The Wall St.Journal 24Feb2020

THE WALL STREET JOURNAL. ** Monday, February 24, 2020 |B9

THE TICKER|Market events coming this week

Monday Earnings expected* Estimate/YearAgo($) Guardant Health (0.30)/(0.30) HP Inc. 0.54/0.52 Intuit 1.03/1.00 Keysight Technologies 1.08/0.93 Oneok 0.77/0.70 Palo Alto Networks 1.12/1.51

Tuesday

Consumer confidence Jan., previous 131.6 Feb., expected 132.3

Earnings expected* Estimate/YearAgo($) Ameren 0.31/0.28 American Tower 1.02/0.62 CoStar Group 2.62/2.81 Home Depot 2.11/2.25 Public Storage2.01/3.04 salesforce.com0.56/0.70

Wednesday Short-selling reports Ratio,daysof trading volume of currentposition NYSE 4.2 Nasdaq 3.7

EIA status report Previouschangein stocks in millionsof barrels Crude oil up 0.4 Gasoline down 2.0 Distillates down 0.6

Mort. bankers indexes Purch., previous down 3% Refinan., prev. down 8%

New-home sales Dec., previous 694,000 Jan., expected 710,000

Earnings expected* Estimate/YearAgo($) Booking Holdings 22.03/22.49 Crown Castle 0.48/0.44 Lowe’s Cos. 0.91/0.80 Marriott 1.47/1.44 Public Service Enterprise Group 0.62/0.56

TJX Cos. 0.77/0.68

Thursday

Durable-goods orders Dec., previous up 2.4% Jan., expected down 1.5%

EIA report: natural gas Previouschangein stocks in billionsof cubic feet down 151

GDP Deflator 4th qtr. adv. est. up 1.4% 4th qtr. sec. est. up 1.4%

Gross domestic product Percentagechange,annualrate 4th qtr. adv. est. up 2.1% 4th qtr. sec. est. up 2.1%

Initial jobless claims Previous 210,000 Expected 215,000

Earnings expected* Estimate/YearAgo($) Autodesk 0.89/0.46 EOG Resources1.16/1.24 Keurig Dr Pepper

0.35/0.30 Occidental Petroleum (0.16)/1.22 Sempra Energy1.45/1.56 Workday 0.40/0.41

Friday

Chicago PMI Jan., previous 42.9 Feb., expected 46.0

Personal spending Dec., previous up 0.3% Jan., expected up 0.2%

Personal income Dec., previous up 0.2% Jan., expected up 0.3%

U.Mich. consumer index Feb., prelim. 100.9 Feb., final 100.7

Earnings expected* Estimate/YearAgo($) AES 0.33/0.36 Foot Locker 1.59/1.56 Vistra Energy 0.54/0.97 Wayfair (2.63)/(1.12)

* FACTSET ESTIMATES EARNINGS-PER-SHARE ESTIMATES DON’T INCLUDE EXTRAORDINARY ITEMS (LOSSES IN PARENTHESES) ADJUSTED FOR Home Depot, seen here, and home-improvement rival Lowe’s Cos. post quarterly results this week. STOCK SPLIT NOTE: FORECASTS ARE FROM DOW JONES WEEKLY SURVEY OF ECONOMISTS

STEVEN SENNE/ASSOCIATED PRESS

MARKETS

Reportedamountstolen through‘emailcompromise’ wire-fraudschemes

Source: Federal Bureau of Investigation

$2.0

0

0.5

1.0

1.5

billion

2015 ’16 ’17 ’18 ’19

message his assistant. “Carol...please wire $150,000,” the hackers wrote Mr. Krasovec’s assistant from his email account, the executive said. It was around 11:30 p.m. in Shanghai, where Mr. Krasovec had landed hours earlier and was fast asleep, he said. Unlike cruder scams that might ask for money in broken English, the note sounded just like him. An attachment with transfer instructions showed intimate knowledge of his ac- counts, he said. The assistant asked PlainsCapital Bank to wire the money. The Dallas-based community bank had courted Mr. Krasovec’s business for months, he said, after poach- ing his longtime banker at Wells Fargo & Co. PlainsCapital called his assistant to confirm the request, then made the transfer. The bank declined to comment. Meanwhile, in China, Mr. Krasovec powered through 14- hour workdays unaware anything was amiss. The chain has grown quickly there after switching to a local menu that includes seafood toppings. Three days after the first transfer, at 10:26 p.m. local time, intruders asked Mr. Kra- sovec’s assistant to wire an additional $300,000, according to Mr. Krasovec. The hackers had changed Mr. Krasovec’s email settings so their corre- spondence was quickly de- leted, according to Kyle Camp, a technology consultant who examined the hack for Mr. Krasovec. A few days later, Mr. Kras- ovec flew home to Austin. Catching up in their offices overlooking Lady Bird Lake, his assistant mentioned she “took care of the wires.” “What wires?” he recalls saying. When she explained, he said he began to feel “abso- lutely sick.”

He frantically called his banker at PlainsCapital Bank, who said there was nothing the bank could do. Mr. Kras- ovec said the bank then stopped returning his calls. He is now suing PlainsCapi- tal, saying he shouldn’t have to repay the stolen money because the bank failed to put proper antifraud controls in place. PlainsCapital Bank said in a court filing that the loss was “undoubtedly the fault of [Mr. Krasovec’s] own failure to im- plement appropriate internal controls to prevent his company and its employees from falling victim to a third-party scam.” The bank said in filings that Mr. Krasovec must repay the money with interest. The case is continuing in the Texas court system. Under decades-old consumer-protection laws, consumers are often entitled to refunds of unauthorized charges. But that generally

doesn’t apply to wire transfers requested after a customer was tricked by hackers, according to the American Bank- ers Association. Sometimes, consumers who catch the fraudulent wires can halt them by immediately calling their bank, said Don Vilfer,

an investigator who works on these cases. But that isn’t cer- tain: One law firm calledBank of AmericaCorp. about an hour after a fraudulent request, but still lost $500,000, according to court documents. A Bank of America spokesman said the bank called the law firm to confirm the wire be- fore sending it. Some banks try to prevent fraud by calling customers to confirm large wire transfers. Mr. Krasovec said PlainsCapi- tal Bank should have called him, not just his assistant. The bank declined to comment be- yond its court filings. Mr. Krasovec has put in place tougher passwords and two-factor authentication, said Mr. Camp, the technology consultant. Legal costs have added $300,000 to his al- ready-sizable loss, and he is concerned about his reputa- tion. “It makes me look like a dummy,” he said of the fraud.

to the American Bankers Asso- ciation. But community banks, with much smaller technology budgets to build their de- fenses, are also vulnerable. The Federal Bureau of In- vestigation received reports of nearly $1.8 billion in losses from this type of scam in 2019, up from about $1.3 billion the prior year. The agency estimates total losses world-wide, which include those not re- ported to the agency, were $26 billion between June 2016 and July 2019. The transfers pri- marily go to banks in Hong Kong and mainland China, where chances of recovering the money are slim, the agency said. Victims include “the elderly, college students, nonprofits, religious organizations, celeb- rities, CEOs of companies,” FBI supervisory special agent Zacharia Baldwin said in an interview. “It could be any- body.” Hackers can break into a target’s email by trying out passwords made public in previous data breaches. They also may use phishing schemes like those used against political campaigns and in corporate espionage. The hackers then comman- deer an account and imper- sonate the victim, asking as- sistants or colleagues to initiate a wire transfer. Mr. Krasovec, 76 years old, isn’t sure how his email was compromised. He said he be- lieves the fraudsters, once in- side his servers, tracked his travel plans and waited until he was out of the office to

Continued from page B1

Hackers

Push Wire

Scams

safety stocks typically doing their best when money managers feel most skittish about economic prospects. The S&P 500 tech sector is up 8.2% for the year, while utilities have risen 8.3%. Both groups have significantly out- performed the broader index, which has climbed 3.3% in 2020. “It’s a really polarized market,” said Art Hogan, chief market strategist at National Holdings. Even as the S&P 500 hangs within a few percentage points of its record high, “we have all of this money plowing into harbors of safety,” he said. Money managers and analysts had begun the year relatively optimistic about the

global economy. Risky assets like stocks had even been relatively resilient through some spurts of selling related to the coronavirus epidemic, with analysts attribut- ing the calm to investors’ faith that the disease would be con- tained and that central banks would deploy enough stimulus to help offset a temporary pullback in growth. In recent days, that confidence has shown signs of fal- tering—with defensive parts of the stock market, as well as the price of other havens like gold and U.S. Treasurys racing higher. The yield on the 30-year U.S. Treasury slipped to a record Friday. Yields fall as bond prices rise.

Gold, meanwhile, jumped 1.7%, ending at its highest level since February 2013. Analysts have attributed the moves to fears that the coronavirus epidemic will dis- rupt consumer spending, man- ufacturing and supply chains around the world more than investors had expected. Many firms’ initial estimates of the epidemic’s im- pact on growth had assumed that the disease would be con- tained within the first couple of months of the year. But in recent weeks, reports have shown the number of cases continuing to jump around the world, and multinationals like AppleInc. have warned that their sales would take a hit because of a pullback in con-

sumer spending. With that kind of dim outlook, investors might typically retreat from risky assets over- all. But faith that U.S. multinationals—particularly big tech companies—are resilient enough to withstand a temporary slowdown in global growth has helped keep those shares higher. Even with Friday’s pullback, NetflixInc. is up 17% for the year.AlphabetInc. has risen 11%, whileMicrosoftCorp. is up 13%. It is difficult to imagine the disconnect being sustainable for long, Mr. Hogan said. “Are we really pricing in re- cession fears? Or are people just so nervous they’ll pay for anything with yield?” he said.

Risky investments have ral- lied this year. So have safe ones. The tug of war across financial markets shows just how divided the outlook among investors is as they struggle to assess the economic toll of the growing coronavirus epidemic. Within the stock market, the two best-performing sec- tors in the S&P 500 in 2020 have been technology and utilities. That is notable because the two groups often move in opposite directions—with technology stocks rallying when investors feel confident in taking on riskier investments, and utilities and other

BYAKANEOTANI

Tech, Utility Stocks Both Rally in Polarized Market

Frank Krasovec lost $450,000 in a wire-transfer scam.

BRENT HUMPHREYS FOR THE WALL STREET JOURNAL

from a loss of $25.4 billion, or $15,467 a share, the year be- fore. Berkshire’s earnings were mostly boosted by unrealized investment gains, while its results a year ago were dragged down by an unexpected write- down at Kraft Heinz Co. Berkshire posted operating earnings of $4.4 billion, down from $5.7 billion a year earlier, due to lower results in insurance underwriting and some of Berkshire’s smaller operating businesses. Operating earnings exclude some investment results, and Mr. Buffett has said they more reflect Berkshire’s performance than net earnings, which can fluctu- ate widely due to unrealized investment gains or losses. Berkshire’s Class A shares closed Friday at $343,499, up 1.1% for the year. In contrast, the S&P 500 is up 3.3% this year. Cathy Seifert, equity ana- lyst at CFRA Research, said she thought Mr. Buffett should have addressed Berkshire’s results compared with the index more directly. “It’s easy to say you’re not concerned about short-term performance,” she said. But “this short-term underperformance could turn into a lon- ger-term underperformance.”

Mr. Buffett also used his letter to discuss corporate boards, which he said are often ill-equipped to oversee companies and incentivized not to challenge executives. Noting that he has served as a director for 21 public companies over the past 62 years, Mr. Buffett complained that board members are often too reliant on their board-related income to truly function as in- dependent overseers. He also said many board members aren’t experts in finance or investing. “Almost all of the directors I have met over the years have been decent, likable and intel- ligent,” Mr. Buffett said. “Nev- ertheless, many of these good souls are people whom I would never have chosen to handle money or business matters. It simply was not their game.” Berkshire runs a large insurance operation as well as railroads, utilities, industrial manufacturers and retailers. Its holdings include recogniz- able names like Dairy Queen, Duracell, Fruit of the Loom, Geico and See’s Candies. Berkshire’s insurance business sits at the core of its moneymaking machine. Insur- ance brings in billions of dol- lars of “float,” upfront premi- ums customers pay and that Berkshire invests for its own gain. Berkshire also holds large stock investments, including in AppleInc. andWells Fargo& Co.

Continued from page B1

Berkshire

Trails

S&P 500

Finance chiefs are shelling out more than they expected in wages as job candidates press for higher salaries amid a tight labor market. Fifty-four percent of U.S. employees and managers said they tried to negotiate higher pay with their last employ- ment offer, a survey released by staffing firm Robert Half

International Inc. said. That is slightly down from 55% last year but up from 39% in 2018, according to the study, which surveyed 2,800 employees and 2,800 senior managers. Chief financial officers are learning it can take a long time to fill job openings with candidates with the right ex- perience at the right cost and in many cases end up increas- ing the compensation they ini-

tially offered, said Steve Saah, executive director for Robert Half’s finance and accounting division. “It may take them a while to come to the realization they need to pony up,” Mr. Saah said in an interview. Mr. Saah expects the pro- portion of job candidates asking for higher pay to rise as they leverage the continuing strength of the U.S. job mar-

ket. The unemployment rate was 3.6% in January, near a 50-year low. Many executives have cited rising wages on earnings calls in recent weeks. Sunstone Hotel Investors Inc., for example, found that cost pressures, in part because of wages and benefits, drove down hotel profits de- spite hotel revenue being stronger than anticipated,

John Arabia, chief executive of the Irvine, Calif., real-estate investment trust, said on an earnings call. Chief risk officers counted attracting and retaining talent among the top emerging risks in 2020, according to a survey released in December by North Carolina State Univer- sity’s Enterprise Risk Manage- ment Initiative and consulting firm Protiviti Inc.

BYMARKMAURER

Finance Chiefs Pay More Than Expected in Salaries

‘Your company is 100% prepared for our departure,’ Warren Buffett said.

The Wall St.Journal 24Feb2020

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