The Wall Street Journal - 14.09.2019 - 15.09.2019

(Kiana) #1

B2| Saturday/Sunday, September 14 - 15, 2019 ** THE WALL STREET JOURNAL.**




Citi and other bank stocks rose Monday, buoyed by
rising Treasury yields. Investors recalibrated their ex-
pectations for rate cuts following a speech by Fed-
eral Reserve Chair Jerome Powell Sept. 6, analysts
said, sending yields higher. Shares of financial companies
tend to fare poorly when interest rates are declining, and vice
versa. Citi shares gained 4.3% Monday, while Wells Fargo &
Co. added 2.7% and JPMorgan Chase & Co. rose 2.5%.


Source: FactSet














Mon. Tues. Weds. Thurs. Fri.

within a couple years of the dot-
com bubble bursting. Inc. founder Jeff
Bezos is an evangelist for math-
based decision making, and has said
that much of what you need to
know can be derived from data.
However, a lack of concrete infor-
mation isn’t an excuse for inaction.
“All of my best decisions in busi-
ness and in life have been made
with heart, intuition, guts; not anal-
ysis,” Mr. Bezos said last September
during an appearance at the Eco-
nomic Club of Washington that I at-
tended. He left a job at a New York
hedge fund to start a website sell-
ing books in 1995, a time when
many questioned whether consum-
ers would spend a dime on products
they had never held from a business
they had never entered.
“There is always unknown,”
wrote Chet Pipkin, who founded
electronics company Belkin Interna-
tional, in an email this week. “As
the unknown becomes known, a
choice is to expect it, welcome it,
embrace it, and make choices that
create a new competitive advan-
tage.” This is wisdom that the
founders of WeWork, Airbnb, Slack
and Uber—all starting their compa-
nies during or in the immediate af-
termath of the financial crisis—
seemed to live by.
It isn’t just techies who thrive in
uncertainty. Recently, while touring
Airstream’s recreational vehicle fac-
tory in Jackson Center, Ohio, I was

surprised to learn about the deci-
sion to build a new plant on nearby
vacant land. It was late 2018, a time
when threats of punishing tariffs
combined with a slowdown in RV
deliveries were giving executives
ample excuse to hold off on sinking
big money in hard assets that take
years to pay off.
I later asked Bob Martin, chief
executive of Airstream’s parent
Thor Industries, about his logic. Mr.
Martin said his business is always
facing uncertainty. Dealers order
too much, causing an inventory
glut. Summer gets off to a cool
start, softening demand for trailers.
Investors pay guys like him to think
longer term, he said.
Same goes for the high seas.
Carnival Corp. CEO Arnold Don-
ald spent his career in agriculture
but more recently took the corner
office at the cruise operator, which
sends ships to hundreds of ports
around the world. Being able to
plan for a long list of unknowns is
core to his job.
Geopolitical disruptions or cur-
rency fluctuations are among the
many variables he has to deal with.
Hurricanes, tsunamis and cold
snaps are also top of mind.
“The problem is that sharehold-
ers don’t care about the weather,”
Mr. Donald said. “We need to as-
sume bad weather and make a plan
to deal with that. We’ve got to ask
ourselves how are we going to or-
ganize so we can deliver?”

Hug the Uncertainty Monster

Businesspeople are haunted by the unknown, but it can also be a friend


many of their businesses having en-
joyed record levels of both earnings
and cash),” Mr. Buffett wrote in
that 2012 letter. “We didn’t share
their fears.”
To be sure, Mr. Bloom said 2019’s
concerns are a unique brand of fear
because many of them center on
trade disputes between the world’s
two largest economies, China and
the U.S. The tariff implications are
unprecedented and hard to calculate.

Still, it would be foolish to forget
the level of uncertainty that ran
through business when crises such
as the 9/11 terrorist attacks and the
bursting of the dot-com bubble cre-
ated a cloud over the entire econ-
As many executives fretted in the
late 1990s and early 2000s over
what the internet would grow into,
how risky internet investments
were proving to be, and at what
speed the online world was evolv-
ing, certain entrepreneurs started
building empires. Three of the top-
five valued companies in the
world—Google, Facebook and Ama-
zon—were started or expanded

‘Uncertainty comes with
plenty of upside,’ says
Stanford economist
Nicholas Bloom.


Uncertainty is the
monster that lives un-
der the bed of every
CEO. It waits until the
door is shut and the
lights are out, and
even then, it bides its
time. Pulses race, sweat beads, no
move seems the right one.
The first eight years of my life
were spent in the sprawling farm-
lands of Howell, Mich., and I
learned firsthand that uncertainty
is a constant.
My father scratched out a living
selling Ford pickups to farmers, and
the line chart tracking his income
through the late 1970s and early
1980s mimics a roller coaster that
rises and falls alongside inflation,
weather patterns, oil shocks and
trade embargoes.
For corporate executives, fear to-
day about tariffs has displaced fear
about fiscal policy, which displaced
fear about government regulation,
which displaced fear about geopo-
litical shifts, which displaced fear
about market volatility and so
Let’s consider for a moment that
the Uncertainty Monster, as climate
scientist Judith Curry refers to it,
has proven to be as much of a
friend as it is a foe. She argues that
debates about the rate and cause of
global warming can get so extreme
and contentious that it creates in-
decision about how to address the
problem. Instead of taking baby
steps toward solutions, we let un-
certainty paralyze us.
The same moral applies to
broader business issues. You’ll miss
a lot if you spend all your time fo-
cusing on the unknown.
“Uncertainty comes with plenty
of upside,” Nicholas Bloom, a Stan-
ford University economist, told me
this week.
Mr. Bloom conducts regular stud-
ies published by the Atlanta Federal
Reserve that track just how uncer-
tain we are, and his World Uncer-
tainty Index, developed for the In-
ternational Monetary Fund,
suggests we are suffering from
near-historic heights of uncertainty.
This is when it would be good to
remember we’ve been here before.
Think back just a little earlier in
this decade about how then-unprec-
edented levels of uncertainty,
caused by the 2008 financial crisis,
were still wreaking havoc even as
the economy boomed. Executives,
burdened by concerns about the Eu-
ropean Union debt crisis and fragil-
ity of America’s recovery, were
slow-walking investments, hiring
and expansion.
Billionaire Warren Buffett ad-
dressed this in real time, telling his
peers in his 2012 annual letter to
quit whining. Withholding invest-
ment when confidence is shaky is a
recipe for being underprepared
when everyone’s confidence re-
turns. For instance, the same manu-
facturers or retailers who scrimped
back then were forced to scurry to
hire and buy new equipment later
in the decade.
“There was a lot of hand-wring-
ing last year among CEOs who cried
‘uncertainty’ when faced with capi-
tal allocation decisions (despite


During a time of intensifying
competition, Oracle is losing
one of its CEOs. The com-
pany said late Wednesday
that one of its two chief ex-
ecutives, Mark Hurd, will take
a medical leave of absence, leaving Sa-
fra Catz as Oracle’s sole CEO. Mr. Hurd
and Ms. Catz have shared the CEO title
since 2 014 , while Oracle co-founder
Larry Ellison is chairman and technology
chief. Ms. Catz said Mr. Hurd was “ex-
tremely engaged” with the business
through the company’s fiscal first quar-
ter, adding that “now Mark needs to fo-
cus on his health.” Oracle shares fell
4.3% Thursday.



One of the most powerful ac-
tivist investors is challenging
AT&T’s media ambitions.
Hedge fund Elliott Manage-
ment on Monday disclosed a
$ 3 .2 billion stake in AT&T,
criticized the company’s strategy to ex-
pand further into media and called on
the telecommunications giant to shed
unnecessary assets. “AT&T has suffered
from operational and execution issues
over the past decade, for which the cur-
rent leadership team is accountable,” El-
liott wrote in a letter to AT&T’s board.
AT&T defended its strategic direction
and said it would engage with the hedge
fund. AT&T shares rose 2.1% Tuesday.



Breakfast could be bad for
Wendy’s. Wendy’s stock
slumped 10% Tuesday after
the burger chain said that in-
vestments in more menu
items for breakfast had
prompted it to cut its earnings guid-
ance for the year. Breakfast has become
an increasingly competitive part of the
day for major fast-food companies.
Wendy’s said that it will spend $2 0
million to add more menu items and
longer hours at its 5,8 13 domestic res-
taurants. Wendy’s currently offers
breakfast at about 300 restaurants af-
ter earlier efforts to expand nationwide
were abandoned.



Apple has upped the stakes
as it enters the streaming
ring. In addition to revealing
a trio of upgraded iPhones
Tuesday, Apple set monthly
prices for its long-awaited
TV+ video-streaming service at $ 4 .99,
largely undercutting rivals. Shares rose
1.2% that day. The company is making
just a handful of shows available for
the TV+ debut in November, but at
$ 4 .99 a month, TV+ is much cheaper
than Netflix’s $ 1 2.99 and Disney’s
$6.99. Disney CEO Bob Iger, a longtime
Apple board member, resigned from
the board the same day the pricing
was announced.



Uber vowed to fight back
after California lawmakers
passed landmark employ-
ment legislation on
Wednesday that would up-
end the business model of
companies that rely on contract work-
ers. The legislation intends to force
companies to reclassify certain con-
tract workers as employees, a serious
threat to Uber and rival Lyft Inc. as
their business models have relied on
flexible labor and minimal worker
costs. Uber legal chief Tony West said
that Uber intends to continue working
for a compromise solution. Uber
gained 1.5% Wednesday.



PG&E shares gained 11% Fri-
day after the power company
agreed on an $ 11 billion set-
tlement to resolve the major-
ity of claims by insurance car-
riers from the 2 01 7 Northern
California wildfires and the 2 01 8 Camp
Fire. It would be the company’s second
resolution with major groups of wildfire
claimants. In June, PG&E agreed to pay
$ 1 billion to compensate more than a
dozen California cities, counties and
agencies for losses resulting from deadly
wildfires sparked by its equipment.
Camp Fire, which became California’s
deadliest wildfire yet, killed 86 people
last year. —Francesca Fontana


Hackers are exploiting a vul-
nerability in software embedded
in the SIM cards of hundreds of
millions of phones to track users’
whereabouts—a novel form of
spyware targeting one of the
most important bits of hardware
in a mobile device.
AdaptiveMobile Security, a
Dublin-based telecommunica-
tions-security company, said it
found the technique has been
used for at least two years by
hackers tracking phones in Mex-
ico, Colombia and Peru. It said
the vulnerability exists, however,
in SIM cards in use across a
much larger swath of the world.
“It’s the most sophisticated at-
tack I’ve ever seen over these
networks,” said Cathal McDaid,
the company’s chief technology

The technique, nicknamed
“Simjacker” by the researchers,
targets the latest in a series of
vulnerabilities hackers have
found to track the location of a
phone without its user’s knowl-
edge. Attacks targeting phones
often involve some form of phish-
ing, in which a victim clicks a link
and inadvertently downloads
malware that carries out com-
mands for an attacker, like relay-
ing location data.
In the case of Simjacker, hack-
ers have managed to exploit a
relatively old form of software
found on some SIM cards that
mobile operators have used in
the past to send customers bill-
ing information or special offers.
Essentially, hackers send secret
text messages to particular SIM
cards, which then send back in-
formation like the phone’s loca-
Phones vulnerable to the hack
number in the hundreds of mil-
lions across some 30 countries in
South America, Africa and parts
of Europe and the Middle East,
AdaptiveMobile says, though it
has so far identified cases only in
the three Latin American coun-
tries. The total number of af-
fected phones in those countries
isn’t known, but the company
said over a one-week period last
month, it identified hundreds of
phones being tracked with the
The GSM Association, a trade
body of mobile network opera-
tors, said it had sent out recom-
mendations to carriers for identi-
fying and patching the
vulnerability, which it said af-
fected a “minority of SIM cards”
around the world. The GSMA
“has been working with the im-
pacted member operators to help
implement these mitigations,” it


Hackers Use


To Track

SIM Cards

‘Simjacker’ hack sends
text messages to SIM
cards, which respond
with phone’s location.
Free download pdf