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Hackers stole photos of travelers' faces and license plates collected by the US Customs and Border Protection agency

Mon, 06/10/2019 - 7:00pm

Hackers broke into a database of images of travelers and license plates collected by US Customs and Border Protection, the agency said on Monday.

The hackers gained access to the images through a subcontractor's network, CBP said. The subcontractor, which the agency declined to name, had transferred the photographs to its network in violation of CBP policies, the agency said.

"CBP has alerted members of Congress and is working closely with other law enforcement agencies and cybersecurity entities and its own office of professional responsibility to actively investigate the incident," the agency said in a statement.

The agency became aware on May 31 that the subcontractor had transferred the images to its network. CBP did not say when the subcontractor transferred the photographs, when the cyber attack occurred, or how many images were accessed by the hackers.

Read this: Internet pioneer Paul Vixie thinks we're giving up both privacy and speed thanks to the way we've configured our internet connections

Agency spokesman Mike Niezgoda declined to comment on the incident beyond CBP's statement, which he pasted into an email message.

The agency released a separate copy of the statement as a Microsoft Word document that was entitled, "CBP Perceptics Public Statement," according to the Washington Post, which first reported the security breach. The title seemed to indicate that Perceptics, a company that offers license-plate reader technology, was involved in the incident.

Niezgoda declined to confirm whether Perceptics was connected to the breach. Company representatives did not respond to an email seeking comment.

The CBP had been collecting images of travelers at airports and at land border crossings. It has also begun to use facial recognition to identify travelers, including those trying to enter the country illegally.

Got a tip about computer security industry? Contact this reporter via email at, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: One of the internet's creators says there's a potential of severe dangers from the 'avalanche of devices' on the network

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Here's exactly why it's so important to hire a fee-only financial adviser

Mon, 06/10/2019 - 5:23pm

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.

  • You should always ask your financial adviser before hiring them: Do you earn a commission from the products I buy or investments I make?
  • If they do earn a commission from selling specific products or investments to clients, they're a fee-based financial adviser.
  • These financial advisers do not have to disclose conflicts of interest and are only required to recommend strategies and products that are "suitable" for their client.
  • By contrast, a fee-only financial adviser must be a fiduciary, meaning they are legally required to make recommendations in the best interest of their client, and they only earn money from client fees.
  • If you're looking for a financial adviser, SmartAsset's free tool can help find a licensed professional near you »

If you're in the market for honest, no-holds-barred money advice, there's at least one question you can ask to weed out unfitting financial advisers: Do you earn a commission?

If they answer "yes," they're considered a fee-based financial adviser. Whether a financial planner or investment adviser, "fee-based" refers to the way they earn their money.

In addition to getting paid by the client, fee-based advisers may also get a kickback from directing you to invest in a specific fund or product or open a certain type of account — their fees are based, in part, on where you put your money.

This doesn't mean a fee-based financial adviser will necessarily work against your best interests. It only means that they may be more inclined to recommend products and services for which they get a commission, which may or may not be the best option for your financial planning needs.

Fee-only financial advisers, by contrast, do not get paid commissions. Their only objective is to provide sound financial advice to the client, who is paying them an hourly fee, flat retainer fee, or asset under management fee. They cannot accept kickbacks from insurance companies or brokerage firms if that's where their client chooses to put their money.

SmartAsset's free tool can help find a financial adviser to help with your goals »

Most important, fee-based advisers are not required to be fiduciaries. A fiduciary is legally bound to put their client's interests first. Instead, many fee-based financial advisers follow a loosely monitored "suitability" standard, which allows them to make recommendations so long as it's suitable for their client's goals, risk tolerance, and financial situation. Usually this translates to recommendations that will also earn them money.

As Eric Rosenberg wrote for Business Insider, a fee-based adviser "may have an incentive to put your money in a fund that charges a higher fee because they get a commission even though a better performing or comparable fund that charges a lower fee is available."

In early June, the Securities and Exchange Commission adopted a new set of rules for investment advisers and brokers requiring them to provide a "relationship summary" to clients before working with them, The New York Times reported. The document is meant to spell out fees, commissions, conflicts of interest, and legal conduct, but experts say there's no industry standard for how this will look, so transparency likely won't improve much immediately for the everyday investor.

For now, you can find exact fees and commissions for investment advisory firms with more than $25 million in assets under management laid out in part two of Form ADV, a document filed with the SEC detailing the firm's operations. Some firms will link to the form on their website, but it's also available through a search tool on the SEC's Investment Adviser Public Disclosure website.

Looking for a financial adviser? SmartAsset's free tool can help you find the right person for you »

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Tesla is gearing up for its annual shareholder meeting amid wild stock fluctuations and mounting pressure on Elon Musk (TSLA)

Mon, 06/10/2019 - 4:10pm

  • Tesla's annual shareholder meeting is set to kick off at 2:30 PM local time on Wednesday in California. 
  • Investors will be voting to re-elect two board members, as well as on proposals relating to supermajority voting and a public policy committee. 
  • A major proxy advisory service is urging shareholders to vote against Ira Ehrenpreis's re-election.
  • Visit Business Insider's homepage for more stories

Tesla shareholders will convene for the company's annual investor meeting on Tuesday afternoon in California, amid one of the company's most challenging months yet.

Since they last assembled in 2018, Tesla's market value has declined by more than 30% thanks to a failed bid to take the company private by CEO Elon Musk, which resulted in $20 million fines for himself and the company as part of a settlement with federal regulators.

In April, shortly after Tesla and the SEC agreed on new terms regarding Musk's social media usage to end the months-long legal battle, Tesla announced that four members of its board of directors will leave their posts after their tenures are up.

Brad Buss and Linda Johnson Rice will leave the board following Tuesday's meeting, and Steve Jurvetson — who returned from an extended leave of absence stemming from sexual misconduct allegations at his venture capital firm in April — will leave in 2020 along with Antonio Gracias shortly after.

In addition to the board reshuffling, investors will have plenty of other issues on their minds after the challenging last 12 months of Tesla's business. Falling deliveries and quarterly earnings in the first half of 2019 also weighed on the stock, which traded below $200 per share in May before recovering slightly. In past years, Tesla's stock price has risen dramatically following announcements at the company's annual meeting.

This year, shareholders will consider the re-election of two board members, new equity incentive and employee stock purchase plan, recertification of the company's outside accounting firm, a proposed public policy committee, and proposed simple majority rule to replace the current super majority.

Here are all the proposed items for Tesla's annual shareholders' meeting on Tuesday:

SEE ALSO: Tesla employees are giving the company lower scores on LinkedIn and Glassdoor, and some say there's a hole in senior leadership

Proposal 1: Re-electing two directors

Tesla's directors have nominated Ira Ehrenpreis, the second-longest serving board member after Kimbal Musk, and Kathleen Wilson-Thompson for re-election to the board. If re-elected, which is likely, they will serve for three years, as is the board's current structure. However, if a proposal to reduce director terms to two years is successful, they will serve the shorter amount of time.

A major shareholder advisory service is urging investors to vote against the nomination of Ehrenpreis, due to Tesla's skyrocketing equity awards.

"Tesla does not have traditional incentive programs and, while no NEOs received bonuses in 2018, equity awards are sizable and lack performance vesting conditions,' Institutional Shareholder Services, or ISS, said in a May report.

"Investors increasingly expect at least a meaningful portion of long-term incentives be tied to pre-set, disclosed forward-looking performance goals. Concerns are also raised regarding the magnitude of grants to other NEOs, as all but one of the NEOs received 2018 pay in excess of the median CEO in the ISS-selected peer group."

"While these concerns would normally warrant an adverse recommendation for the advisory compensation proposal, the company has adopted a triennial say-on-pay frequency and will not present the proposal again until 2020," ISS continued. "In the absence of a say-on-pay proposal on the ballot, shareholders are advised to vote against compensation committee member Ira Ehrenpreis."

Tesla defended Ehrenpreis' re-election in its proxy statement.

"We believe that Mr. Ehrenpreis possesses specific attributes that qualify him to serve as a member of the Board and to serve as chair of each of our Nominating and Corporate Governance Committee and our Compensation Committee, including his experience in the Cleantech and venture capital industries," the company said. 

Glass-Lewis, the other major proxy advisor, does not have the same concerns about Ehrenpreis' re-election and recommends a "for" vote on the proposal. Tesla's board of directors also recommends a "for" vote.

Both Tesla and the proxy advisors recommend director Kathleen Wilson-Thompson for re-election.

Proposal 2: A new equity incentive plan

Tesla is asking shareholders for approval to issue 12.5 million new shares as part of a new equity incentive plan. This will allow the company to continue issuing stock as compensation for employees and executives.

ISS and Glass-Lewis are worried the new issuances will dilute shareholders' total equity by about 6.8%, and are therefore urging investors to reject the proposal.

"Stock purchase plans enable employees to become shareholders, which gives them a stake in the company's growth," ISS said in its report.

"However, purchase plans are beneficial only when they are well-balanced and in the best interests of all shareholders. From a shareholder's perspective, plans should have reasonable purchase discounts and offering periods, and they should limit the number of shares allocated. In this case, the plan's purchase price is at least 85 percent of fair market value and the offering period is not longer than 27 months. Also, the number of shares allocated to the plan is not more than 10 percent of outstanding shares. As such, support for this proposal is warranted."

In its proxy statement, Tesla urged shareholders to vote for the proposal:

"While we offer to our employees restricted stock units, which tend to retain some value even if the market value of our stock decreases, the equity-based compensation to our directors is exclusively in the form of stock options, which have value only to the extent, if any, that our stock price increases following their grant. Consequently, a large portion of our non-employee directors' compensation is entirely at risk," the company said. 

Proposal 3: Approving the company's employee stock purchase plan

Tesla allows employees to purchase stock at a significant discount, and the Board has already approved a continuance of this plan. Now it needs shareholder approval.

"Tesla strongly promotes a culture of stock ownership in order to incentivize employees to contribute to our successes, from which they reap the benefit of increases in our stock's value," the company said in its proxy statement. "For this reason, in addition to establishing minimum stock ownership and holding periods for our directors and named executive officers, we offer equity awards to all of our employees."

ISS and Glass-Lewis also support the proposal as employee stock plans "align the interests of employees and shareholders and encourage a sense of ownership at companies," Glass Lewis writes.

Proposals 4 and 8: A simple majority vote

Two separate proposals deal with eliminating a supermajority vote. One is supported by Tesla's board, and one is not.

James McRitchie, an activist investor who runs the site has submitted proposal 8, which urges Tesla to adopt a simple majority and eliminate the current supermajority voting requirements, which he says could enhance shareholder rights.

"Large funds, such as T. Rowe Price, BlackRock, SSgA and Northern Trust generally support elimination of supermajority requirements, since most view them as an entrenchment device for management," the proposal reads. "Currently a 1 % special interest minority of shares can frustrate the will of shareholders casting 66% of shares in favor. In other words a 1 % special interest minority could have the power to prevent shareholders from improving our corporate governance.

ISS supports the measure, but Tesla and Glass-Lewis are urging investors to vote against it.

"The Board has determined that this proposal would not serve the best interests of Tesla or our stockholders, because we have separately included a proposal (Proposal Four) for our stockholders to directly approve amendments to each of our Certificate of Incorporation and our Bylaws to eliminate any voting requirements therein that require greater than a majority vote of our stockholders," the board said in its opposing statement. "Unlike this proposal, which is advisory and non-binding, Proposal Four would result in our implementing such amendments upon approval, and the Board urges our stockholders to vote for Proposal Four."

Proposal four, which the board supports, also eliminates the supermajority vote requirement for amending the company's governing documents.

Proposal 5: Reducing director terms from three to two years

Tesla is asking investors for permission to shorten the term lengths that directors serve on its board from three years currently to two years. The Board is urging investors to vote for the measure, something both proxy advisors also support.

"While this proposal would not result in a fully declassified board, the reduction from three to two board classes would represent an incremental increase to overall board accountability," ISS writes. "As such, support for this proposal is warranted."

Proposal 6: Ratifying Tesla's outside auditor

Tesla needs shareholder approval to continue its use of Pricewaterhouse Coopers as the company's auditor and outside public accounting firm. Both proxy advisors also support the motion, as is typical of most companies' annual meeting.

Proposal 7: Establishing a public policy committee

Jing Zhao, who owns 12 shares of Tesla, has proposed a public policy committee to "oversee the Company's policies including human rights, environment, domestic governmental regulations, foreign affairs and international relations affecting the Company's business."

Zhao argues that "many companies, such as the dead Yahoo and the troubled facebook [sic], failed without a public policy committee. The Company's current Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are not adequate to deal with the new age of global competition, confusion, conflicts and confrontation. The Company needs not only an independent Chairman (or Chairwoman), but also a public policy committee.."

Tesla's board does not support the proposal, arguing that it already has the necessary powers to guard against public policy issues.

"Ultimately, the Board is responsible for overseeing the major risks that we face, and its members represent a unique collection of diverse backgrounds and experience in a variety of industries that allows them to react to new risks and business conditions," it said in an opposing statement.

Goldman Sachs is sending much less mail to potential Marcus customers. A senior exec lays out the reason why.

Mon, 06/10/2019 - 4:00pm

  • Goldman Sachs has slashed the number of direct mailings it sends out to attract new customers to its Marcus personal loans product.
  • The slowdown is a result of enacting a "test and learn" philosophy to marketing and choosing those strategies that offer the greatest reward, according to Omer Ismail, head of consumer digital finance in the Americas for Goldman's Marcus division.
  • At Business Insider's IGNITION: Transforming Finance event on Monday, Ismail said the bank will modulate its use of various marketing strategies based on the success it's having.
  • Visit Business Insider's homepage for more stories

For a long time, direct mail has been a cornerstone of the credit card and consumer lending industry's efforts to attract new customers. The strategy requires sending promotional materials — often glossy brochures or cardboard stock — in the mail to select groups of potential customers. 

Goldman Sachs has followed a similar playbook to boost its consumer lending business. Last December, for example, the bank sent more than twice the amount of direct mail than any other lender, or 49 million pieces, according to Credit Suisse estimates and data from advertising tracker Mintel Comperemedia.

But by February, Goldman's mailings had plunged to 14 million, according to the data. By April, the latest data available, it was still far below previous highs, at 16 million. 

See also: JPMorgan spends $11 billion on technology. But a top exec at the giant bank says some clients don't want it to be a tech company.

While it's not clear why — Bloomberg reported in October that Goldman had slashed its 2019 lending goals for Marcus, the bank could be looking to save money, or it could be something else entirely. Omer Ismail, head of the Americas for Goldman's consumer-finance unit, ascribed it to better success in other marketing channels. Ismail spoke on Monday at Business Insider's IGNITION: Transforming Finance event.

"Direct mail happens to be an important marketing channel, we've used it and we continue to use it, but the truth is we have looked at a lot of different forms of digital marketing," he said. "We will modulate one or the other based on the success that we're having."

He cited a recent campaign where the bank plastered three US train stations with advertising messages and did other outdoor advertising. Last year, it partnered with JoJo Fletcher, who gained fame on ABC's "The Bachelorette," to pitch Marcus loans for home renovations.

It's using a philosophy that Osmail referred to as "test and learn" to figure out what works best for driving customer growth. 

See also: A Goldman Sachs exec explains why the bank isn't sweating concerns over the Apple Card's profitability

One common problem with direct mail is that it can be expensive, pushing up the cost of customer acquisition and making it harder to turn a profit. Financial technology firms often cite such costs as one of the key limiting factors to their growth and Goldman execs including CEO David Solomon have talked about improving the bank's efficiency.

The bank has already spent $1.1 billion on building and promoting the consumer finance operation. 

Goldman has turned to partnerships as a way to gain a lot of customers at once, signing an agreement in 2017 with Intuit's TurboTax software and announcing in March an agreement with Apple to launch a credit card. Harit Talwar, global head of Goldman's consumer business, has said more announcements are in the works and that partnerships is one of three . 

"The other thing that I'd say is when we think about marketing capabilities and growing our business and growing distribution, partnerships is a really important way of doing it," Ismail said. "You continue to see different ways of marketing, both where we are directly acquiring customers and where we are doing it through marquee partners like Intuit and Apple."

Join the conversation about this story »

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The innovation heads at Barclays and Morgan Stanley break down how their firms leverage technology to stay one step ahead of the competitors trying to steal their business

Mon, 06/10/2019 - 3:03pm

  • Innovation executives from Barclays and Morgan Stanley spoke on Monday at Business Insider's IGNITION: Transforming Finance event at the New York Stock Exchange. 
  • Megan Brewer, head of technology innovation office at Morgan Stanley, said her group allows businesses to get input on problems from employees across the bank, as opposed to just those that work directly with it.
  • Mariquit Corcoran, head of partnerships and programs for group innovation at Barclays, added it's important to get employees involved early in the innovation process, and that small changes can sometimes go a long way in terms of improving efficiency. 
  • For more stories like this, visit Business Insider's homepage.

Like a large cruise ship, big banks aren't know for their ability to move quickly or change direction at a moment's notice. Banks' size and regulatory requirements means fostering change is often times a marathon, not a sprint.

However, eager to keep pace with agile competitors cutting into their market share, banks have made efforts to ease the hurdles that come with introducing new technology into their organization.  

Executives at Barclays and Morgan Stanley tasked with leading the innovation efforts at the banks spoke Monday at Business Insider's IGNITION: Transforming Finance event at the New York Stock Exchange about programs they have in place. 

Megan Brewer, head of technology innovation office at Morgan Stanley, said her group provides an alternative to the traditional route taken to innovate within a bank where the business works with its tech partner to come up with a proof of concept. 

Morgan Stanley's technology innovation office has access to 140 leaders with domain expertise across the entire bank. As a result, the group is able to decide if a solution to the problem already exists in another part of the bank, or if it is an entirely new challenge. 

In the case of the latter, over 3,000 technologists have signed on to work on solutions. The majority, Brewer added, are eager to tackle challenges outside of their area of expertise. For example, Brewer said there are a number of machine learning experts that work in the wealth management space who enjoy looking at problems on the institutional side of the bank.

"What we are offering the business is a chance to tap into people who might have different ideas on how to solve their problem," Brewer said.

Read more: Wall Street's massive tech spend has reached an 'inflection point' as billions in investments are starting to pay off

Money, people and lab resources are all made available for the technologists to tackle the problem. Morgan Stanley employees have the ability to launch a public cloud lab from their desktop that gives them access to a variety of tools for working on ideas. 

"We accelerate the time to value on a lot of these ideas because we are able to reduce the barriers they face in trying to get them done," Brewer said. 

She added that employees are motivated to get involved in the program because they'll be able to work on problems outside their day-to-day jobs, allowing them to hone new skills, and get access to senior leaders they might not typically deal with. 

Managers are also motivated as consideration of involvement in the program is baked into Morgan Stanley's talent review and promotion process. 

"You, as a manager, are also getting evaluated on whether you are creating time and safe spaces for your employees to participate in our program or any innovation program within the firm," Brewer said. 

See more: The head of tech for Citigroup's global consumer bank points to 2 key themes for managing its $8 billion tech budget

For Mariquit Corcoran, Barclays' head of partnerships and programs for group innovation, it's all about planting the seed early.

Whether it's public forums in which business leaders voice issues they are face that employees are encouraged to tackle, or internal tools the bank uses to enable employees to pitch ideas, the goal is get them engaged early on. 

"In order to to get colleagues excited about innovation, they have to be able to be a part of it and get involved from the get go," Corcoran said. 

The idea also doesn't necessarily have to be groundbreaking, she added. Sometimes tweaking things is all it takes to make a big difference.

"You always talk about innovation having to be transformational technology," Corcoran said. "We like to say often times it is just slightly changing something someone does that makes getting that job done faster, better, more efficient."

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How to make money from home, without going to an office every day

Mon, 06/10/2019 - 2:59pm

  • It can feel like there are endless ways to make money from home, but being smart about the opportunities you take can make a big difference.
  • Consider how much time you want to put into this job, where your skills would be most effective, and whether the jobs you're finding are legitimate. It's not uncommon for "make money from home" opportunities to be scams.
  • Once you've chosen a job (or two), make sure to spread the word that you're looking for work, and have a plan for the money you make — and don't forget about taxes.
  • Visit Business Insider's homepage for more stories.

Whether you already work a full-time job, stay home with the kids, or are in school, making some extra side money from the comfort of your own home is an easy way to pad your budget.

Before diving right into the plentiful "work from home" market, there are some important things to consider.

How to make money from home 1. Think about your time

It's nice to think you could sit down at your computer, work for an hour or two and make hundreds of dollars, but unless you're highly skilled in a very niche area, the odds of that happening are pretty slim. Most "make money from home" jobs are things that can be done quickly and easily, without much skill, so they don't tend to pay a lot.

If you're just hoping to cash in on whatever free time you have at home that you would otherwise spend trolling Instagram or binge-watching Netflix, then proceed ahead. If you'd really like to make some steady, predictable money, then an actual part-time or seasonal job might better suit your needs.

2. Narrow down your field of work

Google "work from home" and you'll get billions — seriously — of results.

Start your job search by looking through some of the options to narrow down the area in which you'd like to work. There's money to be made by answering online surveys and questions, selling your Instagram photos for marketing campaigns and even hosting dinner parties in your home.

The best way to make the most money from your home with one of these opportunities is to pick one you really think you'll enjoy (and therefore be good at) and really perfect your talent.

3. Weed out the scams

The last thing you want to do is set yourself up with a work from home job only to find out the whole thing is a hoax. Protect yourself by doing your due diligence before signing up with any company.

Signs that a job might not be legit include missing or confusing contact information, overall bad grammar or a sloppy website, high-pressure moves to get you to sign up for the job quickly or a request for personal information — like a Social Security number or bank details — up front.

A quick Google search and a check through the Better Business Bureau will also help give you a better sense of how a company is performing and whether or not it is legit.

4. Sign up for a helpful service

You don't need to navigate the waters of work-from-home jobs all by yourself. These days, there are plenty of services that can help. For example, sites like FlexJobs, ZipRecruiter and Glassdoor allow you to customize your search for work-from-home options.

5. Get the word out

Using online sites is the best way to see what's available to the general public, but getting the word out with your former coworkers, current colleagues, and friends that you're looking to make a little extra cash while working from home is a good way to hear about any other potential opportunities that might not even be listed online.

6. Set yourself up for success

Once you've narrowed down a job field and put some feelers out, make sure you have all the resources you'll need to make the most money while working from home. This could mean upgrading your computer, downloading apps on your phone, making sure you have good cell service or installing a home line. Just be sure to have a plan to at least make back whatever money you have to sink into preparing for your new side job.

7. Have a plan for that money

Once you've found a job that's making you money while you work from home, be sure to use that cash for what you originally planned to use it for. If you want to funnel any extra money directly into savings, set up a separate savings account and plan to make the move from checking to savings once or twice a month so that you aren't tempted to spend it.

If you want to use it help pay down debts, try putting the money directly towards those debts as soon as it comes in.

8. Don't forget about taxes

If the money that you are making through your work-from-home side job isn't taxed, you'll need to remember to handle that on your own. Consider setting up a separate savings account and putting a certain percentage into it from each paycheck to go towards quarterly tax payments.

An accountant can help you determine whether or not you'll actually need to make quarterly tax payments based on how much you expect to make, as well as how much you should save for taxes based on where you live and other factors.

Join the conversation about this story »

NOW WATCH: The world's tallest mountains like Mount Everest and K2 have a 'death zone' — here's a first-hand account of what it's like

Tesla's monster rally rages on as analysts make an about-face ahead of the carmaker's annual meeting (TSLA)

Mon, 06/10/2019 - 2:45pm

  • Tesla surged on Monday after logging its best week since October.
  • Some analysts are becoming increasingly optimistic over the demand picture for Tesla's cars after fears over demand drove shares lower by 46% this year. 
  • One Tesla analyst upgraded the stock on Monday after he came away from meetings with electric-car makers in China more positive about demand there.
  • The rally comes as Tesla is scheduled to host its annual shareholder meeting on Tuesday.
  • Watch Tesla trade live.

Tesla shareholders, rejoice. 

Shares of the electric-car maker jumped by as much as 6% on Monday after a blockbuster week for the stock amid a string of positive commentary surrounding demand for Tesla's vehicles — one of the core issues that's plagued the stock in recent months.

Last week, Tesla posted its biggest weekly gain since October, surging by 10.5% and outperforming the broader market as stocks logged their best week of the year. Also buoying investor sentiment was a positive story about North American deliveries on the news website Electrek, Craig Irwin, an analyst at the investment firm Roth Capital, said. Electrek tends to cover Tesla in a positive light.

"While we believe rising battery costs are likely to be a 2019 margin headwind, demand from China will likely be stronger than most anticipate, reducing the potential for lowered 2019 unit guidance," Irwin told clients on Monday.

He upgraded Tesla to "buy" from "neutral" after coming away from four meetings with electric-vehicle producers in China more positive about demand there. This marks something of a change in tone for the analyst, who previously cut his price target twice this year amid several disappointing developments for the automaker.

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Other analysts have recently expressed optimism ahead of the company's annual shareholder meeting scheduled for Tuesday. Wall Street's increasingly positive view follows months of analysts cutting their earnings estimates, price targets, and investment ratings en masse.

Joseph Osha, a JMP Securities analyst and one of the more bullish Tesla voices, told clients last week that his checks show Tesla's second quarter looks better than the first, which was a massive disappointment for investors.

"The numbers show that more Model 3s were registered in April and May than during all of the first quarter, and it is important to note that Tesla's quarterly vehicle deliveries are typically back-end loaded," Osha told clients last week. "Demand for the Model 3 continues to be solid."

Read more: The investment giant that was once Tesla's biggest Wall Street backer cut its stake in half last year. Now it's dumped most of what was left.

Another prominent Tesla watcher, the Morgan Stanley analyst Adam Jonas, said in May the stock could fall to $10 in a worst-case scenario. But in his latest note, he told clients he believes weak demand is "largely temporary." 

"For the remainder of 2019, we expect a significant sequential improvement in demand driven by: continued European ramp, greater availability of leasing, Model S/X refresh, introduction of lower priced models and a number of price reductions," Jonas wrote last week.

Still, some investors are still betting the stock could tumble from current levels.

An unnamed investor on Monday effectively assumed a big short position in Tesla with a complex options strategy, an analysis from Susquehanna derivatives strategists showed.

"While not stock impactful at the time, the trading is interesting as it indicates where the investors think the bottom could be in shares (at month-end) and expresses a willingness to buy 800k shares there," about 13% below current levels, the strategists led by Alison Edwards wrote. "Further, it follows investors last week similarly getting short ~22k JunQ 190 puts."

Tesla is down 35% this year. 

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

Stocks are popping on Trump's Mexico tariff suspension. But the market's still littered with major risks, experts warn.

'We're going to get rolled': Billionaire investor Stanley Druckenmiller breaks down why the US is headed for devastating losses to China in the trade and tech wars

We just got the latest evidence Trump's trade war is throwing a wrench in business plans

Join the conversation about this story »

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Here's what the tallest residential building in NYC will look like when it's completed in 2020

Mon, 06/10/2019 - 2:39pm


The tallest residential building in New York City just listed its first condos for sale.

Central Park Tower, which sits at 225 W 57th Street on Billionaires' Row along the southern end of Central Park, surpassed 432 Park Avenue in height this spring, making it the tallest residential building in the city — and one of the tallest in the world.

When it's completed in 2020, the luxury skyscraper will stand at 1,550 feet.

Read more: I spent a day on NYC's Billionaires' Row. Here's your ultimate guide to one of the city's glitziest streets, which borders Central Park and is home to the most expensive apartment ever sold in the US.

The first seven condos listed in Central Park Tower include a two-bedroom for $6.9 million, a three-bedroom for $18.8 million, and a five-bedroom on the 112th floor for $63 million.

Central Park Tower, from Extell Development and Adrian Smith + Gordon Gill Architecture, will house 179 luxury condos starting on the 32nd floor. The building will also include the exclusive Central Park Club with 50,000 square feet of amenities spread across three floors, and a new 320,000-square-foot, seven-story Nordstrom New York flagship store. 

Here's a peek at what Central Park Tower will look like when it's finished in 2020. 

SEE ALSO: I spent a day on NYC's Billionaires' Row. Here's your ultimate guide to one of the city's glitziest streets, which borders Central Park and is home to the most expensive apartment ever sold in the US.

DON'T MISS: Jeff Bezos is reportedly looking to drop $60 million on an NYC apartment, but he already owns 4 condos in the city — look inside the building where he owns $13 million worth of real estate

Central Park Tower sits at 225 W 57th Street on Billionaires' Row in New York City, along the southern edge of Central Park.

In wealthy cities around the world, from New York to London to Los Angeles, a certain ritzy neighborhood or street is being given an extravagant nickname: Billionaires' Row, which refers to a part of the city where some of the richest people live in ultra-expensive homes.

The building is one of a bevy of super-tall luxury skyscrapers rising along Billionaires' Row that are home to some of the most expensive residential real estate in the world. Some were recently finished, and others are still under construction.

Central Park Tower's neighboring buildings have sold multimillion dollar condos to high-profile buyers including Dell Technologies founder Michael Dell, Chinese billionaire Liu Yiqian, and billionaire Ken Griffin, who broke the record for the most expensive home ever sold in the US when he bought a $238 million penthouse at 220 Central Park South.

The newest renderings of Central Park Tower show a grand lobby outfitted with the finest finishings.

The tower was designed by Adrian Smith + Gordon Gill Architecture (AS+GG), with interiors by Rottet Studio.

Central Park Tower will include 179 ultra-luxury residences ranging from two- to eight-bedroom residences.

The first seven condos available in Central Park Tower today include a two-bedroom for $6.9 million, a three-bedroom for $18.8 million, a four-bedroom for $33.38 million, and a five-bedroom on the 112th floor for $63 million.

The living spaces are placed in the corners of the residences to maximize the views of the city and Central Park, according to the developer.

The homes are clearly designed with the striking views at top of mind.

The residences start on the 32nd floor and are outfitted with floor-to-ceiling windows.

In addition to the 179 residences, Central Park Tower will include the exclusive Central Park Club.

The private club will offer 50,000 square feet of luxury amenities spread across three floors, including a 14th-floor terrace with a 60-foot swimming pool, a sundeck and cabanas, and poolside food and drink service.

The club will also have its own fitness and wellness program.

The wellness amenities include an indoor pool, a spa offering massages, facials, and body treatments, and a fitness center with private swimming classes, coaches, and personal training services.

In addition to the lavish amenities available to residents and club members, Central Park Tower will house a new 320,000-square-foot, seven-story Nordstrom New York flagship store. 

WATCH LIVE — IGNITION: Transforming Finance livestream from the New York Stock Exchange on June 10

Sun, 06/09/2019 - 5:42pm

IGNITION: Transforming Finance is happening next Monday, June 10, at the New York Stock Exchange, featuring conversations with top executives and innovators who are disrupting Wall Street from within.

Starting at 8:00 a.m. sharp, some of the brightest minds in finance will break down the hype around AI, big data, blockchain, and crypto, and share how they're mining value from these and other fintech opportunities.

Programming will include:

  • Omer Ismail, Head of Consumer Digital Finance in the Americas, Marcus by Goldman Sachs, in conversation with Dakin Campbell, Senior Finance Correspondent, Business Insider
  • A conversation moderated by Meghan Morris, Senior Finance Reporter, Business Insider with:
    • Lucien Foster, Head of Digital Partnerships, BNY Mellon
    • Huw Richards, Global Head of Digital Investment Banking, J.P. Morgan
  • A discussion moderated by Alyson Shontell, US Editor-in-Chief, Business Insider featuring:
    • Megan Brewer, Executive Director and Head of the Technology Innovation Office, Morgan Stanley
    • Mariquit Corcoran, Managing Director and Head of Partnerships and Programmes for Group Innovation, Barclays
    • Gavin Michael, Head of Technology, Global Consumer Bank (GCB), Citi

Tune in to the livestream on Monday morning right here, and join the conversation on Twitter by using the hashtag #IGNITIONFinance.

SEE ALSO: Apply to attend IGNITION: Transforming Finance at the New York Stock Exchange on June 10!

Join the conversation about this story »

In the worst opening weekend ever for an 'X-Men' movie, 'Dark Phoenix' made just $33 million

Sun, 06/09/2019 - 12:16pm

  • "Dark Phoenix," the latest installment in the "X-Men" franchise, brought in $33 million at the domestic box office, the worst in franchise history.
  • However, the movie did make over $100 million at the international box office, making it the number one global release for the weekend and tops in 36 markets, including China.
  • Universal's "The Secret Life of Pets 2" won the weekend domestically with $47.1 million, however, underperformed as projections had the movie earning around $60 million.
  • The summer is turning into a feast or famine season, as big weekends like "Avengers: Endgame" and "Aladdin," follow weak ones, like the modest opening by "Godzilla: King of the Monsters."
  • Visit Business Insider's homepage for more stories.

If there was any doubt that Disney would do a complete overhaul of the "X-Men" franchise after acquiring Fox, that's all been erased after this weekend.

The latest movie in the franchise, "Dark Phoenix," earned an estimated $33 million in its opening weekend at the domestic box office, marking the worst first weekend ever for the franchise. Previous to this, the lowest opening for an "X-Men" movie was 2013's "The Wolverine" with $53.1 million.

It's a sad end to the famous Marvel characters that fueled the box office at Fox for two decades. Now under Disney, the IP will be added into the studios' Marvel Cinematic Universe under Marvel Studios. But first, Disney will have to take its lumps from the release of "Dark Phoenix."

The first sign of major trouble for the movie came from critics who gave "Dark Phoenix" the worst Rotten Tomatoes score in the franchise's history with 23% (the verified audience score is 65% on the site). Then the movie only brought in $5 million at its Thursday night preview screenings, hinting that the movie would be the first in the franchise to not have a $50 million opening.

Friday's $14 million take, the lowest opening day tally for the franchise, confirmed that the weekend would be really bad for the movie.

But like many of the "X-Men" movies before it, the saving grace for "Dark Phoenix" is its international box office. The movie brought in $107 million internationally, hitting its projection. The movie was number one movie globally with $140 million and was tops in 36 markets, including China.

Capitalizing on the major fail by the X-Men was Universal's "The Secret Life of Pets 2."

The latest release from the studios' animation arm, Illumination (also behind the "Despicable Me" movies), brought in $47.1 million to win the weekend box office. But it was largely disappointing as it also came in under its projected $60 million opening and was a huge drop (over 50%) from the opening of the 2016 original, which had a $104 million first weekend and went on to earn over $875 million worldwide.

The underwhelming performances by "Dark Phoenix" and "Secret Life of Pets 2" points to a growing feast or famine trend happening this summer season.

Read more: "Dark Phoenix" is the worst-reviewed "X-Men" movie of all time, but international box office could save it

While last year it seemed everything met or exceeded projections, this summer so far we have weekends that are huge hits — like the openings for "Avengers: Endgame," "John Wick: Chapter 3 - Parabellum," and "Aladdin" — or underperformers like "Godzilla: King of the Monsters" and now "Dark Phoenix" and "Secret Life of Pets 2."

Next weekend will be another test for the summer box office when Sony releases "Men in Black International," the first release in the franchise in seven years.


SEE ALSO: Inside Kevin Hart's 10-year journey to make his production company into a Hollywood hit maker

Join the conversation about this story »

NOW WATCH: The true story you probably don't know behind 'Godzilla' came from the devastation after Hiroshima and Nagasaki bombings

I have 26 credit cards — here's how I decide which one to use

Sun, 06/09/2019 - 12:15pm

Business Insider may receive a commission from The Points Guy Affiliate Network if you apply for a credit card, but our reporting and recommendations are always independent and objective.

  • The author, Holly Johnson, has 26 credit cards, but she uses a specific formula to determine which one to use.
  • Johnson keeps her eye out for credit card bonus categories on specific types of purchases, particularly when it comes to cards that offer 5% back in categories that rotate each quarter.
  • While rewards are great, there are times when it makes sense to use a specific credit card to gain consumer protections or free insurance benefits instead.

My husband and I have 26 different credit cards across our personal profiles and business accounts. I'm painfully aware of how crazy that sounds, but to me, it feels totally normal.

We have credit cards for different businesses we own, and we each have several of the same rewards cards we use to rack up airline miles and flexible travel points. I'm organized, so keeping track of a slew of different cards and their details isn't a big deal.

Still, we never carry them all — not even close. In fact, I only carry three or four credit cards with me when I go somewhere, even though sometimes I do trade cards in and out of my wallet. And even that might sound like too many for some people, but keep in mind that each card has a purpose.

Here's how I decide which credit card to use for everything I buy:

Which card offers the most points or miles?

Since I mostly use credit cards to earn rewards, the first question I ask myself is which of my favorite cards will dole out the most points or miles for any purchase.

I always use my beloved Chase Sapphire Reserve card for travel and dining purchases, but I will sometimes use my Barclaycard Arrival Plus World Elite Mastercard for regular purchases so I can earn 2x miles for every dollar I spend. And of course, I always use my Hilton Honors Aspire Card from American Express for Hilton Hotel stays since I earn 14x points for each dollar I spend.

Do any bonus categories apply?

Then there's the question of bonus categories, which I mostly focus on with my Chase Freedom card. Like the Discover it® Cash Back, this card gives you 5% back on up to $1,500 spent in categories that rotate each quarter once you activate, plus 1% back on all other purchases.

The Chase Freedom categories are usually ones I can utilize, although they change every quarter. For April of June of this year, for example, I am using my Chase Freedom more than normal to earn 5% back at grocery stores and home improvement stores. I can easily max this category out through grocery spending alone, so why not?

Do I need access to insurance or travel perks?

Still, there are times when I use credit cards for the consumer perks more than the rewards. When I'm booking travel and especially airfare and car rentals, for example, I always use my Chase Sapphire Reserve. This is due to the myriad travel benefits it offers, including primary auto rental coverage, trip cancellation/interruption coverage, baggage delay insurance, trip delay reimbursement, lost luggage reimbursement, and travel and emergency assistance.

When it comes to the insurance benefits specifically, you only qualify for coverage "when the common carrier fare for the transportation has been charged to an eligible Chase card or purchased with rewards earned on an eligible Chase card," according to Chase. In other words, you have to pay for travel with your Chase card to get Chase benefits. Fortunately, the Chase Sapphire Reserve offers 3x points on travel purchases (excluding its $300 travel credit) so it's a good card to use anyway.

Believe it or not, my husband and I have had to use this coverage before. We wound up stranded in Jamaica for two extra days a few years ago when a snowstorm blanketed the southern US. This meant paying for two extra nights at our all-inclusive hotel plus a few airport meals. I submitted our claim through our Chase Sapphire Preferred Card, which is what we paid with at the time, and I was reimbursed for all the charges within a few weeks. Ever since then, I've been extra careful about paying for travel with a card that offers different types of travel insurance. You never know when you'll need it!

The bottom line

Having a lot of credit cards may not be for everyone, but I'm happy with the perks we get in return. Not only do we earn travel rewards we use to see the world, but we get consumer protections and insurance that helps make travel a lot less stressful.

However, you may notice that I never consider credit card interest rates before I make a purchase. That's because I'm 100% debt-free and plan to stay that way. Before you jump into credit card rewards, you should make sure you're free of consumer debt.

Curious which credit cards I use the most and why? Here are some of my favorites:

Join the conversation about this story »

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More rich millennials are abandoning New York than any other state — and they're not the only ones fleeing the high cost of living

Sun, 06/09/2019 - 11:45am

Rich millennials are over New York. 

According to a new SmartAsset study, New York is the number one state rich millennials are moving away from. The report used data from the IRS 2015 to 2016 tax year to take a look at the states wealthy millennials are moving to.

It defined rich millennials as those individuals younger than 35 who have an adjusted gross income of $100,000 or more. SmartAsset ranked each state by net migration, which it determined by subtracting the number of millennials moving out of the state from the number of millennials moving into the state.

It found that 4,867 rich millennials left New York during the one-year period — 10,048 moved into the state, while 14,915 moved out.

That's more than twice the number of rich millennials who, in the same time period, left Illinois, the state that saw the second-largest amount of rich millennials moving out (2,248). About 35% more rich millennials left New York than moved to California, which ranks as the state attracting the most rich millennials, AJ Smith, SmartAsset's VP of Financial Education, told Business Insider.

Even their less affluent generational peers aren't drawn to New York — or at least not to its namesake city. A previous SmartAsset report tracked the top cities millennials were settling in, and New York City didn't even make the top 25.

Read more: NYC is getting so expensive that even Wall Street bankers are bolting — and it's not the only major city the wealthy are abandoning

Rich millennials aren't the only wealthy demographic abandoning the state. New York City's high cost of living is causing multimillionaires — particularly wealthy bankers — to flee to more affordable states, John Aidan Byrne of the New York Post reported. In 2016, New York lost $8.4 billion because of residents moving to other states, according to Byrne. 

According to Zillow, the city's median rent of $3,400 is twice the national median rent. The city's real-estate market has gotten so expensive that residents are living in vans or houseboats instead of traditional homes. And those who can buy are forgoing apartments in the sky for basements, where they can get more space for their money, reported Stefanos Chen for The New York Times.

SEE ALSO: The top 18 states rich millennials are moving to

DON'T MISS: Forget New York — these are the 10 surprising cities millennials are moving to

Join the conversation about this story »

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I'm not against buying a house, but I know that right now renting is the best choice for my family for 3 reasons

Sun, 06/09/2019 - 11:30am

  • The author, Brynne Conroy, rents a two-bedroom duplex in the Pittsburgh suburbs.
  • She scored a good deal on rent by watching the market and turning her bonus room into a third bedroom sans closet.
  • She enjoys renting now for its flexibility, but will likely buy in Pittsburgh's stable housing market in the future.
  • Visit Business Insider's homepage for more stories.

About a year ago, I moved my family from our home in the city of Pittsburgh up to the Steel City's northern suburbs.

I had been relatively sheltered from rent increases by staying put in one apartment over the past decade, so I knew my rent was going to be going up regardless of where I moved. I was moving with my two, school-aged children, so if the place was a two-bedroom they'd just have to share a room.

Or at least that was the plan.

When I went to view the duplex where I ended up living, I was pleasantly surprised to discover there was a fully finished bonus room that was originally supposed to be the garage. It didn't have a closet, so it couldn't be marketed as a three-bedroom, but I moved my wardrobe in and claimed it as the master. My children each have their own rooms without me having to pay a three-bedroom price.

For now, I know this is a good fit for us, and although I'd like to buy a house one day I don't mind renting for three reasons:

We're living where we need to be right now

As my children aged, it became apparent the school district couldn't meet their educational needs long-term. I had to move, and because of the way Pennsylvania schools are funded, I had to be very careful about where I moved. Two school districts can be adjacent to each other and have a completely different quality of education.

I knew where I needed to live for their sakes. Besides great schools, the northern suburbs have the best commute in the city, helped along by the only HOV lane in the metropolis. But I also knew the area was expensive. I sat and watched rent trends in the area, and hopped on the opportunity for a two-bedroom under market.

How much would owning a home cost you right now? Find out with these offers from our partners:

I don't have to put all my energy — and money — toward home repairs

There's also the added benefit of not being responsible for maintenance. I do have to mow the lawn, but when my oven stopped working I didn't have to foot the bill for repairs. When the HVAC professional had to come over to get the heater working again in the winter, my pocketbook didn't flinch.

The flexibility of renting suits our lifestyle right now

I moved into my duplex during a divorce. I wasn't sure what was going to happen next as far as life plans even 12 months out, so renting made more sense than buying.

While I greatly appreciate the flexibility that renting presents, I'm not opposed to buying in the future. Pittsburgh's housing market is one of the most stable in the nation, making housing relatively attainable depending on where you live and how much gentrification is happening in the area.

As in most American cities, we have a housing shortage which disproportionately affects low-income residents, but if you have an income which allows you to save up a down payment, buying often wins out over renting long-term as far as the numbers are concerned.

For right now I appreciate the flexibility renting provides as I figure out my new life. I love where I live, and love not having to deal with unexpected costs when an appliance breaks down. My children are getting the education they need, and I have no plans on leaving anytime soon. When life becomes a little more predictable, I'll start saving up a down payment for my first home.

Join the conversation about this story »

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It is not a surprise that Apple has been accused of price-fixing — just look at its history (AAPL)

Sun, 06/09/2019 - 9:44am

  • Apple was sued last week by app developers who believe there should be more competition in the App Store.
  • The company has a long history of controlling access and setting prices in new marketplaces it creates.
  • Apple has previously been sued — successfully — for fixing prices in the e-book business.
  • Apple's top executives were "extremely angry" about that decision, and will "never get over the case," their lawyers said.
  • Apple also successfully fought a suit that claimed it prevented competition for songs on iTunes.

It was not a surprise when Apple was sued last week by app developers who believe there should be more competition in the App Store.

That's because Apple has been accused of price-fixing or monopolistic abuse before, once regarding their control of e-book prices in the iBookStore developed for iPad, and once around the way Apple prevented rivals from selling music that can be played on the iPod and in iTunes.

In the most recent case, the developers of the "Pure Sweat Basketball" workout app and "Lil' Baby Names," a newborn-naming app, allege in a lawsuit filed in a California federal court that Apple's total control of the App Store, and the pricing regime inside it, stifles competition. Apple also faces a consumer class-action lawsuit in the US on the same issue.

It is not possible to have your app compete on price in the App Store by charging 50 cents

Their argument looks like this: Apple does not allow anyone else to operate the App Store's gateway function. Neither Amazon nor Facebook, for instance, are allowed to distribute their developers' apps in the App Store. Everything has to go through Apple. Apple thus faces no price competition on the 30% cut it takes from all in-app revenue. Competing app distributors can't offer developers a more generous 20% cut to Apple's developer-customers. And Apple also charges a flat $99 fee for developers, which is non-negotiable and — you guessed it — is not exposed to any kind of marketplace competition.

Apple also controls the 99 cent pricing structure for apps and in-app purchases. It is not possible to have your app compete on price by charging 50 cents. (Developers must charge at least 99 cents, and can only charge prices higher than that if the price ends in $.99, the lawsuit claims.)

In its defence, Apple points out the obvious: There is competition. Developers can work with Google if they prefer. Apple built, owns, and maintains the App Store, and thus has a right to charge a fee for developers who want to use it. Neither of these developers would even exist had Apple not built the iOS App Store and launched it, in 2008.

"Developers set the price they want to charge for their app and Apple has no role in that. The vast majority of apps on the App Store are free and Apple gets nothing from them. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store. Developers have a number of platforms to choose from to deliver their software – from other app stores, to Smart TVs to gaming consoles," Apple says.

But the lawsuit does raise some basic questions about what a monopoly looks like: Why doesn't Apple allow non-Apple competition from app distributors inside the App Store? And why aren't apps allowed to compete on prices?

Apple's conspiracy to control book prices

This has happened before.

In 2016, a court ruled that Apple should pay $450 million in damages because Apple fixed the prices of e-books sold in its iBookStore.

In that case, a federal judge concluded that Apple organised a conspiracy with book publishers that resulted in the typical price of an e-book on the iPad rising from $9.99 to $14.99, almost overnight. And when I say "conspiracy," it was literally a conspiracy: Apple media SVP Eddy Cue took a series of secret meetings with New York book publishers in which they all agreed to raise e-book prices rather than let the market sort it out. Some publishers deleted their internal emails in the hopes of keeping the conspiracy from the public. And Steve Jobs all-but admitted to a reporter that he knew that all e-book prices "will be the same" after the iPad launched.

Crucially, Apple leveraged its 30% cut to get the book publishers to agree to go along.

Why did Apple prevent music labels from setting their own prices?

The new App Store lawsuit has a lot of parallels with a long-running class action lawsuit, which Apple won, called "The Apple iPod iTunes Anti-Trust Litigation."

The suit originated in the prehistoric era before the iPhone was invented. When Apple founder Steve Jobs launched the iPod, he persuaded all the record companies selling music for it to agree to a set range of prices — 79 cents, 99 cents and $1.29, with equivalents in local currencies. The prices were, literally, fixed. He also made sure that music could only be bought and played on the iPod if it had come from Apple's iTunes store (or from a commercial CD). Generally, users were prevented from playing their own music collections — which at the time often came from pirate copies obtained via Napster — on their iPods.

But Real Networks — a digital media company that was a big deal in the late 1990s and early 2000s — found a way to sell songs from its Real Music shop that could be played on iPod. Apple immediately changed its software to prevent Real songs from being played on an iPod. The litigation went on for years, and Apple finally won when it discovered that the two lead plaintiffs had not actually bought iPods during the time period in question.

Although Real's litigation strategy was based on a catastrophic error, the heart of the case raised a legitimate question: Why was it that no one else could sell songs that could be played on Apple products? And why had Apple prevented music labels from setting their own prices?

Apple has a clear strategy for markets on its devices

In all three cases, Apple did broadly the same thing:

  • Create a new marketplace over which Apple was the sole gatekeeper.
  • Prevent outside companies from competing in that marketplace.
  • Set the prices of the products inside the marketplace.

Previously, these cases have tended not to succeed. Courts took a common-sense line, which is to say that they ruled Apple had created a product with a simple pricing structure, and the market could take it or leave it. It is hard to demonstrate that consumers who choose to buy an app for 99 cents are being "harmed" in some way.

But now that the European Union has carved into Google's abuse of its monopoly on search, advertising, and Android, the atmosphere has changed. The US government is looking afresh at whether tech companies are abusing their dominance by reaching into markets they have no business in — music, books, app development — and controlling or stifling competition there.

Apple will 'never get over the case'

This is not a mere technicality for CEO Tim Cook and his crew. It is the core of their business, and they take it personally. Apple executives were chided by the judge in the e-books case for being "less than forthcoming" in their testimony. Later, documents in the case said that Apple's top executives remained "extremely angry" about the decision, and will "never get over the case."

So expect Apple to fight the App Store case tooth and nail.

Join the conversation about this story »

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Wall Street's 'inflection point,' the Vision Fund's power players, and secret messages

Sun, 06/09/2019 - 9:38am


Wall Street has reached an "inflection point." After years of spending big on tech, America's biggest banks are starting to see that investment pay off. 

Citigroup CEO Michael Corbat recently said his firm reached a turning point last year in which its $8 billion tech budget, part of which is used for streamlining its operations to "shrink the cost of running the bank," started to pay off in meaningful net savings.

"Last year, we crossed the inflection point of actually getting net savings on that," Corbat said

And at a recent conference, Gordon Smith, JPMorgan's president and consumer-banking chief, raved about the savings that were materializing within his division.

"In all of the years that I've been doing this, I've never seen the impact that technology is having on our business segment be so positive, be so sustainable and have such longevity," he said. 

Similarly, Howard Boville, Bank of America's chief technology officer, told Dan DeFrancesco that Bank of America now saves $2.1 billion in infrastructure costs thanks in large part to its transition of workloads to its private cloud in 2013

On the topic of transformation in finance, we're hosting our IGNITION: Disrupting Wall Street from within event at the New York Stock Exchange on Monday. You can tune in to our event livestream, broadcasting live starting at 8:00am sharp.

I'll be at the event, along with our editor-in-chief Alyson Shontell, and our finance team led by Olivia Oran. Come say hello if you're attending. 

And speaking of tech, Google struck its first deal under new cloud boss Thomas Kurian this week, buying Looker for $2.6 billion. Kurian said the deal gives the company's customers better tools for making sense of the massive amounts of data they hold — whether that data is stored on Google Cloud or with rivals like Amazon Web Services or Microsoft Azure.

Industry insiders had predicted Kurian would do deals, and the reaction to the Looker deal was generally positive, with some saying it would give Google Cloud more of a competitive edge against Microsoft, Amazon, and Oracle. Megan Hernbroth talked to some of the investors getting richer off the deal.

As always, you can contact me at if you have any ideas or suggestions. You can also find me on Twitter and LinkedIn

-- Matt

Quote of the week

"There's a way to do [mergers] and there's a way not to do them. The vast majority of people get it wrong." — Martin Flanagan, CEO of Invesco, on the surge in acquisitions in the asset management business

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Etsy exec explains why the company has a huge advantage over everyone else who tries to copy it

Sun, 06/09/2019 - 9:38am

  • Other online stores have their own handmade or vintage shops, but Etsy remains the first one most people think of.
  • That's because it has placed a special emphasis on these goods, which has required a lot of innovation specifically for these unique items that can't be easily categorized or inventoried.
  • Etsy completely changed how it ranks its search results for buyers, and it's resulted in hundreds of millions of additional gross sales.
  • Visit Business Insider's homepage for more stories.

Etsy would like you to know that it stands alone.

Though other websites with handmade and vintage marketplaces like Amazon Handmade or Ebay have tried to imitate Etsy, it still remains the go-to for these goods.

"If I asked you like, 'Where do you go to find special?' Those names don't pop in your head," said Etsy's CTO Mike Fisher. "But Etsy pops in people's heads as a special place."

After a major reorientation of the business two years ago, Etsy has made serving these sellers of handmade objects — and the customers who buy them — its top priority.

One example is Etsy's reforming how the search on its site works to show more relevant results to its shoppers.

"We don't have a catalog that a lot of e-commerce shops have, or SKUs that one person fills in the description. Our sellers write their own descriptions, and these are unique items," Fisher said. "Our search becomes infinitely more difficult because of that."

Read more: I ordered the same items from Amazon and Walmart to see which one does e-commerce better — and they both had major flaws

So, using machine learning powered by Google's cloud computing muscle, Etsy has instead instituted a program called context-specific ranking that uses keywords sellers tag to re-rank listings according to a buyer's past behavior. 

"We take searches from the past and what people look for — the terms — and we analyze that based on what they've clicked, favorited, added to cart, purchased, and so forth," Fisher said.

It doesn't re-rank all the search returns — only the top 800. But the first page is where 83% of purchases happen anyway, Fisher said, making it still very impactful.

In fact, he said, it added $260 million to 2018's gross sales on Etsy in over the year prior.

Now, Fisher is figuring out how to put that data and machine learning to work on things like personalized recommendations for buyers.

Sure, other companies can copy this approach, but it requires a lot of data, resources, and focus to pull it off.

"If we had SKU and catalogs and stuff like that, we would be [just] another e-commerce shop," Fisher said. "Because we're not that. What makes us unique, that you don't come to us for the commodities, you come to us for that special item."

SEE ALSO: eBay exec reveals a key advantage for sellers choosing the site over rivals like Amazon

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One of Lyft's early investors explains why he opted for the smaller company over Uber, and which growth metrics he'll be watching in the coming quarters (LYFT, UBER)

Sun, 06/09/2019 - 9:33am

  • Autotech Ventures invested $120 million in Lyft in 2016, a stake that could now be worth three times the size.
  • Cofounder Alexei Andreev told Business Insider that the fund opted for Lyft over Uber because of its focus on customer experience.
  • You can read his full interview with Business Insider here.

When Autotech Ventures invested in Lyft in 2016, the company was already worth $4.5 billion and beginning to snap up market share from Uber in the United States.

Uber, meanwhile, was already netting valuations of more than 10 times that of its smaller ride-hailing competitor.

Still, Alexei Andreev, cofounder of the VC fund that manages about $200 million in capital, stands by his decision to go with the smaller of the two.

"First, we definitely knew Lyft better through John Zimmer, we had barbecues many times together and felt really good about it," Andreev said in an interview with Business Insider. "He graduated from the hospitality department at Cornell so he's very focused on customer experience. At the end of the day, you have to make sure your customers are happy and keep them coming back to you after having a positive experience."

Read more: A transportation investor overseeing a $200 million portfolio reveals the biggest opportunities coming to the industry

Autotech would end up investing $120 million from its first fund into Lyft in early 2016, a stake it still holds today. Back-of-the-envelope math suggests that at the company's current market value post-tumultuous IPO, the firm's stake could be worth approximately $360 million, provided no shares are sold when the 180-day lockup period ends.

Lyft's stock price has stabilized somewhat after sliding dramatically in its first month of trading. Going forward, Andreev says he'll be looking for the company to entice riders to take more rides on the platform.

"We'll be watching for repeat customers, or the number of times people are using Lyft normalized for customer growth," he said. "How many times on average per month is a customer booking rides, and what is the company's cost for customer acquisition."

Despite some very small players operating in niche markets, Andreev says the major ride-hailing industry is likely down to just Uber and Lyft.

"Personally I believe we are down to two players," he said. "If they act rationally, both companies should be in great shape financially."

You can read Andreev's full interview with Business Insider here »

SEE ALSO: 2 of Uber's top executives have left the company

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NOW WATCH: This company turned the Model S into the first official Tesla race car

Rich New Yorkers are fleeing to Miami to escape high taxes. I spent 3 days there, and it was immediately clear why so many people are making the move.

Sun, 06/09/2019 - 9:07am

More and more rich New Yorkers are ditching the northeast for sunny Miami.

High-net-worth individuals and families from high-tax states like New York, New Jersey, California, and Illinois are moving to the Miami area to take advantage of Florida's status as a no-income-tax stateDora Puig, a top real-estate broker in the area, previously told Business Insider.

I recently spent three days in Miami, touring exclusive private islands, waterfront mansions, and a $48 million penthouse. I spent an afternoon on Fisher Island, a members-only island that's one of the most popular destinations for affluent New Yorkers moving to the area. It's also the richest zip code in the US, with an average income of $2.2 million.

It didn't take long for me to see why wealthy New Yorkers are moving to Miami.

Millionaires from New York can save more than $1 million in taxes by relocating to Florida.

President Donald Trump's 2017 tax overhaul capped the amount of state and local tax deductions at $10,000, which hit wealthy homeowners in high-tax states like New York and California particularly hard and prompted many to relocate to Florida.

Read more: How Trump's new tax law affects homeowners at every income level from $83,000 to $336,000 a year

Under the new tax laws, a New Yorker who makes $10 million per year and owns a $10 million home would save almost $1.2 million in total taxes by relocating to Florida, according to Crain's New York Business.

Beyond the tax benefits, luxury home buyers get more bang for their buck in Miami than in New York City.

In New York City, I've toured homes including a $40 million triplex penthouse, a $22 million "sky mansion," and a $58.5 million condo on the 87th floor of a Billionaires' Row tower.

In Miami, after visiting a $48 million penthouse, a $29.5 million waterfront mansion, and a $24 million home on a private island, it quickly became clear that money buys you a whole different type of luxury: The Miami homes are larger and often have generous private outdoor space, as well as waterfront locations, surrounding greenery, and swimming pools. 

The $48 million penthouse I saw in Miami Beach, for example, spans 11,031 square feet across three floors and included a 2,000-square-foot terrace and a private pool. The $58.5 million condo in New York, on the other hand, has a relatively modest 6,234 square feet of living space on just one floor — and not even the top floor.

There's also no private outdoor space, yet it's more than $10 million pricier than the Miami Beach penthouse. While it's hard to say that one is categorically better than the other, what I did find was that your money will simply buy you more space in Miami.

As an added bonus, every single home I visited in Miami had a pool, a rarity in New York City. 

There is one major downside to moving to Miami.

In addition to the tax breaks and the home sizes, there's the simple matter of the weather: Miami has plenty of beautiful beaches to enjoy the temperate weather. New York City has beaches, of course, but they're not nearly as accessible as those in Miami and they lack the same warm waters.


But, while Miami may have a lot of great things going for it, science indicates that the city will likely be partially underwater and unlivable within 80 years due to rising sea levels and increasingly intense storms.

Read moreMiami is racing against time to keep up with sea-level rise

When I asked real-estate agents why wealthy home buyers continue to snap up luxury waterfront homes in Miami, and why developers keep building condominiums right on the water, I was told that people aren't too concerned about the future.

"My clients are not making their home-purchasing decision on what may or may not be 100+ years out," Dina Goldentayer, the executive director of sales at Douglas Elliman in Miami Beach, previously told me. "They want to enjoy their wealth now with their families in their homes."

Then again, New York City is also surrounded by water, making it susceptible to rising sea levels. But, between the two, I can certainly see why millionaires would see Miami as a better bet.

SEE ALSO: Wealthy CEOs and hedge-fund managers are flocking to Miami for the tax breaks, and it's creating massive waiting lists at the area's elite private schools

DON'T MISS: I spent 3 hours walking up Miami's old 'Millionaires' Row,' and I was completely underwhelmed. Here's what it looks like.

Join the conversation about this story »

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The White House is said to be vetting Judy Shelton for a seat on the Fed board. She told us what she would bring to a central bank whose policies she has long criticized.

Sun, 06/09/2019 - 8:36am

  • The White House is vetting former Trump adviser Judy Shelton for nomination to the Federal Reserve Board of Governors, according to reports.
  • The potential nominee has been critical of the central bank and would like to change some of the core ways it operates. 
  • In an interview with Markets Insider, she said she thought it would be "superficial" to solely answer yes or no to whether the central bank was independent, outlined a zero-percent inflation target, and expressed support for the president and his policies.  

The White House is said to be vetting Judy Shelton, a former campaign adviser to President Donald Trump, for a top policymaking position at the Federal Reserve.

The New York Times and Bloomberg reported in May that Shelton is being vetted for the position, and she told Markets Insider she has been contacted by the Office of Presidential Personnel.

In an interview with Markets Insider, Shelton laid out what she would bring to a central bank whose policies she has long been critical of.

The conservative economist said she thought it would be "superficial" to answer yes or no to whether the central bank was independent, said she wanted a zero-percent inflation target, and expressed support for the president and his policies.  

Shelton currently serves as the US director for the European Bank for Reconstruction and Development. 

This interview took place on June 6, 2019. You can read the full interview transcript, edited for brevity and clarity, below. You can click here for articles on the following points from the conversation:

Full interview: 

Gina Heeb: Where exactly are you in the run-up to the — I know you haven't formally been nominated — but I have seen reports that you're being vetted and then I've also seen reports that it's not a sure thing. If you could speak to that.

Judy Shelton: I really can't speak to it. I met with people from the Office of Presidential Personnel. And so, I assume I'm being considered. I'm also reading that I'm being considered.

What I appreciate is that I think that the whole issue is an interesting one and deserves a lot of attention at a time when the Fed itself seems to be asking questions about our models working or are mechanisms delivering the best economic performance potential. Because it's not that the Fed creates economic growth, but I think it's an important part of having the conditions out there that make it possible to generate a productive economic growth. They're all really important issues.

I also think because we do live in an economy where international trade is very important, the central banks do affect exchange rates. I think it's an it's an interesting time even from an intellectual framework point of view to say, how do you have something that is coherent? How do you integrate domestic and international monetary policy so that you have the appropriate level playing field for free trade?

I like that because my name is out there people are more interested — pro or against — but the point is we're talking about these things. I'm very pleased about that. And we'll just have to see what happens if anything goes any further for me.

Heeb: Could you tell me a little bit about your relationship with President Trump?

Shelton: I was actually an adviser to Ben Carson during the primary. Just on issues that would come up on the Federal Reserve. But he really wasn't asked enough about it during the debate. I wasn't able to really have much of an impact I don't think. And then when he went with Donald Trump I was very happy. Because one thing I really liked about what Donald Trump was bringing up as a candidate was the issue of currency manipulation. Here I am, someone who thought that this had been ignored for decades, and here was someone at the presidential candidate level who was willing to say that he believed in free trade, but that currency manipulation was an unfair trade tactic. And I thought, finally we're going to address this.

I think early on — maybe it was in July or August of 2016 — I wrote something for the Wall Street Journal on Trump's contribution to sound money. Because to me, again, that's an entrée into this whole issue of what is the importance of money and having monetary clarity to transmit price signals if you want to take a free market approach? And for me that's all kind of what I would call the sound money thinking that interests me very much.

At right about that same time, I had a note from Steven Mnuchin saying, would you be willing to have your name as part of the Trump economic advisory council? I was pleased to be part of that group. I've known Larry Kudlow and respected him very much for a long time. I've known Steven Moore for a long time. Likewise, their idea of productive economic growth and the necessary aspects of it, I'm aligned with them to a large extent. I was happy they wanted to include me.

And then within a month of that, I went out to one of the rallies and met Trump as he was a candidate and he was traveling with Mike Pence. I sat with him and his wife and attended the rally and met members of the team. They were all there that day and then were sending memos back and forth to members of the economic team, just with ideas.

And then I guess a few weeks before the election David Malpass, who was very much involved with the Trump economic team, asked if I would serve on the transition team. I was thrilled to do that. And then when Trump won, we jumped into action and I was the lead adviser for international affairs at the Treasury. And that was the landing team that we had during the transition. That was a wonderful experience. And I guess that was about three months because it actually included preparing papers and studies and recommendations for the incoming Treasury secretary and kind of overseeing the area that — David Malpass was slated to become the undersecretary of international affairs — so preparing positions in conjunction with David. And then also briefing Secretary Mnuchin through his confirmation hearing and shortly after that.

But then I really wasn't looking for a position. I loved the experience during transition, but I wasn't seeking a position. I just kind of said, great, thank you very much, and I was looking forward to seeing things unfold. It was several months later, it was well into the summer of 2017, that David Malpass at Treasury asked if I would be interested in serving in this particular position. And there's a lot at the European Bank for Reconstruction and Development.

Heeb: Right. Well, it sounds like you've had a busy few years and developed close relationships within the administration and with the president. Would those change if you were nominated to the Fed?

Shelton: Well, how do you mean? I mean, I guess you don't give up friendships. But you mean like, would I take orders or something? I don't know [what you mean]. I think the people who are already there are especially aware of what are the appropriate boundaries. And anyone who knows me knows I'm pretty consistent in my own person. I guess I don't know how else further to answer. But I think that when you can work with people and you're like-minded... But obviously the Fed is independent and I know everyone respects that. I wouldn't see any conflicts. At the same time, I don't think that you put up artificial barriers or change your feelings of respect or friendship for people.  

Heeb: What about Larry Kudlow? I know you mentioned a close relationship with him. Would you guys discuss monetary policy?

Shelton: When I say close friends, I've just known him a really, really long time. We don't really get together socially or anything and I always took it as a professional task. We would write memos. He would just say, what are your thoughts on this or that issue, if it involved more international monetary issues. I would write, with great seriousness, memos. But I would say in more of a professional — not even arm's length — except that I know generally how he might feel about something and he probably knows generally how I feel.

The only thing he's ever said to me when we talked about whether I could throw my hat in the ring for this was, I said something that, while working in my current position I had really refrained from commenting. I had been writing op-eds. I used to write more often for the Wall Street Journal about exchange rate issues or monetary issues, but I felt like since the Treasury — I didn't work for Treasury but it involved a relationship with Treasury — I didn't know what was appropriate to say. I don't really like feeling like I can't write things because I don't want to violate... I think Treasury respects the Fed and vice versa.

And he said, well, one thing. You would be free to say what you want if you were in line for the Fed. And I remember saying, really? Don't governors have to be careful what they say in speeches and such? And he says, not that I know of. He said, I think people write what they think. And I thought, well, that sounds liberating actually. But I have no sense that I have any special in or I don't know if I'm even on a short list to tell you the truth. I just think he was talking generally. That I agree to say what I think, so that's always very appealing.

Heeb: Do you worry that expressing support for fiscal policies could make people skeptical of the central bank's independence?

Shelton: I haven't really thought about that because I wouldn't be responding to... I don't know why the Fed is... I don't know. I haven't really thought about it. I saw people trying to make something of if somebody wanted to meet for coffee and talk with me. For me the easiest, most convenient place was at the Trump Hotel. And I saw people say, oh, oh, she's trying to promote that. I thought no, it's a block or two from Treasury and they leave you alone and you can have a cup of coffee and sit there and no one bothers you and there's not loud music that drives you out. So anyway, I don't know.

Heeb: I just came across a photo of you the other day at Trump Hotel. I was going to ask if you frequent there.

Shelton: When I come into DC, if I'm in the US, I basically live on an old farm. A very old property, and it's almost two hours away by train. So for me, it's easy to then get into DC and I don't have an office there. I can't bring reporters into the Treasury. My office is back in London. And so I have to meet at some hotel or coffee shop. And that one happens to be very convenient because I'm usually going to Treasury or State or NSC or the visits that are involved with my work at EBRD.

After I met with James Politi in London, he said, can I take your photo? I thought well, okay. And then I saw people say, oh, she's promoting that. I don't see any conflict whatsoever. Isn't it regular — and maybe you know better than I do — isn't it regular practice for the Treasury secretary to meet with people at the Fed, to meet with Chairman Powell? I believe so.

Heeb: That's definitely normal. They usually issue a readout and as long as everything's transparent, it's normal. I'm more so asking about these close relationships, as opposed to a formal meeting, because you already have these friendships within the administration.

Shelton: When I say close, I don't know what people are thinking. I mean, I don't go out and play golf with anyone. I don't. I'm kind of a hermit. I'm not very socially active. I don't mean close. I don't even mean picking up the phone or even emailing. I don't even do that now really. That was really during the campaign and just on maybe three or four issues related to the economic agendas going forward. What do we think about this or what do we think about that? Just things that were circulated on the team. It's just that I've known Larry Kudlow since I think early 90's. I would say it's more of a long-term respect for him as a person. I just think he's great, but we're not what I would call social friends. Only because I'm not socially... As I say, we live on a farm, and I'm kind of a hermit.

Heeb: To sum it up, you wouldn't allow these relationships — close or not — to influence your decisions as a Fed board member?

Shelton: No.

Heeb: Do you think that central bank independence in general has been challenged by the president? He repeatedly comments on the job the Fed is doing, he pressures them to lower interest rates, and even reportedly wanted to fire Chairman Jay Powell.

Shelton: I would say that that's one of those things where people say, oh the independence of the Federal Reserve. If you get on the Federal Reserve website, it is an agency of the US government. Right away then you say okay, but they're very independent. I think some of the practices are — I'm not saying what I believe necessarily — I'm just saying let's look at the reality of sort of the sacrosanct idea that they're so independent.

The Federal Reserve purchases the debt issued by the government, issued by another agency of government, the Treasury. Then the Federal Reserve, as another independent federal agency of government, purchases that debt, collects the interest off that debt, pays for its own... and at one time was purchasing 60 percent of the debt being issued by the Treasury during the crisis years. Then it takes the interest off that portfolio that the Treasury is paying to the holder of the debt, another agency of government, and lives off that. I mean takes its own administrative expenses out of that amount, the interest on the government debt it's holding. Then it remits the rest of that back to the Treasury and we call that revenues to the federal budget. Now, that I think is a bit fiscally incestuous.

Then I think okay, so not so independent in a way. And as you just mentioned to me, it's not unusual at all for Treasury officials to meet with the head of the Fed. I think it's healthier to be transparent. I would rather have a president who says what he thinks about the policies out loud for everyone to hear, instead of these little subtle meetings we're now learning about historically. As to whether Nixon said this or that to Arthur Burns or intimidated or put pressure on in these supposed behind-the-scenes attempts to intimidate. I think Paul Volcker has referred to words from Secretary Baker. I don't know that those took place, but I can well imagine. And I would much rather have someone if the goal is to be transparent. Then instead of people sort of doing the signaling that oh, how dare they, why not just be open about it?

And I think it's even sillier people who then say, oh now the Fed wanted to lower rates, but now they can't because it will look like the president intimidated them. I mean that was kindergarten to talk about these things. I think everybody's professional and everyone should feel free to talk about things. I don't think they're intimidated by what is said at the presidential level. I think we should be happy that someone is savvy enough about the role of interest rates and the role of the Federal Reserve to have an opinion.

Heeb: So, you're saying that the Fed is not currently a completely independent institution? Am I getting that right?

Shelton: I'm just saying that people are human and they absorb tons of information. And I presume we choose people who are capable of executing their best independent judgment in the interest of the responsibility to which they have pledged their fealty and their capabilities to uphold. I'm not appalled at the notion that the president can have an opinion about financial markets or about monetary policy. I think that the chairman of the Fed is fully capable of handling it, of taking into consideration whatever advice he deems appropriate from whatever sources he deems appropriate. And he is his own person and intellectually secure and will do what he thinks is the best thing to do. I think people harumph a lot about this without saying everyone's doing their best job. Let's give them credit.

Heeb: Do you think the Fed is currently a completely independent institution?

Shelton: I think I've answered that.

Heeb: What was your answer? Sorry, it wasn't clear to me.

Shelton: Is the Fed a completely independent institution? I mean, isn't that what you just asked me a moment ago?

Heeb: I wasn't clear on whether your answer was yes or no.

Shelton: Well, I think it would be a little bit superficial to say yes or no. The Fed itself calls itself an agency of government, an independent agency. But as I think I just walked you through, the Fed purchases the debt issued by Treasury and takes the interest from that and then remits that back to the Treasury as revenues to the federal budget. I think at one point when it was really over a hundred billion that it was remitting under Bernanke, he even said with some pride that we are one of the larger revenue centers for the federal budget. And I think they were about the sixth-largest contributor to the federal budget that year. So, not independent fiscally. Just looking at the financial income statement for a consolidated government.

Heeb: But is it independent from political influences? That's more so what I'm asking.

Shelton: Well, I think that the Federal Reserve has to be aware of economic slash political developments at any given moment because there's a lot of interaction there. And I think the Fed has to take prudent consideration of what is happening politically and economically. And I hope they don't have blinders on.

Heeb: But I mean for political motives or —

Shelton: Hey, Gina. I'm assuming that you're just being a straight shooter with me as I'm trying to be with you. So, if there's another answer you're looking for...

Heeb: No. Just a yes or no would be fine.

Shelton: Well, okay. Anything else?

Heeb: I was just seeing if you'd be able to answer it in a yes or a no.

Shelton: Well, I really think I've overkilled on that. I see we've almost done 30 minutes. So, give me your next legitimate question.

Heeb: I think that was a legitimate question. So, I'm just going to say you didn't want to answer yes or no on that?

Shelton: Wow. Well, okay, I'm sorry. I don't know why I thought this would be a good conversation. [MUFFLED] Could you give my answer, which I think was more that it would be superficial to try to say yes or no to is the Fed an independent agency? And then sort of give my enlarged answer in terms of the intermingling, with the relationship between Treasury and the Fed.

Heeb: I think we're saying the same thing in a different way. You're saying you think it would be superficial to say yes or no. And I was just saying that you weren't saying yes or no.

Shelton: That's a hot-button issue. It's the kind where people will say, oh, she doesn't believe in the independence of the Federal Reserve. So then, it will take a longer answer. Whereas I suppose, it's easy to say no, it's 100 percent independent and they should never even talk to each other. That it should be more strict and I don't think they should be allowed to read newspapers. You could say that. But I don't think that's realistic.

I would say my most true answer in my opinion is that you choose professional people, they rise to the position and they have integrity, and they don't wear blinders. But they always choose what they think is the best way to fulfill their responsibilities. And I just think you give responsible people the benefit of the doubt that they are not unduly influenced, that the primary goal of their service is to conduct it responsibly. I don't think people are intimidated or they wouldn't be in that position.

Heeb: Okay. Well, we can move on here. I recently read that you were against the Fed's dual mandate. There have been growing debates about how inflation should be measured, even at these conferences in Chicago this week. What do you think the Fed's mandate should be and what yardsticks should be used for measurement?

Shelton: On the dual mandate, it's another one of those concepts that has taken on sacrosanct importance. I wonder how much people really go back and read that legislation, the Humphrey-Hawkins legislation from 42 years ago. And that was a time when I think there was a certain amount of hubris. Those are the Phillips curve days, the idea that government could fine tune economic performance and could chart it. There was an overemphasis on econometrics in the quantitative approach to running the economy and controlling it. That you had this perfect trade off between unemployment and inflation. The mandate just said maximizing employment. Okay. So, I don't know if that's the Fed's job or how you then define it. We're certainly at minimal unemployment right now — a 50-year low or 49-year low.

Stable prices? Stable usually means no movement. If that is the sacrosanct mandate then we get back into really interesting... If you go back and look at the transcripts when Janet Yellen and Alan Greenspan were talking about why 2 percent versus 0 percent. What is stable? I mean if it's a value of a house and you have 2 percent inflation for 10 years, 20 years, that means the price changes what 20 to 40 percent during your ownership of your house. Is that still relevant? Is 2 percent right? Is it good to sort of incentivize people? I think that was the argument that Yellen made. Again, the transcripts I really recommend. They're fascinating to read because she convinced Alan Greenspan and he was probably more a zero change in prices guy, a zero delta guy. And she made a good case basically to say workers want to see a nominal increase in their wages. It's very Keynesian, that ultimately money illusion. Even though you're not any wealthier, if all prices go up two percent there's still an incentive. If there are sticky wages downward, nobody wants to have flat income or negative. So, you build in this little cushion that makes it look like you're getting ahead. That's more economics as a social science. And I think she got a lot of that from her husband. It's very well-known in that field. So, those are interesting arguments.

But to just say the Fed's mandate is stable prices and not comment about why the 2 percent or some people are four percent or even six percent to give the Fed more room to maneuver. Those are interesting questions not answered by that quote dual mandate.

And then to me, it's actually a triple mandate that people seem to forget. The third element is in the same sentence. It was the maximum employment, price stability and moderate long-term interest rates. What happened to that? We have the 10-year now lower than the 3-month. What happened to moderate long-term interest rates? That disappeared when the Fed became much more activist following 2008. I don't understand why people call it the dual mandate and then they don't bring up that it was actually three things.

You could say from a saver's point of view that not being compensated for retirement when you're — as Trump used to say during the campaign — people who have done all the right things to put money in savings accounts are getting creamed. That was his word. But I thought he was absolutely right about that. Maybe low rates are good for developers, but they sure don't give adequate compensation to people who are saving to put away for retirement in a responsible way. I wish the Fed would have been more concerned about the third and, for no reason less important, aspect of the mandate. It was a triple mandate.

Heeb: Okay. I have a few questions if we could just back up a little bit as far as maximum employment. You said you don't know if that's the Fed's job. You would be against that as a congressionally-mandated task for the Fed?

Shelton: Well, what do they mean by that? Because what was the Fed doing differently when we had high unemployment a few years before? And then when the Trump administration came in and we got some other things going like reducing the regulatory burden and I think a better environment from a tax point of view for business and entrepreneurship. I think people are starting to see potential movement and getting an improved trade reform set of policies in place. Now, we have low unemployment. But the Fed was the same Fed during all of that. And if people are saying the Fed should maximize employment, will you do that by lowering rates or raising rates?

I find people start arguing without knowing what they really want the Fed to do. Are negative rates good for employment? Is that what people mean when they say the Fed should maximize employment? Does that always mean they should lower the interest rate? Because I think some labor groups had thought that but maybe now they're reconsidering.

To me, the only thing that really matters from a jobs point of view is getting productive economic growth. You don't just want the Fed to do things that are good for investors who arbitrage differential interest rates or who speculate on currencies. You want to see what we're starting to get which is increased productivity, which then justifies the increased wages. Those are things that I think have more to do with other policies that the government can be involved with, including infrastructure. I don't think the Fed can create that. I don't think just by raising or lowering interest rates, you can you can create productive jobs. So, I would just leave it at that.

Heeb: So, the mandate should be productivity growth?

Shelton: I do think stable money is very important. I think you'll find many central banks that's their only mandate — monetary stability. You could say that, and that's not very controversial.

But I just think that there are other factors, including people's confidence about economic growth.

You could look at Fed policies now on paying interest on excess reserves. Does that or does that not disincentivize banks to make loans? It's the loans to small businesses or consumer loans or mortgages. The kind of community bank loans that I think help to create jobs. So, the Fed is a factor. But there, it might not be the rate of the interest. It's whether banks decide that it's easier to leave the money sitting at the Fed and collecting interest for doing nothing or to actively seek risky loans by definition — the kind of loans that create more small businesses and lead to more employment. I would say I want the Fed's actions not to discourage employment. Just by raising or lowering rates, if that's all the Fed can do. That's why I'm looking at mechanisms for how they do it, not just whether they're going up or down.

I think you had written something saying that I'm in favor of zero interest rates or near zero. I'm not commenting. I try to go out of my way to say, I don't know what the interest rate should be. I don't think anyone does. I think that's the whole issue of you have a central bank thinking that it's smarter than the free market in terms of what the interest rates should be based on the supply of loanable funds and the demand for loanable funds. I'm not saying what it should be. What I'm talking about is a mechanism that rewards banks and pays them 2.35 percent interest for doing nothing. I think that is not good for employment.

Heeb: Would you instead use manipulating the balance sheet as opposed to these? It sounds like you want to eliminate the interest rate on excess reserves.

Shelton: That's the primary way that they raise and lower the interest rate. That was meant to be an emergency measure. At the time, everyone, including Ben Bernanke, thought that if you inject all this liquidity into the system in the wake of the meltdown in 2008 that that was an assumption that if you increase base money and we have the normal multiplier effect that you're looking at excessive inflation down the road. And so Bernanke wanted to move up the timetable for paying interest on excess reserves to lock up those reserves. Because then he said with all these people saying, what about inflation down the line if you're going to have all of this quantitative easing? He said, I can stop inflation in 15 minutes. That's because all you would have to do is keep raising it to the level where banks would say, why should I make any loans? I mean, what if I could get 10 percent from the Fed?

The point is that became a way to prevent the inflation that everyone expected. When we didn't get the inflation, that's when I think the Fed should have been saying, why is that the dog that's not barking? Why aren't we seeing an increase in the CPI? Because the goal of pumping the money in was to make it easy for companies with this low cost of capital to invest in expanded plant and equipment and then to hire people so then that would start helping. That was the idea, that you would be hiring these people and you'd be paying them because now you had expanded production capabilities. That their aggregate level of wages gave them increased purchasing power and that would have put pressure on the CPI and you would have seen the inflation.

So, when we didn't see that after so many years, I think we should have said it was a reasonable experiment maybe by the Fed. But where is that money going? And maybe it's not doing what we thought. Instead of buying or investing in expansion, maybe companies were buying back their own shares to a larger degree than anyone would have thought. And maybe already wealthy investors are getting access to margin accounts at near zero rates where they can invest in the market. And maybe governments had the opportunity to borrow big time at low rates and lock in low rates. Those were the unanticipated consequences where I think then the Fed should have said that maybe the model isn't working the way we thought.

Heeb: You mentioned that no one knows what the interest rate should be —

Shelton: Instead of saying no one knows, I'm just saying that having studied the Soviet economy, I think we had the experiment that was showing what works better: central planning or market mechanisms. And I'm saying market mechanisms give you better outcomes. In a sense, by having a committee of people decide what the interest rate should be, that's a closer model to central planning than having the free market find the interest rate that is appropriate for the cost of capital. That's what we're pricing in the market, the cost of capital, and that's the interest rate. I'm just saying there are people who have funds they could lend and there are people who could use funds because they see productive investment opportunities. And normally banks would be the financial intermediaries that charge the interest rate that allows them to connect the source to the use, hopefully in the most productive way. Because they're good at judging risk and return, and that's why we have banks.

Heeb: I'm going back a few questions because I forgot to ask a follow-up here. You mentioned the two percent inflation target. You said some people want four or six percent. Do you have a target?

Shelton: My sense would be genuine price stability is really... I mean my ideal would be zero. Stable prices mean stable.

Heeb: So, zero percent inflation?

Shelton: Well, yeah. Price stability means stability. I'm not saying the CPI measures everything. I'm not saying the PCE measures everything. What would you really want to do is, the level of money and credit in an economy is calibrated to stable consistent price signals that are conveyed through time. That would be the ideal.

Heeb: You said in a Financial Times interview the Fed has a "Soviet" style power over markets. As a board member, you would get just one vote and the framework would be largely the same as it is now. So, why do you want to be part of that?

Shelton: I don't think I want to answer that. I think it would be presumptuous. But I think it's good to have fresh thinking and to challenge. It's hard to do. I mean I will say that within the current structure, I don't believe in just pulling the rug out from people and coming in and trying to blow it all up. I think consistency and moving toward a better place. I would want to be having the conversations, asking the Fed. And I'm very pleased to see the Fed is already doing this, going through self-evaluation. Is the Federal Reserve functioning in a way that is setting up optimal conditions for productive economic growth?

I would start by looking just very generally. We see around the world I think we're up to 11 trillion in securities that... or have a negative interest rate. And I think that situation has been largely engineered by central banks. I think we have to say, what is the role of central banks in a productive economy? And are they helping or hurting? I think it's legitimate to say, are they too dominant or does it turn out that they only serve a small segment of the private sector? And what is their interaction with governments and what is their impact on currency? Those are all the questions we should be talking about at a very basic level. I'm happy for the new open debate on all of these issues.

Heeb: What do you think of the Fed saying it's ready to act if trade conditions worsen? A lot of people saw that as a signal that they could lower rates.

Shelton: I think the market is a little bit Kabuki theater and over responds in both directions to comments. The Fed doesn't wear blinders and is watching developments, economic and political, all the time, as it should. That was kind of just an obvious statement, but I think the market grasps at clippings and overreacts for better or worse.

Heeb: But what about the actual policy move to make that statement? Does that signal that tariffs are hurting the American economy or have the potential to?

Shelton: What we're going through on all of that has more to do with negotiating toward a better overall trading platform, more of a level playing field. I see that as necessary and especially with China. That had been neglected for too long, and I think in the end we'll end up in a good place.

Heeb: What is necessary? The tariffs or the Fed response?

Shelton: I think it's appropriate on trade to use the levers that you have to work with your trade partners, especially in these bilateral agreements. I think that we needed to confront China and and work out a better relationship that's more equitable with more access to their markets. That's just one factor in the economic outlook that the Fed takes into consideration.

Heeb: Are there any conditions that would call for tightening monetary policy?

Shelton: I think just the classic ones. The Fed is now saying that they are willing to overshoot the two percent target because they were undershooting for so long. I would think that at some point we would be using — if we're doing a path to phase out of paying banks on excess reserves. Because I think that's going to be challenged that whole practice. Then the Fed still has 3.6 trillion in its portfolio that it can interact. But then that's going to these other questions of should the Fed be trying to engineer an artificial interest rate? I think that's when you cause distortions.

Heeb: You support the gold standard, but I haven't seen a lot of details about how it would be implemented.

Shelton: First of all, whenever you see that, please, please try to figure out what do people mean when they attribute that to me. Do they mean a gold standard where… We only have 261 million ounces, so I don't understand. Do people really think that I'm saying that somehow about 300 or 350 billion or so — I'd have to calculate it out -- but not a big chunk. Is that what they're talking about or are they talking about where during like the classical international standard? I mean the government didn't stand ready to convert. All they did is look at what Thomas Jefferson wrote on the establishment of a money unit. The United States you just declare, what is your measurement? What do we call the US dollar? He did it as so many grains of silver or so many grains of gold. And you just define it. Bretton Woods was something completely different where only a foreign central bank had the right to convert dollars into gold.

I'm not sure what people mean when they attribute that to me or what they think I'm suggesting. What I said is that it's a good way to look at the virtues of what you want your monetary system to provide, in terms of a monetary integrity or price signal clarity or international system of sorts that sovereign countries can voluntarily agree to abide by. What do you want and do you have a universal reference or benchmark? So that other countries could voluntarily agree to abide by certain rules on currency relationships. It doesn't have to be gold. Gold is the cliche. But if someone wants to suggest something different, I've heard people say sand or water or oil. I just haven't seen anything better than gold.

Heeb: You're not in favor of pegging a currency to the price of gold?

Shelton: When you say pegging, what do you mean by that? What are you asking me?

Heeb: When a currency is defined in terms of —

Shelton: I'm sure I've never said that the Fed should have a price rule to ratchet up or down interest rates in accordance with the daily price of gold. But I'm sure that if anything I would have said a price rule I don't think is a good idea. I've never suggested that. I'm not badmouthing the gold standard. I'm saying look to see what you like about prior systems that have worked and see if we could develop a future system that would incorporate the virtues of things that worked in the past.

Heeb: But you haven't favored a system in which the value of a currency is defined in terms of the price of gold?

Shelton: I'm just saying that it's way too easy to toss out the term. When the government overspends you could say, oh we should just have a gold standard. Because then you have some discipline because then there's kind of a fiscal price to pay. You could lose gold and then that shrinks your money supply and then that puts the brakes on if you're overinflating or whatever you're doing wrong. I mean there's lots of aspects to it, but you really have to be careful about what you mean to just say, oh, you favor the gold standard.

I would just say if you're talking about the classical International gold standard like Alan Greenspan, like Robert Mundell, the Nobel Prize winner, I recognize the virtues of when we had an international voluntary currency system that honored the sovereignty of countries and that was based on their own self-discipline and not say like we have problems with the euro because if one country kind of blows it — whether it's Greece or Italy or Portugal — it doesn't threaten the whole system. Those are those are things we should be talking about.

SEE ALSO: Fed's Powell signals he's open to a rate cut as Trump's trade wars escalate

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5 reasons why Tesla is probably poised for a rebound (TSLA)

Sun, 06/09/2019 - 8:07am

  • After dropping below $200, Tesla shares last week moved above that mark again, on news that Q2 sales would be better than Q1.
  • Several years ago, Tesla endured a pattern of falling stock prices at the beginning of the year, followed by recoveries by the year-end. That pattern is reasserting itself.
  • With some of the noise fading around CEO Elon Musk's antics and the war between Tesla longs and shorts cooling off, the company's dominant position in the EV market is becoming more important.
  • Visit Business Insider's homepage for more stories.

Has the Tesla recovery begun? It sure looks like it, if you watched the stock price, hammered down below $200, bounce back last week.

Who knows if shares will rally, but if history is a guide, the stock had fallen too far, too fast. Now the bargain-hunters have moved in, recalling prior comebacks.

Read more: Tesla's tanking stock price is actually the best thing that's happened to the company recently

Tesla isn't a stock for the weak-minded, obviously. It's wildly volatile, enduring huge swings over short periods of time. It also trades on any scrap of news that crosses the radar.

But over the years, the company has established some fundamentals. Right now, the biggest of these is that Tesla dominates the small but growing electric-car market. There are people out there who want EVs, and Tesla is there to sell them. The competition is unenthusiastic, so Tesla should enjoy this market advantage for a little while longer.

In fact, there are a few reasons why Tesla is poised for a recovery. Here's a rundown:

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1. Tesla has often rebounded in the second half of the year.

Debates around Tesla and its future have, for the past few years, centered on its stressed balance sheet, its awkward ramp-up of Model 3 production, and the erratic behavior of CEO Elon Musk.

But back when the company was worth ... about what it's worth now, it had retreated from a high-water marker for its stock in 2014 of about $300 and had established a routine pattern of declines in valuation at the beginning of the year, followed by recoveries as the year closed out.

Because Tesla is always in the news and because the stock is a battleground for investors, wild swings in the share price aren't unusual. This is abnormal for the business Tesla is in — building and selling cars, where major automakers can see their shares remain flat for years — so the trick from 2014-17 was to discern a pattern that made at least some sense.

That was the only way you could figure out if Tesla was just slightly overvalued or wildly overvalued. By the same token, big sell-offs for Tesla were sometimes overcooked. The classic example was a big drop after Tesla acquired SolarCity in 2016.

Savvy investors who thought the deal wasn't going to kill Tesla bought when shares we're below $200 and enjoyed a run to nearly $400, prior to the stock's retreat in 2018 and collapse in 2019.

Lo and behold, Tesla is once again rebounding as we prepare for the second half and for the car maker's report on second-quarter vehicle deliveries. Tesla has been telegraphing that deliveries should be a big improvement over the first quarter, which was a big drop-off from a robust close in 2018.

That speculation has pushed shares above $200 again, an important level of support for the stock. A decent Q2 should send the stock back toward $250. History has taught Tesla investors that they really don't want to miss the rallies, which tend to be dramatic.

Deliveries for Q2 should also set the stage for what could well be a return to profitability by Q3 or Q4 (Q2 is staging for a loss). The final quarter is typically Tesla's biggest, so no surprises there.

The takeaway here is that we've seen this movie before. The difference is that we're now watching it for the first time again after Tesla's nightmarish 2018 and early 2019.

2. Musk has been chillin'.

Compared with 2018's orgy of Twitter-enabled madness, Musk has more or less stuck to his knitting in 2019.

Some of this has been ironically the result of short-sellers getting the better of him. They've been winning, so they have less incentive to provoke, and that has given Musk less to react against.

Musk has also been busy with his other company, SpaceX, which recently launched a small constellation of internet satellites. Rocket science is hard — and time-consuming.

Additionally, Musk has been pushing Tesla in a heads-down, get-it-done direction, akin to how he ran the company in the second half of 2018, when it surged to a profit.

3. Tesla is consolidating its dominance of the electric-car market.

The electric-car market is tiny — only about 1% of global sales — but in the US, it's growing, and much of the growth is being captured by Tesla. estimated that Tesla's May sales were up 71% from the same month last year, by far the largest increase among companies selling vehicles in the US. In fact, Tesla is one of the key reasons why the US auto market continues to run at near-record sales levels after four years.

There's a bit of a misunderstanding about other automakers' desire to compete with Tesla. In a note to investors last week, Morgan Stanley analyst Adam Jonas pointed out that, in May, Tesla likely sold three times as many cars as other companies with EVs on the market. Essentially, Tesla has an EV monopoly.

The "competition" doesn't really care. They aren't making very many EVs, firstly because they aren't seeing a particularly big market for them yet, and secondly because they haven't figured out how to make money on the per-unit basis. Much of their EV efforts right now are really preemptive of what they assume will be more stringent government emissions regulations in the future.

Of course, people don't not want to buy EVs, and for them, Tesla is increasingly going to be their first stop. In practical terms, that means Tesla should enjoy increasing revenue over the short term.

4. Tesla negatives are wearing thin.

The Model 3, Tesla's theoretically mass-market sedan, endured the worst birth of any vehicle I've ever seen in the car business.

Tesla tried to push a massive number of vehicles through a poorly designed production system, broke that system, and then had to improvise. At one point, some of the most expensive Model 3 variants were being built on an assembly line under a tent in Tesla's parking lot. Henry Ford wouldn't have recognized the setup.

The resulting vehicles had some issues. That's nothing new for Tesla; every vehicle it's developed has suffered from early-production snafus. They've usually taken about a year to sort out.

Ditto the Model 3. The more cars on the road that don't have problems, the less likely Tesla is to be fighting daily customer-relations battles. The Model 3, like the Model S and the Model X before it, is a pretty good car. Not perfect, but plenty satisfying for most owners.

This isn't to say that Tesla doesn't have some challenges ahead. But the first rule of business in the auto industry is that your customers, most of them, have to love what they drive.

5. The ultra-bulls are being discounted.

Tesla's daffier boosters — ARK Invest, with its wild $4,000 price target recently bumped up to $6,000, for example — are engaged in a sort of marketing-as-performance art. The daffiness gets them headlines and TV spots, which in turn pumps their businesses, or at least brands them.

Financial markets, meanwhile, continue to grapple with what a reasonable valuation for Tesla could be, assuming some robust future growth but nothing Earth-shaking, despite Musk's predictions about millions self-driving robotaxis.

For the remainder of 2019, that puts Tesla in a $200-$400 trading range. That's good news for the company's business because it anticipates a staunching of the red ink. It's bad news for the ultra-bulls because it implies that Tesla would have to abandon a solid business to embrace a colossally expensive and uncertain new one.

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