CWS Market Review – May 26, 2017

CWS Market Review

May 26, 2017

“The single greatest edge an investor can have is a long-term orientation.”
– Seth Klarman

On Thursday, the S&P 500 closed at yet another all-time high. The index is already up 7.8% this year, and we’re still in the merry month of May. Last week, the market had a slight jitter, and I thought the recent quiet period might be coming to an end.

Not so.

On Wednesday, in fact, the S&P 500 was on track for one of its narrowest days (meaning the difference between the daily high and low) in decades, but an afternoon surge put that off. Last week, Wall Street was alarmed when the Volatility Index jumped above 16. But once again, the index collapsed. On Thursday, the VIX closed at 9.99. That’s only the seventh sub-10 close in the last 20 years.

It’s as if the low-volatility, slowly upward-trending market is reasserting itself after a momentary disruption. No matter what happens, we keep returning to a market of micro changes that are mostly rising.

In this week’s issue, we’ll look at two of our recent Buy List earnings reports, from HEICO and Hormel Foods. Even though the report from HEICO was quite good, and the report from Hormel was mediocre, both stocks fell. Such is Wall Street. I’ll have more on that in a bit.

But first, I want to discuss this week’s Fed minutes, and what the central bank plans to do with its enormous balance sheet. I still think the Fed is making a big mistake by raising interest rates next month. Let’s hope cooler heads prevail.

What Will Happen to the Fed’s $4.5 Trillion Balance Sheet

On Wednesday, the Federal Reserve released the minutes of its last meeting. The minutes revealed largely what Wall Street had expected, and I feared. The Fed acknowledged the weak spots in the economy, but it still sees the need for another rate hike. I just don’t get it.

If the rate hike happens, and I’m afraid it will, then this would be the fourth hike of this cycle. The Fed seems to believe that the sluggishness in the economy during the first quarter will soon pass. I sincerely hope they’re right, but I haven’t seen the evidence just yet. I think the Fed has become overly concerned about the idea of being “behind the curve.” Chairwoman Yellen has said that if we don’t raise rates beforehand, then we’ll require faster rate increases later. What’s so awful about that?

I should be clear that one rate hike probably won’t sink the economy. Even after a fourth hike, real interest rates will still be quite low by historical standards. The facts are clear: wage growth is iffy, inflation isn’t a problem, and there are few signs of an economy overheating.

I like to keep an eye on the spread between the two- and ten-year Treasury yields. Over the last 30 years, whenever the spread turns negative, the economy has soon gotten bad. The current spread suggests the Fed can raise rates four more time. That would be three after a rate hike in June. I suspect that means that a rate increase wouldn’t hurt the economy, but it decreases our breathing room for further hikes.

What was interesting about these Fed minutes is that they give us a preview of what the Fed intends to do with its massive balance sheet. Let me rephrase that: the Fed’s gigantic, massive, world-devouring, $4.5 trillion balance sheet. The central bank has been reinvesting the proceeds of its bond holdings into still more bonds. The plan presented at the FOMC meeting is to pull the plug on all that reinvesting. In other words, just let the current holdings mature.

According to Binyamin Appelbaum at the New York Times, the Fed “would begin by keeping a fixed amount of the monthly proceeds and then increase the cap every three months until proceeds were no longer being reinvested.” What’s the downside of this? Probably not much, assuming the economy avoids a recession. That’s even more reason why the Fed should hold off raising interest rates next month. Now let’s take a look at this week’s Buy List earnings reports.

HEICO Earns 53 Cents per Share

After the bell on Tuesday, HEICO (HEI) reported fiscal Q2 earnings of 53 cents per share. That was three cents better than Wall Street’s estimate. The details look pretty good. Net sales rose 5% to $368.7 million. For the first half of the year, net sales are up 8%. I was pleased to see HEICO’s operating margin edge up from 19% a year ago to 20.8% for this year’s Q2.

Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the Company’s second-quarter results, stating, “We are very pleased to report record quarterly results in consolidated net sales, operating income and net income driven by record net sales and operating income at both operating segments. Our outstanding performance principally reflects increased demand and operating efficiencies within both of our operating segments, as well as the excellent performance of our well-managed and profitable fiscal 2016 acquisition.”

Best of all, HEICO raised its full-year guidance. This was the second increase this year. Unfortunately, the company doesn’t guide for EPS, but they do for a few other metrics.

HEICO now sees net sales rising this year by 8% to 10%. The previous forecast was 6% to 8%. For net income, HEICO projects growth of 12% to 14%, up from 9% to 11%. HEICO also projects cash flow from operations of $270 million. That’s up $10 million from the previous forecast.

Last year, HEICO earned $1.86 per share. If we assume no change in shares outstanding, that implies 2017 EPS of $2.08 to $2.12. Wall Street had been expecting $2.05 per share.

Unfortunately, shares of HEICO dropped 3.4% on Wednesday. I listened to the earnings call, and it seemed fine to me. Perhaps some folks were expecting more. I can’t complain too much about the share price, considering HEI hit a new high on Tuesday. Perhaps the drop was due to some price jitters. I’m lifting my Buy Below on HEICO to $75 per share.

Shares of Hormel Drop on Turkey Issues

On Thursday morning, Hormel Foods (HRL) reported fiscal second-quarter earnings of 39 cents per share. That was a penny below expectations. The culprit is apparently an oversupply of turkeys. Hormel’s Jennie-O Turkey Store saw its volume drop 6% and sales fell 8%.

Turkey prices are near a seven-year low. The issue is that some folks were afraid of another outbreak of avian flu. As a result, they ramped up production. To their credit, Hormel acknowledged the problem and was careful to explain that it’s not a long-term one.

This was, by no means, a lousy quarter for Hormel. Their grocery-products division did quite well, as did their international business. I often tell people that Hormel is a lot more than Spam. Well, it’s a lot more than turkey as well. Most importantly, the company is standing by its full-year forecast of $1.65 to $1.71 per share. However, they now say they expect results to be at the low end of that range.

Shares of Hormel get dinged for a 6.4% loss on Thursday. I’m not bailing out at all. This is still one for the long term, but I will lower my Buy Below on Hormel Foods down to $35 per share.

Buy List Updates

One of the lessons of investing is that periodically, the market freaks out. Sometime the reasons are good; many times, they’re not.

Last September, shares of Cognizant Technology Solutions (CTSH) plunged after the company said that an internal investigation revealed that the company may have violated the U.S. Foreign Corrupt Practices Act. Cognizant notified the SEC and DOJ. The same day, the company’s president resigned.

That day, the stock got crushed. At one point, CTSH dropped down to $45.44, which was a loss of 17.4% for the day. By the closing bell, the stock had shed 13.3%.

The good news is that we waited the mess out, and on Thursday, CTSH is at a new 52-week high. The stock is up 47% from its post-plunge low.

To quote Warren Buffett, “the stock market is designed to transfer money from the active to the patient.”

I also wanted to highlight the surge in Stryker (SYK). This company doesn’t make a lot of news, but it’s been a steady winner for us. The shares have rallied 32% since mid-November. The company has turned out good earnings reports, plus we got a dividend increase. The shares just closed at another 52-week high.

Shares of Alliance Data Systems (ADS) got a nice boost on Thursday after Signet Jewelers said it was selling ADS $1 billion worth of prime accounts. That represents 55% of Signet’s credit portfolio. The two companies agreed on a seven-year deal in which ADS will become the primary credit source for Signet’s business. Shares of ADS rallied 3.3% on Thursday.

The board of directors at Cerner (CERN) approved a $500 million share-buyback plan. At the current price, the plan represents 2.3% of CERN’s outstanding shares. CEO Marc Naughton said, “Given our strong balance sheet and expected strong cash flow, we are well positioned to continue investing in growth while also returning value to shareholders through share repurchases.”

Over the weekend, Barron’s highlighted Ingredion (INGR). The stock is a favorite of David Anguilm, a portfolio manager:

One favorite is Ingredion (INGR), which makes sweeteners and nutrition ingredients, like ones that make crackers crisper, and pharmaceutical products like intravenous solutions. The stock has pulled back amid concerns about changes in foreign trade. Anguilm sees demand rising from a growing middle class in emerging markets and aging populations in the developed world.

Ingredion “generates strong and consistent cash flows, has a healthy balance sheet, and has a history of returning cash to shareholders,” he says. Ingredion yields 1.7% but has grown its dividend by 170% over the past five years. Its payout ratio is 26% of earnings, “which we believe will allow for attractive dividend growth in the years ahead,” says Anguilm, who recently added to the fund’s position.

That’s all for now. The stock market will be closed on Monday for Memorial Day. I’m taking some time off, so there will be no issue next week. The Memorial Day weekend traditionally marks the beginning of summer. On Tuesday, we’ll get the latest reports on personal income and spending. On Thursday, we’ll get the ADP payroll report, plus the ISM report for May. Then Friday is Jobs Day, when we’ll get the latest employment figures for May. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 eight times in the last ten years. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

#G7 summit, #India’s new bridge, anti-“and” crusade

Good morning, Quartz readers!


World leaders converge in Sicily for the annual G7 summit.Climate change and international trade policy are on the agenda for the two-day event. US president Donald Trump is skeptical of both issues.

AlphaGo goes for the sweep. The suspense during Saturday’s match between Google’s Go-playing AI and world number one Ke Jie will be minimal, after AlphaGo swept the first two games. Today, the AI will compete against a team of top humans working together.

India’s longest bridge opens near the disputed border with China. It runs from Assam across a Brahmaputra River tributary to Arunachal Pradesh, which China has claimed as South Tibet. Stretching 9.2 km (5.7 miles), the tank-ready bridge will make it easier for India to send troops, weapons, and equipment to the northeast state—and keep an eye on its neighbor.


A US appeals court declined to reinstate Trump’s travel ban.Judges confirmed a lower court ruling that the ban discriminates on the basis of religion. Trump has vowed to fight the ruling, and the case will likely make its way to the Supreme Court.

The FBI turned its attention to Jared Kushner. It believes Trump’s son-in-law and senior adviser has significant information related to its probe into Russia meddling in the 2016 US presidential election and related matters. While Kushner hasn’t been accused of wrongdoing, the FBI’s interest in him brings the investigation closer to not just the White House, but also the Trump family circle.

Nissan could fetch $1 billion for its stake in a rechargeable-battery unit. The carmaker owns 51% of Automotive Energy Supply, a venture with NEC that makes lithium-ion batteries for electric cars, including the Nissan Leaf. It’s nearing a deal to sell the stake to a Chinese private-equity firm, according to Bloomberg. Beijing wants China to produce more such batteries.

Greg Gianforte won the Montana race for US Congress despite body-slamming a journalist. The Republican millionaire was charged on Wednesday after assaulting Guardian reporter Ben Jacobs, whose questions were apparently annoying. Montana’s three largest newspaper rescinded their endorsements for Gianforte afterwards, but he won anyway.


Akshat Rathi on the Chinese company training US coal miners to become wind farmers: “If you want to truly understand what’s happening in the energy industry, the best thing to do is to travel deep into the heart of American coal country, to Carbon County, Wyoming (yes, that’s a real place).” Read more here.


Mallrats can rejoice / Best Buy shows retail’s not dead / Sears? Um, not so much.


The $11 million budget for Star Wars was the best film investment ever made. The film, released 40 years ago, pulled in almost $2 billion and spawned a money-making empire.

NAFTA is good for America—and Canada and Mexico can explain why. The countries’ foreign ministers are debunking Trump’s myths about trade.

Saudi Arabia is OPEC’s weakest link. The looming IPO of Saudi Aramco will make it impossible to support the cartel’s attempts to cut production.


The World Bank’s chief economist was demoted for his crusade against “and.” Paul Romer pushed staff to write more clearly and avoid “Bankspeak.”

Scientists have discovered the first snakes that hunt in packs.They hang from the mouths of caves in Cuba to catch bats.

Texas has approved the hunting of feral pigs from hot air balloons. They’re a lot more stealthy than helicopters.

A Swiss watchmaker is trolling Apple with a faux-smartwatch.The analog timepiece from H. Moser & Cie “cultivates this ambiguity in irreverent fashion.”

Kuwaiti officials caught a drug-smuggling pigeon wearing a backpack. It was carrying nearly 200 pills over the border from Iraq.

Our best wishes for a productive day. Please send any news, comments, grammatical crusades, and pigeon smuggling accessories to You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

Trump meets NATO, Brazil protests, festival beer pipeline

Good morning, Quartz readers!


Donald Trump meets with NATO leaders in Brussels. The organization that the US president once called “obsolete” is pulling out all the stops with a ribbon-cutting ceremony for its new headquarters, followed by a ceremonial dinner. Trump will also participate in a European Union meet-and-greet.

Aboriginal Australians discuss constitutional recognition.During a three-day meeting at the sacred landmark of Uluru, leaders will hammer out a plan to be presented to prime minister Malcolm Turnbull. That could lead to a referendum to make changes to Australia’s constitution.

OPEC meets to discuss its production-cut agreement. The Organization of the Petroleum Exporting Countries is expected to recommend (paywall) a nine-month extension to an agreement that expires in June. The pact doesn’t seem to be working: Prior to the meeting, oil prices fell to just $55 a barrel, thanks in large part to US shale drillers.


The US challenged Beijing’s claim in the South China Sea. In the first such action under Trump, the US sent a warship within 12 nautical miles of the Spratly archipelago’s Mischief Reef, atop of which China has built one of its militarized artificial islands. The move was long expected. Going against international law and norms, Chinaclaims nearly all of the sea as its own.

Protesters set fire to a Brazilian ministry. Tens of thousands of demonstrators calling for president Michel Temer’s removal clashed with riot police, resulting in widespread damage to government buildings in the capital, Brasilia. Temer deployed the army to restore order. Demonstrators believe he condoned paying off a potential witness in a massive corruption probe.

A Republican candidate for US Congress was charged for body-slamming a reporter. Greg Gianforte, running for Montana’s lone House seat in a special election, allegedly attacked (paywall) Ben Jacobs, a reporter for the Guardian, during a final rally on the eve of today’s vote. An audio recording reveals the nominee saying “I’m sick and tired of you guys!” followed by the sounds of a physical struggle.

The US charged seven people with economic espionage. The defendants, including four Americans, allegedly stole trade secretsfrom a Texas-based marine technology firm and shared the information with a Chinese company. A day earlier, a Chinese womanwas arrested for sending restricted US space and military communications technology to Hong Kong.


Tim Fernholz explains Trump’s $2 trillion accounting error.“Here’s the problem. You’re counting on the tax cuts generating $2 trillion in extra revenues to compensate for the cost of the tax cuts. You’re also counting on them generating $2 trillion in extra revenues to help close the deficit. That $2 trillion can’t do both jobs at once.”Read more here.


Downgraded China / Isn’t dejected. But it’s / Degrading Moody’s


We can’t let ISIL shape the news. Media coverage of terrorist atrocities is playing right into the Islamist group’s hands.

For all the chest-thumping, India cannot win a conflict against Pakistan. “War is a strange game, in which the only winning move is not to play.”

The alt-right is weaponizing irony to support its fascist agenda. Humor and ambiguity are some of the movement’s favorite tactics.


See the future of life-changing creativity at Lions Health, from pioneering doctors and medical innovators to award-winning creatives and some of healthcare’s biggest brands. This is the must-attend event for creatively courageous people working in pharma, healthcare, and wellness communications taking place on June 17 and 18 in Cannes. Get your pass here.


A German heavy-metal festival is building its own beer pipeline. The 75,000 Wacken Open Air attendees are expected to drink about 5.3 liters of beer each.

Psychedelic mushrooms are the safest drugs for getting high.Just 0.2% of users needed medical attention in a recent survey.

Norway’s central bank has created an ode to cod. The ridiculously catchy music video promotes a new cod-themed banknote.

A Chinese company is offering free training for US coal miners to become wind farmers. In the fittingly named Carbon County, Wyoming, no less.

Flamingos are more steady on one leg than two. They can effortlessly maintain the pose while sleeping—and even when dead.

Our best wishes for a productive day. Please send any news, comments, weaponized irony, and catchy marine tunes You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

#China’s downgrade, #UK’s terror threat, “cauliflower rice” rage

Good morning, Quartz readers!


A Taiwan court rules on same-sex marriage. A Taiwan courtrules on whether same-sex couples can marry. Judges will consider a lawsuit filed by gay rights activist Chi Chia-wei. If the answer is yes, Taiwan would become the first country in Asia to have marriage equality.

A senior Japanese banking executive steps down. Takashi Oyamada, the head of the Bank of Tokyo-Mitsubishi UFJ, is expected to announce his resignation for health reasons after less than a year on the job. The move may upset succession planning at parent company Mitsubishi UFJ Financial Group, one of the world’s largest banks.

Marks & Spencer reports earnings. Analysts expect the high-street apparel maker to report a drop in profit as clothing sales decline. Investors are more optimistic about results for Tiffany, since the jeweler has proven largely immune to online competition.


Moody’s downgraded China for the first time since 1989 on debt risk. The ratings agency warned that the nation’s financial strength would erode, “with economy-wide debt continuing to rise as potential growth slows.” Though the downgrade will likely increase the cost of borrowing for the government and state-owned enterprises, it keeps China within investment-grade status.

The UK raised the terror threat level to “critical.” Further attacksmight be imminent, said prime minister Theresa May, and military personnel will be deployed to protect key sites. The move comes after a suicide bomber killed over 20 people at a concert by US singer Ariana Grande in Manchester.

A video-game toolmaker scored a $400 million investment.Unity Technologies, based in San Francisco, is now valued at $2.6 billion following the hefty investment by private equity firm Silver Lake. The startup offers not games but the software used to make them, meaning its success depends more on the overall industry than individual titles. Its software underpins Pokémon Go.

Rodrigo Duterte declared martial law on the southern island of Mindanao. The Philippines president made the move as security forces fought to capture Isnilon Hapilon, the leader of an ISIL affiliate in Southeast Asia. Duterte had to cut short his official visit to Moscow, but he still managed to squeeze in a meeting with his “favorite hero” president Vladimir Putin.

The US sued Fiat-Chrysler for emissions cheating. More than 100,000 diesel vehicles—Ram 1500s and Jeep Grand Cherokees from 2014, 2015, and 2016—were allegedly sold with “defeat-device” software. Now, the US Department of Justice is suing the company for violating the Clean Air Act.


Ana Campoy on the surprising demographics of illegal immigration in the US: “By the end of fiscal year 2016, some 630,000 visitors had failed to leave the US, far exceeding the 415,000 people who were intercepted crossing the US-Mexico boundary during the same time period. According to Homeland Security, Canadians, not northbound Latin Americans, were the biggest group of violators.” Read more here.


Should you consider bitcoin for your retirement savings? It’s a risky way to achieve steady asset growth but also a bet on atransformed financial sector.

…And what about asteroid mining? Goldman Sachs sees a trillion-dollar opportunity for investors.

India is ready and eager to welcome Tesla. CEO Elon Musk was “misinformed” about the country’s “Made in India” trade restrictions.


Join top venture capitalists, a former US treasury secretary, and fintech unicorns like Credit Karma, Palantir, and Robinhood for CB Insights’ Future of Fintech conference in New York City June 26-28. They’ll be discussing all things fintech, including insurtech, wealth management, alternative lending, and product design. You can use the exclusive promo code FoFQuartzto save $1,500 off your ticket.


The rice industry is furious at “cauliflower rice.” The faux grain—made by finely chopping cauliflower florets into tiny granules—may end up in court.

More than half of Americans are getting the recommended amount of exercise. For the first time ever.

India’s horrific rush hour is primetime for Netflix. Peak streaming occurs at 5pm, the earliest of any market, as users cope with lengthy commutes.

Some mango maniacs take their obsession to another level.Under the patronage of the Sheherwali Jains, Murshidabadi mangoes are an icon of flamboyant sophistication.

Conservative Americans are furious that their favorite sitcom has been canceled. Last Man Standing is standing no longer.

Our best wishes for a productive day. Please send any news, comments, mango techniques, and canceled sitcoms to You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

#Ford replaces CEO, #bitcoin hits new high, avo-lattes

Good morning, Quartz readers!


Euro zone finance ministers debate debt relief and fresh aid for Greece. The issue is particularly sensitive in Germany in the run-up to general elections in September. German finance minister Wolfgang Schäuble opposes debt relief. But he also refuses to unlock more loans without the partnership of the International Monetary Fund—which insists on more debt relief.

BMW workers go on strike in the UK. They’re angry about potential losses to their retirement benefits. The Unite union expects3,500 will participate in the round-the-clock strikes, which will run until Wednesday at factories across the nation.

Trump lands in Israel. Prime minister Binyamin Netanyahu told all cabinet ministers their attendance at Ben-Gurion International Airport was required for the US president’s arrival, even though they won’t have the opportunity to shake his hand.


Ford is replacing its CEO. Taking the place of Mark Fields will be Jim Hackett, who currently heads the carmaker’s autonomous-driving subsidiary. Shares in Ford have dropped 40% in Fields’s three-year tenure. Ford has suffered a number of recalls this year, and it’s beenunable to keep pace in self-driving cars.

Bitcoin reached new heights. The digital currency passed $2,100,putting gold to shame. Some argue the driving force is economic uncertainty in the US, others contend it’s trading from South Korea and Japan. Many are simply puzzled.

North Korea conducted another test missile launch. The missile flew about 500 km (310 miles) off the east coast and appeared to be an upgraded version of the country’s solid-fuel submarine-launched missile. South Korea condemned the test, calling it “reckless and irresponsible” and casting doubt on “denuclearization and peace on the Korean peninsula.”

Incumbent president Hassan Rouhani was re-elected in Iran.Rouhani’s victory was announced on state television on Saturday. He picked up about 57% of the vote compared to 38% for judge Ebrahim Raisi, a protégé of supreme leader Ayatollah Ali Khamenei, who strongly opposed Iran’s nuclear deal in 2015.

Donald Trump addressed the Muslim world from Saudi Arabia.The US president delivered a speech about Islam and terrorism on Sunday without referring to “radical Islamic terrorism.” Instead, he described a battle between good and evil.

Recep Tayyip Erdoğan made a power grab. A month after a referendum granted the Turkish president even more power by allowing him to become a leader of a political party, Erdoğan was elected head of the Justice and Development (AK) Party on Sunday at a special congress in Ankara, taking back control of the ruling partyhe founded.


Keith Collins on the WannaCry ransomware attack that terrorized the world. “A group calling itself the Shadow Brokers dumped a large cache of hacking tools to the public, which included software that exploited various security holes. The group claimed it had stolen the cache from the US National Security Agency (NSA). One of the tools it included was DoublePulsar. Another was EternalBlue, an exploit that targeted the Windows vulnerability Microsoft had patched in its MS17-010 release a month earlier.”Read more here.


We’re not in Watergate territory yet. The Trump-Russia probe isnot akin to Watergate (paywall) because there isn’t evidence of “obstruction on a monumental scale.”

Patriotism is the result of having your values tested. It isn’t about nationalism or “us vs. them,” but rather a never-ending struggleto defend a nation’s founding beliefs.

Hungary is the most authoritarian country in Europe. A law aimed at shutting down the Central European University is part of a larger war (paywall) on liberal culture.


From Russia to South Africa and Finland to Japan, here’s a snapshot of the speakers who will be touching down in France to share their wisdom at Cannes Lions 2017. Hear from Dame Helen Mirren, Arman Alizad, Kazuhiro Shimura, Gabourey Sidibe, Sir John Hegarty, Sheryl Sandberg, Khuli Chana, Bessie Lee, Shahrzad Rafati, Lee Seo Jin, and many more from June 17-24. Get your pass here.


Australia gave email addresses to over 75,000 individual trees.People around the world have been writing digital love notes to them.

Avo-lattes are a thing. You can buy a latte served in an avocado peel at coffee shops in Turkey and Australia.

Twin Peaks was first resurrected in Japan. Before David Lynch revived the series for Showtime, it had a brief second life inJapanese coffee commercials.

A court in Israel ruled that emoji prove intent. They are, it said, an integral part of modern communication and open to legal interpretation.

Reading in bed used to be considered immoral. It was a fire hazard when candlelight was the norm.

Our best wishes for a productive day. Please send any news, comments, legally binding emoji, and Japanese coffee ads You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

Weekend edition—ransomware chaos, Slack’s creep, selfish women

Good morning, Quartz readers!

No one had to click a phishing link, download a PDF, or visit a sketchy website to contract the ransomware that worked its way into 300,000 computers within a matter of hours last week. To contract the WannaCry ransomware, the only thing Windows users had to do was nothing.

By the time the UK’s National Health Service (NHS) announced on May 12 that Windows computers in 16 of its facilities had beeninfected with ransomware all at once, security researchers had been sounding the alarm about a Microsoft exploit called EternalBlue for weeks. It had been released a month earlier by an anonymous hacker group calling itself the Shadow Brokers, who claimed they’d stolen it from the US National Security Agency.

EternalBlue was what allowed WannaCry to spread so quickly. It preyed on Windows computers that hadn’t been updated with a security patch Microsoft released in March. Every time the software lands on an unpatched computer, it disguises itself as a legitimate Windows service—gaining full access to the filesystem—and begins scanning the internet for more vulnerable computers to copy itself onto. There is no human interaction required.

Although WannaCry was soon stopped by a 22-year-old research in the UK, who identified and triggered a kill-switch, the ransomware still managed to create global chaos. NHS doctors were locked out of patient records. Emergency rooms were forced to turn people away. A telecommunications company in Spain, a cell phone carrier in Russia, and French automaker Renault were all affected.

Out-of-date Windows computers are still vulnerable to malware that uses EternalBlue (read: check your updates). But maybe more important: That exploit was just one of many that the Shadow Brokers released in April. Experts warn there is more to come—and the next time there may not be a kill-switch.—Keith Collins


Trump navigates the outside world. Be fawned upon by Israeli and Gulf leaders, shake hands with the Pope, and make a show of pummeling NATO leaders about their military spending: The US president’s first foreign trip was supposed to be an easy win. But on the back of the worst week of his short tenure, things aren’t looking so easy. Max de Haldevang outlines the deals Trump will be looking for and where he risks slipping up.

A global shortage of an old drug is causing new superbugs.Penicillin was a miracle drug that ushered in modern medicine. But Big Pharma stopped making it because it stopped being profitable. Keila Guimarães tracks how a scarcity of the drug is now causing treatable diseases like syphilis to wreck havoc all over the world—and new antibiotic-resistant bacteria to develop and spread rapidly.

Picturing a North Korean refugee crisis. Life inside the hermit kingdom’s borders is already harsh, and it’s not hard to imagine leader Kim Jong-un’s erratic behavior leading the country to civil warand forcing millions of people into China. Steve Mollman asks how China might cope with a humanitarian disaster of this scale.

General Electric peers into the “future of work.” The conglomerate recently appointed Lynn Calpeter, the former CFO of its power-generation and water-technologies business, to figure out exactly what that means. Sarah Kessler explains why the company has political, marketing, and practical reasons to put some resourcesbehind the buzz phrase.

In praise of selfish women. If only our culture had embraced “healthy narcissism” in the 1970s, when it briefly captured the public’s imagination. Instead, narcissism has become a dirty word. Fortunately, psychologists are rethinking the importance of this trait in driving ambition and creativity. Lila MacLellan argues that women, who are too often socialized to be “selfless,” need to hear that message.


You can now automatically send Quartz stories to your Pocket, your email, or even your vacuum cleaner through our new partner, IFTTT. Use one of the applets made by our Bot Studio to receive notifications in your preferred format as soon as we publish new stories, or try building a combination on your own.


Slack is reshaping the office. Molly Fischer’s New York magazine primer on Slack is an enlightening and at times eye-popping overviewof how the instant-messaging tool is changing office dynamics and employee behavior, and rapidly becoming a “utility we both rely on and resent.”

China’s road to expanding its reach. The country’s $1 trillion, 60-country “One Belt, One Road” infrastructure initiative is unprecedented, representing a starkly different worldview than Trump’s policy of isolationism. Jane Perlez and Yufan Huang of the New York Times explore what influence (paywall) those projects will bring.

A story of modern-day slavery. For 56 years, she kept the house, cooked the meals, and cared for the children, without complaint, pay, or the freedom to leave. In this heartbreaking story for The Atlantic, Pulitzer-winning journalist Alex Tizon recounts how he came to realizethat the woman who raised him was actually his family’s slave, as he returns her ashes to the Philippines to be finally laid to rest.

Saudi Arabia opens up. Music on the streets and women in the workforce: What’s driving one of the world’s most conservative countries to change? An economic crisis, waning regional influence, and a reform-minded prince, writes Susanne Koelbl from Riyadh for Der Spiegel. While this “isn’t the dawn of some new liberal era,” she says, space has opened up for activities and debates that would have been previously unimaginable.

Our love of the apocalypse. Frank Bures and the Aeon teamexamine our insatiable appetite for stories about the end of the world, and how those terrifying futures have morphed from being the result of a single problem to the outcome of multiple diffuse events. Modernization may have put us further away from some of those doomsday scenarios, but they sure do feel closer than ever.

Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, healthy narcissists, and end-of-world visions to You can follow us on Twitter here for updates throughout the day, or download our apps for iPhone and Android.

Trump intel leak, Ford job cuts, Florence Nightingale’s infographics

Good morning, Quartz readers!


The EU’s top court rules on how a free-trade pact with Singapore should be ratified. At issue is a bigger question: Can the EU approve such pacts by itself, or must every national parliament also weigh in? The UK will be watching anxiously. As it gears up for EU trade talks of its own, it would prefer, naturally, the less bureaucratic route.

The UN Security Council meets to discuss North Korea’s latest provocation. Sunday’s missile test showed dramatic improvements in North Korea’s progress toward a long-range missile capable of reaching the US and other targets. That may prompt China and Russia to agree to new sanctions.

Trump has an uneasy sit-down with Erdogan. The Turkish president’s Washington visit has been overshadowed by US support for a Kurdish militia in Syria that Turkey considers a terrorist affiliate. Turkey is also vying for the extradition of US-based cleric Fethullah Gulen, who it says inspired a military coup last year.


Trump reportedly revealed “highly classified” intel to the Russians last week. The Washington Post reports that the US president discussed information (paywall) “from an ally that has access to the inner workings of the Islamic State” with the Russian ambassador and foreign minister during an Oval Office visit. The intel was related to the decision to ban carry-on laptops on some flights.

Ford plans to cut about 10% of its global workforce. The cutscould be outlined (paywall) as early as this week, reports the Wall Street Journal. The carmaker is targeting $3 billion in cost reductions for 2017 as it seeks to boost profits and its sliding share price. The company has fallen far behind Tesla and GM in terms of market value.

The WannaCry ransomware attack lost steam. No new infectionswere reported on Monday, after a three-day surge that affected 300,000 computers in 150 countries, but researchers expect further variants to spread, including some that may use another exploitstolen from the NSA (paywall). They also found clues possibly linking North Korea to the attack.

Google’s AI received too much access to 1.6 million UK patient records. The company’s DeepMind unit was improperly granted access to National Health Service data, according to a UK data watchdog. DeepMind is developing a mobile app to alert medical staff when patients’ vital signs are abnormal.

The US accused Syria of mass executions and cremations.State Department officials released satellite photos and other evidence suggesting that thousands of civilians are executed every year at the Saydnaya military prison outside of Damascus. According to Amnesty International, the Assad regime carries out mass hangings at the prison, including some at night to avoid detection.

SpaceX launched a satellite to aid in-flight wifi. The satellite will help London-based Inmarsat expand its Global Xpress broadband service. Previous launches for the service were made from Russia. SpaceX itself has plans to provide internet from a constellation of satellites starting in 2019.


Lily Kuo on the pitfalls of China’s New Silk Road: “The One Belt One Road (OBOR) initiative, marketed as a modern-day recreation of the ancient Silk Road trading route, is about gaining access to new markets for Chinese goods. In this way, OBOR is similar to Britain’s colonial trade routes, used to take natural resources from its outposts as well as ship finished goods back to its colonial subjects.” Read more here.


For nice, frothy stocks: / Take weak dollar, add dollop / of West Texas crude


Ransomware is great advertising for cybersecurity stocks.Hackers have netted a paltry sum compared to the sector’s soaring shares.

Trump gave the new Silk Road a credibility boost. The presence of a top US official at the summit was exactly what Beijing wanted.

The US is starting a disastrous new war on drugs. A move to re-impose tougher sentencing guidelines is a throwback to an ugly era(paywall).


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The asteroid that killed the dinosaurs landed in the worst possible spot. Its impact sent vast amounts of sulphur into the atmosphere.

A US retailer is giving its workers exoskeletons. They’re designed to transfer energy more efficiently while lifting heavy objects.

Florence Nightingale was great at infographics. The famous nurse used persuasive statistics to improve the health-care system.

Coca-Cola has quietly been removing sugar from its sodas.Nobody seemed to notice or care that artificial sweeteners have been swapped in.

Americans are still naming their babies after Star Wars. Forty years after the uptick in Lukes and Leias, there has been a surge of Reys and Kylos.

Our best wishes for a productive day. Please send any news, comments, exoskeletons, and sci-fi names to You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.