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LSE's $27 billion bid for Refinitiv highlights how hungry exchanges are for data. Industry insiders say FactSet could be the next target.

Tue, 07/30/2019 - 1:41pm

  • LSE is in talks to acquire data provider Refinitiv, and industry experts suggest that FactSet makes sense as exchanges' next focus for a deal. 
  • Acquisitions have proved a viable way for trading venues to add data that they can then sell on to clients. 
  • Of the five large data providers, experts say FactSet appears most likely to be snapped up next: it is public, has a manageable price tag, and could be easily merged into an exchange.
  • ICE would be the most likely exchange to look to strike a data deal because of its size and acquisitive nature, experts suggested. 
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On Saturday, the London Stock Exchange Group confirmed reports it's in talks to acquire Refinitiv, the financial data company behind Eikon terminals that's owned by Blackstone and Thomson Reuters.

The deal, valued at approximately $27 billion, highlights trading venues' desire to move beyond trading and clearing into the profitable business of selling data

That has industry watchers speculating about which data company might be bought next, as exchanges look to quench clients' seemingly endless thirst for financial data while also generating new streams of revenue for themselves. The verdict, according to consultants and executives: FactSet.

M&A has proven a viable route for exchanges looking to add more data. In 2015, Intercontinental Exchange, which owns the New York Stock Exchange, shelled out $5.2 billion for Interactive Data. New York-based rival Nasdaq purchased data provider eVestment for $700 million in 2017. That deal was followed by its purchase of alternative-data company Quandl for an undisclosed amount in late 2018 as the exchange looked to tap into Wall Street's interest in unique data sets

But when it comes to large data providers like Refinitiv, exchanges' options are limited. Rachel Carpenter, founder and CEO of Intrinio, a startup that offers a la carte access to data, told Business Insider that five companies control roughly 75% of the market in financial data. In addition to Refinitiv, there is market leader Bloomberg, along with S&P Global, FactSet, and Morningstar. 

Of the group, Carpenter said FactSet seems the most likely candidate to be acquired next. Dan Connell, managing director for market structure and technology at Greenwich Associates, came to a similar conclusion.

"If someone said to me, who would be the most likely, then [FactSet] would come to mind," Connell told Business Insider. "Just because of the public nature of the organization, the standalone nature of the organization, and the fact that it has been such a high-quality business."

Read more: Exchanges made nearly $30 billion in 2018, but a new report suggests their business could be at risk if they don't innovate in 3 ways

A spokesperson for FactSet declined to comment. 

In many ways, what makes FactSet such a viable option is a process of elimination. Bloomberg is privately held and seems unlikely to be sold anytime soon. S&P Global, while public, is also a stretch due to its potential price tag. The company had a market cap of nearly $60 billion as of Tuesday. Meanwhile, FactSet, which is also public, had a market cap of about $10.6 billion.  

As for Morningstar, it's the smallest of the group with a market cap around $6.5 billion but more of a niche player, as its focus sits more with mutual funds as opposed to broader financial data, according to Carpenter.

That's not to say FactSet's only value is due to its availability. Carpenter pointed to its Open:FactSet Marketplace, which is part of the company's push into focusing more on APIs. With Wall Street's increased use of data, APIs have taken center stage as they help facilitate the process of tapping into various feeds.

That type of work would make the company a good fit at most exchanges, potentially allowing it to merge easier than some of the larger providers. 

"FactSet is probably the most innovative," Carpenter said. "They are doing things that I think would catch the eye of an exchange and be pretty complimentary."

Octavio Marenzi, CEO of consultancy Opimas, told Business Insider another benefit FactSet brings is its expertise in analytical tools that could prove useful for exchanges.

"I think FactSet would be a perfect candidate for an exchange to acquire ... The exchanges provide a lot of the raw, underlying data. What makes sense to do is provide sort of value-added services on top of that data," Marenzi said. "That is sort of moving up the food chain."

As for which exchange would be interested in buying FactSet, or any data provider, one name was referred to by Carpenter, Connell, and Marenzi: ICE. The exchange operator's large size and acquisitive nature makes it a top candidate.  In 2016, ICE reportedly attempted to buy the LSE

"They have an insane history. [ICE CEO] Jeff Sprecher has been buying exchanges left and right, all over the place," Carpenter said. "I think a shoe-in is ICE to start looking for another data play." 

A spokesperson for ICE declined to comment.

See more: Large exchanges had a staggering 60% profit margin. We break down how they made their money.

To be sure, exchanges aren't exactly struggling. Since 2012, they've enjoyed a 12% increase in revenue annually and in 2018 trading venues made nearly $30 billion in revenue globally. 

And while Connell agrees exchanges are likely to continue looking for more deals for companies related to data and content, he doesn't see any making a rash decision after hearing of the potential LSE-Refinitiv deal. 

"I don't think any of those organizations are the type that are reactionary that say, 'Oh geez, we need to do something to stay competitive so let's go out and start looking,'" Connell said. 

But there is no doubt exchanges feel some pressure. A recent report from Opimas suggested exchanges eye-popping returns won't continue unless they add revenue streams

Exchange fees, particularly those around market data, have come under fire in recent years. The issue reached a boiling point earlier this year when Nasdaq, NYSE and Cboe Group all filed lawsuits against the Securities and Exchange Commission, one of their regulators, over a proposed pilot that would analyze their pricing models for transaction fees and rebates.  

"They'll be tempted to try and expand out into other data areas while the going is still good," Marenzi said. "The exchanges are afraid that sort of revenue is going to come under great pressure and greater scrutiny, so they'll probably be extra keen to diversify in terms of the data business."

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Data shows Trump's trade war is hurting US manufacturers. Here's what 4 companies had to say about the negative impact.

Tue, 07/30/2019 - 1:32pm

  • Concerns around President Trump's trade war and slowing Chinese growth are continuing to pop up during earnings calls with corporate executives. 
  • A large concentration of negative mentions can be found among industrials and materials companies.
  • The impact is also being felt in the numbers: Earnings results within the materials sector are coming in 5% below consensus targets, according to Bank of America Merrill Lynch data.
  • Visit the Markets Insider homepage for more stories.

The effects of President Trump's trade war with China are reverberating through industrials and materials companies.

Firms within the two sectors have mentioned the negative impacts of tariffs and a slowing Chinese economy more frequently throughout the most recent earnings season, compared to the first quarter of 2019, according to a report from Bank of America Merrill Lynch.

"Industrials and materials continued to cite weakness in their end markets on slowing business spending and tariffs," BAML said of second-quarter earnings reports.

About three-fourths of industrial stocks in the S&P 500 have reported second financial results, and so far earnings are coming in just 2% above the consensus estimates, the firm said. Materials companies are faring worse, with earnings tracking 5% below consensus expectations. 

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BAML also said Trump's 25% tariff increase in May could be driving the increased frequency of negative tones around China within earnings calls.

Out of the 45 companies that mentioned China trends, almost 50% were negative comments, compared to 28% in the first quarter.

Here are four of the companies that mentioned concerns about the trade war and slowing growth in China during their second-quarter earnings calls: 

Honeywell International

Honeywell, an industrials conglomerate with business lines in aerospace, chemicals, and manufacturing, has significant operations and sales in China. 

Despite reporting a backlog and increase in orders in China for its Universal Oil Products business in the second quarter, Gregory Peter Lewis, the senior vice president and chief financial officer of Honeywell, still counted slowing growth in the country as a major concern in the economic backdrop. 

"We are taking the cautious view on the short-cycle growth as many of the macro signals, the China GDP, US-China trade tensions and Brexit, just to name a few, are still clouding the economic outlook," Lewis said. "We think it's prudent to plan conservatively given the uncertainties." 



Dow Inc.

Last week, Dow posted second-quarter revenue of $11 billion, representing a 14% drop from the same period last year. The company said it expects to see trade and geopolitical uncertainties affect the buying patterns of its customers. 

"The macro environment is cautious largely driven by geopolitical volatility and prolonged trade negotiations which continue today," James Fitterling, the chief executive officer of Dow Inc. said during an earnings call. "We still see the global economy expanding, but the pace of growth is slower particularly in Europe and in China."



3M

3M, which manufacturers and supplies products for a wide variety of industries, saw its growth in China fall by 0.80% in the second quarter. Growing sales in 3M's health care, transportation, and electronics segments were offset by declines in demand for industrial, safety, and consumer products. 

"For the year, we now expect organic growth in China to be down low to mid-single digits versus a prior expectation of flat as we continue to experience challenging end market conditions, particularly in the electronics and automotive industries," Nicholas C. Gangestad, the senior vice president and chief financial officer said. 



Caterpillar

Caterpillar's second-quarter earnings signaled slowing growth in China amid the trade war as consolidated sales and revenue fell 7% in the Asia Pacific region from the same period last year. The company also saw manufacturing costs increase $328 million, with tariffs accounting for $70 million of the additional expenses. 

"We expect continued pressure from competitive pricing in China, partly offset by growth in other areas in Asia Pacific," D. James Umpleby, the chief executive officer said during the company's earnings call.



I've driven the Ford F-150, the Chevy Silverado, the RAM 1500, and the Toyota Tundra — here are the coolest features of these full-size pickups (GM, FCAU, F)

Tue, 07/30/2019 - 1:22pm

  • In the past few years, I've driven all the major full-size pickup trucks sold in the US: the Ford F-150, the Chevy Silverado, the RAM 1500, and the Toyota Tundra.
  • Of these pickups, the Ford, Chevy, and RAM are either all new or redesigned in the past five years; the Toyota is a bit long in the tooth but is due for an update.
  • Here's a rundown of the best features of these four full-size pickup trucks.
  • Visit Business Insider's homepage for more stories.

In the USA, we sure do love pickup trucks. Especially full-size pickups, which are at the heart of the market.

Since 2014, Ford, Chevy, and RAM — the Big Three of pickup brands — have each redesigned their bread-and-butter (Meat and potatoes?) truck.

I've driven them all, but I've also checked out the Toyota Tundra, a solid pickup that sells outside the top three, and that hasn't been revamped for a while.

These are all pretty good trucks, and for this roundup, I've highlighted some of their best features (by the way, I skipped towing because all four trucks can tow weight that's within the expectations of this class).

 

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Here's the F-150, which I tested right after Ford redesigned the iconic pickup in 2015, to use more lightweight aluminum in the construction; Ford has since updated the vehicle. The price for this one was around $50,000.

Read the review »



A big question about the redesigned F-150 was whether an aluminum bed would be as strong as steel. In my testing, the bed performed fine.

The tailgate in the F-150 has a very useful retractable step.

The F-150s styling is also a plus. This pickup just looks like it can get the job done.

Perhaps the best feature of the F-150 is how popular it is. The pickup has long been the best-selling vehicle in the US.

Of course, if the F-150 isn't high-performance enough for you, there's always the mighty Raptor, the race-car version of the the pickup.

The all-new 2019 Silverado! Price was $57,000.

Read the review »



The LTZ Crew Cab I tested came with a short bed, but a larger box is available. For me, this box is exactly the right size for everyday duty.

How's this for cool? The Silverado still had a column shifter!

The Silverado could be outfitted with a 2.7-liter turbocharged four-cylinder, a 4.3-liter V6, a 5.3-liter V8, a 3.0-liter inline-six-cylinder diesel — or, in the case of my tester, a 6.2-liter V8. Me, I'll take the V8.

The Chevy infotainment system was the best of all the four trucks here. Plus, you can use Apple CarPlay and Android Auto.

The back seats are a bench design, but plenty roomy. Adults would be comfortable.

Here's the new 2019 RAM 1500. Price? $68,500, in Crew Cab Laramie "Longhorn" edition trim.

Read about how the RAM 1500 stacked up against the Chevy Silverado »



The power tailgate can be activated using the key fob.

RAM is part of Fiat Chrysler Automobiles, whose uConnect infotainment system is well-executed, but not praised often enough. The screen on the RAM 1500 is huge.

A mild hybrid "eTorque" system is coupled to the Hemi 5.7-liter V8, making a total of 395 horsepower with 410 foot-pounds of torque. The 0-60 time is about 6 seconds. Fuel economy is OK: 17 mpg city/22 highway/19 combined.

The RAM 1500's calling card has always been its four-wheel independent suspension, which contributes to a smooth ride. Skeptics argue that the lack of a hardtail rear suspension — the other full-sizers have leaf-spring suspensions — means that the RAM 1500 suffers from a potential point of failure. But happy customers don't seem to care.

The RAM 1500 I tested had by far the most luxurious and comfortable interior.

Finally, the stalwart Toyota Tundra, which is due for an update. It stickered at $53,000.

Read the review »



I tested the 1794 Edition. The 1794 backstory is intricate: The oldest cattle ranch in Texas, near San Antonio, dates to that year. The property is where Toyota built its US pickup-truck factory.

The Toyota had the second-nicest interior of the full-size pickups I've tested, behind the RAM 1500.

Yep, the bed handled a hefty load of stuff with ease. To be honest, the beds were notable features on all these pickups. Only the Ford F-150's came without a spray-on bedliner.

Gotta love a good old-fashioned ignition key! Crank 'er up!

The Tundra, although in need of an update, still has a roomy and comfortable back seat that grown-ups should adore.

I drove a $46,000 VW Artreon to find out if the new flagship sedan is a budget Audi — here's the verdict

Tue, 07/30/2019 - 12:57pm

  • The Volkswagen Arteon is a flagship sedan that replaces the slow-selling CC.
  • My test car was priced at an appealing $46,000, with numerous standard options.
  • I liked the VW Arteon and think it's a good deal with near-luxury four doors, but VW might find that getting US buyers interested could be challenging.
  • Visit Business Insider's homepage for more stories.

Volkswagen is seriously getting its act together in the US market. After struggling for years with low market share and, more recently, dealing with the Dieselgate scandal that took out what was its only truly strong suit in America — peppy little oil-burners — the brand now has a spate of appealing vehicles.

The new Atlas SUV, a solid three-row offering, is at the top of the pile, the stalwart Jetta has been redesigned, and while small cars aren't exactly all the rage in the US, the Golf lineup still offers fine options for anyone who wants performance and versatility in a modest, hatchback configuration.

The freshest Vee-Dub on the block is the 2019 Arteon, a fastback sedan that lives above the Passat in the German automaker's hierarchy. VW flipped me the keys to this new flagship four-door, and I drove it around the New York-New Jersey are for a week, exposing it to a mix of suburban, urban, and highway driving.

Read more: The best Buick money can buy is a $44,000 alternative to European sport sedans — here's what it's like to drive

The Arteon, which debuted in 2018, replaced the Volkswagen CC, an oddly obscure car that was in the stable for nearly a decade but that sold in notably low volumes. The problem for VW is that in the US, the company is known for small vehicles and has been since the glory days of the Beetle. The Atlas SUV has started to change that perception. But the business challenge for VW is to sell a large sedan in a market that isn't interested in big four-doors.

We'll have to see how it goes. Short-term, however, the key question is, "How good is the Arteon?"

$46,000 worth of well-optioned German engineering

It's quite good. Obviously, you look at a $46,000 sedan (my as-tested price) from the VW Group, wearing the VW badge, and you wonder if it's as good as a comparably-scaled Audi — say, the A5 or A6, perhaps even the A7 at a stretch.

My test car was a well-equipped Arteon 2.0T SEL Premium trim, with VW's 4Motion all-wheel-drive system, coming in a $45,000 before a destination charge added about a grand. That's Audi-level pricing, so is the flagship VW worth it?

Honestly, I'd say the Audis are a better choice, but the truth is that the Arteon is aiming for a slightly different customer. The best analogy I could come up with was with Buick, GM's near-luxury brand. That might sound like a diss of the VW's aspirations, but it isn't. If there's a buyership for large sedans, this is what it expects. Sportiness and styling are less important that legroom, overall comfort, and ease-of-use. One winds up, invariably, in the less-well-known cul-de-sac of the near-luxe market, where you'll also find vehicles such as the Toyota Avalon. 

This segment is just kind of there. Unlike the plutocratic offerings from Mercedes-Benz — quasi-limos, really — this realm traditionally looks to capture old-school value buyers. Beyond that pitch, the cars themselves tend to have subtle flavorings, with the European marques offering sportiness and styling and, at the most American extreme, vehicles from Lincoln selling a nice, relaxing experience and a big trunk.

True, that sounds snoozy. But it's actually hard to get this type of car right. Overdo the sportiness and you alienate the core customer. But sacrifice too much pep and you consign yourself as an automaker to selling the cars to an aging demographic.

The Arteon, to its credit, splits the difference perfectly. In my time behind the wheel, I didn't think the Arteon did any one thing particularly well, but I looked forward to driving it, as I usually do these days with larger sedans that promise decent power and relatively gentle handling, alongside a smooth ride. The Arteon is, in a word, easy. To live with, to load up, and to take on a road trip. 

Style and technology

My tester arrived in what has become a signature color for the lastest wave of VWs: "Kurkuma Yellow Metallic," a shimmery mustard. The interior was a severe "Titan Black," but the leather was primo and only the generally minimalist design prevented the Arteon from exuding a more plush vibe. The tech was prevalent but not showy. Infotainment runs off an eight-inch touchscreen, while the 700-watt Dynaudio premium audio system brings a subwoofer to the party and performs as well as any setup I've tested in a VW (Apple CarPlay and Android Auto are available). 

The driver-assist features on my tester's trim level were the usual mix of adaptive cruise control, lane-keep assist, forward-collision warning, emergency braking, blind-spot monitoring, and so on. This feature set is becoming common on most luxury and near-luxury vehicles, depending on trim, so buyers have come to expect it. In my sampling, the VW meets expectations on this front. The presentation of info, both through the center touchscreen and on the digital instrument cluster, was excellent.

Under the hatch, I found about 23 cubic feet of cargo space, more than sufficient to handle grocery runs, shopping excursions, and luggage-hauling for weekend family getaways. Rear legroom was ample, and the curving, fastback roof didn't create too many headroom issues, although taller adults might disagree.

The Arteon's powertrain is a 2.o-liter turbocharged four-cylinder engine yoked to an eight-speed automatic. The motor cranks out 268 horsepower, with power piped to the all-wheel-drive system. The engine is brisk, without much apparent turbo lag, zipping the Arteon to 60mph in around six seconds. Of the multiple drive modes, I spent the majority of my time with Normal, Comfort, and Eco. Sport jazzed everything up, but not enough to make it a fixation. If I owned the Arteon, I'd likely choose Comfort and Eco most of the time — the latter to capture as much of a 20 mpg city/27 highway/23 combined fuel economy as possible.

Like every VW, the made-in-Germany Arteon errs on the bracing side when it comes to driving; the suspension, steering, brakes, and throttle response have all be tuned to reward a swift spirit behind the wheel. Combined with the Arteon's conservative yet sleek design — starting with a bold grille made up of aggressive vertical slashes and extending to a fastback rear that culminates in a dashing decklid spoiler — this makes for a compelling motoring experience that doesn't have that butt-kicking quality so common now in cars that deliver horsepower numbers north of 350.

So what's the verdict?

I genuinely enjoyed the Arteon. But would I buy one?

I would consider it. If you go Audi, you'll get better driving dynamics, but less passenger and cargo space for the price. With Audi, you'll also get more upmarket technology. As for build quality, I'd have to say it was about a dead heat in my evaluation; the Arteon is nicely crafted set of wheels.

The Buick Regal, to name a competitor, is also roomy and fun to drive, and I relished my time with it last year. It beats the Arteon on styling and infotainment tech, but the Arteon is a tad more luxurious. Other vehicles in the near-luxe, sorta-sporty segment are either too soft of a ride or too skimpy on the premium appointments to catch my eye, although the Kia Stinger is an interesting alternative if you want more of a full-on sport sedan.

The bottom line is that I'm glad we still have cars like the Arteon on the SUV-heavy US market. And I'm glad VW remains committed to the four-door platform. Ultimately, it's now up to buyers to determine whether the Arteon can be an impressive flagship or suffer the same fate as the CC and fail to light up the sedan imagination.

On that score, there's no question that the Arteon offers significant bang for the buck.

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Two Sequoia Capital bigwigs once hung out at a coffee shop dressed as 'Toy Story' characters to impress a candidate with a job offer

Mon, 07/29/2019 - 8:15pm

To set itself above the rest, Sequoia Capital apparently goes to infinity and beyond.

In an interview with Bloomberg, Jess Lee, now a partner at the legendary Silicon Valley venture capital firm, recounted exactly how she received her offer.

Lee told Bloomberg that Sequoia partners Jim Goetz and Roelof Botha offered to meet her at a cafe in Mountain View. When she showed up, she noticed two cafe patrons were in full Toy Story cosplay as characters Woody and Buzz Lightyear. Turns out they were Goetz and Botha, who took off their headpieces to reveal themselves and extend the offer to Lee, an avid devotee of cosplay. 

Read More: Startups with women founders are on track to see record venture investment in 2019

The theatrics are apparently part of Sequoia's schtick to stand out in a competitive market.

Once, Sequoia built a LEGO-model of the Golden Gate Bridge to woo a Lego-loving founder it wanted to invest in, according to a 2018 Forbes story.

For Lee, the tactic worked. She told Bloomberg that the gesture "meant I could bring my whole self" to work.

can’t decide if I like this or not pic.twitter.com/L9jZlJsuK0

— alex (PVD) (@alex) July 29, 2019

 

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Capital One says it was hit with data breach, affecting tens of millions of credit card applications

Mon, 07/29/2019 - 7:55pm

  • Capital One says it was hit with a data breach, affecting an estimated 100 million US individuals and approximately 6 million in Canada.
  • Paige A. Thompson, a former software engineer, was arrested Monday by FBI in Seattle.
  • She appeared in court and was charged with a single count of computer fraud and abuse, which carries a sentence of up to five years in prison and a $250,000 fine.
  • Visit Business Insider's homepage for more stories.

Capital One says it was hit with a data breach, affecting an estimated 100 million US individuals and approximately 6 million in Canada, according to a press release published Monday.

Here's what was compromised, according Capital One:

  • The largest category of information that was accessed pertained to consumers and small businesses, who applied for credit cards between 2005 and early 2019. The data accessed included personal information from credit card applications, such as names, addresses, zip codes/postal codes, phone numbers, email addresses, dates of birth, and self-reported income.
  • Data involving transactions and customer status was also accessed, including credit scores, credit limits, balances, payment history, and contact information.
  • Approximately 140,000 credit card customers' Social Security numbers
  • Approximately 80,000 of credit card customers' linked bank account numbers 
  • Approximately 1 million social insurance numbers of Canadian credit card customers

"Importantly, no credit card account numbers or log-in credentials were compromised and over 99 percent of Social Security numbers were not compromised," according to Capital One.

"We will notify affected individuals through a variety of channels. We will make free credit monitoring and identity protection available to everyone affected."

Paige A. Thompson, a former software engineer, was arrested Monday by FBI in Seattle, according to a press release from the Justice Department. She appeared in court and was charged with a single count of computer fraud and abuse, which carries a sentence of up to five years in prison and a $250,000 fine.

"While I am grateful that the perpetrator has been caught, I am deeply sorry for what has happened," Capital One Chairman and CEO Richard D. Fairbank said in a statement. "I sincerely apologize for the understandable worry this incident must be causing those affected and I am committed to making it right."

Capital One said it expects the incident to cost $100 to $150 million in 2019, stemming from "customer notifications, credit monitoring, technology costs, and legal support."

Thompson was arrested after she posted about the theft of information on the sharing site GitHub, the Department of Justice alleged in a Monday statement. Another user flagged the posts to Capital One on July 17 on the possibility of data theft. Capital One contacted the FBI two days later once it confirmed there had been an intrusion into its data. The breach occured on March 22 and 23, 2019.

Capital One said in the statement that "this type of vulnerability is not specific to the cloud," as the elements involved are "common to both cloud and on-premises data center environments."

While it's not clear which cloud provider Capital One is referring to in its press release, it's extremely likely that it's the market-leading Amazon Web Services — the two companies announced a partnership back in 2016 that would see Capital One become one of Amazon's highest-profile cloud customers in the financial services industry.

This story is developing and will be updated accordingly as more details emerge.

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Lone Pine Capital stock-pickers explain why they're investing in Tiffany and Nintendo and how they value 'disruptors' like Beyond Meat

Mon, 07/29/2019 - 5:13pm

  • $19 billion hedge fund manager Lone Pine Capital categorizes companies as young disruptors,  disrupted, or "compounders" when deciding whether to go long or short.
  • Young disruptors include recently IPO-ed companies that require a "high degree of creativity" to value them, Lone Pine Capital said in an investor letter seen by Business Insider. 
  • "Compounders" — companies that Lone Pine considers undervalued — include World Wrestling Entertainment, Nintendo, and Tiffany & Co.  
  • Lone Cypress and Lone Cascade, the firm's long-short fund and long-only fund, are both up around 24% for the year. The letter, dated July 15, also said fund-of-funds Lone Juniper closed July 10. 
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What do Nintendo, World Wrestling Entertainment, and Tiffany & Co have in common?

$19 billion Lone Pine Capital, a legendary stock-picking hedge fund, owns shares in all of them and sees "long runways" for their growth, according to a recent investor letter seen by Business Insider.

Lone Pine Capital has divided the market into three segments: young disruptors such as Beyond Meat; disrupted firms like banks, ad agencies and legacy technology companies; and "compounders" — like WWE and Tiffany. 

The firm is long the compounders, short the companies it considers already disrupted, and both long and short  young disruptors, according to the letter, and it thinks judgement about the overall market misses the "nuance of underlying extremes." 

Founded by Stephen Mandel in the late 1990s, Lone Pine Capital is one of the few hedge fund firms that does not focus on a specific industry or theme. Mandel — one of several "tiger cubs" who worked at Tiger Management before going on to run high-profile funds — stepped back from day-to-day portfolio management in January.

Through the end of the second quarter, both the firm's long-short fund, Cypress, and long-only fund, Cascade, are up roughly 24% for the year, according to the letter, versus roughly 7% for the overall market.  Lone Pine Capital declined to comment.  

See more: We got a copy of billionaire hedge-fund manager Seth Klarman's letter to investors — here are his 5 biggest warnings about the economy

The letter, signed by Mandel and managing directors Mala Gaonkar, David Craver, and Kelly Granat, said young disruptors almost always lose money, "sometimes lots of it," and that "expectations embedded in their share prices are high."

Companies the firm considers young disruptors include Wayfair, Sea, Chewy, Beyond Meat, Canopy Growth, and more. The letter said Lone Pine Capital is both long and short several such companies, though it did not list any specific investments. 

The disrupted companies meanwhile are facing challenges to their long-established models, and the firm is short many of those companies, the letter said. 

"Being right about the pace of decline is critical to shorting success here," the letter said. 

See more: A $10.5 billion fund at Canyon Partners has loaded up on cash amid a shaky stock market

Companies that fall under "compounders" have a proven business model now, but might have originally been a disruptor. "Examples include credit card networks, data analytics companies, Internet platforms, and vertical software leaders," the letter states. 

The firm is particularly interested in companies it believes fall in this category because "the power of the business platforms is often underestimated," despite being well-known and established. The letter named companies like Activision, Axis Bank, Melrose Industries, Nintendo, Shiseido, Tiffany, Union Pacific, and WWE.

Lone Pine Capital owns shares in all of those "compounders," and said each should improve profitability in the coming years through "overdue management actions" on costs, distribution, and products. 

The letter also said that the firm closed the  fund-of-funds known as Lone Juniper on July 10 after 19 years, and the person in charge of it, Frank Knapp, will take on a risk and analytics role on one of its other funds. 

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Beyond Meat plunges after losing more money than expected

Mon, 07/29/2019 - 4:53pm

  • Beyond Meat reported second-quarter earnings Monday that showed the company lost more money than analysts expected.
  • The plant-based meat alternatives company raised its full-year outlook for 2019 again. 
  • Shares tanked by as much as than 13% in after-market trading on the news. 
  • Watch Beyond Meat trade live on Markets Insider. 

Beyond Meat did not fully live up to expectations for its second-quarter earnings. 

Shares of the plant-based meat company plummeted more than 13% Monday after the newly public firm released its results. The company reported a wider loss than forecast, although it did generate more sales than expected.

The company also raised its full-year outlook for 2019. It now expects revenues to exceed $240 million and to be profitable by year-end. 

Further, Beyond announced plans to sell more than 3 million additional shares — a move that will dilute the per-share value of existing units. Even amid the after-market losses, Beyond is still up roughly 800% since going public three months ago.

Here is what the company reported versus what analysts surveyed by Bloomberg had expected:

  • Earnings per share: loss of $0.24 per share reported versus loss of $0.08 per share (expected)
  • Revenue: $67.3 million reported versus $50.7 million (expected)

The revenue growth in the second quarter was due to increased sales volumes from the company's fresh platform and across both its retail and foodservice channels, according to a press release.

"We believe our positive momentum continues to demonstrate mainstream consumers' growing desire for plant-based meat products both domestically and abroad," said Ethan Brown, Beyond Meat's CEO, in a statement. 

Beyond Meat raised its full-year outlook for 2019 as well, the second time it has increased its expectations. It now expects revenue to be more than $240 million for the year, representing growth of 170% from 2018. That's a boost from the guidance it released in the first quarter, when it expected 140% revenue growth for 2019. 

The company also saw improved margins this quarter and reported improvement in both income from operations and gross profit in the second quarter. Gross profit was 33.8% of sales, up from 15% a year ago and more than the 26% consensus estimate. Adjusted EBITDA was $6.9 million, or 10.2% of new revenues, up from a loss of $5.6 million in the year prior. 

"The early benefits we are seeing on cost productivity across our supply chain and manufacturing network, in conjunction with solid demand through our customer partnerships, have helped deliver these strong gross margin and operating margin results," said Mark Nelson, Beyond Meat's CFO and treasurer, in a statement. 

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The results were the second public earnings release for the company since its May IPO. Shares have risen more than 800% in that time and even broke the $200-a-share threshold on positive sentiment before earnings

Demand for Beyond's products have continued to ramp up, contributing to the net-revenue increase of 287% from the second quarter of 2018, the company said. 

The company has made strides in the last quarter, landing new deals with companies such as Dunkin' and Blue Apron. The company previously announced deals with Famous Dave's, Tim Hortons, Del Taco, and TGI Fridays. 

Beyond is also looking to expand into new protein areas. It announced in June that it would release a new "ground beef" product. Bloomberg reported earlier this week that it is developing a plant-based bacon alternative but does not yet have a release date. 

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What is a good credit score? It depends whether you're asking VantageScore or FICO

Mon, 07/29/2019 - 4:37pm

  • A good credit score is typically anything above 670.
  • Your credit score is a three-digit number that tells a lender how risky a borrower you are.
  • A credit score can determine whether you get approved for a mortgage, auto loan, or new credit card. It also influences the terms of a loan, including the interest rate.
  • A credit score can be negatively influenced by late or missed credit-card, cellphone, utility, or loan payments.
  • Visit Business Insider's homepage for more stories.

Credit scores are like the GPAs of adulthood.

Just as colleges use GPAs to evaluate students during the admissions process, banks and other lenders evaluate us by our credit scores when we apply for a new credit card, mortgage, or auto loan.

Three major credit bureaus — Equifax, Experian, and TransUnion — closely track a person's financial history to develop an individual credit report and calculate a three-digit credit score, which tells lenders how risky a borrower that person is. The lower the score, the greater the risk.

Anyone who has ever opened a credit card has a credit score. The bureaus are given information about our credit-card histories from creditors, but they don't all have the same information, which can lead to slight variation in the credit score calculated by each bureau.

Credit scores fall into five categories. The three major credit bureaus created the VantageScore model, which breaks down like this:

  • Very poor: 300-549
  • Poor: 550-649
  • Fair: 650-699
  • Good: 700-749
  • Excellent: 750-850

There's also the FICO model, which was created by the Fair Isaac Corp. and outlines a different set of ranges:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very good: 740-799
  • Excellent: 800-850

In determining your risk as a borrower, lenders may match your credit score against either model, but industry-specific models also exist, according to Experian. Where you rank largely determines whether you get approved for a mortgage, auto loan, or new credit card. It also influences the terms of a loan, including the interest rate.

Where can I check my credit score?

Under federal law, you are entitled to one free credit report every year from each of the credit bureaus. Websites such as Credit Karma or Credit Sesame will allow you to check your credit score at any time.

Whenever we check our own credit score or credit report, or a bank checks our credit score to issue a preapproved offer, it's called a soft inquiry. These don't influence our credit report or credit score.

Want to learn more about your credit score? Our partner Experian can help. Find out how »

But when we apply for credit — whether it's for a new credit card, a mortgage, or an auto loan — and a lender issues a credit check, it will appear on our credit report and may influence our credit score. This is referred to as a hard inquiry.

Too many hard inquiries may raise red flags for lenders, according to Experian, because they signal a high volume of new accounts in a short period of time, which "may mean you're having trouble paying bills or are at risk of overspending." However, hard inquiries remain on a credit report for only up to two years, so they don't permanently influence a credit score.

If you feel as though something on your credit report is false or inaccurate, you can contact the lender or file a dispute directly with the credit bureau.

What hurts my credit score?

In addition to too many hard inquiries on your credit report, a credit score can be negatively influenced by late or missed credit-card, cellphone, utility, or loan payments.

If a bill is 30 days or more past due, the lender will report it as a delinquency to the credit bureaus, which will stay on your credit report for seven years. 

Our credit scores are also majorly influenced by our credit-utilization rates, which are the balance-to-credit ratio on all active credit cards. Experian recommends keeping your credit-utilization rate below 30%. For example, someone with a total credit limit of $20,000 should keep their credit card balances under $6,000.

How can I improve my credit score?

The biggest ways improve your credit score are to pay off any outstanding debt, make future payments in full and on time, and keep credit utilization low. It's also important to make sure you aren't making too many applications for new credit at one time.

The bottom line: Your credit score is ever-evolving. It's not impossible to improve a credit score, it often just takes careful planning, diligence in paying bills, and keeping spending in check.

Need to improve your credit? Our partner CreditRepair.com can help you learn more about removing negative items from your credit score. Learn more »

SEE ALSO: The insurance policy that can protect a family's future isn't nearly as complicated or expensive as you'd think

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NOW WATCH: The US women's national team dominates soccer, but here's why the US men's team sucks

The stock market is getting increasingly confused about how the US government should regulate cannabis and CBD

Mon, 07/29/2019 - 4:34pm

  • Two hearings on hemp production and banking for cannabis companies stirred up volatility in cannabis stocks last week. 
  • The hearings show progress but also confusion over how cannabis should be regulated in the US.
  • Activists and industry watchers say legalization is coming, but the process for it is unclear. Still, the market for CBD and cannabis products is growing and investors see promising returns on the horizon.
  • Read more on Markets Insider.

Pot stocks have been subject to recent volatility as a number of key hearings show that, while there is support for progress on cannabis regulations, there's confusion from legislators about how to best proceed. 

Shares of Tilray, Cronos, and Curaleaf slid around 2% last Thursday after a hearing with the Senate Committee on Agriculture, Nutrition and Forestry entitled "Hemp production and the 2018 Farm Bill." Aurora and Canopy Growth were mostly flat following the hearing. 

The cannabis industry in the US and abroad is growing much faster than regulation is being introduced, said Bethany Gomez, the managing director of Brightfield Group, a market research and predictive analytics firm. 

"Everyone is begging for regulations," Gomez said. "There's still a lot of confusion and a lot of legal gray area surrounding those products."

Even though the 2018 Farm Bill federally legalized hemp and its derivatives, the Food and Drug Administration has yet to release clear guidelines on the marketing and sale of CBD products. It is also currently illegal for banks and financial institutions to work with cannabis companies, even though the Secure And Fair Enforcement (SAFE) Banking Act, which would reverse this, has bipartisan support. 

The stakes are high for the US government and for companies that produce and sell cannabis products. It has been estimated that the CBD industry alone could grow to be a $16 billion industry by 2025. Globally, the legal marijuana market could reach $66.3 billion in the same timeframe. 

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Per the FDA's current rules, products with CBD — a hemp extract that doesn't make the user high — cannot be sold over state lines, and products with CBD cannot be marketed as a health or dietary supplement. This means that it can be difficult for companies that produce and sell CBD products to describe what they offer to consumers. 

Take Curaleaf for example. It took a hit last week after the FDA sent the company a letter saying some of its products don't have approval to be sold in the US. Shares also came under pressure after CVS Pharmacy said it would pull Curaleaf products from its stores.

Other companies have also contended with FDA letters. In 2017, Charlotte's Web Holdings, then called Stanely Brothers, was issued a similar letter by the FDA. This year, PotNetwork Holdings was also issued a letter by the FDA, which sent its stock down slightly although it has since regained its losses. 

"It's a delicate tightrope for those companies to walk," Gomez said. 

But the confusion at the federal level has also boosted pot stocks in some cases. As cannabis has become more mainstream and companies begin to list on public exchanges — US companies in Canada, and Canadian companies in the US — more money has flowed into the industry. 

"The position of the federal government on cannabis has made the job of the cannabis industry more difficult, but that industry is still one of the most rapidly growing industries in the US," said Steve Deangelo, a cannabis activist and co-founder of Harborside, a cannabis company in California.

Another hearing earlier in the week on cannabis banking reform sent Tilray, Canopy Growth and Aurora up as much as 2% after positive signs from Senate Banking Chairman Mike Crapo that the SAFE act wouldn't face any obstacles moving forward. 

The gray area in the CBD market has also presented an opportunity for cannabis companies, Gomez said. For many consumers, it's played a part in normalizing the idea of using a product derived from cannabis and has driven talks about legalization. 

"It is unclear what the road ahead will look like. We're in the midst of a pro-cannabis cultural shift, CBD has played a part of accelerating the speed of that shift," said Martin Lee, the director of Project CBD. 

The market potential, which analysts say could reach $16 billion by 2025, has driven shares higher as well. When Cronos announced that it plans to enter the US CBD market within the next year, it gained more than 15%.

It's also attracted talent and deals that have boosted stocks. Cronos jumped more than 3% when it announced that a veteran from Mondelez International, the maker of Oreo cookies, would join as its chief innovation officer. In August 2018, beer conglomerate Constellation Brands paid $4 billion for a 38% stake in Canopy, which was the first major corporate investment in a marijuana cultivator.

Canopy Growth also completed a major deal when it spent $3.4 billion to purchase Acreage Holdings, a US pot company, pending the federal legalization of marijuana in the US. Tilray surged 18% when it announced its intent to join Privateer Holdings, its majority shareholder, and extended its shares lock-up period. 

Further legislation that's been recently introduced could also move the industry forward. Presidential hopefuls Sen. Corey Booker, Sen. Elizabeth Warren, and  Sen. Kamala Harris with House Judiciary Committee Chairman Jerry Nadler have all introduced different bills about marijuana that include decriminalization at the federal level or would leave it up to states. 

The consensus is that legalization will occur at some point - it's a question of "how",  not "when." Companies have already set themselves up to profit - Whole Foods and Coca-Cola have said that they're eyeing the market and Heineken and Molson Coors have produced CBD or THC infused products. 

More from Markets Insider:

The CEO of Constellation Brands throws cold water on the idea that former Canopy Growth chief Bruce Linton was fired for financial reasons

Cannabis giant Cronos Group gets a boost after saying it will buy a state-of-the-art fermentation and manufacturing facility

Cannabis producer Cronos Group jumps after appointing a Mondelez veteran as its chief innovation officer

Join the conversation about this story »

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A good credit score to buy a house is at least 620, but the barrier can be much lower for government-backed loans

Mon, 07/29/2019 - 4:32pm

If you're borrowing money to buy a house, your credit score will likely influence how much you end up paying to your mortgage lender every month.

A credit score is a three-digit number that indicates your riskiness as a borrower. A good credit score is usually anything above 670, depending on the credit-score model, which generally means you can be trusted to repay borrowed money on time. Credit scores range from 300 to 850.

When you apply for a mortgage, lenders will evaluate your credit score to determine whether they want to lend you money at all and how much they'll charge in interest if they do. A higher credit score will usually yield better loan terms than an unfavorable credit score, leaving you with a more affordable monthly mortgage payment.

What is a good credit score to buy a house?

A good credit score to buy a house varies depending on the type of mortgage you're applying for, but generally you need a credit score of at least 500.

In order to qualify for a conventional mortgage — a loan backed by a private lender, not a US government agency — you need a credit score of at least 620, according to the Lenders Network. The higher your credit score, the better chance you have of securing a lower interest rate. Conventional mortgages require a down payment of at least 5% of the purchase price, however, and any down payment below 20% will also require private mortgage insurance.

If you have a lower credit score, a government loan may be more suitable. The Federal Housing Administration (FHA) loan allows buyers with a credit score of 580 or higher to put down just 3.5% of the purchase price of a primary residence. Buyers with a credit score between 500 and 579 may also qualify for an FHA loan, but the minimum down payment is 10%.

Mortgage lenders also look at your debt-to-income ratio

Your credit score isn't the only factor lenders consider when you're applying for a mortgage.

Lenders will also calculate a potential borrower's debt-to-income ratio to determine whether they're suited to take on another monthly payment. You can find your debt-to-income ratio through a simple calculation: Divide all monthly debt payments by gross monthly income and you have a ratio, or percentage (once you move the decimal point two places to the right).

The lower the percentage, the better you look to lenders, because it indicates your debts make up a smaller portion of your earnings. A debt-to-income ratio of 43% is considered the cutoff for a qualified mortgage, according to the Consumer Financial Protection Bureau, but smaller lenders and government lenders may make exceptions.

Related coverage from How to Do Everything: Money

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The 15 most popular private jet destinations for the ultra-wealthy right now, from Spain's most famous party town to the Bahamas

Mon, 07/29/2019 - 4:32pm

As airports become more crowded and flight delays more frequent, the world's wealthiest are increasingly turning to private jets as their travel method of choice.

The number of flights on private jets jumped 10% in 2018, a Bloomberg analysis of Knight Frank and WingX data found. The ultra-wealthy prefer the comfort and convenience of private flights to commercial ones for shorter flights, but still book seats on commercial airlines for long-haul flights, analysts told Bloomberg.

Read more: From NASA artifacts retrieved from the ocean floor to vintage photographs, take a look at 7 billionaires' collections

Mallorca and the Bahamas were among the frequent destinations for private jets in 2018, according to Bloomberg. The majority of flights to the Bahamas originated in the United States and Canada, while many flights to Mallorca originated in mainland Spain or Germany.

There were over 30,000 private flights to islands in North and South America in 2018, Bloomberg found.

Keep reading to learn more about the 15 most popular destinations for private jets.

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15. Crete

Number of private jet arrivals in 2018: 912

Greece's largest island is known for its pristine beaches, mountains, and palm tree forests, according to U.S. News and World Report.

Read more: A secluded cove on the beach in Crete is the perfect spot to surf the waves

 



T14. Barbados

Number of private jet arrivals in 2018: 1,200

Barbados is a tropical paradise in the eastern Caribbean. Despite the island's popularity as a cruise ship port, Business Insider previously reported that the State Department advises Americans to avoid Crab Hill, St. Lucy; Ivy, St. Michael; and Nelson Street, Bridgetown due to high levels of crime.

Read more: The risk of traveling to every country in the Caribbean, according to the US State Department



T14. Malta

Number of private jet arrivals in 2018: 1,200

The tiny Mediterranean island-state is home to perfect weather, stunning architecture, and a booming real estate market, Business Insider previously reported.

Read more: Foreigners are snapping up real estate on a tiny Mediterranean island to get EU citizenship, and it highlights the significance of 2nd passports as status symbols among the wealthy



12. Sint Maarten

Number of private jet arrivals in 2018: 1,300

Sint Maarten is a Dutch territory in the Caribbean known for its picturesque lagoons, according to Lonely Planet.



11. Philippines

Number of private jet arrivals in 2018: 1,600

The Philippines is a cluster of islands in the Western Pacific that is an excellent destination for divers and beach lovers, Business Insider previously reported.

Read more: 16 photos that will make you want to travel to the Philippines



10. Mykonos

Number of private jet arrivals in 2018: 1,900

Mykonos is the most cosmopolitan of the Greek islands and is known for its nightlife, according to Visit Greece.



9. US Virgin Islands

Number of private jet arrivals in 2018: 2,000

The US Virgin Islands are the best Caribbean destination for history buffs, Business Insider previously reported. The islands are home to the ruins of four-century-old churches and plantations.

Read more: The best Caribbean island for every type of traveler



8. Corsica

Number of private jet arrivals in 2018: 2,100

Corsica is an island off the coast of France with a distinctly Italian culture, according to Lonely Planet. The island is known for its national park, which takes up almost half of its landmass. 



T7. Sicily

Number of private jet arrivals in 2018: 2,300

The island off the coast of Italy is famous for its archeological sites and golf courses, according to Discover Italy.



T7. Cayman Islands

Number of private jet arrivals in 2018: 2,300

The group of three British Islands is known for having the best duty-free shopping in the Caribbean, Business Insider previously reported.



5. San Juan, Puerto Rico

Number of private jet arrivals in 2018: 3,400

San Juan is one of the most popular destinations in the Caribbean for nightlife, thanks to its restaurants, casinos, and clubs, Business Insider previously reported.  



4. Sardinia

Number of private jet arrivals in 2018: 5,200

Sardinia is an Italian island with picturesque towns and beaches that's best visited in shoulder season, Business Insider's Libby Kane previously reported. 



3. Ibiza

Number of private jet arrivals in 2018: 5,400

Ibiza is known as one of the best places to party in the world, with 24-hour clubs, pool parties, and gorgeous beaches, Business Insider's Harrison Jacobs previously reported. 



2. Mallorca

Number of private jet arrivals in 2018: 5,600

The Spanish island is the most popular island destination in the Mediterranean, according to Lonely Planet



1. The Bahamas

Number of private jet arrivals in 2018: 16,400

The Bahamas is the best Caribbean destination for families, Business Insider previously reported. 

Read more: The best Caribbean island for every type of traveler



'There was a lot of yelling': Trump was furious that Delta's CEO skipped a White House meeting

Mon, 07/29/2019 - 4:21pm

When the CEOs of major US airlines and freight carriers met with President Donald Trump at the White House earlier in July, there was one person conspicuously missing: Delta CEO Ed Bastian.

Far from going unnoticed, his absence became a sticking point for the president, according to a new detailed report by NBC News.

The CEOs of American Airlines, United, JetBlue, FedEx, Atlas Air, and Qatar Airways met on July 18 with the president; Vice President Mike Pence; the White House trade adviser, Peter Navarro; the national security adviser, John Bolton; and several other advisers.

The CEOs of American and United asked the White House to intervene in a long-running dispute with Qatar Airways and two other Middle Eastern airlines that American, United, and Delta have accused of competing unfairly by receiving subsidies from their governments. Delta has been particularly vocal about this in recent years.

At the root of the issue is a recently rebranded and expanded Italian airline, Air Italy. Qatar Airways has a 49% stake in the airline, which flies to several locations in the US. The "big three" US airlines, through a lobbying coalition, argue that Air Italy's flights represent illegal "fifth freedom" flights, in which an airline flies between two countries that are not its own. Those flights are highly regulated and typically must originate or eventually end in the airline's home country.

But executives from other airlines and industries have argued that since Qatar Airways is not the majority owner of Air Italy, there is no violation of the Open Skies trade treaty that regulates international air travel. They've also argued that any action taken against the Middle Eastern airlines would result in a harmful trade war.

Read more: Trump sided with Qatar over US airline CEOs in the nastiest battle in the aviation industry

According to the NBC report, the lobbying coalition that represents the US airlines, the Partnership for Open & Fair Skies, sought a meeting with Trump by airing commercials during Fox News programs, including "Fox & Friends," to get his attention in the weeks after Qatar Airways signed the contract on a major purchase from Boeing and GE. The thought was that the Trump administration's overall protectionist trade tendencies would lead the White House to side with the airlines, a source told NBC.

But the White House sided against them in a meeting that NBC described as "a heated, 'Apprentice'-worthy showdown."

Trump "repeatedly harped" on Bastian's absence and criticized the airline for buying planes from the European planemaker Airbus rather than Boeing, an American firm, NBC said.

He was particularly offended by Bastian's absence because Delta had been so vocal in the fight against the Middle Eastern airlines.

"The president kept going back to it," a source who was at the meeting told NBC. "There was a lot of yelling."

Delta told Business Insider after the meeting that Bastian had scheduled international travel that he was unable to change. The airline did not say where he was traveling to, what he was doing on the trip, or why he was unable to change it.

The airline also did not immediately respond to a request for comment related to the new report.

SEE ALSO: Trump sided with Qatar over US airline CEOs in the nastiest battle in the aviation industry

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Stocks edge lower on mega-cap tech losses as investors await the Fed

Mon, 07/29/2019 - 4:20pm

US stocks edged lower on Monday as losses in mega-cap tech firms like Facebook, Netflix, and Amazon offset gains in utilities and real estate.

Facebook and Amazon fell by 1.7%, while shares of Netflix dropped by around 1.2% ahead. Elsewhere in tech, Apple will report second-quarter earnings results on Tuesday. 

Meanwhile, President Trump took to Twitter on Monday to attack the Federal Reserve just a day before the central bank is scheduled to meet and make a decision on interest rates.

The president reiterated his position that the fed should lower the benchmark interest rate to help boost the economy. Analysts and investors widely expect the bank to cut rates on Wednesday, but there is still a debate as to how big the adjustment will be. 

Here's a look at Friday's closing numbers:

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Shares of Mylan soared as much as 19% on Monday after the company announced a merger with Pfizer's off-patent-drug unit. The new company, which will be rebranded and renamed once the deal closes in mid-2020, is expected to generate around $20 billion in annual sales. Pfizer's off-patent-drug unit, also known as Upjohn, sells medicines such as Viagra and Lipitor. 

Chipotle rose as much as 4% after Goldman Sachs initiated coverage of the company with a "Buy" rating and $1,000 price target. The bank said the restaurant is was its top pick in the space, and its digital-sales strategy is a major driver for the stock's upside. 

Exact Sciences plunged 5% after shelling out $2.8 billion for Genomic Health, a company that focuses on cancer testing products. The purchase represents the largest-ever deal for Exact, and gives the diagnostics company access to breast and prostate cancer tests. 

Within the S&P 500, these were the largest gainers:

And the largest decliners:

Within the S&P 500, gains in real estate, utilities, and healthcare were offset by losses in the communications services, financials, and consumer discretionary sectors. 

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NOW WATCH: Jeff Bezos is worth over $160 billion — here's how the world's richest man makes and spends his money

Elizabeth Warren just unveiled a trade plan designed to improve the lives of workers and tighten the screws on big corporations

Mon, 07/29/2019 - 3:40pm

  • A new Medium post released by the Democratic presidential candidate Elizabeth Warren on Monday detailed the trade policies she would try to enact if elected.
  • The initiatives emphasize stronger enforcement of labor laws and the improvement of global living conditions.
  • Warren also called on the US to only trade with nations that follow a new set of standards. The preconditions focus on environmental consciousness, labor rights, and anti-corruption measures.
  • Visit the Markets Insider homepage for more stories.

The Democratic presidential candidate Elizabeth Warren released a new policy proposal Monday, detailing the trade initiatives her administration would take to create jobs, improve global living standards, and hold corporations accountable.

"I won't hand America's leverage to big corporations to use for their own narrow purposes," Warren wrote in a Medium post. Her proposal seeks to raise wages for US workers, bolster farm income, drive climate-friendly initiatives, lower drug costs, and raise standards for current and future trade agreements.

"If we raise the world's standards to our level and American workers have the chance to compete fairly, they will thrive — and millions of people around the world will be better off too," Warren said.

Here are the three main goals detailed in Warren's post:

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Reinvent "free trade"

The Massachusetts senator argued that free trade is only good if it benefits American workers, and tariffs aren't a permanent solution to systemic trade issues.

The policy emphasizes America's ability to set examples for other nations, whether its labor laws, anti-corruption policies, or environmental standards. Instead of free trade that benefit multinational corporations, investment in American workers will "raise the bar" for the US and nations it trades with.

The policy does away with the "Fast Track" method used by Congress to push policy through. Warren's proposal emphasizes transparency, calling for publicly disclosed negotiation drafts, regional analysis of an agreement's economic effects, and a longer congressional approval procedure.

The new process would allow representatives and the public to have a greater say in such agreements, Warren wrote.

"Our current approach to negotiating trade agreements works great for the wealthy and the well-connected," she said. "Once those corporate interests are finished whispering in the ears of our negotiators, the completed text is released."



Demand a higher standard of living

There is no reason to trade access to the US market for "vague commitments to do better" in regard to labor, environmental, and human rights issues, Warren wrote.

Under a Warren administration, the US would establish a set of standards for nations looking to trade, and renegotiate current trade deals to meet the same conditions.

Here are the preconditions noted in the post:

  • Recognition and enforcement of the International Labour Organization's core labor rights. These include the elimination of child labor and the right to collective bargaining.
  • Enforcement of human rights laws set forth by the State Department's Country Reports on Human Rights.
  • Enforcement of religious freedom.
  • Compliance with standards of the Trafficking Victims Protection Act.
  • Membership in the Paris Climate agreement, with an independently verified plan to reduce harmful emissions.
  • Elimination of fossil fuel subsidies.
  • Ratification of the Convention on Combating Bribery of Foreign Public Officials
  • Compliance with any tax treaty made with the US, and participation in the Organization for Economic Co-operation and Development's project to combat tax evasion.
  • Absence from the Treasury's list of nations that "merit attention for their currency practices."

"Shamefully, America itself does not meet many of these labor and environmental standards today," Warren said. "I am committed to fixing that as President."

The candidate also expands on areas she seeks to improve the lives of US citizens. Her post mentions a number of initiatives to support green policies, bring down the cost of prescription drugs, reward American farmers, and assess how mergers harm competition.



Strengthen enforcement of corporations and foreign governments

Warren's post argued that corporations have access to powerful tools that benefit their bottom line at Americans' expense. Warren's enforcement policy calls for an end to "Investor-State Dispute Settlements," or practices used by corporations to skirt typical courts when they believe a new law violates a trade agreement.

The rulings aren't reviewed by "an actual court," but instead by an international panel of "corporate lawyers" typically tied to the corporations involved, Warren wrote.

The policy looks to eliminate ISDS from current and future agreements. The rulings often leave a nation's citizens to pay corporations billions in damages, all outside the purview of a fully independent court, Warren said.

The post also calls for greater enforcement of labor and environmental standards. Labor unions don't enjoy the benefits of ISDS, allowing the government to ignore their requests for a wide range of reasons, Warren said.

The senator proposes independent and expert-led commissions to investigate union claims and monitor violations. If one of the commissions recommends the US bring a claim against another country, the US would be required to do so, Warren wrote.

The Medium post follows a release from Warren on July 22 that outlined her plan to avoid a "coming economic crash." The post named household and corporate debt, as well as a weakening manufacturing sector, as the biggest risks for the American economy.



FREE SLIDE DECK: The Future of Fintech

Mon, 07/29/2019 - 3:30pm

Digital disruption is affecting every aspect of the fintech industry. Over the past five years, fintech has established itself as a fundamental part of the global financial services ecosystem.

Fintech startups have raised, and continue to raise, billions of dollars annually. At the same time, incumbent financial institutions are getting in on the act, and using fintech to remain competitive in a rapidly evolving financial services landscape. So what's next?

Business Insider Intelligence, Business Insider's premium research service, has the answer in our brand new exclusive slide deck The Future of Fintech. In this deck, we explore what's next for fintech, how it will reach new heights, and the developments that will help it get there.

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A division of Citigroup hired 3 criminals because of lax background checks (C)

Mon, 07/29/2019 - 3:08pm

The Financial Industry Regulatory Authority announced on Monday that it had fined Citigroup Global Markets $1.25 million, saying its failure to "conduct timely or adequate background checks" led it to hire three convicted criminals.

The Citigroup unit's shortcomings came amid screenings of about 10,400 nonregistered people associated with the firm from 2010 to 2017, FINRA said.

Citigroup didn't fingerprint at least 520 of those people before they started working at the firm, FINRA said, adding that the firm limited its background-check screening to only what's required by federal banking laws, leaving out what's required by federal securities laws.

The years of poor practices led the group to hire the three people, who should've been immediately disqualified, FINRA said.

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"Member firms must live up to their responsibility as a gatekeeper protecting investors from bad actors," Susan Schroeder, the executive vice president of FINRA's enforcement department, said in a release. "It is important that firms appropriately screen all employees for past criminal or regulatory events that can disqualify individuals from associating with member firms, even in a non-registered capacity."

The FINRA release said that as part of the settlement, Citigroup Global Markets "neither admitted nor denied the charges, but consented to the entry of FINRA's findings."

In an email to Markets Insider, a Citigroup representative wrote: "Our comment is that we are pleased to have this matter resolved."

Earlier this month, Citigroup reported strong second-quarter results that beat analyst expectations and led a rally in bank stocks. Shares of Citigroup were little changed after FINRA announced the fine and are up about 38% year-to-date.

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A top Lyft exec is reportedly leaving after less than 18 months on the job, and the stock is dipping (LYFT)

Mon, 07/29/2019 - 2:36pm

  • Lyft COO Jon McNeill is reported to be leaving the company.
  • McNeill came to Lyft from Tesla, but is said to be leaving after less than 18 months on the job. 
  • Lyft stock dropped some 2% at the time of publication, in the wake of the initial report. 
  • Visit Business Insider's homepage for more stories.

Lyft COO Jon McNeill is planning to leave the ride-hailing company, reports CNBC, citing a person familiar with the situation. In the wake of the CNBC report, Lyft stock has dipped some 2% ahead of the closing bell. 

McNeil has been at Lyft for less than 18 months. The ridesharing company hired McNeill from Tesla in February 2018, where he was head of sales and service. Tesla sales doubled during McNeill's time at the company, Lyft wrote in McNeill's job announcement.

Read more: A Tesla exec is leaving to be COO of Lyft

At the time of publication, Lyft was trading down near $64 a share, off about 2.5% from where it opened on Monday morning.

Lyft went public in March 2019 at a $24 billion valuation. Despite some volatility in the immediate wake of its IPO, Lyft stock is up some 5% overall in the last three months.

Lyft declined to comment.

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Citigroup is shaking up its stock-trading group. 3 execs will be in charge of the new-look unit.

Mon, 07/29/2019 - 2:32pm

  • Citigroup is restructuring its stock-trading operation, according to an internal memo seen by Business Insider. 
  • The firm is merging its equities division with its prime, futures, and securities services division. The new unit will be called "Equities and Securities Services."
  • The new-look group will be co-headed by three execs: Dan Keegan, Okan Pekin, and Murray Roos.
  • Keegan will additionally take on the role of head of markets and securities services for North America.
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Citigroup is restructuring its stock-trading operations and combining several units, the latest in a string of leadership and organizational changes within the bank's markets division.

The firm is merging its equities division with its prime, futures, and securities services division (PFSS), according to an internal memo seen by Business Insider.

The memo, from markets co-heads Carey Lathrop and Andy Morton, said the new group — called Equities and Securities Services — will be headed up by three executives: Dan Keegan, Okan Pekin, and Murray Roos.

"We are pleased to announce that we are combining our Equities and PFSS businesses to generate integrated capabilities in all geographies and offer our clients a seamless experience across the value chain," the memo reads. "The new organization — Equities and Securities Services (ESS) — will include broad trading and execution capabilities for electronic and complex structured products, financing and hedging solutions, clearing, custody and funds services."

A Citigroup spokesman confirmed the contents of the memo but declined to comment.

Separately, the bank is reportedly planning to cut 100 jobs in its equities division this year — or roughly 10% of the group — in addition to trading cuts in fixed-income, according to a report Monday from Bloomberg. 

A person familiar with the bank's strategy said the decision to cull jobs and the decision to combine the units were made independently.

The memo detailed additional role changes. Keegan, the long-time equities co-head based in New York, has also been named head of markets and securities services for North America.

"In this role, he will be responsible for executing our regional strategy, working closely with the functions to ensure strong governance and controls and to maintain a culture of responsible finance," the memo read. 

Other details announced in the memo:

  • The management team for the division will include the current global product, sales, structuring, operations, technology, and HR heads in addition to four regional heads.
  • Cedric Pauwels will lead North America, Chris Cox will lead Europe, the Middle East, and Africa, Ricardo Hesse will run Latin America, and Julia Raiskin — previously the Asia head of Investor Sales and Relationship Management — will run Asia.
  • Chris Glauner will be the global COO for the division.

This is only the most recent in a string of reorgs within Citi's markets division this year. Paco Ybarra was promoted to run Institutional Clients Group in April after Jamie Forese retired, and Lathrop and Morton were promoted to co-run markets in place of Ybarra. 

In June, the bank merged its rates and currencies operations, two of its top moneymakers in sales and trading.

Citi's equities division has traditionally lagged behind its big-bank brethren but has gained market share in recent years, according to data from industry consultant Coalition. 

Like most banks, Citi's stock-trading group suffered a decline in second-quarter revenues amid tough market conditions.

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MORGAN STANLEY: The stock market's rally to new highs is masking 3 under-the-radar warning signs that danger lies ahead

Mon, 07/29/2019 - 2:06pm

  • Stocks have rallied to new highs as investors anticipate the interest-rate cut likely to come this week. 
  • According to Mike Wilson, the chief US equity strategist at Morgan Stanley, the S&P 500 rally is serving as a misleading indicator of the investing climate ahead. 
  • He singled out at least three trends beneath the surface that illustrate why there's more unease among investors than the S&P 500's current level is implying. 
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A stock's price, on its own, is often not the best gauge of a company's worth or prospects.

One Wall Street strategist is applying this maxim to the broader market, arguing that the recent rally to all-time highs is painting an inaccurate picture about what the future holds. 

The rally has been partly driven by investors' anticipation of the interest-rate cut that the Federal Reserve is expected to announce on Wednesday. Such a cut could be interpreted as a cue that turbulence lies ahead for investors. However, the market's rally to new highs since the Fed's so-called pivot shows that investors are foreseeing a conducive climate for corporate earnings growth. 

The latter scenario is less convincing to Michael Wilson, the chief US equity strategist at Morgan Stanley.

"While that conclusion is usually the right one, there are times when the market index can be a bit misleading," Wilson said in a recent note to clients. "We think this is one of those times."

He pointed to three trends that indicate there's are more threats to the S&P 500's rally than meet the eye. 

His first observation is that broader indexes like the Russell 2000 and Wilshire 5000 are underperforming the S&P 500. The benchmark index is also underperforming an alternative version in which all companies are weighted equally, not by market cap.

These performance gaps show that a larger swath of the market is pricing in slower growth ahead, Wilson said. 

Some investors have expressed their concerns about slower growth by buying parts of the market they expect to outperform in a harsher environment. Wilson's second observation is that the quality factor — which includes companies with low debt and a high return on capital — is topping the performance charts. 

"Rarely have we witnessed such a defensive skew in leadership, particularly with the S&P 500 making all-time highs," he said. 

Read more: Morgan Stanley scoured 100 sets of data and warns we're 'just outside the danger zone' of the next recession. Here's how it says to prepare.

Finally, he observed that the same underlying defensive factors driving the stock market are at play in parts of the credit market. Leveraged loans are underperforming relative to an index of Treasuries that mature in seven to 10 years, Wilson said. 

These trends are unfolding against a backdrop for corporate earnings that Wilson says is deteriorating. While the second-quarter reporting season is not over, he pointed out that the share of S&P 500 companies providing negative earnings guidance, relative to those offering positive guidance, has spiked to a three-year high. 

Combine this with the enthusiasm for lower interest rates, and you have a stock-market rally that is ignoring fundamentals, according to Wilson.

He also flagged the systematic strategies that have fueled the rally by riding the price momentum higher. In his mind, their rules-based nature means that the market's eventual reversal could be sharper than investors expect.

SEE ALSO: An investment chief overseeing $785 billion says there's a bigger risk to the stock market than an economic recession. Here are his top trades to combat it.

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