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Pier 1 Imports gets approval from a judge to liquidate its remaining stores

Fri, 05/29/2020 - 7:05pm  |  Clusterstock

  • Pier 1 Imports is winding down its business.
  • "This is not the outcome we hoped for when we began this process, and we are deeply saddened to move forward with winding down Pier 1," CEO Robert Riesbeck said in a statement.
  • The company plans to finish liquidating stores by October, once it can safely reopen.
  • Visit Business Insider's homepage for more stories.

Pier 1 Imports is shutting down its business after the US Bankruptcy Court for the Eastern District of Virginia approved its request to wind down its operations.

"This is not the outcome we hoped for when we began this process, and we are deeply saddened to move forward with winding down Pier 1," CEO Robert Riesbeck said in a statement. "We are incredibly grateful to everyone who has supported Pier 1 since the Company's inception nearly 60 years ago, including our committed associates, passionate customers and talented vendors."

The retailer previously filed for Chapter 11 bankruptcy protection in February, after announcing roughly 450 store closures, according to Business Insider's Madeline Stone. The retailer failed to attract a buyer for its business, which has been affected by the coronavirus pandemic.

"The challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down," Riesbeck previously said.

Pier 1 will be selling its assets, including its intellectual property and e-commerce business by mid-July.

The company also intends to open store locations once local authorities lift the coronavirus restrictions, and plans to finish all of its liquidation sales by October. Customers will still be able to make purchases through its website, Pier1.com, and current orders will still be processed and filled, the company said.

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'Ignore the president's unlawful order': Democrats and military veterans are up in arms after Trump suggests National Guard troops may shoot looters

Fri, 05/29/2020 - 6:24pm  |  Clusterstock

  • President Donald Trump's statement suggesting looters in Minneapolis, will be shot by National Guard troops drew fire from critics, particularly from congressional leaders with previous battlefield experience.
  • "He encouraged police officers to bash suspects heads on squad cars when making an arrest, he cheered largely white protesters who stormed a state capitol with semi-automatic rifles while threatening violence against elected representatives, and now he's literally suggesting shooting those protesting the senseless death of a black man," Sen. Tammy Duckworth, a retired US Army helicopter pilot, said in a statement.
  • "As a Marine veteran who was trained to disobey unlawful orders ... I am also calling on the men and women of the Minnesota National Guard to ignore the president's unlawful order to shoot civilians, and rely instead on your training and your oath to defend our Constitution," Rep. Seth Moulton, a retired Marine Corps infantry officer, said.
  • Visit Business Insider's homepage for more stories.

President Donald Trump's controversial statement suggesting looters in Minneapolis, Minnesota, will be shot by National Guard troops drew fire from critics, particularly from congressional leaders with previous battlefield experience.

Riots raged within Minneapolis on Thursday night as protesters took to the streets to demonstrate against the death George Floyd, a 46-year-old black man who died after being violently detained by a Minneapolis police officer.

On Monday, Floyd was pinned down on his neck by a Minneapolis police officer's knee. Video captured by bystanders during the incident showed Floyd's arrest, which has sparked outrage throughout the country. In Minneapolis, several buildings were broken into, looted, and set ablaze — including a police station.

By Thursday evening, Trump tweeted his thoughts on the ongoing riots.

"These THUGS are dishonoring the memory of George Floyd, and I won't let that happen," Trump said on Twitter. "Just spoke to Governor Tim Walz and told him that the Military is with him all the way. Any difficulty and we will assume control but, when the looting starts, the shooting starts."

Trump later clarified his tweets by adding that it was merely an "expression" that was "spoken as a fact, not as a statement."

"It's very simple, nobody should have any problem with this other than the haters, and those looking to cause trouble on social media," Trump tweeted.

Trump's statement that looting could prompt a shooting has attracted scrutiny —the same line has been used by former Miami police chief Walter Headley and other segregationists during the civil rights movement in the 1960s.

Beyond the tweet's controversial historical context; however, Democrats with military experience blasted the notion that National Guardsmembers would be firing live rounds at looters in the US.

As the commander-in-chief, Trump has the ability to federalize members of a state's National Guard for domestic law enforcement purposes.

In 1992, President George H.W. Bush federalized the California National Guard and deployed thousands of US Army soldiers and Marines to quell the Los Angeles riots.

As of Friday, roughly 500 Minnesota National Guard troops were activated to St. Paul, Minneapolis, and the surrounding communities, with a "key objective to ensure fire departments are able to respond to calls," state authorities said in a statement.

The standing rules for the use of force, a distinct set of rules different from the broader standing rules for engagement, is typically applied during civil operations within the US. While it allows service members to use deadly force for self-defense, it consists of additional bureaucratic barriers before a unit commander is allowed to authorize specific weapons or tactics during a civil mission.

The notion that US troops could be shooting US citizens amid the riots rankled congressional leaders, including Democratic Sen. Tammy Duckworth of Illinois, an Iraq War combat veteran and retired US Army helicopter pilot.

"We also cannot ignore the insidious and outright un-American responses from Donald Trump," Duckworth said in a statement. "He encouraged police officers to bash suspects heads on squad cars when making an arrest, he cheered largely white protesters who stormed a state capitol with semi-automatic rifles while threatening violence against elected representatives and now he's literally suggesting shooting those protesting the senseless death of a black man."

"Whether it's calling Mexicans rapists, racializing this pandemic as the 'Chinese virus' or his reaction to the injustice of excessive police force now, his racism is obvious," she added.

Democratic Rep. Seth Moulton of Massachusetts, a retired Marine Corps infantry officer who deployed to Iraq in 2003 and 2004, noted that "the vast majority" of protesters were demonstrating peacefully.

"As a Marine veteran who was trained to disobey unlawful orders ... I am also calling on the men and women of the Minnesota National Guard to ignore the president's unlawful order to shoot civilians," Moulton added. "And rely instead on your training and your oath to defend our Constitution, which upholds our American values including freedom of assembly and freedom of speech."

Other Democratic leaders on Friday lambasted Trump's response to the situation and described it as "pathetic."

"It perfectly encapsulates his inability to lead when our nation needs it most," Senate Minority Leader Chuck Schumer of New York said in a statement, in reference to Trump's brief remarks at the Rose Garden. "The only question is whether President Trump is afraid to lead or just doesn't know how."

Trump would later claim on Friday that he was not aware of the statement's racially-charged history.

"Well, I've heard that phrase for a long time," Trump said to reporters on Friday evening. "I've heard it for a long time as most people have. And frankly, it means when there's looting, people get shot — and they die."

"And that's the way that was meant, and that's the way that I think it was supposed to be meant," Trump added. "But I don't know where it came from, I don't know where it originated. I wouldn't know a thing like that."

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Why are Apple Pay, Starbucks' app, and Samsung Pay so much more successful than other wallet providers?

Fri, 05/29/2020 - 6:05pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

In the US, the in-store mobile wallet space is becoming increasingly crowded. Most customers have an option provided by their smartphone vendor, like Apple, Android, or Samsung Pay. But those are often supplemented by a myriad of options from other players, ranging from tech firms like PayPal, to banks and card issuers, to major retailers and restaurants.

With that proliferation of options, one would expect to see a surge in adoption. But that’s not the case — though Business Insider Intelligence projects that US in-store mobile payments volume will quintuple in the next five years, usage is consistently lagging below expectations, with estimates for 2019 falling far below what we expected just two years ago. 

As such, despite promising factors driving gains, including the normalization of NFC technology and improved incentive programs to encourage adoption and engagement, it’s important for wallet providers and groups trying to break into the space to address the problems still holding mobile wallets back. These issues include customer satisfaction with current payment methods, limited repeat purchasing, and consumer confusion stemming from fragmentation. But several wallets, like Apple Pay, Starbucks’ app, and Samsung Pay, are outperforming their peers, and by delving into why, firms can begin to develop best practices and see better results.

A new report from Business Insider Intelligence addresses how in-store mobile payments volume will grow through 2021, why that’s below past expectations, and what successful cases can teach other players in the space. It also issues actionable recommendations that various providers can take to improve their performance and better compete.

Here are some of the key takeaways:

  • US in-store mobile payments will advance steadily at a 40% compound annual growth rate (CAGR) to hit $128 billion in 2021. That’s suppressed by major headwinds, though — this is the second year running that Business Insider Intelligence has halved its projected growth rate.
  • To power ahead, US wallets should look at pockets of success. Banks, merchants, and tech providers could each benefit from implementing strategies that have worked for early leaders, including eliminating fragmentation, improving the purchase journey, and building repeat purchasing.
  • Building multiple layers of value is key to getting ahead. Adding value to the user experience and making wallets as simple and frictionless as possible are critical to encouraging adoption and keeping consumers engaged. 

In full, the report:

  • Sizes the US in-store mobile payments market and examines growth drivers.
  • Analyzes headwinds that have suppressed adoption.
  • Identifies three strategic changes providers can make to improve their results.
  • Evaluates pockets of success in the market.
  • Provides actionable insights that providers can implement to improve results.
Subscribe to an All-Access membership to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

Purchase & download the full report from our research store

 

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Oil surges 88% in May, posting its best month on record (XLE)

Fri, 05/29/2020 - 4:44pm  |  Clusterstock

  • WTI crude oil spiked 88% in May, notching its best monthly performance gain on record, according to data from Bloomberg.
  • The surge in oil prices comes just one month after oil prices went negative for a brief period of time, as demand for oil plummeted amid the economic shutdown caused by the COVID-19 pandemic.
  • Fast forward a month later, and signs of bottoming economic data suggest investors are willing to bet that demand for oil will bounce back as well.
  • While crude oil prices surged nearly 90% in May, energy stocks jumped only 2.5% for the month, as measured by the SPDR Select Sector Energy ETF.
  • Visit Business Insider's homepage for more stories.

WTI crude oil spiked 88% in the month of May, marking its best monthly performance on record, according to data from Bloomberg.

The previous monthly record for oil was in September 1990, when the commodity jumped 44.6%, according to Bloomberg.

The surge in oil comes a month after the commodity turned negative for the first time ever, as investors were spooked by a surge in supply and a drop in demand for oil amid the coronavirus pandemic.

Now, investors seem to be betting that demand for oil will bounce back as the economy begins to show initial signs of a recovery.

Despite oil's massive jump in May, the commodity is still down 42% year-to-date.

And while oil surged, energy stocks didn't. 

Read more: Billionaire investor Mario Gabelli's flagship fund has delivered a 3,082% return since its inception. He told us his 13 favorite stocks right now — and the trends he's betting on for a post-coronavirus world.

Compared to the 88% surge for oil, energy stocks, as represented by the SPDR Select Sector Energy ETF, jumped only 2.5% for the month of May.

The disconnect between the performance of the commodity and the energy stocks may have something to do with the increased balance sheet risks associated with the over-leveraged energy sector.

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US stocks erase losses, finish higher after Trump refrains from China sanctions

Fri, 05/29/2020 - 4:07pm  |  Clusterstock

  • US stocks gained on Friday, reversing earlier losses, after President Donald Trump said he would take steps to revoke Hong Kong's preferential treatment but stopped short of imposing sanctions on China.
  • US consumer spending in April also posted the biggest drop on record as the personal savings rate jumped to a record 33% from 12.7%.
  • Oil rose on Friday, capping off its best month ever on a percentage-return basis.
  • Read more on Business Insider.

US stocks rallied on Friday, reversing earlier losses, after President Donald Trump's press conference on China offered fewer fireworks than expected.

During the anxiously awaited address, Trump said he would take steps to revoke Hong Kong's special treatment but did not impose sanctions on China or indicate that the US would pull out of the phase-one trade deal the countries reached earlier in the year.

Here's where US indexes stood at the 4 p.m. ET market close on Friday:

Read more: An elite 'ultra growth' investor explains how he's beating the market in 2020 — and analyzes 4 stocks he thinks will help him stay on top for the next 5 years

Tensions between the US and China came back into the spotlight this week after Beijing moved to impose national-security legislation for Hong Kong. On Thursday, the JPMorgan analyst Marko Kolanovic said stocks could trade "drastically lower" on the renewed tension, walking back a months-long bullish stance.

Earlier in the day, stocks were weighed down by a report showing that US consumer spending dropped by 13.6% in April as the coronavirus pandemic kept businesses closed and people at home. The personal savings rate jumped to a record 33% from 12.7% as people looked to stockpile cash.

Read more: MORGAN STANLEY: Buy these 23 high-growth stocks that look poised to deliver market-beating returns over the long term

Federal Reserve Chairman Jerome Powell discussed the economy and the central bank's actions to provide relief in a conversation with former Vice Chair Alan Blinder on Friday. Powell reiterated that negative interest rates were not the right tool for the US economy and noted that the coronavirus downturn had exacerbated inequality.

Oil rallied, capping off its best-ever monthly performance on a percentage-return basis. West Texas Intermediate crude gained 4%, to $35.17 per barrel. Brent crude, the international benchmark, gained 4%, to $37.47 per barrel.

Peet's Coffee raised $2.5 billion in an initial public offering that defied the pandemic, the company announced on Friday. The offering, which took only 10 days, was Europe's largest and the world's second-largest of 2020.

Read more: A Wall Street firm studied every crash over the past 100 years — and concluded that the unusual performance of 7 tech stocks is masking the risk of a prolonged meltdown

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TRANSFORMING USER EXPERIENCE IN BANKING: Here are the strategies winning financial institutions are using to deliver a superior user experience

Fri, 05/29/2020 - 4:01pm  |  Clusterstock

As digital channels become a more critical part of the overall banking journey, banks' design teams need to strategize on how best to create user experiences (UX) that resonate with their customers.

A strong UX enables banks to deliver a simple, intuitive, and frictionless digital banking experience.  A superior UX can also help banks improve customer satisfaction and bring in new customers.

Offering a wide range of in-demand mobile banking features, for example, can satisfy existing customers and drive bank selection among new ones — but only if these features are designed and implemented well: JD Power found that customer satisfaction was negatively impacted across both online and mobile channels by the flood of complex and hard to understand features that are common in banking apps today, per an analysis from its 2019 customer satisfaction ratings. 

The risk of not delivering a solid UX strategy is high — slower-moving banks face the threat of fintechs and big tech firms that boast a great UX as their main competitive advantage. Fintechs' excellently designed apps are pleasing to the eye and simple to navigate.

Meanwhile, leading cross-industry players like Amazon and Google have long raised the bar for digital experiences within their core services — and as they venture into finance, they join fintechs in threatening legacy FIs' established market positions. Large financial institutions (FIs) are already focusing on UX design as they reshape their organizations by enhancing their digital channels, and smaller ones can learn best practices from these early movers to inform their own UX strategies.

In Transforming User Experience In Banking, Business Insider Intelligence looks at winning UX design strategies employed by leading banks to reveal how other FIs can best capture the UX opportunity. We conducted exclusive interviews with nine major FIs to examine their UX teams in detail, offer insight into their approach to designing UX, and illustrate winning strategies for delivering a superior UX.

Their strategies highlight the need to create multidisciplinary teams that place customers' needs and desires at the center of design initiatives, as well as the importance of utilizing a UX design methodology to deliver successful propositions in a timely manner.

The banks interviewed in the report are: Bank of America, BBVA USA, Capital One, DBS Bank, Goldman Sachs, HSBC, JP Morgan, Lloyds Banking Group, and U.S. Bank.

Here are a few key takeaways from the report:

  • FIs should put customers at the center of their design initiatives by involving them in all stages of the process to ensure maximum uptake of their UX initiatives. 
  • They should use an established UX design methodology — like Design Thinking or Double Diamond — to zero in on the best solutions to users' problems. 
  • FIs should create multidisciplinary design teams with a broad range of talent and expertise to develop meaningful experiences more efficiently. UX design teams should in turn collaborate with other teams and senior leaders to identify solutions that account for user demands, banks' business needs, and what is technologically feasible.
  • Although the majority of customer interactions are happening digitally, FIs shouldn't neglect physical channels when designing UX, as the customer experience often still involves these channels.
  • FIs need to find the right tools to measure the success of their UX initiatives to better link UX to business outcomes. 

In full, the report:

  • Identifies the UX oppportunity and provides an overview of popular UX design methodologies that can by deployed by banks.
  • Utilizes exclusive interviews with nine leading banks to show how different FIs structure UX teams, approach UX design processes, and measure UX to link it to business outcomes. 
  • Helps banks identify strengths and weaknesses in their own UX strategies by providing insights on winning strategies for designing a superior UX. 

Interested in getting the full report? Here's how to get access:

  1. Business Insider Intelligence analyzes the banks industry and provides in-depth analyst reports, proprietary forecasts, customizable charts, and more. >> Check if your company has BII Enterprise membership access to the full report 
  2. Sign up for the Banking Briefing, Business Insider Intelligence's expert email newsletter tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
  3. Purchase & download the full report from our research store. >> Purchase & Download Now

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From Anifa Mvuemba founder of Hanifa | A 3D Runway Fashion presentation @officialHanifa

Fri, 05/29/2020 - 3:57pm  |  Timbuktu Chronicles
CNN reports:
Congolese designer, Anifa Mvuemba, gave a preview of what catwalks might look like in a post-pandemic world with a collection using virtual models.

Mvuemba released the latest collection for her fashion brand, Hanifa, on Instagram live on Friday. During the show, the digital models sashayed down the runway with the designer's outfits draped on headless, three-dimensional bodies. The Pink Label Congo collection featured pants and dresses in vibrant colors and was described as the future of runway fashion by spectators...[more]

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A post shared by Hanifa (@hanifaofficial) on May 24, 2020 at 9:55am PDT

JPMorgan provides 5 charts that suggest the stock market still has 'plenty of room' to rise from current levels

Fri, 05/29/2020 - 3:22pm  |  Clusterstock

  • Stocks still have plenty of room to rise from current levels, according to a note published by JPMorgan on Friday.
  • The bank largely pointed to investors' underweight equity positioning as a main driver for stocks to move higher over the medium to longer term, despite near-term risks of elevated momentum.
  • Investors' allocation to stocks is 40%, which is below historical averages and is well below the early 2018 high of 49%. 
  • With bonds yielding next to nothing, investors may return to stocks and drive up prices as fears over the coronavirus pandemic subside.
  • Here are the five charts JPMorgan pointed to in support of its bullish view on stocks.
  • Visit Business Insider's homepage for more stories.

Stocks still have "plenty of room" to rise further from current levels after a nearly 40% rally off the lows, according to a note published by JPMorgan on Friday.

The bank acknowledged that short-term risks are present, especially with elevated momentum positioning by traders, which signals overbought levels.

But over the medium to longer term, JPMorgan said it thinks stocks are the place to be.

The short-term overbought condition is "not enough by itself to stop or derail a bull market underpinned by four medium to longer term drivers," the bank said.

Those four drivers include a still-low overall equity positioning backdrop; a rapid healing of funding markets; a structural change in the liquidity and interest rate environment; and a rapid economic recovery driven by steady lockdown relaxation.

Part of JPMorgan's argument is similar to a recent note from Bank of America, which pointed to a potential "Great Rotation" by investors from bonds into stocks.

Despite the nearly 40% rally in stocks since the March 23 low, investors' stock allocation "isn't much different from last March's backdrop as the rise in cash holdings and the expansion of the value of the bond universe partly offset the equity rally," the bank said.

Read moreDavid Herro was the world's best international stock picker for a decade straight. He breaks down 8 stocks he bet on after the coronavirus decimated markets — and 3 he sold.

JPMorgan said it thinks investors will increase their allocation to stocks given the favorable backdrop of high liquidity and low interest rates.

Here are the five charts JPMorgan used to expand on its reasoning for being bullish on stocks.

1. Short interest remains elevated

This chart is a short interest proxy of the S&P 500 index. It shows that bearish traders still have elevated short bets on the market. As the market grinds higher, the bank expects shorts to cut their losses and close out their short positions, which would creating buying pressure in stocks.



2. Investors are underweight stocks

Non-bank investors currently have a 40% allocation to equities, which is below its historical average and below its 2018 high of 49%.

The chart shows that there is plenty of room to move higher for investors' allocations to stocks.

JPMorgan believes equilty allocations are likely to increase over the next few years thanks to low interest rates and high liquidity. 

Investor fear surrounding the coronavirus pandemic would likely help improve equity positioning as well.



3.Investors are overweight bonds

On the flip side of investors' low equity positioning, is their current allocation to bonds.

Investors rushed into bonds amid the coronavirus pandemic, pushing the bond allocation to 24%, well above its historical average of 19%. 

As investor fear over the virus subsides, and investors wake up to the near-zero interest rates they're receiving with their fixed income holdings, it is very possible that they will rotate into stocks, according to JPMorgan.



4. Cash positions remain elevated

JPMorgan's implied cash allocation level has also spiked amid the cornavirus pandemic, but remains at its historical average of 37%. 

The bank said given cash yields are zero across the board for the foreseeable future, "it remains reasonable to expect this cash allocation to decline further over the medium to longer term."

With more than $4 trillion in cash on the sidelines, JPMorgan isn't the only one looking for that cash to be put to use into stocks. 



5. Funding markets are healing

Most important to the economy is the ability for credit markets to function properly.

If a company is cut off from raising new debt in the credit markets, it could be put in a poor position that ultimately ends in bankruptcy.

Fed Chair Jerome Powell's main mission with the Fed's monetary stimulus policies, such as buying high-yield debt, was to make sure the credit markets could still function, and companies could still raise much-needed money amid an economic crisis.

It looks like Powell's actions helped calm the credit markets. Besides back-to-back record debt issuance by corporations in March and April, JPMorgan pointed to the spread in Libor interest rates stabilizing at levels around 30 basis points as evidence that the credit markets are functioning properly.



Navy SEAL who oversaw the Osama bin Laden raid says 'Batman and Superman are not coming' in a speech advising college graduates to become their own heroes

Fri, 05/29/2020 - 2:46pm  |  Clusterstock

  • Retired US Navy Adm. William McRaven, the commander who oversaw the military raid that killed al-Qaida leader Osama bin Laden, called on recent college graduates to "save the world."
  • In a speech to the graduates of the Massachusetts Institute of Technology, he said he initially prepared a speech that included "cute little anecdotes."
  • "But somehow that speech just didn't seem right in light of all that has happened in the past five months," McRaven said during an online commencement address. "The fact that I am standing here alone, and you are isolated somewhere at home, is proof enough that the world has changed."
  • "As I saw more of my fair share of war and destruction, I came to the hard truth that Captain America isn't coming to the rescue," McRaven said. "There is no Superman, no Batman, no Wonder Woman, no Black Widow ... no Gandalf, no Harry Potter."
  • Visit Business Insider's homepage for more stories.

Retired US Navy Adm. William McRaven, the former head of US Special Operations Command and the commander who oversaw the military raid that killed al-Qaida leader Osama bin Laden, told college graduates that they, not super heroes, must be the ones to "save the world" in an online commencement speech on Friday afternoon.

In a speech to the graduates of the Massachusetts Institute of Technology, McRaven said he initially prepared a speech that included "cute little anecdotes" suggesting the "brilliant men and women of MIT are like the Navy SEALs of academia."

"But somehow that speech just didn't seem right in light of all that has happened in the past five months," McRaven said. "The fact that I am standing here alone, and you are isolated somewhere at home, is proof enough that the world has changed."

"After all these years, I came to realize that the heroes that we need are not the heroes that I've been searching for," McRaven said. "But as I grew up and traveled the world, and as I saw more of my fair share of war and destruction, I came to the hard truth that Captain America isn't coming to the rescue. There is no Superman, no Batman, no Wonder Woman, no Black Widow ... no Gandalf, no Harry Potter."

Despite the challenges facing the US and the world, McRaven said the graduates still had hope.

"If we are going to save the world from pandemics, war, climate change, poverty, racism, extremism, intolerance, then you, the brilliant minds of MIT, you are going to have to save the world," McRaven added.

McRaven offered up several qualities that the students ought to have in life to "save the world" — qualities that transcended their academic accomplishments.

"Physical courage has long been the hallmark of a warrior. But I would offer that the moral courage to stand up for what's right has an equal place in the pantheon of heroes," McRaven said. "If you hope to save the world, you will have to stand by your convictions. You will have to confront the ignorant with facts. You will have to challenge the zealots with reason. You will have to defy the naysayers and the weak-kneed that have not the constitution to stand tall."

McRaven added: "There will always be those who don't want to hear your convictions, particularly if they are true. Speaking the truth can be dangerous. But those that came before you ... those brilliant minds, those tellers of truth who made the world a more knowledgeable place, a more compassionate place, a more livable place — they had courage."

McRaven also highlighted integrity and "always trying to do what is moral, legal, and ethical."

"It will not be easy," McRaven said. "And I dare say you will fail occasionally. You will fail because you are human. You will fail because life often forces you into an unseeingly untenable position. You will fail because good and evil are always in conflict.

"And when you fail to uphold your integrity, it should make you sick to your stomach. It should give you sleepless nights. You should be so tortured that you promise yourself never to do it again."

McRaven concluded his roughly 10-minute speech with a request for the graduates.

"I want you to promise me one thing," McRaven said. "Promise me that you will be the last class, the last class to miss a commencement because of a pandemic. The last class to miss a commencement because of war. The last class to miss a commencement because of climate change, unrest, tyranny, extremism, active shooters, intolerance, and apathy."

McRaven added: "Batman and Superman are not coming to save the world. It will be up to you."

McRaven has become a highly sought-after commencement speaker. In the past few years, he's become a strident critic of President Donald Trump. In 2014, he spoke to the graduates of the University of Texas at Austin, his alma mater, where he advised them to perform the simple task: "Make your bed every morning."

"You will have accomplished the first task of the day," McRaven said. "It will give you a small sense of pride, and it will encourage you to do another task and another and another. By the end of the day, that one task completed will have turned into many tasks completed."

He added: "And if by chance you have a miserable day, you will come home to a bed that is made, that you made, and a made bed gives you encouragement that tomorrow will be better. If you want to change the world, start off by making your bed."

McRaven retired from the Navy in 2014 after 36 years of service as a Navy SEAL. He was hired as the chancellor of the University of Texas' school system in 2015. In 2017, McRaven announced he would leave the school, citing health concerns.

SEE ALSO: 5 times the Navy SEAL admiral who oversaw the Osama bin Laden raid has lambasted Trump

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Ted Cruz, Trump, and other Republicans are pushing a payroll-tax cut that would do little for families suffering financially due to coronavirus

Fri, 05/29/2020 - 2:25pm  |  Clusterstock

  • The payroll-tax cut has gained support from Trump and several other GOP lawmakers and conservative economists eager to jumpstart growth.
  • Trump, Sen. Ted Cruz, and other conservative economists have called for it.
  • But the move would not provide the economy with the adrenaline shot it needs to tide over people already out of work and businesses struggling to survive the pandemic.
  • Visit Business Insider's homepage for more stories.

The prospect of a payroll-tax cut has gained traction among some Republicans as a way to shore up incomes for workers and jumpstart growth. 

President Donald Trump strongly advocated for it at the onset of the virus outbreak, and the administration continues lobbying for it. Larry Kudlow, the National Economic Council director, has argued for a payroll-tax cut in numerous interviews without detailing specific figures.

The proposal sounds like a sensible move on paper. Payroll taxes are used to finance Social Security, with employees and employers each paying 6.2% on their wages scaling up to $137,700. Then an additional 1.45% from the employee's gross pay is used to fund Medicare.

Despite facing steep opposition in Congress, particularly from Democrats, the payroll-tax cut has drawn support from GOP Sen. Ted Cruz of Texas.

In a statement previously provided to Business Insider, Cruz called for a complete suspension of the payroll-tax cut through the end of the year.

"Not only would this alleviate the employers' burden of paying back deferred taxes over the next two years, but it would also give employees a de facto wage hike, putting more money into Americans' pockets," Cruz said.

Stephen Moore, an informal economic adviser to Trump and a fellow at the Heritage Foundation, echoed Cruz. In a separate statement, he framed a payroll-tax cut as "the biggest job creator."

Read more: A Wall Street firm studied every crash over the past 100 years — and concluded that the unusual performance of 7 tech stocks is masking the risk of a prolonged meltdown

But many experts say the tax cut would do little for people who are already unemployed. Over 40 million Americans have filed for unemployment in the last three months as the pandemic slammed the economy.

The wave of job losses sent the unemployment rate skyrocketing to nearly 15%, the highest level it's ever been since the Great Depression. A payroll tax cut would do virtually nothing for people who are out of work, since they are no longer drawing paychecks from employers.

Chye-Ching Huang and Samantha Washington of the left-leaning Center on Budget and Policy Priorities laid out in a blog post why they found slashing those taxes would be "poor stimulus" earlier this month:

  • Cutting the employee portion of the tax would mostly benefit higher earners, who are less likely to spend the money, and not provide a substantial pay-bump for minimum wage workers, they said.
  • Eliminating employer taxes would be "ineffective" to bolster business hiring and investment, they added. The authors noted ongoing social distancing measures and a rise in unemployment, causing reduced demand for services and products. Firms are unlikely go on a hiring spree or expand their operations amid uncertain economic conditions.

The prospect of a payroll-tax cut appears slim. House Speaker Nancy Pelosi, Democrat of California, shot down the proposal earlier this month, Bloomberg reported.

The $3 trillion Democratic spending proposal doesn't include it either. Instead, the proposal is focused on aiding states and providing another lifeline to jobless people by extending their $600-per-week unemployment payment boost through January.

Read more: A part-time real-estate investor quit his traditional job 5 years after snagging his first deal. He shares his no-hassle strategy that's allowed him to travel the world with his 6 kids.

With Democrats and Republicans fiercely debating the scope of a future stimulus package, the payroll-tax cut is unlikely to provide the economy with the adrenaline shot it needs to tide over millions of people already out of work and businesses already in dire financial straits.

Laura Casado contributed reporting.

SEE ALSO: PUTTING AMERICA BACK TO WORK: 19 of the country's top economists and lawmakers share their best ideas for the 40 million newly unemployed Americans

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Stocks could trade 'drastically lower' on breakdown in trade between China and US, JPMorgan says

Fri, 05/29/2020 - 1:57pm  |  Clusterstock

  • JPMorgan has turned cautious on equities after months of being bullish, the analyst Marko Kolanovic said in a note on Thursday.
  • Kolanovic said that despite his constructive view on equities since mid-March, equities could trade "drastically lower" on "a complete breakdown of supply chains and international trade."
  • Rising tensions between the US and China could exacerbate the damage already done to supply chains by the coronavirus pandemic.
  • Kolanovic is sticking to his forecast of stocks hitting all-time highs in 2021 but said he would like to see recent political risks show signs of normalizing before getting more constructive.
  • Visit Business Insider's homepage for more stories.

After being bullish on stocks since mid-March, JPMorgan has dialed back its positive outlook following a nearly 40% rally in the S&P 500, Marko Kolanovic said in a note published on Thursday.

The analyst said there were two main risks that could justify stocks "trading drastically lower" going forward.

First, the politicization of the coronavirus pandemic could lead to delays in reopening the economy, and messages from politicians and the media could negatively affect consumer behavior.

The second is "a complete breakdown of supply chains and international trade, primarily between the two largest economies (US and China)."

Any increase in trade tensions between the US and China would put additional strain on a global supply chain that has already been damaged by the coronavirus pandemic.

Read more: An elite 'ultragrowth' investor explains how he's beating the market in 2020 — and analyzes 4 stocks he thinks will help him stay on top for the next 5 years

President Donald Trump has recently focused his ire on China, blaming the country for the pandemic and threatening to abandon a trade deal between the two countries. He's set to hold a press conference on China later Friday.

Kolanovic said that he wanted to see these political risks show signs of normalizing and that he ultimately thinks the politicization of the coronavirus "will backfire and will be abandoned, but some self-inflicted damage could perhaps happen first."

Still, despite the increasing risks for stocks, Kolanovic's current forecast is for stocks to hit all-time highs in 2021.

Read more: Bank of America says a new bubble may be forming in the stock market — and shares a cheap strategy for protection that is 'significantly' more profitable than during the past 10 years

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NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America

The average cost of car insurance in the US

Fri, 05/29/2020 - 1:49pm  |  Clusterstock
  • Car insurance prices include a variety of factors, and every insurance company looks at those factors differently. According to premium information gathered by Business Insider, the average cost for car insurance between 2017 and 2019 was $1,566 per year. But, every person's quote will be different.
  • The state you live in, the level of coverage you'd like to have, and your gender, age, credit history, and driving history will all factor into your premium.
  • While a California driver might pay between $987 and $1,815 per year, a driver in New York may pay between $1,352 and $2,752 per year for coverage.
  • That said, you'll want to shop around and see which insurance company will have the best price for you. Before you start shopping, use this guide to get an idea of car insurance prices. 
  • Check out our partner Savvy — a free tool that lets you compare car insurnce quotes in minutes  »
/* Business Insider / Auto Insurance Content Pages */ var MediaAlphaExchange = {    "data": {       "zip": "auto"    },    "placement_id": "RxLRBKtcQejwbKRhebUT0f87Cp5b7w",    "sub_1": "average-cost-of-car-insurance-united-states",    "type": "ad_unit",    "ua_class": "auto",    "version": 17 };

If you're in the market for your next car insurance policy, it's important to understand all the factors that can go into the price you'll pay for coverage. 

Car insurance policies have lots of moving parts, and your premium, or the cost you'll pay for coverage, is just one of them. Insurance is regulated at the state level, and laws on required coverage and auto insurance pricing are different in every state. Insurance companies take into account many different factors, including the state and area where you live, as well as your gender, age, driving history, and the level of coverage you'd like to have.

Business Insider compiled data from industry regulators, personal finance publications, and comparison sites to find out which factors affected car insurance costs the most, and what the typical driver can expect to pay. Here are the biggest factors that will influence the price you'll pay for coverage, and what to consider when looking at your car insurance options. 

Keep in mind that there have been some big changes to car insurance during the coronavirus pandemic. Now, some car insurers are offering discounts as Americans drive less, and are also helping people affected by the virus postpone payments.

Table of ContentsCost of car insurance by state

Every state handles car insurance differently. States regulate their own laws and policies about car insurance coverage, including how much coverage is required, how much insurance is responsible for covering, and what factors insurance companies can use to determine rates.

In some states, like New Hampshire, car insurance isn't even required. In Michigan, car insurance is expensive because of a no-fault law requiring unlimited coverage for personal injury protection. Regulations like these will be big factors in the amount you'll pay for coverage. 

Business Insider put together a list of average car insurance prices for each state. These rates were determined as an average of rates reported by Nerdwallet, The Zebra, ValuePenguin, Bankrate, and the National Association of Insurance Commissioners. Here's a range of what you can expect to pay each year for coverage in every US state. 

/* Business Insider / Auto Insurance Content Pages */ var MediaAlphaExchange = {    "data": {       "zip": "auto"    },    "placement_id": "RxLRBKtcQejwbKRhebUT0f87Cp5b7w",    "sub_1": "average-cost-of-car-insurance-united-states",    "type": "ad_unit",    "ua_class": "auto",    "version": 17 }; State Range Average Car Insurance Premium (Annual) Alabama $868 - $2,078 $1,439 Alaska $1,028 - $1,502 $1,242 Arizona $973 - $2,699 $1,543 Arkansas $906 - $2,213 $1,459 California $987 - $1,815 $1,647 Colorado $982 - $3,164 $1,915 Connecticut $1,151 - $2,619 $1,781 Delaware $1,241 - $2,513 $1,970 District of Columbia $1,331 - $2,793 $1,715 Florida $1,257 - $3,370 $2,007 Georgia $1,048 - $2,619 $1,942 Hawaii $873 - $1,548 $1,324 Idaho $680 - $1,777 $1,122 Illinois $885 - $2,313 $1,335 Indiana $755 - $1,489 $1,166 Iowa $702 - $1,482 $1,100 Kansas $863 - $2,190 $1,313 Kentucky $939 - $3,418 $1,863 Louisiana $1,405 - $3,525 $2,480 Maine $704 - $2,340 $1,510 Maryland $896 - $2,431 $1,463 Massachusetts $1,129 - $1,866 $1,385 Michigan $1,272 - $8,723 $3,343 Minnesota $875 - $2,693 $2,040 Mississippi $994 - $2,208 $1,450 Missouri $872 - $2,584 $1,560 Montana $864 - $2,525 $1,498 Nebraska $831 - $2,038 $1,355 Nevada $1,103 - $3,190 $1,855 New Hampshire $819 - $2,004 $1,451 New Jersey $1,104 - $3,013 $1,756 New Mexico $938 - $2,194 $1,608 New York $1,352 - $2,752 $1,894 North Carolina $789 - $1,692 $1,316 North Dakota $773 - $1,979 $1,178 Ohio $789 - $1,688 $1,249 Oklahoma $1,005 - $2,659 $1,465 Oregon $905 - $2,205 $1,598 Pennsylvania $971 - $2,018 $1,414 Rhode Island $1,304 - $3,847 $2,018 South Carolina $973 - $2,112 $1,706 South Dakota $767 - $2,338 $1,399 Tennessee $871 - $1,821 $1,365 Texas $1,110 - $2,594 $1,699 Utah $873 - $2,538 $1,606 Vermont $764 - $1,769 $1,207 Virginia $843 - $1,498 $1,127 Washington $918 - $1,691 $1,106 West Virginia $1,026 - $2,131 $1,410 Wisconsin $737 - $1,590 $1,241 Wyoming $847 - $2,118 $1,246

Source: Data from ValuePenguin, Bankrate, The Zebra, and the National Association of Insurance Commissioners.

Cost of car insurance by type of coverage

As a general rule, the more a car insurance policy covers, the more it costs. 

You'll often see quotes listed with numbers and slashes — a 50/100/50 policy would cover up to $50,000 of injury protection for each person involved in an accident, up to $100,000 worth of injuries per incident, and up to $50,000 of property damages per incident. 

As these coverage limits go up, your premium will increase. Every state has a different minimum requirement, making auto insurance coverage more expensive in some states than others. 

Some policies go beyond the minimum coverage in a state, offering additional protection. Collision coverage can help repair your car if it's damaged in an accident, and comprehensive policies can protect it in events like storms and disasters. However, these additional coverage types will increase your costs. According to Nerdwallet, additional coverage could raise your premium by about $1,000 per year. 

What's the difference in the cost of car insurance for men and women?

Gender does influence car insurance, at least in states that allow insurers to consider it. And from Business Insider's data, car insurance companies tend to charge women more. 

Business Insider collected quotes from Allstate and State Farm for basic coverage for male and female drivers with an identical profile in Austin, Texas. When swapping out only the gender, the male profile was quoted $1,069 for coverage per year, while the female profile was quoted $1,124 per year for coverage, costing the woman driver 5% more. That held true in other cities and states across the country, including Seattle, Miami, Chicago, and Columbus, Ohio. On average, the profiles for women were quoted $172 higher. 

But, there is a relationship between age and gender. According to data from the Zebra, young men tend to pay about 14% more for coverage. The gap in costs for coverage gets smaller as young men approach their mid-20s. 

However, six states — California, Hawaii, Massachusetts, Pennsylvania, North Carolina, and Montana — don't allow gender as a factor in premium pricing. 

Average car insurance premiums by age

The number of years you've been driving will affect the price you'll pay for coverage. According to Business Insider's data, a 16-year-old's coverage will be between $1,700 and $3,000 higher per year than the typical 21-year-old's coverage. 

To find these ranges, Business Insider gathered rates reported from comparison sites CarInsurance.com and ValuePenguin. Quotes were obtained by these two sites for the same driver with the ages changed. Carinsurance.com's data comes in at the low end, calculated as the average state minimum insurance coverage for 10 zip codes in all 50 states, through insurers Allstate, Farmers, GEICO, Nationwide, Progressive, and State Farm. ValuePenguin's data chose a 25/50/25 insurance plan in California, New York, and Michigan, a policy which would cover more than the state minimum policy, and is calculated as the average of 20 insurance company's quotes across three cities in each state.  

When it comes to your quote, remember that it will vary from person to person, regardless of your age. Here's the breakdown of what coverage could cost at each age. 

/* Business Insider / Auto Insurance Content Pages */ var MediaAlphaExchange = {    "data": {       "zip": "auto"    },    "placement_id": "RxLRBKtcQejwbKRhebUT0f87Cp5b7w",    "sub_1": "average-cost-of-car-insurance-united-states",    "type": "ad_unit",    "ua_class": "auto",    "version": 17 }; Age Typical Car Insurance Costs 16 $2,593 - $6,777 17 $2,179 - $6,225 18 $1,870 - $5,473 19 $1,260 - 4,163 20 $1,102 - $3,816 21 $875 - $3,057 25 $608 - $2,184 35 $552 - $1,907 45 $525 - $1,816 55 $494 - $1,690 65 $515 - $1,737 75 $630 - $2,037 85 $778 - $2,416 How auto insurance prices vary by driver profile and history

By this point, you're probably starting to see how much information goes into a car insurance quote. There are many more factors that are also considered: 

  • Younger (or newer) drivers pay more. New drivers are 73% more expensive than a driver with 16 or more years of driving experience, according to quotes obtained from the California Department of Insurance.
  • Married drivers pay more. When you're married, auto insurance costs 42% more, according to quotes from the California Department of Insurance.
  • Drivers with a previous accident on their records pay more. After an accident, premiums jump 30%, according to Insurance.com and Insure.com reporting, based on data from Quadrant Information Services.
  • Drivers with a DUI on their record pay more. With a DUI on your record, insurance will cost 63% more, according to Insurance.com and Insure.com reporting.
  • Drivers with poor credit scores pay more. Consumer Reports compiled rate pricing information from car insurance companies in every state, and found that credit scores were one of the biggest factors in premium costs. In Michigan, a driver with poor credit will pay about $2,470 more each year than someone with excellent credit — and $444 more in Ohio, $1,512 more in Texas, and $251 more in North Carolina. Three states (California, Hawaii, and Massachussetts) don't allow credit scores to be factored into car insurance prices. 
  • Drivers who live in more urban areas pay more. Car insurance is cheaper in zip codes that are more rural, and the same is true at the state level. Insure.com data shows that Iowa, Idaho, Wisconsin, and Maine have the cheapest car insurance of all states, and that's because they're more rural states. 
Other factors that can impact the cost of car insurance 

There are a few other factors that will contribute to your premium, including: 

  • The amount of miles you drive per year. If you don't drive many miles per year, you're less likely to be involved in an accident. 
  • What type of car you drive. The more expensive the car would be to replace, the more it will cost to insure.
  • Previous insurance coverage. If you've had a gap in coverage, it could increase your premium. According to ValuePenguin data, a lapse in coverage for more than 30 days meant 29% higher premiums. 

Car insurance has lots of factors that go into its pricing. And, it's changed over time. Data from the National Association of Insurance Commissioners shows just how much car insurance premiums have increased over time. The chart below shows how auto insurance prices have increased between 2007 and 2016: 

But, the biggest effect on auto insurance costs is whether you're shopping around. Each insurance company looks at all of these factors and prices your coverage differently as a result. It's critical to compare what you're offered. Get quotes from several different auto insurance companies and compare them to make sure you're getting the best deal for you. 

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The world's largest marijuana company craters 22% as recreational pot demand sinks amid coronavirus pandemic (CGC)

Fri, 05/29/2020 - 1:31pm  |  Clusterstock

  • Canopy Growth cratered as much as 22% on Friday after the company reported its fiscal fourth quarter earnings that missed analyst estimates.
  • The coronavirus pandemic took a toll on the Canadian marijuana company after it was forced to close its corporate-owned retail stores in mid-March.
  • Additionally, the company saw a 14% decline in its direct-to-consumer sales in the quarter, which Canopy attributed to "off peak seasonal demand decline."
  • Canopy withdrew its financial guidance for fiscal-year 2021 and took a "mostly non-cash" charge of $743 million Canadian dollars.
  • Visit Business Insider's homepage for more stories.

Canopy Growth, the largest marijuana company by market cap, cratered as much as 22% on Friday after reporting earnings that missed analyst estimates.

The company was hit hard by the coronavirus pandemic, having closed its retail stores in mid-March for a number of weeks, in addition to a decline in demand for its recreational products from consumers.

Here are the key numbers:

Revenue: $107.9 million Canadian dollars, representing a 13% decline from its previous quarter.
Earnings per share:
-CA$3.72, versus the -CA$0.44 estimate.

Overall, the company lost CA$1.3 billion in the quarter, with roughly half of that loss attributed to a "mostly non-cash" restructuring charge.

Direct-to-consumer sales in the quarter fell 14% due to "off peak seasonal demand decline amid the closure of corporate-owned retail stores late in the quarter in response to COVID-19," according to the company.

Read moreDavid Herro was the world's best international stock picker for a decade straight. He breaks down 8 stocks he bet on after the coronavirus decimated markets — and 3 he sold.

Product sales to other dispensaries plunged 31% in the quarter as a decline in flower and pre-roll joints sales overpowered the growth in softgels, oil, and cannabis-infused products.

The company is implementing a new strategy reset, in efforts to become "faster and more agile," as demand for its products have been dynamic amid the pandemic, the company said in its earnings release.

Canopy CEO David Klein commented, "... we have taken steps to align our capacity with the current market demand ..."

Canopy is hoping to boost sales via its new cannabis-infused beverages and vape product launches in Canada.

For fiscal year 2020, Canopy's revenue of CA$399 million was up 76% year-over-year. The company withdrew its financial guidance for fiscal year 2021.

Canopy traded down as much as 22% to $16.95 in Friday morning trades.

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A political strategist turned VC thinks Trump's war with Twitter and Facebook could have a silver lining for small startups trying to compete with the giants

Fri, 05/29/2020 - 1:24pm  |  Clusterstock

A political strategist turned venture capitalist is playing devil's advocate to the Silicon Valley cries that President Trump's war on Twitter and Facebook will be bad for business.

Bradley Tusk, the founder and CEO of Tusk Venture Partners, thinks Thursday's executive order targeting social-media giants like Facebook and Twitter could work out well for startups, perhaps at the expense of the long-term impacts to the social-media behemoths.

"Generally, it's not clear that the big platforms are good for startups anyway," Tusk told Business Insider. "If you are working on a new idea in the social-networking space, Facebook is the monopoly, so competing with them is hard. The weaker the platforms are, the easier it is for new entrants to the marketplace."

The former political strategist is still active in Democratic circles. He ran Mike Bloomberg's 2009 New York mayoral reelection campaign, acted as deputy governor of Illinois, and headed the communications work for New York Sen. Chuck Schumer. He joked that he has been dodging calls from unknown phone numbers, given the sheer volume of fundraising or advising requests he has gotten leading up to the 2020 election cycle.

Tusk is one of the few venture-capital insiders that has been willing to cautiously wade into policy conversations as regulation circles Silicon Valley's powerful tech industry. But with one foot still in the world of politics, Tusk feels he may be more able to do so given his background and network of contacts. 

For instance, Tusk said he had heard that both sides of the aisle were convinced social-media companies were unfairly targeting them, often without hard evidence. But he predicted Trump's actions on Thursday could push Democratic lawmakers to further protect Section 230, the legislation guarding social-media platforms from retaliation over third-party content that is at the center of Trump's ire.

"They were convinced there's a conspiracy because that's how politicians think, so the platforms have earned opposition from both sides," Tusk said. "But the more aggressive Trump is, the more Dems have to reconsider their position. It became a partisan issue."

The silver lining

Tusk predicted Thursday's executive order would likely get pulled into lengthy legal fights, even as Facebook, Twitter, and Google are fighting fires on other regulatory fights. The lack of attention and innovation from the industry giants could create a power vacuum ripe with opportunity for smaller competitors, according to Tusk.

"For me personally, the question is: Does this create an opportunity for new startups to emerge?" Tusk said. "If Section 230 goes away, or there's ambiguity over its future over the next few years, startups with a slightly different model can succeed now or at least take on the big platforms."

Tusk invests primarily in early-stage companies through his venture practice and said he has already advised a startup in the space to take a hard look at the current environment before launching with contentious user features, such as allowing third-party-hosted comments sections. 

"We weren't planning on letting people post comments anyway, and this just enforces that decision," Tusk said. "If you are a new startup with limited resources, it's hard for you to win a fight in Congress on your own."

It's a risk calculation that changes significantly for public companies and investors in public markets, Tusk said. Those that have invested in companies like Twitter and Facebook have financial interests in making sure the risk to those business models stays low, Tusk said, and could explain part of the rift among the investor community over the long-term outcomes of Thursday's order.

However, he said even private investors could be hesitant to provide funding to companies they deem risky given the political environment.

"I do think that a brand-new startup in this space will have trouble raising if people are skittish about what is coming, especially in an already challenging environment," Tusk said.

SEE ALSO: How 23 rising star enterprise VCs got their start in venture — and what other rookie professionals can do to break into the notoriously exclusive industry

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NOW WATCH: Pathologists debunk 13 coronavirus myths

Some US asset managers are slashing fees on money market funds so their investors don't lose money because returns are so low

Fri, 05/29/2020 - 1:24pm  |  Clusterstock

  • Asset management firms in the US are slashing fees charged on short-term debt funds as plunging interest rates and yields on US government debt mean that investors risk losing money simply by investing in them, the FT reported Friday.
  • Federated Hermes, Fidelity Investments, and TIAA-CREF have scrapped or lowered fees on some funds, and are still monitoring yields before considering further cuts.
  • A drop in the 3-month Treasury bond yield, caused by the US central bank's near-zero benchmark rate, has sharply dragged down overall returns for investors.
  • Negative interest rates "could be detrimental to the nearly $5 trillion money market mutual fund space," according to money manager Megan Horneman.
  • Visit Business Insider's homepage for more stories.

Asset management firms in the US are slashing fees charged on short-term debt funds as plunging interest rates and yields on US government debt mean that investors risk losing money simply by investing in them, the Financial Times reported Friday.

The Federal Reserve pushed its key interest rate to financial-crisis level at between 0% and 0.25% during the heat of the pandemic in mid-March as the US went into lockdown mode, and the coronavirus hit all sectors of the economy.

This pulled the 3-month US Treasury yield to a meager 0.14%, and the benchmark 10-year yield to an all-time low of 0.318% in March.

Although returns on short-term Treasury instruments remain negligible, worried investors are still flocking to invest their cash into money market funds, which are generally low return, but extremely low risk.

Assets in money markets have risen by over $1 trillion to $4.8 trillion since the start of March, the FT said, citing data from the Investment Company Institute.

That huge flow has led asset managers in the industry to buy debt with near-zero yields, significantly pulling down overall returns.

Read More: MORGAN STANLEY: Buy these 23 high-growth stocks that look poised to deliver market-beating returns over the long term

So low are returns on some funds now that a handful of money managers have had to cut or remove fees on their products so that investors don't lose money just by investing in the funds.

Three firms that handle some of the largest short-term debt funds in the US have already cut fees on many products, the FT said. These are: Federated Hermes, Fidelity, and TIAA-CREF.

Pittsburgh-based Federated Hermes has cut fees on over 30 money market funds, while New York-headquartered TIAA-CREF cancelled its charges on two funds invested in government debt and government-backed securities, the newspaper reported. 

Fidelity, one of the biggest asset managers, has waived fees on some funds, and told the FT it was closely monitoring yields on its money market mutual funds before cutting further.

Having to bow to pressure from falling interest rates, short-term debt funds are faced with a risky future if the Fed decides to go the way of pushing interest rates into negative territory. 

Read More: David Herro was the world's best international stock picker for a decade straight. He breaks down 8 stocks he bet on after the coronavirus decimated markets — and 3 he sold.

However, Fed chairman Jerome Powell has been vocal about his stance against negative interest rates, and has gone as far to say they remain out of the question. 

"The committee's view on negative rates has not changed. This is not something we're looking at," Powell has said.

Speculation continues about their use in the US however, and analysts at Standard Chartered said this week that if the Fed were to implement negative interest rates, it would have to be at least -0.5% or -1%, rather than a small cut below zero.

"Negative interest rates are a dangerous tool and should only be considered in a worst case scenario," according to Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.

"In the US, it could be detrimental to the nearly $5 trillion money market mutual fund space," she said.

Read More: A part-time real-estate investor quit his traditional job 5 years after snagging his first deal. He shares his no-hassle strategy that's allowed him to travel the world with his 6 kids.

SEE ALSO: The coronavirus pandemic is messing with how economic data is produced, and making it hard to work out how badly it's hitting the global economy, the IMF says

Join the conversation about this story »

NOW WATCH: Here's what it's like to travel during the coronavirus outbreak

Power Line: Not enough bank for bankruptcy — A $400 billion hole in energy investment — More fuel for fusion

Fri, 05/29/2020 - 1:14pm  |  Clusterstock

Welcome to Power Line, a weekly energy newsletter brought to you by Business Insider.

Here's what you need to know:

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  • Thanks to everyone who sent in tips about misleading solar ads in response to our story. You can always reach me at bjones@businessinsider.com. 

We love a short week, and I spent most of it working on a feature about my hometown — "America's most unusual town," according to Oprah. So that must be true. 

It might be. Fairfield, Iowa is home to thousands of disciples of the late Indian guru, Maharishi Mahesh Yogi. People here meditate together daily in large golden domes, eschew wifi and smart meters, and live in unique structures that are said to nourish their occupants. 

The feature will go live on Sunday. In the meantime, let's get to this week's energy news. 

When things are so bleak in the oil industry that you can't afford to file for bankruptcy

Last week, I learned that you actually have to pay a ton of money to file for Chapter 11 bankruptcy.

  • Among the costs are steep fees for lawyers, financial advisors, and industry consultants. 

Some energy companies might not be able to afford to file, according to a partner at the law firm Allen & Overy. Oil has recovered its April losses, but it's still down about 50%. 

What happens if you can't afford Chapter 11? You might be forced to file for Chapter 7 instead, a far more dire form of bankruptcy, according to Ken Coleman, head of Allen & Overy's US restructuring and banking group.

  • Essentially, Chapter 7 is a fire sale. Your business gets liquidated, instead of being restructured.
  • Coleman said this downturn will see more Chapter 7 filings than previous ones. 
  • The problem, he says, is that a lot of these companies won't have an apparent exit — a problem we explain in detail here

OK, but: Chapter 7 filings will still be rare, another lawyer told me. 

  • Small companies in the oilfield services industry will be most likely to file for Chapter 7, Patrick Hughes of the law firm Haynes and Boone, said. 
  • Far more likely than chapter 7 filings will be creditors converting debt to equity, he added. 

Phrase of the day: "Naked 363 sale." 

  • Sign me up! Just kidding. This is actually bad. 
  • Section 363 of the bankruptcy code is the provision that allows you to sell assets or whole businesses, Coleman said. What makes it naked is when there's no buyer. It's basically like an auction, he said. 
  • Similar to the protection that lenders have when they provide financing, buyers in a 363 sale also get added protection.
  • "That's why you see a lot of sales that could otherwise happen outside of a bankruptcy happen inside of bankruptcy because the buyer wants those special benefits," Coleman said. 
A $400 billion hole in energy investment 

At the start of 2020, the International Energy Agency estimated that capital investment in energy would grow by 2% this year. 

Wrong! 

How wrong? "2020 is now set to see the largest decline in energy investment on record," the IEA said in a report this week. 

  • The agency is expecting a reduction of one-fifth, or almost $400 billion, in capital spending, relative to last year.

Is this shocking? Not really, considering that oil accounts for half of consumer spending on energy, and as we know, oil crashed. But a few figures from the IEA report are. 

  • The agency projects that spending on oil will fall by more than $1 trillion this year. 
  • "Among other implications, this would mean an historic switch in 2020 as electricity becomes the largest single element of consumer spending on energy," the agency wrote. 

How do renewables stack up? Better than oil, at least. Investment in renewable projects is expected to fall by 10% this year, the IEA said, far less than the overall decline in investment of 20% across the energy sector. 

  • IEA expects an investment of about $280 billion in renewable power this year, down from $311 billion last year. 
  • "Clean energy investment has been relatively resilient in the downturn, but a flat trend of spending since 2015 is far from enough to bring a lasting reduction in emissions," the agency said. 

A buzzy fusion startup raises another $84 million 

Skeptics of fusion energy — the same reaction that powers the sun — like to joke that commercial fusion reactors have been 30 years away for the last 100 years or so. 

One startup may be close to putting that joke to rest. MIT-spinout Commonwealth Fusion Systems (CFS) just received another $84 million to build its tokamak reactor, which it says will be ready in prototype-form by 2025.

Singapore's Temasek Holding led the funding round and Norwegian oil giant Equinor also invested, among other firms.

Why fusion is important: It's a source of clean energy that can be turned on whenever we need it, unlike other forms of clean power like wind and solar.

  • Fusion comes with fewer downsides than nuclear fission — what most people mean when they refer to nuclear power. 

One big hurdle remains: Proving that it takes less energy to produce fusion than the reaction generates, or net energy gain. 

4 top reads from May

Monday is June 1. I can't even.

What I can do is take this opportunity to promote myself. Here are my four favorite reads of this past month. 

Got feedback? Pass it along at bjones@businessinsider.com. 

Highlights from my inbox this week

If reading my email doesn't grab your attention, I don't know what will. But in all seriousness, there are a lot of interesting tidbits I missed. Here are the highlights. 

Oil & Coal

  • Rystad Energy says its new forecast for global oil demand projects a decrease of 11.5%, or 11.4 million barrels per day, for the year. Demand for May alone is down almost twice that, meanwhile 2021 is looking like it will nearly match demand last year. 
  • 729,000 vehicles were sold in the US in April, the lowest total since early 2010, per the US Energy Information Administration.
  • Coal companies are more likely to default on their debt as a result of the coronavirus pandemic, according to a new analysis by S&P.
  • David Lawler, will take over from Susan Dio as chief of bp's US division, bp America. He was formerly the CEO of BPX energy, bp's US onshore oil and gas business. 
  • Chevron will cut 10% to 15% of its global workforce, Reuters reported

Clean energy

  • Investment in solar and wind projects by oil majors like Shell and bp is set to reach $17.5 billion over the next five years, according to Rystad. More than half of that will come from Norway's Equinor, which is investing heavily in offshore wind. 
  • I'm not really sure who's buying solar-powered yachts and sailing them to the Caribbean right now, but a company called Soel Yachts is selling them. And dang, they look cool! 

Electricity

  • Surging energy consumption by people working and living at home in the wake of the pandemic could threaten grid reliability as droves of people start turning on air-con, according to the firm Logical Buildings. 

That's it! Have a great weekend.

- Benji 

Ps. Last weekend, I went searching for frogs in ditches around Iowa, you know, like a normal person about to turn 30. Here's a lil cutie I found. 

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US stocks slide as traders await Trump's China news conference

Fri, 05/29/2020 - 12:33pm  |  Clusterstock

  • US stocks slipped on Friday ahead of President Donald Trump's news conference on China.
  • US consumer spending in April also posted the biggest drop on record as the personal savings rate jumped to a record 33% from 12.7%.
  • Oil slumped but remained on track for its best month ever.
  • Read more on Business Insider.

US stocks slipped on Friday as concerned traders awaited President Donald Trump's news conference on China. Consumer spending dropped by a record amount in April, reflecting the immense economic damage caused by the coronavirus pandemic.

The slump extended declines from Thursday, when stocks erased early gains and finished negative after Trump announced the conference following China's approval of national-security legislation for Hong Kong.

Even with Friday's declines, major US indexes are on track to end the month higher. The S&P 500 and the Dow Jones industrial average have gained more than 3%  in May, while the Nasdaq has risen more than 5%. 

Here's where US indexes stood at 12:30 p.m. ET  on Friday:

Read more: An elite 'ultra growth' investor explains how he's beating the market in 2020 — and analyzes 4 stocks he thinks will help him stay on top for the next 5 years

Tensions between the US and China have come back into the spotlight this week after Beijing moved to impose the national-security legislation. On Thursday, JPMorgan analyst Marko Kolanovic said stocks could trade "drastically lower" on the renewed tension, walking back a months-long bullish stance.  

On the economic front, US consumer spending dropped by 13.6% in April as the coronavirus pandemic kept businesses closed and people at home. The personal savings rate jumped to a record 33% from 12.7% as people looked to stockpile cash.

Federal Reserve Chairman Jerome Powell is set to participate in a virtual discussion later Friday that could give clues about the central bank's next policy steps.

Read more: A Wall Street firm studied every crash over the past 100 years — and concluded that the unusual performance of 7 tech stocks is masking the risk of a prolonged meltdown

Oil slumped but remained on track to post its best monthly performance ever. West Texas Intermediate crude fell as much as 4%, to $32.36 per barrel. Brent crude, the international benchmark, declined 3.5%, to $34.06 per barrel.

Peet's Coffee raised $2.5 billion in an initial public offering that defied the pandemic, the company announced on Friday. The offering, which took only 10 days, was Europe's largest and the world's second-largest of 2020.

Read more: A part-time real-estate investor quit his traditional job 5 years after snagging his first deal. He shares his no-hassle strategy that's allowed him to travel the world with his 6 kids.

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How growing consumer demand for tech solutions is accelerating innovation in financial services

Fri, 05/29/2020 - 12:32pm  |  Clusterstock

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  1. Sign up for Fintech Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
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US consumer spending plunged the most ever last month as savings spiked to a record high

Fri, 05/29/2020 - 12:14pm  |  Clusterstock

  • US consumer spending slumped by 13.6% in April, the largest drop on record, the Commerce Department reported Friday. Economists surveyed by Bloomberg had expected a 12.8% decline.
  • Meanwhile, the personal savings rate surged to a record 33% in April from 12.7% in March as people held on to cash.
  • Incomes also increased by 10.5%, reflecting the $3 trillion worth of government social benefits paid during the month.
  • Visit Business Insider's homepage for more stories.

US consumer spending dropped by the most on record in April as the coronavirus pandemic kept businesses closed and people at home.

Household outlays slumped by 13.6% from March, the largest drop since 1959, the Commerce Department reported Friday. Economists surveyed by Bloomberg had expected a 12.8% decline.

A sharp decrease in spending could have a devastating effect on the US economy, as consumption is responsible for roughly two-thirds of gross domestic product. Adjusted for inflation, spending fell by a record 13.2% in April, supporting forecasts of a record GDP drop in the second quarter. The decline was driven by slumps in spending on food and beverages, healthcare, hotels, and restaurants.

The sharp drop in spending pushed household incomes and the personal savings rate up to records as well.

Incomes increased by a record 10.5%; the median economist estimate was a 5.9% decline. The jump reflected the federal economic-recovery payments distributed under the Cares Act, the department said — an annualized $3 trillion worth of government social benefits was paid in April, up from $70.2 billion in March.

Read more: An elite 'ultra growth' investor explains how he's beating the market in 2020 — and analyzes 4 stocks he thinks will help him stay on top for the next 5 years

The personal savings rate — how much people save as a percentage of disposable income — also surged to a record high of 33% from 12.7% as Americans socked away cash to brace for an economic downturn that has rivaled the Great Depression. The drop in spending fueled the jump.

"This is the basis for believing that spending will rebound strongly as lockdowns are eased, but it will also make it easier for Republicans in the Senate to keep pushing back on the idea of further stimulus, for a while at least," Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a Friday note.

It's likely that stimulus payments and unemployment benefits will tick up this month while compensation drops, leading to another jump in overall incomes, Shepherdson said.

The PCE price index, the Federal Reserve's preferred gauge of consumer prices, gained 0.5% on the year. It was the slowest advance in the index since 1961 and fell below the central bank's 2% target. The core price index, which excludes energy and food costs, gained 1%, the smallest jump since 2011.

Read more: MORGAN STANLEY: Buy these 23 high-growth stocks that look poised to deliver market-beating returns over the long term

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A Goldman Sachs cryptocurrency report angered true fans

Fri, 05/29/2020 - 12:13pm  |  Clusterstock

Goldman Sachs just made new enemies in the world of cryptocurrency. 

On Wednesday, the bank released a report that outlined five reasons that crypto is not an asset class or a suitable investment, drawing the ire of those that support the digital currency. 

"We believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients," said Goldman.

The bank also called out cryptocurrency's popularity with hedge funds, saying "while hedge funds may find trading cryptocurrencies appealing because of their high volatility, that allure does not constitute a viable investment rationale."

It didn't sit well with supporters of cryptocurrency. The Winklevoss twins, who co-founded Gemini, a cryptocurrency exchange platform, responded with vocal backlash to the report. 

"Hey Goldman Sachs, 2014 just called and asked for their talking points back," Cameron Winklevoss said in a tweet. 

His brother, Tyler Winklevoss, also joined in the fray, tweeting, "the more I think about it, the Goldman report is probably a head fake." 

Read more: A Wall Street firm studied every crash over the past 100 years — and concluded that the unusual performance of 7 tech stocks is masking the risk of a prolonged meltdown

In addition, Goldman compared crypto's popularity and epic 2017 rally to Dutch tulip mania, which occurred in the 17th century and is one of the most famous examples of a speculative bubble. 

"Goldman Sachs served a cold dish to the crypto community, which was largely expecting them to come out with a bullish call on the world's number one digital asset," Mati Greenspan, founder of Quantum Economics, wrote in a note, Bloomberg reported. 

He continued: "Perhaps Goldman is just trying to jawbone Bitcoin to buy more for themselves at a cheaper price. Who knows?"

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