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Trump calls the US presidency 'one of the great losers of all time,' because he says he's not making more money

Fri, 02/01/2019 - 1:11am

  • President Donald Trump said he loves his job at the White House — with one exception.
  • "I lost massive amounts of money doing this job," Trump claimed in an interview with The New York Times published on Thursday night. He said he's not in it for the money, and called the financial outlook of the presidency "one of the great losers of all time."
  • Trump also appeared to address some of the scrutiny surrounding potential conflicts of interest with his business enterprises, namely his Trump-branded hotels.
  • The former real-estate mogul now earns a base income of $400,000 per year as president, which he donates to various organizations.

President Donald Trump said he loves his job at the White House — with one exception.

"I lost massive amounts of money doing this job," Trump claimed in an interview with The New York Times published on Thursday night, saying he wasn't in it for the money, and calling the financial outlook of the presidency "one of the great losers of all time."

Despite this, Trump says he loves the job.

"I don't know if I should love doing it, but I love doing it," he said.

Trump also appeared to address some of the scrutiny surrounding potential conflicts of interest with his business enterprises, namely his Trump-branded hotels. World leaders and lobbyists have frequented the hotels during his presidency, raising suspicions that they may have done so to try to curry favor with Trump.

"You know, fortunately, I don't need money," Trump said. "But they'll say that somebody from some country stayed at a hotel. And I'll say, 'Yeah.' But I lose, I mean, the numbers are incredible."

Trump did not provide any specifics about how much money his companies have earned or lost while he's been in the White House. Multiple news reports published in the last two years describe how portions of his businesses have lost money since he took office.

The former real-estate mogul now earns a base income of $400,000 per year as president, which he donates to various organizations, including the Small Business Administration, the National Institute on Alcohol Abuse and Alcoholism, and the National Park Service.

Trump's tax payer-funded income is noticeably smaller than what he was earning as the star of NBC's reality show "The Apprentice."

Financial documents for the show revealed Trump earned over $30 million in 2005, and $65 million between 2004 to 2007 for revenue and distribution-based royalties, according to Yahoo Finance.

SEE ALSO: 5 times Trump praised WikiLeaks during his 2016 election campaign

Join the conversation about this story »

NOW WATCH: MSNBC host Chris Hayes thinks President Trump's stance on China is 'not at all crazy'

The Huawei indictment marks the end of US and China's cycle of trust

Thu, 01/31/2019 - 11:54pm

  • The US Justice Department's criminal indictment of Huawei marks a new phase in the cycle of trust between the US and China.
  • It is one in which aggression is more out in the open, and that aggression will directly influence perception and policy in both countries.
  • What's more, China is no longer opening. It's closing. And President Xi Jinping stands to make the country more totalitarian as time goes on.

And just like that, with its indictment of the Chinese phone maker Huawei, the US entered a new, chilling phase in its cycle of trust with China. There is no knowing where the cycle will take us next, but what is for certain is that there is no going back.

Huawei stands accused of stealing trade secrets from US partner, German telecom firm T-Mobile. The company encouraged employees to lie and steal until they secured the design of a phone-inspecting robot named Tappy. When the Huawei employees were discovered, the company feigned concern, writing a falsehood-filled memo — complete with redactions — to cover its tracks. Huawei even offered its employees bonuses for stolen technology.

None of this subterfuge was particularly elegant, and it didn't go unpunished. In 2017, T-Mobile won a civil suit against Huawei and was awarded a $500 million fine for this very behavior.

So this information is not new. Everyone knows what happened to Tappy. What's new is the US Justice Department's willingness to bring criminal charges against one of China's national champions — a symbol of the success of its economic development and victory over the humiliation of a lost century.

In this way, Tappy — though hardly the pinnacle of Western robotics — has ushered in a new era in global relations.

The relationship between the US and China has worn out its phase of polite negotiation and plausible deniability. Beijing can no longer pretend it isn't engaged in state-sanctioned technology theft, and American companies can no longer pretend to be ignorant of that theft. Now that bad actors and actions are out in the open, repercussions are carried out in the open.

None of what is happening in this new phase would have happened in the old phase: The US seeking extradition of a well-connected Chinese executive; the US State Department warning Americans not to go to China if they ever want to come home; Chinese billionaires who thought they had friends in Washington realizing those friends have turned against them; Americans billionaires with friends in Beijing being forced to admit that things have gone awry in the country both economically and politically. There is a trade war with little hope for a lasting resolution. The planet, it seems, is being split in two.

Trust and cooperation between people — posited Martin Nowak, a mathematical biologist at Harvard University — is cyclical. Decisions have consequences, and those decisions impact people's perceptions. That perception, in turn, impacts people's decisions. It's a conversation.

And in an address at the Bloomberg New Economy Forum in Singapore last year Hank Paulson, former US Treasury Secretary and founder of US-China think tank The Paulson Institute, said the conversation between the US and China has turned sour.

"...at this point, after forty years, when we have had one kind of relationship but now, quite clearly, face the daunting task of transitioning to a new one – anchored in a realistic and more sustainable – strategic framework – divorce is a real risk."

It is a risk not just because of where the US and China are in their cycle of trust, but also because of where China is in one of its own cycles — its cycle of opening to the world and closing again. Right now, it is closing.

A cycle of opening and closing

For the past few decades, the history of China has been rather short, at least in the West.

Here, the narrative of what China is has been crafted to encourage investment in the country, and so it begins in 1978, at the beginning of Deng Xiaoping's "reform and opening" of the Chinese economy.

But that's a mistake, according to Anne Stevenson-Yang, co-founder and research director of J Capital Research Ltd., a China-based investment advisory firm, who headed up the US Information Technology Office in the 1990s.

"When China embarked on its current opening phase in 1970s and mainly in the 1990s, a lot of international corporations and countries believed that China was in the process of liberalizing, and that the liberalization was open ended, and that China ultimately would become some kind of Jeffersonian democracy and a capitalist country," she said in a recent interview with Bloomberg Radio.

"That is not at all the case. China goes through these cycles of opening and closing again. It opens when the country needs cash and that's what happened through the 1990s and the 2000s to date... now the cost is getting higher than the benefit and so you'll see China closing again."

The cost Stevenson-Yang is talking about is more about control than money. To truly open its economy, China would have to take its hands off the wheel and allow the market to dictate winners and losers. It would have to allow foreign companies — or even its own private companies – to compete freely without joint ventures with Chinese state owned companies. 

These are among the thorniest demands the Trump administration is making in trade talks with China. They are the demands that Commerce Secretary Wilbur Ross says the two countries are "miles and miles away" on.

To China, the demand to resolve these issues has come unexpectedly. China has been opening up its economy at a snail's pace since it joined the World Trade Organization in 2001. For example, American companies like Visa, Mastercard and American Express have had major trouble entering China's growing payments market. Only American Express has won regulatory approval to begin clearing transactions, and that just happened in November.

As for the US's demand that China stop stealing technology by force or trickery — Hong Kong property tycoon Ronnie Chan, an American citizen who sits on the Council of Foreign Relations and counts Henry Kissinger among his friends, told the South China Morning Post: 

"People said China has been stealing technology. Well first of all, everybody steals technology. And number two, three years ago, I had a discussion with [former CIA director] general David Petraeus and [former US secretary of state] Condoleezza Rice on this subject of stealing technology from one another. Is that something that happened in the last one year? Did it get worse? It didn't get worse, so what changed your mind?"

To China, the US is simply not behaving rationally. To the US, China is veering off a course it never necessarily charted.

The kind of opening the Trump administration wants costs too much in the only currency China's leaders really care about — political control. If that were not the case, the convulsions we're seeing from China's economy right now might not be so worrisome. But they are.

A credit cycle, with Chinese characteristics

All of China's economic indicators are flashing red. The eerily stable labor market is even showing signs of strain. In 2018, the country's stock market had its worst performance in a decade. The yuan is weakening against the US dollar, threatening to dip below an important psychological threshold of 7 to 1. Debt has spread from the Chinese corporate and financial sectors to households, who've accumulated the same level of household debt to GDP as the US after just around a decade of having credit cards. 

The problem isn't all about the level of debt either, as Dr. Keyu Jin, professor of economics at the London School of Economics explained during a discussion at the World Economic Forum in Davos, Switzerland. The problem is how China's system allocates capital — it's that China's state-controlled system is throwing good credit after bad. 

"Today's challenge is, how do you get credit and resources from the financial sector into the real economy, and into the productive firms, into the highly innovative private sector with latent potential. That's China's problem. It's not necessarily the debt levels and slowing growth rate," he said.

Last year the government shut down China's shadow-banking system, an increasingly risky capital-allocation mechanism that provided credit to private companies and individuals. Shadow banking exploded after 2009 when the Chinese government went on an credit creation and infrastructure spending spree to avoid getting sucked into the global financial crisis.

But when the shadow-banking system was stamped out, it took around 40% of China's new credit with it.

Since the crackdown, big state-run banks have stuck to lending to big state-run companies with implicit/explicit government guarantees, leaving private enterprise and individuals out to dry. This has even China's most successful entrepreneurs wringing their hands, especially after an op-ed suggesting the state should just take over the private sector went viral on the country's closely monitored internet.

The government is feverishly trying to figure out how to get capital to the right places — through tax cuts, for example — but their efforts have yet to hit the real economy, if they ever do.

 

"To the extent that a pickup is occurring in lending to SMEs [small and mid-sized enterprises] – as the authorities have been encouraging for months – we suspect it is largely taking place via shorter-term loans that can be quickly reassessed if repayment issues emerge," Charlene Chu an analyst at Autonomous Research wrote in a recent note to clients.

This is a moment when the world could help China out of an economic mess. But it won't.

China needs credit and the world has it. But credit comes from the Latin word for trust, and trust is in short supply right now, especially since China is unwilling to do the things (outlined above) that would cede control of the economy to the market.

"Foreign banks in theory could fill the gap left by maxed out mid-sized and city/rural banks," Chu told Business Insider via email.

"But in reality, many of them say they haven't figured out how to lend in China. That's why their books remain so small. I also don't know that the authorities want a truly independently operating part of the banking system – it would be a lot harder to lean on foreign banks to be aggressive with lending to whoever the state wants them to."

A political cycle of perpetual struggle

This turn in China's domestic credit cycle is part of why, earlier this month, Chinese President Xi Jinping told his cadres to prepare for a "worst-case situation."

Xi also outlined all the risks China is facing in the year ahead — "political, ideological, economic, technological, social and international threats, as well as those from within the party," according to the South China Morning Post.

So, risks from everywhere. Enemies everywhere. 

This suits Xi's political reality just fine. His understanding of socialism and politics is one of perpetual struggle. This worldview was outlined in a recent speech by John Garnault, a former journalist and Australian government official who came to have rare access to China's Deep Red princelings — the Chinese Communist Party's ruling class — Xi and his (almost) peers. Garnault gave the speech for the Asian Strategic and Economic Seminar Series, and it was called "Engineers of the Soul: Ideology in Xi Jinping's China."

Garnault argues Xi understands his party in the same way the USSR's Joseph Stalin did — as a vehicle to engage in a perpetual struggle against enemies internal and external, where politics serve as an end unto themselves. Xi is not an opener, he is a closer.

Because of this, Garnault says, China will only become more totalitarian, not less. Xi's anti-corruption campaign will never end, much like Stalin's purges never did. As for the West, in this framework it exists only to serve as the Chinese Communist Party's ideological foil.

From the speech: 

"The Western conspiracy to infiltrate, subvert and overthrow the People’s Party is not contingent on what any particular Western country thinks or does. It is an equation, a mathematical identity: the CCP exists and therefore it is under attack. No amount of accommodation and reassurance can ever be enough - it can only ever be a tactic, a ruse. 

Without the conspiracy of Western liberalism the CCP loses its reason for existence. There would be no need to maintain a vanguard party. Mr Xi might as well let his party peacefully evolve." 

Totalitarianism is the only way to guard against this encroachment from the West, and that is why Xi — who eliminated term limits for himself — has worked harder than any of his recent predecessors to stamp out influence in China's physical and digital space.

Garnault does not believe that's where this ends either:

"The challenge for us is that Xi’s project of total ideological control does not stop at China’s borders. It is packaged to travel with Chinese students, tourists, migrants and especially money. It flows through the channels of the Chinese language internet, pushes into all the world’s major media and cultural spaces and generally keeps pace with and even anticipates China’s increasingly global interests." 

So when Chinese billionaires like Ronnie Chan muse as to why the US is suddenly unfriendly, it isn't just because of President Donald Trump and his cabinet of economist war dogs. It isn't just because the US is suddenly angry about things that have been going on for years either.

It is because Xi is a kind of Chinese leader the world had not yet seen in this last 40-year cycle — one who naturally reorients the country toward a closed society. 

On Wednesday, China's parliament fast-tracked a bill meant to protect foreign companies in the country. The body will vote on the bill in March. According to Chinese state media, it includes penalties for failure to report violations to relevant authorities.

This should be good news, but we are experiencing a trust deficit, so members of  Trump's economic team are waiting to see how China says it will enforce these measures.

This isn't the only gesture to end the trade war China has made that has been met with skepticism. Officials also reportedly offered to buy enough US imports over the next six years to eliminate the trade deficit between the two countries. 

But, as analysts at Barclay's pointed out, sticking to that commitment would throw China's economy off-kilter. It isn't realistic.

Important details like that — which only amplify the trust deficit between the two countries — will only spur more talk of "decoupling" in US circles. That conversation isn't about whether or not decoupling is valid, either.

As Paulson mentioned in his speech, it's about whether or not decoupling will be "comprehensive" or "carefully calibrated." Too much and the world could end up split behind an "economic iron curtain," he said.

None of this ends with the trade war, it transitions. In this new reality, it is more important than ever to recognize China's agency over its own destiny, independent of the West's ambitions. It's Xi's understanding — not ours — of where China is in its cycle of opening and closing that could mean the difference between peace and prosperity, and confrontation and calamity. 

SEE ALSO: China's best hope is that Trump, Wall Street, and the whole world are willing to play pretend

Join the conversation about this story »

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The CEO behind Bustle and the new Gawker is reportedly making a bid on the remaining Gizmodo Media blogs

Thu, 01/31/2019 - 9:27pm

  • Bryan Goldberg, founder and CEO of Bustle Digital Group, has made an offer on the remaining Gizmodo Media Group blogs, according to the New York Post.
  • Goldberg bought Gawker.com in July for $1.35 million. While the plan was to relaunch this month, the company faced backlash after its two reporters abruptly quit last week.
  • Gizmodo Media Group, which includes blogs like Jezebel and Deadspin, is up for sale by Univision, which bought the assets for $135 million in 2016.

A Gizmodo Media Group reunion could soon be in order.

Bryan Goldberg, founder and CEO of Bustle Digital Group, is looking to buy up the remaining the blogs of the former Gawker Media empire, according to the New York Post.

Last week, Goldberg's company Bustle Digital Group sent an offer between $30 million and $40 million to Morgan Stanley, the bank working with Gizmodo's parent company Univision, according to the report. Gizmodo Media Group includes its namesake tech blog, the feminist blog Jezebel, and the sports site Deadspin.

Goldberg acquired the URL and archives of Gawker.com back in July for $1.35 million during a bankruptcy auction. He also acquired rights to the defunct tech blog Valleywag, Business Insider's Lauren Johnson reported in September.

Gawker.com had been dormant since 2015 after Gawker Media was sued into bankruptcy from a longrunning lawsuit brought by Hulk Hogan and bankrolled by Silicon Valley investor Peter Thiel. Univision bought Gawker Media for $135 million in 2016 and began selling off Gawker Media's assets this summer.

Univision announced in July that would attempt to sell Gizmodo Media Group along with the satirical news site The Onion. The Spanish-language media conglomerate originally wanted between $100 to $120 million, according to the Post, but by December had reportedly lowered the price to $80 million.

There's no word yet on whether Goldberg's bid has been accepted.

Regardless, the media CEO faces an uphill battle. Though Gawker.com started out the year with a new editorial team, its two full-time reporters quit the project on January 23 in protest of its newly hired editorial director Carson Griffith, who the pair claimed made offensive remarks.

SEE ALSO: Bryan Goldberg quietly purchased Valleywag in addition to Gawker — and it could be heading for a relaunch

Join the conversation about this story »

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Facebook thinks Amazon's ad business has officially become a threat (FB, AMZN)

Thu, 01/31/2019 - 8:57pm

  • Facebook listed Amazon as a competitor for the first time in its annual report.
  • Facebook says it competes with Amazon in advertising.
  • Amazon joins Google, YouTube, Tencent, and Apple on Facebook's official list of rivals.

Facebook has a new rival: Amazon

The two companies have occupied the tech industry's top ranks for years, and they have increasingly encroached on each other's turf. But on Thursday, Amazon's fast-growing online advertising officially became a threat in the eyes of Facebook.

"We compete with Apple in messaging, Google and YouTube in advertising and video, Tencent in messaging and social media, and Amazon in advertising," Facebook said in its annual 10K filing with the Securities and Exchange Commission on Thursday. 

The filing marks the first time the Amazon name has appeared in one of Facebook's regulatory filings, and it underscores the growing importance of Amazon in an online ad market long dominated by Google and Facebook.

While Amazon does not directly report its online ad sales, the company's "other" revenue, which is mostly comprised of ad sales, surged 95% year-over-year in the fourth quarter, to $3.4 billion.

Amazon's share of the online digital ad market is expected to grow to 2.8% in 2019, up from 2.1% last year, according to eMarketer. Google is expected to claim 31.3% of the global digital ad market this year, while Facebook is expected to remain in second place with 20.5% share o the market. 

The advertising business may be the most immediate clash between Facebook and Amazon, but it's unlikely to be the last. Facebook's video streaming service Watch is one of the company's most important initiatives, pitting Facebook against other entrenched video streaming players like YouTube, Netflix and Amazon Prime. 

And during the Facebook earnings call earlier this week, CEO Mark Zuckerberg cited a new effort to turn the Instagram photo-sharing app into a platform for e-commerce. If Zuckerberg has his way, Facebook's name will appear on Amazon's list of retail rivals someday, too. 

SEE ALSO: Amazon tops Wall Street's holiday expectations, but offers weak sales guidance

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Amazon's cloud was a $25.65 billion business in 2018, and shows no signs of slowing down (AMZN)

Thu, 01/31/2019 - 8:51pm

  • On Thursday, Amazon announced that its cloud business, Amazon Web Services, generated $7.43 billion in net sales this past quarter, and $25.65 billion in all of 2018. 
  • AWS generated $2.2 billion in operating income last quarter, too — accounting for two-thirds of Amazon's entire operating income for the period. 
  • The number two cloud player Microsoft doesn't break out specific revenue for Microsoft Azure, its rival to AWS. But it seems like Microsoft is still playing catch-up to Amazon.  

Amazon beat Wall Street estimates for its most recent quarter, thanks in large part to its colossal cloud growth.

During the quarter ended in December, Amazon Web Services generated $7.43 billion in net sales, jumping 45% from the same period of 2017. It posted $2.2 billion in operating income — accounting for  more than two-thirds of the entire company's total operating income, and 61% higher than this time last year.

For all of 2018, AWS made $25.65 billion in sales, the company reported. 

AWS is considered the number one player in the cloud wars, with a more fully-featured offering and more government certifications than most, if not all, of its rivals. Experts say Microsoft is catching up with its Microsoft Azure platform, but Amazon still eats up the lion's share of the market.

In comparison, Microsoft reported earlier this week that its Intelligent Cloud unit generated $9.38 billion of revenue in the same quarter. However, while Intelligent Cloud revenue includes Microsoft Azure, it also includes other cloud and server products as well — and Microsoft doesn't disclose specific revenue figures for Azure. This makes it impossible to directly compare Microsoft's cloud with Amazon's, but suggests that AWS is still ahead of the game.

Read more: Amazon tops Wall Street's holiday expectations, but offers weak sales guidance

Indeed, at an Amazon conference in November, AWS CEO Andy Jassy suggested that his company has 51.8% of cloud market share. In comparison, he estimated that Microsoft has 13.3% of the market, Alibaba has 4.6%, and Google has 3.3%.

Product-wise, Amazon has been moving fast as well: In the last quarter, AWS announced a hybrid cloud offering called AWS Outposts, and added significant artificial intelligence capabilities.

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The Trump administration just proposed a ban on a little-known practice in the pharmaceutical industry that's been blamed for high drug prices

Thu, 01/31/2019 - 6:12pm

  • The Trump administration just proposed a new rule that could bring down the cost of prescription drugs for patients.
  • The Department of Health and Human Services wants to ban some payments, called rebates, between drugmakers and middlemen.
  • Rebates are negotiated between middlemen called pharmacy benefit managers and drugmakers, and are linked to individual drugs. They're usually passed along to health plans, but don't always make it to the patients taking the drugs.
  • These rebates have historically been protected from the Anti-Kickback Statute

The Trump administration just made a big move against a little-known pricing practice that the pharmaceutical supply chain depends on. 

On Thursday, the Department of Health and Human Services (HHS) said it's proposing a rule that would effectively ban the use of rebates for pharmaceutical drugs. HHS said the move is designed to lower the cost of prescription drugs for patients, a major goal for the administration.

"This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need," HHS Secretary Alex Azar said in a statement.

Drugmakers pay out more than $100 billion in rebates annually. Rebates are a big business for pharmaceutical middlemen, otherwise known as pharmacy benefit managers (PBMs), such as Express Scripts, CVS Caremark, and OptumRx. Cigna, which owns Express Scripts, and CVS Health, which operates Caremark, both fell 3% in after-hours trading Thursday. UnitedHealth Group, which owns OptumRx, fell 1% after-hours. 

While these rebate payments — which act as incentives to pick one drug to cover over a competitor — may sound a lot like a kickback, they're technically protected from the Anti-Kickback Statute

That would no longer be the case under the new proposed rule. Instead, the protection would apply to discounts given at the pharmacy counter directly to patients. Drugmakers would also be able to pay PBMs a fixed fee for their services. 

Read more: The Trump administration has a little-known practice in the pharma industry in its crosshairs

To be sure, there's still a fair amount to be worked out. It's a proposed regulation change, which means there will still be time for feedback from the industry, and the final rule could be different. And it's not clear just how far the new regulation would extend, particularly its effect on the health-insurance plans provided by employers to their workers.

Generally, eliminating the rebates could increase the cost of health insurance because rebates right now are often kept by health-insurance companies. The biggest benefit would be to people who need lots of expensive prescription medicines, particularly if they have health-insurance plans that require them to pay a fixed percentage of the cost of their drugs.

JC Scott, the president of the Pharmaceutical Care Management Association, the lobbying group that represents PBMs said that while he's been encouraged by proposals that use PBMs to increase competition and reduce cost, he has concerns about making changes to the protections given to rebates. 

"We are concerned, however, that eliminating the long-standing safe harbor protection for drug manufacturer rebates to PBMs would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses, unless there is a viable alternative for PBMs to negotiate on behalf of beneficiaries," Scott said. 

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Nvidia's crypto problem may be bigger than it admits, according to an analyst who crunched the numbers (NVDA)

Thu, 01/31/2019 - 5:56pm

  • Nvidia generated $1.95 billion in total revenue related to crypto/blockchain rather than its reported $602 million, according to RBC analyst Mitch Steves.
  • By his calculation, total crypto revenue from April 2017 to July 2018 should be around $2.75 billion. Nvidia accounted for around 75% and AMD captured around the rest.
  • Steves came to his conclusion by pouring over the company's latest earnings report.
  • Steves slashed his price target.
  • Watch Nvidia trade live.

Nvidia's crypto problem is bigger than it admits, an RBC analyst says after crunching the numbers. 

"We think NVDA generated $1.95 billion in total revenue related to crypto/blockchain," RBC analyst Mitch Steves said in a note out Wednesday. "This compares to company's statement that it generated around $602 million over the same time period."

By his calculation, the total crypto revenue from April 2017 to July 2018 should be around $2.75 billion, based on the hash rate of ethereum and other cryptocurrencies that require graphics processing units. Steves estimates Nvidia captured around 75% of the total crypto market during that period and AMD captured the rest. There is no way to actually confirm the numbers, according to Steves. 

Steves said that AMD's recent earnings release added another piece of evidence that Nvidia's exposure to crypto should be higher than it revealed.

On Tuesday, AMD said it expects its first-quarter revenue to be approximately $1.25 billion — down 24% year-over-year — due to "excess channel inventory, the absence of blockchain-related GPU revenue and lower memory sales."

AMD's guidance implied it had crypto exposure of $234 million in the first quarter of 2018, which roughly matches the 25% of the total crypto revenue, Steves noted. 

Nvidia has long warned about the potential for crypto headwinds following the boom and bust in digital currencies. 

In August, CEO Jensen Huang said he was expecting "essentially no cryptocurrency" business moving forward. And then in November, in the company's third-quarter earnings release, he noted Nvidia's "near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected.

"While Nvidia and AMD have suggested that the crypto currency overhang will be a one quarter issue, we think it is more likely a two quarter issue given new market dynamics," Steves said in November. 

Based on jis calculation of Nvidia's historical crypto revenue, Steves lowered his price target for Nvidia from $200 to $180 and noted that the company's revenue will bottom in the second quarter. 

Nvidia was up 8% so far this year.

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Former Hewlett Packard Enterprise CEO Meg Whitman is leaving the company's board of directors (HPE)

Thu, 01/31/2019 - 5:51pm

  • Meg Whitman will not stand for reelection to the board of directors at Hewlett Packard Enterprise (HPE). 
  • This marks Whitman's final departure from HPE, a company she helped create after presiding over the splitting of Hewlett Packard in 2015. 
  • Whitman stepped down as HPE CEO in early 2018 and is now CEO of video startup Quibi.
  • HPE announced that Jean Hobby, most recently of PricewaterhouseCoopers, will join its board.

Meg Whitman will not stand for reelection to the board of directors at Hewlett Packard Enterprise, the company said on Thursday. 

Whitman first became CEO of Hewlett Packard in 2011 and oversaw its 2015 split into two companies — Hewlett Packard, which retained its consumer-facing PC and printer businesses, and Hewlett Packard Enterprise (HPE), focused on serving larger customers. After the split, Whitman become CEO of the newly formed HPE. 

However, in late 2017, Whitman announced that she would step down as HPE's CEO after reports that she was looking for a new job. It was reported, at the time, that she even interviewed to be the CEO of Uber. After her departure in early 2018, HPE President Antonio Neri was named the new CEO. 

"I thank Meg for her long dedication to HPE, helping us successfully launch as an independent company and execute a smooth leadership transition. We wish her every success in the future," HPE chairwoman Patricia Russo said in  statement on Whitman's departure from the board.

Nowadays, Whitman is the CEO of Quibi, a video-on-demand startup founded by famed Hollywood exec Jeffrey Katzenberg. 

As for HPE, the company also announced on Thursday that Jean Hobby, most recently the chief strategy officer at consulting firm PricewaterhouseCoopers, will be joining its board. She also once served as chief financial officer at the same firm. 

HPE also announced on Thursday a cash dividend of $0.1125 per share on its common stock and that it has about 1.4 billion shares of common stock outstanding. 

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The latest lawsuit against Goldman Sachs pits it against a law firm with an incredible track record of winning money from Wall Street (GS)

Thu, 01/31/2019 - 5:42pm

  • A lawsuit filed Wednesday by United Natural Foods against Goldman Sachs pits the firm against a familiar adversary, the plaintiff's law firm Quinn Emanuel Urquhart and Sullivan LLP. 
  • By its own count, Quinn Emanuel said it has collected $30 billion in settlements from Wall Street, according to a June 2017 Bloomberg article. 
  • A Goldman Sachs spokeswoman said the firm believes the allegations are "entirely without merit" and that it intends to "vigorously defend" itself. 

Goldman Sachs finds itself facing down a familiar adversary in the latest lawsuit to target the investment bank. 

The famed litigation firm Quinn Emanuel Urquhart and Sullivan LLP is representing United Natural Foods, which sued Goldman Sachs on Wednesday over the bank's role in advising the wholesale grocer in its $2.9 billion purchase of Supervalu. UNFI, as the company is known, alleges that Goldman used its position as both adviser and lender to extract tens of millions of dollars in improper fees. 

In choosing Quinn Emanuel, the grocer picked a law firm with a remarkable track record of forcing Wall Street banks to pay large settlements. 

According to a June 2017 Bloomberg story, Quinn Emanuel's attorneys made the bold decision before the financial crisis to give up the lucrative work of representing banks in favor of suing them on behalf of plaintiffs, and taking a cut of any settlement. At the time of the article, the firm estimated it had won nearly $30 billion in settlements tied to financial fraud.

That story profiled Daniel Brockett, a senior litigation partner at Quinn. Gabriel Soledad, the partner leading the UNFI litigation, has also taken on other financial-services firms, according to the firm's website. Another partner with notable success against the banks, Philippe Selendy, left and set up his own firm last year. 

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Quinn Emanuel also successfully sued on behalf of the Federal Housing Finance Agency, collecting about $20 billion from more than a dozen banks, according to the Financial Times. In 2014, Goldman became the 14th bank to settle, agreeing to pay $1.2 billion, the newspaper reported. Another win was a $2 billion settlement with banks, including Citigroup and Bank of America, over antitrust accusations. 

At issue in this most recent case is at least $52 million that UNFI alleges Goldman improperly collected from the grocer, which sells to Whole Foods and other chains. Goldman is also accused of manipulating the credit default swaps market tied to Supervalu's debt, and UNFI would like to see damages related to that allegation assessed at trial.

Stephan Feldgoise, a Goldman mergers-and-acquisitions banker, and Bank of America are also named as defendants in the case filed in New York state court. 

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"This litigation is about trust," Soledad said in a Bloomberg television interview. "Goldman Sachs has built its franchise on the notion that its clients can trust it with their most important transactions." They broke that trust, he said. 

"Goldman Sachs believes that these claims are entirely without merit," a spokeswoman said in a statement. "We intend to vigorously defend ourselves against these accusations."

This isn't the only suit that Quinn Emanuel has against the investment bank. The law firm is also representing the International Petroleum Investment Company, an Abu Dhabi sovereign wealth fund known as IPIC that alleged Goldman perpetuated a fraud against IPIC as part of its role in selling bonds on behalf of the Malaysian state-owned investment fund 1MDB

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SEE ALSO: Goldman Sachs' 1MDB problems are eating into employee morale, and insiders worry the firm will use its legal woes as an excuse to scrimp on bonuses

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Amazon tops Wall Street's holiday expectations, but offers weak sales guidance (AMZN)

Thu, 01/31/2019 - 4:45pm

  • Amazon beat Wall Street's expectations with its fourth-quarter results.
  • But the company said its first-quarter sales won't match analysts' forecasts.
  • Amazon's results were boosted by its cloud-computing business.

Amazon's holiday results topped Wall Street's heady expectations, but the Seattle company warned that it might not do the same in the first quarter.

Company officials also cautioned investors to expect increased spending this year compared to last year in terms of investments in fulfilment centers and data centers and increasing its employee base.

"I would expect those investment to increase relative to 2018," said Brian Olsavsky, Amazon's chief financial officer, on a conference call with investors.

Investors initially seemed to take Amazon's report in stride, with the company's shares little changed in after-hours trading immediately following the report. But shareholders seemed to sour on the results following news of the stepped-up investments. After the company's conference call with investors, the stock was off $76.34, or 4.4%, to $1,642.39.

"We have such skeptical environment when it comes to tech," said Dan Morgan, a senior portfolio manager at Synovus Trust, which owns Amazon shares. "If [companies] don't hit every single metric they've got out there ... then [investors] are like, 'this isn't a good report.'"

Here's what Amazon reported and how it compared with Wall Street's expectations and the company's results a year earlier:

  • Fourth-quarter (Q4) revenue: $72.4 billion. Analysts had forecast $71.92 billion. In the same period in 2017, Amazon posted sales of $60.45 billion.
  • Q4 EPS: $6.05. Wall Street had predicted $5.55. In the fourth quarter a year earlier, the company earned $3.75 a share.
  • First-quarter (Q1) revenue (company guidance): $56 billion to $60 billion. Analysts had forecast $60.99 billion. In the first quarter last year, Amazon saw sales of $51.04 billion.
  • Q1 EPS (guidance): Amazon didn't offer specific EPS guidance, but it predicted it would post operating income of between $2.3 billion and $3.3 billion. Wall Street had forecast $2.99 billion in operating income for the quarter and $4.43 a share in profit before the report. In the same period of 2018, the company posted $1.9 billion in operating income and earned $3.27 a share.
Amazon's cloud and advertising businesses drove its results

Amazon's results were boosted yet again by its cloud-computing business. Sales at Amazon Web Services jumped 45% from the period a year ago to $7.4 billion. The unit posted $2.2 billion in operating income, which was more than two-thirds of the entire company's total profit and was up nearly 61% from the fourth quarter of 2017.

The company also saw continued strong growth from its advertising business. Amazon's "other" revenue, which mostly consists of ad sales, hit $3.4 billion in the quarter, up 95% from the same period a year earlier. Growth in the business did slow, though, from the torrid pace the company was on in the prior three quarters, when sales grew by at least 123% year-over-year in each period.

The news from the company's retail businesses was more mixed. The company's direct online sales grew 13% in the quarter from the period a year ago, and its sales through its physical stores — mostly from its Whole Foods chain — fell 3% year-over-year.

Meanwhile, its North American business — which mostly consists of its retail sales but also includes its advertising unit and its business of selling goods on behalf of third-party vendors — grew 18% to $44.1 billion. Its international retail business grew just 15%.

However, the operating profit of Amazon's North American business grew 33% to $2.3 billion. And the operating loss of its international business, long a money loser, shrank by 30% to $642 million.

Amazon's shares closed regular trading Thursday up $48.30, or 2.9%, to $1,718.73.

SEE ALSO: Jeff Bezos' divorce could soon make MacKenzie Bezos one of Amazon's biggest shareholders

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The CTO at $55 billion asset manager Cohen & Steers explains why AI is 'in the middle of a hype cycle' and what he's investing in instead

Thu, 01/31/2019 - 4:40pm

  • Artificial intelligence is 'right in the middle of a hype cycle,' the chief technology officer at asset manager Cohen & Steers told Business Insider.
  • The publicly traded asset manager is investing in technology infrastructure like cloud computing instead of AI.

Artificial intelligence is "right in the middle of a hype cycle," said the head of technology for asset manager Cohen & Steers.

Chief technology officer Dan Longmuir told Business Insider in a recent interview that his firm is focused on building up its internal infrastructure, staying away from AI.

"People are having a very high hit-and-miss rate with it, and that's really not what we want," Longmuir said. "There are a lot of people trying to take what they've done algorithmically for the last 15 years and saying, 'Let's do this with artificial intelligence.' Is it going to generate more alpha? No. That's not what machines are good at."

Other managers have had mixed success integrating AI. Investors in strategies with environmental, social, and governance considerations, for example, are incorporating the technology into their investment processes, but are also bumping up against its limitations.

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Instead, the firm is looking at tech upgrades "that aren't going to turn us into a quant shop but that will help us with the active management of the portfolio," Longmuir said. That includes tools to narrow the universe of stocks so that analysts are spending their time on the right subset of equities.

Longmuir is also working on cloud computing to improve security, access, and business continuity, which he said is a precursor to doing more work in AI.

Joe Harvey, the firm's president and chief investment officer, said more robust information technology helps with efficiency and allows the firm to use broader data sets and to integrate quantitative techniques, which improve results.

Read more: Artificial intelligence is transforming a $22.9 trillion investing strategy — but the cutting-edge technology comes with a new set of problems

"IT and AI and the like are not silver bullets for underperforming managers to turn around performance and prevent the competition from indexing/ETFs," Harvey said.

Cohen & Steers, which invests in liquid real assets like real-estate-investment trusts, managed $54.8 billion as of December 31.

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Amazon has soared 15% this year — but it's still in a correction. Here's what traders are expecting ahead of earnings. (AMZN)

Thu, 01/31/2019 - 4:28pm

  • Amazon shares jumped ahead of the company's fourth-quarter earnings release, which is expected after Thursday's closing bell.
  • Traders were expecting a larger-than-average move for the stock.
  • Amazon shares have handily outperformed the broader market so far this year, though are down 16% since hitting an all-time last September.
  • Goldman Sachs analysts said the stock's underperformance comes amid some big-picture questions surrounding the company's future growth.
  • Watch Amazon trade live here.

Amazon is scheduled to report quarterly earnings after Thursday's closing bell, with shares jumping 3% ahead of the release. After a disappointing earnings report last quarter that crushed the stock, shareholders may now be in for a slightly larger-than-usual market reaction.

Even as Amazon shares have easily outperformed the S&P 500 this year, the stock has fallen mightily — it's in a technical correction, off 16% since hitting an all-time high last September.

Goldman Sachs analyst Heath Terry told clients in a note last week that its underperformance has centered around some big-picture questions about the company. Specifically, Terry referred to questions around the "trajectory of growth in the retail business, the sustainability of margins (particularly in AWS), and the scale of the advertising business." The firm has a "buy" recommendation and price target of $2,000.

Read more: Amazon is now paying influencers big commissions to sell its products. We got a leaked document that shows how it all works.

As far as key levels on the chart go, Ari Wald, Oppenheimer's head of technical analysis, told Business Insider that "near-term action is positive above $1,600 support." That level — around 7% below where Amazon was trading on Thursday, at $1,715.75 a share — is the stock's 50-day moving average. Oppenheimer carries a "buy" rating. 

More granularly, Wald has observed an intermediate trading range below $1,780 resistance — the stock's peak in November and December. 

"Aside from an additional few months of sideways consolidation, we generally expect a premium to be placed on high-growth companies in a low-growth world making stocks like AMZN prime candidates to lead the S&P 500’s secular advance over the coming years," he wrote in an email. 

Traders are expecting to see a move of 6% — in either direction — compared to the stock's average 3.7% move over the prior four reports. That's according to an analysis from Susquehanna Financial Group's derivatives strategists, who noted the average move over the last eight quarters has been 4.3% in either direction. 

Wall Street was looking for adjusted earnings per share of $7.90 on revenue of $71.9 billion, according to analysts surveyed by Bloomberg.

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Western Union CEO: Migrants are responsible for $600 billion in payments a year, yet they "have no voice"

Thu, 01/31/2019 - 4:23pm
  • Western Union CEO Hikmet Ersek is certainly worried about the protectionism trend that is happening right now but says you can’t stop globalism or globalization. People are too connected. The first wave of globalization was led by big companies, but he says the next wave will be led by individuals.
  • Ersek believes that CEOs have a responsibility to speak up on issues where politicians are falling short.
  • Ersek has been a strong advocate for the migrant population. He says, this community is made up of 158 million people — equivalent to the 7th or 8th largest nation in the world. And this productive population — that sends payments of $600 billion a year — has no voice.
  • He says President Trump doesn't understand how even the most developed economies can be helped by the migrant population.
  • Ersek talks about the importance of diversity in Western Union’s management team. He says there are 10 people on his senior management team from seven different nations. Saying, "we are from all different culture, different religion, different race and it's a good thing." Ersek says it really reflects the company's customer base.
  • Ersek says the future of payments will be controlled by the customer. It used to be big banks that controlled financial services. Now, he says, every company is a startup and individuals are completely empowered.
  • Ersek also explains Western Union's recent partnership with Amazon that allows people to pay for online purchases with the local currency in person.

Hikmet Ersek is the CEO of Western Union. Ersek, a citizen of Austria and Turkey, draws on his international background to speak out publicly for the rights of migrants and refugees. Ersek sat down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland.

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Facebook and Twitter just took down hundreds of fake accounts from Iran and elsewhere that were trying to influence politics

Thu, 01/31/2019 - 3:52pm

  • Facebook and Twitter have both announced takedowns of hundreds of fake accounts designed to influence politics around the world.
  • Facebook detected accounts from Iran dating back to 2010, while Twitter's came from Iran, Venezuela, and Russia.

Facebook and Twitter have taken down hundreds of fake accounts designed to influence politics and public debate, the two social networks announced on Thursday.

Facebook took down 783 accounts linked to Iran that targeted countries ranging from Afghanistan to France, Germany, Israel, Morocco, South Africa and the US.

Twitter, meanwhile took down accounts linked to Iran, Venezuela, and Russia, it said, that were active during the US 2018 midterm elections. According to The Washington Post, 418 and were from Russia, 764 were from Venezuela.

"This morning we removed 783 Pages, groups and accounts for engaging in coordinated inauthentic behavior tied to Iran. There were multiple sets of activity, each localized for a specific country or region," Facebook cybersecurity exec Nathaniel Gleicher wrote in a blog post.

"The Page administrators and account owners typically represented themselves as locals, often using fake accounts, and posted news stories on current events. This included commentary that repurposed Iranian state media’s reporting on topics like Israel-Palestine relations and the conflicts in Syria and Yemen, including the role of the US, Saudi Arabia, and Russia.

"Some of the activity dates back to 2010. Although the people behind this activity attempted to conceal their identities, our manual review linked these accounts to Iran."

This story is developing...

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Wall Street weighs in on the Fed's big change

Thu, 01/31/2019 - 3:50pm

The Federal Reserve held its benchmark interest rate steady at a target range of between 2.25% and 2.5% on Wednesday and signaled that the end of hikes could be in sight. It also announced plans to adjust the pace of its balance-sheet reduction, and overall the meeting was received as more dovish than expected.

Stocks rallied following the announcement, with the major US indexes ending between 1% and 2% higher. Treasury yields were lower, and the dollar fell against a basket of peers.

Here's what Wall Street is saying about the meeting.

Initial reactions

"Investors wanted to see this, as the Fed came off surprisingly hawkish at the last meeting … It was a nice change to see markets finally bounce after the Fed made a decision versus having a knee jerk selloff." -Ryan Detrick, senior market strategist at LPL Financial

"When you consider how strong the economy is it's a pretty bold move to see all mentions of increasing rates wiped off the map. To be sure we're seeing signs of slower growth but that should be par for the course given where many think we are in the business cycle. That being said, we're not seeing inflation tip the scales in favor of more hikes." -Mike Loewengart, vice president of investment strategy at E-Trade

 



On the next rate adjustment

"Our baseline forecast calls for one interest-rate increase later this year, likely in September. We'd stress that there's a lot of dispersion around this projection--the Fed could cut rates if conditions continue to deteriorate, or it could raise rates up to three times this year if financial markets, the global economy and inflation all move higher in short order." -Paul Eitelman, strategist at Russell Investments

"With financial conditions easing over recent weeks and the economic data still solid, we still on balance expect one more rate hike from the Fed, either at the April/May or June meeting. We would place far more emphasis on our forecast for a sharp slowdown in economic growth further ahead, which we expect will force the Fed to cut rates by 75 basis points in 2020." -Michael Pearce, senior US economist at Capital Economics

"The FOMC still thinks the economy is strong. This statement is intended to convey that strength but to ensure that markets realize that the FOMC will not be tightening monetary policy in a vacuum. We still see a hike as the most likely next policy move, and in our forecast that happens in September. However, the Fed is being as explicit as possible that it is in no hurry to raise rates anytime soon." -Seth Carpenter, economist at UBS



On the balance sheet

"The Fed had separated, two statements, one on their policy decision, the other on the balance sheet. The purpose is so that we in the market do not conflate the two. These are different decisions and tools. Setting the interest rate remains the Fed's primary policy tool. A distant second is the balance sheet." -Jim Caron, managing director of global fixed income at Morgan Stanley Investment Management

"The market received the update they had been seeking with regards to the Fed's balance sheet and as the Committee said it is prepared to make adjustments. Overall, this was a positive message from the Fed as the ability to be nimble and make changes to monetary policy during periods of high uncertainty are extremely important." -Charlie Ripley, Allianz Investment Management

"In and of itself, the text of the Fed's balance sheet statement wasn't markedly different from public comments made over the past month by Chair Powell himself and several of his deputies, but it was seen as an admission that the end of the balance sheet runoff is closer than some FOMC participants thought last year." -Ellen Zentner, economist at Morgan Stanley



See the rest of the story at Business Insider

The world's biggest tech stocks are at a crucial turning point. Here's why the next few months could determine the fate of the market.

Thu, 01/31/2019 - 3:32pm

  • Facebook and Apple have jumped this week after their quarterly reports eased investors' minds. Like FAANG compatriots Amazon, Netflix and Alphabet, they suffered huge losses late last year.
  • The stocks have surged over the last month, and it's a sign investors are putting some of their fears behind them and getting more optimistic about the US economy and the stock market.
  • There are still signs technology stocks could struggle, and the FAANG group may never be as unified as it was over the past few years.

The world's biggest tech stocks are on the mend after a brutal three months, and it could be a good sign for the broader market.

Facebook had its best day in three years after its fourth-quarter profit and revenue beat analyst estimates. That came two days after it rallied following a quarterly report that was rough, but no worse than expected.

Netflix has soared 45% since the market hit its low point on Christmas Eve. Facebook has jumped 33%, Amazon is up 28% and looks like it will rise further after its quarterly report.

While those stocks and FAANG compatriot Alphabet are all far from the highs they set earlier in 2018, their recent surge shows investor mindsets have changed dramatically in January from the month before.

"Growth expectations were very washed out, and people were afraid the Fed would keep raising even in the face of weaker economic growth," said Sameer Samana, global equity strategist for the Wells Fargo Investment Institute.

Since December, the Federal Reserve has made it clear it's not in a hurry to raise interest rates further, and investors have become more optimistic about the health of the US and global economies and the state of US-China trade talks.

That's made them willing to go back to their FAANG favorites, which are unified by their links to consumer spending and economic growth as well as the increasing role of technology in peoples' lives.

But the medium- to long-term picture isn't quite so clear. Samana said an acronym-based trade like FAANG that attracts a lot of hype is eventually going to struggle to meet expectations over time.

"It was a hot trade, it was a momentum trade, people were willing to overlook a lot," he said.

The broader market has taken its cues from tech for years, and the largest S&P 500 sector will have a big vote in determining the course US stocks take. But Samana said investors are getting more selective and might not put their faith in FAANG or tech broadly.

While the future for technology companies still looks good, Samana said, the stocks may not be able to dominate the market the way they did over the last few years. They've struggled for about six months, and so far, the tech industry's fourth-quarter profit and revenue growth look weaker than the broader S&P 500.

"This is one of the first quarters I can remember where tech has underperformed from a growth-rate standpoint versus the rest of the market," Samana said.

SEE ALSO: A billionaire investment chief at the world's biggest hedge fund explained to us why the economy is headed for '20 years of ugliness' — even if a major recession is avoided

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Why Amazon Prime may not be such a good thing for the company anymore (AMZN)

Wed, 01/30/2019 - 11:38pm

  • Amazon's Prime service may be a good deal for customers, but it's becoming a worse one for the company.
  • The key component of the subscription offering is its free-shipping deals.
  • But the cost of those deals also now eats up half of the $119 annual subscription price the company charges customers, estimates Dan Morgan, a portfolio manager who closely follows the company and whose fund owns Amazon shares.
  • Amazon's fulfilment costs are slated to keep rising, thanks to price hikes by the major shippers.

Amazon's Prime service may be starting to become too much of a good thing for the tech giant.

The offering has attracted some 100 million subscribers. That sizable customer base has in turn encouraged a growing number of third-party merchants to sign up as customers of Amazon's fulfilment services. That's because products offered by vendors who are part of that program are eligible for Prime's free shipping offers.

So far, so good right? Prime brings more customers to Amazon, which lures in more merchants, which helps Amazon expand its product offerings, which likely attracts more shoppers and encourages existing ones to buy more items from Amazon.

The problem for the company is that shipping costs are rising, cutting into its profits and making its free shipping offers more costly. Amazon's fulfillment costs have already been rising faster than its revenue, noted Dan Morgan, a senior portfolio manager at Synovus Trust, which owns Amazon shares.

One of the key questions for the company, he said in an email, is "How can Amazon balance its fulfillment/shipping costs with increased order volumes from Prime members?"

Free shipping is costly for Amazon to offer

Morgan is a longtime bull on Amazon, but much of his optimism about the company is due to its Amazon Web Services cloud-computing business and its burgeoning advertising business. He's more skeptical of the prospects for its traditional retail business.

Read more: A gold mine is buried 'under the weeds' at Amazon — here's why it could take the company beyond the $1 trillion mark

Amazon charges customers $119 a year for its Prime subscription. But about half of that amount is now being consumed by the cost of offering free shipping to customers, Morgan estimated.

Those costs could continue to rise.

Amazon spent $25.2 billion on fulfillment costs in 2017, which was up 43% from the year before and amounted to 14% of the company's total revenue. That amount likely rose to $35 billion, or 15.1% of the company's sales, for all of 2018, and will probably jump to $43.3 billion, or 15.4% of sales, this year, estimates Benchmark analyst Daniel Kurnos in a recent report.

Indeed, Kurnos worried that shipping-related factors may have weighed down Amazon's results over the holidays. While Wall Street analysts as a whole are betting that the company posted $3.7 billion in operating income in the fourth quarter, Kurnos is forecasting $3.2 billion.

Amazon is slated to report its holiday period results on Thursday.

"We are somewhat cautious ... given external pressure on delivery costs and significant increases in same-day to two-day shipping," he said.

Amazon is facing price hikes

Part of the problem for Amazon going into this year is that all three of the major domestic shippers — the US Postal Service, FedEx, and United Parcel Service — just hiked their prices. Amazon recently adjusted its own charges for merchant customers who take advantage of its fulfillment services. But it's unclear if its higher charges will fully cover its increased costs. And regardless, those fees only apply to third-party merchants, not to products Amazon sells itself.

Add it all up, and Prime's free shipping offering is becoming a better deal for customers — and a worse one for Amazon.

The "rising fulfillment costs not only hurt operating margin, but it also erodes revenues from Prime members, as the $119.00 annual fee revenue evaporates as shipping costs rise," Morgan said.

SEE ALSO: The business school prof who predicted Amazon would buy Whole Foods now says an AWS spinoff is inevitable — and the standalone company could be worth $600B

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$1 billion video conferencing startup Zoom has picked banks but is sitting in SEC purgatory ahead of a planned IPO

Wed, 01/30/2019 - 9:33pm

  • Zoom, the $1 billion video conferencing company, is in the process of filing confidentially with the Securities and Exchange Commission, a source told Business Insider.
  • While the company submitted its paperwork, it hasn't gotten confirmation from the regulator, which was mostly shut down throughout January with the rest of the US federal government.
  • Zoom is working with Morgan Stanley, JPMorgan, Goldman Sachs and Credit Suisse on its IPO.

The $1 billion video conferencing company Zoom is in the process of filing confidentially for an IPO with the Securities and Exchange Commission but its registration is stuck due to the government shutdown, according to a source familiar with the company's plans. 

While Zoom has submitted paperwork with the SEC, the compay still isn't officially filed because of a processing delay, the source added. 

The startup has picked banks for a public offering that include Morgan Stanley, JPMorgan, Goldman Sachs and Credit Suisse, the source said. 

Representatives for Zoom and the banks declined to comment. 

Reuters previously reported that Zoom was preparing for an IPO with Morgan Stanley last October. 

Zoom was founded in 2011 by CEO Eric S. Yuan, who was previously VP of engineering at the video conferencing company WebEx. Yuan joined Cisco in 2007 when it bought WebEx for $3.2 billion.

Zoom, which sells subscriptions for enterprise-grade video conference services, is used by companies including Uber and Box. Morgan Stanley also uses Zoom's video conferencing technology, which played a role in the company's decision to appoint the bank as its lead underwriter, the source said. 

The company is cash flow positive, the source said. It was last valued at $1 billion in a Series D led by Sequoia Capital in 2017. The company is also backed by Facebook and Qualcomm. 

Zoom is just one of a handful of tech unicorns awaiting feedback or confirmation from the SEC following the federal government shutdown. The ride-hailing competitors Uber and Lyft reportedly had not gotten comments from the SEC as of January 9, despite filing confidentially in early December, ahead of the shutdown.

SEE ALSO: 2019 was supposed to be a banner year for IPOs, but now it's turning into a 's---show'

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After 2 years of apologies, Mark Zuckerberg says he wants to go all-out building new stuff again (FB)

Wed, 01/30/2019 - 9:17pm

  • Facebook CEO Mark Zuckerberg outlined 4 priorities for 2019
  • The four goals are designed to get the company out of the defensive crouch that's defined the past two years amid a string of scandals.
  • Zuckerberg emphasized that the company will redouble its efforts on "building new experiences."

After a two-year apology tour, Facebook is changing strategy: It's going to go all-out building stuff again.

On Wednesday, CEO Mark Zuckerberg told analysts on a conference call after the company's Q4 2018 earnings that the Silicon Valley tech giant believes it has made significant progress tackling its myriad woes, and that throughout 2019 one of the company's key areas of focus will be launching significant new features and products for its apps.

"I'm not talking about the many day-to-day iterative improvements we make so that ranking gets a bit better or things get somewhat faster, but major improvements to people's lives that whole communities recognize and say 'wow, we're all doing something new on Facebook or WhatsApp that we weren't doing before,'" Zuckerberg said in remarks also shared to his public Facebook page.

It's a significant step for Facebook, which has been on the back foot almost constantly since the 2016 US presidential elections, as its historically rosy image was tarnished by a string of scandals over everything from misuse of users' data and hacking, to the social network's role in spreading hate speech that fueled genocide in Myanmar and Russia's sowing of propaganda on the platform.

The new focus on product updates is also a likely necessity for keeping the company's increasingly unhappy workforce on board. Employees have been bombarded by a barrage of negative headlines, while the company's faltering stock price has put a dent in their compensation packages. ("Employee morale is dead," a Facebook employee recently told Business Insider. "It's like an open secret ... everyone has to pretend like they're all happy-go-lucky, but most people aren't, which is kinda crazy.")

As such, Zuckerberg's change of tack will allow rank-and-file employees, especially newer ones, to feel invested in new initiatives — rather than constantly playing on the defense and cleaning up other people's mess.

Zuckerberg conceded this, saying: "The reality is we've put most of our energy into security over the past 18 months so that building new experiences wasn't the priority over that period."

Particular points of focus when it comes to building new experience will be around messaging, groups and communities, "commerce and shopping" on Instagram, and Facebook's video service Watch, the 34-year-old billionaire chief exec said.

Zuck's four Facebook priorities for 2019

The plan is one of four key priorities Facebook's leadership has set for 2019. These are (in Zuckerberg's words):

  • "First, continue making progress on the major social issues facing the internet and our company."
  • "Second, build new experiences that meaningfully improve people's lives today and set the stage for even bigger improvements in the future."
  • "Third, keep building our business by supporting the millions of businesses — mostly small businesses — that rely on our services to grow and create jobs."
  • "And fourth, communicate more transparently about what we're doing and the role our services play in the world."

Facebook's attempts to refresh its image have had false starts before. The New York Times previously reported that in early 2018, the company had an internal comms campaign that was "meant to assure employees that the company was committed to getting back on track in 2018" — but it was ditched in the aftermath of the Cambridge Analytica scandal.

And 2019 is already shaping up to pose some challenges for Facebook.

Less than a day before Facebook announced its Q4 earnings, TechCrunch reported that Facebook was paying users on iOS to let it spy on them — and Apple responded by revoking the company's developer certificate, effectively blocking Facebook employees' from using internal apps to do their jobs and causing chaos for the company.

 

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SEE ALSO: Facebook's stock soars 12% after beating on top and bottom lines for Q4 2018 earnings

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Former Trump official Gary Cohn reveals the biggest difference between working at the White House and Goldman Sachs (GS)

Wed, 01/30/2019 - 9:08pm

  • Gary Cohn, a former economic advisor to President Donald Trump and a senior executive at Goldman Sachs, said employees at the Wall Street bank knew who they were working with and what they were working for, while the White House lacked an agenda and familiarity.
  • Cohn, who left the White House last March, said White House officials quickly had to learn each other's strengths and weaknesses at the highest level while Goldman colleagues often spend decades together before making it to senior leadership.

Ask Gary Cohn the difference between working for President Donald Trump and Goldman Sachs.

"Everything," Cohn, a former White House economic advisor and Goldman executive, said on Wednesday at the Context Summits conference in Miami.

Cohn pinpointed two items that separated his two most recent employers: agenda and familiarity. 

At Goldman, the instructions were clear and simple, said Cohn, who left the White House in March of last year over a disagreement on tariff policy.

"You serve clients and make money," Cohn said. 

Read more: The David Solomon era at Goldman Sachs kicked off with 43 words Lloyd Blankfein would never say

In the White House, however, the agenda was set before Trump's team even got into their offices by former Speaker of the House Paul Ryan, Cohn said. 

"Had we been left to our own agenda, we would not have done Obamacare first," he said.

The lack of familiarity between White House officials also cut into the team's productivity, Cohn said, adding that at Goldman, there's "very, very, very few political games played."

"You're thrown into this and said 'work together,'" he said. Compared to Goldman — where Cohn said he has worked with colleagues for decades before reaching senior leadership — the White House staff had to learn everyone's strengths and motives immediately. Though, he said, "you can figure out the good communicators pretty quickly and the bad communicators pretty quickly."

Read more: Goldman Sachs' 1MDB problems are eating into employee morale, and insiders worry the firm will use its legal woes as an excuse to scrimp on bonuses

Cohn expressed frustration with some of the moves made by "nationalists" in the White House, specifically naming trade hawk Peter Navarro and his axing of the Trans-Pacific Partnership on the first day of Trump's presidency. 

Calling Navarro an "Amazon economist," Cohn said that his team killed "a vast majority" of the protectionist executive orders Navarro tried to push Trump to sign early on. 

"I will never fully understand why we got rid of the TPP," he said. 

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