Penn Wealth Publishing

2018.11.04 Penn Wealth Report Vol 6 Issue 04

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16 PeNN Wealth RepoRt volume 6 issue 04 04 Nov 2018 Penn Wealth RePoRt Copyright 2018. All Rights Reserved. iNvestmeNt intelligenCe Weekly BusiNess RepoRt aNother trade deal doNe, aNd this oNe Was huge The lousy, 24-year-old NAFTA deal is dead. Long live the US-Mexico-Canada Agreement, or USMCA. While the limited trade agree- ment reached with the EU a few months back was good, and the US-Korea Free Trade Agreement (KORUS) was better, the new North American deal is huge. It ends the bick- ering between the three nations with respect to trade, helps America's manufacturing base, and puts the entire continent on bet- ter footing with respect to world trade. It also helped the US garner two new allies on the united front against China's unfair trade prac- tices. The stock market agreed, with the Dow jumping a few hundred points after the deal was inked. While legislators in all three nations must still approve the USMCA deal, there is little chance that any will shirk their duties, as that would mean an enormous setback in free trade. While the Democrats might well win the House this November, and they would love to deal a blow to President Trump, we don't believe their constituents would let them pull off something so audacious as kill- ing this trade deal. Their radical fringe would love it, but there are still too many blue collar voters and unions aligned with the party to let that happen, except in the most unhinged districts. Next stops on the trade train: a deal with Japan and a more extensive deal with the unruly and petulant EU, led by the likes of Trump-hater Angela Merkel. BloomBerg uNCovers massive ChiNese haCkiNg attaCk oN us maChiNes Despite denials by the likes of Apple (AAPL), and Super Micro (SMCI), Bloomberg has released an exclusive report providing evi- dence that the Chinese, via their People's Liberation Army, have "seeded" tiny micro- chip spy devices in thousands of server motherboards; computer equipment that was sold to at least 30 American companies, including Apple. The devices were implanted during the manufacturing process at Chinese facilities, and (according to the Bloomberg report) at Super Micro Computer (SMCI), a San Jose- based server manufacturer which employs primarily Asian workers. These devices, which Amazon (AMZN) first uncovered and reported on to US authori- ties, allow the attacker to create a "doorway" into any network on which the servers reside. Consider this: these are "viruses" which are impossible to remove, because they are part of the machine's hardware, not software. The networks in question run the most sensitive systems from a national security standpoint, operated by agencies such as the CIA, NASA, and the Department of Defense. This story should send shivers through the US intelligence community, and it should be the impetus needed to begin the search for other sources of manufacturers, outside of the reach of the Chinese military. This story also portends a long, ugly road ahead for US-Chinese trade negotiations. This is pre- cisely the type of illegal intellectual property theft the Administration has railed against. Super Micro fell by 33% shortly after the Bloomberg article was released. sears (fiNally) Pulls the trigger oN BaNkruPtCy, lamPert to stiCk arouNd Until it lost the moniker to Walmart (WMT) in 1990, Sears (SHLD $0.34-$0.41-$6.83) was America's largest retailer. In April of 2007, the company had a share price of $133 and a market cap of $23 billion. Then, Eddie Lampert and his eponymous ESL Investments began steering the company, along with the Kmart brand they picked up along the way, down the river of its slow, painful demise. Today, SHLD shares are selling for 40 cents, and the combined company is worth a paltry $33 million. Lampert was the driving force behind the merger of Kmart and Sears back in 2004. At the time, ESL owned over 50% of Kmart, which it accumulated by buying the compa- ny's debt while it was in bankruptcy. Lampert became the company's chairman and, as the largest single shareholder of Sears stock, engineered the $11 billion merger. Since that time, Lampert has been highly criticized as a vulture, selling off the retailer's only real tangible assets— the real estate—ostensibly to keep the combined company afloat. However, few strategic moves to help the company actually sell more products have been made during his tenure at the helm. As suppliers are no longer willing to take any of Lampert's refinancing deals, the company has been forced to file for bankruptcy. While Lampert will step down as CEO, he will remain chairman of the firm. Five years ago, the company had around 2,000 stores nationwide. Today, that num- ber has fallen to 700, with another 142 to be shuttered by year's end. Lampert says the Chapter 11 bankruptcy proceedings will give the company time to speed up its Weekly Business Report gloBal strategy: trade CyBerseCurity multiliNe retail

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