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Alphabet's Q3 earnings missed the Street's expectations by a mile (GOOG, GOOGL)

Mon, 10/28/2019 - 2:52pm

  • Alphabet, Google's parent company, missed Wall Street's earnings expectations Monday, reporting a third-quarter profit that declined even farther than what analysts had forecast.
  • A drop in the value of the company's investments weighed down its overall results.
  • But Alphabet's bottom line was also hampered by its operating costs, which grew faster than its sales.
  • The company's stock fell on the news.
  • Visit Business Insider's homepage for more stories.

Google parent Alphabet fell far shy of Wall Street's earnings expectations on Monday as a decline in the value of its investments weighed heavily the bottom line, marring a quarter of solid sales growth in the company's advertising and cloud businesses.

A hefty $1.5 billion loss on the value of undisclosed equity investments took a toll on Alphabet's bottom line, overshadowing healthy revenue growth in mobile search advertising, YouTube advertising and sales in the Google cloud business.

Alphabet did not list which of its investments went south in the quarter. But the company invested in both Uber and Slack before they went public. Both companies have seen their stock prices decline since they debuted on the market earlier this year. 

Alphabet's shares dropped on the news. In after-hours trading following its report and a conference call with analysts, the company's stock was down $23.25, or 2%, to $1,266.75.

A strong showing in Google's Cloud

Alphabet posted a per-share profit of $10.12 in the third quarter, well below the $13.06 a share it recorded in the same period last year.  Analysts polled by Bloomberg were expecting the search giant's profit to dip from the year-ago period, but not nearly that far; they were looking for a per-share profit of $12.35.

Google's net revenue grew more than 21% during the third quarter, topping analyst expectations. And the company's "Other Revenues" category, which includes Google's cloud business, app sales in the Google Play Store, and hardware sales, increased by 39% year-over-year to account for roughly 16% of the company's total revenue. 

Here's what the internet giant reported and how that compared with analysts' expectations, where applicable, and Alphabet's year-earlier results:

  • Q3 net revenue (excluding traffic acquisition costs): $33.01 billion. Wall Street was looking for $32.7 billion. In the same period last year, Alphabet posted $27.2 billion in net sales.
  • Q3 earnings per share: $10.12. Analysts had forecast $12.35 a share. In the third quarter last year, the company earned $13.06 per share.
  • Q3 "other bets" revenue: $155 million. In the same period last year, the company's businesses other than Google brought in $146 million in sales.
  • Q3 "other bets" operating loss: $941 million. In the third quarter a year ago, those non-Google businesses posted an operating loss of $727 million.
  • Q3 Google capital expenditure: $7.3 billion. In the same period last year, the search business invested $5.6 billion on such items.
  • Number of employees: 114,096. At the end of the third quarter last year, Alphabet had 94,372 employees. At the end of the second quarter, it had 107,646.
  • Q4 net revenue (analysts' pre-report forecast): $38.4 billion. In the holiday period a year ago, Alphabet saw $31.7 billion in net sales.
  • Q4 EPS (analysts pre-report forecast): $12.90. In last year's fourth quarter, the company earned $12.77 a share.
Alphabet's costs grew faster than sales

Alphabet's investments weren't the only thing hampering its bottom line. Rising costs also helped to depress its profits.

The company's overall operating costs rose to $31.3 billion. That was up nearly 25% from the $25.1 billion in operating costs Alphabet recorded in the same period last year.

By contrast, the company's net revenue grew 21% year-over-year.

Alphabet saw a particularly sharp rise in its general and administrative expenses. Those grew about 48% from the third quarter last year to $2.6 billion.

The surge in administrative expenses was due in large part to a deal Google announced last month with France to settle a tax dispute, Ruth Porat, Alphabet's chief financial officer, said on the conference call. Google agreed to pay France a $554 million fine as part of the settlement. Without that amount, Alphabet's general and administrative costs would have risen by just 16%.

But the company saw other costs rise faster than its sales growth. Both its cost of revenue — the expenses directly related to the products and services it offers — and its research and developments costs outpaced its revenues.

Alphabet's cost of revenues were largely driven by data-center related costs and depreciation, Porat said. Its research and development expenses, by contrast, were boosted by its hiring of new engineers, she said.

Analysts largely ignored regulatory and workplace troubles

Google — along with Facebook and Amazon — has been under regulatory scrutiny lately, as antitrust officials in Washington and within most of the states are scrutinizing its impact on competition. It's also been seeing growing tension with employees over its workplace culture and controversial projects, including a now-abandoned effort to develop a censored search engine for China.

But analysts largely ignored those topics during the call. Only one, Baird's Colin Sebastian, asked about the antitrust scrutiny, wondering if it might affect Alphabet's ability to innovate. Google CEO Sundar Pichai responded by saying that the company wanted and intended to continue to innovate and appeared to blame some of the scrutiny on Alphabet's rivals in its newer markets being afraid of competing with it.

There are "many new areas of opportunities available for us, and in many of these areas we are new entrant, and we create competition," Pichai said. "And sometimes the competitive pressures can lead to concerns from others."

The company's stock closed regular trading Monday up $24.87 a share, or about 2%, to $1,290.

SEE ALSO: Google employees are raising alarms about a new tool that keeps tabs on their internal meetings, but the company says it's nothing to worry about

Join the conversation about this story »

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Photos from WeWork's famed extravagant annual Halloween parties, with performances from Busta Rhymes and Rick Ross

Mon, 10/28/2019 - 2:48pm

  • WeWork was characterized as a "nonstop party" under ousted-CEO Adam Neumann, a company complete with raucous summer retreats and alcohol-fueled meetings.
  • That party culture extended to the company's annual Halloween parties, with an extravagant event held in New York and other parties held in San Francisco, South Korea, and Israel.
  • Photos and videos posted by both WeWork and attendees show people dancing to bumping electronic music, a cameo appearance from Rick Ross, and massive venues decked out in extravagant Halloween decor.
  • A WeWork spokesperson said the company will not be holding a flagship Halloween party in New York this year. An Eventbrite listing shows WeWork holding a 90s-themed Halloween party in the Philippines.
  • Visit Business Insider's homepage for more stories.

Around this time last year, WeWork was getting ready to host its annual Halloween party, a massive event in New York filled with loud electronic music and hundreds of people dressed in costume eyeing the open bar.

But after a disastrous two months in which the coworking company saw its IPO shelved, its CEO ousted and its control handed to SoftBank, it's no surprise that the company's Halloween celebration is the last thing on its mind. A WeWork spokesperson told Business Insider that the company is not holding its flagship Halloween party this year, although it's not clear when that decision was made.

WeWork employees have recounted tales to Business Insider about a culture, under former CEO Adam Neumann, that blurred the lines between work and play. Employees told stories of taking tequila shots at meetings and a wild summer retreat during which employees "could hear people audibly having sex in their tents all day and night."

That party culture extended to the company's Halloween parties, for which WeWork rented out concert venues, splurged on an open bar, and featured performances from popular DJs and Rick Ross.

Check out scenes from WeWork's wild Halloween parties over the years:

SEE ALSO: The career rise and fall of Adam Neumann, the controversial WeWork cofounder who is reportedly getting $1.7 billion to step down from the company's board

It's relatively simple to find scenes inside WeWork's crazy Halloween parties — the company has posted teasers and promotional videos of parties from a few years on video-sharing platform Vimeo.

Source: WeWork on Vimeo



The location and details of WeWork Halloween parties haven't been kept secret. WeWork has promoted tickets to WeWork members via publicly available URLs, and has readily shared information in social media posts.

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It's not clear when WeWork, founded in 2010, first started throwing its Halloween parties in New York. But the first social media-documented bash is from 2012, when WeWork held it at the Angel Orensanz Foundation, a trendy arts center on the Lower East Side.

Source: Eventbrite



WeWork sold tickets for its 2012 Halloween party for $35, which admitted one WeWork members and one guest. Guests could also pay more to donate to Charity: Water, and WeWork said it would match donations. However, due to Hurricane Sandy, the 2012 party was apparently cancelled.

Source: Eventbrite, WeWork on Vimeo



However, the 2013 Halloween party was more successful, and was not inhibited by any natural disasters. The event was held at New York's Edison Ballroom in midtown Manhattan. According to WeWork's Instagram, tickets started at $45, which included an open bar.

Source: WeWork on Instagram



The 5.5-hour party featured performances from a Spice Girls cover band, as well as an electronic music DJ, White Panda.

Source: WeWork on Vimeo



Even more, WeWork's video on Vimeo appears to show CEO Adam Neumann at the party, standing on a balcony above the crowd and raising his drink in salute the dancing attendees below.

Source: WeWork on Vimeo



In 2014, WeWork moved its Halloween party over to Hammerstein Ballroom, a popular concert venue with the capacity to hold up to 2,200 people. The annual party has been held there since.

Source: BizBash



It's fitting that WeWork held its Halloween parties at a concert venue, as the company is known for featuring musicians and performers at its events. WeWork summer retreats have featured artists like Lorde and Bastille, and Neumann once brought in a Run DMC member after an all-hands meeting about layoffs.

Source: Business Insider, Wall Street Journal



The 2014 Halloween party — with the theme, "Dark Side of the Moon" — featured appearances from Busta Rhymes and Wyclef Jean, a Haitian singer who was a member of the 1990s hip-hop group The Fugees.

Source: Check in Tech



The following year, WeWork brought out Rick Ross. The rapper of "Hustlin'" fame performed some of his greatest hits at the 2015 Halloween party.

Source: Facebook



WeWork's 2015 party was Midnight Circus themed, and the venue was decorated elaborately to reflect it. Costumes that attendees come to the events in aren't only to celebrate Halloween, but often have reflected each year's party themes as well.

Source: Facebook



In celebration of the theme "3016," electronic band Empire of the Sun performed at WeWork's 2016 event.

Source: Instagram



WeWork's Halloween parties beyond New York seem to have reflected the same theme as its flagship event each year. The 2017 parties were centered around Great Gatsby, as shown in photos from WeWork's San Francisco party.

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At last year's party, WeWork paid for popular DJs Laidback Luke and Krewella. The party was themed around the question "What is Real?" purporting illusion and mystery.

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Source: Eventbrite



A photo posted by Neumann's sister, Adi Neumann, appears to show her at last year's WeWork party, although it's unclear which location's party she attended. The since-ousted CEO was not spotted in any photos from the party, however.

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A WeWork employee shared with Business Insider in September a startling experience he had with some employees a few weeks before Halloween 2018.

The employee told Business Insider: "A member of my team, a white male, he pulls out his phone and he said he dressed up as Dr. J — the basketball player — for Halloween, and he shows everybody a picture of him doing blackface. He showed the picture around and I looked around and nobody seemed shocked at all."

The experience made him think differently about his team, he told Business Insider. "I was surprised that, at that time it was 2018, nobody on the team ... said anything about it."



As for this year's Halloween, there's no big New York party happening, a WeWork spokesperson told Business Insider. There are still some smaller offshoots planned for other locations, including a 90s-themed event happening Wednesday in the Philippines. WeWork told Business Insider that that event is "basically a meet-and-greet" to celebrate employees in the area.

 

 



The 7 biggest yacht debuts at the largest boat show in the US

Mon, 10/28/2019 - 2:31pm

  • The Fort Lauderdale International Boat Show (FLIBS), touted as the biggest boat show in the country, will be held October 30 through November 3.
  • Celebrating its 60th anniversary this year, the show expects 110,000 attendees, 1,200 exhibitors, and 1,500 boats on display, according to a press release. It also anticipates over $500 million in direct sales, with purchases ranging from sunglasses to superyachts.
  • Seven yachts are expected to make their world debut at FLIBS, including a megayacht with over-the-top amenities like a dance floor and a helicopter landing pad.
  • Visit Business Insider's homepage for more stories.

Over the course of five days, an estimated 110,000 attendees will flock to South Florida where 1,500 boats will be on display, over 100,000 glasses of beer will be consumed, and $508 million will change hands in the name of yachting.

Now in its 60th year, the Fort Lauderdale International Boat Show is known as the biggest in-water boat show in the US. With credentials like that, it's no wonder several boats will be making their world debut at the show, which will take place from October 30 through November 3.

The seven yachts that will be unveiled for the very first time at the boat show emphasize the direction the yachting industry is taking: increasingly technologically advanced vessels that still maintain an air of luxury. Some were designed with jet propulsion mechanisms while others were designed to function in all climates — but all were created with grandeur in mind.

Here are the yachts that are celebrating their world debuts at the Fort Lauderdale International Boat Show, listed by size in ascending order.

SEE ALSO: The world's first hydrogen-powered superyacht was unveiled at the Monaco Yacht Show. Here's a look inside the game-changing 367-foot vessel concept.

DON'T MISS: Lexus just unveiled its first-ever luxury yacht, a sleek watercraft that'll cost about $3.6 million. Here's a closer look.

7. The PB70 is a vessel that was built just up the coast from the boat show in Palm Beach.

Length: 70 feet

Yard: Palm Beach Motor Yachts

It was designed with comfortable speed in mind, capable of reaching a cruising speed of 32 knots. The bow was built to slice through water rather than bounce atop it, promising a smooth ride with minimal wake.



6. The 84R Open, shown here as a concept, will be an 84-foot motoryacht that promises maximum light, even in the cabins.

Length: 84 feet

Yard: Ocean Alexander

It will also have interior detailing that features satin, with Cambria stone flooring and counter surfaces.



5. LeVen 90 is a Dutch-engineered superyacht that was built using renewable aluminum. It has a nearly silent propulsion system and a special hull allowing it to venture into shallow waters, unlike most vessels of its size.

Length: 90 feet

Yard: LeVen Yachts

The technologically advanced boat is on its way to Fort Lauderdale from the Netherlands, but it was originally designed to be the ideal Bahamas island hopper.



4. At 100 feet, the Marlow Voyager 100 is the yard's largest yacht to date and was specifically designed for extended stays in frigid or tropical climates.

Length: 100 feet

Yard: Marlow Yachts

The yacht was also designed and built in Florida, using carbon fiber and Kevlar.



3. The Hargrave G120 is a motoryacht that can accommodate 10 guests and six crew members and prioritizes speed and long-range efficiency.

Length: 120 feet

Yard: Hargrave Custom Yachts

Galati Yacht Sales specializes in selling to American luxury yacht buyers. They teamed up with Fort Lauderdale-based Hargrave Custom Yachts to design and build a vessel they envisioned would be perfect for their existing clientele.



2. BABA'S is another Hargrave Custom Yacht. At 186 feet, it is the largest yacht the yard has ever attempted and was built out of steel and aluminum.

Length: 186 feet

Yard: Hargrave Custom Yachts

The boat, on the way to Fort Lauderdale from Turkey, is even equipped with a "beach club" lounge on the stern.



1. Madsummer, a 311-foot megayacht built this year, will be the show's largest and most glamorous debut.

Length: 311 feet

Yard: Lürssen

The yacht can accommodate 20 guests, is outfitted with colorful interiors, and has amenities like a dance floor, a gym and spa, a helicopter landing pad, a swimming pool, and beach lounge. The yacht was signed for at the 2015 Fort Lauderdale International Boat Show.



Fewer Americans are borrowing against their homes after getting nailed in the financial crisis — and it's hurting banks

Mon, 10/28/2019 - 2:07pm

  • The number of home equity lines of credit, or Helocs, has been cut in half since the financial crisis, according to Bloomberg. 
  • It's taken away a big chunk of revenue for banks. 
  • Americans have grown wary of the loans after 2008. Today, there are easier ways to access credit that consumers often prefer. 
  • Read more on Business Insider.

The housing market recovery over the last decade hasn't been matched by homeowners taking out home equity lines of credit, or Helocs, which are loans that use property as collateral. 

The change is hurting banks, which once counted on homeowners taking the loans as a solid source of revenue, Bloomberg reported Monday. At Bank of America, Helocs produced $552 million of interest income in the third quarter, down almost 70% from a decade ago, the report said. 

A main reason is that American homeowners have grown wary of the products following the financial crisis. 

The years leading up to the crisis saw doubled volumes of Helocs, according to the Federal Reserve Bank of New York. Because property prices were so high at the same time, homeowners could borrow significantly against their homes to boost consumer spending — some used loans for renovations, college payments, and more, according to the report. 

But, when the housing bubble burst, that left those who had taken out the so-called "piggy bank" mortgages unable to repay debts when the prices of the houses they'd borrowed against fell. 

Read more: UBS studied 50 years of history to pinpoint the single biggest risk to stocks — and its conclusion spells imminent trouble for the market

Now, many homeowners are foregoing the products. In the last decade, the number of Helocs has fallen by almost half, according to data from the New York Fed. That means in 2016, only 4% of households in the US had an open home equity line, down from 10% during the 2000s. 

In addition, low mortgage rates today and easy access to different types of personal loans have made Helocs less appealing. Currently, the typical interest rate on a 30-year mortgage is lower than the rate on a Heloc, which means that borrowers are more likely to go for a cash-out refinancing, Bloomberg reported, citing Rutger van Faassen, a vice president of consumer lending at Informa. 

Often borrowers would also rather apply for personal loans, many of which can be done online and approved quickly, than fill out paperwork and wait 45 days for a Heloc, the report said. Consumers can be more comfortable with personal loans too because if they default, they don't risk losing their homes like they would with a Heloc, according to Bankrate.

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Financial Services: 6 Key Attributes to Attract Gen Z

Mon, 10/28/2019 - 12:00am

Now the largest generation worldwide, Gen Z accounts for nearly 68 million people in the US alone. As Gen Zers age, financial services providers will be increasingly pressed to shift focus to the burgeoning demographic.

As digital natives, Gen Zers are more receptive to influence from friends and family than traditional advertising. For marketers, strategists, and developers, understanding Gen Z's unique needs — and creating and marketing products accordingly — will be critical to reaping their value.

In Financial Services: 6 Key Attributes to Attract Gen Z, Business Insider Intelligence provides a six-point framework that highlights core traits of the demographic, which banks and payments firms can use to attract, engage, and retain Gen Zers.

This exclusive report can be yours for FREE today.

As an added bonus, you'll receive a free preview of our Banking Pro Briefing.

Join the conversation about this story »

The Future of Payments

Sun, 10/27/2019 - 8:02pm

The payments industry is transforming.

Noncash payments methods are quickly becoming the norm.

Business Insider Intelligence projects digital payments to continue to grow through 2023 and beyond.

This shift has created a battle between incumbents and startups vying to become the leaders of the future of payments.

While incumbents have massive scale to lean on, startups typically offer a much friendlier user experience. Whoever can master both first will win the battle.

That will require navigating four key digital transformations: diversification, consolidation and collaboration, data protection and automation.

In this FREE section of The Future of Payments slide deck from Business Insider Intelligence, we look at the first key digital transformation: diversification.

Subscribe to Business Insider Intelligence today for full access to the complete deck.

As an added bonus to this FREE section, you will gain immediate access to our exclusive BI Intelligence Daily newsletter.

To get your copy of this free slide deck, click here.

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Mastercard wants to be more than just a card company. It's turning to a blockchain for seafood and analytics for the healthcare industry.

Sun, 10/27/2019 - 3:30pm

  • Mastercard is making moves outside of cards with pushes into services for food and healthcare.
  • "We're adding different use cases that aren't payment related, we're leveraging the infrastructure we have, and we're getting into new industries," Jess Turner, the executive vice president of product and innovation at Mastercard, told Business Insider.
  • Mastercard's blockchain solution Provenance will give shoppers visibility into the supply chain of seafood.
  • Mastercard's Healthcare Solutions will target fraud and data security in the healthcare space.
  • Click here for more BI Prime stories.

Mastercard has been on a bit of a rebranding mission, hoping that by dropping the "Mastercard" from its logo, it will be known for more than just credit cards. Today, at the Money 20/20 conference in Las Vegas, Mastercard announced some new places outside of its core credit card business where it's hoping to gain traction.

Through acquisitions, partnerships, and redeployment of existing technologies, Mastercard is entering new ecosystems where they aren't necessarily competitors.

"We're adding different use cases that aren't payment related, we're leveraging the infrastructure we have, and we're getting into new industries," Jess Turner, the executive vice president of product and innovation at Mastercard, told Business Insider.

At an investment community meeting in September, Mastercard's CEO Ajay Banga had emphasized the ways the credit card network is looking to do more, saying: "I think we were basically a credit and debit card processing player. That has changed completely. And I think we're on a journey that's got another long run rate to go with."

Blockchain shrimp makes its debut

Provenance, Mastercard's blockchain solution, brings transparency into the food supply chain. Partnering with Envisible, a company that enables visibility in food systems, Mastercard will power a blockchain called Wholechain, which will provide supermarkets with the ability to trace the origin of the seafood they stock.

Business Insider got a sneak peak at Provenance in September, at a technology showcase during its Investor Day. At the showcase, the proof of concept was a bowl of cocktail shrimp. By scanning a QR code attached to a toothpick, we saw where and when the shrimp was caught, and where it went before arriving at the New York Stock Exchange that Thursday.

Read more: We went to Mastercard's tech showcase, which featured biometric sensors and shrimp-tracking blockchain. It's part of a push to embrace a future without cards.

In early 2020, Provenance will enable shoppers at pilot grocer Food City to scan seafood packages to see the journey of a fish, from the time it was caught to when it arrived at the store.

"It will allow the store to show consumers where that seafood actually originated from," Turner said. Provenance will give grocers and their shoppers insights like whether a product is organic, or if it was produced in an environmentally conscious way. The technology could also help pinpoint issues in the supply chain if there were to be a recall.

With the pilot roll out, Provenance will be used to track shrimp, salmon, and other seafood, though Mastercard says it could be applied to other products.

"You could do it for other food products, you could do it for high value items, you could do it for pharmaceuticals, the list goes on and on," Turner said.

Healthcare play

Mastercard is also looking to healthcare as an industry where it can apply its technologies with the launch of Mastercard Healthcare Solutions. With that, Mastercard is offering its existing machine learning, artificial intelligence, and biometric capabilities.

Using Mastercard's Test and Learn technology, healthcare systems can use a patient's payment history predict patient billing patterns and determine payment methods.

"It will allow the providers a better way to bill that user," said Turner.

AI comes in with fraud prevention, especially as pertains to claims management. "Partners can use this AI asset to asses new providers, reduce onboarding risk, or address omni-channel fraud," said Turner.

Mastercard is also offering biometric technology to protect patient information. Biometrics will be used to authenticate patients during new account enrollment, and secure mobile access to healthcare accounts.

"Health information is a big deal for companies everywhere, and using the assets that we have, we can help make sure that we're protecting that data," said Turner.

Join the conversation about this story »

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3 reasons to get life insurance before your first child is born

Sun, 10/27/2019 - 1:00pm

There's a lot to take care of in the lead-up to having a baby.

If you don't have a life insurance policy but plan to have a baby in the next year or so, it's a good time to consider getting one.

Here's why:

1. You'll likely get a better rate

The way life insurance works, the younger and healthier you are, the lower your rate, regardless of the amount of coverage you get. Generally speaking, most people's health declines with age. The longer you wait to buy a policy, the greater the eventual cost.

If you're already pregnant and you're the breadwinner of the family, it's still possible to buy life insurance, though you'll probably get the best rates if you undergo the medical exam before or after pregnancy, according to Policygenius insurance expert Logan Sachon.

Still, if you're already carrying a baby and the need for life insurance feels urgent, some insurance companies will allow you to retake your medical exam a year or two after giving birth and then adjust your rate accordingly.

Policygenius can help you compare policies to find the right coverage for you, at the right price »

2. One parent plans to stay home

If one parent is leaving a steady paycheck behind to stay at home with the baby, it's time to get life insurance.

Start by choosing a coverage amount equal to a year, two years, or more of the working partner's income so the stay-at-home parent won't have to rush back to work too soon if the breadwinner dies. The coverage amount doesn't have to be perfect — something is always better than nothing. If you have more kids or one parent decides to stay at home indefinitely, you can always increase the death benefit later.

3. You need a contingency plan

Most parents plan to leave at least a little bit of money to their children and/or spouse. But when you're young, building up a trust or even making a formal will usually aren't top priority amid bills and more immediate savings goals. Life insurance can act as a stand-in during the earlier years, or indefinitely if you have a permanent policy.

Whoever is named as the beneficiary on a policy will get the entire death benefit, income tax-free. But keep in mind that some states won't allow you to name a minor as a beneficiary on a life insurance policy. Even in places where it is allowed, experts often recommend naming a spouse or legal guardian instead, explains Sachon.

Policygenius can help you compare policies to find the right coverage for you, at the right price »

Join the conversation about this story »

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4 ways to use credit card rewards to save on last-minute Thanksgiving flights

Sun, 10/27/2019 - 12:27pm

  • Thanksgiving airfare — even prices in miles — can be off the charts, especially if you've waited till the eleventh hour to book.
  • You can search for a ticket on an airline's partner airline and often find it for fewer points or miles.
  • Booking airfare through a bank portal, such as Chase Ultimate Rewards Travel with the Chase Sapphire Reserve, is a good option if award availability is slim.
  • If you need flexibility, you can lock in an award ticket that's free to change or cancel. Southwest is especially generous in this regard.
  • Some airlines have same-day change options that you can gamble with, but remember that your ability to change your flight will depend on availability.
  • Read more personal finance coverage.

We've all been there. You have an event you know is coming up, and you had all the notice in the world to book cheap plane tickets months out. For some reason, though, you just haven't done it, and it's crept up on you to the point where prices are now through the roof.

That problem gets compounded when this event is Thanksgiving, one of the busiest travel days of the entire year and a time when airfare prices are no joke. If you're in my boat — booking tickets six weeks out or less — here are some rewards credit card strategies that can help ease the pain.

Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which will far outweigh the value of any points or miles. It's important to practice financial discipline when using credit cards by paying your balances in full each month, making payments on time, and only spending what you can afford to pay back. 

1. Leverage airline partnerships

With airlines moving to dynamic pricing — that is, award prices that fluctuate and tend to align more closely to a ticket's cash price — you're likely to find prices in miles that look pretty steep, particularly on Delta and United. And this is where airline partnerships come in. You can often find the exact same award ticket for fewer points on a partner airline, which is why the ability to transfer points — earned with credit cards including the Chase Sapphire Preferred Card and the American Express® Gold Card — to a range of different partners is so important.

If Delta is committing highway robbery with its SkyMiles prices, try looking for award space on Virgin Atlantic. If you're striking out on United, see if you can find your flights on Avianca. British Airways, with its distance-based award chart, often fields better award-ticket prices for Alaska and American flights than those airlines do for their own flights (although note that you'll have to call British Airways to book Alaska flights).

2. Look to credit card travel portals

Of course, the easiest thing to do when award space is pricey — or scant — is use your points to book a cash ticket for free. Holders of the Chase Sapphire Reserve, for example, can book any flight they want through the Chase Ultimate Rewards travel portal at a rate of 1.5 cents per point — compared to just 1 cent per point if you don't have a premium Chase card. It's a great strategy for when award prices are off the charts or you just can't find award availability on your route.

While it won't yield quite the same value, using the Purchase Eraser feature from the Capital One® Venture® Rewards Credit Card is another way to achieve the same result — you can redeem miles to cover travel purchases on your card statement.

On the flip side, if you have the Business Platinum® Card from American Express, you can get even better value, though it's a little more complicated. Cardholders will get a 35% rebate in points for business and first-class tickets booked through Amex, or for economy tickets booked through Amex on a single airline they've preselected for the year—the same airline for which they receive the airline fee credits that come as a perk of the card.

One bonus of booking through a portal or using your purchase eraser? Since these are revenue tickets, you'll still earn redeemable airline miles when you fly, so you can work toward your next trip booked on miles. You'll also earn qualifying miles and dollars toward airline elite status.

3. Book something flexible

If you're dragging your feet because you don't quite know what your plans are yet, I have two words for you: Southwest Airlines. Instead of watching award and cash prices tick higher with every passing day, snag an award ticket on Southwest — you can always change or cancel it later with no penalty.

No Southwest Rapid Rewards points? No problem. Southwest is a transfer partner of Chase Ultimate Rewards, and you can earn its points through cards including the Chase Sapphire Preferred.

Now, I know what some of you are thinking: Better to save those Ultimate Rewards points for international business class so you can really maximize their value. And it's true that you're definitely not going to be winning any "best redemption" awards by transferring to Southwest. But at the end of the day, if what you need is to lock in a flexible ticket without spending cash, this could be the way to go.

(Do take note that if you do transfer from Chase, while Southwest may let you cancel your award ticket and get your points back, you won't be able to transfer them back to Chase. But with Southwest's new-ish flights to Hawaii, you could argue that sitting on a stash of Rapid Rewards points isn't the worst thing in the world!)

Southwest, of course, isn't the only airline that'll let you change or cancel an award ticket, but with other airlines, you're likely to see some kind of change or redeposit fee associated with the move. Something to investigate before you book!

4. Take a gamble

It's no secret that you can often find the lowest-priced flights, both in miles and money, at undesirable times. If you're willing to accept the fact that you might end up stuck with it, you can always go for one of the low-priced tickets and try your luck at a same-day flight change.

Airlines differ on what type of changes they allow — and whether or not they'll charge you, which often depends on your elite status or lack thereof — so make sure to read up on your airline's policies if you think you might go for it. Also, remember that your ability to move to a different flight depends on availability, which is generally pretty scarce on, say, the Sunday after Thanksgiving. But you never know!

(In case you're doubting that this is actually possible: I've had a friendly gate agent, apparently in the giving mood, make this type of switch for me free of charge on the Sunday after Thanksgiving — and he even let me change the city I was flying into from Baltimore to Washington, D.C. Proof that anything can happen!)

Join the conversation about this story »

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Bitcoin 101: Your essential guide to cryptocurrency

Sun, 10/27/2019 - 12:00pm

Bitcoin is everywhere.

The cryptocurrency is seemingly in the news every day as investors and businesses try to understand the future of this digital finance.

But what is Bitcoin all about?

Why is it suddenly on every financial news program?

And what does it mean to you?

Find out the answers to these questions and more in Bitcoin 101, a brand new FREE report from Business Insider Intelligence.

To get your copy of the FREE slide deck, simply click here.

Join the conversation about this story »

I've lived in Seattle for a year and a half, and here are the 9 best cheap or free things to do when you visit

Sun, 10/27/2019 - 11:05am

  • I've lived in Seattle for a year and a half, and while it's anything but affordable, there's still lots to do here on a traveler's budget
  • From sampling fresh local seafood during happy hour at a sushi kitchen, to taking a bus to a nearby trailhead during the summer for less than $3, there's lots to do on the cheap if you know where to look. 
  • Here are my favorite local spots I'd recommend to any traveler on a budget. 
  • Read more personal finance coverage. 

Anyone who's lived in Seattle for any length of time knows that it's not a cheap city to live in. But, if you're just here to check it out for the weekend, you certainly won't have to break the bank to see what it's all about.

I've lived here for about a year and a half, and during that time, I've done all the touristy things, either by accident or with friends who come to visit. But, I have to say that my favorite ways to see this city aren't on the tour guides' lists, and they won't cost you much, either. 

From taking advantage of happy hours to visiting a high-up coffee shop with a view, there's so much to do without having to pay for an expensive tour. From Fremont and Ballard to Belltown and International District, this city has no shortage of vibrancy. But for the full experience, you'll also want to get out of the city, and there are plenty of affordable ways to do so. 

Here's how I'd recommend spending a weekend in Seattle on the cheap. 

Start a day off wandering through Pike Place Market, and get some affordable eats

Opened in 1907 as a produce market, Pike Place has since expanded to include lots of local fish, crafts, baked goods, and so much more. 

 Grab yourself a few snacks in the market. You can find lots of things from donuts and coffee to gyros, dumplings and more. Skip the expensive waterfront restaurants and pick up snacks from some of the local vendors as you walk. Pike Place Bakery has some great donuts for a morning treat. 

If you're lucky enough to go on a weekday morning, you'll see fewer crowds and have an all-around better experience.



And, stop by the gum wall while you're there

A Seattle institution since the 1990s, the gum wall started as something of an accident, but the trend of sticking gum to the walls took off and hasn't stopped since.

The gum wall can be hard to find, but look look for a brick ramp down where Pike Street crosses First Avenue near the market entrance.

Follow that down, and you'll see the gum wall (or more accurately, gum walls) in all their glory. Take a picture, and maybe add your own piece to the wall. 



If you're still around the market during lunch, drop into Japonessa for great sushi and a good deal

At sushi kitchen Japonessa, happy hour is a great time to get some very affordable rolls, which I'd say are some of my favorites in Seattle. Their happy hour is rather generous, and runs from opening until early evening — go later in the evening and you'll pay quite a bit more. It's a great way to get a taste of some of the city's fresh seafood without paying for one of the more touristy waterfront restaurants. 

During happy hour, most rolls are under $10. Go anytime before 6:30 p.m. for the deal, or before 8 p.m. at the bar. 



Then, get out of downtown on the light rail to visit Gas Works Park

Up north, across Lake Union, life slows down a little bit. Take a break from the hustle-and-bustle of the city's booming tech and finance scene and head for Gas Works Park, a local favorite for picnicking, dog walking, and a great view. 

Take the light rail for $2.50 at the kiosk in the station, and catch the train from downtown north towards University of Washington for a 15-minute ride.

From there, you can snag one of Seattle's many Jump rental bikes, which you can unlock through the Uber app for $0.15 per minute. Ride to Gas Works Park on the Burke-Gilman bike trail and walking path. You'll end up right near this park after a one-mile ride or walk. 



Walk along South Lake Union and check out the city's many floating home and boat communities

While you're up here, it's worth taking a minute to admire some of Seattle's most unique homes in the marinas.

Here, floating homes can be more expensive than homes on land, and there's no shortage of houseboats, yachts, and other boats that people use as their primary residence. They're neat to see, and are often visible from the trail which follows the water.

Keep heading towards Fremont on the Burke-Gilman trail. From Fremont, it will take about 15 to 20 minutes to get to the city center and will cost $2.75 (you'll need cash if you didn't get an ORCA reloadable card).  



Head towards the city center to get close to the Space Needle — but don't go up

The Space Needle is pretty iconic, but going up it can be expensive, with ticket prices over $30 per person. 

Don't get me wrong — the Space Needle is pretty neat. If you decide to splurge and go up it, check out the recently installed glass floors and look down on everything below. 

But, seeing the Space Needle up close from the ground can be just as good. Wander the streets of Belltown to get a feel for a day in the Seattle life, and look for the views of the Space Needle as you walk along 4th or 5th Avenue.

Hopefully, you already got a view of the skyline from Gas Works Park. But, if you're still wanting a view from the top, go somewhere where you can get a just-as-good view for much less ...

 

 



For a cheaper view of the city from above, head back downtown to Columbia Tower and visit the Starbucks on the 40th floor

This Starbucks in the sky has some pretty good views of the city. Located on the 40th floor of Columbia Tower, there's plenty to see from here. A coffee with a view sounds much better than a $30 view with crowds, doesn't it?

I'd suggest visiting around noon or in the early afternoon for the best views, as the clouds tend to linger here. On a clear day, you might catch a glimpse of one of the mountain ranges that border the city.



End your night underground, but don't do it with an expensive tour

Seattle's city streets used to sit quite a bit below where they do now. And some of those original streets, rooms, and alleyways still exist under the new infrastructure. 

Most people take one of the city's underground tours to see them. But, with tickets generally over $20 per person, there are far more affordable ways to see what's going on beneath the streets.

There are a few local watering holes and nightlife venues near Occidental Square that are mainstays on many of the underground tour routes. If you want to see what an underground space looks like and see how they're used today, visit one on your own.

The Comedy Underground is one of them, with comedy shows in an original underground structure. Purchase tickets in advance online for a $10 show, and skip the tour groups. 

 



Go for a hike to appreciate how beautiful the Pacific Northwest is — that's really what Seattle's all about

Judging by the intensely thick weekend traffic on I-5 almost every Friday evening and Sunday afternoon, I've come to find that most Seattle-ites feel the same: The best part of Seattle is being outside of it. If you can get out of the city, it's a great way to spend a day on the cheap and see all that this stunning and unique region has to offer. 

In the summer, King County Metro runs a trailhead program, which will take you directly to some of the most popular local trails for $2.75, including Mt. Si, Issaquah Alps, and Cougar Mountain. Or, take an Amtrak rain for about $25 each way out to Leavenworth in the Cascades.

If you have some more room in your budget, you can also rent a car (pack your camping gear!) and visit one of the many parks near the city, including Olympic National Park, Mount Rainier National Park, and many national forests. 

The best part of life in the Pacific Northwest is the nature here. And that's not something the downtown does justice.



‘Joker’ beats ‘Maleficent’ sequel in dead heat weekend box office match-up

Sun, 10/27/2019 - 10:46am

  • In a photo finish for the top domestic weekend box office spot, "Joker" edged out "Maleficent: Mistress of Evil" with an estimated $18.9 million.
  • "Joker" is now the highest-grossing R-rated movie ever at the worldwide box office with a total of $849 million.
  • Visit Business Insider's homepage for more stories.

It's not often that Disney has to battle for a box office win, but that's exactly what happened this weekend when its "Maleficent: Mistress of Evil" went up against Warner Bros.' sensation, "Joker."

When the dust settled "Joker" won the domestic box office with an estimated $18.9 million. "Mistress of Evil" came in second with $18.5 million. Because there are only estimates, the official winner of the weekend will be known on Monday when the exact figures are posted by the studios.

The "Maleficent" sequel came into the weekend as the reigning box office champ, winning last weekend with a $36.9 million take in its opening. However, that was below industry expectations, which made it vulnerable to be topped this weekend, a quiet one with no major release opening as it's just before Halloween.

The weekend before Halloween is always a dull one when it comes to movie releases. The conventional wisdom is that many are out and about, leaving the holdovers to rule the multiplexes.

But with "Mistress of Evil" not performing the way Disney expected it has opened the door for another title to take the crown, and Warner Bros.' "Joker" was happy to take on the challenge.

The origin story of the DC villain continues to amaze in its fourth week in theaters. With its $849 million global cume to date, the movie has passed "Deadpool" ($782 million) and its sequel ($785 million combining the R-rated and PG-13 rated releases) to become the highest-grossing R-rated movie ever at the worldwide box office. Its $277.6 million domestic gross puts it seventh all-time at the domestic box office (passing "The Hangover," which is the previous hit by "Joker" director Todd Phillips).

With its win over a Disney title to recapture the domestic box office crown this weekend (for now), it's is just the latest amazing achievement for "Joker," one of the most unlikely success stories of 2019.

 

SEE ALSO: Why Netflix's "Dolemite Is My Name" is dedicated to Eddie Murphy's brother, Charlie

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Tech giants, Warren Buffett's empire, and the 'Generals': Here's what to look for when these 6 companies report earnings this week (AAPL, FB, BRK.B, GE, GM, GOOG)

Sun, 10/27/2019 - 10:30am

Third-quarter earnings season is well underway, and some of the world's largest companies are slated to announce their quarterly figures this week.

Apple recently reclaimed the throne as the world's largest company, and its latest report could send shares even higher than their current record prices. General Motors and General Electric will likely use their reports and analyst calls to calm worries related to a worker strike and transition plans, respectively.

Facebook and Google-parent Alphabet will want to post continued strength in ad revenue, as well as a defense to claims that big tech companies are an anti-trust liability. Warren Buffett's Berkshire Hathaway may finally announce its next big purchase, as the holding company sits on a massive cash pile.

The latest reports will arrive as the US-China trade war nears a partial truce and certain recession warnings retreat from their summer highs.

Here are the figures, themes, and issues to look for when these six companies report earnings this week.

Alphabet (GOOG) — October 28

Google-parent Alphabet makes the majority of its revenue through advertising. Investors will want to see a continued uptrend in both paid clicks and cost-per-click, as strong figures in both categories would signal the key business is still expanding.

The company has also been investing in its Google Cloud service to compete with Amazon and Microsoft. Any significant growth in that business would likely excite analysts, as cloud computing revenues boosted other tech giants in recent months.

Updates on the company's Waymo self-driving vehicle project may also be in the cards in Alphabet's analyst call. The project entered Los Angeles for further testing earlier in October after operating in Phoenix, and successful trial runs could signal an entirely new revenue stream for Alphabet down the road.

Here are Wall Street's quarterly estimates heading into the week:

  • Revenue: estimated $32.73 billion, versus $27.16 billion in the year-ago period
  • Adjusted earnings per share: estimated $14.30, versus $13.03 in the year-ago period



General Motors (GM) — October 29

General Motors' third quarter was dominated by a month-long strike involving about 48,000 workers. Some analysts viewed the event as a way for the automaker to clear away stockpiled inventory, but as the demonstration lasted longer than first expected, some found it could cost GM more than $1 billion.

The earnings report and subsequent analyst call is sure to address the new deals inked between United Auto Workers and GM, as well as how the strike affected third-quarter revenue. Investors will want reassurance that the company won't be threatened by another demonstration, and that it can ramp up production fast enough to gain back the efficiency lost through late September and early October.

Here are Wall Street's quarterly estimates heading into the week:

  • Revenue: estimated $35.73 billion, versus $35.79 billion in the year-ago period
  • Adjusted earnings per share: estimated $1.29, versus $1.87 in the year-ago period



Apple (AAPL) — October 30

Apple took back the crown as the world's most valuable company earlier in October, and with shares hitting record highs in recent days, the tech giant's next earnings report can either sour investors' rosy sentiment or send its valuation even higher.

Analysts are likely to focus on iPhone 11 sales, as many reports indicate demand for the phone at higher levels than first expected. The report also arrives just days before the release of Apple TV+, so any guidance on how quickly it will grow subscribers or how much the company is budgeting for original content could grab headlines.

Finally, the report should detail whether Apple's bet on its Services business continues to thrive or is beginning to fizzle out. The company is relying more on its service offerings to drive revenue as the iPhone upgrade cycle lengthens, so any drop in growth could spell disaster for the record share price.

Here are Wall Street's quarterly estimates heading into the week:

  • Revenue: estimated $53.36 billion, versus $53.27 billion in the year-ago period
  • Adjusted earnings per share: estimated $2.10, versus $2.30 in the year-ago period



Berkshire Hathaway (BRK.B) — November 1

Warren Buffett's holding company has been blighted in recent months by Kraft Heinz's lagging performance and the loss of one of Buffett's top proteges. Analysts will look forward to any news on a potential increase to Berkshire's stake in Bank of America, as well as any updates on how Buffett wants to spend Berkshire's massive cash pile.

Berkshire is also relatively unique in that its operating earnings figure is far more relevant than earnings per share. Since the company has to calculate gains and losses from its hefty stock positions into its earnings figure, per-share earnings can drop significantly even when Berkshire isn't necessarily losing money.

Investors will want to see that Berkshire's operating profit remains strong and that income produced by its various businesses isn't slowing in the wake of recession warnings and trade war escalations.

Here are Wall Street's quarterly estimates heading into the week:

  • Revenue: estimated $66.47 billion, versus $63.45 billion in the year-ago period
  • FILL IN OPERATING PROFIT/MARGINS



Facebook (FB) — October 30

Hot off Mark Zuckerberg's congressional testimony related to the company's Libra currency, Facebook will want to appeal to investors with steady growth in ad revenue, strong user retention, and success in spinoff products like its new dating service.

The company is also still haunted by past and potential lawsuits related to user privacy and anti-trust issues. Though the report may not offer any new details as to how Facebook plans to combat these cases, analysts are sure to ask about them in the earnings call.

The Libra project has also lost several key collaborators in the last few weeks, so any mention of a project delay, overhaul, or even complete scrapping would likely harm the company's share price. Facebook may even unveil details on how it'll work with the US government to release the crypto-coin, which may soothe regulation-based fears.

Here are Wall Street's quarterly estimates heading into the week:

  • Revenue: estimated $17.34 billion, versus $13.72 billion in the year-ago period
  • Adjusted earnings per share: estimated $2.25, versus $2.07 in the year-ago period



General Electric (GE) — October 30

Once a behemoth of US industry, GE is in the midst of a massive overhaul as it seeks to cut costs and focus its investments on a few key businesses. Investors aren't yet sure the strategy will work, as GE stock is still down significantly from its early-2000 highs. Most will be interested in hearing things are going as planned, and that the shifted priorities aren't harming quarterly profits.

The company is also still reeling from an August report that alleged GE is committing Enron-like fraud. Any update on the matter, as well as detailed rebuttals to some of the claims, could reassure analysts the company is in fine shape.

Finally, GE's previous guidance set its cash flow as arriving between negative $1 billion and positive $1 billion in the third quarter. Though the company's market cap of $78 billion dwarfs the projection, the result will be watched closely.

Here are Wall Street's quarterly estimates heading into the week:

  • Revenue: estimated $26.52 billion, versus $29.57 billion in the year-ago period
  • Adjusted earnings per share: estimated 12 cents, versus 14 cents in the year-ago period



I'm a financial adviser with $2.5 million of life insurance, and every cent of it is the same kind for a reason

Sun, 10/27/2019 - 10:30am

As a former financial planner, I both recommended and sold life insurance to many of my clients. But I'm also a consumer, and need life insurance as well. Naturally, I'm a big advocate of having the right amount of life insurance coverage. I personally have $2.5 million in life insurance. 

That may seem like a lot, but I have a wife, four children, and I own several businesses. It's a matter of matching coverage with the ongoing care of my family, and the payoff of any liabilities, upon my death.

Now I must make clear upfront that I have a bias — my entire $2.5 million in life insurance is made up of term policies. Because of the amount of coverage I need, as well as what it would cost for an equivalent amount of whole life insurance, term life is the right choice for me. And it is for most other people as well.

But so many insurance agents are big advocates of whole life insurance that I had to at least find out exactly how much it costs.  

Here's what I found out and the reasons why I think term life insurance is likely to be the best choice for you over whole life insurance:

Term life insurance costs significantly less each month

For most people — and financial advisers — this is the most compelling reason to choose term life over whole life. You probably already know that, but you may not know the magnitude of the cost difference.

Here are some examples of annual premium differences for a $250,000 policy:

  • 30-year-old male: term life, $225; whole life, $2,395
  • 30-year-old female: term life, $190; whole life, $2,138
  • 35-year-old male: term life, $253; whole life, $2,843
  • 35-year-old female: term life, $223; whole life, $2,540
  • 40-year-old male: term life, $343; whole life, $3,440
  • 40-year-old female: term life, $288; whole life, $3,105

As you can see from the premiums listed above, whole life costs at least 10 times as much as an equivalent amount of term life on average. It should also show you why 100% of my own $2.5 million in life insurance is term life. I didn't want to dedicate ten times as much money to life insurance by buying whole life. 

Even though you might prefer the security of permanent life insurance coverage that whole life offers, as well as the accumulation of cash value, the wide difference in premium rates forces most people to lean heavily in favor of term life insurance. If you're on a budget, and most people are, it's not even a difficult decision.

If you need a large death benefit, term is much cheaper

If you're a 35-year-old male, you might have been able to afford $2,843 per year to pay the premium on a $250,000 whole life insurance policy. But the major question became will $250,000 be sufficient coverage?

If I were single and had few obligations, or my wife were fully capable of surviving on her own financial resources, it might have been plenty. In fact, it may even have been more than enough.

But being married, with children, a big mortgage, and several businesses, it wouldn't come close to meeting my needs.

I may need to $250,000 just to pay off the mortgage. Another $50,000 might need to be available to cover final expenses, including uncovered medical expenses.

But then there's the issue of providing for my family. If my children were, say, 16, 14, 12, and 10 years old, I would need to provide for them for at least the next 10 years. That requires a much higher level of coverage.

For me, or anyone else in my situation, it's easy to see how $250,000 in life insurance is completely inadequate. At a minimum, I needed at least $2.5 million in coverage. I can get that much coverage with a term policy for about the same cost as a $250,000 whole life policy.

But to afford a whole life policy for $2.5 million wasn't doable. The annual premium would approach $25,000.  

By contrast, I was able to get a $2.5 million term life policy for well under $2,500 per year. 

This is exactly why term life is so popular among people with substantial financial obligations. Whole life is too expensive to make those provisions, while term life provides the perfect balance between need and cost.

If you have a health condition(s), it's often easier to get term life

I didn't have any health conditions that would affect my life insurance premium. And though this isn't a major consideration for most consumers, it's a possible issue for insurance companies. When an applicant has one or more significant health conditions, it's often easier to get term life than whole life.

The reason has to do with the length of the policy. Since a whole life policy is permanent coverage, the insurance company is guaranteed to pay a claim. Now that's true on virtually all whole life insurance policies. But when an insurance company provides a whole life policy, they generally expect it to be in force for decades. When it is, the policy will be profitable even with the payment of the death benefit.

However, if a 40-year old takes a whole life policy and dies 15 years later, the company may take a loss. Of course, this type of situation is not uncommon. But life insurance companies naturally want to minimize this outcome by approving applicants with better health. They may reject this application determining it to be too risky.

But the same company may approve the applicant with a 10-year term life policy. Though the applicant's health condition may give a strong indication he won't have a normal life expectancy, he may be judged an acceptable risk for a limited term policy.

Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »

Even still, there may be times when whole life is the better choice

So far, I've been singing the praises of term life insurance. And that's definitely the better choice for most people. But are there times when whole life is the better choice? Absolutely!

In fact, there are actually several situations when this may be true:

If you're buying life insurance very early in life

A 25-year-old female can purchase a $250,000 term life insurance policy for about $178 per year. She can also purchase a whole life policy in the same amount  with a premium of $1,795. On the surface, the cost differential may not seem like a smart choice. But the applicant will be locking in her premium for the rest of her life.

That may not seem like a big advantage when she's 30 or 40 years old. But it will look like a much smarter decision when she's 50 or 60 years old, and the cost of renewing a term insurance policy reaches or exceeds her locked-in premium for a whole life policy.

When you have a family history of serious illness

Though you may be perfectly healthy now, your family's health history may indicate an uncertain future. A whole life insurance policy taken now will guarantee you won't need to worry about the condition of your health in the future. You'll be locking in coverage, come what may.

The insurance company will take your family's health history into account with either policy type. The premium may be slightly higher if there's a negative history, but not nearly as high as it will be if you were to actually experience a serious illness. 

You don't save and invest money

Let's get one point out of the way quickly — life insurance is not a very good investment. It's often said, buy term and invest the difference, and that's absolutely correct. You'll be better served buying a term life policy, and investing the money you save from a whole life policy in an index-based exchange traded fund. The long-term performance will be far superior to what you'll earn on the cash value in a whole life policy.

As someone committed to building long-term wealth, saving and investing money is what I do with very little trouble. An investment-type life insurance policy, like whole life, wasn't a good choice for me. 

But what if — for whatever reason — you don't save money? And if you don't save, it follows that you won't invest either.

In that case, a whole life policy can act as a forced savings plan. You'll be making your policy premium payments on a regular basis, and gradually building up cash value as the years pass.

At any point you'll be able to take a loan against the cash value and use the proceeds for whatever your need happens to be. Alternatively, at some point in the distant future you can liquidate the policy and collect your cash value.

That won't be as effective as saving and investing money in more traditional ways, but it will allow you to build an investment with no additional effort on your part.

Term life is usually the better choice — but not always

It's clear that term life was the right choice for me, and it will be the preferred choice for most people. Cost alone will make that point obvious, especially if you need a large amount of coverage.

But there are some people in certain situations where whole life should be considered. If one of them applies to you, you'll need to ignore the conventional wisdom, and take a close look at your options with a whole life policy.

No matter which policy that you go with — term life or whole life — be sure to shop around. If you take a policy from the first company you apply with, you'll almost certainly pay too much. The better strategy is always to solicit policy quotes from multiple insurance companies. That will give you an opportunity to compare policies side-by-side, and see which will provide the most coverage for the lowest premium.

Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »

Jeff Rose is an entrepreneur disguised as a financial adviser, author, and blogger. Jeff is an Iraqi combat veteran having served in the Army National Guard for nine years, including a 17-month deployment to Iraq in 2005. He's best known for his award-winning blog GoodFinancialCents.com and book, "Soldier of Finance: Take Charge of Your Money and Invest in Your Future." He's also the founder of Wealth Hacker Labs, a movement to teach accelerated wealth-building strategies to future generations.  

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The Mercedes-Benz Sprinter has a reputation for being a great van — and I finally got to drive one

Sun, 10/27/2019 - 10:13am

I can credibly say I've driven just about everything.

But a hole in my experience — a big one — was the Mercedes-Benz Sprinter, one of the world's most popular commercial vehicles. In 2018, Mercedes sold nearly 30,000 of them in the US alone.

Mercedes filled the gap when the company recently asked me if I wanted to test not just any Sprinter, but a 16-passenger version.

I leapt at the opportunity, even though I wasn't sure what I'd do with all that seating capacity, given that I didn't want to go into the airport-shuttle business for a weekend.

Here's how it went down:

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The Mercedes-Benz Sprinter 2500 definitely filled the driveway of our suburban New Jersey test center. The base price is $48,790, but an array of options brought the sticker up to over $65,000.

In fact, I think it beat out the Ford Super Duty pickup for the title of Largest Vehicle We've Ever Tested at Business Insider.

The Sprinter is a massively popular van worldwide.

Yep, he's a big boy: 23 feet long, to be exact, with a 14-foot wheelbase.

The tall, narrow, narrow stance of the Sprinter makes the van relatively easy to maneuver and also allows for passengers of varying sizes to move around the interior. The engine is a pretty modest 2.0-liter turbocharged four-cylinder that runs on gas (not diesel) and has a nine-speed automatic transmission. It makes a decent 188 horsepower.

My tester was "Obsidian Black Metallic" with a "Leatherette Black" interior.

The side door slides open and closed automatically.

It a LARGE opening. Even tall humans would have no trouble.

The step extends and retracts to make climbing in and out simpler.

There's a lot of room in this thing, and the seats have multiple USB charge ports and retractable cupholders.

So I know what you're thinking: Where did I find 16 people to ride in the van? Well, serendipitously, I attended a relative's wedding over the weekend I had the Sprinter and got to play shuttle-bus driver.

So what's it like for the driver?

The front cabin is slightly barebones, but it's no less comfortable than a minivan I once owned.

In fact, driving the Mercedes Sprinter was almost exactly like driving a minivan — except that I had to be constantly aware of the vehicle's height and length.

The central touchscreen infotainment system offers all the usual stuff, from GPS navigation to SiriusXM radio to USB connectivity and Bluetooth device-pairing.

The Sprinter can haul people but also a lot of stuff in this cavernous cargo area.

A massive amount of luggage would fit in there.

So what did I think of the Mercedes Sprinter?

I've wanted to drive one forever, and I wasn't disappointed. This van deserves its reputation. 

What particularly struck me was how much pep the turbo-four generates, given that its 188 ponies has to haul over 9,000 pounds of van. Sure, the Sprinter didn't feel like a Mercedes AMG sport sedan. But it didn't feel underpowered, either.

I also enjoyed the driving experience. In no time at all, I was tooling around like somebody who spends his days making runs between the Hilton and the airport. I can see why pros like this machine.

Hey, I'm don't typically review vehicles like this, but if you're a fleet manager and you need a 16-passenger van, I certainly have a recommendation for you.



Credit card purchase protection isn't as glamorous as free travel or bonus points, but it can save you hundreds of dollars when things go wrong

Sun, 10/27/2019 - 9:18am

  • Many credit cards offer purchase protection for free as a cardholder perk. This coverage can reimburse you for all or part of the purchase price if an item is damaged or stolen within a specific length of time, usually up to 120 days.

  • As you compare rewards credit cards and their benefits, make sure you understand which cards offer a higher level of this type of coverage.
  • For example, while the no-annual-fee Chase Freedom offers purchase protection good for up to $500 per incident, the premium Platinum Card® from American Express offers $10,000 of the purchase price of an item.

  • Other cardholder perks to look out for include extended warranties and price protection. 

  • Read more personal finance coverage.

Rewards credit cards offer plenty of exciting perks, from airport lounge access to bonus points on your top spending categories to annual statement credits for travel. Some of these cards also offer benefits that, while not as glamorous, can help you save money or get a refund for certain products.

Purchase protection is one such credit card feature that protects consumers when they buy eligible products with their card. This coverage allows you to receive reimbursement if a product is stolen or damaged in most cases, although the amount of coverage can vary. Coverage can easily be worth up to $1,000 per item, although annual caps of up to $50,000 can also apply.

Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which will far outweigh the value of any points or miles. It's important to practice financial discipline when using credit cards by paying your balances in full each month, making payments on time, and only spending what you can afford to pay back. 

How credit card purchase protection works

Let's say that, for example, you buy a laptop computer for $900 and pay with a credit card that offers purchase protection. If your laptop is stolen from your car or damaged during your credit cards' purchase protection coverage window, you could be reimbursed — with the amount depending on the specific of your card's coverage.

Most credit cards that offer purchase protection offer coverage for 90 to 120 days after you make a purchase, and the coverage amount may vary depending on the state you live in. 

The best credit cards for purchase protection in 2019

As you explore credit cards that offer purchase protection, keep in mind that many offer other perks like cash back or travel rewards, travel credits, airport lounge access, and more.

Here are some of the absolute best credit cards for purchase protection available in 2019, 2020, and beyond:

 

How purchase protection works among payment networks

The credit cards above offer some of the most valuable purchase protection coverage available today, but keep in mind that different credit card networks set standards for their coverage that most of the credit cards adhere to. In other words, Visa sets rules for Visa credit cards that offer purchase protection, while Mastercard and American Express also set their own. 

The following chart outlines the rules most cards from each credit card network tend to follow:

Other cardholder protections to look out for

As you search for credit cards that offer purchase protection, don't forget about the similar benefits some credit cards offer. You may want to look for credit cards that also offer extended warranties or price protection, for example.

Extended warranties

With credit card extended warranties, you can qualify for an additional year or longer of warranty protection after the manufacturer warranty on eligible items runs out.

Let's say you purchase a refrigerator that comes with a two-year warranty, for example. If your refrigerator stopped working a month after the manufacturer's warranty ends, a credit card that offered an additional year of extended warranty coverage might pay for the required costs involved in repairing or replacing your refrigerator.

Some of the best credit cards that offer extended warranties include:

Price protection

Credit card price protection works differently, but it can be just as useful. With price protection, you can typically be reimbursed for the difference if you pay for an item and the price goes down within a specific length of time, usually up to 120 days. 

This type of coverage can be beneficial if you want to purchase a big ticket item but worry the price may go down in the future for any reason, including a pending sale. 

Some of the best credit cards that offer price protection coverage include:

The bottom line

Since credit cards offer lucrative rewards schemes that let you score cash back, free travel, and more, it can be easy to overlook all the other benefits they offer.

However, purchase protection and similar benefits can pay off in a big way over time if you wind up having to use them. And since they're offered free as a cardholder benefit, it can make sense to pick up a card that offers as many perks as you can get. 

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Alignment Healthcare is aiming for $1 billion in revenue. CEO John Kao told us how it's taking on the red-hot Medicare Advantage market.

Sun, 10/27/2019 - 8:32am

  • Alignment Healthcare provides health-insurance plans and services designed to help coordinate care, focused on Americans over age 65.
  • The company is backed by private-equity firms Warburg Pincus and General Atlantic.
  • Since its founding in 2013, the company's grown to 61,000 members, with plans to make $800 million in revenue in 2019. 
  • Here's how it plans to keep growing in the competitive Medicare Advantage market, where it faces rivals like Humana, CVS Health's Aetna, and UnitedHealth.
  • Visit BI Prime for more stories.

Health plan startups are vying for a foothold in the ultra-competitive market of selling insurance to seniors.

Competition for the 22 million Americans enrolled in Medicare Advantage plans, and the thousands signing up daily as they turn 65, is fierce.

Venture-backed startups Oscar Health, Devoted Health, Bright Health, and Clover Health have raised a combined $3 billion to use technology to build new kinds of health-insurance plans and go after Medicare Advantage members. Plus, insurers like UnitedHealth, Aetna and Humana are battling for members too.

Meanwhile, Alignment Healthcare, backed by the private-equity firms Warburg Pincus and General Atlantic, is massively expanding its operations for 2020. The company, founded in 2013, has roughly 61,000 Medicare Advantage members in California, North Carolina and Florida, and says it'll make about $800 million in revenue in 2019.

For 2020, Alignment is doubling the number of counties in which it'll operate, with plans to hit $1 billion in revenue. The company is counting on a partnership with the Sutter Health hospital system to fuel much of its growth.

Read more: America's largest health insurer is going toe-to-toe with a growing number of venture-backed companies with billions in their war chests. Here's how UnitedHealthcare plans to beat the disruptors.

How it got its start

John Kao founded Alignment in 2013, after a career in healthcare services. Kao says the company's approach to caring for seniors was inspired in part by a personal experience he had with caring for his mother.

In 2015, Kao got a call from his mom telling him to come over because she was having a heart attack. By the time he made the 15-minute drive, the paramedics were there to take her to the hospital. She spent six days in the hospital.

But the months that followed weren't as smooth.The hospital didn't communicate with his mother's other doctors, and instead, Kao had to act as his mother's caretaker, having conversations with her primary-care doctor and organizing visits from nurses while she was recovering.

It's what Kao is now trying to prevent from happening to other elderly people.

How it works

Alignment provides health-insurance plans and services designed to help coordinate healthcare for the Medicare Advantage market. When seniors in the US turn 65, they can choose to be part of either traditional Medicare or Medicare Advantage, which is operated through private insurers like Alignment and often provides additional healthcare benefits.

Alignment has raised a total of $240 million from investors. Most recently, in March 2017, it raised $115 million from the private-equity firm Warburg Pincus.

The company offers its own plans and works with other health insurers on their offerings. 

In North Carolina, Alignment is working with FirstCarolinaCare, a health insurer that's part of the FirstHealth of the Carolinas healthcare network, and Humana. In Florida, it's working with Florida Blue.

In these instances, the insurers are the ones running the plans and receiving payments from the federal government. Alignment gets paid a percentage of their revenue to provide services like making sure patients are getting the right health services and showing up for appointments. The company also runs its own health clinics..

In California, where Alignment operates its own health plans, the company's finances are easiest to track. The state accounts for the bulk of the company's member, about 48,000 people.

Alignment generated a net gain of $3.7 million on $336 million in revenue in the first half of 2019 in California. The company spent roughly 86% of the premiums it took in on medical care.

Similar financial figures aren't available for North Carolina or Florida, where Alignment works with other health insurers. The company declined to provide its full financials to Business Insider.

Partnering with health systems

In 2020, Alignment is expanding in California by launching a co-branded health plan with Sutter Health, a health system in the northern part of the state.

The partnership with Sutter, Kao said, will be a part of how Alignment scales its business. 

"I think a lot of the health systems out there over the last 5 years who have tried to get value based care realize it's not as easy as they thought," Kao said. "I expect our relationships, our partnerships, to continue as part of our growth strategy." 

It's a strategy venture-backed companies like Oscar Health and Bright Health are exploring as well. In July, Oscar said it's creating a co-branded Medicare Advantage plan with Bronx-based Montefiore Health System. Bright typically partners with one health system in each market to help set up its insurance plan. For instance, in New York, it's working with Mount Sinai Health System. Bright typically offers its plans to individuals, families, and seniors. 

For Sutter's part, the health system has been offering insurance plans since 2014. Sutter has set up its own commercial health plan and has a joint venture with health insurer Aetna.

When it came to Medicare, Phil Jackson, CEO of Sutter's health plan partnerships and products, said the health system decided to partner out.

Jackson told Business Insider the decision to work with Alignment in large part came from the company's focus in Medicare Advantage, its expertise in the California insurance market, and the approach it was taking to healthcare that went beyond what traditional insurers were doing — using analytics and perks like a card with money customers can spend on fod.

So far, Alignment has the biggest presence in Medicare Advantage of the newer startups that have attracted major funding. Bright has about 4,000 Medicare members, Clover had 40,989 and Devoted Health covered about 3,256 people. 

When it comes to competing with the bigger insurance incumbents who have been viewing the Medicare Advantage space as a key pat of their companies' growth, Kao said he sees the space as not the same as just adding another insurance product to a portfolio. 

"In my opinion it's an entirely different business," Kao said. 

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Elizabeth Warren has become a litmus test for who on Wall Street knows what America is and who does not

Sun, 10/27/2019 - 7:47am

  • Elizabeth Warren's presidential run has become polarizing on Wall Street. There are some people who like her policies, and some people who worry about what those policies will do to their jobs and their wealth.
  • There's also a third category of people on Wall Street who, like billionaire investor Leon Cooperman, think because Warren is bad for their jobs and their wealth she's also bad for America. In an interview with Politico he said Warren was "s------g on" the American Dream.
  • It's almost as if he thinks his wealth and American Dream are one in the same.
  • His view is as unfortunate as it is incorrect. What's more, it demonstrates a fundamental misunderstanding of American values and capitalism.

Wall Street is not a monolith. There are Republicans and Democrats, people from all religions and walks of life, gay people and straight people, all kinds of people.

And in the 2020 presidential election Elizabeth Warren has become a litmus test for who among them know what America is, and what it stands for, and who does not.

There has been a fair amount of reporting about where Wall Street stands on Warren since her political career was born out of her work for consumers during the financial crisis — work that ultimately created the now-gutted Consumer Financial Protection Bureau.

Plus, Warren's plans would alter Wall Street forever.

For one thing she would kill the private equity industry as we know it by forcing investors to take on more risk when they take over ailing companies. The idea is that if a private equity firm's efforts fail it shares in losses with the employees and other stakeholders (like pensioners) of the business they've taken over.

As the industry stands now that doesn't always happen, to put it mildly. For example, research from the California Polytechnic State University shows that 20% of  companies acquired by private equity through a leveraged buy-out (which adds more debt to a company's balance sheet) go bankrupt again within 10 years.

So while there are some on Wall Street who like Warren and know that some of their industry is toxic, there are also many who know she's bad for their business. Fair enough. This column isn't about either of those groups. This column is for the Leon Coopermans of the world.

The alpha and the omega advisors

Cooperman, a billionaire investor who settled insider trading charges with the Securities Exchange Commission in 2017, has been griping about Warren in a very particular way. Not only does he think Warren's Wall Street policies bad for him and his business, they are — he argues — anti- American. They are against our values.

"What is wrong with billionaires? You can become a billionaire by developing products and services that people will pay for," the head of Omega Advisors said in an interview with Politico. "I believe in a progressive income tax and the rich paying more. But this is the f-----g American dream she is s------g on."

Warren, we should note, has made a wealth tax that would place a 2% tax on the $50 million and 1st dollar of wealth an individual holds and beyond the centerpiece of her campaign. This is likely what was upsetting Cooperman, and it makes one wonder exactly what kind of progressive income tax he would be open to.

The "services" billionaire investors like Cooperman provide are also being reimagined in Warren's campaign, much to Cooperman's discomfort. However, last I checked the founding fathers did not put the right to do a leveraged buy-out in the Declaration of Independence, Bill of Rights, Federalist Papers, or even Articles of Confederation. Last I checked the 2% and 20% fee structure hedge funds charge their clients wasn't an integral part of the the American Dream either.

It seems Cooperman is conflating Warren's policies (which he is welcome to dislike) with an attack on the values we all share as Americans, because he seems to believe the values we all share as Americans are that the Leon Coopermans of the world should be allowed to get rich exactly the way want to get rich.

To Cooperman it is an affront to our core American values if we as a nation come to believe there is something wrong with how Wall Street is doing business and elect someone to reflect that idea. As if the 10 year yield, Goldman Sachs, and Bain Capital were all written on the Statue of Liberty along with "your tired, your poor, your huddled masses yearning to be free."

Warren responded directly to Cooperman on Twitter saying: "Leon, you were able to succeed because of the opportunities this country gave you. Now why don't you pitch in a bit more so everyone else has a chance at the American dream, too?"

That is to say that Warren, through her policies, is attempting to revitalize a real American value — every individual's right to an equal chance at life, liberty and the pursuit of happiness.

Research published by worker groups including the Private Equity Stakeholder Project and the Center for Popular Democracy argue that private equity firms were directly and indirectly responsible for the loss of 1.3 million jobs over the last decade. It hardly seems un-American to want to do something about that.

Job losses of that scale, after all, are why Donald Trump has a trade war on with China. They make you wonder if there's something wrong with American capitalism — if something has happened to make it more violent, and less able to produce the kinds of jobs that do, in fact, get you to the American Dream.

And that American Dream is not to help the Leon Coopermans of the world remain billionaires no matter what it costs anyone else.

Cooperman has argued that Warren's policies are bad for America's dynamism and growth  — that remains to be seen. What is certain is that they would be bad for the Leon Coopermans of Wall Street and their bonuses.

I am here to say that those two things are not one in the same. To believe that they are is to be confused about what America, fundamentally, is.

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BANK OF AMERICA: Here are 3 reasons US consumers are likely to spend less going forward, derailing one of the economy's few bright spots

Sun, 10/27/2019 - 7:05am

  • Consumer spending remains strong despite recession warnings and global economic slowdown, but Bank of America Merrill Lynch found a collection of negative signals that could drag on spending behavior.
  • Slowed spending can incite a recessionary cycle by hitting company profits and prompting job cuts.
  • The team highlighted non-mortgage debt, slowing job growth, and volatile consumer sentiment as the three critical threats to consumer spending.
  • Here's how these threats could drag on economic expansion, and what to look out for.
  • Visit the Business Insider homepage for more stories.

Data on consumer spending has shown consistent strength amid several recession warnings, but Bank of America Merrill Lynch analysts found three threats that could curb the economic driver.

Consumer spending makes up roughly 70% of US GDP, and a slowdown in the key metric could slowly drain capital from the country's money markets. As consumers spend less, companies earn less, and jobs are typically cut to bring costs lower. 

Warnings of global economic slowdown and continued pressure from the US-China trade war make consumer spending data even more relevant, as a hit to spending behavior could set the wheels of economic contraction in motion. Recent Federal Reserve rate cuts helped some secure a capital boost through debt refinancing, but consumers who don't own homes are expected to moderate their spending through 2019, BAML said Friday.

"The headwinds are stronger than the tailwinds, in our view," the team led by Michelle Meyer wrote. "The main challenge has been the weakening in the labor market coupled with heightened geopolitical risks."

Here are the three key threats to consumer spending detailed by BAML analysts.

Non-mortgage debt

The Fed's recent cuts allowed some Americans trim some of their biggest debts, but other sources of debt continue to pile up. The analysts "see little sign" of the lower rates hitting the everyday consumer, and warn that the amount of debt outstanding across the nation could begin to drag on spending habits.

The ratio of consumer debt service sans mortgages has slowly grown while mortgage debt has fallen with the lowered interest rates. Ignoring this steady rise leaves investors with only part of the country's debt story, BAML said.

"When only focusing on mortgage debt, we can make the case that there has been meaningful deleveraging in an environment of low rates," the analysts wrote. "This is not the same story for other consumer debt."



Volatile sentiment

Consumer sentiment can serve as a forward-looking indicator of spending shifts, and recent months have brought unusually volatile movements in sentiment as the stock market swung lower in the winter and summer.

Recession warnings often drive stock sell-offs, and in turn, sell-offs can lead investors to fear that the economy is contracting. A stronger correlation between market moves and sentiment could lend itself to exacerbated swings when either shows worse-than-expected figures.

"Sentiment tumbled on a month-over-month basis in both August and December along with the sell-off in the stock market. This shows a more worried consumer," they wrote.

 



Slowing job creation

Unemployed consumers historically spend less, and although the unemployment rate remains low, the labor market has added fewer and fewer jobs in recent months.

"In prior episodes of slowing job growth, there tended to be a similar slowdown in consumer spending," the analysts said.

The six-month moving average for jobs slipped to 154,000 from 234,000 in January, and future reports are projected to maintain the slowing trend. The next release will likely reflect an even more negative figure as the GM strike troubled the month. Continued slowdown, coupled with lagging wage growth, could leave consumers with a less rosy view of the economy, and shift behavior from spending to saving.

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

Amazon shares tanked on weak earnings, but Barclays says it's too early to buy the rare dip

The US and China are reportedly close to finalizing parts of a trade deal

Facebook is launching a dedicated news tab Friday and will pay some publishers $3 million a year to participate — here's everything we know



'Carnage awaits': A market expert who saw the dot-com crash coming explains why tech stocks are in the early stages of another collapse

Sun, 10/27/2019 - 5:05am

  • Stock prices have run well ahead of underlying corporate profits, exposing them to a sharp sell-off similar to the dot-com bust, according to Societe Generale's Albert Edwards. 
  • While it's not entirely unusual for investors to pay a premium for elusive growth, Edwards warns that high-flying tech stocks have created "illusory" expectations for the broader stock market.
  • He says the next recession will shake out tech and other sectors that have garnered unwarranted valuation premiums.
  • Click here for more BI Prime stories

Albert Edwards has seen this playbook before.

The global strategist at Societe Generale is drawing attention to the fact that stock prices are running far ahead of the actual profits that companies are delivering.

Such a mismatch is not entirely unusual. It is, after all, the premise of buying growth stocks — many of which are money-losing companies that invest in cash-burning endeavors today so they have the capacity to deliver profits in the future. 

However, Edwards is of the view that investors' expectations for such companies have spiraled out of control just like they did during the dot-com bubble.

The chart below, which he shared in a recent note to clients, illustrates the disconnect he sees between valuations and profits that reminds him of the 1990s. 

The tech industry has become the focal point when anyone talks about richly valued growth stocks, having delivered one of the strongest sector returns of this bull market. Its gains have come at the expense of other S&P 500 sectors and value stocks — those considered bargains because they trade at more reasonable prices relative to their fundamentals.

This outperformance of growth over value — and of tech over almost everything else — informs Edwards' thesis that a rollback is coming. 

The role of the next recession

At the height of the dot-com bubble, Edwards found that exuberance within the tech sector helped inflate long-term earnings expectations for the overall market. And he cautioned that an economic slowdown would be enough to prick the bubble. 

But he did not only warn about the tech industry. He also sensed danger for stocks that had premium, growth-like valuations even though they were highly cyclical in nature and vulnerable to an economic crunch.

The 2001 recession exposed and collapsed tech along with these non-growth stocks that had "illusory" earnings expectations attached to them.

Fast-forward to 2019, and Edwards sees the same scenario repeating itself soon.

He warns that the next economic recession will not only ravage tech stocks, but others that have been wrongly assigned growth-like valuations. 

His chart below shows that analysts are reining in long-term earnings forecasts at the same time as early recession signals are beginning to flash. 

Profit expectations are falling after two straight quarters of growth declines in the first and second quarters of 2019. Analysts expect the July-September quarter to be three-for-three

"The unfolding profits recession will expose the 'growth' impostors and they will collapse, as they are on the wrong 'growth' PE valuations with the wrong EPS projections," Edwards said. 

He continued: "Just like in 2001, investors will not wait to distinguish true 'growth' stocks from the impostors. Investors will slam the whole sector and work it out later." 

One auxiliary observation he makes on the severity of his forecast is that the share of public companies — numerically and by market cap — with fewer than 10 years of trading history has exploded since 1999. Numerically, it has grown from about 4% then to roughly 14% today. Since this record-long expansion is more than 10 years old, an "unusually high share" of the market has never experienced a recession.

He concluded, "US IT is now above 20% of the US market cap, the same as it was just six months before the tech bubble peaked in March 2000. Carnage awaits."

SEE ALSO: JPMorgan’s quant guru presents his 10 best trades to profit from the peak of a monumental earnings season

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