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Hershey Rejects $23 Billion Acquisition Offer From Mondelez

twocents@thestreet.com (Brian Sozzi) — Thu, 30 Jun 2016 18:43 GMT

Updated with additional details. Hershey's business may be looking too sweet to for one fellow food giant to ignore. Shares of the iconic chocolate maker were up 15% to $111.87 in afternoon trading Thursday following a report by The Wall Street Journal that fellow candy giant Mondelez has made a $23 billion bid in cash and stock, or $107 a share, for the company. Shares of Mondelez were trading up 4.8% to $45.05 on Thursday. Hershey confirmed the bid, but the company promptly rejected it, noting that its board determined that Mondelez's expression of interest provided no basis for further discussion. Hershey's rebuff could mean it is trying to secure a higher bid from Mondelez. According to an afternoon note by analysts at Stifel, Mondelez could bid end up bidding $120 to $130 to seal the deal for Hershey. A Hershey spokeswoman did not immediately return a request for comment. According to the WSJ, any acquisition of Hershey would have to be approved by the Hershey Trust, which holds 81% of the voting rights of the stock and 8.3% of outstanding shares, though Mondelez is prepared to work to win the trust's approval. But, the Hershey Trust has set a precedent of being unpredictable. In 2002, the charitable trust that controls Hershey abandoned a $12.5 billion cash-and-stock offer from fellow candy-maker Wm. Wrigley Jr. Company in the final stages of approval. Wrigley's offer represented a generous 42% premium over Hershey's stock price at the time, and Hershey's auction also attracted a joint bid from Nestlé and Cadbury Schweppes. Wrigley went on to be acquired by Mars for $23 billion in 2008 in a deal that was financed by legendary investor Warren Buffett. And Cadbury was acquired by Kraft Foods, which split off its confectionery business into Mondelez in 2012. Here's a brief look at what may have attracted the maker of Chips Ahoy, Oreos and Cadbury, among many other well-known brands, to Hershey. 1. Hershey is reinventing its business. Hershey recently acquired "snacking chocolate" brand Barkthins. TheStreet recently sampled several versions of Barkthins and can confidently report they are absurdly addicting and have a much better nutrition profile than a regular dark chocolate bar. Further, Barkthins have gobbled up some prime shelf space at major retailers such as Walmart lately as they play into the broader consumer trend toward snacking. Barkthins joined another interesting acquisition made by Hershey of Krave beef jerky last year. Krave has some of the most innovative flavors in the premium beef jerky market, and similar to Barkthins is receiving prime shelf space at major retailers due to their snacking qualities. Mondelez may appreciate the diversification beyond core chocolate bars. 2. Core Hershey products are being reinvented. Walk down most candy aisles today and you're likely to come across two new snack mixes from Hershey's -- the Reese's snack mix (peanut butter cups mixed with nuts in a 2-ounce package size), and the Hershey's snack mix (mini-Hershey bars mixed with pretzel and almonds in resealable plastic containers). These new products make ridiculous amounts of sense in this new snacking-crazed world. Ultimately, it's good to see the creativity around a storied name such as Hershey, and likely has Mondelez optimistic on further innovations in the not-too-distant future. 3., Cost-cutting continues. Like Coca-Cola , General Mills Kellogg and other big-name food companies, Hershey has not been reluctant to wield the ax to improve profit margins and the flow of new innovations. The company recently increased its annual savings target from cost-cutting to $100 million per year through 2019, from the previous $50 million to $70 million. Mondelez may have confidence that under its umbrella, it could slash even more costs at Hershey, by, for instance saving on raw materials such as sugar and fuel.

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Tiger Woods Is Falling Apart and so Is Nike Golf

twocents@thestreet.com (Brian Sozzi) — Thu, 30 Jun 2016 13:10 GMT

With a surgically repaired back keeping golf's biggest spectacle Tiger Woods off the links, the Nike golf business he once put on that back is struggling. Nike reported this week that sales at its golf business plunged 8% to $706 million for the fiscal year ended May 31. Excluding the impact of the strong U.S. dollar, sales dropped 6% from the prior year. It was the worst-performing business for Nike in terms of sales last fiscal year. Weak sales for Nike golf -- which represents about 3% of total sales for the apparel and footwear giant -- has now become a recurring theme in recent years with the injury prone Woods being spotted less in riveting final rounds of PGA Tour events and other Nike product endorser Rory Mcllroy lacking the star-power of Woods. Sales for the Nike golf division fell 2% to $771 million for the fiscal year ended May 31, 2015. Excluding the impact of the strong U.S. dollar, sales were unchanged from the prior year. Nike golf didn't light up it up on the sales line the year before, either. Nike's golf division saw sales relatively unchanged at $792 million for the fiscal year ended May 31, 2014. Excluding the impact of the strong U.S. dollar, sales rose a meager 1%. Adding insult to injury for Nike here? People are back out playing more rounds of golf, which is spurring sales of new drivers, shoes and irons. Earlier this year the National Golf Foundation reported, for the first time since 2012, the number of golf rounds played in the United States increased in 2015. Helped by a warmer than average winter, golf rounds played increased 5.5% in the first three months of 2016, according to Golf Datatech. In March alone, rounds played boomed by 13.2%. "Some brands came out with some really great product that captured the imagination of the golfer," said Dick's Sporting Goods CEO Ed Stack on a May 19 call with analysts. Stack praised all of the big names in golf product manufacturing but Nike for their latest innovations. "Taylor Made with the M1 and the M2 [drivers and irons], Callaway with the Great Big Bertha [driver], and there has been some new shoe designs out from FootJoy -- so, there has been some good products out there." Adidas is on the comeback trail not only in the sneaker business, but also in golf. Same-store sales for Dick's Golf Galaxy chain rose 1.7% in the first quarter, while the golf business inside of Dick's stores did slightly better, according to the company. One brand in particular may be hurting Nike golf at the moment: Adidas. According to Adidas, its Taylormade equipment brand returned to growth in the first quarter with sales up 6% from the prior year. Adidas credited momentum behind metal woods and irons. In addition, Adidas said sales for its broader golf business also increased during the quarter, driven by high single digit growth in footwear. Adidas golf apparel and Taylormade equipment is used by number one ranked golfer, and this year's U.S. Open champ Dustin Johnson and number two ranked golfer in the world Jason Day. The trajectory of sales for Nike golf may not reverse in the near-term for several reasons. First, the harsh reality is that Woods may not play a single competitive tournament this year as he tries to recover from lower back surgery, meaning less face time on TV for Nike golf's biggest pitchman. Said Woods recently on the timetable for his return, "I just need to get to where, strength-wise, I can handle the workload of playing out here on a weekly basis, practicing after round, not having to go ice my back and all that kind of stuff -- I need to get to where I can play 18 holes out here and go to the range for an hour and work on my game," who then added, "Just not quite there yet.'' Not spotted at the summer Olympics: Nike's Rory Mcllroy Meanwhile, number-four-ranked golfer in the world Mcllroy has decided to skip the Olympic Games in Rio de Janeiro due to concerns about the Zika virus, while Woods will likely sit out due to injury. Under normal circumstances, Nike would be poised to have its shirts, golf balls and golf clubs used by Mcllroy and Woods plastered all over TV screens and social media feeds around the world. Now, that won't happen. The company's other athlete endorsers for golf -- Paul Casey and Charl Schwartzel -- are lesser-known players who may not even appear at the Olympics based on their current world rankings. If they do, each lacks the ability to drive product sales in the same way as Mcllroy and Woods. Talk about a business being buried in the rough.

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'Mad Money' Lightning Round: You Should Own General Electric

twocents@thestreet.com (Scott Rutt) — Thu, 30 Jun 2016 10:00 GMT

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. Here's what Jim Cramer had to say about some of the stocks during the Mad Money Lightning Round Wednesday evening: Dominion Resources : "I think you're fine. You're in good shape." Spark Therapeutics : "They are incredibly speculative. This one makes me uneasy." General Electric : "I think you should own GE." Prospect Capital : "I do not know what they invest in. I say don't buy." Verizon : "I'm not going to recommend it at 52-week highs, but long term it's worth buying." Freeport-McMoRan : "They have a bad balance sheet. I'm going to say don't buy it." Illumina : "This one is a hold but Thermo Fisher Scientific is the better buy." To read a full recap of "Mad Money" on CNBC, click here. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

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Deutsche Bank, Santander Fall After Another Fed Test Failure

twocents@thestreet.com (Paul Whitfield) — Thu, 30 Jun 2016 09:56 GMT

U.S. operations of Deutsche Bank and Santander have again failed the Federal Reserve's stress test, leaving them unable to send cash back to their European parents and drawing a rebuke from regulators. The results leave Santander Holdings USA with the dubious honor of being the only lender to have failed the tests three years running, while Deutsche Bank Trust Corp tallied up its second failure in a row. Market support for the lenders was already fragile following Britain's decision to leave the EU and the two banks shares reacted predictably to the U.S. failure. Deutsche Bank shares fell Thursday to €12.23 ($13,59), down €0.43, or 3.4%, on their Wednesday close, while Santander fell to €3.39, down €0.08, or 2.4%. The Fed runs tests annually on bank financial strength and risk management systems to ascertain lenders' ability to resist severe economic and financial shocks. Banks that fail the test are limited in their ability to distribute earnings and can face penalties. This year's tests cleared 30 U.S. banks and foreign lenders with U.S. operations, freeing them to boost dividends, though Morgan Stanley only squeezed through. The U.S. investment bank was handed a conditional pass and told to improve internal systems before resubmitting its capital plan before the end of the year. Despite failing the tests, neither the Deutsche nor Santander units represent any danger to themselves, their parents or the financial system. The units ranked first and second among foreign lenders in terms of capital reserves, according to the Fed's results, but failed because they demonstrated "broad and substantial weakness across their capital planning processes," the regulator said. The immediate impact of the stress test failure is likely to be limited. Deutsche said that Deutsche Bank Trust Corp. had not applied to remit any cash to its parent this year. The unit is one of several that the German bank operates in the U.S. and is due to be incorporated into a large holding company, DB USA Corp, on July 1. "The capital adequacy of Deutsche Bank Trust Corp. has never been in doubt," said the unit's deputy chief Bill Woodley in a statement. "We will implement the lessons learned this year in order to strengthen our capital planning process." The failure is a little more vexing for Santander, which would like to explore a sale of its U.S. unit. The Spanish bank owns Santander Bank NA, which operates 670 branches in the northeast of the country, as well as 60% of listed lender Santander Consumer USA Holdings. The U.S. operations represented about 8% of Santander's overall profit and 10% of its loans in 2015. "Our results confirm that Santander Holdings USA has strong capital levels that are well above the required minimums," the division's chief executive officer, Scott Powell, said in a statement. "We are well on our way to making the enhancements necessary to improve our qualitative assessment." Santander chairman Ana Botin in January gave the U.S. operation two years to get its house in order before making a decision on selling or retaining the unit. Shares in both Deutsche Bank and Santander have fallen 19% and 18%, respectively, since the U.K.'s Brexit vote. Santander operates Britain's No. 5 retail bank, whose earnings are at risk from an expected economic downturn in the British economy and from falling interest rates. Deutsche Bank has a large investment banking operation in London that could be hurt by reduced activity.

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Obama: Brexit Could Pose Threat to Global Growth

twocents@thestreet.com (Lisa Botter) — Thu, 30 Jun 2016 08:03 GMT

Global growth could be under threat now that the U.K. has voted to leave the European Union, President Barack Obama has said. Speaking at a press conference in Ottawa, Canada, following a summit with the leaders of Canada and Mexico, Obama said, "There are some genuine longer term concerns for global growth if in fact Brexit goes through." He warned that the implications of lower growth "freezes the possibility of investment in Great Britain or in Europe as a whole at a time when global growth rates were weak already, [Brexit] doesn't help." Markets plunged after the result of the referendum was known last week. The FTSE 100 was recently down 0.31% in morning trading after two days of gains. S&P 500 mini futures were recently down 0.33% and Dow Jones Industrial Average mini futures were down 0.24%. Obama said that the government and Federal Reserve were closely monitoring the markets for any indication of systemic strains on the system. "So far what you have seen are reactions in the market [in] stock prices and currencies. I think the preparations done by central banks and finance ministers ... indicate the degree to which the global economy in the short run will hold steady," he said. Obama was the latest to warn about the political jockeying taking place in the U.K. and Europe, saying that leaders should conduct exit negotiations in a timely and orderly manner. He said, "Everyone should catch their breath, come up with a plan and a process that is orderly, that is transparent, that people understand and then proceed in understanding that both sides have a stake in getting this right. It'll be a difficult process." Yesterday European leaders took a hard line with the U.K. saying they could not pick and choose the aspects of a free market that they would like.

Asia Stock Markets Mixed; Fitch Downplays Brexit Impact in Asia Pacific

twocents@thestreet.com (Laura Board) — Thu, 30 Jun 2016 06:10 GMT

Green outweighed red among Asian stock leader boards on Thursday as Fitch Ratings underlined the region's relative insulation from the Brexit storm by stating it had no immediate ratings impact on Asia Pacific banks and sovereign debt. The report, which singled Japan out as a potential exception, follows a period of post-Brexit resilience among Chinese stocks. Even before European indices began to rebound on Tuesday, the CSI Composite index had held firm and towards the end of the trading day on Thursday was up 2.4% from its closing price last Thursday, before the outcome of the U.K. referendum to leave the European Union was known. The report also follows evidence of a consumer rebound in China from companies ranging from sporting goods maker Nike and cruise operator Carnival Cruise yesterday, to drinks maker Remy Cointreau and otherwise-struggling luxury goods maker Burberry earlier this month. Jim Cramer, portfolio manager of the Action Alerts PLUS Charitable Trust, yesterday noted "the amazing strength in China" since the Brexit vote. Chinese stocks were mixed. The CSI 300 was recently down 0.05% at 3,149.93. In Hong Kong the Hang Seng was up 1.63% at 20,768.21, led by property developers China Resources Land and China Overseas Land. In Tokyo the Nikkei 225 was recently up 0.57% at 15,655.96. The benchmark index is headed for a monthly drop of about 9%, its worst in more than four years. The Topix was up 0.44% at 1,253.13. Earlier in the day Japanese industrial output figures had come in below expectations, with output slumping 2.3% in May on the month, after rising 0.5% in April. Analysts had been looking for a 0.1% decline. S&P 500 mini futures were recently down 0.25% and FTSE 100 futures were up 0.20%. As of Tuesday's close, up 3.58% at 6,360.06, the U.K. benchmark had recouped all of its post-Brexit losses. Meanwhile in Ottawa President Obama said Brexit raises "longer-term concerns about global growth" and could "freeze" U.K. and European investment. In its report Fitch said Japan bore the risk that a continued flight to the yen could stymie policymakers' planning. But it noted that Asian exports to the U.K. account for less than 3.5% for every Asian country and that "direct financial linkages" are limited. Fitch said short-term uncertainty, particularly if it weighs on consumer confidence, is the biggest risk, particularly for Singapore, Taiwan, Hong Kong and Korea. "Fitch maintains its base case for APAC sovereigns and banks," the ratings agency said. "Emerging Asia will remain the fastest-growing global region. Rising political uncertainty in Europe may lead to some downward revisions to regional growth projections, depending on how serious this turns out to be. However, China is likely to remain a much more significant driver of economic outcomes in APAC than Brexit, while risks from tightening US monetary policy also remain a key challenge." Towards the end of the Asian trading day the dollar was down 0.18% against the yen at ¥102.6500. The pound had slipped 0.34% against the dollar to $1.3383. Japanese government bond yields edged further up from record lows. But Brent crude was down 1.26% at $49.97. Gold edged 0.22% lower to $1,316.26 an ounce.

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Jim Cramer's 'Mad Money' Recap: What a Relief! This Rally Has Legs

twocents@thestreet.com (Scott Rutt) — Thu, 30 Jun 2016 00:07 GMT

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. Tuesday was a relief rally, Jim Cramer told his Mad Money viewers Wednesday. Today's move, however, is a welcome change that is also likely permanent. Cramer said sometimes investors are willing to pay a higher price today because yesterday's price was just too low. That was certainly the case today in several sectors, where investors were re-evaluating what stocks are actually worth. Indeed, the markets have all but forgotten about Brexit, expect to note that thanks to Britain's poor decision, the U.S. will now enjoy low interest rates for a lot longer that anticipated. Today's rally was also driven by deals, with a takeover bid for Diamond Resorts sending those shares up 23.7%, leading to a strong rally in all the travel names including Wyndham Worldwide up 4.1%, Marriott Vacations up 4.5% and Hyatt Hotels up 4%. Even the airlines were sparked into action, with Cramer fave Southwest Airlines spiking 3.9%. Strong earnings from General Mills led to boosts in Kellogg and Kraft Heinz , while Nike rebounded sharply from early losses after investors learned the company has cleaned up its inventory problems. Rivals Under Armour and Lululemon Athletica were also up on the day. Executive Decision: Cliff Hudson For his "Executive Decision" segment, Cramer spoke with Cliff Hudson, chairman and CEO of burger chain Sonic , which recently posted a disappointing 1-cent-a-share earnings beat on weaker-than-expected revenue with a rare decline in same-store sales growth. Hudson said while Sonic is confident in the initiatives it has put in place, the company has been less certain about the shift in consumer behavior seen in May. Promotions have reversed some of the slumping sales, but sales of ice cream and soft drinks continue to lag expectations. When asked about competition, Hudson noted Sonic has always had a ton of competition, from convenience stores to Dairy Queen, all of which want a piece of Sonic's sales. Turning to the issue of wage inflation, Hudson said most of the significant wage inflation has been in states where Sonic doesn't have large footprints, thus the impacts have been minimal. Hudson did tout Sonic's "Limeades For Learning" program, which is committed to donating $15 million to teachers in the communities they serve over next five years. In addition to education, Sonic is also committed to its stock buyback program, which currently stands at $155 million. Retail Survival Guide In his "Retail Survival Guide" segment, Cramer took a look at six ailing department stores to see which ones have what it takes to survive. He compared Kohl's , Macy's , Nordstrom , Dillard's , J.C. Penney and Sears Holdings , all of which are well off their 2015 highs. In his analysis, Cramer ranked each of the companies against four metrics, their decline in both sales and earnings, the strength of their balance sheets and their strategic flexibility to ward off Amazon.com . On the revenue front, both Nordstrom and J.C. Penney are declining the least, while Macy's and Sears are declining the most. Positions change on the earnings front, however, with Penney and Macy's faring the best, with Nordstrom and Sears bringing up the rear. As for the strength of their balance sheers, Cramer gave Dillard's the highest marks, with Nordstrom coming in second. The worst of the bunch were Penney and Sears, both of which have mountains of debt. Finally, on the flexibility metric, Cramer felt Nordstrom and Penney were again in the best position to compete, while Dillard's and Sears were in the worst positions. Adding up all of the scores, Cramer concluded that Nordstrom and J.C. Penney were in the best shape, with Macy's and Kohl's tied for fifth and Sears a distant last place. He said that he would not be a buyer of any department store long term, but for a trade Nordstrom and Penney may see some short-term lift. Executive Decision: Martin Richenhagen In his second "Executive Decision" segment, Cramer spoke with Martin Richenhagen, chairman, president and CEO of farm equipment maker Agco , which today announced a $340 million acquisition in the seed and grain processing space. Richenhagen debuted one of Agco's newest tractors, costing $450,000, which he proclaimed could do the work of two tractors from rival John Deere while using less fuel. The tractor was a result of Agco purchasing the farm equipment business of Caterpillar . When asked for a market outlook, Richenhagen said he expects to see a bottom in the agriculture business in 2016 with growth returning next year in 2017. He said commodity prices are stabilizing and he's optimistic on Argentina and the possibility of growth in Russia. Lightning Round In the Lightning Round, Cramer was bullish on Dominion Resources , General Electric , Verizon and Thermo Fisher Scientific . Cramer was bearish on Spark Therapeutics , Prospect Capital and Freeport-McMoRan . No Huddle Offense In his "No Huddle Offense" segment, Cramer said underneath all of the Brexit turmoil is a hidden winner, China, which has rallied 2.7% since the debacle. Not only are Chinese stocks rallying, but the Baltic freight index is showing that China is importing more, while strong moves in both oil and copper confirm the trend. Cramer noted that Carnival Cruises and Nike had bullish things to say about the Chinese consumer recently, which is another great sign for the health of the Chinese economy. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

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Where to Invest Now? How About Multi-Family Real Estate?

twocents@thestreet.com (Gregg Greenberg) — Wed, 29 Jun 2016 22:21 GMT

With all that's going on in the world from Brexit to Zika, U.S. investors may want to consider keeping their money at home in multi-family real estate projects. But not necessarily in publicly traded real estate investment trusts. " Buying real estate is better done on a direct basis," said Eric Jones, chief investment officer of Dome Equities. "Public REITs are too correlated to the public market and interest rates in particular. Jones spent 11 years at Citibank and GE Capital prior to joining Dome Equities. While at Citibank, Jones spent two years directing its private bank's private equity co-investment platform. The private bank platform was the genesis of Dome. Dome Equities is a New York-based private equity real estate investment firm specializing in core plus, value-add, and opportunistic strategies in U.S. Real Estate with a current focus on multifamily rental properties. Jones said he is targeting 7% to 9% yields on his portfolio, with a low-teens total return. Jones said higher income suburban locations in major metropolitan areas will outperform urban core for apartment investment. In his view, new supply in urban core areas with slowing growth coupled with investors currently paying too low of cap rate is a recipe to lose money, even in multi-family apartments. He prefers to focus on regions with above-average growth in prime renter demographics and regional economies with strong economic vitality. Jones said his favorite locations right now include North Miami Beach, Orlando, Dallas and Denver. Jones said the demographic trends are also compelling for the multi-family apartment space as millennials are still primarily renting. "Home ownership rates for people under the age of 35 have not found a bottom yet," said Jones. "They are getting married later in life. That makes them rent longer. And there is a record number of millennials living at home."

Walmart Takes on Amazon Prime; Facebook Shakes Up Its News Feed -- Tech Roundup

twocents@thestreet.com (Steve Zuckerman) — Wed, 29 Jun 2016 21:24 GMT

In a challenge to Amazon.com Prime, Walmart said on Wednesday that it will offer a 30-day trial of ShippingPass, its two-day, unlimited shipping service. "Starting today, we're offering a free 30-day trial of ShippingPass, which gives you unlimited two-day shipping," said Fernando Madeira, CEO of Walmart.com U.S., in a release. "If you already have ShippingPass, there's also good news -- we're going to give you an extra month for free. ShippingPass is about half the price of similar programs out there at just $49 a year, and customers who are using it, love it. They shop on Walmart.com more often to take advantage of our low prices, fast shipping and added benefits of no minimum order requirements and free online or in-store returns." Amazon Prime, which includes two-day shipping as well as other benefits, costs $99 a year. Walmart's move comes as Amazon is expected to launch its second annual Prime Day, which took place last year on July 15. Walmart reported last month that "global e-commerce sales rose 7% in the first quarter, weaker than the 8% in the previous quarter and far below the 20% increases seen less than two years ago," according to a report by the Los Angeles Times. "[Walmart's] U.S. business was a little better but still disappointing. That came as the company reported overall strong first-quarter results that were a bright spot in an otherwise somber season for many retailers." the newspaper said. Walmart shares closed Wednesday at $72.46, up 1.3%. Amazon closed at $715.60, up 1.1%. Facebook is altering its News Feed again, this time to favor more posts from family and friends over followed Pages. "Facebook was built on the idea of connecting people with their friends and family," said Lars Backstrom, Facebook's engineering director, in a company post. "As we say in our News Feed values, that is still the driving principle of News Feed today. "Our top priority is keeping you connected to the people, places and things you want to be connected to -- starting with the people you are friends with on Facebook. That's why today, we're announcing an upcoming change to (the) News Feed ranking to help make sure you don't miss stories from your friends." Backstrom conceded the change "may cause reach and referral traffic to decline for some Pages. The specific impact on your Page's distribution and other metrics may vary depending on the composition of your audience." Read this report by TheStreet's Eric Jhonsa to learn how Facebook's latest move fits in with its overall financial health and corporate objectives. Facebook shares closed Wednesday at $114.16, up 1.3%. Now here's a possible technology breakthrough that could really change the concert-going experience. As a native son of the state that has brought us the likes of Frank Sinatra, Cory Booker and Philip Roth, I'm proud to say I've shelled out more than a few dollars over the years to enjoy Bruce Springsteen from the vantage point of the pit, right in front of the stage. It's always quite a rockin' night. But in recent years it's become more difficult to get an unobstructed view of the Boss and the E-Street Band. Blame that on all the iPhones being hoisted into the air. But that could change one day -- hopefully soon. Apple has "received a patent for technology that would allow cell phones to be temporarily blocked from shooting photos or videos, after receiving infrared transmissions from a broadcasting device," according to a report by SiliconBeat. "A transmitter can be located in areas where capturing pictures and videos is prohibited (e.g., a concert or a classified facility) and the transmitters can generate infrared signals with encoded data that includes commands temporarily disabling recording functions," said the patent application, according to SiliconBeat. Now that's something to look forward to further on up the road. Apple closed Wednesday at $94.40, up nearly 1%. Apple and Facebook are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL or FB? Learn more now.

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Jim Cramer -- Buy Some Constellation Brands Before, After Earnings

twocents@thestreet.com (Bret Kenwell) — Wed, 29 Jun 2016 15:49 GMT

Constellation Brands shares, at around $159, are on a momentum ride to the stars, up 12% so far this year and 37% over the past 52 weeks. That's why TheStreet's Jim Cramer is particularly interested in the beer, wine and spirits purveyor's earnings, expected Thursday before the open. This is one of the few consumer packaged-goods companies out there growing sales at a double-digit rate, Cramer, co-manager of the Action Alerts PLUS portfolio, said Wednesday from the New York Stock Exchange. The Modelo and Corona beer brands have really helped accelerate sales, he explained, as have Constellation's wine business and the recent acquisition of a craft beer company. Here's a tip, he said: The stock tends to initially trade lower after earnings. Investors who want to be long Constellation should consider buying half a position before the results are released and half after the company reports, Cramer advised. Shares are up nearly 40% over the past 12 months and a whopping 666% over the past five years.

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Twitter Makes a Big VR Hire; Line Sets IPO Price; Alphabet Wants to Remake Cities

twocents@thestreet.com (Eric Jhonsa) — Wed, 29 Jun 2016 13:28 GMT

Here's a look at noteworthy tech stories for Wednesday: Twitter hires a VR/AR chief and gives businesses tools for managing their accounts Not wanting to get left out as tech giants step over each other to unveil their virtual reality and augmented reality roadmaps, Twitter has hired Alessandro Sabatelli, once an Apple user interface designer and later the CEO of VR/AR startup IXOMOXI, to be its director of VR and AR. Sabatelli's LinkedIn profile says he's now working on the modest goal of "empowering us all in the spatial computing revolution." The hiring shouldn't be taken as a sign Twitter plans to join Microsoft , Sony , HTC and Facebook's Oculus unit in what's becoming a very crowded VR/AR headset market. A more plausible explanation: Twitter wants to create quality VR and AR experiences for video and other content. Both Twitter's core service and its Periscope livestreaming platform appear to be natural fits for AR headsets such as Microsoft's HoloLens, which superimpose digital content onto real-world views. Twitter and Facebook are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells TWTR or FB? Learn more now. Separately, Twitter has unveiled a dashboard to help businesses manage their accounts, monitor what users are saying about them, and engage with current and potential customers. The move follows the launch of Twitter's Engage app for celebrities. Both solutions have much in common with products Facebook has released. While it still faces some big problems with regards to user growth, ad sales execution, and talent loss, Twitter is clearly getting more proactive under Jack Dorsey's leadership about addressing user needs and complaints. Line sets its IPO price range, aims for a relatively high valuation Two weeks after filing for listings in New York and Tokyo, Asian mobile messaging firm Line has set a price range of 2,700 to 3,200 yen ($26.30 to $31.17). That spells a valuation of up to $6.57 billion, and IPO proceeds of up to $1.26 billion. The Wall Street Journal previously suggested Line's offering could be valued above $5 billion. Twilio's blistering debut last week might also be giving Line confidence to seek a higher valuation. At $6.57 billion, Line would trade at 6.1x 2015 revenue of $1.07 billion -- a high multiple, but not a mind-boggling one. There have been concerns that slowing user growth will depress Line's valuation; monthly active users rose by only 6% annually in the first quarter to 218 million, as Tencent's WeChat and Facebook's WhatsApp and Messenger remained dominant outside of Line's core markets of Japan, Thailand, Indonesia and Taiwan. Working in Line's favor as it courts investors: Sales growth is outpacing user growth, as the company aggressively monetizes its apps via ads, stickers, games and e-commerce services. Revenue rose 19% annually on a yen basis in the first quarter to $298 million. Line's financial success could act as a blueprint for Facebook as it begins monetizing Messenger. Alphabet's Sidewalk Labs unit reportedly wants to offer services to "fix" U.S. public transit Compared with Google Fiber, the self-driving car team, and other Alphabet units working on "moonshot" projects, Sidewalk Labs doesn't get much attention. But its goal -- to use digital technologies to reimagine how modern cities function -- is arguably just as ambitious as that of any other project getting funding from the Google parent. Citing e-mails and documents obtained via public records laws, The Guardian reports Sidewalk has floated proposals to "radically overhaul public parking and transportation in American cities" to city officials. Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL? Learn more now. One of the proposals involves using Sidewalk's Flow transport coordination software to -- with the help of Street View and crowdsourced driver data -- direct users to open parking spots. Another involves allowing retailers and office buildings to temporarily provide access to parking spots for a fee. There's also one that calls for integrating "information and payment for almost every form of transport into Google Maps," and then having Flow estimate the travel price and duration for using anything from buses to bike-shares to Uber rides. The Guardian's report follows one from The Information stating Sidewalk wants to "create an area in the U.S. that serves as a testbed for new technologies from superfast Internet to autonomous cars." These projects, of course, require extensive support from both city governments and various local service providers, not to mention the residents they'll affect. But no one accused Alphabet of thinking small when it comes to its moonshots.

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GE Convinces Feds to Lift Costly "Systemically Important" Label

twocents@thestreet.com (Ronald Orol) — Wed, 29 Jun 2016 13:15 GMT

The Financial Stability Oversight Council, a panel of U.S. regulators, on Wednesday voted to rescind its "systemically important" designation on a unit of General Electric (GE) in a move that came after the conglomerate under the oversight of Jeffrey Immelt moved to divest over $160 billion in assets. The move represents the first time that regulators had ever moved to de-designate a financial institution from the tough regulatory requirements that came with the categorization. "Today's decision clearly demonstrates that the Council's designation of nonbank financial companies is a two-way process," said Treasury Secretary Jacob Lew. "The council will remove a designation when that company no longer poses risks to U.S. financial stability." In a move that is expected to bolster GE's stock price, the group of regulators voted to remove a "Systemically Important Financial Institution" or SIFI, categorization that that comes with costly and time consuming form of government oversight including tough capital and liquidity rules. SIFIs must also undergo Federal Reserve Board stress tests to see if they can survive a hypothetical future financial crisis and designated firms must put together annual living wills to explain how they would break themselves up during in the wake of their own financial collapse in a way that wouldn't spread havoc on the U.S. and global economy. EXCLUSIVE LOOK INSIDE: General Electric is a holding in Jim Cramer's Action Alerts PLUS charitable trust portfolio. Want to be alerted before he buys or sells the stock? Learn more now. GE had been shedding financial assets since spring 2015 in hopes that regulators would de-designate them on the basis that as a smaller and less complex entity they no longer posed a risk to the economy. In its own effort to lose the SIFI designation, GE has approved well over $160 billion in divestitures from its GE Capital unit. In January, the mega-conglomerate said it was planning to submit a de-designation application to regulators in Washington in the first quarter of 2016. Regulators noted in their order that GE has "executed significant divestitures" since it was designated, transforming its funding model. "The company is a much less significant participant in U.S. financial markets and the economy," regulators said. "The council concluded that these and other changes at GE Capital since the Council's determination have significantly reduced the potential for GE Capital's material financial distress to threaten U.S. financial stability. The public explanation of the basis for the Council's rescission is attached." In what appeared to be a final deal needed prior to the regulatory adjustment, General Electric Co. (GE) agreed Monday to sell its $1.4 billion restaurant finance business to three regional buyers, bringing sales of the manufacturer's once-sprawling loan portfolio to 90% of CEO Jeffrey Immelt's goal.

Chipotle Does Something It's Only Done Once Before in Its 23-Year History

twocents@thestreet.com (Brian Sozzi) — Wed, 29 Jun 2016 13:00 GMT

Embattled Chipotle is hoping that a new menu item will help lure back in customers that have been reluctant to return because of a high-profile E.Coli outbreak and other health issues at the fast-casual giant last year. Chipotle will introduce spicy chorizo, which traditionally is made from seasoned pork but in Chipotle's version will include white meat chicken -- starting Wednesday at restaurants in Columbus, Ohio; New York City (Manhattan locations); Sacramento and San Diego, Calif.; one location in Denver, Colorado; and at Dulles International Airport in the Washington, DC area. The company expects to expand chorizo to all of its U.S. restaurants this fall. The fast-casual chain had previously tested chorizo in markets such as Kansas City back in June 2015. "It was very popular, it quickly became customers'... favorite protein," said Chipotle Founder and co-CEO Steve Ells on an Apr. 26 call with analysts when he teased the upcoming launch. Chipotle's chorizo is made with a blend of pork and white-meat chicken and is seasoned with paprika, toasted cumin and chipotle peppers, according to the company. It will be cooked in each individual restaurant by searing it on a hot grill, and will be available in the company's burritos, tacos, burrito bowls and salads. Historically, Chipotle has been reluctant to make any changes to its menu in the fear of upsetting customers and slowing up busy lines. In fact, it's only added one new food to its menu -- sofritas in 2014-- in its entire 23-year history. This stands in marked contrast to many fast-food companies such as McDonald's and Yum Brands' Taco Bell that routinely introduce new items to drum up publicity and buzz. Chipotle has added new drinks from time to time, however. In April 2013, Chipotle debuted margaritas with Patrón Silver tequila, a more expensive offering compared to its "house" version. And more recently, the company debuted a new craft beverage program in its home market of Denver, Colorado. But, with sales and traffic likely still sluggish, Chipotle may see little risk in betting that people will want to give its new chorizo a taste. "Since we opened the first Chipotle 23 years ago, our menu has changed very little, and our focus has been on constantly improving the quality and taste of the food we serve," said Ells in a statement Wednesday, adding, "While we have never been opposed to changing our menu, we only do so when we think there's an opportunity to add something that is really unique but that fits within our overall menu, and where we can find ingredients that meet our high standards." Chipotle's sales and stock price have been hammered by its health issues. During the first quarter of fiscal 2016, same-store sales plummeted by nearly 30%, and the company's stock has declined by almost 50% since last October. And if customers don't want to visit Chipotle for chorizo, perhaps a new summer loyalty program will whet their appetite. Under the new program, which will be launched this Friday and could be extended beyond the summer, customers are rewarded for how many times they visit Chipotle and purchase a burrito or other entrée. Customers will earn free meals after their fourth, eighth and eleventh entrée purchases each month. They can also earn additional rewards, such as free meals and catering, when they reach certain status levels.

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Here's How Brexit May Affect the U.K. Entertainment Industry

twocents@thestreet.com (Buster Coen) — Wed, 29 Jun 2016 12:53 GMT

Last Thursday's Brexit referendum in which the U.K. electorate voted to leave the E.U. may take two years or more to come to fruition, but the entertainment industry could see some gradual effects in the near-term. Ahead of the Brexit vote, a list of British producers, including Barbara Broccoli and Matthew Vaughn, released a letter urging British citizens to vote 'Remain' in the interest of the creative industries. Following the vote, Michael Ryan, the chairman of the Independent Film and Television Alliance, predicted the decision to leave the E.U. would be "a major blow to the U.K. film and TV industry." But how, exactly, will Brexit negatively impact the U.K. entertainment industry? First of all, the amount of foreign productions that film in the United Kingdom is likely to fluctuate wildly within the next few years. The U.K. is currently a popular place to film large Hollywood movies, with big-budget films such as "Avengers: Age of Ultron" and "Star Wars: The Force Awakens" opting to shoot there. In the short-term, the U.K. will likely remain a hotspot for Hollywood productions. The drop in the value of the pound following the Brexit vote means that it will be economically appealing for productions to shoot in the U.K. "Pretty much all of film financing is done in dollars," Eric Fellner, producer of such British productions as "The Theory of Everything" and "Tinker Tailor Soldier Spy," explained. "When you have a weak pound against the dollar, there is likely to be a short-term increase of film productions in Britain." Nonetheless, in the long-term, it may be difficult to convince studios to film their productions in the U.K.. That's because the movement of labor to and from Britain may become more difficult following the departure from the E.U. As a member of that Union, the British workforce is allowed to move freely into other European countries to shoot films, and likewise, European talent can move freely into Britain. However, after the Brexit, both film crews and film equipment may have to receive special work permits, or "carnets," in order to shoot across borders. "Carnets can be brutally difficult to operate," Fellner said. "So the issues will likely be around the workforce." Because of the increased amount of red tape, it will likely become more difficult to convince non-local productions to shoot in the U.K. And local productions will face problems of their own due to the Brexit decision. U.K. productions will no longer be eligible for E.U. subsidies, which helped fund such British films as "The King's Speech" and recent Cannes Palme d'Or winner "I, Daniel Blake." This also means that British co-productions may become increasingly rare as well. It will be difficult to incentivize European productions to partner with the U.K. when it may complicate, rather than facilitate, funding. "Before Brexit, if a French director wanted to shoot something in England, they could get tax benefits," said John Sloss, co-founder of film company Cinetic Media. "That may no longer be the case." And then there is the question of whether or not British productions will now be subject to taxation. British media exports can move freely between borders because of the U.K.'s status as a member of the E.U.; when the country withdraws, taxes may make that process more expensive. "We have no idea whether there are going to be taxes or tariffs," Fellner said. If the E.U. were to instate some kind of taxation on the U.K.'s exports, that would hurt British entertainment companies across the board. Finally, it may be difficult to convince talent to enter the British entertainment industry when there is so much murkiness around its future. "Whenever there's no clarity, there is uncertainty," Fellner added. "And whenever there's uncertainty, there is fear."

Priceline, Expedia, TripAdvisor Hope for End of Bitter Brexit Holiday

twocents@thestreet.com (Chris Nolter) — Wed, 29 Jun 2016 11:10 GMT

Online travel stocks caught a break on Tuesday, as shares recovered a sliver of their losses after concerns that the "Brexit" vote signalled a long, painful holiday for companies with exposure to the U.K. and Europe travel markets. Expedia , Priceline , TripAdvisor and Sabre gained on Tuesday, but have not recovered losses following the vote. Priceline is the largest of the group, with a nearly $60 billion market cap, and has the greatest exposure to the U.K. and Europe. Shares gained $18.20, or 1.5%, to $1,204.25 on Tuesday, but are still well below the pre-Brexit close of $1,390.20 on June 23. Morningstar analyst Dan Wasiolek said that about 55% of total bookings are from Europe and 15% from the U.K. Recent acquisitions, such as the $1.8 billion purchase of travel site Kayak Softwware Corp. in 2012 and the $2.6 billion acquisition of reservation site OpenTable Inc., likely "there were, and probably still are, more of a U.S.-centric mix," Wasiolek said. "They certainly wouldn't increase their exposure to Europe." Expedia, which Wasiolek said has 30% of exposure to Europe and 8% to the U.K., has boosted its European exposure through the deals, such as a $632 million purchase of a nearly 62% stake in German travel site Trivago in late 2012. Shares of Expedia gained $2.75, or nearly 2.8%, on Tuesday to $101.19, but still have not recovered from their level of $109.90 before the U.K. voted to leave the European Union. UBS Internet and interactive entertainment analyst Eric Sheridan noted that TripAdvisor obtained 21% of 2015 revenue from Europe in 2015, with 14% coming from London. On Tuesday, TripAdvisor rose $1.12, or nearly 1.9%, to $61.15, versus a close of $65.98 on June 23. Saber is best positioned among the group, according to Pacific Crest Securities analyst Brad Erickson, who wrote that the company has "low-single-digit" exposure to the U.K. and 20% to Europe. Saber gained 63 cents, or nearly 2.5%, to $25.93 on Tuesday, less than a dollar from its $26.93 close on June 23. Reactions to the vote appear, at least partly, overdone. Were the pound to drop to $1.275, Erickson wrote, 2017 earnings per share would decline 2.1% for Priceline, 2.3% for TripAdvisor, 1.5% for Expedia and .4% for Sabre. A fall in the euro to $1.05 would produce a 3.4% drop in EPS for Priceline, 1% decline for TripAdivsor, 2.5% for Expedia and 1.3% for Saber. UBS's Sheridan estimates that Priceline, the most exposed name in the bunch, applying the June 24 spot rate for the pound, would cost Priceline a modest .4% of revenue in 2016 and .9% in 2017. Standard & Poor's analyst Elton Cerda said that the credit agency is not currently contemplating changes in ratings for Priceline and Expedia. Fellow S&P analyst Andy Liu suggested that the market would adjust to a downturn. "The hoteliers will say, we're not getting as much traffic. Let's give more to the online travel agencies," he said. Shifting patterns in travel could also have an impact. Amsterdam travel site Bookings.com, which Priceline purchased for $133 million in 2005, is stronger in secondary and tertiary markets. Expedia is better positioned in capitals such as London and Paris. Priceline and European bookings, in general, were resilient during worries about sovereign debt in 2011 and 2013, Morningstar's Wasiolek noted. Cheap deals in London could lure travelers from Europe, the U.S. and China, providing a potential benefit for the online travel agencies. "There are a lot of offsets," he said.

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How to Trade Lockheed Martin, Northrop Grumman, General Dynamics Now

twocents@thestreet.com (Richard Suttmeier) — Wed, 29 Jun 2016 09:57 GMT

Defense contractors Lockheed Martin and Northrop Grumman did not experience major setbacks in reaction to Britain's decision to leave to European Union. The third major contractor, General Dynamics , took a minor hit. Based on this notion, military spending in the war to defeat ISIS appears to have trumped the adverse effects of the U.K. decision to leave the European Union. These three stocks began the year on Jim Cramer's list of 38 "anointed" stocks for 2016. This makes them important allocations to consider in a diversified investment portfolio. Cramer owns Lockheed in his Action Alerts PLUS portfolio. Cramer says this stock benefits from continued defense spending and also is known for its consistency in increasing dividend payouts. Lockheed Martin is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells LMT? Learn more now. Let's take a look at the daily and weekly charts for these defense stocks and the guidelines on how to trade them. Here's the daily chart for General Dynamics. Courtesy of MetaStock Xenith General Dynamics closed Tuesday at $133.94, down 2.7% year to date and up 10.1% above its Jan. 20 low of $121.61, but in correction territory 12.9% below its 52-week high of $153.76 set on Aug. 19. The horizontal lines are the Fibonacci retracement levels from the Aug. 19 high to the Jan. 20 low. The stock set its 2016 high of $147.16 on May 17, well above the 61.8% retracement of $141.49. The stock was below this retracement on June 21 before the "Brexit" vote. The stock closed below the 50% retracement of $137.68 on June 24 and after a low of $132.68 on Monday closed Tuesday above its 38.2% of $133.88. Here's the weekly chart for General Dynamics. Courtesy of MetaStock Xenith The weekly chart for General Dynamics has been negative since the week of June 17 with the stock below its key weekly moving average of $138.38 but well above the 200-week simple moving average of $112.32. The weekly momentum reading is projected to decline to 56.62 this week down from 67.21 on June 24. The weekly chart shows a red line through the weekly price bars is the key weekly moving average (a 5-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean". The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00. Investors looking to buy General Dynamics should do so on weakness to $101.63 and $97.74, which are key levels on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $141.39, which is a key level on technical charts until the end of this week. Here's the daily chart for Lockheed Martin. Courtesy of MetaStock Xenith Lockheed Martin closed Tuesday at $240.91, up 10.9% year to date and up 20.2% since setting its Jan. 26 low of $200.47. The stock set an all-time high of $245.37 on May 12. The stock has been above a "golden cross" since July 24, 2015 when the stock closed at $201.04. A "golden cross" occurs then the 50-day simple moving average rises above its 200-day simple moving average and indicates that higher prices lie ahead. The stock simply traded back and forth around its 50-day simple moving average of $237.77 in reaction to the Brexit vote. Here's the weekly chart for Lockheed Martin. Courtesy of MetaStock Xenith The weekly chart for Lockheed Martin is neutral with the stock above its key weekly moving average of $237.77 and well above the 200-week simple moving average of $164.20. The stock has been above its 200-week since the week of Jan. 20, 2012 when the average was $81.10. The weekly momentum reading is projected to decline to 78.95 this week down from 80.93 on June 24 moving below the overbought threshold of 80.00. Investors looking to buy Lockheed Martin should consider doing so on weakness to $156.53, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $247.40, which is a key level on technical charts until the end of this week. Here's the daily chart for Northrop Grumman. Courtesy of MetaStock Xenith Northrop Grumman closed Tuesday at $200.75, up 14.5% year to date and up 23.5% above its Jan. 28 low of $175.00. The stock set its all-time high of $218.84 on May 12. The stock has been above a "golden cross" since April 18, 2013 when the stock closed at $69.87. A "golden cross" occurs then the 50-day simple moving average rises above its 200-day simple moving average and indicates that higher prices lie ahead. The stock simply traded back and forth around its 50-day simple moving average of $212.39 in reaction to the "Brexit" vote. Here's the weekly chart for Northrop Grumman. Courtesy of MetaStock Xenith The weekly chart for Northrop Grumman has been is positive but overbought since the week of Feb. 19 with the stock above its key weekly moving average of $212.59 and well above the 200-week simple moving average of $131.42. The last test of the 200-week occurred during the week of Nov. 25, 2011, when the average was $54.18. The weekly momentum reading is projected to end the week at 83.80 slipping from 86.10 on June 24 with both readings above the overbought threshold of 80.00. Investors looking to buy Northrop Grumman should consider doing so on weakness to $132.21, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $222.07, which is a key level on technical charts until the end of this week.

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Toyota to Recall 2.3 Million Cars on Glitches in Airbags, Emission Controls

twocents@thestreet.com (Mariko Iwasaki) — Wed, 29 Jun 2016 09:42 GMT

Toyota Motor said it will recall a total 2.3 million vehicles installed with defective airbags and emission controls, adding to a slew of recalls by automakers and auto parts manufacturers worldwide. The Japanese company said on Wednesday it will recall its Prius, Prius PHV, and Lexus CT200h models installed with cracked airbag inflators that could explode once the temperature inside the car rose, as well as its Prius, Prius PHV, Prius a, SAI, Lexus CT200h, and Lexus HS250h models installed with emission control devices with risks of gasoline leakage. The number of cars with the airbag inflator defects totals over 743,000 units, while those with emission control defects total approximately 1.55 million, according to the automaker's disclosure. Other reports have suggested higher figures. The glitches were found for cars manufactured between 2009 and 2015. The automaker will start the recalls from Thursday. Toyota's recall adds to a series of similar actions taken by its counterparts in recent months. Mitsubishi Motors in February recalled vehicles with improperly installed right-turn indicator switches, while in April, Nissan Motor recalled cars installed with air bags with risks of not deploying. Worldwide, automakers including Ford , BMW , and General Motors that adopt defective airbags manufactured by Takata have also been forced to make recalls over the last two years. On Wednesday, Toyota also said that its global output, including those for separately listed subsidiaries Daihatsu and Hino , advanced 11.1% year-on -year. Toyota on its own enjoyed growth for the first time in two months for its domestic production and for a third consecutive month overseas. Daihatsu shareholders on Wednesday approved a bid from Toyota for the outstanding 49.8% stake despite some dissent about the valuation. Toyota in January said it would offer 0.26 of a share per Diahatsu share, or about Y399 billion ($3.9 billion) at the time for the outstanding shares. The takeover is due to close on Aug. 1. Shares in Toyota closed up 2.9% in Tokyo. The automaker, which has a large operational base in the U.K., has lost nearly 11% since the close of June 23, the day the country's voters chose to leave the European Union. The company has reportedly warned it employees that a Brexit would cause major risks for its U.K. business.

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Moody's Downgrades U.K. Banking Sector but Shares Defy Lack of Confidence

twocents@thestreet.com (Lisa Botter) — Wed, 29 Jun 2016 08:45 GMT

Moody's has downgraded its outlook for the U.K. banking sector to negative from stable due to the expected impact of the U.K.'s decision to leave the European Union. The credit agency also downgraded their outlook for 12 U.K. banks and building societies, including Lloyds , Barclays and HSBC . It did not downgrade its outlook for the Royal Bank of Scotland. Moody's expects the decision to leave the EU will reduce the profitability of the U.K. banks and building societies due to "lower economic growth and heightened uncertainty over the U.K.'s future trade relationship with the EU to lead to reduced demand for credit, higher credit losses and more volatile wholesale funding conditions for U.K. financial institutions," Moody's associate managing director Laurie Mayers said. Barclays and HSBC were downgraded to negative from stable. Moody's said that the referendum uncertainty adds to "existing negative pressures on the bank's intrinsic creditworthiness, largely driven by the ... near-term profitability challenges" for Barclays. Barclays shares were trading 3.8% up in morning trading in London, despite the outlook. The credit agency said that it expects the U.K. will need to renegotiate "passporting" agreements with the EU. These allow companies to set up a base in the U.K. but carry out activities in other European Economic Area countries. That could lead to additional costs for banks if they cannot replicate current conditions, Moody's warned. HSBC was downgraded to negative because these increased costs could "depress the bank's net interest margin and delay the group's planned issuance of loss-absorbing capital." HSBC shares were down 1.9% in early trading. But the contingency planning done by the Bank of England and the banks should mean there is little short-term liquidity implications for U.K. banks, Moody's said. But with the debt market more volatile, the cost of issuing debt could be higher. "While this could make funding plans more challenging and further erode net interest margins, the overall impact should be limited," the credit agency said. Lloyds was downgraded to stable from positive and Royal Bank of Scotland was reaffirmed at positive. Moody's said the positive outlook continues for the state-backed RBS reflected "the substantial progress the firm has made in its restructuring and ... [the] expectation that its credit fundamentals will continue to improve over the next 12-18 moths, which should not be materially affected by the economic and profitability pressures that are expected to arise following the outcome of the U.K. referendum." Lloyds shares were up 2.2% in trading in London and RBS was up 2.9%.

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Jim Cramer's 'Mad Money' Recap: Add These 2 Stocks to FANG

twocents@thestreet.com (Scott Rutt) — Wed, 29 Jun 2016 00:16 GMT

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. The high-growth game never ends, Jim Cramer told his Mad Money viewers Tuesday. That's why after a nasty two-day selloff, investors couldn't resist the lure of FANG, Cramer's acronym for Facebook , Amazon.com , Netflix and Alphabet , formerly Google. These names have growth, Cramer said, while everything else doesn't. It was just two weeks ago that Facebook, an Action Alerts PLUS holding, announced Instagram crossed another user milestone, and investors were quick to snap up the stock today. Then there's Amazon, up 2.4% today as new research suggested the online company is top of mind for 42% of gift givers. Amazon also expanded its Dash button programming, allowing even more products to be purchased with just a click of a button. Meanwhile, Netflix received a buy reiteration right as the company announced that it only has 7% exposure to the Brexit fiasco. But then there's Alphabet, another Action Alerts PLUS holding. Cramer said Alphabet just doesn't rebound as quick as it used to, prompting him to remove it from his acronym. In its place, Cramer added Broadcom , which shot up 4.2% today and has growth in spades, along with Ulta Salon , a company with so much growth the stock never sold off in the first place. As for the new acronym, well, Cramer said he's still working on that. Perhaps UNFAB? Off the Charts In the "Off the Charts" segment, Cramer checked in with colleague Marc Sebastian to take a fresh look at the correlation between the CBOE Volatility Index, known as the VIX, and the S&P 500 and what the Brexit decision is playing out in the markets. Under normal circumstances, the market and the VIX are opposite one another. When the market falls, the VIX, also known as the fear index, rises. Likewise, as the markets rise, the VIX typically falls. This pattern played out as it normally would during the market's February lows. As stocks bottomed, the VIX saw a big spike. In the weeks that followed, as the market recovered, the VIX slowly fell. Fast forward to late May and early June and the pattern changed. The markets rallied, but the VIX rallied too, signaling the big run up would be short lived. It was. The VIX spiked big as stocks plunged on Friday. But Monday was another story. Both the markets and the VIX fell on Monday, a sign that even though stocks were falling investors were not worried. That sentiment in turn led to today's strong rally. According to Sebastian's analysis, the bulk of the Brexit damage is now behind us, sentiments Cramer shares. Inspired by Insperity Even in a bad market there are bright spots, Cramer told viewers. That's certainly the case with the business process outsourcing firm Insperity , which has seen its shares rise 52% so far this year. Insperity is not some new, sexy IPO, Cramer explained. The company is over 30 years old and provides services like payroll and expense management to over 100,000 businesses. Things at Insperity became interesting in early 2015, however, as the company became aware that Starwood Value, an activist investor, had taken aim at the company. But unlike some activists, Starwood came to Insperity with solutions to improve the business. Insperity took these solutions to heart, appointing independent board members, cutting costs and buying back 12.4 million shares of its own stock. When it last reported in May, the company shot the lights out with a 16-cents-a-share earnings beat with raised 2016 guidance. The company boosted its dividend by 14%, too. Trading at 17.6 times earnings, shares of Insperity are no longer cheap, Cramer noted, but with 60% earnings growth there is still more upside ahead. Investors should expect another 40% gain, he concluded, but there is more room to run for this reinvigorated company. Off the Tape In his "Off the Tape" segment, Cramer sat down with Michael Preysman, founder and CEO of the privately held Everlane, the online apparel retailer offering customers total price and supply chain transparency. Preysman explained that the trends in the food industry regarding transparency and sustainability are also coming to the apparel world, where a $7 t-shirt retails for $50 and no one know why. At Everlane, customers not only see the cost of what they're buying, they also know where the item was made and by whom. Preysman said Everlane uses only the best factories in the world and stringently audits all of them multiple times a year to ensure workplace safety and humane conditions. Lightning Round In the Lightning Round, Cramer was bullish on Palo Alto Networks , Southwest Airlines , Sirius XM Radio and Puma Biotechnology . Cramer was bearish on United Continental Holdings . Off the Charts In his "No Huddle Offense" segment, Cramer poured over the stock charts, trying to find a company, any company, that actually benefited from Britain leaving the E.U. He said that ARM Holdings might be one such winner, as a 10% decline in the sterling against the U.S. dollar translates into a 15% increase in the company's earnings per share. But ARM is levered to declines in cell phones, which would negate most of those gains. One winner, Cramer theorized, could be JPMorgan Chase , which stands to take market share from its now-hobbled European rivals. However, thanks to Brexit, U.S. interest rates will also likely be hobbled in the short term, making those gains likely a long way off. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

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Teva Inches Closer to Completion of Allergan Generics Deal

twocents@thestreet.com (Sarah Pringle) — Tue, 28 Jun 2016 21:35 GMT

Australia drugmaker Mayne Pharma Group and privately held Prasco Laboratories have emerged as the latest winners in the Teva Pharmaceutical -Allergan generics divestiture process. Adelaide, Australia -based Mayne said in a June 28 announcement that that it will pay $652 million in cash for 37 approved and five FDA-filed products from Teva and Allergan. The identities of generics assets being acquired were not disclosed. Separately, Prasco said Tuesday it agreed to acquire the distribution rights in the U.S. for Teva's generic version of Adderall XR, a drug that treats attention deficit hyperactivity disorder, or ADHD. Financial terms of the deal were not disclosed. While the pair of deals seem to indicate that Teva's proposed $40.5 billion deal for the U.S. generics business of Dublin-headquartered botox maker Allergan is on track, whether the companies will complete the deal within their intended June timeline remains uncertain. The deal was initially announced in July of last year. Coming off a June high of $249.95 a share, the latest divestitures appeared to renew sentiment in Allergan to at least some extent. Shares of the company added about 4.7% to finish Tuesday's trading session at $227.72. Teva added 2.1% to close at $49.57. Allergan has been pressured in recent weeks amid "investors' lack of conviction around the timing of the generics sale closing (to Teva)", and stressed by uncertainty around the Brexit situation, according to Jim Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns Allergan shares. "With June coming to a close, many investors have become worried that the sale has hit an impasse," Cramer said. "While the June timeline may indeed be pushed back, we believe this is more due to the backlog at the FTC and its limited resources." "We have been working very closely with the FTC since we announced the acquisition last July and have made significant progress since that time," a Teva spokeswoman wrote Tuesday by email. "The status, as we stated in earlier this month, is that Teva has filed all of the documents with the FTC, including all contracts related to the divestitures/remedies, necessary to complete the final review. We are awaiting their final approval." Allergan declined to comment on Tuesday, but the company's CEO Brent Saunders told attendees on June 16 at The Deal's Corporate Governance Conference in New York that the sale of its unit to Teva was in final review with the FTC and just weeks away from closing. The two deals come after Impax Laboratories last week agreed to fork out $586 million for a bucket of generic drug products from Teva and Allergan. Earlier this month, Dr. Reddy's Laboratories disclosed plans to buy a portfolio of generics assets from the pharmaceutical companies in a $350 million deal. Mayne, an ASX-listed speciality pharmaceutical company, said it will finance the acquisition with a fully underwritten equity raising as well as through an extension of its existing debt facilities. The company said the acquired portfolio of generic assets is expected to add more than $237 million to its fiscal year 2017 net sales with gross margins greater than 50%. The deal is expected to be "significantly" accretive to its bottom line in fiscal year 2017, Mayne added. Having begun working with Teva and the FTC in December, Mayne noted that it has entered into supply agreements with Teva to manufacture certain products not already outsourced to CMOs (contract manufacturing organizations) for up to five years. Prasco Labs, a Cincinnati, Ohio-based privately held provider of branded drugs and generics products, said that it will immediately take over the distribution of the generic Adderall drug upon completion of the transaction. Once Teva completes its Allergan generics purchase, investors of the Israel-based pharmaceutical giant will likely shift their attention to upcoming developments within its existing pipeline. At the same time, Allergan will have only 1% and 5% of revenues coming from the UK and EU respectively, post-generics divestiture, noted Cramer: "This limited Brexit exposure, combined with Allergan's unmatched high-quality growth in large-cap pharma, makes AGN an attractive option (currently trading at a discount to biotech and major pharma P/E, EV/EVITDA/ and EV/Rev multiples) for those investors willing to ride out the volatility until the generics sale officially closes." Greenhill & Co. served as financial adviser and Kirkland & Ellis served as legal counsel to Teva on its Allergan generics purchase.

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Under Armour Wants to Prove 3D-Printed Sneakers Aren't Just a Gimmick

twocents@thestreet.com (Brian Sozzi) — Tue, 28 Jun 2016 19:32 GMT

Everyone thought that Under Armour's first 3D-printed sneaker released in March was a glorified marketing tool. Guess again, as the red-hot footwear and apparel maker is about to prove it could be a potentially lucrative business. The company will launch its second 3D-printed sneaker -- likely in the training category -- by the end of the summer, a source close to the matter confirmed to TheStreet. That release may be followed by several others before the end of the year. "What you will see [this year] is an increase in the number of units, colors and styles in the Architect [Under Armour's 3D printed shoe line] platform this year," Under Armour president of product and innovation Kevin Haley told TheStreet at the opening Tuesday of UA Lighthouse, the company's new center for manufacturing and design innovation in its Baltimore, Md. backyard. Haley didn't deny that at some point in the future a Steph Curry basketball shoe -- one of UA's hottest endorsements -- could be made using 3D-printing technology. For now, however, the focus remains on training sneakers. Several Under Armour sneakers that were made using 3D printers. "The training shoe [we created] is phenomenally stable but also cushioned, which is often hard to achieve at the same time," said Haley. "The [3D-printed] lattice structure is allowing us to create the holy grail of a super stable but also cushioned [sneaker] -- I think it has legs in lots of different end uses." Back in March, Under Armour unveiled a limited-edition 3D-printed training shoe called UA Architechs. It featured a 3D-printed midsole and upper design that enhances the fit for consumers and is more lightweight. The training shoe came together after a a two-year research and development process that involved the study of geometric shapes and structures to come up with the midsole design, according to Under Armour. Only 96 pairs of the UA Architechs were made. The price? A cool $300, which was light years removed from the mostly $85 running sneakers Under Armour sold when it entered the footwear space back in 2008. But consumers apparently weren't turned off by the price for a product that is lighter and fits better. Said Haley, "I think the original shoe launched in March sold out in 18 minutes, so we think the demand is there despite the $300 price point." Scientists at Under Armour's new manufacturing plant show off some 3D printing technology. Under Armour's new push into high-priced 3D printed sneakers -- at a time when rivals Nike and Adidas have no competing versions on the market-- could provide a nice boost to an already hot footwear business. Under Armour's footwear sales in the first quarter skyrocketed 64% year over year to $264 million. For 2015, footwear sales increased 57% to $678 million. Footwear now makes up about 17% of Under Armour's business. "3D printing is the future -- imagine walking into a store and 3D printing your own footwear from your favorite brand," pointed out sneaker expert Clyde Edwards. "3D printing is not a gimmick," remarked one of the scientists guiding a tour of UA Lighthouse. He could well be right.

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Obamacare Repeal: Here's the Most Important Bullet Point in House Republicans' Health Care Plan

twocents@thestreet.com (Eric Reed) — Tue, 28 Jun 2016 16:12 GMT

What are high-risk pools and how do they work? You should care about high-risk pools, because they're the latest attempt at health care overhaul by Speaker of the House Paul Ryan (R-Wis.). Already famed for his magic asterisks and out-there tax proposals, Ryan has spearheaded a new health care proposal as part of House Republicans' major policy rollout A Better Way. Although he buried it in a bullet point on page 21, Ryan would like to use high-risk pools as his get out of jail free card for repealing the most popular provisions of the Affordable Care Act, also known as Obamacare. In his proposal, as part of repealing the ACA, Ryan would eliminate the law's ban on denying coverage due to pre-existing conditions. It would be replaced with a continuous coverage guarantee, which does ensure coverage… but in a move very fitting of the Speaker's philosophy, only for people who already have insurance. This will leave the question of how to cover the sick and uninsurable, people who fall through the many cracks of Ryan's new system. He'd like to answer this question with high-risk pools, which is a fine answer. Except, of course, that they aren't a new invention, and they definitely don't work. Here's why. One of the critical issues of health insurance is balancing the risk and participation rates in the marketplace. The entire model of insurance is that healthy consumers will pay for more coverage than they consume, which allows sick ones to pay for less. Ideally premiums will reflect the average costs across an entire pool, which requires insurers to keep a high ratio of healthy to sick enrollees at any one time. If that ratio gets out of whack the plan becomes too expensive, healthy people begin to drop out and premiums spiral. As a result health insurance companies have always been incentivized to reject the sick people who drive up costs. High-risk pools are a way of mitigating that participation dilemma. These are private plans designed for individuals who can't get insurance anywhere else due to a pre-existing condition. High premiums and government subsidies offset the costs of insuring each member of the plan, allowing (in theory) the risk pool to function despite significant per-person spending. (Indeed, with few healthy people to offset costs, the relationship between premiums and spending approaches 1.0.) This is a fine idea in theory, if the government is willing to pay for a large percentage of people's health care. But that costs a lot of money, which the proponents of these risk pools generally aren't willing to spend. As Linda Blumberg, a senior fellow with the Urban Institute pointed out, one of the key flaws with the high-risk pool model is that it's a specifically bad way to cut spending on health care. "The problem with the high risk pools is that when you separate out the high cost people from the lower cost people, what you find is that the distribution of health expenditures in this country is very skewed," she said. "A relatively small percentage of individuals accounts for a very large percentage of health care spending. So when you take a small percentage of high risk individuals and you separate them out from everybody else you get the bulk of health care spending in this country." Carving the sick and most uninsurable people out into specific, dedicated pools "is going to cost a lot of money," she said. "It's where the dollars are, and that's why the designers of the Affordable Care Act wanted the high cost and the low cost insureds together." And this is not a small population. Although Ryan's plan would dedicate $25 billion over ten years to creating these pools, his plan also promises to rip open a potentially enormous coverage gap. More than a third of Americans are uninsured, on Medicaid or subscribe to an individual policy. Any of them could lose their insurance at any time, falling into the cracks of Ryan's continuous coverage guarantee. Helping to directly subsidize their health care would be expensive, and Ryan already rails against the expense of helping people buy health insurance under the ACA. There's no reason to believe that his high-risk pools would be sufficiently well funded, but there's also no need for speculation. In 2010, before the ACA obsolesced them, 34 states ran one of these programs. A study conducted by the Kaiser Family Foundation found that premiums in these pools were 125 to 200% of the national average and out of pocket costs "substantial." In addition to finding that enrollment was rock bottom the report noted that "high risk pools are also extremely expensive for states to operate" and that most "[did] not have sufficient funding to cover everyone who needs coverage." The upshot? Enrollment caps, strict eligibility requirements and lengthy waiting periods (months) before benefits could kick in. "It's all money," Blumberg said. "It's not rocket science," she added. "You and I can sit down with a piece of paper and a pen, and I could design a high risk pool for you that would be very effective at providing adequate coverage at income-related premiums. It can be done. It's just that it would cost you an enormous amount of money to subsidize it." And there's the rub. Segmenting risk skyrockets the costs of coverage for people who are sick, while making things moderately cheaper for everyone else. Consider, for example, the following thought experiment. In a 100-person plan, one person spends $100 per year while the rest spend only a dollar. The resulting premiums will be just under $2 per person, per year (if we assume for only costs). Now kick the sick person out of the plan. The remaining insureds will only save $1 per person, but the sick member of the group will suddenly have to spend $100. Now send him to a high-risk pool, where 90 of the participants have to spend $100 per year and you begin to see the problem. All that money has to come from somewhere. It's probably not coming from Ryan. There's much to be said about the Republicans' health care proposal, the latest version of the Right Wing promises someday to write a bill that will replace Obamacare. It is a mendacious document designed to look like policy while unwinding many of the protections that allow sick people to participate in the joint risk project we call "health insurance." High-risk pools are just one element of this game of three-card monte.

Jim Cramer Wants to Know How Nike Is Doing

twocents@thestreet.com (Bret Kenwell) — Tue, 28 Jun 2016 15:44 GMT

Shares of Nike have struggled so far this year and are down more than 15%. How is the company doing? Investors looking for insight won't have wait long because Nike is set to report quarterly results after the close Tuesday. "Nike is a very difficult situation," TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, said Monday from the floor of the New York Stock Exchange. The sports apparel company has such sprawling international operations -- including major businesses in the U.S., China and western Europe -- that it's hard to get a read on how it's doing. Looking at other companies for a potential read-through on Nike is also difficult, he said. Finish Line reported good results, but investors didn't care for the earnings from Foot Locker . There's also the resurgent Adidas brand to worry about, Cramer said. Nike's chart -- as outlined by Real Money's Bruce Kamich -- is also discouraging. With all that being said, Nike stock is down significantly from its highs over $68, he said, adding that his favorite in the group is Foot Locker, simply because the stock has been oversold. Analysts expect Nike to earn 48 cents per share on $8.28 billion in revenue.

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Jim Cramer -- Stick With Apple but Don't Believe 'Super Cycle' Hype

twocents@thestreet.com (Bret Kenwell) — Tue, 28 Jun 2016 14:24 GMT

Shares of Apple are up roughly 1% Tuesday after analysts at Cowen called the stock a buy. While Apple is a holding in Jim Cramer's Action Alerts PLUS portfolio, there was something in the report the co-manager does not like: forecasts for an upcoming iPhone "super cycle." "Don't believe the super cycle hype. Ever," Cramer said on CNBC's "Mad Dash" segment. The analysts outline that 2017 is setting up for a mega-year for the iPhone. But Cramer said the term "super cycle" tends to lead to too much enthusiasm. Examples? Think of housing in 2007, coal in 2011 and fracking sand in 2012. All were simply too bullish, he said. "I like Apple," he said, and the stock will likely go up because this report is so bullish. While shares are attractively priced and the balance sheet is strong, Cramer's trying not to get too caught up in the bullish hoopla.

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Healthcare Opportunities in Light of Brexit-Driven Selloff

twocents@thestreet.com (Sarah Pringle) — Tue, 28 Jun 2016 14:19 GMT

Britain's decision to leave the European Union has sent stocks across the healthcare sector down broadly speaking alongside those in other industries, but some losses arguably aren't warranted, including those seen by health insurer Aetna and contract research organization Icon . "There's still so much uncertainty over what's going to transpire, but potentially because of the [market's] bloodbath, there are some buying opportunities," said Jeffrey Loo of S&P Global Market Intelligence, part of S&P Capital IQ. Though some investors may have caught on to the market's over-reaction, the surprising Brexit vote might even present some positive implications for certain subsectors. Those that may benefit include contract research organizations, or CROs, which offer support to the pharmaceutical, biotechnology and medical device industries, according to Loo. CROs such as Icon, Paraxel International , Quintiles , LabCorp subsidiary Covance and Charles River Laboratories are among those that could be potential beneficiaries in the sector, according to Loo, who also cited Thomas H. Lee Partners-backed inVentiv Health, the $2 billion-in-sales company that filed for an IPO in April. CRO companies, whose outsourced services help improve the efficiency of clinical trials, drug discovery, preclinical research and drug approval, have seen robust activity in recent months as pharma players and other healthcare companies seek ways to trim costs. Joining inVentiv, Cinven-backed CRO Medpace disclosed on Friday plans to take its shares public. Also this month, Synexus backer LDC announced that Jaguar Holding Co. Luxembourg had acquired the CRO in a deal valuing it at £178 million ($264 million), just weeks after The Deal, a sister publication of TheStreet, reported it had opted for a sale instead of an IPO. If there are going to be different regulations and rules adopted in the U.K. as opposed to existing EU standards as a result of Brexit, it may potentially lead to more work and consequently more business for CRO firms, explained Loo. The largest of global CROs is Quintiles, whose $9 billion merger with IMS Health Holdings remains pending. Shares of Quintiles lost about 3.2% of their value Monday, finishing the trading session at $61.32 and adding to Friday's 2.6% loss. Shares ticked up about 1.7% Tuesday morning to $62.31 but did not erase two days of losses. The broad based sell-off in healthcare might also create buying opportunities across companies that have limited-to-no exposure to the UK, said Loo, who described the reaction of managed healthcare and health care facilities stocks as "unjustifiably battered". The declines seen by managed healthcare companies such as Aetna, Cigna , Anthem , Humana as well as Medicaid-focused Molina Healthcare weren't necessarily warranted, he said. "We do not expect demand for mental health services in the UK to decline as a result of Brexit," Tanquilut wrote, adding that the stock remains very compelling given macro tailwinds alongside the opportunity to continue to fuel growth with M&A, joint ventures, as well as organically speaking. Among other things to keep in mind is the anticipated relocation of the European Medicines Agency, or EMA, which is currently based in London. The headquarters could move to Paris, suspects Loo, who believes the change might result in the U.K. losing some of its influence on European healthcare debates.

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When Will European Union Regulators Reveal Plan B?

twocents@thestreet.com (Antonia Oprita) — Tue, 28 Jun 2016 14:00 GMT

Like children of divorcing parents, markets today are happy that the U.K. and the EU are having a dialogue. At least they're talking. At least they can reach a compromise, is the hope. Continuing the analogy with divorce, at the end of the day separation is painful for the short term but staying together in a toxic relationship is very harmful for the long term. Perhaps, slowly, investors are beginning to realize this. For the long term, investors should probably expect stronger efforts from policymakers to reach a sustainable recovery in Europe. As Algebris Investments CEO Davide Serra pointed out: "Europe gets better when it's on its knees; we are on our knees now. They (European politicians) have a Plan B -- the issue is when do they pull the trigger and how." However, investors should not rush into the markets just yet. Just as I warned before the referendum that the markets were celebrating a Remain vote too early, I feel I have to stress that today is probably not the day to buy U.K. stocks hand over fist, even though the FTSE 100, the DAX and the CAC-40 were all up around 2% in morning trading in Europe. As for European stocks, investors should keep pen and paper (or laptop, smartphone or tablet) handy and jot down attractive names to consider for a shopping list, but not jump in yet either. The markets are celebrating the fact that EU leaders are gathering in Brussels on Tuesday for a summit and outgoing U.K. Prime Minister David Cameron will be there. There is hope that things will begin to move towards some form of progress, although Cameron made clear last Friday that Article 50 of the EU Treaty officially kickstarting the withdrawal will only be triggered by his successor. Already, the battle for leadership in the U.K. Conservative party is underway, with former London mayor and top Brexiteer Boris Johnson and current Home Secretary Theresa May the frontrunners, adding to hopes that things are going ahead. The pound has bounced off its lows, rising around 0.5% against the dollar in morning trade in London. But other than that, investors should not expect any more signs of progress. German Chancellor Angela Merkel has already said that no talks, not even informal ones, can begin regarding the U.K.'s deal outside the EU until Britain notifies the bloc that it wants to pull out. Analysts are optimistic that the EU, and the eurozone especially, will be using the Brexit shock as a positive catalyst. "The response by eurozone officials may be more QE and bigger budget deficits," according to HSBC's chief European economist, Karen Ward. This is because the eurozone will probably be hit by an economic slowdown in the U.K., with Ireland, Belgium and the Netherlands the most vulnerable, but also Malta and Cyprus not far behind, as they are the biggest exporters to Britain from the single currency area. But as portfolio manager and macro strategist at Algebris Investments Alberto Gallo said, investors should be aware we are in an environment of QE infinity, where returns on money-printing are diminishing as "the best of the recovery is behind us and there is less yield." Gallo cautioned that there is political risk ahead for Europe and the world as well. Spain is again facing a hung parliament as repeat elections at the weekend have not yielded a result much different from the one last December. Then there is the Italian referendum on the Constitution in October, followed by elections in the U.S. in the autumn and in Germany next year. "Going forward, volatility and tail risk will be more frequent. Benchmark long-only strategies are no longer good for this environment," Gallo added. Investors should be watching the talks in Brussels today and tomorrow for any signs of what the Plan B is and how it will be implemented, to get ideas about what strategy to follow. In the meanwhile, here are some Real Money articles about the effect of Brexit on U.S. companies and the economy: Cramer: There's a Lot Out There That Is Tempting U.S. Automakers Feel the Pain of Brexit Brexit Shouldn't Rumple U.S. Apparel Makers To Avoid Brexit Storm, Pull Into AutoZone Editor's Note: This article was originally published at 8 a.m. EDT on Real Money on Real Money.

Brexit Comes at a Particularly Bad Time for Software Companies

twocents@thestreet.com (Chris Nolter) — Tue, 28 Jun 2016 13:41 GMT

For most publicly-traded companies, there was never a good time for the Brexit vote. But for the large software companies that market to corporate IT departments, the referendum at the close of the second quarter came at a particularly inopportune moment. Slippage of large accounts from one quarter to the next is a landmine for software companies, resulting in earnings misses and making the last days of a reporting period crucial for sales. "[T]he timing of this exogenous market shock couldn't have come at a worse time," Credit Suisse analyst Michael Nemeroff wrote in a report, noting that "most enterprise-focused software companies -- regardless of size -- sign a large amount of business in the final few weeks of each [quarter]." Nemeroff suggested that well-positioned stocks, given recent declines and their low exposure to Brexit fallout, include Ultimate Software and 2U , with 98% of revenues from the U.S. and none from the UK and Europe; Paycom , with 100% from the U.S.; and Synchronoss , which generates 90% of its top line in the U.S. and 10% in the UK and Europe. Higher risk companies include Open Text and Verint Systems , each with more than 30% of sales in Europe; Cornerstone OnDemand , with 30% in Europe; and Adobe , with 3% in the U.K. and 22% in Europe. In an earnings call before the vote, Adobe CEO Shantanu Narayen told investors that Brexit had not been an issue in the company's sales meetings. "There isn't a customer on the planet that we go visit where digital disruption is not top of mind, it's a line item in everybody's budget and they are all talking about how they are going to aggressively transition to digital experiences," he said. In Adobe's favor, its quarter does not end in June. Kirk Materne of Evercore ISI suggested in a post-Brexit report that investors take a look at some of the "quality growth names that do not have a June Q end" like Adobe, Salesforce.com , Veeva Systems , Splunk , and Palo Alto Networks . Long-term risk to the sector is low, Materne added. While SAP SAP generates 44% of its business in Europe, the Middle East and Africa, most software vendors obtain about 21% of their sales from EMEA and just three to four percent from the U.K. Tyler Technologies and Ultimate Software have "essentially no exposure" to EMEA, the analyst noted. Oracle and Microsoft have nearly 30% and 20% revenue exposure, respectively, to EMEA markets, Materne suggested, but are well positioned because of their balance sheets. Cyber security companies Fortinet and Check Point Software generate 37% and 35%, respectively, of their sales from the EMEA, Gray Powell of Wells Fargo Securities noted in a report. Companies with less EMEA exposure include CyberArk (27%), Symantec (25%), Proofpoint (18%), Palo Alto (18%), and FireEye (14%). Powell suggested that while Brexit will not likely have a great impact on second-quarter demand, it could weigh on guidance for subsequent periods. "[I]f market volatility remains in place through July -- then we would expect most security companies to guide Q3 conservatively," he wrote. "This is because August is always a slow month due to summer vacations which means that a higher-than-normal percentage of demand could be pushed into the month of September if July is soft." MKM Partners analyst Kevin Buttigieg created a Brexit-bucking "wish list" for software stocks. Pluses include higher exposure to smaller businesses that do more business in the U.S. and less in Europe, fewer dealings with the financial sector, recurring revenues and high margins and lower valuations. Few firms can check all of those boxes, however. "[L]arger companies like Oracle and Microsoft ... that screen favorably for margins, recurring revenues and valuation also have the greatest exposure to the UK and EMEA economies and to financials." he wrote. "Smaller companies tend to have lower margins and higher valuations." Of the companies Buttigieg watches, Ultimate Software, Salesforce.com and NetSuite fulfill a number of the wishes.

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Alphabet May Launch Its Own Phone; More Big Acquisitions to Come for Microsoft?

twocents@thestreet.com (Eric Jhonsa) — Tue, 28 Jun 2016 13:10 GMT

Here's a look at Tuesday's top tech news: Alphabet reportedly plans to launch a Google-branded Android phone The Telegraph reports Alphabet plans to launch a Google-branded Android phone by year's end, thus putting the company in direct competition with both Apple and Android phone vendors such as Samsung , LG, Lenovo and Xiaomi. A common and understandable reaction to the report has been "Why?" After all, Google, through its Nexus line, already develops phones meant to fit its vision of what Android hardware and software should look like. And by having the phones produced and sold by OEM partners such as LG and Huawei, the company is able to avoid upsetting OEMs by directly squaring off against them. The LG Nexus 5X and Huawei Nexus 6P A look at the current state of the smartphone market, and the Nexus line's place within it, helps explain Google's thinking. Though Nexus phones have a cult following, particularly among those who want a phone running "stock" Android (a version of Android that doesn't have a custom skin such as Samsung's TouchWiz running on top of it), their distribution model hurts their reach. Specifically, Nexus phones aren't sold by carriers; they're sold by Google and select retail partners at their full unsubsidized prices. A Google-branded phone directly sold by the likes of AT&T , Verizon and Vodafone , and thus eligible for the phone subsidies and installment plans provided by mobile carriers, could reach many consumers who aren't likely Nexus buyers. All while still allowing Google to provide its ideal Android experience. As for whether Android OEMs will be upset about such a move, it's certainly possible, but given Android and iOS's mobile dominance, they have little choice but to grin and bear it. Samsung's Tizen OS has made little traction, Mozilla's Firefox OS recently bit the dust and Microsoft has responded to Windows Phone's struggles by de-prioritizing the platform. Unless Apple opens up iOS to third-party OEMs (don't hold your breath), top Android OEMs have no choice but to continue actively supporting Google's OS. And Google knows it. In addition, launching an Android phone would fit with a broader Google hardware push. The company recently hired former Motorola Mobility chief Rick Osterloh to head a new hardware unit encompassing Nexus devices, the Chromecast streaming stick, Google Glass, and several other products. One has to assume a Google-branded phone will also be under Osterloh's purview. Google has also said it will join Android OEMs in launching a virtual reality headset based on its Android phone-powered Daydream VR platform. Two years after it sold Motorola Mobility to Lenovo, Google once more appears serious about wanting to be a force in mobile hardware. Alphabet and Apple are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL or AAPL? Learn more now. Microsoft reportedly bid up to $4 billion for container startup Docker Citing several sources, SDXcentral.com reports Microsoft tried to acquire white-hot enterprise startup Docker, and bid as much as $4 billion in the last six months. However, the companies weren't able to agree on price. Docker controls the most popular platform for running software containers; they allow apps and services running on the same server to be isolated from each other. Containers have some common traits with server virtualization platforms such as VMware's vSphere and Microsoft's own Hyper-V, but are less resource-intensive. Multiple containers can run on the same operating system, whereas each server virtual machine needs a separate OS and dedicated hardware resources. Containers are also easier to port from one IT environment or cloud infrastructure to another. Though virtualization platforms still have security and management advantages that make them better options for some environments, Docker container adoption has grown like wildfire. And Microsoft is clearly well-aware of this, as shown by its launching of a container service supporting Docker for its Azure cloud platform. Assuming SDXcentral's report is accurate, it highlights Microsoft's interest in skating to where the puck is going in a rapidly-changing enterprise tech landscape, even if that means supporting platforms that compete with its proprietary solutions. It also suggests the company maintains a healthy appetite for M&A in the wake of its $26.2 billion deal to buy LinkedIn .

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Facebook and Alphabet: Two Stocks to Buy Post-Brexit Volatility

twocents@thestreet.com (Chiradeep BasuMallick) — Tue, 28 Jun 2016 13:04 GMT

As you seek safe-haven stocks in the aftermath of the Brexit meltdown, consider the tech giants, Facebook and Google parent Alphabet . They have the size and high-demand services to withstand downturns. To be sure, both companies suffered with the rest of the market Monday. But Facebook and Google should provide growth opportunities -- perhaps a 30% upside. Both companies have expanded their offerings. Facebook is projecting strong growth for the next five years. Alphabet can boast of high profit margins. These stocks should be on your radar as "defensive growth" plays with considerable upside. Facebook is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells FB? Learn more now. Facebook Facebook has beaten earnings expectations for the last four quarters. Moreover, Facebook has expanded its portfolio of businesses with WhatsApp, Instagram, videos, news consumption and virtual reality platforms. The company is projecting 34% per year earnings per share (EPS) growth for the next half a decade. Trading at a PEG ratio of 0.91, Facebook shares are among the cheapest for a large tech stock. The company has 1.6 billion active users, and more importantly a growing ad business. It is also expanding its businesses in video and virtual reality. The 44 analysts offering 12-month price forecasts for Facebook have a median target of $145, pointing to the nearly 30% price appreciation potential from current levels. Investors who avoided Facebook because of the high stock price can now take advantage of the recent weakness. To be sure, the stock pays no dividends because it's on a growth curve. But its annual free cash flow is becoming stronger with each passing year. Churning out billions in rising FCF, Facebook is exactly where Apple was a decade ago. Facebook is a growth stock winner in what is likely to be a tough year for markets. Alphabet Alphabet shares are down 11% in 2016. The lower price offers an opportunity, though. The company offers mid-teen earnings growth. It has an upside potential in excess of 30% over the next year. Alphabet's ad/search business is a major cash cow. ALPHABET is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells GOOG? Learn more now. Moreover, Alphabet is multi-faceted, including not only its popular search engine, but also ads, maps, apps, YouTube and Android and the related technical infrastructure. The company has been innovative, as well. It offers Google Fiber, which is likely to be a strong competitor to AT&T, Promoted Pins, Self-Driving Cars/Vans, Google Assistant and Google Home and a possible online TV service. While its Moonshot factory arguably hasn't done as well, that tiny business is a relatively small part of the overall landscape. But its strategy of adding other parts is a long-term growth positive. The company's massive cash war-chest, coupled with minimal debt, also makes Alphabet among the safest companies around. Its nearly 22% profit margin, high return ratios and projected revenue growth are other positives. At a PEG ratio of 1.23, Alphabet is Brexit-proof. Accumulate the stock at every dip and set yourself up for major gains. --- Post-Brexit anxiety is pummeling global markets. If you'd rather avoid stocks and bonds altogether during this period of extraordinary volatility, I know a way you can make a guaranteed $67,548 over the next 12 months. In fact, this moneymaking technique is so successful and simple, you might want to give up "conventional" investing forever! Click here now to learn more.

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Stock Futures Point to a Rebound From Two-Day Brexit Selloff

twocents@thestreet.com (Keris Alison Lahiff) — Tue, 28 Jun 2016 12:35 GMT

Stock futures pushed higher on Tuesday and were on track to snap Wall Street's two-day selloff driven by the Brexit shock. S&P 500 futures were up 1.1%, Dow Jones Industrial Average futures rose 1.2%, and Nasdaq futures climbed 1.2%. The S&P 500 fell more than 5% over the past two days after the United Kingdom voted to leave the European Union. The move has far-reaching political and economic consequences as new trade deals and regulations begin to get drawn up over the next two years. Both Standard & Poor's and Fitch lowered their ratings on U.K. debt on Monday. The two-day selloff in global markets wiped out $3 trillion in market capitalization on the Brexit shock. The pound plummeted to its lowest level in 30 years on Monday, driving the greenback higher and pushing crude oil prices to their worst settlement in a week. The British government has abandoned plans to sell its stakes in Royal Bank of Scotland and Lloyds Banking Group this year in the wake of the Brexit vote, according to sources, Reuters reported. The government had hoped to reduce its exposure to the banks it took over during the financial crisis, raising roughly 9 billion euros through stock sales. Talk of further accommodation from global central banks appeared to boost investor appetite on Tuesday. Hopes have begun to rise that the Bank of England and the Bank of Japan could offer further stimulus in the wake of the uncertainty in Europe. Since Friday, the chances of a rate hike from the Federal Reserve this year have become unlikely, according to CME Group fed funds futures. First-quarter U.S. gross domestic product was raised to 1.1% growth in the third and final reading on Tuesday morning. First-quarter GDP has previously been estimated at 0.8%. Consumer spending was reduced, while exports were revised to show a slight gain over a previously estimated decline. The U.S. economy suffered an economic slowdown at the beginning of the year as cautious consumers opted to save rather than spend, a strong U.S. dollar and weaker overseas demand hampered U.S. manufacturing, and energy prices continued to weigh on the sector. The cost to settle Volkswagen's numerous lawsuits in the U.S. over an emissions-cheating investigation has increased to more than $15 billion, one-third higher than previously expected. The German automaker is expected to come to another settlement with a San Francisco court on Tuesday which could involve buybacks for 475,000 affected vehicles and $5 billion in fines. SolarCity's board has appointed a two-person committee to ensure Tesla's proposal to acquire all of the remaining SolarCity common stock is fairly evaluated, Re/code reported. Tesla announced plans last week to buy all of SolarCity's common stock, a move some described as a bailout given Elon Musk's position as chairman to both companies. Lending Club climbed in premarket trading after announcing plans to cut 179 positions. The peer-to-peer lender has been under pressure since May when CEO Renaud Laplanche stepped down over an investigation into its lending practices. The job cuts are tied to lower loan volumes over the current quarter. The company also said acting CEO Scott Sanborn would become its permanent CEO and president. ReachLocal rocketed higher after receiving a buyout offer from Gannett . Gannett intends to purchase the digital marketing company for $4.60 a share. The deal has a total worth of roughly $156 million and is expected to close in the third quarter.

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Working After Retirement Is the Newest Trend

twocents@thestreet.com (Buster Coen) — Tue, 28 Jun 2016 11:30 GMT

Stu Gelbord was 62 years old when he retired from his position as vice president of a food manufacturing company. Five years later, Gelbord was back in the business arena, using his retirement money to become a franchisee of two new locations for the British Swim School. "The thought of starting a new adventure just seemed unbelievably appealing to me," said Gelbord, now 67 and based in Philadelphia. "I don't think I would know what retirement meant." Gelbord is one of many retirees who are continuing to work after their initial retirement. A Merrill Lynch Retirement Study recently found that over seven in ten retirees say that they want to keep working after they retire. Indeed, with life expectancy increasing right along with the cost of living, it is becoming an ever untenable plan to draw out from the workforce completely at the expected retirement age. These days, people are likely to run out of either bucket list items or money before they die. Therefore, it doesn't make sense to dedicate the entirety of one's retirement to leisure. Take Scott Vance, who recently retired after 21 years in the army. "While I am receiving retirement income that could afford me to just relax, I would go out of my mind doing nothing," he said. Therefore, he has started officiating soccer and wrestling matches -- a hobby of his that also serves as a source of income. Indeed, the freedom of retirement does not have to be lost by continuing to work. "Now retirees can go do the things they actually wanted to do," says Andrew Meadows, vice president of brand & culture at Ubiquity Retirement + Savings. "They can take a small job, or volunteer or work in their community." By engaging in such activity, retirees can maintain a healthy social life well into old age. "The social appeal of work is the most attractive to retirees," Meadows said. "Whatever age you are, you're always complaining about not being able to meet people. By continuing to work, you're also continuously forming relationships." Of course, retirement is increasingly becoming a luxury, meaning that not everybody gets the option to choose whether or not to work into old age. Indeed, the Employee Benefit Research Institute recently found that only 21% of workers said they are "very confident" about having enough money for a comfortable retirement, while 19% said they are not at all confident about their ability to retire comfortably. And recently-released research from global advisory firm Willis Towers Watson reports that one in four workers now definitively say that they won't be able to retire at 70. Those who do retire and then opt to work again often take a more modest role in the workforce. 59-year-old Harry Coleman, based in Cincinnati, worked at Proctor & Gamble for nearly 30 years before retiring at 51. Now, he works as an independent consultant, a less demanding role that allows him to have greater agency to make choices in his work life. He only accepts assignments that fit his schedule, which is considerably freer since his initial retirement. "The intention was never to work full-time after retirement," Coleman said. "That was the whole purpose." In the interest of working less hectic days, consulting work is often a popular choice for retirees, as is entrepreneurship. While starting a new business can be a risky venture for retirees, it is becoming increasingly popular among the older crowd. According to data from Babson College, 15% of entrepreneurs are between the ages of 55 and 74. And that's not even accounting for older entrepreneurs like Chicago-based Art Koff, who is 81 and running his own business. Koff founded Retiredbrains in 2003, after retiring from marketing company Omnicom. Fittingly, Retiredbrains.com helps retirees find part-time employment. "I could easily live off of the income from my retirement savings," Koff said. "But I love what I am doing." Across the board, retirees interviewed for this article reported being happy with their choice to work after retirement. Soon-to-be retirees should take note: not all of life's thrills belong on a bucket list accomplished after receiving a gold watch. Many of them are right under your nose during the continued pursuit of interests. "Life should be a growing process, not a winding down process," Gelbord said. "It's all about feeling vital."

Jim Cramer's Top Takeaways: Twilio, Idexx Labs

twocents@thestreet.com (Scott Rutt) — Tue, 28 Jun 2016 10:00 GMT

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. Did you miss last night's "Mad Money" on CNBC? If so, here are Jim Cramer's top takeaways for today's trading. Twilio : In his "Know Your IPO" segment, Cramer took a look at Twilio, the cloud communications company that came public last Thursday at $15 a share only to rocket 94% to $29 by the close of its first day and another 3% today. Cramer explained that Twilio allows companies including Uber, Nordstrom and Facebook's What's App to add real-time communications services to their applications. The company offers everything from voice messaging, call recording, text messages and even embedded video services for developers of all sizes. Twilio boasts 28,000 active customers and charges fees based on customers' usage, meaning that as Uber and Facebook expand their user bases, Twilio shares in the profits. That's how the company saw 78% revenue growth in 2014 and accelerated that to 88% in 2015. Twilio is not without some risk factors, however. The company is not profitable and is playing in an unproven market. Twilio also derives 15% of its revenue from a single customer, Facebook, which could decided to built its own platforms. Then there's Twilio's valuation. The stock now trades at 13 times sales, or factoring in its growth rate, 7.5 times 2016 sales. That's higher than the current valuation of Salesforce.com . But valuation aside, Cramer said he thinks Twilio is a winner on any weakness. Idexx Labs : In an exclusive interview, Cramer sat down with Jonathan Ayers, chairman and CEO of Idexx Labs, an animal health products and services company. Ayers said when it comes to our pets and their care, the sky's the limit. That's how a company like Idexx can still see 5% organic growth in times of recession, as the company did in 2009. Pets are not just an American phenomenon. Ayers noted that Idexx sees Europe still as an emerging market for the company, while other countries, like Brazil, have 75 million pets and almost no veterinary care. Ayers went on to explain that Idexx' new urine analyzer for cats can give pets a voice and tell vets what's wrong in just three minutes, and is more accurate than traditional testing. Since testing is done on a continual basis, Idexx enjoys lots of recurring revenue. Cramer concluded that Idexx is the type of stock you buy when Brexit takes the entire stock market lower. To read a full recap of "Mad Money" on CNBC, click here. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

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Takata Chairman Signals Resignation to Take Responsibility for Airbag Recalls

twocents@thestreet.com (Mariko Iwasaki) — Tue, 28 Jun 2016 09:39 GMT

The chairman and president of troubled Japanese airbag maker Takata said he would step down once he was ready to hand over management, after apologizing for the troubles caused by the company's airbag inflators. He spoke to shareholders at a general annual meeting held in Tokyo on Tuesday, June 28. This was the first time Shigehisa Takada, who has been at the helm of the company founded by his grandfather since 2007, announced publicly of his intention to resign. Takata shares spiked 15% at the opening of the afternoon trading when the meeting ended, and closed the day up 2.2%. The Tokyo-based company, which also manufactures seat belts, steering wheels, and child seats, has booked net losses for two consecutive years. It supplies its products to automakers such as Honda , Toyota and Ford . On May 11, the company reported a net loss of Y13.0 billion ($118 million) for the year ended March 31, 2016, after booking Y44.2 billion in extraordinary losses associated with recalls, as well as lawsuits in the U.S. The company has reportedly been in talks with private equity firm KKR and other investors, which would result in control being taken away from the founding Takada family, which holds about 60% of the stock. As of March 2015, 52.1% of Takata shares were owned by TKJ, a Takada family investment vehicle, 2.9% by Chairman and CEO Shigehisa Takada, and 2.1% by his mother Akiko Takada.

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Merkel Insists Timing of Brexit Talks Is Up to U.K.

twocents@thestreet.com (Jonathan Braude) — Tue, 28 Jun 2016 06:43 GMT

The leaders of Germany, France and Italy on Monday insisted there will be no negotiations with Britain on its departure from the European Union until London has formally declared its intention to leave the 28 nation bloc. After meeting French President François Hollande and Italian Prime Minister Matteo Renzi in Berlin, German Chancellor Angela Merkel said she had agreed with her guests that there can be no further steps towards Brexit until the U.K. government has formally invoked Article 50 of the European treaties to say it wishes to leave. "That means that, and we agree on this point, there will be neither informal nor formal talks on a British exit until the European Council has received the [U.K.'s] request for an exit from the European Union," she told a joint press conference. Despite the apparent agreement on their positions, however, both Hollande and Renzi struck a slightly different tone. They emphasized the need to process the U.K.'s exit as quickly as possible and focus on the challenges facing the remaining 27 states, the BBC reported. Germany and the U.K. are the European Union's two largest economies, while France and Italy are no. 3 and 4 respectively. The press conference came after the European markets closed on Monday, but Merkel had already made her relatively dovish and conciliatory stance clear earlier in the day. European stock markets fell less than might have been expected given the prospect of months and possibly years of uncertainty and tough negotiations to come. Budget carrier EasyJet , plummeted over 22% and International Consolidated Airlines , which owns both British Airways and Spain's Iberia was down 15.9%. Banks also continued their slide -- Barclays , was down 17.35% -- and there were further falls in the construction sector. Yet London's FTSE 100 index was down a relatively benign 2.55% on the day at 5,982.20. The more U.K. focused FTSE 250 was off 6.96% on the day at 14,967. In Frankfurt, the Dax closed down 3.02% at 9,268.66 and in Paris the Cac 40 finished the day off 2.97% at 3,984.72. However, Britain's government has made it clear there will be no hasty declarations in Brussels, following the British people's shock 52% to 48% vote in favor of Brexit last week. U.K. Prime Minister David Cameron on Monday acknowledged that parliament must respect the result of the referendum -- despite the fact that there is a large majority in the elected House of Commons opposed to leaving the EU -- and announced the establishment of a team of officials to begin preparations for exit talks. He also rejected a repeat referendum, despite a petition for a rerun which has so far gathered millions of signatures. But he told lawmakers he will not invoke Article 50 himself and trigger the formal start of negotiations. That will be the responsibility of his successor, who is expected to take office in September after a leadership election process due to start this week. Nominations are due in on Wednesday, with the charismatic but flighty Boris Johnson, who led the "Vote Leave" campaign to victory, the odds-on favorite to win the battle. For the moment, however, the country has a lame duck prime minister, and no effective opposition. The leader of the opposition Labour Party, Jeremy Corbyn faces a vote of no confidence from his own party after most of his shadow cabinet resigned their roles in protest at his weak leadership. Although he has appointed some loyalists to key posts as advisers and spokesmen shadowing government ministers, the majority of the parliamentary party are expected to vote against him. Yet Corbyn has so far refused to resign and appears ready to let civil war rage within the party, believing that rank and file members will vote him back into office even after the parliamentary party has tried to depose him.

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Jim Cramer's 'Mad Money' Recap: 'Brexit' Is the Dumbest Financial Mistake Ever

twocents@thestreet.com (Scott Rutt) — Mon, 27 Jun 2016 23:51 GMT

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. Britain's decision to leave the European Union was the "dumbest financial mistake I can ever recall," Jim Cramer told his Mad Money viewers Monday. Even though it has only been a few days since the ballots were cast, the true cost of British independence from the EU is now becoming apparent. Cramer explained that the decision to leave boiled down to two issues, the eight billion pounds a year that the British were paying to stay in the EU and the flood of immigrants they were forced to accept. But while the eight billion seemed like a hefty sum last week, the stocks of Royal Bank of Scotland and Lloyds have lost over 12 billion pounds in just two days. But that's only the beginning, Cramer noted. Without the 200,000 immigrants a year entering Britain, property prices will certainly fall, and the British pound will only continue to devalue, something that will be felt by all. These are just a few of the costs we know about, Cramer said, and they already far outweigh the much-hyped savings. That's why Cramer said he's not worried about other countries following Britain to the exits. "I doubt any other country is dumb enough to follow," he said. Meanwhile, here in the U.S. stock market, Cramer said prices will continue to fall and are almost at levels where he'd advise investors start buying the dip. Nothing Worth Buying There just aren't enough sectors worth buying, Cramer told viewers. Normally, he would be aggressively buying a big two-day sell off like we've seen, but with earnings fears everywhere, the right time to buy remains illusive. Just over 20% of the S&P 500 is technology, Cramer explained, and that sector is the most levered to Europe. Coming in next is finance. And while the U.S. banks aren't at risk, they are linked to Europe, at least for the time being. The third largest sector in the S&P is healthcare. Cramer said here, there is hope because the sector appears to be bottoming, except for biotech. He recommends Bristol-Myers Squibb and Johnson & Johnson . Beyond healthcare are the consumer staples and the energy sectors. The staples just haven't fallen far enough, Cramer noted, while oil stocks remain trapped by crude prices hovers just below $50 a barrel. That leaves only domestic retail as an attractive bet, but only Ross Stores , Kroger and Dollar General seem to be immune to the pull of Amazon.com . Cramer concluded the only sectors really worth buying are the usual recession names -- mainly gold, utilities and telecoms -- and those aren't enough to get him excited about bottom fishing. Know Your IPO In his "Know Your IPO" segment, Cramer took a look at Twilio , the cloud communications company that came public last Thursday at $15 a share only to rocket 94% to $29 by the close of its first day and another 3% today. Cramer explained that Twilio allows companies including Uber, Nordstrom and Facebook's What's App to add real-time communications services to their applications. The company offers everything from voice messaging, call recording, text messages and even embedded video services for developers of all sizes. Twilio boasts 28,000 active customers and charges fees based on customers' usage, meaning that as Uber and Facebook expand their user bases, Twilio shares in the profits. That's how the company saw 78% revenue growth in 2014 and accelerated that to 88% in 2015. Twilio is not without some risk factors, however. The company is not profitable and is playing in an unproven market. Twilio also derives 15% of its revenue from a single customer, Facebook, which could decided to built its own platforms. Then there's Twilio's valuation. The stock now trades at 13 times sales, or factoring in its growth rate, 7.5 times 2016 sales. That's higher than the current valuation of Salesforce.com . But valuation aside, Cramer said he thinks Twilio is a winner on any weakness. Executive Decision: Jonathan Ayers For his "Executive Decision" segment, Cramer sat down with Jonathan Ayers, chairman and CEO of Idexx Labs , an animal health products and services company. Ayers said when it comes to our pets and their care, the sky's the limit. That's how a company like Idexx can still see 5% organic growth in times of recession, as the company did in 2009. Pets are not just an American phenomenon. Ayers noted that Idexx sees Europe still as an emerging market for the company, while other countries, like Brazil, have 75 million pets and almost no veterinary care. Ayers went on to explain that Idexx' new urine analyzer for cats can give pets a voice and tell vets what's wrong in just three minutes, and is more accurate than traditional testing. Since testing is done on a continual basis, Idexx enjoys lots of recurring revenue. Cramer concluded that Idexx is the type of stock you buy when Brexit takes the entire stock market lower. This article is being updated. Please refresh for the latest version. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

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Dick's Makes Its Move for 17 Sports Authority Locations

twocents@thestreet.com (Tony Owusu) — Mon, 27 Jun 2016 21:01 GMT

Shares of Dick's Sporting Goods were caught up in the "Brexit"-induced selloff Monday, shedding 3% to close at $40 on weak volume despite the news that the company submitted bids on 17 Sports Authority stores nationwide. Other retailers bid on only one store, according to Reuters' sources. Sports Authority filed for Chapter 11 bankruptcy protection in March. After efforts to find a buyer who could continue to operate the company as a going concern failed, the Englewood, Colo.-based retailer decided to start liquidating its inventory. There were rumblings that privately held sports retailer Modell's and U.K. retailer Sports Direct International were interested in jointly purchasing between 100 and 200 Sports Authority stores. Under the plan, the stores would continue to operate under the Sports Authority banner. However, those plans fell through, and the two entities ended up bidding on none of the available Sports Authority stores. If Dick's bid is approved, the company will add to its lead as the largest sporting goods retailer in the U.S with over 600 stores. Bids for the sale of 320 of Sports Authority's 450 locations were due last Thursday with an auction based on those bids to follow on Wednesday. Despite the loss of one of its main competitors, Dick's sees the immediate impact of Sports Authority's demise as being minimal thanks to industry headwinds. Earlier this year, Dick's lowered its current-quarter earnings to between 62 cents and 72 cents per share against Wall Street's 78 cents per share expectations. "We're looking at this as some short-term pain that we're willing to endure for the long-term benefit of our shareholders," said Dick's CEO Edward W. Stack following the company's earnings release in May. "Given the expected near-term liquidation activity in the market, we have adjusted our guidance to contemplate this dynamic. Over the longer term, we remain confident in our ability to aggressively capture displaced market share and to strengthen our leadership position." One of the major headwinds facing the sports retail industry is the oversaturation of bricks-and-mortar stores, according to a Credit Suisse note from April. "Excess store growth has been one of our key concerns, with growth accelerating over the last couple of years," the note read. Additionally, the retail sector as a whole has been struggling to cope with the disruption caused by online retailers like Growth Seeker holding Amazon and the increase of direct-to-consumer sales at vendors like Nike and Under Armour , another Growth Seeker holding. "You are seeing retailers make a push online, expanding their online presence in an attempt to reach consumers in the way that they want to shop," said Chris Versace, Fabian Wealth Strategies and Growth Seeker co-portfolio manager. However, that impact does not mean sports retail is dead in the water. For the shoppers who do still like to visit stores, Dick's is well positioned to scoop up the customers Sports Authority is leaving behind. "As we saw when Borders and Circuit City fell, consumers will move to other locations, not forgo spending," Versace said. Editor's Note: This article was originally published at 2:50 p.m. EDT on Real Money on June 27.

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How Invesco Got Slammed by Brexit -- And the Fallout for Other Money Managers

twocents@thestreet.com (Keith Griffith) — Mon, 27 Jun 2016 15:35 GMT

With London playing a central role in the global financial system, stocks across the industry have taken a beating from Great Britain's vote to leave the European Union. Some have fared better than others, though. Among publicly traded asset managers, Oaktree Capital and Och-Ziff Capital both closed down less than 3% on Friday, beating the S&P 500's loss for the day. Asset management giant Invesco was one of the hardest-hit stocks, trading down 14% on Friday, roughly double the decline for the sector. "Trading in IVZ stock appears to have been used recently as somewhat of a proxy for the referendum," Barclays analyst Kenneth Hill said in a note to clients this morning. For asset managers, the biggest short-term risk is exchange-rate exposure, with the British pound down 10% against the dollar since Thursday's vote. The Euro has also fallen roughly 3%. Funds with big holdings in foreign currencies, and the pound especially, will feel the most pain in the immediate aftermath. Invesco reported at the end of last year that a 10% decline in the pound would shave 5% to 6% from its annual earnings, which were $964 million in 2015. Invesco has hedged its currency risk with put options on the pound that increase in value as the currency weakens against the dollar, but it's unclear how much of the loss those deals will cover. An Invesco spokeswoman declined to immediately comment. Still, the gap between Invesco's currency stress-test report and it's real-world plummet suggest there could be a buying opportunity as the stock gets punished. "We see much of IVZ's key risk (currency-exchange losses) as largely hedged," writes Hill, adding that the price shock to the company on Friday "provides a compelling entry point for investors." In general, the financial services sector is one to be careful about, but it may hold opportunities said Mark Dorman, CEO of the multi-family asset management office Dorman Group. "There is a currency question we're trying to figure out, but we're looking for buying opportunities," he said. "For long-term investors this is a pretty unique opportunity."

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These U.S. Defense Stocks May Be a Haven in 'Brexit' Selloff

twocents@thestreet.com (Lou Whiteman) — Mon, 27 Jun 2016 14:49 GMT

The United Kingdom's vote to leave the European Union sent traders on both sides of the Atlantic scrambling for the exits, adopting a "sell first, ask questions later" mindset that caused significant declines nearly across the board. There are bargains to be found in such indiscriminate selling, and U.S. aerospace firms are a good place to look. The U.S. spends more on defense than the next half dozen biggest spending countries combined, a stat to keep in mind when pondering how events in Europe could impact U.S. contractors like Lockheed Martin and Northrup Grumman . Most all big-ticket defense items sold overseas are priced in U.S. dollars, further minimizing defense exposure to "Brexit" ramifications, and any economic decline in the region could arguably necessitate higher U.S. government European defense spending, offsetting any order weakness. Lockheed Martin is a holding in Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells LMT? Learn more now. Cramer and Jack Mohr, research director, noted Friday that the company "sits in an industry benefiting from serious secular growth," stating "stability and income generation will win out in this uncertain market and Lockheed fits the bill." Defense IT firms in particular would appear to be safe harbors during the Brexit storm, as they are primarily U.S. focused and have little commercial exposure. They also tend to be more levered than defense equipment makers and would enjoy more of a windfall from continued lower rates due to the economic uncertainty Brexit seems likely to cause. Leidos Holdings , which is in the process of combining with Lockheed Martin's IT and government services business, stands out as a potential beneficiary, as does CSRA . Commercial aerospace is more of a mixed bag, as European heavyweight Airbus and large numbers of European airlines do business with U.S.-based suppliers. Cowen & Co. analyst Cai von Rumohr, in a note, said that the weakness in sterling and troubles in Europe are an issue for United Technologies , which gets 4% of sales from the U.K. and 15% from other European nations. Boeing is already the subject of investor concern over the sustainability of its massive order book, and weakness in Europe could further pressure the company's future orders. The company, in a statement Friday, said "we constantly manage changes in political circumstances and we will continue to do so now with the evolving situation in the U.K. and Europe." Boeing also has a substantial defense business with a book of orders that longs expect to deliver in the quarters to come, potentially offsetting any eventual declines in commercial jet orders. Von Rumohr said that flight control systems maker Moog could be a beneficiary. The company generates about 5% of sales from Airbus, recording those sales in U.S. dollars but benefiting from some of the costs associated with those sales in now lower-valued British pounds. Jefferies & Co. analyst Howard Rubel noted that aircraft assembly maker Spirit AeroSystems generates 7% of revenue on pounds but also prices about 12% of its costs in the currency, "so any currency translation issues should be offset by lower costs." A wild card in thinking of defense stocks post-Brexit is business jets, with General Dynamics and Textron with the most exposure there. Demand for business jets tend to be more closely linked to economic swings than demand for larger commercial jets or armaments, meaning a recession in the United Kingdom or in Europe as a whole could hit biz jets particularly hard. The sector is already facing turbulence due to a slowdown in China and commodity price declines that have dried up demand in many emerging markets. A falloff in Europe would add significant pressure to already falling jet prices.

What's Next for the Stock Market This Week Post-''Brexit?'

twocents@thestreet.com (Richard Suttmeier) — Mon, 27 Jun 2016 13:06 GMT

Is the bear finally here? A week ago the weekly charts were flashing technical warnings despite the high probability that he U.K. would vote to stay in the European Union. Even with the Dow Jones Industrial Average closing above 18,000 on Thursday and with the S&P 500 within 1% of its all-time high, weekly momentum (12x3x3 weekly slow stochastics) continued to decline. This technical setup was a clear warning that stocks would be vulnerable given a vote by the U.K. to leave the European Union. The weekly charts are now negative for all five major U.S. equity averages, which is a clear signal that 2016 would be "the year of the bear." All five now have year-to-date losses. The Dow 30 is down just 0.1% with the S&P 500 down just 0.3%. The Nasdaq Composite NDAQ is down 6% year to date, with transports down 2.5% and the Russell 2000 down 0.7%. The Nasdaq and Russell 2000 ended the week in correction territory with declines off their all-time highs of 10% and 13%, respectively. Transports have fallen into bear market territory 21.4% off its all-time high. Here's how to trade the five major U.S. equity averages via the exchange-traded funds that track them. The Dow Jones Industrial Average can be traded using the SPDR Dow Jones Industrial Average ETF , aka Diamonds. The S&P 500 can be traded using the SPDR S&P 500 ETF Trust , aka Spiders. The Nasdaq is best traded using the ETF that represents the Nasdaq 100, the PowerShares QQQ Trust ETF , dubbed QQQs. The Dow Jones Transportation Average can be traded using the iShares Transportation Average ETF . The Russell 2000 can be traded using the iShares Russell 2000 ETF . Here are the daily charts and trading levels for the five stock market ETFs. Diamonds Courtesy of MetaStock Xenith The weekly chart for Diamonds stays negative with the ETF below its key weekly moving average of $176.26 and still well above its 200-week simple moving average of $162.42. The weekly momentum reading ended last week at 56.63 down from 67.04 on June 17. Investors looking to buy this ETF should hold off as the downside risk is to $145.45 by the end of 2016. Investors looking to reduce holdings should do so on strength to $174.99, which is a key levels on technical charts until the end of this week. Spiders Courtesy of MetaStock Xenith The weekly chart for Spiders remains negative with the ETF below its key weekly moving average of $206.44 and still well above its 200-week simple moving average of $185.59. The weekly momentum reading ended last week at 66.64 down from 79.60 on June 17. Investors looking to by Spiders should hold off as the downside risk is to $163.38 by the end of 2016. Investors looking to reduce holdings should do so on strength to 206.91, which is a key level on technical charts until the end of this week. QQQ Courtesy of MetaStock Xenith The weekly chart for QQQ remains negative with the ETF below its key weekly moving average of $107.10 and still well above its 200-week simple moving average of $91.64. The weekly momentum reading declined to 54.15 down from 65.01 on June 17. Investors looking to buy QQQ should hold off as the downside risk is to $96.72, which is a key level for the remainder of 2016. Investors looking to reduce holdings should do so on strength to $206.91, which is a key level on technical charts until the end of this week. Transports Courtesy of MetaStock Xenith The weekly chart for the transportation ETF stays negative with the ETF below its key weekly moving average of $137/06 and just below its 200-week simple moving average of $132.46. The weekly momentum reading ended last week at 38.77 down from 46.16 on June 17. Investors looking to buy the transportation ETF should consider doing so on weakness to $123.82, which is the downside risk until the end of 2016. Investors looking to reduce holdings should do so on strength to 136.24, which is a key level on technical charts until the end of 2016. Small-Caps Courtesy of MetaStock Xenith The weekly chart for the small-cap ETF has been downgraded to negative from positive but overbought with the ETF just below its key weekly moving average of $113.02 and above its 200-week simple moving average of $108.48. The weekly momentum reading ended last week at 75.19 down from 81.95 on June 17 moving below the overbought threshold of 80.00. Investors looking to buy this ETF should do so on weakness to $103.68, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should do so on strength to $115.49, which is a key level on technical charts until the end of this week.

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Sanofi to Exit Animal Care in $25 Billion Asset Swap With Boehringer

twocents@thestreet.com (Paul Whitfield) — Mon, 27 Jun 2016 08:51 GMT

French drugs maker Sanofi will hand its €11.4 billion ($12.6 billion) Merial animal medicines business to Boehringer Ingelheim in exchange for the German company's over-the-counter medicine's business and €4.7 billion of cash. The deal announced on Monday comes almost exactly six months after the companies announced they were in exclusive talks over the asset exchange, which excludes the German company's Chinese operations. Shares in Sanofi traded Monday morning at €70.02, up 65 euro cents or just under 1% on their Friday close. "The strategic swap lays the foundation for both companies to reach size and scale in two highly attractive pharmaceuticals activities," said Sanofi and Boehringer. Sanofi will increase its share of the consumer healthcare market to about 4.6%, equating to about €4.9 billion based on 2015 sales figures. It will also strengthen its operations in key target markets of Germany and Japan, where it had largely failed to build sales volumes of its own cough, cold and stomach medicines. Sanofi said it expects the deal to boost earnings per share from 2018 onwards and said it would use cash from the sale to repurchase its own stock. Sanofi CEO Olivier Brandicourt is reshaping the French drugs maker to reduce its reliance on a handful of key drugs, including Lantus, a diabetes treatment that recently lost patent protection in the U.S. Brandicourt, who took up his role last year, is also seeking to boost his company's pipeline of new drugs with a $9.3 billion hostile bid for biotech Medivation . That offer $52.50 per share appears unlikely to succeed given Medivation's current share price of $56.95. It suffered a further blow on Friday when influential shareholder advisory service Glass, Lewis advised Medivation shareholders to reject the bid and Sanofi's efforts to oust Medivation's board. For closely held Boehringer the asset swap with Sanofi will make it the world's No. 2 animal care provider, doubling its sales in the sector to about €3.8 billion based on 2015 figures. The deal is expected to close by the end of the year.

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Brexit Triggers U.K. Political Turmoil

twocents@thestreet.com (Jonathan Braude) — Mon, 27 Jun 2016 08:45 GMT

British Prime Minister David Cameron once warned that the peace and stability of Europe were at risk if the people voted to leave the European Union. The warning came to be derided by the "leave" camp as his Armageddon speech. Well, the public duly voted to leave in last Thursday's shock referendum result. And, quicker than Cameron could possibly have imagined, Armageddon has broken out. The war is not on the battlefields of Europe, but in the bloody arena of British domestic politics. Nobody has any clue how to proceed. Other European leaders have been preparing their strategies for a possible Brexit. While they might not agree on how quickly to move forward, or whether to punish Britain or try to reach a pragmatic deal, there is little sign of fundamental disagreement on the principles. If the U.K. wants out, so be it. It cannot have access to the single European market without also accepting the free movement of labor. Membership of the single market implies the right of all Europeans, from Greece and Poland in the East to France and Portugal in the West, to live and work in Britain. There will be no concessions on that. And if Germans and Italians can't work freely in Britain, Britons won't be able to work freely in in Germany or Italy. On the British side there is no plan in place. The "remain" camp, led by the government, was unprepared to lose the referendum vote. The leavers, who campaigned on a promise that Britain would "take back control" from Europe, were unprepared for victory. Prime Minister Cameron himself has already fallen on his sword. The Conservative Party, which he first called on to "stop banging on about Europe" and, when that didn't work, tried to unite by calling his ill-judged referendum, is now tearing itself apart as it battles to replace him. In the turmoil, the hard work of planning is on hold. In the leadership struggle, much of the Brexit faction supports Boris Johnson, the charismatic former Mayor of London who led the "Vote Leave" campaign to a victory that seemed to take him by surprise. But Johnson is a journalist-turned-politician who in neither profession has ever let the facts get in the way of a good headline. So there is a powerful "stop Boris" campaign, supported by some more thoughtful and responsible Brexiteers as well as virtually everyone on the other side of the Conservative Party's great divide. He is seen as ill-suited to lead the country through a crisis largely of his own making. Exactly who would have the stature and support to stand against him is unclear, although there are plenty of names being thrown about. But Britain is about to embark on the most difficult and important negotiation in a generation. The threat is not just to our economy, to our ability to trade with and offer financial services to the vast market of 450 million people on our doorstep. It is a threat to the to the rights of our own people to travel and work in Europe. The rights of the 1.2 million Britons working or in retirement in the EU are in the balance. Brexit will restrict the future choices of our children. It will reduce the options for British scientists to work with their continental peers, for British universities to take part in international initiatives and exchanges for British qualifications in medicine or teaching to be recognized abroad. With so much at stake, Britain needs a leader with gravitas, not a shambling clown whose reputation with the crowd rests on his readiness to be photographed kissing a fish, waving a Cornish pasty, or hanging helplessly in mid-air after getting stuck on a zip-wire. The parliamentary opposition, the Labour Party, is imploding too. The party failed to rally its base to the "remain" cause. Disaffected Labour supporters voted en masse for Brexit. Labour's hard-left leader, Jeremy Corbyn, a bland British version of Bernie Sanders, but without the skill at working crowds, is refusing to step down. But half his top officials have resigned in protest and are leading a revolt against him. The truth is, however, that the rebels are probably even further out of touch with the party base than the so-called Corbynistas. Neither the Liberal London elite of the parliamentary Labour Party nor the privately educated, independently wealthy Conservative leadership has much experience of insecurity or unemployment. So: no leader, no effective opposition - and that's only the beginning. England and Wales voted overwhelmingly for Brexit. Scotland and Northern Ireland - the other two "home nations" of the United Kingdom - voted to remain. Scotland voted to remain in the U.K. in a 2014 referendum, but is now considering whether to ballot again. Scottish Nationalist Party leader Nicola Sturgeon is thrashing around for the constitutional ways to keep Scotland in the EU. Among other desperate ideas, she has said the Scottish regional parliament in Edinburgh might withhold legislative consent to legislation necessary for Brexit. Constitutionally and legally, she is likely to be on shaky ground. She might also have a tough time with the principle that it is wrong for the much larger population of England to impose its will on Scotland, but fine the other way round. And yet it is not only Scotland that feels hard done by. Britain is used to parliamentary democracy. Lawmakers are elected to make decisions on the voters' behalf. After a general election, the government of the day usually gets its way, but minority voices can still make themselves heard. Especially when the government has a slim majority, concessions may have to be made to avoid punishment at the next election. This referendum might have been a more direct form of democracy, but the 48% of the country who voted to Remain - including big majorities in London and the wealthier parts of Wales - now have no recourse. It is true that in the parliament of the United Kingdom at Westminster, where lawmakers have the final say on foreign affairs and relations with the European Union, the opponents of Brexit are in a majority. Like their regional counterparts, and with greater constitutional authority, they could also hold up or block legislation related to Brexit. But to do so would likely be seen as a defiance of the will of the people. And the end result would likely be an even worse form of limbo than the uncertainty which already awaits us over the coming months and years.

IMF Urges Quick Divorce Between U.K. and E.U.

twocents@thestreet.com (Lisa Botter) — Mon, 27 Jun 2016 08:15 GMT

The U.K. and the European Union must work together and quickly to mitigate the impact on markets of Britain's Brexit vote, the head of the International Monetary Fund said. The IMF's Christine Lagarde said on Sunday night that the fund "will continue to encourage the parties involved to actually proceed with this transition in the most efficient, predictable way in order to reduce the level of uncertainty, which will itself determine the level of risk we are facing." Speaking at the Aspen Ideas Festival in Colorado, Lagarde said, "At this point in time, policy makers, both in the U.K. and in Europe, are holding that level of uncertainty in their hands. And how they come out in the next few days is going to really drive the direction in which risks will go." She added that the turmoil in the Labour and Conservative parties is adding uncertainty to the market. Lagarde also said that markets mispriced a Brexit. "Despite that, there was no panic. There was a violent, brutal, immediate massive move...But there was no panic, and the central bankers did the job that they were prepared to do just in case," she said. This comes as S&P said that $2.08 trillion was wiped off global markets on Friday. It said this was the biggest daily loss ever - bigger than that triggered by the Lehman Brothers bankruptcy during the financial crisis and the Black Monday crash in 1987. Calculations based on S&P Global Broad Market Index - based on equity markets in 47 countries - showed that 4.7% was taken off equity indices' market capitalizations on Friday. Benchmark indices in Europe were the hardest hit, with those in Italy and Spain falling about 12%. Markets today have seemingly calmed. The FTSE 100 opened only slightly down and was recently at 6,113.12, 0.41% down. The pound was recently down 1.58% against the dollar at $1.3463.

Skullcandy to Be Gobbled by Incipio, Not Founder

twocents@thestreet.com (Laura Berman) — Fri, 24 Jun 2016 21:34 GMT

Weeks after disclosing a take-private offer from its founder, Skullcandy announced Friday that private equity-backed Incipio had agreed to acquire the consumer electronics company for $177 million in cash. Under the terms of the deal, Incipio will offer $5.75 in cash per Skullcandy share, a 22.9% premium over Thursday's close of $4.68. Skullcandy's cash, cash equivalents and short-term investments of $46 million as of March 31 imply an enterprise value of $131 million, the company said. Skullcandy shares closed just above the purchase price at $5.76 in Friday trading, up 23.1%. Mobile accessories specialist Incipio of Irvine, Calif., most recently acquired two Apple accessories companies, buying ClamCase in June 2015 and Incase Designs the following September, both for undisclosed terms. "The team at Skullcandy and its international presence will also allow us to accelerate the global impact of our multi-brand offense," Incipio CEO Andy Fathollahi said in a statement. The Skullcandy price tag was below the roughly $6.65 per share that analyst Dave King of Roth Capital Partners had predicted. That estimate assumed a multiple of 0.51 times King's revenue projection for fiscal 2016. Electronics accessories company Zagg paid a multiple of 0.54 times revenue, or $100 million, for competitor Mophie on Feb. 2. Apple shelled out $3 billion, or a 1.92 times multiple, for audio products company Beats Electronics in 2014. "We see the company/brand as attractive to both financial and strategic buyers, though the deal makes sense for Incipio given the company's existing action sports-related retail distribution for the Tavik brand and consumer electronics distribution for its Incipio, Incase and Braven brands," King wrote in a Friday note. "This suggests the potential for both back-end and certain front-facing synergies." King believes another bidder may come forward, although it's "not necessarily likely." The Deal previously reported that potential bidders, in addition to private equity firms, could include consumer electronics company Harman International Industries and brand management licensing groups such as Sequential Brands Group and Iconix Brand Group . Skullcandy disclosed in a Schedule 13D filing with the Securities and Exchange Commission on June 7 that Ptarmagin, the investment firm of Skullcandy founder and former CEO Rick Alden, was considering taking the company private. Ptarmagin holds a 12.7% stake in the Park City, Utah, company. The asset purchase agreement with Incipio allows a go-shop period through July 23. If Skullcandy pursued another offer, Incipio would receive a breakup fee of roughly $6.2 million. Skullcandy anticipated the Incipio deal would close in the third quarter. The buyer will fund the transaction through a new senior credit facility with Monroe Capital Advisors and Wells Fargo Bank. Skullcandy specializes in headphones and other audio accessories. While the company went public at $20 per share in 2011, it has never traded above its IPO price. Consumer products-focused private equity firm Goode Partners acquired a minority stake in Incipio on Dec. 31. Goode previously acquired a stake in Skullcandy in 2008, taking the company public in 2011 and exiting its investment four years later. Skullcandy retained David Shiffman and Juan Mejia of Peter J. Solomon as its financial advisers for the deal. Cary Hyden, David Wheeler, Jim Barrall, Holly Bauer, Wesley Holmes, Joshua Holian, Laurence Stein, Eric Cho and David Kuiper led a Latham & Watkins team that provided legal advice to the target. Eric Rindahl, Jeff Ng, Daniel Friedman, Aidan Lenihan and Austin Black of Wunderlich Securities were financial advisers to Incipio, which tapped a Rutan & Tucker team of Derek Dundas, Garett Sleichter and Marc Boiron as its outside counsel. Incipio declined to comment. Skullcandy representatives did not respond to requests for comment.

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Deals of the Week: Pushback on Tesla Bid for SolarCity

twocents@thestreet.com (Bob O'Brien) — Fri, 24 Jun 2016 20:49 GMT

This week's merger and acquisition activity provided a stark reminder, if one was needed, that not all hookups are constructively received by the market. The most notable deal of the week found Tesla bidding $2.8 billion for SolarCity , the maker of solar panels. Tesla's well-known chief Elon Musk touted the merger as an initiative that would create the first "vertically integrated energy company," marrying Tesla's electric cars and energy storage systems with SolarCity's solar panel products. The offer represented a 21% premium to SolarCity's share price, which has dropped from a 12-month high of $61, to $21 recently. Wall Street wasn't nearly as enthusiastic about the deal as Musk. Tesla shares lost 12% in after-hours trading following the announcement of the linkup. Part of that owed to the less than hand's off character of the transaction. Musk owns 20% of SolarCity. A cousin of his is its chief executive. Musk distanced himself from the oversight of the transaction, saying it would have to be the decision of independent shareholder interests that ruled on accepting the deal. Others worried that the money-losing SolarPower operations would sink the balance sheet of Tesla, which recently undertook a $1.4 billion stock sale of its own. One sell-side analyst projected just a 20% to 40% likelihood the transaction would take place. Meanwhile, it marked another somewhat logy week for the M&A market. Jim Cramer, founder of The Deal's parent, TheStreet and manager of the Action Alerts PLUS portfolio, said on his CNBC television program this week that the market was ripe for consolidation, but that he wasn't seeing an appropriate level of M&A activity. Cramer stated that the economy has "too many of everything," including retailers, airlines, banks and restaurants, but that the consolidation taking place hasn't been powerful enough to redress the problem. Once again, as has been the case all year, the market has seen a powerful uptick in the number of deals undertaken versus the past two years, but at substantially lower price points than had been the case in those periods, suggesting the transaction activity has been centered on middle market deals, rather than megacap asset swaps. The number of transactions announced year to date in 2016 stands at 3,344, a 60% bulge over the 2,070 struck to this point last year, and larger than the 2,303 in the banner year of 2014. Despite the surge in announced transactions, the volume has declined, to just under $1.2 trillion year to date, versus $1.3 trillion at this juncture last year. Nearly halfway through the year, the total dollar value of transactions has retreated 8%. One of the largest M&A transactions of the week reflected one of the biggest trends involving China-based companies: Chinese companies that are listed on U.S. exchanges getting offers to go private so they can relist in China, where public valuations tend to be larger than in the U.S. In this week's transaction, Ocean Management launched a $4.4 billion nonbinding proposal to buy Qunar Cayman Islands , China's leading travel booking website. Ocean Management -- a unit of Ocean Imagination, a private equity fund that invests in travel industries in China -- said it would seek to win the approval of Qunar shareholders, including its largest shareholder Ctrip.com , China's largest online travel portal and a portfolio company of U.S. private equity firm Silverlake Partners. Meanwhile, in the biggest announced M&A transaction of the week, Tencent Holdings, a China-based media and internet company, said it would buy up to 84% of Supercell Oy, the Finnish gamemaker best known for its "Clash of the Clans" game title. Tencent itself has been involved in transactions for Chinese online travel enterprises, reflecting the broadening appetite for outbound tourism activities on the part of China citizens. Tencent is paying $7.3 billion for the 72% stake in Supercell held by SoftBank Group, the Japanese telecom concern that is the majority owner of Sprint . For SoftBank, the sale of its interest in Supercell is the latest in a spree of divestitures aimed at reducing the company's roughly $80 billion in debt. Earlier this month, SoftBank said it will sell a total of $8.9 billion worth of securities in Alibaba , the huge Chinese e-commerce platform, bringing down its holding in the company to around 28%. SoftBank also recently announced it would sell a majority of its stake in game publisher GungHo Online Entertainment, the business it originally partnered with in 2013 to take the position in Supercell.

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Jim Cramer -- I'm Worried About Double-Digit European Bank Losses

twocents@thestreet.com (Jim Cramer) — Fri, 24 Jun 2016 20:49 GMT

It's tough to go down more than the 3% that Britain was down, as they are the epicenter of this, not us. But the complacency of today's opening was too much for me. Now we are getting more realistic. Let's not be glib. I am not worried about systemic risk here. Our banks have never been stronger. Our companies are flush with cash. The world will grow more slowly than it is now and our companies will be ready for that. We will be the safe haven. But here's what I am worried about -- European banks. Lloyds shares are off 24%, Royal Bank of Scotland has lost 22%, Barclays is down 20%, Deutsche Bank has dropped 16% and Credit Suisse has shed 15%. That's very disconcerting. These moves are ugly, and they aren't the type of thing that happens in a vacuum. This is what you should pay attention to, not our banks or our industrials or anything else except oil and interest rates. Oil is bad for the bull and interest rates are terrible for the banks. This is a distinctly subpar situation. (Check out other Real Money columnists take on the banks here, here and here.) Editor's Note: This article was originally published at 1:31 p.m. EDT on Real Money on June 24.

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How Past Financial Shocks Prepared Biggest U.S. Banks for 'Brexit'

twocents@thestreet.com (James Langford and Bradley Keoun) — Fri, 24 Jun 2016 18:48 GMT

If the Clash's "Should I Stay or Should I Go" described the acrimonious debate before Britain's vote to leave the European Union, the punk band's apocalyptic "London Calling" may have prophesied the world's worries the day after the decision. Released at the height of the Cold War, the song's hook references a BBC tagline from broadcasts to occupied countries during World War II. Its dour lyrics contemplate everything from another ice age to a nuclear meltdown, but one of the less vivid lines may be the most apt: "London calling to the imitation zone; forget it, brother, you can go it alone." Going it alone, however, is likely to cause significant disruptions both in London and for companies far outside the city, particularly the largest U.S. banks. Given its history as a global financial center and its access as a European Union member to the continent's markets, London was, before the vote, an ideal location for financial firms. JPMorgan Chase , Goldman Sachs , Morgan Stanley , Bank of America and Citigroup each employ thousands of workers at U.K. operations and garner billions of dollars in operating income from the country, according to an analysis by brokerage firm Keefe, Bruyette & Woods. All five sought to reassure customers and employees on Friday, even as their stocks plunged amid speculation that the resulting market volatility and devaluation of the British pound might impair trading results. There's also the possibility that the U.S. Federal Reserve might further delay interest rate increases, hurting lending margins. Executives at the firms said they had plans in place to deal with the possibility of a British departure, as well as experience dealing with market upheaval. Each of the banks has been in business for more than a century, and their U.K. income accounts for only a fraction of total income. Additionally, all have substantially increased capital reserves -- a financial cushion against economic downturns -- since the 2008 financial crisis, which took down the investment bank Lehman Brothers and saw Bear Stearns and Merrill Lynch acquired by JPMorgan and Bank of America, respectively. Results of annual tress tests released by the Federal Reserve on Thursday showed each of the companies had more than enough of a buffer to withstand a severe economic downturn, with unemployment of as much as 10% and negative interest rates. "It is to our advantage that we work in an organisation that has a long history of thriving on change, be it regulatory, market or strategic," Alex Wilmot-Sitwell, president of Charlotte, N.C.-based Bank of America's European, Middle East and African businesses, wrote to employees in a memo obtained by TheStreet. The company has about 5,545 workers in the U.K., according to Keefe Bruyette, and $5.2 billion in operating income, or about 6% of its total. The firm's focus "must not be on ourselves but on ensuring that we are squarely behind our clients during these unprecedented times," Wilmot-Sitwell wrote. "Across each of our areas of business, we have many clients who will be reflecting on the changes that they will need to make in the light of the U.K.'s decision. We must make sure that we are a vital contributor to that strategic dialogue and the first port of call when they are ready to transact their business." Among the banks affected most by the decision would be JPMorgan and Goldman, Keefe Bruyette analyst Brian Kleinhanzl predicted in an interview before the vote. JPMorgan garnered $7.7 billion in 2014 operating income in Britain, or about 8% of the companywide total; Goldman's $6.3 billion represented 18.5%. EXCLUSIVE LOOK INSIDE: Citigroup is a holding in Jim Cramer's Action Alerts PLUS charitable trust portfolio. Want to be alerted before he buys or sells the stock? Learn more now. How JPMorgan structures its European businesses going forward will depend on Britain's degree of engagement with the rest of the Europe, with details that will be negotiated over a period of years, CEO Jamie Dimon said in a note to employees obtained by TheStreet. "For the moment, we will continue to serve our clients as usual, and our operating model in the U.K. remains the same," he wrote. "In the months ahead, however, we may need to make changes to our European legal entity structure and the location of some roles. While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world." Dimon had told bank employees earlier this month that a vote to leave the European Union might affect as many as 4,000 of its 16,000 employees in the country. "We will always do our best to take care of our people and do the right thing during times of change," he said in Friday's memo. The bank also recognizes "the potential for market volatility over the next few weeks, and we are ready to help our clients work through it." New York-based Goldman, which has 6,410 workers in the U.K., has "been focused on planning for either referendum outcome for many months," CEO Lloyd Blankfein said in an e-mailed statement. "Goldman Sachs has a long history of adapting to change, and we will work with relevant authorities as the terms of the exit become clear. Our primary focus, as always, remains serving our clients' needs." The bigger risks to U.S. banks are all in the long-term, Keefe Bruyette's Kleinhanzl said in the interview. An important one is whether Britain retains passporting privileges that allow banks in any EU country the right to conduct business throughout Europe without obtaining a separate license in each country, London law firm Ashurst said in a report. A vote to leave would "challenge London's role as the venue of choice for global firms to conduct their European business," Ashurst partners Rob Moulton, James Coiley and others noted in the report. "Whether it survives such a challenge depends in part upon the deal that the U.K. manages to negotiate on exit, and in part upon London's legendary ability to reinvent itself where necessary." The full extent of the vote's "considerable" impact won't be apparent for some time, New York-based Morgan Stanley said in a statement. "There will be at least a period of two years before an actual exit takes place, so there will be time to implement any changes required to adjust our business to the new environment," the bank said. "Morgan Stanley will continue to monitor developments very closely and will adapt accordingly while prioritizing the interests of our clients, our shareholders and our employees." Economic conditions will be a focus for not only the banks themselves but one of their regulators, the Federal Reserve, and its interest-rate policy. The Fed cut short-term rates to nearly zero during the 2008 crisis, then kept them there for seven years. During market volatility prompted by China's slowing growth and plummeting oil prices early this year, the Fed cut a forecast for as many as four rate hikes before December by half. Many traders now expect only one, which Morgan Stanley predicts will be in December, a timing forecast in which it's now joined by Bank of America. Moody's Analytics still views September as a possibility, albeit a narrow one. "Everything Despite the short-term challenges, European upheaval is likely to prove beneficial to U.S. banks overall, Dick Bove, an analyst with Rafferty Capital Markets, said in a telephone interview. "They'll benefit from an enhanced competitive position," Bove said. "American banks are considered to be in reasonably good condition, and if you're looking at European banks which may not be in such great condition, then for customers inside the U.S., the European banks are not going to be meaningful competitors." Further, with both the pound and the euro dropping against the dollar, "that is a stimulus to greater economic activity here," he said. "It lowers the price for everything, which means more credit-card activity." For financial-company investors, the relevant question is the outlook over the next couple of months, said Stan Bokov, chief operating officer of TradingView, a social media platform for non-professional traders in more than 80 countries. "I think the bounce-back will be fairly fast," Bokov said in a phone interview. "There is no real alternative in Europe to London. In Madrid, there's no infrastructure, and the local macro setup is not favorable. France has constant social and political disruption. There's just nowhere else to go." Trading in the days prior to the referendum -- where many investors were betting that U.K. voters would choose to remain -- exaggerated the risks, said David Ellison, senior vice president at Hennessy Funds, which oversees about $6.5 billion. "The financial markets are a lot like Vegas," he said. "It looks like this is a lot worse than it is, because of the casino-like nature of the financial markets."

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Baker Hughes Rig Decline May Subdue U.S. Oil Tension After Brexit

twocents@thestreet.com (Tom Terrarosa) — Fri, 24 Jun 2016 17:33 GMT

After a three-week rally, Baker Hughes' reports the number of active U.S. oil and gas rigs is down, falling to 421 this week, an decrease of 3 rigs over last week. U.S. oil rigs down significantly by 7 to 330 from 337 last week, while U.S. natural gas rigs were up 4 to 90 versus 86 last week and miscellaneous rigs came in the same at 1. The U.S. offshore rig count remained stable once again this week at 21, but is down 7 rigs year over year. While the recent increase of U.S. active rigs had been somewhat expected at this stage in the cycle and a fairly positive event in recent weeks, following U.S. and global crude oil's reaction to the United Kingdom's break from the European Union, the market could have been further stressed by the count's continued ascent. West Texas Intermediate crude futures, the U.S. benchmark, were down 4.7% to $47.77 at 1 p.m., while the global Brent crude benchmark saw futures down 4.6% to $48.54. In short, rigs being put back to work earlier than many analysts expected could signal operators are working their way through drilled but uncompleted wells, or DUCs, which therefore entails that U.S. production could see less of a decline than anticipated. The International Energy Agency has hinted toward this outcome in recent weeks, leading many, including longtime oil market bear Goldman Sachs, to believe the commodity recovery remains in a fragile state. Prior to a commodity rally beginning in March, industry followers saw little hope for rigs going back to work in 2016, and even after prices seemed to stabilize near $50 per barrel, bullish analysts have only pulled up forecasts to the tail-end of 2016. But according to TheStreet's founder Jim Cramer, and as BHI's report demonstrated Friday, data that we're getting about oil continues to show a decline in the amount of drilling, leading him to believe oil remains between $45 and $50 per barrel, despite recent breakouts from powerhouses ExxonMobil and Chevron , which suggest oil is heading toward $80. "I don't think [oil] is doing that," Cramer explained, adding that recent positive movement of oil stocks like Pioneer Natural Resources despite oil's fall illustrates the lack of opportunities for buying oil stocks now. "I don't see any bargains in oil." A sooner-than-expected uptick in U.S. drilling, which has fallen dramatically as companies drastically cut capital expenditures through 2015 and into the first quarter of 2016 when oil prices hit a 12-year low, could halt improvement in a global oversupply of oil that has been dampened in recent months with exogenous production disruptions in Canada, Nigeria and elsewhere. And while many analysts, such as the KLR Group's Darren Gacicia, insist that the supply-demand imbalance is headed toward correcting itself, others, including Cantor Fitzgerald's Brad Carpenter have opined that U.S. producers' insistence on adding rigs in a $50 oil world could prove self-defeating and cause a delay in a West Texas Intermediate crude oil rally that at one point did not see oil above that mark until 2018. Nevertheless, the market could feel some relief Friday after seeing the U.S. lose the majority of what it gained last week in oil rigs, an event that signals continue volatility in the count and shines light on the looming theory that $50 may not be the magic number.

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Cramer Says Steer Clear of Financials Amid 'Brexit' Fallout

twocents@thestreet.com (Laura Sanicola) — Fri, 24 Jun 2016 17:05 GMT

While the financial sector took the biggest hit after the U.K. voted to leave the EU, the fallout and disruption in the global markets does not necessarily provide a buying opportunity in the sector. "Financials are not a buy," said Jim Cramer, adding that he is most concerned about the big international banks. "These are not the opportunities I've been waiting for to get people to buy stocks," said Cramer, TheStreet's co-founder and portfolio manager of the Action Alerts Plus portfolio. The S&P 500 dropped 3.08% lower to right around 2,050 midday Friday and financials saw a 4% decline. The Dow Jones Industrial Average dropped more than 500 points in mid-day trading. Lloyds Banking Group's New York-listed shares were down 24.74% at 3.27. Barclays traded down 20.13% at $8.93 per share midday Friday. Royal Bank of Scotland traded down 22.76% at $5.78. In other financials: JPMorgan traded down almost 5% at $60.92 while Goldman Sachs shares were down 5.33% at $144.53. Cramer advises holding off on buying or selling in the current market conditions. The executives of several financials responded on Friday morning in attempts to reassure their workers and the public that they should remain confident in the banks' relationship with the UK. CEO of Barclays Jes Staley told his staff earlier that his company was not straying from its course, writing that "the strategy we announced on 1 March was not conditional on the U.K. remaining in the E.U. We are a transatlantic consumer, corporate and investment bank, anchored in the U.K. and the U.S. That remains the core of our strength and the Barclays of the future." Lloyds CEO Antonio Horta-Osorio told his employees Friday that the bank will "work at pace" on its contingency plans in an attempt to quell fears over Brexit. "As one of the U.K.'s best capitalised banks we remain committed to helping Britain prosper, continuing our support for the U.K. economy, and providing banking and insurance services that our customers rely on," he wrote. Douglas Flint, chairman of HSBC, stated that "our commitment to British businesses, customers and staff in the UK remains undiminished." See full Brexit coverage here.

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WTI Crude Plummets With Brexit; Oil-Levered Names Feel the Hurt

twocents@thestreet.com (Tom Terrarosa) — Fri, 24 Jun 2016 15:06 GMT

Just as the oil and gas industry started to see signs of renewed life in the U.S., the United Kingdom appears to have sent a title wave crashing down on commodity markets. West Texas Intermediate futures, the U.S. crude oil benchmark, were down more than 5% to $47.56 as the stock markets prepared to open Friday. Futures for the global benchmark, Brent Crude, were down nearly 5.4% to $48.18. U.S. stock markets also saw their steepest decline in 10 months as the Dow Jones Industrial Average plummeted by 400 points to start the day, the S&P 500 opened down 37 points, and the Nasdaq Composite took its largest daily hit since 2011, beginning the session down 186 points, or 3.8%. While the effect of the so-called Brexit weighing heavily across the board, diversified oil and gas behemoths like ExxonMobil and Chevron took a relatively modest hit in share prices, both down less than 2% near 10 a.m. Friday. Not surprisingly, oil and gas players that are more heavily levered to commodity prices, such as U.S. independent explorers and producers QEP Resources , Pioneer Natural Resources and Marathon Oil , were all suffering greater losses between 3% and 4% early Friday. The drop in oil prices following Brexit can be largely linked to a bolstered dollar, which saw as much as a 3.7% increase Friday, as a stronger dollar typically depresses oil prices. But fear not says BMI Research, a market analysis firm, in the long-term the UK's Brexit vote will have a limited impact on the global crude oil market. "Risk-off trading will depress prices in the coming days, but positive physical fundamentals - which remain unchanged in the wake of the vote - will see any losses quickly pared. However, we highlight strong downside risks to North Sea investments, due to renewed uncertainty surrounding Scottish independence," BMI analysts wrote in a Friday report. "Heightened volatility and broad risk-off sentiment pose further downside risk to prices [temporarily]. However, declines will be capped by firming fundamentals in the physical crude oil market and we expect any losses to be rapidly reversed." On the other hand, the firm also warns that the Brexit vote is "a potential trigger for wider and more sustained financial market weakness" and has raised the odds on other tail-risk events, such as a U.S. recession, Chinese yuan devaluation and a fiscal crisis in Japan. Meanwhile, the commodities market could take another blow later today as Baker Hughes is set to release its weekly rig report at 1 p.m. After three consecutive weeks of reported rig increases, a fourth uptick in active rigs could mean operators are putting rigs back to work sooner than expected, and even though analysts have warned that production tends to lag increased rig activity significantly, some have noted that a lower-than-expected U.S. production decline could hinder a global oil rally.

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Britain Leaving the EU? So What?

twocents@thestreet.com (Jay Somaney) — Fri, 24 Jun 2016 13:35 GMT

Well, the unimaginable has finally happened. The 17% chance of a ""Brexit"" has come to pass and global markets are paying the price for a political situation. Prime Minister David Cameron of the U.K. has in essence stepped down, but said he will stay on till October, by when Britain should get a new PM. Our futures are indicating a lower open. However, European markets are well off their lows, while our own equity futures are well off the lows of the night. Our futures were off a lot more a few hours ago, when the vote in favor of Britain leaving the EU was first made public. This is mainly an EU issue and a Britain issue with global ramifications, but not to the extent that people might think. Yes, the dollar will strengthen, yes the yen has strengthened, yes there is a knee-jerk reaction to run to gold. However, in the big picture not much will change after all is said and done. George Soros will make a killing on his bet against the British pond, but already the pound is at the high of the day vs. the greenback. The Bank of England has just said that it stands ready to inject up to 250 billion pounds ($342 billion) into the British financial system if required. The FTSE 100 is down around 5% after having plunged around 8% at the open, and has pretty much given back just what it gained in the last five trading days. It is back at last Thursday's levels, which in the big picture is not as bad as feared. Of course, the Asian markets like Hong Kong and Japan got hammered due to the fact that they were closed by the time the European markets opened. Shanghai was barely down given the events of the day, closing lower by 1.3%. Can our markets react as calmly as the Chinese markets did? I doubt it. However, I have never been happier that our markets did not move up in the last five or six days like the European markets did. Maybe our markets had already sussed out that "Brexit" was a go, despite the odds makers saying there was virtually no chance of that. Given the fact that we did not participate in the upside the last week or so, maybe our drop will also be small relative to the European markets and more importantly wash out the excess in our system. The key as far as investors here at home is to not give in to the panic that the headlines, the talking heads and the pundits, swamis and gurus will try to introduce into the trading environment today and for the next few days. There is a lot of uncertainty at the moment globally, and most importantly, it will take up to two years for Great Britain to leave the EU, and a "Brexit" does not mean a global economic collapse. Just like the global markets recovered from the dotcom crash, the horrific fallout from 9/11, the global subprime thievery, "Brexit" will be a long and drawn-out process and most importantly, pales in comparison to the afore mentioned events. In essence, the "Brexit" event just means that we have to find a way to turn the current short-term volatility into an opportunity. Editor's Note: This article was originally published at 6:17 a.m. EDT on Real Money on June 24.