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The future of work, the changing shape of the office, and the end of business travel

Sun, 05/17/2020 - 9:51am

Hello!

The coronavirus has affected everything, from how we work and take care of one another, to how we shop, pay, and entertain ourselves.

To understand how the pandemic is transforming business, we recently asked 200 CEOs from a variety of industries in the US and beyond a three-part question:

How will the way you operate change because of the coronavirus? How will your industry change? And how will the world change?

You can read responses from the CEOs of companies like Walmart, AB InBev, Duke Energy, ViacomCBS, Sanofi, Zoom, PayPal, and more.

WHAT'S NEXT: 200 CEOs look into the future of business

I want to highlight three themes that appeared in many of the answer we received.

The future of work

Chief executives say the pandemic has pointed the way toward a near future of flexible work, a more relaxed work-life balance, and more inclusive cultures, Allana Akhtar reported. 

"It's difficult to draw many positives from a crisis that has had such a significant human cost and that has created such dire economic circumstances for so many families," Lee Olesky, CEO of the financial-services company Tradeweb, told Business Insider. "I hope we'll use it as an opportunity to ask some tough questions: Do we need to adjust the work-life balance? How can we make sure the most vulnerable are better protected? Are we really getting healthcare right?"

From her story:

Aaron Levie, CEO of the cloud-content-management company Box, said the company would "absolutely" shift to a more "dynamic, real-time" work style, defined by working from home and flexible work hours. Todd McKinnon, the CEO of the software company Okta, said the future of work would likely enable employees to work anywhere without sacrificing benefits like healthcare and volunteer opportunities.

You can read the full story here:

Your job is never going to be the same again

The changing shape of the office

Alex Nicoll reported that because remote work will become more common than ever, fewer people will head to the office. 

"We used to joke about meetings that could have been emails, but now we'll wonder why we can't just do them in our pajamas with our pets on video conference," Nancy Dubuc, Vice Media Group CEO, told Business Insider. "There's a balance of course because some work is actually more productive and better done in person, but it will never need to be 5 days a week, all day every day again."

As Alex reports, when companies begin to shift their business models to accommodate remote work, the office will change. They may cut back on individual workspaces and increase investment in collaborative spaces, turning the office into a cultural and training hub.

"This (more remote work) means adapting some of the office structure to help this way of working succeed, with even more video facilities and more flexible group spaces for brainstorming sessions," Luke Ellis, CEO of investment manager Man Group, told Business Insider

You can read the full story here:

The office as we knew it is dead

The end of business travel

Madeline Stone reported that many executives are reevaluating business travel amid the coronavirus pandemic. 

"I think we're seeing that you can do a lot [via] video conferencing, and that's going to have a big impact on how often people travel for work," Airbnb CEO Brian Chesky told Business Insider. "Business travel isn't going to go away, but I think it's going to look very different in the future."

From her story:

"It may be the case that we can do less travel, but we can get more done, that we're more thoughtful about what the live meetings need to be," said Doug Ingram, CEO of Sarepta Therapeutics, a medical research company based in Massachusetts. 

You can read the full story here:

Business trips could become a thing of the past as the pandemic pushes CEOs to ask themselves what warrants a flight and what could've been a Zoom call

I'd love to hear from you. Do you agree? How will the way you operate change because of the coronavirus? How will your industry change? Let me know.

Below are headlines on some of the stories you might have missed from the past week. Stay safe, everyone. 

-- Matt

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A 105-year-old company that invented the checkbook explains how it used products from Salesforce and Microsoft to transform from a tangle of disparate businesses that 'no one really understood' to a sales powerhouse

Sun, 05/17/2020 - 9:20am

  • Deluxe is best known for inventing the checkbook in 1915. Now, the 105-year-old company is trying to modernize with new technology and a more transparent culture. 
  • After acquiring more than 50 companies, the business was wildly fragmented, CEO Barry McCarthy said, spurring him to try to unify it using software tools from the likes of Salesforce, Microsoft Teams, Workday and SAP.
  • The transformation process started with Salesforce, because the most pressing need was to bring all the company's customers into one single system.
  • The new technology goes hand-in-hand with cultural changes that McCarthy has made as well, like "flattening" the management structure and granting employees shares of the company.  
  • While the economic downturn has hit the company hard — putting some initiatives on pause — executives say they are still committed to the transformation process that's underway. 
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In 1915, W. R. Hotchkiss took out a $300 loan and started a company called Deluxe which created the first flat checkbook. About 105 years later, the Shoreview, Minnesota-based company now sells many more products and is in the process of modernizing its business for the 21st century. 

While it still prints checks, Deluxe expanded its business to include web hosting, marketing services, promotional items, payroll management tools and more, an empire its built through more than 50 acquisitions over the past decade.

The problem was, each time Deluxe bought another company it neglected to meaningfully integrate it with the rest of the company. When Barry McCarthy took the reins as CEO in late 2018, he realized that he had quite a dilemma on his hands. 

"The company was operating as a company of companies, not as a company of products," McCarthy told Business Insider. "No one really understood the company. There was no integrated strategy — none of these 50 different companies were ever integrated." 

Each company used its own software tools: There were 50 different customer relationship management systems, 52 resource planning software systems, and multiple HR systems, too, McCarthy said.

Sales teams in one unit had no idea if their customers were using other Deluxe products and there was no easy way to quickly access that information. That was particularly ironic because the only thing all the entities had in common was that they were all going after the same type of customers: small businesses and financial institutions.

McCarthy knew that he had try to fix these issues, believing that if he was successful all the different units would benefit. So, over the last year and half, he's guided Deluxe through a massive transformation, upgrading its technology and revamping the culture with the aim of unification.

While the recent coronavirus crisis has hit the company hard and many of Deluxe's changes are still underway, McCarthy has reason to be optimistic that his changes are having concrete benefits: The company's revenue grew 6% between the first quarter 2018 and Q4 2019 (before the effects of the coronavirus hit), and the company is "cross-selling to our customers in a way we weren't doing before."

Partnering with Salesforce to get a "360-degree" view of customers 

McCarthy got a major wake-up call about Deluxe's disjointed customer strategy soon after he joined the company. During a meeting with one of Deluxe's largest customers — a financial institution — the CEO of that company asked him which part of Deluxe he was in charge of. It came out that the customer had a meeting planned with a sales rep for one of Deluxe's products right after McCarthy's meeting and wasn't even aware that they worked at the same company. Similarly, McCarthy and that sales rep also had no idea that they were both meeting the same customer that day. 

"The customer is telling me about business they do with my companies that I have no idea about because I'm running so many different systems," McCarthy said. "I'm blind."

This huge red flag prompted McCarthy to decide that one of his first steps would be to make sure the company had a clear picture of who its customers were and which Deluxe products they were each using. That led Deluxe to Salesforce, which touts its software's ability to give businesses a "360 degree" view of their customers.

Last July, Deluxe signed a deal with Salesforce to implement its CRM software across the entire company, which would create one massive database of all its customers instead of a bunch of separate ones. This gave Deluxe employees a single hub for customer service, direct and indirect sales, digital commerce, and marketing. 

McCarthy also hired Chris Thomas as the company's first ever chief revenue officer, tasking him with creating a new sales culture within the entire organization to go along with the back-end technology upgrades. 

That included making sure every employee had a customer-focused sales mindset. During Thomas' second week at the company, his team launched a Salesforce-connected portal where anyone from across the company could submit new customers leads. Within 24 hours, they had 72 new leads come in. 

Previously, sales reps didn't have a plan for how to convince existing customers to use additional Deluxe products, but it was much easier to plan around using its new tools. He also created a forward planning culture within the sales organization. Previously, sales reps didn't have a plan for how to bring more products to existing customers (which, typically, were only using one or two of its products). 

"[It] gives us the visibility to figure out how we can help [reps] more, which we didn't have before," Thomas said.

It seems to be paying off: In the fourth quarter of last year, just four months after implementing Salesforce, Deluxe closed four of its ten largest deals in the last decade. 

The deal didn't just benefit Deluxe, either. The company become a reseller for Salesforce Essentials — a set of tools targeted towards small business — which opens up about 4.8 million small business customers of Deluxe to potentially start buying the product. Salesforce invited McCarthy to speak at its investor day and annual Dreamforce conference last year. 

Modernizing IT and navigating the coronavirus crisis 

Deluxe's technology upgrades go beyond its partnership with Salesforce though. To standardize all its different businesses, it's revamped almost every single piece of technology that it was previously using in what's become a whopping $120 million investment in its own infrastructure. 

Deluxe CIO Mike Mathews reflects that when McCarthy joined Deluxe the company became laser-focused on using technology to achieve its end goal. 

There are six areas of the company that Mathews' team has implemented new technology for: customer relationship management through Salesforce, communication through Microsoft Teams, financial planning through Anaplan, human resources through Workday, resource planning through SAP, and data management through Cloudera. 

Not all of the tools are completely new — some teams were already using older iterations — but it was key for his team to upgrade everyone to the same cloud-based versions. The company initiated all the partnerships last year and its shift to Microsoft and Workday are complete, while others are still underway.

The SAP project is the only one that's still in its very early stages: It was about 25% complete before the economic downturn spurred by the coronavirus crisis prompted Deluxe to slow down as it tries to conserve money. What was originally a 25-month process might now take between 28 and 30 months, the company expects, because some of the implementation requires consultants to work in the office, which can't be done right now due to shelter-in-place mandates. 

While Deluxe is now facing lots of uncertainty — it suspended its second-quarter and full-year guidance and warns its revenue this year may be significantly lower than previously expected — McCarthy said that its transformation plans haven't stopped. They've just slowed down. In fact, McCarthy said on the company's earnings call in early May that he believes that the new technology will help the company survive the crisis better than its older systems would have. For example, he doesn't think the company would have been able to transition to remote work as easily without tools like Teams.

It would previously have been a "herculean" effort to have the company operating remotely, CIO Mathews added: "In this moment of the COVID-19 crisis, having these robust, scalable platforms that help operate and run the company are really nice because they allow us to work from wherever we are located." 

For the sales organization in particular, using Microsoft Teams allowed CRO Thomas to send all sales reps to work remotely without "any hiccups." 

Changing the company culture

The shift to more modern technology also required a culture shift in the company, too. McCarthy wants Deluxe to operate more like a tech company, with faster decisions and processes he said.

Part of that was "flattening" the organization and getting rid of layers of bureaucracy. Initially, there were seven layers of management between McCarthy and entry level staff in offices as well as manufacturing managers and now there are only four.

McCarthy also wanted to make that every employee felt invested in the success of the overall company, rather than only the success of their own unit. Deluxe reorganized into four divisions centered around products: payments, cloud, promotional, and checks. As an added incentive to think as one team, McCarthy also gave all of Deluxe's North American employees shares of the company. 

"It changes employees from being 'just' an employee that goes to work [to], now, owners: They have a stake in the success of the company," he said. "That fundamentally changes the story and the trajectory of how people interact with the company. And, honestly, that's exactly how tech companies work."

Finally, McCarthy also reads and replies to every single email he gets from employees — though, he admits, not always on the day he gets them. 

"People think of us as the sleepy check company," McCarthy said. "Yeah we sell checks, but we are so much more than checks and so different than the check company you think we are." 

Got a tip? Contact this reporter via email at pzaveri@businessinsider.com or Signal at 925-364-4258. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Salesforce's free online learning platform could create a pipeline for tech jobs amid record unemployment and help the company retain customers during the coronavirus crisis

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Sorrento Therapeutics skyrockets 244% after claiming a breakthrough on a COVID-19 antibody (SRNE)

Sun, 05/17/2020 - 7:53am

  • Shares of Sorrento Therapeutics spiked as much as 244% on Friday after the company said an antibody it was developing showed "100% inhibition" of the COVID-19 virus in preclinical studies.
  • The small biotechnology company said it aimed to create "an antibody cocktail that would act as a 'protective shield'" against the coronavirus.
  • Sorrento said the full results of from its experiments would be "submitted to a peer-reviewed publication shortly."
  • Visit Business Insider's homepage for more stories.

Sorrento Therapeutics skyrocketed as much as 244% on Friday after the company said an antibody it was developing showed "100% inhibition" of the COVID-19 virus in preclinical studies.

The small biotechnology company said it planned to "generate an antibody cocktail product that would act as a 'protective shield' against SARS-CoV-2," the official name of the novel coronavirus.

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Sorrento said it would ask regulators for "priority evaluation and accelerated review" of its antibody candidate. The company added that it hoped to receive government support and partner with a pharmaceutical company to scale up manufacturing of its candidate if clinical studies find it to be successful.

Sorrento said the full results from its preclinical experiments would be "submitted to a peer-reviewed publication shortly."

Sorrento's market value surged from $549 million at Thursday's close to roughly $1.9 billion at Friday's intraday highs.

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THE DEATH OF CAMPUS LIFE: The finances of America's universities have long been a time bomb — and if schools can't prove the real worth of their hefty price tags, they might just implode

Sun, 05/17/2020 - 7:45am

  • US colleges and universities are suffering across the board. 
  • Enrollment is down, government funding is limited, and students newly sent into virtual learning are clamoring for refunds.
  • More than ever, schools will be relying on the performance of their endowments, the pool of donor money meant to help fund operations in perpetuity.
  • To convince students to attend, these schools will need to do a better job showing the value of a college education by preparing students for career success.
  • Visit Business Insider's homepage for more stories.

Minh Phuc Tran, a student at the University of San Francisco, has been just about as present and involved in campus life as you can get. 

His LinkedIn reads more like a Silicon Valley stalwart than a 19-year-old college student. He's founded clubs and non-profits while racking up scholarships and awards, not to mention his speaking four languages.

He also may choose not to come back to school if classes stay online next academic year.

"My experiences with classes the past couple of months have not been so great," he told Business Insider. 

He's found that once-lively seminars are less engaging over Zoom. And there are other practical complications that make virtual learning less than ideal — he had to move back home to Kentucky once the virus broke out in the Bay Area, so one of his night classes now ends at 11 P.M. 

"For me, for college, you really have to be there and be present," he said. He chose his college partially based on location, so he could be in San Francisco and network.

"The dynamics now just aren't the same," he added.

Aakshi Agarwal, meanwhile, was supposed to spend her summer ranking possible law schools. The 21-year-old Yale student has just one more year left before she graduates, but isn't sure if she'll be taking classes in fall if the pandemic forces classes online.

"It's really hard for me to weigh graduating on time versus all the experiences I was expecting to have," she said.  

She said everyone in her eight-person group of close friends is leaning toward taking leave for a semester or a year. She'd consider taking the online classes at Yale the coming semester if the school lowered the cost of tuition, but she already has plans to work on Telehealth Access for Seniors, the non-profit she started, and study for the LSAT if she takes a leave for the fall semester.

These experiences help explain why the US college and university system, a longstanding access point into adulthood and the middle or professional classes, is suddenly looking precarious. 

The pandemic has exposed the harsh economic reality of the US higher education system, and it could be a breaking point for students and schools after years of mounting financial pressures, not to mention the debate over the benefits of a pricey degree. 

Schools need to prove that they can replicate the campus experience virtually in order to survive — and many may not succeed. 

Colleges close down. And it happens more frequently than you think. 

When the University of Washington said it could lose up to $100 million in revenue because of the coronavirus pandemic, it was like a "stab in the heart" to one faculty member.

The 39-year-old has been juggling teaching at the university with taking care of her young child as daycare is closed. It's her first time leading classes online, and she's striving to make it a valuable experience for her students. She's worried that she and her colleagues could lose their jobs. And she's exhausted.

"I've done a lot of really hard things," she said, "and I think this is the hardest I've ever worked in my entire life." She requested anonymity because she was not authorized to speak to the media. 

The pandemic has put 36 million Americans out of work since February. The ivory tower, like many industries impacted by social distancing, hasn't been spared. 

The Chronicle of Higher Education reported in May that at least 37,181 employees at colleges and universities have been laid off or furloughed, or haven't had their contract renewed. (That number includes student workers.) 

But continued job cuts aren't even the biggest worry. Hundreds of schools could shutter entirely.

What happens when colleges run out of money?

Estimates of how many schools could close in the coming years because of financial trouble range from 345 to 1,000. Even before the pandemic, colleges collapsed under financial pressure on a somewhat regular basis. Private colleges will be most at-risk in the post-pandemic era.

In February, for example, Concordia University in Oregon closed its doors because of financial challenges. The private, nonprofit school, with about 1,500 undergraduates in 2018, had been paying an outside firm to help boost enrollment in its online programs, OregonLive reported. That partnership ultimately backfired. 

Consolidation is another possible route. 

In March, Robert Morris Illinois, a private, nonprofit school with roughly 1,800 students, was absorbed into Roosevelt University, also located in the state. According to Inside Higher Ed, Roosevelt had reported operating deficits every year since 2014. Robert Morris had also been showing signs of financial distress. 

The University of Washington faculty member said many faculty and staff at her school are worried about losing their jobs or seeing administrative cuts that could make their day-to-day more challenging.

The university said it expects to lose at least $50 million, and up to $100 million, in revenue that would normally come from student housing, food services, and athletics. 

In general, it may also get harder for faculty to earn tenure, further undermining job security.

Ibrhaim Firat, the CEO of college-preparation company Firat Education, said some schools might consider having fewer full-time professors and more part-time instructors in order to cut costs.

At Grinnell College, a private liberal arts school in Iowa with about 1,700 students, cutting personnel is seen as a last resort. Keith Archer, the school's vice president of finance and treasurer, said Grinnell has yet to lay off or furlough any faculty or staff. 

But Grinnell is in a "unique" position, he said, because roughly 70% of its endowment is unrestricted, meaning the school can use it for general purposes. Archer said Grinnell has also been building cash reserves for years, to prepare for a crisis like this one.

The Iowa school is the exception that proves the rule: If colleges in the United States were a businesses, then short-sellers would be circling them. 

How the business model of US colleges got so expensive (and fragile)

Richard Vedder, a professor emeritus at Ohio University, has been studying the economics of American higher education — and what he sees as its diminishing value proposition — for decades. 

Colleges and universities have now been hit by a "triple whammy," he said. Enrollment numbers were already falling; governments are now cutting funding for state schools; and many schools are being forced to refund students' room-and-board fees after sending them home for the semester.

While universities can draw funds to operate from their endowment, a pool of donor money intended to provide an ongoing source of funding, these funds are not meant to entirely replace normal fees when times get hard. 

There were signs that this model was precarious even before the pandemic hit. 

A survey of 919 trustees by Gallup and the Association of Governing Boards of Colleges and Universities in 2019 found that more than half of respondents were concerned with the financial sustainability of the higher education model in the United States.

College tuition has skyrocketed over the last couple of decades, far outpacing the rise in household incomes and minimum wage. Business Insider has reported on the odd convergence of trends that's driven that spike. More people want to go to school, which means you need more instructors and student support. There's more financial aid, so colleges may be comfortable charging more. 

State funding for public schools has fallen: a 2017 analysis found a 16% drop for funding per student since 2008. 

Public schools, meanwhile, have been forced to raise tuition since the Great Recession more than a decade ago, as funding from state legislatures has yet to return to the same levels. Only five states — Indiana, Montana, Nebraska, North Dakota, and Wyoming — were found to be spending more.

For smaller, less prestigious private colleges, a combination of aggressive financial-aid outreach and an "amenities arms race" has turned college campuses in places like High Point, North Carolina, and St. Leo, Florida, into educational resorts, says Kaitlyn Maloney, senior director of research at education consulting firm EAB. These regional private schools, with student bodies typically below 5,000, are "heavily reliant on undergraduate tuition dollars" and were in trouble even before the pandemic, she added.

Whether you're a State U or a nestled liberal arts school, the increasingly high fees students pay to live in dorms, eat dining hall food, and generally be a college student are increasingly critical to the survival of the institutions they attend.

These fees are a fixed source of revenue that is nearly identical for colleges of all types — a College Board review of the average undergraduate costs for the past academic year found that both in-state and out-of-state students at a public college pay about $11,500 to live in a dorm. Private colleges, where tuition is more than triple a public school on average, charge just under $13,000 to live on-campus.

At Wake Forest University, where students are required to live on-campus for their first three years, the school ended with net revenues of more than $27 million last academic year after accounting for students covered by financial aid, according to the school's audited financial statement

Schools of all sizes are cutting costs, with executive pay cuts, layoffs, and furloughs. For larger institutions, this might be to refund students and keep the balance sheet clean going into the school's next fiscal year (which typically begins, for universities, after the second quarter ends in June.) Notre Dame, for example, announced a pay cut of up to 20% for senior leadership to fund a special student emergency fund. 

Those smaller private schools — the kind that have students flinching at their high costs — may be leaning on their endowments more than ever.

What an endowment is for 

An endowment isn't a piggy bank that schools can crack open and empty, but rather an engine for ongoing investment income that a college depends on over the long term.

These investment pools are a key source of funds for a school's operating budget, with the money coming in through donations. Running them can be a tricky balancing act between three factors: securing those gifts, managing spending needs, and aiming for sustainable returns on the investments in the endowment. 

Further complicating the picture, endowments can be skewed towards investments with longer time horizons, and some assets can be hard to sell out of quickly without taking a big hit.

"There's a misperception that they are rainy-day funds," says Maloney, the senior director of research at EAB.

Right now, the financial pressure on schools is much greater because of the potential losses of recurring revenue from room and board, as students and parents weigh whether they want to pay full tuition for online classes. That in turn means tough decisions for the people who run the schools and those who manage endowments. 

"They are going to have to consider things now that would have been crazy four months ago," according to Sally Staley, who used to run Case Western University's endowment. "Everyone will be evaluating everything."

David Swensen became a celebrity in the investing world after running Yale's endowment for decades, creating a model copied by dozens. The returns of massive endowments of Ivy League schools, MIT, and Stanford are followed like those of billionaire hedge fund managers. 

Throughout Staley's time running and consulting endowments, she was never asked for a special distribution to help a school make its budget for a year — but the amount of the budget the endowment was responsible for covering every year was increased slowly. 

At some schools, according to Moody's Investors Services, the investment revenue for the endowment can make up more than a third of the operating budget, much like how a wealthy individual investor can plan for passive income via investment returns.

At schools with large endowments where this is the case, like Princeton, Harvard, Notre Dame, and Rice, this isn't too much of a concern, because even a minimal yearly gain in the endowment can meet their budgetary requirements. 

But "a very seemingly small endowment that's actually a big part of a school's operating budget is much more important for the day-to-day survival of the university," Staley said.

Compared to 2008 — when Harvard's massive endowment lost more than a fifth of its value — endowment experts say funds overall are in a better position and have been more conservative. 

A review of endowment performance done by National Association of College and University Business Officers and TIAA found that endowments have, on average, beat their target returns over the last decade.

There have still been isolated incidents of endowments getting slammed during the wild market moves that have characterized the first half of the year. Endowments run by the University of Texas and Texas A&M systems are extremely correlated with the oil industry — and energy prices have cratered. 

So make that a quadruple whammy: not only are enrollment numbers falling, room and board fees evaporating, and funding from states drying up, but endowments, these financial devices meant to help schools chug along forever, have also been touched by the covid economy. 

Colleges need to convince students that it's still worth attending

Many students, at the University of Washington and elsewhere, are petitioning (and filing lawsuits) to get their tuition partially refunded for the half-semester they spent taking classes virtually.

These students may opt to leave four-year institutions and enroll — at least temporarily — at community colleges. High school juniors and seniors may decide not to apply to these schools at all, or to pursue alternative education pathways, like "mini MBAs" and certificate programs.

At the moment, it's still unclear whether campus life will resume in the fall. 

In a College Reaction poll of 835 students in May, 65% said they would return to in-person classes, even without a vaccine or cure for coronavirus. The California State University system has announced that the fall 2020 semester will be primarily online. Meanwhile, the University of California, San Diego, is planning to test students this summer; if the school can track and isolate new coronavirus cases, many students can return to campus in the fall.

In this environment, the key to survival for colleges may be clearly articulating to students that the schools are worth the money. Schools will need to be "lean and mean," Firat said. Taking a tip from trade schools and community colleges, Firat said, they'll need to "be much more vigilant about [students'] career readiness." Firat added that some schools may need to cut funding for certain student services on campus and reallocate those dollars toward, say, career centers.

Colleges will also need to come up with a solid answer to students' question: Why on earth would I pay hundreds of thousands of dollars to take classes online, when I could just as well take them at my local community college and save most of that money? In education, as in business, it all boils down to the value proposition.

Ultimately, colleges may find it's in their best interest to team up with larger institutions. In an interview with New York Magazine, Scott Galloway, a professor at New York University's Stern School of Business, used the example of the University of Washington partnering with Microsoft on technology and engineering; the university would provide the accreditation and the tech giant would help scale the programs.

Another option is for otherwise vulnerable schools to partner with each other.

TCS Education System is a non-profit partnership of higher-education institutions that share resources like IT, academic affairs and support systems, and finance and accounting. CEO Michael Horowitz said in the past he's spoken with schools (that aren't currently in the system) about merging because they provide similar student experiences and would be able to cut costs through a partnership. These schools typically scoff at the idea, Horowitz said, because they believe they're "profoundly unique" and don't want to muddy their brand.

Lydia Page, an online program administrator at New York University, said most schools haven't yet proven the value of virtual classes — after all, the shift to all-remote education this semester was pretty sudden. The most important thing for colleges like NYU to do right now, Page said, is to be "transparent about how they're shifting to online education."

Page doesn't think NYU is at risk of collapse. But she said she understands why students would second-guess the value of their education there if the school hadn't made clear their efforts to develop strong online programs. "Tuition is extremely expensive," she said. "If I had the perception that I was going to be paying for a lesser experience, I probably wouldn't want to do that." 

For Minh Phuc Tran, the rising sophomore from the University of San Francisco, a couple months' of Zoom classes has been enough to convince him that going to college is a lot more than just going to class.

"I would rather take a gap year," he said, "and find some internships or work on something I'm passionate about and learn a lot more than focus solely on school at home with online classes."

SEE ALSO: The NYU professor who predicted WeWork's failed IPO says college is about to change forever — and expensive schools could close for good

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Warren Buffett has weathered multiple market crashes. Here are his 8 best quotes about investing in tough times.

Sun, 05/17/2020 - 7:42am

  • Warren Buffett has weathered several market crashes including Black Monday in 1987, the dot-com bubble bursting in 2000, and the 2008 financial crisis.
  • The famed investor and Berkshire Hathaway CEO advises investors to be bold when others are scared, warns against waiting too long to buy, and recommends they never bet against America.
  • Here are his 8 best quotes about investing in times of crisis.
  • Visit Business Insider's homepage for more stories.

Warren Buffett has navigated multiple market crashes including Black Monday in 1987, the dot-com crash in 2000, and the 2008 financial crisis. As a result, many people are looking to the famed investor and Berkshire Hathaway CEO for guidance on how to protect and grow their wealth during the coronavirus pandemic.

Buffett has shared plenty of tips during past downturns. They include acting boldly when others are scared, capitalizing on cheaper stock prices, and not waiting too long to buy or trying to time the market. He also warned against panic selling and betting against America at Berkshire's recent shareholder meeting.

Read more: A Wall Street equity chief lays out 5 reasons why another 'significant drawdown' in stocks is coming right after the fastest crash in history

Here are his 8 best quotes about investing during a crisis:

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

Source: 1986 shareholder letter



"Like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you."

Source: 1987 shareholder letter

Read more: GOLDMAN SACHS: Buy these 14 stocks poised to surge in an economic recovery because of their limited exposure to consumers



"When hamburgers go down in price, we sing the "Hallelujah Chorus" in the Buffett household. When hamburgers go up, we weep."

Source: Fortune, December 2001

Read more: BANK OF AMERICA: Investors should buy these 12 cheap stocks to bet on the coming US recovery - but they should steer clear of these 8 competitors



"If you wait for the robins, spring will be over."

Source: "Buy American. I Am," New York times, October 2008

Read more: 'We have a depression on our hands': The CIO of a bearish $150 million fund says the market will grind to new lows after the current bounce is over — and warns 'a lot more pain' is still to come



"Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price."

Source: "Buy American. I Am," New York times, October 2008



"Investors and managers are in a game that is heavily stacked in their favor. Charlie and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of "experts," or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it."

Source: 2012 shareholder letter

Read more: A fund manager who's quadrupled his competitors' returns for 15 years breaks down his 3 favorite stocks — and his top 3 contrarian ideas



"If you owned the businesses you liked prior to the virus arriving, it changed prices, but nobody's forcing you to sell."

Source: Berkshire Hathaway 2020 annual meeting



"Never bet against America. That is as true today as it was in 1789, during the Civil War, and in the depths of the Depression."

Source: Berkshire Hathaway 2020 annual meeting



'We have a depression on our hands': The CIO of a bearish $150 million fund says the market will grind to new lows after the current bounce is over — and warns 'a lot more pain' is still to come

Sun, 05/17/2020 - 7:39am

  • David Tice — the chief investment officer at the $150 million Ranger Active Bear Fund, which makes money by shorting stocks — believes we're currently in the midst of a full-fledged economic depression.
  • To support his melancholy views, Tice relays several reasons, including: depressed consumers, no viable cure for the coronavirus, and a job market in disarray.
  • Tice also harbors a bearish stock outlook. He was expecting the latest market rally because of what technical indicators were signaling, but doesn't think it has staying power.
  • Michael Batnick, the director of research at Ritholtz Wealth Management, bolsters Tice's case that the current rally is vulernable with historical evidence showing previous bear markets have followed a similar pattern.
  • Click here for more BI Prime stories.

If you're looking for a sanguine forecast of the US economic and market situation, it's best not to look to David Tice, chief investment officer at the $150 million Ranger Active Bear Fund (HDGE).

"I believe we will retest lows. I believe we will break through lows. I believe that we have a depression on our hands," he said on the "Money Life with Chuck Jaffe" podcast. "This is not a standard, garden-variety recession."

Tice's pessimistic view is perhaps unsurprising, given the fact that his fund makes money by selectively shorting stocks. But his outlook goes well beyond selective short-selling opportunities. He's worried about the economy and financial markets as a whole.

The CIO's stark economic prognostication rests upon a brigade of factors:

  • A depressed and frightened consumer
  • Disappearing jobs
  • A potential second coronavirus outbreak in the fall
  • Lack of a virus cure
  • Shrinking economic activity
  • Turmoil in small businesses
  • A stock market that is "very, very expensive."

All of these factors combine to make Tice believe that the worst for markets and the economy is yet to come. As for the ongoing rally off multiyear lows? Tice says he saw it coming, but he's not convinced it's built to last. 

"This has been a retracement rally, and therefore we were expecting that," he said. "Fibonacci tells us it should be between 38% and 63% on the retracement rally. We've had that. We've actually gone a little bit past that."

For context, Fibonacci retracement levels are commonly used technical analysis indicators that attempt to pinpoint levels of support and resistance between price points. They're also used to forecast subsequent moves based on how an index responds to meeting these key thresholds.

The fundamental economic factors outlined above — combined with Tice's belief that the market's current rally is a mere head fake — informs his bearish outlook.

And Tice's lack of conviction in the ongoing rally is not without historical precedent. It's not uncommon for stocks to compulsively rally higher during longer bear markets. Michael Batnick, the director of research at Ritholtz Wealth Management, detailed this notion in a recent blog post

Batnick noted that, over the last two bear markets, stocks experienced a number of false rallies — some over 20% — before running out of steam.

Provided below are two charts Batnick cites. The first details the S&P 500's behavior during the tech bubble of the early 2000s. In that two-year span, the S&P 500 rallied 12.1%, 7.7%, 8.6%, 19.0%, 20.7%, and another 20.7% — all on separate occasions — before eventually succumbing to the turmoil.

Here's the second chart detailing the S&P 500 during the financial crisis of 2007 to 2009. Investors experienced five false rallies in the midst of a greater bear.   

"Even in the worst historical markets, stocks never went straight down," said Batnick. "Often times there are several bear market rallies that give investor's a sigh of relief, only to see the carpet of hope ripped out right from underneath them."

Tice agrees. And with all of that under consideration, he delivers a bleak final message.

"I believe that we are in a depression," Tice said. "I believe that the longer-term consequences of this can't really be questioned."

He concluded: "Activity and feelings of consumers are going to change longer term by this outbreak of the China virus and that we have a lot more pain to go."

SEE ALSO: A 20-year hedge fund vet shares the 3-part checklist that guides every investment decision he makes — and breaks down a stock pick he thinks could increase 50 to 100 times in his lifetime

Join the conversation about this story »

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4 Wall Street experts weigh in on what makes the stock market's rally so fragile

Sun, 05/17/2020 - 7:36am

  • The stock market's rally from March lows overcame dismal economic reports, corporate profit warnings, and economist caution.
  • As stock market investors pocket sizable gains, experts warn the uptrend is fragile and facing significant threats.
  • "Gravity is taking over" as markets begin to assess reopening risks and a second wave of virus cases, said Marc Odo, client portfolio manager at Swan Global Investments.
  • Recession aftershocks could arrive later in the year as businesses fail to stage healthy rebounds, other experts warn.
  • Some strategists even point to indexes' heavy weighting of mega-cap tech stocks, cautioning that such crowding can drive as strong a downtrend as a rally.
  • Visit the Business Insider homepage for more stories.

Bleak economic reports in recent weeks have been largely ignored by an unrelenting market rally. 

The S&P 500 is up 28% from its late-March low, while the Dow Jones industrial average has climbed 27%. Just last week, the Nasdaq composite erased its year-to-date losses and now is less than 6% from record highs.

But as stock investors mint fresh gains, a growing number of experts warn the run-up isn't made to last.

One element they cite is overstretched valuations. By one measure, equities are historically expensive relative to profit forecasts. The S&P 500's price-earnings ratio rose to 20.4 times on Tuesday, the highest since 2002.

There are other troubling aspects surrounding the underlying economic environment. The unemployment rate soared to 14.7% in April as the coronavirus pandemic's fallout intensified. Corporate earnings forecasts are their gloomiest since the financial crisis. Federal Reserve chair Jerome Powell, who typically strays from exaggeration, recently classified the current recession as "without modern precedent."

That has experts questioning the strength of the stock market's recent rally, and wondering if such profits are under threat. Business Insider spoke to several experts to get their views, and the consensus was clear: recent market gains are vulnerable.

Read more: A Wall Street equity chief lays out 5 reasons why another 'significant drawdown' in stocks is coming right after the fastest crash in history

Wiping out on the second wave

The prospect of rebounding COVID-19 infection rates isn't new to markets, but fears of such an trend are growing.

Equities faced new pressure throughout the week as economic and public health experts warned against prematurely reopening economies. Unbridled market optimism was shaken and investors enjoyed a preview of what may likely prolong the current recession, said Marc Odo, client portfolio manager at Swan Global Investments.

"What we're seeing this week is a little bit of reality coming in," Odo told Business Insider in an interview. "Eventually, gravity is taking over."

Where more optimistic commentators see deferred demand boosting the economy in the second half of 2020, Odo fears the pandemic's fallout presents serious obstacles to a recovery. Consumers will be more likely to avoid crowded spaces. Corporations may trade office space for telecommuting strategies.

Read more: GOLDMAN SACHS: Buy these 14 stocks poised to surge in an economic recovery because of their limited exposure to consumers

Markets are largely underestimating how the once-in-a-century pandemic will prompt permanent change, Odo said.

The second-wave risk was also ignored for psychological reasons, according to Rich Steinberg, chief market strategist at The Colony Group. Investors trapped in quarantine saw hope in the prospect of reopening. Such hope fueled a spike in market optimism, but the upswing quickly showed "an element of complacency," Steinberg said.

"It's somewhat of a psychological response to be like, 'can we just get back to normal?'" he said. "The markets are acting like we're going to flip a switch and be back to normal. But the economic reality is not there."



The bankruptcy-layoff loop

Despite trillions of dollars in fiscal and monetary relief, not all businesses will last after their shutdowns. Economic damage across industries risks a recessionary aftershock and second market tumble, Seema Shah, chief strategist at Principal Global Investors, wrote in a Wednesday blog post.

"Markets may be right to look through Q2 numbers and look forward to a Q3 recovery," Shah said. "But it is entirely possible that there will be a Q4 reckoning, where a second wave of job losses & prolonged period of business failures tests equity sentiment."

Read more: Buy these 13 tech stocks that are abnormally disconnected from Wall Street's expectations for profit growth and poised to rocket higher, Credit Suisse says

Shah pointed to the air-travel sector as a prime example for companies facing deferred turmoil. Airlines clamored for government aid through March and saw travel activity almost completely freeze as lockdowns took effect. The firms have since said they don't expect travel activity to recover until 2022, threatening their ability to pay off relief loans.

With several companies punting risks down the field, the stock market faces years of "negative feedback loops" where fresh bankruptcies drive major layoffs, Shah said.

On the other side of the economic spectrum, the labor market is likely more tenuous than April's jobs report suggested.

While the 20.5 million erased payrolls highlight a dramatic job-market toll, the 18.1 million Americans who reported their job loss as temporary will serve as a critical indicator moving forward, Shawn Snyder, head of investment strategy at Citi Personal Wealth Management, said. If that population is unable to reenter the labor market, look for asset prices to react poorly.

"What's really important is that these businesses are able to successfully reopen, bring back those workers, and stay solvent," Snyder said. "If you see solvency issues, then that becomes something that I don't think is really, completely priced in."

Read more: A 20-year hedge-fund vet shares the 3-part checklist that guides every investment decision he makes — and breaks down a stock pick he thinks could increase 50 to 100 times in his lifetime



The market make-up

The market's make-up

One of the market's biggest threats has little to do with the economy or the coronavirus. Several experts point to the breadth of indexes' rallies as the true sign of market health and blame surging tech giants for misrepresenting the broader market landscape.

The data supports their claims. The S&P 500 Equal Weight index is down 21% year-to-date, while its cap-weighted peer has declined roughly half that over the same period. Until the upswing is reflected among several other industries, investors may be turned off by the tech-fueled jumps and lessen their risk-taking.

"You probably need to see the beaten-up areas — real estate and financials — help create the next foundation to move forward," Steinberg said. "We need to test on the way down to see where investors' resolve is going to broaden out the rally."

Read more: 10 big money managers shared with us their favorite hidden gems in the market, and the contrarian trades they're making amid the pandemic

The first place money goes in a crisis is where it was working before, he added, but that trend is now intensifying a previous threat.

Goldman Sachs warned in early February how crowding in tech giants was reaching dot-com bubble levels. With such concentration only swelling further, the market risks a major slide if those names disappoint.  

"Concentration is not the sign of a healthy bull market," Odo said. "You want to look at the energy sector, real estate, and yeah, it's not pretty right now."

Now read more markets coverage from Markets Insider and Business Insider:

US industrial production tanks the most in 101 years amid factory lockdowns

The Fed buys $305 million of corporate-debt ETFs to kick off its groundbreaking relief program

Warren Buffett calls the prospect of negative interest rates the 'most interesting question I've seen in economics.' We had 5 financial experts weigh in on how they could change the investing world as we know it.



GOLDMAN SACHS: Buy these 14 stocks poised to surge in an economic recovery because of their limited exposure to consumers

Sun, 05/17/2020 - 7:35am

  • Wall Street experts are poring over data from China to understand what an eventual post-coronavirus rebound in the US economy could look like.
  • Arjun Menon of Goldman Sachs says cyclical stocks usually do best when the economy is recovering, but says companies that sell goods have more potential than those that sell services. 
  • He adds that companies that sell to businesses have an advantage, as consumers may be reluctant to start spending money again.
  • Menon and his team lay out 14 companies that are particularly insulated from consumers — and whose stocks therefore possess strong upside.
  • Visit Business Insider's homepage for more stories.

Just as this market crash and economic lockdown were once unimaginable, it's hard the imagine the recovery. But that's going to be a vital task for every investor.

Goldman Sachs strategist Arjun Menon is attempting to envision it, and says China can give investors some key clues about the eventual US rebound. That's a concept more experts are adopting.

Menon notes that the big winners in general should be cyclical stocks, or shares of companies that will do much more business as the economy gains strength. Typical examples might include retailers, restaurants, car makers, and companies in the travel industry.

But those are also some of the companies that have been hit hardest by the pandemic, and it's clear that different elements of the market and the economy will come back at different times. That's where the China example comes in.

Menon says one key trend is that the healing for consumers is going to be slow, so he's telling investors to look elsewhere, and suggesting they focus on goods producers rather than companies that provide services.

"The reopening experience in China shows that manufacturing and construction activity will likely recover faster than consumer services," he said. "We prefer companies that sell to other businesses versus those that sell directly to consumers, which will be limited while virus control measures remain in place."

That's the source of this list of stocks that he believes will rally as the economy improves. It's made up of companies that have limited sales to consumers. Menon omits energy companies because of the enormous volatility in oil prices. He also leaves out companies with higher inventory-to-sales ratios compared to their peers.

Menon explains that companies with higher inventory levels could be more vulnerable to write-downs on their assets or to defaults by consumers.

These 14 companies meet all of those criteria, and their stock prices have suffered major declines in 2020. They're organized from the smallest to largest drop in price as a proxy for the upside they might have in an economic recovery.

SEE ALSO: Todd Ahlsten has dominated the market and his competitors for 2 decades. He lays out the 6 stock-picking decisions that reshaped his portfolio after the coronavirus meltdown.

14. TE Connectivity

Ticker: TEL

Sector: Information technology

Market cap: $31.7 billion

Year-to-date loss: 27.9%

Source: Goldman Sachs



13. Fortive

Ticker: FTV

Sector: Industrials

Market cap: $20 billion

Year-to-date loss: 28.5%

Source: Goldman Sachs



12. Whirlpool

Ticker: WHR

Sector: Consumer discretionary

Market cap: $6.4 billion

Year-to-date loss: 29.4%

Source: Goldman Sachs



11. Honeywell

Ticker: HON

Sector: Industrials

Market cap: $87.3 billion

Year-to-date loss: 33.1%

Source: Goldman Sachs

 



10. Emerson Electric

Ticker: EMR

Sector: Industrials

Market cap: $31.2 billion

Year-to-date loss: 34.2%

Source: Goldman Sachs



9. NetApp

Ticker: NTAP

Sector: Information technology

Market cap: $9.5 billion

Year-to-date loss: 35.1%



8. PPG Industries

Ticker: PPG

Sector: Materials

Market cap: $20.5 billion

Year-to-date loss: 38.6%



7. Raytheon Technologies

Ticker: RTX

Sector: Industrials

Market cap: $81 billion

Year-to-date loss: 40.6%



6. Newell Brands

Ticker: NWL

Sector: Consumer discretionary

Market cap: $4.9 billion

Year-to-date loss: 41.1%



5. BorgWarner

Ticker: BWA

Sector: Consumer discretionary

Market cap: $5.8 billion

Year-to-date loss: 41.8%



4. Dow

Ticker: DOW

Sector: Materials

Market cap: $24 billion

Year-to-date loss: 42.7%



3. LyondellBassell Industries

Ticker: LYB

Sector: Materials

Market cap: $17.4 billion

Year-to-date loss: 46.3%



2. CF Industries

Ticker: CF

Sector: Materials

Market cap: $5.5 billion

Year-to-date loss: 50.9%



1. Leggett & Platt

Ticker: LEG

Sector: Consumer discretionary

Market cap: $3.5 billion

Year-to-date loss: 52.1%



A Wall Street equity chief lays out 5 reasons why another 'significant drawdown' in stocks is coming right after the fastest crash in history

Sun, 05/17/2020 - 6:05am

  • The stock market's road to eventual recovery will stay choppy for the next few months, says Lori Calvasina, the head of US equity strategy at RBC Capital Markets. 
  • She expects another "significant drawdown" due to risks stemming from pandemic headlines, earnings, investor positioning, valuation, and the elections later this year. 
  • Click here for more BI Prime stories

For the last few weeks, stock-market investors have focused on the US government's massive efforts to support the economy through this crisis. 

But the often-ignored risks to the feverish rallies and to the possibility of new record highs this year will soon return to the fore, according to Lori Calvasina, the head of US equity strategy at RBC Capital Markets. 

"We expect US equity markets to stay choppy in the months ahead and anticipate another significant drawdown," she said in a recent monthly note to clients. 

Her year-end target for the S&P 500 is unchanged at 2,750, about 4% below the market's current level. Her investing playbook for this view is largely unmodified as well. She recommends a balanced view on the market's trajectory by overweighting defensive sectors like utilities and healthcare, and using industrials to profit from the economy's recovery.    

But she expects the road to said recovery to be a bumpy ride, as one should expect from stocks. Here are the five reasons why she is cautious: 

1. Newsflow about the pandemic got off to a rocky start in May. 

In March, US investors came to understand the full-blown reality of the coronavirus crisis after months of carrying on as usual. The World Health Organization officially declared a pandemic that month and the US halted travel from Europe.

Some good news followed in April including federal guidelines to reopen the economy, the Fed expanding its Main Street lending program, and positive results on a drug trial from Gilead. 

But May is proving to be a mixed if not negative bag, in Calvasina's view. China renewed lockdowns in some cities after new cases emerged, three New York children died after developing a rare COVID-19-related complication, and US authorities are warning about the health risks of opening the economy too quickly. 

Clearly, no one is out of the woods yet — and markets may soon start reflecting the increasingly mixed newsflow. 

2. 2021 earnings forecasts are still too high.

You'd be hard-pressed to find anyone who expects business activity to swiftly return to normal across the economy. 

But Wall Street's expectations for corporate profits, the most important driver of returns, tell a different story: the consensus S&P 500 earnings-per-share forecast for 2020 was $127 and $164 for 2021 as of May 12.

Even though analysts have reined in their estimates for this year, 2021 is still too high because it is in line with actual 2019 earnings of $165, according to Calvasina. In other words, analysts expect that business activity will have fully recovered to pre-crisis levels by the end of next year.

Calvasina recalled that during the 2008-2009 crash, stocks put in a bottom only after earnings estimates stabilized. And this is why the level of estimates matters to the market's direction. 

3. Positioning did not bottom in March. 

Institutional and retail investors never really capitulated during the March sell-off.

On the institutional side, Calvasina tracks sentiment through equity futures positioning data from the Commodity Futures Trading Commission. Bets for higher prices in excess of bets for lower prices, or so-called net long positions, reached a record high in February. They then plunged to the lowest level since December 2018, but not to the record low that had been touched in 2016.

The fact that sentiment never hit its all-time lows is of concern to Calvasina, and a sign that bad news can still send the market lower. 

On the retail side, bearish readings from the American Association of Individual Investors survey peaked at 52% during the worst pandemic selling. That's still tame compared to the 2008 crisis, when it peaked at 70% and came near 60% in the years afterwards. 

4. Stocks are still richly valued.

The market quickly lost any valuation advantage it gained after its fastest crash in history, according to Calvasina. 

At its recent high, the S&P 500 traded nearly 23 times projected 2020 EPS and 19 times 2021 earnings — both of which were well above its average since 2013.   

5. The 2020 election is still a risk for stocks. 

Calvasina finds that betting-market odds for President Donald Trump's re-election have closely tracked the S&P 500 price performance. She views these odds as a key driver of the stock market's performance in the months ahead. 

She is also watching the Democratic vice-presidential selection process now that the party has a presumptive nominee. And lastly, the odds of Democrats flipping the Senate are low for now, but bear watching for how markets will react to the election.   

SEE ALSO: MORGAN STANLEY: Buy these 20 stocks built to profit from a mounting inflation comeback that will alter the investing landscape

Join the conversation about this story »

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Bill Ackman turned a $27 million bet into $2.6 billion in a genius investment. Here are 12 of the best trades of all time.

Sat, 05/16/2020 - 2:48pm

  • The hedge fund billionaire Bill Ackman is among few who minted a multibillion-dollar profit during the throes of the coronavirus pandemic. 
  • The famed investor turned a relatively modest $27 million bet into a whopping $2.6 billion windfall as the outbreak continued to drag on stocks and threatened deep economic recession.
  • From George Soros' breaking of the Bank of England in 1992, to Michael Burry's now world-famous Big Short during the financial crisis, Markets Insider decided to round up some of the best trades of all time. 
  • Visit Business Insider's homepage for more stories.

Pershing Square Capital's CEO Bill Ackman made headlines last month after making $2.6 billion for his hedge fund off a wise, yet controversial bet that the coronavirus would crash the stock market. 

With stock markets going into free-fall during the economic downturn, Ackman was one among a handful who landed massive profits by using credit protection on investment-grade and high-yield bond indexes.

Ackman's was the latest in a long line of renowned risky but wildly successful bets on the markets.

From George Soros' breaking of the Bank of England in 1992, to Michael Burry's now world-famous Big Short during the financial crisis, Markets Insider decided to round up some of the best trades of all time. 

Check them out below.

Read more: 'We have a depression on our hands': The CIO of a bearish $150 million fund says the market will grind to new lows after the current bounce is over — and warns 'a lot more pain' is still to come

SEE ALSO: Apple employees will start returning to the company's offices soon even as other tech giants are letting staff continue working from home

Bill Ackman turned $27 million into $2.6 billion during the coronavirus pandemic

Ackman, the billionaire hedge-fund manager, had an intuition that the coronavirus-driven market meltdown would have a greater impact than investors expected.

That led him to mint a multibillion-dollar profit in March 2020, turning a $27 million position into a $2.6 billion windfall through defensive hedge bets as the coronavirus outbreak threatened a deep economic recession.

Ackman's bet that the debt bubble would burst was based on a hunch that investors would cast aside riskier securities in bond indexes as the coronavirus spread across the world.

The trade was so good that one columnist said it "may be the single best trade of all time."

Read more: Buy these 13 tech stocks that are abnormally disconnected from Wall Street's expectations for profit growth and poised to rocket higher, Credit Suisse says



Michael Burry's 'Big Short'

Possibly the most iconic trading victory of all time, Michael Burry's fund Scion Capital built up huge short positions against the US sub-prime mortgage market starting in 2004.

When the market collapsed during the financial crisis in 2007 and 2008, Burry netted a $100 million profit for himself, and $725 million for other investors.

His successes became the subject of Michael Lewis' seminal book about the crisis "The Big Short," and then a film of the same name.

Source: Vanity Fair



David Tepper's $7 billion win during the depths of the financial crisis

In 2009, American billionaire David Tepper bought large quantities of distressed bank assets.

The huge investments he made in Bank of America and other burdened companies netted his hedge fund an enormous $7 billion.

Source: Wall Street Journal

Read more: BANK OF AMERICA: Investors should buy these 12 cheap stocks to bet on the coming US recovery — but they should steer clear of these 8 competitors



'Evil Knievil' Simon Cawkwell's ingenious shorts against Northern Rock

In 2007, British spread-better Simon Cawkwell predicted the demise of the bank Northern Rock and made a neat profit of over £1 million ($1.2 million) by short-selling its shares. 

Source: Financial Times



Kyle Bass' $4 billion win on the US housing market collapse

In 2007, famed investor Kyle Bass and his hedge fund made a $4 billion profit by buying credit default swaps after the housing market crashed due to the ongoing US recession. 

Source: D Magazine

Read more: A real-estate investor who generates $342,000 of annual cash flow shares his unique spin on a popular investment strategy that's helped land him 114 units



Andrew Hall's $100 million profit on $100 oil futures

In 2003, oil trader Andrew Hall bought cheap long-dated oil futures that would pay off if the price reached $100 at some point over the next 5 years.

By 2008, oil reached $100 and Hall acquired $100 million for his employer Phibro, and a mammoth paycheck for himself.

Source: Time



Neil Woodford's unconventional bets in tobacco stocks

In 2000, British fund manager Neil Woodford invested generously in tobacco stocks which were being shunned before the dotcom bubble burst.

By 2014, his flagship equity fund received annual returns of more than 20% from British American Tobacco (BAT).

Source: Financial Times

Read more: BTIG says to buy these 25 under-the-radar stocks that have been neglected for years because they're tempting M&A targets with big upside



George Soros: 'The Man who Broke the Bank of England'

In 1992, billionaire philanthropist George Soros and his hedge fund made a profit of over $1 billion by bringing the Bank of England to its knees after betting that the price of the Pound Sterling would drop. 

Source: Forbes



Louis Bacon's 86% return through betting on oil prices

In 1990, American investor Louis Bacon chose to invest in oil after correctly predicting that the Iraq War would impact the commodity's prices.

He ended up with an 86% return on that bet. 

Source: Money Week



Stanley Druckenmiller's double bets on the Deutsche mark

Between 1988 and 2000, American investor Stanley Drunckenmiller made millions by making two long bets in the German currency, Deutsche Marks, while working as a trader under George Soros' hedge fund Quantum. 

Source: Trading Education



Andrew Krieger at odds with the Kiwi dollar

In 1987, currency trader Andrew Krieger took up a short position worth hundreds of millions of dollars against the New Zealand dollar. His sell positions exceeded the entire money supply of New Zealand and ultimately led to him netting $300 million for his employer Bankers Trust.

Source: Traders DNA



Paul Tudor Jones' $100 million profit on Black Monday

In 1987, famed hedge fund manager Paul Tudor Jones predicted the 'Black Monday' crash. By shorting the stock market, he ended up with 200% returns for investors besides a $100 million paycheck for himself, an almost unheard of sum at the time.

Source: New York Times



30 Big Tech Predictions for 2020

Sat, 05/16/2020 - 12:32pm

Digital transformation has just begun.

Not a single industry is safe from the unstoppable wave of digitization that is sweeping through finance, retail, healthcare, and more.

In 2020, we expect to see even more transformative developments that will change our businesses, careers, and lives.

To help you stay ahead of the curve, Business Insider Intelligence has put together a list of 30 Big Tech Predictions for 2020 across Banking, Connectivity & Tech, Digital Media, Payments & Commerce, Fintech, and Digital Health.

This exclusive report can be yours for FREE today.

Join the conversation about this story »

30 Big Tech Predictions for 2020

Sat, 05/16/2020 - 12:32pm

Digital transformation has just begun.

Not a single industry is safe from the unstoppable wave of digitization that is sweeping through finance, retail, healthcare, and more.

In 2020, we expect to see even more transformative developments that will change our businesses, careers, and lives.

To help you stay ahead of the curve, Business Insider Intelligence has put together a list of 30 Big Tech Predictions for 2020 across Banking, Connectivity & Tech, Digital Media, Payments & Commerce, Fintech, and Digital Health.

This exclusive report can be yours for FREE today.

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Meet the bankers, traders, and lawyers set for big paydays from a wave of corporate distress and bankruptcies

Sat, 05/16/2020 - 10:28am

  • Economic disruption caused by the novel coronavirus has put a group of investors, lawyers, and bankers back in the spotlight.
  • Restructuring attorneys and investment bankers are fielding a rush of calls from clients. 
  • Distress investing, which looks to take advantage of bankruptcies and other high-risk situations, struggled to find opportunities for years.
  • Private-equity shops are looking to invest in public equities and ramp up loans to help businesses through the crisis.
  • Click here for more BI Prime stories.

The coronavirus is slamming global economies and sending company revenues plunging. The sudden, unexpected shock has prompted credit downgrades and sent global markets on a roller-coaster ride. 

But the chaos is an opportunity for a group of advisers, traders, and investors who have been waiting years for a big shakeout. And things are heating up. 

The coronavirus is accelerating work on energy companies and retailers that were already seeing weakness, restructuring attorneys have told Business Insider.  But even advisers who are veterans of the 2008 financial crisis say that the current situation, where healthy businesses have seen their cash flow evaporate overnight, is unprecedented. 

JCPenney and Neiman Marcus have filed for Chapter 11 bankruptcy, following J. Crew Group Inc. Whiting Petroleum and Diamond Offshore Drilling filed for bankruptcy in April. The parent company of Chuck E. Cheese, the family fun center known for its playgrounds and skee-ball games, is struggling under a heavy debt load and lenders are organizing and tapping restructuring lawyers

We took a look at the top investors set to pounce on the chaos with the hopes of bagging huge returns, as well as some of the traders that specialize in dealing distressed debt.

We've also compiled the names of leading restructuring bankers and lawyers to understand who the power players are when it comes to cleaning up the mess. And we've talked to private-equity insiders to understand the opportunities they see and how they'll balance new investments with helping to stabilize existing portfolio companies. 

Restructuring advisers see a surge in business

Distressed debt trading heats up

Investors are gearing up

PE firms are shoring up investments while eyeing new opportunities

SEE ALSO: Coronavirus is clobbering the real estate industry. From a frenzy of flex-office layoffs to iBuyers pressing pause, here's everything you need to know.

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NOW WATCH: Pathologists debunk 13 coronavirus myths

The remote-work boom born from the COVID-19 lockdown has prompted some tech workers to reconsider living in the Bay Area. The region's rivals see it as a growth opportunity.

Sat, 05/16/2020 - 10:18am

 

  • Coronavirus is prompting some tech workers to consider leaving the Bay Area.
  • They're betting that permanent work-from-home policies will become more and more popular — lessening the troubled region's allure.
  • Some realtors in other smaller cities across the Western US say they've seen an uptick in interest from Bay Area residents looking to decamp.
  • And regional organisations and preparing to launch programs to attract remote workers to their states.

Coronavirus has some tech workers reconsidering their commitment to the San Francisco Bay Area.

The region's high cost of living, traffic, and housing crisis have long been pain points for professionals in the technology industry headquartered there — but now offices closures and work-from-home policies are prompting a renewed questioning of whether it's still worth it.

With companies like Twitter announcing that it will allow employees to work remotely even after pandemic lockdowns lift for good, some industry-watchers are predicting the city will rapidly lose its luster as workers decamp for more appealing locales.

In conversations with Business Insider, realtors in smaller cities say they're seeing increased interest from potential Bay Area buyers, regional development groups are scrambling to put out the welcome mats for remote workers, and investors are said to be looking to capitalize on the trend.

Balaji Srinivasan, a Silicon Valley investor and entrepreneur, predicted on Twitter that the lockdown and new work-from-home policies are removing some of the few incentives left for people to stay in the Bay Area. "The office isn't used, the industry is going remote. So SF is just pure repulsion. And people will fly away," he wrote. 

The prohibitive cost of living in the Bay Area and lack of housing stock has already forced many — particularly younger generations — to consider relocating in recent years, said Skylar Olsen, senior principal economist at real estate listing firm Zillow. If permanent work-from-home policies become more and more prevalent post-lockdown, that may well accelerate the trend.

The multimillion-dollar question is whether that will translate into workers moving out to the suburbs, or going further afield.

Even if they can work remotely, workers are still likely to favour metropolitan areas with access to creature comforts over more far-flung locales: think a condo in downtown Bozeman, Montana rather than a cabin in the depths of Kootenai National Forest. "Our value we place on amenity-rich, walkable neighborhoods is still really high," she said, and that's unlikely to change after the lockdown lifts.

Real estate listing site Realtor.com said they saw a surge in people Bay Area looking for listings elsewhere as lockdowns came into affect. "The Bay Area's balance of within-metro and outbound home searches tipped substantially toward outbound starting in mid-March," spokesperson Cody Horvat said. "The share of traffic from the Bay Area looking outside of the area jumped up 3.4 percent in April compared to the same period last year, marking the largest jump in outbound traffic share so far in 2020."

That surge has since subsided, and the areas that saw the most interest from Bay Area users were Los Angeles and Riverside in California, Las Vegas, Houston and Chicago.

It's hard to quantify any potential lockdown-influenced increase in sales this early, with deals typically taking a month or more to close. But Tony Levison, a realtor in picturesque Bend, Oregon, said he's seen an uptick recently in interest from Bay Area buyers. 

"It's a direct flight to most of the major cities on the West Coast ... you can get anywhere pretty fast, and you don't have ot deal with the city lifestyle any more. Lots of outdoor activities, smaller town, and for a lot of people in the major cities, it's a lot more affordable, too."

In Bozeman, Montana, Noel Seeburg, a realtor with Bozeman Real Estate Group, also said he's seen some increased interest — in particular from investors looking to buy up properties to rent to workers who might be relocate. 

In Nevada — home to beautiful Lake Tahoe and bustling Reno — the government-backed Economic Development Authority of Western Nevada (EDAWN) is actively developing a new program in response to coronavirus to try and attract new remote workers to the state, Mike Kazmierski, the organization's CEO said, to be rolled out after the lockdowns lift.

"There's no need for that workforce, regardless of the lockdown, to be stuck with high prices, traffic, all those other issues ... associated with California, when they can do the exact same job 30 minutes away from a ski slope."

That said, there's at least one group predictably confident that the Bay Area won't lose its allure any time soon: San Francisco realtors.

Mariana Pappalardo, a realtor with Sotheby's, said she's seen some uptick in interest in people looking to get out of the city (one client is "more motivated than ever to get out of here and move to Tahoe") but predicted that work from home won't become the norm.

"Eventually, people are going to want to see people in the office," she said. "I think this trend of working remotely is going to be popular for a year, tops, and then the shareholders are gonna want to see some faces."

Plus, she added, San Francisco's incredibly dense network of talent will long continue to be a major draw.

"We have such a strong population ... nine out of ten of my clients have a PhD, where else do you get that? Those people are going to move to Montana and be bored out of their minds."

How is COVID-19 affecting your work? Contact Business Insider reporter Rob Price via encrypted messaging app Signal (+1 650-636-6268), encrypted email (robaeprice@protonmail.com), standard email (rprice@businessinsider.com), Telegram/Wickr/WeChat (robaeprice), or Twitter DM (@robaeprice). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by standard email only, please.

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

The Death of Cash

Sat, 05/16/2020 - 10:01am

Both globally and in the US, the payments ecosystem is evolving.

Two related trends: the slow death of cash and the fast rise of digital payments, are transforming how consumers, businesses, governments, and even criminals move money.

Annual global non-cash transactions are expected to pass the 1 trillion milestone by 2024. This major transformation is being propelled by several factors, including increased usage of digital wallets, more small vendors adapting to accept credit cards, and the explosive growth of mobile commerce.

In The Death of Cash slide deck, Business Insider Intelligence projects what the payments ecosystem will look like through 2024 by examining the driving forces powering digital payment proliferation.

This exclusive report can be yours for FREE today.

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Macro managers have been the stars of the pandemic-stricken markets. Here's a breakdown of how big names like Alan Howard, Paul Tudor Jones, and Greg Coffey are performing.

Sat, 05/16/2020 - 10:00am

  • April was another strong month for some of the biggest macro managers in the business, including Alan Howard, Paul Tudor Jones, Greg Coffey, and more.
  • Unlike other types of investors, macro managers have mostly been able to dodge the impact of the earlier market crash from the novel coronavirus pandemic. 
  • Hedge Fund Research notes that while the average hedge fund is down more than 8%, macro funds are roughly flat for the year.
  • Visit Business Insider's homepage for more stories.

After years of underperformance, macro hedge funds — which make bets across different asset classes across the world — are back in the spotlight.

In the first quarter, when the novel coronavirus pandemic caused credit and equity funds alike to suffer, macro managers shone despite oil's crash. After April, when equity markets rebounded along with hedge funds, macro managers continue to do their work. 

According to Hedge Fund Research, the average macro manager made roughly 1% for the month — less than the 4.8% the average fund made— but big names like Alan Howard, Paul Tudor Jones, Greg Coffey, and more continued their strong years.

Brevan Howard, co-founded by Howard nearly two decades ago, is up more than 24% for the year through the first week of the year in its $3.8 billion master fund. The firm's AS macro master fund run by Alfredo Saitta is up more than 14% for the same time period, sources say. 

"Wizard of Oz" Greg Coffey's Kirkoswald Capital is up more than 16% for the year through the end of April, sources say, while Caxton Associates, now run by Andrew Law, has made nearly 17% through the same time period after gain of more than 6.6% last month. Institutional Investor previously reported the returns of Brevan Howard and Caxton. 

Billionaire Paul Tudor Jones, a recent proponent of bitcoin, has made roughly 6% in his firm's flagship fund, while fellow billionaire Chris Rokos re-opened his fund in April to new capital after his firm's best-ever month in March. The FT meanwhile reported that Louis Bacon, the billionaire founder of Moore Capital who returned outside capital last year, is up 17% for the year through April.

The average macro fund is roughly flat on the year, according to Hedge Fund Research, while the average fund is down 8%. The reasons for the subsector's outperformance is varied, but one macro manager, Marwan Younes of Massar Capital, explained to investors during the early days of the pandemic that his mindset, forged during his childhood in Lebanon during the country's civil war, is one of the main drivers of performance. 

The funds either declined to comment or did not respond immediately to request for comment. 

SEE ALSO: April hedge fund performance numbers are in — here's how big names like Third Point and Renaissance turned things around after a rough March

SEE ALSO: A hedge-fund chief overseeing $2 billion shares 5 reasons he sees bitcoin surging 900% by the end of 2021 as Paul Tudor Jones dives into the asset

SEE ALSO: 'A $35,000 data set that could have saved or made $100 million': Alt data is back in the spotlight — here's how providers and buyers have adapted.

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How bedroom trader Navinder Sarao made his first millions and kickstarted an odyssey that ended with historic market manipulation and a $1 trillion crash

Sat, 05/16/2020 - 9:45am

  • Navinder Singh Sarao was arrested in 2015, accused of helping cause a $1 trillion market crash.
  • Sarao was accused by the US government of manipulating markets by posting then canceling huge volumes of orders to trick other participants about supply and demand — a brand new offence known as 'spoofing.'
  • In this extract from his new book, "Flash Crash," author Liam Vaughan recounts how Sarao made his first million pounds taking the other side of trades with another notorious financial figure, Jérôme Kerviel.
  • Visit the Business Insider homepage for more stories.

Navinder Singh Sarao made $70 million buying and selling futures from his suburban London bedroom before the FBI showed up to arrest him for helping cause a $1 trillion market crash.

A preternaturally gifted trader with a penchant for computer games, Sarao was accused by the US government of manipulating markets by posting then canceling huge volumes of orders to trick other participants about supply and demand — a brand new offence known as 'spoofing.' He believed his actions were justified because the markets were rigged in favor of highly-profitable, computerized entities known as high-frequency traders, or HFT. Many agreed, and in the aftermath of his arrest, Sarao became a kind of folk hero to those on the fringes of the financial ecosystem —the lone trader who took on the billion-dollar behemoths and won.

Sarao started his trading career at a rough-and-ready prop shop above a supermarket. In an extract from his forthcoming book, Flash Crash, Liam Vaughan recounts how the man dubbed the Hound of Hounslow made his first million pounds after crossing paths with another notorious financial figure.

After a few years of patiently building up his account, Nav, pulled off a trade at the start of 2008 that would catapult him into the big time. The global financial crisis was gathering pace and markets lurched around on news of the precarious state of the economy and the measures governments and central banks were taking to shore up the system. Where the S&P 500 might previously have moved forty or fifty ticks in a day, it was now not uncommon for the index to jump around in a range of 5 percent, more than five times as much. The turmoil may have been disastrous for the wider economy, but it was a boon for traders like Nav who thrived on the action. Sentiment had swung firmly from exuberance to panic, and there was easy money to be made.

Late one afternoon in early January, Nav was at his desk when he noticed something odd in the DAX, an index that tracks Germany's thirty biggest companies. Despite the swirling negativity, there was a glut of buy orders waiting in the order book; and whenever the bids were hit, they quickly replenished. The result was that, over the course of the evening, while most US and European markets remained depressed, the German index actually crept higher. Somebody out there appeared to have an insatiable appetite for DAX futures in the face of strong signals that prices should be going down.

"It's the Chinese, I know it," suggested one trader when Nav asked him what he made of the mysterious buying. Residing as they did on the fringes of the financial firmament, traders at Futex, the arcade where Nav cut his teeth, were inclined to indulge in conspiracy theories about sinister forces controlling the markets. If it wasn't China, it was the Plunge Protection Team or Goldman Sachs or the Bilderberg Group. Whoever was buying up the DAX had significant firepower. For long periods there were hundreds of millions of dollars' worth of bids sitting in the order book.

Nav resigned to keep watching the DAX and went home for the night. The following morning he saw that the index had opened 90 points lower, a substantial drop. Whoever was propping up the market had seemingly given up and gone to bed. Over the next few hours, DAX futures continued to tumble in line with markets around the world, but by late afternoon the wall of bids had reappeared and prices started to edge up again.

It was surreal. During the regular trading day for stocks, from 9:00 a.m. to 5:30 p.m. Central European Time, German futures followed the global downward trend. Then, when the country's stock market closed and volumes thinned out, DAX futures, which keep trading until 10 p.m., began edging higher, like a salmon swimming against the stream. It wasn't clear who was behind the phenomenon or why. In some ways it didn't really matter. The important thing was that there was a trend that could potentially be exploited.

That night, before heading home, Nav and one of his colleagues devised an experiment. Both of them would sell a few DAX contracts and see what happened. If the market took a tumble, as it had the previous night, they would buy back the same number of contracts the next morning, closing out their position for a profit. If it didn't, they would take the hit and move on with their lives. Generally speaking, it was frowned upon at Futex to leave a position open overnight because you couldn't react quickly if the market moved against you. They needn't have worried. The following morning the DAX opened 65 points lower, earning them more than $10,000 apiece. By day three, the traders around them had started to take notice. There still hadn't been anything in the press that might explain the move, but the pattern was clear. Half the office followed their suit, hoping to piggyback on the nightly deviation between the German index and markets around the world. Once again, the market rallied before collapsing overnight, this time by 80 points.

Nav had struck gold. For two weeks, he repeated the overnight trade, placing steadily larger positions before heading home to bed and praying his good fortune would hold. Time and again it did, and by the second week of January, Nav had gone from shorting a handful of contracts to betting two hundred lots a night, a $15 million position that yielded six-figure profits. As he put everything on the line, the strength of his conviction never faltered, and by the middle of January his balance had ballooned to more than a million pounds.



ON SATURDAY, January 19, 2008, a thirty-one-year-old French trader named Jérôme Kerviel stood outside Société Générale's imposing headquarters on the outskirts of Paris and texted his boss: "I don't know if I'm going to come back or throw myself under a train." Waiting for him in a conference room inside were the head of the bank's investment banking division and various other executives who had spent the past twenty-four hours frantically scouring Kerviel's trading records after uncovering evidence of what they suspected to be a massive fraud. Over the next several hours, Kerviel confirmed their fears. Starting in 2005, he confessed, he'd been secretly placing unauthorized trades worth hundreds of billions of dollars. Unlike most of the firm's elite traders, Kerviel, the son of a blacksmith and a hairdresser from Breton, had started his career in an administrative function, and it was there that he'd learned how to cover his tracks using a combination of fictitious transactions and forgery. He'd escaped detection because, for the most part, he'd been successful. In 2007 alone, he said, he'd made a profit of around $2 billion by correctly predicting the impact of the impending financial crisis. Bizarrely, he was never able to claim credit for his success, because nobody else knew about it. The story might have ended there, except Kerviel had recently embarked on his most ambitious foray yet.

Between January 2 and January 18, the trader had accumulated a long position of $70 billion, double the market capitalization of the entire bank. As his colleagues left the trading floor each evening, Kerviel had stayed behind manically buying futures tied to the DAX and other indices, convinced that the worst of the crisis was over and that the markets would rebound. But his winning streak had come to an end. Kerviel's wave of after-hours buying only ever propped DAX futures up for a few hours each night. Then, like some horrific Wall Street version of Groundhog Day, he awoke each morning to find gravity had kicked in and the market had sunk back in line with the rest of the world. As Kerviel made his confession, Société Générale's management ordered one of his colleagues to close out his positions. By the time the employee was finished, the bank had lost $7.2 billion. News of the incident rocked global markets and helped push the DAX 12 percent lower in two days, wiping hundreds of billions of dollars off the value of Germany's biggest companies.

Reading about events at Société Générale, the traders at Futex quickly worked out that Kerviel had been the one behind the DAX's strange maneuverings. It wasn't the Chinese after all. One of Europe's biggest banks had been brought to the brink by a lone trader with oversize ambitions and inadequate oversight. Later, Kerviel was sentenced to three years in jail and ordered to pay back the entire $7.2 billion he lost, the biggest fine ever levied on an individual. His desperate buying spree placed him among history's most notorious rogue traders, a name uttered alongside the likes of Nick Leeson of Barings Bank and Kweku Adoboli at UBS. It also gave a young day trader from Hounslow the capital he needed to take his trading to new heights.

Flash Crash: A Trading Savant, A Global Manhunt and the Most Mysterious Market Crash in History (Doubleday and William Collins) by Liam Vaughan is available now.

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Wall Street CEOs map out the future — Goldman snaps up a fintech — PE recruiting

Sat, 05/16/2020 - 9:29am

 

Welcome to Wall Street Insider, where we take you behind the scenes of the finance team's biggest scoops and deep dives from the past week. 

If you aren't yet a subscriber to Wall Street Insider, you can sign up here.

Business Insider asked 34 top execs across investing, trading, and consumer finance how their business, their industry, and their world would transform as a result of the coronavirus. The big takeaways? More remote work, less travel, and a new appreciation for work-life balance.

You can read the full survey here:

Here's how CEOs are thinking about the future of investing, trading, and banking

Goldman Sachs is diving deeper into the world of independent financial advice with its deal to buy Folio Financial, a custody, financial-technology, and clearing company primarily serving registered investment advisers. Rebecca Ungarino laid out the reasoning for why Goldman, which has a $509 billion wealth business geared towards ultra-rich clients, is buying the small Virginia fintech— and why there's likely more consolidation and structural change in the broader wealth industry to come. 

It was another tough week for retail, capped with JCPenney filing for Chapter 11 bankruptcy on Friday. Meanwhile, as Dan Geiger reports, Macy's is seeking to dramatically slash the size of its new corporate headquarters in Long Island City, Queens, as it grapples with the coronavirus and the devastating impacts the pandemic has had on the nation's retail business.

Keep reading for a look at how PE recruiting is quickly evolving, how Wall Street internships will work this summer, and details about a new push at UBS to help family offices get access to private markets. 

Thanks for reading, and have a great weekend!

Meredith

PE recruiting is getting upended

Casey Sullivan laid out how recruiters are gearing up for a massive reshuffling of private-equity talent as the coronavirus hits some funds' portfolios. Here are the hottest hiring areas right now — and how the PE employment picture for both senior and junior roles is being transformed.

Read the full story here: 

6 PE recruiters lay out the biggest trends they're seeing, from senior execs jumping ship to new timelines for scouting junior hires How internships will go virtual

Bank of America is running its summer internship fully virtually this year. Shannen Balogh spoke with Ebony Thomas, an executive in the bank's global human resources division, who laid out how the summer programs will work, and how the firm plans to go about replicating key in-person aspects of the job. 

Read the full story here: 

Bank of America's summer internship will be entirely virtual. A talent exec runs through how the bank's 2,000 global interns will learn, network, and volunteer without stepping into an office.   Family offices want in on private-market deals

UBS is expanding an internal group focused on better serving rich clients interested in private investments. Rebecca Ungarino laid out the details, and explained how the new effort underlines sophisticated investors' growing appetite for access to asset classes like private equity, private debt, and private investments into public entities.

Read the full story here:

UBS is rolling out the red carpet for ultra-rich people and family offices that want to invest in private-market deals On the move

Bank of America has hired Diane Daley — who spent over two decades at Citigroup —  to lead its enterprise data governance function. The newly-created role will be focused on data and artificial-intelligence policies, standards, and oversight.

Careers Real estate Investing and trading  Fintech and payments

 

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

Elon Musk tried to help explain Bitcoin to J.K. Rowling in a bizarre Twitter exchange, and said central banks have made cryptocurrency 'look solid by comparison'

Sat, 05/16/2020 - 8:26am

  • JK Rowling asked Twitter to explain bitcoin to her, and was bombarded by replies — including from Elon Musk.
  • Rowling ultimately gave up engaging with the topic, a decision Musk supported.
  • In the process, he took a swipe at conventional central banks, which he said had undermined their credibility and made even bitcoin "look solid by comparison."
  • Banks like the Federal Reserve and European Central Bank have pumped trillions of dollars into the global economy via quantitative easing programs.
  • Many of these have been expanded in an attempt to mitigate the economic fallout of the coronavirus pandemic.
  • Visit Business Insider's homepage for more stories.

Elon Musk intervened in a Twitter thread to attempt to explain bitcoin to J.K. Rowling, and ended up attacking central banks whom he said made the cryptocurrency "look solid by comparison."

Musk chimed in after Rowling, the author of the Harry Potter novels, was bombarded by replies after tweeting: "I don't understand bitcoin. Please explain it to me."

I don’t understand bitcoin. Please explain it to me.

— J.K. Rowling (@jk_rowling) May 15, 2020

Bitcoin advocates and skeptics then rushed to explain the cryptocurrency — a financial asset which exists solely in digital form.

Unlike traditional currencies, it is not tied to a central bank controlled by a government, and instead is regulated by complicated mathematics and a public log — called a blockchain — of all transactions.

Its value has ballooned since its creation. According to Markets Insider data, a single Bitcoin was worth almost $20,000 in December 2017. Its price at the time of writing was around $9,410.

Despite lofty predictions by its advocates, it has not found widespread use.

Rowling eventually gave up trying to understand bitcoin, posting a tweet that implied that she was no longer interested.

People are now explaining Bitcoin to me, and honestly, it’s blah blah blah collectibles (My Little Pony?) blah blah blah computers (got one of those) blah blah blah crypto (sounds creepy) blah blah blah understand the risk (I don’t, though.)

— J.K. Rowling (@jk_rowling) May 15, 2020

Musk responded essentially agreeing with her, but taking a swipe at the behavior of traditional central bankers in the process.

Pretty much, although massive currency issuance by govt central banks is making Bitcoin Internet

These 7 economic signals flashed red this week, showing the continued damage being inflicted by coronavirus

Sat, 05/16/2020 - 8:13am

  • While many states across the US have begun to slowly reopen, economic data continues to show devastation from the coronavirus pandemic.
  • Economists agree that the US is already in a recession. Now, they're weighing what shape a potential recovery might take.
  • Many reports this week hit fresh records. But some showed glimmers of hope that a recovery may be coming as some states begin to reopen. 
  • Here are seven economic signals that flashed warnings this week. 
  • Visit Business Insider's homepage for more stories.

In just two short months, the US economy has been devastated by the coronavirus pandemic and sweeping shut downs to contain the spread of the disease. 

Last week's April jobs report showed that the US economy lost a record 20.5 million jobs and the unemployment rate spiked to 14.7%, the highest since the depths of the Great Depression. Since the eye-watering report, more have been released showing further damage to the US economy. 

Economists and industry watchers agree that the US has been thrown into a recession from the coronavirus pandemic shutdowns. Now, all eyes are watching US economic data to gauge the extent of the damage and weigh what shape a recovery might take.

Initially, some argued that a swift, V-shaped recovery was possible. But as coronavirus-induced layoffs persist, and many consumers are still stuck at home, it now appears that any rebound will be more muted.

There have also been a few glimmers of hope as many states across the country slowly reopen. For example, even though April's jobs report showed devastating losses, 18.1 million workers were classified as temporarily unemployed, suggesting that they may be able to quickly re-enter the workforce when lockdowns are lifted

Read more: 'We have a depression on our hands': The CIO of a bearish $150 million fund says the market will grind to new lows after the current bounce is over — and warns 'a lot more pain' is still to come

In addition, some reports this week — while dismal — may represent a low point before a rebound. For example, April retail sales posted a second record slump, but may not record a third. 

"This report was always going to be terrible," said Ian Shepherdson of Pantheon Macroeconomics in a Friday note. "But it likely marks the floor, given the gradual reopening now underway or soon to be underway."

Listed below are the seven indicators that were released this week, and what they tell us about the US economy:

1. Small businesses are banking on a rebound, but expect sales to plummet

The National Federation of Independent Business' survey released Tuesday showed that small business optimism slumped to 90.9 in April. The median economist estimate was for a drop to 83. 

The smaller-than-expected slump was boosted by business owners' expectations of the US economy, which jumped 24 points in April, erasing all losses from March. This likely reflects optimism around economic reopenings, now underway in many states. 

On the flip side, the survey's index of sales expectations posted the sharpest drop from March, slumping 30 points to negative 42, the lowest reading in 46 years. 

Read more: Buy these 13 tech stocks that are abnormally disconnected from Wall Street's expectations for profit growth and poised to rocket higher, Credit Suisse says



2. US consumer prices posted a record drop in April

The core consumer-price index fell 0.4% in April, following a 0.1% decline in March, according to a Tuesday report from the Labor Department. 

It's the largest monthly drop for the measure — which excludes food and fuel costs — since 1957, when the series began. The index rose 1.4% from last April, the smallest year-over-year increase since 2011. 

US CPI including food and fuel slumped 0.8% in April, the largest monthly drop since December 2008.  



3. Jobless claims fell again, but brought the eight-week total to 36.5 million

US jobless claims posted another weekly decline according to Thursday's report. In the week ending May 9, 2.98 million Americans filed for unemployment, slightly less than the 3.17 million initial claims a week earlier.

While the downward trend is promising, claims are still highly elevated, a concerning sign as some states begin to reopen for business. In addition, in just eight weeks — since major coronavirus layoffs began — more than 36.5 million Americans have filed for unemployment insurance. 

That boils down to roughly one in 10 Americans, according to Daniel Zhao, an economist at Glassdoor. 

Read more: A real-estate investor who generates $342,000 of annual cash flow shares his unique spin on a popular investment strategy that's helped land him 114 units



4. Retail sales plunged by a record for the second month in a row

Retail sales plunged 16.4% in April, according to a Friday report from the Commerce Department. The decline was worse than the 12% drop economists were expecting. 

April's dismal number also came after a record slump in March, when retail sales fell 8.3%. At the time, it was the worst drop in the series, which began in 1992. 

Sagging retail sales don't bode well for US gross domestic product. Retail sales account for more than 40% of consumer spending, which in turn is around 70% of US GDP. 

"The 23% cumulative fall in retail sales over the last two months this alone is enough to knock more than 6 percentage points off the level of nominal GDP," said James Knightley, chief international economist at ING, in a Friday note.



5. Consumer sentiment rose ... but expectations for the future dropped

The University of Michigan's consumer-sentiment index gained to 73.7 in May from 71.8 in April according to preliminary data released Friday. In April, the index fell the most on record as the coronavirus pandemic froze the economy. 

But in May, the index was led higher by a nearly 10-point jump in current economic conditions to 83 from 74.3 in April. This likely reflects economic relief from the CARES Act, according to the survey. 

Still, consumers aren't anticipating a quick rebound. The index of consumer expectations fell to 67.7 from 70.1 in April, and personal financial prospects for the year ahead fell to the lowest level in almost six years, according to the report. 

Read more: MORGAN STANLEY: Buy these 20 stocks built to profit from a mounting inflation comeback that will alter the investing landscape



6. US industrial production fell by the most in 101 years of data

In April, total US industrial production fell 11.2%, and manufacturing output declined a record 13.7%, according to a Friday report from the Federal Reserve. Economists surveyed by Bloomberg expected a 14.6% drop.

All major industries posted decreases, according to the Fed. Automobile and auto parts manufacturing plummeted more than 70%, the biggest industry-group decline in the Fed's index.

 

 



7. JOLTS, well, jolted

The Job Opening and Labor Turnover Survey, or JOLTS, released by the Labor Department Friday showed that available positions fell to 6.2 million in March from 7 million in February.

The median economist estimate was for a fall to 5.8 million, according to Bloomberg data. While opening positions fell slightly less than expected, separations — which includes layoffs and quits— jumped to 14.5 million, a series high. 

The month also ended a two-year streak where job openings outnumbered unemployed workers — at the end of March, there were 1.2 people for every open job, according to the report.

The report shows that effective employment is "primarily a story of layoffs really driving employment down, rather than a slower, steadier decline in hiring growth," Nick Bunker, an economist at Indeed, told Business Insider. 





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