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Microsoft's making moves, a shakeup at Charles Schwab, and WeWork's landlords

Sun, 07/28/2019 - 8:49am


The cloud computing market is close to hitting a $100 billion milestone, according to a new report. And competition is heating up.

The cloud market, which covers web-based services for infrastructure, platform, and hosted private clouds, totaled about $23 billion in the second quarter, according to Synergy Research Group. That means overall revenues are close to hitting a $100 billion annual run rate. 

The same report found that Amazon had 33% of the market share, more than double that of Microsoft, the next biggest player. But Microsoft is catching up.

According to separate research, Microsoft's overall cloud-hosted businesses — including Azure, Office 365, LinkedIn, GitHub, Bing, and Xbox Live — now appears to account for as much revenue as the tech titan's more traditional businesses. That's a key milestone for the company. 

Plus, Todd Pekats, vice president of cloud computing and services for a big Microsoft reseller partner, PCM, told BI's Julie Bort that there's an "obscenely large" opportunity for Microsoft's cloud, as customers are forced to give up a very old version of its database.

Still, it's not all good news for Microsoft. Outages, runaway costs, and frustration with tech support have hurt Microsoft's cloud in the eyes of its customers, according to analyst firm Gartner. (Gartner also had a warning for Amazon cloud customers: Beware of prices, new features, and Amazon's competitive behavior.)

And Google Cloud also appears to be making headway. There's a growing list of signs that new CEO Thomas Kurian is starting to make Google Cloud more successful with big companies, according to Bort. 

In the cloud startup space meanwhile, hot startup Gusto raised a $200 million round, doubling its valuation to $3.8 billion. CEO and cofounder Josh Reeves told BI's Ben Pimentel that it's just a matter of time before it goes public. "It's not if, but when," he said. 

And the new CEO of $3.9 billion Snowflake says there's no room for "distractions" like employee activism in his mission to fight Amazon and Microsoft. "You go somewhere else if you want that conversation," he told Pimentel. 

What have we missed? Get in touch!

- Matt

Quote of the week

"Talent agencies have had the reputation of being all smoke and mirrors for a long time, but we've really tried to arm our clients with data that shows why they should partner with a certain show or talent." — Julian Jacobs, cohead of UTA Marketing, on Hollywood talent and entertainment giants branching out into advertising

In conversation Finance and Investing

Charles Schwab's retail head and marketing chief are out — and the firm's still figuring out what's next

Charles Schwab is shaking up its retail arm and two key executives are leaving the firm, Business Insider has learned.

We got a peek at WeWork's top landlords. Here's who is most exposed to the fast-growing, but money-losing, coworking company as it prepares to IPO.

WeWork's landlords have so far avoided much of the media coverage swarming around the startup.

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

The next recession may not be imminent — but it's close enough for investors to start getting their portfolios in order.

Tech, Media, Telecoms

Snap is secretly testing dynamic product ads that retarget consumers as it races to compete with Facebook and Pinterest for e-commerce dollars

Snapchat is revving up its retargeting engine to attract e-commerce ad dollars.

AT&T has quietly bolstered its ad tech to compete with Google. Here's the pitch deck it's showing to agencies to explain how it works.

AT&T wants to reinvent advertising using its data and content including that of Turner and Warner Bros.

A top talent manager breaks down the big trends in how YouTube stars are making money in 2019

Some of YouTube's top creators are making millions a year off their online brands, like the 7-year-old Ryan of Ryan ToysReview, who makes $22 million a year.

Healthcare, Retail, Transportation

'We're light years ahead of where we were': Novartis CEO Vas Narasimhan told us how the Swiss drug giant is using AI for everything from evaluating managers to predicting its financials

Since taking the reins at Novartis early last year, CEO Vas Narasimhan has been a prominent voice on the potential for technology in the pharmaceutical industry.

Transforming parking lots into hubs for Uber Eats and Amazon deliveries is big business — and one of the world's most prolific tech investors is now on board

The humble parking space hasn't changed much since Henry Ford's era.

Beyond Meat, whose plant burgers can fool even die-hard meat lovers, is up 700% since its IPO. Early investors say it will change how we eat, but there are signs Wall Street's binge could end badly.

Greg Bohlen knew early on that Beyond Meat could be big.

Join the conversation about this story »

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

Apple already has a China problem. Here's why it could get worse. (AAPL)

Sun, 07/28/2019 - 8:30am

  • China has become a big problem for Apple.
  • For years the company benefited from cheap labor there and a growing consumer market.
  • But its sales there have fallen off a cliff in recent quarters, and it could be hit hard if President Trump follows through on his threat to impose yet another round of tariffs on China.
  • Some analysts aren't as worried as others about the China situation, thinking it will eventually blow over.
  • Click here for more BI Prime stories.

Apple's got a China problem.

The hope is it will get better soon. The danger is that, thanks in part to President Trump's trade war, it could get a lot worse.

Over the last two decades, the iPhone maker has been one of the biggest beneficiaries of China's integration into the world economy. Now, Apple is among the companies that are most vulnerable as China's ties with the US become increasingly frayed.

"China remains the wildcard in the Apple story," said Dan Ives, a financial analyst at Wedbush who covers the company. "Apple," he continued, "is going to go up or down — [its business] fundamentals as well as the stock — depending on China."

Indeed, Apple's stock is trading about $20 to $25 a share lower than it otherwise would be, due to concerns about the trade war, Ives said. The company's stock closed at $207.74 a share on Friday.

The tech giant will offer a glimpse at how China is continuing to affect its business on Tuesday, when it releases its fiscal third quarter earnings report. Analysts expect Apple to post a drop in its per-share profit on flat sales, with a third-straight decline in revenue from its China region weighing on its results.

Most of Apple's products are made in China

Apple's vulnerability when it comes to China comes down to two primary factors: It manufactures nearly all its products in China; and the Asian country has become a major market for Apple's goods and services.

On the manufacturing front, Apple has reportedly been exploring shifting some of its production out of the country. But analysts including Ives estimate that shifting even just 10% of its iPhone manufacturing out of China could take years. That's an important obstacle, because iPhone sales represent around 60% of Apple's total revenue.

Read this: Here's why Apple's plan to escape Trump's tariffs by building iPhones outside of China won't actually be possible anytime soon

And the company has actually been moving in the other direction. Apple drew praise earlier this decade when it announced it would make the Mac Pro, its professional desktop computer, in the US. But after that model and design largely failed, the company has decided to make its successor in China.

The company saw huge benefits from shifting its production to China starting around the turn of the century. It was able to streamline its production and, thanks in part to low-cost labor, boost its profits markedly.

Now, though, the company's big bet on Chinese manufacturing could come back to bite it, thanks to the ongoing trade war. Already, Apple has asked — and President Trump has rejected, via a tweet — that parts for its new Mac Pro be exempted from the existing tariffs. Meanwhile, if the president goes through with his threat to impose another $300 billion in tariffs on goods made in China, Apple could be hit even harder, because those new impositions would be levied on the company's core products — phones and computers.

If the administration does enact the new tariffs, Apple will be faced with a choice, just like every other company so affected. It could pass along the additional costs to consumers or it could decide to swallow them and take a hit to its profits.

Apple's price hike is catching up with it

But Apple may actually have less latitude than other companies. The electronics giant boosted the price of its smartphone lineup significantly with the launch of the $1,000 iPhone X in 2017. Although Apple's unit sales initially held up after that price hike, they fell off a cliff last fall, a fact that analysts attribute at least in part to the company's phones being too expensive for many of its customers.

So, the company likely can't hike prices even more to account for the tariffs without seeing another big hit to its unit sales.

"You've kind of hit a ceiling on how far you can keep jacking up the prices on the phone," said Daniel Morgan, a portfolio manager with Synovus Trust, which owns Apple shares.

The other part of Apple's China problem has to do with its sales to consumers there. For years, Apple's Greater China region, which includes Hong Kong and Taiwan in addition to the Chinese mainland, was one of the company's fastest growing geographic segments and it has become a huge part of the company's business. In Apple's most recent fiscal year, Greater China accounted for 20% of its sales, which was a greater share than Japan and the rest of the Asia-Pacific region combined.

However, the company's business in China took a nosedive starting last fall. Its sales in the region plunged by 27% on an annual basis in the holiday quarter, then fell at a 22% annual rate in the March quarter. Wall Street's expecting Apple to report another drop in sales in Greater China for the June quarter.

The high prices of Apple's products certainly played a big part in the drop in its sales in the region. The flagship iPhone XS, which costs $1,000 in the US, initially cost around $1,300 in China. The supposedly more affordable XR model, which starts at around $750 in the US, cost around $967 in China.

Those prices would be expensive even by US standards. But they're even more so in China, where the average workers make a fraction of their American counterparts. And the prices stood out even more, because Chinese phone manufacturers including Huawei and Xiaomi have been releasing competitive models there at much lower prices.

Apple "had pricing hubris," said Ives. Given that the company's latest smartphones didn't offer any must-have new features, he continued, "a Chinese consumer's not going to spend half a months' paycheck to a full month's paycheck for the next iPhone."

Chinese nationalism is ramping up

But Apple may be facing other challenges than just its pricing in trying to sell its products to Chinese consumers. The country is experiencing a wave of nationalism both among its populace and in its government, people who have traveled in the region say. The focus of that nationalism is on US-made goods and companies, they say.

Already today, but particularly going forward, Chinese companies and consumers are likely to choose alternatives to US-made products, said Melissa Guzy, managing partner at Arbor Ventures, which recently moved its headquarters from Hong Kong to Singapore. Although the trade war has helped to augment the trend, it goes well beyond that dispute.

"It's not temporary. It's a long-term shift that's happening," said Guzy. She continued: "I think most Chinese don't believe they need the US for anything."

Should Apple's sales in China continue to slump, that could threaten another part of its business. In recent years, as the smartphone industry has matured, Apple has been touting the growth of its services segment. That segment actually is composed of a motley collection of different businesses and partnerships, including the revenue it sees from sales through its App Store, subscriptions to Apple Music and its iCloud offering, and the deal it has with Google to make the latter's search engine the default on iPhones and iPads.

Apple's services revenue is directly linked to the number of iPhones and iPads in use; a big part of the growth in that business has come from convincing more of its customers to sign up for an increasing number of its services. If its user base actually declines in China thanks to the drop in sales there, the company could see its services revenue likewise take a hit.

Some analysts think this will all blow over

Some analysts, though, think the fears about the trade war and Apple's sales in China have been overblown. With his economy slowing dramatically recently, Chinese President Xi Jinping will be under increasing pressure to strike a deal with Trump to end the tariff battle, said Scott Rothbort, president of LakeView Asset Management. That will relieve a big overhang on Apple's stock.

"There's a lot more bark than bite when comes to all these tariff issues, and it will settle out," said Rothbort, who owns Apple shares. "And China understands it will have to settle."

While nationalism may be on the rise in China, it's not predominant, Ives said. He estimates that only about 10% of the drop in iPhone sales has to do with Chinese consumers turning away from an American company's goods. Ives thinks there's a good chance Apple's overall iPhone unit sales will be flat next year, instead of continuing to fall, and may actually start to tick back up.

Skeptics "have made investors believe in China they're throwing iPhones into the fire and protesting [against] Apple," he said. But if you visit an Apple store in the country, he continued, you'd realize that "couldn't be further from the truth."

And many Apple investors and analysts are bullish on the company's services business, regardless of what's happening in China. Ives, for example, expects that segment to continue to grow by the mid- to high teens, percentage-wise, going forward, boosted by Apple's recently streaming video business, which is set to launch this fall.

With Apple, "it's now all about the services," Rothbort said. "Everybody is so focused on the iPhone sales and all the other hardware sales that I think they're missing the forest for the trees."

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

SEE ALSO: These 4 charts show why Apple's China troubles aren't going away anytime soon

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NOW WATCH: 7 lesser-known benefits of Amazon Prime

There are 2 areas where Uber's competitors could leave the ride-hailing giant in the dust (UBER)

Sun, 07/28/2019 - 8:13am

  • Uber stands to lose its dominant position in both Europe and Latin America, HSBC analysts say. 
  • The ride-hailing giant is set to keep its pole position in places like the US, where a duopoly is all but solidified. 
  • But in other markets, especially for food delivery, there's still plenty of capital for smaller startups to raise.
  • Visit Business Insider's homepage for more stories.

Uber's stranglehold on most ride-hailing markets around the world is set, but there are still a few areas where competitors could erode enough customers to put a dent in Uber's armor.

Europe and Latin America, in particular, are vulnerable to encroachment from smaller upstarts, HSBC analysts said earlier this month when they launched coverage of Uber.

"Much of our long-term thesis on Uber is about rationalization," the bank's team, led by Masha Kahn, Henning Cosman, and Tessie Petion, said in a note to clients.

"But near term," they continued, "we see new competitors in ride-hailing coming into Uber's markets outside the US. While the US has turned into a duopoly between Lyft and Uber (and there is hardly any room for a third player), we think Uber's position in Europe and Latin America is still vulnerable to ride-hailing competition."

Read more: The CEO of one of Uber and Lyft's hottest rivals reveals why the DNA of his company is fundamentally different from its competitors

Uber's market-leading position is even less secure when it comes to food delivery, HSBC says.

In the US alone, there are a handful of delivery-specific startups hoping to eat Uber Eats' lunch as the company expands its platform beyond taxi rides and into food, groceries, and more.

"Uber's competitors have good access to funding," HSBC said. "The online food delivery industry is less mature than ride-hailing, and hence all players have the potential to take share from the large offline takeaway market (and potentially from dine-in and even grocery segments."

Despite the words of caution, HSBC, like most other Wall Street research shops, is bullish on Uber with a price target of $49, or roughly 10% higher than where shares were trading on Friday. However, the team has rated the stock a "hold," rather than buy or sell, because of ongoing legal challenges and the previously mentioned competition.

"We see many opportunities to diversify Uber's product offering and consolidate existing markets," HSBC said. "Yet we think this is somewhat offset by competitive and regulatory headwinds and relative valuation (even incorporating long-term margin guidance) compared to other marketplaces (e-commerce, food delivery, etc.) and internet companies."

SEE ALSO: I spent 24 hours living on SoftBank services like Uber, WeWork, and Oyo. It revealed some flaws in Masayoshi Son's grand $100 billion investment vision.

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NOW WATCH: Here's why phone companies like Verizon and AT&T charge more for extra data

Billionaire 'Bond King' Jeffrey Gundlach unpacks a market phenomenon that takes place just before a recession hits — and warns it's happening right now

Sun, 07/28/2019 - 6:05am

  • Jeffrey Gundlach, the CEO of DoubleLine Capital, sees a key lapse in the understanding of the yield curve, which has long been a favorite recession indicator of investors.
  • The billionaire investor — who is commonly referred to as the "Bond King" — sees the phenomenon already taking place in financial markets. And he says there's unfortunately no way to fix it.
  • Click here for more BI prime stories.

Trying to forecast when a recession is going to hit the US economy is about as easy as trying to hit a 100-mile-per-hour fastball. Basically, you're better off closing your eyes and taking a hack at it. Maybe you'll get lucky and connect, but odds are you're going to whiff. 

Money managers around the world have their own special go-to indicators including: purchasing manager indexes, employment metrics, consumer sentiment, and — perhaps most notably — the yield curve. And although these metrics serve as a valuable measuring stick, their reliability and accuracy tends to vary.

But, as Mark Twain famously stated it, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." And billionaire investor Jeffrey Gundlach thinks this false sense of understanding is creating a lapse in the market's recession outlook.

Gundlach — who serves as CEO of DoubleLine Capital and is commonly referred to as the "Bond King" — thinks market participants are missing a key event that takes place right before the economy spirals into a recession.

Read more: Ray Dalio just unloaded on 'worthless' debt investments he sees headed for disaster — and revealed where you should put your money instead

"It's true that you get these inversions in the yield curve prior to recessions, most of the time, if not all of the time," he said on The Sherman Show, a podcast hosted by Doubleline's deputy CIO, Jeffrey Sherman. "But then what people don't understand, is it stays inverted for a while, and it starts steepening right before the economy goes deeper into a negative momentum situation."

If this situation sounds familiar, it's because it's happening right now.

The US yield curve has been inverted since March, but has recently started to steepen. This would normally be a welcome sign, as a steepening yield curve coincides with higher growth prospects. However, it's bad news when the steepening occurs because of a cosmic drop in short-term rates — and that's exactly what has transpired.

Gundlach watches the 5- and 30-year US Treasury spread like a hawk, and its steady steepening as of late has been adding fuel to the fire.

He continued: "It's like the bond market sniffs it out, and says 'Ah ha! The Fed is going to be easing like crazy,' and that's going to obviously be in response to what we believe is going to be further economic downside momentum."

In short, Gundlach thinks the Federal Reserve is in a lose-lose situation. If they cut, they'll exacerbate the rapid drop in rates, and if they don't, markets will turn into a calamity. Either way, it's not looking good.

"You get this strange situation where the yield curve model is not truly fixable," he said. "Your attempt to fix it, each and every time, has coincided with a recession actually showing up."

SEE ALSO: Here's how one portfolio manager has doubled the market's return by putting 80% of his money in just 4 stocks

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

Boeing reportedly kept the FAA in the dark about big changes it made to the 737 Max's flight-control software late in its development (BA)

Sat, 07/27/2019 - 7:11pm

  • The Federal Aviation Administration didn't understand the risks of the flight-control system in Boeing's 737 Max before the first of its fatal accidents last October, according to a new report in The New York Times.
  • The engineers charged with overseeing the safety of the automated software had little experience with such systems, according to the report.
  • The FAA allowed Boeing to assess the safety of the system itself, The Times reported.
  • Boeing largely kept the agency in the dark about the importance and risks of the system and didn't give the FAA an updated safety assessment after making a significant change to the software late in the plane's development, the report said.
  • Visit Business Insider's homepage for more stories.

The Federal Aviation Administration was poorly positioned to oversee the safety of the automated flight system that was to blame for the two deadly crashes of Boeing's 737 Max plane over the last year, The New York Times reported Saturday

The agency engineers in charge of keeping a watch on the airplane's flight control systems through the latter part of its development had little experience with such software, according to The Times report. And Boeing largely kept them in the dark about the importance of the flight-control system on the 737 Max and a crucial change they made to the software soon before releasing the plane commercially, The Times reported.

The Times did not name the engineers in its report.

In a statement emailed to Business Insider, Boeing spokesman Peter Pedraza said the company actually had informed the FAA about changes it made to the flight-control system, dubbed MCAS, during the 737 Max's development.

"The 737 MAX met the FAA's stringent standards and requirements as it was certified through the FAA's processes," Pedraza said in the statement. "The FAA," he continued, "considered the final configuration and operating parameters for MCAS and concluded it met all certification and regulatory requirements."

FAA spokesman Lynn Lunsford declined to comment on The Times' report. The agency's certification process for the 737 Max is the subject of multiple investigations and reviews, he said in an emailed statement.

"While the agency's certification processes are well-established and have consistently produced safe aircraft designs, we welcome the scrutiny from these experts and look forward to their findings," he said in the statement.

The 737 Max's flight control system, dubbed MCAS, has been at the center of the investigation into the safety of the plane. In certain circumstances, that system can take control of the plane and tilt its nose sharply downward.

The software is believed to have played a role in both of fatal crashes, which together killed 346 people. The FAA grounded the plane after the second crash in March.

Read more: Boeing says it could suspend 737 Max production if grounding continues, putting tens of thousands of jobs at risk

According to The Times report, FAA had two highly experienced engineers overseeing the safety of the Boeing's flight control systems in the agency's Seattle office. But both engineers left the FAA midway through the development of the 737 Max, The Times reported. One of the engineers the FAA named in their place had little flight control experience. The other was a newly hired engineer who graduated from graduate school just three years earlier.

The two "seemed ill-equipped" to be in charge of the safety of the MCAS software, The Times reported, citing unnamed people who had worked with them.

Boeing largely kept the FAA in the dark about the MCAS software

Even if the engineers had been more experienced, they might not have caught the problems with the system, The Times suggested.

Early reviews of the plane's development provided by Boeing to the engineers played down the system's importance and the safety risks it might entail, according to the report. An FAA manager later delegated a safety review of the system to Boeing itself — an increasingly common, albeit controversial, practice by the agency, The Times reported.

As the plane got closer to production, Boeing made a big change to the MCAS system, allowing it to turn on at low speeds and to move the tail stabilizer by as much as 2.5 degrees each time it turned on, according to the report. Previously, the system could only activate at high speeds and could only move the stabilizer by 0.6 degrees a time.

Boeing didn't provide the FAA with an updated safety assessment of the flight-control system after making the changes and the two new agency engineers were unaware that the software could move the tail by 2.5 degrees, according to the report.

After the first crash of the 737 Max last October, FAA officials found they didn't understand and had little documentation about the workings of the MCAS system, The Times reported.

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

SEE ALSO: Boeing lost nearly $3 billion in the 2nd quarter as its 737 Max crisis drags on

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NOW WATCH: Inside Roborace: the Formula One for self-driving cars

GitHub is reportedly blocking access to its site for users in places like Crimea and Iran, which are under US sanctions (MSFT)

Sat, 07/27/2019 - 3:05pm

Some longtime GitHub users reported this week that the Microsoft-owned company has restricted their use of its code-hosting service because they live in countries that are subject to US trade sanctions.

A software developer who is based in the Russian-occupied Crimea region of Ukraine and another who lives in Iran each said in separate online posts that they'd been notified by GitHub that their access to its service has been curtailed. The Iranian developer, Hamed Saeedi, said in a post on Medium on Wednesday that his code repository has been disabled, he can't access parts of the GitHub site, and he can't download the data he had hosted there.

"I hope that they can find a good way to fix this," Saeedi said via direct message on Twitter Saturday. "Before this, as a software developer I really liked GitHub."

But he's not the only GitHub user who reported being restricted by the service, as ZDNet first reported on Friday. Also affected was Anatoliy Kashkin, the Crimean programmer. Kashkin developed an application called GameHub that allows users to download and run computer games from multiple sources, including Steam and Humble Bumble and hosts the code for the program on GitHub. In a post on GitHub Wednesday, he said the service has blocked him from creating new private code repositories and disabled his existing ones.

Kashkin confirmed those restrictions in an email to Business Insider. But an issue he had had with his website, which is also hosted by GitHub, has since been resolved he said. In the email, he played down the seriousness of the GitHub restrictions.

"It hasn't affected my main open-source project that much," he said in the email.

"I have no idea why there's so much attention to this," he continued. "I don't really think this restriction differs that much from previous restrictions we have experienced for the last 5 years and people from other countries experienced even longer."

GitHub says it's complying with US trade sanctions

On an undated support page on its website, GitHub said it is trying to comply with US trade laws and noted that the Crimea, Cuba, Iran, North Korea, and Syria are all under US trade sanctions. It's unclear why GitHub only started restricting access recently, given that the sanctions in some cases have been in place for years.

"To comply with US trade control laws, GitHub recently made some required changes to the way we conduct our services," the company said on the support page. "As US trade controls laws evolve, we will continue to work with US regulators about the extent to which we can offer free code collaboration services to developers in sanctioned markets."

GitHub representatives did not immediately respond to an email seeking comment.

The company has become a popular place for developer to host and share code and software. It was purchased last year by Microsoft for $7.5 billion.

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

SEE ALSO: GitHub, Microsoft's wildly popular developer service, launches a new service to help programmers get paid for their open source code

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NOW WATCH: Why Apple's Mac Pro 'trash can' was a colossal failure

Here's how to know exactly how much money you need in your emergency fund

Sat, 07/27/2019 - 12:30pm

It's no secret that Americans struggle to save

Whether it's because wages are low, debt repayment consumes our paychecks, or we're overspending, nearly 60% of Americans have less than $1,000 saved, according to a GoBankingRates survey. Most of that group has $0.

As a certified financial planner in training, I've learned that the No. 1 step to a sound financial plan is setting up an emergency fund. Before aggressively saving for retirement or investing, the very best thing you can do for yourself is build up a cash reserve.

An emergency fund is money you can access quickly if there's a sudden medical emergency, your car needs a new transmission, you lose your job, or some other huge, unexpected bill lands in your mailbox. For the vast majority of people, it's not a matter of if something will happen that threatens your financial stability, but when.

Some people will disagree that everyone needs an emergency fund. If you have more money coming into your bank account each month than you can spend, you have a trust fund waiting to be tapped, or you're highly risk-tolerant, then you may prefer to put your unspent cash to work in the markets. But here's the reality: For the average American, an emergency fund is the greatest defense against high-interest debt and we simply can't afford to risk it.

How much to save in an emergency fund

If you're looking for a savings benchmark, it will depend on your monthly expenses and the stability of your income. The Certified Financial Planner Board of Standards teaches the following rules of thumb:

  • If you're a single-earner household, you need a minimum of six months worth of expenses saved.
  • If you're a double-earner household, you need a minimum of three months worth of expenses saved.
  • If you're a single-earner household with a second source of sizable income, you need a minimum of three months worth of expenses saved.

Expenses includes both fixed and variable costs. In other words, how much you spend in a regular month on everything that allows you to maintain your lifestyle — mortgage or rent payment, car, food, credit-card payments, etc.

Once you have a target number you're working toward, it should feel more achievable than just saving a buck here and there. If you do some number crunching, it's easy to figure out how much you need to save every month, week, or day to get there. If you can jumpstart your savings with a bonus or a tax refund, all the better.

Where to save your emergency fund

Starting from scratch and building up a four or five-figure savings account takes some discipline. I recently reached my emergency fund savings goal using a strategy I borrowed from my 401(k).

I basically started to treat my savings an expense and set up direct deposits from my paycheck into a high-yield savings account at a different bank than where I keep my checking account to avoid the temptation to dip into it for a non-emergency.

Saving off the top meant I never had to contemplate what I was going to cut out in order to save more. I worked backwards in a sense — I picked a savings amount that would give me a solid emergency fund in less than two years and forced myself to live on what was left over.

The beauty of utilizing a high-yield savings account for your emergency fund is that your money earns interest while it's sitting there. Robo-advisers Wealthfront and Betterment have no-fee, high-yield accounts that earn some of the highest rates on the market right now. Interest can add a little boost to your savings — the more you put into the account, the more you'll earn in interest. And most importantly, your money will be right there when you need it.

It may seem impossible to save cash if you're balancing other priorities, like paying off debt, but an emergency fund can't wait. Whatever amount you can afford to contribute, whether it's $5 or $500, will make a difference. At the end of the day, the most important thing is that you have at least some money to fall back.

Related coverage from How to Do Everything: Money

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6 people on how living in a tiny house has changed their finances, from going debt-free to saving six figures

Sat, 07/27/2019 - 9:35am

  • Tiny house living changes your finances for the better, according to six people who live in tiny houses.
  • Many were able to significantly reduce their housing costs, thereby doubling — or even tripling — their savings.
  • The extra money has brought them new opportunities to enrich their lives, they said — with experiences like traveling or starting a business.
  • Visit Business Insider's homepage for more stories.

Life tends to gets smaller when joining the tiny-house movement.

There's the 100 to 400 square feet of space — defined as the criteria for a tiny house — that makes up your home. There's the downsizing of possessions so you can live comfortably. And there's the overall minimalist lifestyle that comes with both of those things.

But the one thing that doesn't shrink, according to many tiny house dwellers, is your bank account.

Business Insider talked to six people who went tiny about how their finances changed after making the move. Turns out, going tiny has made them richer in more ways than one.

Many have significantly cut the cost of their rent or mortgage and thus doubled their savings, which has yielded them more opportunities to take advantage of — like traveling or starting a new business.

Here's how going tiny has changed people's finances for the better.

SEE ALSO: Here's what living in a tiny house is really like, according to people who traded their homes for minimalism

Couple Bela and Spencer cut their housing costs in half when they downsized to a tiny home — and they earn income of it by turning their tiny house into a vacation rental.

Bela and Spencer of thisxlife in Boulder Creek, California, were renters before they bought their 300-square-foot tiny house in 2007.

After including rent for the land, depreciation on the home, and loan interest, they cut housing costs by half, down from $30,000 to less than $15,000, they told Business Insider. They did that without a down payment or any first-time homebuyer incentives.

Because most banks don't consider tiny houses as "homes," many tiny-house buyers can't take out a mortgage and instead pay for the home through personal loans, they said. They did just that, but will have paid off their tiny house in just seven years — or less.

They also convert their tiny house into a vacation rental while they travel, which allows them to make a little income on the side, they said. "We could not have afforded to set up such a luxurious rental if we had continued to rent or even bought a starter home — and renting our house for a handful of months a year covers the costs of ownership," they said.

"There's no way we can really know the full financial picture of our tiny house, but it's easy to say that it's been a valuable investment," they said. "Much, much better than renting, as long as you can stomach the adventure!"

Bekah Taylor said her housing expenses are half to a third of what she would be paying if she lived in the city.

Bekah Taylor of Tiny Little Life said that getting into tiny living can be complicated. There are parking restrictions, insurance can be expensive depending on where you live, and if you can't finance your own home, it restricts the companies you can buy from. She and her husband Paul went to the bank and were offered the option to refinance their home or take out a personal loan with 14% interest rates.

They ended up self-financing and building their 250-square-foot tiny house, located in Portland, Oregon.

"We have amazing friends and family, who gave us a lot of free labor, which made the cost significantly less," Taylor told Business Insider.

She said their monthly housing expenses are half to a third of what most of their friends are paying for in the city. "It has allowed us the freedom to live where we want yet still do all the traveling we had hoped for," she said.

Couple Tim and Sam have cut back on unnecessary expenses because living in a tiny house has forced them to downsize.

Tim and Sam of Tiffany the Tiny Home bought their 270-square-foot tiny house, which they live in in Florida. Downsizing for the move wasn't "terribly hard to do," they previously told Business Insider.

"Besides being able to have a three- to four-year mortgage, which will give us an extra $1,000 a month back into our pockets, living tiny has changed our finances for the better," Tim told Business Insider.

He added: "Since we live in such a small space we think more about what we bring our home than we used to. That mindset alone will cut out a lot of unnecessary spending we used to do on a day-to-day basis. We evaluate what we buy a lot more carefully, which in turn ends up saving money from those 'I need to have this' moments. This allows us to invest back into our lives."

Ryan Mitchell has saved six figures since moving into his tiny house.

Before Ryan Mitchell of The Tiny Life moved into his tiny house, he was spending about $1,500 a month on rent, utilities, insurance, and the like, he told Business Insider.

He said it cost him about $30,000 to build his 150-square-foot tiny house, including the solar panels. "Even after accounting for the cost of the house, I've saved over $100,000 going tiny and it's been a great experience," Mitchell said.

With that money, he started a new business, which he then sold, using the profits to buy land of his own. He's also been doing a lot of traveling, sometimes spending up to a few months in a country.

Ultimately, tiny living has afforded him a low cost of living: "I only have to work about five hours a week to cover all my needs, so I have a really great lifestyle while still meeting all my bills, savings, and retirement needs," he said.

Laura LaVoie said going tiny has opened up new opportunities for her and her husband.

Laura LaVoie of Life in 120 Square Feet told Business Insider her tiny house experience was about changing her life and finances. In 2009, she and her partner Matt began building their 120-square-foot cabin in North Carolina while living in Atlanta and working in corporate jobs.

"We spent weekends and vacations working on our tiny house, which was a symbol for the things we wanted to outside of full-time jobs," she said. "When the tiny house was finished, we could take the leap."

She quit her job and began writing full time in 2012.

"Since then, our financial choices allowed us to do so much more," she said. "We bought a 700-square-foot bungalow in a city we love and last year my husband decided to go back to school and is attending law school in Atlanta. We couldn't have done any of this without the experience of building a tiny house."

While they moved out of their tiny house to live in the bungalow for several reasons, including some big life changes, they plan to move back in this summer.

Jenna Spesard is now debt-free because she lives in a tiny house.

Jenna Spesard of Tiny House Giant Journey built her 165-square-foot tiny house from scratch — there weren't many resources available and most of the planning and building was achieved through trial and error, she previously told Business Insider.

But it was worth the financial freedom. After downsizing, she was able to save so much money that she paid off her $20,000 student-loan debt and car loan in just a few years with a part-time job, she told Business Insider.

"I have now been debt-free for more than a year and I'm saving enough money every month that I can travel all over the world a few times a year while working on my own business," Jenna, whose tiny house is currently parked on Whidbey Island in Washington, said. "I never would have been able to do that before going tiny."

Reddit cofounder Alexis Ohanian explains how he curbs his reliance on his smartphone and reduces his time spent on email to get more done every day

Sat, 07/27/2019 - 9:15am

Much ink has been spilled and hands wrung on the issue of "having it all." From the gendered origins of the question to the responses that are unreasonable and unsatisfying, founders have been battling the idea that managing their business comes at a cost to their personal obligations.

But during an event on managing workplace burnout in San Francisco on June 24, Reddit cofounder Alexis Ohanian didn't mince his words, calling his mobile phone an "ever-present ball-and-chain" keeping him connected to work even when he wants to log off.

The founder-turned-venture investor at Initialized Capital let the audience in on some of his best productivity hacks to help him get the most out of the limited hours in his day. His biggest inspiration? His wife, tennis star and venture investor Serena Williams.

"The reason that Serena is so great is because she works just as hard when she's not working than when she is working," Ohanian said. "When she's not working, she is completely off. It's a wall that she is able to build and turn on, and I think it's the only way to perform well under that amount of scrutiny and pressure like she does."

Read More: Reddit cofounder Alexis Ohanian: San Francisco is great but 'no one in their right mind' will build a company here anymore

Here are some of Ohanian's productivity hacks that keep the cofounder, venture investor, father, and avid traveler sane.

SEE ALSO: Andreessen Horowitz partner Scott Kupor explains the valuable lesson that today's startups can learn from the dot-com bubble: Be careful about selling to other startups

Turn off notifications.

Ohanian admitted that he turned off push notifications on his phone, and the crowd reacted with a mixture of surprise and horror. 

"It really just changed something in me and how I communicate with people," Ohanian said as attendees laughed or exchanged incredulous looks with seatmates.

If people need you, they will find you.

As the cofounder of a successful startup, board member, and the founder of a venture firm, Ohanian had to come to terms with the fact that he wasn't as essential to the day-to-day operations of both organizations as he might have been in the earlier days. But his conscious decision to be hard to reach has forced his team to go old school.

"People know if they need to reach me, they always can," Ohanian said. "Like, who makes a phone call these days? If you're calling me, I know I need to pick it up."

Set aside time dedicated to responding to emails.

Ohanian said he blocks off an hour and a half each day to only respond to emails. He explained that this helps him avoid falling "down the rabbit hole" of trying to quickly respond to an email as soon as it comes in and getting sucked in to other tasks or non-urgent needs.

"I am not allowed to do email at all outside that time," Ohanian said.

Create boundaries and stick to them.

No phones at the dinner table. According to Ohanian, it's a habit he and Williams have adopted after having their daughter. He explained that even though she is still too young for a phone, they want to model a healthy relationship with technology that is second to human interactions.

"We really have to be deliberate about it," Ohanian said. "Creating those boundaries, and trying to be more like Serena Williams, those are my professional goals."

Recognize when you’ve hit your limit.

Ohanian recounted the early days at Reddit when he and cofounder Steve Huffman would work for weeks on end, oftentimes through the night, to build the site. Although Ohanian thought the long hours "felt right" as a founder, he now recognizes that the same leadership strategy just isn't possible now that he has a family.

"Now I know when I hit my limit," Ohanian said. "And it's obviously easier now that I have a wife and child because I have to acknowledge there's something I care more about."

If all else fails, get up and take a walk around the block.

"I shudder at all the hours of youth wasted," Ohanian said of his early founder days. "The effect on my health of not doing any exercise, or just the fact that I did not care about myself physically enough."

Now 36, Ohanian's days of all-nighters in a computer chair are mostly over. But he's still acutely aware of his physical health and how that has translated to his mental well being and overall productivity.

"When you get to the ripe old age of 36 and you have a kid, you start to think, 'how do I get the most out of the next 35 years because I want to be around for a bit," Ohanian said.

Invest in yourself for some of the best returns.

"I'm more productive in my 30s than I was in my 20s even though, on an hourly basis, I put more time into myself and my well being than I used to," Ohanian told the audience of investors and founders.

Ohanian has been relatively open about his mental health struggles, publicly discussing therapy and other changes he's made to his lifestyle to better combat the unrealistic expectations founders put on themselves, oftentimes at the demands of investors.

"I was so naiïve," Ohanian said. "I was putting myself through obscene working hours because it felt right, and there wasn't anyone that could break that reality."

Tesla needs to redesign the Model S sedan — here are 9 changes I'd like to see (TSLA)

Sat, 07/27/2019 - 9:06am

  • The Tesla Model S has been around since 2012; the revolutionary sedan is due for a redesign.
  • Tesla has been tweaking the Model S, but the company hasn't yet committed to an all-new version.
  • I'd like to see a redesigned Model S, and I have a wish list of features.
  • Visit Business Insider's homepage for more stories.

The Model S was Tesla's first "real car," and it was an immediate hit. Introduced in 2012, it won Motor Trend's Car of the Year award, and this year, Motor Trend named the Model S its greatest-ever Car of the Year.

All good, but the Model S is getting long in the tooth, and consumers aren't as thrilled by it as they used to be. Sales have been flagging, partly because the cheaper Model 3 is fresher, but also because the Model S, brilliant as it is, has become dated.

Seven years is at the outside edge of what most car makers would allow for a model. Designs are typically all-new every five to seven years, and there are usually a few refreshes in a model's cycle.

Tesla has tweaked the Model S a few times, and the automaker said that over-the-air software updates could give owners the impression of a brand-new car. But still, an early 2010s design is gonna get boring by the end of a decade, even it was conceived to last.

Here, then, are nice features I'd like to see on an all-new Tesla Model S:

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1. Exterior design. The Model S was launched in 2012. Penned by Franz von Holzhausen, it was Tesla's first "clean-sheet" design.

A few years later, the Model S was slightly revamped, with the biggest change being the loss of the nose cone that cleaned up the front fascia.

Von Holzhausen is a real minimalist, and the triumph of the Model S is that it's held up so well. But it's starting to look too conservative for a luxury ride. Here, for example, is the new Toyota Camry, a mass-market car that outdoes the Model S for exterior styling dynamics.

2. Wilder colors. The Model S can be ordered in five colors, with red being the most expensive (and best-looking). I'm not saying Tesla has to go acid green, but some frisky new colors could breathe some life into the good old Model S.

3. A distinctive high-performance variant. BMW has M Sport, Mercedes has AMG, Audi has RS, and Cadillac has V. Tesla has used "P" to showcase performance trim levels, but something flashier is in order.

4. "Maximum Plaid." The fastest Model S is the P100D, blasting from 0 to 60 mph in about 2.5 seconds in "Ludicrous Mode." A "Maximum Plaid" mode should be next (check the "Star Wars" spoof "Spaceballs" for the reference).

5. A truly UPSCALE interior. The interior of the Mercedes CLS, pictured here, is what luxury buyers expect. Tesla has upgraded the Model S over the years, but I'd like to see some serious bling in a redesigned version.

6. A truly SPORTY interior. A redesigned Model S doesn't need to go full Lamborghini, but some snappy patterns and contrast topstitching would be cool.

7. The Model 3's dashboard. The lack of traditional instruments takes some getting used to, but once you have that wide-open view in front of you, you appreciate the design. The Model S could use it.

8. More wheel options. For the current Model S, there are two 19-inch options and a single 21-inch choice. I'd like to see twice as many designs for a new Model S.

9. A Model S wagon. Sure, a guy can dream. I'd like to see a Model S estate, à la the Jaguar Sportbrake, pictured here.

I've always thought the Model S fails to get the props it deserves. It's a truly great set of wheels that deserves a fantastic redesign. Bring it on, Tesla!

Google’s $8 billion cloud confession sent its stock soaring. Here are the other hidden goldmines in Google’s business that are still shrouded in secrecy. (GOOG, GOOGL)

Sat, 07/27/2019 - 9:00am

  • On Thursday's second-quarter earnings call, Google's parent company, Alphabet, offered up a rare nugget of granularity not typically revealed in its financial report. 
  • The company's cloud businesses, Google CEO Sundar Pichai said, had reached an $8 billion annual revenue run rate in the second quarter of 2019. 
  • Analysts' appreciated the insight, but told Business Insider after the call that they still want more. 
  • Read more BI Prime stories here.

Google's update on its cloud revenues on Thursday caught investors by surprise, providing a rare peak behind the curtain from a company famous for saying very little. 

Is this the start of a new, more open Google? 

The financial analysts who follow the $137 billion revenue company certainly hope so. In the wake of Thursday's cloud surprise, Business Insider asked some of the top Google analysts what other information they'd like the tech giant to start disclosing now that it's in a sharing mood.

James Lee, an analyst at Mizuho Securities, told us that if he could pick any numbers to be included consistently in Google-parent company Alphabet's earnings report, he would put YouTube revenues at the top his list.

Second on his wish list, Lee said he would like to see actual cloud revenues — not just the annualized "run rate" Google provided Thursday — as well as cloud profit margins; and third, he'd like know pricing for mobile and desktop search ads. 

Alphabet shows investors only how its ads business is performing, lumping the rest of its businesses into fuzzy categories called "Other Revenues" and "Other Bets," which covers separate companies under the Alphabet umbrella, like its self-driving-car company, Waymo. 

And even within its ads revenue line item, analysts are left scratching their heads.

YouTube, the world's top video streaming site, for instance, makes most of its money from ads and is the company's second-largest revenue generator. But nowhere on the company's income statement will you see YouTube as a line item. 

Instead, YouTube's ad revenue is combined with Google's search ads to make up the company's overall ad revenue segment. For a business that's estimated to bring in between $16 and $25 billion annually, that's a major puzzle piece missing for analysts and investors. 

Wedbush analyst Michael Pachter and Jefferies' Brent Thill told us as well that they think the YouTube number would be one of the most important to break out. Pachter also wished search ad revenues were a stand alone line item. 

The two also agreed with Lee that seeing regular numbers for its cloud business — which appears to be growing in significance at Alphabet — would be a top ask.  

"I think Google should break out search, YouTube, third party and cloud as separate line items," Pachter said. "Apparently, Ruth Porat [Google's CFO] disagrees with me." 

"Thanks, but we still want more"

Dan Ive, who is also an analyst at Wedbush, described Google's cloud reveal as a step in the right direction.

As it stands now, Google's cloud business results are obfuscated within a line item on Alphabet's income statement known simply as "Other Revenues." That line item contains all the revenue Google generates that doesn't come from ads, including things like the app store and hardware sales.

So when "Other Revenues" are up or down — on Thursday it was up 40% year-over-year — it's impossible to know how much of that was due to the cloud business or to sales of gaming apps in the Google Play Store. The last time the company shared actual numbers from its cloud business was in Q4 2017 when it said it had reached $1 billion in revenues for that quarter. 

"As its cloud business ramps, the Street will demand more transparency and run rates," Ives said. 

His sentiment was consistent with most analysts we spoke to about the one-off cloud reveal — "Thanks, but we still want more." 

Dan Morgan, a senior portfolio manager at Synovus Trust Company, put consistent cloud revenue at the top of his wish list. After that, he pined for information about hardware sales, such as the Pixel smartphones (Google said sales of its Pixel phones more than doubled in Q2, but provided no specific numbers that would give the statement any real meaning).

Like others, Morgan wants YouTube revenue too. But given that YouTube now has a nascent premium business, for streaming TV and streaming music, Morgan says a breakdown of the various YouTube revenue-generators would be appropriate.

If they told us, they'd have to kill us

There is legal precedence (TSC Industries v. Northway) for companies being forced to provide information in its earnings report that a "reasonable shareholder might consider important."

In 2017, the SEC actually looked into why, specifically, Alphabet was not disclosing its YouTube revenues. But after the company reportedly said, among other things, that its overall goal was to sell online advertising — not just ads on YouTube — the commission backed off and no changes were demanded of the tech giant. 

Morgan thinks it would actually be in Alphabet's interest to be more open. 

As the company's core ad business matures, it becomes more difficult to post bombshell growth numbers. In the second quarter, for instance, Alphabet's advertising revenues beat analysts predictions and its Q1 numbers, but were still way down from the same period last year (Ad revenues grew 16% year-over-year in Q2 2019 compared to almost 24% in Q2 2018). 

"[New disclosures] would give you something to get excited about in terms of the stock," Morgan said. "All of a sudden, the spotlight goes off your maturing ad revenue growth, and the spotlight goes on these new, exciting businesses in GCP [Google's cloud business] and YouTube. More clarity would really light it up."

Still, even though pulling the curtain back on more of its business might make strategic sense for Alphabet, some are not convinced that it will actually happen. Analysts have been calling on the company to give more transparency into the business for some time now to no avail.

"I don't understand them at all," Wedbush's Pachter said. "They treat us like if they told us anything, they'd have to kill us." 

Got a tip? Contact Nick Bastone via Signal or WhatsApp at +1 (209) 730-3387 using a non-work phone, email at, Telegram at nickbastone, or Twitter DM at @nickbastone.

SEE ALSO: Google's booming cloud business and ad-revenue rebound combined for a giant Q2 revenue surprise

Join the conversation about this story »

NOW WATCH: How Area 51 became the center of alien conspiracy theories

Trump wants to reshape the $114 billion kidney-care market. Here are the 6 companies vying to benefit from the disruption.

Sat, 07/27/2019 - 8:45am

  • The Trump Administration recently announced plans to reshape how people get care for kidney disease by pushing for more people to get care at home, rather than in special centers.
  • People whose kidneys don't work properly can undergo a treatment called dialysis to clean their blood. Currently, just 12% of patients get dialysis at home in the US.
  • President Donald Trump issued an executive order on kidney care earlier this month. The administration aims to have 80% of patients with kidney failure either getting home-based care or receiving transplants by 2025.
  • Right now, for-profit companies Fresenius Medical Care and DaVita control a large portion of the kidney-care market. They largely operate centers where people go three times a week to get dialysis.
  • A slew of companies are seeking to disrupt the market by offering cheaper and more convenient care at home. They could benefit from Trump's executive order and related policies.
  • CVS Health recently invested in a hemodialysis device, and Cricket Health, Outset Medical, and Somatus are trying to break into the market. 
  • Click here for more BI Prime stories.

In the US, 37 million people have chronic kidney disease, and it's the ninth leading cause of death.

Because such a significant part of the population is affected, and because treatment can be so expensive, the government covers the medical expenses of people with end-stage kidney disease through the Medicare program. In 2016, Medicare spent about $114 billion caring for people with chronic and end-stage kidney disease. 

Earlier this month, Trump released an executive order to transform kidney care in the US, reducing costs and improving outcomes for patients by encouraging more home-based kidney care. The order also outlined the need to provide better access to kidney transplants and to prevent kidney disease from progressing.

Read more: Trump just announced a new approach to caring for millions of people with a devastating disease, and it could upend a $114 billion market

To address the high cost of kidney care, the goal is to target dialysis, a procedure that filters the blood for people whose kidneys are failing. Currently, 88% of patients receive their dialysis in centers. They must go three times a week for hours at a time. By 2025, The Trump administration wants 80% of patients who are newly diagnosed with kidney failure to be able to get care at home or get a kidney transplant.

Home-based dialysis treatment can be better for patients, as patients can perform their own dialysis more frequently, leading to improved health and potentially lower costs.

"Home dialysis has a lot of advantages in terms of quality of life, convenience, and control of one's schedule," said Dr. Leslie Wong, the vice chairman of the Department of Nephrology and Hypertension at Cleveland Clinic. "I've been in the field for 15 years and physicians have been supportive of home dialysis since I began practicing." 

For-profit companies DaVita, Fresenius, US Renal Care, and American Renal Associates operate centers where people can get dialysis. Currently, Fresenius and DaVita control about 75% of the market, according to an analysis from S&P Global. US Renal Care has about 5% and and American Renal Associates has 3%, S&P said.

Startups like Somatus, Outset Medical, and Cricket Health, which offer different types of kidney care, including home-based dialysis, are trying to break in. CVS Health, which operates in-store clinics and owns the health insurer Aetna, is now investing in home-dialysis technology, too.

Never miss out on healthcare news. Subscribe to Dispensed, our weekly newsletter on pharma, biotech, and healthcare.

There are two types of dialysis: hemodialysis and peritoneal. Hemodialysis pumps blood out of the body to an artificial kidney machine and returns the clean blood to the body via tubes connected to the patient. That's the type of dialysis you'd usually get at a center. Peritoneal dialysis fills the abdomen with fluid and uses the membranes in the body as a filter. Most home dialysis is peritoneal, which is easier to do. 

Medicare spent $28 billion on hemodialysis and about $2 billion on peritoneal dialysis in 2016, according to the US Renal Data System. Peritoneal dialysis is cheaper on a per-person basis. It cost about $76,000 for each recipient, while hemodialysis cost about $91,000.

Business Insider talked to top executives at CVS Health, Cricket Health, Outset Medical, and Somatus, which are all seeking to reshape kidney care. We also checked in with DaVita and Fresenius. Here's what they told us about how the Trump's administration's moves could affect the market and their companies.

Cricket Health — $50 million

Cricket Health was founded by James Chaukos, Vince Kim and Arvind Rajan in San Francisco in 2015. 

The startup is trying to set itself apart from other kidney care startups by emphasizing the need for preventative care. 

Cricket Health works with health systems and insurers to indentify high-risk patients earlier on, using advanced data analytics. Cricket Health then provides the patients with at-home and in-center dialysis care, education for patients, and one-on-one care with nephrologists. 

CEO and co-founder, Rajan, told Business Insider that the Trump administration's executive order was a step in the right direction and that while providing in-home dialysis to 80% of recipients is a lofty goal, he thinks 50% to 60% is definitely doable.

"It won't be an easy transition, but it's the right kind of goal to set for this country," Rajan said. 

Cricket Health raised $24 million in its Series A funding round in 2018. The startup is valued at about $50 million, according to PitchBook.

CVS Health — $70 billion

CVS Health operates about 10,000 pharmacies and more than 1,000 in-store clinics. The publicly traded company acquired the health insurer Aetna last year, and is making a bigger push into providing healthcare.

Kidney care will be one element of that. CVS recently announced the start of clinical trials for a new home-based hemodialysis device. The trial will evaluate the safety and efficacy of the HemoCare Hemodalysis System, which is designed to make treatment simple for patients to use. The trial will consist of 70 patients in ten sites across the US.

"There is a big unmet clinical need and market need in this area," Dr. Alan Lotvin, chief transformation office at CVS Health, told Business Insider. "People are frustrated with the high cost and poor outcome of treatment. We want to deliver complex therapies in the home."

Dr. Lotvin said CVS wants to pursue hemodialysis as there are not optimal machines currently on the market for patients to use at home.

The S&P analysts said that CVS will have difficulty breaking into the market, because Fresenius and DaVita are so dominant. But if there is a sizable shift to home-based care, the barriers to enter the market lessen for CVS, the analysts said.

CVS Health is publicly traded and has a market value of about $70 billion.

DaVita — $9.4 billion

DaVita is one of the two largest provider of kidney care services in the US. As of March 2019, the company served 203,000 patients and operated 2,644 outpatient dialysis centers in the US. 

DaVita has 1,500 home dialysis centers in the US, supporting over 25,000 patients who get their treatments at home, and continues to expand home-based care. 

"The technology we've developed is designed to make it easier for patients to treat at home, including a platform that allows patients to be monitored remotely by their care team and the first telehealth home therapy platform in kidney care." Dr. Martin Schreiber, chief medical officer for DaVita Home Dialysis told Business Insider via email. "We're glad to see more focus from the health care community on home, transplantation and better kidney health overall."

After the executive order, DaVita CEO Javier Rodriguez said in a statement: 

"In partnership with nephrologists, we are best positioned to deliver in the home dialysis space, as the largest provider of home dialysis in the U.S. We're accelerating home growth with our investments in technologies, such as home remote monitoring and a telehealth platform, to make it easier for patients to treat at home."

DaVita is a publicly traded company based in Denver, and has a market value of $9.4 billion.

Fresenius Medical Care

Fresenius Medical Care, a unit of Germany's Fresenius SE, is one of the main providers of kidney-care services in the US. Fresenius at the end of 2018 had 2,529 clinics in the US, treating around 204,100 patients.

In February 2019, Fresenius Medical Care completed the $2 billion acquisition of home-dialysis device maker NxStage Medical. Fresenius said the purchase would accelerate its move toward in-home treatments. 

"By combining NxStage's capabilities with our broad product and service offering, we can help patients to live even more independently," Bill Valle, CEO of Fresenius Medical Care North America, said in a statement at the time. "This acquisition positions Fresenius Medical Care to benefit from the growing trend toward home-based therapies."

After the executive order was signed by Trump, the company said in a press release that the  order aligned with its own work to expand access to home dialysis, transplantation and new models of values-based care.

Fresenius SE is publicly traded and has a market value of about $28 billion.

Outset Medical — $607 million

Outset Medical was founded in 2004. The company created a more streamlined and user-friendly kidney dialysis machine. The technology is already FDA cleared for use in hospitals and medical clinics.

The startup designed its own kidney dialysis machine called Tablo. The machine is much smaller than regular dialysis machines, making it less cumbersome for patients. 

The company began conducting a clinical trial exploring the use of Tablo for home dialysis in 2016, which is still underway.  In the trial, a medical technician or nurse must assist and educate the patient on using the machine for eight weeks. The patient then has an additional eight weeks to use the machine on their own. 

"We don't want to get ahead of ourselves," CEO Leslie Trigg told Business Insider. "But we are very pleased with the results in the home setting."

The home-care machine only needs to be plugged into an outlet and have access to water. The machine automates certain steps that are typically required to be done manually on most dialysis machines. All the collected treatment data is stored on the company's cloud. It also connects directly to the patient's electronic health records to automatically track their progress. 

Outset Medical has raised $364 million and is valued at $607 million, according to PitchBook.

Somatus — $61 million

Somatus was founded in 2016 and is a provider of value-based kidney care. 

Somatus integrates kidney care services, like dialysis, with health system partners to improve cost performance for insurers. By partnering with health plans, health systems and provider groups, the startup helps patients navigate their dialysis treatments, and ensures they get the right care. The company also offers lower cost for home-based dialysis

"When Somatus was founded we wanted to deliver innovative value-based kidney care," Angela Suthrave, the VP of Product & Innovation told Business Insider. "You can save costs and deliver better outcomes." 

Dr. Ramon Mendez, the Vice President of Medical Affairs, told Business Insider that home dialysis and preemptive transplantation are "no brainers" and other players in kidney care need to get on board. 

Somatus has raised a total of $16 million and is valued at $61 million, according to PitchBook.


Facebook's privacy settlement is such a joke, Mark Zuckerberg likely celebrated its signing (FB)

Sat, 07/27/2019 - 8:35am

  • The agreement Facebook struck with the Federal Trade Commission this week to end the agency's investigation into its alleged privacy violations was a good deal for the company.
  • Facebook can easily afford the $5 billion penalty, and the FTC could have legitimately assessed it a much higher fine.
  • The supposed restrictions in the agreement on its business are fairly meaningless — they generally don't limit its ability to collect personal data from consumers.
  • Likewise, the governance reforms don't represent any real check on Mark Zuckerberg's control over the company.
  • Visit Business Insider's homepage for more stories.

The Federal Trade Commission would like to have you believe that its settlement with Facebook over the latter's alleged privacy violations was a great deal.

And it was — for Facebook.

The FTC — or at least its Republican majority that approved the agreement announced Wednesday — touted the "record" $5 billion penalty the company will pay as part of it and the "unprecedented" new restrictions the agency is putting in place to oversee the social media giant's privacy practices going forward. The agency also argued that the settlement was far better than it could have gotten — and agreed to much sooner than would have happened — if it had gone to court.

Maybe so. But the deal is much more show than substance. And, given the scope of Facebook's alleged misdeeds, is far too lax on the company and CEO Mark Zuckerberg.

The $5 billion penalty is all-but-inconsequential to a company as profitable as Facebook. The new oversight structure has some major flaws and weaknesses. The settlement does little to limit Zuckerberg's power and doesn't hold him personally accountable for the actions of a company that he alone controls. And the agreement does almost nothing to stop the collection and sharing of data — or the use of it for targeted advertising — that was at the heart of the company's privacy violations.

The agreement "lets Facebook off the hook," said FTC Commissioner Rohit Chopra, who joined with fellow Democrat Rebecca Kelly Slaughter in voting against the deal, in a written dissent. "The fine print in this settlement," he continued, "gives Facebook a lot to celebrate."

Chopra wasn't the only one lambasting the agreement. Consumer groups including Free Press and the Electronic Privacy Information Center, which for years has been criticizing Facebook's privacy practices, blasted it as inadequate. So too did Republican Sen. Josh Hawley, a frequent Facebook critic, who called it disappointing, saying that it "utterly fails to penalize Facebook in any effective way."

Facebook can easily afford $5 billion

For all the patting on the back the FTC's majority gave itself for the agreement, it's not hard to understand why many see it as a bad deal.

Take the monetary penalty. A $5 billion fine sounds like a lot, and the FTC's majority certainly trumpeted it as such. After all, the biggest prior penalty the agency had imposed in a case like Facebook's was the $22.5 million fine it slapped on Google in 2012.

But compared to Facebook's revenue, profits, cash flow, market capitalization, or cash on hand, $5 billion is fairly small. In its second quarter alone, for example, Facebook posted $16.9 billion in sales, generated $8.6 billion in cash from its operations, and ended the quarter with $48.6 billion in cash and marketable securities. It "only" posted a profit of $2.6 billion for the period, but that amount included a deduction for the FTC fine. In other words, even with the fine, it earned billions of dollars of profit in the period.

Read this: The FTC's $5 billion fine for Facebook is so meaningless, it will likely leave Zuckerberg wondering what he can't get away with

And that was just one quarter. Facebook's alleged violations date back years, meaning that over the period in question, it's generated easily hundreds of billions of dollars in revenue and tens of billions of dollars in profits.

Meanwhile, comparing the fine to past penalties is not actually supposed to be part of the FTC's methodology, as Chopra noted in his dissent. The FTC has a well defined set of factors it's supposed to take into account when determining financial penalties. Among other things, the agency is supposed to take into account a company's ability to pay, its good or bad faith in dealing with the agency, and the profits it made that can be attributed to its offending conduct.

"In my view, a rigorous analysis of unjust enrichment alone ... would likely yield a figure well above $5 billion," Chopra said.

The company can keep on collecting consumer data

But it's not just the penalty where the agreement is far less than it seems on the surface. The new privacy oversight Facebook will have to put in place as part of the deal is also more impressive in the abstract than it's likely to be in reality.

Under the deal, the company will have to set up a new privacy committee comprised of independent directors. It will also have to establish a new nominating committee, also composed of independent board members, that will name people to the privacy committee.

Facebook's new chief privacy officer, Michel Protti, whose naming was also required by the agreement, will have to give quarterly reports to the privacy committee about the company's privacy practices under the deal. It will also have to name an independent person to assess its compliance with the privacy program laid out in the deal on a biannual basis to the FTC.

What's more, Facebook will have to assess and report on the risk to privacy of each new product or service it launches.

All of that sounds pretty onerous. But it's likely to be more of a bureaucratic headache than a meaningful restriction on Facebook's activities. That's because the order generally doesn't preclude Facebook from implementing new products and services that infringe on users' privacy or from collecting their personal information.

Under the order Facebook can no longer use members phone numbers that they've supplied it for the purpose of its two-factor authentication feature to target them with ads. It also has to get their express consent before applying its facial recognition technology to pictures of their faces. But other than those exceptions, it's free to continue collecting, using, and sharing whatever personal data it wants on its users, as long as it makes an assessment of the risks involved and describes what safeguards it puts in place — if any — to mitigate them.

"The order allows Facebook to evaluate for itself what level of user privacy is appropriate, and holds the company accountable only for producing those evaluations," Chopra wrote. "What it does not require is actually respecting user privacy."

The agreement doesn't check Zuckerberg's power

The new governance structure similarly seems more about trying to give the semblance that the FTC was doing something rather than meaningfully constraining Zuckerberg's power. For all the talk in the order about "independent" directors, it's hard for any Facebook board member to be truly independent when Zuckerberg controls the company.

Thanks to his ownership of a special class of stock that give him 10 votes per share, Zuckerberg has about 58% of the voting power at Facebook. By himself, he can determine the outcome of any shareholder vote or board election. The agreement did nothing to limit that fundamental power.

The agreement purports to limit that control by barring the removal of any member of the privacy committee without the support of shareholders representing two-thirds of the voting power at the company, or more than what Zuckerberg alone controls. But that's not really a meaningful constraint.

As Chopra noted in his dissent, it's rare for corporate directors to be removed from office midway through their term. Generally, they get replaced when their term is up, when companies hold a vote for directors at their annual shareholder meeting. If Zuckerberg doesn't approve of a supposedly independent director's work on Facebook's new nominating or privacy committees, he could name and vote in alternative board members at the annual meeting all by himself.

"The proposed settlement ratifies Facebook's governance structure instead of changing it," Chopra said. "The 'Independent Privacy Committee' has little independence, no meaningful powers, and no buy-in from shareholders."

The FTC let Zuckerberg off the hook — without interviewing him

But perhaps the worst part about the settlement is that with it, the FTC is essentially wiping the slate clean for Facebook and its executives unnecessarily and before it even finished its work.

The agency could and probably should have held individual Facebook executives and directors responsible for allegedly breaking the terms of the 2012 agreement. But it didn't. Even though Zuckerberg, Chief Operating Officer Sheryl Sandberg, and the company's directors were responsible for ensuring that Facebook hewed to that agreement, the settlement doesn't hold any of them personally accountable for allegedly failing to do so. That's in sharp contrast to the actions the FTC has taken against smaller companies, including Cambridge Analytica. In that case, which the agency settled on the same day, it did actually hold the company's executive personally responsible.

Relatedly, despite investigating Facebook for 16 months, the agency never interviewed Zuckerberg. The agency's enforcement director said the FTC feared Facebook would have gone to court rather than allow Zuckerberg to be deposed and that the agency felt it had all the information it needed without him.

But that assertion seems ludicrous on its face. Zuckerberg controls the company. He was the one who announced or was intricately involved in the major steps that affected the ability of companies including Cambridge Analytica to access the personal data of Facebook users without their knowledge.

The agency likely could have learned at least something about his involvement and thinking in those decisions by interviewing him. And even if it still chose not to hold him personally responsible for those decisions, the interview itself would have been a way of holding him accountable.

Given Zuckerberg's control over Facebook, the FTC failure to uncover his role in the company's myriad alleged privacy violations — including by interviewing him — was a "critical" missed step in the investigation, Chopra said.

"It is hard to imagine that any of the core decisions at issue were made without his input," he said. "The FTC Act," he continued, "does not include special exemptions for executives of the world's largest corporations, but this settlement sends the unfortunate message that they are subject to another set of rules."

And that's precisely why they're likely celebrating at Facebook's headquarters.

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

SEE ALSO: Facebook's former security chief says Mark Zuckerberg has too much power and needs to step down as CEO

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Citi's trade-financing is thriving as trade wars heat up. Here's why instability is a good thing for the business.

Sat, 07/27/2019 - 8:06am

  • While many Wall Street businesses are suffering amid market turmoil, Citi's treasury and trade-services business is surging, the bank reported in its second-quarter earnings results.
  • Amid Brexit, President Trump's trade wars, and other geopolitical flare ups, long-standing trade flows are shifting. China, once the largest importer of US soybeans, is buying from South America instead, for instance.
  • Citi's trade-financing business, thanks to the bank's presence in nearly 100 countries, has benefited from the disrupted trade routes, in some cases financing the same trade flows twice as countries adapt. 
  • The dynamic showcases the value of the bank's global network, but Citi global trade head John Ahearn cautioned there are early signs the volatility is slowing the global economy. 

When Citigroup announced its second-quarter earnings results last week, a familiar division popped up to steal the thunder in its institutional division: Treasury and Trade Solutions. 

The group got a shout out during executives' call with Wall Street analysts thanks to revenue growth of 4% to $2.4 billion in the quarter, with "growth in deposits, transaction volumes, and trade spreads" and "strong client engagement," according to CFO Mark Mason. 

The treasury and trade business, which handles cash management and trade financing needs for multinational corporations and governments, often flies under the radar compared to more glamorous investment banking endeavors. But it is nonetheless considered the bank's crown jewel given its consistent growth, robust returns, and centrality to Citi's global network

Taking aside a one-off $355 million gain from the firm's investment in bond-trading platform Tradeweb, most businesses in the Citi's Institutional Clients Group, which includes its investment banking and sales and trading units, suffered year-over-year declines amid tough market conditions. 

Read more: A 'hidden asset' at Citigroup has given the bank a dominant position in the fastest-growing business on Wall Street — but challengers are knocking at the door

The uncertainty that roiled the markets thanks to tariff wars, Brexit, and other geopolitical discord would appear the perfect maelstrom to upend trade financing operations.

But at Citi — the No. 1 transaction banking franchise, according to industry data and consulting firm Coalition — business has seemed to only grow stronger in 2019, Jim Mitchell, an analyst with Buckingham Research, pointed out.

It begged the question: Is "the trade war helping you a little bit?" Mitchell asked.

It turns out, it is. 

Citi's trade-finance business is uniquely positioned to benefit from President Donald Trump's confrontational trade tactics with China, Mexico, and Europe, showcasing the value of the bank's entrenched presence in nearly 100 markets. 

To explain why Citi's trade-services unit is thriving, take one high-profile example: soybeans. 

China is the world's top soybean consumer and for many years has relied on US farmers to meet its voracious demand, eclipsing $14 billion worth of US soybean imports as recently as 2016, according to US Census estimates.

Amid the trade dispute with the US — Trump has imposed tariffs on $250 billion of Chinese imports — China has drastically cut back its US soybean consumption and is instead buying from South American countries like Argentina and Brazil, according to John Ahearn, global head of trade at Citi. Argentina and Brazil are in turn buying soybeans from the US to fill their own domestic supply, much of which has been diverted to China. 

The overall demand and soybean capacity hasn't changed much, but now there are new trade routes that require financing services, and Citi's presence in each of these countries means it's poised capitalize — in some cases essentially financing the same trade flows twice. 

"Because of Citi's global footprint, we are financing both the export of soybeans from Brazil and Argentina to the Chinese, and also financing the exports of soybeans from the US to Argentina and Brazil," Ahearn told Business Insider in an interview. "As our clients adapt and need financing through these new routes, we get to finance the same transaction throughout the entire lifecycle, which has helped our profitability."

Other banks with less global operations won't necessarily experience the same dynamic.

Disrupted trade flows only help a bank's trade-finance business if they have an established presence wherever the flows are shifting, according to Eric Li, a research director and trade-finance expert at Coalition.

"When trade corridors shift, not every bank benefits," Li said, adding that "it can take years to develop a footprint in a given country or region."

Citi's trade unit also drums up more business in the short term when individual companies on its long global roster move their operations because of the trade volatility.

More than 50 multinational firms, including the likes of Amazon, Apple, Dell, and HP, have uprooted or are planning to shift operations out of China amid the tariff war, according to research from Nikkei Asian Review

The disruption may be helping Citi's trade business for the time being, but uncertainty has the potential sap confidence and dry up global demand, taking a toll on the whole industry — Citigroup included. 

Ahearn, who has a front-row seat in observing shifts in trade flows and financing demand, says every region in the world is dealing with some form of economic upheaval right now, and that there are early signs that the global economy may be losing steam as a result.

"You're seeing all these trade quarters shifting," Ahearn said. "Will it lead to a global economic slowdown? We're seeing some early signs, but the next few quarters will be key."

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Bernie Sanders has a plan to erase student debt by taxing Wall Street. But industry watchers tell us it will hurt Main Street more.

Sat, 07/27/2019 - 8:05am

  • Senator Bernie Sanders has proposed a financial-transaction tax on Wall Street to support his plan to make college free and pay off all outstanding student debt.
  • Other legislation also proposes such a tax to deal with inequality. 
  • Business Insider spoke to a handful of industry watchers, who outline their case for why a transaction tax could ultimately hurt Main Street and capital markets alike.
  • Read more on Markets Insider.

When Bernie Sanders revealed that his proposal for free college tuition and the erasure of student debt depended on a financial-transaction tax, many industry watchers on Wall Street groaned. 

That's because many are skeptical such a tax would actually accomplish what Sanders hopes it would — and many worry that this kind of levy would actually harm US markets and investors.  

"When you break down the actual impact of the financial-transaction tax proposal, the real burden gets placed on the savings community," Kirsten Wegner, CEO of Modern Markets Initiative (MMI), told Markets Insider in an interview.

Sanders' rationale behind the tax is straightforward: Since Main Street bailed out Wall Street during the financial crisis, Wall Street should now return the favor. The tax would include a 0.5% tax on stock transactions, a 0.1% tax on bond trades, and a 0.005% tax on derivatives transactions.

Those who support such a tax point out that it would raise significant revenue for governments, and keep high-frequency traders in check. They also argue that it would help redistribute wealth in the US, which has long struggled with inequality.

Markets Insider is looking for a panel of millennial investors. If you're active in the markets, CLICK HERE to sign up.

But there's one major issue: FTT doesn't tax banks. It taxes transactions, and would likely pass the elevated cost along to consumers, which means that anyone who has money invested in the stock market would pay the price. That includes 401k retirement plans, 529 college savings plans, and pension funds, the very investment vehicles that help many Americans hold and grow wealth. 

A study by the MMI — an independent education and advocacy organization for quantitative traders — showed that if the tax had existed in 2015, the California Public Employees' Retirement System (CalPERS) would have paid more than half a billion dollars in taxes.

"It's ironic," Wegner said. "It's actually the teachers' pension funds, university endowments and 529 plans that would be helping pay" for free college and student loan debt relief."

There's also debate over how much money such a tax would actually raise. Some think it would be significantly less than Sanders has claimed.

The Tax Policy Center analyzed Sanders' 2016 plan, which was very similar to the plan unveiled during his 2020 campaign. It concluded that Sanders' plan would generate about $400 billion over a decade, not $3 trillion as he claimed. 

The debate over high-frequency trading

Much harder to calculate are the potential implicit costs of having FTT. The MMI says it could disincentivize trading and reduce the efficiency of capital markets in the US. Wegner also argues that the tax could put a damper on the high-frequency trading — a practice he says adds liquidity to markets.

As an extension of that, another commonly cited argument in favorite of FTT is that it reduces market volatility by clamping down on the type of trading that increases it. But a 2012 study by the Bank of Canada suggested that it could actually make price swings worse

"It's going to discourage the arbitrage process and cause much more of a disconnect across markets and result in less fair prices," Chester Spatt, a professor of finance at Carnegie Mellon University, told Markets Insider. "I can't believe that candidates that believe in fairness want the prices in our marketplace to be much less fair than they are at present."

Dean Baker, a senior economist and the co-founder of the Center for Economic and Policy Research, points out that even if trading volume gets cut in half — a conceivable outcome in his mind — trading volume would still be roughly what it was in the 1990s.

"We clearly want vibrant markets, deep markets," Baker said. "I would be very hard pressed to say we didn't have deep capital markets in the 90s."

Baker also said that lower trading volume would save investors in the long run. 

"The savings on reduced trading will offset the increase in the cost per trade," Baker said. And, he argued that the small increased costs that investors might see would be worth it for something as important as free college. 

Howard Gleckman, a senior fellow at the Tax Policy Center, minced no words with his take on the matter.

"Shutting down the flash boys would slash the revenue Sanders needs to pay for free college," he said.


Past failures

Implementing something like FTT would hardly be a new idea, considering other governments have tried similar measures in the past.

In fact, they aleady exist in many countries such as Britain, South Korea, Hong Kong, Brazil, Germany, France, Switzerland, and China. But FTT-like measures haven't always worked.

And then there's the unique case of Sweden. From 1984 to 1991, the nation applied a financial transaction tax of 0.5% to purchases or sales of equity securities, fixed income securities, and financial derivatives.

The tax ultimately decreased trading volume of the most popular share classes by 60%, and much of Swedish equity trading moved offshore, according to the Tax Foundation. As a result, the tax raised far less money than was expected and was considered a failure.

More recently, the European Union has also been trying to implement its own financial transaction tax since 2011. But it's had little luck because of arguments that the tax wouldn't raise as much money as previously thought. Projections for how much the tax would actually raise have actually been dramatically lower than when the tax was first proposed.

In 2013, the EU projected the tax would raise as much as 35 billion euro annually. The latest estimate based on the performance of a similar tax in France is 3.45 billion euros, according to the Tax Policy Center, a nonpartisan think tank based in Washington DC. 

Alternate plans already in the works

US Senator Brian Schatz of Hawaii and US Representative Peter DeFazio of Oregon have already introduced legislation that also proposes a financial transaction tax, meant to address economic inequality. The Wall Street Tax Act proposes a smaller tax than Sanders' plan — it would levy 0.1% tax on the sale of stocks, bonds, and derivatives. It's estimated that it would raise $777 billion over a decade. 

According to Baker, this plan may make more sense in the market currently. 

"I don't think the Sanders plan will freeze up the markets, but I'd rather start with something smaller," he said. One good thing about the Sanders plan, he said, is that it is scaled for different assets. 

Still, the Sanders campaign is very confident in analysis that shows the proposed plan could raise up to $220 billion in the first year and $2.4 trillion over ten years, Sarah Ford, deputy communications director of Bernie 2020, told Markets Insider in an email. 

"Some 40 countries throughout the world have imposed a similar tax, including Britain, South Korea, Hong Kong, Brazil, Germany, France, Switzerland and China and their capital markets function just fine," Ford wrote.

She continued: "Placing a 0.5% tax on stock trades — 50 cents on every $100 of stock — a 0.1% fee on bond trades, and a 0.005% fee on derivative trades to pay for free college and student debt cancellation a decade after Wall Street's gambling tanked the economy is exactly what this country needs to create an economy that works for all."

No flashy tech tools needed: Brown Brothers Harriman is betting human interactions will help it dominate in wealth management

Sat, 07/27/2019 - 8:00am

  • Adrienne Penta, a managing director at Brown Brothers Harriman, spoke with Business Insider about the firm's digital strategy and her communication with wealth management clients.
  • While the firm is constantly updating its technology, it isn't necessarily planning to go all-in on an online-only product, Penta said.
  • The firm has a total of $36.4 billion in private wealth assets under management. 
  • Visit BI Prime for more stories.

Brown Brothers Harriman managing director Adrienne Penta is trying to bring fresh perspectives to the 200-year-old private bank, but sees the art of conversation — even if it's via text — as a better way to impress wealth management clients than flashy tech tools. 

"I don't really see us going to online financial planning tools or a robo experience, because it just doesn't speak to our clientele," she told Business Insider.

The firm launched a new online interface for its clients last year, but Penta, who advises clients in the private wealth business and also created a communication strategy for the firm to connect better with women, "wouldn't call it a digital experience."

The firm's private wealth arm is doubling down on tried-and-true methods of communication at a time when technology is upending the wealth management industry, with app-based entrants vying — and sometimes failing —  to catch the attention of new investors.

"We're not hearing from clients a lot of want on the digital side," she said during a recent interview in the firm's New York office, and wondered whether that's because there are already so many investing apps out there already.

"Where we are getting more innovative is with the high-touch experience for our larger clients, being more holistic in how we serve them," Penta said, adding the firm is aiming to provide an increasingly "family office-like experience" for those clients, whether that's meshing with household management or paying bills.

In the US, Brown Brothers Harriman has around 100 client-facing relationship professionals, which includes wealth planners. The firm declined to disclose how many planners its private wealth business houses, or how that number has shifted in recent years. 

Its average private banking client has about $30 million in assets managed by the firm, and private wealth assets under management total $36.4 billion. 

Penta highlighted that text messaging is key when communicating with clients, particularly with those who are younger — older clients typically don't prefer that method — as they are often busy with their jobs.

Read more: This wealth manager for celebrities says the young people who ask her for investing advice are often making a basic financial error

"They have limited bandwidth, so how do you make the experience they have with us impactful, even if we don't get to see them on a quarterly basis?" she asked. 

Texting changes the "pattern and the cadence" of relationships, she said. "It means you can actually be much more part of somebody's life even if you're not sitting in the room with them."

Across Brown Brothers' client base, where in the private wealth segment individuals and families range from having a minimum of $10 million in liquid assets managed by the firm to more than $1 billion, Penta said she's witnessing a changing landscape.

"It's become only recently that the client base has really diversified," she said, referring to gender, cultural backgrounds, education levels, and sexual orientation. "The clients we serve have become very diverse, very quickly."

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Here's who is most exposed to WeWork; Inside the growth plans at Fleming's Rockefeller Capital

Sat, 07/27/2019 - 7:53am


Dear Readers,

I'm back on the newsletter this week — thanks to my deputy Meredith for subbing in! 

We're hot on the trail of WeWork, the high-flying, but money-losing, $47 billion coworking company expected to IPO this fall. It's known for its well-designed office space, which it leases itself and then rents out to customers like startups and, increasingly, big corporate clients.

As WeWork prepares to go public, there's increasing scrutiny on it that can be boiled down to three major concerns: the stability of its model (pairing long-term office leases with short-term occupants and what that might look like during a downturn), its categorization (is it a tech or real-estate company?), and the wild card that is its CEO, Adam Neumann.

This week, we did a deep dive on the company's top landlords, which until now have largely avoided media scrutiny. We also spotlighted a little-known Mexican real-estate investment trust, which is WeWork's biggest landlord and highlights how quickly the company has grown overseas. 

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

While coworking is seen as primed for explosive growth, large real-estate companies will have to decide how much they want to work with young flex-space firms that haven't been tested through a downturn. If the economy were to turn, it would mean that some of its tenants may choose not to renew their leases (or negotiate lower rent), while WeWork would still owe payments to its own landlords. 

WeWork's financials, in particular, are also giving some prospective IPO investors pause. The company is hemorrhaging money: $219,000 every hour of every day during the 12 months leading up to March, according to the Financial Times. As the company moves toward an IPO, it will need to convince investors that its significant growth makes it a worthwhile long-term investment despite equally large losses.

You can check out a roundup of our latest WeWork reporting here

There was also a relatively small piece of news that we reported on this week that you may have missed but may have major ripple effects in the next couple of months. Swell, a 2-year-old environmental, social, and governance (ESG) investing app, is shutting down. While socially conscious investors are pouring capital into these types of funds that claim to support social good like clean water and gender diversity, there is no one consistent standard for ESG qualifications, and some are skeptical that these funds are more than a marketing gimmick. With tons of ESG-focused funds popping up every day, a shakeout may be on the horizon. 

To read many of the stories here, you can subscribe to BI Prime.

Have a great weekend! 


We got a peek at WeWork's top landlords. Here's who is most exposed to the fast-growing, but money-losing, coworking company as it prepares to IPO.

The flexible-office provider WeWork's top US landlords include industry giants like Blackstone and Brookfield, a slew of New York City-based firms, and itself, according to a Business Insider analysis of data from CoStar Group.

The list, along with data from WeWork, provides one of the most comprehensive looks so far at who's leasing to the coworking company as it prepares to go public.

With a hotly anticipated initial public offering on the horizon, and details of WeWork's financials — and wide losses — emerging, more attention is being paid to the company and those that touch it.


Charles Schwab's retail head and marketing chief are out — and the firm's still figuring out what's next

Charles Schwab is shaking up its retail arm, and two key executives are leaving the firm, Business Insider has learned.

Terri Kallsen, the executive vice president of investor services, and Andy Gill, Schwab's chief marketing officer, are out as part of a restructuring, the Charles Schwab spokesperson Mayura Hooper confirmed to Business Insider on Tuesday.

The departure comes just over a week after The Wall Street Journal reported that Schwab was in talks to move further into wealth management by buying USAA's brokerage and wealth operations, which would bring Schwab some $100 billion in assets.

The brokerage's restructuring and key departures also come as the broader wealth-management and investing landscapes shift; digital entrants are creating a crowded space, and clients' fees are broadly headed to zero as competition ratchets up.


Citi's trade-financing is thriving as trade wars heat up — here's why instability is a good thing for the business

While many Wall Street businesses are suffering amid market turmoil, Citi's treasury and trade-services business is surging, the bank reported in its second-quarter earnings results.

Amid Brexit, President Donald Trump's trade wars, and other geopolitical flare-ups, long-standing trade flows are shifting. China, once the largest importer of US soybeans, is buying from South America instead, for instance.

Citi's trade-financing business, thanks to the bank's presence in nearly 100 countries, has benefited from the disrupted trade routes, in some cases financing the same trade flows twice as countries adapt.

The dynamic showcases the value of the bank's global network, but the Citi global trade head John Ahearn cautioned there are early signs the volatility is slowing the global economy.


Blackstone raised $14 billion to invest in bridges, tunnels, and wind plants. Now comes the hard part: Spending it.

Blackstone has raised a massive fund to invest in infrastructure, but analysts are focused on the challenges that come with deploying $14 billion in capital.

Business Insider spoke with a person familiar with Blackstone's strategy who said the firm is targeting long-term, billion-dollar-plus deals in North America.

Competition for assets is stiff and funding plentiful as investors see infrastructure as an alternative to low-yielding fixed-income products.


Jeffrey Epstein and Sen. Dianne Feinstein's husband were coinvestors in an exclusive private-equity fund

The disgraced New York financier Jeffrey Epstein invested $30 million in Second City Capital Partners I, a private-equity fund also backed by the husband of California Sen. Dianne Feinstein, Richard Blum, among 38 other limited partners.

The investments by Epstein and Blum were disclosed in public documents reviewed by Business Insider and confirmed by people familiar with the fund.

It's unclear whether Epstein was aware of Blum's investment in Second City, or vice versa. But the multimillionaire convicted sex offender has a long history of using money to cultivate relationships with powerful political figures.


Greg Fleming's Rockefeller Capital wants to grow to as many as 200 high-end advisers. The firm's private-wealth head describes his ideal candidate.

Rockefeller Capital Management's wealth-management head, Chris Randazzo, spoke with Business Insider in a keynote interview. He talked about what the firm is looking for in an adviser as it grows its wealth business.

The firm's division has 30 advisers and wants to grow to 100 to 200 advisers over the next five to eight years.

"We're never going to become thousands of advisers," said Randazzo, who previously held executive roles in the wealth-management divisions of Morgan Stanley and Bank of America Merrill Lynch.

By comparison, Morgan Stanley, a much larger player in the space, said on Thursday it had 15,633 wealth representatives at the end of the second quarter.


Wall Street move of the week:

Ken Griffin's Citadel is losing a longtime money manager and the COO of its global-equities business

In markets:

In tech news:

Other good stories from around the newsroom:

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Blackstone raised $14 billion to invest in bridges, tunnels, and wind plants. Now comes the hard part: Spending it.

Sat, 07/27/2019 - 7:37am

  • Blackstone has raised a massive fund to invest in infrastructure, but analysts are focused on the challenges that come with deploying $14 billion in capital.
  • Business Insider spoke with a person familiar with Blackstone's strategy who said the firm is targeting long-term, billion-dollar-plus deals in North America.
  • Competition for assets is stiff and funding plentiful as investors see infrastructure as an alternative to low-yielding fixed-income products.
  • Visit BI Prime for more stories.

Blackstone has amassed $14 billion to invest in infrastructure, which means it is primed to be the No. 3 investor in the asset class globally, but analysts are wondering how the private equity giant will go about spending all that money. 

With interest rates relatively low, investors on the hunt for yield have poured more money into infrastructure as an alternative to fixed-income products. But that has caused stiff competition and driven up prices for infrastructure deals. 

"The question is, 'What do you buy?'" Glenn Schorr, an analyst at Evercore ISI who covers Blackstone, told Business Insider. "In infrastructure, there just aren't that many bridges, tunnels, wind plants and electric facilities. And they don't turn over that often."

When Blackstone held its second-quarter earnings call last week, Schorr had asked about what infrastructure opportunities were out there, noting that they could be challenging to find. Blackstone COO Jon Gray called it a "fair question."

Since January, the firm has announced two investments. Gray pointed to a "couple other" large opportunities Blackstone was looking at, but did not disclose names. 

"It is a competitive space," Gray said on the call, "By playing where the air is thinner, which is really the competitive strength of our infrastructure business, we've got a better competitive dynamic." 

Business Insider then spoke with a person familiar with Blackstone's efforts who said that the infrastructure fund has been targeting investments of more than $1 billion and will have a North American focus. By focusing on bigger deals, Blackstone will be going head-to-head with a small number of players who have deep pockets. 

Currently, Blackstone has about 20 percent of its fund deployed, and plans to put the rest to work over the coming two to three years, the person said.

At Blackstone, a team of more than 35 are working the phones to find investments in industries that span energy, transportation, communications, water and waste, the person said.

The field vying for multi-billion dollar infrastructure deals is narrower than for smaller deals, this person added, naming only GIP and Brookfield as infrastructure investment firms "in the same zip code."

GIP and Brookfield are No. 1 and No. 2 in terms of overseeing infrastructure investments, according to Preqin data. 

Others such as KKR and Morgan Stanley have large infrastructure funds as well. KKR closed a $7.4 billion infrastructure fund last year, while data from Preqin shows Morgan Stanley overseeing $4 billion. 

Blackstone will handle infrastructure deals principally in North America and is looking for long-term investment opportunities with a timeline of two decades or more, the person said. That's in contrast to a traditional private-equity business which can buy and sell companies in a five-year time period.

There is a "massive" set of potential infrastructure deals that fit those parameters, this person said. And Blackstone would only need to do two or three deals a year to deploy its capital. 

Although Blackstone's infrastructure fund started in 2017, the firm has been involved in various kinds of investing in the sector over 15 years through other funds.

Still, Chris Kotowski, an analyst at Oppenheimer, flagged Blackstone's relatively brief history in infrastructure fundraising. Blackstone in 2017 announced its intention to raise $40 billion in infrastructure funding and has been hitting up investors, from pension plans to insurance companies, ever since. 

"I'm not sure exactly what their approach is going to be," said Kotowski. 

The infrastructure fund's first deal came in January, when it acquired a controlling stake in the oil and gas pipeline company, Tallgrass Energy. In March, it announced an investment in marine terminal operator Carrix, which owns SSA Marine and operates more than 250 port and rail locations worldwide. Blackstone characterized the investment as growth-oriented and did not disclose the exact financial terms, though the source familiar with Blackstone's strategy said they fit within the firm's more than billion-dollar focus. 

Bankers told Business Insider that the level of capital flowing into infrastructure funds should be seen as a sign of opportunity for global investment, not a constraint.  

"Overall, there is a lot of capital coming into the space," said Michael Comisarow, managing director leading Credit Suisse's infrastructure initiative. "But there is a reason for that. There have been a lot of assets to chase." 

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Facebook and Google could be forced to hand over details of their algorithms in a new tech regulation push by Australia

Sat, 07/27/2019 - 7:02am

  • A tough new enforcement regime in Australia could see Facebook and Google compelled to reveal details of their algorithms to regulators.
  • An 18-month investigation into the companies concluded that an enhanced regulator is needed, with powers to scrutinize how the companies work.
  • The Australian Competition and Consumer Commission said it should be able to "pro-actively monitor" whether tech giants' algorithms are stifling competition, and compel them to hand over information.
  • Facebook and Google are famously secretive about how their algorithms work, and the proposals represent a challenge to their desire to keep the details under wraps.

Facebook and Google could be compelled to reveal the workings of the closely-guarded algorithms which power their companies under a new push for tech regulation by Australia.

Australian regulators set their sights on the tech giants when they published the results of an 18-month investigation into the impact of platforms like Facebook and Google on the country's economy.

The proposals of the report by the Australian Competition and Consumer Commission (ACCC) — which Australia's government must now decide whether to implement — would constitute one of the toughest enforcement regimes in the world.

Details of how the tech giants' algorithms could be put under the microscope were not made explicit in the report, a 619-page document which you can access here.

News: Holistic, dynamic reforms needed to address dominance of digital platforms

— ACCC (@acccgovau) July 26, 2019

However, the document outlines a powerful new government regulator within the ACCC which would have the ability to scrutinize the workings of algorithms: the Digital Platforms Branch.

The clearest reference comes near the end of the document, following a section which discusses the risk of Facebook or Google stifling competition in new markets by instructing their algorithms to prioritise their own products over those of rivals.

Page 531 of the document says (emphasis added):

The ACCC notes that concerns over potential anti-competitive behaviour, including by leveraging market power in one market into related markets, is a key reason for the creation of a specialised digital platforms branch of the ACCC, to build on and develop expertise in digital markets and the use of algorithms (recommendation 4).

The creation of this branch will allow the ACCC to pro-actively monitor the conduct of digital platforms and investigate potentially anti-competitive behaviour on the part of digital platforms, including the type of potential conduct discussed in this section.

As the "conduct" in question in these paragraphs is the operation of Facebook and Google algorithms, in order to pro-actively monitor it, it would be necessary for the regulator to understand how they work.

Earlier in the report, the ACCC said it should be able to force Facebook and Google to hand over details of its inner workings.

Page 32 of the report asks the government to grant it "the ability to compel relevant information" via a public inquiry.

In a press conference in Sydney to promote the report, Josh Frydenberg, the Treasurer of Australia, said the ACCC will "lift the veil" on the secretive algorithms, according to Reuters and the Guardian.

According to the BBC, he also said of Facebook and Google that "their activities need to be more transparent."

Facebook did not respond publicly to the regulator's report, the Wall Street Journal reported. The newspaper said that a Google representative said the company would "engage with the government on the recommendations."

The creation of the powerful Digital Platforms Branch was only one of 23 recommendations the report made, which also cover fake news and changing whether Google can automatically set its own services as defaults on Android devices.

For a broader summary of what the report recommended, read this article from Business Insider Australia.

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