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4 biotechs that could be the next takeout targets after AbbVie's $63 billion acquisition of Allergan

Wed, 06/26/2019 - 2:45pm

  • AbbVie's recent deal for the pharmaceutical company Allergan is the latest in a string of healthcare mergers and acquisitions this year that have shifted the pharmaceutical industry's landscape. 
  • AbbVie is betting on Allergan's cosmetic products, such as Botox, and other medical areas, including women's health, neuroscience, and eye care.
  • Analysts at Stifel said four biotechs could be the next takeover targets: Revance Therapeutics, TherapeuticsMD, Aerie Pharmaceuticals, and Kala Pharmaceuticals. 
  • Click here for more BI Prime stories.

The US drugmaker AbbVie just announced a megadeal to buy the pharmaceutical company Allergan for about $63 billion.

It's only the latest in a string of active healthcare deals this year, with Bristol-Myers Squibb's $74 billion proposed acquisition of Celgene and Eli Lilly's $8 billion agreement to buy the biotech Loxo Oncology in January. 

With Tuesday's deal, AbbVie is betting on Allergan cosmetic products, including the well-known filler Botox and the fat-freezing procedure CoolSculpting.

But the drugmaker also clearly values Allergan's other medical treatments in areas like women's health, neuroscience, and eye care, the Stifel analysts Annabel Samimy and Nick Rubino said.

"This demonstration of interest could bring a host of other transactions that complement and build on franchises that [AbbVie] appears more committed to than [Allergan] has been," they said. 

There is, of course, no guarantee of future dealmaking, but this latest acquisition could foreshadow a "rebalancing" in Big Pharma, opening up doors to areas that have historically not gotten much interest, the Stifel team said. 

Read more: 3 biotechs that investors should buy next after Pfizer's $11 billion deal for cancer drugmaker Array BioPharma

Here are four biotechs that could also get acquired by AbbVie, thanks to its new focus.

Revance Therapeutics

Revance, based in Silicon Valley, has been around since 1999 and is developing an experimental product for frown lines, forehead lines, and crow's feet that would compete with Botox. The product, Daxi, is in late-stage development, and the company plans to submit it for Food and Drug Administration approval this fall.

Revance is also working with the drugmaker Mylan to develop a copycat "biosimilar" version of Botox. The biotech also has experimental medicines in the works for a neurological movement disorder, migraines, the degenerative musculoskeletal condition plantar fasciitis, and more.

On Tuesday's conference call with investors, AbbVie CEO Rick Gonzalez questioned whether another company would be able to make a biosimilar copycat of Botox. But "the jury is still out in our view," the Stifel analyst team said. 

Revance has a market value of $550 million, and the stock jumped 5% yesterday after the AbbVie-Allergan deal was announced.

The Stifel team rates Revance a "buy," with a price target of $12.14 a share. 



TherapeuticsMD

The Florida-based TherapeuticsMD was founded in 2008. It's focused on medicines for women's health, like treatments for menopause symptoms. 

AbbVie's interest in women's health "bodes well for others in the space that could broaden the portfolio meaningfully," the Stifel analysts said.

Other companies in women's health, like Myovant Sciences and ObsEva, by contrast, compete with AbbVie drugs like the endometriosis drug Orilissa, they said. 

The drugmaker has a market cap of about $610 million.



Aerie Pharmaceuticals

Founded in 2005 and headquartered in North Carolina, Aerie focuses on the development and commercialization of treatments for glaucoma, retinal disease, and other eye conditions.

It already has two approved drugs, Rhopressa and Rocklatan, for high eye pressure. Aerie is also developing an experimental implant for diabetic macular edema, which is being tested out in early- and mid-stage research trials. 

While Stifel analysts don't believe that eye care is of as much interest as women's health to AbbVie, the drugmaker did call Allergan "a leader in glaucoma and dry eye," the Stifel team said. 

"We see AERI, with on-market Rhopressa/Rocklatan and a self-fueling pipeline, as an interesting target to maintain that leadership," they said. The analysts' rating for Aerie is "buy," with a $30.32 price target. 

Aerie has a market cap of about $1.3 billion.



Kala Pharmaceuticals

Founded in 2009 and based in Massachusetts, Kala Pharmaceuticals was named after a famous hiking trail in Hawaii known for its views. 

The drugmaker is focused on eye disease, with its furthest-along product, KPT-121, in late development for the short-term treatment of dry eye. 

Because that drug is so advanced, Kala could also be of interest to a company like AbbVie, the Stifel team said. 

Kala has a market value of about $190 million.



'There are no obvious opportunities': A Wall Street fixed income investment chief at a $23 billion firm says now is the time to protect returns rather than seek new ones

Wed, 06/26/2019 - 1:59pm

  • There are fewer opportunities to make money in markets today as both stocks and bonds extend rallies, capping further upside for current holders and discouraging new entrants.
  • Bill Zox of Diamond Hill Capital Management says that rather than making money, now is the time to focus on not losing it.
  • Taking on too much risk in your portfolio could lead to losses during market volatility driven by trade or a downturn in the future, Zox told Business Insider.
  • Instead, Zox said to be nimble and consider price to reward to prepare for any opportunities volatility might bring.
  • Read more on Markets Insider.

The market adage "buy low, sell high" is great advice. But it becomes more difficult to find bargains when prices are elevated and continuing to rise.

As the S&P 500 hovers near all-time highs, it's become increasingly difficult for new entrants to see the kind of returns they might expect in the market. As stock prices climb, the upside potential for future gains becomes capped. In addition, a rally in bonds has brought down yields to a point where investors see little incentive to buy them.

In this type of environment, it's time to focus on preserving existing gains, as opposed to making money outright, Bill Zox, the chief investment officer of fixed-income and portfolio manager at Diamond Hill Capital Management, told Markets Insider in an interview.

"There are no obvious opportunities" in the market, Zox said. "There were just six months ago in December, but it's been a very sharp rebound."

There are a few reasons investors find themselves in this situation, Zox said. First, while it's generally unusual to see so-called safe-haven assets such as government bonds rallying at the same time as equities, their high correlation suggests they're drawing different conclusions about the health of the economy.

On one hand, the bond-market rally has been driven by perceived weak economic data as it prices in multiple interest-rate cuts from the Federal Reserve this year. At the same time, however, "the equity market doesn't seem concerned about the strength of the economy," Zox said.

Therefore, as investors look to generate returns, they're becoming more and more comfortable with taking on risk assets such as equities, commodities, high-yield bonds, or currencies.

But new market highs mean investors have to take increasingly risky bets to get returns. Given that the economy is late in its recovery cycle, too much risk is a bad idea, especially in certain parts of the market, Zox said.

With market pricing where it is, the riskiest parts of the high-yield bond market are ones to avoid, he said. He also said to be careful with leveraged buyouts and private-equity-controlled issuers, especially those held by aggressive private-equity firms.

It's not time for these assets because if there is a market downturn, investors could see big losses and have difficulty exiting trades with lower liquidity.

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To be sure, Zox isn't counting on a recession in the next 18 months or a sharp downturn anytime soon. Instead, markets are likely to "meet somewhere in the middle," he said, with equities pulling back and Treasury yields rising as it becomes more clear that a recession isn't on the horizon.

Care is still warranted, however, because of the factors that could and most likely will continue to drive volatility, Zox said. One is the Federal Reserve. While the central bank has capitulated to the market since the late-December sell-off that nearly derailed the 10-year bull market, there may be signs it won't do that forever.

If the Fed starts trying to walk back market expectations of  75-basis-point rate cuts before year-end, that could increase market volatility, Zox said.

Another big volatility driver is trade tension. A key part of the Fed's decision-making will come from what happens at the G20 summit this week. All eyes are on President Donald Trump ahead of his planned meeting with Chinese President Xi Jinping to talk trade. If discussions go south and more tariffs are imposed, that could be a drag on markets and could push the US closer to recession. At a certain point, the Fed will run out of room to overcorrect for bad policy, Zox said.

This gives investors all the more reason to hedge bets, stay nimble, and consider price to reward in investments. Opportunity in the markets for the next few months is "not going to be in table pounding ideas," he said. "It's going to be something that doesn't get you into much trouble until volatility spikes again."

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Americans think the economy is tanking and a recession is just around the corner, but nearly 30% don't have the cash to get through it

Wed, 06/26/2019 - 1:47pm

  • Everyday Americans have a far more negative view of the current economy than experts, according to a recent Bankrate survey.
  • About 40% of Americans think a recession has already begun or will start in less than a year, while experts think an economic downturn is at least one to two years out.
  • Despite their bleak predictions, nearly one-third (28%) of Americans say they have no emergency fund, while 25% have some savings, but it would cover less than three months of expenses.
  • Experts recommend saving enough cash to cover up to six months' worth of expenses or more in a high-yield savings or money-market account, where it can earn interest but remain accessible.
  • Visit Business Insider's homepage for more stories.

Too many Americans aren't ready for the recession they predict is right around the corner — or already here.

According to a new Bankrate survey of 1,000 Americans, there's a jarring disconnect between experts' and everyday Americans' views of the current economy. Forty-seven percent of everyday Americans think the United States economy is in good shape and 12% think it's "excellent," but 40% say it's either "not so good" or "poor." Meanwhile, Bankrate asked nine experts for their take: They all rated the economy either good or excellent.

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The US economy is, in fact, less than a month away from recording its longest expansion ever, Business Insider's Akin Oyedele reported. Despite adding far fewer jobs in May than expected, the unemployment rate held steady at 3.6%.

Still, everyday Americans see a recession coming sooner than experts do, and 20% think it has already begun. About half of the experts surveyed predict a recession will begin in the next year to two years, while the rest think the economic downturn won't start for at least two more years.

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"The Macroeconomic indicators are great — the unemployment rate is at a 50-year low, GDP growth has been solid, markets are buoyant and inflation is low and stable," Julia Coronado, president of economic research firm Macropolicy Perspectives, told Bankrate. Despite this, many Americans have still struggled to gain their financial footing since the last recession.

"However we know there is an issue with rising inequality of both income and wealth that leaves many households still feeling vulnerable," Coronado continued. "There is a generational dimension to rising inequality — millennials came of age in a bad labor market and are still struggling to build savings and wealth and job security."

An emergency fund is crucial for weathering a potential recession

Although they're bullish about a forthcoming recession, nearly one-third (28%) of Americans surveyed by Bankrate say they have no emergency savings to fall back on. Twenty-five percent have some savings, but it would cover less than three months of expenses. More than half of Americans said they'd feel most comfortable having at least six months worth of expenses in an emergency fund, but only 18% of the respondents do.

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These findings underscore those of a recent survey by Harvard Business School Online and City Square Associates, which revealed that two out of every three people reported they are not prepared for a recession.

"There might be some apathy because the economy has been strong for so long but that's precisely the reason people need to get prepared," Patrick Mullane, the executive director of Harvard Business School Online, told Business Insider's Frank Olito. "I can't tell you when a downturn will happen, but it will happen."

Maintaining a cash reserve is crucial for weathering potential job loss or other unexpected emergencies that may arise during a recession. Securing an emergency fund and diversifying your investments across, and within, stocks and bonds and are two of the most important ways to protect your money, regardless of the state of the markets, financial expert and bestselling Ramit Sethi previously told Business Insider.

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Sethi recommends keeping cash reserves equal to at least three months and, ideally, up to a year's worth of expenses to fall back on whenever it's needed. The best place to keep that emergency fund, rainy day fund, "oh f---" fund, or whatever you call it, is usually in a high-interest bearing account, like a high-yield savings or money-market account, where it remains within arm's reach but continues to grow while you're not using it.

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13 things rich millennials look for in a luxury home, according to real-estate agents

Wed, 06/26/2019 - 1:30pm

For rich millennials, luxury homes are largely about function.

Business Insider spoke to real-estate agents in three popular states among rich millennials — New York, California, and Florida — about what the demographic looks for in a luxury home. While specifics depend on the buyer's situation — like whether they're married, single, or have kids — some common themes cropped up.

Turns out, rich millennials like a new, clean, and modern design, but they seem to be less about aesthetic and more about convenience and amenities. 

Read more: The top 18 states rich millennials are moving to

And they care less about size and more about quality, West Palm Beach real-estate agent Burt Minkoff of Douglas Elliman told Business Insider. They're also more savvy buyers, according to Southern California agent Sally Forster Jones of Compass, who told Business Insider that rich millennials are cautious about their money and make sure they don't overpay.

Here's what rich millennials look for in a luxury home, according to real-estate agents.

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

DON'T MISS: Here's exactly what millennials should be doing every five years to become rich, according to a financial planner

Walkability is a major factor for rich millennials.

Agents in all three states cited location and walkability as a key factor.

"Primarily, millennials are focused on location as the main selling feature," Forster Jones said. "Whether they are looking for views or a home with walkability to local shops and/or their job, the location plays a major part in the decision-making process."

In New York City, many want to be able to walk to work, according to Ian Slater of Compass.

Millennials also want to walk to restaurants, recreational activities, and, in the case of Florida, the water, Minkoff said. Millennials with kids also look for proximity to good schools, he said.



Millennials have an eye for sustainable luxury.

Both Minkoff and Cindy Scholz of Compass in New York City have noticed a trend in millennials looking for green features in their homes.

"Millennials are increasingly conscious of the environment and want eco-friendly features," Scholz told Business Insider. "Something I have been noticing in new builds is finishings created from hemp."

Eco-friendly features can be anything from solar panels to LED lighting.



Contemporary design is popular among rich millennials.

Millennials tend to prefer contemporary homes or traditional homes with contemporary finishes, Forster Jones said.

Consider outdated parquet flooring — it can make a home unsellable to millennials, according to Scholz. Millennials would prefer something like wide plank oak flooring, which immediately brightens up any space, she said.



Tech-savvy homes are also popular with millennial buyers.

Millennials love having a Smart Home, according to Minkoff — like a Savant system that controls everything from lights and music to the fireplace, TV, and alarm. 



Private outdoor spaces are a significant draw.

In New York City, wealthy millennials want what's hard to come by: private outdoor space. And not in the form of small balconies — they're looking for terraces, roof decks, and back yards, according to Schulz.

Outdoor space is almost seen as a necessity, as millennials really care about having a place to chill, New York City real estate agent Ante Jakic of Compass told Business Insider.



Summer kitchens are a bonus for millennials on the hunt for luxury homes.

Leisure is important to many of Minkoff's clients, who want a summer kitchen near the main kitchen. Here, they specifically seek a grill, an ice maker, and an area to lounge in, he said.

Homes are nearly 25% more likely to sell to millennials if they have an outdoor kitchen, according to a Zillow report.



Millennials are also looking for pools with all the works.

Millennials don't just want any pool. They want it to be full of features — think an adjoining hot tub, a lap pool with an infinity edge, or a wall with a waterfall, Minkoff said. They also like to have a fire pit nearby.



A workspace is high on many rich millennials' list of priorities.

Many millennials are part of the gig economy, and as such, are likely to work from home and seek a workplace to do so, according to Slater.

Usually, that comes in the form of an extra bedroom, which increases the price of the home, according to Schulz. This extra space is extremely valuable, she said — many young couples will transform the office into a baby's room before upgrading to a new home altogether if they become parents.



Open-concept kitchens with fun amenities are a common request.

Several real-estate agents, including Minkoff, said millennials want an open-concept kitchen.

"Younger clients like a space that they can entertain [in]," New York City real-estate agent Eric Goldie of Compass told Business Insider. "I've noticed most of my millennial clients want an open kitchen that can be the center of their entertainment space."

While most millennials care about the kitchen and how it looks, having amenities like a nice coffee machine and wine cooler as an appliance is even more important to them, according to Jakic.

They particularly like homes with pizza ovens and wine cellars, according to Zillow's research.

Another reason millennials want a nice kitchen and dining area is that they're increasingly health-conscious, Schulz noted.



A space for entertaining is top of mind.

Millennials who are entertainers or bachelors also prefer an open floor plan throughout the house for indoor and outdoor entertaining, according to Forster Jones. For the same purposes, they also prioritize movie theaters and a bar or lounge, she said.



Rich millennial homebuyers have an eye for Instagram-worthy spaces.

Another reason millennials like a good kitchen? Instagram purposes. Slater said rich millennials prefer a nicer kitchen and bathroom if they're going to be posting on social media, as a lot of content is created there.

Millennials pay great attention to anything that could potentially have germs, so they tend to like very white and medicinal baths and kitchens, David Christopher Salavatore of The Red Jacket Team at Compass in New York City told Business Insider. Look at any influencer's Instagram feed, and you'll find white kitchens and bathrooms serving as the backdrop to home photos.



Double sinks are a common request.

"Most millennials want double sinks in their master bathroom," Schulz said. "Due to the high cost of living, younger people tend to cohabitate even when they are just dating. A double sink can extend the life of any relationship." 



Rich millennials aren't just focused on themselves: Pet amenities in luxury homes are also a common request.

Millennials' search for amenities isn't just focused on their own needs — they're also looking for space for their pets, according to Slater. And if they're buying in an apartment building, pet spas are a must, Jakic said.



In leaked email, Elon Musk says Tesla is very close to setting a record for deliveries in one quarter. But whether the company pulls it off comes down to one of the things it struggles with most

Tue, 06/25/2019 - 9:57pm

  • Tesla is close to setting a record for the number of vehicles delivered in one quarter, and delivery logistics will play an important role in determining whether that record is broken, CEO Elon Musk said on Tuesday in an email to employees.
  • "We already have enough vehicle orders to set a record, but the right cars are not yet all in the right locations," Musk said. "Logistics and final delivery are extremely important, as well as finding demand for vehicle variants that are available locally, but can't reach people who ordered that variant before end of quarter."
  • Tesla's second-quarter delivery numbers will face particularly intense scrutiny because the company's first-quarter deliveries fell well below those of the prior quarter.
  • Strong second-quarter delivery numbers, even if they don't set a company record, could restore confidence in the demand for Tesla's vehicles and help push the company back to profitability.
  • Visit Business Insider's homepage for more stories.

Tesla is close to setting a record for the number of vehicles delivered in one quarter, and delivery logistics will play an important role in deciding whether that record is broken, CEO Elon Musk said on Tuesday in an email to employees.

"We already have enough vehicle orders to set a record, but the right cars are not yet all in the right locations," Musk said. "Logistics and final delivery are extremely important, as well as finding demand for vehicle variants that are available locally, but can't reach people who ordered that variant before end of quarter."

The current quarterly delivery record, 90,700 vehicles, was set during the fourth quarter of 2018.

Tesla did not immediately respond to a request for comment.

The email reiterates a sentiment Musk expressed at Tesla's annual shareholder meeting on June 11, during which he said the company had a "decent shot" of breaking its quarterly delivery record. Internal documents viewed by Business Insider suggested that the electric-car maker was not on pace to break the record between late May and early June, based on a criterion described by Musk in a May 22 email to employees.

Tesla's second-quarter delivery numbers will face particularly intense scrutiny because the company's first-quarter deliveries fell well below those of the prior quarter. Some analysts said the disappointing first-quarter numbers suggested a decrease in demand for Tesla's vehicles, but the company blamed logistical challenges related to international deliveries and seasonal trends.

Strong second-quarter delivery numbers, even if they don't set a company record, could restore confidence in the demand for Tesla's vehicles and help push the company back to profitability. (Tesla estimates it will be profitable in the third quarter but not in the second.)

Weak delivery numbers could intensify concerns about demand and the company's chances of achieving consistent profitability. Tesla has produced four profitable quarters in its 16-year history, including two in the second half of 2018, when delivery numbers reached record highs.

You can read Musk's full email below:

As you may have noticed, there is a lot of speculation regarding our vehicle deliveries this quarter. The reality is that we are on track to set an all-time record, but it will be very close. However, if we go all out, we can definitely do it! We already have enough vehicle orders to set a record, but the right cars are not yet all in the right locations. Logistics and final delivery are extremely important, as well as finding demand for vehicle variants that are available locally, but can't reach people who ordered that variant before end of quarter. I have great faith in you. Please let me know if there is anything I can do to help. Thanks, Elon Have you worked for Tesla? Do you have a story to share? Contact these reporters at mmatousek@businessinsider.com and grapier@businessinsider.com.

SEE ALSO: Apple reportedly acquires self-driving car startup Drive.ai

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Ulta shouldn't worry about Amazon's foray into the beauty sector, but other brands might not be so lucky, analysts say

Tue, 06/25/2019 - 5:39pm

Amazon's announcement of a new online storefront for beauty products had a swift impact on competitors.

Ulta's stock fell 2.6% following the news, according to CNBC. Sally Beauty's stock dropped 17%.

But investors may have acted prematurely on the news, with analysts saying Amazon's encroachment into the beauty sector will likely have a limited impact on Ulta. That's because the beauty retailer relies on customer loyalty and has a different customer base than Amazon.

Amazon's Professional Beauty Store will primarily cater to professional stylists and aesthetician by offering a wide selection of top-notch brands, including Wella Color Charm, RUSK, and OPI Professional. The selection is meant for professional use and customers must possess a state-issued cosmetology, barber, or aesthetician license to make a purchase.

Read more: 42 Ulta Beauty employees tell us the only products you should buy

"Stylists can find more of what they need at great prices with convenient delivery options, freeing up their time to focus on what's important: their customers," Steve Kann, director of customer driven experience at Amazon Business, wrote in a blog post. 

But with the threat of Amazon looming over beauty, analysts say there are a few reasons Ulta should be in the clear for now.

Analysts at UBS estimate in a report to investors that less than 10% of Ulta's sales are from professional stylists, so a significant impact on Ulta's sales from Amazon's professional store is therefore unlikely.

Instinet analyst Simeon Siegel noted Ulta's favorable position could also stem from the unique experience that Ulta offers its customers. "Amazon has shown the ability to move units very effectively rather than to help people find something they didn't know they wanted. That is what Ulta and Sephora do very well."

The UBS report also notes Ulta's devoted customer base and rewards program, which gives customers the chance to rack up points and earn discounts. Customer loyalty programs like this help Ulta's position in the face of a competing retailer, analysts say.

Finally, analysts note that there is only minimal crossover in the brands that Amazon and Ulta both carry. Ulta currently has about 30% of the brands in Amazon's inventory. This small overlap, analysts suggest, will further help keep Amazon and Ulta away from each other's necks.

Ulta got a sales boost last March when it started selling merchandise from Kylie Jenner's makeup brand, Kylie Cosmetics. The Kylie Cosmetics lip kits were largely responsible for strong sales and store traffic.

"While today's news may temporarily reignite the debate on online-only competition in the beauty market, we believe Ulta is well positioned to sustain its recent momentum," reads the UBS report.

However, experts estimate a larger toll on Sally Beauty's sales. Its stock already was hit harder than Ulta's on Monday, and analysts estimate that 30% of Sally Beauty's sales come from beauty professionals.

For now, the long-term effects of Amazon's announcement remain undefined.

"Amazon has seen a tougher time at tackling the beauty industry," said Siegel. "And the question remains whether this will end up simply being another attempt, or whether this will be the beginning of the end for brick-and-mortar beauty."

"Companies might be put on notice, but it doesn't mean they are dead," he added.

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China might blacklist FedEx for not delivering Huawei phones. To save as much as $1.3 billion in Chinese deals, the package giant is now suing the Trump administration. (FDX)

Tue, 06/25/2019 - 5:21pm

  • FedEx and Huawei have been embroiled in a transpacific spat after FedEx failed to deliver several Huawei packages in May and June.
  • FedEx CEO Fred Smith said this wasn't because of any "nefarious activity," but China is reportedly considering blacklisting FedEx from doing business in the country.
  • On Monday, FedEx said it was suing the US Department of Commerce over trade rules that say the global shipping company must investigate all 15 million packages it moves daily — a task it calls "virtually impossible."
  • The threat and federal lawsuit are happening as FedEx grapples with internal financial problems.
  • Visit Business Insider's homepage for more stories.

A weekslong transpacific spat between FedEx and Huawei, fueled by the US-China trade war, is becoming increasingly fraught.

In May, FedEx failed to deliver several Huawei parcels through Asia. That prompted the Chinese government to start an investigation into the global package giant, which moves some 15 million parcels per day in more than 220 countries and territories. FedEx's stock quickly sank to a three-year low.

FedEx CEO Fred Smith denied that was a purposeful jab against China or Huawei, but the issue reemerged a few weeks later. On June 21, a PC Mag reporter tweeted that a coworker attempted to FedEx a Huawei phone from the UK to the US.

It was never delivered.

This is totally ridiculous. Our UK writer tried to send us his @HuaweiMobile P30 unit so I could check something - not a new phone, our existing phone, already held by our company, just being sent between offices - and THIS happened @FedEx pic.twitter.com/sOaebiqfN6

— Sascha Segan (@saschasegan) June 21, 2019

"The package in question was mistakenly returned to the shipper, and we apologize for this operational error," FedEx said in a statement concerning the returned shipment.

Huawei was not convinced. In a tweet on Sunday, the Chinese electronics giant said FedEx has a "vendetta" against Huawei.

Amid all of this, authorities in China are close to completing the preparations needed to place FedEx on a list that would restrict it from operating in the country, people familiar with the matter told Bloomberg. Senior leaders would need to approve the ousting.

"FedEx is a global commerce icon, if you will, so they sometimes get used by our government as well as other governments as a platform to publicize an issue or promote a cause," Donald Broughton, the founder and manager partner of Broughton Capital, told Business Insider.

Now, as investors worry about the company's slumping stock, FedEx is taking matters into its own hands.

On Monday, the shipping company filed a lawsuit against the US Department of Commerce over trade rules that require FedEx to inspect each parcel to ensure no goods violate the Trump administration's blacklisting of Chinese firms, among other trade bans. FedEx said in the lawsuit such an inspection would be "virtually impossible" to execute.

"FedEx values our business in China," the company said in a statement sent to Business Insider. "Our relationship with Huawei Technologies Co. Ltd. and our relationships with all of our customers in China are important to us. FedEx holds itself to a very high standard of service. FedEx will fully cooperate with any regulatory investigation into how we serve our customers."

The Chinese government's blacklist would be a 'game changer' for FedEx's investors

Trip Miller, the founder and managing partner of Gullane Capital, said FedEx being placed on the Chinese blacklist, while not certain, would be problematic for the Memphis-based package giant. FedEx is already showing signs of financial distress, including reported moves to cut FedEx Express air-cargo rates, a buyout plan estimated to save up to $275 million, and a dividend freeze.

"That would be game changer for all of us as investors in the company," Miller told Business Insider. "This list that the Chinese are putting together, certainly that would be very damaging if FedEx were to be placed on that."

Read more: FedEx no longer will fly your Amazon packages — and now pressure is mounting on the company as it gears up its in-house air-freight network

FedEx told analysts that business in China comprises some 2% of its $65 billion revenue, or $1.3 billion total. Broughton said Asia-Pacific as a whole is a high-margin market. (FedEx does not publicly break out its business by country, but its 2018 annual report showed that 54% of its package revenue comes from outside the US.)

High margins are becoming crucial at FedEx Express, where package volumes are ever-increasing, but margins aren't. The Memphis, Tennessee-based logistics giant said in its most recent quarterly report that the number of total average daily packages have increased by 5% year over year, but revenue per package dropped by 3%.

"At FedEx Express, macroeconomic weakness and trade uncertainty, continued mix shift to lower-yielding services and a strategic decision to not renew a customer contract will negatively impact operating income," the quarterly report said.

Huawei did not respond to Business Insider's request for a comment.

It's not FedEx's 'first rodeo' when it comes to negotiating the public-policy sphere

Smith, the founder and longtime CEO of FedEx, is highly experienced when it comes to influencing public policy. From accelerating FedEx's growth in the 1970s by pushing for airline deregulation to blocking organized-labor reforms in 2009, "Fred Smith is anything but a naive newbie to the political process," Broughton said. "This isn't his first rodeo."

And now, Smith is grappling with the latest government leadership in his 48 years at the helm of FedEx.

FedEx's lawsuit against the Department of Commerce points to the Export Administration Regulations (EAR) that prohibit parties from shipping items subject to export restrictions. This has landed FedEx in the middle of the debacle between the US government and Huawei, but the laws have been a challenge for FedEx for years.

According to the lawsuit, FedEx had to pay $500,000 in civil penalties for exporting unnamed goods worth $58,091 to France, Pakistan, and elsewhere in violation of EAR. Violating EAR can be punishable by up to $1 million in criminal penalties.

"The credible threat of civil and criminal liability places FedEx between a rock and a hard place — absent the availability of review, FedEx must either forgo lawful activity because of its well-founded fear of prosecution, or willfully violate the Export Controls, thereby subjecting itself to criminal prosecution and punishment," FedEx wrote in the case filed in the US District Court for the District of Columbia.

FedEx concluded in a statement that it is a transportation company, not a police force.

"FedEx is trying to make a point here that it's not reasonable to expect them — to require them — to know what's in every single package," Broughton said. "They are not responsible for becoming the US export-import police; they're not responsible for taking over large amounts of the federal government's responsibility and not responsible for taking on those costs. It's an unreasonable burden for them."

But how long these measures will drag on is still up for debate.

"The funny thing about this to me is that this whole trade war and all these skirmishes, it could be over in a week, it could be over in a year, might be over before the courts even decide what they're going to do with this," Miller said.

"That's kind of the wild card here," he said while looking ahead to the June 28 G20 summit in Osaka, Japan.

"This is obviously an incredibly fluid situation, and with Presidents Trump and Xi meeting this weekend, anything could happen," he added.

SEE ALSO: Industry leaders are 'freaking out' about tariffs and clamoring for warehouses in this loophole-friendly Mexican border town

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Wall Street payday: The banks on the massive AbbVie-Allergan deal stand to make $183 million

Tue, 06/25/2019 - 5:12pm

  • AbbVie said on Tuesday that it's buying the Botox maker Allergan in a $63 billion deal. 
  • The deal could generate as much as $183 million in fees for the banks that worked on the deal, according to an estimate from Dealogic.
  • That includes JPMorgan, which represented Allergan; Morgan Stanley, which was the lead adviser for AbbVie; and PJT Partners, a boutique investment bank that worked with AbbVie as well. 
  • Click here for more BI Prime stories.

AbbVie's proposed $63 billion takeover of the Botox maker Allergan could bring a big payday for the bankers involved in the megamerger. 

The deal combines the North Chicago, Illinois-based AbbVie, which makes the world's best-selling drug, Humira, with Dublin-based Allergan, which has been struggling in the face of competition for some of its biggest products, including the wrinkle-smoothing treatment Botox.

Read more: AbbVie's $63 billion megadeal for Botox maker Allergan is the pharma industry's latest bet that bigger is better. But the deal is already facing big questions.

According to the research provider Dealogic, AbbVie's lead adviser, Morgan Stanley, could stand to make $71 million, while its adviser PJT Partners could make $17.7 million in fees on the deal. JPMorgan, which advised Allergan, could take home $94.6 million. That's a total of $183 million, should the deal close.  

It's a big win for PJT, which in November hired the former star Goldman Sachs pharmaceutical analyst Jami Rubin. Rubin served as the lead banker for PJT, and this was her first deal at the bank.

Read more: A former star Goldman Sachs pharma analyst just made her first deal with AbbVie's $63 billion bid for Botox-maker Allergan. Meet the bankers involved in the megamerger.

Rubin has been an analyst since the early 1990s and famously pressed major pharmaceutical companies on their plans for mergers and acquisitions. She joined Goldman Sachs in 2008 after working at Morgan Stanley and became a partner in 2012.

PJT was founded after the former Morgan Stanley banker Paul Taubman left the bank in 2012. In 2015, it merged with assets from Blackstone's financial- and strategic-advisory services, and now operates as a publicly traded company.

Dealogic estimates fees earned on deals using a model that takes into account the deal's size, the banks involved, and where the deal is happening. JPMorgan declined to comment on the fees. Morgan Stanley and PJT didn't immediately respond to requests for comment.

Join the conversation about this story »

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The DOJ is reportedly probing Tyson and other major processors over poultry price-fixing claims — and chicken stocks are sinking (TSN)

Tue, 06/25/2019 - 4:18pm

Shares of the major US chicken processors fell sharply Tuesday afternoon after Bloomberg reported the Department of Justice opened a criminal investigation into claims over whether companies including Tyson Foods, Pilgrim's Pride, and Sanderson Farms conspired to fix poultry prices.

The probe was disclosed Friday in a court filing in Chicago, where civil lawsuits against more than 12 companies in the industry are pending, Bloomberg reported.

The civil lawsuits allege the poultry processors conspired to raise prices on broiler chickens, Bloomberg found. The companies allegedly "reduced the supply of broiler chickens and then manipulated prices on a weekly benchmark compiled by the Georgia Department of Agriculture," according to court papers viewed by Bloomberg.

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Tyson and other chicken processors have dealt with other price-fixing allegations in recent years.

The US Securities and Exchange Commission in 2017 concluded after an investigation that it would not recommend enforcement against Tyson, along with other meat industry peers, over antitrust allegations related to price-fixing.

When reached for comment on Tuesday, a spokesperson for Pilgrim's Pride said the company "strongly denies" allegations of anti-competitive conduct. 

"The company welcomes the opportunity to defend itself against these claims through the legal process," Cameron Bruett, a company spokesperson, said in an emailed statement. 

Sanderson Farms released a statement Tuesday acknowledging the DoJ filed a motion on Friday regarding broiler chicken antitrust litigation, but said the company had not been subpoenaed in connection with the investigation. 

"The Company continues to believe the civil plaintiffs' claims as to Sanderson Farms are wholly without merit, and we are committed to defending the case vigorously," the company said.

A representative for Tyson Foods did not immediately respond to Business Insider's request for comment.

Tyson shares have proved volatile in recent weeks as a competitor, the plant-based meat company Beyond Meat, has soared since its initial public offering.

Noel White, the company's chief executive, told investors last week the company was willing to raise its marketing spending to expand into alternative meat. That pushed Beyond Meat's shares down by 6%, Markets Insider's Daniel Strauss reported. 

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

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Global stocks will sink into a bear market if trade tensions escalate, UBS predicts

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This forgotten investigation into Microsoft, 10 years before the antitrust trial, let it get away with tactics that sealed its tech dominance, according to a key player (MSFT)

Tue, 06/25/2019 - 3:55pm

  • With concern growing over the power of Google, Facebook, and the other tech industry behemoths, people have been looking back to the Microsoft antitrust trial for possible insights.
  • But an earlier investigation into the company may have a more important lesson, said Rick Warren-Boulton, an economist who served as an expert witness for the government in that trial.
  • That investigation, led by the Federal Trade Commission nearly a decade before the antitrust trial, looked into the tactics Microsoft used to maintain its operating system dominance in the pre-Windows days.
  • Had the FTC acted quicker, the second trial may have been unnecessary, Warren-Boulton said.
  • Click here for more BI Prime stories.

In trying to figure out what to do about today's tech giants, many antitrust experts and public policy pundits have drawn on the lessons of the Microsoft trial 20 years ago.

Economist Rick Warren-Boulton thinks there's perhaps an even more important lesson to be learned from a separate, little-remembered antitrust investigation of the software giant that took place nearly a decade earlier than that momentous case.

That investigation, conducted by the Federal Trade Commission focused on the actions Microsoft allegedly took to thwart DR-DOS, a rival to its MS-DOS operating system, which was its flagship software before Windows. The FTC ended up deadlocked and the government didn't taken any serious action to combat the software giants' anti-competitive activities until several years later, by which time it had essentially wiped out all rivals in the PC operating system market.

The lesson from that episode, Warren-Boulton told Business Insider, is that it's really important to address anti-competitive activity as soon as possible in the tech industry.

"People are always saying things that 'In tech, don't worry, it will fix itself,'" said Warren, a long-time industry consultant who served as an expert witness for the government in the Microsoft trial. "And the short answer is, no, it doesn't fix itself. And it is really important to go early because of the rapid change."

Read this: Here's why the failed attempt to break up Microsoft will make or break the crackdown on Facebook, Amazon, and Google, according to 2 top lawyers in the Microsoft case

Tech's quick pace is a double-edged sword

Opponents of government intervention point to the quick pace of the industry as the big reason why regulators should take a hands-off approach. Today's dominant firm can quickly become an also-ran, thanks to technological change, they argue.

But the rapid pace of the industry has a more dangerous flip side, said Warren-Boulton, now a senior managing director at Ankura Consulting Group. Companies can quickly parlay an edge in a market into dominance and then monopoly power. That's what happened in the PC operating system market.

"If the FTC had acted back then ... we would today have two competing operating systems, and Microsoft would be worth 10% of its current market value," Warren-Boulton said.

Warren Boulton is an economist and consultant who has been a thorn in Microsoft's side since the early 1990s, serving as an expert witness against the company in numerous antitrust-related trials. After a stint as the chief economist for the US Justice Department's antitrust division during the Reagan administration, he founded a consulting firm and worked with some of Microsoft's rivals who were urging government officials to scrutinize its market power and how it was maintaining it.

It was during that time that he got involved in the DR-DOS case. In the early 1980s, as IBM was preparing to launch its first personal computer, it contracted with Microsoft to have the latter provide an operating system for the new machines. Microsoft came up with MS-DOS, largely by cloning an existing text-based PC operating system called CP/M, which was made by Digital Research. The IBM PC became the standard personal computer, in part because IBM allowed other companies to copy its design and market their computers as IBM-compatible. As such devices took over the market, MS-DOS became the dominant PC operating system, because IBM allowed Microsoft to license it to the PC clone makers.

Microsoft tried to box out rivals

Digital Research tried to get back in the game, creating a competitor to MS-DOS called DR-DOS that promised full compatibility and extra features. But Microsoft moved to thwart Digital Research, pushing PC makers to sign agreements that required them to pay Microsoft a license fee for every IBM-compatible computer they shipped, regardless of whether it had MS-DOS installed on it or not. Not wanting to pay two different operating system license fees, few shipped their machines with DR-DOS.

The Federal Trade Commission launched an investigation into Microsoft's operating system dominance in 1989 then widened the probe in 1991. But the FTC couldn't come to an agreement over whether to press charges against the software giant. After deadlocking on a 2-to-2 vote, the commission dropped its probe.

The Justice Department later picked up the investigation and got Microsoft to drop its per-processor licensing contracts. But by then, the damage was done. MS-DOS and Windows, which ran on top of it, dominated the market.

The per-processor license deals "were extremely effective and basically killed off DR-DOS," Warren-Boulton said. "The FTC basically dropped the ball," he continued.

That was the "crucial moment"

With Microsoft's power unchecked by that case, the company went on to extend its dominance from the text-based operating system market to the one based on graphical-user interfaces with Windows. When Microsoft moved to quash the threat to its Windows monopoly from Netscape's Navigator browser a few years later, government regulators decided they needed to scrutinize its dominance again, which led to the famous antitrust trial.

But that case would have been unnecessary, if the FTC had just taken quick action against the company a decade earlier, Warren-Boulton said.

"That crucial moment, looking back in history, was that FTC decision," he said.

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

SEE ALSO: Apple's surprise defeat in the Supreme Court is bad news for Tim Cook's turnaround plan

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Spotify is spending hundreds of millions to become a major podcasting player — and Wall Street sees massive potential for the stock (SPOT)

Tue, 06/25/2019 - 3:55pm

  • Spotify's integration of podcasts into its streaming services could boost its advertising revenue, an analysis published by Guggenheim on Tuesday found. 
  • Between new listening formats, better ad targeting tools, and exclusive content deals, Guggenheim sees a path for Spotify to monetize podcasts more effectively.
  • SunTrust Robinson Humphrey hosted an investor meeting with members of Spotify's management team this week and reached a similarly bullish conclusion.
  • The Sweden-based music streaming app has already purchased three podcasting companies in 2019 including Gimlet Media, Anchor, and Parcast. 
  • Visit Markets Insider's homepage for more stories.

Spotify's big bet on podcasting could pay off, and handsomely.

So says a research team at Guggenheim Partners led by Michael Morris. Spotify's podcast initiatives over the last few months have led the analysts to elevate their outlook for the music-streaming service's advertising revenue. 

After shelling out hundreds of millions of dollars on podcasting companies this year alone, Spotify has begun to make product changes to integrate podcasting into its service. 

Guggenheim's analysis points to Spotify's exclusive content agreements such as the company's deal with former President Barack Obama, and new formats like the "Your Daily Drive" playlist which mixes news podcasts with music, as major enhancements to its podcast offering. 

Last week, Spotify also rolled out a feature to allow advertisers to target people based on which types of podcasts they're listening to.

Guggenheim notes that Spotify was the ninth-most-downloaded app during the second quarter of 2019. That marked its highest quarterly ranking in more than two years, according to data compiled by AppAnnie.

"Sequential improvement in app downloads indicates new and returning user growth, a positive trend and supportive of a bullish view that the company's global addressable market is well in excess of current streaming music subscriber levels." Morris said in the research note published on Tuesday. 

Podcast advertising revenue increased by 54% last year to $479 million, and could grow to as much as $1 billion by 2021, according to the report. If Spotify can capture 25% of that market, which is in-line with current estimates, it would generate an additional $250 million in annual revenue, the firm estimated.

Guggenheim is hardly the only Wall Street firm to look fondly upon Spotify's podcasting efforts. SunTrust Robinson Humphrey hosted an investor meeting with members of Spotify's management team on Tuesday and said the company predicts exclusive content deals will strengthen user engagement and monetization for its podcast business.

"The company sees it as a content arms race and not many others are racing alongside SPOT," Matthew Thornton, an analyst at SunTrust Robinson Humphrey said in a research note published on Tuesday.

In February, Spotify announced its intentions to spend somewhere between $400 million and $500 million on acquisitions in the podcast space in 2019.  The company purchased Gimlet Media, a podcast creation studio, for about $230 million, and Anchor, which provides tools create and distribute podcasts, for an undisclosed amount. 

"This is a very, very early market that we're seeing. And our view obviously is that while are starting to flock to listen to podcasts, there's still tremendous growth both in the US and internationally on the demand side," Daniel Ek, the chief executive officer and chairmen of Spotify said in the company's earnings call for the first quarter of 2019. 

Join the conversation about this story »

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What Slack's direct listing can tell us about creating the perfect IPO

Tue, 06/25/2019 - 3:53pm

  • Slack went public last week via a direct listing, meaning they got the benefits of algorithmic market pricing, speed and lower fees, but didn't raise capital or pick new investors.
  • An IPO and direct listing structures could be combined so as to receive the best of both methods. But just because they could be, doesn't mean they will be.
  • Visit Business Insider's homepage for more stories.

When Slack went public last week via a direct listing, it got the benefits of algorithmic market pricing, speed and lower fees. But it didn't raise any capital for what remains a money-burning enterprise, as it would have via a traditional IPO, nor did it get to pick its new investors.

The big picture: The question, therefore, is if IPO and direct listing structures could be combined so as to receive the best of both floats. The answer is yes. Probably.

Slack drafted behind a legal framework developed last year by Spotify and securities regulators.

Two of its primary features were that a direct listing couldn't include underwriting (i.e., no intermediaries that sell or forecast, nor pricing stabilization) and that its registration statement needn't include bona fide pricing estimates before being made effective by the SEC.

  • There's also been discussion of how direct listings enabled both Spotify and Slack to (mostly) eliminate lockups, but that's correlation without causation. We're seeing more flexible lockups structures in traditional listings and a company could theoretically IPO without any lockups (if it could get underwriter approval).

To create a hybrid structure, an issuer would borrow from the Spotify precedent and add in elements of the modified Dutch auction process that Google used to go public in 2004 (which was viewed dimly at the time, thus discouraging copycats, but which worked in retrospect).

  • It wouldn't be as clean as a direct listing in that it would move a bit slower with more Wall Street involvement.
  • It would differ from what Google did in that it would provide 100% insider liquidity and not use a preliminary price range.
  • But it would solve the "price guess" dilemma, provide liquidity and give some greater control over the public investor base — all while also adding cash to corporate coffers. And, again, lockups shouldn't be an issue.

The highest hurdle, banking sources tell me, would be finding a company that wants to do it.

There's still a belief that direct listings will only work with a "household name" issuer (yes, Slack counted), and that's a limited universe. Then narrow it even further, as most companies don't want the hassle of working out all the complications with SEC officials (that price range issue would be thorny).

  • Airbnb makes all sorts of sense for its anticipated offering, which we now hear is more likely in Q1 2020 than in Q4 2019, but it's unclear if CFO Dave Stephenson has the same HBS case study ambitions as Spotify's Barry McCarthy.

The bottom line: Just because it could be done doesn't mean it will be done, as VC-backed "unicorn" disruption rarely extends to their own securities.

Join the conversation about this story »

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We compared the Chase Sapphire Preferred to the AmEx Platinum — and this time, the winner isn't clear-cut

Tue, 06/25/2019 - 3:51pm

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A few friends have asked me lately about the Chase Sapphire Preferred, and whether I thought it was better card than the AmEx Platinum.

I thought it was an interesting question. While we've compared the beefier Chase Sapphire Reserve to the Platinum Card before, and we've covered all three cards in the past, we've never looked at the accessible Sapphire Preferred in the context of the ultra-premium AmEx Platinum.

To be honest, they're such different cards that it's hard to say which is better: Depending on your spending habits and how you travel, it could be worth having both.

The Chase Sapphire Preferred offers 2x points on all dining and all travel. Dining includes everything from bars and restaurants to fast food, and travel includes everything from taxis, parking, and trains, to travel agencies, flights, hotels, vacation rentals, cruises, and more. It earns 1x point per dollar spent on everything else.

The Sapphire Preferred also offers trip delay and baggage delay coverage for any travel you book through the card (you can read more about that here).

The AmEx Platinum offers 5x points on flights, but only if you book directly with the airline or through AmEx Travel. If you book through a website like Expedia or Orbitz, you only get 1x point per dollar. You'll also get 1x point per dollar on everything else. The card only offers major trip cancellation coverage — not delay insurance.

However, the AmEx Platinum offers much better benefits and perks than the Chase Sapphire Preferred. It offers extensive access to airport lounges, a yearly credit up to $200 for incidental airline fees, up to $200 of annual credits for Uber (or UberEats), and up to $100 in annual credits for Saks Fifth Avenue. It also offers free elite status at Hilton and Marriott hotels, and a few other perks. Without spending much on the card, I got $2,000 worth of value from it in my first year.

I personally hold the AmEx Platinum for the perks and services — especially lounge access and hotel elite status — but do most of my spending on a Chase card, since it earns better rewards faster (and makes it easier to spend them). I use a Sapphire Reserve, rather than a Preferred, though that means I pay $1,000 in annual fees for the two cards.

While that's the best option for my personal case, the Sapphire Preferred is still an excellent card — with a substantially lower annual fee, and a better sign-up bonus. You can read more about why you might want to choose the Sapphire Preferred over the Reserve.

Click here to learn more about the Chase Sapphire Preferred from Insider Picks' partner: The Points Guy. Click here to learn more about the AmEx Platinum from Insider Picks' partner: The Points Guy.

SEE ALSO: The best credit card rewards, bonuses, and benefits of 2019

READ MORE: 5 reasons the decade-old Chase Sapphire Preferred is a powerhouse within the increasingly competitive credit card space

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A billionaire who built 2 Fortune 500 companies just joined the chorus of ultra-wealthy Americans begging to be taxed more

Tue, 06/25/2019 - 3:35pm

Entrepreneur and philanthropist Eli Broad is the latest in a series of billionaires asking the government to raise their taxes in hopes of closing the wealth gap.

"Our country must do something bigger and more radical, starting with the most unfair area of federal policy: our tax code," Broad wrote in an editorial for The New York Times published June 25. "It's time to start talking seriously about a wealth tax."

Policies such as a $15 minimum wage, public school reform, affordable housing initiatives, and Medicare expansions have not done enough to close the wealth gap on their own, Broad wrote.

Broad's editorial comes one day after a group of 19 ultra-wealthy Americans, including George Soros and Abigail Disney, published an open letter asking presidential candidates to support a moderate wealth tax. The revenue, they argued in the letter, could be used to fund environmental initiatives, fuel economic investment, and fund health care in addition to protecting America's democracy by reducing inequality.

Broad's editorial has the support of at least one of the letter's signatories: heiress and investor Liesel Pritzker Simmons shared the editorial on Twitter.

I guess there are more of us! A clear-eyed view on why Americans deserve more, much more than philanthropy.

Please, Please Raise My Taxes https://t.co/ZWoJjRGUkF

— Liesel Pritzker Simmons (@lieselpritzker) June 25, 2019

 

"I guess there are more of us," Simmons tweeted alongside a link to Broad's editorial. "A clear-eyed view on why Americans deserve more, much more than philanthropy."

Read more: Billionaires from George Soros to Abigail Disney are begging to be taxed more

Now a full-time philanthropist, Broad has a net worth of $6.7 billion, according to Forbes. The son of Lithuanian immigrants, Broad made his fortune founding homebuilder KB Homes and insurance company SunAmerica, which he sold to AIG in 1998.

"I'm not an economist but I have watched my wealth grow exponentially thanks to federal policies that have cut my tax rates while wages for regular people have stagnated and poverty rates have increased," Broad wrote.

Broad also asked other ultra-wealthy Americans to join him in the call for a wealth tax.

"I can afford to pay more, and I know others can too," Broad wrote. "What we can't afford are more shortsighted policies that skirt big ideas, avoid tough issues and do little to alleviate the poverty faced by millions of Americans. There's no time to waste."

Read the full editorial in The New York Times »

SEE ALSO: Less than 1% of the world's billionaires donate to housing and shelter charities. Here are the top 10 causes the world's richest people give their money to.

DON'T MISS: The Disney heiress who's begging for a wealth tax says income inequality has created a 'superclass' in the US — and it's putting the American dream at risk

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Delta is offering the highest welcome bonus we've ever seen on all 3 of its main credit cards, but only for one more week

Tue, 06/25/2019 - 3:17pm

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

  • Delta's three main credit cards are all offering some of the highest welcome bonuses we've ever seen, but there's only one week remaining on the offers.
  • If you apply before July 2 and meet the minimum spending requirements, you can get as many as 80,000 bonus miles — there are personal and small business versions of each card.
  • Each of the three cards offers useful benefits, but there are some major differences between them. Read on to see which is best for you.
  • Keep in mind that even if you've had one card before, you can still get the bonus on the other ones to pad your Delta SkyMiles frequent flyer account.
  • You can also read our guide to the best credit cards of 2019 overall.

A common misconception is that it's impossible to earn enough frequent-flyer miles for a free flight unless you fly all the time. Plenty of people figure that if they only fly once or twice a year, the miles they'll earn are effectively useless.

Luckily for those of us who don't travel for work every other day, there are a ton of opportunities to earn miles that don't involve flying. One of the easiest: rewards credit cards.

In addition to the rewards you can get from actually spending on a card, you can typically earn a large welcome bonus when you open a new one.

The catch is that these bonus offers can change, and in many cases, you can only earn it once, so you'll want to make sure to get the highest bonus you can.

For those looking to earn miles on Delta — or, if you're just looking for benefits that can make flying a little bit easier — now is the time to open one of the airline's co-branded cards, thanks to newly increased offers on the personal and small business cards.

Hurry, though — these offers are only available until July 2.

There are three main Delta credit cards, issued by American Express, and each one is available in a personal and a small business version. 

If you've had any of them before, you can still earn the bonus on one of the others.

Aside from the initial bonus, each card offers a ton of ongoing value, whether you're a casual, once-or-twice-a-year flyer, or a hard-core Delta loyalist.

Read on to learn more about the three cards, and see which one is best for you.

Best for the casual Delta flyer: The Gold Delta SkyMiles® Credit Card from American Express

Welcome offer: 60,000 Delta SkyMiles when you spend $2,000 in the first three months. Plus, get a $50 statement credit when you make any Delta purchase in the first three months.

Small business version: Gold Delta SkyMiles® Business Credit Card from American Express (70,000 SkyMiles after spending $4,000 in the first three months. Plus, get a $100 statement credit when you make any Delta purchase in the first three months).

The Gold Delta SkyMiles card is the best of the three for the casual Delta flyer, someone who finds themself on the airline a couple of times a year, but doesn't fly regularly enough to use the heftier cards' perks (more on that later).

One of the biggest perks: The card offers a free first checked bag for the cardholder and up to eight people on the same reservation. Delta charges $30 each way for a checked bag, so this can save up to $60 per person on a round-trip itinerary.

Cardholders and travel companions also get Zone 1 priority boarding. This means you can board the plane sooner, giving you plenty of time to settle into your seat or find overhead space for any carry-on luggage. Zone 1 is after most Delta elite frequent flyers and extra-legroom passengers, but is usually within the first half of passengers to board.

Other perks include discounted day passes to Delta Sky Club airport lounges— $29 per day pass — as well as a 20% discount on in-flight purchases (in the form of a statement credit), such as food or drinks, and no foreign transaction fees.

Like the other Delta cards, the Gold SkyMiles card earns 2x Delta SkyMiles on eligible Delta purchases, and 1x mile on everything else.

The Gold Delta card has an annual fee of $95, which is waived the first year. This is a great value considering the perks, not to mention the welcome bonus — 60,000 SkyMiles is more than enough for two round-trip flights across the United States, and is just shy of enough for a round-trip to Europe. The card normally offers 30,000 SkyMiles.

Best for more regular flyers: The Platinum Delta SkyMiles® Credit Card from American Express

Welcome offer: 75,000 Delta SkyMiles and 5,000 Medallion Qualification Miles (MQMs) when you spend $3,000 in the first three months. Plus, get a $100 statement credit when you make any Delta purchase in the first three months.

Small business version: Platinum Delta SkyMiles® Business Credit Card from American Express (80,000 SkyMiles and 5,000 MQMs after spending $6,000 in the first three months. Plus, get a $100 statement credit when you make any Delta purchase in the first three months).

If you fly somewhat regularly, the Platinum Delta SkyMiles card is a better option, thanks to an often-overlooked benefit that can completely cover the $195 annual fee each year.

The Platinum Delta card has most of the same perks as the Gold version, like priority boarding, free checked bags, 2x SkyMiles on Delta purchases and discounted Sky Club access.

However, the Platinum Delta comes with a huge perk — it's so useful that I'm planning on keeping my card indefinitely.

After your first year with the card, you'll get an annual domestic companion pass each year at your card-member anniversary. A Delta companion pass is essentially a buy-one-get-one-free coupon. When you book an economy-class flight for yourself anywhere within the continental US, you can get a second ticket for free, other than minimal taxes and fees.

The companion pass completely blows away the annual fee for me, which is $195 and isn't waived the first year. My wife and I fly domestically at least a few times a year, whether it's to visit family or friends, or to go on vacation. So I save my companion pass until we're taking a flight together that costs more than $195 each. You can read more about the Delta companion pass benefit here.

While you don't get a companion pass the first year, the 75,000 SkyMiles from the welcome offer more than outweigh the annual fee — that's enough to fly from the US to just about anywhere in Europe round-trip.

The MQMs in the welcome bonus can be a boost for anyone looking to earn or keep Delta Medallion frequent-flyer status. Plus, each year that you spend $25,000 or more on the card, you earn a bonus 10,000 SkyMiles, 10,000 MQMs, and have the Medallion Qualifying Dollar (MQD) requirement for most elite status levels waived.

When you have Medallion status, you can enjoy things like free upgrades to first class or extra-legroom seats whenever you fly, subject to availability.

Best for Delta Medallion frequent flyers: The Delta Reserve® Credit Card from American Express

Welcome offer: 75,000 Delta SkyMiles and 5,000 Medallion Qualification Miles (MQMs) when you spend $5,000 in the first three months.

Small business version: Delta Reserve for Business Credit Card (80,000 SkyMiles and 5,000 MQMs after spending $6,000 in the first three months).

The Delta Reserve card has a higher, $450 annual fee, but it has a few additional perks that can make it worthwhile for some frequent flyers.

Like the Platinum SkyMiles card, it offers a domestic companion pass. However, that pass can be used for first-class tickets, not just economy.

Additionally, the Delta Reserve offers full access to Delta Sky Club airport lounges whenever the cardholder is flying with Delta (the Gold and Platinum SkyMiles cards offer discounts on single-access Sky Club passes).

The Reserve has one other major perk, which can be crucial for travelers who hold Delta Medallion elite status.

Delta Medallion members are eligible for complimentary, space-available upgrades to first class and Delta One on flights within the US and the region, including Mexico and Central America, and extra-legroom seats on international flights.

Upgrades clear in hierarchical order based on a number of factors, including each passenger's Medallion status level, the original fare class they booked, and a few other factors. The first tiebreaker for people with the same Medallion level and fare class: whether they hold the Delta Reserve card. Reserve cardholders will be prioritized over those without it. If there's only one seat left and two members are still tied and both have the Reserve, it continues down the list of tiebreakers.

For travelers who fly a lot and frequently find themselves one or two upgrade-list spots away from getting that first-class seat, holding the Reserve can be extremely valuable.

$95 annual fee: Click here to learn more about the Gold Delta SkyMiles Credit Card from American Express from Insider Picks' partner: The Points Guy. $195 annual fee: Click here to learn more about the Platinum Delta SkyMiles Credit Card from American Express from Insider Picks' partner: The Points Guy $450 annual fee: Click here to learn more about the Delta Reserve Credit Card from American Express from Insider Picks' partner: The Points Guy

SEE ALSO: American vs. Delta vs. United — we compared the 3 most popular airline credit cards and named a winner

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Your car is worth less now than the day you got it. Gap insurance can help make up that difference.

Tue, 06/25/2019 - 2:39pm

  • Gap insurance is an enhancement to auto insurance that covers the "gap" in what a car is currently worth versus what you owe on it in the event of an accident or loss.
  • Without gap insurance, the insurance company will only pay for what the car is worth when it gets totaled or stolen and you may still owe money to the creditor.
  • Gap insurance may be necessary if you finance a car with less than 20% down and a 60-month or longer loan term, and is typically required if you lease a car.
  • The monthly payment for gap insurance is usually tacked on to the loan or lease payment, and costs about 5% of the annual comprehensive and collision insurance premium.
  • See how much you could save on car insurance with Allstate »

If you drive a car in the United States, you need auto insurance. 

The average driver pays about $78 a month for car insurance, according to ValuePenguin, but it varies depending on location, driving record, and other factors. If you lease a car or finance the purchase of a car, you may have an extra payment tacked on to your premium for gap insurance.

Gap insurance is "guaranteed auto protection" that covers the difference between what you owe on the car and what it's worth at time of an accident, theft, or other type of loss, according to insurance-comparison site Policygenius.

Your lease or loan payments, plus interest, are determined by the car's value at the time of purchase, but cars depreciate quickly. If your car is totaled or stolen, the insurance company will only pay for what the car is worth at the time of the catastrophic event, and you may still owe money to the creditor. That's where gap insurance comes in.

How much could you save on car insurance? Find out with our partner Allstate »

Gap insurance is basically an "enhancement" to your collision and comprehensive coverage, according to Policygenius. You pay an extra premium to the insurance company so it will pay out the car's value at the time of the loss, plus whatever you owe on it (that's the "gap"), although some insurers impose a limit.

Most car insurers offer cheaper gap insurance than a dealership would, totaling about 5% of the driver's annual collision and comprehensive coverage bill, according to Policygenius.

You may need or want gap insurance if you lease a car and put down less than 20% of the purchase price and/or have a loan term longer than 60 months; your car generally depreciates more quickly than average; you drive more than 15,000 miles a year, forcing depreciation; or if you owe more on your loan or lease at any time than the car is worth and you can't afford to cover the "gap" that could arise.

Collision and comprehensive coverage only covers property damage, not medical coverage or liability to other drivers, or mechanical repairs. Also, most policies require a deductible to be met before the insurance company will step in.

Looking for auto insurance? See how much you could save with our partner Allstate » Related coverage from How to Do Everything: Money:

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Fed chief Jerome Powell just issued the strongest signal yet that the central bank will soon cut interest rates

Tue, 06/25/2019 - 2:31pm

  • Trade uncertainty and other global strains have risen in recent months and could lead the Federal Reserve to lower borrowing costs, Chairman Jerome Powell signaled on Tuesday. 
  • "If you see weakness, it's better to come in earlier rather than later," Powell said of rate adjustments at the Council on Foreign Relations in New York. 
  • Ongoing tariff disputes between the US and major trade partners have dimmed forecasts for growth, with policymakers preparing to step in if conditions worsen.
  • Visit Markets Insider's homepage for more stories.

Trade uncertainty and other global strains have risen in recent months and could lead the Federal Reserve to lower borrowing costs, Chairman Jerome Powell signaled on Tuesday. 

"If you see weakness, it's better to come in earlier rather than later," Powell said of rate adjustments at the Council on Foreign Relations in New York. 

The Fed kept its benchmark interest rate unchanged last week and signaled a new openness to a cut in July. Ongoing tariff disputes between the US and major trade partners have dimmed forecasts for growth, with policymakers preparing to step in if conditions worsen.

"The question we're going to ask ourselves is whether these uncertainties are going to continue to weigh on the outlook," Powell said. 

Read more: Trump has been putting pressure on his Fed chief for nearly a year — and it's raising serious questions about how the central bank is supposed to function

The Federal Open Market Committee has diverged on its forecasts for the rest of the year, with seven members predicting that interest rates would be slashed by half a percentage point in 2019. 

Powell said on Tuesday that key aspects of the economy solid, with unemployment at historic lows and softer inflation readings expected to pick up. 

"But we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment," he said. 

Powell also touched on the importance of Fed independence, opening his speech by mentioning "the damage that often arises when policy bends to short-term political interests." Bloomberg reported last week that the White House had examined whether it could demote Powell, which President Donald Trump has denied. 

"I think we have long experienced that when you see central banks lacking those protections, you see bad things happening," he said. 

A bonus just for you: Click here to claim 30 days of access to Business Insider PRIME

SEE ALSO: Trump lashes out at the Federal Reserve yet again, comparing it to 'a stubborn child'

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Most people think real estate is a safe bet, but 1 key indicator looks like we're in for another Great Recession

Tue, 06/25/2019 - 2:27pm

  • Big Wall Street investors are now investing roughly 10% of their portfolios into real estate and increasingly, they're putting their money into higher-risk, higher-return properties.
  • Joe Azelby, head of real estate and private markets at UBS Asset Management, said he's concerned about this trend especially among US pension funds.
  • Visit Business Insider's homepage for more stories.

Big Wall Street investors are now investing roughly 10% of their portfolios, or $1 trillion, into real estate and increasingly, they're putting their money into higher-risk, higher-return properties. This trend reminds at least one expert of the years before the Great Recession. 

Joe Azelby, head of real estate and private markets at UBS Asset Management, had a mostly positive view of the real estate market when he spoke at UBS's Panorama Roundtable event last Thursday.

However, Azelby pointed to a "worrisome" trend: the increasing amount of higher-risk real estate in investors portfolios, especially among US pension funds. This type of real estate, known as value-added, requires renovation or development, but also can lead to much higher returns on investment when sold or rented.

Investors have traditionally invested the vast majority of their real estate portfolio into core assets, instead of value-added. Core assets are the safest and most-guaranteed real estate assets, providing income through sources like rent. With interest rates close to core assets' usual rate of return, and real-estate prices high, core assets are unable to provide yields at the level that investors want. 

Read more: Josh Friedman, the hedge fund titan who predicted the mortgage crisis, explains why his firm is spending $1 billion to short the commercial real estate market

US investors are now investing record levels of their portfolios into value-add real estate. According to a 2019 study conducted by Kingsley Associates for Institutional Real Estate Inc, large investors invested 22.5% of their real-estate portfolio into value-add properties. They also invested a record-high of 9.5% of their portfolios into foreign real estate, which can be as risky as value-add properties. 

"The thought is I'm going to move out the risk curve to either develop, redevelop or do higher-risk, higher-reward activities in order to get a higher return," Azelby said. US pension funds in particular are especially attracted to these risky investments because they are trillions short in funding and need higher returns to make up their shortfall

Azelby explained that this strategy is reasonable until the economy is hit with a downturn. 

"People did a lot of this in 2006 and 2007, and it didn't end very well when you got to 2008 and 2009, because buildings that were half-built and buildings that were half-leased performed very poorly," Azelby said. 

Value-add real estate is often illiquid, as it requires significant investment to make a profit, compared to core assets which provide liquidity through rent and other income. In a downturn, pension funds could run out of liquid cash if they invest too much into value-add real estate. 

Read more: The US pension system has gotten so bad that Congress is planning for its failure

The Dallas Police and Fire Pension System almost went bankrupt in 2016 when too many of its assets were tied up in real estate, especially value-add, and members began to withdraw their money as the fund began to underperform. It was rescued through state legislation, is an example of what could happen on a larger scale if money continues to flow into value-add real estate.

Azelby was also cautious about causing concern, and doesn't think this means we're heading for another crash. Under today's conditions, he wouldn't call this strategy irrational. 

"It actually could be a reasonably smart move to continue to do what's worked for the last seven or eight years, but only time will tell," Azelby said. 

Join the conversation about this story »

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Staggering medical bills are the biggest driver of personal bankruptcies in the US. Here's what you need to know if you're thinking about filing for bankruptcy.

Tue, 06/25/2019 - 2:16pm

  • Personal bankruptcies have been on the decline since the recession ended, but one reason people may not be filing for them is that the process is too expensive.
  • Personal bankruptcy is largely driven by unexpected causes, like medical debt.
  • There are two ways people can eliminate debt: by filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.
  • However, student loan debt is non-dischargeable — debtors still need to pay it off.
  • Visit Business Insider's homepage for more stories.

There's a dark irony to personal bankruptcy.

Indebted consumers can declare bankruptcy for debt relief — but they need to pay to do so.

With average attorney costs for Chapter 7 cases (more on what that means in a bit) around $1,200, the cost of filing might be why bankruptcy filings have declined since the Great Recession to hit a 10-year low: Debtors can't afford the lawyers they need in order to file, reported Andrew Keshner for MarketWatch.

Around 12.8 million consumer bankruptcy petitions were filed in the federal courts from October 2005 to September 2017, according to US Courts

But what's driving personal bankruptcy in the first place? Turns out, several factors.

Personal bankruptcies are mainly driven by unexpected causes 

Personal bankruptcy is most often caused by an unexpected change in circumstances, such as a loss of income or emergency medical issues for which the debtor is under-insured, attorney Simon Goldenberg of The Law Office of Simon Goldenberg, PLLC told Business Insider.

While most people rely on a steady income to pay bills and maintain their standard of living, a tough economy can make it difficult to quickly find a new job, Goldenberg said, adding that it becomes only a matter of time until depleted savings can no longer cover expenses.

"Even with a steady income, an emergency medical bill for thousands of dollars could be a struggle to tackle," he said.

In fact, 66.5% of all bankruptcies are related to medical issues, either because of expensive medical bills or time away from work, reported Lorie Konish for CNBC, citing a study by the American Journal of Public Health. The study looked at court filings for a random sample of 910 Americans who filed for personal bankruptcy between 2013 and 2016, and found that 530,000 families file for bankruptcy every year for medical issues or bills.

According to the study, other reasons for personal bankruptcy include unaffordable mortgages or foreclosure (45%), spending or living beyond one's means (44.4%), providing help to friends or relatives (28.4%), student loans (25.4%), and divorce or separation (24.4%).

Read more: An astounding number of bankruptcies are being driven by student loan debt

Attorney William Waldner of Midtown Bankruptcy told Business Insider he's had an influx of clients dealing with divorce, such as single mothers who are taking care of multiple kids and not getting enough support or single men paying for legal fees.

Goldenberg also cited loss of income provider (such as a spouse) and high-interest loans as drivers of personal bankruptcy, along with loss of business and bad investments.

High-interest loans can be related to student loan debt. According to a new LendEDU study, 32% of consumers filing for Chapter 7 bankruptcy (coming to that soon) carry student loan debt. Of that group, student loan debt comprised 49% of their total debt on average.

Personal bankruptcy is affected by location and age

The factors contributing to personal bankruptcy also depend on where debtors live, Waldner said. In an expensive city like Manhattan, people are more likely to quickly fall behind on rent or taxes, he said. But in different parts of the country, medical debt might be more common, he added.

Age and life stages also play a role. Bankruptcy filings have declined from 1991 to 2016 for people ages 18 to 54, but they have increased among people ages 55 to 74, reported Tara Siegel Bernard for The New York Times, citing the Consumer Bankruptcy Project.

Read more: A growing number of Americans over age 65 are filing for bankruptcy just to get by, and it could signal a larger problem in the US

The rate of people 65 and older filing for bankruptcy has tripled since 1991, Siegel reported. Respondents of the study cited too much debt, a decline in income, and too many healthcare costs as contributing factors. Many of them have co-signed loans for their children and taken on the burden of student loan debt, Siegel wrote. 

What's the difference between Chapter 7 and Chapter 13 bankruptcy?

"For many struggling borrowers, bankruptcy can be a powerful and affordable way of eliminating debt," Goldenberg said. There are two different processes debtors can file for to eliminate their unsecured debt. Unsecured debt, such as medical debt or credit card debt, is debt not related to an asset.

Chapter 7 bankruptcy is liquidation bankruptcy for people with limited incomes who can't pay back all or a portion of their debt. The debtor has to prove they don't have the income to get out of debt (which varies by state), and the goal is to discharge all debt.

Chapter 7 is quick — resulting in a fast discharge — but debtors might have to give up more of their property so that a trustee can sell it for the benefit of unsecured creditors, Nancy Rapoport, a Garman Turner Gordon professor of law at the UNLV Boyd School of Law, told Business Insider.

Chapter 13 involves a restructuring of debt — the debtor makes payments for three or five years, with the goal of getting the debt discharged at the end. In exchange for paying off as much debt as possible during the repayment plan, the debtor gets to keep more of their own property, rather than seeing it sold to benefit unsecured creditors, Rapoport said.

This process enables people to settle their debts for less than the full balance, Goldenberg said. It also offers them protection from collections.

And legal fees incurred prior to bankruptcy may be dischargeable in bankruptcy, according to Goldenberg.

One debt-elimination process is quicker, but the other is less risky

Chapter 7 is more commonly filed, and more often associated with medical debt, according to Waldner. Chapter 13 more commonly deals with debt related to mortgages, savings, and taxes, he said.

While many debtors want to file for Chapter 7 because it's a quick and easy process, he said, it involves more risk. If they made transfers to others, that could put those people in peril. For example, if they had $180,000, and gave $20,000 to an aunt, $30,000 to a divorce attorney, $50,000 to their daughter, and so forth, the judge could go after those assets.

"Chapter 13 is better because it's the only voluntary form of bankruptcy," he said. "It's much less risky, but more involved. If you file 13 and it doesn't work out, you can walk away. That's not the case with Chapter 7."

Debtors still need to pay their student loan debt

However, one personal bankruptcy driver — student loan debt — is generally non-dischargeable in bankruptcy, Goldenberg said. Those seeking to discharge their credit cards and other unsecured debts would free up their budget to pay student loans, he said.

Let's look at an example, as provided by Goldenberg: Fred has $30,000 in credit card debt, $30,000 in student loan debt, and $50,000 in annual income. He's having trouble keeping up with the required minimum payments, and the balances continue to grow due to the compounding of interest and accrual of fees.

Fred could pursue a Chapter 7, in which his credit card debts could be fully discharged, Goldenberg said. Once his credit card debts are eliminated, Fred may be able to allocate a larger portion of his income to pay down his student loans. Or he could try for a Chapter 13, which may help him restructure all his debt, including student loans, so that the monthly payments are in line with his income, according to Goldenberg.

Either way, Fred still needs to pay off his student loans.

SEE ALSO: The riskiest places to swipe your debit card

DON'T MISS: Your credit score isn't the only number lenders use to decide if you're trustworthy

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The Disney heiress who's begging for a wealth tax says income inequality has created a 'superclass' in the US — and it's putting the American dream at risk

Tue, 06/25/2019 - 2:13pm

  • The Disney heiress and film director Abigail Disney said wealth inequality has made it impossible to achieve the American dream, like her great uncle Walt Disney did, in a June 24 interview on "CNN Tonight."
  • Disney is among a group of 19 ultra-wealthy Americans who signed a letter on June 24 asking presidential candidates to support a wealth tax.
  • The revenue generated by the wealth tax could be used to pay for environmental initiatives, fuel economic investment, and fund healthcare, according to the letter. The tax would also protect America's democracy by reducing inequality, it added.
  • Visit Business Insider's homepage for more stories.

The American dream has disappeared, according to one of its greatest beneficiaries.

Abigail Disney, the granddaughter of The Walt Disney Co. cofounder Roy Disney and heiress to the family's fortune, said on "CNN Tonight" that growing income inequality is one of the biggest problems in the country today.

"[Income inequality] is the game changer that we're living in right now," Disney told CNN's Don Lemon in the episode that aired on June 24. "We're creating a superclass so far above the vast majority of people that they don't share the same planet anymore."

"That's not good for solidarity," Disney added. "It's not good for the opportunity. We've eroded all the paths to the American dream that my grandfather and great uncle took."

Read more: Billionaires from George Soros to Abigail Disney are begging to be taxed more

Disney was part of a group of ultra-wealthy Americans — which also included George Soros and members of the Pritzker and Gund families — who signed an open letter to 2020 presidential candidates. The letter, published on June 24, expressed the group's support for a moderate wealth tax on the 1%, which would generate revenue that could pay for initiatives to slow climate change, fuel economic growth, and fund public healthcare. A wealth tax also has widespread public support, a survey conducted by The Hill found.

Disney previously spoke out about tax policy in 2017, appearing in a NowThis video to criticize the tax cuts for the wealthy included in the 2017 tax legislation. 

Disney is a longtime critic of wealth inequality. Business Insider previously reported that Disney questioned the morality of the pay gap between The Walt Disney Co. CEO Bob Iger and the company's average employee while testifying before the House Financial Services Committee in May.

In March, she also told The Cut that she would outlaw private jets if she could because they shield billionaires from discomfort.

SEE ALSO: Less than 1% of the world's billionaires donate to housing and shelter charities. Here are the top 10 causes the world's richest people give their money to.

DON'T MISS: Reddit cofounder Alexis Ohanian took 16 weeks off to be with his family when his daughter was born. Here's a look inside his fight for paid paternity leave — and why he's bringing it to Congress

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