currents from other major events. Bitcoin futures, the FOMC meeting, more debate on the tax legislation, the Alabama special Senate election, and an avalanche of 2018 forecasts.

[Image is one of many clever art, craft, and creative ideas at Chica and Jo].

It is the time of year when the punditry looks for the nearly-annual Santa Claus rally. This year, that jolly old elf may need a GPS system to navigate the cross-currents. I expect many to be asking:

Is a Santa Claus rally possible?

Last Week Recap

In the last edition of WTWA I took note of the strengthening economic outlook and predicted that attention would turn to the effects of the tax cut legislation. That shot hit the mark, but Mrs. OldProf was not impressed. She said the shot did not require Steph Curry! (And I thought she was skipping the basketball section of PTI).

The pundits pondered, and the market reacted. Little was determined, and there are plenty of tax implications to wonder about in the week ahead.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. Investing.com has a nice interactive version of futures trading with news. Check out the site to have some fun.

Compared to recent days, it seemed like there was a lot of volatility. The range was actually only 1.5%. Some week we will see some real volatility. The market weathered questions about problems in the tax bill and the debt limit.

Personal Note

Readers often ask how I prepare for WTWA. I read many sources. Even when I share many links, most of the material does not make the cut. Part of my approach is to save and organize material as I read it. For this, I like to use Pocket and a system of tags. This week I got a message from Pocket summarizing my reading saved on this particular source. Readers might find it interesting, and might want to try Pocket. I also use Feedly to monitor all my sources along with OneNote and Evernote.

Policy Wonks

Are you really interested in tax reform? Are you willing to put aside self-interest and prejudice, emphasizing broad principles? If so, I highly recommend the analysis by my friend, retired econ prof, and former colleague, Marty Finkler. Dr. Finkler provides a thoughtful, objective framework. Many of my readers will appreciate this approach. You will find it difficult to disagree with the key principles! Hint: Think broad base, low rates, simplification, and little distortion of private activity. What is not to like?

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

The economic news continues to be strong. New Deal Democrat notes a slight improvement in his wide array of indicators.

The Good

  • Commercial property leading index remains strong. (Calculated Risk).
  • Progress in the Brexit talks (Fortune). This helps the European financial sector and global growth. It is important.
  • Households are wealthier. Scott Grannis regularly follows household net worth. Here is the current look.

  • Government shutdown averted. (Politico via Wealth Advisor). Plenty of issues remain, but this is a clear sign of progress.
  • Rail traffic registered another small improvement. (Steven Hansen at GEI)
  • Home prices increased 7% y-o-y. (Calculated Risk).
  • Employment
    • ADP reported net private employment growth of 190K. This strong number also beat expectations.
    • Initial Claims fell more than expected. Bespoke has the story and an informative chart.

    • Payroll employment increased and beat expectations with a net gain of 228K jobs. The WSJ has a nice collection of comments from leading economists.
    • Unemployment remains low and labor force participation is improving. The WSJ has a nine-chart package. The look at prime-age workers is representative of the overall story, as is the look at the median duration of unemployment.

The Bad

  • Factory orders registered a slight decline. Steven Hansen (GEI) reports the data from his expected wide range of perspectives.
  • ISM services pulled back from the multi-year high, declining from last month and missing expectations. Bespoke puts the story in context.

  • Tax policy changes may reduce housing supply (Calculated Risk). On the other side of the ledger is the reduction in mortgage foreclosures to 0.68% from 0.99% a year ago.
  • Michigan sentiment declined from the prior high. Jill Mislinski has the best chart on this subject, pulling together multiple factors in a single look.

The Ugly

Bitcoin trading hazards. Many are doing quite well. Unless you are careful, you can be tripped up by several hazards:

The Coinbase founder advises “responsible investing.”

I recommend that anyone interested in trading Bitcoin (it is not an investment) watch this brief, informative, and helpful video from Josh Brown. You will learn how to execute trades and what to watch for.

Seeking Alpha also has excellent coverage of this topic, reflecting many approaches and ideas. If you are not reading SA, you are missing out.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

We have a normal calendar, but with plenty of extra news. The data features retail sales and the much-misunderstood JOLTS report. Inflation is creeping higher, but not yet an important consideration. (See Carola Binder).

We also have Bitcoin futures, the Alabama Senate election, possible changes to the tax legislation, and the December FOMC meeting. And this is not an exhaustive list!

Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

Next Week’s Theme

This time of year would normally lead to some quiet markets and often, a Santa Claus rally. The cross-currents raise doubts.

Here is the litany of possible year-end surprises:

  • Tax cut effects. This is especially important, since there is active trading based upon the current version. There is selling of winners as well as tax-loss losers. Why? Concern about FIFO rule changes and carried interest. There is also great concern about the corporate AMT which was apparently retained by accident. John Rekenthaler has a good assessment of the current situation and risks. Brian Gilmartin has a good analysis of the potential earnings effects – a key metric for investors.
  • The Fed. Widely expect to hike rates on Wednesday. What will be the future signals?
  • Bitcoin futures trading. There is a wide divergence of opinion about the likely effects.
  • The Alabama election. This is especially important since the GOP Senate majority is so thin.

And of course, the start of the year-end market forecasts, already begun in Barron’s with their cover story. I will discuss this topic in more detail next week.

As usual, I’ll have more in the Final Thought, where I always emphasize my own conclusions.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

Recession odds remain low and many economic indicators are improving.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

Georg Vrba: Business cycle indicator and market timing tools.

Doug Short: Regular updating of an array of indicators. Great charts and analysis. Let’s take another look at the regular update (via Jill Mislinski) of the Big Four indicators most influential in recession dating. The recent strength in these indicators is clear from the chart.

Guest Sources

Urban Carmel (The Fat Pitch) discusses the overall macro strength and especially the prospects in housing.

Fannie Mae sees an “Awakening of Millennial Homeownership Demand.” Their clever approach uses moves in age cohorts rather than static ranges.

Insight for Traders

Our discussion of trading ideas has moved to the weekly Stock Exchange post. The coverage is bigger and better than ever. We combine links to trading articles, topical themes, and ideas from our trading models. This week’s post illustrates how technical approaches can spot trades you would not find through fundamental analysis. As always, we include trading tips from experts like Dr. Brett Steenbarger and Larry Swedroe, who both describe ideas relevant for our own trading models. Model performance updates are published, and of course, there are updated ratings lists for Felix and Oscar, this week featuring the DJIA. Blue Harbinger has taken the lead role on this post, using information from me and from the models. He is doing a great job.

Insight for Investors

Investors should have a long-term horizon. They can often exploit trading volatility!

Best of the Week

If I had to pick a single most important source for investors to read this week it would be Guggenheim Partners analysis of forecasting the next recession:

First, it is important.

The business cycle is one of the most important drivers of investment performance. As the nearby chart shows, recessions lead to outsized moves across asset markets. It is therefore critical for investors to have a well-informed view on the business cycle so portfolio allocations can be adjusted accordingly. At this stage, with the current U.S. expansion showing signs of aging, our focus is on projecting the timing of the next downturn.

Second, there are some patterns in pre-recession times.

The last several expansions have shown similar patterns leading up to a recession. The charts on the following pages help to tell this story by identifying six indicators that would have exhibited consistent cyclical behavior, and that can be tracked relatively well in real time. We compare these indicators during the last five cycles that are similar in length to the current one, overlaying the current cycle. Taken together, they suggest that the expansion still has room to run for approximately 24 months.

Finally, there are several key indicators in a model-based recession probability. One must be wary of results determined strictly by a back test.

The last several expansions have shown similar patterns leading up to a recession. The charts on the following pages help to tell this story by identifying six indicators that would have exhibited consistent cyclical behavior, and that can be tracked relatively well in real time. We compare these indicators during the last five cycles that are similar in length to the current one, overlaying the current cycle. Taken together, they suggest that the expansion still has room to run for approximately 24 months.

It is nice to see a prestigious firm joining into a campaign I have championed for over seven years. There are excellent warnings before recessions (and the major market declines linked to them). Our favorite methods have worked in real time, not just in back tests. Most people do not understand how to recognize an overfit model.

[If you are concerned about major declines, you might be interested in my paper on risk. Just write for our free information on these topics. While they describe what I am doing, the do-it-yourself investor can apply the same principles. Both the concepts on recessions and how we used it to forecast Dow 20K are available for free from main at newarc dot com].

Stock Ideas

Internet stocks maintain the uptrend (Andrew Thrasher) despite the rotation out of tech.

Morningstar’s ultimate stock pickers – conviction buys, and sales. Here are the current top holdings.

Playing Bitcoin via stocks instead of direct purchases.

What stocks might take the lead in the DJIA. (24/7 WallSt) Hint: Think beyond current winners!

Finding dividend aristocrats among retail stocks. This is a nice analysis of the merits of some likely Amazon survivors. (Dividend Sensei)

Top picks from Merrill Lynch, with a view toward the long-term investor.

How about some biotech? Some even qualify on “value screens.”

Junk Bonds

Maybe not as risky as we thought? (Charlie Bilello).

Personal Finance

Seeking Alpha Senior Editor Gil Weinreich has an interesting topic every day. While his series’ theme emphasizes financial advisors, the topics are usually of more general interest. His own commentary adds insight and ties together key current articles. It is a valuable daily read. My favorite this week is his discussion of the values and pitfalls of market forecasts. This is a first-rate analysis, which I will take up in greater detail. Meanwhile, check out his links – one of which I have cited below.

Sector rotation

Eddy Elfenbein has his normal, level-headed approach to current developments. He has a good take on the rotation from tech stocks to cyclicals. His new buy list, a widely-anticipated annual event, will be published in two weeks.

Watch out for

Mall REITs. Brad Schwer (Morningstar) discusses the reduced the “moat rating” for malls.

Excessive focus on the expense ratio in ETFs. The holdings themselves are much more important. (Todd Rosenbluth).

High-commission products. Investment News reports on what happened to the values of non-traded REITs after the DoL forced commissions lower.

Final Thoughts

I have my own conclusions about the cross-currents.

  • On tax cuts, I expect another compromise. It will preserve the basic business breaks. It is premature to make big sector bets based upon the original House and Senate versions. The first, knee-jerk moves looked like algorithmic trading, spreading into ETFs. There was a lot of “collateral damage.”
  • On Bitcoin, I have no idea about the effect of futures trading. This is a trade, not an investment. If you plan to trade it, make sure your position size is appropriate. Think about what you can risk, rather than what you hope to gain!
  • On the Fed, I expect no effect. An increase is widely anticipated. While Chair Yellen’s conference may include some thoughts, these will be spun by anyone who prefers a switch to the new chair. Despite the policy change, this should have little effect.
  • If we believe the polling, Judge Moore will win the Alabama election. Even if he loses, the GOP will get the tax bill through, perhaps via some additional modest changes.

My expectation is that we will see a year-end rally, but the story is much more complicated this year. Repositioning your portfolio requires attention to sector strengths and potential, not just the overall market.

In short, the many cross-currents are not likely to disrupt Santa’s course.

What worries me:

  • Continuing budget issues when government agencies need new computers and better protection against hacking.
  • Josh Brown disagrees with my take on the Mueller investigation. I am not yet convinced, but look for yourself.

And what doesn’t:

  • Automation and employment. Poor analyses focus on existing jobs with little attention to what will probably grow.
  • The debt ceiling deadline was on the “not worrying” list last week. While there is still a deadline, it has once again been moved.

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

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

Altria Vs. Brown-Forman: Battle Of Dividend Paying Sin Stocks

By Bob Ciura

Altria (MO) and Brown-Forman (BF.B) are both manufacturers of vice products, and both have impressive dividend growth histories.

Brown-Forman has increased its dividend for 34 years in a row. It is a Dividend Aristocrat, an exclusive group of 51 high-quality stocks with 25+ consecutive years of dividend growth. You can see all 51 Dividend Aristocrats here.

Meanwhile, Altria is a Dividend Achiever, a group of stocks with 10+ consecutive years of dividend increases. You can see the entire list of all 264 Dividend Achievers here.

Altria is not officially a Dividend Aristocrat, because its various spin-offs over the years technically reduced its dividend payout at times. But the company has increased its dividend 51 times in the past 48 years, which is a highly impressive track record.

If an investor were attempting to pick between them, which dividend-paying vice stock is the better buy today?

Business Overview

Winner: Toss-Up

Both Altria and Brown-Forman have very strong business models. They are both part of a group of companies, commonly referred to as ‘sin’ stocks. These are companies in the alcohol and tobacco industries. They sell vice products, that are generally viewed as detrimental to one’s health. At the same time, these are some of the shareholder-friendly businesses in existence.

Altria is a tobacco giant. It sells the Marlboro cigarette brand in the U.S., and it has a number of other businesses, such as smokeless tobacco, cigars, and wine. Its other brands include Skoal, Copenhagen, Black & Mild, and Ste. Michelle. Altria also has a 10% ownership stake in global beer giant Anheuser Busch Inbev (BUD).

Marlboro is the flagship of Altria’s fleet. Marlboro captures nearly half of all U.S. retail cigarette market share.

Source: 2017 CAGNY Presentation, page 42

Brown-Forman manufactures alcoholic beverages. It has a large product portfolio, which is focused on whiskey, vodka, and tequila. Its most famous brand is its flagship Jack Daniel’s. Other popular brands include Herradura, Woodford Reserve, El Jimador, and Finlandia.

Brown-Forman is highly profitable. It generates high returns on capital, and has significantly expanded operating margins over the past 10 years.

Source: Annual Stockholder Meeting, page 11

Altria and Brown-Forman are both cash cows. They generate high levels of free cash flow, thanks to their economies of scale, and strong brands. They sell products with steady demand, even during recessions, and can raise prices each year. This results in sustained earnings growth, which in turn gives them the ability to increase dividends each year.

Growth Prospects

Winner: Brown-Forman

When it comes to future growth, Brown-Forman could have two significant advantages over Altria. First, the growth outlook for alcoholic beverages is far more favorable than it is for tobacco products in the U.S. The major challenge for Altria is declining smoking rates.

Altria’s domestic cigarette shipment volume declined by 4% over the first half of 2017. This caused adjusted earnings growth to slow, to just 3.3% in that period. To reignite growth, Altria is working on “reduced-risk” products, which include e-vapor and e-cigarettes. These products heat tobacco, rather than burn it. According to Altria, this produces fewer harmful health effects.

Source: Investor Day Presentation, page 114

Altria is making significant progress in these areas. Last quarter, e-vapor shipment volumes grew over 50%. And, the company has submitted product applications for its next-generation IQOS line to the FDA, and is preparing to launch IQOS at some point over the next year.

Still, Brown-Forman is seeing much stronger growth in the U.S, particularly from bourbon and tequila. For example, the company generated double-digit sales growth from Woodford Reserve and Old Forester over the first half of 2017. Its tequila brands Herradura and el Jimador tequila also grew sales by double-digits, in the U.S.

Brown-Forman could continue generating higher growth, because it has a heavy presence in the emerging markets, while Altria generates 100% of its revenue from the U.S. Brown-Forman’s emerging-market sales increased 15% over the first half of the year.

Source: Q2 Earnings Presentation, page 7

For fiscal 2018, Brown-Forman expects sales growth of 6% to 7%. Earnings-per-share are expected to increase 11% to 16%, to a range of $1.90 to $1.98. Meanwhile, Altria expects full-year earnings growth of 7.5% to 9.5%, to a range of $3.26 to $3.32.

Valuation & Dividends

Winner: Altria

Brown-Forman has an advantage when it comes to future growth potential, but investors have to pay a much higher price for that growth. Brown-Forman trades for a price-to-earnings ratio above 36.Its valuation has expanded considerably over the past few years.

Chart
BF.B PE Ratio (NYSE:TTM) data by YCharts

For its part, Altria stock trades for a price-to-earnings ratio of 21.7. Meanwhile, the S&P 500 Index has an average price-to-earnings ratio of 25.5.

Both stocks are trading above their average valuations, but Brown-Forman’s overvaluation is more severe. According to ValueLine, in the past 10 years, Brown-Forman held an average price-to-earnings ratio of 22.7. In the past 10 years, Altria held an average price-to-earnings ratio of 15.7. While it is far from cheap, Altria still has a much lower valuation than Brown-Forman.

Brown-Forman appears to be significantly overvalued, both in relation to the broader market, as well as when compared to its own historical average. If Brown-Forman’s price-to-earnings multiple contracted from its lofty levels, it would significantly impact future returns.

Plus, Altria is much more attractive as a dividend stock.

Chart
MO Dividend Yield (TTM) data by YCharts

Altria’s dividend yield is more than three times Brown-Forman’s. They are both strong dividend growth companies, but Altria’s superior dividend yield gives it a huge advantage for income investors.

Final Thoughts

Altria and Brown-Forman are both highly profitable consumer goods companies, with strong brands and reliable dividends. Both companies are on our list of 350 dividend-paying stocks in the consumer staples sector. You can see the full list of all 350 consumer staples dividend stocks here.

Brown-Forman is the better growth pick. The environment is more favorable for alcohol than tobacco, in the U.S. This should result in stronger earnings growth for Brown-Forman going forward. However, Altria has a significantly higher dividend yield, and a lower valuation. That makes Altria the better pick for value and income investors.

Brown-Forman is a Dividend Aristocrat, but it isn’t undervalued right now. There are cheaper Dividend Aristocrats out there. Find them with our service Undervalued Aristocrats, which provides actionable buy and sell recommendations on some of the most undervalued dividend growth stocks around. Click here to learn more.

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

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

The 1 Question You Need to Ask About Your Social Media Content in 2018

We all have seen, firsthand, how fast social media moves. With each passing year, it seems new platforms arise, old trends die out, and best practices become outdated. While 2018 will be no different in terms of change, by asking yourself the following question, you’ll put your brand in a terrific position to “win” in the game of social media:

Is my brand building community on social media?

The days where consistency and high quality content almost guaranteed a loyal following are long behind us. If you aren’t building community on social media, your brand will fall behind faster than ever before in 2018.

The Rise of the Algorithm on Social Media

The catalyst here has been the rise and rule of social media algorithms. Simply put, the algorithm tailors a platform’s news feed based mostly on engagement rather than general chronology. 

The algorithm is a natural progression and reaction to the increased volume of content across social media. Social media apps need to maximize the amount of time users spend on their platforms in order to maximize advertising dollars, and the algorithm is the most efficient way to do that.

Due to the success of the algorithm, it’s likely organic reach on social media will only continue to decrease over time. So, what’s the answer then? Well, the easiest way to ensure others remain highly engaged with your content is to build a community of loyal followers. 

How to Build Community on Social Media

1. Start a Facebook Group. 

Facebook’s primary mechanism for building community is Facebook Groups. Facebook has also been explicit in sharing that one of their main objectives going forward is to encourage community building on their network. For this reason alone, starting a Facebook Group centered around your brand’s interests wouldn’t be a bad idea. 

Keep in mind that your Facebook Group doesn’t have to be directly linked to your business. For instance, if you own a pizzeria in Jacksonville called Grandma Jo’s Pizza, your Facebook Group wouldn’t have to be (and shouldn’t be) named “Grandma Jo’s Pizza”. Instead, consider a title like, “Pizza Lovers of Jacksonville” or something along those lines.

2. Give your community members a name.

Giving the members of your audience a label will, whether consciously or subconsciously, reinforce the existence of the community your company is building. Additionally, it’ll allow your customers to know they’re a part of a movement, a club, as opposed to them just exchanging money for goods. 

Musicians like Justin Bieber use this practice by calling his fans, “Beliebers”, while brands like Starbucks do it in a more subtle way by catering to their “Gold members” within their rewards program.

3. Show your audience some love and recognition. 

The point of having a community is to facilitate relationships between the members. Customers and community members alike want to know you appreciate their time and money, so make sure you show them some love. Here’s a few ways to do it:

  • Post user-generated content (photos customers took while at your business, etc.) to your social media channels.
  • Showcase and commend fans who are doing wonderful things in the community (military service, volunteers, non-profit organizers, and more).
  • Have a weekly segment where you publish a top-rated testimonial or comment on your social media to get followers actively engaged in your content.

The list goes on and on here, but the important thing is to make sure your customers know they’re being recognized by you as the company.

4. Start a meetup.

Nothing beats face-to-face, human interaction when it comes to building relationships, and a meetup is an ideal medium for you to begin making those connections possible. Much like a Facebook Group, your meetup doesn’t have to be directly affiliated with your company. In fact, starting a local meetup in conjunction with your Facebook Group, “Pizza Lovers of Jacksonville” (to continue with the above example) would be a seamless way to build community both virtually and online.

By building a loyal core of fans around the mission your brand has, you’ll be in a terrific position to overcome the algorithm on social media. Going into 2018, ask yourself whether or not you’re taking the necessary steps to build community on social. When it comes to marketing, it could be very well be one of the most important questions you ask yourself this year.

Uber to Settle Lawsuit Filed By India Rape Victim

Uber has agreed to settle a civil lawsuit filed by a woman who accused top executives of improperly obtaining her medical records after a company driver raped her in India, according to a court filing on Friday.

In a criminal case in India, the Uber driver was convicted of the rape, which occurred in Delhi in 2014, and sentenced in 2015 to life in prison.

The Indian woman also settled a civil U.S. lawsuit against Uber in 2015, but sued the company again in June in San Francisco federal court saying that shortly after the incident, a U.S. Uber executive “met with Delhi police and intentionally obtained plaintiff’s confidential medical records.” Uber retained a copy of those records, the lawsuit said.

The woman was living in the United States when she filed the lawsuit.

Terms of the settlement were not disclosed in the court document on Friday. Representatives for Uber and an attorney for the woman could not immediately be reached for comment.

The lawsuit cited several media reports which said former Uber CEO Travis Kalanick and others doubted the victim’s account of her ordeal.

“Uber executives duplicitously and publicly decried the rape, expressing sympathy for plaintiff, and shock and regret at the violent attack, while privately speculating, as outlandish as it is, that she had colluded with a rival company to harm Uber’s business,” the lawsuit said.

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In a prior statement, Uber said: “No one should have to go through a horrific experience like this, and we’re truly sorry that she’s had to relive it.”

Citigroup: The Pain Before The Gain

Citigroup (C) is a bank that has greatly benefited from a positive change in investor sentiment, as C shares have greatly outperformed the broader market over the last year.

(Source: Nasdaq)

More recently, however, the stock has ticked lower due to the news that Citigroup’s trading revenue will be down big this quarter and the fact that the bank will likely need to take a higher-than-expected non-cash charge if the current tax reform bill is passed. In my opinion, investors with a long-term perspective should seriously consider using any sizable pullback caused by the recent noise as an opportunity to add to their long position because the bank’s story remains intact.

The Pain [Before The Gain]

The recent news that Citigroup will likely need to take a $20B (yes, with a “B”) non-cash charge if the current version of the tax reform bill is passed has been widely discussed, and rightfully so, as the previous estimate was only around the $12B range. The new estimate that Mr. John Gerspach, CFO, disclosed at the Goldman Sachs U.S. Financial Services Conference surprised investors and caused C shares to pull back. But in my opinion, the fact that the bank will be writing off a portion of its deferred tax assets because the environment is improving should not be viewed as a negative. Instead, I view it as short-term noise. Yes, Citigroup will not be able to fully benefit from the massive losses that the bank suffered during/after the Financial Crisis, but looking out, I do not believe that this changes the investment thesis for the company. To this point, management still expects to reach its capital return target of $60B:

So it’s a non-cash hit that would be a one-time hit to the P&L. Then of that $20 billion now, you asked about capital, because most of our DTA is disallowed for regulatory purposes, while we would take a GAAP hit or a hit to our GAAP income of $20 billion and we would certainly reduce our TCE by $20 million, the hit to our CET one capital we will probably be a much more manageable $4 billion.

So again a very modest hit to our regulatory capital, which means that as capital plans that we talked about during investor day, which said that our view is that over three CCAR cycle ’17, ’18 and ’19, we should be able to return in excess of $60 billion, that stays intact. That statement that goal to return $60 billion plus of capital over three CCAR cycles is not impacted by the senate bill the way we understand it or by the house bill, for that matter.”

I believe that any pullback that comes as a result of this material non-cash charge should be considered a buying opportunity because, as Mr. Gerspach correctly highlights, Citigroup’s capital hit will be a lot more manageable number (~$4B). So, at the end of the day, the $20B sounds like a big number (and it is) and the bears will most likely pounce on the news, especially if the new estimate turns out to be accurate. But I do not believe that this type of charge means that investors should sell the stock. Remember, Citigroup’s long-term story will remain intact, even with a $20B charge.

Improving Results, The Story Remains Intact

On October 12, 2017, Citigroup reported better-than-expected Q3 2017 adjusted EPS of $1.42 on revenues of $18.1B billion, which compares favorably to what was reported in the same quarter of the prior year.

(Source: Q3 2017 Earnings Presentation)

The highlights from Citigroup’s Q3 2017 results:

  • Net income of $4.1 billion, which was an 8% YoY increase.
  • Operating expenses of $10.17 billion, which was an improvement of 2% when compared to Q3 2016.
  • Repurchased 81 million common shares, and its BV and T/BV both increased by 6% YoY.

This bank has reported impressive operating results for several quarters in a row now, and management believes that Citigroup is well-positioned for 2018 and beyond. It is hard to deny the fact that Citigroup’s operating results have greatly improved over the last few quarters.

(Source: Q3 2017 10-Q)

The bank has reported YoY growth in revenue, net income, and earnings per share for the nine months ended September 30, 2017. Moreover, investors should be encouraged by the prospect that all of the U.S. banks, including Citigroup, are likely to be operating in a more favorable environment in the near future. As I described in this Bank of America (BAC) article, many pundits are predicting that the U.S. will be entering a rising rate environment and it is now widely expected that deregulation will have a significant impact on the banks. Lastly, similar to BAC, Citigroup’s stock has been pulled down by poor investor sentiment since the Financial Crisis and I think that this will soon be a thing of the past.

Therefore, the investment thesis for Citigroup (i.e., an under-appreciated bank that is slowly gaining investors’ trust back by reporting improving operating results and returning a significant amount of capital to shareholders) is intact, and it will likely continue to strengthen in the quarters ahead.

Valuation

Citigroup’s stock has consistently traded at a discount to its peer group, and this is still the case today.

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C Price to Book Value data by YCharts

For example, C shares would be trading hands at the mid-$80 range if the bank traded at 1.2x its T/BV. Citigroup is also cheaply valued based on trailing and forward earnings when compared to peers.

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C PE Ratio (TTM) data by YCharts

Does Citigroup deserve a valuation in line with the likes of JPMorgan (JPM)? No, in my opinion, but Citigroup’s discount should continue to dissolve the further we move away from the Financial Crisis. In addition, let’s not forget that Citigroup’s international business model may eventually warrant a higher valuation if the global market continues to strengthen.

Bottom Line

C shares have also been under pressure because management recently disclosed that the bank’s trading revenue would likely be down in the “high-teens percentage” range for Q4. This is, however, in line with what the other U.S. banks are projecting for the current quarter too, so Citigroup is not an outlier. A tick-down in quarterly trading revenue and the estimated $20B charge have caused downward pressure for C shares, but in my opinion, this is simply a case of pain coming before the gain.

I believe this bank has a lot more going for it than just the potential benefits of interest rate hikes, as deregulation and the opportunity to return more capital to shareholders have both become more important components of my investment thesis. As such, I believe that C shares are a great investment at today’s price, so I would treat any pullbacks as long-term buying opportunities.

Author’s Note: Citigroup is a core holding in my R.I.P. Portfolio, and I have no plans to reduce my stake in the next few weeks.

If you found this article to be informative and would like to hear more about this company, or any other company that I analyze, please consider hitting the “Follow” button above. Or, consider joining the Going Long With W.G. premium service to get exclusive content and one-on-one interaction with William J. Block, CPA, President and Chief Investment Officer of W.G. Investment Research LLC.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Disclosure: I am/we are long C, BAC.

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

Don't Miss Out On The Changing Tide At This Oil Major

The oil industry was roaring after the turn of the millennium saw oil prices skyrocket to triple figures. After the recession of 2008 killed the price of oil, it rebounded to once more cross over the $100 mark. Thanks to a supply glut caused by a trio of increased global production, decreased demand in key markets, and nobody wanting to cut their production to stabilize prices, oil prices again plummeted all the way down to just under $30 by early 2016, where they have slowly begun to climb since.

This downturn in prices shook the oil & gas industry, with numerous small-time players closing their doors, some major players such as ConocoPhillips (NYSE:COP) cutting their dividend, and the integrated oil majors such as Exxon Mobil (NYSE:XOM) being forced to make massive changes to stay financially stable.

Luckily, XOM’s dividend was never cut, but this did come at a cost. Debt skyrocketed, dividend growth came to a standstill, and share buybacks stopped. This has bogged down shares from going much of anywhere for some time. A combination of recovering oil prices and financial remodeling via strategic divesting of assets has cash flows back on the rise. Let’s take a look at where the new look Exxon Mobil is headed.

Financial Effects Of The Downturn

The plunge of oil prices was severe and sent shock waves through the industry and markets.

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WTI Crude Oil Spot Price data by YCharts

With the downturn in oil went Exxon Mobil’s free cash flow and operating margin. Exxon was able to weather this storm of low oil prices, while many small companies had to close their doors, and some upstream-oriented companies such as COP had to cut their dividends.

However, Exxon Mobil did not emerge from the oil crisis unscathed. It had to scale every aspect of its operation back to conserve cash as profits plummeted. This was especially true for shareholder returns. The dividend was not cut, but growth has slowed to a pace that only matches inflation.

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XOM Dividend Growth (Annual) data by YCharts

In addition, it had to scale back buying back shares to boost earnings. With a company as massive as Exxon Mobil, share repurchases are a key driver of earnings growth.

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XOM Stock Buybacks (TTM) data by YCharts

Without the share buybacks throughout the decade, Exxon Mobil’s current TTM earnings of $3.09 per share would only be $2.49 per share, or about 20% lower.

Despite management taking these measures to conserve cash, Exxon still had to take on quite a bit of debt throughout the oil downturn in order to fund its dividend. This has left the balance sheet with more debt than is typical for the oil major.

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XOM Debt to Equity Ratio (Quarterly) data by YCharts

A New, Lower-Cost Oil Environment

The downturn has forced energy companies such as Exxon Mobil to alter its approach, as we seem to have entered a world of lower oil prices. While not a fortune teller, it looks like we are a long ways off from $100 oil. During the past few years, Exxon has sold off what it considered “non-strategic” assets ($21 billion in proceeds from 2012-2016) to raise cash during the downturn, and shifted its focus to North American shale assets.

Earlier this year, Exxon Mobil acquired 275K acres in the Permian basin. These shale assets are “short-cycle” projects which have much shorter cost capture time frames than major offshore projects, and are generally much less capital-intensive.

Operations are ramping up in the Permian, with a 50% increase in rig operation planned for 2018, which will total 30 operated rigs in the Permian region. The Permian region will be a production growth driver for the company over the next few years, with Permian output estimated to more than double the pace of overall production growth. Exxon Mobil’s cost position should improve due to the higher make-up of its resource portfolio consisting of less capital-intensive assets such as shale.

While major exploration will never “die”, the company needs to be very careful about the capital it employs towards these types of projects moving forward. The immediate path to cash flow growth that will get the Exxon Mobil “ship” back moving in the right direction seems to be in shale. I am interested to continue following the development of shale efforts in the intermediate future.

Long-Term Optimism For Natural Gas

Exxon Mobil’s 2010 acquisition of XTO Energy made it a titan in the natural gas industry. Unfortunately, natural gas prices have struggled, stuck in a slow and modest downtrend over the past decade.

(Source: Nasdaq)

Prices have been pushed lower by a combination of mild weather and plentiful supply. Still, natural gas consumption growth is estimated to outpace traditional fuel sources over the very long term.

Exxon Mobil could have opportunities as a natural gas exporter over the long term. The United States is currently the largest natural gas-producing nation in the world, and Exxon Mobil’s XTO Energy business makes it a leading presence in that field. As the United States looks to focus on exports, Exxon will benefit from this given its position in the industry.

The largest driver moving forward for natural gas prices may end up being potential demand spurred from the eventual attempts by nations to phase out the use of coal as an energy source. Climate change is slowly becoming more important across the world, and as emission standards tighten over time, I see natural gas as the “next man up” on the energy source roster.

(Source: Wired)

Renewable energy faces challenges in scaling to a size suitable to fill the giant hole traditional fuels like coal would leave. Renewable energy can be adversely affected by weather. There are also efficiency and energy storage issues, especially with solar. Lastly, natural gas also currently enjoys a cost of production advantage over renewable sources – which may be the most important factor of all.

Improving Cash Flow Signals “Good Things” To Come

As Exxon Mobil gears itself for this new age of low-cost energy production, there are early signs of results – even if they have a lot to do with a modest rebound in oil prices.

The dividend has been funded throughout the past year, and YTD cash from operations has covered all shareholder distributions and investments. At this point, Exxon is only looking “up” from here. With just under $41 billion of debt, there is still a bit of digging to do for management. It is hard to tell how long it will take to return the debt to a more manageable level, as that will highly depend on oil prices in the short term boosting cash flows.

The good news is that OPEC recently extended its agreement on production cuts, which has the industry a bit more bullish on oil prices for 2018. After averaging around $53 per barrel in 2017, oil prices in the $58-60 range for 2018 would drastically boost cash flows.

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WTI Crude Oil Spot Price data by YCharts

Sustained prices in this range should pick up free cash flow per share well past this point, which currently results in an 85% payout of free cash flow towards the dividend. Again, Exxon Mobil is positioning itself for lesser reliance on these commodity prices, but in the short term, oil prices will determine how soon the company can “dig itself out” of the debt it is now in.

Accumulation Stage

Shares have been hanging out in the low $80s for some time now, to the disappointment of a lot of long-term shareholders.

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XOM data by YCharts

Those patient enough have lucked out with the occasional opportunity to purchase shares under $80. Now that Exxon Mobil is cash flow-positive and trending in the right direction, I cannot say in confidence that price dips like those seen in late 2015, early 2016, and mid-2017 will happen again anytime soon – barring a major event in the market.

Income investors get a juicy dividend that is way above its 2.48% historical yield at 3.71% (drip, drip, drip).

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XOM Dividend Yield (TTM) data by YCharts

Meanwhile, free cash flows are yielding as high as they have in almost five years (meaning cash flows are the cheapest they have been in a long time). Exxon Mobil’s cyclical nature can skew traditional valuation metrics, so I want to focus on how much cash flow I can get for my money. As Exxon increases its cash flows in 2018, either the cash flow yield will go up (making it an even better value) or shares will go up with cash flows.

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XOM Free Cash Flow Yield (TTM) data by YCharts

Given Exxon Mobil is on the “up and up”, and the high dividend and cash flow yields, a price as close to $80 per share as possible makes a great entry point for long-term oriented investors. Oil prices are stabilizing in the high $50s, and the financial metrics for the company will only look better by the quarter.

Not a finished product, Exxon Mobil has nice positioning for the long term in an oil & gas environment that is likely to feature lower commodity prices than we have seen in the past. Nobody knows exactly where oil prices will be 1, 5, or 25 years from now, but I am confident that the company’s position in the industry will enable it to generate sufficient cash flows in the near future. Once Exxon Mobil turns on the faucet for share buybacks, the share price should float higher.

Note: Charts sourced from YCharts. Unless noted, graphics sourced from Exxon Mobil.

Disclosure: I am/we are long XOM.

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