Archives for August 2018

Apple’s Pride-Themed Watch Face Is Being Blocked in Russia

Part of the fun of an Apple Watch is choosing the right watch-face design to suit your tastes. Toward this end, Apple introduced a gay-pride themed, rainbow watch face in June, but it seems that particular watch face has been blocking it in Russia.

After people began asking on Apple’s support forum and on Reddit why they couldn’t find the pride-themed watch face in Russia, Tom Warren, an editor at The Verge, tried installing it on a Watch and then changed the regional settings of its paired iPhone to Russia. A video that Warren shared on Twitter shows that the installed pride face vanishes under the new setting.

Guilherme Rambo, an iOS software developer, also shared software code that he said showed the Watch is “hardcoded” to not show the pride face when a paired iPhone’s settings are set to Russia.

Russia passed a law in 2013 that sought to prohibit what its government considered as promoting homosexuality. While Russia decriminalized homosexuality after the fall of the Soviet Union, homophobia and discrimination against gays has persisted in the country under the leadership of President Vladimir Putin. In June, Europe’s top human-rights court ruled that Russia’s so-called “gay propaganda” law was itself illegal.

Also in June, Apple CEO Tim Cook led about 1,000 Apple employees who marched in San Francisco’s annual Pride Parade. Some employees shared photos of themselves marching with Apple’s top executive, while Cook himself cheered on Apple employees in attendance.

Apple did not immediately respond to a request for comment.

Apple self-driving car rear ended during road testing

(Reuters) – An Apple Inc (AAPL.O) self-driving car was rear-ended while merging onto an expressway near the company’s Silicon Valley headquarters this month, the company said in an accident report posted on Friday that confirmed the iPhone maker is still in the race to build autonomous vehicles.

FILE PHOTO: The company’s logo is seen outside Austria’s first Apple store, which opens on February 24, during a media preview in Vienna, Austria, February 22, 2018. REUTERS/Heinz-Peter Bader/File Photo

Apple executives have never publicly spoken about the company’s self-driving car program, but filings in a criminal court case last month confirmed that the company had at least 5,000 employees working on the project and that it was working on circuit boards and a “proprietary chip” related to self-driving cars.

Apple is entering a crowded field where rivals such as Alphabet Inc’s (GOOGL.O) Waymo unit and traditional carmakers such as General Motors Co’s (GM.N) Cruise Automation, as well as startups such as Silicon Valley’s Zoox, are pouring billions of dollars into cars that can drive themselves.

On Aug. 24, one of Apple’s Lexus RX 450h self-driving test vehicles in “autonomous mode” was merging south on the Lawrence Expressway in Sunnyvale, California at less than 1 mile per hour when it was rear-ended by a 2016 Nissan Leaf going about 15 miles per hour, according to the report posted on the California Department of Motor Vehicles website.

The accident happened at about 3 p.m. as the Apple vehicle had slowed and was waiting for a safe gap in traffic to complete the merge, the report said.

Both vehicles sustained damage but there were no injuries, the report said. Under a safety plan filed with California regulators, a human driver must be able to take control of Apple’s self-driving test cars.

An Apple spokesman confirmed that the company had filed the report but did not comment further. He declined to respond to questions about whether the trailing car could have been at fault.

Apple’s efforts remained shrouded in secrecy until years after its rivals like Google had begun testing on public roads. The iPhone maker’s first public acknowledgement of interest in the field came in a letter to U.S. transportation regulators in late 2016 urging them not to restrict testing of the vehicles.

Last year, Apple secured a permit to test autonomous vehicles in California. It has been testing cars on the road since last year and now has permits for more than 60 vehicles. Apple researchers also last year published their first public research on cars, a software system that could help spot pedestrians more readily.

The safety of self-driving cars has become a source of concern for U.S. transportation regulators this year after one of Uber Technologies Inc’s [UBER.UL] vehicles struck and killed a woman in March in Arizona, prompting the company to shut down its testing efforts for a time. Uber has said it plans to have self-driving cars back on the road by the end of the year.

The California DMV said it has received it has received 95 autonomous vehicle collision reports as of Aug. 31. Dozens of companies have received permits to test self-driving vehicles on California roads, but those permits require the presence of a human safety driver.

Reporting by Laharee Chatterjee and Nivedita Bhattacharjee in Bengaluru and Stephen Nellis in San Francisco; Editing by Richard Chang and Cynthia Osterman

New OpenStack cloud release embraces bare metal

OpenStack is getting bigger than ever. It now powers more than 75 public cloud data centers and thousands of private clouds at a scale of more than 10 million compute cores. But it’s always been hard to upgrade from one version of OpenStack to another, and it’s been hard to deploy on bare metals. With OpenStack 18, Rocky, both problems are much easier to deal with now.

The open-source OpenStack cloud, like its ancestors, has always run well on diverse hardware architectures — bare metal, virtual machines (VMs), graphics processing units (GPUs), and containers. Bare metal was always a bit tricky. OpenStack Ironic, its bare metal provisioning module, is bringing more sophisticated management and automation capabilities to bare metal infrastructure. Nova, which provisions compute instances, now supports creating both virtual machines (VM)s and bare metal servers. This means it also supports multi tenancy, so users can manage physical infrastructure in the same way they manage VMs.

Also: Open-source community has an integration problem: OpenStack

Other new Ironic features include:

  • User-managed BIOS settings: BIOS (basic input output system) performs hardware initialization and has many configuration options that support a variety of use cases when customized. Options can help users gain performance, configure power management options, or enable technologies like single root input/output virtualization (SR-IOV) or Data Plane Development Kit (DPDK). Ironic also enables users to manage BIOS settings, supporting use cases like Network Functions Virtualization (NFV) and giving users more flexibility.
  • Conductor groups: In Ironic, the “conductor” is what uses drivers to execute operations on the hardware. Ironic has introduced the “conductor_group” property, which can be used to restrict what nodes a particular conductor (or conductors) have control over. This allows users to isolate nodes based on physical location, reducing network hops for increased security and performance.
  • RAM Disk deployment interface: A new interface in Ironic for diskless deployments. This is seen in large-scale and high performance computing (HPC) use cases when operators desire fully ephemeral instances for rapidly standing up a large-scale environment.

Julia Kreger, Red Hat principal software engineer and OpenStack Ironic project team lead, said in a statement, “OpenStack Ironic provides bare metal cloud services, bringing the automation and speed of provisioning normally associated with virtual machines to physical servers. This powerful foundation lets you run VMs and containers in one infrastructure platform, and that’s what operators are looking for.”

This isn’t just theory. It works. And it heading into production.

James Penick, Oath’s IaaS architect (Oath is AOL and Yahoo’s parent company), said Oath is already using OpenStack to manage “hundreds of thousands of bare metal compute resources in our data centers.” He added, “We have made significant changes to our supply chain process using OpenStack, fulfilling common bare metal quota requests within minutes.”

That’s good, but it’s not good enough.

“We’re looking forward to deploying the Rocky release to take advantage of its numerous enhancements such as BIOS management, which will further streamline how we maintain, manage and deploy our infrastructure,” Penick said.

Also: How to install OpenStack on Ubuntu Server with Devstack TechRepublic

That’s great, but many OpenStack users are already saying, “Maybe I’ll install this in 2021.”

Upgrading OpenStack isn’t easy. But OpenStack Rocky’s Fast Forward Upgrade (FFU) feature is ready for prime time, and it’s all set to help users overcome upgrade hurdles and get on newer releases of OpenStack faster. Now, FFU lets a OpenStack on OpenStack (TripleO) user on Release “N”, and they can quickly speed through intermediary releases to get on Release “N+3” (the current iteration of FFU being the Newton release to Queens). You can’t jump all the way to Rocky, but you can a lot closer to it more quickly than you ever could before.

Other new features are:

  • Cyborg provides lifecycle management for accelerators like GPUs, FPGA, DPDK, and SSDs. In Rocky, Cyborg introduces a new REST API for FPGAs. These floating point chips are used machine learning, image recognition, and other HPC use cases. This enables users to dynamically change the functions loaded on an FPGA device.
  • Qinling is introduced in Rocky. Qinling (“CHEEN – LEENG”), a function-as-a-service (FaaS) project. This delivers serverless capabilities on top of OpenStack clouds. It also enables developers to run functions on OpenStack clouds without managing servers, VMs or containers — while still connecting to other OpenStack services like Keystone.
  • Masakari, which supports high availability by providing automatic recovery from failures, expands its monitoring capabilities to include internal failures in an instance, such as a hung OS, data corruption, or a scheduling failure.
  • Octavia, the load balancing project, adds support for UDP (user datagram protocol). This brings load balancing to edge and IoT use cases.
  • Magnum, a project that makes container orchestration engines and their resources first-class resources in OpenStack, has become a Certified Kubernetes installer. This makes it easier to deploy Kubernetes on OpenStack.

Want to check the new OpenStack out? You can download Rocky today.

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Sears Stock Rallies After Amazon Deal Gives Its Stores a Surprise Boost

The summer of 2018 has been another tough period for Sears, but there’s one thing that has reliably helped lift the retailer’s share price: Amazon.

On Tuesday, Sears Holdings announced that it’s expanding a pilot program with Amazon to install and balance automobile tires that consumers buy through Amazon. Under the partnership, Amazon shoppers who buy tires, including the Die-Hard brand made by Sears, can ship the tires to a nearby Sears Auto Center for installation.

Amazon also offers similar ship-to-store programs with, for example, local bike shops. In May, when Sears announced it would service tires bought on Amazon, its shares shot up 38% during the following week.

Sears’ stock more than gave up those gains in June, however, after the company said sales fell 31% in its most-recent quarter and announced it would close 72 more stores. That was on top of hundreds of stores that Sears had closed in the previous couple of years. Last week, Sears said it would close yet another 46 stores, dragging its share price down even further to a record low of $1.08 a share.

News that Amazon and Sears were expanding the ship-to-store program from 47 initial stores to all Sears Auto Centers in the U.S. offered Sears a reprieve from the weeks of a declining share price. Sears shares surged as much as 23% to $1.37 a share Tuesday. While Sears’ stock price drifted down Wednesday, they were trading about 3% higher in afterhours trading at $1.26 a share.

Sears has been undergoing a long, painful restructuring for several years, with the stock now down 96% from its high point in 2013. Sears, K-Mart, and other onetime powerful retail brands have been struggling in the era of Amazon retailing. Amazon, meanwhile, has been working with brick-and-mortar retailers, including partnerships with Sears and Kohl’s and the purchase of Whole Foods Market.

Instagram Adds 2FA, Account Verification in Security Update

Social media platforms’ struggle with safety and security is like a game of Whac-A-Mole. One day, the threat is coordinated bot activity; the next, it’s SIM hijackers stealing the identities of regular users. In an effort to protect Instagram users from these and other threats, the company announced a set of features today designed make Instagram feel “safer,” including ways to protect your own account and to verify whether the accounts you follow are genuine or not.


First, all users will soon be able to use a more robust form of two-factor authentication to log into Instagram. Previously, Instagram offered two-factor authentication with a code sent via SMS—better than nothing, but insufficient to protect all Instagram users from having their accounts compromised. (Users with “valuable” handles may be more vulnerable to scams like SIM hijacking, where hackers access a person’s phone number and use it to log into their accounts and steal their usernames.) Now, the platform will allow integration with third-party authenticators, like DUO Mobile and Google Authenticator, which supply two-factor codes locally and provide an additional layer of security against account hacking.


To help users differentiate between real and fake accounts, Instagram will now make it easy to look up information about individual accounts—including the date the account was created, its country of origin, and a record of username changes over the past year. You’ll also be able to see any ads the account is running and similar accounts with shared followers. To surface this information, tap the three dots on an Instagram profile page and select the new tab, “About This Account.” The feature will roll out first to accounts with large followings (celebrities, public figures, so-called influencers) and later to all Instagram accounts.

What’s more, accounts with large numbers of followers will now be able to request verification from Instagram. The platform already gives blue checkmarks to some celebrity users and brands—WIRED’s Instagram, for example, has one—but the verification process is mysterious, and Instagram hasn’t previously let users request verification. The new verification process involves a request form along with a place to upload a photo of a government-issued photo ID.

Post Mates

Instagram says the new changes are part of an effort to make the platform feel safe and to empower users to follow genuine accounts over fake ones.

“Keeping people with bad intentions off our platform is incredibly important to me,” Instagram’s co-founder and CTO, Mike Krieger, wrote in a blog post today. “That means trying to make sure the people you follow and the accounts you interact with are who they say they are, and stopping bad actors before they cause harm.”

The platform is also hoping to avoid some of the problems befalling its parent company, Facebook, which has struggled to keep fake accounts, misinformation campaigns, and untrustworthy pages off its service. Facebook said it has deactivated millions of fake accounts this year, and that some malicious actors are becoming harder to trace.

Instagram is, of course, a different beast. As it grows, it will have to face decisions about how to create community and trust on a global platform of over 1 billion users. Checkmarks and two-factor authentication aren’t the end of that story. But they’re a good place to start.

More Great WIRED Stories

White House investigating Google after Trump accuses it of bias

WASHINGTON (Reuters) – U.S. President Donald Trump said on Tuesday Google’s search engine was hiding “fair media” coverage of him and said he would address the situation, taking a swipe at the internet giant without providing evidence or giving details of action he might take.

FILE PHOTO: FILE PHOTO: The logo of Google is pictured during the Viva Tech start-up and technology summit in Paris, France, May 25, 2018. REUTERS/Charles Platiau/File Photo

The company, part of Alphabet Inc, denied any political bias in its search engine.

Trump’s economic adviser, Larry Kudlow, later told reporters that the White House was “taking a look” at Google, saying they would do “some investigation and some analysis,” without providing further details.

Trump’s criticism and threat of action to somehow restrict Google was his latest attack on a major tech company, following a series of tweets about, which he has accused of hurting small businesses and benefitting from a favorable deal with the U.S. Postal Service.

Last week, without mentioning specific companies, he accused social media companies of silencing “millions of people” in an act of censorship, without offering evidence to support the claim.

In several tweets on Tuesday, the president said Google search results for “Trump News” showed only the reporting of what he terms fake news media, saying this was rigged against him and others.

Blaming Google for what he said was dangerous action that promoted mainstream media outlets such as CNN and suppressed conservative political voices, Trump added, “This is a very serious situation-will be addressed!” He did not offer any details.

Google said in a statement that its search engine “is not used to set a political agenda and we don’t bias our results toward any political ideology … We continually work to improve Google Search and we never rank search results to manipulate political sentiment.”

U.S. member of Congress Ted Lieu, a Democrat, said in a tweet directed at Trump: “If government tried to dictate the free speech algorithms of private companies, courts would strike it down in a nanosecond.”

Shares of Alphabet fell 0.3 percent to $1,252.98.


While the exact science behind Google searches on the internet is kept secret, its basic principles are widely known. Search results on Google are generated by a variety of factors measured by the company’s algorithms.

They include determining a site’s relevance by counting the number of links to the page. Other factors such as personal browsing history and how certain keywords appear on the page also affect how pages are ranked. Popular news sites such as and, which many readers link to, can appear higher in searches based on such factors.

FILE PHOTO: FILE PHOTO: U.S. President Donald Trump listens to a question during an interview with Reuters in the Oval Office of the White House in Washington, U.S. August 20, 2018. REUTERS/Leah Millis/File Photo

Trump has long criticized news media coverage of him, frequently using the term fake news to describe critical reports. Earlier this month, he accused social media companies, which include Twitter Inc and Facebook Inc, of censorship.

Trump’s accusation of bias on the part of Google comes as social media companies have suspended accounts, banned certain users and removed content as they face pressure from the U.S. Congress to police foreign propaganda and fake accounts aimed at disrupting American politics, including operations tied to Iran and Russia.

Companies such as Facebook and Twitter have also been pressed to remove conspiracy driven content and hate speech.

Tech companies have said they do not remove content for political reasons.

Some Republican U.S. lawmakers have also raised concerns about social media companies removing content from some conservatives, and have called Twitter’s chief executive to testify before a House of Representatives panel on Sept. 5.

Earlier this month, Alphabet’s YouTube joined Apple Inc and Facebook in removing some content from Infowars, a website run by conspiracy theorist Alex Jones. Jones was also temporarily suspended on Twitter.

Trump and the White House did not provide any detail on how they would probe Google, but the new Republican chair of the Federal Trade Commission, Joseph Simons, said in June that the agency would keep a close eye on big tech companies that dominate the internet.

Reporting by Susan Heavey; Additional reporting by Ken Li in New York and Chris Sanders in Washington; Editing by Frances Kerry

The Cisco Of Pot

Recently, Molson Coors (NYSE:TAP) did a deal with Canadian marijuana company HEXO (OTCPK:HYYDF) (HEXO.TO) to develop a cannabis infused beer.

Source: Coors Website

Molson Coors Canada will have a 57.5% controlling interest in the joint venture (pun intended), with HEXO having the remaining ownership interest. HEXO in turn will probably need to do a variety of deals with other marijuana companies (growth, production and technology) in order to fulfill the vision. The structure helps insulate US-based TAP from potential liability** while also allowing it to participate in what is expected to be the greatest growth segment for beer since “Coors Light” was introduced in the late ’70s. However, in all this, Coors is likely a bit behind the times.

Coors wants to grow like a weed and smoke the competition (puns intended); however, it isn’t the first beer company to enter the space. Constellation Brands (NYSE:STZ) (Corona, Pacifico, Modelo, Robert Mondavi, Clos du Bois, Black Box, etc.) took a significant position in marijuana company Canopy (NYSE:CGC) back in October 2017 with a similar motivation. Then, just the other day, it upped that investment with an additional $4 BILLION follow-on. I’m guessing it sees a market here; that’s some serious green (pun intended, but OK I’ll stop now). Constellation however will probably not be the first significant THC infused beer brand to market. Small startup Ceria, a cannabis infused beer company founded by Blue Moon’s Keith Villa, is my guess for who will probably take that prize (with all the early adopter advantage it implies). Ceria not only enjoys the nimbleness of a startup, but also has the significant beer brand development experience of its founder behind it. That is until Coors, Constellation, HEXO, or Canopy buys it. Meanwhile, Rebel Coast, a winemaker out of Sonoma, claims to have the first marijuana-infused Sauvignon Blanc on the market (now available in the California market).

So, as had been forecasted previously, the first mainstream companies in the cannabis space aren’t tobacco firms such as Altria/Marlboro (MO), nor drug firms such as Pfizer (PFE), but the beer, wine, and alcohol companies. These companies are already used to delivering an intoxicating product which used to be prohibited, to consumers under strict regulation. Sound familiar?

Yep, cannabis is going mainstream. Speculative investors can consider CGC or HEXO.TO; more conservative investors STZ or TAP. Accredited investors can try calling Ceria or Rebel Coast to see if they are looking for funds. But who is going to win, who will dominate?

As stated, Constellation Brands – Corona, Modelo, Robert Mondavi, etc. – followed up a $190 million investment it made last year to buy 9.9% of Canopy Growth Corp. with a whopping $4 billion + additional investment last week. In the process, it will own 38% of Canopy with the necessary warrants to take that above 50%. To say this is a game changer doesn’t do justice to the probable effect on the industry. It’s put-up or shut-up time. Competitors are going to have to secure their own multi-billion-dollar investments quickly, join others that have, or be left behind as an also ran. Marijuana companies that don’t capture share soon will become the Geocities and of this decade.

Constellation didn’t just invest in Canopy to protect the beer market share as is sometimes reported, but rather it is ensuring Canopy has $4 billion to spend consolidating and growing the overall industry.

Source: Canopy Presentation

Most will think that’s a lot. However, subconsciously they are probably still underestimating the effect by comparing it to say the market cap of their favorite cannabis market stock, or the $21B market cap estimated for the entire industry before this deal. In doing so they miss the point.

That’s not $4 billion in market cap, shares that one couldn’t really sell without tanking the stock. That’s $4 billion in directly spendable cash for M&A and product development. Many if not all cannabis companies are chronically short on cash. Compare CGC’s $4 billion to the total cash Aurora (OTCQX:ACBFF), Aphria (OTCQB:APHQF), GW Pharma (NASDAQ:GWPH), MedReleaf (OTCPK:MEDFF), and Cronos (NASDAQ:CRON) have on hand combined ($860 million) and you get a better idea of the relative impact. Canopy now has more than 4 times the money to spend on development, mergers, and acquisitions as its next five largest competitors combined. If you want to guess what relative market shares and profits are likely to look like for this high-growth industry five years down the road, this is as good an indicator as any.

For now, operations for almost all marijuana companies still generate relatively little cash flow compared to more established industries. Furthermore, whatever cash flow is produced is immediately spent to fund further growth. Cannabis companies would be crazy not to spend every dollar they make, plus whatever they can reasonably raise, to grow as fast as practical. The opportunity is just too wide open and big not to.

This is because while it is about to change, the Cannabis industry is still a wild west land grab. Think Uber and Didi burning as much cash as possible, locking in critical mass in as many cities as possible, before some else does. Because the plant has been illegal all this time; marijuana is a similar situation. Everything is an open field waiting to be staked, homesteaded, and developed. There are few patents, no dominant established brands, product types, and delivery methods are not standardized, logistical supply chains and processes are only starting to become efficient, etc., etc. So the $4 billion in cash is huge because it allows Canopy to develop, buy, and dominate this high-growth industry.

The big deal for Canopy now becomes how good is management on making capital allocation decisions? Obviously, Constellation thinks it is pretty decent or the $4 billion follow-on would not have occurred. Constellation effectively anointed Canopy the winner. The horse it is going to back to the hilt to control all things cannabis worldwide.

Provided management can make decent capital allocation decisions, this money essentially makes Canopy in the marijuana industry analogous to what Cisco (NASDAQ:CSCO) was in the internet industry.

Source: Google Search

It can buy other companies and/or develop and research a burgeoning industry like no other. In the process it can create synergies, establish brands, and own patents that will make the whole much greater than the sum of the parts. Canopy will lead the way; long-term dominance is now theirs to lose.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CGC over the next 72 hours.

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

Additional disclosure: This article discusses risky investments that are not federally legal in the United States, yet. I do not know your goals, risk tolerance, or particular situation; therefore, I cannot recommend any specific investment to you. Please do your own additional due diligence.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

My Oh My, Another Strong Buy

In a Forbes article last year, I explained that “over the past three decades, corporations have been increasingly executing sale/leaseback transactions – usually to better allocate capital, but also in many cases to manage residual real estate risk.”

Remember that in a sale/leaseback transaction, the owner-occupant of a commercial property sells the asset it owns and occupies by executing a long-term lease with a real estate investor. This structured financing alternative has evolved into an attractive strategy for many corporations to unlock the value of their real estate assets.

Many corporations earn a higher return on their core business as compared to investing their capital in owned real estate. This off-balance sheet alternative provides the occupier 100% of the value of the property compared to traditional mortgage financing, which is usually around 65% loan-to-value.

In the same Forbes article, I explained that “the spigot of capital flowing into corporate machinery and equipment will serve as a catalyst for the Net Lease REIT consolidators that have the strongest management teams and lowest weighted average cost of capital.”

Current economic indicators are very favorable for the U.S. industrial real estate sector due to (1) rising GDP, (2) rampant e-commerce growth, (3) limited new construction since 2010, and (4) manufacturing growth.

The entire retail industry has been shifting its focus from traditional brick-and-mortar stores to e-commerce platforms which has led to significant demand for large, modern industrial distribution centers. In the U.S., e-commerce sales are expected to increase to over $500 billion in 2018. Excluding food, fuel, and auto, e-commerce represents approximately 16% of total U.S. retail sales.

Global consumer habits continue to change resulting in ever greater market share taking place online. Global e-commerce sales are expected to rise to $2.4 trillion this year.

Morningstar Credit Ratings, a subsidiary of Morningstar, Inc., assessed the industrial sector in “an expansionary mode,” well-positioned, reporting, “Trends driving strong demand for warehouse space-primarily the growth of e-commerce and an expanding manufacturing sector-continue to drive low availability of space and encourage developers to build more.

Their Chartbook report suggested with strong demand and low vacancies, industrial REITs in the first quarter easily increased rental rates. And while primary threats to these positive trends are a drop off in manufacturing activity (if escalating tariffs led to an outright trade war), or deceleration in e-commerce trends (very unlikely), the silver lining is: during the downside of previous cycles, the industrial sector “can turn off the new supply spigot relatively quickly, allowing supply and demand to more rapidly return to equilibrium.”

In a article, Charles Keenan explains, “there is no doubt that one of the trends that has had the biggest impact on the real estate industry over the past decade has been the growth in e-commerce. While the rise in online shopping has clearly posed challenges for many retail real estate owners and tenants, it has been an absolute boon for other sectors-including industrial REITs.

Photo Source

Monmouth Real Estate: An Overview

Monmouth Real Estate (MNR) is just a few years older than FedEx (NYSE:FDX) (Monmouth is in its 49th year as a public REIT), and the Industrial-sector REIT has also enjoyed a long-standing real estate relationship with the global shipping giant.

Monmouth operates a property portfolio that consists of 109 industrial properties, representing approximately 20.5 million square feet. The geographically diversified portfolio is from coast to coast across 30 states.

The portfolio is highly concentrated with FedEx; the remaining portfolio is balanced with high-quality tenants such as Siemens (OTCPK:SIEGY), Anheuser-Busch (NYSE:BUD), Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), Kellogg (NYSE:K), Sherwin-Williams (NYSE:SHW), United Technologies (NYSE:UTX), Cracker Barrel (NASDAQ:CBRL), and others.

MNR began investing in properties leased to FedEx in 1992, and recent acquisitions include six properties consisting of an additional 1.8 million square feet leased to FedEx. Fourteen total expansion projects were recently completed, increasing the rent and lease terms of these FedEx facilities. FDX and its subsidiaries represent 55.5% of annual rent and 46.0% based on square footage.

Monmouth leases from FedEx Ground, FedEx Express, and FedEx Supply Chain Services – all unique operating subsidiaries that enjoy the parent S&P rating of BBB. On the Q4-18 earnings call, FedEx’s EVP, Raj Subramaniam commented:

The economic outlook remains very favorable. The U.S. industrial sector has shifted into higher gear and capital spending is expanding. Consumers are benefiting from a strong labor market and tax cuts are supporting incomes.

Overall sentiment remains near multi-year highs. Globally, the structured three-speed world is becoming visible again after a couple of years of synchronous global growth. While the U.S. accelerates, the Eurozone and Japan are slowing and the emerging world continues to post the fastest rates of growth.

On balance, we expect another year of strong global growth as economic momentum runs through a healthy pace. Sound fundamentals remain in place to underpin sustained growth in global manufacturing and business investment.”

Photo Source

As you can see below, MNR also has substantial exposure to the East Coast, and that’s another important characteristic since the company should benefit from the Panama Canal expansion that was completed in the first half of 2016.

Each of MNR’s FedEx locations has become a highly coveted foothold for large businesses. Major retailers are drawn to FedEx locations, so they can get their goods delivered to their customers as fast as possible.

MNR’s FedEx Ground locations have become the nucleus of today’s logistics clusters. The company has focused investments on assets that are mission-critical to its strong tenant base.

Note that the leases are well-balanced, so there is no fear of expirations that could impact MNR’s reliable rental income. Monmouth’s average lease maturity as of the latest quarter increased to 7.8 years and the average annual rent per square foot is $5.89.

During the latest quarter, Monmouth acquired two brand-new Class A built-to-suit facilities. These acquisitions contain a total of approximately 762,000 square feet and represent an aggregate cost of $64 million.

One of these acquisitions is leased to B. Braun Medical for 10 years and the other facility is leased to Amazon (NASDAQ:AMZN) for 11 years. From a run rate standpoint, Monmouth expects these two properties to generate a combined total annual rent of approximately $4.2 million, representing an initial unlevered return of 6.6%.

Photo Source

Monmouth financed both of these properties with two fixed-rate mortgages totaling $38.5 million with a weighted average interest rate of 4.2% and a weighted average debt maturity of 14.5 years. The B. Braun Medical facility located in Daytona Beach, Florida, near the tenant’s new manufacturing facility and is in close proximity to the Daytona Beach International Airport and Interstate 4.

The Amazon acquisition is located in Mobile, Alabama, and represents Monmouth’s second property leased to Amazon. The Port of Mobile has been experiencing substantial demand as a result of the recently completed Panama Canal expansion. With two interstate highway systems and five Class-1 railroads serving the port, this region is very well situated to benefit from meaningful long-term growth.

Photo Source

Thus far in fiscal 2018, Monmouth has acquired five buildings for a total purchase price of $174 million. Through the first three quarters, Monmouth has generated 9% growth in gross leasable area and a 15% increase over the prior-year period.

Additionally, during the quarter, Monmouth sold two properties totaling 156,000 square feet for net proceeds of approximately $11.6 million, resulting in a net realized gain of $2.1 million.

The Balance Sheet

Monmouth’s acquisition pipeline contains 1.1 million square feet, representing $221.4 million, comprised of four acquisitions scheduled to close over the next several quarters.

To take advantage of today’s attractive interest rate environment, Monmouth has already locked in very favorable financing for all four acquisitions. The combined financing terms for these four acquisitions consists of $142.1 million in proceeds, representing 64% of total cost, with the weighted average interest rate of 4.1%.

Each of the four financings are 15-year, self-amortizing loans and these acquisitions will result in a weighted average loans return on equity of approximately 13%.

Thus far during fiscal 2018, Monmouth has fully repaid four mortgage loans, totaling approximately $8.6 million with fixed interest rates ranging from 5.2% to 6.8% associated with these properties. These newly unencumbered properties generate over $2.6 million in net operating income annually.

As of the end of the quarter, Monmouth’s capital structure consisted of approximately $815 million in debt of which $657 million was property level fixed-rate mortgage debt and $158 million were loans payable.

Around 81% of total debt is fixed rate, with the weighted average interest rate of 4.1% as compared to 4.2% in the prior-year period. Monmouth also had a total of $277 million in perpetual preferred equity at quarter-end. Combined with an equity market capitalization of $1.3 billion, the company’s total market capitalization was approximately $2.4 billion at quarter-end.

From a credit standpoint, Monmouth continues to be conservatively capitalized, with net debt to total market capitalization at 33%, and net debt plus preferred equity to total market capitalization at 45% at quarter-end.

In addition, Monmouth’s net debt less securities to total market capitalization was 26% and net debt less securities plus preferred equity to total market capitalization was 38% at quarter-end.

For the three months ended June 30, 2018, Monmouth’s fixed charge coverage was 2.4x, and net debt to EBITDA was 6.6x. The ratio of net debt less the REIT securities portfolio to EBITDA was 5.2x.

From a liquidity standpoint, Monmouth ended the quarter with $6.9 million in cash and cash equivalents and held $167.6 million in marketable REIT securities with $8.4 million in unrealized losses.

At quarter-end, Monmouth’s $167.6 million REIT securities portfolio represented 9.2% of undepreciated assets. Additionally, the company had $90 million available from the credit facility as of the quarter-end, as well as an additional $100 million potentially available from the accordion feature.

The Latest Earnings Results

Monmouth’s core funds from operations for Q3-18 were $18 million, or $0.23 per diluted share. This compares the core FFO for the same period one-year ago of $15.4 million or $0.21 per diluted share, representing an increase of 10%.

Adjusted funds from operations (or AFFO, which excludes security gains or losses) was $0.22 per diluted share for the recent quarter, representing an increase of 16% over the prior-year period.

Rental and reimbursement revenues for the quarter were $36.2 million, compared to $28.6 million, or an increase of 27% from the prior year. Net operating income increased $4.8 million to $28.8 million for the quarter, reflecting a 20% increase from the comparable period a year ago.

This increase was due to the additional income related to the 10 properties purchased during fiscal 2017, and the 5 properties purchased during the first three quarters of fiscal 2018.

Monmouth’s end of period occupancy decreased 20 basis points from 99.8% in the prior-year period to 99.6% at quarter-end, and was up 40 basis points sequentially. As referenced above, the weighted average lease maturity as of the quarter-end was 7.8 years, which remained unchanged from the prior-year period.

With regards to Monmouth’s same property metrics for the current nine-month period, the same property occupancy decreased 30 basis points from 99.8% to 99.5%, while same property NOI remained relatively unchanged.

Monmouth has maintained or increased its common stock dividend for 26 consecutive years, and also increased AFFO per share by 16% over the prior-year quarter and by 18% year over year for the nine-month period.

As Monmouth’s CEO, Mike Landy points out:

“With a very conservative 77% AFFO dividend payout ratio this quarter, we remain confident about continuing to provide our shareholders with the high-quality, reliable income streams we have delivered for over a quarter century. This quarter represented our 10th consecutive quarter with an occupancy rate above 99%.”

The Key Differentiator

It’s important to understand that while Monmouth is considered an Industrial REIT, the company has longer lease terms than many of the peers. Most industrial leases are 5 years (with options to extend), but Monmouth invests in newer buildings that were build-to-suit for companies like Amazon and FedEx.

These newer buildings make Monmouth more like a Net Lease REIT than an Industrial REIT, and this means there is less cap-ex and releasing costs (compared to the industrial REIT peers).

So there is value in Monmouth’s highly predictable cash flows that are less influenced by tenant rollover and retention risk. Now consider Monmouth’s attractive dividend history:

As you will see, Monmouth has not excelled at dividend growth, up until recently. However, it’s important to note that the company has never cut its dividend.

Now let’s compare Monmouth’s dividend yield with the peer group:

Considering Monmouth’s growing portfolio of high-quality properties, I consider the dividend yield attractive. Remember that the payout ratio is now 77% (based on AFFO) that provides a nice cushion and attractive margin of safety supporting continued acceleration of dividend growth. Now consider the P/FFO multiple:

As you can see, many of the Industrial REITs have benefitted from the boom, but Monmouth continues to trail the 4-year P/FFO average. Currently, Monmouth trades at 18.8x, around 4% below the 4-year average.

What about growth?

As you see, Monmouth is forecasted to grow FFO/share by double digits in 2018-2020. There aren’t many REITs that can move the needle by double digits unless you are in the cell tower or data center sector.

Wait… Monmouth is in the e-commerce sector and that’s precisely what is fueling the strong performance.

So why has Mr. Market ignored the catalyst?

I can’t speak for Mr. Market, but I can for myself…

I am upgrading Monmouth from a BUY to a STRONG BUY and including this REIT in my “New Money Portfolio“. Essentially, this means that I believe Monmouth could generate total returns of around 25% per year during 2018 and 2019. For more information on the New Money portfolio, subscribe to The Intelligent REIT Investor or the Forbes Real Estate Investor newsletter.

Note: Brad Thomas is a Wall Street writer, and that means he is not always right with his predictions or recommendations. That also applies to his grammar. Please excuse any typos, and be assured that he will do his best to correct any errors, if they are overlooked.

Finally, this article is free, and the sole purpose for writing it is to assist with research, while also providing a forum for second-level thinking. If you have not followed him, please take five seconds and click his name above (top of the page).

Sources: F.A.S.T. Graphs and MNR Investor Presentation.


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

China’s Didi Chuxing Suspends Carpool Service After Woman Is Killed

Didi Chuxing said it will suspend a carpool service and has removed two executives after a second female customer in three months was allegedly killed by a driver in China.

The ride-hailing app company said in an emailed statement on Sunday that it will halt its Hitch service starting Monday and reevaluate the carpool operation’s business model. Didi has removed Huang Jieli as Hitch’s general manager and Huang Jinhong as vice president for customer services, according to the statement.

A driver in the eastern city of Wenzhou suspected of killing a female passenger on Aug. 24 has been detained, Chinese state media reported. Didi came under intense scrutiny in May, when state media reported a driver used his father’s account to pick up and kill a woman in the central city of Zhengzhou.

Didi apologized for the latest incident and said that it would upgrade its processes for handling complaints. The Hitch service, which the company said handled 1 billion trips over the past three years, was being suspended “because of our disappointing mistakes.”

“Growth of our service scale puts our safety management mechanisms under huge pressure, especially in terms of identifying potential risks, designing effective and efficient processes, and rapid response,” Didi said. “We take to our heart all criticisms from the public and the relevant authorities.”

Officials from China’s ministries of transport and public security said in a statement they met with Didi representatives on Sunday. The government said it ordered the firm to immediately rectify its Hitch service, protect the safety and rights of passengers, and publish the details of any progress it makes. Didi agreed to submit a compliance plan and submit it to the government before Sept. 1, and to add more customer service personnel.

The company said the suspect in the second alleged killing provided full and authentic documentation, and had no criminal record. He passed a facial-recognition test before starting work for the day, Didi said.

Hitch has been marketed as a social ride-sharing service, allowing drivers and passengers to label or rate each other by appearance. Such features have attracted criticism because the platform was rife with comments that marked female passengers as “goddesses” and “beauties.”

Didi said in May it was overhauling safety measures across its business after the first killing. One of the changes would involve the redesign of its emergency help button to display it more prominently on the app interface, it said.

Users of carpooling or similar services should send information including the car’s license plate number and the driver’s name to relatives, the Wenzhou Public Security Bureau said in a statement on its WeChat account.

The 3 Industries Amazon Will Disrupt Next

If you own a business and you expect (NASDAQ: AMZN) to leave you alone, think again. A company that generates over $50 billion in sales in three months, must constantly look for new markets to enter, to maintain the ridiculous growth investors expect. From books, to general merchandise, to cloud services, Amazon’s expansion has already been an incredible run. In the short-term, Amazon Web Services (AWS) is the clear growth driver, with near 50% annual revenue growth. That being said, Amazon is making moves into three different industries and one of these new ventures in particular, could become the next great growth driver for the company.

Trying to secure revenue growth

One of the key changes occurring within Amazon, is the company is moving toward becoming a services company. In the last quarter, 60% of Amazon’s revenue came from product sales, and 40% from service sales. This trend looks to continue, as service sales jumped by more than 59%, whereas product sales increased by just under 29%.

Each of the industries Amazon is moving into focuses primarily on providing services to customers, with product sales being a small piece of the puzzle. The first business Amazon wants to disrupt is a relatively new development. Amazon acquired Ring in April of this year. Selling security systems to do-it-yourself customers is job one. In true Amazon fashion, the company isn’t afraid to undercut its competition to try and take market share.


System Cost

What’s Included

Monthly Cost


“Installation starts at $199”

You have to call to get a quote (depends heavily on what your needs are)

$36 per month

Ring Alarm Security Kit


Base, keypad, motion sensor, contact sensor

$10 per month or $100 per year

SimpliSafe “The Foundation”


Base, keypad, motion sensor, contact sensor

$15 per month

(Source: Web sites for ADT, Ring, and SimpliSafe)

ADT is a well-known leader in home security. Unfortunately, the company’s monthly plans are far more expensive than either SimpliSafe or Ring. When it comes to self-installation, Ring and SimpliSafe offer similar products, and SimpliSafe says, “97% of our customers set SimpliSafe up themselves.”

The reason Amazon wants in on home security is it fits with the push of Alexa-enabled devices. At $10 a month or $100 a year, this is a cheap way for Amazon to cross-sell security along with other devices and services. The home security market currently is worth about $10 billion. In the next 4-5 years, estimates have the market growing to as much as $50 billion, on the back of self-install options like Ring. If Amazon can capture even 5% of this overall opportunity, at present the company would bring in an additional $500 million in sales. This doesn’t sound like a lot for a company selling billions, but it’s a relatively simple add-on. Over the long-term, monitoring fees would increase the subscription revenue that is driving Amazon forward.

The connection of car to home

It’s no secret that Amazon, Apple, and Alphabet (NASDAQ: GOOG) are battling it out for your smart-home dollar. Apple’s CarPlay and Android Auto have been integrating into vehicles for years, but Amazon isn’t going to let its large cap peers have all the fun.

At present, it seems Android Auto is winning the race for the largest footprint. Alphabet claims that Android Auto works with, “over 500 models.” According to Apple, CarPlay works presently with, “over 400 models.” Since Amazon got a late start in this game, it’s hard to find a hard number of vehicles that work with Alexa. However, if we look at a list of compatible vehicle systems, there are models including high-end vehicles like Lexus, Infinity, BMW, and Mercedes. The non-luxury brands are well represented as well, such as: Ford, Nissan, Toyota, and Fiat Chrysler.

Amazon isn’t just waiting for vehicle manufacturers to allow it into their systems either. There are multiple third-party devices for getting Alexa into your car. One example is the Garmin Speak, which is essentially an Alexa-enabled speaker that sticks to your windshield.

Though much is made of autonomous vehicles, many analysts expect there will be a much larger layer of the market that has smart car capabilities like maps, auto, multimedia streaming, and more, inside of a traditionally controlled vehicle. This “connected car” market is estimated to be worth about $35 billion to as much as $50 billion today. Depending on who you ask, this market could growth to as much as $219 billion in less than ten years.

Using a conservative estimate that Amazon only takes 5% of this market, would imply somewhere in the $2 billion range of additional revenue for the company. Looking less than 10 years out, Amazon could be doing $10 billion or more a year, at just 5% of the connected car business. If Amazon is able to take say 15% to 20%, the company would generate as much in sales from this business by 2025 as it does from all of its product sales today.

$557 billion reasons to crush this market

To even discuss the advertising market, we must at least acknowledge that even Amazon has an uphill road going against the likes of Google and Facebook. In their respective quarters, Google generated over $28 billion in advertising revenue, while Facebook produced about $13 billion. Most investors don’t think of Amazon when it comes to advertising, but that’s exactly my point.

Amazon puts advertising in the “Other” category of its earnings report. This “Other” category generated $2.2 billion in revenue, which doesn’t seem to be too significant when we compare to the duo listed above. However, Amazon isn’t ignoring this business as the category listing might suggest.

In fact, Amazon’s advertising business turned a significant corner late last year. Through the first half of 2017, the advertising business grew significantly by 50% to 60% annually. The latter half of 2017 and moving into 2018, Amazon clearly realized the potential and expanded its offerings.

The company offers sponsored product listings, which were revamped at the beginning of 2018. Each Kindle device gives Amazon a prime (pardon the pun) opportunity, to serve up advertising on the lock screen. In addition, with an estimated 100 million Prime members, there are a lot of eyes on Amazon pages, which makes the site more valuable to traditional advertisers as well.

In the last three quarters, Amazon’s advertising revenue jumped by over 120% or more on an annual basis. At $2.2 billion in revenue, advertising represents about 4% of Amazon’s overall revenue. This business reminds me of the infancy of AWS. Years ago, smart investors were pounding the table about the potential for AWS to Amazon. Advertising has climbed from 2.6% last year to 4% this year. The business is growing at more than double the rate of AWS and is a massive market opportunity.

In 2018 alone, the global advertising market is expected to reach $557 billion. Using our same 5% thesis as before, Amazon’s take would be nearly $28 billion. This would also be a massive shot in the arm for Amazon’s margins as well. At present, Facebook has an operating margin of 44%, and is guiding that this will land somewhere in the mid-30s. Alphabet (aka. Google) carries an operating margin of over 24%. By comparison, Amazon’s operating margin is currently just under 6%.

The bottom line

Analysts are expecting a slowdown in revenue growth for the online giant from 32% annual growth this year to 22% growth next year. If Amazon can capture even 5% of the three industries we’ve talked about, this would add as much as $30 billion to the top line. Admittedly this is an aggressive assumption, but even half of this amount would push Amazon’s revenue growth next year from 22% to 28% annually.

Amazon stock is hard to call cheap, at more than 75 times 2019 projected earnings. However, the company has been crushing analyst estimates, by an average of 48% over the last four quarters. If Amazon can make inroads into home security, connected cars, and advertising, this string should continue. Knowing where Amazon’s next leg of growth comes from, gives long-term investors just another reason to buy the shares.

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

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