AT&T’s WarnerMedia spinoff plan ends ‘one of the dumbest mergers in recent history,’ Jim Cramer says

CNBC’s Jim Cramer on Monday slammed AT&T as a disgrace after the company announced it will spin-off WarnerMedia to merge the business and create an entertainment giant with Discovery.

He also took aim at those hailing the move as a transformational one, railing against AT&T for taking on heavy debt three years ago to purchase Time Warner for $85 billion.

“It’s not a transformational deal… it’s the final act of one of the dumbest mergers in recent history,” the “Mad Money” host said. “The truth is, AT&T made a boneheaded decision and now they’re paying for it, but in corporate America, no one really pays for it, no one’s even allowed to say it, no one’s allowed to admit it.”

In a deal worth $43 billion, the WarnerMedia-Discovery tie-up will give AT&T shareholders a significant stake in the new company. The transaction, expected to close about a year from now, ends AT&T’s experiment to combine content and distribution in a vertically integrated company.

Cramer lambasted the phone company for buying a media business, criticizing former AT&T CEO Randall Stephenson, who received a $64 million retirement package last year.

“Today’s move is a major repudiation of that nonsense. All this talk of synergies and monetizing AT&T’s close relationship with its customers was totally chimerical,” Cramer said. “To me, this was a tremendous destruction of value.”

AT&T shares fell 2.7% to $31.37 alongside a 5% slide in Discovery to $33.85.

AT&T is a cautionary tale for why investors should be careful in owning high dividend-yielding stocks, Cramer said. The nearly 6.7% yield on AT&T was a sign that something is wrong with the company, or else the stock would be higher and the yield lower. And many AT&T shareholders own the stock for the dividend, which has been cut in half, he added.

“This is what happens when you run the most heavily indebted company in America. I can tolerate this blundering by Apple or Alphabet or Facebook,” he said. “They’d never do something as stupid, but at least they’re sitting on mountains of cash, so they can afford to make mistakes.”

Disclosure: Cramer’s charitable trust owns shares of Facebook, Apple and Alphabet.

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Ahead of Walmart earnings, Oppenheimer analyst says another big-box retailer looks like a better buy

Walmart, one of the biggest retailers in the world, is set to report earnings on Tuesday. The mega chain has been able to navigate the pandemic with curbside pickup and its investments in the online shopping experience.

Shares have not performed well this year, though. The stock is down more than 3%, trailing the S&P 500’s 11% gain and bottoming out as one of the worst Dow performers in 2021.

Ari Wald, head of technical analysis at Oppenheimer, sees Costco as the better big-box bet over Walmart.

“We don’t really have a very strong view on how Walmart’s going to react to a fundamental catalyst in terms of earnings, but where our conviction does lie is that we do expect it to underperform versus the relative strength being exhibited in industry peer Costco,” Wald told CNBC’s “Trading Nation” on Monday.

Comparing Walmart to Costco on the charts, Wald says Walmart has bounced back from March lows but now shows signs of stalling at its 200-day moving average.

“Costco, on the other hand, hasn’t seen a clear-cut breakout. It’s still below its December high but the fact that it’s retraced more of its prior decline going into that first-quarter low is a sign of relative strength. It indicates there’s more support, less resistance. And I think when you do add it up, it does argue for additional outperformance from Costco over Walmart,” said Wald.

Mark Tepper, president at Strategic Wealth Partners, is betting on Walmart over the long haul, though. He says e-commerce was crucial for Walmart’s success through the pandemic but sees the return to in-store shopping as even better for the stock.

“It’s really the vaccination rate and it’s the return of normalcy that works best for Walmart because Walmart, you get a little bit of everything — you get the e-commerce exposure, groceries, consumer electronics — a nice diversified revenue stream, and they’re a one-stop shop,” Tepper said during the same interview.

Walmart also has an ace up its sleeve in its investments in health care, says Tepper.

“The health-care thing for them, it’s going to be a long process, it’s not going to happen overnight. But if you think about all those high-margin medical services — diagnostics tests, x-ray, stuff that can be done by a nurse practitioner rather than a physician — that’s going to help them to gain even further share of their customers’ wallet in a very high-margin manner,” he said.

Walmart will report before the bell Tuesday. Analysts surveyed by FactSet expect $1.21 a share in profit for its April-ended quarter, up from $1.18 a year earlier. Sales are forecast to have slipped roughly 2%.

Disclosure: Strategic Wealth Partners holds shares of Walmart.

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Israel and Hamas: What We Know About the Violence

Some people have been hurt or killed in a burst of unrest in mixed-population cities in Israel, including in Lod, where two people died. And in the occupied West Bank, at least 10 Palestinians were killed by Israeli security forces over the weekend.

The conflict erupted a week ago, on May 10, when weeks of simmering tensions in Jerusalem among Palestinian protesters, the police and right-wing Israelis escalated, against the backdrop of a longstanding battle for control of a city sacred to Jews, Arabs and Christians.

The root of the latest violence is an intense dispute over East Jerusalem, which is predominantly Palestinian. Protests had gone on for days ahead of a Supreme Court ruling, originally expected on May 10 but then postponed, on the eviction of several Palestinian families from East Jerusalem. Israeli officials described it as a dispute over real estate. Many Arabs called it part of a wider Israeli campaign to force Palestinians out of the city, describing it as ethnic cleansing.

The protests sharply intensified after Israeli police prevented Palestinians from gathering near one of the Old City’s ancient gates, as they have customarily done during the holy month of Ramadan. The police responded on May 10 by raiding the Aqsa Mosque compound, one of Islam’s holiest sites, to keep Palestinian protesters from throwing stones, they said. Hundreds of Palestinians and a score of police officers were wounded in the skirmish.

Militants in Gaza then began firing rockets in Jerusalem’s direction, to which Israel responded with airstrikes on Gaza. Barrages by both sides intensified through the week, as did casualties — though Gazans have suffered a disproportionate number of deaths.

Despite Israel’s surveillance capability and overwhelming military firepower next door, Palestinian militants in Gaza have managed to amass a large arsenal of rockets with enhanced range in the 16 years since Israel vacated the coastal enclave, which it had occupied after the 1967 war.

Hamas, with help from allies outside Gaza — including Iran, according to Israeli and Hamas officials — has parlayed that arsenal into an increasingly lethal threat. Since the conflict erupted last week, Hamas has launched more than 3,000 rockets toward Israeli cities and towns. The intensity of the barrages has put the Israeli city of Tel Aviv, among others, under greater threat than in previous conflicts.

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Palestinian activists are calling for a general strike in Gaza, the West Bank and Israel.

Palestinians in the Gaza Strip, the West Bank and Israel live under different governments and have increasingly developed separate identities. But on Tuesday, Palestinian activists hope to unite people across the three territories in a general strike to protest Israel’s air campaign in Gaza and other measures targeting Palestinians.

The initiative also has the backing of both Hamas, the militant group that rules Gaza, and Fatah, the ruling party of the Palestinian Authority that exercises limited self-autonomy in parts of the West Bank.

“We want to send a clear message that we stand together in saying enough to the aggression on Gaza,” said Essam Bakr, one of the organizers. “But we are also saying enough to the attacks on the Aqsa Mosque, enough to the occupation and settlement building and enough to the unjust treatment of Palestinians.”

Over the past week, militant groups in Gaza have fired thousands of rockets toward Israel, killing at least 10 Israeli residents, while Israel has pounded Gaza with airstrikes, which have claimed the lives of more than 200 Palestinians, including dozens of children, even though the army has said it means only to target Hamas military sites and personnel.

On Monday, social media was flooded with calls on Palestinians to participate in the strike and a billboard encouraging Palestinian citizens of Israel to take part was seen in Nazareth, the largest Arab-majority town in Israel.

In the West Bank, the Palestinian Authority declared that a large number of its employees would participate in the strike.

Mr. Bakr said marches would take place in the West Bank, Gaza and Israel at 2 p.m. local time. The protesters in the West Bank were planning to head to dozens of areas near where there are Israeli security forces, he said, and clashes were expected.

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N.J. Removes Remote School Option Next Year

New Jersey’s public school students will no longer have the option to learn remotely starting in September.

Gov. Philip D. Murphy, a Democrat, announced on Monday that he was rescinding an order that permitted families to choose to keep their children home for virtual instruction. It was a surprise announcement from a state where some of the largest school districts have not yet reopened to all students, and many families continue to keep their children home.

Many other states are still struggling with guidance for next year. In Massachusetts, remote learning options were eliminated last month for elementary and middle school students, and Connecticut won’t require schools to offer remote learning next school year.

“We are declaring that all students will be back in school for full-time, in-person instruction come the start of the 2021-2022 school year,” Mr. Murphy said.

1,263 cases of in-school transmission of the virus since schools reopened in September, according to the state’s Department of Health.

“We know that we can get back fully in person, safely, with the right protocols in place,” the governor said.

Marie Blistan, president of the state’s largest teachers union, the New Jersey Education Association, a close ally of Mr. Murphy’s, said in a statement, “We hope and expect that all New Jersey public schools will safely open for full in-person instruction in the fall.”

But, she added, “There is still work to do to ensure that every student and staff member returns to a safe learning and working environment.”

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Inflation Fears Rise as Prices Surge for Lumber, Cars and More

Turn on the news, scroll through Facebook, or listen to a White House briefing these days and there’s a good chance you’ll catch the Federal Reserve’s least-favorite word: Inflation. If that bubbling popular concern about prices gets too ingrained in America’s psyche, it could spell trouble for the nation’s central bank.

Interest in inflation has jumped this year for both political and practical reasons. Republicans, and even some Democrats, have been warning that the government’s hefty pandemic spending could push inflation higher. And as the economy gains steam, demand is coming back faster than supply. It’s a recipe for bigger price tags for everything from airline tickets to used cars, at least temporarily.

The Fed, which Congress has put in charge of controlling inflation, thinks the jump in prices this year will fade as data quirks, supply bottlenecks and a reopening-induced pop in demand work their way through the system. For now, officials see no reason to tap the brakes by slowing down large-scale bond purchases or raising interest rates, policy changes that would slacken demand as an antidote to accelerating inflation.

And the Fed has big reasons to avoid overreacting: The problem in the wake of the 2007 to 2009 recession was tepid price gains that risked an economically damaging downward spiral, not fast ones. Inflation far above the central bank’s comfort level hasn’t been a feature of the economic landscape since the 1980s.

data from the Gdelt Project. On Fox News Channel, mentions of inflation have surged to six times the normal rate.

Google searches for “inflation” have taken off, Twitter inflation hashtags have increased, and monthly price data reports have newly become front-page headlines.

The surge in attention comes amid stories of computer chip shortages, gas lines, and surging lumber prices, and also as overall measures of real-world price gains are speeding up.

Consumer Price Inflation surprised economists by rocketing higher in April, data released last week showed, rising by 4.2 percent. While prices were expected to climb for technical reasons, supply bottlenecks and resurgent demand combined to push the data point much higher than the 3.6 percent analysts had penciled in. Fed officials use a different but related index to define their inflation goal.

Eye-popping gains are widely expected to cool down as supply catches up with demand and reopening quirks clear, but as they catch consumer attention, inflation expectations are shooting higher across a range of measures. And that poses a risk.

highest level since 2006 last week. A consumer survey collected by the University of Michigan — and closely watched by top Fed officials — jumped in preliminary May data, rising to 4.6 percent for the next year and 3.1 percent for the next five, the highest level in a decade.

The gap between short- and long-term expectations is echoed in the Federal Reserve Bank of New York’s Survey of Consumer Expectations. Americans’ year-ahead inflation expectations rose to the highest level since 2013 in April, but the outlook for inflation over the next three years has been much more stable.

Fed policymakers have taken heart in the fact that households seem to be preparing more for a short-term pop — something central bankers have said they are willing to look past without lifting rates — than for years of superfast price gains.

But they have been clear that there are limits to tolerable increases, without precisely defining what those would be.

If expectations started to rise “month after month after month,” that would be concerning, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said during an interview on May 10, before the latest Michigan data were released. She declined to put a number on what would worry her.

Inflation expectations data are notoriously hard to parse, and the consumer trackers tend to be heavily influenced by gas prices. The Fed has recently been using a quarterly measure that has moved up by less. But the speed of recent adjustments has called into question how much acceleration would be a problem, signaling that people have come to accept inflation in a way that will keep actual prices rising.

The inflation outlook is uncertain both because of the unusual moment — the economy has never reopened from a pandemic before — and because the way the government approaches economic policy has shifted over the past year.

The Fed’s new policy approach, adopted last August, both aims for periods of higher inflation and doubles down on the central bank’s full employment goal. Practically, it means the central bank plans to leave rates low for years, and it has helped to justify continuing a huge bond-buying program that the Fed began at the start of the pandemic downturn. Those policies make money cheap to borrow, ultimately bolstering demand for goods and services and helping prices to rise.

At the same time, the federal government has drastically loosened its purse strings, spending trillions of dollars to pull the economy out of the pandemic recession. Both the fiscal and the monetary response are meant to keep households economically whole through a challenging period, so there was also a risk to having less-ambitious policies.

Things will most likely work out, economists have predicted. The demand boom anticipated in 2021 is unlikely to last, because consumers’ pandemic savings will eventually be exhausted. Supply issues should be resolved, though it is not clear when. Many analysts expect prices to moderate over the next year or so.

But some underline that expectations are the vulnerability to watch when it comes to inflation, in case they shift before the smoke clears and prices slow their ascent.

“This is something people are talking about in their daily lives, it’s not just a Washington thing,” said Michael Strain, a researcher at the American Enterprise Institute. “My expectation is that expectations will remain anchored — but it’s clearly a huge risk.”

Jim Tankersley contributed reporting.

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Apple’s Compromises in China: 5 Takeaways

Apple has created an internal bureaucracy that rejects or removes apps the company believes could run afoul of Chinese rules. Apple trains its app reviewers and uses special software to inspect apps for any mention of topics Apple has deemed off limits in China, including Tiananmen Square, the Chinese spiritual movement Falun Gong, the Dalai Lama, and independence for Tibet and Taiwan.

Apple said it removes apps in China to comply with local laws.

In 2018, China’s internet regulators ordered Apple to reject an app from Guo Wengui, a Chinese billionaire who had broadcast claims of corruption inside the Communist Party. Top Apple executives then decided to add Mr. Guo to Apple’s “China sensitivities list,” which meant software would scan apps for mention of him and app reviewers would be trained to reject his apps, according to court documents.

When an app by Mr. Guo later slipped by Apple’s defenses and was published to the App Store, Chinese officials contacted Apple wanting answers. Apple’s app review chief then sent colleagues an email at 2:32 a.m. that said, “This app and any Guo Wengui app cannot be on the China store.” Apple investigated the incident and later fired the app reviewer who had approved the app.

Apple said that it had fired the app reviewer for poor performance and that it had removed Mr. Guo’s app in China because it had determined it was illegal there.

Since 2017, roughly 55,000 active apps have disappeared from Apple’s App Store in China, with most remaining available in other countries, according to a Times analysis.

More than 35,000 of those apps were games, which in China must get approval from regulators. The remaining 20,000 cut across a wide range of categories, including foreign news outlets, gay dating services and encrypted messaging apps. Apple also blocked tools for organizing pro-democracy protests and skirting internet restrictions, as well as apps about the Dalai Lama.

Apple disputed The Times’s figures, saying that some developers removed their own apps from China.

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Censorship, Surveillance and Profits: A Hard Bargain for Apple in China

On Chinese iPhones, Apple forbids apps about the Dalai Lama while hosting those from the Chinese paramilitary group accused of detaining and abusing Uyghurs, an ethnic minority group in China.

The company has also helped China spread its view of the world. Chinese iPhones censor the emoji of the Taiwanese flag, and their maps suggest Taiwan is part of China. For a time, simply typing the word “Taiwan” could make an iPhone crash, according to Patrick Wardle, a former hacker at the National Security Agency.

Sometimes, Mr. Shoemaker said, he was awakened in the middle of the night with demands from the Chinese government to remove an app. If the app appeared to mention the banned topics, he would remove it, but he would send more complicated cases to senior executives, including Mr. Cue and Mr. Schiller.

Apple resisted an order from the Chinese government in 2012 to remove The Times’s apps. But five years later, it ultimately did. Mr. Cook approved the decision, according to two people with knowledge of the matter who spoke on the condition of anonymity.

Apple recently began disclosing how often governments demand that it remove apps. In the two years ending June 2020, the most recent data available, Apple said it approved 91 percent of the Chinese government’s app-takedown requests, removing 1,217 apps.

In every other country combined over that period, Apple approved 40 percent of requests, removing 253 apps. Apple said that most of the apps it removed for the Chinese government were related to gambling or pornography or were operating without a government license, such as loan services and livestreaming apps.

Yet a Times analysis of Chinese app data suggests those disclosures represent a fraction of the apps that Apple has blocked in China. Since 2017, roughly 55,000 active apps have disappeared from Apple’s App Store in China, according to a Times analysis of data compiled by Sensor Tower, an app data firm. Most of those apps have remained available in other countries.

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