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Read the pitch deck that helped Divvy raise $30 million to provide alternate financing for prospective homebuyers

Sun, 07/05/2020 - 8:01pm

Buying a home, particularly for Millennials, is a complicated and expensive process – at times it can be complicated and expensive enough to discourage potential buyers from even trying.

Enter Divvy, one of the many Silicon Valley startups working to change the way people buy homes. The company is specifically interested in providing alternative financing options for prospective homebuyers who don't qualify for traditional mortgages.

Divvy accomplishes this by purchasing homes outright and allowing customers to pay the company back through monthly installments — 25% of the total goes toward building equity and 75% goes toward paying "rent."

And some top venture capitalists have bought into Divvy's mission as well. In October 2018, Divvy raised a $30 million series A round led by Andreessen Horowitz, with participation from Caffeinated Capital, DFJ, and Affirm CEO Max Levchin.

Divvy helped purchase homes for more than 100 buyers in its first year, but it has much higher hopes. The startup's official mission is to put 100,000 families into their first homes within five years.

To really understand Divvy's strategy, Business Insider Prime has published the investor deck the company used to acquire that $30 million in funding. Simply enter your email address to receive a FREE download of the full deck!

BI Prime is publishing dozens of stories like this each and every day, chock full of exclusive content and industry analysis. Get started by reading the full investor deck.

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The Future of Fintech: AI & Blockchain

Sun, 07/05/2020 - 1:01pm

Sweeping global regulations, the growing penetration of digital devices, and a slew of investor interest are catapulting the fintech industry to new highs.

Of the many emerging technologies poised to transform financial services, two of the most promising and mature are artificial intelligence (AI) and blockchain.

74% of banking executives believe AI will transform their industry completely, and 46% of global financial services employees expect blockchain to improve transparency and data management.

In The Future of Fintech: AI & Blockchain slide deck, Business Insider Intelligence explores the opportunities and hurdles of adopting the two technologies within financial services.

This exclusive slide deck can be yours for FREE today.

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Why historically high unemployment should embolden investors to take more market risk, according to a Wall Street chief strategist

Sun, 07/05/2020 - 9:25am

  • The still-lofty unemployment rate offers investors the latest sign to return to the stock market, James Paulsen, chief investment strategist at The Leuthold Group, said Thursday.
  • The S&P 500's average annual return in years when the unemployment rate exceeded 8% is roughly 25%, the strategist observed. When joblessness slid below 4.5%, the index notched yearly gains of about 8.4%.
  • Lofty unemployment rates signal "the outsized potential that future economic conditions are destined to improve because employment will ultimately recover," Paulsen said.
  • As economies recover and hiring picks up, so does spending and corporate profit growth, he added.
  • Visit the Business Insider homepage for more stories.

Widespread joblessness is the latest sign for investors to position for a stock market run-up, James Paulsen, chief investment strategist at The Leuthold Group, said Thursday.

June's jobs report revealed a 4.8 million increase in nonfarm payrolls and saw the unemployment rate slide to 11.1% from 13.3% the month prior. The reading is the second straight improvement for the US labor market since the unemployment rate spiked to 14.7% at the start of the coronavirus pandemic. Even though joblessness remains at dire highs, history suggests strong market gains will continue, Paulsen wrote in a note.

In every unemployment-rate spike since 1948, the S&P 500 performed better on average. The index posted average annual returns of 18.7% whenever the rate crept above 6.8%. Whenever the rate breached 8%, the benchmark notched an average 25% annual return.

Read more: GOLDMAN SACHS: Buy these 13 stocks that are poised to crush the market within the next 2 weeks as earnings season gets underway

The correlation is relatively simple. According to Paulsen, high unemployment rates signal "the outsized potential that future economic conditions are destined to improve." Joblessness would recover, incomes would rise, and spending would bounce back. All in all, investors can bet on the eventual reacceleration of profit growth after a bout of economic pain.

Several experts fear the stock market has already run too hot and underestimated the likelihood of a second downturn. Yet Paulsen pointed to the recessions of 1982 and 2009 as precedent. The market's trajectory so far mimics the two prior rebounds, and both past recessions hint at more gains to come in 2020.

Read more: Bank of America identifies 3 indicators that could make or break the stock market this summer – and warns they're all deteriorating fast

The echoed trend isn't a coincidence, according to the strategist. The 1982, 2009, and 2020 recessions all featured the largest increases in unemployment of the post-war era. In turn, all three economic contractions "possessed the uncommon opportunity for outsized economic improvement."

The economy still faces long-term scarring from the coronavirus pandemic. Trade faces major hurdles as countries recover from the outbreak on disjointed timelines. Consumer confidence is unlikely to fully rebound until a proven coronavirus vaccine hits the market. Yet the recessions of 1982 and 2009 gave way to lengthy bull markets, and the early stages suggest 2020 will be no different.

"Investors should be appreciating how much room there is for 'improvement' in the coming years, how policy officials are aggressively attempting to bring better times, and how the stock market, in these conditions, typically does fantastic!" Paulsen said.

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

'We may have a blow-up': Famed investor Jim Rogers explains how central bank 'madness' has the stock market hurtling towards another crash

CEO confidence climbs in 2nd quarter, with 70% expecting economic improvement by 2021

Trump's favorite trade scorecard worsened in May as exports hit lowest level since 2009

Cathie Wood's firm built 3 of the world's best ETFs, which all doubled in value within 3 years. She told us her 3-part process for spotting underappreciated technologies before they explode.

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Bank of America identifies 3 indicators that could make or break the stock market this summer – and warns they're all deteriorating fast

Sun, 07/05/2020 - 7:33am

The news flow around coronavirus infection rates and how various states are responding continues to drive market volatility and keep investors on their toes. 

In addition to the evolving situation on the ground, there are market-based indicators that are just as useful in clueing investors on what happens to stocks next.

That's where Bank of America's team of technical analysts come in, as experts who use trends and charts to analyze the market. They recently highlighted multiple indicators that threaten the summer rally — one which has already brought the S&P 500 within 5% of its all-time high after a record-breaking crash and kept alive hopes of a swift economic recovery.

"Although seasonality is bullish and sentiment remains mostly constructive, this deterioration across several notable market indicators could delay and/or could test our conviction in a summer rally for US equities," said Stephen Suttmeier, the chief equity technical strategist at Bank of America. 

Without further ado, here are three of the indicators on his radar that recently sent distress signals: 

1. Stock-market breadth 

Suttmeier's indicator of breadth is the advance-decline line, which measures the difference between the number of rising and falling stocks to gauge which way the momentum is leaning towards. 

In early June, there were disproportionately more advancing companies than decliners listed on both the New York Stock Exchange and in the S&P 500. These trends helped confirm the rally that rounded out the benchmark index's best quarterly percentage gain since 1998. 

However, this breadth indicator began to weaken in June. Suttmeier considers the slump a risk for the month of July, which is seasonally a strong period for the market.   

2. The share of stocks above key moving averages 

This set of indicators is similar to the aforementioned advance-decline line in that it also gauges the broader market's relative tilt.

Suttmeier flagged a recent new near-term lows in the percentage share of S&P 500 stocks which were above their 50- and 200-day moving averages. On Friday, June 26, the S&P 500 actually closed below its 200-day moving average — a development that should have unnerved anyone counting on an unabated rally. 

3. The performance of junk bonds 

A rally in high yield — specifically the iShares iBoxx High Yield Corporate Bond exchange-traded fund — helped confirm the stock market's strength in early June.

After all, this ETF tracks an index of companies with lower credit ratings and more risk of defaulting on their debt in an economic crisis.

For proof of its importance in this environment, consider that it is one of the select few ETFs that the Federal Reserve is buying directly as part of its economic stimulus. 

"If HYG sustains a tactical breakdown, the risk is deteriorating credit markets is a bearish leading indicator for the S&P 500," Suttmeier concluded. 

SEE ALSO: Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal — including 11 new stock picks for the months ahead

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These are the hottest fintech startups and companies in the world

Sat, 07/04/2020 - 8:00pm

It's a fascinating time for fintech.

What was once a disruptive force in the financial world has become standard practice for many industry leaders. 

Fintech industry funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3.

Some new regions, including South America and Africa, are emerging on the scene.

And some fintech companies, including a number of insurtechs, have dipped into new markets to escape heightened competition.

Now that fintech has become mainstream, the next focus is on the rising stars in the industry. To that end, Business Insider Intelligence has put together a list of 10 Up and Coming Fintechs for 2019.

Coconut

Total raised:   £1.9 million ($2.5 million)

What it does: Coconut is a UK-based current account and accounting platform for small- and medium-sized businesses (SMBs).

Why it's hot in 2019: Next week, Coconut will launch its first subscription service, dubbed Grow, which will bundle unlimited invoicing and end of year tax reports, for £5 ($6.51) a month. This will make it a very attractive option for SMBs, that conventionally don't have a lot of time on their hands to handle their accounting.

Brex

Total raised: $282 million

What it does: Brex is a US-based corporate credit card provider, which initially focused on serving startups.

Why it's hot in 2019: The startup gained unicorn status in 2018, only months after it launched its first product. Now, after receiving debt financing worth $100 million, Brex wants to target larger enterprises with its topic — opening it up to a whole new set of customers and helping bring the company to the next level.

Want to get the full list?

There's plenty more to learn about the future of fintech, payments, and the financial services industry. Business Insider Intelligence has outlined the road ahead in a FREE report, 10 Up and Coming Fintechs for 2019

>> Download the report now

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BANK OF AMERICA: Wall Street bullishness gauge spikes most in 2 years, signaling a 11% gain for S&P 500 within a year

Sat, 07/04/2020 - 1:00pm

  • Wall Street bullishness surged the most in two years last month as economic reopenings lifted investor optimism, Bank of America said Wednesday.
  • The firm's Sell Side Indicator gained to 55.8% from 54.9% in June, a sizable increase but still "far from the euphoria one sees at the end of bull markets."
  • The reading also implies an 11% return for the S&P 500 over the next 12 months, the bank's strategists added.
  • The gauge's "buy" and "sell" thresholds shrank to their narrowest gap in nearly two decades, according to the bank. Such a trend could form a bias against equities and create cheap dividend opportunities in the stock market.
  • Visit the Business Insider homepage for more stories.

Bank of America's Sell Side Indicator notched its biggest increase in roughly two years as economic reopenings boosted risk appetites.

The gauge of Wall Street bullishness jumped to 55.8% from 54.9% in June, bringing the metric just 0.3 percentage points below its 15-year average. The update implies an expected S&P 500 return of 11% over the next 12 months and factors into the firm's year-end target for the benchmark index.

Though the leap signals an optimistic shift among investors, stock market emotions are still fairly lukewarm, the bank said.

"This indicator is the most bullish of our five target models and continues to indicate that sentiment on stocks is still tepid, far from the euphoria one sees at the end of bull markets," the team led by Savita Subramanian wrote in a Wednesday note.

Read more: GOLDMAN SACHS: Buy these 13 stocks that are poised to crush the market within the next 2 weeks as earnings season gets underway

Recent price activity backs up such observations. After rallying hard through May, stocks ended June only slightly above where they began. Fears of a second wave of coronavirus and dried-up stimulus measures pushed investors back to safe havens.

The trend also rears its head in the closing gap between "buy" and "sell" thresholds. Both thresholds had been falling for years, and the coronavirus pandemic has since shrunk the gap to its narrowest in nearly two decades, the strategists said. The shift is likely a result of yield scarcity, the pandemic's hit to retirement assets, and a "hot stove" mentality toward equities, they added.

Read more: 'We may have a blow-up': Famed investor Jim Rogers explains how central bank 'madness' has the stock market hurtling towards another crash

Still, the mild optimism creates a strong buying opportunity for US stocks. The Federal Reserve indicated in June that the current low-rate environment could last through 2022 to usher in a robust economic recovery. Such policy, when coupled with a growing bias against stocks, will allow investors to buy into safe dividend yield at low prices, Bank of America said.

"The dividend yield of the S&P 500 is now at a multi-decade record multiple of bond yields, and whereas the sustainability of dividends has come into question amid the recession, we think a significant proportion of the S&P 500 offers sustainable dividend yields," the team wrote.

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

Stock analysts are having a moment in the sun as the market gets flipped upside down. We spoke to 11 of the top-ranked on Wall Street to get their forecasts and single-stock picks.

Pfizer leaps 6% after releasing positive trial results for coronavirus vaccine

Top US manufacturing index jumped the most since 1980 in June as reopenings spurred growth

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30 Big Tech Predictions for 2020

Sat, 07/04/2020 - 12:02pm

Digital transformation has just begun.

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

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

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

This exclusive report can be yours for FREE today.

Join the conversation about this story »

30 Big Tech Predictions for 2020

Sat, 07/04/2020 - 12:02pm

Digital transformation has just begun.

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

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

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

This exclusive report can be yours for FREE today.

Join the conversation about this story »

The Death of Cash

Sat, 07/04/2020 - 10:01am

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

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

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

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

This exclusive report can be yours for FREE today.

Join the conversation about this story »

The Death of Cash

Sat, 07/04/2020 - 10:01am

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

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

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

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

This exclusive report can be yours for FREE today.

Join the conversation about this story »

'We may have a blow-up': Famed investor Jim Rogers explains how central bank 'madness' has the stock market hurtling towards another crash

Sat, 07/04/2020 - 9:44am

"I am not very good at timing the market, but I suspect we may have a blow-up at least in the American stock market, and maybe the Japanese stock market, because of all this madness that is going on."

That's what Jim Rogers, the chairman of Rogers Holdings, said in an Economic Times op-ed partly titled "There will soon be a blow-up in US and, possibly, Japanese markets."

The aforementioned "madness" Rogers refers to is none other than the confluence of unprecedented central-bank and fiscal aid. These coronavirus crisis-era measures have stoked concerns that monetary authorities are creating asset bubbles that would become vulnerable as policy support is withdrawn.

"The main thing that is going on in the world is that central banks all over the world are printing huge amounts of money and governments are borrowing and spending huge amounts of money," he said. "This is insane."

Here's what the Federal Reserve has been up to since the crisis shuttered huge swaths of the US economy mid-March:

As a result, the Fed's balance sheet has ballooned to colossal proportions. Below is a snapshot of the Federal Reserve's balance sheet. Today, it tops $7 trillion.

But Rogers has danced this dance before. He has a long history on Wall Street, having cofounded the legendary Quantum Fund with billionaire investor George Soros in the 1970s.

"The end game?" he asked. "Well often in history, after a long rise in the market, it turns into a blow of bubble, especially when there is a huge amount of money that suddenly comes in."

Today, it seems plausible that markets have met the historical precedents Rogers refers to above. Prior to the fastest bear market in history, stocks enjoyed the longest bull market on record. Now, in just a few months time, the Fed has expanded its balance sheet by approximately $3 trillion.

Although Rogers isn't putting a timetable on the impending "blow-up," he says we can expect more money printing and low interest rates as the US gears up for an election.

"In Washington, they are doing everything they can to get re-elected," Rogers said. 

He added, "That is what they do. They do not care about us. They do not care about our children. They care about getting elected," he said. "So until November anyway, this is all going to continue in the US."

SEE ALSO: A market-crash expert known as 'Dr. Doom' warns a 10-year depression is coming — and says investors are far too confident about a possible recovery

Join the conversation about this story »

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Warren Buffett spent $6.5 billion to help Mars acquire Wrigley during the financial crisis. Here's the story of how he made the candy deal happen.

Sat, 07/04/2020 - 9:37am

  • Warren Buffett spent $6.5 billion to help Mars acquire Wrigley during the financial crisis.
  • The famed investor and Berkshire Hathaway CEO bought $2.1 billion of Wrigley preferred stock paying a 5% annual dividend, and $4.4 billion in bonds boasting an 11.45% interest rate.
  • The merger was "completed without pause while, elsewhere, panic reigned," Buffett said.
  • Buffett made about $6.5 billion on the deal, doubling his investment.
  • Visit Business Insider's homepage for more stories.

Warren Buffett shelled out $6.5 billion to help Mars acquire Wrigley in October 2008, cementing one of the few mega-mergers during the financial crisis and creating a global confectionery giant.

'They met the 70-year taste test'

Buffett famously guzzles Coke, munches See's Candies, and slurps down Blizzards at Dairy Queen.

Unsurprisingly, the sweet-toothed investor and Berkshire Hathaway CEO was a fan of Wrigley and Mars years before he got involved with the maker of Juicy Fruit and Altoids, and the confectioner behind M&Ms and Skittles.

"I've been conducting a 70-year taste test since I was about 7-years-old on the products," he told CNBC after the Wrigley-Mars merger was announced in the spring of 2008. "And they met the 70-year taste test."

Indeed, Buffett was singing Wrigley's praises more than a decade before the deal. He compared it to Coke in terms of enduring market share in his 1993 letter to shareholders.

"Leaving aside chewing gum, in which Wrigley is dominant, I know of no other significant businesses in which the leading company has long enjoyed such global power," he said.

Read more: 'We may have a blow-up': Famed investor Jim Rogers explains how central bank 'madness' has the stock market hurtling towards another crash

Buffett also lauded its simple business model in his 2011 letter.

"'Buy commodities, sell brands' has long been a formula for business success," he said. "It has produced enormous and sustained profits for Coca-Cola since 1886 and Wrigley since 1891."

Buffett's familiarity with the candy business and both Wrigley and Mars products meant he felt comfortable dealing with them at a difficult time.

"I understand a Wrigley or a Mars a whole lot better than I understand the balance sheet of some of the big banks," he told CNBC.

"I don't know what oil or wheat or soybeans or cocoa or anything like that's going to be selling for next week or next month or next year," he continued.

"I do know people are going to be chewing Wrigley gum and eating Mars bars."

'They knew the check would clear'

Wrigley accepted a $23 billion takeover offer from Mars in April 2008, paving the way for the pair to bring their brands under one roof, share talent and insights, and consolidate their sales, marketing, and distribution infrastructure.

Privately owned Mars decided to pay $11 billion itself, secure a $5.7 billion debt facility from Goldman Sachs, and enlist Buffett and Berkshire to provide the rest of the financing.

"We fit very well as a partner for what the Mars family wanted to achieve in this purchase," Buffett told CNBC at the time.

"They needed somebody they felt comfortable with, they knew the check would clear, that wouldn't interfere in any real way," he added.

Read more: The most accurate tech analyst on Wall Street says these 6 stocks have potential for huge gains as they transform the sector

Buffett agreed to purchase $2.1 billion of Wrigley's preferred stock, which paid a 5% annual dividend and gave him a 10% stake in the company. He also committed to buying $4.4 billion in Wrigley bonds that carried an 11.45% interest rate and matured in 2018.

The Mars-Wrigley deal closed about six months later in October 2008, just weeks after Lehman Brothers collapsed, and the US financial system seized up.

Buffett trumpeted the transaction, along with Berkshire's investments in Goldman Sachs and General Electric, in his 2008 shareholder letter.

"We very much like these commitments," he said, highlighting their lofty yields and the equity that Berkshire received in all three cases.

Buffett also mentioned the deals in his 2009 letter as examples of Berkshire supplying much-needed liquidity to companies during the crisis.

The Mars-Wrigley merger was "completed without pause while, elsewhere, panic reigned," he said.

Buffett added to his Wrigley investment in December 2009 when he bought $1 billion of the group's 5% senior notes, due in 2013 and 2014. Berkshire's filings offer few details about the notes, but they appear to have been settled on time.

Read more: GOLDMAN SACHS: Buy these 13 stocks that are poised to crush the market within the next 2 weeks as earnings season gets underway

Buffett doubled his money

Nearly five years after the merger, Mars reached out to Buffett and asked to repurchase Berkshire's Wrigley debt early. The investor demanded the candy giant pay a 15.45% premium to the bonds' par value as compensation.

Berkshire received just under $5.1 billion in October 2013, scoring a $680 million return on its $4.4 billion outlay. It also earned about $2.5 billion in interest during the five years it held the notes based on their 11.45% interest rate.

Mars contacted Buffett again in 2016 as it wanted to buy him out and take full control of Wrigley. The confectioner originally had the option to repurchase up to half of Berkshire's Wrigley shares during the 90 days starting October 6, 2016, but had to wait until 2021 to redeem the rest.

Buffett agreed to sell all his Wrigley shares for about $4.6 billion in September 2016. The steep premium reflected the value of the future dividends he was giving up.

As a result, Berkshire made a $2.5 billion return on its Wrigley stock. It likely earned another $840 million in dividends as it held the shares for about eight years.

Add up the gains on the bonds and the shares with the interest payments and dividends, and Buffett made an estimated $6.5 billion from his Wrigley bet. He doubled his money even before accounting for the second tranche of Wrigley bonds he bought in 2009.

Buffett was happy with the investment and his return, he told Forbes in October 2016.

"I have enjoyed all of Berkshire's experiences with the Mars family and management and wish them the very best," he said.

"Both Mars and Berkshire have profited from our investment and that's the way it should be."

Read more: A 22-year market vet explains why stocks are headed for a 'massive reset' as the economy struggles to recover from COVID-19 — and outlines why that will put mega-cap tech companies in serious danger

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Goldman says an under-the-radar driver is signaling further upside in stocks — one not driven by retail investors

Sat, 07/04/2020 - 9:34am

  • "Investment flows are an important driver of equity returns," according to Goldman Sachs, and right now they're signaling further upside ahead for the stock market.
  • In a note published on Thursday, Goldman went under the hood of the stock market and analyzed the impact fund flows, or the actual trading of securities, had on security prices.
  • The firm found that fund flows can have a sizable impact on market prices if liquidity is especially low, and not so much if liquidity is high.
  • Additionally, Goldman said that the the recent rise of individual investors amid the COVID-19 pandemic has been associated with declines in the stock market, not gains.
  • Visit Business Insider's homepage for more stories

The flow of money through different investment vehicles like stocks, bonds, and funds like exchange-traded funds is "an important driver of equity returns," according to Goldman Sachs.

In a note published on Thursday, the firm analyzed just how much or little fund flows drive returns in the stock market. And based on its analysis, it found that there's "further upside potential" in the S&P 500 due to recent investment flows.

"We conclude that investment flows in the context of low liquidity are supportive of recent S&P 500 returns and would suggest further upside potential," Goldman said.

The firm added that its analysis showed "that recent investment flows have been more-than-sufficient to support the recent rally in equity prices."

Goldman said that liquidity is an important factor in determining if fund flows will have a sizable impact on stock prices.

Read more: 'We may have a blow-up': Famed investor Jim Rogers explains how central bank 'madness' has the stock market hurtling towards another crash

"Flows that occur in low liquidity environments have a larger impact on asset prices than flows in high liquidity environments, which has big implications for the effect of flows during sell-offs and rebounds when market liquidity is most volatile," Goldman said.

Goldman also noted that the recent surge in retail investor flows due to the COVID-19 pandemic hasn't had a sizable impact on equity prices, which backs up a recent study published by Barclays.

Read more: The most accurate tech analyst on Wall Street says these 6 stocks have potential for huge gains as they transform the sector

The firm said that "elevated individual investor activity in stocks and options have been associated with declines in SPX prices over the past 18 months that we studied."

Goldman was not sure if either a decline in the S&P 500 attracted individual investor activity, or if individual investor activity was responsible for the decline in S&P 500 prices. 

"On its surface, this runs counter to the hypothesis that individual investors are boosting stocks prices. Although it is possible that the high cash levels and the belief that the recent economic weakness is temporary has led to an unusual increase in 'buy-the-dip' sentiment among individual investors," Goldman concluded.

Read more: Real-estate investor Joe Fairless breaks down how he went from 4 single-family rentals to overseeing 7,000 units worth $900 million — and outlines the epiphany that turbocharged his career

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Wall Street Insider: The Mooch's leaked memo to Merrill — Boutique bank exits — Hackers target PE

Sat, 07/04/2020 - 9:14am

 

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

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

Dealmaking activity has fallen off a cliff this year, as executives focus on steering their existing businesses through the havoc caused by the coronavirus crisis instead of seeking out new deals. Data from Refinitiv released this week showed that the drop in activity was more pronounced for bigger M&A transactions, with the overall value of deals worth more than $5 billion down 53% year-on-year.

As Alex Morrell reports, the fading memories of the megadeals of the last few years are hitting boutique banks. Independent investment bank Perella Weinberg Partners was ramping up its footprint after an explosive start in 2016, landing one of the largest mergers in history — AT&T's $100 billion deal for Time Warner. 

But since then, deals have been scarce for Perella's media and telecom team, and the group has been gutted by departures in 2020. Alex dives into how experienced media and telecom bankers have been laid off, quietly asked to leave, or departed for other firms.

Read the full story here: 

After flashy hires and a big buildout, Perella Weinberg's media and telecom team has been gutted. We tracked the exodus — and what it says about the landscape for blockbuster M&A deals.

Over in the world of real estate, big office deals are stalling as banks grow cautious about extending debt over concerns about the future of the workplace. Dan Geiger reports on how this is especially perilous for real estate investors who have pledged hundreds of millions of dollars to enter into contracts for buildings like the Transamerica Pyramid in San Francisco. 

Despite the uncertainty of when or how people will occupy spaces like they did in the pre-pandemic era, there are real estate players looking far into the future. As Dan reports, a Las Vegas landlord, which owns some of the strip's biggest casino resorts like Caesars Palace, is plotting the city's next mega-project. Recruiting for executives to lead new projects is also picking up, reports Alex Nicoll, who spoke to four recruiters on the roles they're looking to fill.

Keep reading for a look at how private equity and hedge fund firms are ramping up their efforts in impact investing; some due diligence drama between Anthony Scaramucci and Merrill Lynch Wealth Management; and the story behind a JPMorgan trading team's hot streak. 

Have a great holiday weekend, 

Michelle Abrego

(Meredith is on vacation and will be back next week.)

PE goes ESG

The coronavirus pandemic and the ongoing reckoning of racial justice and equity in the workplace have put ESG investing at the forefront of the conversations in the asset management business.

As Casey Sullivan and Bradley Saacks report, some private-equity firms and activist hedge funds are committing resources and capital to ESG and impact investing.

Read the full story here: 

Big investors like Apollo and Carlyle are clamoring for a piece of the $30 trillion ESG space. We spoke to 15 insiders about how they're ramping up hires, raising money, and striking data-driven deals. The Mooch vs. Merrill 

SkyBridge founder Anthony Scaramucci sent a 6-page, strongly-worded memo to Andy Sieg, the president of Merrill Lynch Wealth Management, on Thursday after the company downgraded its flagship fund, Meghan Morris reveals. 

In a leaked memo seen by Business Insider, Scaramucci said Merrill Lynch published an inaccurate due diligence report. He called the firms' relationship "yet another casualty of the pandemic," writing that the report "reflects a breakdown in communication" between the firms – one he didn't think would happen if executives had met in person.

Read the full story here:

LEAKED MEMO: Anthony Scaramucci mourns his relationship with $2.2 trillion Merrill Lynch after it downgraded SkyBridge's main fund Victorious volatility trades

Markets have produced bizarre and historic results in the first half of 2020, creating stark swings and diverging fortunes for traders.

As Alex Morrell reports, that's especially true in the world of equity derivatives and the traders that bet on volatility, where some investment funds have flamed out spectacularly while many Wall Street banks have minted hundreds of millions in revenues.

Read the full story here: 

JPMorgan volatility traders raked in $700 million through June — 3 times what they brought in for all of 2019. Here's how they outpaced Goldman Sachs and Morgan Stanley on the hottest trade of the year. Hackers are targeting private equity firms 

Cyberattacks have been on the rise in 2020 due to the pandemic, with financial services targeted the most.

Private equity, in particular, has been viewed as a viable new opportunity for cybercriminals as they have deep pockets and wire large sums of money, reports Dan DeFrancesco. While bigger PE firms have the resources to dedicate to cybersecurity, the process at small to mid-size shops remains a work in progress.

Read the full story here:

Cyberattacks against financial firms are up 238%. Experts explain why deep-pocketed private equity firms are most at risk. The future of fintech is infrastructure  

As Shannen Balogh reports, fintechs are looking for ways to reimagine and disrupt core banking services that have been long dominated by infrastructure giants like FIS and Fiserv.

"They are all, as it currently stands, very good businesses with large customer bases who trust them, but the fact of the matter is they've fallen behind on technology," Tripp Shriner, partner at Point72 Ventures told Shannen.

Shriner isn't alone in his prediction. Goldman's investment banking head of fintech also says that the next trend to watch in fintech is players that focus on banks' core, often dated, infrastructure. 

Read more:

Investors at Point72 and Goldman Sachs believe industry giants like FIS and Fiserv will be the next to be disrupted by fintech. Here's where they are most susceptible. Business Insider events

One-click checkout startup Fast raised its $20 million Series A from investors including Index Ventures and buzzy fintech Stripe in May as it looks to take on Apple Pay to solve pain-points around password management and online checkout.

Join Business Insider reporter Shannen Balogh on Tuesday, July 14 at 1:30 p.m ET when she will speak with Domm Holland, Fast's co-founder and CEO, and Jan Hammer, general partner at Index Venture. They'll discuss how Holland came up with the idea for Fast, how to build a pitch deck, and what it takes to win over investors.

If you're a Business Insider subscriber, you can sign up here.

You can also join Business Insider on July 8 at 12 p.m. ET for "Planning for the Future in Uncertain Times," a free digital event and part of the Master Your Money series. Presented by Fidelity, it will explore components of a strong financial plan and how to adjust it given recent events. 

Click here to register for the Master your Money event. Real estate Careers Wealth management & fintech Going public

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NOW WATCH: How waste is dealt with on the world's largest cruise ship

THE GLOBAL NEOBANKS REPORT: How 26 upstarts are winning customers and pivoting from hyper-growth to profitability in a $27 billion market

Sat, 07/04/2020 - 9:00am

Neobanks — digital-only banks with industry-leading capabilities that don't operate physical branches or rely on legacy back-ends — have exploded onto the global scene in recent years.

Increased consumer interest in neobanks is stimulating competition globally, creating an increasingly competitive landscape which has driven neobanks to roll out extravagant features, like overdraft protection and sign-up incentives. 

Beyond scaling rapidly by user count, neobanks are navigating the best route to profitability. Today, the average neobank loses $11 per user, per Accenture, and though neobanks' expenses are partially offset by not operating costly branch networks, they still need to find sustainable business models.

Some major strategies are beginning to coalesce: Most neobanks operate under a "freemium" model, in which they offer their product for free, but charge for additional features, while others offer multitier subscriptions with varying levels of premium accounts. Additionally, other players are targeting niche segments, like small businesses or gig economy workers, in their pursuit of profitability.

In The Global Neobanks report, Business Insider Intelligence explores how the neobank market has grown rapidly, and what's in store as the industry pivots from hyper-growth to sustainability. We discuss how 26 neobanks in key global markets are prioritizing scale versus profitability, identifying best practices to emulate and pitfalls to avoid.

The companies mentioned in the report include: ABN Amro, Adyen, Ant financial, ANZ, Aspiration, Banco Inter, Bank Leumi, Banco Sabadell, Banco Votorantim, Bnext, bunq, Chime, Commonwealth Bank of Australia, Dave, Finleap, ING, Judo, Klar, Kuda, Mastercard, Monzo, Moven, MYbank, National Australia Bank, Neon, Nubank, N26, OakNorth, Open, Pepper, Penta, Revolut, Raising, Rabobank, Santander, Starling, Standard Chartered, Tandem, TD Bank, TransferWise, Tencent, Uala, Uber, Volt, Varo, WeBank, Westpac, Xinja, 86 400.

Here are some key takeaways from the report:

  • With an estimated 39 million users globally, neobanks' valuations have skyrocketed thanks to their attractive value propositions which include personal finance management features, low rates, and superior user experiences.
  • But the same features that have helped neobanks catch on have pushed profitability further out of reach. Neobanks have been forced to roll out flashy features to stand out to users, and marketing these features has driven up expenses. 
  • There's no universal path to profitability for neobanks — but a few major categories are emerging. Freemium pricing strategies, multitiered subscriptions, and targeting niche demographics are three strategies neobanks are employing in pursuit of profit.  
  • Individual neobank landscapes vary by market, but their inherent advantages are allowing neobanks to emerge in markets globally. Regional factors have made certain markets particularly ripe, such as fintech-friendly regulations, negative consumer perceptions of incumbents, and gaps in banking services for underbanked populations. 

In full, the report:

  • Sizes the neobank market by value, number of users, and number of accounts to 2024.
  • Explores the factors that will propel the neobank market to new heights over the next five years, and the challenge of reaching profitability underpinning this growth.
  • Highlights key players in various global markets — including Europe, North America, Latin America, Asia Pacific, and the Middle East and Africa — that are representative of the general neobank landscape and that have excelled in global footprint, features, users, or total funding raised. 
  • Spotlights some of the smaller players that represent the emerging opportunity in a given market.
  • Discusses how different neobanks in key global markets are prioritizing scale versus profitability, identifying best practices to emulate and pitfalls to avoid. 

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

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Sign up for Banking Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
  3. Join thousands of top companies worldwide who trust Business Insider Intelligence for their competitive research needs. >> Inquire About Our Enterprise Memberships
  4. Current subscribers can read the report here.

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Real estate investors are struggling to raise hundreds of millions in debt for office buildings. Here's why this poses major problems for pending deals like the Transamerica Pyramid in San Francisco.

Sat, 07/04/2020 - 8:00am

  • Major commercial real estate acquisitions in cities across the country hang in the balance as the lending market has dried up.
  • Lenders have grown wary of extending debt to office assets as concerns have grown about the future of the office workplace.
  • If tenants can't repopulate their offices in the near term or decide to abandon the workplace in favor of remote work strategies, it could push down office rents and diminish the value of office buildings.
  • The difficulties sourcing debt are especially perilous for real estate investors who have pledged hundreds of millions of dollars to enter into contracts to buy major office assets they may now have trouble financing. 
  • For more stories like this, sign up here for our Wall Street Insider newsletter.

In Chicago, a group of buyers led by the New York City real estate investor Michael Shvo, has lingered in contract for months to purchase a large Chicago office building for $370 million.

Shvo has also appeared to stall in his bid to buy the Transamerica Pyramid in San Francisco for around $700 million, a signature office tower on the city's skyline. Shvo has been negotiating to purchase the two skyscrapers since the start of the year. 

Another colorful commercial landlord, Aby Rosen, meanwhile, has been trying to close since March on his firm RFR Realty's deal to buy 522 Fifth Avenue, a nearly 600,000 square foot office building being sold by Morgan Stanley, for around $350 million. 

The slow pace of the transactions underscores the challenges that buyers face raising the hundreds of millions of dollars of financing from lenders such as banks, life insurance companies, and debt funds that are necessary to purchase large commercial real estate assets.

"It doesn't normally take this long to close on financing deals," said Brian Stoffers, the global president of debt and structured finance at CBRE.

Read More: Billions of dollars of Las Vegas development hang in the balance right now, but the owner of Caesars Palace sees the city's crisis as an opportunity to imagine its next mega-project.

The difficulties stem from lenders who have grown wary to extend debt as uncertainty lingers over the office market in the aftermath of the Covid-19 crisis. Their concerns include how quickly tenants will reoccupy the workplace, whether some may choose to adopt remote work strategies long term, and if rents and office values could fall as a result of the upheaval.

"The whole office sector is under stress right now over questions about the level of tenant demand going forward and how well get back to work strategies will be implemented," Stoffers said. "It's definitely creating concern."

A spokesman for Shvo said that his investment group, which includes partners Deutsche Bank Finance and BLG Capital, was on track to securing the debt necessary to close the deal to buy 333 South Wabash Avenue, a 400,000 square foot office building near Millennium Park in Chicago that is notable for its red-tinted facade.

Read More: Vacancy rates are soaring above 15% in Washington DC's normally recession-proof office market. Here's why some industry players are still optimistic.

"The partnership has secured financing for the acquisition of 333 South Wabash and is expected to close on the transaction within the next 30 days," the spokesman said. The spokesman declined to identify which lender or lenders were providing the loan nor how much of the purchase price the debt would cover.

A spokeswoman for Transamerica said of Shvo's deal to buy that 850-foot tall skyscraper: "Transamerica and Shvo continue to move forward toward closing on the sale of the Transamerica Pyramid."

Aby Rosen didn't respond to a request for comment, but a source familiar with his efforts to raise the money to close on 522 Fifth Avenue said he was in discussions with several lenders, but still hadn't formalized a deal.

All three transactions may still close, but observers say the months that have dragged on since they went into contract demonstrates the difficulties raising money for major real estate deals.   

Before the Covid-19 crisis, major banks such as JP Morgan Chase, Wells Fargo, Citi, and Bank of America would routinely extend loans hundreds of millions of dollars in size to fund office acquisitions in major markets across the country. To offload the risk of having so much money tied to a single asset on their balance sheets, large financial institutions would often subsequently sell off portions of a loan to other lenders - a practice known as syndication - to spread the risk around.

"Few banks want to take on the risk of syndicating a large loan right now," said Gideon Gil, an executive at Cushman & Wakefield who works within the company's equity, debt, and structured finance group. "They don't want to get stuck with a loan and tie up their balance sheet."

Gil said that borrowers are now being forced to try to arrange groups of lenders out of the gate to source the necessary debt to close on a deal, rather than split up a loan retroactively after a purchase has already closed. That process of stitching together a large loan from multiple parties is more tedious, he said.

"It's taking longer as more banks have to collaborate earlier in the process," Gil said.

Other borrowers have managed to arrange major loans from groups of lenders.

In June, SL Green, for instance, announced it had secured a $510 million mortgage to refinance the New York City office building it owns at 220 East 42nd Street from several lenders, including Aareal Capital Corp., Citi, and Credit Agricole. That deal was as much a cautionary tale for borrowers as it was a sign of resilience in the lending market.

SL Green sourced the debt after a buyer, the Chetrit Group, failed to close on its contract to purchase the office building for $815 million in March after it couldn't source the necessary financing. SL Green is now suing to claim Chetrit's $35 million deposit on the building, a sum that demonstrates the large financial risks that property buyers assume in entering deals to scoop up major real estate assets.

Sources familiar with Aby Rosen's contract to acquire 522 Fifth Avenue said he pledged a similarly sized non-refundable deposit that he could potentially lose if he is unable to close on the transaction.

Have a tip? Contact Daniel Geiger at dgeiger@businessinsider.com or via encrypted messaging app Signal at +1 (646) 352-2884, or Twitter DM at @dangeiger79. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Life-insurance giant Transamerica just told all its salaried workers they need to take a one-week unpaid furlough in what the company is calling a 'responsible step' during the downturn

SEE ALSO: Real-estate tycoon Aby Rosen is abandoning $600 million worth of acquisitions as the coronavirus puts New York City's multibillion-dollar sales market on ice

SEE ALSO: Facebook is eyeing offices in cities like Dallas, Atlanta, and Denver to act as 'hubs' to support 50% of its workers staying remote — and it's a move that could upend Silicon Valley and NYC real estate

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NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time

Financial Services: 6 Key Attributes to Attract Gen Z

Sat, 07/04/2020 - 6:00am

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 »

Financial Services: 6 Key Attributes to Attract Gen Z

Sat, 07/04/2020 - 6:00am

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 »

2 of Europe's top central bankers dropped hints that it might be time to start removing unprecedented coronavirus stimulus packages

Sat, 07/04/2020 - 3:57am

  • Chief economists at the Bank of England and the European Central Bank are indicating it might be time to retreat from injecting massive amounts of economic stimulus into economies.
  • Business indicators seem to suggest that global economies and the UK have recovered sooner and "materially faster" than expected, according to Andy Haldane.
  • ECB chief economist Philip Lane has a more cautious outlook. He said that although it might be too soon to tell what the economic trajectory will look like, it might be time to rein in monetary policy over the next few months.
  • In dealing with negative shocks, Lane said the European Governing Council in the past has "pulled back, we did shrink the asset purchase program, and we did bring asset purchases to zero when we thought we could."
  • Visit Business Insider's homepage for more stories.

Top policymakers in Europe this week seemed to indicate it might be time to rein in the flow of money meant to protect economies from an outright collapse.

While assessing the path to recovery, the Bank of England's chief economist Andy Haldane said this week that the UK economy has bounced back sharply in comparison to what was originally expected. 

He pinned that down to indicators such as closely-watched business surveys. He also tied in strong consumer spending as a sign that households are now making use of the money they were forced to save during the start of the pandemic.

Haldane seemed further optimistic that the opening up of pubs, restaurants, hotels, cinemas, and other outlets on Saturday will do more to propel consumer spending, and highlighted reports that suggest advance bookings for these services are "brisk." 

Last month the Bank of England decided to add another £100 billion ($125 billion) of monetary stimulus to boost financial markets impacted by the pandemic, a decision ratified by an 8-1 vote by the monetary policy committee.

The only dissenter was Haldane. 

To explain his opposition he said: "I judged the upside news in demand since our previous meeting in May to have outweighed the negative news to the UK's economic outlook."

He wanted to maintain the monetary stance rather than loosen it further.

He noted there is a possibility that unemployment in the UK could get worse in the second half of the year as the furlough scheme narrows, warranting more action. But as this currently remains uncertain, it may not be a top-of-list priority. 

Philip Lane, the chief economist at the European Central Bank, is more discreet about recovery.

In a recent interview with Reuters, Lane pointed out that the European economy will see a long period of positive data compared to drastic lows seen in April.

"Whether it grows at the same speed, or we get an initial bounce and then it levels off it's not going to be so easy for us, you or the market to navigate or extract useful signals from the data," Lane said.

He said that even in case of a severe scenario, inflation in Europe would not go negative. But that does not say much about what it may look like in the medium term. 

In terms of negative shocks to the economy, Lane believes they are only temporary.

"My view is that some of those negative shocks cannot be sustained, some of them have the seeds of their own demise," he said. "I don't see the world as always having these negative shocks and this is why central banks have the ability to reverse course."

Lane warned it may be too early to tell whether Europe's economies are seeing a solid footing, and that they may only return to pre-crisis levels by 2022. 

The few weeks seeing an initial bounce does not serve as a good guide for what may happen in winter. 

However, both Haldane and Lane agree that it is time for the central banks to pull back and wait for further data to lead the way for the next steps.

Over his five-year tenure at the Governing Council, Lane said the central bank had "pulled back, we did shrink the asset purchase program, and we did bring asset purchases to zero when we thought we could."

Both central bankers are aiming to wait before wading through "noisy data" and hopefully extract useful signals from the post-crisis economy to make next moves.

SEE ALSO: The IMF's chief economist poured cold water on the Bank of England's claim the UK is heading for a V-shaped recovery

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NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time

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

Fri, 07/03/2020 - 7:58pm

Want more Fintech research? Here's how to get access:
  1. Sign up for Fintech Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
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